Ace of Spies (8 page)

With his flair for languages and business, Reilly was seen as a distinct asset when he joined the staff of Ginsburg & Co., where he worked initially under G.M. Gandelman, Ginsburg’s office manager.
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In addition to ‘direct’ trading, the company also acted as agents for other enterprises such as the East-Asiatic Company, a steamship line with branches in Odessa, St Petersburg
and Copenhagen. Reilly was charged by Ginsburg to deal directly with all the line’s business and in this connection Reilly attended a major trade conference on behalf of the company in February 1902.
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Reilly’s responsibilities as representative for both companies thus explains why East-Asiatic’s business address in Port Arthur is the same as that of Ginsburg & Co.
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Also trading from the same address was ‘Grunberg & Reilly’, which along with the American firm Clarkson & Company was the main importer of American lumber.
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Reilly’s business partner in the lumber business, V. Grunburg, was, according to East-Asiatic records, also a representative of the naval steamship company and the Chinese East railway.
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The approaching war with Japan was no secret for Moisei Ginsburg, who had a web of agents in Japan and China picking up news and speculation from some of the most informed sources. After the war, Ginsburg was to claim that he had warned the Russian navy of Japanese intentions, but had been overlooked or ignored.
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It is equally possible that this claim may have been made to deflect criticism that he had been profiteering during the war. He further countered later criticism by claiming, with some justification, that his foresight had enabled the Russian garrison to hold out for two or three months longer than they would otherwise have been able to do.

Thoroughly convinced that war with Japan was inevitable, Ginsburg and Reilly had been purchasing enormous amounts of food, raw materials, medication and coal. On 10 July 1903, for example, the Russian War Ministry in St Petersburg wrote to the Russian-Asiatic shipping company in Port Arthur, asking them to make enquiries about provisions sent to Grunberg and Reilly, intended for delivery to the 4th East-Siberian Rifle Regiment. Needless to say, the regiment was adament that the shipment had never arrived. What happened to this and indeed other missing shipments remains a mystery. There were also reports that Reilly was speculating in ground-lots during this period, another indication that he was well aware of what was looming.
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In
addition to the ample provisions that were ordered and purchased from Ginsburg & Co. by the Russian Naval Ministry, the company amassed a stockpile at its own expense. For example, 150,000 roubles worth of medication and dressings were purchased some months before the first shot was even fired.

While the growing gulf between Russia and Japan was creating understandable tension in the Far East, and within the Port Arthur community in particular, closer to home Reilly’s marriage to Margaret was also under strain. What for him had always been a marriage of convenience was, for her, something very different. It is highly unlikely that she would ever have taken the risks she did five years earlier if the objective had been anything less than marriage to a man she truly loved. While Margaret no doubt found her socially restricted life dull, Reilly himself found the colonial atmosphere of Port Arthur very much to his liking. With Chinese servants to cater for his every whim at home, and the drinking and gaming clubs to while away the evenings, he lived to the full the persona of the English gentleman, albeit one with an ‘Irish father and Russian mother’. A recreation even more to his liking was afforded by the social circumstances of colonial life. Among the 4,000-strong European community was a large band of wives who, like Margaret, were often bored and neglected. Such opportunities to philander were ones that a man of his character found hard to resist. Like a good many serial philanderers of that era, his success with women seems to have relied on a judicial use of gentlemanly charm, and his undoubted ability to make a woman feel that she was the centre of his universe without resorting to obvious or overt flattery. This approach, combined with a steady stream of gifts and affectionate letters almost always seemed to do the trick. One relationship in particular, with a lady by the name of Anna, may well have resulted in Margaret’s premature departure from Port Arthur.

With his knowledge of the impending Japanese attack, now possibly only months away, he insisted that a town under siege was no place for Margaret and had her pack her things and return to
England. In the autumn of 1903 she left Port Arthur for Yokohama, then journeyed to Europe across the Pacific, via San Francisco and New York.
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Now free to continue his dalliance with Anna unhindered, their affair began to attract attention. Whether this was another relationship of short-term convenience, or the beginning of a much longer term liaison depends very much on how one interprets Reilly’s connections with the Japanese and his own hasty departure from Port Arthur the following year.

His undoubted knowledge of Japanese intentions would later lead to questions being raised about his role in Port Arthur and the allegation that he was in fact a spy in the pay of the Japanese. Authors Winfried Ludecke and Richard Deacon state clearly their view that Reilly was a Japanese spy,
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while Robin Bruce Lockhart portrays Reilly as being distinctly anti-Japanese in his account of events.
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Professor Ian Nish, of the London School of Economics, and author of
Causes of the Russo-Japanese War,
is therefore right to refer to Reilly’s role as ‘one of the unsolved riddles about the Russo-Japanese War’.
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The first known and recorded suggestion that Reilly had been a Japanese spy is contained within a US Bureau of Investigation report written by Agent L. Perkins on 3 April 1917.
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Written while Reilly was living in New York during the First World War, the report refers to information volunteered to the Bureau by one Winfield Proskey, an engineer with the Flint Arms Company, who stated that Capt. Guy Gaunt,
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the British Naval attaché in New York, had told him that Sidney Reilly had once spied for Japan. Gaunt was certainly in Manchuria at the time the Russo-Japanese War broke out, where he was serving on HMS
Vengeance
in the summer of 1904.
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It is, therefore, not unlikely that Gaunt either encountered Reilly while in Manchuria or had heard stories of his alleged spying there.

Although Richard Deacon’s stated belief that Reilly’s Japanese intelligence contact was Col. Akashi Motojiro is not supported by Akashi’s own records,
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a letter written by Reilly to an unknown correspondent simply referred to as ‘ECF’, on 3 December 1902, does clearly suggest that he did have an interest and knowledge of intelligence matters at this time:

The Manchu’s are finished. It is only a matter of time before China becomes the playground of the great powers. Their intelligence service, such as it is, for all practical purposes simply does not exist. But I should warn you that in this vacuum which is left a new and much more dangerous Secret Service will eventually spring up. Today it is like a sperm in the womb. Tomorrow? Perhaps a fully fledged child.
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Although not stated openly in the letter, the ‘sperm in the womb’ can only mean the Japanese Secret Service, who had a growing network of agents in Manchuria at this time to help them gauge Russian intentions. Britain was also keeping a watching brief on developments in the area through its Military and Naval Intelligence Departments with a view to her future policy. Her first preference would have been an agreement with the Russians to preserve the status quo in the region. Unable to achieve this objective, Britain concluded a treaty with Japan in January 1902, by which she hoped to achieve the next best thing. At the time of the treaty, the Japanese had six capital ships, Russia six, France six and Britain four. Under the treaty, Britain or Japan would come to the other’s aid in the event of one of them being at war with more than one of the other great powers. Should Japan be unable to get the Russians to come to some agreement concerning their ongoing expansionism, the treaty would at least now make it possible for Japan to contemplate war with Russia as a last resort, in the full knowledge that the French would be kept in check by the British.

Understandably, Britain took a greater degree of interest after the treaty and particularly as tensions between the Russians and the Japanese were seen to be heightening. War Office Military Intelligence records confirm that in 1903, ‘the first four officers were sent to Japan as language students’.
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The thrust of Britain’s intelligence gathering was therefore through the armed forces, although this is not to discount information
picked up by diplomatic posts and newspaper correspondents. Russian espionage files, for example, refer to a
Daily Telegraph
corres-pondent in Manchuria, a retired lieutenant colonel, Joseph Newman, who appears to have been well connected within the European business community.
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He would, more than likely, have relayed back anything of interest he had heard and could well have come across Reilly during his stint in Manchuria. Whoever Reilly was supplying information to, it was certainly not the Russians. While not expecting to lose any future conflict with Japan, they were certainly sensitive to Japanese efforts to obtain information about Port Arthur and were keen to keep a watchful eye on those suspected of being foreign spies, particularly among the European residents of Port Arthur. Comprehensive records still exist in Moscow, providing a wealth of detail about the numerous agents they themselves were running in Port Arthur and in the region generally.
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Reilly’s name is nowhere to be seen.

When the inevitable conflict between Russia and Japan broke out into open hostility on 8 February 1904, it was as a result of a surprise Japanese attack against the Russian Pacific fleet at Port Arthur. With no declaration of war prior to the attack, it bore many of the hallmarks that would characterise the assault on the American Pacific fleet at Pearl Harbor some thirty-six years later. Although the attack on Pearl Harbor was carried out in daylight by air and the attack on Port Arthur was at night by torpedo boats, the theory behind both acts of war was the same. The Japanese had calculated that the only possible way they could defeat a larger and theoretically stronger power was by attacking without warning and in so doing striking a blow from which the enemy would have great difficulty recovering.

As a result of superior intelligence, Japan’s Admiral Togo was not only aware of the positions of all Russian ships but was equally aware of the layout of Russian minefields and search-light locations. This enabled the Japanese to move through the minefields unhindered and to emerge from the darkness unseen by Port Arthur’s search lights, which on the night of the attack were mysteriously disabled.
Although Togo’s attack succeeded in crippling the Russian Pacific fleet, it was not until 1 January 1905 that the Japanese actually captured the port. Neither side had foreseen the lengthy siege of Port Arthur and the Japanese in particular were not prepared for a winter campaign. Although ultimately victorious, 58,000 Japanese lives were lost in comparison to the 31,000 Russians who perished defending the town.

Credit for Togo’s initial attack on Port Arthur, which was one of the most brilliantly conceived and co-ordinated assaults ever undertaken, was very much the result of the advance intelligence operation which enabled him to access Russian defence plans. How he managed to obtain these has been shrouded in mystery for nearly a century. When the US army, led by Gen. MacArthur, arrived in Japan in August 1945, it set about examining Japanese intelligence records. A large consignment of material was taken away by MacArthur’s intelligence chief, Gen. Willoughby, and sent to Washington for detailed analysis. Students of the Russo- Japanese War hoped that here at last would be revealed the answer to the mystery. Sadly, no hint as to the identity of the agent who procured the plans for Togo was ever found in the records, copies of which now reside in America’s National Archives in Washington DC. As a result, it was widely assumed that the solution to the riddle had been lost or destroyed.

In Moscow’s Military Historical Archives 6,000 miles away, however, a dusty file of intelligence reports finally exposes the Russians’ number-one suspect. The file, not seen by unauthorised eyes before the downfall of Soviet communism, contains a report from April 1904 addressed to ‘His Excellency the Commandant of Port Arthur’ and marked ‘Secret’.
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In it, the conclusions of an in-depth investigation into the theft of harbour defence plans are revealed, and the culprit named as one Ho-Liang-Shung, a Chinese engineer who worked under the Head Marine Architect, Svirsky. Ho-Liang-Shung had a detailed knowledge of the harbour, its fortifications and mine field. He also had access to the harbour defence plans. According to the report, he had prior
knowledge of the Japanese attack as early as 26 January 1904. On 23 February and again on 8 March, large sums of money were deposited into his bank account. On 10 April he attempted to leave without an exit permit and was detained by the port gendarme. In spite of this, he managed to escape confinement and was never seen again.

While convinced of Ho’s guilt, the Russians were clearly of the view that he had not acted alone and was very much a minor player in a wider web. The identity of his ‘go-between’, the person to whom he had given the plans and who had paid the money into his bank account, was never established. Intriguingly, some twenty-seven years later, when Margaret Reilly wrote a manu-script about her husband’s life, she referred in passing to a port engineer acquaintance he had known in Port Arthur – ‘Ho-Ling-Chung’.
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While the spellings are at variance, the chances of there being two engineers with such similar names, moving in similar circles, must be viewed as somewhat remote. Bearing in mind the intimate relationship between Ginsburg & Company and the Pacific fleet, it is highly probable that Reilly would have come into regular contact with port and naval officials at all levels. In fact, many of the naval contacts he utilised in later years were initially made during his time in Port Arthur.