A very British coup

Fletcher, born Walter Fleischl, the son of a naturalised Austrian, was not the only SOE agent involved in this operation. But he was the pivotal figure, because Remorse had grown directly out of his earlier, disastrous attempt at economic warfare. Known by the code name "Mickleham", it was an attempt to deny essential rubber supplies to the Japanese by purchasing stocks at inflated prices (Fletcher had been in the rubber business before the war). It was a resounding flop, failing to secure a single pound of rubber. It was astonishing that the British ever financed this first abortive operation; it was even more remarkable that they gave him a second shot.
Fletcher spent time in China between January and March 1943, while trying to make Mickleham viable, and became excited by the opportunities the country presented for trading profitably in any valuable goods, including gems and quinine. When Mickleham was finally wound up later that year, Fletcher began to lobby for his next project: to be let loose on China's black market. It says much for his force of personality that he got even a foot, let alone the rest of him, in the door.

His timing certainly helped. By late 1943, the Treasury was feeling the strain of having to finance Chinese operations with dollars bought at the official rate, when the illegal option could generate four or five times more CNDs to the pound. It was the perfect opportunity for Fletcher's masterstroke. He proposed acquiring black-market dollars for the British by trading in hard currency, waterproofed cotton, tungsten, medical supplies, rubies, pearls and South African diamonds. That way, an unnecessary drain on the Treasury would be plugged, albeit by irregular methods. After examining his proposal, London gave him the okay to purchase the dollars through what was euphemistically described by the SOE's finance officer as "discreet banking and exchange transactions". Closer to the truth was the original SOE description of Mickleham: "a covert project of the buccaneering type".

Understandably sceptical after the failure of Mickleham, London sent another agent to keep an eye on things. Enter Edward Wharton-Tigar: spy, saboteur and the greatest cartophilist (collector of cigarette cards) in the world.

A mining executive in Yugoslavia before the war, Wharton-Tigar had ended up in Tangier, then an enclave of wartime espionage. This supposedly mild-mannered minor bureaucrat pulled a number of memorable stunts in Tangier for the SOE. One involved blowing up a house containing German infrared equipment. Another was distributing Nazi postage stamps, forged by the British, where Hitler's head had been replaced by Himmler's. The intention was to foment trouble between the two, which, by all accounts, it did. And everywhere he went, he took a selection of his precious cigarette cards. He would eventually amass 3m of them.

In April 1944, Wharton-Tigar was recalled to London; there, the SOE's finance officer, John Venner, summoned him to a meeting. He later wrote: "It had occurred to Venner and others in the hierarchy that my currency experience in Tangier could be useful. I said I would be happy to help, whereupon Venner pressed a bell button on his desk and the mountainous figure of Fletcher came through the door." Along with Lionel Davis, a senior SOE officer in China formerly with Dunlop, they would form the backbone of the new money-laundering scheme. Operation Remorse had begun.

Fletcher chose Kunming as his base. The capital of Yunnan province, the city was once home to 100,000 people, but, by 1944, refugees from the Japanese-occupied east and military personnel had swelled the population tenfold. Kunming was not only the terminus for the Hump flights but also HQ for the Flying Tigers, an ad-hoc air force sanctioned by President Roosevelt to assist the beleaguered Chiang Kai-shek against the Japanese. The original Tigers — the American Volunteer Group (AVG) — led by the former barnstormer General Claire Chennault, had been mercenaries, flying shark-faced P-40 Tomahawk fighters. In 1940-1, they were also fighting a war that the USA had not yet officially entered. After the attack on Pearl Harbor, though, this guerrilla outfit was subsumed into the regular USAAF, but its successor, the 23rd Fighter Group, still based in Kunming, kept both the name and the iconic snarling nose decoration. So Chennault and his crew had been in town for almost five years and knew it well. Operation Remorse, meanwhile, was pitching its tent in the heart of Uncle Sam's Chinese campsite.

Called "the City of Eternal Spring", Kunming was at least cool, thanks to its elevation of over 6,000ft. Still, it was, as the pilot Otha C Spencer recalls in his book Flying the Hump, "a typical Chinese city. Dirty in parts, and the streets were lined with prostitutes. Opium sellers were everywhere". Into this chaos came Remorse, which set up an office downtown, on 9 Hsin Chin Kai. The operation needed staff and, as well as Davis, Wharton-Tigar, Fletcher and their Chinese intermediaries — most notably the local businessman Frank Shu, who acted as a sort of Mr Fixit for Operation Remorse — secretaries and cipher clerks had to be recruited.
One of these, Lorna MacAlister (nŽe Tidmarsh) joined her older sister Jill out there. Sixty two years later, now one of only a handful of surviving Remorse people, she described her recruitment: "My father worked at Beaulieu, the SOE finishing school for agents, and I was at secretarial college but hated it. So my father's secretary suggested I join them in the 'Racket'.

I was only 18, and had no idea what he was actually doing, but you soon learnt. You only had to walk around the offices. People were practising opening envelopes, getting out of handcuffs and so forth. My sister Jill had somehow managed to get herself sent out to China. And I let Jill know that I fancied seeing something of the world too. So when Lionel Davis, an old China hand, came back to London, he met me in a Park Lane hotel. There followed a very boozy evening where we went all over town before finally I dropped him back at his hotel before going on to mine. The next day, I found out I was in. So I passed the test."

There was some method in this drunken madness. "Well, it turned out life was pretty rough in that respect in Kunming. Quite hard drinking. It wouldn't do to get floored; you might start talking to the Americans, giving away our secrets. The Yanks were very suspicious of us — they wanted the British to keep out of China."

The real trial was still to come, though: the only way to join her sister and assist Remorse was to travel to Calcutta and fly the Hump. "Life in Calcutta was very comfortable. Remorse had a house in Merlin Park, at Ballygunge, run by Lionel Davis's wife. I remember parties at the Saturday Club and the 300 Club. I had a wonderful time. But the Hump: dear me!

"When the plane arrived at Kunming, Jill and Tigger — Wharton-Tigar — were waiting on the tarmac. Everyone got off, but no sign of me. They went on board and found this limp, green figure at the rear. I was so airsick. It was a job getting over the top of the mountains. They often threw everything out the plane except the people to gain height. One of the girls lost all her precious 78 records. People often turned up in only the clothes they stood in — their luggage had been turfed out over the mountains."

In Kunming, there was a raucous social life available for European girls. "General Chennault of the Flying Tigers was still there," explains Lorna. "He was quite a guy, with a famous eye for the ladies. He had a big house up on the hill, where he was always throwing parties. You had to be careful what you drank: there was this gin that they made up in the hills which was absolutely lethal. You didn't want to be trapped up there. So at some point during the party, Tigger would blow a whistle and the girls would race for the cars to be driven back. He called it the Whistle Test — if you wanted to be saved, you could be. Otherwise, it was your lookout."

Lorna insists there was hard work too. "Walter and Tigger or their agents were buying and selling all over China. And in Kunming itself, too — all the rich Chinese traders had moved there. Which is why we could sell them diamonds. And Rolexes — they loved them. Bought them to give to their mistresses and paid top dollar. We made a fortune on each one." The watches — not just Rolexes but Omegas, Longines, Jaegers and other brands — were smuggled out of Switzerland, across France (Resistance couriers were told they were precision lenses for RAF bombsights), and ended up in Kunming. "We all wore nice Rolexes, too, of course. It was a perk of the job."

And at the centre of all this was Fletcher. "He was the big cheese. He was a bit of a dodgy character, really — almost a crook. That's why he was so good at it. We were trading in all kinds of things — silkworms, rupees, gold, diamonds, Dewar's whisky, which was mainly to keep Frank Shu happy. Frank was very Anglicised. We had to bring him in a couple of fox terriers once, so he could breed them. You kept him sweet because he had all the contacts, you see, knew all the Chinese business etiquette. Tigger had a brilliant mathematical mind, and Lionel brought in his nephews, Arthur and Micky, who spoke fluent Chinese. A right bunch, but perfect for the job."

It was all "fearsomely illegal", as Lorna puts it, with Chinese officials bribed ("influenced personally" in SOE-speak) to ignore proscribed transactions. In order to cover up what they were doing, many of the individuals involved ended up with thousands of pounds' worth of rupees sitting in their accounts, to be exchanged for dollars when the right deal was offered. "There were some awkward questions asked now and then, but the money always ended up in the Remorse coffers in the end."

The scope of items for sale in this British-run bazaar broadened to encompass cigarette papers, indigo dye, motor spares, proprietary medicines and bicycles; all disposed of at a healthy profit. Organisations other than the government became clients: ICI, Reuters and the Red Cross all availed themselves of Remorse's expertise in the grey markets.

Promissory notes were sold for local currency, pledging to repay the bearer in sterling after the war, and the Remorse team came up with the idea of purchasing at knockdown prices the assets of Chinese rupee accounts in India, frozen at the start of the Sino-Japanese war. The Indian banks — still operating under a British colonial government — would then unfreeze the monies for the SOE. So a Chinese merchant with £100,000 worth of rupees locked up in Calcutta would be offered £22,000 in rupee notes in Kunming, with Remorse pocketing the difference.

Professor Robert Bickers of Bristol University, an authority on the British empire's relations with China, believes there was a darker side to the trading. He points to a blanked-out section of the surviving Remorse documents in the National Archives. "Supplies of gold, gold bars, silver coins, various currenciesÉ [deleted text] Éwere secured for other British organisations for operational requirements." He argues the two missing words might well be "and opium", but points out that if it were, it would hardly be inconsistent with the drug-riddled history of Sino-British relations.

Regardless of the morality of some of its transactions, there is no doubt that the scheme more than lived up to Fletcher's promises.

So what exactly did Operation Remorse achieve? Reckoning up the value of a clandestine organisation like the SOE is difficult. For every Heroes of Telemark mission, there is the depressing debacle of the SOE in Holland, where, thanks to "turned" radios (when the Germans operated captured sets, pretending to be British agents still in the field), every parachute drop of men and materials for over a year fell into the Abwehr and Gestapo's welcoming arms.

Remorse, though, is rather different. It didn't involve glamorous female agents going undercover or interrogation by the Gestapo; it was grubby old trade, a war fought across the pages of ledgers and bank statements, rather than any kind of covert derring-do. Yet it is far easier to quantify Remorse's success than its more celebrated cousins. As Bickers writes, "Remorse flew the British trading flag, and kept up a British presence in specific markets." It also, of course, made a substantial profit. At one point, the Kunming office received a cable from John Venner in London asking them to stop trading for a while: thanks to Remorse, the SOE had made a worldwide operating surplus for the month and he was having trouble explaining the situation to the chiefs of staff. The operation's total profits may have amounted to as much as £77m. The SOE must be the only spying organisation to come out of a war with its books, at least for Far East operations, in the black. No wonder Fletcher was awarded a knighthood after the war.

By the end of 1945, Remorse had been shut down. Lionel Davis and Frank Shu (who was rewarded for his efforts with a British passport) subsequently formed a currency-dealing company in Hong Kong. Wharton-Tigar went back to mining and his ever-expanding collection of cigarette cards. He eventually bought the house next door to his own in Kensington to store them, and bequeathed the bulk of his catalogue to the British Museum on his death in 1995.

Jill and Lorna Tidmarsh both married former PoWs and settled down to be mothers. And Sir Walter Fletcher? What possible career was there for a freebooting, carpetbagging man of gross appetites? Dalton's "thug with good commercial connections".

Immediately after the war, he took his seat at Westminster as the Conservative MP for Bury, until ill health forced him to stand down in 1955. Sir Walter Fletcher died the following year, well before anyone outside a tiny circle of insiders had heard of his great billion-dollar adventure in China.

The Last Sunrise (Headline, £19.99), Robert Ryan's novel inspired by Operation Remorse, is available at the Sunday Times BooksFirst price of £17.99 including postage and packing. Tel: 0870 165 8585