Ace of Spies (9 page)

Reilly and Ho are further linked by their mutual disappearance, for shortly after Ho’s escape, Reilly too departed. In 1917 Moisei Ginsburg recalled that Reilly had ‘suddenly vanished’, leading the local Russians to conclude that he was a spy.
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Winfried Ludecke and Richard Deacon have both maintained that Reilly concluded the Russians had their suspicions about him after discovering someone associated with East-Asiatic was in the employ of Russian intelligence.
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This theory again finds corroboration in Moscow archives, which reveal that one of Russia’s most valuable espionage finds was a British citizen by the name of Horace Collins who indeed happened to work for the East-Asiatic Company. Collins was born on 12 March 1870 in Hever, Kent.
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His father was a well-to-do farmer, and Horace grew up working
with horses, eventually taking up an apprenticeship as a jockey at the nearby Lingfield stables. On completion of his apprenticeship in 1893 he went to the Far East, where he eventually secured a job at the stables of the Japanese Emperor. It was during this period that he learnt to speak Japanese and a Chinese language. Although moderately successful as a jockey, it was not long before he took to business, making the most of his oriental languages and travelling widely on behalf of various trading houses in China, Korea, Japan and eastern Russia.

There is no indication in Russian records as to how Collins was recruited as a spy, although money may well have been a factor. It would seem from the commentary in his file that he was not exactly prospering in business when he was first recruited. From the Russian point of view, he was most useful by virtue of his language abilities and his knowledge of Japan and her people. Accordingly, the Russians were paying him $300 per month plus expenses.
²⁹

Whether Reilly’s discovery of the Russian agent was made by chance or through a third party is unknown. However, bearing in mind the suggestion that he was involved in an affair with a woman by the name of Anna, one candidate stands out in particular – Anna Grigoryevna Collins, Horace Collins’ Russian-born wife.
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She not only knew of his work for the Russians, but was also known to be having an affair with an associate of her husband.

Having made a swift exit from Port Arthur, Winfried Ludecke suggests that Reilly headed for Japan in the company of ‘a lady with whom he had been flirting’.
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Whether Anna and the lady companion are one and the same is conjecture. If Reilly did go to Japan, he could not have stayed there very long, for in June 1904 we find him in Paris.
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During the brief time he spent in the city he renewed his acquaintance with William Melville, whom he had last seen in 1899, shortly before his hurried departure from London. Reilly’s meeting with Melville is most significant, for within a matter of weeks Melville was to enlist his help in what would later become known as the D’Arcy Affair.

Authors writing about Reilly’s role in the D’Arcy Affair have often relied on Reilly’s own tale of what happened. Other sources lead to a rather different train of events. The background to the affair is succinctly set out in a letter of reminiscence dated 30 April 1919 from E.G. Pretyman MP to Sir Charles Greenway, the chairman of The Anglo-Iranian Oil Company,
³³
in which Pretyman recounts his own involvement some fifteen years earlier, as Civil Lord of the Admiralty, in securing the Persian oil concession for Britain, which led indirectly to the founding of the Anglo-Iranian Oil Company:

In 1904 it became obvious to the Board of the Admiralty that petroleum would largely supersede coal as the source of fuel supply to the Navy. It was also clear to us that this would place the British Navy at a great disadvantage, because, whereas we possessed, within the British Isles, the best supply of the best steam coal in the world, a very small fraction of the known oilfields of the world lay within the British Dominions, and even those were situated in very distant and remote regions. Lord Selborne therefore decided to appoint a small Standing Committee to deal with this question and to take any steps they found possible to bring additional sources of petroleum supply under British control. I was appointed Chairman of this Committee and was assisted by Sir Boverton Redwood and the late Sir Henry Gordon Miller, then Mr Gordon Miller, Director of Navy Contracts. In the course of our investigations we learned through Sir Boverton Redwood that the late Mr D’Arcy had secured a valuable concession from the Persian government of the oil rights in southern Persia, and that he was negotiating for a similar concession from the Turkish Government for oil rights in Mesopotamia. We also ascertained that Mr D’Arcy was desirous of disposing of his rights under the Persian Concession to some financial Syndicate with the necessary capital and experience to undertake development operations. We further ascertained that D’Arcy was, at that moment, in the Riviera negotiating for the transfer of his concession to the French Rothschilds. I therefore wrote to Mr D’Arcy explaining to him the Admiralty’s interest in petroleum development
and asking him, before parting with the concession to any foreign interests, to give the Admiralty an opportunity of endeavouring to arrange for its acquisition by a British Syndicate.

I further asked him to come and see me on the subject. Mr D’Arcy accepted my invitation and returned from the Riviera to discuss the position with me. As a result of our conversation, the Committee approached the Burmah Oil Company with whom arrangements had already been made for emergency supplies of Naval Oil fuel, and, after investigating the prospects of the Persian Oil Field, they agreed to undertake its development and to form a Syndicate.

D’Arcy had already spent over £150,000 in the search for oil over and above what he had spent in obtaining the concession in the first place. It was clear that he could not continue in this way. He soon found, however, that he was very much in a ‘chicken and egg’ position, as potential backers, including the British government, would have nothing to do with the project until oil was found. Then, in December 1903, there seemed to be hope in that Lord Rothschild, who had heard of D’Arcy’s venture, had expressed the view that it was of ‘great importance’. D’Arcy’s intermediary, Sir Arthur Ellis, met with Lord Rothschild and on 30 December wrote to D’Arcy to inform him that Rothschild would be writing to his cousin Baron Alphonse de Rothschild in Paris. It was indicated to the Rothschilds by Sir Arthur Ellis that £2 million would have to be spent in Persia. A personal meeting was therefore arranged between D’Arcy, who was accompanied by John Fletcher Moulton, and Baron de Rothschild in Cannes. According to the records of the Anglo-Iranian Oil Company, this meeting took place towards the end of February 1904.
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Pretyman’s letter also raises a number of other questions: why, for example, had the British government had such a quick and fundamental change of heart in now wanting to assist D’Arcy? Back in November of the previous year they had shown a distinct lack of enthusiasm for assisting him. Now, three short months later,
they had not only a dramatic change of mind but were positively pursuing him to the negotiating table.

It may well be that in December 1903 the government view was that in the absence of any other potential D’Arcy backers they could afford to wait for a sign of the concession’s potential before committing any money. The situation changed dramatically the following month, however, when it seemed not only that D’Arcy had now found potential funding, but that potential funding was sourced abroad and might purchase the concession outright.

In
Ace of Spies,
Robin Bruce Lockhart repeats one of Reilly’s oft-recited tales of how, at the British Admiralty’s behest, he tracked down D’Arcy and covertly approached him in the south of France. According to Reilly, he boarded de Rothschild’s yacht disguised as a priest and persuaded D’Arcy to break off negotiations and return to London to meet with Pretyman and the Admiralty.
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This story is clearly fantasy on Reilly’s part, for in February 1904 he was thousands of miles away in Port Arthur. However, this should not discredit the theory that the Admiralty was engaged in efforts to entice D’Arcy from the clutches of the Rothschilds.

As D’Arcy and the Rothschilds were making the first tentative moves towards exploratory talks, William Melville mysteriously resigned as head of Special Branch on 1 December 1903. No known reason was given for his sudden departure. His Metropolitan Police Service File would have contained the answer to this puzzle, but unlike those of other Special Branch heads, it is no longer to be found. Had he made too many anarchist enemies, and decided to disappear from view, or had he accepted a lucrative position outside the force? All the signs are that this was a speedy and unplanned departure. Patrick Quinn was appointed to succeed him, and as an indication of the haste involved, was promoted to superintendent without sitting the usual examination, which he would have done well in advance if his promotion had been planned and anticipated.

Where then did Melville go? It seems unlikely that his departure was motivated by a desire to avoid the attentions
of anarchists or any other undesirable element, as his name and address continue to appear in the London Post Office Directory from the time of his resignation in 1903 to the time of his death in 1918.
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There is no indication either, from any source, that he set up in business in Britain or abroad. It was not until after his death on 1 February 1918,
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that a clue to this mystery presented itself in the ‘Funerals’ column of
The Times
on Wednesday 6 February 1918. Under the heading ‘Mr William Melville’, the report referred to his funeral the previous day at St Mary’s Cemetery in Kensal Green, and went on to state that he was ‘formerly a superintendent of Special Police at Scotland Yard, and recently of the Military Intelligence Department of the War Office’. Among those listed as attending the funeral was one Lt Curtis Bennett RN, who author Nicholas Hiley
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believed was a naval intelligence officer. This led Hiley to speculate that Melville had been recruited by NID, the Naval Intelligence Division, in 1903 and that he later joined MI5 during the First World War, as stated by
The Times
report.
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Research by this author has confirmed that Henry Curtis Bennett was indeed an intelligence officer, but was an MI5 officer with no connection to the Naval Intelligence Division.
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It was not, however, until November 1997, when MI5 released material on Melville to the Public Record Office, that Hiley’s theories were finally corroborated, if only in part.
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It revealed that ‘W. Melville, MVO, MBE, was employed with effect from 1 December 1903’ by the War Office.
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It further indicated that he initially worked in the second auxiliary of the Military Intelligence Investigation Branch, which was later incorporated into MI5 when the new service was created in 1909. Those working in this branch are described as ‘shadowing staff’, whose responsibility it was to ‘watch and report’ on designated persons.

We know from contemporary records that the Admiralty and the War Office worked closely together on a number of intelligence matters, and shared the cost of such operations.
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Had the Admiralty decided in December 1903 that a close eye should
be kept on developments between D’Arcy and a possible French source of funding? It is highly unlikely that Pretyman would have written such a letter to D’Arcy completely out of the blue, particularly bearing in mind that there does not appear to have been any contact between them since the rejection of D’Arcy’s approach to the Admiralty the previous November. It is therefore probable that some reconnaissance work took place prior to Pretyman’s approach. The impression given by Pretyman in his letter to Sir Charles Greenway is significant, in that it states, ‘we further ascertained that Mr D’Arcy was, at that moment, in the Riviera negotiating for the transfer of his concession to the French Rothschilds’. This very much suggests that such information had come to them literally at a moment’s notice, necessitating prompt action.

D’Arcy was staying at the Grand Hotel while the Rothschild negotiations were taking place, and there would seem little point in the kind of approach featured in Reilly’s story. Where better to approach D’Arcy than at his own hotel, and who better to do so than a fellow guest?

Le Littoral
very helpfully lists comings and goings during the period that Alphonse de Rothschild and William Knox D’Arcy were in Cannes. Of the many British visitors passing through, one particular couple stand out – Mr and Mrs William Melville, who stayed at the Grand Hotel throughout D’Arcy’s stay there.
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Melville was no stranger to France,
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and was a fluent French speaker.
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Whatever transpired during the Melville’s ‘holiday’ in Cannes, D’Arcy was soon in receipt of Pretyman’s letter and on his way back to London to meet with the Admiralty’s Oil Committee, who approached Burmah Oil to undertake the formation of a British syndicate.

This process was not, however, quite as speedy and seamless as Pretyman implied fifteen years after the event. In fact, negotiations between D’Arcy and the Burmah Group did not begin for another six months. In the intervening period D’Arcy was experiencing more difficulties with Lloyds Bank, who were pressing him to
put forward the concession itself as security against his overdraft, something D’Arcy fiercely resisted. As a result, D’Arcy once again turned to Alphonse de Rothschild, although this time he did not negotiate directly, but sent John Fletcher Moulton to Cannes as his representative.
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Melville, by virtue of the fact that he was now a known quantity so far as Fletcher Moulton was concerned, perhaps felt that his presence could compromise the situation, and appears at this point to have enlisted Reilly’s assistance.

Back in February, the threat that the oil concession might slip into foreign hands had been successfully averted. Now, three short months later, the possibility was again in contention, and it was deemed essential from the Admiralty’s point of view that the renewed talks be stopped dead in their tracks. Unable to again play the same hand that had worked so well before, namely to appeal to D’Arcy’s patriotism, other means of stalling the negotiations had now to be found.