[4] On 16 January 1981, Smallwoods participated in an attack on the Coalisland home of Michael McAliskey and his wife Bernadette, in which both were shot multiple times and seriously wounded.
[8] Following his release from prison in 1990, Smallwoods found the UDA to be greatly changed, with his ally McMichael dead and Andy Tyrie removed as leader and replaced by an Inner Council.
[11] Amongst those to be killed as a result of this strategy were Sinn Féin activists Tommy Casey,[12] Councillor Eddie Fullerton[13] and Thomas Donaghy,[14] as well as Robert Shaw, the father of an SF worker but not himself a member.
At these meetings, facilitated by Reverend Roy Magee, a former member of the Ulster Vanguard and campaigner against the Anglo-Irish Agreement who had become a peace advocate, the ministers pressed Smallwoods to lead the Inner Council towards a ceasefire.
[18] Father Reid had already built a relationship with Robert "Basher" Bates, one of the Shankill Butchers whose conversion to born-again Christianity had seen the two co-operate on ecumenical initiatives, but Smallwoods was the first active, high-ranking loyalist to hold regular dialogue with Catholic clergy.
Magee would later state that, despite his endorsement of a policy of targeting Sinn Féin members, Smallwoods proved to be an important voice for moderation on the Inner Council and a prime architect of the eventual loyalist ceasefire.
[24] It was also noted by both Ian S. Wood and an Observer journalist that Smallwoods sometimes struggled with his dual role as politician and paramilitary director, often beginning interviews by calling the UDA "them" before eventually switching to "us".
[24] Having come from a background in the UDA in the 1970s, Smallwoods was sympathetic to Ulster nationalism and, during his chairmanship, he placed the notion of an independent Northern Ireland at the heart of party policy.
[5][27][28] Smallwoods' killing was one of a series of attacks by the IRA during the middle of 1994 in which top loyalists and other opponents, such as Martin Cahill, were targeted before the movement went on ceasefire.
[32] His funeral was held on 14 July, where Reynolds and Reid were amongst the mourners[32] whilst his pallbearers included Democratic Unionist Party politicians Peter Robinson and Sammy Wilson.