11

THE COMBE–IVANOV AFFAIR

ASIO’s Startling Welcome for Hawke, 1983

On 4 March 1983, the eve of the Federal election, David Combe, the former National Secretary of the ALP and good friend of the soon to be 23rd Prime Minister of Australia, Robert James Lee (Bob) Hawke, enjoyed a drink and a discussion in the Canberra suburb of Curtin, at the home of the First Secretary of the Soviet Embassy, Valeriy Ivanov. As discussed in Chapter 9, Ivanov, who was actually a KGB officer, had been of interest to ASIO since his arrival in Australia in June 1981. ASIO, having bugged Ivanov’s house with a suite of microphones just eight months earlier, listened in to almost every word spoken between Ivanov and Combe. It was clear to ASIO, which had been studying the RIS mentality for decades, that Ivanov was cultivating the vulnerable Combe, now a lobbyist, for access he could provide to the then possible new government. This posed some serious concerns for ASIO, especially following the Hawke victory, that the KGB may be very close to recruiting an unconscious ‘agent of influence’. As we will see, the Combe–Ivanov affair, as it came to be known, would dominate the relationship between the Government and ASIO—long distrusted by some within the ALP—and would thrust ASIO back into the public spotlight. This chapter tells the story of that period.¹

Soon after the election, the Director-General of ASIO, Harvey Barnett, sought opportunities—over the phone, via correspondence and in person, to brief both the Attorney-General, Senator Gareth Evans, QC, and the Prime Minister, Bob Hawke. Indeed, Barnett spoke with Evans on 6 March, shortly after victory was declared, and assured him of ASIO’s loyal support.² In a letter written the same day, Barnett assured Evans he would not find anything out of place in ASIO, and said he would arrange the delivery of some ASIO documents that had been prepared for the incoming government. He also expressed a hope of briefing Hawke separately the following week.³ He actually met Hawke two days later, on 8 March, when, along with the NSW Regional Director, he briefed the Prime Minister at his Sydney residence, Kirribilli House.⁴

These and subsequent briefings by ASIO were frank. Hawke was told of members of Parliament who had dealings with ASIO targets, but the main purpose of all the contact was to familiarise the new government with ASIO’s work, and to bring warrants to the attention of Evans. It was quite clear that ASIO was dealing with a different government that would look at ASIO’s work in a different way from its predecessor.⁵

Ten days later, on 18 March, Barnett visited Evans at his Melbourne offices in Treasury Place, where Evans read and signed a number of warrants relating to telephone intercepts on the Soviet Embassy. Barnett used the occasion to brief him on some Soviet official contacts, and the mechanics of telephone intercepts and short-term technical operations.⁶

But there was one glaring absence from each of these briefings: the relationship between Combe and Ivanov. The reasons for this were complex; principal among them was that Harvey Barnett, acutely aware of the political scandal that followed the 1954 Petrov defection (and its close proximity to the Federal election) wanted to avoid any potential criticism that ASIO was politicised and a puppet, acting in the interests of the previous Liberal–Country Party Coalition Government, now in opposition. But to understand Barnett’s delay in briefing the new government more fully, it is necessary to go back and examine the Combe–Ivanov interaction.

The Combe–Ivanov relationship

As discussed in Chapter 9, ASIO’s coverage of Ivanov had led to its firm conviction that he was an intelligence officer: he had provided counter-surveillance for the KGB Resident, Lev Koshlyakov, and he was known to be attempting to cultivate foreign diplomats in Canberra.⁷ His clandestine activities, Harvey Barnett noted, were consistent with KGB tradecraft.⁸ In the course of its coverage, ASIO also noticed Ivanov showing an interest in Australia–USSR Society members, including David Combe.⁹ But Combe was not of concern to ASIO at that stage. Indeed, Barnett, as he later wrote in his memoirs, Tale of the Scorpion, issued orders that despite his relationship with a suspect KGB officer, Combe was not to be regarded as an ASIO target. He would be given ‘the benefit of every doubt’, and ASIO’s focus would remain on Ivanov.¹⁰

That order partly clouds the issue. ASIO had earlier opened a file on Combe but, in accord with criteria established during the Whitlam Government, it had been one of many ASIO files destroyed in September 1975 based on the understanding that he was not of security concern.¹¹Moreover, while ASIO did not actively target Combe, it was still, nonetheless, aware of his attractiveness to the KGB.

Combe, who had been national secretary of the ALP from 1973 to 1981, had been instrumental in propagating the notion that interference from the United States CIA had contributed to the downfall of the Whitlam Government in 1975. Eager to exploit growing trade links with the Soviet Union, Combe had visited Moscow with the support of Ivanov.¹² Working as a lobbyist, Combe looked set to be very well placed with the incoming government to play a leading role in expanding Soviet trade ties. This would have built on his relationship with individuals such as Laurie Matheson, an Australian, Russian-speaking, ex-Navy businessman who ran a Melbourne-based firm, Commercial Bureau of Australia, which had a commercial relationship with Combe.

Victor Marchetti, a former CIA officer and author who was brought to Australia by Combe’s lawyers, later questioned why ASIO had not let the relationship between Combe and Ivanov develop under ASIO’s direction. This, on the surface, is a legitimate question. After all, that method seems to have been entirely justified. It could have resulted in Combe’s recruitment and then running as an ASIO double agent to feed disinformation to Ivanov. The question appeared to indicate that ASIO did not know how to play the intelligence game.¹³ In reality, the idea had been discussed on a number of occasions, but the political sensitivity of this high-profile and complex ALP figure meant that ASIO conducted this operation differently from others.

In fact, several ASIO sources were approached for a considered opinion on the merits of such an approach. In October 1982, for instance, Gerard Walsh, Assistant Director General (C Branch), had asked one of his political contacts about ALP members who would be open to an ASIO approach to learn more about Ivanov’s contact with the party.¹⁴ Included among those discussed was David Combe, and ASIO’s contact thought an approach would be worthwhile.¹⁵ But ASIO also asked others about Combe’s openness to an approach. On 11 January 1983, one reliable source recommended against it given Combe’s ‘ill feelings toward ASIO’ and the CIA. Another reliable source said that ASIO would not likely get a favourable response from Combe. Yet another source agreed, noting that Combe was not expected to talk to ASIO unless there was something in it for him.¹⁶ In ASIO’s defence, there was still suspicion among the left following Whitlam’s dismissal, and Combe himself had publicised his views on the CIA’s involvement in Whitlam’s downfall.

To Barnett, the problem was compounded by the timing of events. With an election imminent, he felt it inappropriate to mention the issue to Durack or Fraser in case it was politicised. Better to await the election outcome, he reckoned, and seek an appointment with the new Prime Minister. In the meantime, the case became far more compelling to ASIO on the eve of the Federal election.

Election eve, 1983

Combe was invited to dinner at Ivanov’s house on the night of Friday 4 March 1983, shortly before the Federal election the next day, and ASIO’s receivers recorded a conversation. At that stage, it seemed to be just another technical operation against another RIS officer, but it would have far-reaching consequences. Ivanov would be expelled, Combe would lose his lobbyist status, the Government would face its first major test, and the matter would become a major feature in another royal commission. At first, it would bring ASIO favourable publicity, but this would fade before long in the face of an ensuing political storm.

The microphones in Ivanov’s house were not scheduled for activation on 4 March, but telephone interception late that afternoon indicated that Combe would be dining at Ivanov’s house. The senior technical officer therefore asked an ACT technical officer to check the equipment and fix any problems so that it could operate that night. As it was a Friday, the shops were open late, and the technical officer was able to purchase the parts and make the repairs. He was at the listening post tuning the equipment when Combe arrived at the door. The technical officer overheard enough of the conversation to know that some of it would be of interest to ASIO, so he switched on the monitoring equipment and kept it running until Combe departed. This initiative by the technical officer, although not yet covered by a warrant, proved to be decisive in the whole affair. Recording continued over the weekend but the conversations were not monitored in real time. On Monday 6 March, the technical officer delivered the tapes to the ACT office and briefly explained what had happened. As usual they were then sent to headquarters for transcription.¹⁷

The tapes revealed that Combe and Ivanov discussed the forthcoming election and agreed that Bob Hawke would win. Combe spoke of the need to replace the Soviet Ambassador and of journalist Brian Toohey’s attempts to get to the bottom of what the CIA was doing in Australia during the Whitlam years. They mainly spoke about general topics, not security related, including building business and trade relations between Australia and the USSR—something that in hindsight ASIO would come to understand was Combe’s primary reason for being there. ASIO was perhaps thrown by the fact that it was Combe who pushed the conversation, wanting to know whether he should consult to one company, thus restricting all of his contact with Soviet firms to them, or whether the embassy would use Combe as a consultant, thereby not locking him in. Combe finished by asking Ivanov to get an answer on this question.¹⁸

The original tapes from that evening’s conversation between Combe and Ivanov arrived at headquarters on 8 March 1983, and a preliminary summary transcript was prepared by the next day. The transcript caused some headaches for the Director-General. Barnett recalled, ‘I read it over and over again, unwilling at first to believe my eyes and then chilled by its portent.’ Barnett believed the situation was heading towards a recruitment: Combe was ‘exposing his aspirations, baring his soul, and offering his services before the representative of the most aggressive intelligence service in the world’.¹⁹

Given his concerns, Barnett directed a counterespionage officer to produce a full transcript.²⁰ The officer was given the tape on 17 March and spent the greater part of Friday 18 through to Monday 21 March transcribing it. Following his completion of the transcript, the tape remained locked in a drawer at headquarters until 28 March.²¹

Given the sensitivity of what the tape appeared to show (a KGB recruitment), next day, 29 March, ASIO allotted the codename Epic to David Combe.²² Barnett, however, continued to sit on this potentially damaging intelligence.

The second Combe–Ivanov meeting

On 3 April, Combe again visited Ivanov’s house. It is clear from the transcript that Combe instigated the contact, and the purpose of the visit was to talk business. During the conversation, Combe said that he was seeing Brian Toohey and would be getting documents on the CIA, which he would give to Ivanov.²³ Mention of material on the CIA could have been a benign reference to newspaper articles, but to ASIO officers it appeared to be something far more sinister. Following the established procedure, the tapes for the Easter weekend, 1–4 April, were sent from ACT office to headquarters in Melbourne.²⁴

There were other meetings between Combe and Ivanov in the subsequent weeks, but Barnett was particularly concerned about what had transpired on 3 April, when ‘a very significant event occurred’. Ivanov told Combe that ASIO had opened a file on him and had tapped his phone. Barnett knew this to be incorrect—ASIO’s interest was still Ivanov, not Combe—but Ivanov went further and suggested they should seek to avoid being seen in public together. Barnett considered Ivanov’s warning to be ‘carefully crafted misinformation designed to “scare” David Combe into a clandestine association with the KGB’. To Barnett, it was clear that the Ivanov–Combe relationship was reaching a flashpoint.²⁵ Barnett’s perspective was entirely focused on Ivanov and not Combe, which meant he missed what could have been an opportunity for ASIO to use Combe operationally, had he been approached and been willing. While Barnett had extensive intelligence experience, it was not in a security intelligence service and this possibly led to a number of poor operational decisions taken with regard to Combe.²⁶ From this initial point of misjudgement the situation would deteriorate further.

Barnett was sufficiently concerned that on 5 April he requested a meeting with the Prime Minister, who could not see him until 4.45 p.m. on 20 April.²⁷ In a move that would raise more questions than answers afterwards, Barnett refrained from briefing his new Attorney-General, Gareth Evans, something the head of a security intelligence service would otherwise do as a matter of course. Why Barnett chose to work around Evans remains a mystery that would have damaging consequences for the Organisation.

On 19 April 1983, Barnett asked his senior headquarters representative in Canberra, the head of the Headquarters Liaison Group John McFarlane, to pass the following message to the Attorney-General:

I have sought an interview with the Prime Minister to raise with him a matter affecting national security and with political overtones of some delicacy. He has kindly agreed to see me tomorrow (Wednesday) afternoon. I shall be travelling to Canberra for the day and would be happy to brief you at your convenience after I have seen him.²⁸

Barnett appeared to understand that Hawke was likely to be more receptive to his message than Evans. He was right. Evans was very much a civil libertarian and very sceptical of claims of national security justifying intrusions and invasions of privacy. To him, ‘the whole Cold War preoccupation with the Soviets and the forces of left-wing darkness was all overdrawn’. Evans, not surprisingly therefore, acknowledged he was ‘not a fan’ of Barnett. To Evans, ‘he was a complete Cold War warrior and utterly without nuance’.²⁹ Insiders, however, saw him as a more measured and meticulous person than that.

By this stage, ASIO had concluded that Ivanov was cultivating Combe. Ivanov’s aim, ASIO believed, was ‘to secure Combe’s services as a KGB asset providing information and forecasts on the Labor Government’s activities, assisting KGB access to key members of the ALP and influencing government policy to the Soviet advantage’.³⁰ This meant the KGB could use Combe as an ‘agent of influence’—someone who could shape the way VIPs thought. As Blanche d’Alpuget wrote in her second biography of Hawke, Combe ‘was the perfect Trojan horse to penetrate the fortress of government’. He knew everyone, and ‘All he had to do was talk.’³¹

On 20 April 1983, the day Barnett was to meet with Prime Minister Hawke, several ASIO officers entered Ivanov’s house and replaced faulty microphones. As before, surveillance was employed for security. The report from the ACT office noted that ‘the whole operation seemed to run like clockwork’ due to ‘the professional manner in which the various components carry out their tasks’.³² The operation gained pace in the following days.

The Government is informed

Barnett met with the Prime Minister at Parliament House as arranged at 4.45 p.m., 20 April. That same day, the Attorney-General, Gareth Evans, was busy defending his record over his use of RAAF reconnaissance aircraft to photograph the area of the proposed site of the Franklin Dam in Tasmania.³³ Barnett gave Hawke the background on Ivanov and ASIO’s coverage of him, then told him about the dinner on 4 March. He explained that an overseas defector had confirmed Ivanov’s KGB status and that intelligence indicated that at the 3 April meeting, Ivanov had tried to move their relationship onto a clandestine basis. The purpose of their meeting now, Barnett explained, given the political aspects of Combe’s involvement, was to obtain some guidance from Hawke on what action ASIO should take.³⁴ This was an extraordinary step for a director-general to make and appears to demonstrate that Barnett lacked confidence in his own judgement.

Barnett reportedly went in with a small notepad of notes and, as one did in the intelligence service, had a friendly chat about it all and the implications and what you want to do with it. Hawke was indignant and asked a number of questions seeking expansion and clarification of the facts. In effect, Barnett found himself under cross-examination, but he did not have all the necessary information to hand to fully brief the Prime Minister.³⁵

When asked, Barnett was clear about what action would be best for ASIO. He told Hawke ‘that it would suit my purposes to have an expulsion with publicity as it would be good for ASIO morale: we had been accused for so long of not being able to catch spies’. After hearing the procedure for expelling a diplomat, Hawke decided on that approach.³⁶ He later explained his action this way:

I was absolutely certain … there was no question in my mind that we had to be tough, decisive and immediate in our reaction. Any pussyfooting around on this issue could have seen the early demise of the Government because if we had been seen to be soft on the threat of Soviet espionage it would have been an incalculably valuable weapon to the Opposition.³⁷

This threatened, in Hawke’s mind, the very life of his government, and he acted immediately so that any inaction could not be used against him.³⁸

The meeting ended at 5.25 p.m. Barnett went to the Lakeside Hotel to await a call from the Prime Minister. He was joined at the hotel by John McFarlane. Together with the head of ASIO’s counterespionage branch, at 9 p.m. they were summoned to brief the meeting of the National Intelligence and Security Committee of Cabinet. In attendance was Hawke, Mick Young (Special Minister for State), Bill Hayden (Minister for Foreign Affairs), Gareth Evans and Graham Evans (the Prime Minister’s Principal Private Secretary). On Hawke’s direction, Barnett told the meeting the chain of events. Hayden was the most sceptical and said that the publicity would suit ASIO. Hawke replied, ‘Harvey has been very honest on this point’; he accepted Barnett’s ‘declaration of interest’. When asked for his opinion of Combe’s motives, Barnett replied ‘greed’.³⁹Hawke later recalled: ‘I knew it was a sort of make or break situation. And if we didn’t handle that properly we would have been a one-term government.’⁴⁰

To his Attorney-General, Gareth Evans, Hawke’s conviction was that the new Labor Government would be nothing like the frenetic, short-lived government of Gough Whitlam. To Evans, it was this conviction that, in part, led Hawke to accept ‘too readily all that Barnett told him’ and not to question adequately the detail or meaning of ASIO’s intelligence.⁴¹

In the end, despite continued concerns from Hayden, the ministers unanimously decided that Ivanov should be expelled. Evans, with senior members of his department, agreed that Combe had not committed any crime. That said, it was clear that he had rendered himself vulnerable and should be further investigated by ASIO to determine whether the Soviets made contact in the future and whether his activities in the period following Ivanov’s expulsion ‘indicated any clandestine affiliations’.⁴²

Barnett and the Attorney-General were told to draft a press release, and Barnett to prepare a written report on Ivanov for a meeting the following morning. An ASIO working party prepared the paper through the night at the ACT office. At 8.30 a.m. the following morning, 21 April, Barnett attended a meeting with all members of the National Intelligence and Security Committee and the Secretary of the Department of the Prime Minister and Cabinet. Hawke requested more information on the 3 April meeting.⁴³ Combe had earlier written a condensed report on his visit to Moscow. Harvey Barnett, in his book, Tale of the Scorpion, recounts that ASIO acquired a copy of that report and separately was able to confirm the details of the meeting on 3 April.⁴⁴

A Lear jet was chartered to bring several ASIO officers working on the case to Canberra from Melbourne. The National Intelligence and Security Committee reconvened in the Cabinet Room at 12.30 p.m. with five ASIO officers now present. Foreign Minister Bill Hayden said that there was not enough ‘hard evidence’ to expel Ivanov. Others disagreed, and Hawke eventually decided that Ivanov would be expelled.⁴⁵ In the account of the meeting from the head of Counter-Espionage, Assistant Director-General (E Branch) John Ross-Perrier, Hawke asked what should be done about David Combe and Barnett said that it was a decision for the Prime Minister. As before, this was an unusual position for a director-general to adopt. It would have been more standard procedure for him to present Hawke with options rather than expect the Prime Minister to formulate them for him.

Hawke eventually said ‘that he wanted David Combe placed under full surveillance’.⁴⁶ The politicians then left for the opening of Parliament. Hawke was concerned that this not be seen as a partisan ploy, and sought to have the Opposition Leader, Andrew Peacock, briefed on the affair on the basis of strict confidentiality. Later that afternoon, at 5.15 p.m., Barnett was called to the Prime Minister’s office to brief Peacock.⁴⁷

According to released Cabinet papers, Hawke had directed those present at the National Intelligence and Security Committee meeting that they should not make use of Combe’s services. In hindsight, Evans observed, the decision to ‘blacklist’ Combe was ‘almost certainly wrong and the relationship between Combe and Ivanov was probably never a risk to national security’.⁴⁸ But reeling as he was from the backlash over the public disclosure of the RAAF reconnaissance flight over Tasmania, Evans was constrained in his actions and ‘feeling a bit vulnerable’.⁴⁹

Hawke later learned that one of those present, Mick Young, breached Cabinet confidence by telling a former Whitlam press secretary of the decision to expel a Russian. Hawke found out and challenged Young, who denied having leaked the information, but Hawke was certain and asked for Young’s resignation.⁵⁰ Young was a good friend, but he had lied to Hawke and Hawke felt he had to act. He later recalled: ‘It was the hardest thing I ever had to do in politics.’⁵¹

Ivanov is declared persona non grata

The next day, 22 April, the Soviet Ambassador, Dr Nikolai Soudarikov, was called to the Department of Foreign Affairs, where the Foreign Minister, Bill Hayden, told him that Ivanov had been declared persona non grata and had seven days to leave Australia. The news release reported that Ivanov, a KGB officer, ‘had infringed the conventions applying to the proper conduct of diplomats’, and ‘was no longer welcome in Australia’. Hayden commented that ‘by his actions Mr Ivanov had threatened Australia’s national security in a way which could not be tolerated by the Government’.⁵²

Barnett subsequently sent a telex to all staff advising and congratulating them:

You will all share our common delight in the Organization’s counter-espionage success in obtaining the expulsion today of Valeriy Nikolayevich Ivanov, a KGB officer serving as a First Secretary at the Soviet Embassy in Canberra. This successful operation has been achieved as the result of painstaking professional work over many months by a large number of officers. I thank you all and express my congratulations and admiration.

All branches of ASIO have borne a part in this operation, especially desk and case officers plus strong support from technical officers, monitors … It has been an admirable team effort of which you may all be justly proud.

While [counterespionage] is only one aspect of our work, I hope today’s success will be but the first of many others to come. Well done.⁵³

A foreign security intelligence service had been included as an addressee on Barnett’s celebratory telex and the reply was interesting: ‘That’s what I call celebrating Lenin’s birthday with style. Congratulations on producing the first head on a platter—may there be many more to follow.’⁵⁴

Barnett’s note seemed to suggest the sole purpose of the operation of the Organisation was to seek the expulsion of KGB officers. His effusive congratulatory note is in stark variance to the fraught situation that was still unfolding. His apparent obliviousness to the implications of the involvement of David Combe was surprising. The risk of dangerous blowback did not appear to occur to him as he wrote this telex. But the sense of triumphalism would soon evaporate in the face of the not surprising public and political support for David Combe, who was perceived as the victim. Indeed, as Evans’ biographer noted, ‘Combe had committed no offence, but Hawke saw a need to cut him loose to head off potential allegations of political favouritism.’⁵⁵

Ivanov was in Adelaide on the morning of 22 April, and the Regional Director for South Australia was ordered to give him ‘the maximum coverage possible’ and alert the ACT office if he decided to return to Canberra by air.⁵⁶ Similarly, the Organisation conducted coverage of other Soviet officials in Australia.⁵⁷

On being advised of the case, the ACT surveillance supervisor briefed his surveillance officers that they were required to cover Combe and the Soviets until Ivanov’s departure. Recognising the inconvenience caused to officers and their families (some of whom had booked leave), he added:

This is the biggest intelligence event for ASIO for 20 years and will rank with the defection of Petrov and the PNG [persona non grata] of Skripov in ASIO’s history. The potential dividends from our coverage over the next few days are enormous. Not only will this be a boost for ASIO morale and public image, but the potential to get an intelligence spin-off considerable.

He told his officers to be aware of media presence and reminded them of their need to adopt counter-surveillance techniques before returning to their base. The surveillance team was then split into eight groups.⁵⁸

Ivanov returned to Canberra on 23 April. Rather than going home, he and his wife stayed at the Soviet Embassy. The next day, 24 April, the Soviet Minister-Counsellor was seen to drive past Combe’s house twice.⁵⁹ ASIO’s primary focus—from its static observation posts around the Soviet Embassy and its telephone interception—was to record who attended the meeting summoned by the Ambassador after he was informed of the expulsion. ASIO suspected that all KGB officers would be there. Upon identifying those present, ASIO then monitored their activities. ASIO kept watch on the movements of Ivanov and his colleagues until the former’s departure on 28 April.⁶⁰

The farewell party for Ivanov was revealing. He was reported to have been ‘roundly castigated’ by the ostensible embassy press and information officer, but KGB station chief Lev Koshlyakov was actually ‘furious’ with Ivanov for having gone too far too soon.⁶¹

ASIO kept watch on the movements of Ivanov and his colleagues until the former’s departure on 28 April. A team of ASIO officers entered Ivanov’s house on the morning of 2 May, then left a short while later with all the listening devices that had been installed.⁶²

After Ivanov’s return to Moscow, he continued to work for the KGB and was posted to Finland in 1988. Only three months into the posting his wife was killed in a car accident and he returned to Moscow.⁶³

The ‘Hogg breakfast’ incident

In the meantime, on 2 May Combe got in touch with Labor pollster Rod Cameron and arranged to have breakfast at the Lakeside Hotel the next morning. Hawke’s senior advisor, Bob Hogg, was invited but did not turn up.⁶⁴ Hawke recalled:

There was one kerfuffle that occurred in the middle of it, where one of Barnett’s ASIO men had made an absolutely fundamental mistake in reporting that Bob Hogg was having breakfast with Combe, which was untrue. It hadn’t happened. I called Barnett, gave him a real dressing down and, in his own words, he made an abject apology. It was a genuine [mistake].⁶⁵

In fact, one ASIO officer, aware of an intercept that pointed to the planned breakfast meeting, reported directly to John Enfield, Deputy Secretary of the Department of the Prime Minister and Cabinet, saying that Bob Hogg appeared to be meeting with Combe and Rod Cameron for breakfast after Hawke had banned Cabinet members from having contact with Combe only hours earlier.⁶⁶ The Deputy Director-General, Blair Nienaber, later recalled that the officer concerned

phoned me and said this has come in and I said, ‘Don’t touch it. Send a signal down to Headquarters giving all of the details and so forth, but don’t touch it.’ And I shot in to see Harvey, and I found Harvey on the phone and he was just saying [to the same officer], ‘Yes, go ahead.’⁶⁷

The phone call was duly made and Enfield promptly passed the news on to the Prime Minister. The ASIO officer had assumed the event took place with Hogg present, but ASIO had no surveillance on the breakfast. Hawke, concerned that Hogg had contravened his instructions, challenged Hogg, who then adamantly denied the breakfast had taken place.⁶⁸ As David Marr observed, ‘Hawke was staggered to hear that Hogg had disobeyed him. Hogg in turn, was amazed at the allegation.’⁶⁹

As it turned out, the ASIO officer had not been sufficiently explicit about the information, indicating a breakfast meeting was anticipated rather than having taken place, and the lack of ASIO surveillance meant there was no confirmation one way or the other. Hawke was initially embarrassed at having incorrectly confronted his colleague. He subsequently met with the ASIO officer concerned, along with Barnett and others. John Ross-Perrier records with marked understatement that Hawke ‘expressed considerable annoyance at these errors and said they must stop’.⁷⁰To Marr, ‘here was a failure of analysis, surveillance and care’. In reality, it was simply a lack of emphasis on certain wording over the telephone, but it was sufficiently disconcerting for Hawke to demand to see for the first time the primary material upon which ASIO had relied to make its claims against Combe and Ivanov.⁷¹

Hawke’s heightened interest

After a few weeks of ASIO eavesdropping on Combe’s telephone and with Ivanov now out of the picture, Hawke ordered the telephone interception on Combe to be revoked on 4 May.⁷² But with so much remaining uncertainty, Hawke’s interest in what had already transpired increased dramatically.

At 2.30 p.m. on 8 May, a van left Headquarters ASIO carrying technical equipment, which was set up in the Prime Minister’s office at 4 Treasury Place, Melbourne. The Prime Minister arrived at 3 p.m. Present were Director-General Barnett, Deputy Director-General Nienaber and the desk officers who had transcribed the tapes. After one of them had explained the technicalities of the operation, and shown the Prime Minister the device used, Hawke sat down, put on his earphones, and spent an hour and a half listening to the tapes.⁷³ The Director-General and Deputy Director-General listened via the loudspeaker. One of the officers noted: ‘The optimal acoustic conditions of the P.M.’s suite, together with the fact that he was using a rather better set of earphones than I had used in transcribing the tapes, resulted in the P.M. making a few, mostly minor, corrections to the transcript text.’ The briefing lasted until 4.30 p.m.⁷⁴ According to the Director-General, ‘The Prime Minister believed that Bushfowl showed a much closer involvement of Brian Toohey with Ivanov via Epic [Combe] than recognised before.’⁷⁵ As a result of these briefings, the following day the assigned ASIO officer, using better equipment, amended the transcripts.⁷⁶

At 8 p.m. on 10 May, John McFarlane in Canberra called the Director-General, who was then at Mt Eliza on the Mornington Peninsula, and advised him that Hawke and Evans wanted to see him about briefing Combe. An aircraft was chartered, and Barnett and a counterespionage desk officer left Essendon at 10.30 p.m. They landed in Canberra and later arrived at Hawke’s office at Parliament House at 11.35 p.m. In the room were the Prime Minister, Attorney-General, John Enfield, Jeff Townsend (on Hawke’s staff), and three ASIO officers—Barnett and two others. They discussed the case until 1.30 a.m.⁷⁷

In the recollection of one of the ASIO officers involved, upon entering the room, Barnett introduced him as ‘our Russian guru’. During the briefing it emerged that Hawke was concerned about two issues: how to approach Combe the following day and encourage him to state publicly that he understood the Government’s denial to him of lobbyist status and access; and the contents of the Government’s statement to Parliament on the case, which was scheduled for 11 May.⁷⁸

According to an ASIO ‘note for file’, Hawke

called this meeting to discuss how the Government would handle [Combe] after he … had submitted an account of his relationship with V.N. Ivanov. The Prime Minister was adamant that [Combe] would have to publicly understand and accept the Government’s decision not to use his services as a lobbyist.

Both the Prime Minister and Attorney-General believed that Combe would be able to sue a Sydney newspaper that alleged he was a spy. The Director-General expressed some reservations about the Organisation becoming ‘too deeply involved in political matters’, and felt that there was a ‘strong likelihood’ that nosy journalists ‘could make much of ASIO’s part in the whole affair’.⁷⁹

According to the account of one of the ASIO officers present, Hawke was most concerned by Combe’s references to the CIA. But Evans did not believe these references proved anything, noting that they could be newspaper clippings for all they knew:

The Attorney-General said that, while he appreciated how one could, from a Security Service perspective, arrive at a particular interpretation of Combe’s evolving relationship with Ivanov, from a ‘court of law’ point of view there seemed little in the transcripts that might constitute a viable charge of impropriety, or even worse, against Combe.

Hawke replied to Evans in a slightly jocular vein, that ‘you civil libertarians’ tended to a somewhat unrealistic view at times; that Hawke too was a civil libertarian but that ‘one had to draw the line somewhere, given the involvement of a KGB officer’. By the end of the discussions, Hawke had given Evans a series of points to raise during his meeting with Combe the following day.⁸⁰

At 8 a.m. on 11 May, the same three ASIO officers visited the Prime Minister’s office, where it was agreed that Combe would be interviewed that day in the Attorney-General’s departmental office. Barnett, who had been sitting in the Secretary’s office, entered Evans’ office at 11 a.m., where he was introduced to Combe and asked to tell Combe what information the Government held. Barnett outlined the background of Ivanov and ASIO’s interest in him, noting that ASIO had noticed contact between the two of them. Barnett told Combe: ‘These appeared to be normal overt contacts which were quite legitimate and caused us no particular alarm.’⁸¹

Combe had handed Senator Evans a statement of his relationship with Ivanov. Evans then passed this to ASIO for comment. Barnett replied that ASIO was unable to comment on many aspects of Combe’s statement because ‘ASIO has never conducted an investigation of Combe’, and its information on Combe was ‘derived from ASIO’s coverage of the Soviet mission in Australia’. Barnett explained that the situation was exacerbated because ASIO’s file on Combe had been destroyed in September 1975 in accordance with criteria established during the Whitlam Government.⁸²

Barnett then described the technical operation against Ivanov, mentioning the dinner on 4 March: ‘This conversation was of such significance and caused me such alarm,’ he explained, ‘that I felt it necessary under my statutory powers to inform the Prime Minister of the danger I believed existed to both [Combe], and to Australia’s national security.’ Barnett said that his approach to the Prime Minister was an attempt to neutralise the situation. He then read extracts of the conversation from the dinner, drawing attention to those aspects that caused him the most concern. Primary among these were what could be interpreted as an offer, by Combe, of his services to the Soviets, and clear (to ASIO at least) KGB cultivation tactics designed to move the relationship towards a clandestine basis.⁸³ Barnett told Combe that the KGB would regard him as a ‘big fish’ given his position in the ALP and that he ‘would be regarded by the Russians as a natural target for cultivation and recruitment’.⁸⁴ Marr recounts that

Combe found the man [Barnett] very pleasant indeed. ‘I was in a state where I suppose I almost felt grateful to be appraised of anything which shed some light on what I was supposed to have done. I frankly felt devoid of fight. I felt emotionally, intellectually and physically inadequate.’⁸⁵

Establishing a royal commission

Combe would quickly bounce back, aided by mounting press criticism of his treatment at the hands of the Government and of Young’s dismissal. Conscious of the growing backlash, Barnett exhorted his staff be proud of ASIO’s performance:

This was a classic counterespionage case in which the Organization demonstrated its skill and sophistication … Unfortunately, political considerations have introduced a note of confusion, not helped by some comments from an ill-informed press. However, I should like you all to know that the Organization’s performance in this case has the robust support of the Prime Minister.⁸⁶

Gareth Evans, however, was less comfortable.

Hawke and Evans, recognising the damaging political implications of the matter being mishandled further, set about appointing Justice Robert Marsden Hope to head another broad-ranging review of the Australian intelligence arrangements. Called the Royal Commission on Australia’s Security and Intelligence Agencies, its remit was to review the progress in implementing the recommendations outlined in Hope’s earlier Royal Commission on Intelligence and Security concluded in 1977.

On 30 May, two of Hope’s commissioners visited Headquarters ASIO to listen to the tapes. An R Branch officer set up a tape recorder and remained with them throughout to ensure that portions of the original tapes were not accidentally erased. Upon finishing, the two commissioners asked that the tapes be sent to Canberra. The R Branch officer explained that the original tapes were fragile, and ‘not of a type to stand constant use’. He therefore proposed that ASIO make good-quality copies with background noises filtered out. The Deputy Director-General decided that four copies should be made: the Office of the Director-General would retain the originals plus one copy; and copies would be given to the warrants registry, Headquarters Liaison Group in Canberra, and the royal commission.⁸⁷ Copies were also given to Combe’s counsel.⁸⁸

Reflections

The Royal Commission, which began on 14 June, ‘exonerated the government and found Mr Combe’s relationship with Ivanov had “serious implications for national security” ’.⁸⁹ Before that was made clear, however, ASIO was exposed to withering criticism in court before the Royal Commissioner, Justice Hope, and in the media.

The popular view inside ASIO was that the opening days and weeks under the Hawke Government would be challenging. But no one had anticipated the storm that would be generated by the Combe–Ivanov affair, and Barnett, the gentleman, was temperamentally not best suited to the fire and fury created as a result.

Ivanov was demonstrably cultivating Combe, and most eventually came to realise that Combe should have known better. Conscious of the tensions generated in the bilateral relations with the United States under the previous Whitlam Labor Government, Hawke was eager to avoid a crisis in the relationship and to present what would be seen as a trustworthy set of hands to manage the important security and intelligence relationship, without causing Australia’s ‘great and powerful friends’ concern. He acted precipitously, in an attempt to forestall such concern and to prevent the Opposition from gaining political advantage, but in so doing, raised the ire of Combe’s political supporters. With the launch of a second royal commission headed by Justice Hope, he provided the media with a golden opportunity to scrutinise ASIO publicly, ridiculing its apparent missteps. The royal commission was a brutal experience for the Director-General of ASIO, Barnett, and many of his staff. But, as we will see, the trial by fire led to significant regeneration and reform.