[5] In October 1921 McGrath travelled with the Irish Treaty delegation to London as one of Michael Collins' personal staff.

In the Irish Civil War of 1922–1923, he took the pro-treaty side and was made Director of Intelligence, replacing Liam Tobin.

In a strongly worded letter, written in red ink, McGrath warned Collins not to take his last, ill-fated trip to Cork.

[2] He was later put in charge of the police Intelligence service of the new Irish Free State, the Criminal Investigation Department or CID.

It was modelled on the London Metropolitan Police department of the same name, but was accused of the torture and killing of a number of republican (anti-treaty) prisoners during the civil war.

[6] In December 1922 McGrath was a reluctant supporter of the government's decision to execute four high profile IRA prisoners; Liam Mellows, Dick Barrett, Rory O'Connor, and Joe McKelvey.

In 1927, McGrath took a libel case against the publishers of The Real Ireland by poet Cyril Bretherton, a book that claimed McGrath was responsible for the abduction and murder of Noel Lemass (the brother of Seán Lemass) in June 1923 during the civil war, as well as a subsequent coverup.

Joseph's son Patrick W. McGrath inherited many of his father's business interests, and also served as Fine Gael Senator from 1973 to 1977.