£1,000 worth of French francs, which he sold 24 months later at a profit of £135. Both the purchase and the sale were cash transactions and were made through his bank in London, and there is no question of any official information being used. The francs were not bought for family or holiday purposes, but in the hope of an appreciation in value, and we regard such a purchase of foreign currency by a member of the Diplomatic Service as undesirable, even though it was a single transaction only, and had nothing at all in common with a gamble in differences.

We have come to the definite conclusion that we should be doing a grave injustice if we were to identify any persons whose names have been the subject of what we have satisfied ourselves to be unfounded rumour. Not only are they, in our opinion, absolutely innocent of any act of which exception could possibly be taken, but there is no evidence against them other than the rumour itself. This we have thought it our plain duty to probe, because, whether ill-founded or not, mere gossip can often do more harm to reputation than a charge openly brought upon evidence which can be tested; but to mention names in our report might be taken as giving colour to the suggestion that there was, in fact, evidence which required investigation. There was not a scintilla of evidence, and we decline to give further currency to rumours which reflect discredit only upon those who circulate them.

Although ourselves amply satisfied that the events which have occasioned the appointment of this Board were wholly exceptional, we were anxious to fortify our conclusions by independent evidence unconnected with the Civil Service. It seemed to us impossible that any real leakage of official information or any extensive speculation on the part of Civil Servants could have failed to come, directly or indirectly, to the knowledge of the City. We have now had the advantage of hearing the views of the Chairman of the Midland Bank, the Deputy-Governor of the Bank of England (in the absence through illness of the Governor), the Deputy-Chairman of Lloyds Bank, and the London Managing-Director of Martins Bank, who were so good as to attend some of our meetings and to give us the benefit of their knowledge and experience. Each of them stated that no rumours of any leakage of official information or of any speculation by Civil Servants had reached them, and that, notwithstanding the facts disclosed in the recent proceedings in the High Court, their own belief, and that of their business associates in the integrity of the Civil Service remained unshaken. They added that the general surprise at the disclosures in that case might itself be taken as a measure of the confidence with which the Civil Service was regarded in the City, and which was still unimpaired.

This is perhaps a convenient place for a brief reference to the written rules for the conduct of Civil Servants in financial matters which are now in force. We have received evidence on this subject from Sir Russell Scott, who handed in copies of the more important of these rules in their latest form. These are printed as an appendix to this report. Sir Russell Scott also drew our attention to the fact that in many offices departmental regulations had been made supplementing the general rules where the circumstances of the particular Department seemed to require it. It appears to us, after an examination of these documents, that their scope is sufficiently comprehensive, but it may be that in some respects the obligations which they imply could usefully be stated with greater precision.

PART III.

There is one other investigation of which we should have been glad to be relieved, since it touches upon matters which have formed the subject of political discussion. But inasmuch as it is closely related to our present enquiry, and

involves the honour of the Civil Service, we think it our plain duty to express an opinion upon it. It arises in the following way:

On the 25th October, 1924, there appeared in the public press a letter addressed to the Soviet Chargé d'Affaires on the subject of a document to which the attention of the Foreign Office had recently been drawn. This letter was signed by Mr. Gregory "in the absence of the Secretary of State," and the circumstances in which it was despatched from the Foreign Office and made public became the subject of acute political controversy. Suspicions of a deliberate attempt to compromise the Government were freely expressed, and to many unacquainted with the machinery of Government Offices the mere fact that the letter was signed by Mr. Gregory seemed to have a special significance.

On the 11th December, 1924, a statutory declaration, which we have seen, was made by a former inmate of Mrs. Dyne's house containing statements in which Mr. Gregory's name was mentioned. These statements, so far as they are material for the present purpose, were to the following effect: (1) that Mr. Gregory and Mrs. Dyne had been speculating in foreign currency and had lost a large sum of money; (2) that on or about the 21st October, 1924, Mrs. Dyne had spoken of the possibility of Mr. Gregory having to leave the Foreign Office; (3) that on the 25th October Mrs. Dyne said with reference to the letter to the Soviet Chargé d'Affaires that " Mr. Gregory did it when the Prime Minister's back was turned"; (4) that on the 27th October Mrs. Dyne said that Mr. MacDonald had got thrown out and that Mr. Gregory had made his name; (5) that at some time before 8 P.M. on the 28th October, the day before the General Election, Mr. Gregory had visited Mrs. Dyne's house in company with a gentleman supposed to be of Russian nationality, and had said, laughing, “Come on into the plot"; (6) that Mrs. Dyne, after the General Election, expressed satisfaction at the defeat of the Government, and that Mr. Gregory had said that they were "no good."

It is clear that statements of this nature, if and when they became known, as they did, to a number of persons, were well calculated to give rise both to suspicion and to rumour. The rumours seem ultimately to have taken the form of allegations that Mr. Gregory had engineered both the despatch and publication of the letter to the Soviet Chargé d'Affaires behind the back of the Prime Minister, that he had done this to serve his own financial ends, that Mrs. Dyne and a White Russian were connected in some way with the transactions, and that the defeat of the Government at the polls was celebrated by a party at Mrs. Dyne's house.

The statutory declaration at some time early in 1925 was brought to the notice of Mr. Ramsay MacDonald. It is scarcely necessary to say that, as he told us, he treated it with every possible reserve, but he thought it both right and fair that its contents should be communicated both to Sir Eyre Crowe, the then Permanent Under-Secretary of State at the Foreign Office, and through him to Mr. Gregory himself. He accordingly saw Sir Eyre Crowe, who at once expressed his total disbelief in the allegations made, but agreed that Mr. Gregory should be invited to make any statement which he might desire upon the matter.

Mr. Gregory accordingly saw first Mr. MacDonald and later Mr. J. H. Thomas, who was a member of the Cabinet Committee which had investigated the Zinoviev document before the Government went out of office. The clear impression left upon the minds of both Mr. MacDonald and Mr. Thomas was that Mr. Gregory denied all the statements in the statutory declaration, including the references to foreign exchange transactions. Mr. Gregory's recollection is, that while he denied that in the performance of his official duties he had been influenced by any motives of a personal or political character, he declined to discuss the private affairs of one of his friends. He was, as he told us, indignant

at what he supposed to be espionage upon Mrs. Dyne,-a supposition which, we may say, was entirely mistaken, for the statutory declaration was a voluntary statement and the person making it had herself no connection with any political party. But whatever Mr. Gregory said or did not say, it is quite clear that he made no admission of speculative dealings in foreign exchange, and we think that the only reasonable inference which Mr. MacDonald and Mr. Thomas could have drawn from their interviews with him was that such dealings had not taken place. We cannot but regret Mr. Gregory's reticence, whatever may have been the motive for it; and even if he was in the circumstances unwilling to make any admission to Mr. MacDonald and Mr. Thomas, we think that he was wrong in not making a full disclosure to Sir Eyre Crowe. No further action was taken either by Mr. MacDonald or by Mr. Thomas, for, as they told us, they were both ready to assume that the statements made had no sufficient founda. tion to justify further action. That this was so is shown by the fact that neither mentioned the matter again to Sir Eyre Crowe.

When, however, the case of Ironmonger v. Dyne was reported in the newspapers Mr. MacDonald very naturally recalled the earlier incident, and let us know through the Prime Minister that he had in his possession information which he thought it right to lay before us. He told us that he made no charge or accusation against Mr. Gregory, but that in an investigation such as that on which we were engaged he felt it desirable that every fact which might have a possible relevance should be brought to our knowledge. If we may be permitted to say so, we concur in this view and we are grateful to Mr. MacDonald and Mr. J. H. Thomas for their assistance in the matter; for it is clear that the earlier suspicions and rumours, dismissed at the time as improbable and as resting upon hearsay alone, would naturally be revived by the evidence given before Mr. Justice Horridge, which afforded conclusive proof that Mr. Gregory had in fact been speculating largely in foreign exchange. It might therefore be believed by some persons, and we are satisfied that this belief exists, that Mr. Gregory, finding himself seriously embarrassed and being anxious to retrieve his losses, conceived the idea of making use of his official position for the purpose of discrediting the Government at a critical moment and possibly of securing their defeat at the polls, in order to bring off a financial coup with the assistance and co-operation of Mrs. Dyne, his fellow-speculator, and Russian residents in England who were political opponents of the Russian Government. The bare statement of these suggestions indicates their extreme gravity. They are suggestions not merely of a breach of duty, but of gross corruption and of an unparalleled abuse of his position by a Civil Servant. We have therefore thought it right minutely to investigate all the circumstances, and have delayed the presentation of our report until we had had an opportunity of doing so. For this purpose we have been permitted to see all official papers which might have a bearing upon the subject, and the persons concerned have afforded us full inspection of their pass-books and other documents besides giving oral evidence and replying to any questions which we wished to ask.

It will be convenient in the first instance to set out the assumptions on which a charge of corruption such as we have indicated above must necessarily be based and afterwards to examine in detail the evidence which is available for the purpose of establishing or disproving the charge.

If it be the fact that Mr. Gregory "behind the back of the Prime Minister" and with a view to his own financial gain sent or caused to be sent on the 24th October, 1924, the letter to the Soviet Chargé d'Affaires, and gave it or caused it to be given to the Press on the same day, it is clear that the plot, if plot there was, must have been conceived before that date. The document afterwards known as the Zinoviev letter first came to the notice of the Foreign Office on the 10th October, and the inception of the scheme must therefore

have been at some time between the 10th October and the 24th October. Presumably, the idea must have been to bring about a state of things likely to produce a marked effect upon the course of foreign exchanges, so that an astute speculator, knowing in advance what that effect would probably be, would be enabled by extensive and timely sales or purchases to reap the benefit of his act. As soon as the act was done and the effect produced, the opportunity would be gone. It is therefore reasonable to suppose that advantage would have been taken of it previously; and, accordingly, the speculative sales or purchases must have been made before the 25th October. After that date the speculator would be in no better position than any other member of the public.

The evidence which is relevant to the above matters is as follows: The document known as the Zinoviev letter was brought first to the notice of the Foreign Office, as we have said, on the 10th October. It came before Mr. Gregory in the ordinary course of his official duties on the 14th October, and in minuting it to Sir Eyre Crowe he wrote: "I very much doubt the wisdom of publication. The authenticity of the document would be at once denied." Sir Eyre Crowe took a different view and minuted to the Secretary of State accordingly. The gist of Mr. MacDonald's reply on the 16th October was that they must be sure that the document was authentic, that he favoured publication of such things, and that a draft of a letter of protest to the Soviet Chargé d'Affaires should be prepared for his consideration, which must be such as to carry conviction. It is therefore clear that up to that date no plot could have been conceived by Mr. Gregory. It fell to him to prepare the first draft of the letter; the draft was altered by Sir Eyre Crowe, who, having satisfied himself on the question of authenticity, on the 21st October submitted the redraft to Mr. MacDonald (who was then in the country conducting his election campaign) with the observation that it could be published as soon as it had reached M. Rakovski's hands. On the morning of the 24th October it was received back at the Foreign Office by Sir Eyre Crowe with extensive alterations in Mr. MacDonald's own hand-writing, but not initialled by him. Sir Eyre Crowe at a meeting before midday on the 24th in his own room, at which Mr. Gregory and one or two others were present, announced his decision to despatch it forthwith to the Soviet Chargé d'Affaires. A copy was handed to the Press during the evening, and the letter was published in all the newspapers on the 25th October.

The decision to despatch the letter was, we are satisfied, the decision of Sir Eyre Crowe alone. Apart from the fact that he was not a man to allow himself to be overruled or overpersuaded by a subordinate, we are able to state on the authority of one of our own number, as well as on the unimpeachable evidence of other witnesses, that Sir Eyre Crowe acknowledged his entire responsibility for the action taken. It is no part of our duty to inquire whether his decision was due to a misunderstanding of Mr. MacDonald's wishes, to an error of judg ment, to a desire to anticipate the possible publication of the Zinoviev document by a London newspaper, or (it may be) to a belief that the hands of the Govern. ment would be strengthened by his action. Whatever the reason, none who knew Sir Eyre Crowe's high and austere sense of public duty will doubt that his motives were upright, single-minded and honourable; and we are confident that he never for one moment anticipated the political consequences which in fact followed.

So far as regards Mr. Gregory, it is a necessary conclusion, we think, from what we have said above, that he could in no circumstances have known before the morning of the 24th October, when a communication would be received from Mr. MacDonald, nor what its contents would be. And even if, contrary to the actual fact, the decision to despatch the latter had been his and not Sir Eyre Crowe's, his only opportunity for turning his act to his own financial

advantage would have been during that day. There is not the slightest evidence that he did anything of the kind.

After a minute examination of the transactions opened or closed during the nine months beginning the 1st April, 1924, and particularly during the month of October, and after inspecting the pass-books of Mr. Gregory and Mrs. Dyne, we find no evidence to support the hypothesis that their operations had any relation to the publication of the Zinoviev letter or were planned to derive advantage therefrom.

It is clear that the operations were conducted on no systematic plan; the dealings in the month of October, though somewhat larger in volume, were not abnormal in comparison with the preceding months; the individual transactions can all be explained by the ordinary factors known to the public at large, and they afford no ground for supposing that either Mr. Gregory or Mrs. Dyne contemplated bringing off any special financial coup. The record of transactions initiated or closed between the 10th October and the 6th November, a period which includes both the arrival of the Zinoviev document in the Foreign Office and the resignation of the Government, seems to us to speak for itself. It is as follows:

NEW COMMITMENTS (Forward Sales or Purchases).

It will be seen that of the new commitments entered into by Mrs. Dyne (whether or not Mr. Gregory was interested in them) within the period none were closed before the 5th November, and the sale effected on that date resulted in a loss of £1,382. One old commitment entered into as long ago as the 23rd June actually matured on the 24th October, but the closing sale, so far from realizing a profit, resulted in the heaviest loss of the month, viz., £4,565. Nor is there any indication that between October 1924 and the present time Mr. Gregory has had the disposition of any substantial sum of money of which the source and origin are not accounted for.