Kiwi diplomat was a Russian spy, says NZSIS, author and historian

Kiwi diplomat Paddy Costello was “most likely” a Russian spy, the NZ Security Intelligence Service has said.

The statement follows questions from the Herald after a new book and, separately, the findings of a hallmark academic study said there was now evidence putting “beyond reasonable doubt” the allegation Costello was a Soviet spy.

In response to questions from the Herald, the NZ Security Intelligence Service has now for the first time stated that “Costello most likely was working with the intelligence services of the USSR”.

It’s a claim that continues to be refuted by core Costello supporters, including his family and particularly Oxford University academic, New Zealander Rita Ricketts.

Auckland-born Costello was a brilliant Cambridge scholar, intelligence officer for General Bernard Freyberg during World War II, New Zealand’s post-war representative in Moscow after the war, and then to Paris.

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He was also a communist marked by marriage to fellow communist Bella (Bil) Lerner with a diplomatic career that included post-war Moscow and a posting in Paris forever marked by questions over New Zealand passports issued there to two of Russia’s most infamous spies.

The British wanted Costello gone but he was closely connected and warmly embraced by leading New Zealand figures – so much so that he spent a month in 1953 driving Prime Minister Sid Hollard around Europe.

The new details come after intelligence researcher Trevor Barnes’ research of MI5 files held in Britain’s National Archive and from by historian and researcher Denis Lenihan’s analysis of archival material in New Zealand, including transcripts from an unpublished interview carried out by historian Michael King.

The Herald approached the NZSIS for comment and was told: “NZSIS assesses that Costello most likely was working with the intelligence services of the USSR and the association was substantiated by information in the Mitrokhin Archive.”

The archive was compiled by KGB archivist Vasili Mitrokhin over 30 years. Mitrokhin defected to the United Kingdom in 1992, handing the archive to the West.

A NZSIS spokesman said Costello’s connection to false passports used in the Portland Spy Ring – the focus of Barnes’ book – was “looked into extensively at the time it came to light in the early 1960s”.

“Investigations as to who was responsible for issuing the passports, and whether they were knowingly supporting the intelligence services of the USSR, were inconclusive.”

It did not mean there was no connection but a “direct link” between the passports and Costello “has never been established”.

The spokesman said the service’s certainty of a relationship between Costello and Moscow was based on the contents of the Mitrokhin Archive. The NZSIS had previously been unable to confirm the source of its assertion.

Barnes said it detailed Costello’s links to Russia in his new book Dead Doubles: The Extraordinary Worldwide Hunt for One of the Cold War’s Most Notorious Spy Ring.

He said the case was closed on the former New Zealand diplomat. “You have to look at all the evidence before you can reach ‘beyond reasonable doubt’. I think it’s clearly beyond reasonable doubt he was a KGB spy.”

Barnes’ book Dead Doubles aims to tell the story behind the Portland Spy Ring, which was a network of Russian agents undercover in Britain spying on naval research developments.

Key Russian spies among the network were Americans Morris and Lona Cohen, who were operating in England under the false New Zealand identities of Peter and Helen Kroger. As the Cohens, the couple had fled the United States a decade earlier after Lona Cohen successfully stole nuclear secrets.

The Portland spy ring was broken up in January 1961, exposing the Krogers and casting a fresh spotlight of suspicion on Costello because of his role at New Zealand’s Paris diplomatic outpost where the Cohens’ false passports were issued.

At that stage, Costello had already suffered decades of suspicion, detailed by Lenihan in a fresh exposition for Victoria University Stout Centre’s Security and Surveillance History series.

Lenihan detailed how the New Zealand Government came under significant and persistent pressure to cut ties with Costello, yet continued to defend its well-connected, highly-regarded diplomat.

Costello’s greatest cheerleader was Sir Alister McIntosh, who led both the Prime Minister’s Department and the Department of External Affairs, as our foreign affairs ministry was called at the time.

Lenihan claimed McIntosh shielded Costello through withholding information from New Zealand’s nascent security services, and continued to support his diplomat in the face of pressure from the United Kingdom and United States to drop him.

That protection endured even when the British blocked sensitive intelligence information being sent to New Zealand’s Paris diplomatic office simply because of Costello’s presence.

Lenihan wrote: “There can have been few more extraordinary events in the history of New Zealand diplomacy: a post had been rendered ‘more or less useless’ by a determination to retain an individual member about whom the most senior levels of the New Zealand administration had been warned.”

Eventually, in 1952, Costello was told he would have to leave government service. McIntosh gave him time to find a new job, which took him through to 1955.

Lenihan said McIntosh “completely changed his mind about Costello” towards the end of his life. The shift was revealed in 1978 transcripts of an interview historian Michael King carried out with the retired Wellington diplomat.

In a letter found by Lenihan, King wrote in 2000: “McIntosh believed that both men[Costello and fellow spy-accused Bill Sutch] had been working for the Russians when they were employed by the New Zealand Government, and produced evidence to this effect.”

Other evidence against Costello included his alleged identification as “Agent Long” in a KGB archive smuggled out of Russia, being named by defecting KGB agents as the person behind the Cohens’ passports, and Russian intelligence describing him as one of its “top 10” agents in Paris.

In the 1960s, MI5 suspicions rose again the Portland spy ring disgorged the Cohens and their false New Zealand passports. Fresh inquiries into Costello led to him being tailed to meetings in London with KGB agents while his wife Bil Costello was implicated in obtaining a passport through birth certificates of dead babies. Inquiries ended with Costello’s death by heart attack in 1964.

Former diplomat and senior public servant Gerald Hensley knew McIntosh and described him as utterly loyal to his staff.

“It was the sort of thing that made the rest of us trust him completely. Perhaps he was unwise with that loyalty to Costello.”

Hensley joined the Department of External Affairs in the early 1960s where, he said, there was a strong feeling Costello was not a Russian agent. Information made public since then would be complete when access was gained to Russian intelligence files in Moscow, he said.

Hensley said the focus on Costello needed to be seen in the context of the Cold War and the “relentless” Soviet attempts to manipulate or penetrate New Zealand.

Academic Ricketts has written papers and articles disputing many of the assertions on which Barnes and Lenihan rely.

She said Costello became a target because he didn’t fit the mould of the polished diplomat. She said Costello was also prone to speaking his mind, even if such thoughts were not in vogue.

Costello’s problem, she said, was one he recognised – he was “too clever by half”.

“There was this real paranoia about spies, and so they looked around (and fixed on Costello). The only shred of evidence that could clear this whole thing up is if there is something in the secret service files in Moscow.”

Ian McGibbon, editor of the NZ International Review, said it was still impossible to know for sure until Russia allowed access to its intelligence archives.

“Was he a brilliant diplomat or was he a brilliant traitor?”

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