Paddy Costello's MI5 files keep diplomat's Soviet spy mystery alive

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A long-running controversy over whether a senior New Zealand diplomat was really a top Soviet spy is set to reopen with the release of his MI5 files.

For years, the Security Service was convinced Desmond Patrick "Paddy" Costello was passing secrets to Moscow.

He was identified by the intelligence historian Professor Christopher Andrew, based on KGB files, as one of the Soviet Union's most important agents, but supporters have long felt he was the victim of smear campaign.

Dr Richard Dunley, a records specialist at the National Archives in Kew, west London, where his files are now open to view, said that while he was subjected to three decades of surveillance, MI5 never conclusively established whether he engaged in espionage.

Costello first came to the attention of MI5 while studying at Cambridge in 1930s, the era when Kim Philby and the other future Cambridge spies were recruited by the Soviets, for his openly left-wing views.

In 1940, his political sympathies cost him a teaching post at Exeter University, but that did not stop him getting a job four years later with New Zealand's Department of External Affairs as second secretary at the Legation in Moscow.

In a blog post on the National Archives website, Dr Dunley said Costello was reputed to have informed the New Zealand prime minister he was "a little bit left wing" only to be told "Oh well, it won't hurt us to have one or two communists in Moscow".

MI5 was horrified Costello had been appointed to such a sensitive post, but when they tried to raise their concerns with the Dominions Office, they had to admit the case against him was "a thin one".

Costello remained in Moscow until 1950, but his career began to unravel during a return visit to New Zealand.

"While in Auckland he met up with some old acquaintances; having consumed copious quantities of alcohol Costello was arrested by the police, at which point he became abusive and candidly expressed his political views," Dr Dunley wrote.

"The New Zealand police were shocked to find the man in their cells had a diplomatic passport, and began digging into his background.

"On uncovering his previous communist connections the New Zealand police commissioner took the matter up with the prime minister and MI5. British intelligence were not entirely surprised by the revelations and clearly believed them; in the words of (senior MI5 officer) Roger Hollis 'in vino veritas'"

Under pressure from the British and the Americans, Costello was finally forced out of the Department of External Affairs in 1955. He returned to Britain where he resumed his academic career at Manchester University.

MI5 however continued to fret as to whether he was working for the Russians. In 1960, his wife Bella was linked to a KGB operation to build false identities for Russian spies and in 1963 he was reported to have met two Soviet intelligence officers.

He died in 1964 with the case against him still unresolved.

"Throughout much of his lifetime, MI5 went back and forth about whether Paddy Costello was a foreign agent, or simply a politically active intellectual," Dr Dunley said.

"This story appears to be one with more to run."