The Cavalry of St George

Peter Rushton reports on Churchill’s top secret Spanish bribery plot

Many readers will remember Goldeneye as the title of a 1995 James Bond film – the plot involves an international crime syndicate stealing a secret Soviet satellite weapon, then planning to use it to destroy financial records in the City of London as part of a massive fraud.

This was the first Bond film that was not in any way based on the writings of James Bond’s creator Ian Fleming – Goldeneye was not the name of an Ian Fleming story, but was the name of his cliffside estate in Jamaica. The author named his Caribbean home after a real secret operation during World War II – a plan which Fleming himself had supervised as a senior officer of British Naval Intelligence.

This real Operation Goldeneye had nothing to do with satellite weapons, but involved a tangle of very real criminals, arms dealers, fraudsters and spies – culminating in a financial crime of breathtaking audacity, combining a veteran Spanish gangster with the British financial elite.

One place to begin this story is with a fragment from the 1941 diary of Hugh Dalton, later in charge of Britain’s fragile postwar finances as Chancellor of the Exchequer from 1945 to 1947.

Writing in the spring of 1941, Dalton was officially “Minister of Economic Warfare” in Churchill’s coalition government: unofficially he was responsible for the Special Operations Executive (SOE), carrying out the dirtiest side of the British war effort.

In building up SOE during the previous summer, Dalton had explained to the Foreign Secretary, Lord Halifax, that this dirty tricks aspect of warfare required a different type of man from regular soldiering. It would involve “many different methods, including industrial and military sabotage, labour agitation and strikes, continuous propaganda, terrorist acts against traitors and German leaders, boycotts and riots.”

“What we have in mind,” Dalton confided to his diary the night before his letter to Halifax, “concerns Trade Unions, Socialists, etc; the making of chaos and revolution – no more suitable for soldiers than fouling at football, or throwing when bowling at cricket.”

The diary fragment from May 1941 refers to a particularly mysterious type of ‘fouling’: “The Cavalry of St George have been charging; hence some of the recent changes; hence also Attaché H’s concern for J.M.’s tinplate.”

The “Cavalry of St George” was an age-old British system of indirect warfare, and referred to large scale bribery of foreign political and military leaders. The words denoted the image of a mounted St George which appears on the reverse of a British gold sovereign. As the British empire was rising to global dominance during the 18th century, her leaders had wisely avoided European military entanglements by purchasing the services of (at various times) Prussia and Austria. Frederick the Great’s Prussia, for example, was paid £670,000 a year under the terms of an Anglo-Prussian convention signed in 1758: the arrangement lasted for four years.

During the First World War, the Cavalry of St George was deployed in the Middle East, with bags of gold being delivered to various Arab chieftains in exchange for joining the revolt against the Ottoman Turks. British prime minister David Lloyd George even explored an audacious scheme to bribe the Turkish government and in effect buy them out of the war!

The intermediary in this affair – much of which remains secret – was the international arms dealer Basil Zaharoff, who was later allowed to call himself “Sir” Basil Zaharoff even though he was not a British subject. Non-British subjects can only receive honorary knighthoods: they do not use the title “Sir” (well known examples include the singer and charity fundraiser Bob Geldof and former U.S. Defence Secretary Caspar Weinberger). “Sir” Basil Zaharoff was the sole exception.

Zaharoff’s role behind the scenes in British diplomacy was attacked in the British Parliament by Walter Guinness MP, who denounced Lloyd George for taking control of foreign policy away from Foreign Office professionals:
“I cannot find any expert, whether traveller or soldier, who approves of our policy in the Near East. This is not to say that the Prime Minister has no counsellors. The voice behind the throne, or, to be more accurate, behind the presidential chair, is probably Sir Basil Zaharoff’s.
“Sir Basil Zaharoff is undoubtedly an able financier with international interests in the munitions industry. Outside political circles his chief fame is that he is understood to have been a controlling factor in the production of armaments in four or five different countries.”

During 1917 and 1918 Zaharoff had been Lloyd George’s intermediary with influential Turks, authorised to handle £10 million in gold. The deal was eventually aborted, but it complicated Lloyd George’s simultaneous negotiations with Zionist leaders towards what became the Balfour Declaration, committing Britain to support a Jewish homeland in what had been the Ottoman territory of Palestine.

(It might not be a coincidence that Walter Guinness, who was such a well-informed enemy of Zaharoff and Lloyd George back in 1921, was eventually murdered by the Zionist terrorist Stern Gang in 1944. By then he had been ennobled as Lord Moyne and was serving as British minister in the Middle East: international Zionism could not tolerate the presence of a well-informed opponent in British ruling circles.)

A younger member of Zaharoff’s international arms dealing network, and also drawn into First World War operations on behalf of the British secret service, was Juan March – the “J.M.” referred to in Hugh Dalton’s 1941 diary entry. March had acquired a large fortune from tobacco smuggling and arms dealing, and had used his shady connections in various Spanish ports to assist operations against the Kaiser’s navy. A director of March’s London company was the millionaire shipowner Leopold Walford, married to Basil Zaharoff’s stepdaughter.

An illiterate thug from the island of Majorca, Juan March had become the richest man in Spain by the end of the 1920s. Bribes and other favours to political leaders and the Spanish royal family allowed March to convert his illegal tobacco smuggling into a legal tobacco monopoly. In 1931 the New York Times described him as “Spain’s Rothschild, who cannot write his name, although he is Spain’s richest man.” By then he had acquired legal immunity from prosecution by winning election to the Spanish Parliament, the Cortes, where his main ally was the conservative leader Calvo Sotelo. In June 1932 the Parliament voted to expel March and remove his legal immunities: he was imprisoned the following week and held for eighteen months pending trial, after the new republican finance minister announced: “Either the republic overthrows Don Juan March or the señor will overthrow the republic!”

In November 1933 a prison official was bribed to unlock Juan March’s cell, and he made his escape to the British colony of Gibraltar. While the British press kept quiet about the reasons why this notorious crook should feel safe on Crown territory, the New York Times was not so shy, pointing out: “It is known Señor March has a host of powerful friends in Gibraltar. He made many valuable contacts there during the war [of 1914-18] as he had a contract for supplying provisions to the British submarine base.”

March had enhanced his British connections by paying large bribes to the financially embarrassed Queen Ena, formerly British princess Victoria Eugenie of Battenberg, consort of King Alfonso XIII and granddaughter of Queen Victoria. Queen Ena (whose grandson Juan Carlos was King of Spain from 1975 until his own financial scandal and abdication in 2014) retained close links to the British establishment. The British ambassador in Madrid, Sir Maurice Peterson, had personally intervened during the various criminal proceedings against March to ensure that Queen Ena’s name was not mentioned.

Five months later March cut a deal with the republican authorities and returned home to Majorca. He helped finance the conservative government’s crushing of anarchists and trade union revolts, but when the Spanish Left again won power in the 1936 elections, Juan March’s many and various financial interests were again threatened, and he began to meet regularly with conservative and military elements plotting a nationalist rebellion.

These plans were accelerated after assassins close to the leaders of the Spanish Socialist Party murdered Juan March’s close ally Calvo Sotelo. March turned to his old friends in British intelligence, who were keen to ensure that instability in Spain did not benefit either the Soviet Union (whose agents were already busy among some Spanish left-wing parties), or the fascist and national socialist governments in Italy and Germany, whose example increasingly inspired the more radical elements of the Spanish Right.

March turned over substantial funds to the nationalist cause, and his decisive intervention came via business links to Arthur Loveday, a veteran British intelligence agent and director of Juan March & Co. in London. In the first week of July 1936, this company provided cash to hire a Dragon Rapide plane which flew from Croydon Airport on a secret mission to collect General Francisco Franco from his base on the Canary Islands and fly him to North Africa, where he was to lead a nationalist invasion of southern Spain. On board the flight from Croydon was another British intelligence veteran, Maj. Hugh Pollard, who was to take charge of the mission.

Although he had longstanding ties to some leading figures in Germany, notably military intelligence chief Admiral Canaris, Juan March was a natural anti-nazi, for reasons which have been buried by modern historians but were mentioned by some 1930s journalists. The gossip column of The American Israelite, published in Cincinnati and now the oldest English-language Jewish newspaper in the U.S., wrote on 31st December 1936: “Juan March, multimillionaire financier of the Spanish Fascist rebels, is descended from the Chuetas, that little known colony of Majorcan Jews converted to Catholicism in the 15th century. The Chuetas (which means ‘dirty little Jews’) are still pariahs.”

Unsurprisingly, Juan March later sought to disguise these origins. While early reports described his father as a cattle dealer, later biographies always referred to him as a “pig farmer.” This was in accordance with the medieval practice of his Chueta (or in the Majorcan spelling Xueta) ancestors, who commonly made a great show of eating pork in public to demonstrate that they had renounced their Judaism.

March’s business partner Arthur Loveday was also very likely disingenuous when he joined the anti-Jewish Right Club, a secret organisation led by the Conservative MP Archibald Maule Ramsay. It was exposure of the Right Club’s dealings with a young cypher clerk at the U.S. Embassy in London, Tyler Kent, which allowed Churchill to crack down on his domestic opponents in May 1940 soon after becoming prime minister, and to bury the truth about his treacherous negotiations with President Roosevelt, behind the back of Prime Minister Chamberlain and the U.S. Congress. The role of two young MI5 women in targeting the Right Club has long been known: files which might explain the role of MI6 agent and Juan March employee Arthur Loveday remain for the moment secret.

In the autumn of 1939, Juan March again offered his services to British intelligence, both to resolve certain difficulties on the international arms market and in a top secret proposal to acquire German merchant ships that were laid up in neutral Spanish ports. The Majorcan godfather travelled to London, where (accompanied by Arthur Loveday) he held secret meetings with Sir George Mounsey, the top civil servant at the Ministry of Economic Warfare, and Admiral John Godfrey, Director of Naval Intelligence.

British officials were under no illusions about March. A secret memo to defence coordination minister Admiral Lord Chatfield in October 1939 reported the view of Admiral Godfrey, that “March is a scoundrel but very rich and ready to take part in any negotiations behind the scenes. The Director of Naval Intelligence suggests that our Naval Attaché in Spain should be instructed to get in touch with March and to ask him if he could say what types and quantities of armaments might be made available for sale to a foreign country.”

March’s man in London was José Mayorga, a partner in Kleinwort Sons & Co. – a prominent City of London institution which was to become part of the modern financial giant Kleinwort Benson (which since 2016 has been Kleinwort Hambros following a merger with the family bank of former SOE chief Sir Charles Hambro). Then and later, Kleinworts had a very close and legally dubious relationship with Juan March.

The “Attaché H.” mentioned by Dalton was Alan Hillgarth, officially assistant naval attaché at the British Embassy in Madrid, but in reality a secret intermediary not only for naval intelligence and for the head of Britain’s secret intelligence service MI6, but for Winston Churchill himself. As suggested in the naval intelligence memo above, Hillgarth was instructed to develop contacts with March.

Churchill’s personal relationship with Hillgarth dated back to 1936, when the latter had been British vice-consul in Majorca and had accommodated Churchill at his home on the island for a couple of days. During this period Churchill was in the political wilderness and was bankrolled by various shady international financiers who encouraged his anti-German foreign policy.

The nature of the Churchill-Hillgarth relationship is clear from several documents in the British National Archives. In October 1943, for example, when the Navy proposed to promote Hillgarth to a new role in the Far East, the Prime Minister intervened personally with an angry note to the First Lord of the Admiralty:
“I cannot approve this appointment without further information. Captain Hillgarth has acquired a unique position in Spain and is the centre of most vitally secret matters. No one could replace him.”

Hillgarth’s “unique” position was due to his extraordinary dealings with Juan March, which had been built up on Churchill’s personal instructions dating back to the latter’s time as head of the Admiralty from September 1939 until his elevation to the Premiership in May 1940. After the discussions about arms mentioned earlier, Hillgarth and March discussed a proposal to seize 55 German merchant ships blockaded in Spanish ports. Due to Spain’s neutrality, the blockade took effect as soon as the Second World War began in September 1939, but the situation obviously embarrassed Franco, since Germany had given him substantial support during the Civil War from 1936 to 1939, not only with arms and logistical support but with the commitment of the Condor Legion, volunteer air force and army units drawn from the Luftwaffe and Wehrmacht.

The Falangist element in Franco’s government was strongly pro-German: after the murder of Falangist leader José Antonio Primo de Rivera in 1936, their most important representative was Ramón Serrano Suñer, whose wife was the sister of Gen. Franco’s wife. Serrano Suñer was Foreign Minister from 1940 to 1942, and had to be neutralised by Juan March’s pro-British network.

March proposed that he could buy the impounded German vessels and reflag them as neutral ships. Since Britain obviously wished to deny the Germans hard currency in exchange for the ships, he also proposed an alternative devious scheme – a situation could be engineered in which the Germans were presented with a bill which they could not pay, creating a technical default and allowing the seizure of the ships.

This scheme is highly significant, as a very similar plan was concocted post-war to allow March to carry out a sensational financial coup, with secret support in the British corridors of power.

During 1939-40, Churchill personally intervened to override legalistic objections from more squeamish colleagues. Admiral Godfrey had warned Churchill that March “is definitely a scoundrel of the deepest dye, but was one of the first Spaniards to try to convince Franco of the necessity for reopening trade with England, and from his commercial interests in this country his sympathies are believed to lie with the democracies at the present time.” Godfrey’s political boss Churchill underlined in red ink his reference to March being “a scoundrel of the deepest dye”, and indicated he saw this as a recommendation rather than a criticism! Churchill was emphatic in his endorsement of March:
“This man is most important and may be able to render the greatest services. …We might even get torpedo boats from Spain through him. …I have no doubt that he hates the Nazi regime as much as the Bolsheviks, both being equally inimical to capital.”

Churchill later added a further note about March: “I am very sorry I did not see him myself, and I shall be glad to know if he is likely to return here. Supposing his talks with the Naval Attaché show any substantial promise, it would be well that Señor March should come over here again, when I would see him personally.”

In a “Most Secret” update on the deal, dated 15th December 1939, Hillgarth stressed that Juan March was able to assist with anti-German sabotage operations across Spain:
“The advantages of his organisation over anything else that we can do are that it is entirely in his hands, that I deal with no one except himself, that it costs us nothing, that it is perfectly ruthless when necessary. He has already had two German agents shot in Ibiza, though I did not ask him to do so and knew nothing about it until afterwards.”

Soon after Churchill became Prime Minister, Hillgarth was back in touch with a new proposal from March: this amounted to the wholesale bribery of a group of Spanish generals and admirals. Initial instalments totalling $5 million were paid in June and July 1940 into a New York bank on behalf of the Société de Banque Suisse, Geneva, to be made available to three nominees of Juan March. These funds were held by March on behalf of leading Spanish officials, on the understanding that they would frustrate any moves towards a Spanish-German alliance. A further $3 million was paid into the account in August 1940, and additional instalments of $3 million in January and May 1941.

A handwritten note in a Cabinet Office file (which I have seen) labelled “Requests from Madrid for money to bribe Spaniards” states that in respect of the first three payments “correspondence [was] destroyed November 1940 with Sir Horace Wilson’s approval.” Wilson was then the senior civil servant at the Treasury and head of the Home Civil Service.

One of the bribe recipients was Gen. Luis Orgaz, commander of Spanish forces in North Africa after 1941, who was seen at the time as pro-German, making him especially useful as a secret British agent. A report from the British Consul-General at Tangiers, later buried in the Foreign Office files, spelled out Orgaz’s character as:
“a man in whom vanity, lack of culture and shyness combine to produce a violent bully who exacts terrified obedience from civilians and military alike.”

Orgaz was careful not to make his monarchist sympathies too obvious, and by the end of the war Franco promoted him to Chief of the General Staff. Another officer who had sold himself to the Cavalry of St George was less discreet: Gen. Alfredo Kindelán openly advertised his preference for a restoration of the monarchy to replace Franco’s dictatorship, though the Governor of Gibraltar reported after meeting him in April 1942 that “Kindelán struck me as elderly, tired and altogether lacking in pep.” Franco removed him from all official Army positions at the start of 1943, but he remained on the Juan March payroll as someone who might be a credible figurehead if an anti-German coup proved necessary.

Yet another of the British-funded conspirators was Gen. Antonio Aranda, who had headed the Spanish military delegation to Berlin after Franco’s 1939 victory in the Civil War, and was then put in charge of the Valencia region. Franco knew that Aranda was a Freemason, and sacked him as head of the Army War College in October 1942.

The British files makes clear that another key conspirator receiving bribes was Gen. Juan Luis Beigbeder, former Foreign Minister of Spain, who had drawn up a contingency plan to buy support of Moorish troops in North Africa. In the event of Franco coming into the war on Germany’s side, Beigbeder and his Moors would launch a royalist coup in support of Don Juan, son of the former English princess and friend of Juan March, Queen Ena:
“Under the slogan ‘Viva el Rey’ he will make his move, form a government and declare a regency, which England should recognise. In French and Spanish Morocco he is arranging that on one day and in both zones, Moors will not leave a single German alive.”

This contingency plan formed part of Operation Goldeneye, the overall codename for the plans drawn up under one of Hillgarth’s closest contacts in Naval Intelligence, Ian Fleming, from August 1940. Hillgarth wrote in a summary report to Naval Intelligence on November 20th 1941: “As originally conceived, Goldeneye was a Joint Mission of the three Services. …Goldeneye is really a precaution against a German invasion of Spain.”

During 1940-41 Ian Fleming met with Roosevelt’s emissary Col. William Donovan, who was later to establish the Office of Strategic Services (OSS), forerunner of the CIA. Although the U.S. was still officially neutral, Donovan was pursuing a secret anti-German policy on President Roosevelt’s behalf. A “Most Secret” report from Ian Fleming to his naval intelligence bosses in July 1941 revealed that Donovan had an initial budget of $10 million, and had already recruited anti-German propaganda agents including the journalist William Shirer, later author of the best-selling but heavily propagandist “history” The Rise and Fall of the Third Reich.

Fleming added: “President is very enthusiastic and Donovan has his full support, but rumour that Donovan is British nominee and a hireling of British SIS is spreading and should be carefully watched.”

Meanwhile with the U.S. still officially neutral, the Goldeneye files indicate that Britain’s contingency plan against any Spanish-German alliance was concentrating on undercover operations rather than conventional military plans. As one naval intelligence document put it:
“We have reconsidered functions of Goldeneye. For the time being it appears unlikely that our other commitments will allow us to undertake regular operations upon the mainland of Iberian peninsula or Spanish Morocco. We wish, however, to keep the position open.”

This involved plans for “guerrilla and demolition operations”, and for Spanish ships to be evacuated from various ports, which would then be targeted by British saboteurs equipped with specialist naval explosives. The veteran smuggler Juan March would of course facilitate these operations, in line with the plans developed as early as 1939.

It was in the spring of 1941 that the political side of March’s bribery plan was mobilised in earnest, as hinted in Hugh Dalton’s diary and confirmed in notes between Prime Minister Churchill and Foreign Secretary Anthony Eden. With the entire war in the balance, it seemed likely that Spain’s foreign minister Ramon Serrano Suñer would persuade Franco to sign up to the Axis, or Tripartite Pact, which had been agreed between Germany, Italy and Japan the previous year.

Hillgarth came to London with a message from Juan March and the generals he had bought on Britain’s behalf. Eden minuted Churchill on 26th April 1941: “I have just seen Hillgarth… He is absolutely convinced that if Franco and Suñer sign the Tripartite Pact there will be serious trouble in Spain and he by no means accepts that all is lost there.”

Eden suggested that Hillgarth should attend the next Cabinet meeting and inform Churchill’s ministers about the Spanish situation, but the prime minister knew that the full details of the bribery scheme were too secret to be shared even with his own government colleagues. He told Eden that it would not be possible for Hillgarth to be candid, even in a Cabinet meeting: “The basis of Captain Hillgarth’s policy is of the most secret character, and cannot possibly be mentioned. Yet without it, his assurances would not carry conviction.” Instead of a discussion with ministers, Churchill met Hillgarth privately over lunch.

A few days later the Cavalry of St George charged to victory, as the years of British bribes took effect. Foreign Minister Suñer and the pro-German Falangists were neutralised, as Franco appointed two of the main British agents to key commands: Orgaz took charge of Spanish forces in Morocco and Kindelan in Catalonia. Ambassador Hoare sent a personal and “Most Secret” note to Eden warning against any public gloating:
“No doubt you have realised that the political changes here are directly due to the secret plan of which you and the Prime Minister are aware. This makes it all the more necessary to stop any publicity that may give the impression that we are greatly interested in what has happened.”

Hence Dalton’s discretion and the cryptic nature of his diary entry mentioned at the start of this article – though characteristically he could not resist a triumphal reference. The bribes continued via March for the rest of the war: there is no official total in the files, but it can be calculated at roughly $15 million.

The only real difficulty occurred in the autumn of 1941 when the American authorities (then still officially neutral) spotted suspicious movements of gold and suspected that this had something to do with sinister nazi plots, since naive liberals in the Washington bureaucracy regarded Juan March as a genuine fascist!

In their anti-fascist zeal, the Americans were about to derail Churchill’s bribery scheme by freezing Juan March’s secret accounts. The financial counsellor at the British Embassy in Washington, R.J. Stopford, paid a late night visit to the home of U.S. Treasury Secretary Henry Morgenthau, accompanied by one of Morgenthau’s Treasury Department lawyers, John Pehle, who had been in charge of freezing suspicious foreign accounts in American banks.

Stopford explained that March was a British agent, not a fascist. Nine days before Pearl Harbor, Pehle and Morgenthau quietly arranged the unfreezing of his $10 million.

The British establishment’s ultimate pay-off for Juan March, gangland fixer and buyer of generals, came after the defeat of Germany and Italy, who had done so much to secure Nationalist victory in Spain’s civil war, only to be comprehensively betrayed. Winston Churchill had by now lost power but was still leader of the Conservative Party and effectively Prime Minister in waiting: he was careful to keep his links to Juan March secret. In July 1946 he wrote to his old intermediary Hillgarth: “It would give me great pleasure to meet Mr March… Perhaps you would be so kind as to give Mr March my regards and express my regret that I am unable to see him on this occasion.”

By this point Juan March was occupied with his greatest fraud: the takeover of Spain’s largest utility company, the Barcelona Traction, Light and Power Company. This enormous enterprise had been created by Canadian and American investors before the First World War but in 1945 was 80% owned by Belgian interests. During the 1930s it had funded the expansion of electrical power projects in Spanish cities by issuing bonds, whose interest was payable in sterling.

Due to a shortage of sterling after the Civil War and the Second World War, Franco’s government prevented Barcelona Traction from paying this interest. At the start of the war (as we saw earlier in this article) Juan March had proposed to British Naval Intelligence a scheme by which German merchant ships could be forced into a situation where they defaulted on Spanish debts, allowing his front companies to seize them on London’s behalf. An almost identical plot was played out in the post-war years against the unfortunate investors in Barcelona Traction. March’s front companies bought up the sterling bonds. He then went to a Spanish judge and argued that the company was in default. The judge agreed and bankrupted Barcelona Traction. March took over the company: at least £20 million in assets alone, having invested just £2 million in buying the bonds!

For the next twenty years Barcelona Traction’s original owners fought March – by then the seventh richest man in the world – in Spanish and international courts. The Spanish godfather’s co-conspirators were also sued by the mainly Belgian investors, and these co-conspirators included not only Alan Hillgarth, who had become March’s close business associate, but also some of the biggest names in the City of London: accountant Henry Benson, senior partner in Coopers & Lybrand; Ralph Jarvis, director of Hill Samuel; Cyril Kleinwort of the eponymous family banking firm (very closely tied to Juan March for many years) which was later merged to create Kleinwort Benson; and Sir Arthur Page QC, former Chief Justice of Burma in the pre-war British Empire, who had been a senior intelligence official in the Ministry of Economic Warfare after 1939, ideally placed to prevent any awkward investigators from interfering with March’s multimillion gold transfers, smuggling and bribery schemes.

Juan March died after a car accident in 1962. His son built up one of the world’s greatest art collections, and the grandchildren of this semi-literate crypto-Jewish gangster continue to operate the Juan March Foundation – Spain’s largest cultural sponsors – and the Majorca-based Banca March, rated in 2010 as the most securely capitalised European bank in a continent-wide “stress test exercise.”

It is commonplace among nationalists to point out that we Europeans were all losers in the Second World War. But the story of Juan March and the Cavalry of St George indicates that in certain quarters there were some winners.

This article by Peter Rushton first appeared in Issue 58 of Heritage and Destiny. The author has carried out additional research more recently which will appear in a forthcoming book on secret aspects of the British war effort.