Inside Story

Soldiers, spies and Soviets

Books | Inept and corrupt, Australia’s earliest security organisations were ill-equipped for emerging threats

Phillip Deery 7 August 2020 1515 words

Full force: NSW detective inspector Bill MacKay (left) taking into custody Francis de Groot of the proto-fascist New Guard after he pre-empted the opening of the Sydney Harbour Bridge in 1932. Fairfax archive of glass plate negatives/National Library of Australia

Traitors and Spies: Espionage and Corruption in High Places in Australia, 1901–50
By John Fahey | Allen & Unwin | $34.99 | 448 pages

Is a security service essential? John Fahey, a former intelligence officer, certainly thinks so, and this belief underscores his scathing analysis of the uneven and unsuccessful efforts to develop an effective Australian security and intelligence service before 1950.

The central argument of Traitors and Spies has two parts. First, that the security services, in their changing incarnations during the first half of the twentieth century, were beset by systemic corruption, political self-interest, insufficient resources and staff, bureaucratic incompetence, internecine departmental conflicts, and bitter turf wars between the military and civilian authorities. Second, that the threat of espionage and clandestine communist activities was growing: Fahey sees a straight line from the Comintern’s Alexander Zuzenko, who established cells that performed “illegal work” in Australia after the Bolshevik revolution, to Wally Clayton’s “Klod” network, which successfully penetrated the Australian government in the 1940s and passed secrets to the Soviet Union.

The capacity of the hotchpotch security services to counter these threats, Fahey further argues, was negligible; in fact, their efforts were a “complete failure.” But all this changed when ASIO was established in 1949, and especially when it was led by Charles Spry, who brought “order, professionalism and focus” to the struggle against domestic subversion and Soviet espionage.

Underpinned by an extensive and meticulous examination of security files in the Australian and British archives, this is a sprawling book with a large cast of characters, ranging across time and places. It begins with the fitful attempt in the years before the first world war to identify and remove non-white immigrants and residents. The organisation given this role, the Australian Intelligence Corps, established in 1907, was racist and xenophobic — consistent with the newly minted White Australia policy — rather than political: Japanese spies more than socialist agitators were its targets.

It was not until 1916, when the Counter Espionage Bureau was formed, that the Industrial (not “International”) Workers of the World, or IWW, and Irish-born anti-conscriptionists were subjected to surveillance and scrutiny. Even then, it was the Unlawful Associations Act 1917 that was most responsible for decapitating the IWW. Although the wartime bureau was largely ineffectual, it became a political tool for the capricious prime minister, Billy Hughes, who established the persistent tradition of political interference in the security services.

Fahey’s discussion of the first world war is punctuated by contestable claims. To dismiss the IWW as “social malcontents,” for example, misunderstands the theoretical bedrock of syndicalism and the widespread disenchantment with the parliamentary road; indeed, the war gave the IWW a sturdier platform and an increasingly receptive audience.

Historians of the Great Strike of August–September 1917, one of the most protracted and bitterly fought industrial conflicts in Australian history, would be astonished to learn that a “semi-truce” existed between the Hughes government and the working class prior to the October revolution in Russia. Or that in 1918–19, “Australian workers did not need the leadership of socialists” when, in fact, these years marked the peak of workers’ militancy, a record strike wave and a discernible leftward shift in a labour movement in which explicitly socialist ideas were both appealing and influential.

In the interwar period, the security services, most notably the Commonwealth Investigation Branch, or CIB, were disorganised, deficient in resources and lacking professionalism. It was mainly the state police forces and Military Intelligence that assumed responsibility for the surveillance of radical activists, or “subversives.” By October 1939 the number of CIB inquiry officers totalled seven. “Effectively,” Fahey writes, “Australia had no counterespionage capability.” But two individuals stand out, and Fahey accuses both of them of significant “procedural corruption.”

The first was a NSW Police Force inspector, superintendent and later commissioner, W.J. (“Wee Wullie”) MacKay. Best known for dragging New Guardsman Francis de Groot from his horse after his sabre prematurely opened the Sydney Harbour Bridge in 1932, MacKay directed the full force of his security apparatus to combating the threat to law and order posed by the quasi-fascist, paramilitary New Guard. MacKay also took on the Old Guard, the subject of Andrew Moore’s book, The Secret Army and the Premier. Yet Fahey alleges that this shadowy organisation was “a fabrication of MacKay’s fertile mind,” a threat manufactured to strategically buttress his own power. Here, Fahey relies heavily on Richard Evans’s article about MacKay in History Australia but ignores Moore’s detailed rebuttal.

The second individual dominating this period, brought vividly to life in Traitors and Spies, is R.F.B. (Bob) Wake. Like Colonel Spry, who sacked Wake in 1950, Fahey is scathing of this “morally weak” and duplicitous figure, whose rapid rise through the security services he charts. By 1942, Wake, an army major, concurrently held no fewer than four posts in Queensland, his “fiefdom”: director, Military Intelligence; director, Field Security Service; inspector-in-charge, CIB; and regional director of the freshly formed Commonwealth Security Service. This remarkable concentration of power attracted concern and criticism, especially from the army.

Yet Wake emerged unscathed from an inquiry into his operational record and character chaired by Justice Geoffrey Reed in 1943. Reed had been appointed by Dr H.V. Evatt (another of Fahey’s procedurally corrupt politicians), “most likely” on Wake’s own advice. Fahey hints at collusion between the three — Wake, Reed and Evatt — that resurfaced when ASIO was formed in 1949: on Evatt’s recommendation, Reed became its first director-general and Wake his deputy. Wake’s close relationship with Evatt continued into the early 1950s, when (under the pseudonym “Phil’s friend”) he provided Evatt with questionable intelligence.

The book confirms Wake’s ruthlessness in rounding up and interning Italians in wartime Queensland, yet overlooks his selectivity: strong circumstantial evidence now suggests that he shielded his pro-fascist friend, Sir Raphael Cilento, from internment against the explicit advice of army intelligence. But Wake and the Commonwealth Security Service (now led by the indefatigable MacKay) were not selective in their draconian treatment of Jehovah’s Witnesses and the Australia First Movement, the focus of two illuminating chapters. Surprisingly, though, Fahey overlooks the raids on the Communist Party (banned from June 1940 to December 1942) and the repression and arresting of its members, conducted or overseen by the security services.

Spies are the central preoccupation of the remainder of the book. The activities of the Russian intelligence services in Australia, Clayton’s Klod network in the Department of External Affairs, and an apparent Soviet cell in Melbourne are examined in forensic detail. The first two have already been the subject of historical analyses (by Des Ball, David Horner and David McKnight), but Fahey uses MI5 files in the British archives and the top-secret decrypted Soviet cables codenamed Venona (released by the US National Security Agency in 1995) to good effect.

It is Fahey’s identification of the unfamiliar Melbourne group — primarily three obscure businessmen and a well-known communist, all handled by Soviet military intelligence, or the GRU — that has been promoted by the publisher as a significant discovery. Each was interrogated by the 1954–55 royal commission on espionage but none was convicted of espionage. In such matters, documentary proof can be highly elusive, but this reviewer, despite the publisher’s claim, could find no evidentiary trail of operational links between the members of this “professional” cell or between it and the GRU.

Notwithstanding the depth of the author’s research, the originality and scope of his detective work, and the important argument regarding the ineptness and inefficiencies of the successive security services, Spies and Traitors is undermined by false assumptions and errors of fact. A few examples. It is incorrect to detect “a decline in the energy” and a “lack of interest” in security concerns within the Chifley Labor government in 1949 because of a preoccupation with the general coal strike. On the contrary, the director-general of ASIO was a regular visitor to Chifley’s office in July 1949, advising on communist activities. It is incorrect to judge the Commonwealth Investigation Service (not CIB) raid during that strike on Marx House, the Communist Party headquarters, as “at best a fishing expedition” designed to “make mischief.” In fact, the truckload of documents ASIO seized helped it identify those earmarked for internment camps under the Communist Party Dissolution Act 1950.

It is also incorrect to assume, as ASIO did and Fahey does, that because the Russian intelligence services assigned a codename to conceal an identity, the individual was ipso facto a Soviet agent. For instance, neither Nina Christesen (not “Christiansen”), who chaired the Department of Russian Language and Literature at Melbourne University from 1946, nor her husband Clem, the founder and editor of Meanjin, were Soviet spies or members of what Fahey terms the “CSIRO network” in 1948. There is also compelling evidence, including the Venona decrypts, that Ric and Dorothy Throssell were not members of Clayton’s Klod network, which Fahey axiomatically assumes but neglects to demonstrate.

Such errors of fact or judgement blemish a book with an otherwise strong historical backbone. In short, this is an ambitious but flawed work. But, as with his earlier book, Australia’s First Spies: The Remarkable Story of Australia’s Intelligence Operations, it is one that will have great appeal to those interested in the history of Australian security and intelligence. •