10

MANAGING COMPETING PRIORITIES

Countering Non-Soviet Espionage, 1975–1983

On 27 January 1976, only four months into his term as Acting Director-General of ASIO, Frank Mahony did something unprecedented in the history of his office: he personally delivered to the Attorney-General a report into ASIO’s intelligence priorities and targets.1 In some respects, the significance of this report lay not in what its content revealed but the fact that it had been compiled for external consumption. For a senior and experienced public servant such as Mahony was, these sorts of appreciations were a normal way of both keeping the Government abreast of what an agency was up to, and the avenue through which to make a case for increased resources. But it was abnormal for ASIO, an organisation that traded in secrecy. Details like those provided in the report had never been divulged in their entirety, even to an Attorney-General, and particularly not on paper.

Stamped ‘Secret’, this extraordinary report made it clear that ASIO considered espionage and the prejudicial actions of foreign intelligence services as more significant and threatening to Australia’s national security than those of the subversive, terrorist or politically motivated violence groups and individuals ASIO was monitoring in Australia (as discussed in Chapter 5). Unsurprisingly, the top-priority counterespionage target, and the one that consumed the majority of ASIO’s resources, was still the Soviet Union. Until that time, a number of foreign intelligence services were believed to be operating in Australia and were given little more than cursory coverage with ASIO’s leftover and limited resources.2 Mahony was a deft bureaucrat, and he knew the Organisation over which he was presiding faced significant challenges, not the least of which was inadequate resourcing. Mahony’s unwritten yet unambiguous message to the new government, evident in the statistics he provided, was that more work was required to monitor the expanding and real espionage threat posed by these and other lower priority targets.

To a large extent, the picture painted by Mahony reflected ASIO’s traditional counterespionage priorities and concerns.3 The Soviets and other Eastern bloc countries still rated highly. There were, however, some noticeable and significant differences. The number of ASIO targets in 1970 had nearly doubled by the mid- to late 1970s. The Chinese Intelligence Services, despite still being a largely unknown entity, had become a priority for the Organisation. In the context of declining resources, ASIO was forced to reconsider the importance and significance of a number of long-term communist states, including East Germany, Bulgaria, Romania and Hungary. This reconsideration of targets included new additions: North Vietnam, soon to become the unified Socialist Republic of Vietnam (SRV), and North Korea, for example.4 The YIS was also of concern, because of its activities among and against local Croatians rather than any intelligence work directed against the Australian Government. It was treated as a politically motivated violence target, and is therefore discussed in Chapter 6.

This chapter tells the story of ASIO’s efforts to manage competing priorities and understand, monitor and counter the espionage activities of some of these non-Soviet targets during the years of Malcolm Fraser’s prime ministership. In many cases, and even against those countries with a long intelligence presence in Australia, ASIO was starting from scratch—building its knowledge base, familiarising officers with their new targets, and developing new sources of information. Yet, for the most part, ASIO attempted to tackle these new problems with the old and trusted methods it had used since 1949. As we saw in the previous chapter, even when a new approach was implemented, neither ASIO’s modus operandi or its thinking evolved at the same pace as that of their targets. In spite of this, ASIO had some genuine successes against non-Soviet targets, the kind that produced valuable and, in some cases, ongoing intelligence concerning Australia’s national security. Some of these are discussed below.

B4 Section and the Asian Affairs Group

The ‘lack of resources’ mentioned by Mahony was felt keenly throughout the Organisation. Of ASIO’s 506 employees in January 1976, only one-fifth was directly involved in obtaining intelligence.5 Spread out across ASIO’s eight regional offices, they collectively ran more than 400 agents and contacts. Of that one-fifth only a fraction was deployed against non-Soviet espionage targets: primarily the intelligence services of communist countries.6 With such small numbers and with problems of communication between headquarters and the regions, it is not surprising that ASIO’s two counterespionage sections both believed their requirements for intelligence were not being met.7

At headquarters in Melbourne, B4 Section, responsible for coordinating ASIO’s efforts against the intelligence services of China and the other countries mentioned above, consisted of only two desk officers.8 When the Coordinator of B4 Section complained to the head of B Branch, Blair Nienaber, about the low staffing levels in the section, he also noted that various espionage cases, including current leads, ‘cannot properly be progressed’. Moreover, he emphasised that unless ASIO adopted a long-term approach towards its more assertive Asian targets, who were already ‘laying foundations’ for the future, ‘a situation is likely to arise whereby ASIO will not have the capacity to deal with that future problem’.9 The requirement for linguists, as well as the ‘acute staff shortage’ had not been rectified by March 1977.10 Indeed, they had worsened. An additional desk officer allotted to B4 Section was diverted to another section without reference to the Coordinator. Frustrated, he told Nienaber, ‘I must enter a plea that the Asian section not be thrust upon the Sovbloc’s Procrustean bed.’ This move, which denuded the section of an officer to examine Chinese operations, was, the Coordinator added, ‘to the serious detriment of ASIO’s study of the [Chinese Intelligence Services]’.11

Things looked to be improving when ASIO was restructured in December 1977. B and D branches were abolished and E Branch assumed responsibility for all espionage-related analysis and coordination (see Chapter 9). The old B4 Section was replaced by the Asian Affairs Group, and its staffing levels ostensibly increased. The new Coordinator explained that the group ‘had been established to increase our capacity to investigate and assess the activities of security interest in Australia of the countries of East and South East Asia’.12 A university graduate with broad experience in ASIO and secondments with both SEATO and the JIO, the Coordinator was quick to appreciate ASIO’s limited knowledge of Asia’s intelligence services, and worked to fix this by improving the Organisation’s domestic liaison partnerships.13

During his first week in the new role, the Coordinator either met or corresponded with the Department of Foreign Affairs and Australia’s other intelligence agencies. All were prepared to assist by providing the expertise of their officers and information on regional issues.14 Importantly, senior Department of Foreign Affairs officers reminded the Coordinator that ASIO’s concerns did not always align with the interests of the Department of Foreign Affairs or the Government. Those same officers requested that ASIO ‘keep the broader issues in mind’ when operating against foreign targets, particularly where those relationships were ‘vital’ to Australian interests. The Coordinator was also asked to what extent ASIO would inform the Department of Foreign Affairs if its operations were ‘likely to affect country to country relations’.15 ASIO agreed to keep ministers and their departments briefed on operational activity against foreign diplomats or diplomatic property. In practice, this meant that the Department of Foreign Affairs knew basic details about nearly all of ASIO’s counterespionage operations.16

Improving ASIO’s collaboration with its partner agencies in Australia was just the first step in improving the Asian Affairs Group’s analytical capabilities. The Coordinator realised that through much hard work, and with little time to waste, his desk officers would have to re-examine the threat posed by each of its targets, revisit ASIO’s objectives and priorities, and then develop a guide to the intelligence-collection efforts in the region.17 The Coordinator advised his staff to ‘relax and enjoy’ the Christmas break ‘and prepare yourselves for a hectic start to 1978’.18

Apart from the amount of work required, the Coordinator had another problem. He did not have enough staff, and nor did the regional offices. In March 1978, he requested that Personnel Branch approve the recruitment of case officers with deep cultural and linguistic insight, noting that ‘the only way to guarantee success in the Chinese ethnic community’, where the Chinese Intelligence Services were active, was by using such specially skilled officers. Without this change, he added, ASIO would find collecting information on Chinese espionage in Australia difficult—although not impossible, as some of its successes attest.19

The Organisation made strenuous efforts to recruit officers with these unique attributes to meet what was seen to be a shortfall in capacity. But the record of ASIO’s work on the China target, even as far back as the Fraser years, eventually proved the Coordinator’s claim to be not entirely correct. Many of ASIO’s successes in the ‘Chinese ethnic community’ and against other Chinese targets, for instance, were achieved by officers without such specialised skills.20

Of greater concern for the Coordinator, however, was the strain imposed on his overworked staff at headquarters. Instead of the intended staff of eighteen, in May 1978 the Asian Affairs Group consisted of only ten officers. The Chinese Section (E4) was still without a supervisor (this work being done by the Coordinator in addition to his managerial duties), and three desk officers were doing the work of seven. Similarly, in the South-East Asia Section (E6), the supervisor did his work plus the desk-work for North and South-East Asia, while his only desk officer did the work of two people.21 By July 1978, the four desk officers had been reduced to two: the same number that had existed in B4 Section. ‘At the risk of being laborious’, the Coordinator repeated his by now regular concerns and asked the head of E Branch to persuade ASIO’s senior management to place greater emphasis on fixing the desk officer deficiency. Without them, ASIO could not hope to stay on top of its work, nor could headquarters direct the regions—a crucial part of the intelligence planning process—about the Organisation’s intelligence needs.22 The branch head obliged, informing the Deputy Director-General, Harvey Barnett, and the head of Personnel Branch, Les McBride, that unless the staffing situation improved he would be forced to combine the E4 and E6 sections, and narrow their focus and attention.23 In an atmosphere of limited resources, competing priorities and staff shortages across the entire Organisation, the Director-General, Judge Woodward, knew that ASIO would have to constrict and focus its efforts until things improved.24

The Chinese Intelligence Services

Although ASIO knew that the Chinese Intelligence Services were active in Australia before the establishment of diplomatic relations with the PRC in December 1972, monitoring this activity was not a high priority.25 During the years of the Whitlam Government, for example, coverage of the Chinese was restricted to the use of agents, contacts and information provided by liaison partners.26 In spite of its limited coverage, ASIO was aware that since the arrival of the first diplomats from the PRC in 1973, the Chinese Intelligence Services had ‘expanded’ their work among and against the Chinese and Taiwanese communities in Australia’s major cities.27 This confirmed advice received from overseas, and convinced senior management that ASIO needed to take the Chinese Intelligence Services seriously.28

Housed in a former motel next to the drive-in cinema on the Federal Highway at Watson—a suburb on Canberra’s northern outskirts—the Chinese Embassy was described as a fortress. It was self-contained, protected by a fence 2.4 metres high, and provided both office and living accommodation for its staff—a mixture of diplomats and press officials. Staff rarely left the compound unaccompanied, and visitors were few.29 Combined with the language barrier, this security made it all the more difficult for ASIO.30 The location, with its scarcity of buildings and surrounding open paddocks, also hindered ASIO’s surveillance efforts. Occasionally, ASIO hired a room at a nearby motel to photograph Chinese staff inside the embassy’s southern compound. By standing on the toilet in another room, ASIO could photograph the northern compound, the car park and the main entrance to both the embassy and the consulate.31 Beyond parking a surveillance van ‘quite openly … outside the Embassy main gate each day’, as the Coordinator suggested, there were few other options for ASIO to cover the comings and goings at the embassy.32

ASIO’s top suspect intelligence officer was an outgoing individual with an extensive network of contacts across numerous parts of the community. He had arrived in the early 1970s and was in regular contact with the CPA (Marxist–Leninist), including one of its leading lights, Duncan Haigh Clark.33

Unconstrained by the travel restrictions imposed on some of his colleagues, the Chinese officer travelled interstate and came into contact with a large circle of people. Before long, ASIO built up a picture of his movements and activities. It was clear that he provided direction to the Chinese Youth League, was in regular contact with communist sympathisers, and monitored and sought to neutralise Taiwanese influence in the Chinese community.34 He was active within the local Chinese community, where he attempted to cultivate agents of influence.35 These activities were considered synonymous with those of an intelligence officer, and confirmed his status in ASIO’s eyes. After he departed Australia, however, the limited coverage ASIO gave to his successors did not unearth any evidence of intelligence work.36

As time progressed it became clear to ASIO that the Chinese did not ‘fit the mould of conventional intelligence services’.37 This was as true of their organisational structure as it was of their methods and intelligence interests. The Chinese Intelligence Services had six components, only two of which were conventional security or intelligence organisations. The most prestigious was the Investigation Department of the Central Committee of the Chinese Communist Party, which collected foreign intelligence in all fields: economic, political, military, scientific and technological. The other, the Ministry of Public Security, was responsible for the internal security of the mission and its personnel. Another two, the Investigation Department and the Military Intelligence Department, were both part of the People’s Liberation Army and were tasked with collecting military information concerning potential threats to China. The final two, the International Liaison Department and the United Front Work Department, were concerned with political action, that is, influencing pro-China and anti-Taiwan sentiment in the expatriate Chinese community and among Chinese sympathiser groups, including ‘fraternal communist parties’ such as the CPA (Marxist–Leninist).38

Overseas experience and history confirmed that the Chinese Intelligence Services were most active within local communities.39 This posed a number of challenges for ASIO. With an estimated 50,000 Chinese living in Australia in 1978, the first challenge was one of volume. Many of these migrants were economic rather than political refugees and, as such, retained a strong cultural identity with China and provided a ready pool of contacts for the Chinese Intelligence Services.40 Indeed, as former MI6 Director Nigel Inkster has shown, the Chinese Intelligence Services viewed these migrants as Chinese first, and any work within these communities was therefore seen as an ‘internal affair’.41 By appealing to national pride, offering financial rewards or threatening those with family still in China, the Chinese Intelligence Services were able to recruit people at all levels in society.42 This recruitment was also more subtle than ASIO was used to. The Chinese had an ‘enormous amount of patience’ in developing contacts and could wait generations before activating a source.43 This presented another problem for ASIO. Long-term monitoring without quantifiable results was not an option, both because of the Organisation’s limited resources and because as a democratic, lawful security intelligence service, it had to justify periodically—with hard intelligence—the use of its powers.

Contact with the Chinese community

Given the difficulties of monitoring the Chinese Embassy and its personnel, ASIO turned its attention to the Chinese community and pro-China groups, in particular the Chinese Youth League, the Australia China Friendship Society (formerly the Australia–China Society), and the CPA (Marxist–Leninist). These were natural contacts of the International Liaison Department and the United Front Work Department, which could and did use them to influence community attitudes towards China and against Taiwan.44 In an attempt to understand the level and extent of this influence, ASIO’s regional offices—especially New South Wales and Victoria—conducted interviews among the public. Ian Thomas, supervisor of the counterespionage section in the Victorian office from August 1979 to November 1980, recalled that the Chinese community in that state had ‘several factions based upon ethnic background and language’. These factions, particularly the pro-China and pro-Taiwan groups ‘were at each other’s throats’, but ‘not in a vicious way’. ASIO’s field officers interviewed supporters of China, who would ‘give you an hour-and-a-half lecture on the nasty habits these Taiwanese had, then they would entertain you to a magnificent Chinese yum cha’. Kuomintang supporters did the same. Through this process, ASIO confirmed that the Chinese Intelligence Services, through its community contacts, was monitoring the Chinese community in Victoria, ‘but it was pretty upfront, there was no clandestinity about it’.45 The same could be said for its work in the other states.

By 1980, ASIO was ‘witnessing the results’ of China’s active and widespread engagement within the community, political, commercial and academic sectors. In ASIO’s view, to a large extent, China was able to ‘control’ and ‘dictate’ attitudes among its supporters, and was working to cultivate various pro-Taiwan elements of society.46 China’s focus, in ASIO’s eyes, was influence rather than clandestine contact. Many of its information needs—especially in the scientific and technological sphere, which was a high priority for China’s modernisation policy—could be met by purchasing unclassified publications and through overt contact with academics, students and visiting delegations.47 This re-emphasised how different Chinese methods were from those of the Soviet bloc countries ASIO was used to combating: to the frustration of many, on the surface, China’s intelligence collection was entirely lawful.

In some respects, it was easier to monitor pro-China groups—which had identifiable premises and members. ASIO had long been interested in these groups, particularly the CPA (Marxist–Leninist) and its chairman, Ted Hill. As recounted in Volumes I and II of this history, Hill’s security consciousness made it hard for ASIO to penetrate the party, but this did not stop it from trying when an opportunity emerged. One such opportunity came in early 1983, when ASIO was forewarned that Hill would be meeting with a senior Chinese communist.48 Both men were of security interest: Hill, who had visited China in May 1982, because of his contact with senior Chinese officials and his long history with ASIO, as well as ASIO’s growing concern that the principal political parties identified with communism—the SPA, the CPA and CPA (Marxist–Leninist)—were collaborating to create a ‘coalition of the left’ (see Chapter 7); and the other because ASIO believed he might have had an intelligence background.49 Headquarters ASIO told the Victorian office that it wanted the meeting recorded, and so an operation was hatched.50

The primary aim of the operation was to ascertain the state of relations between China and the CPA (Marxist–Leninist).51 The operation provided an insight into the inner workings of the relationship, but the meeting itself was of little value. Despite this, ASIO still considered that Hill received regular policy direction from the PRC through this person.52 This was contradicted later, when in 1988 ASIO concluded that, apart from the PRC purchasing CPA (Marxist–Leninist) publications, there was no evidence to confirm that the party leadership took direction or money from China.53The contradictory conclusions pointed to ASIO’s challenge in making accurate and reliable assessments on such matters.

Change of focus

When ASIO learned that the Chinese sought approval to open a Consulate-General in Sydney, its focus shifted from the community back to the Chinese diplomatic missions, which ASIO believed could be used as a base for harmful intelligence operations. Operations against diplomatic missions were the bread and butter of ASIO’s counterespionage work.54 As the Chinese had done when shopping for their Canberra embassy, they inspected many properties, thus making ASIO’s job of watching them more difficult. By April 1978, Chinese officials had inspected numerous sites and seemed no closer to making a decision.55 The Chinese would appear to settle on a location, but would then change their mind. Both headquarters and the NSW office had therefore to ‘remain patient and persistent’.56

One potential site, the Four Seas Motel at 539 Elizabeth Street, Surry Hills, was a case in point. Surveillance officers had first noticed Chinese officials near it in March 1978, but put this down to the officials being lost.57 This assessment was proven wrong after the Chinese inspected the motel in April.58 The Chinese finally showed some real interest in September, but then baulked at the price.59 The Chinese started negotiations in November 1978.60 Contracts were exchanged on 29 December, thus bringing a renewed intensity to ASIO’s coverage of the Chinese target.

The initial aim of ASIO’s increased coverage was to assist it ‘to identify intelligence officers and their agents and to gain access to the substance of Chinese clandestine activities in Australia relevant to national security’.61 This later evolved to a more strategic outlook to obtain:

information to enable ASIO to more accurately assess the broad threat posed to Australia’s internal security by the Chinese intelligence services and to enable ASIO to detect, monitor and advise Government of specific threats emanating from the proposed Consulate-General in Sydney.62

The Consulate-General opened for business in March 1979, and by the end of the year housed a couple of dozen personnel.63 ASIO did not require Department of Foreign Affairs consent to monitor the Chinese; it did, of course, brief its own minister, the Attorney-General. Whether ASIO was the right organisation to assess the possible diplomatic implications is debatable. As discussed later, the Department of Foreign Affairs certainly did not think so, and was aware that its interests and ASIO’s interests did not necessarily align. In reality, however, opposition from the Department of Foreign Affairs would have meant very little unless it was elevated to the Minister and, through him, to the Prime Minister to intervene.

ASIO’s interest in the activities of the Consulate-General continued into the period of the Hawke Government. In December 1983, the Attorney-General, Gareth Evans, asked for the Director-General’s opinion of ASIO’s coverage. Harvey Barnett replied that it had ‘not produced any single piece of information of major significance relating to espionage’. It had, however, provided ‘many small fragments’ of information that, when combined with other sources, was ‘a valuable aid to the systematic study of the Consulate-General for counter-espionage purposes’. Barnett was therefore content for coverage to continue.64

ASIO was not solely focused on the happenings in Sydney. Indeed, it looked closely at those who remained in Canberra. By doing so, ASIO hoped that its coverage would ‘provide operational leads’ to help determine whether certain targets were ‘engaged in intelligence activities on behalf of the Chinese Government and, if so, the precise nature of those tasks and the identity of individuals who may be assisting them in that role’. Once again, ASIO informed the Department of Foreign Affairs of its intentions where appropriate, remarking that the risk of exposure and the resultant ‘embarrassment to bilateral relations’ or the ‘repercussions for Australian diplomatic personnel in China’ was ‘worth taking in view of the probable intelligence dividend’.65 At no stage did ASIO’s intelligence indicate that these particular individuals were involved in intelligence work.66 In spite of these intelligence limitations, the coverage contributed to ASIO’s overall picture of what the Chinese were interested in and up to. Even negative or neutral intelligence has its place and, in this instance, it helped ASIO with its broader assessment of the activities and the threat posed by the Chinese Intelligence Services.

Undeclared ASIO–Chinese liaison

In addition to seeing the Chinese Intelligence Services as a threat, ASIO also saw in them the potential to assist with ASIO’s coverage of other targets: the Soviet and Vietnamese intelligence services. In an attempt to do this, a semi-overt although undeclared liaison relationship between an ASIO officer and a Chinese counterpart was established. The operation began in 1978, when the Coordinator of Operations in the ACT office, Quentin Anthony, attended a social function at the home of a friend. During the function, Anthony was introduced to an official from the PRC Embassy. Reporting this contact to Headquarters ASIO, Anthony added that the official was clearly anti-Soviet and that the possibility existed to establish communication on issues of common interest.67 The Director-General approved another social contact.68

A little while later, Anthony invited the official to lunch at the Old Canberra Inn in Lyneham. They got along well, but it was clear to Anthony that his guest was not an intelligence officer.69 With the objective unmet, contact became infrequent but it did not lapse. When Anthony attended another diplomatic function in late 1979, he was introduced to another senior Chinese official, whom Anthony believed was an intelligence officer. The operation was therefore re-established.70 Soon after, Anthony was seconded from ASIO to the Protective Security Coordination Centre but he did maintain some informal contact with this new official.71 In early 1980, Anthony attended a function at the Chinese embassy where Soviet and Vietnamese issues of interest to both parties were discussed.72 Anthony’s role seemed to take another turn when, in 1980, the Protective Security Coordination Centre put him in charge of security for the visit of the Chinese Vice-Premier.73 Following the successful visit, Anthony was one of 30 people invited on 30 May 1980 to a VIP lunch at the embassy. Although Anthony never confirmed to his Chinese counterpart that he was an intelligence officer (or vice versa), the implication was there.74 It had been an interesting experiment, but at no stage was intelligence exchanged.

Evolution of ASIO’s China coverage

Starting from an almost non-existent base during the Whitlam years, ASIO’s knowledge, assessments, approach to and coverage of the Chinese Intelligence Services evolved considerably over the years of the Fraser Government. With limited resources and even fewer staff, ASIO went from having almost no coverage of the Chinese to, within a period of less than two years, contacts within both the Chinese and Taiwanese communities in Australia’s major cities, and some insight into the activities of officials posted to China’s diplomatic missions. This was considered a significant operational success for ASIO, and is indicative of its capabilities at the time.

This period also witnessed a shift in ASIO’s understanding of the Chinese Intelligence Services’ modus operandi. During the early years of its coverage of the Chinese, ASIO expected, largely based on overseas advice (and in the absence of any real knowledge in Australia), that the Chinese used official premises, such as the embassy or consulate, ‘for briefing and debriefing agents involved in clandestine intelligence operations’.75 Understandably, therefore, ASIO’s limited efforts were largely directed at seeking to monitor this. Experience, however, quickly showed that there was no evidence this was how the Chinese operated. Contrary to earlier beliefs, Chinese espionage was generally not carried out from within missions but instead from within China itself.76 This likely went some way to explaining evident concern within ASIO that by the end of 1980 it could still not categorically identify who the intelligence officers were within Chinese missions. Another explanation was the difficulty of fully grasping what Chinese modus operandi looked like. As one ASIO officer explained, the Chinese system operated ‘as an amorphous, omnivorous vacuum cleaner’.77 They went about their business in a different manner, collecting small pieces of mainly overt information—what has been described as the ‘thousand grains of sand approach’.78 Separating the spying from legitimate work was not an easy process.

Over time, ASIO also began to appreciate its own limitations in responding to this unique Chinese approach. ASIO did not have the necessary expertise to exploit any vulnerabilities detected among Chinese intelligence officers.79 Notwithstanding its limitations, ASIO was reluctant to reach out for help. This was largely because ASIO was dedicated to conducting these operations independently, being aware that any publicity or blowback would reflect on the Organisation alone. ASIO was also aware that the task of targeting Chinese intelligence officers was a job that it—not others—should have been doing, and so it started working in that direction.80

This realisation coincided with a growing appreciation of the challenge posed by the Chinese Intelligence Services. By mid-1980, ASIO had to concede that it had ‘no evidence of direct espionage’ by the Chinese in Australia.81 This was repeated by the Director-General to Prime Minister Fraser in February 1981, when Woodward said ‘it did not appear that the Chinese Intelligence Services were very active in Australia’. Woodward qualified this by adding that there was ‘considerable ignorance’ among Western intelligence services about what the Chinese were up to, and the only way to improve that knowledge was to continue studying it.82 Woodward was correct on both accounts. The Chinese Intelligence Services were certainly more active than they had been before the early 1970s, but this was only the beginning of China’s foreign intelligence collection efforts against the West (which would really take off following the 1983 restructuring of the Chinese Intelligence Services).83 Woodward’s latter point has been confirmed by subsequent publications, which although limited in number, show that Western intelligence agencies, including ASIO, misunderstood the Chinese Intelligence Services.84 It was not Soviet intelligence and they did not act like the Soviets, yet they were treated as such. In the end, ASIO knew no other way.

On another level, ASIO showed some maturity, even at this stage, in its dealings with the Chinese Intelligence Services. As any good intelligence service knows, there can always be something of benefit in any liaison relationship—the challenge is how to manage the counterintelligence risks and the issue of reciprocity. As Quentin Anthony’s authorised sojourn with the Chinese showed, ASIO took a different attitude towards this priority counterespionage target than it had towards the RIS. ASIO was prepared, in this instance, to liaise on its own terms if it helped catch the Soviets and the Vietnamese.

The Vietnamese Intelligence Service

ASIO paid little attention to the North Vietnamese between the establishment of diplomatic relations in February 1973 and the downfall of the Whitlam Government in November 1975.85 This reflected the Whitlam Government’s nonchalance towards any security concerns the presence of Vietnamese intelligence officers may have generated. During this time, and while still recognising the Government of South Vietnam, Australia opened its mission in Hanoi.86 In response, in October 1973 North Vietnam opened an embassy at 92 Endeavour Street in the Canberra suburb of Red Hill. Their staffing levels were small, as was the Vietnamese population in Australia, and ASIO was not overly concerned about their activities.87 By the time Malcolm Fraser became Prime Minister, the political and humanitarian situations had vastly changed. The stream of Vietnamese refugees, mainly from the south, was increasing. The ‘fall of Saigon’ on 30 April 1975, where the north overran the southern capital, Saigon, resulted in an exodus of refugees, mainly by boat. Many of these eventually were accepted into Australia. In the Census of 1976, the first year Vietnamese were counted, 2427 Vietnamese were recorded in Australia. The influx continued, and by 1981 this figure had increased to 41,000.88 This context of an openly aggressive North Vietnam and the large pool of refugees who could potentially be vulnerable to manipulation by the Vietnamese Intelligence Service was of concern to ASIO. The threat was deemed significant enough that Woodward insisted on ASIO maintaining some interest in the SRV.89 The problem for ASIO was that after its work on the Soviets and Chinese, it had few resources for any other counterespionage work.

ASIO treated the Vietnamese Intelligence Service as both a politically motivated violence and counterespionage problem.90 As discussed in Chapter 7, ASIO officers working on politically motivated violence, mainly through community contacts and interviews, monitored the extreme left- and right-wing elements of the Vietnamese refugee community for two reasons: the potential for violence between pro- and anti-Vietnam Government elements; and to establish whether the SRV Embassy, which controlled visas into Vietnam, was putting pressure on refugees and leveraging support by threatening to withhold visas for their family members (as part of the ‘family reunion’ program)—a practice later known as ‘foreign interference’.91 Of more concern to ASIO, however, was the counterespionage threat the Vietnamese Intelligence Service could pose to Australian interests. This threat was believed to come from two areas: the refugee stream and intelligence officers based in the SRV Embassy in Canberra.92

The North Vietnamese began future intelligence planning while the Vietnam War was still in progress. They made preparations for sympathisers to move into South Vietnam, infiltrate the refugee stream and eventually work against expatriate groups worldwide. ASIO’s liaison partners knew this, and warned ASIO to be wary of illegal agents or intelligence officers posing as refugees.93 This tactic was not a well-kept secret, as stories in the international and Australian press confirmed, but these infiltrators were near impossible to identify.94 The Government was aware of the problem, and in response in 1977 it set up an Inter-Departmental Committee on Determination of Refugee Status to consider all refugee applications. Although ASIO was not officially represented on the committee, C Branch at headquarters provided the committee with security trace checks—from its own files and from liaison partners—on various individuals that came to its attention.95 ASIO’s main role, however, was to attempt to uncover any intelligence assets within the refugee stream. It did this through normal migration checking.96 The main work of the ASIO officers, as well as conducting security interviews with those applying for refugee status and making a recommendation to the Department of Immigration and Ethnic Affairs about their suitability based on security grounds, also sought to identify Vietnamese intelligence officers. Despite these efforts, the program did not identify any Vietnamese intelligence activity. ASIO continued to suspect that agents had been ‘fed into the refugee streams’.97

Apart from screening Vietnamese refugees, ASIO sought to identify any intelligence activity emanating from within the embassy.98 Specifically, ASIO was concerned with identifying Vietnamese Intelligence Service officers and their work in the community, particularly in using groups such as Doan Ket (a Vietnamese community group) and ex–South Vietnamese military associations as leverage for intelligence operations in Australia.99 Experience overseas showed that they were.100 Canada, for instance, declared a Second Secretary of the Vietnamese Embassy in Ottawa persona non grata in March 1979 for his exploitation of pro-Vietnamese Government associations and threats towards the Vietnamese population. ASIO also maintained the traditional concern about scientific and technological intelligence collection, and Vietnamese Intelligence Service interest in those who had access to classified or sensitive information, or were in a position to influence others, and who would be manipulated by the Vietnamese Intelligence Service.101 ASIO approached the target in the same way it approached traditional counterespionage targets. That is, ASIO focused on identifying people who were vulnerable because they still had relatives in Vietnam.102 In general, ASIO focused on all expatriates and visiting Vietnamese. In this case, ASIO was interested in finding out whether the SRV was placing pressure on them while in Australia, but also to see whether any might be performing intelligence tasks.103

ASIO did, however, assess that a number of Vietnamese Embassy officials were intelligence officers, and made note of its expectation that the embassy ‘may become involved in intelligence gathering activity’ against Australian interests and the expatriate community. Moreover, at ASIO’s own acknowledgement, the handful of officers identified as suspect intelligence officers belonged to the Ministry of the Interior, which was trained by and organised along the lines of the KGB. These were thought to be professional intelligence officers with well-developed tradecraft.104Despite these assessments, resource constraints and other priorities considered more significant meant that the Vietnamese Intelligence Service, while important, was probably given inadequate attention. By November 1978, the embassy staff had increased to more than a dozen, a large proportion of whom were identified as or suspected to be intelligence officers. Yet none had ‘been subjected to significant operational action by ASIO’.105 Senior ASIO officers admitted that they did not fully understand the Vietnamese target.106 Clearly, for that to happen more work was required.

ASIO’s efforts against the Vietnamese Intelligence Service increased from mid-1979, when it learned that the SRV had signed a lease on a house in Deakin, which it intended to use as accommodation for junior consular and trade staff from the embassy, a number of whom were suspect intelligence officers.107 E Branch at Headquarters ASIO immediately saw an opportunity to focus its efforts in the hope that it would confirm the identity of the intelligence officers and provide information on their activities.108 Instead of having their embassy staff live separately, the Vietnamese later decided to lease new embassy premises at 31 Endeavour Street (the same street as the current embassy), Red Hill, which would double as accommodation for all staff.109 The short duration of ASIO’s efforts meant that it ‘yielded no revelations directly on intelligence or foreign policy matters’, but, on a positive side, at least in ASIO’s assessments, they provided information that helped build a better picture of the embassy staff and their activities.110

Although ASIO had been unable to prove that the Vietnamese Intelligence Service was ‘conducting intelligence activities’, it still believed that intelligence collection was taking place.111 Lack of resources hindered ASIO’s efforts to come to terms with the Vietnamese Intelligence Service. This was not helped by the fact that there were no travel restrictions on Vietnamese officials who, unlike their Soviet or Chinese colleagues in Australia, or their Australian equivalents in Hanoi, did not need to give notice of their intention to travel. This made it harder for ASIO to plan and allocate its limited surveillance personnel to cover last-minute sightings. The Department of Foreign Affairs was aware of the difficulties imposed on ASIO by the freedoms allowed to Vietnamese officers, but it had bigger diplomatic concerns. ASIO understood these concerns and therefore chose not to push too hard for Vietnam’s inclusion on the travel notification scheme.112

Other Asian targets

ASIO’s inability to monitor the Vietnamese adequately gives more weight to Woodward’s 1979 instruction that the Asian Affairs Group should limit its focus. The group obeyed that instruction, but this did not mean that ASIO ceased to monitor other Asian targets when an opportunity presented itself.

While maintaining incidental coverage of a number of intelligence services from Asian countries, the Organisation did take a particular interest in the intelligence service of the Democratic People’s Republic of Korea (or North Korea). Australia had recognised North Korea in August 1973, and both countries established embassies in the respective capital cities, North Korea opening its embassy in Canberra on 31 December 1974. The relationship, however, broke down before long. On 30 October 1975, North Korea, in protest against Australia’s continued international support for South Korea, withdrew its embassy and a few days later expelled the Australian Embassy from Pyongyang.113 When, in 1977, a high-level North Korean delegation visited Australia for discussions about re-establishing diplomatic relations, ASIO sought to monitor their activities.114Formal diplomatic relations were not renewed until decades later.115

Monitoring the Soviet satellites

While the monitoring of Asian intelligence services continued, ASIO had not abandoned its coverage of the intelligence services of Soviet satellite states. In fact this coverage had been maintained to varying degrees since ASIO’s inception in 1949. Yet, in some cases, including Bulgaria and Hungary, ASIO’s focus on the Soviets meant that it still knew little of their activities. In other cases, such as Czechoslovakia and Poland, ASIO had better coverage through tried and tested methods, but this did not mean that ASIO could rest on its laurels. The intelligence services of each target were active in and against Australia, and ASIO could not afford to ignore them. The main concern for ASIO (common across each satellite target) was that despite their control by, contact with and work for Soviet intelligence, they also had their own operational priorities and interests. Reflecting on the previous decade, a 1978 ASIO paper noted that contact between Soviet and Soviet bloc missions, with the exception of Romania, ‘is known to occur frequently at a senior diplomatic level and also at the Consular level’. This relationship was strongest with the Czechs and Bulgarians, who both used Soviet diplomatic couriers.116 It should be noted that during the closure of the Soviet Embassy in Canberra in 1954–59, the Czech Intelligence Service assumed responsibility for Soviet intelligence operations in Australia.117

Uncovering satellite collaboration with Soviet intelligence was not the only challenge. By mid-1977 there was a ‘gradual increase’, mainly due to an expansion in the trade relationship, in the numbers of staff in satellite missions in Australia. ASIO expected that the number of intelligence officers would also increase. The relevant desk officers in B3 Section noted, however: ‘Unfortunately ASIO, as with the RIS, GRU and KGB, did not devote the resources to properly understand the nature and extent of intelligence activity in Australia emanating from representatives of the East European Communist countries (excluding the Soviet Union).’118 Despite this, ASIO devoted sufficient resources and effort against the satellite states to enable it to develop a reasonable understanding of their activities, intelligence priorities, links to local émigré communities and involvement in commercial enterprises.

While overworked staff covering the satellites knew their targets were busy, information both from operational work by the Organisation and liaison partners showed that the satellite intelligence services were collecting military, technical, scientific, economic, commercial and industrial information. Each service had recruited contacts in Australia in the political, trade union or educational spheres. ASIO’s work also confirmed that the Polish were ‘actively involved in the affairs of their country’s expatriate communities in Australia’.119

With little hope of covering everything, ASIO focused on recruiting and disrupting those it believed were working on behalf of satellite intelligence services. It did this through pre-emptive measures, using a variety of methods to prevent the situation from developing further. Where possible, ASIO also attempted to disrupt espionage efforts by recommending that the Government refuse visas to known intelligence officers: two Czechs, a Hungarian and a Romanian were, for example, refused visas in 1977.120 ASIO’s coverage of the intelligence services of satellite countries remained consistent, and drew upon all of its special powers.

Covering the Czech Intelligence Service

This broad-ranging coverage applied equally to the Organisation’s monitoring of the Czech Intelligence Service. There was a good reason for this: as we now know, the Czechs ran operations on behalf of the Soviets in Australia, and ASIO assessed the Czech Intelligence Service to be highly professional. The Czech Intelligence Service was ASIO’s most consistent counterespionage target after the Soviets. Following the 1969 defection of the Consul-General Karel Franc (see Volume II of this history), however, the consulate took a number of measures to protect itself from ASIO attacks.121 Nonetheless, coverage was maintained, along with a network of well-placed agents and contacts.

In one instance a Czech official put himself in a compromising position the Organisation sought to exploit. The Sydney office began planning an undercover approach by one of its officers, whose successful recruitment ASIO hoped would help it better understand the nature of the Czech presence in Australia. Speaking from experience, ASIO told the Department of Foreign Affairs that the chance of success ‘is not large’ but the results could be ‘considerable’.122 It therefore went ahead.

Surveillance soon showed that the Czech officer had indeed compromised himself. He was approached and refused to be intimidated into cooperating with ASIO, effectively ending the operation.123

This particular operation, as was so often the case, did not provide a single piece of intelligence. Nevertheless, the scope of the operation did enable ASIO to coordinate its intelligence efforts better and, more importantly, build up a picture of Czech Intelligence Service activities in Australia. This was valuable enough that successive attorneys-general continued to support ASIO’s targeting effort.124 Justice Hope, who was briefed in mid-1984 on targeting the Czech representation in Australia and some of the operational methods employed, raised no objections either informally or in his report on the Royal Commission on Australia’s Security and Intelligence Agencies.125

The Polish Intelligence Service

The Polish Intelligence Service, consisting of representatives of the Ministry of the Interior and Polish Military Intelligence, and spread between missions in Sydney and Canberra, was ‘one of the most active of the Satellite Services’ in Australia. They were technically sophisticated, well trained, aggressive and, as the discovery of several microphones in the walls of the Australian Embassy in Warsaw and another in the roof lining of the Australian Ambassador’s car showed, they were aggressively targeting Australia.126 It is no surprise, then, that when ASIO was informed the Poles were to build a new embassy complex in Turrana Street, Yarralumla, opposite the Israeli Embassy, ASIO immediately looked to mount a series of operations against the Poles.127

The small number of embassy staff moved in during August 1977, and ASIO monitored them closely.128 Although ASIO had been planning the operation for some time, it was by and large a failure, and some consideration was given to the possibility that it had been deliberately compromised. The Organisation never ascertained what had gone wrong.129 More worrying, ASIO became concerned that a number of operations were failing and in some cases simply came to an abrupt stop. Certainly, there were many possible explanations, but the fact that the need-to-know principle had not been rigorously adhered to raised questions about ASIO’s operational security.130

As for its coverage of the Czechs, ASIO used its full range of operational activities against the Poles.131 Nonetheless, all these sources could confirm was that intelligence officers were active in the Polish community. Despite a history of Polish defectors (see Volume I of this history), by mid-1978 ASIO still had not detected Polish espionage in Australia. Repeating a by now regular complaint, officers from Headquarters ASIO and the Canberra, Sydney and Melbourne regional offices agreed that they could do no more with present resources.132 Competing priorities meant that the situation went unchanged for the remainder of the Fraser years.

The remaining targets

ASIO’s files show that East Germany, Bulgaria, Romania and Hungary, among others, were treated to little more than passing interest. They were generally not considered of sufficient concern, as in the case of Bulgaria—which in 1979 ASIO assessed as no longer having a legal resident intelligence apparatus in Australia.133 The only case of significance against these targets was a pre-emptive operation against the East Germans in 1977, which was more about the future security of ASIO’s headquarters building than any current intelligence threat. Indeed, at that point, ASIO did not think there were any East German intelligence officers in Australia.134

At one stage, ASIO intervened to block a lease for the East German Trade Office in Melbourne.135 The reason was simple: the building was next door to Headquarters ASIO on St Kilda Road. The news that a lease had been signed took ASIO by surprise—approval from the Department of Foreign Affairs had not even been given. ASIO’s senior technical officer, Bill Miller, advised his superiors that if the East Germans moved in, they would be able to monitor ASIO’s communications.136 Mick Jiear did most of the work in having the lease denied, but the Director-General, Judge Woodward, even got involved, personally phoning one of the concerned parties and explaining that if this went ahead it ‘would cause great problems for ASIO’. Woodward also informed the Prime Minister, the Attorney-General, the Secretaries of the departments of Foreign Affairs and Overseas Trade, all of whom agreed with his action.137 The East Germans threatened legal action, claiming they had already purchased furniture and were seeking $25,000 in damages. Woodward thought they were bluffing, and decided that ASIO would only consider the matter if they actually sued.138 He was right, and they did not.

This preventative action forced the East Germans to look elsewhere. When ASIO learned of their next choice of premises in Albert Road, it sought to exploit its operational options.139 One reason for this was that the East German Trade Office would be the first Soviet bloc representation in Victoria and could therefore provide an ‘excellent base’ for the East German Intelligence Service to mount operations in that state.140

Reflections

Counterespionage work, Judge Woodward declared, ‘is about 50 per cent hard grinding surveillance, inquiries and following leads, and about 50 per cent luck … We certainly have been doing the hard, grinding work in recent years’, he told those listening to his end-of-tenure address at the National Press Club, yet ‘we haven’t had that luck’.141 But counterespionage was more than these things. As shown in this chapter, luck was an element, but it was mainly about coordinating efforts, and managing sparse resources and competing priorities. It was also about professionalism, proper planning, and knowing one’s own and one’s adversaries’ strengths, limitations and vulnerabilities.

Despite its resource constraints, and the overwhelming focus on the RIS, ASIO’s work against non-Soviet espionage targets—some new and some old—was, in most respects, considered successful. These operations did not all provide the rich intelligence for which ASIO’s senior management hoped, but each was, at least technically speaking, an operational success in its own right. Combined with ASIO’s other resources, notably some excellently placed human sources, a small number of ASIO officers ensured that the Organisation was in the best position possible to assess the threat posed by these smaller targets. The threat arising from these targets would continue to be monitored through to the final years of the Cold War. It is to ASIO’s experience during the Hawke years from 1983 to 1989 that we now turn our attention.

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While he did not commission the work of Justice Hope, or select Justice Woodward to head ASIO, Prime Minister Malcolm Fraser (1975–83) supported the work of both men. (NAA 11398638)

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Robert Ellicott, Attorney-General (1975–77) and cousin of former Attorney-General Sir Garfield Barwick, was more prepared than his Labor Government predecessors to authorise warrants for ASIO operations against counter-subversion targets. (Fairfax FXB111143)

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Frank Mahony, the interim head of ASIO between Peter Barbour’s departure in 1975 and the appointment of Judge Woodward in 1976, was highly regarded by those who worked for him. (ASIO)

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Justice Sir Edward Woodward was the first judge to head ASIO since its first Director-General, Justice Sir Geoffrey Reed, in 1949. (ASIO)

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Justice Robert Marsden Hope’s work on two royal commissions and the Protective Security Review laid the way for reform within ASIO and across the Australian intelligence community. (NAA A12386 EO/1/2)

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The secretary to the Royal Commission on Intelligence and Security, George Brownbill, was highly critical of ASIO and played a key role in drafting the reports that led to significant reform within ASIO and the broader Australian intelligence community. (NAA A12386 EO/1/2)

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Justice Hope with the Royal Commission on Intelligence and Security reports, which were issued successively during 1976 and 1977. Of immediate concern to ASIO were the second and fourth reports. (Fairfax FXB110973)

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Bill Hayden, Leader of the Opposition (1977–83), phoned the Director-General, Harvey Barnett, when it appeared one of his staff had leaked a classified unpublished report from the royal commission. (NAA 11881075)

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Woodward (right) was succeeded as Director-General in 1981 by his deputy, Harvey Barnett. Here he is being presented with a pair of binoculars by Barnett upon his retirement. Together, they reorganised and modernised ASIO in accordance with the recommendations of the royal commission. (Photographer unknown, reproduced from A Brief Interval by Edward Woodward)

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Mobile surveillance often used cutting-edge technology to monitor and record target activity. This ladies’ shoulder bag from 1978 concealed a compact camera, a radio transmitter and a receiver. (ASIO)

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ASIO sought to keep abreast of improved technology that could be used for surveillance. This photo shows a Tessina camera rigged for infrared photography in 1980. (ASIO)

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Portable dry photocopiers like this proved very convenient for ASIO operations that required rapid and discreet copying of sensitive documents. (ASIO)

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Technical operations often involved extensive audio surveillance. Here is an inside view of an ASIO listening post monitoring several hidden microphones. (ASIO)

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Prabhat Ranjan Sarkar, aka Baba, founder of the Ananda Marga, was arrested in India in 1971 for alleged murder. His imprisonment triggered a series of protest actions around the world against Indian officials. (ASIO)

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Scene of the bomb that exploded in front of the Hilton Hotel in downtown Sydney on 13 February 1978. The bomb killed two garbage workers and one police officer, seriously wounding another. (Fairfax FXJ198168)

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Ananda Marga members Tim Anderson, Ross Dunn and Paul Alister, known as the ‘Yagoona Three’, were charged with conspiracy to murder and imprisoned in August 1979. Their convictions were overturned in 1985. (Fairfax FXT136686)

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Prominent Ananda Marga member Michael Brandon indicated it was morally justifiable in a revolution to overthrow a corrupt government and that those circumstances existed in Australia. (ASIO)

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Sarik Ariyak, the Turkish Consul-General, was assassinated with his bodyguard in Sydney in December 1980. Responsibility was claimed by the Justice Commandos of the Armenian Genocide. (ASIO)

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Hamid Meziani was a nom de guerre for an Al Fatah operations officer who visited Australia in March 1976. He was detained and interviewed by ASIO before being deported to Algeria in July. (ASIO)

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Haydar Haj Ismail, aka Aboud Aboud (right), spearheaded the Syrian Social Nationalist Party. ASIO supported the Government’s efforts to deport him, while working to protect its sources from exposure in court. (ASIO)

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On 23 December 1982, the Hakoah Club in Sydney’s beachside suburb of Bondi was bombed. Groups associated with the cause of Palestinian liberation were the principal suspects investigated by ASIO. (ASIO)

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ASIO, which kept a modest watch on Irish groups and demonstrations like this one in Melbourne, September 1981, found no evidence that funds raised in Australia were used to support terrorism. (ASIO)

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A Croatian demonstration in Dandenong, 1983. ASIO identified a number of Croatian extremist organisations in Australia with ‘a philosophy of violence and demonstrated ability to plan and execute acts of violence’. (ASIO)

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Lisa Walter was recruited as an ASIO agent and used to target Trotskyists in 1975–76. Walter eventually went public about her undercover role, revealing names of ASIO officers. (Clippings from National Times, ASIO file)

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ASIO conducted surveillance on several prominent Australians seen to have connections with the USSR, Eastern bloc states and revolutionary groups aligned with or financed by them. (Tandberg cartoon, Sydney Morning Herald, 29 July 1989)

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Andrey Duchkov, a Third Secretary at the Soviet Embassy. He was the subject of ASIO’s attention and of an aggressive attempt at recruitment by an undercover ASIO officer. (ASIO)

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Gennady Petrovich Nayanov pictured arriving at Sydney Airport in July 1979. Soviet defector Oleg Gordievsky later revealed that Nayanov was the KGB Resident during a successful tour of Australia. (ASIO)

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KGB Resident Lev Koshlyakov (left), who stayed in Australia for seven years until March 1984, was considered one of the most dangerous KGB officers ever posted to Australia. (ASIO)

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The home of Soviet Embassy official Valeriy Ivanov, in the Canberra suburb of Curtin, was under close surveillance by ASIO. Operation Bushfowl exposed startling discussions between Ivanov and David Combe. (ASIO)

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The Chinese Embassy in the Canberra suburb of Watson. Ringed by a high fence and surrounded by open paddocks, it was a difficult building to place under surveillance. (ASIO)

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A Vietnamese diplomatic residence in south Canberra. Residences like these were popular surveillance targets. (ASIO)

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Polish Embassy under construction, 1976. As the diplomatic presence of communist countries increased, ASIO sought to monitor closely the construction of additional premises and capitalise on opportunities presented. (ASIO)

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Peter Durack (left), Attorney-General (1977–83), and his successor, Gareth Evans (1983–84). Both men oversaw drastic change within ASIO, including the implementation of the ASIO Act 1979 and the reforms arising from the Hope royal commissions. (NLA pic-vn4771601-v)

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David Combe crossed ASIO’s path as it undertook surveillance of Ivanov. Combe’s controversial association with Ivanov would generate an early crisis for the incoming Labor Government of Bob Hawke. (ASIO)

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Mick Young (right), Special Minister of State, was asked to resign after breaching Cabinet confidence regarding Ivanov’s expulsion. Hawke (left) called it ‘the hardest thing I ever had to do in politics’. (Photographer unknown, reproduced from The Australian)

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Valeriy Ivanov, a KGB officer in Canberra, was expelled from Australia after an ASIO technical operation in his house showed him trying to cultivate former ALP national secretary David Combe on the eve of the 1983 Federal elections. (ASIO)

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