A man accused of making false claims of child abuse against public figures told police his dog was abducted “as a warning” from a paedophile gang which included the former head of MI5.
In a video interview shown in court Carl Beech claimed ex-spy chief Michael Hanley told him it was “punishment” for missing a meeting with his abusers.
His claims led to the £2m Operation Midland, which resulted in no arrests.
Mr Beech denies 12 counts of perverting the course of justice and one of fraud.
In the video interview with police, recorded in October 2014, he also accused former Conservative MP Harvey Proctor of being part of the gang.
Mr Proctor will give evidence during the trial, the jury at Newcastle Crown Court was told.
In the interviews, Mr Beech – who was previously known by the pseudonym “Nick” – told police that his dog was taken while she was being walked by his aunt because he “forgot” to meet his abusers.
“The punishment was they took my dog,” the 51-year-old former nurse from Gloucester said.
He described how Mr Hanley, who died in 2001, visited him outside his school in Kingston upon Thames, Surrey, after his dog had gone missing.
“He didn’t have her in the car, but they had taken Heron, my dog, and they had taken her as a warning. They kept her for five days and then they let her go.”
He said he collected his dog from Surbiton police station and she was unharmed.
In the tapes, Mr Beech – who jurors have been told has himself since been convicted of paedophile offences – also alleged he was made to perform a sex act on Mr Proctor while former Tory Prime Minister Sir Edward Heath was present.
Mr Beech added that Sir Edward, who he said reminded him of his grandfather, stepped in to prevent him from being beaten by the former MP.
“The next thing, he just started laying into me and hitting,” he said.
“Edward stopped him and he didn’t like it. He didn’t like it though he didn’t question it.”
‘Threatened with a penknife’
Mr Beech claimed that Mr Proctor had wanted to cut him with a penknife but was stopped by another member of the alleged group of abusers.
He told police that Mr Proctor had issued the warning “next time…”, and put the penknife in the then schoolboy’s trousers.
The police tapes showed Mr Beech produce a penknife, which he claimed was the one given to him by Mr Proctor.
He also described having to attend annual “Remembrance Day” sexual abuse parties where, he claimed, generals and spies stuck poppies into his skin.
“I had poppies pinned to my chest whilst they did whatever they wanted to do,” he said. “As a mark of respect.”
He claimed that attendees had included Sir Michael, ex-military chief Lord Bramall, now 95, and former head of the Army Field Marshall Sir Roland Gibbs, who died in 2004.
Mr Beech said the alleged abusers would “just get a bit of skin and put a pin through it”.
“I don’t like this time of year, with all the poppies around”, he said during the interview.
Previously, the court had heard that Mr Beech had convictions for voyeurism and making and possessing indecent images of children.
He has been described in court by the prosecution as a “committed and manipulative paedophile”.
Yesterday, the court heard that Mr Beech told the detective that he was part of a “little group” with Labour MP Tom Watson, a Exaro News journalist called Mark Conrad, and a retired social worker, who were trying to “put my information out there to encourage other people to come forward”.
Mr Beech said he met Mr Watson in his office, where they spoke “at some length”.
The trial continues.