Sex orgy link embarrasses British MI5 spy service

LONDON (Reuters) - A bizarre sex scandal involving a top motor sports official and the prostitute wife of a British spy has raised urgent questions about the screening procedures employed by the MI5 security service.

The Sunday Times and Sunday Telegraph reported that an MI5 officer had been forced to resign after it emerged that his wife was one of five prostitutes who took part in an orgy with Max Mosley, president of Formula One's governing body, the FIA.

A security source contacted by Reuters did not dispute the reports but said any suggestion the orgy had been an MI5 'sting' operation to entrap Mosley was "nonsense".

"The service is very busy and constantly stretched by the demands of the threat from AQ (al Qaeda) and other terrorist organizations...This is not how they're spending their time," he said when asked about the Mosley affair.

"This is a very unhelpful distraction for us."

Mosley has been fighting to keep his job after another paper, the News of the World, reported in March he had taken part in what it called a Nazi-style sado-masochistic orgy.

The 68-year-old FIA president, while apologizing for any embarrassment caused to the sport of motor racing, has strongly denied any Nazi connotation to the affair and said he was the victim of a "covert investigation".

He asserted after the scandal broke that he had been targeted "by a group specializing in such things, for reasons and clients unknown".

The affair raises many questions, not least how MI5 could have failed to know that the wife of one of its own operatives was working as a prostitute.

Staff are subjected before joining the agency to what its website calls "the most comprehensive form of security vetting in the UK", aimed at establishing their reliability and suitability.

The screening continues after a person has joined the service, and there is a responsibility on staff to inform MI5 of changes in their personal circumstances.

The security source said he could not comment on individual cases. But in general, he said: "The security service does expect higher standards of behavior at all times from all its staff. Everybody is vetted to a very high level. That is the subject of continuing and ongoing review."

He added: "Where there appears to have been any problem with the system, there would be an immediate review and steps would be taken to improve the process."

With some 3,500 staff, MI5 bosses say the agency has its hands full dealing with more than 2,000 British-based individuals it considers to pose a terrorist threat.

Mosley, whose father Oswald founded the pre-World War Two British Union of Fascists, has resisted calls for his resignation from the FIA but faces a confidence vote by secret ballot in Paris on June 3. The FIA (International Automobile Federation) declined to comment on Sunday's reports.

(Additional reporting by Alan Baldwin; editing by Philippa Fletcher)