Duncan Campbell uncovers the sordid background to the man behind last year's notorious ''Fettesgate'' robbery -- and reveals how he has spent more than a decade playing journalists, gays, policemen, and criminals against each other.
THERE are few Scottish police officers who have served much of their time in Edinburgh who have not had to deal with Derek William Donaldson, the homosexual 32-year-old crook and self-acclaimed ''Fettesgate raider'' who was imprisoned for 18 months at Edinburgh Sheriff Court for assault and robbery.
Apart from his central role in the Fettes robbery, Donaldson was also one of a network of gay crooks who has assiduously encouraged detectives and journalists to believe in the fictitious notion of a homosexual ''magic circle'' conspiracy among senior lawyers and the Scottish judiciary.
These widely-reported rumours have until recently served as an effective distraction from their own criminal activities -- which openly gay advocate Derek Ogg has dubbed the real ''black magic circle.'' Only the slightest hint of this activity emerged in court yesterday.
Since 1976, when as a teenager at Portobello High School he was first convicted for housebreaking and theft, Donaldson has amassed convictions for almost 50 offences of fraud, theft, violence, and sexual offences against young people of both sexes.
More striking than that is the list of confidence tricks for which Donaldson has not -- so far -- faced either trial or punishment.
These include conning the Security Service, MI5, into believing that he was a useful counter-intelligence agent, and TV journalists into making a documentary in which a civil servant and former Portobello schoolmate, Brian Gentleman, was falsely portrayed as a Czech spy.
They also include a visit last year to William Nimmo-Smith, the QC asked by the Lord Advocate to investigate the alleged gay ''Magic Circle'' among Scottish lawyers and the judiciary. Posing as reporter ''Allan MacDonald'' of the Daily Telegraph, Donaldson tried to get the advocate to be indiscreet about the likely conclusions of his report, published two months later.
Donaldson secretly recorded the meeting, and then offered his tapes for sale to newspapers.
The Scottish Sun were the only takers.
From their Glasgow offices, they agreed a #10,000 deal with Donaldson. The terms Donaldson demanded included undertakings by the Sun not to tell their readers about his lengthy and unattractive criminal record, nor to show his photograph.
The Sun also agreed to pass money to Donaldson by an unusual and complex route.
On Friday December 18, the day the report was published -- under the banner headline ''FETTES THIEF CONS GAY JUDGES PROBE QC'' -- News International Ltd. deposited #6500 in the clients' account of Edinburgh solicitors Cochrane and Blair Paterson, of Abercromby Place, to be passed on to Donaldson.
The next day, the Sun published a second report on Donaldson's hoax, entitled ''NIMMO THE DIMMO.'' That evening, an intensely distressed Mr Nimmo-Smith sought psychiatric treatement at the Royal Edinburgh Hospital.
The theft from the Fettes offices of the Scottish Crime Squad (SCS) in July last year of many sensitive criminal intelligence files was the high point of Donaldson's criminal career. This is the event now known throughout Scotland as ''Fettesgate.'' The documents he then stole included SCS's dossiers on himself and a group of criminal acquaintances, and on such highly-sensitive police operations as ''Operation Burnt Bush,'' a Scotland-wide intelligence investigation into the activities of the Animal Liberation Front.
After details of some of the stolen documents were published, the police raided Donaldson's mother's house at Stenhouse, Edinburgh. They also raided a cover address in Dundee used by Donaldson for many of his fraudulent activities. This was the Queensway Guest House at 127 Broughty Ferry Road, which was then a DSS hostel for young men run by a close friend of Donaldson's, Norman Lilburn. (It has since been closed). Lilburn, like Donaldson, is a criminal, with convictions for fraud, fire-raising, and sexual offences against young men.
But no documents were found at either site. Then Donaldson's solicitor at the time, Nigel Beaumont, bartered with Lothian and Borders CID officers for ''immunity'' for Donaldson in exchange for the return of the original files. Before they were returned, however, Donaldson made copies.
These and other copies remain hidden at several addresses around Edinburgh. However, in an unpublicised police raid several weeks ago, many of the copies were recovered from the Midlothian home of a retired businessman, who has since died.
Donaldson has always taken particular pleasure in using the media to tweak the tail of the police and other authorities, and in playing journalists, policemen, gays, and his criminal acquaintances against each other.
Last autumn the Scotsman printed a series of unchallenged ''exclusives'' from him and his solicitor, Mr Beaumont, about how the Fettesgate break-in took place, together with other allegations against the police. Delighted with this, Donaldson took to referring to his contact, the paper's chief reporter, Alan Hutchison, as ''Fido.''
Ironically, after leaving school, Donaldson had applied to join the police. When his application was rejected, he became a ''police groupie''. He then used radio monitoring equipment to learn about police operations, staff, and command and control systems. Then he used this information to interfere with and disrupt police activities.
By 1984, he had been convicted of more than 40 charges of fraud, theft, reset, criminal damage, and offences against the person and the Companies Acts. Then, while on the run from the police in London, he moved on to hoaxing MI5.
That summer, Donaldson met Security Service counter-intelligence staff in a secret Whitehall basement called ''Room 055'' and made allegations about former Portobello schoolmate Brian Gentleman. When both MI5 and the Czech intelligence service realised that they were being deceived, Donaldson took the tale to journalists instead.
A 1986 Channel 4 documentary accused Gentleman of being a Czech spy. But Special Branch investigators found no evidence for this -- and Gentleman kept his job at the Department of Trade.
The truth was that it was Donaldson who had tried to spy for the Eastern Block, and to get Gentleman to become a Czech spy. When this plot failed, Donaldson approached a gay Edinburgh friend, former soldier Terry Smith, and asked him to arrange for serving gay Army officers to be photographed secretly in compromising sexual scenes. By threatening them with exposure of their homosexuality, Donaldson then hoped to blackmail them into passing over documents and information for him to sell.
Smith refused to take part in the plot, and instead warned the police. After this, the two became bitter enemies. According to one of Donaldson's closest criminal acquaintances, at one meeting he produced a gun and announced that he was going to kill Smith. At this point, however, Donaldson's solicitor, Nigel Beaumont (who was also present), persuaded him to hand over the weapon and disarmed him.
During the mid-1980s Donaldson was a gay fraudster who earned his money running DHSS hostels. He and others bought large properties with fraudulently obtained mortgages, and filled them with young men on the dole.
One such hostel (at the time) was the Murrayfield Hotel in Murrayfield Avenue, Edinburgh; another was in Balerno. Both were run by ''D & S Properties,'' a partnership between Donaldson and Grant Gordon Sutherland, a heterosexual businessman who was jailed soon afterwards for a different fraud involving meat packing companies. Other such DHSS landlords -- and members of the gay ''black magic circle'' -- were Norman Lilburn and journalist John Hein.
In November, 1986, Donaldson was sentenced by the High Court to six-and-a-half years' imprisonment for mortgage and insurance frauds and for sexual offences against young men and a young woman. After his sentence was reduced on appeal to five years, he was released from Shotts prison in July, 1989.
He was quickly back in fraudulent activities. He teamed with two other former DHSS landlords, Gordon Gosnell and John Hein, the one-time editor of the magazine Gay Scotland. From premises in Hope Street, Glasgow, the three started operating 0898 premium rate telephone services, which they used for major frauds against British Telecom.
Advertisements for Donaldson's services, ''Crossed Lines,'' started appearing nightly in the Edinburgh Evening News.
Hein was a telephone expert, and the brains behind the fraud. During 1989 he devised and perfected a special method of making fraudulent phone calls from public phone boxes to the 0898 numbers run by himself and Donaldson. Every time such a fraudulent call was made BT was obliged to pay the operators of the 0898 service -- Hein or Donaldson -- up to #200.
In November, 1989, Donaldson recruited an unemployed gay man to travel round Edinburgh late at night, making the special calls. Soon Donaldson was earning #5000 a week from BT. He rented a new car, luxurious West End flat in Learmonth Terrace, and boasted to cronies that he was ''living like a lord.''
Then, taking a lavish holiday in the sex suburbs of Bangkok in January 1990 with boyfriend (and co-accused at yesterday's trial) Billy Langa, he was arrested. British Telecom computers had detected the fraud -- and Donaldson himself had been watched and identified while making a fraudulent call from an Edinburgh suburb.
Donaldson was arrested by the Scottish Crime Squad and charged with #40,000 fraud and attempted fraud against BT. Donaldson then turned on his former ''manager,'' Dean Barnes, who had admitted in a statement to police how Donaldson had told him to fiddle calls to Donaldson's services. It is claimed that Barnes and his mother were threatened with maiming or death and, in consequence, Barnes agreed to lie at Glasgow Sheriff Court at Donaldson's trial in May 1991, and did so. Donaldson was acquitted. Two months ago Donaldson's solicitor, Nigel Beaumont, was arrested and charged by Lothian and Borders Police with attempting to suborn Dean Barnes to commit perjury at Glasgow Sheriff Court in May, 1991. Mr Beaumont denies the charge.
MEANWHILE in Edinburgh, Donaldson carried out an insurance fraud on his mother's house in Stenhouse. On February 14, 1991, he set fire to her kitchen with a Calor gas stove. Two claims were made for the costs of building a new kitchen; once from an insurance company, and secondly from the building society which had helped his mother buy her former council home.
Moving to Kirkcaldy, Donaldson moved in with another gay mortgage fraudster, Willy Hampton.
Hampton had successfully run a string of mortgage frauds in Edinburgh and Kirkcaldy. He had even obtained mortgages on behalf of his 17-year-old boyfriend. Donaldson and Hampton took over and ran a snooker hall in Methil called Connections. The two men and other members of the ''black magic circle'' also successfully defrauded the Royal Bank of Scotland and the Clydesdale Bank which involved opening false cash dispensing bank accounts.
But the pair fell out after Donaldson made a sexual advance towards Hampton's boyfriend. A squabble ensued, and Hampton took over running the Methil snooker hall. Then, in October 1990, there were two attempts to burn it down. The second attempt was successful, and the hall remains a hulk.
Donaldson then tried ringing stolen cars and selling fake Armani sweaters at Ingliston market. But he was caught and prosecuted by trading standards officers. His new career as a police informant was, however, soon flourishing.
Hampton was an early victim. After his Edinburgh mortgage frauds were detected, Hampton went into hiding in a friend's west end flat. Donaldson tracked him down -- and he was arrested within hours. He only narrowly escaped the unpleasant consequences of his lifestyle and actions. From inside prison, Hampton offered other criminals up to #1000 to have Donaldson beaten up. But the attempt failed after Hampton could not pay the fee he had offered.
In characteristic fashion, Donaldson's 1992 deception of William Nimmo-Smith, QC, was not initially planned as a deliberate intervention in the ''Magic Circle'' affair. He had sought to interview the QC under false pretences because he wanted to settle scores with Smith, and was desperate to find out what Smith might have told him.
The ''Fettesgate'' theft was also, ironically, planned as an act of private spite.
This event, perhaps the greatest blow to the reputation of a Scottish police force, began after CID officers attached to the elite regional Scottish Crime Squad -- with headquarters in Glasgow, and offices at Fettes -- agreed in 1990 to employ Donaldson as a ''registered'' police informant.
For years he had been trading information with policemen, journalists, and other criminals, and using the information he gleaned from each to play off detectives against fellow homosexual criminals.
His new career as an official police ''grass'' began after he was released from Shotts prison on parole in July 1989. It came to an end in July, 1992, when -- aggrieved because he was not paid a fee of #500 which he had expected -- he decided to get even by burgling the Scottish Crime Squad's own offices.
After the break-in, senior Lothians and Borders police officers learned about Donaldson's recruitment by the SCS, and were astounded. They were appalled that the experienced CID officers concerned had not realised who had been running whom. All of the officers concerned have now been found new jobs, and are unlikely ever to return to plain-clothes police work.
''The SCS's relationship with Donaldson was an absolute disaster of informant handling,'' said one senior officer. ''The key mistake in 'Fettesgate' was ever to let Donaldson into the building at all.''
''The gravity of this misjudgment beggars description. If ever a mackerel was launched to catch a sprat, this was it. Donaldson -- of all people!''
BUT the roots of Fettesgate began far from Scotland. Early in 1992, a large consignment of Visa dollar travellers' cheques were stolen while in transit from Czechoslovakia to England.
This haul was then distributed to criminal networks throughout Europe. Some of the stolen cheques were passed to leading criminals in the Glasgow area, who made plans to cash them in Spain and in London.
Although he was approached to take part in this scheme, Donaldson declined -- but suggested instead the services of some fellow gay crooks. One who agreed to take part was Gordon Gosnell, of Linwood, near Paisley, the editor of a monthly Scottish gay magazine called Pulse.
So, in April 1992, Gosnell travelled to London with four other men to cash the cheques.
Donaldson informed the police about their plans.
During the trip, Gosnell and three of his companions were arrested in London by detectives from Number 6 Regional Crime Squad. Donaldson, it appears, assumed that the arrests of Gosnell and others was the direct result of his ''grassing.'' So he approached Detective Chief Inspector Jimmy Smith of the Scottish Crime Squad and demanded an informant's fee of #500, payable (he claimed) on behalf of the Metropolitan Police.
But, according to police sources, it was Gosnell himself who had brought about the arrests. He had blown the plot after becoming extremely drunk. ''He was like a smartly dressed Rab C. Nesbitt,'' said one London detective. ''He waddled into a bureau de change in Paddington and asked to cash $20,000.'' The cashier he met called the police and, after intensive surveillance, four men, including Gosnell, were arrested. A fifth escaped back to Glasgow.
After the Fettes theft, Donaldson attempted to sell his haul to Scottish newspapers. But most were leery of potential charges of reset -- and rightly so.
Although Donaldson himself then remained Teflon-coated, the reporters whom he met were not so lucky.
After Scotland on Sunday reporter Ron McKay published some details of the ''Burnt Bush'' documents, he was arrested in Kent, flown back to Scotland, and charged with reset.
Donaldson's main contact on the Scottish Sun, reporter Alan Muir, faced an early-morning raid by police a day later. But the charges against journalists were dropped in November 1992 by Edinburgh's procurator fiscal.
JUST before Christmas, Donaldson told his mates that his next get-rich-quick scheme was going to be a roulette scam. He had, he claimed, devised a unique system for winning, play after play.
This ''system'' would make him up to #500 an hour, he believed. He spent weeks proving to himself that it would work. Then he made elaborate plans for a new life in 1993. He would join a host of London casinos, hire a luxurious new car, and move south to a new flat in the North London diplomatic suburb of St Johns Wood.
But he never got the opportunity to see if the streets of London could indeed be paved with gold.
On January 6 this year, three days after he savagely attacked me in an attempt to suppress Channel 4's report on the Fettesgate and Magic Circle affairs, he returned openly to his house in Double Hedges Road, Edinburgh.
He had, meanwhile, spent three days in hiding at the Holiday Inn hotel in Queensferry Road, Edinburgh. While on the run he had frequently been in touch with the Sun -- and had secretly met his solicitor, Nigel Beaumont, who, it appears, told him that he could reasonably expect to be able to ''walk'' from police custody, and thus to get away with assault and theft.
On the day he was arrested at his house in Double Hedges Road reporters from the Scottish Sun were on hand to record what they and he supposed would be next day's ''blunder by the plods'' splash for the Sun. As the police led him off, a Sun photographer recorded every move, anticipating that he would be released after a few hours' questioning.
But the Crown's evidence of Donaldson's assault, theft and dishonesty was more than he had anticipated. He remained in custody.
It was the one Donaldson story the Sun did not print. ...read more