Ace of Spies (10 page)

One of the surest ways of scuttling the discussions would have been to sow seeds of doubt in de Rothschild’s mind concerning the chances of oil being found in the location D’Arcy was drilling. By the time the talks commenced in June, Fletcher Moulton was already complaining that de Rothschild’s terms were now somewhat less favourable than when they had last met.
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His despondence was even more evident when, on 24 June, he cryptically referred to an ‘unhelpful outside interest’ whose influence had led to de Rothschild questioning the location of drilling.
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Although the ‘unhelpful outside interest’ is never actually identified by Fletcher Moulton, it seems clear that there is a distinct connection between this involvement and de Rothschild’s acquisition of a report that seems to have been the source of his misgivings.

Meanwhile, some 30km down the coast, where ‘Mr and Mrs Reilly’ were guests at the Continental Hotel in St Raphael, Reilly wrote a letter dated 30 June, in which he referred to ‘a most useful report’ that had helped him ‘turn the tide’.
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The tide had indeed turned for Fletcher Moulton, who apparently found that there was little he could do to dispel de Rothschild’s misgivings or to
reassure him. Their discussions finally broke down during the first week of July 1904.
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On cabling Knox D’Arcy in London with the regrettable news, Fletcher Moulton was surprised to find that his friend was not at all downcast by the news. On the contrary, out of the blue, the Admiralty-sponsored talks with Burmah Oil were suddenly back on the agenda with a renewed sense of urgency.
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An agreement was finally signed on 20 May 1905 and, almost three years later, oil was struck at Masjid-i-Suleiman. In April 1909 the Anglo-Persian Oil Company was founded, today known as BP Amoco. Apart from making D’Arcy and his syndicate rich beyond their wildest expectations, the find also guaranteed the Royal Navy a substantial and dependable source of oil.

The Reillys appear to have stayed on the Côte d’Azur for the remainder of the summer. Apart from the mystery report referred to by both Reilly and Fletcher Moulton, a secondary puzzle in this episode concerns the identity of ‘Mrs Reilly’. If, as will later become evident, there is a strong case for believing that Reilly bigamously remarried after the Russo-Japanese War, we can confidently discount the possibility that the ‘Mrs Reilly’ at the Continental was in fact Margaret, as she herself declared that the first occasion on which she saw her husband after their parting in Port Arthur was Christmas 1904.
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Following his departure from the Continental Hotel, Reilly returned to Brussels.
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In the new year he moved on to St Petersburg, where he arrived alone on 28 January 1905, checking into room 93 at the Hotel Europe on Nevsky Prospect.
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If he had remarried, where was the new Mrs Reilly, and why did he go to such extraordinary lengths to successfully keep the marriage a secret?

I
f Reilly did marry bigamously after the Russo-Japanese War, the question arises as to how he managed to conceal his second wife’s existence for so long. The most likely explanation is that she was found secreted away in ‘backwater’ locations where he had contacts and connections who would ensure she was well taken care of. Odessa and Port Arthur are two such possibilities.
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After Russia’s defeat in the war of 1904/05, the Liaotung peninsula became a Japanese possession, eventually becoming part of the Japanese puppet state of Manchukuo. Whatever the reality of Reilly’s connections with the Japanese during the war, it is evident that he had, and continued to have, very close business connections with a number of businesses in Japan and her occupied territories. As someone known to the Japanese authorities, Reilly would have had no trouble in accommodating his new spouse in Port Arthur, which after the war was rebuilt and restored by the Japanese. His representative and principal agent in Japan was William Gill, in Narunouchi, Tokyo.
²
Again, Gill would have been well placed to act as conduit and to ensure that Reilly’s wife was well provided for.

Likewise, Alexandre Weinstein became a trusted lieutenant of Reilly’s before the Russo-Japanese War, and remained such
for over a quarter of a century. If Reilly did take a second wife, then Weinstein above all would not only have been aware of her, but would more than likely have played a pivotal role in liaising between ‘husband and wife’. When a decade later Reilly joined the Royal Flying Corps, he named his next of kin as his wife, ‘Mrs A. Reilly’, who in the event of his death could be contacted at 120 Broadway, New York City, a business address being run on his behalf at the time by Alexandre Weinstein.
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Further evidence concerning a possible second marriage is examined in later chapters.

In contrast to the comings and goings of wives, ex-wives and mistresses, one female relationship that survived the test of time was that with his first cousin Felitsia. Born in the Grodno gubernia of Russian Poland, she later moved to Vienna during the closing years of the 1890s. The city’s large Jewish population lived principally in the old quarter, and it was here that Reilly visited Felitsia
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whenever he could. She was the only member of his immediate family that he kept in touch with after leaving Odessa in 1893, and her existence was kept a closely guarded secret from all who knew him. It was through these visits to Vienna that he made the brief acquaintance of an influential businessman whose precise role in Reilly’s story has since become a source of some controversy.

Josef Mendrochowitz, an Austrian Jew, was born in 1863 and came to St Petersburg in 1904.
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In partnership with Count Thaddaeus Lubiensky he founded a firm of brokers, Mendrochowitz and Lubiensky, who successfully secured the right to represent Blohm & Voss shortly thereafter. Under the representation contract, Blohm & Voss undertook to pay Mendrochowitz and Lubiensky a commission of 5% on each successful business deal.
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In
Ace of Spies,
Robin Bruce Lockhart argues that ‘Mendrochovitch and Lubensky’ were awarded the rights of representation in relation to Blohm & Voss in 1911, as a result of Reilly’s chicanery with the Russian Admiralty. Blohm & Voss archives and Mendrochowitz and Lubiensky’s own business records demonstrate quite clearly that this was not the case. At
the time the contract was awarded, Reilly was not even in Russia. According to the St Petersburg Police Department, Reilly first arrived in the city en route from Brussels on 28 January 1905,
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where he seems to have stayed for a comparatively short period of time before moving on to Vienna. By the summer of 1905 he was back in St Petersburg, this time with the intention of staying on a more or less permanent basis.

Thanks to a chance meeting with George Walford, a British born lawyer, whom he accompanied to St Petersburg’s Warsaw Railway Station on 10 September 1905, an account of his activities at this time have found their way into Ochrana records. Walford was under Ochrana surveillance, and Reilly was watched and followed from 11–29 September as a result of his being seen with him. Why Walford was under surveillance is unclear, although it was routine practice for the Ochrana to keep a watchful eye on foreign citizens, a task they took even more seriously in the wake of the Russo-Japanese War. The surveillance on Reilly yielded nothing of value for the Ochrana, although it is most helpful to us in confirming that on arrival in St Petersburg, Reilly made contact with Mendrochowitz and Lubiensky, and actually lived in their apartment building at 2 Kazanskaya. According to the surveillance report, Reilly also visited the offices of the China Eastern Railway and introduced himself as a telephone supplier. Whether or not he succeeded in making a sale is unknown. Bearing in mind that Ochrana ‘tailers’ often gave their targets nicknames in written reports, Reilly was appropriately referred to as ‘The Broker’.
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If Reilly had nothing to do with Mendrochowitz and Lubiensky securing the right to represent Blohm & Voss, did he have any connection or dealings at all with the firm? Details of the firm’s dealings are contained in six volumes of files containing over 1,000 pages of correspondence and records now held by the Hamburg State Archive. In addition to the two partners, there appear to have been four other employees, including deputy manager Jachimowitz, who ran the office in the absence of the partners and was particularly well connected with influential
Russian politicians. Reilly’s name is not among those employed by the firm, but is mentioned in letters and invoices concerning his work on behalf of Blohm & Voss, as a freelance broker during the winter of 1908 and the spring of 1909. During this time he was working with Mendrochowitz and Lubiensky, assisting them in marketing a new Blohm & Voss boiler system. Company records show that agents or brokers like Reilly were often used to ‘influence’ people in favour of the company.

Exchanges of correspondence and telegrams between Mendrochowitz and Lubiensky and Blohm & Voss in Hamburg during this period give some impression of the working relationship between the firm and the freelance Reilly. His name first surfaces in a telegram dated 14 December 1908
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in which Blohm & Voss are told that ‘Reilly asks for advance payment of 1,000 roubles urgently. Please notify us whether we should pay’. It is apparent from Blohm & Voss records in Hamburg that Reilly was not only waging his campaign for a higher fee through Mendrochowitz but was also making personal representations to Blohm & Voss. On 13 April, while staying at the Hotel Bristol in Berlin, he sent them a handwritten letter:

Dear Mr Frahm,
I am here in Berlin on my way to Paris, where I will stay only tomorrow.

At the initiative of Mr Mendrochowitz (who is in Vienna right now) I dare to ask you whether it would be convenient for you if I came by on my way back and visited you in Hamburg. Mr Mendrochowitz was of the opinion that the unsolved matter between us would be dealt with best by a meeting. I will be at the Grand Hotel Paris tomorrow until 1 p.m. and would be grateful for a telegram.
Yours faithfully,
Sidney G. Reilly
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The following day, while he was in Paris, a telegram duly arrived from Blohm & Voss: ‘Nothing against a visit this week, next week
not possible’.
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Whatever the outcome of this meeting, it seems clear that despite the impression he sought to create, namely that his approach was being made at Mendrochowitz’s instigation, Mendrochowitz had no idea he was doing anything of the kind. In ignorance of the meeting, Mendrochowitz wrote to Blohm & Voss on 23 April
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expressing some frustration at Reilly’s demands for a higher commission:

In this matter we inform you that with utmost respect that Mr Reilly does not want to accept the application made to him on the part of Mr Frahm. He asserts that the amount offered him is not even enough to satisfy his background men and otherwise considers the sum not nearly commensurate with his services. It will not be easy for us to reach agreement with this stubborn man. We request by all means a response from you, after which the matter will be further dealt with.

Reilly’s stock with Blohm & Voss was clearly somewhat higher than it was with Mendrochowitz, for on 26 April they sent a telegram agreeing to raise Reilly’s portion from 6,700 roubles to 10,000 roubles.
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On 27 April Blohm & Voss sent Mendrochowitz and Lubiensky a cheque for 27,500 roubles made payable to the firm’s bankers, Crédit Lyonnais, St Petersburg, and a statement
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setting out how the money should be dispersed:

The fact that Reilly had clearly been asking for more than 10,000 roubles is apparent from Mendrochowitz’ reply on 27 April:

We confirm receipt of your dispatch in which you increase the portion in question by 3,300 roubles. We have not yet, however, informed the person in question because he continues to insist on the preposterous standpoint: ‘all or nothing at all’. Relenting immediately on your part would certainly at this point in time not serve its purpose and to the contrary strengthen the view of the person in question that he should succeed. It appears to be the case that he has a difficult standpoint, which is his own fault. In view of your very noble concessions, we hope to reach a result in the course of the next few days, about which we will inform you.
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When Mendrochowitz issued Blohm & Voss with a receipt
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he informed them:

We confirm with thanks the receipt of your valued letter from 27 of this month with the enclosed cheque for 27,500 roubles (twentyseven thousand five hundred roubles). With exception to the money
intended for Mr Reilly we have used the amount according to your deployment. We are not yet finished with Mr Reilly and withhold the money at his disposal until he declares his agreement to the amount. He believes he is able to act in our interests in the course of the next few days by his friends getting the German boiler system accepted. We therefore want to wait a few days until the meeting in question takes place, and we hope then agreement is achieved. We thank you in the name of all involved for transmitting the amounts in question.