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In 1905, letters from a ‘C. Werner', a Hamburg import-export agent, began to fall into Melville's hands. All referred to the importation of arms to South Africa.

These letters were marvellously well written and were masterpieces of detail and perfectly logical. Names and addresses were given in Hamburg and South Africa.
¹⁴

Yet something wasn't right; despite shipping details, even markings on the packing cases, being mentioned in the letters, these boxes never appeared on any ship's manifest. So in June of 1906, with the letters still coming and the Foreign Office scrutinising every penny, Melville accepted his £50 expenses and set off for Hamburg to get to the bottom of it. In this he was assisted by Gottlieb Goerner, Long's old contact in Hamburg, who became a friend. Goerner was an interesting character known to the German authorities. He told Melville that the German Colonial Minister had approached him in 1904 to run a fake import-export business in Fernando Po, a Portuguese colonial possession in the Atlantic, with the ultimate aim of starting a diplomatic incident which would result in a German seizure of the island. He objected reasonably enough that, were he to be shot, the Berlin Government did not guarantee to look after his family. He refused to go, and the whole plot came out in the
Reichsrat,
causing quite a stink at the time.

Goerner probably gave Melville all sorts of useful information, for, according to Michael Smith in
The Spying Game,

Melville proved his resourcefulness by blackmailing the city's Chief of Police into helping him find the mysterious ‘Herr Werner' who, along with a known gun-runner called Otto Busch, was allegedly behind the conspiracy. Melville investigated a number of different Werners, conning them into providing specimens of their handwriting which he then compared with intercepted letters from Herr Werner. The main suspect turned out to be ‘not a man as originally assumed, but a woman with whom Busch is believed to have had immoral relations'.
¹⁵

Goerner had known (and sued) Busch in South Africa, but could shed no light on the letters. Once again Melville drew a blank. To sum up, the Hamburg addresses existed but, except for Busch, the people and businesses didn't. Maybe, since these were German steamers allegedly used for transport, the guns destined for South Africa were being smuggled ashore somewhere along the West African coast and forwarded overland to the Transvaal? Sometimes the letters gave details of Werner's own travels, yet when the passenger list was checked, Werner wasn't there.

Inevitably, the plug was pulled. There would be no more money. Mr Haldane, now at the War Office, thought this chase after Werner was all a waste of time.

Melville passed the letters up the line to Haldane, who read them and revised his opinion. Suddenly it was all on again. One of the letters provided intelligence of an important Boer conference, to be held at a given time and place in Carlsbad.

It didn't happen.

By now this farrago had been going on for over two years. Melville was on holiday at Ramsgate in October 1907 when the London office informed him by letter that Werner was due to call at Dover the following morning aboard the SS
Eliza Woerman, en route
for Hamburg. Durban officials had instructed a passenger on board called J.W. Brown to point out Werner to Melville.

This was exciting news, but how would Melville recognise J.W. Brown?

I was on Dover Pier the following morning in good time. All was ready for the arrival of the
Eliza Woerman
, the buffet was open, and the pier men at their posts. Suddenly I noticed a man on the pier evidently saturated with alcohol. He had three or four lots of whisky in the buffet. He then sat down on the pier and took off his boots and socks. I went to him and said ‘Going to have a swim?' He replied ‘No, I'm just warming my feet to the sun. They're as cold as ice.' I said ‘Excuse me, but is not your name Brennan?' To which he replied ‘No sir, my name is George Brown, and I've come here to meet my brother, J.W. Brown, who is arriving by this ship from Durban.' I said ‘I know him too!' He said ‘Then you must be one of his wife's people.' I said ‘Yes.'
¹⁶

There were over 500 passengers on board the SS
Eliza Woerman,
which would drop anchor at Dover Harbour for just fifteen minutes, so it would be helpful to have Mr Brown pointed out. Melville left the pier and discovered that the ship was delayed by fog far south-west down the Channel. It would not arrive until 9.00 p.m. He kept clear of the drunken brother all day, but at 9.00 p.m. both George Brown and Melville were on the tender that drew up alongside the big ship when it arrived. Hundreds of excited people crowded above them on the upper deck.

‘There is my brother', said George Brown to me, ‘him with the straw hat.' I looked up and called out to J.W. Brown, who thought I knew him, that I was coming up.
¹⁷

Melville shinned up the ladder. Unfortunately J.W. Brown had not been approached by anyone at Durban, was mystified by any reference to Werner, and in his bewilderment handed him a passenger list. It showed no such man aboard.

Back in London, Melville was now the sceptic while his superiors, previously lukewarm, were all for offering a £1,000 reward in South Africa for anyone detecting the smuggling of arms. He persuaded them to delay this plan for a week, in which he wrote a report. The whole thing, he insisted, must be a hoax. Not a hoax with any point to it; just a meaningless time-waster. He listed his reasons, which could be summed up as a trail of red herrings which he had been following for far too long. And besides, the letters when minutely checked against the facts did contain inaccuracies.

The substance of this report was cabled to South Africa, and as a result a number of men were arrested. Somebody had been paying them ten pounds per letter. Exactly who this was remains unclear; Steinhauer, in his memoir, makes no reference to it and Michael Smith in
The Spying Game
says it was ‘a freelance' making work for himself. The person had succeeded in wasting a good deal of British intelligence time.

Melville remained convinced that local police, the postal authorities and the coastguards should be alerted to suspect foreigners. Unlike the Home Office he did not see insurmountable legal and operational difficulties. He doggedly submitted reports suggesting at least an awareness-raising round robin, and the Home Office just as doggedly made objections; they had no authority over police or coastguards, they could not legally allow mail interceptions, the police outside London would make a mess of it, and so on. So these cases kept frustrating Melville, usually because he was told about them long after the protagonists had moved on.

There were, for instance, in 1907 three Germans at Hartlepool photographing gun emplacements and railway viaducts and the coast at high and low water. They always took their film to Mr Walburn, a chemist in the town, to be developed. These were holiday snaps, they told the incurious chemist, for their friends in Germany. After a while they were joined by another man who sent some of the pictures back to be redeveloped. One day the four of them had an argument, in German, in the shop. Unnoticed by them, an Irishman was listening. He had lived in Germany for years and after they left, he told Mr Walburn that the men were spies, one of them being a superior officer who was annoyed with the other three for having failed to get a decent shot of a certain gun near a lighthouse. Mr Walburn thought it over and later offered this information to the
Standard
newspaper, who told the War Office. Melville visited the area. But the Germans, and their photographs, had long gone.

Many times he found himself pursuing lines of enquiry that had gone cold or been mishandled. In Trearder Bay, North Wales, somebody told the coastguard that a couple of Germans staying at Roberts' Hotel had hired a boat and a boatman and were out every day taking soundings. Whoever reported this had the wit to understand that depth soundings were useful to anyone investigating submarine access to the bay.

Had Melville received this information, he would probably have got aboard as a substitute boatman and watched and obtained written proof before having his suspects arrested. The coastguard, meaning well but completely uninstructed in these matters, put on dress uniform before proceeding to the landing stage, where he waited proudly decorated with badges and braid in full view of the incoming party. The Germans saw him, panicked, and told the boatman to turn around and sail along the coast, or go wherever – just not here. He ignored their instructions, and when the officer strode sternly aboard to question them they said they were taking scientific soundings of the temperatures of various waters. Then they scuttled off. Melville was disgusted.

For the few evenings that those Germans were at the Roberts' Hotel, their demeanour was typically German. They overshadowed everyone in the dining room. But on arrival there, after seeing the naval officers, there was a marked change in their conduct. The other visitors noticed it. They ate their dinner in silence and sneaked away like mice. Evidently they were in mortal terror of arrest. Their names were never taken at the hotel.
¹⁸

It was all highly unsatisfactory. The old MO3 was reinvented in February 1907 as ‘MO5 – Special Duties Section, Interior Economy'
¹⁹
with a brief to assume ‘duties of an executive nature' (i.e. breaking and entering, shadowing and eavesdropping as required) but it was still a tiny department operating partly in contravention of the law, in the interests of national defence, in an international political climate which the Admiralty and the Home Office, at least, did not seem fully to comprehend.

It was in this year that wheels seemed at last to be creaking into motion; at least, Prime Minister Asquith insisted that the Committee for Imperial Defence must enquire into the state of military preparedness for a German invasion. As things stood, forewarning seemed to be left to chance. A group of concerned civilians led by Colonel A'Court Repington had told Balfour, now leader of the opposition, that nothing systematic was being done. In Repington's view, mobilisation for an attack could be swift and unseen. German forces on land and sea were in such a state of readiness that movements of transport and men were familiar and could be explained away, and a big fleet was often concentrated in one place; and in an emergency Berlin could take a strong grip on communications.

The committee enquired, and did not agree. Germany could not mount an offensive out of the blue. Nonetheless, there was cause for concern, as the Admiralty had no effective espionage network abroad. Naval intelligence relied upon consuls or naval attachés for information and the only relevant British representation was at Hamburg. The Foreign Office
(Arturo
Peel notwithstanding) disapproved of the services' independent use of consular staff as spies. It followed that more agents must be actively recruited in the German ports.
²⁰

Colonel Edmonds, Kell's superior officer, was a fan of, indeed a friend of, the novelist William Le Queux. History has judged Le Queux a conspiracy theorist and a dreadful writer and he had his detractors at the time, but his books, such as
Spies of the Kaiser
and
The Invasion of 1910,
set off a whole new spy-paranoia bandwagon. They were popular in the decade before the outbreak of war and the
Daily Mail
encouraged the moral panic.

In his batty way, Le Queux was right. There were German agents at work in British ports. Steinhauer ran the network and managed to move around British coastal towns in the guise of a commercial traveller visiting them. He could pass for an American and at least once, according to Melville's memoir and his own, narrowly escaped arrest in England. But where Le Queux imagined thousands of fiendish Huns just biding their time before arising, like the dragons' teeth of legend, to slay the peaceful British, the real agents were numbered in tens. With few exceptions they were a sorry lot, desperate for the pittance they got in exchange for information that required sneaking, rather than skill, to obtain. Edmonds probably exaggerated the cunning of their masters too; Steinhauer, whose opinion of his military superiors was disparaging, opined that even intelligence officers in Berlin were selected because they were not bright enough for the army.
²¹

Le Queux and the
Mail,
despite their outraged xenophobia, were right in another respect. Public fear of a threat from Germany reflected a perceptible shift in international relations between 1906 and 1909. Traditionally the British Empire had been safe thanks to a small, expert, professional army for deployment when required in the colonies, and an overwhelming navy that no other nation could match. The Germans had treaties with the Austrians and Italians, a big, well-armed and determined army, the Schlieffen Plan to mount a defensive line against the French in the west, and a comparatively insignificant navy. Nonetheless they felt encircled and threatened by the increasing
rapprochement
between the British, French and Russians.

When the British launched the first Dreadnought battleship in 1906 it was so much faster and better equipped than anything else that many in the Admiralty must have felt the British Navy was invincible. In fact it had set a new standard, so that Germany soon began building Dreadnoughts of its own while Britain was lumbered with the world's largest fleet of out-of-date ships. For the first time Germany was turning itself into a formidable naval power. Germany was also starting to pick fights, mainly with the French in North Africa.

Le Queux knew both Steinhauer and Melville; he had known Steinhauer for years. Ironically, the one English spy who did supply the Germans with useful information throughout the prewar years had been spotted in Chatham Dockyard in Steinhauer's company long ago in 1902,
²²
and it was Le Queux who saw them together. Perhaps it was something about Steinhauer's false beard that alerted him. He hot-footed it to the police. Had he taken more notice of Steinhauer's companion, he could probably have saved Melville a good deal of trouble later. The man was Frederick Adolphus Schroeder, alias Gould, and he would remain undetected until the first months of 1914.