Ace of Spies: The True Story of Sidney Reilly

^TWELVE A CHANGE OF BAIT

Reilly’s relationship with SIS was not the only one that hit the rocks in 1922. In the early months of the previous year he had struck up a business association with Brig. Sir Edward Spears, who had left the army the previous year. Whilst Spears had good connections that he had built up in the army, he lacked, by his own admission, business experience.¹ He proposed to make good this deficiency by taking on Reilly as a partner in the tobacco business they set up in the Czech capital Prague. Their biggest venture was, however, an attempt to commercially market Czech radium, to which end they founded the Radium Corporation Ltd.

Spears’ first impression of Reilly was ‘rather seedy but really quite nice’.² Throughout their tempestuous business relationship Spears, like Lockhart and C before him, seems caught between these two opposing sides of Reilly’s character. Often frustrated, and at times angered by his methods, he can never bring himself to dislike Reilly on a personal level.

In July 1921 Reilly met Lockhart again while on a business trip to Prague with Spears. Lockhart, who was now commercial secretary at the British Legation in Prague, was involved in ‘smoothing the way for the revival of Central European banks’.³ Spears and Reilly lunched with Lockhart, and discussed with him the situation concerning commercial opportunities and the banking negotiations that he was involved in. Reilly was, as usual, mixing business with pleasure, and seems to have taken Spears on a hectic round of socialising during their stay. The same day as their lunch with Lockhart, Spears recorded in his diary:

By the following month, Reilly’s unreliability was becoming apparent to Spears; who wrote:

The atmosphere was hardly improved when Spears received what he considered to be a ‘rude’ telegram from Reilly two weeks later. ‘I won’t stand cheek’, ⁹ Spears recorded in his diary that day. Within months, however, their relationship had taken an even greater turn for the worse. What had started out as misgivings about reliability and protocol now focused on Reilly’s honesty in his dealings with the company. Suspicions had apparently been raised as to the amount of money Reilly was taking from company funds and receiving in expenses.¹⁰ Matters came to a head on the morning of 25 October when Spears arrived at the office and was outraged to find that the phone had been cut off ‘owing to Reilly not having paid’.¹¹ After a row over an inflated expenses claim, Reilly appears to have placated Spears with yet another of his ‘get-rich-quick’ schemes, for as Spears’ diary records, on 22 November he and Reilly proceeded to the British and North European Bank ‘to see Rheiar re a Bulgarian egg scheme’. The following week Spears was again lecturing Reilly:

If 1921 had seen its ups and downs so far as the Spears/Reilly relationship was concerned, then 1922 was downhill all the way. On 20 April another Reilly ‘get-rich-quick’ scheme hit the dust. Held out as another sure-fire winner, the ‘big Moravian scheme’, in Spears’ own words, ‘went fut’.¹³ Following another row over Reilly’s business methods in June,¹⁴ Spears no doubt decided that he had no other option but to terminate his business relationship with him. On 2 August over lunch, he ‘very pleasantly’ severed his connection with Reilly.

This was a further blow to Reilly’s already depleted bank balance, which was still bearing the brunt of funding Savinkov’s activities. His chance meeting in Berlin with the wealthy widow Pepita Bobadilla, some four months after parting company with Spears, can therefore be seen as a somewhat fortuitous lifeline.

Like Reilly, much mystery has surrounded Pepita Ferdinanda Bobadilla’s true identity, nationality, parentage and origins. Many have claimed that she was born in Latin America and came over to England, where she found celebrity as an actress. According to an interview Pepita gave to The Tatler magazine in October 1918, she was born in Equador.¹⁵ On various other occasions over the years she claimed to have been born in Argentina and Chile. Reilly himself told a number of friends and acquaintances that she had an Equadorian mother and an Irish father,¹⁶ although it is not clear whether he actually believed this himself or was simply a willing accomplice in perpetuating the myth. She herself also did much to encourage and perpetuate this myth. The truth, however, is somewhat less exotic and very much more down to earth. Her mother, Isobel, was born in 1862 in Lancaster, the daughter of a flour warehouseman.¹⁷ On 5 June 1888 Isobel arrived in Hamburg, and registered at the British Consulate where she informed them she was looking for a job as a servant.¹⁸ It would seem that Isobel had met Franz Brueckmann in England and on his return to Germany had followed him. One month after her arrival in Hamburg, on 5 July, she gave birth to a son, Franz Kurt Burton.¹⁹ Although Franz Kurt’s record of birth does not indicate the name of his father, he was almost certainly Brueckmann. In fact, Isobel moved into an apartment owned by Brueckmann shortly after Franz Kurt’s birth.

Her second child, Nelly Louise Burton, was also born in Hamburg on 20 January 1891.²⁰ Again, no father’s name appears on the record. Isobel was still living at the apartment owned by Brueckmann at the time, and Brueckmann may possibly have fathered the child too. On 27 April 1892, Isobel returned to England with her two young children in tow.²¹ Two years later, Isobel gave birth to her third and last child, a daughter named Alice. Again, no father is indicated on any records.²²

In 1910 Nelly made her modest entry into show business as a dancer and in 1912 was engaged by the Bal du Moulin Rouge, in the Pigalle district of Paris.²³ The Moulin was reputedly the centre of Parisian sinfulness and was famous for having first commercialised the cancan in the 1890s. It was here that she adopted the stage name of Josefina Bobadilla.²⁴ In 1915 the Moulin burnt down and Nelly returned to England. The war had provided a great stimulus to all forms of entertainment, and the theatre in particular. Musicals proved a popular form of escapism, and were packed out by servicemen wanting to make the most of their brief period of leave. Nelly’s initial break in London was with Charles B. Cochran, who recruited her as a chorus girl after an audition in spring 1916.

With more productions and performances came the demand for more actors and actresses. This was good news for chorus girls like Nelly, as the chorus line was a ready source for promoters to tap into. In November 1916 she was given her first acting role by Cochran, who cast her as Gladys in Houp-La, which was to be the first production staged at his new theatre, the St Martin’s, which was due to open in December. Houp-La, described by Cochran as ‘a comedy set to music’,²⁵ starred Gertie Millar and George Graves. Gertie Millar, eleven years Nelly’s senior, was an old hand and had been on stage since the age of thirteen. She had been the mistress of a Russian businessman, who had only recently left London for New York, by the name of Alexandre Weinstein.²⁶

The London stage was a honey pot for rich ‘playboys’ like Weinstein and Reilly, and it was some three years later in January 1920, after a performance of Daddies, at the Haymarket Theatre that Nelly was first introduced to Reilly. It would also seem that Reilly had met her wealthy brother-in-law, Stephen Menzies, during his time in New York. By all accounts, Alice and Stephen Menzies had a very ‘open’ marriage, and it was rumoured that she and Reilly had been more than acquaintances on his return to London. Alice, the more extrovert of the two sisters, threw herself headfirst into the ‘Roaring Twenties’, as an emancipated Flapper, dancing the Charleston till dawn and maintaining her own apartment at Pembroke Mews in Belgravia.²⁷

In October 1920, Pepita married the sixty-year-old playwright Charles Haddon Chambers, thirty-one years her senior.²⁸ The marriage was a great surprise to everyone, not least the forty-year- old widow engaged to Haddon Chambers, who only learned that her intended had deserted her when she picked up the Evening Standard the following day.²⁹ Pepita, like her sister, had now found herself a husband of substance and, like Alice, maintained her own apartment, at 35 Three Kings Yard in Mayfair.³⁰ The adjective that could most accurately describe their marriage would have to be ‘short’, for five months later Haddon Chambers died of a stroke at the Bath Club, leaving the newly wed Pepita the not insub-stantial sum of £9,195.³¹

Although she had first met Reilly in 1920, her 1931 book tells of a ‘love at first sight’ encounter with ‘Master Spy’ Reilly the year after Haddon Chambers’ death:

This delegate apparently regaled Mrs Burton and her two daughters with tales of Britain’s Master Spy and his daring exploits. That same evening at dinner, Pepita claims to have had her first glimpse of Reilly:

In this romantically charged account, Reilly gets a member of the British delegation to introduce him to Pepita, and by the end of the week they have become secretly engaged. History again repeated itself when they married the following May, and Caryll Houselander discovered almost at the last moment that the man she was devoted to was about to marry another. Devastated by Reilly’s marriage, she was never really able to recover emotionally or fill the void he left. In 1947 she confided to a friend:

Reilly was not alone in being secretive about their engagement; Pepita, too, kept it hidden from those closest to her: ‘Our engagement was a secret one and I carefully kept it from my mother and my sister during the short time we were together’.

By 9 January 1923 Reilly was back in London and wrote to his ‘sweet little pal’, who was still in Berlin,³⁵ letting her know that due to the ongoing legal dispute with Baldwin Locomotives, he would be unable to visit her on 15 January. He hoped, however, that she would be able to come to London to meet him instead. Although containing little of importance, the letter is significant in that it is one of the few personal letters he wrote to a wife or lover that has survived. The final part of the letter is particularly telling in that it typifies his ‘affectionate’ charm:

For a couple who had, supposedly, only just met a few weeks before, and had spent a little over a week together, a great deal of detailed knowledge about each other’s affairs is evident from this letter. Their marriage took place on 18 May 1923 at the St Martin Register Office in London.³⁸ The witnesses were George Hill and Stephen Alley, formerly of SIS, and Pepita’s sister Alice. A lavish reception at the Savoy Hotel was attended by many theatrical acquaintances of Pepita’s and a smaller number of Reilly’s former SIS colleagues. A number of those present on the groom’s side knew or suspected that this was a bigamous marriage, but said nothing. In fact, it was his second if not third bigamous union. Although she would be blissfully unaware of this for ten years, the realities of the world Reilly moved in dawned on Pepita much quicker:

So too were the Bolsheviks. On 6 February 1922 the Cheka had been disbanded and the State Political Directorate (GPU) created in its place. When the Soviet Union came into being later that year the GPU was renamed the Unified State Political Directorate (OGPU). Having established an iron-like grip on internal dissent, the organisation now began to focus on dissidents and opposition leaders outside the Soviet Union who it perceived to be a threat to the Bolshevik regime. The ultimate eradication of such opponents was now given top priority.

To this end the OGPU was to perpetrate one of the biggest and most successful hoaxes in the history of counter-espionage. Perfecting an old Ochrana tactic, the OGPU’s Counter-Intelligence Department (KRO) set up an organisation called the Monarchist Organisation of Central Russia, whose cover was a trust based in Paris by the name of the Moscow Municipal Credit Association. The Trust was a deception operation devised to entice counterrevolutionary exiles back into Russia where they could be executed or imprisoned. Its ostensible purpose was to offer support to anti-Bolsheviks, and by so doing could infiltrate KRO agents into exile groups. This not only gave KRO impeccable first-hand knowledge of what was being planned, but also enabled it to directly influence events in groups where agents had been able to infiltrate the inner circles and take up posts of responsibility.

One of KRO’s top targets was Boris Savinkov, who they aimed to lure back to Russia through a similar deception operation codenamed ‘Syndicate II’. When in July 1923 Sidney and Pepita visited him at the Chatham Hotel in Paris, they found him closeted by bodyguards, who were clearly taking the possibility of OGPU abduction very seriously. While Reilly himself greatly admired the ‘Napoleonic’ Savinkov, his actress wife knew a ham performance when she saw one and was not the least bit impressed by ‘the portly little man who strutted in with the most amusing air of self assurance and self esteem’.⁴⁰ Pepita could hardly contain her disdain as Savinkov ‘posed in front of the mantelpiece’ thrusting his hand ‘into his breast in the approved Napoleonic manner’.⁴¹

The main subject under discussion in Paris was the growing realisation that funding for Savinkov’s cause was running thin, due to the recent decisions of the French, Czech and Polish governments to cease their contributions. Like many other European governments, they were slowly coming to the conclusion that despite the dedicated efforts of the Russian opposition, the Bolsheviks were not to be budged from power. The net result was that Reilly was left as the main source of income for Savinkov’s organisation.

In addition to this burden, Margaret was still hovering in the background exerting her mysterious hold over him. Their last meeting occurred just prior to Reilly’s departure from France, and no doubt involved a further plea from Margaret for money.⁴² Her own fortunes had shown little sign of improvement over the years. There seems little she would not do for money when in a tight corner, and could well have supplied information about her estranged husband to the Baldwin Locomotive Company, who were in the process of preparing their defence against his claim for outstanding munitions commission.⁴³

Despite Pepita’s money, Reilly was intent upon restoring his own fortunes. Ever a creature of habit he again returned to the world of patent medicine as a means of making money. With Hugh Coward and long-time associate Alexandre Weinstein he set up Modern Medicine Ltd, with £5,000 capital.⁴⁴ The three founder directors were joined shortly afterwards by William Barclay Calder, who had been a partner in the Ozone Preparations Company.⁴⁵ Reilly had high hopes for the company and placed particular faith in a preparation known as Humagsolen,⁴⁶ which he intended to market in America. To this end he and Pepita planned to visit America in July, where Reilly also hoped to further pursue his legal claim against the Baldwin Locomotive Company, which seemed to have become bogged down in the legal mire of claim and counter claim.⁴⁷ Shortly before he was due to depart he called in at the London office of his friend Maj. ‘Robbie’ Field Robinson in the Strand, and pleaded to him, ‘Robbie, I am broke. My credit in London is finished. I must get over to New York to fight my case. It is my last chance. Will you help?’⁴⁸ Field Robinson immediately went to the bank and withdrew two £100 notes which he gave to Reilly in exchange for an IOU. This enabled Reilly to book their passage. ‘Of course, I never saw the money again’, Field Robinson told George Hill twelve years later when he was assisting Hill in researching his Reilly biography.⁴⁹

It would seem that Reilly was viewed by some acquaintances as akin to a naughty child that you could never remain angry with for too long. On this basis, Reilly was often able to return to people he had previously crossed or dropped into hot water, like Lockhart, C and Field Robinson, for small favours. Edward Spears would appear to be a further example, for the week after he had procured £200 from Field Robinson, Reilly approached Spears for letters of introduction to two of his American business contacts in Chicago. On 19 July Spears wrote to Reilly:

According to Spears’ introduction, the Modern Medicine Company Ltd had ‘a brilliant future before it’.⁵¹ Sadly, when Reilly arrived in Chicago, he was unable to interest Messrs Borden and Hertz in the wonders of Humagsolen. Modern Medicine’s brilliant future failed to materialise and the company eventually went bankrupt.⁵² Neither was Reilly to find any joy concerning the other purpose of his American visit. The Baldwin Locomotive Company was to remain resolute that it was not legally obliged to pay him a cent in commission.

Returning empty handed to England in January 1924, the failures of the past year were clearly beginning to take their toll on his health. When advised by his doctor that he was on the verge of a breakdown due to business worries, he reluctantly agreed to follow the doctor’s advice and take a long holiday in the south of France for a complete rest and change of surroundings.

With their hotel reservations and railway passage booked, the Reillys were ready to depart from London during the third week of January 1924, when an unannounced visitor called at their home. In her ghostwritten book, Britain’s Master Spy, published a decade later, Pepita refers to the mysterious bearded visitor as ‘Mr Warner’ and gives a dramatic account of the events that unfolded during the week following his appearance on their doorstep.⁵³ According to Britain’s Master Spy, Mr Warner was, in fact, an anti-Bolshevik Russian whose real name was Drebkoff. Having been invited into their sitting room, he proceeded to explain that he had been delegated by anti-Bolsheviks in Russia to visit Reilly and beseech him to return and lead them to power. Appealing to Reilly’s vanity, he is quoted by Pepita as telling Reilly, ‘We want a man in Russia… a man who can command and get things done, whose commands there are no disputing… a man who will be master’. As ‘excitement was surging up within him’ Reilly found it hard not to be seduced by the call as Drebkoff told him ‘we still have no leader… with one accord they all, Balkoff, Opperput, Alvendorff, Vorislavsky and the others, call for you – we are ready to strike – we wait for your hand to guide us’.⁵⁴

Drebkoff produced documentation that seemed to substantiate his claims and invited Reilly to lunch at the Savoy. Clearly moved by this turn of events, Reilly took up the offer and consequently decided to postpone the French holiday for a week in order that he could ‘learn fully… the prospects of our friends in Russia’.⁵⁵ Barely able to resist the temptation to return, Reilly finally resolved that due to ill health he could not accept, but promised Drebkoff that once he had recovered they could count on him.

After accompanying a disappointed Drebkoff to the station to see him off on his journey back to Russia, Reilly returned home to find the house empty. Within minutes a stranger appeared at the door to tell him that Pepita had been knocked down by a car and was in hospital. Just as he was about to leave for the hospital, Pepita telephoned to tell him that shortly after he left for the station, a man called to tell her that he had been knocked down by a car and had been taken to hospital. On being offered a lift to the hospital, she readily agreed, but was drugged in the car by a hypodermic needle, and came to in a chemist’s shop where she had been left by the occupants of the car. Reilly concluded immediately that this was an attempt to kidnap him and take him back to Russia.

This cloak and dagger story of Pepita’s has understandably met with much cynicism over the years and is certainly typical of the highly dramatised stories included in her book. Before dismissing the account out of hand, however, a passage from a letter written on 25 January 1924 by Pepita to her sister Alice, who was holidaying in Cannes, should be considered: ‘after yesterday’s events it would seem there are no lengths to which Sidney’s enemies will not go’.⁵⁶

Whether the attempted kidnapping was a reality, an embellishment or a fantasy, it seems clear that something sinister occurred during their last week in England.

By the following week they had joined Pepita’s sister Alice at the Hotel de la Terrasse in Theoule, a short distance from Cannes. Despite the fact that he was supposed to be taking things easy, Reilly’s correspondence indicates that he was in almost daily communication with both political and business contacts.

In letters to Savinkov, for example, Reilly frequently refers to his perilous financial state. While his finances were indeed far from satisfactory, his repeated references to the lack of ready cash could well be a ploy, for by this stage he was more than likely tiring of his role as Savinkov’s principal coffer: ‘I am unable to send you even 500 francs. I am waiting for a few pounds from London, but have not received them yet’. After seven weeks in the south of France, Reilly was now desperate to get back to New York in pursuit of his Baldwins claim:

Despite this plea of poverty, Reilly’s mine on the moon clearly came up trumps, for after spending a month tidying up his affairs in London, he and Pepita booked a passage on the SS New Amsterdam, which sailed for New York on 7 May.⁵⁸

While Reilly was closeted with lawyers in New York, the OGPU were putting the final touches to their plan to entrap Savinkov. Having infiltrated a number of OGPU agents into Savinkov’s inner circle, moves were set in hand to persuade him to return to Russia. After several weeks of soul-searching, he finally succumbed to temptation, despite advice to the contrary from Reilly, who now travelled back across the Atlantic aboard the SS Paris to bid him farewell.

On 10 August Savinkov left Paris for Berlin, where he was met by Syndicate II agents Alexander Yakushev and Eduard Opperput. They provided him with a Russian passport in the name of V.I. Stepanov and arranged his passage to the Byelorussian border, which he crossed on 20 August. He was barely fifteen miles inside Soviet territory when Roman Pilar of the OGPU placed him under arrest as he sat down for breakfast in a forester’s hut just outside Minsk.

When news of Savinkov’s arrest and trial were announced by Izvestia on 29 August, Reilly at first refused to believe it. On 3 September The Times published an account of the trial, and Reilly immediately wrote a letter to the Morning Post (and a copy to Winston Churchill) asserting that reports of Savinkov’s capture and trial was Bolshevik propaganda, and that in all likelihood Savinkov had been killed crossing the border.⁵⁹ His letter was published in full on 8 September, but was very shortly to be proven erroneous by new information published by The Times. On learning the truth, Reilly reacted angrily, sending a further letter to the Morning Post, which was published on 15 September:

Churchill, on reading the Morning Post, sent a copy of his earlier letter to Archibald Sinclair and a word of support to Reilly:

Sir Archibald Sinclair’s reply to Churchill on 23 September further reinforces this view in quoting the Finnish financier Brunstron, whose comments on Savinkov’s behaviour are said to be ‘more merciful, and I think, shrewder than Reilly’s, whose judgement is no doubt affected by the bitter disappointment he must have felt at the failure of his plans’.⁶²

Despite the writing on the wall, Reilly continued to push his legal claim, which was eventually lost in the New York Supreme Court. Not unsurprisingly, Baldwin’s lawyers White and Case had done a great deal of homework on Reilly and his less than salubrious past.^.63 The recital of this in court caused Reilly to lose his temper and was probably the final nail in the coffin of a case that was legally tenuous to say the least.

While the verdict was a bitter blow, Reilly resolved to remain in New York and rebuild his fortunes. In December 1924 he, Upton Dale Thomas and several other old associates from his munitions days, set up Trading Ventures Incorporated at 25 Broadway, New York City.⁶⁴ In a letter to Edward Spears dated 22 January 1925 Reilly explained that:

Reilly went on to disclose the main activities of his new company:

Finally getting to the point of his letter, Reilly remarked that if Spears ‘should come across anything of this kind’ he would be ‘very glad to undertake it’. ‘I would’, he goes on, ‘also be very much interested in anything in the way of export and import between Great Britain and the United States, as well as in the placing and financing of British inventions and processes here’.⁶⁶

From company records⁶⁷ it is clear that major injections of capital were going to be necessary if his ambitions for Trading Ventures were to amount to anything. To this end Reilly was clearly hunting for new business opportunities that might bring this about. However, he was also only too keenly aware that hunting of another kind was being conducted in New York and that he was more than likely the prey.