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


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


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


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


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


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


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


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


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


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.