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The “bungling fraudster” politician who worked as a Czech spy

Black and White photo of the disgraced MP John Stonehouse

Black and White photo of the disgraced MP John Stonehouse

John Stonehouse was a British MP-turned-fraudster who got himself involved in a poorly conceived scam that landed him in prison.

After graduating from the London School of Economics and then serving in the RAF for two years, he worked as an economist.

He contested various parliamentary seats before getting elected as a Labour MP for Wednesbury in 1957 (and then Walsall North in 1974- 1976).

In 1967 he became technology minister then postmaster general, making him briefly a cabinet member before the post was abolished in 1969.

All this time, he was secretly working with the Czech intelligence services.

According to some reports, Stonehouse was a spy for Czechoslovakia in 1962.

In a subsequent encounter with Harold Wilson in 1969, Stonehouse was reportedly notified of allegations suggesting his involvement as a secret service agent for Czechoslovakia.

The source of this information was a defector from the Czechoslovak StB secret service, who had been thoroughly questioned by the security services of the United States.

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What was the scam?

After Labour lost the 1970 election, Stonehouse failed to get appointed to the shadow cabinet.

He became involved with the British Bangladeshi Trust (later London Capital Securities).

Still, thanks to a combination of poor management, allegations of fraud, and the 1973-1975 secondary banking crisis, the bank quickly became insolvent.

In a last-ditch attempt to prop up the bank's share price, Stonehouse arranged for it to make loans to friends and relatives for them to buy shares.

Facing disgrace after the scam, the fraudster MP disappeared.

What happened next?

In the month leading up to his disappearance, Stonehouse borrowed large sums of money from his own companies, which was diverted (along with cash from London Capital Securities) into a private bank account in the name of Joseph Markham, a dead constituent whose identity he had stolen.

He also took out several life insurance policies to benefit his family in the event of his (faked) death.

In November 1974, he disappeared from a beach in Miami, flying to Australia with Markham's passport.

His ruse quickly unravelled, and he was arrested in Australia after, ironically, being mistaken for the fugitive Lord Lucan).

He was convicted of fraud and sentenced to seven years.

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What was his legacy?

When he fled, Stonehouse's debts amounted to £800,000 money (£8.5m today).

His behavior was embarrassing for his relatives (who were unaware of the actual situation and had agreed to buy shares on his behalf), especially for his nephew.

The latter was director of several of Stonehouse's companies.

He was, as Max Hastings says in The Times: "a successful love rat but second- division politician, fourth-class traitor [and] bungling fraudster [who] is best forgotten."

Stonehouse died in 1988.

20 years later it was it was revealed it was likely he had been an agent for the Czechoslovak Socialist Republic military intelligence, but was never brought to trial by the UK government.

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