The Crimes of Patriots: A True Tale of Dope, Dirty Money, an

"Science," the Greek word for knowledge, when appended to the word "political," creates what seems like an oxymoron. For who could claim to know politics? More complicated than any game, most people who play it become addicts and die without understanding what they were addicted to. The rest of us suffer under their malpractice as our "leaders." A truer case of the blind leading the blind could not be found. Plumb the depths of confusion here.

The Crimes of Patriots: A True Tale of Dope, Dirty Money, an

Postby admin » Sat Dec 16, 2017 2:46 am

The Crimes of Patriots: A True Tale of Dope, Dirty Money, and the CIA
by Jonathan Kwitny
© 1987 by Jonathan Kwitny

NOTICE: THIS WORK MAY BE PROTECTED BY COPYRIGHT

YOU ARE REQUIRED TO READ THE COPYRIGHT NOTICE AT THIS LINK BEFORE YOU READ THE FOLLOWING WORK, THAT IS AVAILABLE SOLELY FOR PRIVATE STUDY, SCHOLARSHIP OR RESEARCH PURSUANT TO 17 U.S.C. SECTION 107 AND 108. IN THE EVENT THAT THE LIBRARY DETERMINES THAT UNLAWFUL COPYING OF THIS WORK HAS OCCURRED, THE LIBRARY HAS THE RIGHT TO BLOCK THE I.P. ADDRESS AT WHICH THE UNLAWFUL COPYING APPEARED TO HAVE OCCURRED. THANK YOU FOR RESPECTING THE RIGHTS OF COPYRIGHT OWNERS.


Image

In Memory of Anne Thaler and of Terri Thaler and for their parents

Table of Contents:

Jacket Cover
Prologue
Cast of Characters
1. The End of the Rainbow
2. The Cover-Up
3. The Golden Triangle
4. The Education of a Banker
5. Corporate Veils
6. Sleight of Hand
7. Terrorists and Patriots
8. Into Africa
9. The Spooking of Australia
10. The Un-Bank
11. Laughing at the Law
12. The Asia Branches
13. The U.S. Branches
14. Banking in Opiumland
15. Officers and Gentlemen
16. The Drug Bank
17. The "Mr. Asia" Murders
18. Bernie of Arabia
19. The Admiral's Colors
20. Men of Substance
21. What the Tape Recorder Heard
22. The Wilson Connection
23. The Explosion
24. Thwarting the Investigators
25. "Everybody Left Alive Is Innocent"
26. The Agency's Assets
Appendix: The Questions Whose Answers are Secret
Afterword by Admiral Earl P. Yates, USN (ret.)
Acknowledgments
Index
Photographs
admin
Site Admin
 
Posts: 27519
Joined: Thu Aug 01, 2013 5:21 am

Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 2:49 am

Author's Note for The Crime of Patriots

For five years prior to the publication of this book, the author tried repeatedly and fruitlessly to interview and obtain comment from Richard Secord, Theodore Shackley, and Thomas Clines, former high federal officials connected to Edwin Wilson, the traitor and convicted death merchant. Some of these efforts are described in the book. At the eleventh hour, as books were sitting on the warehouse loading docks waiting to be shipped to bookstores, Clines, Shackley, and Secord's lawyer, Thomas Green, contacted the publisher, stating that they had obtained a proof copy of the book and alleged that there were numerous errors in it. I have reviewed these specifics, along with my own sources, and I find that the men were, on the whole, treated fairly. As usually happens, comment from the subjects being written about did reveal a few erroneous details and conflicting versions of events. -- J.K. August 12, 1987

Inside Cover:

The Crimes of Patriots -- A True Tale of Dope, Dirty Money, and the CIA, by Jonathan Kwitny

A rifle blast blows off the head of an Australian banker in his Mercedes -- and a tale of the whole Cold War begins to unravel. The death of Frank Nugan exposes the massive fraud at the heart of his empire, the Nugan Hand Bank; but it also exposes the real power of the bank -- a network of U.S. generals, admirals, and CIA men, including a former director of that organization. As the colorful story of the Nugan Hand Bank unfolds, we learn that there have been many similar operations. Patterns and eerie resonances emerge, and the names of those who later master-minded the Iran-contra fiasco lurk in the shadows cast by Nugan Hand: Clines, Shackley, Secord. We are slowly brought to a greater truth.

In his last book, Endless Enemies, Jonathan Kwitny showed how our anti-communist based foreign policy undermines American security. Here he exposes at last the crimes committed against American citizens in pursuit of that policy. He shows how some of the biggest names in American defense and intelligence were involved in an operation that promoted the dope trade, tax evasion, and gun running, and swindled American citizens, and citizens of allied countries, out of millions of dollars. Kwitny lays out a mystery filled with questions whose answers -- so far -- have stayed locked in the U.S. government's vault of secrets.

The Crimes of Patriots is the story behind the story revealed in the Iran-contra investigation. It is a chilling glimpse into the workings of the secret government that has operated ruthlessly in this country and around the world for the last forty years, unchecked, answerable only to itself. It is a masterpiece of investigative journalism that reveals the sordid truths shrouded within the "national security interest."

Image

Jonathan Kwitny, a Wall Street Journal reporter for sixteen years, is one of America's foremost journalists and holds the honor medal for career achievement from the University of Missouri School of Journalism. His reporting exposed former Reagan adviser Richard Allen's conflicts of interest, and forced the resignation of Lynn Helms, Reagan's Federal Aviation administrator. This is Jonathan Kwitny's sixth book. His fifth, Endless Enemies: The Making of an Unfriendly World, was runner-up for the Pulitzer Prize in general nonfiction in 1985. Mr. Kwitny has lived or traveled in more than ninety countries. A native of Indianapolis, he works from the Journal's New York bureau.

Back Cover:

The Crimes of Patriots will reveal how an obscure Australian bank, Nugan Hand Ltd., came to occupy the central position in a vast network of drug transactions, fraud, secret arms deals, and covert intelligence operations.

"The Crimes of Patriots is a masterpiece, pulling together previously unavailable documentation in a most creative way and -- through Kwitny's original research -- addressing the crucial questions to the most mysterious collection of intelligence hands ever caught in a single scandal. The answers Kwitny gathers and the new questions he raises are a roadmap for a major Congressional investigation yet to come." -- Scott Armstrong

"As this book so clearly demonstrates, Jonathan Kwitny is a peerless investigative reporter." -- Peter Maas

"There is a secret government in America. It operates with the explicit and implied authority of the highest officials, and in the name of America's interests it has inflicted great damage on the unsuspecting peoples of other countries and on our own fundamental principles.... I wish everyone would read The Crimes of Patriots. Perhaps then the current hearings on the Iran-Contra affair -- for Ronald Reagan is the latest to wield this secret weapon and to perish by it -- will be the last. An informed people might become an outraged people and finally put a stop to our own self-destruction. If so, we will owe much to Jonathan Kwitny's reporting." -- Bill Moyers

"It is unusual to commend a book of investigative journalism that leaves some questions unanswered, but Jonathan Kwitny's account of the Nugan Hand affair transcends ordinary journalism. The Crimes of Patriots is the story of a reporter at work trying to balance issues of criminality and national security, and Kwitny left me with the sense that no one could have done it better." -- Seymour Hersh

"This is a superbly researched and exceptionally well-told story." -- John Kenneth Galbraith

"Jonathan Kwitny is the John Le Carre of nonfiction crime. Sometimes when I was wallowing in The Crimes of Patriots I burst out laughing (perversely) because the kings of this complicated idyl are such shameless rogues. Is there no limit to their white-collar mischief? Kwitny has raised the question again, as only he can." -- Robert Sherrill
admin
Site Admin
 
Posts: 27519
Joined: Thu Aug 01, 2013 5:21 am

Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 2:52 am

For some time I have been disturbed by the way [the] CIA has been diverted from its original assignment. It has become an operational arm and at times a policy-making arm of the Government. This has led to trouble and may have compounded our difficulties in several explosive areas.

I never had any thought when I set up the CIA that it would be injected into peacetime cloak and dagger operations. Some of the complications and embarrassments that I think we have experienced are in part attributable to the fact that this quiet intelligence arm of the President has been so removed from its intended role that it is being interpreted as a symbol of sinister and mysterious foreign intrigue -- and a subject for Cold War enemy propaganda.

With all the nonsense put out by Communist propaganda about "Yankee imperialism," "exploitive capitalism," "war-mongering," "monopolists" in their name-calling assault on the West, the last thing we needed was for the CIA to be seized upon as something akin to a subverting influence in the affairs of other people. . .

But there are now some searching questions that need to be answered. I, therefore, would like to see the CIA be restored to its original assignment as the intelligence arm of the President, and whatever else it can properly perform in that special field, and that its operational duties be terminated or properly used elsewhere.

We have grown up as a nation, respected for our free institutions and for our ability to maintain a free and open society. There is something about the way the CIA has been functioning that is casting a shadow over our historical position, and I feel that we need to correct it.

-- HARRY S. TRUMAN; December 22, 1963


In a government of laws, the existence of the government will be imperiled if it fails to observe the law scrupulously. Our government is the potent, the omnipotent, teacher. For good or ill, it teaches the whole people by its example. If government becomes a lawbreaker it breeds contempt for law: it invites every man to become a law unto himself. It invites anarchy.

-- Justice LOUIS D. BRANDEIS


PROLOGUE

As this book goes to press, the United States Government is consumed with a foreign policy scandal. Arms were secretly sold to an Iranian government that the U.S. administration publicly-preached against, and there was at least the intention to divert some of the proceeds to evade a Congressional prohibition on aiding rebels trying to overthrow the Government of Nicaragua. To keep the activity secret, the White House conducted its arms sales and Contra supply operations through a network of supposedly private citizens, most of whom had recently held jobs with the armed forces or Central Intelligence Agency.

Not only were laws broken governing the conduct of foreign policy, but private profits were evidently made in the process, of a size still being determined. There are daily expressions of shock and outrage about the "privatization" of foreign policy, and about the White House's obsession with covert activity, as if these were inventions of the Reagan Administration.

They weren't. The need, claimed by the past eight presidents, to pursue a perpetual and largely secret global war by fair means or foul against what is said to be a relentlessly expanding Soviet empire has justified gross violations of American law against the interests of American citizens for forty years. What is happening now in 1987 is that a window has suddenly been opened on this shadow world before the spooks who inhabit it could completely take cover.

By dealing with such an unreliable co-conspirator as Iran, some of whose leaders delighted in exposing the arms sales, the Reagan Administration allowed its secret operations to be blown with unprecedented prematurity. Yet it is important to keep in mind that what we are seeing is not an aberration; the aberration is only that we are seeing it, and what we are seeing is still not the most of it.

Nevertheless, some good may come from the unpleasant sight of so many greedy arms dealers and callous and bumbling ex-generals. Some good may come from the sense that all we achieved by sneaking down from the ethical high ground was to become the butt of the Ayatollah Khomeini's jokes (not to mention the killing of a lot of rag-poor Nicaraguan coffee farmers and their families). Perhaps all this will inspire the reassessment of a long-standing policy by which we have surely outwitted ourselves more often than not. That policy, not just the story of a colorful and crooked bank, is the subject of this book.

It is worth quoting again the words of Walter Lippmann, written after the failed U.S. invasion of Cuba at the Bay of Pigs in 1961: "A policy is bound to fail which deliberately violates our pledges and our principles, our treaties and our laws.... The American conscience is a reality. It will make hesitant and ineffectual, even if it does not prevent, an un-American policy.... In the great struggle with communism, we must find our strength by developing and applying our own principles, not in abandoning them."

The Crimes of Patriots was essentially finished before the Iran-Contra affair exploded. I have gone through the manuscript trying to highlight those longtime actors in the shadow world who have suddenly been catapulted onto the front pages and into the evening newscasts, and to relate their place in the Nugan Hand story to the events of the moment. Among them are air force generals Richard V. Secord and Harry ("Heinie") Aderholt, CIA-men Thomas Clines, Theodore Shackley, and Rafael ("Chi-Chi") Quintero, and even the Sultan of Brunei.

But actors come and go. It is the roles that stay, and that we need to be concerned with.

Perhaps the most surprising fact in this book is this: As of today, no one has been convicted of a crime for the activities of Nugan Hand. Only two relatively minor figures -- Patricia Swan, the secretary, and Michael Moloney, the lawyer who showed up at the very end -- have been charged, and only in connection with the cover-up, not with the bank's substantive work. Whether this means the others involved were innocent -- or why, if any were not innocent, more charges haven't been filed -- is something the reader will have to judge from the facts herein.

Jonathan Kwitny
New York City
May 1987
admin
Site Admin
 
Posts: 27519
Joined: Thu Aug 01, 2013 5:21 am

Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 2:55 am

Cast of Characters

THE BANKERS


FRANCIS JOHN NUGAN Son of a Griffith, Australia, fruitpacker; chairman and half- owner of the bank; shot dead in his Mercedes.

MICHAEL JON HAND Bronx-born Green Beret war hero, CIA operative, vice-chairman and half-owner of the bank, pal of dope-dealers and of retired and not-so-retired military- intelligence officials; now one of the world's most wanted men.

THE YANKS IN THE BANK

DONALD E. BEAZLEY Florida banker, was rushed in late as president of the Nugan Hand holding company to rescue the faltering bank. The U.S. banks he ran before and after were also enveloped in scandal, but he's never been charged with anything.

GENERAL EDWIN F. BLACK Was colleague and pal of CIA bosses Allen Dulles and Richard Helms, boasted of being involved in "right-wing" groups, ran the Nugan Hand Hawaii office.

GENERAL ERLE COCKE JR. Survived an execution, headed the American Legion, ran the Nugan Hand Washington office.

WILLIAM COLBY Retired as Director of CIA after a long and controversial career in clandestine services, became lawyer for Nugan Hand.

GEORGE FARRIS Military intelligence specialist and war buddy of Hand's, worked in the Nugan Hand Hong Kong and Washington offices, then moved into a special forces training base.

DALE HOLMGREN Was head of flight services for the CIA's airline, ran the Nugan Hand Taiwan office.

MAURICE BERNARD ("BERNIE") HOUGHTON The mysterious puppetmaster of Nugan Hand, a Texas manipulator who made money where the wars were; was he also a spy?

ROBERT ("RED") JANTZEN Was CIA station chief in Thailand; announced as Nugan Hand officer there; inquired about drug connections, then backed out of the job.

GENERAL LEROY J. MANOR Was chief of staff for U.S. Pacific Command, U.S. Government liaison with Philippine President Marcos, ran Nugan Hand Philippine office.

WALTER MAcDONALD Former deputy director of CIA for economic research, became consultant to Nugan Hand.

GUY PAUKER Personal advisor to Kissinger, Brzezinski, Nugan, and Hand.

ADMIRAL EARL ("BUD") YATES Was chief of U.S. strategic planning for Asia and the Pacific; president of the Nugan Hand Bank.

BILLY and GORDON YOUNG Thai-born American brothers with on-again, off-again CIA jobs for many years; helped Nugan Hand in the Golden Triangle drug zone.

THE AUSSIES (AND OTHERS) IN THE BANK

GEORGE BRINCAT The CPA who signed the phony books (but, then, so did Price Waterhouse).

JOHN CHARODY Consultant in the Sydney office; on the outside, a business associate of Sir Paul Strasser.

CLIVE ("LES") COLLINGS Headed the Hong Kong branch.

NEIL EVANS The Chiang Mai (Golden Triangle) branch representative.

JERRY GILDER Chief of the sales staff, master extractor of cash from reluctant investors.

WILFRED GREGORY Ran the Philippine office alone, then worked with General Manor; had his own ties to the Marcoses.

STEPHEN HILL The young money manager who agreed to testify to save his skin.

ANDREW LOWE Brought in Chinese customers; his commodity specialty was heroin, and his in-law ran a big Hong Kong bank that backed Nugan Hand.

JOHN McARTHUR Worked with Collings in Hong Kong.

JOHN OWEN Was career British naval officer; ran Nugan Hand Bangkok branch while forwarding detailed reports on communist troop movements in Indochina to Mike Hand.

RON PULGER-FRAME The money courier from Deak & Company who always made it through customs.

GEORGE SHAW Link to the Lebanese money, much of it drug-related; agreed to testify despite threats to his life.

GRAHAM STEER American-educated Australian, worked under Hand in Singapore and Malaysia.

PATRICIA SWAN Nugan's secretary and executive assistant.

TAN CHOON SENG Bookkeeper-administrator Hand hired in Singapore.

OTHERS ON THE SCENE

SIR PETER ABELES Australian transportation tycoon and partner of Rupert Murdoch; his close associates employed Houghton and Hand; their close associates fixed his Mafia problem.

BRIAN ALEXANDER Lawyer for the "Mr. Asia" dope syndicate -- and for Frank Nugan's brother. Mysteriously vanished.

JOHN ASTON Alexander's law partner who says he never realized there was cash in those bags he sent to Nugan Hand on behalf of clients.

THE SULTAN OF BRUNEI Nugan Hand got to him long before Oliver North did.

LEO CARTER The Australian spy chief who vouched for Houghton.

TERRY CLARK Became head of the worldwide "Mr. Asia" drug gang, after having his predecessor murdered; enjoyed chopping up bodies for multinational burials.

THOMAS G. CLINES CIA covert operations official; huddled with Hand, Houghton, and Secord on military equipment deals for Pentagon; rescued Houghton from Australia when the bank failed; later Secord's deputy running Iran-Contra covert arms network

ROBERT GEHRING Vietnam vet who worked in Houghton's operation.

PAUL HELLIWELL The CIA's drugs-and-money man for thirty years, who died, and his Caribbean bank with him, right before the rise of Nugan Hand; was it a replacement?

MICHAEL MOLONEY The lawyer Hand and Houghton brought in at the end.

KEVIN MULCAHY CIA man who blew the whistle on Ed Wilson, then wound up a corpse outside a trailer park.

KEN NUGAN Frank's brother, ran the fruit and vegetable business; the appearance of mobsters' names on his company's checks was, he assured everyone, a coincidence.

DR. JOHN K. and BARBARA OGDEN Lost their son, lost their daughter, lost every dime of their $689,000 savings entrusted to Nugan Hand.

RAFAEL ("CHI-CHI") QUINTERO CIA sabotage and assassination specialist under Clines; purged Secord's name from Houghton's travel bag. Later organized Contra arms deliveries for Secord.

MURRAY STEWART RILEY Former Australian Olympic star and cop, one of the biggest dope smugglers who used Nugan Hand, socialized with Hand.

ABE SAFFRON The Sydney vicelord Hand and Houghton dealt with.

DOUGLAS SCHLACTER "J" in the task force report, he worked for Ed Wilson and remembered Nugan Hand's help in covert arms deals.

GENERAL RICHARD V. SECORD Houghton's and Wilson's pal, introduced Houghton to Clines, later organized and ran the Iran-Contra arms network for the CIA and White House.

THEODORE G. SHACKLEY Top clandestine man at CIA, in Colby's career shadow, dealt with Hand, Houghton, and Holmgren.

SIR PAUL STRASSER Australian real estate tycoon, close friend of Sir Peter Abeles; personally hired Bernie Houghton in a coffee shop the weekend Houghton hit Australia.

FRANK TERPIL Former CIA man wanted for selling arms to lunatic dictators.

HARRY WAINWRIGHT Fugitive lawyer from San Francisco, Australian drug figure who used Nugan Hand, friend of Murray Riley's, regular chess opponent of Nugan's.

GOUGH WHITLAM Prime minister of Australia, dumped in a constitutional coup during a spat with Shackley and the CIA over exposing secrets.

EDWIN WILSON The politically influential CIA and naval intelligence operative now in prison who, while betraying the U.S. arsenal to Libya, was dealing with Shackley, Clines, Secord, and Houghton.

THE INVESTIGATIONS

CORPORATE AFFAIRS COMMISSION OF NEW SOUTH WALES Like the U.S. Securities and Exchange Commission. Final report, March 1983. Recommended further investigation.

COMMONWEALTH OF AUSTRALIA/NEW SOUTH WALES JOINT TASK FORCE ON DRUG TRAFFICKING (JOINT TASK FORCE) An elite police unit assigned by the commonwealth and state governments to investigate. Final report March 1983. Recommended further investigation.

JOHN O'BRIEN The court-appointed bankruptcy liquidator, still working on the case.

STEWART ROYAL COMMISSION Assigned by Parliament to resolve many unanswered questions of previous investigations. Final report June 1985.

HONG KONG LIQUIDATOR'S OFFICE A government agency, still working on the case.
admin
Site Admin
 
Posts: 27519
Joined: Thu Aug 01, 2013 5:21 am

Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 2:59 am

CHAPTER ONE: The End of the Rainbow

The Cold War strayed into the unassuming settlement of Lithgow, Australia, one Sunday morning in a Mercedes-Benz. Sergeant Neville Brown of the Lithgow Police recorded the time as 4 A.M., January 27, 1980.

"I was patroling the Great Western Highway south of Bowenfels with Constable First Class Cross," Sergeant Brown said. "We saw a 1977 Mercedes sedan, parking lights on, parked on the south side of the old highway, known as 'Forty Bends.'"

It was now three months later, and Sergeant Brown was testifying at the first day of a week-long inquest at the Lithgow courthouse. Lithgow, about ninety miles inland from Sydney, had been of little previous significance to Western civilization. Consequently, Sergeant Brown was unused to reporters in the courtroom and television cameras outside. But he maintained his official poise under the stern questioning of the big-city lawyers.

Sergeant Brown and Constable Cross had driven off the main freeway that morning, through some woods and onto the old two-lane road, which had been left open only for a few lonely homesteaders. They approached the unrecognized Mercedes. "A male person was sitting slumped over towards the center of the vehicle," Sergeant Brown testified. "He was dressed in light, bone-colored slacks, a dark blue short-sleeved shirt (January is summertime in Australia), and casual, slip-on shoes."

The reporters leaned forward intently.

"A .30-calibre rifle was held by him," Sergeant Brown went on, "the butt resting in the passenger-side floor well. His left hand held the barrel, three or four inches from the muzzle, and near the right side of his head. His right hand rested near the trigger. There was lots of blood over the console, the front seats, and front and rear floor wells. There was lots of blood on the head of the person. The rifle had a live round in the breech, one in the magazine. There was a spent cartridge in the right passenger-side floor well."

Of the throng that crammed the little courthouse that week,. Sergeant Brown and Constable Cross were among the few who believed that Francis John Nugan, the man in the Mercedes, had committed suicide. In the three months since the body had been found, facts had leaked out about Frank Nugan's life that led most people to suspect, even presume, murder.

But whatever the facts of Nugan's life, the facts of his death told the local police otherwise. The autopsy had found no trace of drugs, poison, or prior injury. Nugan died of a single gunshot wound. Given the moat of undisturbed gore that surrounded his body, there seemed to be no way that someone else could have gotten into the car, killed him, and left.

Later, all this would be of great interest to politicians. But at this juncture the debate was being staged by insurance lawyers. They had been hired to try to establish facts that would relieve their clients, various companies, of responsibility under Nugan's millions of dollars in insurance policies. One large creditor had himself taken out a $1-million policy on Nugan; this policy, which Nugan's intimates weren't aware of, now stood to make the creditor rich for the first time in his life, unless it was challenged.

"Would you agree it is almost impossible to get yourself into that position?" pressed lawyer Barry Edmund Mahoney of Commonwealth Assurance Ltd.

"What position?" replied Sergeant Brown.

"The one you describe, with the head about a foot below the muzzle, which was itself being held by the left hand," said Mahoney.. Then he spoke the words the gallery had been waiting for: "I suggest to you one would have to be a contortionist!"

The reporters had their lead.

Sergeant Brown, unfazed, replied, "It didn't appear to be any great distortion, viewing it." But in the newspapers his reply got second billing to the lawyer's "contortionist" remark. So did Sergeant Brown's further observation that he had plotted a trajectory from the rifle, through Nugan's head, to the bullet mark in the roof of the Mercedes. "They were all very close to being in alignment," Brown said.

That all pointed to suicide -- a scenario the United States Central Intelligence Agency would be able to live with. Other aspects of Brown's testimony, however, were much more disturbing, to the CIA and others.

For example, there was a list found in Nugan's briefcase-it came to be known as "the body list" -- containing scores of typed names of prominent Australian political, sports, business, and entertainment personalities. Next to the names were handwritten dollar amounts, mostly five- and six-figure sums. Were these debtors? Creditors? No one knew yet.

Then there was the Bible, a New Testament, found on the body. It bore, in Nugan's handwriting, the inscription, "I place this day my life, my work, my loved ones in the Lord's hands. He is so good and it will be a good day I believe, I believe this will be a glorious magical miraculous day, he is with me now, Jesus walks with me now. Visualize one hundred thousand customers world wide, prayerize, actualize."

Interleaved at page 252 of the Bible were two pieces of paper. One bore a telephone number in Long Beach, Florida. Nugan had just been negotiating the purchase both of a swank home near Long Beach and of controlling interest in a nationally chartered U.S. bank near there; the bank's best-known customer was the U.S. Air Force. The other piece of paper, by Sergeant Brown's description, was "what looks like the remnants of a meat pie bag." On it, Brown testified, were written "the names of Congressman Bob Wilson -- and Bill Colby."

***

WILSON: The ranking Republican on the U.S. House of Representatives Armed Services Committee. A few weeks before Nugan's death, Congressman Wilson, his wife, fellow Congressman Richard Ichord, and their staff had been out dining with Nugan's American business partner, who had himself worked for the CIA.

COLBY: Though now a lawyer in private practice, Colby was a career professional covert operator of the highest order. A long rise through the ranks had brought him to command of the CIA's station in Saigon in the 1960s. He ran all U.S. "intelligence" operations in the Vietnam War theater, including Operation Phoenix, a Stalin-like program that fingered and assassinated an estimated forty thousand South Vietnamese civilians. [1] Except for the inevitable cases of wrong identification. the assassination victims were local revolutionary leaders. If left alive, they would have been predisposed to give South Vietnam some degree of independence from the Communist party of North Vietnam after the French and Americans were chased out; such an independent South Vietnam, of course, is something the United States would love to see today. The destruction by the Phoenix program 6f this natural barrier to North Vietnamese hegemony typifies many mistakes made in the belief that the war could be won. In retrospect, it was a colossal blunder. Colby, the man in charge of this and other blunders, was then promoted to the top of his profession-United States Director of Central Intelligence. the ultimate keeper of the secrets, guardian of the family jewels, director of the CIA, supervisor of the National Security Agency, and the voice in the president's ear. He was removed by President Ford after revelations of illegal domestic spying by the agency, four years before his name was found in Frank Nugan's Bible.

***

Sergeant Brown also testified that recent CIA boss Colby's calling card was in the wallet found in Nugan's right rear pocket. On the back of the card were "what could be the projected movements of someone or other," Brown testified: From January 27 to February 8, "Hong Kong at the Mandarin Hotel. 29th February - 8th March, Singapore."

William E. Colby was in those places at roughly those times.

***

This is not a book for people who must have their mysteries solved. It begins with unanswered questions, and it will end with them. The men this book is mostly concerned with have lived their lives in a world of spying and secrecy. Though they have been and in some cases still are paid with U.S. tax dollars, they have been trained to keep the taxpayers -- among others -- from finding out what they do. Compunctions about lying have seldom impeded that effort.

They entered their secret world under a cloak of patriotism. They have stretched that cloak in various ways. Claiming a patriotic duty to the United States, they have carried out unlawful and scarcely believable acts of violence against civilians in Asia, Africa, and Latin America. Like the CIA's assassinations of South Vietnamese leaders, these acts repeatedly backfired, and on the whole seriously under- mined the real international security and trade interests of the United States; but that's another book. [2]

This book is about the attempt of these men to stretch the cloak of patriotism still further, to cover civil crimes against citizens of the United States and many foreign countries. Under the cloak of patriotism, and with the help of local bankers like Frank Nugan, hundreds of millions of dollars have been stolen by fraud from innocent investors. Billions of dollars have been moved illegally about the globe, facilitating corruption and thwarting tax collectors in the United States and many countries regarded as U.S. allies. The cost of government has often been taken off the shoulders of citizens who are privileged enough to participate in such machinations, and transferred to the shoulders of citizens who aren't.

Steady, massive supplies of narcotics have been pumped into American cities for decades. As will be described in the pages that follow, the two main sources of heroin in America since World War II-the so-called "Golden Triangle" in Southeast Asia and the "French Connection" in Marseilles--were established in the course of operations by the U.S. Government's intelligence community. They have been protected by that community, ostensibly to further national security. A newer and more diffuse source of drugs, in Latin America, has often been protected similarly.

The Contra army the U.S. is now supporting to take over Nicaragua has in half a dozen documented cases made mutual-benefit pacts with big-time smugglers bringing cocaine and narcotic 'pills into the United States. In every case, the Justice Department has turned a blind eye to this activity. In country after country around the globe, American policy-makers have decided that an alliance with gangsters to help fight local wars against people considered Communist was worth the addiction of American youth.

***

The legitimate security interests of the United States certainly require a large and efficient intelligence operation. There are powerful forces that envy or oppose us, and we need constant, up-to-date information about them. But the people and organizations that make up what is called the intelligence community in the United States Government have gone far beyond the gathering of intelligence. In many cases, the word "intelligence" has been used as a cover for covert and unconstitutional acts of war and civil crime.

The CIA has often taken the rap, when things go wrong, when in fact it was merely carrying out the instructions of civilian policymakers. For example, the training of Cuban expatriates and Lebanese militiamen in terror bombing, which has brought about the killing and maiming of hundreds of innocent civilian bystanders, was not a renegade act by the CIA but rather the execution of policies set by presidents from Eisenhower to Reagan.

Nor has the CIA been alone in carrying out secret plans that turned out to work against America. Other operatives, attached to the Defense Department, the National Security Agency, and the White House have also participated.

Decisions made at the highest levels of government, by our past eight presidents, have bestowed legitimacy on the stretching of the cloak: men in the government service are expected to -- ordered to -- secretly violate our laws to further national policy.

Agents operate in secrecy. Under Presidents Eisenhower and Kennedy, there are vivid examples of times the president, like some Mafia boss, was for his own protection intentionally kept in the dark about exactly what his underlings were doing. Former Undersecretary of State C. Douglas Dillon testified before the Senate Assassinations Committee in 1975 regarding the attempted murder of foreign leaders during the Eisenhower administration. He said that CIA chief Allen Dulles "felt very strongly that we should not involve the President directly in things of this nature." Eisenhower, Dillon said, would simply order "whatever is necessary" to be done, and Dulles and his organization would. take it from there.

President Kennedy ordered a secret, illegal, and ultimately unwise war against Cuba, involving probably thousands of covert operatives and lasting many years beyond the public disaster at the Bay of Pigs. There's no public record on whether he specifically ordered the murder of Fidel Castro, though the CIA attempted it many times. Kennedy's closest aides in those years have argued persuasively that he wasn't aware that during one period the CIA hired some Mafia bosses to perform the Castro assassination.

What is clear is that the policy, and its necessarily distanced execution, resulted in setbacks both for our friendly relations throughout Latin America and for our security against criminals at home. Many of the ill-supervised operatives we hired were terrorists and criminals, and went on to practice their craft against civilians here and abroad while their "national security" links protected them against law enforcement. One Mafia gangster the CIA hired was actually sharing a bed partner with Kennedy at the time also, apparently without his knowledge.

One may assume that this distancing of presidential command from the invited illegal execution has continued. President Reagan became so obsessed with overthrowing governments in two relatively small and remote countries, Angola and Nicaragua, that secret operations were devised in his name to skirt federal laws that specifically banned such activity. In early 1987, the overthrow attempts appeared to be failing-in main part because of inadequate popular support in Angola and Nicaragua. Thousands of innocent Angolan and Nicaraguan civilians had been killed or wounded.

The secrecy around the attempts inevitably collapsed, greatly embarrassing the United States and perhaps mortally wounding the Reagan administration politically. In the truly important country of South Africa, the ability of future generations of Americans to trade with a black majority government was endangered by the United States's alliance with white minority South Africa over the Angolan issue.

Meanwhile, millions-possibly hundreds of millions-of American taxpayer dollars were missing and unaccounted for. As these words are written, investigations are underway to sort out what appears to be a long chain of criminal acts. Already, three senior government officials, including a general and an admiral, have invoked their Fifth Amendment right not to incriminate themselves rather than explain to the Congress what they've been doing with the money it appropriates.

Rough orders are given by presidents--prevent such-and-such from happening at all costs--and left for interpretation straight down the intelligence community's chain of command.

So when agents steal, when they facilitate drug deals, how far does the patriotic cloak granted by national policy stretch to cover them? Does it cover an agent who lines his pockets in side deals while working in the name of national security?

What are the boundaries of law and morality when it comes to helping foreigners who are regarded as our "friends," and hurting those who are regarded as our "enemies"? What acts lie beyond a presidential directive to do "whatever is necessary"? When has license been granted, and when simply taken?

Should any act, no matter how wrong, be covered up to avoid embarrassing our national security program? Who decides--the very people who run the program? And by what measure? Is the cover-up really to protect our country's security-or just to protect the politicians and bureaucrats who should be held to account?

What about the innocent people-including countless Americans-who suffer from all this? Is their only compensation to be the dubious honor of having been sacrificed to a remote battle some men chose to fight against communism? How many sins can be washed by the word "anticommunism"?

Is there a clear line at all between the authorized and the unauthorized national-security operation? Or are there men in the middle- who play both ways?

***

Probably the most sensational testimony at the Frank Nugan inquest came from Michael Jon Hand, Nugan's American partner. Hand identified himself to the court as chairman, chief executive, and 50 percent shareholder of Nuhan Ltd., "the major operating company of a worldwide group of companies with offices throughout the world." Most people still referred to the company by the name of its most prominent subsidiary, the Nugan Hand Bank.

In the three months since Frank died, Michael Hand had given contradictory accounts of who really owned Nugan Hand. He seemed to create whatever story suited him best at the moment. He had at times portrayed himself as merely a minority shareholder. But today, under oath, he said he and Frank Nugan had been 50-50 partners. Hand also reported that he was executor of Nugan's estate.

***

HAND: A highly decorated member of the Army Special Forces, or Green Berets, in Vietnam, he went on to be a contract agent for the CIA in Vietnam and Laos, training hill tribesmen for combat and seeing they were supplied. A few levels removed, Colby had been his boss. Next, Hand headed to Australia, met up with Nugan, a local lawyer, and founded Nugan Hand in 1973.

***

Although Hand's CIA attachment had helped lure the reporters to the inquest, thousands of people were interested in Hand's testimony for reasons that had nothing to do with the CIA or tabloid. sensationalism. They, or their families or companies, had money invested with Nugan Hand. For weeks now, Hand and other officers and directors had stalled off investors who were growing increasingly itchy about their savings.

Finally, on April 10, a reporter for Target, a Hong Kong financial newsletter, entered the bank's Hong Kong office, was mistaken for an investor, and was told that withdrawals had been suspended for two weeks pending an audit. The next day the story spread through the international press. Still, depositors were assured, everything was all right and everyone would be paid.

Now Hand, on the witness stand, let loose the bad news--not the truth, not nearly the scope of the disaster, nor the reason for it, but the bad news. "I understand from enquiries made by me," he said, "that the company owed about $1.5 million to unsecured depositors. To my knowledge, certain of these depositors have approached the company and requested payment of their deposits, and the company has been unable to repay them and has attempted to make alternative arrangements. . . .

"The company has in excess of $5 million of secured deposits, such deposits being secured by bank-endorsed bills of exchange [like bonds] to face value. However, most of these deposits are on call, and each time a secured depositor calls a deposit, the bills of exchange have to be sold and the company is unable to meet the deficiency and payout each secured creditor...." More double-talk, but the message was clear. Even the allegedly "secured" depositors wouldn't be paid.

"I have inspected a schedule of the bills of exchange, and from enquiries made by me the drawers, acceptors and endorsers of those bills of exchange are insolvent companies, and the bills of exchange will not be met on maturity...." Translation: the bonds allegedly "securing" the secured deposits were phony.

"Enquiries made by me indicate that the company owes approximately $2.8 million to its subsidiary in Hong Kong.... I understand from the resident director of Nugan Hand Hong Kong .Ltd., Mr. John McArthur, that unless these moneys are repaid forthwith, Nugan Hand Hong Kong Ltd. will be unable to meet its obligations to depositors.

"Enquiries by me indicate [that the Hong Kong deposits] should have been secured by bank-endorsed bills of exchange. but the deposits are totally unsecured.... The company is not in a position to repay any part of the amount outstanding." Translation: the overseas investors had been taken, too.

Actually, the unpayable claims mounted to some $50 million. And many other deposits were lost, but were never claimed, for the simple reason that the money had been illegal to begin with. Much of the money Nugan Hand received consisted of tax cheatings, dope payments, Marcos family money, and, rumored, the hoarded wealth of a few other Third World potentates--not something the losers would want to account for in an open bankruptcy court. The missing money could easily have been in the hundreds of millions of dollars.

Now, Hand, on the witness stand, laid the blame on a party who wasn't likely to object: "I have ascertained over the last two months that the late Mr. F. J. Nugan has fraudulently misappropriated a vast amount of money from the company and other companies in the group without my knowledge." The embezzled money, Hand said, was paid "to certain of his personal companies and to himself."

Hand said legal advisors had told him it would be "a long and involved process to recover these moneys, if at all."

Up to $3 million had been "loaned out to persons or companies whose identity is either unknown, or without formal documentation. . . . Prospects of recovering these moneys is extremely remote." Hand also complained that Nugan's surviving records "were incomplete and misleading." (Later, it would become clear that Hand himself played no small part in making sure the records were incomplete.)

***

All this embezzlement, on top of a stock fraud indictment that was pending against Nugan, might seem to create a motive for him to have committed suicide. But when lawyer Alexander Shand, representing Sun Alliance Life Assurance Ltd., repeatedly suggested as much, Hand denied it. Hand argued that his partner more likely had been murdered. "I believe that Mr. Nugan was a fighter and would have kept on going," he insisted.

In response to further questions, Hand disclosed the appallingly slipshod police investigation into Nugan's death. Hand was surprised, he said, "that the Police Department have not come down there [to the Nugan Hand office] and tried to look for his diary. . . . We certainly have not seen it. I would like to know what his last notes were, and where he has been and who he has been speaking to."

Hand said police hadn't even talked to him until two days before the inquest began, and then just to ask him "if I would be kind enough to put together a very brief and concise statement because they had a very short period of time." He said the police had never visited his office.

Before Hand was through, the lawyers made him squirm some. They revealed through their questions the fact that he had been called to testify one month earlier before an Australian royal commission looking into the drug racket. They made public certain sections of his testimony revealing that large amounts of money had been transferred by Nugan Hand from Australia to Hong Kong secretly, in apparent violation of exchange control and tax regulations.

Hand stuck by the same tortured excuses he had given to the drug inquiry. He was just following orders.

"Mr. Nugan advised me that it was part of a tax plan," Hand offered.

"And you accepted it as being part of a tax plan?"

"Certainly, sir, he was a solicitor [lawyer]."

"But now you say you regard them as improper purposes?"

"I cannot find, because 1don't have adequate facts available at my fingertips to determine what in essence the purposes were of such transactions ... Mr. Nugan would call me up from time to time or send me a note and ask me to pay a bill or to send money to a particular direction. 1would have no knowledge of whether the client was in Australia or in Timbuctoo, and Mr. Nugan continually assured me that he would not breach any Reserve Bank regulations."

Hand was lying, and events would prove it. The law in Australia, and most other countries where Nugan Hand dealt, forbade the export of money. Hand himself had boasted earlier that Nugan Hand moved $1 billion a year through its magical windows. It certainly didn't do this with Reserve Bank approval.

The real questions should have been asked of the Australian security agencies: how they could have let an operation the size of Nugan Hand break the exchange laws with impunity for so many years -- unless, of course, the Australian agencies were cooperating with it, or had been told that Nugan Hand had a powerful government sanction from abroad. There was reason to suspect that.

But for now, Hand was reduced to inventing new lies that the insurance lawyers in Lithgow would be unprepared to challenge. There were really two Nugan Hands, he suddenly said, one in Australia, controlled by Nugan, and one in Asia, controlled by Hand. This was certainly something the customers had never been told before. But now Hand was blaming all the problems on the Australian end of the business.

Finally, he admitted how bare the cupboard really was. He told shocked onlookers that the Nugan Hand Bank, which had believably claimed to move more than $1 billion a year, owed $20,000 rent for the Sydney headquarters "and the company is unable to pay this. . . . The company is insolvent."

***

There was no meat on Nugan Hand's platter anymore. But there was still plenty of spice, and Sergeant William Leslie McDonnell gave the newspapers one more thing to write about when he testified about the scene at Nugan's multimillion-dollar waterfront villa just hours after the body was discovered and identified.

Sergeant McDonnell didn't find the widow, Frank's wife Lee, at the house. Lee still hadn't returned from her home town of Nashville, Tennessee, where she had gone with the couple's two children to live six months before. Charlotte Lee Nugan always maintained that it was perfectly natural for her to take the children to live with her parents half a world away, and that it wasn't a sign anything was wrong with her marriage. But friends assumed she just couldn't take any more of her husband's mercurial swings from a fifth-a-day Scotch habit to teetotalism, and from tireless pursuit of money to religious zealotry.

Even with Mrs. Nugan gone, however, Sergeant McDonnell found the lights on. Ken Nugan, Frank's older brother, was there with his own wife. Ken had taken over their father's fruit-and-vegetable business while Frank had gone to law school and become an international banker.

Recently, Ken had involved the fruit-and-vegetable business in a stock scandal that was getting wide publicity in Australian newspapers. The name of a prominent drug racketeer had popped up. Worse, Nugan Hand money had financed the business, and Frank had advised Ken on a scheme to block outside shareholders from taking control. As a result, a month before he died, Frank Nugan had found himself indicted with Ken on charges of stock fraud. Their name was so sullied that just before Frank's death the Nugan Hand holding company, Nugan Hand Ltd., had changed its name to Nuhan Ltd.

Ken's lawyer also was at the house the night of Frank's death -- not unusual in itself, but what interested Sergeant McDonnell was the identity of the lawyer Ken had chosen. To assist him at this trying time, Ken Nugan had brought to his brother's house a solicitor named Brian Alexander. McDonnell knew that Alexander was under summons from a Commonwealth police inquiry-similar to a grand jury subpoena in the United States. He also knew that Australian customs officials wanted to talk to Alexander.

The reason for all this attention was that Alexander had become very close to a major international heroin syndicate whose members he was representing, including the leader, a man known as "Mr. Asia." The ring was British in origin, but operated in the United States, Australia, New Zealand, and, of course, southern Asia, where the heroin came from. Police had begun to suspect that Alexander himself was part of the "Mr. Asia" syndicate.

They considered their suspicions confirmed a year later when Alexander disappeared. His body wasn't found-not surprising, perhaps, since the Mr. Asia syndicate was already known to go to extraordinary lengths to disguise and hide bodies. But Alexander's car was located, abandoned, at a park overlooking the ocean near Sydney. It created a sensational news story.

The charges against which Alexander had been defending the heroin bosses included half a dozen murders of turncoat syndicate members who had been secretly talking to narcotics officers. Police were now building a case that Alexander, by bribing some corrupt Australian narcotics officers, had fingered the victims. At this point, they hadn't even come close to guessing that the widely advertised, supposedly reputable Nugan Hand operation was a vehicle for the suspected bribe money.

***

One might expect that the police, faced with the mysterious shooting death of the head of a large international bank, would try to seal off the house to prevent Ken Nugan and his lawyer, Brian Alexander, from removing any papers. But Sergeant McDonnell just interviewed Ken, learning that the recent indictment had "weighed very heavily" on Frank Nugan. On the other hand, Ken told McDonnell that he saw his brother hours before the shooting. Frank had just returned from Europe, where he said he sealed a big bank expansion deal. He "was quite happy and untroubled except that he was so terribly tired and suffering from jet lag," Ken told the policeman.

Though McDonnell testified that he was the chief investigating officer in the case, he said he didn't go to the Nugan Hand office. He said that a manager on the Nugan Hand staff, Graham Arthur Leighton Edelsten, had assured him that no important papers were to be found there.

Ken Nugan evidently thought otherwise. He testified that he went into the Nugan Hand office tbe very next morning, January 28. There were suggestions, never clearly confirmed, that Ken had obtained keys to the office from police, who had got them off Frank's body. Ken Nugan testified that he removed various documents from the office, but he assured the court that the only documents he took were from Frank Nugan's private law office, which was inside the bank. The papers concerned the brothers' joint criminal defense to the stock manipulation charges, and nothing else, Ken said.

The inquest didn't have the benefit of testimony from Patricia Swan, Frank Nugan's longtime secretary and administrative aide. But later, in a statement that was filed during the government's attempt to prosecute her, she gave a version of the looting that makes Ken Nugan's testimony seem a bit tame. That Monday, January 28, was a public holiday in Australia and all offices were closed. But Swan (according to her statement) got a call at 8:30 A.M. from Stephen Hill, a thirty-four-year-old Australian who had joined Nugan Hand six years earlier as assistant money manager and was now its vice-president and financial officer. Hill asked Swan to run in to work despite the holiday.

"I arrived at the office about 9: IS A.M. to find Steve Hill, Dennis Pittard, and Ken Nugan already in the office," she said. (Pittard was a well-known Australian football hero who, on retirement from the sport, went to work as goodwill ambassador for Nugan Hand.) Swan went on: "When I went into my office I found my desk drawers open-to my surprise. Only I and Frank Nugan had keys to those drawers. I can only assume Ken Nugan had obtained Frank Nugan's keys from the police.

"Ken Nugan was taking out of the office the masses of papers pertaining to the Nugan Group [the fruit company] litigation. He also asked me if 1 could find the document that Frank and he had put together, showing dates and amounts of money that Frank had advanced to Ken, and what amounts Ken had paid back. I was unable to locate this document and to my knowledge Ken Nugan did not find it.

"Steve Hill then told me to go through' all the filing cabinets and drawers in my room and Frank's room and 'take out anything that might implicate you or go against you.' I asked Steve if he could be more specific, as I had no idea what I was meant to be looking for, and he just repeated what he first said.

"Not really knowing what I was looking for, 1 quickly went through the filing cabinets in my room-quickly, as both Ken and Steve seemed to think the Corporate Affairs [Commission, the Australian counterpart to the U.S. Securities and Exchange Commission] or the police might arrive at any moment. Steve was in his room putting papers, and I remember in particular either cash books or ledgers or journals, in cartons, and Dennis Pittard was taking them downstairs--presumably to put in a vehicle to take away."

Swan said she didn't remember taking any documents out of the office herself, and that she left with Hill, Pittard, and Ken Nugan after about an hour and a half, "The other thing I remember Ken Nugan telling me was that the next day, the first working day after Frank's death, would be horrific, that the police and Corporate Affairs would be down and things wouldn't be easy."

But the lawmen weren't nearly so diligent. They didn't even show up the next day, when the more methodical ransacking of the files took place. Present for that job was a team of former U.S. military operatives in Southeast Asia, led by former CIA-man Mi- chael Hand and including the president of the Nugan Hand Bank, Rear Admiral Earl P. ("Buddy") Yates.

***

YATES: Nineteen forty-three graduate of the U.S. Naval Academy, Legion of Honor winner in Vietnam, commander of the aircraft carrier USS John F. Kennedy. then chief of staff for plans and policy of the U. S. Pacific Command. in charge of all strategic planning from California to the Persian Gulf, until his retirement from active service in July 1974. He became president of the Nugan Hand Bank early in 1977.

_______________

Notes:

1. Seymour M. Hersh, in his landmark The Price of Power cites South Vietnamese government statistics listing Phoenix casualties at 40,994, and concludes that the victims numbered "far more than the 21,000 officially listed by the United States."

2. Jonathan Kwitny, Endless Enemies (1984).
admin
Site Admin
 
Posts: 27519
Joined: Thu Aug 01, 2013 5:21 am

Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 3:04 am

CHAPTER TWO: The Cover-Up

Attempts to sanitize the public record began almost the moment Frank Nugan's body was identified. Telephones began to ring all over the world.

One, it's now known, was on the desk of three-star General LeRoy J. Manor, Nugan Hand's representative in the Philip pines.

***

MANOR: A much-decorated air force pilot and combat veteran. he became special assistant to the Joint Chiefs of Staff at the Pentagon for "counter-insurgency and special activities." He designed and commanded a widely publicized 1970 raid on a North Vietnamese prison camp that failed to find any U.S. prisoners. His promotions continued, however. and in 1976 he became chief of staff for the entire U.S. Pacific Command, managing and coordinating air force, navy, army, and marine corps operations "from the West Coast of the United States to the East Coast of Africa, and from the Arctic to the Antarctic." He retired full-time active service in July 1978, to undertake new duties that the air force says are so secret that it can't talk about them. These duties are generally known to have included negotiating the 1979 agreement with the Philippine Government of Ferdinand Marcos for continuation of the U.S. military bases there (which General Manor used to command), and investigating the failed hostage rescue raid in Iran in 1980 -- an assignment that apparently stemmed from his own raid in North Vietnam. He joined Nugan Hand's Manila office in 1979. In June 1982, the air force replied as follows to a Wall Street Journal request for information on Manor's official assignments: "The standard bio is good until his retirement, but as for when he was reactivated, it's basically a no-comment type of thing. It's pretty sensitive some of the stuff he might have done. He did some work for the State Department. I couldn't find out anything about the Iranian thing. As far as the Philippines goes, I'd just have to say 'no comment' on that. I'd really like to be frank on this, but they just won't let me say too much. [1]

***
According to Tony Zorilla, Nugan Hand's public relations man in the Philippines, General Manor telephoned Zorilla as soon as he learned of Nugan's death. The public relations man says Manor told him to stop the wire services from reporting the story. Zorilla says he replied that this would be unethical and impossible, and refused. "He wanted for us to see if we could persuade the Philippine media to hold off running the stories. I would not have anything to do with trying to prevent the wire services from running the story," Zorilla recalls.

General Manor acknowledges there was a conversation about the possible ill effect Nugan's death would have on the bank, but denies giving any orders to squelch the story. He says Zorilla is just angry because he later fired Zorilla, who he says wasn't working hard enough.

Of course, all the main principals (who could be located) of Nugan Hand began interviews by denying whatever they thought a reporter would be unable to prove. These denials have to be weighed against the standard denials--"honest lies"-that people in intelligence work are taught to purvey under the cloak of patriotism. Called to testify in court, even in criminal trials, CIA men have said they believe their oath of secrecy will protect them against perjury charges if they lie under another oath.

General Manor began a telephone interview with a reporter [2] by insisting that he "had nothing to do with the Nugan Hand Bank." When the reporter presented evidence to the contrary, General Manor said he "was brought in just to learn," and hung up. Later, confronted in person with the word of men who had served under him that he had actually enticed their deposit money on behalf of Nugan Hand-men who lost every penny-he acknowledged having done so. In fact, records show he worked and talked enthusiastically on behalf of the bank in the fall of 1979. Faced with that, he explained that he was duped into doing so, and never knew that the bank was being run crookedly.

At about the time of the inquest in April, when the papers were reporting that Nugan Hand was suspending payouts and might go under, LeRoy Manor left the Philippines. Wilfred Gregory, the Nugan Hand salesman who was administering the Manila office with General Manor, says that Manor's-departure was inspired by a conversation with their Manila lawyer, William Quasha. Gregory says Quasha "arranged for Manor to leave the country. He told me to go, too. He said, 'You could wind up in jail.'" The three-star general, according to Gregory, left overnight.

General Manor praises Gregory as "a real refined individual, and smart. He married a real nice girl, a society girl." But the general says he left the Philippines only because it was time for home leave, and that he would have returned except for the Iranian mission.

Of course, Gregory's word isn't necessarily trustworthy, either. Since the Philippine Government never chartered Nugan Hand as a bank, it was legally forbidden from taking deposits. Operating from a lavish suite of offices in a prestigious downtown building that also houses several U.S. Government agencies, the Gregory-Manor operation was supposed to confine itself to brokering international trade deals. It apparently never brokered a single successful transaction.

Early in an interview at his Manila office, Gregory stated flatly that the office had abided by Philippine law, and done absolutely no banking at all.

Well, maybe just a little. "I used to get involved only with Australians who were stranded here," he conceded. "They used to have deposits in Australia and come up here and need money. We used to keep a little cash in the office here [to give them]," Gregory explained. But he was very firm that "This office couldn't accept cash.... The law here doesn't permit you to do that. The central bank is just four blocks down. If we had done that we would have been out of business within twenty-four hours."

Faced with evidence, though, Gregory then acknowledged that, well, yes, he, like General Manor, had indeed taken substantial deposits. Told that some of the ruined depositors had actually testified about this before Australian bankruptcy officials, Gregory shook his head. "All those things were confidential," he said. "I don't know who made sworn testimony about this, but I think it's in very poor taste to reveal confidential information."

Manor and Gregory weren't the only Nugan Handers who took deposits despite the prohibitions of Philippine law. George Shaw, a vice-president based in Nugan Hand's home office at Sydney, acknowledges that he also traveled to the Philippines to collect other people's savings. "We had a lot of clients in the Philippines," Shaw says.

One thing that might have enabled the Manor-Gregory operation to skirt Philippine law as it did was its intimate connection to the chief lawmakers at the time, Ferdinand and Imelda Marcos. General Manor had negotiated the U.S. base leases with President Marcos. Marcos's brother-in-law, Ludwig Rocka, actually shared the Nugan Hand office suite, and Rocka's International Development & Planning Corporation took over the suite after Nugan Hand's collapse. Gregory continued to work for Rocka's company after Manor departed for Virginia to help run a veterans' group.

Rocka and his wife, President Marcos's sister, Elizabeth-a provincial governor-put $3.5 million into Nugan Hand, according to records found after the collapse. Rumors that Ferdinand and Imelda moved even larger amounts through the bank remain just that -- rumors.

Quasha, the Manila lawyer, says the attorney-client privilege prevents him from saying whether he told Gregory and Manor that they could get in trouble, or whether his advice had anything to do with General Manor's decision to leave in April. "I'm not confirming or denying that I gave General Manor such advice," he says. He also says, "I don't believe General Manor ever did anything wrong in his whole life." Then he adds an important qualifier: "Without believing it was right."

***

Michael Hand heard about his partner's death in London, where Nugan Hand was trying to buy an established bank. He had just visited Geneva, to try to enlist the help of the United Nations High Command for Refugees in a plan to move displaced Montagnard tribesmen who had fought with the U.S. side in Vietnam and Laos to an island reservation Nugan Hand was acquiring in the Caribbean.

Hand left for home that Sunday night. But instead of flying directly east to Australia, he went west, the long way around, through the United States. At some point he was joined by Admiral Yates, the bank's president. (By one account, Yates was with Hand in London when he heard of Nugan's death; by another, he was at home.)

Though the bank's main offices were in Sydney and Hong Kong, and though its official address was the Cayman Islands (because of the weak regulatory laws there), Yates lived in Virginia Beach, Virginia. Virginia Beach was an easy hop from Washington, where Admiral Yates helped maintain a Nugan Hand office. En route to Sydney, Hand and Yates also were joined by Lee Nugan, Frank's widow, who had been with her parents in Tennessee.

Thanks to a criminal case in Australia, and the agreement of several insiders to testify, much is now known about those days that wasn't revealed at the inquest. Arriving in Sydney, Hand and Yates raced to the Nugan Hand office suites. There was sorting and sanitizing of whatever documents Steve Hill, Patricia Swan, Ken Nugan, and his1awyer Brian Alexander hadn't already made off with. The suites occupied two floors, and the office was being expanded to occupy more. For this new ransacking, Hand and Yates were joined by Hill, by George Shaw, and also by the mystery man of Nugan Hand, perhaps its most important figure-Maurice Bernard Houghton. In fact, it was Houghton who had met Hand and Yates at the airport.

***

HOUGHTON: "Bernie" Houghton was so secretive about his past that he wouldn't tell his own lawyer if he had any traceable wives or children when the lawyer was trying to draw Houghton's will. A Texan, he was known as a camp follower of America's Asian wars, always as a civilian since his few years in the army air corps during World War II. He had been to Korea, and to Vietnam, and had made what seemed a lot of money, buying and selling war surplus and supplying the "recreational" needs of GIs. Though ostensibly occupied in Australia only as a honky-tonk bar impresario, Houghton's movements were facilitated whenever he needed by that country's secret security agency, and he displayed a smooth working relationship with all levels of the U.S. Government.

***

Admiral Yates won't talk about it, but by most accounts Houghton recruited Yates into the Nugan Hand job. And, as one of the first people Michael Hand met after he came to Australia, Houghton may well have introduced Hand to Nugan.

To the rape of the Nugan Hand files, Houghton brought not only himself, but Michael Moloney, fortyish, a Sydney lawyer who had done work for Houghton and Hand. Moloney was used to troubles with the law. A few years earlier, he had survived the threat of criminal proceedings and disbarment in a case that did leave him financially pressed, under a $430,000 civil judgment for improperly taking title deeds from a client's mother. Before that, he had also been the target of a big narcotics investigation after anonymous tipsters reported to Australian authorities that Moloney had ferried heroin in from Hong Kong; the investigation was closed with the allegations unsubstantiated.

Although at first all the Nugan Handers stonewalled authorities, eventually three Australians-Michael Moloney, George Shaw, and Stephen Hill-tried to soften criminal charges against them in Sydney by testifying in various proceedings about the sanitizing of the Nugan Hand files.

Hill, the young financial vice-president, testified that on the Tuesday and Wednesday following Frank Nugan's death, with no interference from any police agency, the files were purged by a team including him, Michael Hand, Bernie Houghton, Admiral Yates, lawyer Moloney, secretary Swan, vice-president Shaw, and Jerry Gilder. Gilder was an Australian with a background in the hard sell of shares in a mutual fund that then went bankrupt; he had been hired to staff and direct a worldwide sales force for Nugan Hand.

Shaw testified, basically corroborating Hill's story, that the ransacking team was spurred on in its work by threats from Hand, Moloney, and, by his mere presence, Houghton.

Moloney ordered the files sanitized before police arrived. By Hill's account, Moloney said, "I am fully aware of what has been going on. You all face jail terms of up to sixteen years." Gilder spoke up criticizing Moloney, but, Hill testified, Hand replied that "terrible things" would happen if Moloney's orders weren't carried out. "He said that our wives would be chopped up and posted to us in boxes. . . . Our wives would be returned to us in bits and pieces," Hill testified. Shaw remembers Hand threatening that Houghton's "connections" could take care of any necessary "arrangements" for such mayhem.

In an interview, Shaw says his instructions were coming mostly from Hand, with Admiral Yates listening on. "Under instructions from Mr. Hand," he says, "I did destroy certain records. I don't know which ones they were. A lot of sensitive documents were put through a shredding machine, similar to what your guys did in Iran before they were taken over [referring to the shredding of classified material by U.S. marines at the U.S. Embassy in Tehran in 1979]."

After the records were sorted and sanitized, Hill testified, Moloney told the group that "Normally after a situation like this there's likely to be a burglary and the records should be removed for safekeeping." Said Shaw, "It was decided that any documents that were there we ought to move to another office."

For a while, Moloney and Hand both adamantly denied taking any files out of the office. But, faced with criminal charges, Moloney later recanted. He now readily admits in an interview, "Sure, I advised Hand to take documents out of the office. I was told there were serious deficiencies in the accounts." But, he adds, "Everything I did I talked about with Yates first." [3]

By various accounts, enough records to fill a small room were fed to a shredder. Others were packed in cartons, everyone helping, and carried at night down eight flights to Gilder's waiting van. Then they were driven to the back room of a butcher shop owned by Robert W. Gehring, a former U.S. Army sergeant in Vietnam who worked for Bernie Houghton's honky-tonk operation.

There the records stayed, while over the next few months Hand and Moloney fought off-sometimes physically-the timid efforts of Australian securities investigators to examine them. Hill remembered Moloney's refusal to admit two investigators from the Corporate Affairs Commission to the office to examine remaining records March 28:

"There followed a distasteful scene wherein Mr. Moloney adopted an attitude of obstruction by physically and verbally preventing them from moving about the very narrow corridor in which the records were contained," Hill testified. The two investigators finally looked at a few random records, and left without taking any, Hill says.

Meanwhile, right up to the inquest in mid-April of 1980, Nugan Hand continued to tell the world that everything was all right, continued to take in whatever deposits it could, and continued to benefit insiders by depleting whatever funds were left.

***

Michael Hand's testimony at the Nugan inquest was almost simultaneous with an announcement by the Nugan Hand Bank office in Hong Kong that it wasn't paying depositors anymore. The shock reverberated around the financial world. Wall Street Journal reporters Seth Lipsky and E. S. ("Jim") Browning in Hong Kong cabled a request for the paper's New York banking reporter, Tom Herman, to check out Nugan Hand's U.S. address.

Herman was surprised to find that Nugan Hand's Washington phone number led to the public relations firm of Cocke & Phillips International. One partner in the firm, Eugene Phillips, assured reporter Herman that he and his partner, Erle Cocke, Jr., had nothing to do with Nugan Hand, and merely allowed Admiral Yates to use their firm as his office. Though Herman had no choice but to accept the statement at the time, the evidence suggests it simply wasn't true-as was largely acknowledged, in interviews, by the firm's leading partner, Brigadier General Erle Cocke, Jr.

***

COCKE: A World War II hero, he then held various Pentagon posts throughout the 1950s and 1960s, including civilian aide to the Secretary of the Army, while also working as an executive of Delta and-simultaneously- Peruvian airlines (Washington office). Obviously able to wear many hats, Cocke was an executive director of the International Bank for Reconstruction and Development during the same period. He is a past National Commander of the American Legion. Named honorary commander of the Nationalist Chinese air force, he also received the French Legion of Honor and equivalent top medals from Spain, the Philippines, and Italy.

***

Treasury Department records show that General Cocke registered as the "person in charge" of Nugan Hand's Washington office. The general says he must have been registered as such by Admiral Yates, who he says never told him about it. But he agrees he's a good friend of Yates. He also agrees he met with Hand, Nugan, and Houghton in Washington and Hong Kong, that he arranged high-level meetings for Yates and Nugan in Jimmy Carter's White House (Cocke is a native Georgian who had strong ties there) to discuss Nugan Hand involvement in resettling Indo-Chinese refugees, and that he frequently talked with and even counseled at least one Nugan Hand depositor.

Wall Street Journal reporter Herman's search also took him to Nugan Hand's Hawaii-based representative, Brigadier General Edwin F. Black. Black's office told Herman he was traveling and couldn't be reached.

***

BLACK: A 1940 graduate of West Point, Black entered the Office of Strategic Services (OSS), which became the CIA. After holding high-level ass posts throughout Europe during the war, he was made OSS commander in Berlin. He became chief administrative aide to (and frequent chess opponent of) Allen Dulles, Director of Central Intelligence under Presidents Eisenhower and Kennedy. Black was also wartime boss and later tennis partner of Richard Helms, who became Director of Central Intelligence after Dulles and before Colby. General Black served on the National Security Council staff under Eisenhower and later became commander of all U.S. troops in Thailand during the Vietnam War. He was named assistant chief of staff for the Pacific. He retired in 1970 to become executive vice-president of the Freedoms Foundation, headquartered in Valley Forge, Pennsylvania, a very vocal group promoting conservative political causes. He later ran some Asian operations for LTV Corporation, an important military contractor, and in 1977 became president of Nugan Hand, Inc., Hawaii, and special representative of the overall organization, making frequent trips to Asia. He said he was recruited for Nugan Hand by Admiral. Yates and another admiral.

***

After a year or more of digging to pierce through the denials, reporters found that the resources of Nugan Hand reached still more deeply into the American intelligence community. They also included a CIA deputy director for economic research, a CIA "think tank" advisor with personal access to White House national security advisors Henry Kissinger and Zbigniew Brzezinski, the former head of flight services for the CIA's Far Eastern air transport operation, the former CIA station chief in Bangkok, two senior operations men straight out of CIA headquarters, and at least three contract agents.

Nugan Hand had enough generals, admirals, and spooks to run a small war.

What were these people doing with a mammoth drug-financing, money-laundering, tax-evading investor-fraud operation?

One man wasn't around to ask.

In June 1980, still in Australia and facing imminent prosecution by the law if not lynching by angry investors, Michael Hand was sneaked out of the country by mysterious accomplices using forged documents. A lot of people would still like to find him. But in 1987, so far as is known, none of them has.

_______________

Notes:

1. Interview with Peter Blume, Air Force media relations, June 21, 1982.

2. The author.

3. Yates denies this and says he only carried one box of records.
admin
Site Admin
 
Posts: 27519
Joined: Thu Aug 01, 2013 5:21 am

Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 3:05 am

CHAPTER THREE: The Golden Triangle

Among the international writers who flocked to Australia at the time of the Nugan Hand scandal was a Ph.D. from Yale named Alfred McCoy. By trade, McCoy is a scholar, and he got a job teaching Asian history at the University of New South Wales in Sydney. But his journalistic bent led him to take intense interest in the Nugan Hand affair, and relate it to his studies of the drug culture in Australia and Asia.

McCoy's unique perspective allowed him to see before others did that the combination in Nugan Hand of U.S. military-intelligence men and drug-related crime was no anomaly. Rather, he knew, it was part of a pattern. And only by understanding this pattern could an investigator put himself on a footing to probe the Nugan Hand mystery intelligently.

Back in 1972, McCoy (with two assistants) had written a silent bombshell of a book, The Politics of Heroin in Southeast Asia (Harper & Row). Although the book got a lot of attention in certain circles, it was too dense to be a bestseller. And so extreme were the book's findings that even though they weren't refuted, they weren't immediately accepted, either.

In the intervening years, however, others have followed McCoy's trail into Southeast Asia's remote "Golden Triangle" area, where Thailand, Burma, and Laos converge. What they learned only bolstered his extraordinary contentions.

These new witnesses included an intrepid British television team, and the staff of the House Select Committee on Narcotics under the direction of Washington lawyer Joseph Nellis, a veteran congressional investigator dating back to the days of the Kefauver Committee on organized crime and the dope trade in the 1950s. In addition, with the decline of American military involvement in the region, current and former U.S. drug enforcement officials, diplomats, and military personnel have talked more freely about what went on.

The gist of what McCoy reported in his Politics of Heroin book is now beyond dispute. Considering that, and in view of the thoroughness of his documentation (often interviews with eyewitnesses), the whole book deserves the acceptance and honor it was not originally accorded. As Nellis, the Congressional investigator, says, "I think he [McCoy] knows more about heroin production in Southeast Asia than any man living. His book is an outstanding example of intelligence in this area."

McCoy's thesis was that CIA operations against China in the early Communist years, and against Communist movements in Indochina later on, were responsible for creating the largest single source of heroin for the U.S. market. This was the famous "Golden Triangle." And according to McCoy, it flourished probably not by the original design of the CIA, but ultimately with the full knowledge and cooperation of the CIA.

At the close of World War II, he wrote, "with American consumer demand reduced to ,.its lowest point, in fifty years and the international syndicates in disarray, the U.S. Government had a unique opportunity to eliminate heroin addiction as a major American social problem. However, instead of delivering the deathblow to these criminal syndicates, the U.S. Government-through the Central Intelligence Agency and its wartime predecessor, the OSS -- created a situation that made it possible for the Sicilian-American Mafia and the Corsican underworld to revive the international narcotics traffic."

The heroin market was revived first in Europe, with the help of two U.S. policy decisions. The decisions were secret at the time, but have been widely attested to since. First, American officials made a bargain with leaders of the Mafia to get criminal gangs to help in the invasion of Sicily. Mobsters were sprung from prison in exchange for their rallying the Mafia's covert army in Sicily and providing the ultimate in translator/ guide services for U.S. military leaders. Lucky Luciano and Vito Genovese, maybe the two most powerful men in U.S. crime, both heavily into the dope business, were loosed on the world by such deals.

Then, in the late 1940s, the OSS/CIA became alarmed that the socialist leaders of the dock unions in southern France might side with Communist political movements. There was fear that strikes might redound against the Christian Democratic governments the United States was supporting. To forestall this threat, the United States conducted a vast covert operation to put control of the dock unions in the hands of Corsican gangsters, an4 take them out of the hands of the socialist unions.

The operation was funded by contributions that the State Department helped wheedle out of large American corporations, and it was aided further by the international division of the AFL-CIO. It concentrated particularly on the prime French port of Marseille. It worked. But besides chasing socialists out of power, the gangsters arranged the port's affairs for their own illicit business. Soon, the town's very name conjured up an association with heroin refining and exporting. The U.S.-installed dockworkers' monopoly in Marseilles became the heart of what was soon known in film and common cliche as "The French Connection."

During the 1950s, several things changed this European domination of the heroin trade. For one thing, occasional honest law enforcement inhibited the gangsters. For another, the Shah of Iran -- for once, apparently, letting his religion overtake his greed-successfully ordered a stop to poppy-growing in what had been the region's largest producing country.

And, finally, the Cuban Revolution closed Havana as a free port of exchange between the Sicilian and U.S. Mafias. For a while, Turkey picked up the slack left by Iran. But events on the other side of Asia were already conspiring to transfer the focus of the world's heroin market away from Europe.

***

All this was basically documentable before McCoy came along, although few paid attention to it. What McCoy showed, as nobody else had, was that, in his words, "In the 1950s the Thai, Lao, Vietnamese and American governments made critical decisions that resulted in the expansion of Southeast Asia's opium production to feed the habits of the region's growing addict population and transform the Golden Triangle into the largest single opium-producing area in the world."

The first big decision came around 1950. At that time, the remnants of Chiang Kai-shek's crumbling western armies were chased out of China's Yunnan Province by the Communist Revolution. Thousands of these defeated soldiers from Chiang's Kuomintang, or KMT, government, melted into the jungles of neighboring Burma. Burma didn't want the KMT soldiers any more than their native country did. But when Burma threatened to chase the cornered KMT out, the U.S. Government decided the KMT were needed, to harass and possibly even reconquer China (or, as it was known then, "Red China").

So the CIA began supplying the KMT through two front companies: Civil Air Transport, headquartered in Taiwan, and Sea Supply Corporation, headquartered in Bangkok. Only a few people with top security clearance knew that both companies were covertly owned by the U.S. Government. They are important, not only for what they did in the 1950s, but also because they were precursors of organizations that touch directly on Nugan Hand in the 1970s.

After China was given up on, the focus of U.S. efforts in East Asia shifted to Indochina. Civil Air Transport was then transformed into (among several successor entities) Air America. That was the airline Michael Hand worked closely with as a CIA contract agent. Many of the CIA associates whose money first helped Hand get started in business in Australia were Air America employees.

Sea Supply Corporation, for its part, was founded and run by a lawyer and CIA operative named Paul Helliwell. During World War II, Helliwell had been chief of special intelligence in China for the OSS. Colleagues from those days told the Wall Street Journal's Jim Drinkhall that Helliwell, then a colonel, regularly used to buy information with five-pound shipments of opium ("three sticky brown bars," one man said). Drinkhall also reported [1] being told that Helliwell ran an operation code-named "Deer Mission," in which OSS personnel secretly parachuted into Indochina to treat Ho Chi Minh for malaria.

After the heyday of Sea Supply in the 1950s, Helliwell moved to Miami and became an important figure in the Bay of Pigs invasion and the CIA's other battles against Castro. His Castle Bank both funneled money for the CIA and, privately, operated as a profitable tax-cheat business. Its unexpected demise in the mid-1970s directly coincided with the growth of Nugan Hand. Considering the gaggle of brass from the U.S. intelligence community who helped. push Nugan Hand into orbit in the late 1970s, there has been understandable speculation that Nugan Hand was Castle Bank's successor. More on this later.

***

As Paul Helliwell's Sea Supply Corporation brought large amounts of arms and other supplies to Thailand in the 1950s, the CIA's airline, Civil Air Transport, ferried them up to the Kuomintang army in Burma-at first by air-drop, then, later, to makeshift airstrips. With these American-supplied weapons, the KMT held off the Burmese' attempts to evict them. But their own efforts over several years to invade China were easily rebuffed, which left them frustrated.

The KMT realized, however, that the mountainous region where they had holed up was long known for its one reliable crop: opium. So they determined to make their fortune organizing the haphazard village production. With their American arms, they did this, going so far as to collect opium taxes from villagers.

The CIA's role went far beyond giving the KMT the military means to organize the heroin trade. Alfred McCoy found Burmese intelligence reports from those early days saying that the CIA planes that dropped off military and other supplies for the KMT then flew opium out to Thailand or Taiwan.

Most of the KMT's original trade, however, seems to have been carried on by mule train to the town of Chiang Mai, whose location in northwest Thailand has made it a fabled drug bazaar for years. Even today, it is accepted on the street there that the town's economy is fueled by the drug trade. Chiang Mai is to opium what Chicago is to corn and wheat, or Detroit is to cars. Chiang Mai would eventually be the location of the strangest and least innocently explainable branch of the Nugan Hand Bank.

Back in the Chiang Mai of the 1950s, McCoy explains, "a KMT colonel maintained a liaison office with the Nationalist Chinese consulate and with local Thai authorities. Posing as ordinary Chinese merchants, the colonel and his staff used raw opium to pay for the munitions, food, and clothing that arrived from Bangkok.... Usually the KMT dealt with the commander of the Thai police, General Phao, who shipped the opium from Chiangmai to Bangkok for both local consumption and export."

Thus General Phao and the elite from his Thai national police force provided the vital link between the landlocked KMT opium lords and the sea. But after establishing this, McCoy also establishes something else: General Phao was the CIA's man in Thailand. The overwhelming evidence comes from contemporary news reports, on-the- scene interviews, and documents from The Pentagon Papers (the Pentagon's secret history of the Vietnam War, much of which was published by the New York Times).

Phao obtained his strong position in the factionalized Thai power structure directly from CIA backing-and in particular from the lavish arms shipments that Paul Helliwell's Sea Supply Corporation sent to Phao's national police. The CIA also financed General Phao's opium purchases from the KMT. Phao and so many other players in this game were actually written up in the New York Times back in the 1950s that it is impossible to believe that the CIA-which, after all, secretly owned Sea Supply Corporation -- hadn't put the picture together and didn't know what was going on.

Of course they knew. To the CIA, Phao appeared useful as a staunch anti-Communist who would employ his power to keep any Thai government from going too far left. Phao would also maintain the KMT as a well-supplied thorn in the "Red Chinese" side.

To be sure, all this doesn't mean that U.S. policy-makers originally envisioned the final result of their script. The Washington planners may not have foreseen that the KMT would come to be virtually a country within a country in the anarchic Shan States of northern Burma, easily crossing over into the unpoliceable jungles of western Laos and northern Thailand. And Washington may not have foreseen that the efficiencies being wrought by this KMT sub-state would bring the Golden Triangle to dominate the world heroin market.

But it gradually worked out that way, under Washington's nose, and no one saw fit to stop it. Soon, just as happened in Marseilles after the gangsters took over the waterfront, refineries were springing up in the Triangle, so that pure heroin could be shipped instead of bulkier raw opium.

***

Readers who are too young to remember the 1950s may find it hard to understand just how shocking these revelations would have been in those times. The KMT leader, Chiang Kai-Shek, on Taiwan, had a mammoth lobbying and propaganda operation that overwhelmed the U.S. Congress and press. In a way, the United States was the victim of its own World War II propaganda. Chiang had deceived the American public into thinking he was the popular leader of a united China, when in fact he was merely preeminent among many leaders-warlords, they were sometimes called. Chiang's KMT ruled the capital of Peiping, but never, from Chiang's ascendency in 1928, a united China.

The most powerful American press voice during the Chinese Revolution and its immediate aftermath was Henry Luce, head of Time Inc. Television was in its infancy, and Time and Life magazines had no close competition. Luce, a staunch Christian moralist, and his wife, Clare Boothe Luce, were close personal friends of Chiang and Madame Chiang. They drummed their support weekly in their magazines, and the rest of the press followed.

Chiang had another powerful cheerleader in General Claire Chennault, hero of the China theater in World War II. Chennault had organized and directed Chiang's air service since 1937. The popular Chennault and his highly visible wife Anna lobbied tirelessly for Chiang. They helped see to it that public humiliation awaited any U.S. Government figure whose support flagged. During the Truman and Eisenhower presidencies-both in the administration and in Congress-Chiang was not an ally of convenience, but a sacred cause.

Loyalty to that cause led the United States to turn its initial Korean War victory into a disaster. The North Korean army almost overran South Korea after its invasion in June 1950. But by early October, the United States (acting under the auspices of the United Nations) had cleared South Korea of northern troops, secured its independence, and moved northward to provide a more defensible border. The fighting capacity of the North Korean army had been broken.

But instead of stopping there, the U.S. commander, General Douglas MacArthur, another Chiang buddy from World War II days, insisted on taking the war to China in a coordinated effort with Chiang to help the KMT reconquer the mainland. Chiang's coordinated attacks against his mainland foes were secret from the U.S. public, but not from the Chinese, who were getting shot at. It could be seen as a turning point in U.S. history-the beginning of the anticommunist folly.

The Chinese were understandably unwilling to have hostile, constantly attacking forces on their northern as well as their southern border. Having promised all along to invade North Korea if MacArthur's forces reached the Chinese frontier, they did so. The result was a tenfold increase in U.S. casualties and the conversion of the Korean War from a win into a tie.

Yet one Washington politician after another continued to talk of restoring Chiang to power. To question Chiang was to call one's own patriotism into question-and, indeed, several State Department careers were ruined for just that reason.

Yet the result of the KMT buildup in the Golden Triangle was the mushrooming of the heroin plague in the United States. By the early 1950s, the drug problem became a nationwide concern as millions of families watched the Kefauver crime hearings. A few years later, Frank Sinatra's terrifying portrayal of a junkie in the movie version of Nelson Algren's bestselling novel, The Man With the Golden Arm, made heroin addiction a stark nightmare to more millions. Soon, criminologists and police chiefs everywhere were blaming addicts, desperate for money to buy a fix, for the soaring national crime rate and the resultant spread of fear through American cities and suburbs.

Knowledge that Chiang and his KMT were constructing the world's preeminent heroin factory to support their cause would have flabbergasted almost everyone. So would the knowledge that the heads of the American Legion and the Freedoms Foundation-the very soul of American anticommunism-would help run a bank for the heroin trade (even if Generals Cocke and Black were, as they have said, unwitting of Nugan Hand's dope deals).

If such shocking news about the Kuomintang could be kept secret for twenty or thirty years, one has to wonder what might have gone on with Nugan Hand in the 1970s--or what might be going on now-that is similarly being kept secret. At any rate, the events described here all did happen. Officially, they happened only for the purpose of helping our "friends," the KMT, who never had a realistic chance of overthrowing Mao Tse-tung's new mainland government anyway.

If the petty harassment of Mao justified starting a new heroin trade, soon there was a much bigger stake. There was the Vietnam War. From 1954, with the arrival of General Edward G. Lansdale and his crack teams of CIA operatives, the United States slowly took over from France the conduct of a war against various Indochinese independence movements. The French, McCoy shows, had cooperated in the export of Golden Triangle heroin through Saigon in order to keep the cooperation of the corrupt local elite. Corsican gangsters even arrived from halfway around the world to smooth out logistics.

This intermingling of heroin traders and the government of South Vietnam only intensified under American administration, McCoy shows. He makes clear that Ngo Dinh Nhu, brother of the U.S.-selected and U.S.-installed President Ngo Dinh Diem, got rich trading dope, as did other U.S.-backed Vietnamese leaders.

The real expansion of opium production, however, was in the mountains, where the U.S. military mission had suddenly discovered some important potential allies. These were the Montagnard (or Hmong, or Meo) tribesmen, constantly lauded by U.S. Government spokesmen and the U.S. press during the Vietnam War as "heroic," "pro-Western" and "our allies." And it's true that the Montagnards fought harder and more loyally with U.S. forces than did other South Vietnamese.

But our brave new allies happened to live on prime poppy-growing land. As U.S. aid and advisors came, landing strips were built for the CIA's special short-take-off and -landing craft. The opium trade grew proportionately. By McCoy's and many other, first-hand, accounts, opium was regularly flown out on flights of the CIA's Air America (formerly Civil Air Transport). The Montagnard villages flourished, as intended.

But a lot of opium wound up as heroin on the streets of the United States. Some was sold directly to American G.I.'s in Vietnam. Addiction plagued the U.S. forces, to the point of reducing their fighting capacity, and when the men came home their addiction came with them. Some of the Air America crews made a lot of money on this trade.

Wilfred P. Deac, senior public relations man for the Drug Enforcement Administration, offers this explanation today: "Their mission was to get people to fight against the Communists, not to stop the drug traffic."

Adds DEA Far East regional director John J. O'Neill, "The kind of people they were dealing with up there, the whole economy was opium. They were dealing with the KMT and the KMT was involved in heroin. I have no doubt that Air America was used to transport opium."

Joe Nellis, of the special Congressional investigation: "The CIA did help bring some very powerful cheap heroin into Vietnam out of the Shan States, the northern states of Burma ... for radio communications, intelligence. In return for that intelligence, the CIA winked at what went in its airplanes."

A former military intelligence noncom tells of a 1960 operation in which an airstrip was hastily built on Borneo as a transfer point for goods going into and out of Vietnam. Curious about the cargos . that were being dropped off by the first planes out of Vietnam, awaiting shipment back home, he says he pried open a crate that was labeled "munitions" but was suspiciously light of weight. It was filled, he says, with parcels wrapped in manilla paper. Opening one, he says, he found small plastic bags of a white powder that he has no doubt was heroin.

The U.S. Government not only promoted this drug traffic, it intervened to make sure the traffic wouldn't be discovered. A former officer who did criminal investigations for the Pentagon in the Vietnam theater, and who now works on the staff of the inspector general for a major federal agency, vividly remembers political interference with criminal justice. "Some of the times when you'd be running a criminal investigation, say narcotics, you'd find out that Inspector So-and-so of your national police is involved in this," the former officer says.

"You investigate it up to a point and then you can't go any further," he says. "It would go to our headquarters and then it would go to Washington and nothing would ever happen. The intelligence. gleaned from these people was more important than stopping the drug traffic." At least that's what he was told.

For many, letting the drug traffic go was also more profitable than stopping it.

Another former officer from the army's Criminal Investigation Division recalls a mammoth heroin scheme he and his colleagues uncovered by accident. He says he and four others from his unit were investigating corruption in the sale of supplies to commissioned- and noncommissioned-officers' clubs. The corrupt U.S. and Vietnamese officers they caught tried to bargain away jail terms by describing the heroin traffic involving Vietnamese politicians and senior U.S. officers. The reports checked out, the investigator says.

The investigator. now a stockbroker, says that his investigation group filed reports to the Pentagon revealing that G.I. bodies being flown back to the United States were cut open, gutted, and filled with heroin. Witnesses were prepared to testify that the heroin-stuffed soldiers bore coded body numbers, allowing conspiring officers on the other end, at Norton Air Force Base in California, to remove the booty-up to fifty pounds of heroin per dead G.I.

The army acted on these reports--not by coming down on the dope traffickers, but by disbanding the investigative team and sending them to combat duty, the former investigator says. Other reports corroborate the use of G.I. bodies to ship dope back to the United States via military channels.

This was the prevailing atmosphere when Michael Jon Hand arrived in Indochina.

_______________

Notes:

1. Wall Street Journal, April 18, 1980.
admin
Site Admin
 
Posts: 27519
Joined: Thu Aug 01, 2013 5:21 am

Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 3:09 am

CHAPTER FOUR: The Education of a Banker

Michael Hand was born in the Bronx, December 8, 1941. His father, a New York civil servant, still lives in a condominium in Queens, but absolutely will not discuss his son, or anything else, with reporters. Visitors are barred from the building by locked doors and security guards. A sister, reportedly severely handicapped, is also said to live in the New York area. Hand is said to have sent home money for her care regularly over the years.

The old Bronx neighborhood is now a slum, but when Hand was young it was upper middle class, and his high school, De Witt Clinton, was considered one of the city's best. He graduated 248th in a class of 695, won a scholastic achievement award, was appointed student prefect, and was starting receiver and defensive back on the football team. He passed every class he took, and was noted for exceptional character, courtesy, cooperation, and appearance. His IQ registered an also exceptional 131.

Graduating in 1959, he stated that his ambition was to become a forest ranger. Shortly afterward, his mother died in a fall from a third-floor window; the question of accident or suicide was never resolved. [1]

Mike Hand turned into a bearish man, with thick layers of muscle that melted largely to flab in later years. On the one hand, he developed an aggressive, macho, locker-room image that put more sensitive men off; on the other, he was known as a devout Christian Scientist and regular churchgoer, who rarely drank.

When Hand became a prominent banker in Australia, he told the world he was a graduate of Syracuse University, and mentioned to some that he had taught school in California before joining the army. The record shows instead that in 1961 he completed a one-year course at the New York State (forest) Ranger School. The school was attached to Syracuse University but hardly the equivalent of its B.A. program.

Hand's teacher, David Anderson, says Hand finished thirty-eighth in a class of forty-nine, though Anderson has a lasting impression of Hand as extremely personable. He must have been that, just to be remembered after all these years. Anderson says that Hand wrote from California in 1962 that he was managing a swim and sports school in the swank Los Angeles suburb of Palos Verdes Estates. The next year, Hand wrote back that he was taking Green Beret training at Fort Bragg, North Carolina. The record shows he enlisted in the army in May, 1963.

In Vietnam, Hand won a Silver Star, a Purple Heart, and the Distinguished Service Cross, second only to the Congressional Medal of Honor-as the nation's highest military award. On June 9, 1965 -- according to the Distinguished Service Cross citation-he almost single-handedly held off a fourteen-hour Vietcong attack on the Special Forces compound at Dong Xaoi.

According to newspaper accounts at the time, Hand braved a barrage of fire in an attempt to rescue a wounded buddy, then darted into a building and dragged to safety a wounded American captain -- Hand's commanding officer -- and another wounded soldier. Wounded by shrapnel himself, he still grabbed a machine gun and held the enemy off until the weapon jammed. Hit by another shrapnel blast, he was ordered to withdraw, but despite his wounds went under further fire to rescue one or two other wounded men. One account says he "acted as a live target to flush out enemy snipers."

A resume Hand later submitted to the State Department to keep his passport current says he left the army in May 1966. The next entry reads: "1966-1967, worked directly for U.S. Government." Banking associates say he sometimes referred fleetingly to his undercover activities in Laos during those years, and sometimes took a perverse joy in describing the bodily mutilations the local people had liked to perform on their slain enemies.

By accounts of men who say they encountered him back then, Hand helped train the mountain people-Montagnards-and worked closely with the Air America crews that supplied them. But there are no detailed accounts of his activities. He migrated to Australia in September 1967.

About the time Nugan Hand was organized, in the early 1970s, Hand married Helen Boreland, an Australian woman nine years his senior. By all accounts, they had a close and loving relationship, though an unusual one: people remark that Helen Hand seemed more like a mother than a wife to her husband. When he finally fled in June 1980, she stayed in Australia, worked for a while in a high-priced Sydney jewelry store, then disappeared from public view. Numerous requests for an interview with her were left with acquaintances and a lawyer who had represented her, but she didn't respond.

***

Even more important than Hand's wife was the person he fairly adopted for a substitute father-Maurice Bernard Houghton (pronounced "How-ton"), the mysterious puppetmaster of Nugan Hand, who, while posing as a simple barkeep, moved intimately among diplomats, spies, and military brass in many countries. The circles Houghton traveled in included the covert action specialists who would become central figures in the foreign policy scandal that engulfed the Reagan Administration in 1987-air force generals Richard Secord and Harry C. ("Heinie") Aderholt, and former CIA officers Edwin Wilson and Thomas Clines.

Bernie Houghton had preceded Mike Hand to Vietnam. He then preceded Hand to Australia, by eight months, arriving in January 1967.

Today, Houghton is still there. Once again, he is ostensibly just a barkeeper, now with a few years of part-time banking in his past. A lot of people think Houghton is a spy, and he has been called one by the looser Australian press. Whatever his business, secrecy is a big part of it. And he is very good at secrecy.

A fleshy, gray-haired, outwardly unobtrusive man with eyeglasses, Houghton seems to pride himself on a quiet demeanor. He is missing a couple of fingers on one hand, and there is no explanation for it in general circulation. He will not talk to reporters. If one hangs out in his bar, or waits at the main entrance to his penthouse ocean- front condo, it doesn't help. Houghton has lookouts protecting him, a tightly knit circle of confidants. They observe visitors and profess ignorance of Houghton's whereabouts until the visitors go away.

Adopted sons, they seem to some. They work at one of his bars, or he sets them up in other enterprises. Often, one is staying at the condo with him. Some are ex-army men from Vietnam. Some are "boys" who appear to be in their late teens or early twenties. Houghton is not known as a womanizer.

Impressive as he is at avoiding reporters, Houghton is even more impressive in his ability to avoid police, even those who have subpoena power. During the most aggressive investigations into Nugan Hand, which lasted several years, he simply slipped out of Australia when the heat was on, and returned when the investigation was over. Amazingly, he alone among his colleagues at Nugan Hand continues to hang around Australia and has still stayed out of the criminal docks.

He did agree to one transcribed interview with the Joint Task Force on Drug Trafficking, a top-level police group that was mandated by the prime minister of Australia and the premier (like a governor) of the state of New South Wales to investigate the Nugan Hand collapse. But Houghton refused to go to the police. He insisted the cops come to him-in Acapulco, Mexico, where he was holing up on the twenty-sixth floor of the Princess Hotel. They did, in June 1981.

His vague and convoluted answers, as transcribed, reveal him as a master of conversational evasion-as other native Texans might put it, he is a virtuoso bullshitter-and one can only wonder at the extent to which he was simply pulling the cops' legs.

"I had come to Australia because in World War II I had served alongside Australian servicemen and had gained a great deal of fondness and appreciation for them," he said. He told the police that he had been "engaged in business activities in Southeast Asia, including Vietnam," for several years. But he never said what business. "In 1966 I became disenchanted with the activities in Southeast Asia and determined to return to the United States, but wanted first to stop off and see Australia since I had heard so much about it in my association with Australian military men."

He said he didn't meet Michael Hand until Hand arrived in Sydney in the fall of 1967. But Houghton said he'd "heard of his [Hand's] reputation as early as 1964 or 1965." Houghton said, "I had heard of Mike Hand's great combat exploits and courage, which was wel1-known in Vietnam. In fact, the image I had of him was comparable to that of the famous Sergeant York [2] in American history. He conducted himself in such a manner in the war as to receive high praise and commendation, including from the President of the United States," [3] Houghton said.

Houghton said he met Hand "casually and through some social acquaintance, the exact particulars of which I cannot now recall. . . . Since we both lived and worked in the Kings Cross area [of Sydney], thereafter I saw him almost daily when we would run into each other all the time."

As for himself, Houghton said he was born July 25, 1920, in Texas "and lived in various cities in the Southwest. My father was an oil driller, which meant we had to move from city to city. I graduated from all the elementary schools and high school and was going to Southern Methodist University, studying business management, when the United States went to war. [Southern Methodist says he attended during the fall semester of 1939-40, a year before the United States went to war, and that he received no degree. It says he also spent the summer of 1946 there.]

"I enlisted in the U.S. Air Force Cadet Training Program and went to many schools," Houghton told the police. "I was discharged in 1946 and went into business, restaurants, clubs, surplus war material and miscellaneous." He said he "went to Vietnam, early in the 1960s, and I went to work for a construction material expediter [apparently in Vietnam] until such time as I came to Sydney, Australia, in January 1, 1967 [sic]."

In 1969, a problem with Houghton's visa caused him to give a statement to Australian immigration officials. He said then that he had spent the early 1960s with two San Francisco-based companies-the East India Company and J. G. Anderson, neither of which lists a telephone there now. He said he then went to Saigon to work for a Bruce Ficke "who is now a resident of Anchorage, Alaska." There is no telephone listing for a Ficke in Anchorage now.

In another brief interview with police in 1980, Houghton told a different story. He said he went to Saigon after seeing "job offers" in U.S. newspapers. "The same day I arrived," he said, "I got a job with an individual, by that I mean he ran his own company, named Green. He was later killed with his wife in Saigon."

This is how the Australian Joint Task Force on Drug Trafficking reported the rest of that police interview: "Asked to elaborate, Houghton said Green was an American whose Christian name was William. According to Houghton, his job with Green entailed 'traveling.... I was in Saigon for a while and then I went to Bangkok and did the same thing there. All this time I was working for Green.' Houghton described this work as being involved in a minor way in the construction of airport and military bases. He maintained that he worked for no one else whilst in South East Asia.

"Later, when asked about Bruce Ficke-the person referred to in his 1969 reply to the Department of Immigration-Houghton said, 'I met him years ago in Alaska. I was working for a company called East India and he was a distributor for goods I was selling. That association goes back over twenty years.'"

Efforts by the author to locate the companies or people Houghton" said he knew back then have failed.

Returning to his 1981 formal interview in Acapulco, Houghton gave this account of what happened after he landed in Australia in January 1967: "I went to work for Parkes Development as a real estate salesman and opened the Bourbon and Beefsteak Bar and Restaurant."

Even the date of the Bourbon and Beefsteak opening is mysterious. Houghton said it opened "November 4, 1967." The task force that interviewed him, however, determined in its final report that the restaurant actually opened in September. The date is significant, because the Bourbon and Beefsteak was designed to cater to the U.S. military.

To relieve the growing strain on the honky-tonk neighborhoods of Hong Kong and Bangkok, the U.S. Government had negotiated a deal with the Australian Government whereby Sydney would open its doors for U.S. soldiers to receive the rest and recreation periods their Vietnam War service entitled them to. According to the task force, Houghton somehow learned of Sydney's selection as an "R and R" center "prior to it becoming public knowledge." The task force said "Houghton did not explain how it was" that he found out early about the Rand R deal. But before the first soldiers arrived, in October 1967, Houghton had arranged to be at the center of the action.

That's as far as the cops got regarding Houghton's history before Nugan Hand. It leaves out a lot.

***

Alexander Butterfield, a former Asian-intelligence officer, had some helpful advice for a reporter asking questions about Bernie Houghton. In 1973, Butterfield had attained instant celebrity by revealing to Congress and the world that Richard Nixon's Watergate conversations were secretly taped in the Oval Office. (Little if anything was made of the curious circumstance that a career intelligence operative had played such a pivotal role in the downfall of a president.)

Asked about Houghton, Butterfield quickly said to call Allan Parks, a retired air force colonel who now runs the flying service at Auburn University in Alabama. Sure enough, Parks remembered Houghton well, mostly, he said, from his days as intelligence officer at the U.S. Embassy in Bangkok during the war. Parks recalls constantly stumbling over Houghton's name in cable traffic.

Military secrecy still prevents Parks from telling all he knows, he says, but he remembers meeting Houghton-and he places Houghton in Asia well after Houghton allegedly retired to Australia to become a barkeep.

"He ferried C-47s, cargo airplanes, from Thailand," Parks says. "The man, he was running everything. Between Australia and Thailand. I met him in Bangkok in a bar. I was involved in Laos in some things I can't discuss in '70 and '71. There was traffic I read relating to that. But I can't go into it because it's all secret." It was something to do, Parks says, with "Project 404," which is still "classified." (Asked about Michael Hand, Parks has the same response: "I can't tell you. It's classified. No comment.")

But the mention of Houghton elicits reminiscences from Parks: "There's no doubt about it, he'd fly anything. The Golden Triangle, that's where he got his opium from. There was one flight, he flew in slot machines. He did some deals over in India."

Asked the name of Houghton's airline, Parks just laughs, and says, "He didn't call his planes anything. Nobody could track his airplanes. He didn't have an airline, like. The embassy was always trying to run him down. It was funny." Asked for other sources, Parks says, "Anybody who would know would give you the same answer I would."

Then he refers a reporter to General Aderholt, who he says also observed Houghton from the U.S. Embassy in Bangkok. Aderholt went on to become commanding general of the U.S. Military Assistance Command in Thailand, and, with General John K. Singlaub, ran covert air operations throughout the Vietnam-Laos-Thailand war zone. Retiring from active duty after the war, generals Aderholt and Singlaub took command of various right-wing paramilitary groups in the United States.

During the mid-1980s, when the Reagan administration was barred by Congress from supplying and directing Contra rebels trying to overthrow the Government of Nicaragua, but was determined to do so anyway, Generals Singlaub and Aderholt played important roles in keeping the Contra rebellion alive. Though they were supposedly working through private channels, their efforts were coordinated by the White House through Lieutenant Colonel Oliver North, and the source of their funds was open to question during the Contra scandal investigations of 1987.

Aderholt seems to have been in good position to know what was going on in Southeast Asia during Bernie Houghton's days there. Aderholt had combined his air force career with work on the side for little airlines and medical relief agencies overseas, creating the aura of someone involved all along in private "front" operations for the CIA or some related U.S. intelligence agency. But Aderholt's recollections of Houghton contradict with the accepted chronology of Houghton's life.

Bernie Houghton? "There was a guy named Bernie Houghton with the Nugan Hand Bank," Aderholt says. But Nugan Hand wasn't officially chartered until 1973, and really didn't begin to burgeon until 1976-well after the time Parks said Aderholt had encountered Houghton in Thailand during the Vietnam War. It was even after Aderholt had supposedly retired from the air force. But Aderholt is vague on dates.

"I had lunch with him," Aderholt recalls. Describing the lunch, he continues to set off alarm bells. Also present, he says, was an American named William Bird. Bird, the reporter knows, was the almost legendary operator of a seat-of-the-pants southeast Asian airline called Bird Air, and was involved with other concerns linked to U.S. military and secret paramilitary involvement there. Although Bird's precise relationship with the CIA has never (to the author's knowledge) been publicly documented, he is widely believed to have had such a relationship for many years. [4]

"Mr. Bird and I had run an airlift out of Bombay," Aderholt continues. "Houghton was with a company in Bangkok [Aderholt names a company, the Alkemal Company; it couldn't be located]. He was interested in opening a restaurant in Bangkok." Aderholt also confirms that William Young, who worked briefly for Nugan Hand in Chiang Mai, Thailand, was for many years a CIA agent (more on Young later). But Aderholt says he is unable to supply further information or leads on Bernie Houghton.

Looking into Houghton's past, all you can come up with is mystery. "He was doing something in Vietnam, but he won't say what," says Houghton's lawyer in Sydney, Michael Moloney. "Nobody really knows. He won't talk about his past."

***

Even for those who enjoy fairy tales, the available version of Houghton's first weekend in Australia may seem fanciful. Supposedly he was broke and on the street. The police task force report says, "Asked if he had had introductions to Sydney people on his arrival in the city, Houghton said, 'No.'"

But through a deus ex machina unworthy of a made-for-TV movie, the story has Houghton quickly falling in with a circle of Australia's leading businessmen. They were friends and business associates of transportation tycoon Sir Peter Abeles, who owns Australia's biggest trucking, shipping, and airline companies.

Sir Peter's shipping and trucking operations extend to the United States and throughout the world. Publishing and television tycoon Rupert Murdoch, perhaps Australia's premier international citizen, is Sir Peter's sometime bridge partner. Murdoch is also Sir Peter's 50-50 partner in ownership of Ansett Airlines, Australia's biggest.

Among the circle of business and card-playing associates of Sir Peter's, besides Rupert Murdoch, are another Knight of the Realm, Sir Paul Strasser, and John Charody, who, with Strasser, was involved in some real estate development companies and an oil company based in Sydney. Sir Paul remembers the weekend in January 1967, when "a friend, I can't remember who" brought Houghton into the coffee shop where Sir Paul was sitting.

Houghton told police that the "friend" was the manager of the not-particularly-elegant hotel Houghton had happened to check into. The hotel was in the honky-tonk King's Cross section of Sydney, a district of B-girl bars and sex shows, where Houghton would eventually become the impresario of U.S. military Rand R. What landed him at the King's Cross Hotel just off the boat? And what led him to immediately seek the hotel manager's help in finding work? Unan swered questions. But it is doubtful that everyone who stumbles into the King's Cross finds himself having coffee a few hours later with a knighted multimillionaire tycoon like Sir Paul Strasser.

Sir Paul remembers [5] that Houghton was described as just out of Vietnam, flat broke and desperate. "Somebody who couldn't find work, he didn't have any money," Sir Paul remembers. Yet, says Sir Paul, Houghton "gave as a reference two high-ranking army people. Admiral Yates was one. Yates gave him an excellent reference." [6] So Sir Paul agreed to take Houghton on as a condominium salesman for one of his development companies.

The police had asked Houghton who his references were, and he had replied, "I'm sorry, I don't remember." But Sir Paul told the police that he sent two telex cables to verify Houghton's credentials, "one to the military in Hawaii and one to Washington.... Both cables were sent to army departments." The replies, he said, "were in glowing terms."

Later, Sir Paul said, Houghton introduced him to both General Black and Admiral Yates. Sir Paul became convinced that Houghton had a "top connection with the U.S. administration." Sir Paul has also told Australian reporters that Houghton was recommended to him by CIA associates and a "top politician in Washington."

This was a pattern that almost everyone around Houghton noticed quickly. As Sir Paul put it, "He was connected with top army people. I have no doubt about that. He was very close to the American embassy. I was once invited by him to the American embassy and he introduced me to all the top people. When [U.S.] senators or top officials came to town they would always see him. I heard he got flights to the States on U.S. military aircraft from Richmond Air Base [in Australia]."

"All the time I asked him about Vietnam," Sir Paul recalls. "But he didn't want to talk about it. He was the best salesman I ever had in my life. I always wondered. He came in literally without a penny in his pocket. I had to give him a loan on Friday [to tide him over] till Monday morning."

***

Houghton's arrival in Sydney in 1967 could not have been better timed for him or the military. The Bourbon and Beefsteak was soon overflowing with incoming shiploads of America's fighting men, and with the prostitutes they picked up in the neighborhood. Houghton soon opened two similar establishments nearby: the Texas Tavern, and Harpoon Harry's.

Because "loose lips sink ships," and because the toughest front the Pentagon had to face in the Vietnam War was in the press back home, Washington doubtless would have wanted eyes and ears on its vacationing troops. As much as their play could be controlled, Washington would have wanted to control it. And no one was better positioned to do that than Bernie Houghton.

Houghton became close friends with Lieutenant Colonel Bobby Keith Boyd, whom the U.S. Army assigned to be commanding officer of the Rand R center in Sydney. Houghton told police, "We are both Texans and that automatically makes you friends."

Besides being a Texan, Boyd had been a former U.S. embassy military attache in Latin America, among other assignments. The prime minister's police task force concluded thus about him: "It would be extremely naive to suggest that with a military career of this type ... that Boyd was not closely allied with U.S. intelligence, if not more directly involved." In 1971 Boyd resigned from active duty-and went to work helping Houghton run his bar-restaurants. He also occupied various positions in the corporations Houghton set up as holding companies.

During Rand R, Houghton received all sorts of special benefits. When the troops came to port, Sydney residents recall that Houghton was sometimes helicoptered out to the flagship to greet his prospective customers and meet their commanding officer.

And as Houghton grew bigger and more visible, so did his friendship with Michael Hand.

***

Despite his denials, a circumstantial case has been made by some that Bernie Houghton was wearing the cloak of patriotism as a U.S. intelligence agent. The case is furthered by his otherwise hard-to-explain relationship with the Australian Security Intelligence Organization, a government agency best known to Australians by its acronym, ASIO. While doing for Australia some of the work that the CIA does for the United States, ASIO also functions domestically, much as the FBI's counterintelligence branch does in the U.S.

ASIO's name showed up when, after the collapse of Nugan Hand, Houghton's immigration file was investigated. Curious references were found both by the police task force and by the local press, which obtained documents through devices of its own. It was learned that on October 21, 1969, ASIO had given Houghton a security clearance; this was after he applied for permanent residency status in Australia.

Then, on February 12, 1972, ASIO did Houghton a very special favor. He had been traveling abroad-to "Saigon to check on the feasibility of buying surplus war material," he later explained. But he had neglected to obtain a re-entry visa for his passport. His original Australian visa had expired November 10, 1971. In the palaver at the airport immigration desk, he gave the officers two references, who quickly saw to it that he was admitted. One was John Charody, Sir Paul's business partner.

The other was Leo Carter of ASIO-not just an ordinary ASIO agent, but the director of ASIO for the whole state of New South Wales, the largest in Australia. Why did one of the handful of top intelligence officials in Australia, one who had direct contact with U.S. intelligence agencies, personally take time out to clear a simple barkeep for admission to Australia? Carter cannot be asked; he died of a heart attack in 1980. The immigration officer who signed Hough" ton in died the same year.

ASIO declined to talk about it with a reporter. In a written statement to the police task force, ASIO said it couldn't explain "the apparent references to ASIO on Bernie Houghton's Department of Immigration papers . . . since he does not appear in our records. . . . It is only possible to speculate that Carter may have known Houghton privately as a restaurateur," ASIO said.

Maybe-except that when the police task force asked Houghton if he knew an Australian named Leo Carter, he replied, quite unequivocally, "No."

Not only did Houghton get admitted to Australia on Carter's word, he also received an immediate and very special "A" stamp -- permission for unlimited re-entries to Australia in the future. One can imagine the embarrassment of the immigration officer who dared question Houghton as he went through the. line, only to have senior government and business leaders roll out the red carpet for him on receipt of a telephone call.

Another item stands out from the police task force's report on Houghton's immigration file. There are records of Houghton leaving Australia only twice in the early years he was there. Yet if the recollections of the former U.S. military officers in Southeast Asia are correct, he must have been gone more than that. The story, relayed by Sir Paul Strasser and others, that Houghton flew in and out from a military air base on U.S. military aircraft provides one possible explanation. His apparent connection with ASIO provides another.

***

Nor is it likely that the regional head of ASIO, along with assorted generals, admirals, high-ranking senators and congressmen, U.S. Embassy officials, and two CIA station chiefs in Australia (Milton Corley Wonus and John Walker), all of whom socialized with Houghton, did so because of his establishments' haute cuisine and ambiance.

His Texas Tavern and Harpoon Harry's have long since folded, but around the corner from their old locations the Bourbon and Beefsteak, where all the dignitaries came to dine, still swings. Just inside the doorway to the left of the entrance are women in thick makeup, tight tops, miniskirts, and fishnet stockings. You know why they're there.

In the doorway to the right of the Bourbon and Beefsteak, through the dinner hour and late into the evening, stands a barker. Sometimes it is a man, sometimes a woman, but always the barker is advertising a sex show that occurs at the top of the stairway behind him. During the show, the barker says loudly enough for anyone entering the Bourbon and Beefsteak to hear, you can see "two young Asian girls shooting Ping-Pong balls out of their pussies."

Inside the restaurant, the lighting and furnishings are reminiscent of a steakhouse not exactly like, say, Christ Cella or Peter Luger, but more like, say, Tad's. So are the steaks--thin and greasy. No one but a sailor long marooned at sea would ever come here for the food. If there is one thing Sydney abounds with, it is truly wonderful places to eat, with seafood and fine local wine that thrill the palate and well occupy the expense account; the Bourbon and Beefsteak is not, by any stretch, one of those places.

***

Operating the most notable bars in King's Cross, where the biggest rush of customers in years scooped up every prostitute in sight and sought every form of vice that could be crammed into a weekend, Bernie Houghton probably needed approvals that even the U.S. and Australian Governments were unequipped to provide. Abe Saffron, the local version of the Mafia, has long run King's Cross the way that Matthew ("Matty the Horse") Iannello runs Times Square in New York.

The police task force described Saffron as "a man who by reputation has for many years dominated the King's Cross vice scene. He has been described in the Parliament of this State [New South Wales] and elsewhere as 'Mr. Sin,' and is reputedly involved in vice and other questionable activities in other states of this country.... His activities are carefully hidden behind complex corporate structures."

Judges and state governors have attested on the record to the foulness of Saffron's character, and to his role, in the words of the South Australia attorney general in 1978, as "one of the principal characters in organized crime in Australia." In a cover story headlined "Who Is Abe Saffron?," the National Times, a major Australian newsmagazine, said in 1982, "The New South Wales Licensing Courts over 30 years have heard police officers rise to their feet to argue against Saffron, his family or associates getting one more liquor license-yet he and his associates still own or control a string of licensed bars, restaurants, clubs and hotels throughout the country."

The article noted that Saffron hadn't been convicted of a crime since 1940-but then, of course, close to the same could be said until recently of Matty the Horse.

Saffron became front-page news in Australia in 1982 for two reasons. One was his meetings with high-ranking police officers caught up in a corruption scandal. But his name also kept cropping up in the Nugan Hand affair.

A royal commission assigned by Parliament to investigate crooked unions was pursuing a former Nugan Hand executive, Frank Ward. The commission turned up a memorandum written to Ward by an associate at Ward's new investment bank: "Abe Saffron phoned 8:30 A.M.-is in city-has balance sheets-wants to settle Friday. He confirmed in no uncertain terms that the fee . . . is agreed at 5 cents. I have enough regard for my knees to agree! ... I/we should clarify today to avoid future problems-physical or financial."

Before the ink from the resultant headlines had dried, news came that the police task force investigating Nugan Hand had uncovered another memo regarding Saffron. It was clearly in Michael Hand's handwriting, and said: "$50,000 Aust in H.K. to be repaid at $5000 per month for 10 months. It is Bank T.N.? Call 322215. Abe Saffron. Referred by Bernie Houghton. regarding yesterday's discussion -- ABE SAFFRON."

The phone number 322215 was Saffron's headquarters.

The memo had been produced by former Nugan Hand executive Stephen Hill, who was giving investigators selective information to try to save his skin. Hill said he had no personal knowledge of the transaction referred to in the note. (Hand and Houghton had both left the country for undisclosed locations when the investigations began.) Hill said he kept the note because "I was interested in what association Saffron had with Hand."

Asked if the note indicated that Saffron wished to transfer $50,000 in Australian money overseas-the kind of illegal deal Nugan Hand specialized in -- Hill replied, "That may be the case." He said, "T.N." may have referred to Treasury note, and "H.K." to Hong Kong.

Houghton's acquaintance with Saffron should have come as a surprise to no one. It seems unlikely that Houghton could have moved so heavily into the King's Cross vice district without making his peace with Abe Saffron. The buildings where Houghton's restaurants were housed had a tangle of corporate owners, but two were connected to associates of Saffron. Furthermore, the soldiers who flocked to Houghton's drinking establishments were referred for further recreation to Saffron's nearby gambling dens. When one of these dens, the Aquatic Club, declared bankruptcy in the mid-1970s to escape paying creditors, it was kept in operation by a new team of owners, including Houghton.

Houghton admitted to the police task force that he had known Saffron for many years "as a result of visits by Saffron to the Bourbon and Beefsteak restaurant." Houghton told the cops, "I would have a social drink with him. Our interests in the restaurant [business] are mutual." But, the task force report said, "Apart from one instance, unrelated to this inquiry, Houghton said that he was unable to recall ever having had any business dealings with Saffron."

Houghton recalled luncheons at which he had introduced Frank Nugan, and "visiting military personnel," to Saffron. Whether the "visiting military personnel" knew exactly whose hand they were shaking when they met Abe Saffron isn't spelled out, but the contact alone could have been embarrassing for some, if publicized. Houghton also said that Mike Hand met Saffron "under similar circumstances," after which "they had a very casual relationship."

Saffron, however, denied to the police that he had ever met Hand, and said he met Nugan only once, socially. Commented the task force, "This claim is, of course, irreconcilable with the statements of Houghton."

The police task force showed both Houghton and Saffron the memo from Michael Hand about the $50,000. "Each denied any knowledge of it," the task force reported. Saffron denied he had ever had "any association with the Nugan Hand group of companies," and Houghton said he wasn't aware of any.


The task force concluded, "It is not clear from the note whether the money was 'loaned' to Saffron or was paid by him into Nugan Hand, but there is little doubt that Saffron was at one time involved in at least this one transaction with Nugan Hand.... That at least Saffron chose to lie about his association with Hand, and both Houghton and Saffron chose to lie about the transaction, only adds to suspicion that there was something either illegal or improper about it," the task force said in its final report to the prime minister and governor.

That report went on:

"A number of observable strands existed within Nugan Hand.

"First ... there is some evidence that Hand retained with U.S. intelligence personnel ties throughout the 1970s and into the 1980s.

"Second, on the evidence available there is little or no doubt that Houghton was until at least the early 1970s and perhaps is involved, in Australia and elsewhere, in some way with U.S. and Australian intelligence personnel.

"Third, Houghton was and still is closely associated with two other U.S. citizens resident in Sydney. Both have military backgrounds and there is strong reason to believe that at least one of them, Bobby Keith Boyd, was in the 1960s-70s and perhaps is still connected in some way with U.S. intelligence activity. The other, Robert Wallace Gehring, if not at that time then later, became exposed to intelligence personnel through his close association with Houghton, Boyd and Hand, and his later role in the 'disappearance' of Hand from Sydney.

"Fourth, Houghton and Hand were extremely close by the early 1970s and there is every indication that Hand regarded Houghton as a 'father figure.' More probable than not it was because of Houghton's U.S. armed services and intelligence connections that Hand regarded him so highly. It was frequently said that Hand's view was that 'anything is all right so long as it is done in the name of America.'"


_______________

Notes:

1. Thanks to an unidentified researcher for the National Times of Sydney, Australia, who dug all this out in 1981, making it much easier for me to verify later. The researcher also reported talking to former neighbors, who "have only fond memories of Hand, his father and his mother."

I tried to augment the researcher's findings, but was blocked by the New York City Department of Health, which suddenly, in 1986, perhaps because of pressure from the families of AIDS victims, banned public access to previously available death records. These records clearly seem public under the state's open information law, but there wasn't time to fight that legal battle before publication.

2. Alvin York of World War I, probably the greatest noncommissioned combat hero the United States has had.

3. Like the Sergeant York comparison, the remark must be recorded as of questionable accuracy.

4. Bird was always in some other country when the author tried to find him, both in the United States and in Thailand.

5. In telephone interviews with the author.

6. Yates denies knowing Houghton. that long ago.
admin
Site Admin
 
Posts: 27519
Joined: Thu Aug 01, 2013 5:21 am

Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 3:12 am

CHAPTER FIVE: Corporate Veils

Outsiders were kept away from the secrets of Nugan Hand until the summer of 1980. That was six months after the supposed brains of the operation had, literally, been splattered all over the roof of Frank Nugan's Mercedes.

Nugan had made his bloody and widely publicized departure from corporate office in January. In April, Michael Hand had put the company under control of a bankruptcy court in order to free his own door from the line of increasingly panicky depositors, sleazy businessmen, and others Nugan Hand had dealt with who now wanted their money back. If that wasn't enough of a hint that something was terribly wrong, anyone interested had been alerted to the likelihood of scandal by Hand's testimony at the Nugan inquest later in April. Finally, at the end of June, it came out in headlines that both Hand and Houghton had vanished.

Even with all that, it wasn't until about a week later, in July, that a truly independent accountant, the newly appointed liquidator John O'Brien, was authorized by the courts to delve into Nugan Hand's books. By that time there was precious little left of them.

O'Brien's was the first of four major, official, wide-sweeping investigations of Nugan Hand in Australia. (There were also countless lawsuits, death inquests, criminal complaints, tax cases, and commissions looking into this-or-that-other-problem, all of which got caught up in the Nugan Hand mess, and many of which turned up valuable information. Moreover, some of the best investigating was done by the press, which for years regarded any new crumb about Nugan Hand as the day's main meal.)

About the time O'Brien, the liquidator, plunged into the case, in midsummer 1980, a second big official effort began at the New South Wales Corporate Affairs Commission-the equivalent of the Securities and Exchange Commission in the United States, but on an individual state basis. The Corporate Affairs Commission had theoretically been investigating Nugan Hand since shortly after Nugan's death, but the early attempts were amateurish and easily manipulated by Mike Hand and other insiders. By summer, the commission had geared up its staff and hired a leading outside lawyer, Geoffrey Nicholson, to head a real inquiry. In March 1983, the Corporate Affairs Commission published its report in two hefty volumes, which were particularly helpful in unraveling the complex financial dealings of Nugan Hand.

Also in March 1983, the last of a series of reports was published by a third body of inquiry, the police Joint Task Force on Drug Trafficking-"joint" in the sense that the prime minister of Australia had ordered the federal police to join forces with the New South Wales police to investigate Nugan Hand. The investigation grew out of the frustration felt by a royal commission that had been appointed to investigate drug trafficking, but that kept running into Nugan Hand and lacked authority and manpower on its own to open that huge can of worms, The Joint Task Force attacked the problem, and was particularly active in pursuing the importance of Nugan Hand's ties to Americans, both high office-holders and racketeers.

But basic questions remained unanswered, even with the publication of the mass of details in the Corporate Affairs Commission and Joint Task Force reports. Outstanding among the unsettled issues were the significance of the Pentagon and CIA links, and the question of who should be given criminal responsibility for what everyone agreed had been vast crimes.

So a new royal commission under Justice D, G. Stewart was appointed by Parliament to carry on the work. The Stewart Royal Commission's two-volume report in June 1985 was a deep disappointment and shed little new light, for reasons best described later, in chronological sequence.

The results of all four investigations -- liquidator O'Brien's reports, the Corporate Affairs Commission report, the Joint Task Force reports, and the Stewart Royal Commission report-are incorporated into this book, as, of course, are the results of the myriad of other inquiries so far as they are known, and of the author's own four-year effort.

***

Back in April, when Hand had been forced to turn the company over in court, he had been allowed to select the accountants who would act as liquidators. They apparently didn't press him, or Houghton, or others who might have been able to supply information or return stolen money. A mass of mail was pouring in from the bank's hapless victims, and what replies the temporary liquidators managed to get off were, judging from the ones forwarded to O'Brien, unhelpfully noncommittal.

John O'Brien was a bearlike, prematurely gray accountant and professional bankruptcy liquidator. With the Australian front pages daily full of Nugan Hand scandal, including the comings and goings of U.S. spies and generals and the horror stories of victims, a judge had picked O'Brien from an independent roster of liquidators to replace the temporary liquidators chosen by Michael Hand.

From that day in July, it was clear to O'Brien that Nugan Hand must have been the product of an intelligence beyond Frank Nugan's. If nothing else, the successful damage control carried out in the six months since Nugan's death was impressive. Either Nugan had been survived by very skillful and organized co-conspirators, or, in the only alternative, the law enforcement officials of Australia and a dozen other countries were stupid and lax beyond belief.

O'Brien got more than a few jolts reading the bills that were piling up. One, for $45,684.09 of legal work, was from William Colby, former head of the CIA. The CIA was well known in Australia, where the United States kept its most important overseas electronic spy installations. The CIA had been openly accused of helping overthrow the Australian Government in 1975. Many Australians still believed that the CIA had subverted their democracy.

The cover letter for Colby's bill to Nugan Hand was addressed to Hand personally, and dated April 4, 1980, long before the bank fell under O'Brien's skeptical purview. The bill was on the stationery of the Washington office of Colby's law firm at the time, Reid & Priest (home office, 40 Wall Street, New York).

"Dear Michael," it began, "I regret to be communicating with you about the subject of our fees, but I am afraid I owe you an explanation of the attached bill. It obviously represents a summarization of the various activities that we did for Frank and separately for you over the past several months....

"Obviously, we still stand ready to continue on the line Frank had intended to follow, a general consulting relationship on various matters involving United States law," Colby wrote to Hand-who had previously helped train and supply Montagnard recruits under 'Colby's overall supervision during the war.

"After you are able to regroup for the future in the unfortunate absence of Frank, I would hope you would find some further utility in consultation with us, If that does not work out, however, please accept my very best wishes for your success and that of the institution Frank and you started so effectively, If you do come in this area, I hope you will feel that the welcome mat is out, either professionally or personally, Sincerely, Bill."

Hand, however, apparently didn't have time to accept this offer of hospitality before he was driven underground by the several investigations and by the thousands of angry citizens of many countries who had trusted the Nugan Hand Bank. The letters they wrote asking for their money back made painful reading for O'Brien.

The assets underpinning Nugan Hand's business were supposedly lodged in accounts at major Sydney banks, But as O'Brien began unsealing these accounts, it did not take him long to discover that the purported assets-millions of dollars in highly rated commercial banking instruments-simply didn't exist, And never had, The full list of numbers wasn't' in, and perhaps would never be, but the bottom line emerged to O'Brien early on.

Whatever else Nugan Hand was, it was, surely a giant theft machine, Judging from the victims' letters, as O'Brien perused them, Bernie Houghton had actually gone around with a big plastic garbage bag slung over one shoulder, like some kind of reverse Santa Claus, taking bundles of cash savings from Americans serving overseas, mostly in Saudi Arabia.

The depositors were told their savings would be invested in the high-interest commercial banking instruments, But instead, the money just seemed to disappear. General Manor collected checks from his former subordinate officers at the U.S. air bases he used to command, and delivered them back Nugan Hand certificates of deposit. Those certificates were now next to worthless. Other depositors had donated their cash in various ways around the world.

Big and little victims all over Southeast Asia wrote in that they had given money to the staff at Nugan Hand, men like George Shaw, But liquidator O'Brien found no records of their accounts among the bank's files-or in some cases, he would find only a puzzling reference to the depositor in the records of some related company.

There turned out to be a dozen related companies, with strange names that neither the investors nor O'Brien had ever heard of. There were even complaints on O'Brien's desk from depositors in the United States-where Nugan Hand had no legal authority to take deposits. Letter after letter referred to the vaults of commercial banking paper that was supposed to stand behind the deposits. But O'Brien knew the paper wasn't there.

Who else knew? That was the question that bothered O'Brien, and would plague every other investigator assigned to the case. How much did the executives working for Nugan Hand know about the fraud they were perpetrating?

It was possible, of course, that people were duped into working for Nugan Hand. It was possible that they solicited deposits in the genuine belief that the money would be prudently invested. It was possible that they really believed the depositors would reap the high interest promised. That was exactly what the American military officers who worked for Nugan Hand later argued: that they had been duped just like the depositors.

But O'Brien's efforts at intellectual charity toward such fellows kept running into obstacles. Once inside the bank, how dumb would you have to be to stay duped? Could that level of stupidity be ascribed to high officials who only recently were responsible for supervising billions of dollars in U.S. taxpayer funds-hundreds of thousands of troops and whole fleets of aircraft and aircraft carriers, who specialized in, of all things, "intelligence"?

True, Colby was just a lawyer for Nugan Hand. Lawyers had somehow managed to establish years ago that they had not only the right but the ethical responsibility to maneuver with all the vigor and genius at their command on behalf of even the most palpably sinister of clients. Indeed, legal "ethics," as they are called, are said to require that lawyers be discharged of all responsibility for the injustices that may result from the successful practice of their craft. So Colby, by such measure, might stand not only discharged but a hero for his efforts on behalf of the bank.

But for nearly three years, Admiral Yates, no lawyer, had been president of the Nugan Hand Bank, the entity that took in most of the money. How much brainpower, how much clarity of observation, should one attribute to an admiral? To the former chief of staff for plans and policy of the entire U.S. Pacific Command, largest in the U.S. military? To a man who, as commander of the aircraft carrier John F. Kennedy, had been entrusted with nuclear weapons?

Now suppose, on the other hand, that the brass wasn't innocent at all. Suppose they had been in on the plot. Did this mean that the U.S. Government had employed, and promoted to the highest offices, a bunch of thieves who were now living high and mighty off the riches of defrauded investors?

Or was it more likely that they weren't, at least most of them, thieves-that there was some political motive behind their work?

O'Brien resolved to try to talk to spy chief Colby, Admiral Yates, General Manor, General Black, and all the other Yanks. But, at least for now, they were far away, on U.S. soil. They were protected from him. And if they did agree to sit down with him there, they would face no compulsion to tell him the truth (unless, of course, he could get the cooperation of the U.S. Government). The return addresses of the potential witnesses against them, the depositors, were spread all the way from Kuala Lumpur to Udhailiyah (wherever that was). For the meantime, O'Brien set about to deal with the complainants who were right there in Australia.

***

A few weeks after John O'Brien was handed the Nugan Hand mess, he received a letter from Dr. John K. Ogden. Ogden was a disabled, sixty-year-old former gynecologist from Toowoomba, a town of eighty thousand souls about six hundred miles north of Sydney. "I understand from the papers that you have taken over the onerous task of winding up the affairs of the Nugan Hand Bank," Dr. Ogden's letter began. It then noted that Dr. Ogden had already submitted his and his wife's claim to the temporary liquidators; the amount-$689,000.

"As you might imagine, I am desperately worried as this was my retirement and security for my wife in old age," Dr. Ogden wrote. "Sixty years of age is too old to start again! I trusted Nugan as my solicitor and banker, and the agreement was that my funds and capital gains would be available when I wanted them. If the bank cannot cover all of this amount, one has to raise the question, Was it not insured? And if not, is not the Reserve Bank [of Australia] and the auditors to some degree culpable for allowing this sort of situation to occur?"

O'Brien knew the money wasn't insured, that the Reserve Bank would be embarrassed, and that the auditors might go to jail. But he also knew that none of the above would get John and Barbara Ogden their $689,000 back. In many ways, the Ogden's letter was typical of the sackfuls the mailman dumped on O'Brien's desk. But in size, and poignancy, their case stood out.

The Ogdens, who say they were "completely wiped out by this affair," met Frank Nugan on the advice of their banker in Sydney. "I was incapacitated with cervical spondylitis [inflammation of the vertebrae]. The insurance company wasn't paying and I needed a lawyer," Dr. Ogden recalls. [1] Nugan was a lawyer, and the banker recommended him as someone who could help the Ogdens with their insurance problem. He did. Then, says Dr. Ogden, "the relationship developed into advisor and finally banker. When my neck got better, we came back to Toowoomba to resume practice and used to fly down to Sydney and stay with the Nugans, and he always seemed a devoted family man and absolutely straight."

Nugan, in fact, was a family man, having in 1970 married Charlotte Lee Sofge Nugan of Nashville, Tennessee-a symmetry, since his partner, American Michael Hand, had married an Australian. Unlike the childless Hands, though, the Nugans had two children and seemed, at least, devoted to them.

Nugan billed himself not only as a lawyer and banker, but most of all as a tax specialist. He told the Ogdens he could help them save on their tax bill by making more careful investments-such as in Nugan Hand. "He said he could get a better return for the money," Dr. Ogden says. "Frank told us that the bank never lent money and that it was absolutely secure and that the Reserve Bank audited their books every two weeks." Besides, at that point the Ogdens were putting in only their cash savings. They still had substantial life insurance investments to fall back on.

Then tragedy struck. In 1978 the Ogdens' twenty-three-year-old daughter was killed in an automobile accident, and less than a year later their twenty-nine-year-old son died in a hang glider accident in Spain. Frank Nugan reacted with a characteristic show of concern. He had Nugan Hand's office in Hamburg, Germany, fly the Ogdens' son's body home, and he personally handled the other arrangements the Ogdens were too grief-stricken to deal with.

Then he suggested the Ogdens were so grief-stricken they should turn everything over to him. Mike Hand then gave the Ogdens the same pitch. "They could manage our affairs much better than we could ourselves," Dr. Ogden says they told him. "We were so upset that we gave Frank Nugan power of attorney. We thought we were incompetent to look after our own affairs.... We never doubted his integrity. He was after all a Master of Law and we thought we knew him."

So, Dr. Ogden says, "I was persuaded and encouraged to sell all of my real estate and cash insurance policies.... All the money was put into the Nugan Hand Bank."

Did Nugan and Hand know that they were ripping the bereaved couple off? Did either of them somehow believe his own lie because the other one, and all their staff, were telling it, too? To the Ogdens, such questions are immaterial. When Frank Nugan died, Dr. Ogden raced to Mike Hand to inquire about his money. He says he "received powerful reassurance that all was well," after which "Hand pushed off to Hong Kong for a few days. I feel that if you can find Hand and Bernie Houghton, you will find a lot of money," he says.

Trying to recoup, Dr. Ogden went to the New South Wales state Law Society, the equivalent of a bar association in the United States, and applied for relief from its client protection fund. But the society rejected him, he says, "because Nugan acted as both a lawyer and a banker and it would depend on which hat he was wearing"; apparently the society decided that when Dr. Ogden's lawyer counseled him on matters other than the insurance claim, the lawyer was moonlighting as a banker, and so he was no longer the responsibility of the law society.

Then, to add insult to injury, the Australian Taxation Office decided that several of Nugan's plans to minimize his clients' taxes were illegal. The office began auditing Dr. Ogden and other Nugan Hand victims, looking to collect money the victims no longer had, to cover back taxes on income they had already been robbed of.

"Certainly we were incredibly naive and stupid to put so much trust in one person," Dr. Ogden says. Then he volunteers, "The impeccable front of the bank was immeasurably helped by having the likes of U.S. admirals and generals actively working in the bank and on the board of directors." In a letter about this, he adds a P.S.: "Don't you think the remaining directors should be brought to trial and Mike Hand located?"

***

Frank Nugan.

There is as much mystery in his origins as in his death. His parents are widely known as Spanish immigrants who settled in Australia in 1938. Yet the January 29, 1943, birth record of Frank Nugan in Sydney shows that his father, then thirty-seven, had been born in Brackwale, Germany, and his mother, then thirty-two, had been born in Schwedt, Germany. It shows they were married in Jerusalem, Palestine, December 30, 1938 -- the same year that recent oral and published accounts have had them settling in Australia.

A call to the father, Alf Nugan, produces flustered, sputtering denials of the recorded evidence. He hangs up. Called a second time, Nugan again denies what is on the records, but on continued questioning concedes that he was, indeed, born in Germany.

"I was a Spanish citizen," he insists. "I left Germany as a baby. I left to find a better life." He says his mother brought him to Spain and that he married his wife in Madrid in 1930. He says they left because of the Spanish Civil War, and became Australian citizens in 1945. He says neither he nor his wife was either Jewish or Nazi. He refuses to say more and hangs up again.

They settled in Griffith, a town nine hundred miles west of Sydney. Griffith is associated in the average Australian's mind with two activities: the farming of fruits and vegetables, and the open, criminal farming of marijuana. All of Griffith's crops, legal and illegal, are raised for both domestic and export markets. In about 1941, Alf Nugan began what became one of the largest fruit and vegetable operations in the area. It is called the Nugan Group, which led to some confusion in the public's mind when Nugan Hand was started in the 1970s.

By the time of Nugan Hand, the Nugan Group fruit and vegetable business had gone public-its shares were traded on the open market. The company was run by Kenneth Nugan, Frank's older brother by two years. One of the Nugan Group's major customers, according to Ken Nugan, was the United States Government. Among other things, he says, the Nugans supplied fresh veggies to the big U.S. Navy base at Subic Bay in the Philippines. This relationship, Ken Nugan says, predated his brother's relationship with Michael Hand.

***

Just as Miami is known not only for its sunshine but also for its drugs, most Australians associate the town of Griffith with more than just fruit and vegetables. As a center for marijuana and the mob, Griffith has long been a national scandal.

In the mid-1970s a furniture dealer and family man, Donald Mackay, decided to speak up and organize to stop the drug traffic. He circulated a petition demanding that the New South Wales state parliament take action. So enthusiastic was the response that Mackay decided to run for public office on the issue. On July 15, 1977, Donald Mackay disappeared.

The disappearance of Mackay was roundly denounced in Parliament. An investigative authority known as the Woodward Royal Commission (after the judge who headed it) was formed. In 1979, amidst much publicity, it reported, "A secret criminal society named L'Honorata Societa, which is comprised of persons of Calabrian descent, exists within Australia. A 'cell' of this society existed and probably still does in the town of Griffith." Visiting Italian officials testified before the commission that marijuana grown in Griffith was processed by a Mafia drug network and showed up in Europe and North America.

The Woodward Royal Commission declared that Robert Trimbole of Griffith was head of the Calabrian Mafia there, and was involved in the marijuana trafficking. So, it said, was a prominent grape-growing and wine-producing family, the Sergis, which it also included in the Mafia. Big headlines told of the 1976 wedding of a Sergi daughter, where, in a scene reminiscent of the opening scenes of The Godfather, Part Two, the twelve hundred guests brought cash gifts, which were banked by the father of the bride, with the groom's blessing.

John Hatton, an independent member of the New South Wales Parliament, whose district covers Griffith, says flat out, [2] "The Mafia killed Mackay. I don't like to use that term because I don't generally think that organized crime is ethnic, but in Griffith's case I think it's appropriate. Donald Mackay stumbled onto a very valuable field and he persisted in making a stink about it. They brought in somebody from the outside to kill him, figuring that if they knocked off somebody with that high a profile nobody else would want to get involved in it. I think they realize now they made a big mistake. The investigation into it, the interest in it, is still going on."

Among other things, investigators turned up Nugan Group checks for thousands of dollars made out to members of the Trimbole and Sergi families. Ken Nugan argued that these cheeks did not indicate payments to the Trimboles or Sergis. He said the payee names on these checks were just phony "code names" used to cover the conversion of corporate funds to cash for legitimate reasons, though he didn't say what the legitimate reasons for this internal money-laundering might have been.

It seemed a strange practice to some-and an even stranger coincidence on the choice of names.

Investigators found other suspicious links between Robert Trim- bole and the family of Sydney organized-crime boss Abe Saffron -- Bernie Houghton's effective landlord. After Frank Nugan died, the newspapers were able to show business connections between Sergi and Houghton, and between Sergi and the U.S. Army men and Australian businessmen around Houghton.

The bad reputation of Griffith dogged both Nugan brothers in their businesses. At one point the publicity proved so hot that the Nugan Group actually flew a planeload of reporters to Griffith to try to restore some respect. The reporters were shown carrots and onions being crated, and grapefruit being squeezed by juicing machines. Then they heard Ken Nugan declare that he had never dealt with the Trimboles or Sergis. On the other hand, he said, he had known and respected Donald Mackay.

***

Frank Nugan got a law degree from Sydney University in 1963, then set out for North America, where he pursued two highly unusual postgraduate degrees in law. His only real achievement during his American stay, though, was constructing, with some artifice, the resume that was to lure many clients when he returned down under.

Nugan later claimed he achieved a reputation as an international tax expert-the result, he said, of his studies at the University of California, Berkeley, for a master of laws degree. Master of laws is a degree most lawyers don't think worth the trouble of obtaining, but which Nugan won in 1965. A veteran professor at the Berkeley law school, Richard Jennings, recalls Nugan as "a kind of wild fellow" who "dropped into Berkeley with an XKE, kind of a playboy type." He remembers Nugan spending time with glider airplanes, and laughs at the idea that Nugan was a tax expert. "He never even studied taxes when he was here," Jennings says.

Next, Nugan went to Toronto, where he studied for the even more arcane degree of doctor of laws (he never got it). To help pay the Jaguar's gas bills and other expenses, he worked for a corporations task force performing an overhaul of Canadian corporate law. Nugan later claimed-and it was widely believed in Australia-that he had a big hand in rewriting the Canadian legal code. In fact, the task force's report names three authors and twenty-four valuable assistants, none of whom was Frank Nugan.

Philip Anisman, a professor of law at Osgood Hall Law School of York University in Toronto, remembers that in 1967 Nugan got a clerical and research job with the task force. But Anisman says Nugan never had a hand in the task force's recommendations. Anis man says Nugan was "kind of wild, loquacious, fun." But on the main expertise Nugan claimed to bring back from North America, Anisman says, "I never heard anything about any work he did on tax."

Recollections of when Nugan returned to Australia vary-from late 1967, about when Hand arrived, to early 1969. And just how did Nugan-the playboy heir to a modest food-processing fortune with strange beginnings, even stranger criminal associations, and built in part on U.S. military contracts-happen to meet Hand, just coming off active duty as a U.S. intelligence operative in Southeast Asia? Nobody seems to remember that, either. Asked under oath at the inquest, Hand declared that he didn't remember how he met Nugan-highly unlikely, considering that for better or worse they became the most important person in each other's lives. [3]

_______________

Notes:

1. The Ogden quotes in this book are intermingled from their correspondence with the two liquidators, which is on public record in Sydney, and interviews conducted by the author.

2. In an interview with the author, elaborating on charges he has made in public.

3. The Stewart Royal Commission report offers its own typically unreliable account of the meeting. At two different places, the report says they met in 1968, while Hand was working as a security guard at a mining company (Meekatharra Minerals) Nugan had invested in. Elsewhere in the report, however, Stewart acknowledges (as corporate records attest) that Meekatharra wasn't formed until 1970, making this sequence of events impossible. (In addition, other corporate records to be cited here later, which the Stewart Commission may not have been aware of, show that Nugan and Hand had a business relationship before Meekatharra started.) There are no other accounts of Hand's working as a security guard. At yet another point, the Stewart report says Hand met Nugan while Hand was selling real estate -- without bothering to note that this completely contradicts information elsewhere in the same report.
admin
Site Admin
 
Posts: 27519
Joined: Thu Aug 01, 2013 5:21 am

Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 3:18 am

CHAPTER SIX: Sleight of Hand

Where did the Nugan Hand Bank get its money?

After Nugan and Hand became famous as big-spending bankers in the late 1970s, a legend arose that they spent the years around 1970 building independent reputations in the financial community as astute speculators. That was when they were said to have accumulated the capital that would launch the Nugan Hand Bank. But the legend doesn't match the facts.

After arriving in Australia, Hand went to work selling development lots along the Australian coast five hundred miles north of Sydney. His prey was mostly his former fellow spooks and war heroes. He made many trips back to the war zone to see these men. But not many actually bought.

Over several years only a few dozen men are on record as having paid cash for the lots, and they paid only in the low- to mid-four figures. This would have provided a total gross under $200,000, leaving Hand with a commission share that wouldn't even have met his living and travel expenses. And there's still more mystery.

His employer in the real estate sales was a company backed by, of all people, Pat Boone, the blond, goody two-white-buckskin-shoes Christian revivalist singer with the toothpaste-ad smile. The money to develop real estate on Boone's good name was put up by someone who seemed almost equally out of place on the outback, D. K. Ludwig, the reclusive multibillionaire shipping magnate then reputed to be one of the two or three richest men alive, and certainly one of the two or three hardest to get to talk to.

Ludwig's operations in Australia were managed by a lawyer named Fred Millar. Millar was and is senior executive and general counsel for the shipping empire of Sir Peter Abeles-Rupert Murdoch's longtime business partner, and the knight whose small circle of friends also picked Bernie Houghton up off the street when he arrived in Australia and put him to work selling real estate.

Thus both Hand and Houghton, on arriving from overseas, quickly landed real estate sales jobs tied to the same multimillionaire crowd that was politically supportive of U.S. hard-line foreign policy.

There is, of course, nothing to prove that this wasn't just a coincidence. Fred Millar insists [1] he didn't know who Michael Hand was back in the 1960s, before the newspapers became full of Hand. Even after Hand was a celebrity, Millar says, he never met the man. All Millar says he remembers of the whole real estate deal is that Ludwig advanced money to "some American" whose name he doesn't remember, the company went bust, and Ludwig had to take over.

Paul Stocker, now an Everett, Washington, lawyer, was running the operation, originally known as Ocean Shores. Stocker says he went to Australia with his family in 1964, and bought some property. In need of financing and a promotional vehicle, he says, he contacted Boone through an old law school classmate Boone was associated with.

Boone was enthusiastic enough to fly to Australia, and, according to Stocker, was "quite a success" in attracting buyers. (Boone failed to respond to messages left with his agent and manager.) But Stocker says not enough money came in to repay Ludwig, who he says took over the development from him in 1970. Servicemen who bought properties say the names of both Boone and Ludwig were used heavily in the promotions.

Stocker says Michael Hand came aboard through a buddy, Kermit L. ("Bud") King, a former CIA pilot in Southeast Asia, who had come to Australia after his war duty and got a job selling lots for the Boone operation. Lots initially went for $2,500, and salesmen got a 25 percent commission, Stocker says.

Brochures poeticized Ocean Shores the way brochures poeticize vacant lots everywhere: "Landscaping of the 3,200 acres has pre- served the natural beauty of the site, which has miles of white sandy beaches and rolling green hills threaded by the North Arm of the Brunswick river...." Also as usual, the poetry was accompanied by prophecy: "7,500 fully improved homesites with underground power .and water, modern motel facilities and an adjacent airport.... Over $2 million will be spent on clubhouse facilities which will include ... an international class 18-hole golf course ... a yacht club-marina complex" and "a permanent art and cultural center."

***

The Ocean Shores development company was reorganized in 1968 into Wendell West, whose corporation filings in Australia that year show an interesting board of directors: besides Stocker and four Washington State businessmen, the registered directors included Charles Eugene ("Pat") Boone of Beverly Hills, California, and one Pat Swan of Sydney, Australia.

Swan soon became, if she wasn't already, the private secretary and administrative assistant of Frank Nugan; she was eventually committed for trial (indicted) for helping rape and destroy Nugan Hand's files in the days after his death. [2] (As of March 1987, Australian authorities still hadn't set a trial date.)

Records, however, show that in 1969, Hand formed a company called Australian and Pacific Holdings Ltd, which announced that it would develop an island off Australia's renowned barrier reef. Hand did this with two other men: an otherwise unidentified fellow named Clive Wilfred Lucas (now also unfindable) and John J. Foley, a lawyer from little Griffith, the family home of Frank Nugan.

Why a lawyer from, of all places, Griffith? A reporter from the local Griffith newspaper said Foley had claimed creditfor first bringing Nugan and Hand together. Foley denies that now, [3] and insists he was never in the same room with both Nugan and Hand. He says he doesn't remember how he met either of them-though he acknowledges he knew both. Lucas, he says, was a friend of Hand's whom he met only once or twice.

According to Foley, Australian and Pacific "was only a small shell, it didn't own anything. He [Hand] had only just come from Vietnam.... Nothing ever happened. I'm not too sure who suggested it. It was just an idea, really."

Records show that in August 1969 the idea-Australian and Pacific- held its first board meeting. The directors present were Hand, Lucas, and Foley. The minutes show that the company's accountants expressed alarm at the directors' plan to sell stock in the company to the public. The directors agreed that for now they would sell stock to "only close and intimate friends." Hand said he had "many friends in Asia who were with the U.S. Armed Forces there, or in the civil service in Hong Kong or Vietnam" who would gladly invest "in excess of $100,000," the minutes say.

But minutes of the next meeting, January 10, 1970, show that Hand and Lucas had gone to Asia and raised only $16,000. Minutes show that six days later, another directors' meeting was held, at which time it was decided what to do with the money that the new stockholders had put up. "It was resolved," the minutes say, "to lend $16,000 to Mr. F. J. Nugan for a six-month period at 10 percent interest. "

And thus we have the first definitive evidence that the Green Beret-CIA operative from the Bronx, and the U.S. Navy carrot-packer- cum-self-proclaimed-tax-expert from Griffith, Australia, had joined league.

***

When Nugan returned from Canada with his puffed-up account of his exploits and accomplishments there, he went to work for a Sydney law firm, representing a brokerage house and other corporate clients. The law firm was where, in 1969, his friend Paul Lincoln Smith met him. Smith, an older and palpably well-heeled lawyer, recalls, "He didn't have much money then. [Smith doesn't mention the Jaguar.] But he was bright, hard-working. I invited him out to dinner. I took him fishing a lot."

Early in 1970, Nugan and a man named Donald O'Callaghan formed a company called Meekatharra Minerals. They boasted big nickel deposits in Queensland. "Everybody was forming mining companies in those days," says Smith.

Smith asserts, and Australian opinion generally seems to agree, that through a bonanza in mining shares Nugan struck his fortune. There is precious little evidence for this, however.

The highly volatile shares of Meekatharra did rise quickly from ,ten cents a share to six dollars a share. But they fell just as quickly when the promised nickel deposits proved to be about as slow to develop as the Ocean Shores arts and cultural center had been.

O'Callaghan says the notion that his partner Nugan made a bundle off Meekatharra is "total bullshit." He points out that as a co-promoter; Nugan was forbidden by corporate rules from unloading most of his start-up shares on the open market during the quick price-rise. O'Callaghan says Nugan's profits from Meekatharra "would have been minimal, in the forty-to-fifty-thousand-dollar range."

Meanwhile, the affairs of Meekatharra and Michael Hand's Australian and Pacific Holdings intertwined. On February 3, 1970, according to the company minutes, Australian and Pacific "was offered and accepted" fifteen thousand shares of Meekatharra, apparently as collateral for the $16,000 loan to Nugan. Then, on April 14, "a further $3,500 was lent to Mr. F. J. Nugan for a period of six months at an interest rate of 10 percent," the minutes say.

Then, in May 1970, a list of Australian and Pacific's shareholders was filed with the government. The list was to become famous when reporters discovered it in the aftermath of the Nugan Hand collapse, for of the thirty-seven listed shareholders, four had the address "c/o Air America, A.P.O. San Francisco." Air America had by 1980 been exposed as a CIA front.

Another of the Australian and Pacific shareholders had the address "c/o Continental Air Service," whose relationship to the CIA had also been exposed. Five more shareholders were reachable through the U.S. Agency for International Development, also A.P.O. San Francisco; AID was a known funnel for CIA funds. Several shareholders were listed at Michael Hand's own Australian post office box, and many others were listed under post office box numbers or strange business names in Vietnam or Laos.

Was this evidence of a U.S. Government plot?-or was Michael Hand just exploiting his former colleagues in the U.S. service? Despite all the fuss made over the list, it does not provide much evidence of government connivance. In all, the persons named were shown owning 29,200 shares, apparently representing an investment of an equal number of dollars, not a munificent sum.

Over the summer of 1970, Foley and the mysterious Lucas resigned as directors of Australian and Pacific. O'Callaghan and a Sydney lawyer, John Jeweller, were appointed in their place.

***

The minutes of September 22, 1970, say, "It was noted that Mr. F. J. Nugan had not repaid the first loan of $16,000 and that repayment of the second loan of $3,500 was due to be paid on 17 October 1970. The secretary was authorized to effect immediate repayment." There is no evidence repayment was made, however, and during 1971 Australian and Pacific made $8,500 in new loans to Nugan.

About all the money taken in by the company was accounted for by the loans to Nugan. Any development costs at the barrier reef were certainly minimal. The company's expenses totaled zero in 1970, $200 in 1971, $1,071 in 1972, and $381.11 in 1973, the only years for which figures are available:

What was Hand really doing with his time all this while? A colleague from CIA airline days, Douglas Sapper-who became close to Hand again in the late 1970s-remembers that in the 1969-73 period, "Michael showed up in Laos a lot. I saw him in Phnom Penh (Cambodia) from time to time." (Laos and Cambodia, of course, were not favored vacation spots on most itineraries in those war-torn years.)

Houghton also made some trips to Southeast Asia in the early 1970s, immigration records show. He told police he went to explore the possibility of starting a business with Hand in Vietnam, buying surplus U.S. war materiel for resale, though he said the deal never came off.

Sapper recalls Hand introducing him to Houghton in 1969. Sapper says he was working for a photo agency based in Saigon during this period, helping supply U.S. television with pictures. Since Sapper had just previously been working for the CIA, could the photo agency have been another CIA operation, using U.S. taxpayer money to propagandize the U.S. taxpayers? "No comment," Sapper says.

Sapper says that he, like Hand, knew Bill Colby. But he adds that "it was very difficult to live at a certain level in Saigon there and not meet certain people at cocktail parties."

***

Evidence just doesn't bear out the myth that Hand or Nugan raked in millions from mining or real estate in the early 1970s. They did try to make a second round of profits from the U.S. servicemen who had invested in the Ocean Shores/Wendell West scheme. Nugan and Hand, using a Panama City-based front company they controlled, wrote the servicemen offering to buy back the plots at· cut-rate prices. About two dozen men, now back in the United States and eager to get rid of their annual Australian real estate tax bill, agreed.

There is no recorded explanation of how Hand and Nugan got rights to the plots from D. K. Ludwig, the billionaire, whose company held mortgages signed by the servicemen. But with Ludwig either agreeing to it or ignorant of it, they resold some of the lots to Australians for about $7,000 each-several times what they were paying the servicemen. Not all the lots were sold, however. Years later, some were still listed as meager assets in the portfolio of a Nugan Hand affiliate company when Nugan Hand collapsed in bankruptcy.

Examining all the recorded land sales records, it appears that Nugan and Hand might have pulled in $100,000, maybe even a bit more, over what they had to layout to buy the properties. That's not much for two years' work by two men. Nor does it count any overhead of the sales operation-let alone trips to Panama.

And what of the supposed mining bonanza? O'Callaghan says he fired Nugan from any connection with Meekatharra Minerals in 1973. He says he "severed relations both socially and in business," because Nugan "adopted an attitude toward life that I would not have wanted a director of Meekatharra to have. Totally abhorrent." O'Callaghan declines to be more specific about this, but does say that Nugan had owed him a hefty sum for a long time, and didn't pay.

He also says that under their agreement Nugan upon his departure had to turn over 490,000 shares of Meekatharra-most of what he had-to the company at five cents a share. "He could not deal with them without my signature," O'Callaghan says. "He was a great story-teller. He was always talking millions." But O'Callaghan estimates that Nugan had perhaps $20,000 to $30,000 to his name, the family vegetable business aside, when he left Meekatharra.

Thus known events do not bear out the notion that. big killings in real estate and mining stocks provided the $1 million in capital-let alone evidenced the genius-that supposedly went into Nugan Hand. Frank Nugan and Michael Hand were pulling in the kind of money that buys Chevrolets, maybe Buicks, but not the kind that buys XKEs, and certainly not the kind of money that capitalizes multinational banks. Yet by early 1975, while the land-sale operation was still winding down, Nugan Hand was already well underway.

Paul Stocker, the Washington lawyer who failed developing Ocean Shores, says he was later amazed to hear that Hand was running a bank. "That was like hearing that my brother had become a ballet dancer. It didn't make sense. He had no education in banking," Stocker says.

***

Before leaving the subject of northern Australian real estate, there are two mysterious events to note. Perhaps they were portentous, perhaps just coincidence. But among the two or three dozen lots Hand and Nugan sold were eight that happened to go to men employed by the Australian customs service. Two of the conveyances to customs men were dated June 19, 1974, well after Nugan Hand was functioning. The other six were dated six days later, on June 25. On seven of the transactions, the same attorney represented the customs men; on the eighth no attorney is listed.

Considering that one of the renowned charms of Nugan Hand was always its ability to move great sums of money illegally under the noses of the customs service, it has struck any number of investigators that these transactions might have served as payoffs.

Nevertheless, the customs men have demonstrated to the satisfaction of the law that they paid $7,000 each, the going price for the lots. They have insisted that there was nothing unusual or untoward about any of the transactions. No one has been able to demonstrate otherwise. The lawyer on the seven transactions failed to return numerous telephone messages.

There is also the matter of Bud King, the CIA pilot who went to Australia after his war duty. King sold lots for Boone and Ludwig. He lived in what was by all accounts a very nice house, in the remote area where the land was located. There was an airstrip. King's job sometimes involved flying customers or interested businesspersons in to look at the place. Hand spent a lot of time at King's house. Other visitors sometimes stayed there.

King had a Thai housekeeper whom he had brought with him from Asia and allegedly mistreated. The housekeeper got into an automobile accident in about 1973, and George Shaw, already working with Nugan and Hand, sent the housekeeper to a Sydney solicitor, Ivan Judd, who could sue for injury compensation.

After the case was resolved, Judd placed a confidential telephone call (at least it was confidential until the Nugan Hand case blew up) to Australian narcotics investigator Russ Kenny. Judd told Kenny that according to the housekeeper, King regularly flew in planeloads of narcotics from Asia to the secluded airstrip. Hand, according to the housekeeper, was part of the operation.

Nothing seems to have been done with this allegation at the time, except for the filling out of the first of many dope-smuggling complaints involving Nugan Hand principals.

There is a certain perverse irony in the idea that Pat Boone, however unwittingly, may, like the national commander of the American Legion and the executive director of the Freedoms Foundation, have been part of a major heroin racket. But when the allegation was finally looked into by several authorities in the 1980s, it couldn't be confirmed, and so had to be discounted.

Judd confirms that he filed the report, but won't say any more. The Thai housekeeper is long gone.

And so is Bud King. Shortly after Judd filed his report, the CIA aviation whiz somehow managed to fall to his death from the tenth-floor window of his fashionable Sydney apartment building. Case, to this date, unsolved.

***

On June 25, 1973, in Sydney, Australia, there was incorporated the firm of Nugan Hand Needham Ltd. Its office was a suite at 55 Macquarie Street, the same posh downtown office tower Nugan Hand would occupy several floors of when it filed bankruptcy seven years later. An early brochure employed all the euphemism, hyperbole, and mystery that would continue to enshroud the bank as it grew:

"This Company's purpose is to act as a trusted Investment House prepared to make all of its services and facilities available to all persons and enterprises, large or small," the brochure said.

"Australia is a land of great natural wealth. It's wealth is to be measured in terms of proven natural resources; industrial and primary development already undertaken or underway and an increasingly educated trained and prosperous population.

"Australia's wealth lies mainly in its depth of vigorous and able people and their growing and effective business enterprises.

"Services and facilities will be available for corporate financial advice and assistance, investment management, economic and security analysis and advice, money market operations, advice and facilities for international commercial activities and any specialised services sought by a client designed to meet special needs."

Special needs?

"There are specialised services required from time to time by clients of investment houses that, if not previously catered for, are often not available to clients of investment houses in this country.

"This Company is prepared to consider any such special request on the basis of a full and proper exercise of the judgment of our Board of Directors and staff. We shall give any such special request proper study, consideration and the application of the best judgment our Board and staff can apply to the matter as skilled and prudent men of affairs."


And that's as detailed as it went.

The Needham of Nugan Hand Needham was John Charles Needham, a Sydney solicitor (lawyer) who quit the bank after about a year. Needham moved to Queensland (in northeastern Australia), began horse farming, and acquired-apparently from Nugan and Hand-what purported to be a rubber company and a real estate company.

He reappeared in spectacular fashion after the bankruptcy, however, when it turned out that million-dollar "assets" claimed by Nugan Hand were in fact IOUs (of a variety known in Australia as "bills of exchange") issued by the rubber and real estate companies while they were under Needham's control. The rubber and real estate companies refused to honor the IOUs, which proved basically worthless.

Needham steadfastly refused to make himself available for interviews for this book. He told the Stewart Royal Commission (it said) that the IOUs had been issued in exchange for loans from a Nugan Hand affiliate. But he also said that he had sold the rubber and real estate companies by 1979.

Who then became responsible for repayment of the IOUs? The Stewart commission either didn't ask Needham, or didn't record his answer. The commission did say Needham had stopped practicing law in 1979, and that he had served as a director and meeting chairman for the Nugan Group fruit company during its time of trouble in 1977.

In the late 1970s, Nugan Hand pledged the IOUs issued by the rubber and real estate companies for substantial credit with a large Hong Kong bank, which eventually went to court claiming it had been swindled. But no one was ever able to tie Needham to Nugan Hand's fraudulent use of the IOUs his companies had issued, and he was never criminally charged. Long efforts in court by the liquidator John O'Brien and the Hong Kong bank to get cash for the IOUs proved fruitless. All the bank could get were some stock shares in the questionable rubber and real estate companies.

***

The five original stock shares in Nugan Hand Needham Ltd. were recorded as having been distributed to Frank Nugan, Mike Hand, John Needham, the accountant Brian Calder, and Pat Swan -- certainly by then Nugan's secretary and administrative assistant. Needham's resignation was recorded June 28, 1974, and Calder's November 25, 1974. There is no record of what capital Needham or Calder may have contributed or withdrawn.

Nugan and Hand later told the public that the bank was started with $1 million paid-in capital, contributed $500,000 by each of them, with the stock divided between them 50-50. Testifying at the inquest, though, Hand told a different story, Nugan had put up the whole original $1 million from his mining stock profits, Hand said, and had awarded Hand 50 percent of the stock-or maybe only 49 percent -- for the time and effort Hand would put in, But, if you believe him, there weren't any formal records of their arrangement.

By the late 1970s, Frank Nugan was calling himself, in the words of his brother Ken, "one of the wealthiest men in Sydney, He made his money out of the mining boom," Frank's wealthy lawyer friend, Paul Lincoln Smith, says, "I never did any business with Frank We didn't need each other, He was rich and I was rich, People who have money don't often do business with each other. We're looking for people with propositions, He was very excited about Nugan Hand."

***

At a meeting of Nugan Hand's executive staff in October 1979, Bernie Houghton gave a speech recalling the start of the bank There were nearly two dozen people present, including Admiral Yates, General Manor, just-retired CIA deputy director for economics Walter McDonald, and still White House and Pentagon advisor Guy Pauker, To everyone's later embarrassment, Houghton's speech, like others at the gathering, was recorded.

Said Houghton, "My approach is, people will always say Nugan Hand is a Vietnam bank and you go through a variety of things like this and I say, 'No,' The genesis of it was a movement of bonds, or trying to be helpful, for people out of Southeast Asia during the Vietnam War, so that they needed to buy property and they needed to buy gold and they needed to put their money on deposit and they couldn't have it up in Thailand or Laos or Cambodia or Vietnam, so one thing led to another and the company determined that it needed to have a bank, and then not one bank but two, three and four, and one thing led to another."

What exactly did he mean? Especially interesting is the use of the word "company," If that word refers to Nugan Hand itself, the word is used strangely, because Nugan Hand from the beginning was a bank; the original brochure says, on its cover, "Nugan Hand Needham Limited/Australia/Investment Bankers," and nothing more. On the other hand, as almost every reader of spy literature knows now, people working for the CIA often refer to it as "the Company."

Among those who have wondered exactly what Houghton meant were investigators from the Commonwealth/New South Wales Joint Task Force on Drug Trafficking, They, alone, are on record as having asked him, in their interview in Acapulco, June 9, 1981.

Houghton-whose obvious goal throughout the interview was damage control-told the investigators: "Before the formation of the bank, Mike Hand was selling gold and real estate in Vietnam, I should say to people, expatriates, who were in Vietnam or Thailand. Apparently at that time the need for such a merchant bank became apparent to Mike Hand and Frank Nugan."

Further trying to explain the 1979 remarks, Houghton added that "although the transcript is ambiguous, this is in effect what I was trying to say. Also, I was attempting to convey that the word 'Nugan Hand,' although sounding like a Vietnamese name, was not a Vietnamese name or bank. The bank was not set up specifically for the purpose of dealing with the people in Vietnam, Thailand and Laos and it was not my intention to say that at that meeting. However, there is no question that those were also opportunities that would be available to the bank."

***

Few records have been found relating to the bank's activities during its first eighteen months. It solicited depositors and tax clients (who were usually told to become depositors). The office was still being used to sell development lots.

Expansion began in mid-1974. As Needham and Calder left the firm, some important people joined. A hard-sell mutual fund, the Dollar Fund of Australia, had stopped redeeming its shares in July 1974, and within a few months some of its sales force had taken jobs with Nugan Hand. They would provide the key sales personnel in Nugan Hand's own overseas expansion.

On August 2, 1974, Hand, Nugan, and a man named Douglas Philpotts legally incorporated Nugan Hand, Inc., in Honolulu, Hawaii- apparently the first overseas branch. Philpotts was (or quickly became) vice-president of Hawaiian Trust Company, a major Honolulu bank. By the end of the year, Nugan Hand, Inc. had a substantial account in Hawaiian Trust Company.

Records obtained by Australian investigators after Nugan Hand's collapse showed that in October and November 1974, loans were made from the account-$23,500 to Nugan, $30,000 to a George Ibrahim Chakiro, $25,450 to a Robert W. Lowry of whom no more is known, and $9,600 to a Kiowa Bearsford, another unidentified character. The loans were at rates of 5 to 5-3/4 percent interest. Where the money came from to fund the account has never been learned. Philpotts has rebuffed every effort to talk to him about it, saying client affairs are confidential.

In January 1975, there were two critical moves. Clive Collings, known as "Les," one of the big performers from Dollar Fund of Australia, went to Hong Kong to open the second Nugan Hand branch out of Australia. And Michael Hand left, to go fight "Communism" in Africa. He pictured himself as restless, wanting to leave his desk and neckties behind for new challenges in exotic places.

To friends, he complained that the Labor Party government of then Australian Prime Minister Gough Whitlam was stifling for business and freedom in general. It was part of a worldwide leftist tide that Mike Hand sincerely believed had to be stopped. Hand talked of places where combat, which he so dearly loved to reminisce about, was still going on against movements he called Communist.

No one who knew Mike Hand was left to doubt his opinions of Communism. But from remarks made by Houghton, and from the prior activities of Hand himself, we can conclude that Hand contemplated the money to be made from such combat as well. To many people, and there is every reason to believe Hand was one of them, the freedom to gather money as they choose is what anticommunism is all about.

During his testimony at the inquest, Hand insisted that when he left in 1975, he had thought he was permanently severing all relationships with Nugan Hand. "I wrote him [Nugan] a resignation on each and every company that I was a director of, and signing over all my powers, etc., to him," Hand testified. "Frank Nugan ... made an agreement with me when we had separated company that he was going to pay me out for my time and effort, what he could afford over a period of years, when we had separated company on January 10, 1975." Hand said he turned back all his stock.

Interestingly, there are no documents to corroborate Hand's story. No documents remain of any legal separation of Hand from his partnership with Nugan, or from the bank, which continued to call itself Nugan Hand Ltd. Hand did indeed take off for fifteen months, and certainly visited some exotic places. But he returned to Australia during that time, and was in regular touch with the office.

It was an eventful period, politically. There is much evidence that throughout it, Hand continued to work for the bank. There is also enough evidence to have set some people wondering as to whether, in addition, he might have been working for another, higher authority.

***

Before turning for a while to political concerns, it is worth addressing again the question: Where did the Nugan Hand Bank get its money? The drive to provide an answer, spurred in part by Nugan's and Hand's early claims that they had $1 million or $2 million behind them, has helped perpetuate the myth about mining and real estate profits, and has even spawned speculation that the CIA might have bankrolled them.

In truth, there is no reason to believe they needed much of an initial bankroll. They created some paperwork to make it appear they were injecting capital, but this was clearly a sham. Nugan wrote a check to the company, and then, to cover it, purported to borrow back the money. The result was a simple check kite.

As the Stewart Royal Commission correctly notes, "Mr. Nugan had less than $20,000 in his bank account at the time when he purported to write a check for $980,000.... Nugan Hand Ltd. had only $80 in its account when a check was drawn on that company in the same amount.... Throughout the life of the company the only money ever in fact paid for shares out of funds belonging to either Mr. Nugan or Mr. Hand and actually received by the company remained at $105."

The question of how Nugan Hand got its money, meaning its seed capital, fades before the real question of how Nugan Hand got its money after it started. And the answer is that no investment profits, or CIA subsidies, were required.

The money came mostly in two ways: from high fees charged for performing illegal (or at least very shady) services, and from the fraudulent procure

_______________

Notes:

1. Interview with the author.

2. I tried to ask Swan how this happened, but ever since the Nugan Hand scandal she has made herself just as hard to interview as D. K. Ludwig.

3. Interview with the author.
admin
Site Admin
 
Posts: 27519
Joined: Thu Aug 01, 2013 5:21 am

Next

Return to Political Science

Who is online

Users browsing this forum: No registered users and 1 guest

cron