What to make of new evidence in the notorious Bill Sutch spy case

Source: Radio New Zealand

Fifty years ago, the trial of Bill Sutch on charges of breaching the Official Secrets Act rocked the nation. Historian Sarah Gaitanos says evidence that was withheld from court gives us an insight into his work as an alleged agent of the KGB. That evidence is published here for the first time.

Bill Sutch could be extremely persuasive. An influential and self-assured intellectual, he could give an impressive account of himself.

In his many books his accounts of his epic solo trek in 1932, around the Arctic Ocean, across the Soviet Union and over the mountains of Afghanistan into India became more extravagant with every telling. Publishers, readers, even his wife Shirley Smith, believed them. Decades after his death, Smith was shocked to discover that it was mostly a fantasy.

Sutch had spent only two weeks in Russia. But that trip – and those two weeks in Soviet Russia – was nevertheless the start of a true story that culminated in his arrest in 1974.

In February 1975, Dr Bill Sutch was tried under the Official Secrets Act. The Act dealt with what was loosely known as spying and wrongful disclosure of communication of official information for a purpose that prejudiced the safety or interests of the state. Sutch, it was said, had been using his position of influence close to the government to gather sensitive information and pass it on to the Soviet Union – an enemy of the state in the Cold War era.

Sutch had been a senior economist in the public service, head of the Department of Industries and Commerce until his forced retirement. Since then he had worked as a consultant. He was an influential public speaker and author with a devoted following.

Over five decades since his trial, accounts of the circumstances surrounding the case have diverged depending on who is telling the story. Those who hold that Bill Sutch was a patriot who would never have betrayed his country shrug off the evidence that he was a KGB agent and point to the lack of evidence of what he was actually doing for Soviet intelligence.

But two documents that NZSIS officers found in Sutch’s office safe do provide direct insight into his activities and relationship with the KGB.

Both written in 1970, the first is a report with classified information on a Cabinet decision about Japanese fishing rights in the Pacific. It shows that Sutch, though no longer a public servant, had access to top level sensitive information. His report, apparently prepared for his KGB handler at the time, gave the Soviet Union an edge in their negotiations for fishing rights in New Zealand waters, potentially compromising the New Zealand Government’s efforts to police their relations with the USSR.

The second – the focus of this article – is a document made up of six short profiles of senior civil servants. It shows a different aspect of the role of a KGB agent.

Attorney General Sir Martyn Finlay, who had the responsibility of deciding whether the case should proceed to court, would later acknowledge that the profiles had ‘tipped the scales’ in his decision to prosecute Dr Sutch, adding that their ‘possible effects in one way or another’, had caused him the greatest anxiety.

This raises intriguing questions. The prosecution went to lengths to determine how to present them in the trial but in the event they were kept secret. The profiles remained classified until 2008 and have not been published until now.

Listen now to The Agency, a new podcast detailing the story of a Kiwi spy who was close to the Sutch case before spending six years in cover for the CIA

I came to the Bill Sutch story as the biographer of his wife (human rights campaigner and trailblazing lawyer) Shirley Smith. Sutch and Smith were married for over 30 years and after his death in 1975, she spent another 30 years defending his reputation. In private, she was more circumspect.

I examined her marriage, her responses to revelations about her husband that continued to emerge, her agonizing doubts and confusion, what she knew and didn’t know about his activities. She would say that her husband didn’t let the truth get in the way of a good story but decades after his death she was still discovering how far he had deceived her. Her discovery of letters Sutch sent to his mother revealed the simpler truth of his travels as a younger man.

She had been shocked, too, to learn of Sutch’s arrest on the night of 26 September, 1974 after agents picked him up on the way to a meeting with Dmitri Razgovorov, First Secretary of the USSR Embassy in Wellington.

The two had been observed meeting in obviously clandestine circumstances, following standard spy craft procedures known as ‘Moscow rules’.

After he was brought in, Detective Colin Lines urged Sutch to come clean and get ‘off the hook’ with the Russians. Sutch at one point asked what would happen to him if he did?

The primary purpose of the joint operation between Police and Security Service was to get Sutch’s cooperation, but Sutch refused to talk to anyone from the SIS and the police had not been sufficiently briefed as to how the matter would be hushed up. In return for his full co-operation, a full and frank account of his association with the Russians, Sutch was to be given immunity. He would have received the knighthood he longed for. His public reputation would have been left intact.

Not knowing this, Lines could only reply to Sutch that it would be a better outcome for him. Sutch considered this before replying that there was no hook.

This testimony, along with evidence of Security Service surveillance of Sutch’s clandestine meetings with Razgovorov, was presented in court.

Whether or not the jury would have returned a different verdict had the report on Japanese fishing rights and the profiles been presented as evidence, one cannot say. Sutch cut a frail figure in court and there was little desire to see him sent to jail. (He would die of liver cancer months later.) According to Smith, a juror told her that they wanted to acquit him and realised they didn’t have to give a reason.

While his acquittal did not end public debate, the profiles were kept out of the discussion until former Attorney General Sir Martyn Finlay was interviewed about them almost 20 years later. What exactly they contained was still not disclosed.

To recap, the profiles refer to a document found in a file labelled ‘Foreign Affairs’ in the safe in Sutch’s office. The document was headed ‘Memo for File’, dated 20 October 1970, and was made up of short pen portraits describing the personal experiences, aptitudes and ambitions of six civil servants, their interests and relationships with their wives.

In four of the six, their attitude towards the Soviet Union is indicated.

The subjects were Tom Larkin and Charles Craw of Foreign Affairs, Geoff Easterbrook-Smith, Geoff Datson and Harold Holden of Industries and Commerce, and Jack Lewin, Department of Statistics. Lewin was Sutch’s closest friend. None of these men were ever suspected of spying for the Soviet Union.

You can read the profiles at the bottom of this article, along with the accompanying SIS analysis.

The SIS analyst who examined the subject, written style, nature and scope of the comments concluded that they were written by a single author, a man with a ‘good working knowledge of Foreign Affairs and Industries and Commerce personnel, and of I & C departmental activities and postings reaching many years back.’

The author wrote familiarly about his subjects as if they were inferior to him. It was noted that Sutch’s background of employment, his general status and degree of influence over the years, fitted him for the part.

The profiles seemed to have been intended for a third person who had asked for information of this sort, the analyst concluded. The first five men were all dealt with in a similar way while the comments on Lewin were more specific.

The analyst wrote a hypothetical brief that the author might have been given:

Prepare brief notes on some of the more senior offices in Industries & Commerce and Foreign affairs Depts. known to you, who hold liberal left-wing political views. I attach a list of points to be covered in your consideration of the men. At the same time, include some comments on LEWIN with respect to his political views, his relationship to the NZ Labour Party and his family interests.

1 Age

2 present job/special expertise

3 Overseas postings

4 Experience and ability

5 Political views (general)

6 Political views during youth

7 Attitude to Soviet Union

8 Intelligence/intellectual ability

9 Interests/hobbies

10 Wife’s attitudes

11 Openness/talkativeness

12 Response to socials/dinners/parties

13 Vulnerabilities/weaknesses/ambitions

The analyst prepared this brief without reference to the Canadian Royal Commission Report of 27 June 1946 (the Gouzenko Report) which outlined criteria Soviet military intelligence used for recruiting agents, based on a document provided by GRU defector, Igor Gouzenko.

Subsequently the analyst studied that report and compared the similarities. He concluded that the ‘memo for file’ was written by Dr Sutch for a trained Russian Intelligence Officer seeking personality information on senior officers in the New Zealand Government Service, specifically in areas where they would expect to have access to classified information and to travel abroad on Government postings.

Crucially, this could then be used by the Soviets for recruitment.

The profiles offer the kind of information that enables an intelligence officer to assess a target: an individual’s likely career path, how to make a friendly approach based on mutual interest, vulnerabilities that might offer leverage, and so on.

The recruitment of foreign government officials is highly prized by intelligence agencies because it allows access not simply to information, but also to people elsewhere in the hierarchy. If the target is recruited in place and remains well placed, the connection can remain open and fruitful over many years.

Intelligence and defence officials are prime targets; after them, foreign affairs.

The profiles were therefore seen as significant supplementary evidence. The Crown Counsels, Solicitor General Richard Savage and Paul Neazor, decided early on to call an expert witness who could explain the methods and information targets of Soviet intelligence agencies. They considered calling a New Zealand intelligence officer to give such evidence, then decided it would be preferable to call an officer from another Service. They approached MI5 but the British were unhappy about one of their officers appearing in court in New Zealand.

Reverting to their original proposal, on 20 December, the prosecution gave preliminary notice of their intention to call additional evidence along with an officer of the New Zealand Service to explain it.

When Bungay showed the profiles to Sutch, he denied all knowledge of them and said they must have been a plant. Smith later told him that wouldn’t sound likely.

Sutch’s former sister-in-law Gladys Brown, who had been his typist in 1970, told police that she hadn’t typed them and didn’t know anything about them but according to an unsent letter to Martyn Finlay among Smith’s papers, Brown confirmed that they were typed on the office typewriter. An SIS search for the typewriter was unsuccessful. It left a question as to whether all of this would amount to evidence in the law.

The decision not to present the profiles in the trial surprised Finlay. He later asked for an explanation. Neazor wrote on 21 July 1975 that it was decided ‘there could be an argument about its probative value not sufficiently outweighing its prejudicial effect, and that it was not of sufficient value to the case as framed to warrant the diversion it would cause.’

The ‘diversion’ resonates with Finlay’s later comment about their ‘possible effects in one way or another’ that caused him such anxiety. They possibly had political repercussions in mind.

The report on the Japanese fishing rights was also not given in evidence. And at the last minute before the trial, the judge decided that cryptic entries from Sutch’s diaries that recorded times and places of clandestine meetings with his handler for years before 1974 were inadmissible because they predated the time-frame of the charge.

All this evidence was analysed by Chief Ombudsman Sir Guy Powles in his [https://www.nzsis.govt.nz/assets/NZSIS-Documents/News-supporting/SutchOmbudsmanReport.pdf

investigation of NZSIS after the Sutch trial], following allegations against them. He found the allegations were without foundation but noted that Sutch’s association with the Russians had lasted for a period of years before his meeting with Razgovorov on April 18, 1974.

Other circumstantial evidence that came to public attention was the wealth Sutch had accumulated, exceeding anything he could have earned legitimately in his career as a public servant, a consultant or as an author (even if his claim that his book Poverty and Progress sold 100,000 copies was true).

Attempts to put a figure on Sutch’s wealth have been based on some of his properties and holdings in New Zealand but not overseas. Smith discovered only in the late 1980s that his estate included a property in the Bahamas. His various overseas funds that could not be known include those in his Swiss bank account.

Sutch’s attempt to hide his wealth was made public after his death when the New Zealand Gazette named him as an evader of taxes estimated at $47,241 between 1966 and 1974, the second highest for any individual among about 650. His undisclosed income during that period was estimated to be about $100,000.

The first evidence that the package Sutch gave Razgovorov in Holloway Road on the 26 September 1974 had reached the Soviet Embassy came from Moscow after the Cold War was over. In 1993, New Zealand journalist Geoff Chapple tracked down Alexei Makarov, who had been Chargé d’Affaires of the Soviet Embassy in Wellington in 1974.

Makarov decided that with the breakup of the USSR and its secret police he had nothing to fear from giving his account of the Sutch affair. He recalled the circumstances of how he received the package of KGB material that Sutch had given to Razgovorov.

Makarov tracked down Razgovorov, who was living in retirement in Moscow. Besides recalling his meeting with Sutch in Holloway Road and how he delivered the package to his driver, Razgovorov told Makarov that he had ‘inherited’ Sutch from the KGB officer he had replaced in Wellington.

In 2014, evidence emerged from the Mitrokhin Archive in Cambridge, England, that Dr Sutch had been recruited to the Soviet intelligence service in 1950.

The Mitrokhin Archive comprises notes of KGB foreign intelligence files hand-copied secretly by archivist Vasili Mitrokhin, who had spent most of his working life in the KGB foreign intelligence archives. Disillusioned by the Soviet system and sympathetic towards dissidents, his chance came to do something in 1972 when he was given the job of overseeing the transfer of KGB foreign intelligence archives to new headquarters.

Mitrokhin secretly wrote summaries of the files, smuggled them out of the building and hid them under the floor in his villa. Over the ten years it took to complete the transfer, he accumulated six trunks of material.

In 1992 Mitrokhin approached British MI6, who then arranged for him, his family and his archive to be brought to the United Kingdom. As copies of original documents, the files have no direct evidential value, but their value in terms of intelligence proved immense. They include the following short entry under a codename: ‘Maori’ – Englishman, born 1907, New Zealand citizen, doctor of philosophy, former high-level bureaucrat in government service, retired in 1965, recruited in 1950, contact with him via Drozhzhin.

The biographical detail fits Sutch exactly and an extensive search proved it fitted him uniquely. After establishing the identity, the significant information is ‘recruited in 1950’.

‘Recruited’ in Russian has a specific meaning in Soviet intelligence, signifying that the subject knows, is tasked and will respond. Mitrokhin later published a KGB dictionary in which he defined ‘agent recruitment’ as ‘the covert involvement as agents of individuals who have opportunities to carry out intelligence tasks at the present time or in the future’.

Transactions were formally recorded. From the moment a KGB agent was on the payroll, he was ‘on the hook’.

Mitrokhin’s entry was written in the early 1970s, before Sutch’s arrest and trial. Mitrokhin names Drozhzhin as Sutch’s contact, confirming Razgovorov’s claim that he had inherited Sutch from his predecessor.

Yuri Timofeyevich Drozhzhin, First Secretary at the USSR Legation and the leading Soviet Intelligence officer in Wellington before Razgovorov, was regarded as a master spy. The pen portraits were written by Sutch for him.

Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.

– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand