Counterintelligence and the Penetration of ASIO, 1975–1989

Allegations of penetration—that the RIS might have placed moles within ASIO—have circulated for years. We now know, as a result of the 2014 public release of Vasili Mitrokhin’s KGB notebooks, that penetrating Australia’s intelligence agencies was one of the KGB objectives following the resumption of diplomatic relations between Australia and the Soviet Union in 1959.1 It now appears evident—as discussed in this chapter—that they succeeded, although, in most instances, the fact of penetration during these years was revealed through information that only came to light after the Berlin Wall fell.

Coming to grips with the question of penetration was a long and difficult process. Indeed, the very issue of penetration was highly sensitive. For senior managers within ASIO to even suggest that this might have taken place seemed to indicate that they did not trust their staff. But to dismiss the possibility would indicate naïvety. More broadly, the attitude was that if the public or government believed that ASIO had been penetrated there would be a loss of confidence in the Organisation. Moreover, there would be damage to ASIO’s credibility with its international partners if it lost their trust. For these, and many other complicated reasons, any discussion of penetration within the Organisation was likely to be circumscribed, but it could not be ignored. While concern about penetration existed during the years covered by the first two volumes of this history, it was more acute in the period covered by this volume. This chapter examines how the question of penetration was dealt with inside ASIO during the Cold War.

Early concerns

The idea that ASIO was penetrated had first appeared during the 1954 Petrov affair and reappeared in 1963 following the Skripov case.2 The concern that someone within ASIO was warning the Soviets was largely rejected by the KGB defector Anatoli Golitsyn, who told ASIO that he did not think it was penetrated.3 This gave some comfort to the then Director-General of Security, Charles Spry, but it did not stop the office whispers. Indeed, over time, Golitsyn’s claims came under intense questioning, particularly once his supporter, James Angleton, retired from the CIA in 1975.4Some of these early suspicions were taken seriously enough by Spry that he ordered investigations, but research into certain individuals and the background of all employees in the 1960s failed to find anything that could not be explained by other means, or that could sustain the uncertainties.5

Since then, ASIO’s internal security area, first known as the National Estimates Section and then the Operations Research Section, or D5, had been allowed to wither.6 Jack Griffiths, who had worked in the National Estimates Section, noted that the very title of the section, combined with its limited access and visibility for the rest of the staff, had created an air of mystery and unnecessary secretiveness about the section and its functions.7 At its peak in 1969, D5 had nine staff, but it had shrunk to only three people by 1974.8 By the mid-1970s, ASIO’s counterintelligence capabilities were so poor, despite the continuing efforts of some judicious officers, that they were almost non-existent.9 Unfortunately for Australia, this coincided with a growing tension between East and West, when KGB residencies around the world were being directed to increase their efforts ‘to recruit a new generation of penetration agents in the West’.10 The Soviet Union wanted more information on Western intentions, particularly regarding America’s nuclear program, and worked hard to recruit ‘access agents’—those who were in a position either to keep the Soviet Union informed, or more importantly, influence the decisions of foreign governments.11 Given its alliance with the United States, and its knowledge of many of the West’s secrets, Australia and its intelligence agencies was a natural target for Soviet espionage.12

Although ASIO management knew that attempts had been made by subversive groups and journalists to penetrate the Organisation in the past, there was no evidence that any hostile intelligence service had ever succeeded. Nor was there evidence, although ASIO suspected it to be the case, that the Soviets were intercepting its communications beyond the basic and unencrypted radio communications used by the mobile surveillance teams.13 The implication of a breach in ASIO’s classified communications networks was severe, and could explain the failure of many operations. At the same time, the notion that the Soviets were intercepting ASIO’s telephone and telex services was less sinister, and therefore less uncomfortable, than another possibility: that a mole or moles inside ASIO was revealing secrets to the Soviet Union, and betraying ASIO and the Australian people.

A number of former ASIO officers interviewed for this history, or by ASIO for its own internal security purposes, speculated that ASIO, like other Western intelligence agencies, was penetrated.14 They based their claims on cases such as the Cambridge Five in the United Kingdom and their knowledge of how the RIS operated. The cases of Kim Philby and Guy Burgess in Britain’s MI6 suggested that ASIO was likely not immune from penetration attempts.15 This was also the opinion of some outside ASIO. According to Judge Woodward, the first he heard of a mole in ASIO was when Malcolm Fraser, still the Opposition Leader, bumped into him at Sydney Airport and said, ‘You realise, of course, that ASIO is penetrated?’ As Woodward noted, this statement was based on the assumption that it must be so—given the penetrations elsewhere—rather than on any evidence.16 This lack of proof would hamper ASIO’s investigations for years.

Penetration and the Royal Commission on Intelligence and Security

The public rumours that ASIO was penetrated had been gaining momentum for some time. In 1977, for instance, the press reported that the Royal Commission on Intelligence and Security had concerns about a mole inside ASIO.17 Indeed, Justice Hope had touched briefly on the possibility of penetration in the top-secret supplement to his fourth report. Noting that this ‘Royal Commission is not a suitable vehicle for counter-intelligence investigation[s]’ and he did not have the resources in any case, he nonetheless commented that there were sufficient ‘indicators’ to cause concern. The question of penetration, he explained, ‘needs answering’.18

Hope observed that several officers who appeared before him during the commission’s hearings had voiced fears of penetration. Circumstantial evidence appeared to back up these concerns. After all, ASIO had achieved no significant counterespionage victory since Petrov’s defection in the mid-1950s. Hope saw the Skripov expulsion of 1963 as ‘at best only a partial success’, and subsequent operations had appeared to have run to sudden and inexplicable conclusions. Furthermore, Hope observed, ASIO had no ‘internal [counterintelligence] capability’ or well-developed ability to review past and proposed operations, and counterintelligence ties with allied counterparts had been allowed to lose status, staff and effectiveness over several years.19 A review of ASIO’s particular technical needs found that counterintelligence targets had ‘outstripped ASIO’s capacity to cope with them’ and that the intelligence-gathering activities of ASIO needed to ‘match the threats from espionage and subversion’.20

Compounding the problem was the fact that security assessments of ASIO staff were not regularly revalidated. Hope observed, ‘There is no real counter-penetration capacity within ASIO and no operations review mechanism to look for signs of betrayal on operations.’ There had been a tendency to assume that once an employee was in the Organisation, their loyalty remained inviolate and that no further risk would arise. ‘This attitude can at best be described as naïve,’ Hope added.21

Ironically, given the lax approach to counterintelligence and inadequate counterespionage that Hope identified, he found while visiting overseas security and intelligence agencies a much greater disposition to discuss these security matters than within ASIO. This illustrated a situation often found in Australian intelligence circles—people adopted an attitude of over-protection, even from those who had a need to know, on the basis of presumed or supposed overseas displeasure were the circle of knowledge to be widened. Such an attitude, Hope observed, was a disservice to US–Australian relations and often meant that those with a real interest in or need for a particular class of intelligence never had the benefit of it in their work.22 This damning assessment indicated a need for fresh thinking and more imaginative and thoughtful leadership within the Organisation.

Hope therefore recommended that ASIO revamp its internal security apparatus and

stand ready to adopt a more aggressive and sceptical attitude to [counterintelligence] work. By aggressive, I mean that ASIO has to go out and look for the evidence; by sceptical I mean ASIO has to face the possibility that all its officers may not be completely reliable.23

Hope also recommended that the Director-General be asked ‘to take steps to ensure that ASIO is not penetrated and has not been’.24 As George Brownbill, the royal commission’s Secretary, recalled, both he and Hope also told Prime Minister Fraser

that ASIO was probably penetrated, that we didn’t have the resources or the counter-intelligence expertise to establish that, nor the time. But it was an absolutely essential task that, for a reformed ASIO, the new head of the Organisation would get to the bottom of it. The evidence related to a number of conversations I had with people inside ASIO about their professional judgements over time. People came to us at great risk to their careers … There were names named—senior people in the organisation. These names we passed on to Woodward.25

Hope and Brownbill then ‘spoke extensively with Woodward about the challenges he would face, including the issue of penetration’.26 In response to this (and as mentioned in Volume II, Chapter 11), the Organisation established an internal investigation that attempted to make sense of these vague and sometimes contradictory leads.

Internal security changes

In response to Hope’s recommendations, in January 1977 ASIO formed an expanded internal security area. Some of the key staff from the Operations Research Section transferred to the new area and continued the work they had been doing previously—actively researching old cases in the hope that they could provide some explanations for where things went wrong.27 Woodward permitted the area to continue to exchange information on international penetration and failed counterespionage cases through the CAZAB group (for more on CAZAB, see Volume II of this history).28

Internal investigations looked into ASIO officers. Conscious that knowledge of these investigations could be dangerous to morale and to the careers of those who fell under a cloud of suspicion, all internal investigations were conducted in the greatest of secrecy.29 But in the absence of any tangible leads, and still hamstrung by a small establishment, the main focus of the investigating area was on preventing future cases, rather than unearthing any former or existing penetrations.30 ASIO therefore paid more attention to its recruitment process—a penetration avenue that it knew had been attempted in the past. Officers were reminded of the need to be vigilant in their own personal security and the constant threat posed by the RIS, and to report any suspicious activity.31 The absence of a serious internal gaze and an effort to uncover any existing moles, as recommended by Hope, was a failure on ASIO’s part. The organisation responsible for Australia’s internal security was not taking its own security seriously enough.

For many ASIO officers there was still a niggling concern that there was a mole within their midst.32 What other explanation was there for the many promising counterespionage operations that either went nowhere or failed without any appreciable reason (such as those discussed in Chapter 9)? How, they wondered, could the RIS operate effectively when their every move was ostensibly covered by ASIO’s myriad intelligence sources? Were they being tipped off by someone who knew of ASIO’s weaknesses or the gaps in its coverage? Very few interviewees were prepared to name a culprit, in the knowledge that they had no evidence that could be used in court; those who did usually added that it was merely a suspicion, based either on operational failures, someone’s oddities, unexplained aspects of someone’s past, or office gossip. One officer, Ian Thomas, was convinced that ASIO was penetrated. But he also recognised that ‘there may be many other factors’ for ASIO’s operational failures ‘besides there being a spy in ASIO’—poor planning, resource limitations or bad tradecraft were presented as possible explanations.33 Other officers refused to entertain the notion that ASIO had ever been penetrated. Either way, the key point was that ASIO had nothing concrete on which to base its investigations.

Renewed penetration concerns

Claims of penetration were aired again in September 1978 when former Whitlam staffer, Richard Hall, published his book The Secret State: Australia’s spy industry. Although only a very minor point in his book, Hall wrote that the real reason Peter Barbour was removed as Director-General was that US and UK intelligence agencies had told Hope that ASIO was penetrated, a message that Hope apparently passed on to both Whitlam and Fraser.34 Hope certainly did pass on his concerns about Barbour’s leadership, but there is no evidence that he used penetration as a basis for recommending that Barbour be replaced. In fact, George Brownbill, who was present when Hope spoke to Whitlam about the Director-General, recalled that the reasons Hope gave when recommending Barbour’s removal, were his perceived poor management and weakness of character.35Similarly, as discussed in Volume II of this history, Barbour’s record of his removal does not mention penetration.36

In reply to a parliamentary question about Hall’s revelations, Woodward—well aware of the importance of evidence given his judicial career—suggested that the Government should state explicitly that ‘neither the Government nor the Director-General of Security has any evidence to suggest or reason to believe that ASIO has been or is penetrated by any foreign intelligence service’.37 Woodward repeated this in his memoir. Clearly, he did not think that ASIO was penetrated, and he used the operation against Ivanov as a case in point. Such a success would not have been possible, he argued, had there been a mole.38

Although he was adamant that ASIO itself was not penetrated, Woodward was not prepared to rule out the possibility that there was a ‘highly placed “mole” in the Australian Government’s service’.39 He had good reason for this caution. As he explained to John Enfield of the Department of the Prime Minister and Cabinet, ‘we do receive leads from time to time from the Americans which suggest the possibility of Soviet penetrations in Australia—we follow such leads assiduously’.40 Woodward expanded on this in his memoir. ASIO, he wrote, was ‘informed by the CIA that they had some imprecise information, from a particular source, that a KGB officer had been rewarded for recruiting an unnamed senior Australian public servant’.41 While Woodward’s memory was not completely accurate (the lead came from another agency), this ‘imprecise information’ resulted in a top-secret operation to identify the ‘unnamed’ mole. An attempt was made on the basis of this lead to go back and look at previous leads to determine if there were any commonalities or consistencies.

The Lazovik lead

The lead came in mid-1980, when an overseas service told ASIO that Gerontiy Pavlovich Lazovik, a KGB officer based at the Soviet Embassy in Canberra from 1971 to 1977, ‘was awarded a medal for an intelligence recruitment while he was stationed in Australia’. Without disclosing the nature of its source, the overseas service added that this medal was a high award, given for a significant recruitment. While there was a possibility that Lazovik’s agent was not even an Australian (that is, they could be a foreigner recruited in Australia), ASIO recognised that ‘the possibility that an ASIO officer was recruited cannot be overlooked’.42 Later information added that the medal was the Order of the Red Star, and Lazovik had been given it for recruiting an Australian intelligence officer.43 ASIO concluded that these additional details were inaccurate,44 but nonetheless used them—in the absence of any other leads—for its investigations.

The investigation of this new lead began in mid-July 1980.45 Based on the fact that no names were given and ASIO was unable to assess the foreign service source, the resulting efforts led to a series of inconclusive investigations that continued for more than a decade. The early investigations, as per Woodward’s directions to Barnett, worked ‘on the assumption that Lazovik recruited a significant source in Australian intelligence’.46 ASIO’s efforts largely went into two directions—internally and externally. Internal research concerned ASIO’s unsuccessful operations during Lazovik’s posting, in an attempt to see why they failed and whether there were any commonalities, including among the staff involved. External research looked at the rest of the Australian intelligence community and the public service more generally.47

As a first step in its investigations, ASIO went back to its Lazovik files. It soon found that its holdings were not complete: the nineteen volumes previously kept by the Canberra office had been destroyed in February 1980—without a reason being recorded.48 While not conclusive, this in itself was a possible indication of unauthorised and untoward action by somebody. Using its incomplete files at headquarters, ASIO built up a picture of Lazovik’s time in Australia. He had arrived as a Second Secretary (Press and Information) on 2 August 1971.49 Although he came with no intelligence trace and no history of previous diplomatic postings, his arrival at Canberra Airport was nonetheless watched by ASIO.50 He ‘was smartly dressed, had a distinct Western appearance, was constantly smiling and looked to be very happy’.51 He had been the subject of regular surveillance from his first week until the end of his posting.52 When he travelled interstate he was kept under close surveillance.53 In response to the expulsion of RIS personnel in the United Kingdom, in June 1972, senior ASIO officers drafted a submission to the Attorney-General recommending that Lazovik and one of his colleagues ‘be expelled from Australia for conduct incompatible with accepted standards of diplomatic behaviour’.54

Peter Barbour later told Prime Minister Whitlam that he decided not to submit the proposal because of the probability of a Federal election and, with a nod to the Petrov affair, ‘the likelihood of being accused of producing another rabbit out of the hat’.55 Lazovik, therefore, was left to continue his work. Described by a former ASIO officer as an urbane agent runner, Lazovik appears to have benefited from the fact that telephonic interception of Soviet premises was cut off by Attorney-General Lionel Murphy from 1972 to 1974—leaving an ‘irretrievable hole’ in ASIO’s intelligence base.56 Using his diplomatic cover, Lazovik met with dozens of journalists, members of the various communist parties, Soviet sympathisers, public servants, Parliament House employees and foreign diplomats.57 One of his confidential contacts, as later reported by the KGB archivist Vasili Mitrokhin, was the Labor MP Albert James.58 In July 1977, Lazovik’s last month in Australia, ASIO admitted that ‘it has never been possible to detect Lazovik actually meeting an agent’.59

In its preliminary report on the operation, ASIO concluded that it only partially knew what Lazovik was up to on nearly half of his 2180 days in Australia. During that time he was known to have had contact with 260 people, some of whom were public servants. Applying a number of filters, ASIO narrowed its field to a small number of individuals. Although it recommended further action, it is not clear that any of those on the list were followed up.60 An updated report in October identified additional persons of interest, but in the end there was no case to answer. Of more significance, however, was the report’s review of a failed undercover operation and other cases that had indirect links to one of ASIO’s Russian translators.61 Like the other leads, this was not followed up at the time.

Another possible lead

There continued to be considerable scepticism within ASIO about the Organisation having been penetrated. In October 1980, the ACT Regional Director was reminded of a possible ‘brush contact’ the previous year between a senior ASIO officer and an ‘unidentified male of Slavonic features’. A report was not written until twelve months later, and even then little was done to follow it up.62 These were not new claims. Suspicion fell upon this officer, a Second World War veteran who had commenced with ASIO in the early 1950s. He gradually rose through the ranks until the early 1970s, when he was appointed to a senior position. His vagueness was confused with mystery, and this, combined with his education, led some in ASIO to believe that he was a Soviet mole.63 Before he commenced as Director-General, Woodward spoke to Peter Barbour about the possible penetration of ASIO. Barbour was aware of the rumours about this officer, but while he had been disappointed with the officer’s performance, he had no reason to doubt his loyalty. Woodward, after speaking with senior ASIO officers whose opinions he trusted, agreed with Barbour’s assessment. The absence of a motivation or an excessively lavish lifestyle, coupled with Woodward’s impression that the officer was an ‘arch-conservative’, led to the conclusion that he was not compromised.64

Another officer wrote in his defence that he, along with a few other officers, were the only ones who had achieved senior rank who displayed any degree of intellectualism within ASIO:

In particular, [he] was a shy and somewhat aesthetic personality. His personal tastes were for intelligent conversation, and good food and wine rather than a boozy afternoon playing poker face at the local hotel, a pastime enjoyed by his senior colleagues. In other words, he did not fit in. He was said to [speak Russian], he had an intellectual appreciation of Soviet espionage and its relationship to Soviet foreign policy and expansionism, things which were not understood by most of his senior colleagues.65

In the event, Woodward decided that there was no information available that would justify operations designed to detect clandestine contact between the ‘arch-conservative’ officer and his RIS handler. He reckoned that there was nothing to justify an application for a telephone interception, and surveillance would be extremely difficult to mount in all the circumstances. He therefore ‘reached a firm conclusion that no further action should be taken unless some fresh information comes to light’.66

Later investigations rekindled the earlier suspicions67 and tested whether this officer could have been Lazovik’s mole, but eventually concluded, once again, that he did not fit the parameters.68 One officer who had known him since the early 1960s wrote: ‘[he] is not our spy, I don’t think so, nor did Charles Spry … If he ever had been recruited he was grossly inept.’ Laziness, unreliability and incompetence had seen him ‘steadily moved out of the most responsible jobs where the best access lay’ during his last fifteen years of service. ‘I have no doubt that [he] would be immensely chuffed and not a little amused if he knew how much time we had spent on him.’69

By February 1981, ASIO had concluded that Lazovik as the KGB Resident was responsible for the oversight of a range of Russian intelligence collection activities in Australia. However at this stage, ASIO had assessed that Lazovik’s agent was not an ASIO officer but someone from the wider public service.70 This fuelled Woodward’s suspicions.71

Looking further afield

In its efforts to consider possible moles in the wider public service, ASIO faced significant challenges and found no conclusive leads. A series of investigations was launched on senior officials in a range of Federal Government departments, particularly those who had been identified as having had contact with Soviet bloc officials. Some who came under suspicion did so for incidental contact with Soviets, coupled with alleged actions that could have left them vulnerable to blackmail, and therefore open to Soviet or other exploitation.72 Yet such accusations could be levelled at many ambitious, capable, driven and amorous bureaucrats. This was hardly enough to prejudge anyone as a mole.

After reviewing the cases, the Director-General was informed that there was no evidence to suggest that senior officials had been recruited by the RIS, or that they were other than loyal citizens.73 That did not stop ASIO from continuing to investigate leads.

On 31 March 1981, the National Times published Brian Toohey’s article ‘KGB makes deep penetration in Australia’, which claimed, based on a ‘top CIA source’, that the KGB had planted a mole in a key government position in Canberra.74 Some still felt there was reasonable doubt concerning the relationship of a number of senior public servants with the Soviets. ASIO’s senior management, however, agreed that in spite of a number of indicators, there was no definite evidence of a conscious Soviet agent.75

As Harvey Barnett explained to the Secretary of one department, ‘in retrospect, it may have been wasteful to have investigated such people at all’. The results of these investigations, he explained, ‘were totally negative and no suspicions of a security nature “stuck” ’.76

Revelations from Chapman Pincher

In March 1981, Justice Woodward wrote to Prime Minister Fraser concerning a book, Their Trade is Treachery, by British author Chapman Pincher. Woodward explained that the book made ‘a number of dramatic disclosures’ and contained ‘two matters of interest to Australia’. The first was that a former Director-General of MI5, Roger Hollis, had been investigated as a possible Soviet spy. Woodward acknowledged that the allegation that Hollis had been investigated was correct, although very few people even inside MI5 had known. He also explained that the British had advised ASIO that Hollis was innocent and came under suspicion only because of a misunderstanding of information obtained from a Soviet defector.77

The second matter of interest to Australia was Chapman Pincher’s disclosure that Charles (Dick) Ellis, who worked for Britain’s MI6, was ‘believed, on good authority, to have worked for the Russians’. Woodward explained that ‘this view is in fact accepted by the United Kingdom Services’. Woodward explained that it was of particular interest to Australia because Ellis had connections with Australian intelligence going back to the early 1950s.78 The Ellis case is discussed in more detail in volumes I and II of this history.

In his letter to the Prime Minister, Woodward discussed the technical operation carried out by ASIO against the unoccupied Soviet Embassy in 1959.79 Pincher’s book alleged that the operation to install a listening device was unsuccessful because knowledge of it leaked from sources abroad. While the listening device was later successfully activated in the technical sense, it never produced any intelligence and was therefore a failure. Woodward suggested that it may well have been because knowledge of it reached the Russians from a source outside Australia. But he noted that there were several arguable explanations and it had never been possible to resolve the matter ‘although a great deal of attention had been given to it over the years’.80 Included in the range of hypotheses was the possibility that someone working for ASIO was the culprit.

Circles of diminishing likelihood

Meanwhile, ASIO continued to investigate possible penetration cases, including in the higher echelons of the bureaucracy in a range of government departments,81 but these cases and the lack of progress on other leads distracted ASIO from the very real possibility that the mole was one of its own. Failed operations were revisited, with the finger being pointed at bad tradecraft or indiscreet agents.82 In hindsight, it seems that the difficult questions were often avoided or not considered. Explanations were settled on, such as indiscreet agents, with no evidence—and these were accepted over the more sinister possibility that a mole was busy undermining ASIO’s efforts. All the while, as later intelligence would suggest, a number of moles were left to continue their treachery. To be fair, though, ASIO had little experience in this type of investigation, and even less information upon which to base its efforts. Moreover, investigations went around in circles, resulting in what the CIA’s counterintelligence chief James Angleton famously referred to as the ‘wilderness of mirrors’.83 Woodward later wrote about ASIO’s inconclusive efforts:

We spent a lot of time looking into it as best we could, with little information to go on, while the Agency’s officers inquired from time to time as to how we were getting on. Nothing ever came to light, and I was left with the uncomfortable feeling that the whole thing might have been an exercise in keeping ASIO alert and up to the mark.84

As the head of Internal Security recorded, Woodward had discussed the investigation with him at some length in the closing days of his administration. The judge confirmed to the Attorney-General in his final meeting that ASIO had exhausted all reasonable leads to the possibility that it was penetrated by a hostile intelligence service.85 Some, however, were critical of Woodward’s approach. George Brownbill, for instance, believed that Woodward’s judicial background meant that the investigation ‘was conducted with such attention to evidentiary quality that the common sense conclusions that an intelligence officer would come to were set aside and the investigations came in inconclusively’.86 In other words, Woodward would not let investigations run their course if there was insufficient evidence to sustain a conviction.

By December 1981, just months after Woodward had left ASIO, investigations had stalled. This was because the initial lead appeared to give no reasonable cause to suspect that a KGB recruitment had taken place in ASIO.87 Woodward’s successor, Harvey Barnett, agreed that the Organisation had devoted many hours to investigating the very thin lead, and yet the results had yielded nothing. There seemed little more ASIO could do in the circumstances without further information from the original source.88 Privately, Barnett was worried. He confided in one officer on more than one occasion (without naming anyone) that he was concerned about a mole within the Organisation.89 To another, he ‘expressed deep concern about the possibility of a penetration’ and ASIO’s lax communications security.90 The Director of Internal Security was not so sure. He believed that it was possible the candidate was not Australian. In what was a rather naïve assessment by a counterintelligence officer, the claim was made that it was reasonable to expect that some collateral intelligence would have surfaced indicating a leakage and there had not been the slightest suggestion of this.91

The failed operations were one sign, as was the reality that a high-placed mole would have been both protected and careful. In increasingly diminishing circles, ASIO had run down all reasonable, and some very unlikely, leads and found nothing to justify concentration on any one case.92And there it largely sat for nearly seven years.

The investigations were reviewed in 1988 following another lead. The earlier efforts were damned for their lack of a rigorous or methodical approach. By this stage, ASIO had received new information from the senior KGB defector Colonel Oleg Gordievsky (who, as discussed in Chapter 18, had worked as an agent for MI6 while employed by the KGB) that Lazovik—who had been promoted on his return to Moscow—was the KGB Resident during his Australian posting. Furthermore, contrary to ASIO’s earlier assessments, new information emerged that Lazovik’s recruitment may indeed have been an ASIO officer. ASIO concluded that the failure to proceed with the persona non grata case against Lazovik in 1972 may have therefore allowed Lazovik to succeed through ASIO’s inaction.93

More worrying, though, were Gordievsky’s comments that the next two KGB residents, Gennady Petrovich Nayanov and Lev Koshlyakov, had successful tours of Australia. Like its Lazovik holdings, ASIO’s Nayanov files offered few leads. ASIO now criticised its own failure to stop any of the KGB officers from operating. The picture that forms from this is of consecutive KGB officers, spanning a thirteen-year period, who recruited and ran agents successfully despite ASIO’s efforts. Koshlyakov’s actions are covered in Chapter 9, but it is worth highlighting here that he stayed in Australia for seven years and was considered by one ASIO officer as one of the most dangerous KGB officers ever posted to Australia.94 ASIO’s capacity for self-criticism may have improved, but there was still no evidence that Lazovik’s agent was an ASIO mole. Equally, while there was evidence that ASIO made attempts to identify penetrations, these were not of the type expected of a government agency responsible for counterintelligence matters, studying all penetration leads or suspicions. That would change after the fall of the Berlin Wall.

Revelations after the end of the Cold War

In November 2004, the ABC’s Four Corners ran an episode entitled ‘Trust and betrayal’ about the penetration of ASIO and its impact on the flow of intelligence from the United States to Australia. Replete with interviews with former ASIO officers, senior government officials and academics, it claimed that since the late 1980s at least, ‘a mole had been passing on Australia’s secrets and the high-grade intelligence of its closest allies to the … KGB’. A claim made in the program was that the mole was a senior officer from ASIO’s Sydney office who had taken early retirement and was never prosecuted for his treachery.95 The source for this claim came from within the KGB itself. Since the end of the Cold War, a number of KGB officers and defectors had gone public with their stories. Two of these, Oleg Gordievsky and Major General Oleg Kalugin, a former Chief of the KGB’s Foreign Counter-Intelligence Directorate, were among those who appeared on the program.

As a senior KGB officer, Kalugin knew of his service’s success in Australia. In his 1994 autobiography, Spymaster: My 32 years in intelligence and espionage against the West, Kalugin claimed that the KGB ‘had excellent sources in Australia’, including ‘productive moles in Australian Intelligence who passed us documents from the CIA and British Intelligence, as well as providing us with information on subjects as varied as the peace movement and the Australian military’.96

This brief revelation is important for a number of reasons: Kalugin refers to moles, indicating that there were more than one; he confirms that the KGB was interested in Australia because of the access it provided to US and British intelligence; and his choice of the words ‘Australian Intelligence’ suggested that it was probably not just ASIO that had a penetration problem. Indeed, as one former ASIO officer commented, Australia’s foreign intelligence agencies would have been more lucrative targets for KGB moles than ASIO.97

But ASIO was not immune. In his Four Corners interview, Kalugin recalled that an ASIO officer had offered his services to the Soviet Embassy in Canberra in the 1970s. Initially, the KGB believed it to be a ruse, but eventually—after the authenticity of the documents he handed over was confirmed by Kim Philby, the MI6 officer who defected to Moscow in 1963—the KGB realised that the approach was genuine.98 According to Kalugin, the ASIO officer contacted the embassy via the post and reassured his handlers that ASIO was not opening its mail and there were relatively few officers in ASIO who knew the full range of its Soviet coverage. Communications between the KGB and this officer were later moved to the more secure, if traditional method of using dead letter boxes. For his efforts, the mole was paid thousands of dollars each time he passed over classified information. The ASIO mole, Kalugin stated, ‘had good access. Everything about Australia, the United States, mutual cooperation, political plans, agents planted in the Soviet Embassy, surveillance squads, I mean, everything.’ Through Lazovik’s mole, the KGB was ‘aware of practically all steps taken or planned by ASIO against Soviet targets in Australia’.99

The Kalugin autobiography and ABC revelations did not catch ASIO off guard. It had carried out a series of investigations, or a ‘mole hunt’ as it was later reported in the press, into this very issue a decade earlier.100 Those investigations grew out of the lead from overseas that the mole and his wife had allegedly worked in ASIO.101 This lead, which came via a foreign service, was delivered in person to ASIO’s Deputy Director-General, Gerard Walsh, who then established a covert team within ASIO to conduct a top-secret investigation.102 The Secretary of the Attorney-General’s Department, Alan Rose, who subsequently became responsible for overseeing the implementation of the Cook recommendations, recalled that the foreign service believed the situation was so grave that they had little option but to cut back on sharing information with ASIO. The challenge, Rose recalled, was to remedy the situation or have the information flow cut off.103 ASIO’s internal investigation began in March 1992. Given a number of codenames, it aimed to identify the likeliest suspects based on the limited information provided.104

A decision was taken at a senior level in ASIO that the Organisation should not be in the position of being accused of investigating itself. There were some in the Organisation who believed a more intelligence-focused investigation would have been preferable. As a result, the AFP was brought in to conduct its own simultaneous investigation, known as Operation Liver.105 The aim of this ‘highly secretive’ police task force, according to one journalist, was to prosecute any moles (given that ASIO did not have the power to arrest people).106 The investigations started with a significant number of suspects, but eventually centred on George Sadil, the Russian translator who had worked for ASIO since 1968 and whose name had appeared briefly in previous investigations. Sadil was arrested by the AFP in 1993 on suspicion of espionage. There, at his house, the AFP found a collection of classified documents. Despite the fact that a number of documents were found in Sadil’s possession, this in itself did not prove he was guilty of espionage. A successful prosecution of espionage would have required direct evidence of Sadil passing information to foreign intelligence officers. In the end, Sadil was convicted for the less serious charge of removing classified documents from ASIO premises without authority.107 The lead that resulted in Sadil’s arrest was not the only one given to ASIO. Separate, more direct leads from overseas gave indications of another possible penetration and led to extensive investigations within ASIO.

Vasili Mitrokhin, the KGB’s chief archivist, defected to MI6 in 1992 and brought with him to the United Kingdom 11,000 pages of handwritten transcripts of decades of Soviet records that he had copied over years of surreptitious note-taking.108

It is unclear how long it took to translate much of the material he removed and when any material relating to Australia came to ASIO’s attention, but it was not immediate. When Mitrokhin’s papers were published in 1999 and 2005, to the annoyance of many, the details of the KGB’s activities in Australia did not appear in either of the two volumes.109 Rather, it appeared that they were ‘suppressed’, as Paul Monk explained in The Australian.110 Some details of the KGB’s Australian assets were published when Mitrokhin’s papers were released to the Churchill Archives Centre at Cambridge University in 2014,111 but a significant portion of Mitrokhin’s files concerning the Canberra residency, admittedly only a few pages long, remained redacted.112 Similar claims of suppression were published by Cameron Stewart in 2014.113 Together, these snippets left open the question of a link between the Mitrokhin Archives and other leads on the issue of penetration.

The leads provided an indication that there could be KGB agents in ASIO, and were used to help narrow down the field of potential traitors and broaden the field of contenders beyond George Sadil. ASIO had to confront the possibility that an agent inside the Organisation may have tried to recruit others.

Following the receipt of foreign service leads and reports on the consequences, Prime Minister Paul Keating commissioned Michael Cook, a former Director of the Office of National Assessments and Ambassador to Washington, to conduct an inquiry into the penetration of ASIO and how it might improve its counterintelligence capabilities.114

Cook’s report, completed in 1994, was kept to a very limited distribution and its contents remain top secret, with both the Government and Cook refusing to comment on what it revealed. The continued cloak of secrecy surrounding Cook’s findings has generated speculation about treason from within.

Former intelligence officers Warren Reed and Christopher Ward observed that not only have the findings of the report never been released but no meaningful statement on its contents has been made even to Parliament.115 Paul Monk speculated that Cook ‘concluded that there had been four Soviet moles inside ASIO right through to the end of the Cold War’. Monk further claimed that all four were quietly retired on full pension.116 Monk’s views were reinforced by Cameron Stewart’s piece in November 2014.117

The combination of evidence suggests there could have been other moles within ASIO. Some former officers interviewed for this history even went so far as to name the officers. They, like everybody else, could offer no corroborating evidence for their accusations, but in some cases there were strong circumstantial indicators. The ‘shameful leak in Australia’s intelligence system’, as Four Corners said in 2004, remained unexplained until that time. But as Secretary Alan Rose observed, a top-to-bottom rebuilding of the Organisation’s counterintelligence function would follow, as well as a thorough security re-validation of all of its staff.118

According to ASIO’s Deputy Director-General at the time, Gerard Walsh, the considered view was that the Organisation had been too lax internally. It had to tighten up. ASIO’s approach was not criticised, but it was urged to adopt a more robust, intrusive counterintelligence approach.119


Looking back, there was, on one level, an understandable concern within ASIO to maintain secrecy over the whole question of penetration. Besides, ASIO subsequently took action to address the concerns raised by Cook, tracking down the leads and, by a process of elimination, seeking to reassure the Government that ASIO was a trustworthy and secure organisation.120 With the passage of time, the gradual revelation of titbits of information, when aggregated, confused rather than informed. The question remains over the whole issue of penetration and whether the veil of secrecy needs to be maintained. As this chapter has made clear, the question of penetration is an extremely complex and difficult one for any security service. While the secret of success in the espionage business is keeping one’s successes and failures secret, secrecy for secrecy’s sake can on occasion prove counterproductive.

It is possible that many of ASIOs efforts may have been compromised through revelations to the Soviets in the 1970s and 1980s. Thousands of hours of covert surveillance aimed at exposing Soviet espionage operations had been for nought because of the penetration of the Organisation.

ASIO’s inability to identify the degree and extent of penetration of the Organisation is an indictment, but at least understandable if considered in isolation. But when placed alongside the evidence from other foreign leads that would emerge later, the picture becomes clearer that ASIO had been penetrated.

To its credit, ASIO undertook a total restructure of its counterintelligence capabilities, also reinforcing the requirement for revalidation of security clearances for all officers within the Organisation. ASIO’s experience echoed, on a smaller scale, the Americans’ experience with trusted intelligence officials such as Aldrich Ames and Robert Hanssen—men who compromised American intelligence operations and whose actions led to the deaths of scores of Soviet agents who were prepared to risk their lives collaborating with Western intelligence agencies. The question remains: how extensive was the betrayal and how extensive was the damage?


The Combe–Ivanov affair, and the subsequent royal commission, thrust ASIO and its dealings with the Government into the public spotlight. The subject of almost nightly television coverage, and a favourite of cartoonists, the event caused great stress for many of those involved, including ASIO officers behind the scenes. (Geoff Pryor, The Canberra Times)



ASIO told Hawke that Bob Hogg attended a breakfast with Combe against his instructions. Hawke confronted Hogg but discovered ASIO had not monitored the event and was mistaken. (The Advertiser (Adelaide) cartoon, 4 August 1983)


Protection of sensitive sources often prevented the public, or those defending themselves against adverse ASIO findings, from learning the full story. As with David Combe, people and their careers could and did suffer. (NLA #PIC/3698/118B)


As the Royal Commission on Australia’s Security and Intelligence Agencies got underway, Barnett (right) made regular appearances, but they took their toll on him. The royal commission workload would continue through to May 1984, when the reports were finalised. (NLA pic-vn3564156-v)


Stephen Rix argued successfully at the Security Appeals Tribunal that CPA membership was inadequate grounds for denial of employment in the public service. The finding made ASIO rethink its priorities. (Fairfax 1010244542)


Alan Wrigley replaced Harvey Barnett as Director-General in 1985. Initially a reluctant appointee, he approached the task of moving ASIO’s headquarters from Melbourne to Canberra with determination and vigour. (ASIO)


Lionel Bowen, Attorney-General between 1984 and 1990, regarded Alan Wrigley highly and took his advice to seek out John Moten, also an aeronautical engineer, to be Wrigley’s successor as Director-General. (NAA 3038749)


John Moten was Director-General from 1988 to 1992. Like his predecessors, he worked to restructure and modernise ASIO in accordance with Hope’s recommendations. (ASIO)


ASIO’s purpose-built new Central Office on Kelliher Drive, in Canberra’s Russell precinct. The long-awaited relocation from Melbourne to Canberra occurred in late 1986. (ASIO)


Gerard Walsh (centre) with former Director-General Peter Barbour (right) in August 1985. Walsh, who worked in ASIO for more than three decades, rose to Deputy Director-General. (ASIO)


ASIO used a suite of technical equipment for surveillance and reporting, including this state-of-the-art receiver–recorder from around 1986. (ASIO)


While many writers on ASIO matters have focused on surveillance conducted on Australian citizens, much of ASIO’s efforts were targeted against other priorities, notably countering espionage from Soviet and Soviet bloc countries. (‘No ASIO file’, © Judy Horacek, 1992)


SPA leader Wilton Brown (left) and Stan Sharkey (right) walking with a Soviet Embassy official, who is dressed conspicuously in a business suit at Bondi beach. (ASIO)


Krikor Keverian, whom ASIO understood to be associated with the Justice Commandos of the Armenian Genocide, was arrested after Customs found weapons in his luggage on his return from Los Angeles. (ASIO)


Armenian training camp, New South Wales, October 1983. ASIO monitored the activities of Armenian groups on the understanding that they may have been associated with the 1980 assassination of the Turkish Consul-General, Sarik Ariyak. (ASIO)


Armenian Training Camp in 1983. The man standing on the left appears to be Armenian Revolutionary Federation member Hagop Levonian. (ASIO)


Hagop Levonian was killed instantly when a bomb he was carrying exploded in the basement of the building housing the Turkish Consulate-General in November 1986. (ASIO)


The bombing of the Turkish Consulate-General in Melbourne caused extensive damage (above and below). The bombing occurred as Headquarters ASIO was relocating to the new Central Office in Canberra. (ASIO)



Croatian protesters (above and below) photographed by ASIO surveillance in Melbourne, 25 January 1984. (ASIO)



A successful operation against the Yugoslav Embassy, Nuyts Street, in the Canberra suburb of Red Hill, gave ASIO confidence in its judgements about the work of the Yugoslav Intelligence Service. (ASIO)


Howls of protest over Salman Rushdie’s novel Satanic Verses failed to trigger violent incidents of the scale ASIO feared. (ASIO)


Although National Action was never a major target, ASIO sought to maintain sufficient coverage to understand the intentions and capabilities of such right-wing groups. (ASIO)


Aerial view of the Soviet Embassy on Canberra Avenue in the Canberra suburb of Griffith, 1985. Throughout the Cold War, the Soviet Embassy and its personnel were ASIO’s top operational and resource priority. (ASIO)


Nikolay Yevgenyevich Fomin, the Soviet Embassy’s Press and Information Officer, arrived in March 1984. Considered to be the KGB Resident, he was subject to all of ASIO’s methods of coverage. (ASIO)


ASIO believed that Valeriy Ryabtsev, a Soviet trade representative and suspect GRU officer, was attempting to procure embargoed scientific and technical goods. He was the target of numerous ASIO operations. (ASIO)


Valentin Matyushevskiy, the Sydney-based representative of the Baltic Steamship Company, was quietly expelled after an ‘extensive and imaginative investigation by ASIO’. It was an example of ASIO’s disruption strategy working. (ASIO)


The house of KGB officer Vitautas Svirinavichyus was subject to intensive operational activity. Through these operations, ASIO learned that the Soviets suspected their houses were under technical surveillance. (ASIO)


Gerontiy Pavlovich Lazovik, a KGB officer at the Soviet Embassy in Canberra from 1971 to 1977, ‘was awarded a medal for an intelligence recruitment while he was stationed in Australia’. The implication was that he had recruited an ASIO officer as a mole for the Soviet Union. (ASIO)


Jan Kuzma was the Czechoslovak Consul-General in Sydney whom ASIO assessed to be an intelligence officer. He was recalled home in early 1984 after being caught shoplifting for a second time. (ASIO)


In April 1984, Petr Stepanek, an official from the Czechoslovak Consulate-General in Sydney, was granted permanent resident status in Australia. He provided ASIO with an insight into Czech intelligence operations. (ASIO)


The fall of the Berlin Wall on 9 November 1989, and the declaration on 3 December by Soviet and US presidents Mikhail Gorbachev and Ronald Reagan, effectively marked the end of the Cold War. (Interfoto/Alamy)

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