A joint report by the Bureau of Investigative Journalism and the Sunday Times has revealed that Lord Tim Bell's PR firm Bell Pottinger was hired by the US military to run a "covert" propaganda operation in Iraq.

At the peak of the Iraq war, the London based consultancy was hired by the US department of defense to orchestrate a mammoth $540m campaign, in what is believed to be one of the most-costly PR contracts in history.

Operating under the agency's now dissolved 'conflict resolution' arm between 2007 and 2011, the bulk of the operation included "scripting soap operas, providing footage for local Arabic news networks and allegedly distributing insurgent videos used to track the individuals who watched them," according to the Times and the Bureau of Investigative Journalism.

Bell confirmed some elements of the news to the Sunday Times, noting he was "proud," of the programme for preventing further bloodshed and saying that his PR firm had reported on its work to the CIA, the National Security Council and the Pentagon.

"It was a covert military operation. It was covered by various secrecy documents. We were very proud of it. We did a lot to help resolve the situation. Not enough. We did not stop the mess which emerged, but it was part of the American propaganda machinery," he added.

Details of the contract first surfaced in US defense and procurement documents, which showed that the former Thatcher PR guru's company was paid close to half a billion dollars for five contracts with the US military between summer 2007 and December 2011.

In order to help America win over civilians and combat militants Bell Pottinger produced reams of material for the Pentagon, a lot of which went far beyond the standard communications remit.

Speaking in the first media interview any Bell Pottinger employee has given about the project, one of the agency's former video editors Martin Wells described how a few days after being given the job he was sent to Baghdad to conduct a "psychological operations" campaign.

The initiative was operated in secrecy and distinct from the PR agency's main offering and included short TV slots created in the style of Arabic news networks and, according to Wells, fake insurgent videos which could be used to track those who watched them.

The Sunday Times has noted that those previously involved in the conflict-resolution division at the firm have denied any involvement in video-tracking software.

However, telling the Bureau how the videos were seemingly made, Wells claims he was given precise instructions that the films had to be shot in the style of al Qaeda and 10-minutes long. The films were then allegedly burned into CDs and contained codes which linked to a Google analytics account, giving a list of IP addresses where the CDs had been played.

This data was then apparently shared with a restricted circulation list, the former employee said, while the tracking account had a very restricted circulation list, according to Wells, who claimed the data went to him, a senior member of the Bell Pottinger management team, and one of the US military commanders.

"If one is looked at in the middle of Baghdad…you know there’s a hit there,” he noted, explaining the videos' value to US forces. "If one, 48 hours or a week later shows up in another part of the world, then that’s the more interesting one, and that’s what they’re looking for more, because that gives you a trail."

Watch Wells' interview in full here.

Bell Pottinger has a history of defense-related dealings, having represented a number of controversial clients including the government of Sri Lanka, ousted Thai premier Thaksin Shinawatra, and Asma al-Assad, the wife of the president of Syria. Earlier this year, the agency announced Lord Bell's intentions to step down from his namesake agency to work on his new PR shop, Sans Frontières.

Updated

The Pentagon has since admitted to funding the PR project to combat the Islamic State’s propaganda online.