Andrew Cook - Ace of Spies

Josef Mendrochowitz, an Austrian Jew, was born in 1863 and came to St Petersburg in 1904. 5In partnership with Count Thaddaeus Lubiensky he founded a firm of brokers, Mendrochowitz and Lubiensky, who successfully secured the right to represent Blohm & Voss shortly thereafter. Under the representation contract, Blohm & Voss undertook to pay Mendrochowitz and Lubiensky a commission of 5% on each successful business deal. 6In Ace of Spies, Robin Bruce Lockhart argues that ‘Mendrochovitch and Lubensky’ were awarded the rights of representation in relation to Blohm & Voss in 1911, as a result of Reilly’s chicanery with the Russian Admiralty. Blohm & Voss archives and Mendrochowitz and Lubiensky’s own business records demonstrate quite clearly that this was not the case. At the time the contract was awarded, Reilly was not even in Russia. According to the St Petersburg Police Department, Reilly first arrived in the city en route from Brussels on 28 January 1905, 7where he seems to have stayed for a comparatively short period of time before moving on to Vienna. By the summer of 1905 he was back in St Petersburg, this time with the intention of staying on a more or less permanent basis.

Thanks to a chance meeting with George Walford, a British born lawyer, whom he accompanied to St Petersburg’s Warsaw Railway Station on 10 September 1905, an account of his activities at this time have found their way into Ochrana records. Walford was under Ochrana surveillance, and Reilly was watched and followed from 11–29 September as a result of his being seen with him. Why Walford was under surveillance is unclear, although it was routine practice for the Ochrana to keep a watchful eye on foreign citizens, a task they took even more seriously in the wake of the Russo-Japanese War. The surveillance on Reilly yielded nothing of value for the Ochrana, although it is most helpful to us in confirming that on arrival in St Petersburg, Reilly made contact with Mendrochowitz and Lubiensky, and actually lived in their apartment building at 2 Kazanskaya. According to the surveillance report, Reilly also visited the offices of the China Eastern Railway and introduced himself as a telephone supplier. Whether or not he succeeded in making a sale is unknown. Bearing in mind that Ochrana ‘tailers’ often gave their targets nicknames in written reports, Reilly was appropriately referred to as ‘The Broker’. 8

If Reilly had nothing to do with Mendrochowitz and Lubiensky securing the right to represent Blohm & Voss, did he have any connection or dealings at all with the firm? Details of the firm’s dealings are contained in six volumes of files containing over 1,000 pages of correspondence and records now held by the Hamburg State Archive. In addition to the two partners, there appear to have been four other employees, including deputy manager Jachimowitz, who ran the office in the absence of the partners and was particularly well connected with influential Russian politicians. Reilly’s name is not among those employed by the firm, but is mentioned in letters and invoices concerning his work on behalf of Blohm & Voss, as a freelance broker during the winter of 1908 and the spring of 1909. During this time he was working with Mendrochowitz and Lubiensky, assisting them in marketing a new Blohm & Voss boiler system. Company records show that agents or brokers like Reilly were often used to ‘influence’ people in favour of the company.

Exchanges of correspondence and telegrams between Mendrochowitz and Lubiensky and Blohm & Voss in Hamburg during this period give some impression of the working relationship between the firm and the freelance Reilly. His name first surfaces in a telegram dated 14 December 1908 9in which Blohm & Voss are told that ‘Reilly asks for advance payment of 1,000 roubles urgently. Please notify us whether we should pay’. It is apparent from Blohm & Voss records in Hamburg that Reilly was not only waging his campaign for a higher fee through Mendrochowitz but was also making personal representations to Blohm & Voss. On 13 April, while staying at the Hotel Bristol in Berlin, he sent them a handwritten letter:

Dear Mr Frahm,

I am here in Berlin on my way to Paris, where I will stay only tomorrow.

At the initiative of Mr Mendrochowitz (who is in Vienna right now) I dare to ask you whether it would be convenient for you if I came by on my way back and visited you in Hamburg. Mr Mendrochowitz was of the opinion that the unsolved matter between us would be dealt with best by a meeting. I will be at the Grand Hotel Paris tomorrow until 1 p.m. and would be grateful for a telegram.

The following day, while he was in Paris, a telegram duly arrived from Blohm & Voss: ‘Nothing against a visit this week, next week not possible’. 11Whatever the outcome of this meeting, it seems clear that despite the impression he sought to create, namely that his approach was being made at Mendrochowitz’s instigation, Mendrochowitz had no idea he was doing anything of the kind. In ignorance of the meeting, Mendrochowitz wrote to Blohm & Voss on 23 April 12expressing some frustration at Reilly’s demands for a higher commission:

In this matter we inform you that with utmost respect that Mr Reilly does not want to accept the application made to him on the part of Mr Frahm. He asserts that the amount offered him is not even enough to satisfy his background men and otherwise considers the sum not nearly commensurate with his services. It will not be easy for us to reach agreement with this stubborn man. We request by all means a response from you, after which the matter will be further dealt with.

Reilly’s stock with Blohm & Voss was clearly somewhat higher than it was with Mendrochowitz, for on 26 April they sent a telegram agreeing to raise Reilly’s portion from 6,700 roubles to 10,000 roubles. 13

On 27 April Blohm & Voss sent Mendrochowitz and Lubiensky a cheque for 27,500 roubles made payable to the firm’s bankers, Crédit Lyonnais, St Petersburg, and a statement 14setting out how the money should be dispersed:

For yourself: 15,000 roubles

For Mr Reilly: 10,000 roubles

For payments already made to Mr Reilly: 300 roubles

For Dr Polly: 1,000 roubles

For payments already made to Dr Polly: 1,000 roubles

For your typist: 200 roubles

The fact that Reilly had clearly been asking for more than 10,000 roubles is apparent from Mendrochowitz’ reply on 27 April:

We confirm receipt of your dispatch in which you increase the portion in question by 3,300 roubles. We have not yet, however, informed the person in question because he continues to insist on the preposterous standpoint: ‘all or nothing at all’. Relenting immediately on your part would certainly at this point in time not serve its purpose and to the contrary strengthen the view of the person in question that he should succeed. It appears to be the case that he has a difficult standpoint, which is his own fault. In view of your very noble concessions, we hope to reach a result in the course of the next few days, about which we will inform you. 15

When Mendrochowitz issued Blohm & Voss with a receipt 16he informed them:

We confirm with thanks the receipt of your valued letter from 27 of this month with the enclosed cheque for 27,500 roubles (twentyseven thousand five hundred roubles). With exception to the money intended for Mr Reilly we have used the amount according to your deployment. We are not yet finished with Mr Reilly and withhold the money at his disposal until he declares his agreement to the amount. He believes he is able to act in our interests in the course of the next few days by his friends getting the German boiler system accepted. We therefore want to wait a few days until the meeting in question takes place, and we hope then agreement is achieved. We thank you in the name of all involved for transmitting the amounts in question.