Second World War
Chapman was still in prison when the Channel Islands were invaded by the Germans. In prison he met Eric Pleasants and the two became friends. They were later transferred, together with Anthony Faramus, to Fort de Romainville in Paris. Chapman offered his services to them as a turncoat agent. Under the direction of Captain Stephan von Gröning, head of the Abwehr in Paris, he was trained in explosives, radio communications, parachute jumping and other subjects in France at La Bretonnière, near Nantes and dispatched to England to commit acts of sabotage.
He was dropped near Littleport Cambridgeshire on 16 December 1942 equipped with wireless, pistol, cyanide capsule and ₤1,000. His mission was to sabotage the de Havilland aircraft factory at Hatfield. However he immediately surrendered himself to the local police and offered his services to MI5. Thanks to Ultra, MI5 had prior knowledge of his mission. He was interrogated at Latchmere House in West London, better known as Camp 020. MI5 decided to use him against the Germans and assigned Ronnie Reed as his case officer. (Reed had been invited to join MI5 in 1940 and remained until his retirement in 1976).
During the night 29–30 January 1943, Chapman with MI5 officers faked a sabotage attack on his target, the de Havilland aircraft factory in Hatfield, Hertfordshire, where the Mosquito was being manufactured. German reconnaissance aircraft photographed the site and the faked damage by Jasper Maskelyne convinced Chapman's controllers that the attack had been successful. In May 1943 he made his way back in the guise of Hugh Anson, an obnoxiously unruly steward, sailing on a merchant ship, the 'The City of Lancaster', from Liverpool to Lisbon in neutral Portugal where he then jumped ship. On making contact with Germans at the Lisbon embassy, for a fee of £20,000 he was given a bomb disguised as a lump of coal to be placed in the coal bunker. However he handed the bomb to the ship's captain. The Germans did not notice the ship was not damaged on the voyage home.
Chapman was sent to Norway to teach at a German spy school in Oslo, Norway. After a de-briefing by von Grunen, Chapman was awarded the Iron Cross for his work in apparently damaging the de Havilland works and the 'City of Lancaster', making him the first Englishman to receive such an award since the Franco-Prussian War of 1870-71. Chapman was inducted into the German Army as an Oberleutnant or First Lieutenant. (See Macintyre, 2007, pp 231 with photo and 286.) Chapman was also rewarded with 110,000 Reichsmark and his own yacht. An MI5 officer wrote in an assessment 'the Germans came to love Chapman... but although he went cynically through all the forms, he did not reciprocate. Chapman loved himself, loved adventure, and loved his country, probably in that order'. While in Oslo he also secretly photographed the German agents who stayed at his safe house.
After Operation Overlord he was sent back to Britain to report on the accuracy of the V-1 weapon. Here he consistently reported to the Germans that the bombs were hitting their central London target when in fact they were undershooting. Perhaps as a result of this disinformation, the Germans never corrected their aim, with the end result that most bombs landed in the South London suburbs or the Kent countryside, doing far less damage than they otherwise would have done. During this period he was also involved in doping of dogs in greyhound racing and was associating with criminal elements in the London's West End night clubs. He was also indiscreet about the sources of his income and so MI5, being unable to control him, dismissed him on 2 November 1944. Chapman was given a £6,000 payment from MI5 and was allowed to keep £1,000 of the money the Germans had given him. He was granted a pardon for his pre-war activities and was reported by MI5 to have been living 'in fashionable places in London always in the company of beautiful women of apparent culture'.
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