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.

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

Postby admin » Sat Dec 16, 2017 3:23 am

CHAPTER SEVEN: Terrorists and Patriots

The United States Central Intelligence Agency's main work, as President Truman envisioned it when he' set it up, is keeping the president accurately informed about the world forces he must deal with, Yet the CIA seems perennially distracted from this mission by its embroilment in covert operations.

This obsession with political activism tends to dam up the best channels of information, and bias the remaining ones, Worse still, operations seem to be self-perpetuating. Instead of achieving their objectives, they wind up causing so much inadvertent damage to American interests that new operations are constantly being dreamed up to try to straighten out the results of the old ones.

Of examples, 1975 offered more than its share. President Gerald Ford, with his relative lack of experience in foreign dealings, was mesmerized (as was most of the press and public) by the supposed expertise of that most unshrinking of all violets in the field of foreign intervention, Secretary of State Henry Kissinger.

Both the Director of Central Intelligence, William Colby, and the deputy director of the CIA's covert action division, Theodore G. Shackley, were men after Kissinger's own heart. Neither of these top spooks-both of whom were about to become involved in the Nugan Hand scandal-had, in his career, shown any reluctance to shed American or foreign blood in covert military operations as a means to carrying out their assignments.

The most prominent of these assignments had been gory and monumental failures. The first was to replace Fidel Castro with a friendly and popular government in Cuba. (This was Shackley's job during the 1960s, running an anti-Castro terror program called JM/ WAVE.) The second assignment was to ensure that the Communist government of North Vietnam did not spread its influence over South Vietnam and the rest of Indochina. (This was first Colby's, then Shackley's task, as CIA station. chiefs in Saigon.)

The results of Colby's and Shackley's terrorist tactics in accomplishing these missions speak for themselves. Castro and Ho Chi Minh were not thwarted. Instead, they were handed victories over a foreign invader, the United States, that solidified popular support for their otherwise vulnerable socialist governments.

Beyond creating political enemies abroad, the CIA's Cuban and Indo-chinese operations were distinguished by the seemingly endless number of thugs and dope dealers on whom they bestowed the legitimacy of U.S. Government service. The Vietnam War dope 'connection has already been discussed in these pages.

In south Florida, by the 1970s, police could scarcely arrest a dope dealer or illegal weapons trafficker without encountering the claim, often true, that the suspect had CIA connections. Perhaps the largest narcotics investigation of the decade, the World Finance Corporation case, involving scores of federal and state agents, had to be scrapped after a year because the CIA complained to the Justice Department that a dozen top criminals were "of interest" to it. [1]

All this accomplished by 1975, more work lay ahead. There are two well-known missions that the Kissinger-Colby-Shackley team undertook that year: first, making sure that friendly governments stayed in power over the long term in Iran and Afghanistan, and second, making sure that a Soviet-allied government did not come to power in Angola when Angola achieved independence from Portugal.

Obviously, the "success" of these missions fairly rivaled that of the Cuban and Vietnamese campaigns. In both the Iran and Angola disasters, Nugan Hand played a demonstrable, though relatively minor, role, according to the findings of the Commonwealth/New South Wales Joint Task Force on Drug Trafficking.

It's also been discussed that there may have been a third operation that year, and that Nugan Hand may have played a role in that, though it's never been demonstrated. This third operation would be the overthrow of the Labor government in Australia, which fell to a highly unusual legal coup in November 1975.

Speculation about U.S. and Nugan Hand roles in the Australian coup have been fueled by the known attempts of both the United States and Nugan Hand to interfere in Australian politics during the 1970s, and by the fact that Shackley, the covert operations chief and later a Nugan Hand character, struck out vigorously against the Labor government a mere three days before it fell.

***

Nugan Hand's known role in U.S. intelligence activities in 1975-76 was played out through the star-crossed marriage of a career CIA officer named Edwin Wilson and a special U.S. intelligence unit known as Naval Task Force 157.

The one best metaphor for the distance U.S. foreign policy has strayed from its constitutional purposes in the latter half of the twentieth century is that the profession founded by Nathan Hale has produced an Edwin Wilson. When a federal judge finally put Wilson away in 1983, probably his only regret was that he had but one life sentence to give for such betrayal.

Wilson joined the CIA in the 1950s, and over the years established a reputation as a tough, fearless, independent field operative. Those were qualities that earned him respect and loyalty among other operatives. No one knew him really well, but in the clandestine services that was merely one more virtue. A veteran of CIA covert activity around the world, he was certainly the kind to appeal to his superior, Ted Shackley, whose closeness and loyalty. to Wilson helped prove Shackley's undoing.

In 1971, Wilson "retired," in official parlance, from the CIA. Coincidentally, the official account goes, he went to work that same year as a civilian employee of Naval Task Force 157. Throughout his service with 157, however, he continued to converse regularly about matters of business not only with Shackley but with two active-duty CIA field officers, Patry. E. Loomis and William Weisenburger.

These CIA contacts have prompted speculation-so far, it's only that-that Wilson was planted by the CIA as a mole inside Task Force 157, a rival U.S. intelligence agency. (Such interagency spying wouldn't be unprecedented; from 1970 to 1972, navy. Yeoman Charles Radford was planted as a mole on the clerical staff of the National Security. Council, and secretly delivered more than five thousand of Henry Kissinger's staff papers on peace talks and other matters secretly to Admiral Thomas Moorer, chairman of the Joint Chiefs of Staff.) [2]

The independent existence of a unit like Naval Task Force 157 is in itself a testament to the CIA's misuse. The reason the task force was created was that the CIA's involvement with covert operations had handcuffed the agency in doing its original and necessary work -- gathering and transmitting intelligence.

Instead of fulfilling its intended and proper mission, the CIA spent its time organizing and maintaining full-scale armies fighting wars in various parts of Africa, Asia, and Latin America; promoting economic havoc here and there in all three regions; attempting to bring down foreign governments (those of Guatemala, Nicaragua, Chile, Zaire, Zambia, South and North Vietnam, Iran, Afghanistan, Albania, Cambodia, Laos, Brazil, Guyana, the Dominican Republic, Angola, Cuba, Lebanon, Indonesia, and China, to name a few publicly documented cases) and often succeeding; bringing about the death of any number of foreign heads of state (Lumumba, Diem, possibly Allende) and hundreds of thousands of other foreign political figures (the deaths in Indonesia alone might justify that number); reporting on the domestic political activities of U.S. citizens; and carrying out other assorted adventures. With all that activity, the CIA has understandably become not much more clandestine than any other branch of government, maybe less so.

In need of the kind of low-profile, workaday spies that the CIA was supposed to provide, the government was obliged to set up a supersecret task force under the Office of Naval Intelligence. Starting slowly in the mid-1960s and named after something so arbitrary as the room number of someone's office, Task Force 157 quietly gathered information about maritime affairs all over the world. It paid particular attention to the activities of the Soviet Navy and the movement of nuclear cargoes, but also kept tabs on cargo movements in general.

Partly because it was small and self-contained, the task force developed such a secure system of coded communications that Kissinger himself came to prefer it to standard embassy transmittals when he wanted to send messages to the White House while visiting foreign dignitaries. The 157 communications system was used for arranging his secret mission to China before President Nixon reopened relations with the Chinese.

To facilitate 157's work, the navy allowed the men and women who did the spying to set up business fronts on their own and to recruit foreign nationals as agents. Says one former 157 operative, [3] "My job was to find out what the Soviet Navy was doing here, here, and here [pointing to locations on a make-believe map]. I had a great deal of leeway in how to go about it. If I wanted to set up a shipping company, I became president of a shipping company." Beginning with about thirty naval officers and seventy civilian spies, its payroll grew to include more than eight hundred human sources of intelligence.

There is no record of 157's ever engaging in any covert operations to change the events it reported on. Admiral Thomas H. Moore, then chief of naval operations, says that during the Vietnam War the task force penetrated the North Vietnamese transport industry and provided precise shipping schedules that helped plan the mining of Haiphong harbor. But 157 didn't get involved in the mining; it merely produced an accurate schedule of ship traffic.

Indeed, from all one can learn about it, Naval Task Force 157 seems to have been the very model of the kind of intelligence agency the United States needs-until CIA cowboy Ed Wilson got into it.

***

Exactly what Wilson's circumstances were before he joined the task force, and exactly what job he had there afterwards, aren't clear. For obvious reasons, the officials who ran 157 have tried to minimize his role, to say he was. just one agent in the field and had no influence in central planning or operations.

That explanation is suspect, however. Unlike other 157 agents who were scattered to port towns on all the seven seas, Wilson's field office was in downtown Washington. Rather than found a little dockside expediting company in Copenhagen or someplace, as other agents did, Wilson founded a roster of shipping companies and international consulting firms.

His associates in these firms included some big names, like Robert Keith Gray, President Eisenhower's appointments secretary and now an influential Republican Party figure who served in 1981 as co-chair of the Reagan inaugural committee. [4] The clients of Wilson's front companies included such firms as Control Data Corporation.

Some say Wilson was used by 157 as a specialist in procuring fancy spy gear (unusual boats, or electronic equipment, for example) for its worldwide needs. Others say his specialty was setting up corporate covers for others to use. Witnesses say he showed up only occasionally at 157 headquarters. It is hard to believe, however, that his bosses at 157 weren't aware-as so many others in Washington were-that Wilson, who was paid less than $35,000 a year for his spy work, lived as a multimillionaire on a fabulous estate he had recently acquired in Virginia.

On this estate, valued at $4 million, he regularly entertained senators (Hubert Humphrey, Strom Thurmond, John Stennis) and numerous Congressmen, generals, admirals, political officials, and senior intelligence officers (such as Ted Shackley). It soon became public record that Wilson was selling his services for high fees to companies or foreign governments that wanted help obtaining U.S. Government contracts or weapons.

The denouement occurred in February 1976. Admiral Bobby Ray Inman, recently returned to Washington to run the Office of Naval Intelligence, recalls he was lunching with a staff member of the late Arkansas Senator John McClellan's appropriations committee. Unexpectedly, another member of Senator McClellan's staff arrived with Ed Wilson.

According to Inman, Wilson promptly announced that he could influence appropriations bills for the navy if more business went to his companies. Then, Inman says, Wilson added, "By the way, I work for you," and explained that he ran fronts for Task Force 157.

Inman says he was "absolutely astounded" when he learned that Task Force 157 operatives could run their own businesses on the side, and a week later arranged another meeting with Wilson. He says Wilson urged him to set up an independent intelligence program for Wilson to run, and then invited Admiral and Mrs. Inman to a Sunday lunch at his estate. Inman says he phoned 157 immediately and ordered that Wilson's contract not be renewed when it came up that spring.

When the task force's own budget came up for renewal in 1977, Inman simply scrapped the operation. He says the reason was that overall budget cuts forced him to use the naval officers employed by 157 in other jobs. Wilson, who was already under investigation by the Justice Department, couldn't have been, out of Inman's mind, however. [5]

Inman went on to become deputy director of the CIA. He resigned soon after President Reagan took office in 1981 (some say so he would be a better candidate for CIA director in a future Democratic administration). He took a job running a computer consortium headed by Control Data Corporation.

Three former 157 operatives, including Thomas ("Smoke") Duval, who helped organize the task force and run it, left government service to take jobs with Wilson himself.

***

Wilson kept running the maritime and consulting companies that he had created as fronts for Naval Intelligence. These companies, originally U.S. Government creations, continued to be regarded as such by outsiders even after Task Force 157 had secretly gone out of business.

Wilson continued to swap information regularly with Shackley. He hired some CIA personnel. Though most were formally retired, two CIA men-Pat Loomis and Bill Weisenburger -- moonlighted for him while still officially on active duty. Among other things, they tipped him off to the equipment needs of foreign governments, so Wilson could steer his corporate clients toward the contracts to supply the equipment.

Wilson's associates later claimed they thought he was still working for the agency. Whether this is because he had created a clever ruse, or because the associates needed an alibi for their own illegal behavior, or because he really was still working for the agency (or maybe some faction within the agency), is nothing you'd want to bet the ranch on.

But in September 1976, one former CIA analyst who had gone to work for Wilson, Kevin Mulcahy, developed serious qualms about what Wilson was doing. Mulcahy called headquarters and asked if Wilson's operation really was agency-approved. [6]

What finally drove Mulcahy to question Wilson's bona fides was seeing Wilson export high explosives and other dangerous weapons to Libya. Using a company Mulcahy was titular president of, Wilson had provided Libyan President Muammar Qaddafi with heat-seeking ground-to-air missiles of a type that could shoot an airliner out of the sky, and training programs covering "espionage, sabotage and general psychological warfare."

Mulcahy also learned that Wilson was carrying out assassinations in his spare time, mostly for Qaddafi, but also out of pique. For example, Wilson bombed a car owned by a Paris merchant who Wilson believed had gypped him on an order of wool uniforms six or seven years earlier-when Wilson would have been a full-time CIA officer. Mulcahy later said the merchant's wife had been killed in the bombing (Hersh's report says severely injured); the merchant escaped.

Having decided to check on Wilson, however, Mulcahy evidently picked the wrong CIA officer to call: Ted Shackley. Shortly after Mulcahy had gone to work for Wilson, Wilson had brought him with great show to Shackley's house. There, Mulcahy said, they discussed Wilson's forthcoming meeting with Qaddafi in Libya, and Wilson's efforts to get a U.S. Government export license for some high-grade communications gear Wilson wanted to sell abroad. Mulcahy figured that with Shackley's senior position in the agency and his obvious familiarity with Wilson, he would be the right person to go to.

Instead, Shackley's noncommittal response over the phone was so alarming to Mulcahy that he reported it to the FBI and to an old friend who still worked in the CIA. Immediately after placing these three "confidential" calls to government officers, he said, Wilson fired a message from overseas telling him to "shut up" and "knock it off." Mulcahy went into hiding under an assumed identity.

Wilson's friend Shackley hadn't even reported Mulcahy's call at the CIA. [7]

After the Justice Department finally began investigating Wilson, it gathered more material, showing that Wilson and another former CIA officer, Frank Terpil, for very large fees had also supplied Qaddafi with a laboratory that turned out sophisticated assassination gear, and bombs disguised as household trinkets using plastic explosive that could slip through airport metal detectors. Wilson and Terpil were hiring anti-Castro Cubans from Shackley's old JM/WAVE program to assassinate Qaddafi's political opponents abroad.

Then came still more material, showing that Patry Loomis and other Wilson agents were hiring U.S. Green Berets for Qaddafi. Some U.S. Army men were literally lured away from the doorway of Fort Bragg, their North Carolina training post. The GIs were given every reason to believe that the operation summoning them was being carried out with the full backing of the CIA-and they made the transition, just as Mike Hand had gone from the Green Berets to the CIA a decade earlier.

Wilson supplied planes, men, and weapons for Qaddafi's military forays against neighboring Chad and Sudan. Wilson's recruits staffed and trained Qaddafi's air force, and maintained the equipment. Wilson personally is said to have cleared at least $15 million from all this, investing heavily in real estate in the United States and England.

In 1982, Paul Cyr, a former Energy Department official, told a federal court in Washington that he attended several meetings in the late 1970s between Wilson and Shackley. These meetings, he said, left him with the same impression Mulcahy got watching Wilson and Shackley together: that even after Admiral Inman had separated Wilson from the navy, Wilson was operating with the CIA's okay. [8]

Whether or not people were correct in the implications they drew from the Wilson-Shackley connection, it is a sad commentary on what our irrational, undiscerning war against a vague "Communist" menace has done to American values. People everywhere accept it as perfectly plausible that the United States Government is routinely engaged in secret, highly illegal, absolutely stomach-turning activities, with profits to be pocketed privately along the way. Unauthorized crimes have become hard to distinguish from the authorized ones. You can no longer tell the crooks from the patriots.

For many years after Wilson's transgressions came to the government's attention, no action was taken. Whether this inaction was due to Cold War politics, ineptitude, or some other reason can only be wondered at. Meanwhile, Wilson continued to operate.

His deals proved especially ironic under the Reagan administration. It served the administration's propagandistic purpose to hold up the bloodthirsty Qaddafi as the leading example of Soviet-orchestrated world terrorism. According to Reagan White House pronouncements in 1981, Qaddafi's violence was made possible by the help of Russians, East Germans, North Koreans, and Cubans.

But all the time the administration was delivering that line, it had evidence that Qaddafi's violence-from his repeated invasions of neighboring Chad to his assassination attempts against political enemies in the United States and elsewhere-was instead made possible by the men of the United States Central Intelligence Agency.

***

It should come as no surprise that slime like Edwin Wilson and Bernie Houghton should, at some point along the line, have met and found a common bond. Though Houghton has denied it, there is evidence that the bond was made while Wilson was still officially in U.S. Government service-and that through it, Houghton helped involve Nugan Hand in U.S. covert activity in southern Africa and Iran.

Later, after Wilson was off the payroll but while he continued to deal with active CIA officers, there were undenied meetings between Wilson, some other officially retired CIA men, and Bernie Houghton, acting for Nugan Hand. The result of these meetings was some strange movements of money around Europe and the Middle East.

Michael Hand's first reported destination when he left Australia in January 1975 was South Africa. To understand what he did, it is necessary to understand, at least briefly, the situation. The bottom half of the African continent in 1975 was teeming with what the U.S. foreign policy establishment contended was the continuing worldwide war over Communism.

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Southern Africa

Hand quickly journeyed to Rhodesia, where he helped defend the government of Ian Smith, a white man "elected" to his job by a "democracy" in which only the 250,000 whites in the country could vote. Smith's opposition came from two "terrorist" groups who didn't think much of a democracy that excluded the country's six million blacks.

To raise aid from abroad, Smith and his colleagues advertised fiction that the two "terrorist" leaders, Robert Mugabe and Joshua Nkomo, were Soviet agents-split perhaps by a few arcane ideological differences, but both Kremlin-controlled Marxist-Leninists at heart.

Like Smith, the South African Government was also vitally concerned with keeping the black majority out of power in Rhodesia -- and the rest of southern Africa. Governments produced by majority rule would, naturally, tend to support a black majority government in South Africa itself. So the South Africans worked closely with Smith in trying to substitute the issue of Communism for the Issue of racism. (Conspiracy buffs may believe it was really Henry Kissinger who conceived this scenario, which he subscribed to, so that the United States could flex its muscles somewhere after the Vietnam disaster.)

Publicly, at least, Smith, Kissinger, and South Africa ignored what was really going on in Rhodesia. Mugabe and his followers were members of the Shona tribe, or nationality group, while Nkomo and his followers were members of the Ndebele tribe, or nationality group. Each was fighting not for Moscow but on behalf of his people.

By 1980, the tide of combat forced Smith to hold real elections, and the world was surprised to learn that the two bands of "terrorists" represented more than 90 percent of the black vote. Mugabe won the election over Nkomo in direct proportion to the extent to which the Shonas outnumbered the Ndebeles.

When Mugabe came to power, he didn't turn to Soviet Communism. Instead, he left the whites their property and turned for aid to the most logical sources, the people who had it to give: the United States and Britain. [9]

Ironically, it was largely Britishers and Americans who had aided Smith, Some of the aid the Smith regime had received in its fight against Mugabe and Nkomo was given for mercenary reasons, some for ideological. Probably most of the aid, from people like Michael Hand, was motivated by a little of both. But despite the wishfulness of some in Washington, none of the aid to the Smith war machine was ever shown to have come from the U.S. Government.

In Rhodesia, the U.S. Government appeared to have followed, however minimally, the two basic rules for winning friends abroad: we had a strong economy that a foreign country would want to trade with and emulate, and we made sure that the people who came to power there had never been shot at with an American gun.

***

To the west of Rhodesia (now Zimbabwe), however, the second of these rules was forgotten. In Angola, forces were at work quite similar to those in Rhodesia. Two nationalist groups were fighting a tiny, white-minority government.

There were differences, however. First, whereas the white Smith government in Rhodesia was in outlaw rebellion against its own British colonial roots, the minority government in Angola was still that of the colonial Portuguese. The Portuguese were America's NATO allies. And so, in the case of Angola, the U.S. shunned even the polite cover of official neutrality and openly supplied weapons for the suppression of Angolan independence, thus making ourselves the enemy of the Angolan nation.

Further complicating things was the legacy of our earlier interventions in the land just north of Angola, the vast country of Zaire. Through a series of American-run coups, the United States had installed a dictatorial and hugely corrupt one-party government in Zaire, with a nationally controlled, socialist-type economy. The dictator we installed, Mobutu Sese Seko, had a cousin [10] who aspired to rule Angola, and for many years the U.S. had financed this cousin in the training of an army.

When the Angolan independence movement gained the upper hand in the spring of 1975 (largely with the help of a coup in mother Portugal), the U.S. was stuck with the cousin. It was a classic example of how old covert actions beget new ones.

To excuse its support, first of the Portuguese, then of Mobutu's cousin, the U.S. did just what Smith and the South Africans had done in Rhodesia: we created a mythology in which the two tribally based independence organizations were called Communist. On the other hand, the army supported by the socialist dictator Mobutu represented, we said, democracy and free enterprise. These were the players:

MPLA (Popular Movement for the Liberation of Angola), made up mostly of Mbundi tribe members;

UNITA (National Union for the Total Independence of Angola), made up entirely of Ovimbundu tribe members;

Holden Roberto (Mobutu's cousin).

To keep the supposedly Communist MPLA and UNITA out of power, the U.S. launched a direct, U.S.-run military operation in support of Roberto. It was intended to be covert, but by year's end it was all over the newspapers (thanks again to Seymour Hersh and the New York Times). Our intervention was described by Kissinger as a response to Soviet and Cuban intervention, but in fact it preceded (and could logically be seen as provoking) Soviet and Cuban intervention. [11]

When Roberto's army crumbled, the CIA began recruiting U.S. and European mercenaries and sending them into Angola to fight. Still, by independence day in November 1975, it was obvious that our force didn't stand a chance against the much bigger Mbundi population of Angola, the MPLA. The other main force, the Ovimbundu -- UNITA- sought to wrest power for itself, which was nothing new since the two tribes had fought for centuries over the best farmland. But the MPLA group dominated the capital city, and Mao Tse-tung, an early backer of UNITA, was fading.

Seeing its dream of ruling Angola shattering, UNITA, whose members populated the outlying southern and eastern reaches of the country, struck a desperate bargain with South Africa.

Just as in Rhodesia, the South Africans wanted to prevent a truly representative government in Angola, which might support majority rule for South Africa as well. South African whites figured they could protect themselves by putting a dependent Ovimbundu (UNITA) government in Angola.

Shortly before independence, the South African army began to drive from the south to try to take the capital of Luanda, and put a compromised Ovimbundu (UNITA) government in power. Rather than cave in before an armed invasion from South Africa, the preeminent Mbnndi (MPLA) accepted an offer of Cuban troops to offset the South African troops on the other side. This guaranteed that the Mbundi (MPLA) would accede to power-as an election probably would have established anyway.

So the Mbundi (MPLA) became the government. The Ovimbundu (UNITA) were reduced to an armed guerrilla movement in the outlying regions, lumbered with a humiliating tie to South Africa. And the United States, throwing worse policy after bad, lavished more weapons and mercenaries on the hopeless and discredited third faction in Zaire. We even covertly cooperated with the white South African Government to do so.

Despite this aid, our side was wiped out in early 1976, leaving behind only some U.S. and European mercenaries in Angolan prisons and cemeteries. South African blacks, who would one day run their country, had been given sobering evidence that the United States of America, which should have been their friend, wasn't. [12]

The Mbundi government in Angola maintained a primary alliance with the Soviet Union, as its only lifeline in a sea of American and white South African hostility. But it was practical enough to maintain commercial ties to U.S. companies, and sell the U.S. Angola's main product, oil-a blessing during the 1979 oil crisis. By the mid-1980s, the Soviets had proven themselves such ill-humored and ill-equipped friends that a U.S.-Angolan deal to the benefit of both countries was still a possibility, even under Mbundi rule.

At any rate, that was the situation into which Nugan Hand inserted itself in 1975: the United States and South Africa were allying to intervene militarily against an Angolan tribe, the Mbundi, that was destined to win control of that country. While the Mbundi represented no security problem whatsoever to the United States, they most certainly did represent a problem to continued racist minority rule in South Africa.

_______________

Notes:

1. Assertions made in this section are all documented at length in Endless Enemies. I regret any annoyance created by these references to a prior book. They are here not for self-promotion, but to assure the reader that certain strong statements made here as background to the Nugan Hand affair are not being made without proper documentation. It seems silly to repeat tangential details in this text that are available elsewhere, but the reader should be assured that they exist.

2. See Seymour M. Hersh, The Price of Power.

3. One of many the author interviewed, who agreed to the interviews on condition their names not be disclosed.

4. Gray told Inquiry magazine in November 1981 that he didn't know his name appeared on the hoard of directors of a Wilson company. But Wilson's biographer, Peter Maas (Manhunt,) established close personal and professional links between the two.

5. The shutdown of 157 provoked such bitterness among former civilian members of the task force that many sued the government claiming that their job rights had been violated. In order to preserve the secrecy of 157, the navy refused for a while to acknowledge that its civilian members had ever been employed there, causing them problems in claiming government pension and pay rights and in getting new jobs.

6. Mulcahy's story was revealed in a stunning series of articles by Seymour Hersh in the New York Times, June 14-21, 1981. Even before Hersh's stories ran, the Boston Globe team of Stephen Kurkjian and Ben Bradlee had exposed the gist of what Wilson was doing. I talked to Mulcahy many times after those articles appeared, confirming them and additional information.

7. In several places in this passage I have stuck very close to the language of Hersh's articles simply because that language apparently passed the scrutiny of all involved.

In preparing this material, and other material in this book about Shackley, I tried relentlessly to talk to him about all of it. My calls to him were returned at times by a Barbara Rosotti (spelling phonetic) and at times by a Ken Webster, each of whom insinuated without quite saying so that she or he was Shackley's lawyer. They insisted that their relationship with Shackley could be disclosed only under an agreement that it would not be reported. Each offered to supply me with the "facts" only if I would accept these "facts" completely off the record, without letting the reader know anything about the source of them. Never having taken any other information under such a stricture, I declined. But I offered literally dozens of times to discuss everything either with Shackley himself or with any authorized spokesman; I was denied access to anyone who would so identify himself.

These conversations with Rosotti and Webster were followed by a letter to me from a Washington lawyer, J. Patrick Hickey, who referred to Shackley as "our client." Hickey's letter showed a familiarity with at least parts of my conversations with Rosotti and Webster. The letter said that the "Australian-New South Wales Joint Task Force" had "informed us" that Shackley wasn't suspected by the task force of having violated any laws. The letter accused me of having "despite several requests . .. failed to provide us with the substance of other comments you may be including with regard to Mr. Shackley and have thereby deprived him of the opportunity to correct possible inaccuracies."

I immediately wrote to Mr. Hickey objecting to his mischaracterization of my conversations with Rosotti and Webster, and offering again to talk to Shackley or an identifiable, authorized spokesman. I got no reply. After that, substantial material about Shackley derived from the work of the Commonwealth/New South Wales Joint Task Force on Drug Trafficking and other material appeared under my byline in the Wall Street Journal, and to my knowledge nothing further was heard from Hickey, Shackley, or the others.

8. Cyr made these statements as he was about to be sentenced for the crime of taking between $3,000 and $6,000 in bribes from Wilson for introducing some Energy Department colleagues-procurement officers-to representatives of Wilson's client Control Data Corporation, which wanted to sell computers to the government; the company wasn't charged with any crime. Judge John H. Pratt evidently accepted Cyr's word about the Shackley connection and its implication of CIA approval for Wilson's operations, because the; judge dealt Cyr a particularly lenient probationary sentence.

Wilson met Cyr through the friendship of their children, and, Mulcahy said, "Paul [Cyr] got Ed some contracts." According to Mulcahy, Wilson not only bribed his way into the Energy Department via Cyr, but also sent a paid mole into Anny Materiel Command meetings to "find out what kind of stuff the army would be buying."

9. Mugabe did announce the intention of eventually creating the kind of one-party "African socialist" state that most other countries in Africa had created on independence and that many still had.

This "African socialist" system has severely hurt economic development on the continent, but hasn't posed any security threat to the United States. Not only do many of our best friends on the continent operate through the one-party "African socialist" system, but in Zaire and possibly elsewhere the CIA helped install the system! And Mugabe, preoccupied with achieving racial and tribal peace at home and good relations with the rich Western countries, put all plans for this system on long-term hold anyway.

10. Relationships in African extended families are hard to correlate with Western usage. "Cousin" conveys the idea.

11. Detailed documentation of these events is given in Endless Enemies.

12. Trapped by their own predictions about the dire consequences of an MPLA victory, the U.S. foreign policy-makers decided to join league with South Africa in support of the UNITA rebels. This in turn required them to write UNITA's "Communist" origins out of history and to let UNITA wear the mantle of democracy and free enterprise that Mobutu's cousin was no longer able to shoulder. All this has been accomplished under the Reagan administration with a facility Stalin would have marveled at.
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Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 3:35 am

CHAPTER EIGHT: Into Africa

Michael Hand laid the groundwork for arms deals before he even left Sydney for South Africa. Or so says Wilhelmus Hans, a fifty-year-old Dutchman who had been hired by Nugan Hand about six months before Hand took off in January 1975.

Hans talked to two investigative bodies the Australian Government assigned to investigate Nugan Hand-the Joint Task Force on Drug Trafficking, and the Corporate Affairs Commission. Both bodies, in their reports, specifically noted that based on much corroborating evidence, they tended to believe Hans, and to disbelieve the former Nugan Hand employees who denied the arms involvement he described. According to Hans, both he and Frank Nugan had been instructed by Hand to check out sources for military weapons.

The Corporate Affairs Commission found a handwritten note from Hand to Nugan, dated January 12, 1975, located in a file entitled "South Africa." According to the commission's 1983 report, "Mr. Hand was concerned that a project in which he was involved was against United States law, and requested that his name be removed from the records of Nugan Hand in Hawaii so that he would not have to include bank account details in United States taxation returns." It was and is illegal for U.S. citizens, no matter where they live, to help arm the white South African Government.

After Hand reached South Africa, he phoned back to Nugan to discuss arms deals. The evidence is in handwritten notes of Nugan's, found in undestroyed files after his death, some of which were apparently taken during a phone call from Hand. The notes read:

Military Weapons Rhodesia

Pay in Gold

Recoilless Rifles

Mortars 60/ 80 ml

M79 Grenade launches [sic: "launchers"?]

Quad 50 Calibre machine guns


It would be significant, of course, if it were shown that the United States Government cooperated with South Africa in the war against majority rule in Rhodesia (now Zimbabwe). The timing of the action, however, exactly coincides with the CIA's raising of arms and men on the black market for the intervention in Angola.

Another set of Nugan's handwritten notes in the "South Africa" file had, on one side, apparent jottings of a telephone talk with Hand, and on the other, some instructions to Les Collings, the head of the new Hong Kong office, for carrying out Hand's proposals. The notes detail Hand's ability to obtain Rhodesian ivory. The front contains such phrases as "Ex factory ... ship self expecting phone call ... in Les Collings ... referred by Hand can send for inspection ... to be sold in two lots 8,000 kilos each mixed ... Estimates $22/$23 Rhodesian/$40 US approx per kilo."

The back says:

"Les [underlined]

(1) HK [Hong Kong] importer of hand guns or sporting fire arms Singapore

(2) NHHK [Nugan Hand Hong Kong] Ltd. purchases hand guns direct from US for re export SE Asia

(3) Charter planes capable of flying one ton or less to S.A. [South Africa] 100 lbs

Initial under 100

3 brand names

Smith & Wesson Colt Ruger

All models .357 magnum .44 magnum

In 4 and 6 inch barrels 50/50

Some ammunition for each [indecipherable word]

1,000 rounds per gun


The re-exporting from the United States to Singapore to South Africa in small lots via chartered planes would lead anyone to suspect that something illegal was being attempted. But the notes in the file were far from conclusive, and the U.S. Government basically wasn't helping. (O'Brien, the Corporate Affairs Commission, and the Joint Task Force all complained of across-the-board stonewalling by American authorities.)

In their attempts to follow this up, Australian investigators questioned their star Nugan Hand witness, George Shaw, who recalled dealings with a Sydney outfit called the Loy Arms Corporation. Shaw hadn't been involved in the details. But Loy's proprietor, Kevin Joseph Loy, acknowledged he had been approached by Wilhelmus Hans on behalf of Nugan Hand. In fact, a search of Loy's records produced copies of a weapons import permit from South Africa, dated September 18, 1975, another import permit from Singapore dated November 4, and an Australian export permit dated November 10 -- all involving weapons, but the lists not identical.

Loy insisted that although Hans had discussed all sorts of new weapons, Nugan Hand placed an order for the export to Singapore of only ten used pistols. His records did include a copy of a letter he sent to Nugan Hand November 14, 1975, referring to Smith & Wesson and Colt revolvers. It said, "On information available we would hope to supply approximately 20,000 weapons per year of the two above mentioned brands." Loy said the order had never been placed.

Soon after the Corporate Affairs Commission visited him, the commission's report says, Loy closed his long-standing arms business and became unfindable.

The trail then led to Wilhelmus Hans; who reported that Hand had telephoned and telexed long lists of weapons and desired small aircraft. from both South Africa and Rhodesia. As a result, Hans told investigators, "I wrote to every gun manufacturer in the world asking for brochures and price lists." Hans said he forwarded the information he received to an eager Hand, whose need for weapons was "as many as possible as soon as possible." He remembered that Hand had said Loy, in particular, couldn't supply enough of the right kind of weapons.

Hans told the investigators that on orders from Nugan, he traveled to Africa to meet Hand, who was in Rhodesia with his wife. The mission, as Nugan had described it, was "to assist persons to transfer funds elsewhere through a corporate structure which was not to be entitled Nugan Hand." But Hand instead had talked of setting up a Nugan Hand branch in South Africa, Hans said. He also told Hans of the market for helicopters and guns.

Most interesting, both the Joint Task Force and Stewart Royal Commission (accepting task force data) report that Hans went to Angola and Mozambique on his trip. Both countries -- under Portuguese rule and later under their own independent governments -- were extremely hard to get visas to. (The author of this book was repeatedly denied visas, first as a student/tourist, later as a journalist.) For the Portuguese colonial rulers to have granted Hans entry would be evidence of some sort of special consideration, not necessarily but possibly government sponsorship.

Hans recalled that Hand told him "it was his intention to sell . . . weapons to whites in South Africa and Rhodesia who were concerned at the possibility of civil commotion and that there was a ready market." The Corporate Affairs Commission's report doesn't distinguish between, on the one hand, the suggestion that Hand was catering to the home protection needs of nervous civilians, and, on the other hand, his desire for 60 / 80 ml mortars, M-79 grenade launchers, recoilless rifles, and .50-calibre machine guns. It does say that Hand discussed with Hans "the establishment of a helicopter squadron in Rhodesia." The Joint Task Force on Drug Trafficking reported that Hand went so far as to set up a company known as Murdoch Lewis Proprietary Ltd. to receive arms in Pretoria.

At bottom, however, Hans denied knowing of any completed weapons deals, and said he dropped out of that end of the business because of squeamishness. Further dealings on weapons, he said, were handled by Frank Ward and George Shaw-both of whom have acknowledged being aware of weapons negotiations by Nugan Hand, but both of whom have denied knowing the result.

Ward did acknowledge to investigators that he had obtained government clearance for the shipment of thousands of rounds of army surplus ammunition to South Africa, but said he "was unable to recall" if the deal went through. Reported the task force, "Ward is simply not telling the truth, or at least the whole truth"; it noted that in 1983 Ward was again under investigation by Australian authorities over arms dealings. [1]

***

The scene then shifted to Washington, where task force investigators found some old associates of Edwin Wilson. They did so with the aid of U.S. Justice Department lawyer Lawrence Barcella, who was prosecuting 'Wilson. For years, until the Stewart Royal Commission got a few other favors, the interviews Barcella arranged stood as the one recorded instance of cooperation between the U.S. and Australian governments in the Nugan Hand investigation.

One star witness against Wilson whom the Justice Department produced was identified in the task force's report only as "J," apparently because Wilson hadn't been tried when the report came out in March 1983, and "J," the witness, feared for his life. But Australian journalist Marian Wilkinson tracked down ''J'' and identified him as Douglas Schlachter. For years, Schlachter's lawyer said he and his client wouldn't comment on the identification, and that Schlachter was afraid because two other expected witnesses against Wilson had already died mysteriously. Finally, in 1987, Schlachter, living under another name, agreed to meet with a reporter and confirm his story.

Schlachter entered the Wilson mess innocently enough, while repairing engines at his brother's Texaco station in Bailey's Crossroads, Virginia, in 1969; it happened to be Wilson's favorite. Friends say Wilson took a liking to the young man, they became hunting pals, and finally in 1974 Wilson hired Schlachter to work in World Marine, Inc., a Task Force 157 undercover operation Wilson had set up in Washington.

Kevin Mulcahy, the former CIA analyst who served as president of one of Wilson's companies and later blew the whistle on him, said Wilson treated Schlachter "like the son he never had." [2] Wilson's two real sons "weren't like Doug, who could hunt and shoot," Mulcahy said. He said Wilson gave Schlachter a horse farm, and trusted him with business matters. He said Schlachter had even been seen with members of a Libyan hit team in Europe. "Schlachter was privy to everything Wilson was doing. He'd be a tremendous witness."

The Justice Department thought the same thing, and while waiting to use Schlachter in the Wilson prosecutions introduced him to the Australian Task Force on Drug Trafficking, which was looking into the Nugan Hand affair.

"J" -- Schlachter -- told the task force investigators that in 1975 or early 1976-while Wilson was clearly still on the U.S. Government payroll with wide discretion to spy as he saw fit-two CIA men based in Indonesia visited the World Marine headquarters in Washington. Schlachter identified the CIA men as James Hawes and Robert Moore, and the task force-through means it never spelled out -- confirmed their connection to U.S. intelligence in Indonesia.

The rest of the story was recounted in detail in the task force's official ultimate report to the prime minister of Australia and premier of New South Wales. "Hawes told Wilson that there would be some Australians visiting Washington," the report says. It says Hawes told Wilson the Australians were coming to discuss an African arms deal 'that had to be put together,' " and that "there was also some discussion about Agency [CIA] operations in Indonesia and the name Nugan Hand was mentioned in a general way." Soon afterwards, possibly on their same visit to Washington, Hawes and Moore returned to the World Marine office with Bernie Houghton and two Australians whom Schlachter couldn't name but who he understood represented Nugan Hand.

The official task force report continues:

"There was a number of meetings between Wilson, Houghton and the others over a relatively short period of time. Subsequently, under the cover of Task Force 157, Wilson placed an order for something like '10 million rounds of ammunition, 3,000 weapons including machine guns, M-15, carbines and others.' The shipment is believed to have left the U.S. from Boston. The End Users' Certificate indicated that World Marine was the U.S. purchasing agent while the middle company or buyer's agent was an Australian company but not Nugan Hand. The name given as the buyer was Portuguese, and was a name that had been used previously and possibly after by World Marine in other unrelated covert operations. 'J' [Schlachter] said that the shipment never formally entered Portugal, but was re-directed to Africa, possibly South Africa, where someone was waiting to receive it. 'J' believes that the weapons were then moved up the African continent and were eventually delivered to U.S. intelligence-supported forces in Angola.

"World Marine paperwork for the transaction was completed and payment for the shipment is believed to have come out of Hong Kong and to have been paid into a Swiss bank," the task force report continues. Throughout the time frame given, the CIA was recruiting men and weapons for its Angolan war, always through private channels. Much of the money was actually being spent on the private market by Holden Roberto, an ersatz Angolan actually from Zaire, who was Zairian dictator Mobutu's cousin, and who was in turn spending money the CIA was giving him for this purpose.

***

One real disappointment in the Stewart Royal Commission report was its failure to deal substantially with the task force's findings about arms deals. The Stewart commission mentioned the task force findings only obliquely by way of introducing a statement it said James Hawes had made to the Australian Government in response to the task force report. The statement denies that Hawes knew or ever met Houghton, or dealt with Nugan Hand.

The statement doesn't mention Hawes's suggested relationship with the CIA. It tacitly confirms his relationship with Wilson, but says Wilson "never once made any mention of the Nugan Hand Bank or any person who has subsequently been identified or connected with it." The commission apparently never questioned Hawes-for example, about Moore, Schlachter, and Wilson.

The Stewart commission also reported that Houghton had denied meeting Wilson until 1979, and had said the names of Hawes and Moore "meant nothing to him."

Almost incredibly, in reporting "allegations ... that 'Nugan Hand executives' were involved in weapons shipments to American aided forces in Africa," the Stewart commission listed the source for these "allegations" not as the Joint Task Force, but as Penthouse magazine, May 1984!

Ironically, the Penthouse article had been excerpted from a book chapter, and both Penthouse and the book publisher later conceded that without their knowledge the author had lifted her information, at times almost word for word, straight from the Wall Street Journal, which published the first detailed American accounts of the Nugan Hand investigations. Thus the Stewart commission bypassed the task force's formal finding, and the report of the more respected Wall Street Journal, and pinned the "allegation" on Penthouse, making it much easier to dismiss. [3]

Without further discussion of specifics, the commission report merely says, "None of these allegations [from Penthouse regarding Africa and from other publications regarding other places] fell within the terms of reference [the commission's authority]." Evidently, this meant that the allegations, even if true, still wouldn't involve violation of Australian law, and therefore needn't be looked into. But the commission went on, "However, in the course of examining the material before it, the commission has found that there is not the slightest evidence to support them." The commission didn't mention "J," or Schlachter. [4]

For his part, Schlachter [5] differs from the task force report only in that he says the ammunition and the machine guns were shipped separately, and that he was aware of at least three shipments in all, each sent as the task force describes. He says Hawes and Moore were working under cover as telephone systems installers in Indonesia, and regularly visited Wilson at the office of his Navy Task Force 157 front.

Schlachter recalls in vivid detail chauffeuring Hawes, sometimes with Wilson, to CIA headquarters in Langley, Virginia, sometimes accompanying them inside to an office, but then leaving them off and picking them up later in the day. He says Nugan Hand came up frequently between Wilson and Hawes as a financing facility.

***

The U.S. armed support for the Zairian-backed minority faction in Angola didn't collapse until late February 1976, with the rout of some U.S. mercenaries. The mercenaries had been recruited via local American newspaper publicity by a man named David Floyd Bufkin. Although the CIA "had never signed a piece of paper with him" (according to John Stockwell, the CIA officer who ran the Angolan mission [6]), Bufkin was transported and instructed by' CIA officers who knew everything he was doing, he stayed in CIA safe houses, and was paid by Roberto with CIA money. This kind of practical, unofficial arrangement illustrates the kind of relationship the CIA has with many cooperating private citizens and may have had with Nugap Hand.

The Joint Task Force report on Nugan Hand continues:

Whilst there is no known available documentation to support the claims of "J" [Schlachter], there are certainly strong grounds for accepting his claims that a transaction took place. First, the whole of "J'"s circumstances in relation to U.S. enforcement and Justice Department authorities ... make it highly unlikely that he would lie. [Schlachter had a plea bargain under which he had served about a year in prison, and been released to live with an assumed identity under the government's witness protection program; his only obligation was to testify truthfully, and by lying he could land himself back in the pen.]

At any rate [the task force report continues], there is no known reason for him to lie. Second, there is no reason to believe that "J" knew of the 1975 arms allegations respecting Nugan Hand prior to his interview with the Task Force. Third, the time frame of the incident described by "J" fits neatly with Nugan Hand's known attempts ... to purchase weapons for that general geographical area. Fourth, the type of weapons nominated by "J" are basically similar to those being sought by Nugan Hand in Australia and elsewhere at that time. Fifth, a connection between "J" and Hawes and Hawes and Wilson has been established, as has a connection between Hawes and Indonesia. Sixth, a CIA or other U.S. intelligence connection between Wilson and Indonesia, and Hawes and Moore has also been established. Seventh, Hand was, during 1975 and until March 1976 waiting in Africa to receive any weapons that could be supplied. "J" said that there was someone waiting there to receive the weapons. Eighth, on five occasions during 1975 and one in January 1976 Houghton departed Australia. On five of those occasions he visited the U.S.

Accepting the probability that the transaction described by "J" was carried out, it remains to be determined on whose behalf. Was it an official U.S. intelligence operation carried out by either the CIA or ONI [Office of Naval Intelligence], or both? Or was it the activity of private entrepreneurs using an available official cover for an operation which was not opposed to prevailing U.S. policy? No assistance was forthcoming from U.S. intelligence or related authorities which might have helped resolve this question. . . . But still there must be an attempt made to resolve the matter.

There is no doubt that Wilson was still officially with Task Force 157 at the time of the arms deal. Certainly "J" [Schlachter] believes it to have been an officially sanctioned operation, but there are obvious gaps in "J's" knowledge of Wilson's intelligence activity. There is also the strong risk that "J's" perception of the situation was an illusion deliberately created by Wilson to give the impression of an officially sanctioned operation.... It is clear that Wilson did act as an individual entrepreneur on other non-Nugan Hand matters whilst in the employ of ONI and when not in the employ of any U.S. intelligence organization purported to be so. Nugan Hand itself, acting for Hand, went about the attempted purchase of weapons in a fashion which displayed little professionalism and a deal of amateurism.


The task force then sets about to give its official conclusions:

In short, it is the view of the Task Force on the available information that in all probability the efforts of Michael Hand to supply weapons to some non government force in Africa -- likely Rhodesia or Angola -- were successful and that they were provided in the manner outlined by "J." It is likely that the forces to which the weapons were supplied were the same forces to which the U.S. government of the day was offering and providing covert military support.


The final judgment rendered by the task force on the weapons matter must be examined in its wording, for it shows some naivete for how the CIA has actually conducted covert operations over the years. The task force report says, "All things taken into account, the operation is considered likely to have been carried out as a result of private entrepreneurial activity as opposed to one officially sanctioned and executed by U.S. intelligence authorities, specifically Task Force 157."

For those, both Australian and American, who haven't paid much attention over the years to the CIA style, perhaps the main problem in understanding Nugan Hand has been this seeming analytical choice between "private entrepreneurial activity" on the one hand and "officially sanctioned" activity on the other. In fact, the two have never been so clearly distinguished. In phrasing the choice, one may inadvertently rule out what is really the most likely explanation.

Of the many former CIA men who have left the agency and written candidly about their experiences, Victor Marchetti is probably the most relied-on for the versatility of his knowledge of the agency. His accuracy and veracity haven't been challenged. Unlike the other best-known CIA renegade, Philip Agee, Marchetti has clearly spoken out from a desire to help, not hurt, the country.

Marchetti has explained that there are basically three kinds of purportedly private organizations that the CIA relies on in its work. One kind is known as a CIA proprietary-a concern that has been designed to provide some service wanted by the CIA, and is secretly wholly owned by the CIA itself while disguised to appear in public to be a private business. Obviously the CIA hires and could fire the heads of such businesses.

Yet Marchetti's book The CIA and the Cult of Intelligence, written jointly with former Foreign Service officer John Marks, says, "For all practical purposes, the proprietors conduct their own financial affairs with a minimum of oversight from CIA headquarters. Only when a proprietary is in need of funds for, say, expansion of its fleet of planes, does it request agency money. Otherwise, it is free to use its profits in any way it sees fit. In this atmosphere, the proprietaries tend to take on lives of their own, and several have grown too big and too independent to "be either controlled from or dissolved by headquarters." [7]

Paul Helliwell's old Sea Supply Corporation was such a company. (It was the outfit designed to supply U.S. "allies" in Southeast Asia, whose guns-for-heroin trade was described in Chapter 3.) Other proprietaries numbered a whole gaggle of CIA-owned airlines, including some in the United States whose growth into the domestic freight market threatened the existence of some free-market competitors. [8]

A second kind of operation, Marchetti has said, is a "front," an organization whose purported business is a sham, kept in place to provide a cover for other activities. Like the little cargo-expediting companies set up by members of Naval Task Force 157, it offers a place for agents to get mail or phone calls, and provides an answer to otherwise embarrassing questions like, "What are you doing here?" Fronts are less tightly controlled than proprietaries, but can do plenty of damage, as revealed by the activities of the fronts set up by Edwin Wilson for Task Force 157.

But, as Marchetti explained on Australian radio October 25, 1980, in the wake of the Nugan Hand scandal, "There's a third kind of organization which is really an independent organization, but it is closely allied to the CIA, not only in ideology but because many of the people who work for it are ex-CIA people. They have mutual goals [with the CIA] in some instances, or at least their goals run parallel in some instances. On the other hand, they operate independently.

"This is like Interarms Company," Marchetti said, citing what is probably the world's largest private arms dealer. Interarms operates mostly overseas, but is run by an American, Samuel Cummings- a career CIA officer whom the CIA set up in private business, whereupon he severed his official ties with the U.S. Government. Since then, Cummings has amassed a fortune buying up arms from some governments or private groups and selling them to others around the globe, apparently always in line with the CIA's wishes. Explained Marchetti about Interarms, "Of course it's an independent organization but it's run by a former CIA man, Cummings, and he does favors, or he used to do favors, for the agency and vice versa.

"Nugan Hand, from what I know about it, seems to fall into this latter category," Marchetti said. "It doesn't seem to be a proprietary in the full sense of the word, that is, owned and controlled by the agency, nor does it seem to be a simple front organization. It seems to be more of an independent organization with former CIA people connected with it, and they're in business to make money, but because of their close personal relationship with the agency they will do favors for the agency.

"This," Marchetti said, "would include providing cover in some instances for operators, it would include laundering of money, it would include cutouts for any sort of highly clandestine activity the agency is involved in but does not want to be any way directly connected with. When these organizations cooperate with the agency, the agency uses its influence, both directly within the government and indirectly through other proprietaries and through other friendly organizations within the establishment, to throw business the company's way because they want the company to flower and succeed because it provides good cover for them."

Richard Bissell, who ran the CIA's clandestine services section when Marchetti, Shackley, and Colby all worked there, once said, "It is possible and desirable, although difficult and time-consuming, to build overseas an apparatus of unofficial cover. This would require the use or creation of private organizations, many of the personnel of which would be non-U.S. nationals, with freer entry into the local society and less implication for the official U.S. posture." [9]

Asked about that on the same Australian radio program, Marchetti replied, "Bissell was making a point that proprietaries were a very dangerous instrument, they're hard to control, they're easy to be exposed. He was advocating the use of private institutions, and he meant not only independent little operations that would get started up and grow into something big, but also banks and other business corporations that had offices overseas, and working through them, putting people into them, and putting ... people from other countries in as cutouts and agents for the CIA."

Thus it is possible-in fact customary-for a business to be both private, for-profit, and yet also have a close, mutually beneficial relationship with the CIA. The men running such a business are employed exactly as if it were a private concern-which it is. But they may have been steered to their jobs by the CIA, and they never forget the need to exchange favors.

CIA men on covert missions do not identify themselves as such. They know to be aloof even to each other, except as there is a need to know. Those exposed to the culture of spying learn how to interpret the word of members of the spying community, whether active or retired. They know, as any Mafia member does, that the business of the organization cannot always be identified by an official seal. But it can be recognized nonetheless.

It is in this sense that one must judge what Nugan Hand was, and what moral responsibility the United States Government has for what Nugan Hand did.

Victor Marchetti: "If Nugan Hand is what it seems to be, this is just one of the kinds of organizations that Bissell would advocate as being used to facilitate operations overseas. He probably would prefer to be working through First National City Bank, or Chase Manhattan, or something like that, because there it's almost impossible to penetrate the cover. But Nugan Hand, here you have all these CIA people associated with it. You know, it's like they say, if it looks like a duck, and walks like a duck and quacks like a duck, pretty soon you can come to only one conclusion: it is a duck."

Schlachter also told the task force agents that Houghton had involved Nugan Hand to handle "funds" and "payouts" in a U.S. military deal with Iran. "About the same time as the [African] weapons deal," the official task force report continues, attributing this to "J," "the U.S. Navy through Edwin Wilson at Task Force 157, arranged the supply of a spy vessel to Iran. James Hawes [the CIA man], who was still operating out of Indonesia, was also involved. While,], did not profess to know the details of the transaction, he said that Wilson had used Task Force 157 proprietary companies to arrange the sale and that the vessel went first to England, before being sailed down the west coast of Africa, around the Cape of Good Hope up to Bondeshipure, Iran, where it was turned over to the Iranian Navy. According to 'J,' at some point in the operation there was a mix up and Wilson flew to Iran to correct it." Schlachter told the investigators that he didn't understand the details of Nugan Hand's role.

The report continues, "Some support for the allegation of']' can be seen in Wilson's January, 1976, three-day visit to Australia." Having checked immigration records, the task force learned that Wilson "arrived at Sydney from Indonesia and declared to immigration authorities his intention of staying at the Lakeside Hotel, Canberra. Perhaps coincidence, perhaps not," the report notes, "but Canberra is the center for U.S. political and intelligence authorities in this country. When Wilson departed Australia he traveled to Iran." That was January 31, 1976. He had come into the country January 28.

The investigators report that "further support" for Schlachter's story came from a man whose identity was withheld, who visited Wilson in Virginia during August and September of 1976, and said Wilson left the United States four times in that period. Once, the task force's source said, Wilson "indicated ... that he was 'going from Switzerland to Iran to sort out some trouble.'"

Next, the task force found an Australian businessman-whose name was also withheld-who told them that on March 8, 1975, he had traveled with Bernie Houghton from Sydney to Iran, returning March 16, 1975. Immigration records confirmed the dates. Furthermore, the businessman said that he and Houghton had been accompanied on this trip by an active U.S. Air Force colonel-name also withheld.

Sure enough, immigration records showed that the colonel had arrived in Sydney from the United States aboard a commercial airliner on March 3, 1975, and left Australia for Iran March 8. The colonel had made one previous visit to Australia, in March 1974, arriving and leaving at the U.S. military air base in Australia.

The local businessman "satisfied the task force" (it said) that he had been going to Iran" on business anyway, and that Houghton, learning of this, "volunteered that a close friend of his," the air force colonel, "was well-connected in that country and might well be able to assist." The businessman said Houghton and the colonel, who was expecting to retire in a few years, were looking to make money from a commercial venture, although the businessman said he "didn't properly understand" the details.

"There is every reason to accept that 'J' related events as he understood them to have occurred," the task force reported to the prime minister and premier. "This being so, the probability is that the U.S. Naval intelligence community was involved in the sale of a spy ship to Iran in or around 1975. Bearing in mind 'J's' allegation that Nugan Hand, which term includes Houghton, was involved, it seems a strange coincidence that Houghton's only known trip to Iran occurred within the rather narrow time frame of the spy ship incident. Further, that at such time Houghton should have been accompanied by a senior serving member of the U.S. Armed Services who, according to [the businessman], was well connected in Iran." Thus, the task , force suggested, the trip and the spy ship sale were no coincidence at all, but interrelated.

"It is recognized," the report went on, "that Wilson's known visits to Iran do not on the surface coincide with the travel of Houghton, but the reality is that the Task Force does not know how long it took to effect this transaction. Perhaps more than a year was involved. [Or perhaps, one could suggest, more than one ship was involved.] Houghton could have been involved in preliminary negotiations and Wilson in attending to final arrangements. There is no way of knowing how many times Wilson went to Iran in the relevant time frame, or indeed if there was any necessity for him to go there prior to January, 1976. Similarly, Houghton could have travelled to Iran from countries other than Australia, so there is no way of knowing for certain how frequently he visited Iran. Finally, the possibility that Houghton's visit was in no way connected with the spy vessel is not dismissed. However, in the end the allegation contains insufficient detail so far as the involvement of Nugan Hand/ Houghton is concerned and insufficient is known of the transaction itself to enable the Task Force to form a view one way or the other respecting that involvement. But as opposed to the [African] arms deal, there seems little likelihood that the spy ship incident could have been carried out as part of private entrepreneurial activity and per haps this is, on one view, the greatest difference between the two incidents."

The Pentagon's reply to all this is simple and straightforward: "Any sort of a sale of that sort would have been under the auspices of the Naval Intelligence Command, and, of course, their activities are classified," a spokesman says. And he won't comment further.

The Stewart Royal Commission's follow-up was just as uninformative: "Major transactions involving spy ships, aircraft, howitzers, patrol boats and various other military equipment have been suggested. As mentioned, none of these allegations fell within the terms of reference. However in the course of examining the material before it, the Commission has found that there is not the slightest evidence to support them."

And that, apparently, was enough about that.

***

Iran was to pop up again in the Australian investigation, as evidence surfaced that Michael Hand and others at Nugan Hand had been negotiating to move hundreds of millions of dollars of the Shah's fortune among various embarrassed banks at the time of the Shah's fall from power.

Neither the task force nor the Corporate Affairs Commission saw fit, however, to address what may have been a more pressing question, at least in the minds of most Australians. That was whether the CIA, through Nugan Hand or any other device, intervened in the internal politics of Australia, even to the point of overthrowing the Labor government there in November, 1975.

That both the CIA and Nugan Hand acted to sway Australian politics can be demonstrated. That the efforts were coordinated, or that either the United States or Nugan Hand actually helped overthrow the government, remains a matter of rumor, circumstance, and speculation.

_______________

Notes:

1. The investigation resulted in two criminal tax charges against Ward, which, in February 1987, still had not been tried. Most of the findings of the investigation as related to Ward are still classified secret, according to my Australian researcher, Andrew Keenan of the Sydney Morning Herald.

2. The information in this paragraph came from an interview Mulcahy gave to agents of the Bureau of Alcohol, Tobacco and Firearms. The information is consistent with what Mulcahy said in interviews with me, but couldn't be confirmed because I obtained the ATF report after Mulcahy's mysterious death in October 1982, outside a Virginia motel room he had rented by the month. His was one of the two mysterious deaths that frightened Schlachter, according to Schlachter's lawyer.

3. Both Penthouse and the book publisher, Doubleday & Company, issued gracious apologies and published acknowledgments.

4. The commission at times came dangerously close to sophistry to explain away its disinclination to pursue leads. For example, the notes found in Nugan Hand files about an ivory-for-arms trade were summed up as an "allegation . .. that Mr. Hand corresponded with Mr. Nugan from South Africa about arms sales to be paid for with Rhodesian ivory." Without adding any new information, the commission reported, "The only connection between 'ivory' and 'arms sales' arises from Mr. Hans' interview with the Joint Task Force and from the fact that notes on both subjects were made, apparently by Mr. Nugan, on the same sheet of paper. The Commission has not located any correspondence between Mr. Nugan and Mr. Hand in relation to such matters. Accordingly the Commission finds that the allegation is without substance."

5. Interviews with the author, February 1987.

6. In interviews; Stockwell has provided the best history of the whole Angolan episode in his book, In Search of Enemies (1984).

7. Asked for comment, a CIA spokesman called the Marchetti remarks "way off base," and said, "Any activity with a financial basis is of the nature that CIA would try and keep a hand on it," She said any financial organization is kept close track of. In early 1987, as it is daily revealed that tens of millions of dollars is missing and unaccounted for from accounts created for no other purpose than the direct funding of covert action, and there is evidence that the true figure could be in the hundreds of millions of dollars, such contentions seem ludicrous.

8. That situation was exposed by reporter Jerry Landauer in the Wall Street Journal, February 16, 1979.

9. At a discussion on Intelligence and Foreign Policy, January 8, 1968, according to official minutes reprinted in Marchetti's and Marks's book.
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Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

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CHAPTER NINE: The Spooking of Australia

In almost the exact center of the vast Australian landmass, far from the population concentrations on the east and west coasts, near the town of Alice Springs, is an American base. Some say it is the most important foreign outpost we have. It is certainly among the most secret.

You would need impressive security clearances to get near it and scientific degrees to understand it. Supplies and personnel are ferried in and out by U.S. military aircraft. It represents a taxpayer investment probably measured in the billions of dollars.

At the base, known as Pine Gap, American personnel read and relay back to the United States data from spy satellites stationed over the Soviet Union, China, and Europe. Through Pine Gap and two related bases in Australia, the United States picks up coded messages from Soviet missile launchings, and intercepts radar, radio, and microwave communications. Greeks have accused the Americans at Pine Gap of listening in on their telephone calls in Greece.

If an arms control agreement is to be reached, the base at Pine Gap, or one just like it, will be indispensable.

Information flows the other way through Pine Gap, too. With its Buck Rogers-style communications gear, the base relays orders from the Pentagon to our nuclear submarine fleet as it moves about, silently threatening to level the Soviet Union whenever it is thought the Soviet fleet is doing the same to the United States.

But as the CIA presence in Australia grew, so did the temptation to manipulate events, even in such a friendly country. In ways, what happened in Australia shows how the productive and the counterproductive sides of the CIA work everywhere. The vital operations at Pine Gap have been threatened by the political resentment of Australians, who, inevitably, learned their democracy was being manipulated.

Australians were suspicious from the founding of the huge Pine Gap base in 1968. They were told the base was part of the United States's space study program, a plausible enough explanation with the lunar landing scheduled for 1969. The sales pitch presented Pine Gap as a means by which Australian scientists might share in the knowledge brought home from galactic frontiers. But the pitch smelled fishy to many people, one of whom, in 1972, was elected prime minister of Australia.

His name was Gough Whitlam, and three years into his prime ministership he was suddenly ejected from office and replaced by the opposition without an election. This was done through an unprecedented, but constitutionally provided-for, maneuver. It would not be going too far to call it a constitutional coup d'etat, and it followed by three days a similarly unusual action by the CIA to halt some things Whitlam was doing.

Whitlam's Labor Party had long doubted the wisdom and morality of America's interventionist foreign policy, not only in Vietnam- the focal point of world attention at the moment-but also in Indonesia (an Australian neighbor the United States had unsuccessfully invaded in 1958 and helped change the government of in 1965) and throughout Asia. In these matters, Whitlam actually stood closer to the United States than many of his Labor colleagues, who, in fact, had criticized his seeming approval of the takeover by Indonesia, with U.S. support, of nearby Timor.

Whitlam was, however, in tune with other Laborites on many issues, including a belief that the Australian people had a right to know if the base operating at Pine Gap would make Australian territory a target in a nuclear war.

Whitlam made the CIA nervous, to say the least. Just as nervous was the Australian Security Intelligence Organization, or ASIO, which had close associations with the CIA. ASIO's franchise to operate domestically as a security organization, which the CIA isn't supposed to do in the United States, gives ASIO more influence in domestic politics than the CIA has. [1]

The CIA, with its own political agenda, was all too ready to encourage and assist ASIO's tendency to oppose Labor, and to support the opposition coalition, which was made up of the Liberal Party, which most Americans would think of as conservative, and the Country Party, which is considered farthest to the right.

A CIA document from all the way back in 1949, obtained by Australia's National Times, concerns "communist influence in Australia," and says that the "U.S. Naval attache in Melbourne has reported that the Labor Government is under communist domination, with two Cabinet members probable communists and the Speaker of the House a communist sympathizer." With some reason, the National Times calls this claim "wild."

Over the years, CIA and ASIO men have forged links that bypassed the Labor Party, even when it was in power. In 1969, when the CIA's guru emeritus Allen Dulles was in the hospital, the director general of ASIO, C. Charles Spry, wrote him a gushing letter. After reporting his severe distress at having missed "the honour" of a meeting with Dulles on his last trip to the States, Spry says:

I shall never cease to be grateful to you for the initiation and development of relations between your Service and mine. I consider, without any reservations, that this was the turning point which has enabled ASIO to reach the level of sophistication which it now enjoys. Jim Angleton [then head of counterintelligence for the CIA] and others have continued to assist us. I always consider you as the No. 1 Honorary Australian in our Organization, and Jim No. 2.


Agents from sister branches of Australian intelligence that operate overseas worked with the CIA in Vietnam, Indonesia, China, and Timor, and according to some Australian press reports helped the CIA shuffle governments in Cambodia and Chile as well. A secret report prepared by a senior civil servant at the direction of the Australian Parliament in 1979, also obtained by the National Times, says, "Our intelligence partners, notably the U.S., are not very active in the South Pacific and look to Australia and New Zealand in this region."

Meanwhile, the CIA developed close links to the Liberal-Country coalition, and by some knowledgeable accounts funneled cash to it. Through the CIA's long-standing secret cooperation agreement with the AFL-CIO, it had a part in bringing potential union leaders to the United States, training them, and later orchestrating their rise to power. Possibly most insidious, the CIA and ASIO swapped derogatory information they collected on Labor and other politicians in Australia. ASIO, at least, leaked the information to selected political opponents who could make the best use of it. [2]

So close was the CIA-ASIO connection that some operatives went into undercover work of the most literal kind. John Walker, a career cold warrior who had been entrusted with running the vital CIA station in Israel, was CIA station chief in Canberra during the Whitlam years, from 1972 to 1975, though he was replaced just before Whitlam was removed. During his time in Australia, he and his wife of thirty years got to know Colin Brown, the deputy director of ASIO, and his wife, so well that Mrs. Walker left him for Brown, who divorced his wife and married her.

The original Mrs. Brown later complained [3] that she knew of her husband's affair early on and wanted to put a stop to it by telling the CIA man, Walker. But she said, "I was told that if I did, it would destroy ASIO's relationship with the CIA." She claimed her thirty-four- year marriage was broken up "in the name of the ASIO/CIA cause."

Walker says [4] his marriage broke up because of the long hours he was forced to devote to his job. Walker also recalls spending long hours at Bernie Houghton's Bourbon and Beefsteak, insisting, without the trace of a smile, that it was "a good place to eat." Walker, back home now, says Houghton still stops by Walker's New York apartment on trips to the United States and has remained good friends with Walker and his daughter.

***

The CIA's involvement in Australian politics, which had long been rumored in Australia, became official record in the United States in a startling spy case-the case of Christopher Boyce and Andrew Daulton Lee. Boyce and Lee are now best known as the Falcon and the Snowman, after the title of Robert Lindsey's wonderful book about them and the movie based on it. Childhood friends in southern California, they became a two-man Soviet spy network in the mid-1970s.

Lee was addicted to heroin and other drugs. He needed money, and was mentally deteriorating. But there was no such desperate explanation for the treason of the clean-cut Boyce, an FBI agent's son who began a career with TRW Corporation, a communications company doing contract work for U.S. intelligence. [5]

So why did Boyce slip documents to Lee for sale to the Soviet embassy in Mexico on Lee's drug runs? The only available explanation is Boyce's own: his alarm, disillusionment, and disgust at what he learned the CIA was doing. And much of this involved Australia -- for it was Boyce's job to sit in the communications room of TRW in Redondo Beach, California, and monitor the traffic coming in from Pine Gap.

At their spy trial in 1977, Boyce told of a conversation he had with his old buddy Lee just before they formed their arrangement. They had been criticizing the CIA, among other things blaming it for overthrowing a democracy and installing a dictatorship in Chile in 1973. Relating that to his own drug problems, Lee lashed out at the U.S. Government.

And Boyce responded: "If you think that's bad, you should hear what the Central Intelligence Agency is doing to the Australians." Then, said Boyce from the witness stand, "He asked me what, and I told him that-"

At this point, on a motion from the government, the judge refused to allow the details onto the record. The government tried to keep the Australian secrets as secret as possible throughout the Boyce-Lee prosecution. But much of the story did get told, partly through the probing of author Lindsey (who is also the New York Times bureau chief in Los Angeles).

Among the things Boyce discovered was that Australian labor unions were infiltrated by U.S. agents. The American operatives manipulated the unions on CIA orders to prevent strikes the CIA objected to. Boyce also learned that the United States wasn't disclosing all its Pine Gap activities to the Australians as called for in the treaty that permitted the base.

In fact, he learned, the Australians were being deceived about a whole satellite system that could overhear telephone conversations and other communications in Europe and dump them down to Pine Gap for relay to Washington. All of this soured Boyce on his job and his loyalty to the United States.

In his book, journalist Lindsey even conjectured that information about all this, sold by Boyce and Lee to the Soviet Union in Mexico City, may have been relayed by the Russians to the Labor Party in Australia, and that this information may have touched off the dispute about the CIA that immediately preceded the constitutional coup in Canberra in 1975.

***

From the Labor Party's electoral victory in 1972, the CIA's allies in Australia were in high dudgeon, and not entirely without reason. Whitlam was no enthusiast for spook work. He quietly closed an Australian electronic spy post that had been operating in Singapore.

By March, 1973, the Laborites had become worried that ASIO was a renegade agency, not informing the elected government of its activities. Attorney General Lionel Murphy led a team of deputies on a surprise raid of the ASIO office to investigate. It was as if the U.S. attorney general and senior FBI staff one day invaded the office of the CIA boss to examine the files and see what the agency was really up to.

Thoughts turned to the critical Pine Gap post near Alice Springs. Whitlam never breathed a word about closing it, and apparently wanted only to restore the Australian government's authority as guaranteed by treaty. But that was no solace to Shackley. Frank Snepp, the operative who helped close CIA's station in Saigon in 1975, then wrote a book about it, has said that his boss, Shackley, was "paranoid" about the Laborites, and ordered the flow of information to them held to a minimum. Ray Cline, the CIA's former deputy director, has recalled "a period of turbulence to do with Alice Springs." [6]

Shackley's boss, Colby, in his memoirs Honorable Men, listed "a left-wing and possibly antagonistic government in Australia" as among the "crises" of his tenure as director of Central Intelligence -- right up with the Soviet threat to intervene in the 1973 Israeli-Egyptian war. The CIA seemed to react almost as if our Australian ally had actually fallen to communists.

James Angleton, the CIA's longtime chief of counterintelligence who was pushed into early retirement in 1975 because of his paranoia about security, was quite spooked by Whitlam. It was Angleton whom ASIO Director General C. Charles Spry had labeled "the No. 2 Honorary Australian in our Organization" because of his assistance in running it.

"He [Whitlam] was elected by Australians for better or worse," Angleton said in a 1977 interview with Australian radio and television. "In my own view for worse, but it did not affect our relationship until his Attorney General Murphy barged in and tried to destroy the delicate mechanism of internal security which had been built on patiently since the end of World War II.... Some of the major secrets that deal with the world I was once in were given to the Australian security services....

"When we saw this Whitlam government come into power and this attorney general moving in, barging in, we were deeply concerned as to the sanctity of the information which could compromise sources and methods and would compromise human life," Angleton said. "This was one of the most extraordinary acts that one has ever seen. It was not done in a friendly manner.... It was a raid."

At this point, the interviewer protested, "It was done by the elected attorney general of the country ... senior people."

Replied Angleton, "I'm not disputing the fact that he was elected. I'm only speaking to the outrageous lack of confidence inherent in his act. When we and others in the Western world had entrusted the highest secrets of counterintelligence to the Australian services and we saw the sanctity of that information being jeopardized by a bull in a china shop who would not understand that the compromise of information, or its exposure, would result in a destruction of life, sources, and methods, and this does violence to the confidentiality that must exist on the counterintelligence level between services of sovereign countries. How could we stand aside without having a crisis, in terms of our responsibilities as to whether we would maintain relationships with the Australian intelligence services?"

The interviewer again noted that Whitlam and Murphy were the men the Australian people had chosen to run their government. But Angleton just complained of "the jewels of counterintelligence being placed in jeopardy by a party that has extensive historical contacts in Eastern Europe, that was seeking a new way for Australia, seeking a matter of compromise, seeking roads to Peking when China used to be one of the major bases of the illegal NKVD [the NKVD is a Soviet security agency; Angleton didn't mention that President Nixon also sought 'roads to Peking']."

Still, Angleton said, "we did not break off the relationship" with the Australian intelligence agencies. "And I believe our judgment was justified," Angleton continued, as after the 1975 removal "the Australian people simply did not put him back into office."

Angleton was asked repeatedly on the program whether the CIA intervened to dump Whitlam. Each time, he replied at length, seemingly in the negative, but each time his answer was cryptically couched in phrases to. the effect that the CIA wouldn't undertake such work without the knowledge of the heads of the Australian intelligence services. Despite the interviewer's efforts to eliminate the equivocation, Angleton never denied that the CIA might have engineered the anti-Whitlam coup with the knowledge of its Australian counterparts.

At one point the interviewer said, "The picture you've just painted is one of a crisis. Was it serious enough, if the situation was as you described it, to warrant the removal of Gough Whitlam?" Replied Angleton, "Of course not, absolutely not. It would simply be inconceivable to meddle in the internal affairs of Australia. I could not go to a man such as Sir Charles Spry, Brigadier Spry [former head of ASIO], and deal with him in good faith and be party to any kind of activity without his knowledge."

Pressed further, he said, "I will put it this way very bluntly. No one in the agency would ever believe that I would subscribe to any activity that was not coordinated with the chief of the Australian internal security."

Ray Cline, the CIA's former deputy director, in an interview with William Pinwill of the National Times, went even further about just what might have happened. "The CIA would go so far as to provide information to people who would bring it to the surface in Australia. . . . Say they stumbled onto a Whitlam error which they were willing to pump into the system so it might be to his damage. . .. If we provided a particular piece of information to the Australian intelligence services, they would make use of it."

To anyone familiar with the political events in Australia in 1975, it would not be hard to guess what particular pieces of information Cline might have been talking about. [7]

***

Twice during 1975 the Whitlam government was embarrassed by sensational scandals broken open by mysterious leaks to the press. Each time, a cabinet minister was forced to resign. One of these ministers was the head of the treasury, Jim Cairns, who had particularly angered Washington by his public denunciation of American bombing in Vietnam two years earlier.

Cairns and some other Whitlam underlings had in some off moment agreed to a harebrained scheme to repatriate petrodollars from the Arabs. To help finance the Australian budget, they decided to borrow $4 billion in Arab cash, and allowed some indiscreet middlemen to go out in search of the loan.

At some point Cairns signed an authorization letter, including the offer of a commission on the deal, to a businessman friend of his named George Harris, who Cairns thought had a connection to a deep-pocketed Arab. The letter wound up in print, and Cairns explained that he was unaware of the commission provision and wouldn't have agreed to it had he known about it.

But then a British businessman announced he had a telex in which Cairns had agreed to give a commission on the deal to his stepson. The press staged a bidding war for the telex, the most surprising aspect of which was that Rupert Murdoch lost out to a competitor for a reported $7,000.

The telex was later exposed as a fake, and the British businessman admitted as much, but it was too late. The press had uncovered some other government deal on which the stepson had turned a dollar, and Cairns was out in July 1975.

Then in October, a Middle Eastern hustler with a long history of shady associations publicly claimed that he, too, was a broker for the sought-after $4 billion. His tales of dealing with Australian cabinet officers sent Rex Connor, the energy minister, packing.

Connor's crime was stupidity, not theft, but the whole "loans affair," as it became known, was seized by the opposition Liberal Party as an excuse to hold up passage of the budget in Parliament, to try to force an election while Whitlam was weak. As embarrassing details dribbled out, Whitlam backpedaled and his popular support faded.

***

While all this covered the front pages, a far more important struggle was being acted out, partly in private. It focused on Richard Stallings, a career CIA officer who had run the Pine Gap installation from its inception until-according to the best accounts one can find of a highly secret business-1969. He spent some time in the United States recuperating from injuries suffered in a bad car crash, then returned to Australia in another CIA capacity.

Stallings had been operating all along under cover of a Defense Department job. Whitlam was outraged in 1975 to discover his true identity and publicly accused the Australian military-intelligence apparatus of having deceived him and his civilian government about Stallings and the nature of Pine Gap.

Though Americans might think it makes little difference which branch of the government Stalling's checks came from, CIA is a dirty word in mum of tile world, including, apparently, Australia. Whitlam's complaint struck a responsive chord in the public.

Stallings, who can't be located now, was himself "very upset" over the CIA's activities in Australia, according to Victor Marchetti, the former CIA officer, whose accounts have been consistently reliable. Marchetti says he was a close friend of Stallings.

Marchetti says Stallings complained that his work at Pine Gap was being jeopardized because the CIA station in Canberra was infiltrating labor unions and funneling money to the Liberal and Country parties. "He was working on what I considered to be a very legitimate project," Marchetti says. "He was very annoyed at what the station chief was doing, getting involved in covert activities.... There were rumors going around that the station chief was involved in local politics, which he knew to be true."

Stallings's case wasn't helped any by the discovery that he was renting his house from a friend who was none other than Doug Anthony, the head of the right-wing Country Party. Anthony had been a guest of Stallings's in the house, and Marchetti says Stallings was considering going to work for Anthony after his retirement from the CIA.

***

In late October 1975, Whitlam further upset the intelligence community by sacking the head of the overseas intelligence agency, whom he accused of deceiving him about its work in East Timor, where the military dictators in Indonesia were trying to put down an independence movement. The United States was backing the military dictators (having helped put them in power in the first place).

Whitlam then asked his foreign affairs department for a list of all CIA officials who had served in Australia. Dissatisfied with the list he received-Stalling's name, for example, wasn't on it-he probed further. This turned up Stallings's identity, and also stirred a defense chief to let his pals in Washington know that the prime minister was probing into sensitive areas.

Knowing of Stallings's relationship with Anthony, Whitlam said in a speech at Alice Springs November 2 that the CIA was helping the Country Party; he didn't disclose Stallings's name. Two days later Anthony offered his reply in Parliament, which introduced Stallings's identity to the record.

Anthony said he hadn't known that his friend Stallings was connected to the CIA, adding; "I imagine it is not the sort of thing the CIA would go around telling people."

***

The chronology of the next critical days before the downfall of Whitlam November 11 can best be relayed in the actual protest note the CIA issued. It was delivered to the Washington representative of ASIO by Deputy Director for Operations Theodore Shackley-Bernie Houghton and Mike Hand's eventual business associate.

Shackley's biting and threatening message, delivered November 8, 1975-three days before the constitutional coup-was quickly cabled back to the director general of ASIO in Canberra. In fact, Shackley expressly asked that the message be relayed at once to "DG" -- the director general.

Exactly who was behind Shackley's move can only be speculated on. The looser Australian press has reported without documentation that Shackley made his strike on personal orders from Secretary of State Henry Kissinger. The tone and style do match Kissinger's, and the sentiments were no doubt present in whatever passes for Kissinger's heart. But in the absence of an American investigation in public, with the ability to compel sworn testimony and the production of documents, one can only assume that Shackley would not have taken so drastic a step without at least consulting higher authority.

The message follows (the Australian press obtained and published copies a few years ago. The authenticity of the message was confirmed in Parliament and not denied by the U.S. Published versions have varied minutely -- a word or punctuation difference here or there, never affecting meaning -- and what follows is a consensus):

ON 2 NOVEMBER THE PM OF AUSTRALIA [Prime Minister Whitlam] MADE A STATEMENT AT ALICE SPRINGS TO THE EFFECT THAT THE CIA HAD BEEN FUNDING [Doug] ANTHONY'S NATIONAL COUNTRY PARTY IN AUSTRALIA.

ON 4 NOVEMBER THE U.S. EMBASSY IN AUSTRALIA APPROACHED THE AUSTRALIAN GOVERNMENT AT THE HIGHEST LEVEL AND CATEGORICALLY DENIED THAT CIA HAD GIVEN MONEY TO THE NATIONAL COUNTRY PARTY OR ITS LEADER NOR ANY OTHER U.S. GOVERNMENT AGENCY HAD GIVEN OR PASSED FUNDS TO ANY ORGANIZATION OR CANDIDATE FOR POLITICAL OFFICE IN AUSTRALIA AND TO THIS EFFECT WAS DELIVERED TO ROLAND AT DFA [Department of Foreign Affairs] CANBERRA ON 5 NOVEMBER.

ON 6 NOVEMBER ASST. SEC. EDWARDS OF U.S. STATE DEPARTMENT VISITING DCM [Deputy Chief of Mission, number two to the ambassador] AT AUSTRALIAN EMBASSY IN WASHINGTON AND PASSED THE SAME MESSAGE THAT THE CIA HAD NOT FUNDED AN AUSTRALIAN POLITICAL PARTY. [The State Department said in 1987 that it never had an assistant secretary named "Edwards. "]

IT WAS REQUESTED THAT THIS MESSAGE BE SENT TO CANBERRA. AT THIS STAGE CIA WAS DEALING ONLY WITH THE STALLINGS INCIDENT AND WAS ADOPTING A NO COMMENT ATTITUDE IN THE HOPE THAT THE MATTER WOULD BE GIVEN LITTLE OR NO PUBLICITY. STALLINGS IS A RETIRED CIA EMPLOYEE.

ON 6 NOVEMBER THE PRIME MINISTER PUBLICLY REPEATED THE ALLEGATION THAT HE KNEW OF TWO INSTANCES IN WHICH CIA MONEY HAD BEEN USED TO INFLUENCE DOMESTIC AUSTRALIAN POLITICS.

SIMULTANEOUSLY PRESS COVERAGE IN AUSTRALIA WAS SUCH THAT A NUMBER OF CIA MEMBERS SERVING IN AUSTRALIA HAVE BEEN IDENTIFIED-WALKER UNDER STATE DEPARTMENT COVER AND FITZWATER AND BONIN UNDER DEFENSE COVER. Now THAT THESE FOUR PERSONS HAVE BEEN PUBLICIZED IT IS NOT POSSIBLE FOR CIA TO CONTINUE TO DEAL WITH THE MATTER ON A NO COMMENT BASIS.

THEY HAVE NOW HAD TO CONFER WITH THE COVER AGENCIES WHICH HAVE BEEN SAYING THAT THE PERSONS CONCERNED ARE IN FACT WHAT THEY SAY THEY ARE, E.G., DEFENSE DEPARTMENT SAYING THAT STALLINGS IS A RETIRED DEFENSE DEPARTMENT EMPLOYEE.

ON 7 NOVEMBER, FIFTEEN NEWSPAPER OR WIRE SERVICE REPS CALLED THE PENTAGON SEEKING INFORMATION ON THE ALLEGATIONS MADE IN AUSTRALIA. CIA IS PERPLEXED AT THIS POINT AS TO WHAT ALL THIS MEANS.

DOES THIS SIGNIFY SOME CHANGE IN OUR BILATERAL INTELLIGENCE SECURITY RELATED FIELDS?

CIA CANNOT SEE HOW THIS DIALOGUE WITH CONTINUED REFERENCE TO CIA CAN DO OTHER THAN BLOW THE LID OFF THOSE INSTALLATIONS WHERE THE PERSONS CONCERNED HAVE BEEN WORKING AND WHICH ARE VITAL TO BOTH OUR SERVICES AND COUNTRIES, PARTICULARLY THE INSTALLATION AT ALICE SPRINGS.

ON 7 NOVEMBER AT A PRESS CONFERENCE, COLBY WAS ASKED WHETHER THE ALLEGATIONS MADE IN AUSTRALIA WERE TRUE. HE CATEGORICALLY DENIED THEM.

CONGRESSMAN OTIS PIKE, CHAIRMAN OF THE CONGRESSIONAL COMMITTEE ENQUIRING INTO THE CIA, HAS BEGUN TO MAKE ENQUIRIES ON THIS ISSUE AND HAS ASKED WHETHER CIA HAS BEEN FUNDING AUSTRALIAN POLITICAL PARTIES. THIS HAS BEEN DENIED BY THE CIA REP IN CANBERRA IN PUTTING THE CIA POSITION TO RELEVANT PERSONS THERE.

HOWEVER CIA FEELS IT NECESSARY TO SPEAK ALSO DIRECTLY TO ASIO BECAUSE OF THE COMPLEXITY OF THE PROBLEM.

HAS ASIO HQ BEEN CONTACTED OR INVOLVED?

CIA CAN UNDERSTAND A STATEMENT MADE IN POLITICAL DEBATE BUT CONSTANT FURTHER UNRAVELLING WORRIES THEM. Is THERE A CHANGE IN THE PRIME MINISTER'S ATTITUDE IN AUSTRALIAN POLICY IN THIS FIELD?

THIS MESSAGE SHOULD BE REGARDED AS AN OFFICIAL DEMARCHE ON A SERVICE TO SERVICE LINK. IT IS A FRANK EXPLANATION OF A PROBLEM SEEKING COUNSEL ON THAT PROBLEM. CIA FEELS THAT EVERYTHING POSSIBLE HAS BEEN DONE ON A DIPLOMATIC BASIS AND NOW ON AN INTELLIGENCE LIAISON LINK. THEY FEEL THAT IF THIS PROBLEM CANNOT BE SOLVED THEY DO NOT SEE HOW OUR MUTUALLY BENEFICIAL RELATIONSHIPS ARE ,GOING TO CONTINUE.

THE CIA FEELS GRAVE CONCERN AS TO WHERE THIS TYPE OF PUBLIC DISCUSSION MAY LEAD. THE DG [Director General] SHOULD BE ASSURED THAT CIA DOES NOT LIGHTLY ADOPT THIS ATTITUDE.

YOUR URGENT ADVICE WOULD BE APPRECIATED AS TO THE REPLY WHICH SHOULD BE MADE TO CIA. AMBASSADOR IS FULLY INFORMED OF THIS MESSAGE.

All year long, the CIA had been assessing Whitlam's popularity -- which in itself is among the things the CIA is supposed to be doing all over the world. But the secret assessments the CIA came up with in its daily newsletter for the president and other top officials certainly show an atmosphere in which the CIA might have wanted to act. Copies of the relevant newsletters were obtained by Jack Anderson's reporter Dale Van Atta and published in Australia's National Times.

During the year, as the Whitlam scandals mounted, the CIA noted Whitlam's falling popularity and noted that "an early national election-a distinct possibility-would almost certainly result in a sweeping victory for the Liberal-Country opposition." Then came the opposition's decision to block the passage of the budget in order to force an election.

But on November 8-the very day Shackley called in the ASIO representative to convey his protest-the CIA reported to President Ford, "The determination of the Australian opposition to force a general election is weakening. Prime Minister Whitlam has managed to raise real alarm about the dire consequences of government bankruptcy, which he claims will result from the opposition's blocking of government appropriations.

"Disenchanted Australians are swinging, at least temporarily, in support of Whitlam's Labor Party. They agree with the Prime Minister and blame the Liberal-Country coalition for the mess.... Several Liberal senators ... are threatening to break ranks ... [and] are talking of replacing opposition leader [Malcolm] Fraser." The CIA said Fraser's "ability to force an election has clearly been weakened."

An important date was coming up. The treaty creating Pine Gap was signed December 9, 1966, and provided that after an initial nine years, either party could terminate the agreement on one year's notice. Whitlam to this day has never indicated other than support for the existence of the base, but he was questioning the way it was being run and on December 9, 1975, he would be empowered to act.

Adding to the urgency, Anthony had challenged. Whitlam in Parliament to supply proof that his friend Stallings was a spook. Whitlam promised to supply it when Parliament re-opened November 11. Thanks to John Kerr, he never got the chance.

***

Kerr had been appointed-by Whitlam, of all people-to the largely ceremonial post of governor-general in February 1974. The governor-general was a throwback to the old days of the British viceroy, an official representative of the queen. Through him, Australia, which is entirely self-governing, continues tied to the British Crown so it can enjoy the benefits of such things as knighthoods and royal commissions.

Kerr had been a lawyer, judge, and finally chief justice of the New South Wales Supreme Court, most important in the land. His closest political connections were through his industrialist friends to the Liberal Party, which appointed him to his chief justiceship. Bur he was a consummate diplomat, avoided partisan wrangling, and kept himself ideologically and socially open to the spectrum of Australian politics, including Whitlam.

Whitlam apparently appointed Kerr as a gesture to those who were suspicious of his own ideological associations. He also used the governor-general's post for ceremonial diplomacy abroad, a function for which Kerr seemed well-suited.

There is no indication he gave a second thought to one of the governor-general's powers: to appoint and dismiss the prime minister. Like the Crown's power in England, it consisted of nothing more than a formal, pompous ratification of decisions actually made by a democratically selected Parliament. Nothing more, that is, until 1975.

Besides his Australian political connections, John Kerr also had long-standing ties to the CIA-a fact Gough Whitlam either was unaware of or ignored when appointing him.

As early as 1944 Kerr had been sent by the Australian Government to Washington to work with the ass, which in 1947 became the CIA. In the 1950s he became a member of an elite, invitation-only group called the Australian Association for Cultural Freedom, which in 1967 was exposed in Congress as being founded, funded, and generally run by the CIA. The group, like similar CIA-backed groups in other countries, held seminars and get-togethers on the general theme of anti-communism, and brought together promising young figures from various countries.

In the 1960s Kerr helped organize and run (as founding president) the Law Association for Asia and the Western Pacific. He traveled to the United States to arrange financing for this body from a tax-free group known as the Asia Foundation; that, too, was exposed in Congress as a CIA-established conduit for money and influence. In fact, Victor Marchetti, the retired CIA officer, says in his book with former Foreign Service Officer John Marks, [8] that the Asia Foundation "often served as a cover for clandestine operations," though "its main purpose was to promote the spread of ideas which were anti-communist and pro-American."

The CIA paid for Kerr's travel, built his prestige, and even published his writings, through a subsidized magazine. According to Kerr's biographer, Richard Hall, [9] at least one Australian colleague became nervous when the U.S. Congress exposed some of Kerr's sponsoring organizations as CIA fronts, but Kerr "brushed his worries aside." Kerr continued to go to the CIA for money.

There is, of course, no more evidence than die' circumstances listed here that the CIA had anything to do with Kerr's decision on November 11, 1975, to remove Gough Whitlam as prime minister of Australia. But remove Whitlam he did, and appoint Liberal Party leader Malcolm Fraser to form a caretaker government pending elections by the end of the year. Kerr says he acted because of the budget crisis. He says he is "pretty sure" he was unaware of the CIA's concern, and at any rate it "absolutely" didn't affect his decision. [10]

Whitlam isn't shedding any light on the matter, insisting that he is saving his theories of what happened for his own memoirs. [11] He did later reveal in Parliament what it was he was going to say about the Stallings affair on November 11 if he hadn't been dismissed first. His message was short. It noted that Country Party leader Anthony was the one who first identified Stallings in public as a CIA man, but confirmed the information from official records. It disclosed no other names.

One Labor Party official who will speak up is Mike Costello, who held the job of "principal private secretary," a sort of chief aide and official spokesman, to Bill Hayden, the Labor Party opposition leader during Fraser's prime ministership. Asked if he thinks the United States had a role in dumping Whitlam, Costello replies, "I don't have any doubt about that. Fraser could not have held the line [on the budget] for another day or two."

Former CIA analyst Kevin Mulcahy, who blew the whistle on Edwin Wilson, said shortly before his death that he had been told of CIA complicity in the events of 1975, and that the effort was spearheaded by a CIA man named "Corley." It was later learned that the CIA man who replaced John Walker as station chief that year was Milton Corley Wonus, called Corley, and another devotee of the Bourbon and Beefsteak and Bernie Houghton.

A CIA spokesman says Wonus "will not be available for comment."

As for Nugan Hand, Michael Hand and Frank Nugan were no friends of the Whitlam government, and were mightily pleased at its downfall. Soon afterward-and after the collapse of the CIA's war in Angola in February 1976-Hand was headed back to Australia from Africa. At some point in his fifteen-month absence, he took time to make at least one trip to Panama, where one of his and Nugan's land companies had been based.

There he opened the third international office (after Australia and Hong Kong, and not counting whatever he did in Africa) of the Nugan Hand Bank.

_______________

Notes:

1. ASIO has a franchise different from the CIA's. It is less concerned with the foreign intelligence and secret operations the CIA handles, and is more concerned with the counterintelligence function that in the United States is performed by the FBI. As a result, ASIO operates openly within Australia, as the CIA is not supposed to do in the United States (though the CIA has sometimes been caught at it).

The assignment of the FBI rather than the CIA to domestic counterintelligence in the United States is important. Because the FBI is basically concerned with the impartial enforcement of laws, it is a much less politically oriented organization than the CIA or ASIO. If law enforcement is in some ways inclined toward the "tough" attitudes generally associated with the Republican Party, it is also very conscious that it directly benefits from the more open-purse attitudes of the Democrats-including not only social programs that tend to soothe law enforcement's underclass clientele, but also programs that directly funnel money to cops, such as the Law Enforcement Assistance Administration (which the Republicans killed).

2. This material summarizes an impressive array of documents uncovered and published over the past five years by the National Times, a mainstream weekly published by John Fairfax & Sons, one of Australia's three big publishing empires. Most of the documents are from secret official reports prepared for the Australian Government. Another source for a discussion of CIA-ASIO relations is the booklet The CIA's Australian Connection by Denis Freney, a reporter for the openly Communist Australian paper, Tribune; but while Freney has compiled a lot of good information, he tends to mix it at will with speculation and with occasional wrong historical facts, and his work needs to be read discerningly.

3. In a letter published in the National Times.

4. Interview with the author.

5. Characteristically of such arrangements, TRW says it won't comment on whether it works for the CIA, but if it doesn't, then it's hard to understand what the Russians were paying Boyce for, or why he went to jail.

6. Both men were originally quoted in interviews with the National Times, and have confirmed the quotes.

7. Cline verified the quotes in a telephone interview, but told my researcher Vicki Contavespi that he had really meant to refer to information against the common interest of the U.S. and Australia, such as a critical attack by the Chinese. "There was no, repeat no, CIA campaign to damage Whitlam within his own country," he told her, though he acknowledged open criticism of Whitlam's policies throughout the CIA and State Department.

8. Marchetti and Marks, The CIA and the Cult of Intelligence.

9. Richard Hall, The Real John Kerr: His Brilliant Career (Sydney and London, 1978).

10. Interview with the author.

11. In a brief phone conversation I had with him, Whitlam angrily accused me of using unfair tactics in calling him during the lunch hour when his secretary was out, because otherwise, he said, he would not have returned my call.
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Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 3:45 am

CHAPTER TEN: The Un-Bank

The Nugan Hand Bank never did any banking. It never hired any bankers-until in its death throes it brought Donald Beazley in from the United States. And he stopped banking as soon as he got to Sydney.

Nugan Hand hired people with contacts. And it hired aggressive professional salesmen -- some of whom paid little heed to the worth of the product they were selling.

Les Collings was a Britisher who came to Australia in 1960 at the age of twenty-three with a grammar school education and career experience as a deck apprentice on an oil tanker. [1] He took up selling real estate and eventually moved into mutual fund shares. Mutual fund salesmen sometimes begin to think of themselves as being entitled to 8 percent of the life savings of anyone they meet. That is the commission they often take off the top. Then they turn over the remaining 92 percent of the savings to a fund manager at no risk to themselves, and move on to the next prospect. So did Les Collings make his living.

In July 1974, the fund Collings was working for-Dollar Fund of Australia-did the one thing that every investor is told his mutual fund will never, ever, do: it stopped redeeming its shares. What happened to the unlucky investors? "They would probably still be holding the securities," Collings says. In other words, the money those people worked for and saved, perhaps over the course of a lifetime, is gone forever.

But, as would happen later with Nugan Hand, Collings doesn't like to talk so much about the investors. "That firm had an elite group of salesmen," he says of the Dollar Fund. There is wonder in his eyes as he speaks of this hustler's pantheon, and it becomes clear who are the true objects of his sympathy. "Peter Dunn and [Jerry] Gilder were with that firm. [Frank] Ward was the administrator. There were eighteen guys around the world and we were just suddenly told by cable that we had to pay our own way home."

As one might expect, they somehow made it. One Dollar Fund salesman, Wilhelmus Hans, got a job with Nugan Hand, selling silver bullion investments (and, eventually, scouting out arms suppliers for Michael Hand's clients in Africa, whoever they were). When Collings had foraged his way back to Sydney, he ran into Hans, who said, "I think I can get you a job selling bullion."

Dunn and Ward went to work at Nugan Hand for a year or so, and Gilder for the duration. A Dollar Fund veteran named Karl Schuller also joined. In one of the many ironies of the Nugan Hand story, the liquidator John O'Brien back in 1974 was called in to wrap up the affairs of the Dollar Fund, and for the first time heard mention of the company that would become his biggest case. Questioning Schuller about the Dollar Fund, O'Brien was told that Schuller was working for a company called Nugan Hand "and making lots of money on the gold and silver market."

Apparently Nugan Hand decided to specialize in commodities at first. Advertising for salesmen, the company hired a Lebanese immigrant, George Shaw, who had been running a coin dealership. His commodity specialty was silver. Shaw brought in a friend, Andrew Lowe, who ran an illegal gambling den in Sydney's Chinatown. Lowe's commodity specialty was number four grade (pure) heroin. He imported as much as sixty pounds of it at a time, until he was caught and sent to prison for it in 1978.

Shaw and Lowe, respectively, brought in banking customers from the large Lebanese and Chinese communities in Sydney. Many of these customers were involved in the dope trade, and wanted to get money across international boundaries without attracting the attention of authorities. Other customers, for reasons of their own, such as tax evasion, also sought ease and secrecy in international currency shipment.

"The whole purpose," Shaw told the Stewart Royal Commission, "was to attract people with 'black money' and to assure them that their anonymity would be preserved."

Nugan Hand began a mutual fund called Ingold. As Collings remembers it, it was "80 percent bullion-gold, silver, platinum -- and 20 percent money market." Schuller went to Germany seeking investors, and Nugan Hand eventually took over a small bank there, though Schuller dropped out of the company. Shaw went to Lebanon and tried to open a Nugan Hand branch, but found the civil war had ruined the business climate and came back to Sydney.

In the move that was to have the biggest impact, Collings was sent to Hong Kong. Before Hand left for Africa, he went to Hong Kong to help Collings legally establish companies there to represent the Ingold fund.

"They gave me $2,000 and an air ticket," Collings recalls over drinks in a Hong Kong bar. "I arrived here with a suitcase and I got the firm established. I was trying to get people to invest in Australia. A mutual fund with silver bullion seemed to me like a very worthwhile investment."

But after a few months, he says, Nugan notified him that the bullion idea wasn't working out. "Nugan told me he had set up an investment bank in Panama called Nugan Hand, Inc. They were selling 10 or 12 percent certificates of deposit." Collings was instructed to offer Ingold investors their cash back, but to try to talk them into converting their investments into Nugan Hand certificates of deposit instead. Most, he says, converted. "I'm a damned good salesman," he explains.

***

From the beginning, Nugan Hand offered essentially four services, which changed only in size and detail as the bank grew. It offered a way to move money overseas flouting Australia's and other countries' laws; it offered tax avoidance schemes based on Nugan's supposed expertise (though these schemes now seem to have been patently fraudulent); it offered extraordinarily high interest and yet great safety for savings; and it offered international trade connections.

Because the United States has such a long, strong tradition of free trade and free commerce, it is sometimes difficult for Americans to understand the currency flow restrictions most countries have. But these are the laws Nugan Hand most flagrantly violated.

America, the land of opportunity, has always attracted capital from abroad. So it has been in our interest to allow capital to flow freely. Of course, it could also be argued that our lack of restraint on capital is one important reason people want to invest it in the United States. At any rate, other countries have built all sorts of regulatory barriers to keep their citizens from exporting capital. It is thought that these laws foster development at home.

One might assume that Australia, with its American-sized territory populated by only about fifteen million people, would offer such enormous development opportunities that it would attract capital the way the United States has. But for whatever reason, the Australian Government saw fit to join the majority of countries that have erected barriers to the free flow of money.

No matter how much money you have in Australia, the Banking Act says that if you leave you can't take more than $250 with you, unless you can persuade the Reserve Bank to give you special permission because you are going to do something good for Australia.

If, for example, you want to start a trading company and need to pay a staff stationed abroad, you may be able to persuade the Reserve Bank to allow you to do that on the ground that you will be helping Australian exports. But you will still be limited to, say, $4,000 per employee for the first two months and $1,500 a month thereafter, and will have to show air tickets or other evidence as proof of what you are doing.

Nor can you invest money abroad without such permission. You can pay properly incurred debts abroad; for example, if you are an Australian book publisher and contract to publish a book by a foreign author, you may send the author his royalties. (Of course, if you are a book publisher, you will probably find some other excuse not to send the author his royalties.) If you are a non-resident who comes to work a while in Australia and then wants to go home, you will be allowed to take back only as much money as you brought in.

As John Booth, a senior finance officer of the Australian Treasury Department explains it, "We do not wish Australian currency to be an international currency. Australia is a capital-importing country. We need capital here."

Although in 1981 the Reserve Bank loosened its guidelines about giving permission for overseas investment (because of an especially favorable balance of trade), during the Nugan Hand years those guidelines were stringent. And then, as now, you can be sure of one thing: before the Reserve Bank will approve your sending or taking that first dime abroad, it will demand proof that you have paid taxes on it and all other income it can trace to you.

***

A lot of Australians wanted to be able to put their money wherever they desired, without approval from anyone. So did a lot of Malaysians, Thais, Indonesians, Filipinos, Hong Kong residents, and others burdened with similar currency restrictions. For them, there was Nugan Hand.

Donald J. Daisley owned an engineering company in Sydney, but he did some business overseas and parked the profits in Hong Kong, where the taxes were lower and the regulations less stringent than if he had brought the money home to Australia. Through an encounter with George Shaw in mid-1975, Daisley met Frank Nugan, and talked about his financial situation.

Before long, Daisley was putting some of his Hong Kong savings on account with the Nugan Hand Bank in Hong Kong. And at just about the same time; he took out a $15,000 loan from a Sydney company named Yorkville Nominees, which had been founded by Frank Nugan many years earlier to handle some of the land sales that he and Hand carried on in their salad days.

Thus Donald Daisley put some money into one Nugan Hand entity, and took some money out of another Nugan Hand entity. If you wanted to subject this money to the Australian income tax, you could say that Daisley was repatriating to Australia some of his overseas profits. If you didn't want to subject it to the income tax, you could say the two transactions were a coincidence. It was $15,000, it was called a loan, and who would holler about it?

That's the way Nugan Hand worked-on a simple level.

Then, in 1976, Daisley spotted his dream house in the posh Hunter's Hill area of Sydney. The price was $260,000. It was a good buy, later valued at over $1 million. But Daisley's bank would cough up only $160,000 of financing. He had plenty of money in low-taxed Hong Kong. But how was he to get that money back to Australia to buy the house without paying Australian taxes on it?

This was Frank Nugan's genius. At just about this time, Nugan was oiling up his relationship with the injured, disaster-stricken doctor, John K. Ogden. Nugan, who had settled Ogden's insurance case, was trying to persuade the physician that through his tax expertise, allegedly acquired at the University of California, Nugan could handle the Ogden family's finances better than the Ogdens themselves.

Now, Nugan showed Ogden just what he meant. Nugan would arrange for Ogden to buy a house-the one Daisley wanted-for $260,000. Then Nugan would arrange for Ogden to sell the house to Daisley for $160,000, creating a $100,000 loss. The loss would be reported to Australian tax authorities for a considerable savings on the Ogdens' annual tax bill. But, then, nothing would really be lost, because the $100,000 would magically reappear in an account with Ogden's name on it in Hong Kong, where it would earn more interest anyway. The money would come from Daisley's account in Hong Kong.

And that wasn't the end of the supposed benefits. Under Australian law, Ogden wasn't entitled to invest in Nugan Hand's higher-interest overseas bank. But since the money to open the account would already be in Hong Kong, the device of the house would solve both problems. It would produce a tax loss, and a high-interest Nugan Hand Bank account at the same time. And, Nugan assured Ogden, lying through his teeth, it was all perfectly legal. [2]

Still, a corporate veil was created. Yorkville Nominees, as agent for Ogden, bought the house high, and turned around and sold it low to Yorkville Nominees as agent for Daisley, who was handed the title. Meanwhile, Wilkinson Holdings, a company Daisley formed in Hong Kong, generously donated $100,000 to an account with Ogden's name on it at the Nugan Hand Bank in Hong Kong-all by coincidence, of course. (Daisley declines to discuss it.)

By the time the liquidator, John O'Brien, took over Yorkville Nominees' books along with Nugan Hand's, they showed scores of client accounts through which millions of dollars disappeared in one country to magically reappear in another. Because these transactions were so informal and so secret, and the records ill-kept or destroyed, O'Brien found it impossible to estimate either the assets or the liabilities of Yorkville Nominees.

Australian tax authorities investigated many of the cases. The outcome of any civil tax claims isn't public information, and no criminal charges are known to have been filed.

***

At times, Nugan Hand didn't bother with such complicated book-work. Cash was physically, illegally, carried across boundaries in pockets and suitcases. George Shaw did it, according to fellow insiders. (Shaw himself stopped talking to the author before the question came up.) No doubt others did, too.

But in mid-1976, a real pro came onto the payroll: a mysterious and secret Britisher named Ron Pulger-Frame. Pulger-Frame had worked for Deak & Company, probably the best-known U.S. international currency and coin exchanger until its bankruptcy filing in December 1984.

For years, it was whispered that Deak had a close working relationship with the Central Intelligence Agency. Certainly the CIA would have been derelict not to try to keep tabs on Deak. And there would have been a lot for Deak to gain by trading off with the world's biggest spy agency, because much of the company's business involved speculation about the relative future value of the world's currencies.

Pulger-Frame talks only sparsely about his work for Deak and Nugan Hand. "I was a courier," he says. "I carried things."

Money?

"Of course."

Large amounts?

"Fifty, a hundred thousand dollars."

Neil Evans, whom Nugan Hand had hired to run its branch in the drug capital of Chiang Mai, Thailand, said that while with Nugan Hand, Pulger-Frame would carry a pencil behind one ear, or make some other sign under a pre-arrangement with customs personnel of various countries who would then let pass what Pulger-Frame wanted passed. Asked about this by a reporter, [3] Pulger-Frame indignantly denied ever crossing frontiers with cash. "I'm not that dumb," he said.

But the Stewart Royal Commission learned of an interview Pulger-Frame gave to the official bankruptcy receiver's office in Hong Kong in 1981, during which he declared, "Deak's had a system which was devised by me to circumvent Australian exchange regulations." When the commission pressed him about what he meant, Pulger-Frame explained the rather ingenious system:

He opened a foreign exchange account in Australia, telling banking authorities that Deak wanted to import Australian cash from Asia, sell it in Australia at profitable exchange rates, and export the proceeds- all perfectly legal, if registered. He would then carry suitcases of Australian currency into Australia from Hong Kong, notifying banking authorities of his arrival.

Once in the country, however, on his way to the bank where he had the account, he would rendezvous with Australians who wanted to illegally export money. He would add their saved-up cash to his imported bundle. He would then turn the combined amount over the bank, which would credit the entire sum as imported cash. It could then be put in international exchange accounts, where it could all be exported if desired. (Pulger-Frame told the Stewart commission that he really didn't devise this system, he just implemented it.)

The Hong Kong liquidator who took testimony from Pulger-Frame in the Nugan Hand case also recalls [4] his boast that while with Deak he played a role in the delivery of Lockheed Corporation cash to Japanese public officials, in a well-known bribery case that helped bring down a Japanese government. There have long been suspicions that such bribes to foreign leaders by American firms, especially defense contractors, are really payments from the U.S. Government in disguise.

"He [Pulger-Frame] took the view that the movement of money was every man's right," says the liquidator. "He said there was one time customs in Japan opened his suitcase and it was full of money. And the man [customs official] said, 'Hmmm, money,' and closed it up again."

Les Collings, the Nugan Hand representative in Hong Kong, says Pulger-Frame dealt directly with the Sydney office, not with him. Collings says the mysterious courier "used to bring in depositors" from Indonesia and other places.

John Owen, the Nugan Hand Bangkok representative, calls Pulger-Frame "a bag man," and recalls running into him in Sydney once "on one of his clandestine sort of deals." Owen says he asked Pulger-Frame about rumors then circulating that the Nugan family might be connected to narcotics trafficking. He says Pulger-Frame told him, "They are all involved in drugs. Nugan fruit group and Nugan Hand," whereupon Owen says he backed off.

Pulger-Frame testified before the Corporate Affairs Commission that he catered to clients mostly in Melbourne who presumably didn't trust the mails. Sometimes, though, even in Sydney there were clients who "wished to remain anonymous," and so used him as an intermediary, he said. According to his testimony, he merely carried cash to the Nugan Hand office in Sydney, then went back to Hong Kong with empty pockets so as not to violate the currency laws. (Apparently he never told the Corporate Affairs Commission that at Deak he had specialized in violating such laws.) Back in Hong Kong, Pulger-Frame said, he would report the transaction, and an international certificate of deposit would be issued to the client by the Nugan Hand Bank.

For this seemingly modest service, Pulger-Frame testified that he extracted the impressive fee of 4 percent of the money he carried. He said he had received 5 percent from Deak. Why he was able to demand such high fees if all he did was carry money across town from one office to another can only be speculated on--especially since Nugan Hand regularly used an armored car service in Sydney to perform that task.

The guard service was K & R Cash Transit, whose main business was providing payrolls for Sydney companies that paid their workers in cash (a much more common practice there than in the United States). Interviewed in his home, Eric Francis Lambkin, who ran K & R, recalls regular trips for Nugan Hand throughout 1977 and 1978, the same period Pulger-Frame was working for the firm. Lambkin would come to the Nugan Hand office, pick up a bundle of cash, and write a check to Nugan Hand (or Yorkville, or whoever) for however much money he was collecting in cash.

"They'd call in the morning and ask us to pick up about noon," he says. "Maybe once a month, maybe twice a week. Very spasmodic." The largest single sum he recalls picking up at Nugan Hand was $350,000, the smallest, $12,000. "When you think about it, it's a bloody good way to wash money," he admits.

Lambkin ought to know about money laundering. He spent eighteen months in prison for it after K & R was liquidated in bankruptcy in 1979. Nugan Hand's name wasn't sullied in that affair.

***

To get the clients it wanted, Nugan Hand needed public trust. And to get that trust, it needed two things: it needed reputable banking and other official references. And it needed a certified public accountant to sign off that its books were true. It got both.

"If there was one thing that was most responsible for the rapid growth of the bank," says Les Collings, "it was the quality of banking references they got." In Sydney, Nugan persuaded officers at two of the biggest banks in Australia, the kind everybody goes to, with branches all over town, to write testimonial letters and even answer telephone inquiries from potential Nugan Hand clients. The men who signed the letters aren't answering inquiries about the bank anymore, at least not for an American reporter.

The first big endorser for Nugan Hand was Ron McKinnon, head of the New South Wales branch of the Australia and New Zealand Banking Group Ltd., popularly known as the ANZ Bank. McKinnon is now dead. The Joint Task Force on Drugs worked for a while on the theory that McKinnon had somehow been bribed by Nugan, but never came up with usable evidence.

J. K. Nicholson, however, lives. And as late as July 1979, six months before the bank collapsed, Nicholson-senior manager of ANZ's international division-supplied Nugan a copy of the report that ANZ was putting out on Nugan Hand.

Under the heading "Ability and Integrity of Management," the ANZ report said, "Directors have proven, in their dealings with the Bank [ANZ], capable and reliable and unlikely to commit the company beyond its means." Under the heading "Remarks on Financial Position," it said, "On information available to us, financial position is considered sound." Under "Conduct of Account," it said, "Good-arrangements have been observed at all times." There was not the least hint of anything derogatory.

Nicholson attached the disclaimer that, "As is our standard practice the report is supplied without responsibility on the part of the bank [meaning ANZ Bank] or writer." But ANZ apparently made the report available for those who inquired about Nugan Hand; certainly Nugan Hand made it available to its clients, along with Nicholson's cover letter on ANZ stationery. (Nicholson, still an officer at ANZ, did not respond to telephone messages.)

With only the same kind of perfunctory disclaimer, the Bank of New South Wales, whose letterhead boasts "First Bank in Australia," also backed up Nugan Hand. Ronald J. Regan, who signed himself "assistant representative" of the Bank of New South Wales, prepared a form report saying that Nugan Hand's account at his bank "opened 1973 and operates with substantial turnover. Directors are considered capable and reliable and we consider they would not enter into any commitment they could not expect to fulfill," the report added.

Possibly the most important banking reference Nugan Hand picked up was that of Wing-au Bank, a major institution in Hong Kong controlled by the wealthy Kwok family, which also owns department stores and other enterprises. Besides kind words in re sponse to inquiries, Wing-On offered a prestigious depository into which Nugan Hand customers could send their investment money, and out of which the investment could presumably be retrieved (through checks Nugan Hand wrote on its account there).

But Wing-On did something much more important even than that. Wing-On actually guaranteed, with its own money, deposits that Nugan Hand took in from certain elite customers-like other banks. Thus, with the help of Wing-On, Nugan Hand acquired prestigious investors, like the Chase Manhattan Bank, the Fidelity Bank of Philadelphia (the third and forty-fifth largest banks in the United States, respectively), the Bank of Nova Scotia, and a dozen other banking behemoths from Europe and North America.

In each case, the major bank would deposit hundreds of thousands of dollars-in Chase Manhattan's case, once $1 million-with Nugan Hand, which offered a high Australian interest rate for a short period of time. The banks were induced to do this because Wing-On Bank, a substantial entity, guaranteed repayment of the money and the interest.

For its guarantee, Wing-On charged a slight fee, which Nugan Hand was more than happy to pay. And Wing-On took care to guarantee its own stake, by requiring Nugan Hand to open an escrow- like account at ANZ Bank in Sydney, containing enough high-grade money market securities to satisfy the debt that Wing-On was guaranteeing. ANZ certified the contents of the escrow account, from which Wing-On could draw if it was ever called upon to bail out Nugan Hand.

In themselves, these deals lost money for Nugan Hand. The money-market securities required to fill the escrow account at ANZ normally paid Nugan Hand less in interest than Nugan Hand was offering to get the deposits. Yet Nugan Hand sought out big, prestigious depositors who required the Wing-On guarantee, because they created still more prestigious references. Potential clients from the general public could then be told that big banks like Chase Manhattan were depositing, which would quell their own doubts about the stability of Nugan Hand.

In Fidelity Bank's case, for example, Les Collings arranged for deposits by getting to know Fidelity's Hong Kong representative. Later, Nugan traveled to the United States and visited senior executives in Fidelity's home office. According to David Carpenter, Fidelity's vice-president in charge of Asia and Latin America, Nugan impressed the bankers as "smart" and "personable."

As for references, Carpenter says, "If anybody called us, our standard reference is that we have had a relationship that has been conducted X period of time and it's been satisfactory." But Nugan got Fidelity to go still farther. On June 30, 1978, William F. Morgan, an assistant vice-president at Fidelity, wrote a glowing "Dear Frank" letter to Nugan, signed "Bill," which Nugan made no effort to hide from those he wanted to impress.

The letter was in response to one Nugan had written to Fidelity, explaining the scandal that was enveloping the family fruit and vegetable business. Wrote Morgan, on Fidelity letterhead, "We had read several newspaper reports on the matter, but knowing you and Nugan Hand Limited, did not feel it necessary to ask you to defend yourself to us.... I should like to wish you and your family well as this situation resolves itself. You and Nugan Hand Ltd. will undoubtedly come out of this period stronger and better for it. With warm personal regards . . ."

Irving Trust Company, seventeenth largest bank in the United States, is where Nugan Hand did its own banking in the U.S., shuffling money in and out of a New York account. An Irving Trust spokesman says his bank was introduced to Nugan Hand through Wing-On, which has a correspondent banking relationship with Irving. The spokesman says that unnamed "sources and references indicated the quality of the organization met our standards."

Irving says there is no record of whether or not Irving provided references to prospective Nugan Hand clients, and won't comment on the other business they did. But Nugan Hand staffers were advised that they could refer a potential client to David Fung, an Irving vice-president, and presumably they did so without ill result. (Fung says he did a lot of correspondence banking with Nugan Hand, which he says was a "sister bank" of Irving, but that he didn't refer any customers.)

When John O'Brien; the liquidator, 'went for information, he reports, "The Irving Trust guy in Hong Kong was the most nervous person I ever saw in my life. He says he knows nothing about it. He had computer printouts of the monthly balances but no details of transactions. The balances are nominal, the low six figures, but he acknowledged there was a lot more going in and out."

***

Albert Kwok, Wing-On Bank's chief manager, refuses to say who introduced Nugan Hand to its critical connection at Wing-On. But there is one person he says absolutely wasn't involved: Andrew Lowe.

Lowe, it may be recalled, was a major international heroin trafficker who was hired by Nugan Hand to bring in clients from the Chinese and drug communities in Sydney, where he was well-connected with people who wanted to move money secretly. Strange as it may seem, Lowe had a brother, Stephen, who was married to the daughter of Alwyn Kwok, patriarch of the whole Kwok family. Alwyn ran the department stores and sat on the board of directors of Wing-On, the family bank. A coincidence? Absolutely, says Albert Kwok. He says Nugan Hand came to him on the recommendation of "a respectable, responsible financial institution in Australia." He just won't name it.

You get a very different story, however, from Les Collings, Nugan Hand's Hong Kong manager. Collings explains the Wing-On relationship very simply: "I established the relationship with the Wing-On Bank," he says. "I was walking down Des Voeux Road [a main drag in the Hong Kong business district] and I saw this bank. I thought, 'I'll see if they'll invest.'"

At the time, Collings was still selling shares in Ingold, the metals fund. He says Wing-On turned down his efforts to get it to invest. (The idea of a bank investing in a precious metals mutual fund seems strange to begin with.) But, Collings, says, he struck up an acquaintanceship with Albert Kwok-even arranged for Frank Nugan to give legal advice when Kwok was sued for fraud-and later, when Collings was selling certificates of deposit, the acquaintanceship paid off.

At first, the certificates Collings was selling were issued by the Nugan Hand company in Panama. By the end of 1976 or early 1977, however, Nugan and Hand had moved their offshore haven to the Cayman Islands, where they set up a company called Swiss Pacific Asia Ltd.

A lot of banks, even some legitimate ones, open subsidiary companies in places like Panama or the Caymans, because the governments of those countries don't pay much attention to what goes on. The "office" is often just a manila file of legal documents in the office of some lawyer, who also serves as a mail-forwarding service; real business is conducted from New York, Paris, or-in Nugan Hand's case-Sydney and Hong Kong.

You'd think investors would know that banks located in such offshore havens aren't subject to normal scrutiny. But a lot of them apparently don't think about that-or else a lack of scrutiny is the very thing they're looking for, because they are trying to avoid paying taxes in the country where they live, or to evade some other law.

The reason Nugan and Hand picked the name "Swiss Pacific Asia" should be obvious. It certainly was obvious to the Government of Switzerland, which protested to Hong Kong authorities in 1977 and forced a change. Inclusion of the word "Swiss" encouraged investors to overlook the Cayman Island address and falsely assume that the bank was connected to Switzerland, which cares very much about how its banks do business, and therefore has developed a great reputation for safety.

So, on Switzerland's protest, the name was changed to the Nugan Hand Bank. And somewhere along the line, Les Collings says, he persuaded Albert Kwok to put in Wing-On's money-and name.

***

By March 1977, Nugan Hand had picked up another impressive reference: the United States Government. The U.S. consular offices in Sydney and Hong Kong cabled reports on Nugan Hand to the Commerce Department, and the reports fairly glowed. How often the Commerce Department or the embassies gave the reports out in response to public inquiries isn't known, but Nugan Hand got hold of copies of the reports. And for potential customers, the clearly labeled words of the U.S. Government made impressive reading.

The data in the reports confirms to false figures handed out by Nugan Hand itself. The Australian report, dated March 1977, says Nugan Hand, Sydney, was established in 1970 and had eighty employees. The Hong Kong report, dated April 1977, says the office there-identified as Swiss Pacific Asia Ltd.-was established in 1972, and had fifty employees.

Both reports, prepared by the State Department for the Commerce Department, list the reputation of the company as "good." Both list the ANZ Bank as a banking reference, and the Hong Kong report also lists Wing-On and the Hong Kong office of Banque Nationale de Paris (a major French bank whose name hasn't turned up elsewhere in Nugan Hand literature).

The report from the U.S. Embassy in Australia says Nugan Hand "acts as a holding company, investment banker and banking service company, providing services as money market operation, financial advice and assistance, economic analysis and information, investment and portfolio management, credit services, custodian and nominee facilities." At January 31, 1976, it says, Nugan Hand had $22.7 million in assets and $1.1 million in working capital.

All this sounds as if it were pulled off one of the fancy advertising brochures Hand and Nugan were distributing. The report repeats the fiction that "Financing for operations is from money market borrowing."

The State Department apparently had talked to ANZ Bank and the Bank of New South Wales, because the U.S. Government report is worded so similarly to the two bank reports. "Banker [unidentified] states directors are considered capable and reliable, unlikely to enter into commitments they could not fulfill," the U.S. Government report assures its readers. "Firm's above balance sheet indicates a good financial position," the State Department adds. "No adverse information is known about Nugan Hand's operations and banker considers directors are reliable."

The report notes that Nugan Hand had incorporated itself in Hawaii, and even asserts that Nugan Hand, Inc. of Hawaii "owns Nugan Hand (Hong Kong) Ltd. and Nugan Hand Bank & Trust Co." It is, of course, illegal for a company operating from the United States to sell banking securities or even call itself a bank without U.S. banking regulation, which Nugan Hand decidedly was not getting. But apparently the FBI, which is in charge of enforcing this regulation, was not among those receiving the State Department report.

The Hong Kong report says Nugan Hand's (Swiss Pacific's) U.S. representative "is Rear Admiral Earl P. Yates, USN (Retired), who would be the appropriate person to contact for U.S. individuals wishing to do business with subject firm.

The report also lists Yates as a "trade reference" for Swiss Pacific, and gives his address in Virginia Beach, Virginia. And it says Swiss Pacific was capitalized with $10 million Hong Kong, the equivalent of about $2 million U.S. or Australian. By all available evidence, of course, this capitalization appears to have been a complete hoax.

***

Yates was brought on board by Bernie Houghton. Although Houghton had no official capacity with Nugan Hand at the time, he acted as an unofficial third partner. Yates has given Australian investigators [5] different versions of when he met Houghton, according to their reports. The Joint Task Force says, and at one point the Stewart Royal Commission says, that Yates told them that he met Houghton in 1972 or 1973 through a Colonel William Prim, who was serving on Yates's staff at the U.S. Pacific headquarters in Hawaii. According to this version, Prim had recommended that Yates look up Houghton, an old Vietnam buddy of Prim's, on a trip to Australia. [6]

This account accords with the one Houghton gave. Bur it quite contradicts the recollection of the prominent businessman Sir Paul Strasser. Strasser has told official investigators and reporters alike that a glowing reference from Yates led him to hire Houghton as a real estate salesman in 1967.

Strasser's account accords with the one the Stewart commission says Yates gave while testifying in Sydney in 1984. There, the commission reported, Yates said he "met Mr. Houghton during the late 1960s when he (Admiral Yates) was in Sydney overseeing the details of the establishment of rest and recreation leave pursuant to which scheme American servicemen serving in Vietnam would come to Sydney as part of such leave. Subsequently Mr. Houghton introduced him to Messrs. Nugan and Hand."

Taking what is consistent in Yates's contradictory accounts, Yates got the standard invitation to the Bourbon and Beefsteak from Houghton, and they struck up a social friendship. When Yates returned to Australia with his boss, Admiral Noel Arthur Meredyth Gayler, Commander-in-Chief of the U.S. Pacific Command, Houghton threw a party for their entourage, and, in the words of the Stewart Royal Commission, "introduced Admirals Yates and Gayler to several political and financial figures in the Sydney area."

Yates told investigators the friendship with Houghton lasted after he left the navy in 1974 and went to work with a U.S. engineering company. Then, early in 1977, Houghton invited him to come to Sydney, meet Nugan and Hand, and join their organization as its U.S. representative.

We are told the initial impressions were splendid. "I thought Frank Nugan was very, very honest and straightforward, and a Christian gentleman," Yates said in an interview with U.S. journalist Jonathan Marshall [7] on September 29, 1980, long after the bank had stopped paying depositors and been exposed as a sham.

Yates said he and his new associates even went to church together. "I never knew him [Nugan] to do anything illegal or dishonest," Yates told Marshall. "Michael Hand [who by the time Yates was speaking had fled Australia and vanished] also was highly decorated. . . . I never heard him swear. He was a very religious and dedicated Christian."

Yates's employment agreement called for him to receive $50,000 a year in salary, and another $50,000 in expenses. He told the Stewart Royal Commission that he never received the salary, and that his real interest was an agreement that he would receive a 20 percent equity share in the enterprise, equal to that of Nugan and Hand, after the bank had achieved "a measure of success." (The commission doesn't explain who would have held the other 40 percent of the shares.)

Yates also told Australian investigators that although he was given the title of president, he "was not given any authority to commit the bank nor direct any of its operations outside the U.S." Yet he was soon representing the bank in public, and also in private business deals in Asia and Europe. A 1977 feature in the business section of Hong Kong's respected South China Morning Post featured Yates's picture, and said:

Hong Kong will rival London and New York as a financial center in a few years and will require the presence of more institutions for the large international financial arrangements that will undoubtedly be made here. This is the prediction of the visiting president of Nugan Hand Bank, Admiral Earl Yates, who is in Hongkong to lay the groundwork for the bank's activities here. The bank has a representative office and a deposit-taking company in Hongkong.


There followed a long exposition of Yates's opinions on various banking and trade matters, with plenty of puffery about Nugan Hand's special ability to serve almost every kind of customer.

Yates was joined by Brigadier General Edwin Black "early" in 1977 -- that's as specific as Black could be about the date. A former OSS man during and after World War II, former Green Beret commander, former commander of the covert Vietnam War support programs run out of Thailand, former executive director of the Freedoms Foundation at Valley Forge, Black said Yates recruited him to the job. Nugan and Hand were flown to Hawaii by Yates to meet him, Black said, after which Black became president of Nugan Hand Hawaii.

As such, he carried on yet another important relationship, with the Hawaiian Trust Company, a large legitimate bank, and its vice-president, Douglas Philpotts. Philpotts will say nothing about the relationship. But millions of dollars flowed through Nugan Hand's account at Hawaiian Trust on its way to or from Europe, Latin America (particularly Panama), and Asia.

What was the money used for? We can only guess. For example, Panama was and is a big center for drugs. It also was, for those years, the main base for U.S. covert military operations in Central and northern South America. General Black insisted in interviews until his death in 1984 that he himself didn't know what the money he shipped around was being used for; he said he was just following orders he got from Frank Nugan and Mike Hand.

***

No amount of financial treachery by Hand, Nugan, Houghton, or any of the talented staff they employed would have succeeded without the signature of a trusted accountant. The role was filled, first, by George Brincat of Sydney, and, later, by the Price Waterhouse & Company office in the Bahamas (which covered the Cayman Islands).

Price Waterhouse, one of the "Big Eight" international accounting firms, is rather larger and better known than Brincat. But its professional employees are, like George Brincat, certified public accountants. (In Australia, they're called chartered accountants).

A CPA is much more than a bookkeeper. A CPA does not just organize numbers. He does whatever investigations he considers appropriate under standard professional guidelines in order to give his certification-his assurance to the public-that the numbers "fairly reflect" the status of the business.

In certifying the books of a manufacturing company, for example, a CPA may actually go into the warehouse (or send someone) and open up some boxes to see whether they contain as many widgets as the company management says they contain. The CPA for a bank may check the vaults and see if the money is really there. He's not expected to count every dime, or widget, which would take forever, but to test according to standards the profession has set for itself -- such as by sending mailings to a sampling of alleged depositors to see if they agree with the bank's records of their accounts.

A CPA license requires a vigorous examination, overseen by state agencies, and continuing professional education. Because finance is so complicated, the public has come to regard the signature of a certified public accountant as something it can bank on.

Brincat, of the firm of Heuschkel & Pollard (later Pollard & Brincat), became Nugan Hand's accountant in 1974, before its big growth. He was only twenty-three years old. The Corporate Affairs Commission concluded, "The more dominant character of Mr. F. J. Nugan and the comparative inexperience of Mr. Brincat, whilst perhaps rendering the behavior of Mr. Brincat more understandable, do not in the estimation of the delegates [commission members] in any way combine to excuse the active role played by Mr. Brincat in the financial deceptions ...

"Whilst it is accepted that by January, 1979, he had become uneasy at the contents of the accounts of Nugan Hand Ltd., and in the underlying transactions concealed by those accounts, his uneasiness could have been equally attributable to his own position as to the behavior of Mr. F. J. Nugan," the commission said. In other words, he may have been less worried over the welfare of the depositors than over his prospect of going to jail.

Brincat's very first "audited" statement for Nugan Hand, covering the year ended June 30, 1974, accepted Nugan's and Hand's word that they had invested $1 million in capital in the company. A company's capital acts as a base, to assure clients that temporary operating losses won't leave the company short of funds to pay its debts. But the financial records Brincat relied on to show the $1 million paid-in capital in fact establish nothing of the sort. As noted earlier, they were merely the result of the kiting of checks among accounts with under $20,000 in them-which would have been evident from the very records Brincat cited.

The Corporate Affairs Commission found that Brincat had "knowingly engaged in the preparation of false accounts for Nugan Hand Ltd." from that day forward. So did the Stewart Royal Commission. In fact, in his testimony before the Stewart commission, Brincat tacitly admitted it, though he argued that he always thought Nugan was so rich he could, if needed, pay from his own pocket the money Brincat knew the company didn't have.

There is no way to say just why Brincat falsely certified these statements. Nugan is dead, Hand is gone, and Houghton, Yates, and the others are not being held accountable for what Nugan Hand did while they were associated with it. Brincat won't talk to journalists, and the only Australian officials he admitted anything to, the Stewart commission, had too little curiosity to ask the right questions.

***

The Nugan Hand Bank was incorporated in the Cayman Islands July 6, 1976, and got its license to operate there on August 26, 1976. The legal papers were arranged by the Cayman lawyer for the Bank of Nova Scotia (Canada), a bank Nugan Hand had courted in Hong Kong. Nugan Hand's mail-drop office in the Caymans was in the Bank of Nova Scotia building there.

How the association with Price Waterhouse came about isn't known. But the Bahamas branch of the big international auditing concern proved ready to sign the books Nugan concocted, just as Brincat had done.

Nugan and Hand shuffled some checks back and forth among the accounts of the Nugan Hand offices in Hong Kong and Panama, and on this basis asserted that the Cayman-based Nugan Hand Bank had received $1 million in fresh capital. This made $2 million in all that they had supposedly invested in the various Nugan Hand entities, but neither the Corporate Affairs Commission nor the Stewart commission could find evidence that any real money was injected at all. (The Stewart commission put the total at $105.)

Financial swindlers do this kind of thing all the time in order to make a worthless enterprise look like it's worth investing in. The difference in this case is that Price Waterhouse certified the financial statements.

Price Waterhouse's New York headquarters says the Bahamas branch is an independent entity, and not a responsibility of the main organization. Investors, however, might be forgiven for not knowing that.

In 1977 and 1978, some combination of Nugan, Brincat, Steve Hill (the in-house financial officer), and Admiral Yates flew to the Caribbean and delivered Nugan Hand's books to Price Waterhouse. Notwithstanding the fact that the books contained bald lies and gross deceptions, Price Waterhouse attested to them. Occasionally the firm would ask for some sort of certification from bank officials that this or that security actually existed.

But then the formal financial statements would be drawn up. Price Waterhouse would sign. At least in 1977, maybe in 1978, Admiral Yates signed. And Nugan Hand's team of salesmen would go to work using these assurances to bilk the governments and citizens of many countries-including the citizens of the United States.

Eventually, in 1979, new management was imposed on the Nugan Hand account at Price Waterhouse in the Bahamas. The resultant investigation may have been what triggered the collapse of Nugan Hand.

***

In 1976 and early 1977, just as Nugan Hand was expanding into a global organization and hooking up with Price Waterhouse in the Bahamas, two other banks were collapsing. Both were based in the Bahamas, and both had ties to the Central Intelligence Agency. According to reports in the Wall Street Journal and elsewhere, both had for many years been used by the CIA to pay anti-Castro Cuban agents and others. At least one of them, Mercantile Bank and Trust Company, annually had its phony books certified by the Price Waterhouse Bahamas office.

Mercantile and the other failed institution, Castle Bank & Trust (Bahamas) Ltd., shared some common officers and directors. Their affairs were intertwined. Each owned a large block of stock in the other, and each deposited substantial funds with the other. The central mover behind both banks was a man we encountered back in Chapter 3-Paul Helliwell, the former OSS chief in China during World War II, who then operated (for the CIA) the Sea Supply Corporation, which traded guns for drugs in Thailand.

As the U.S. Army openly took over the fighting in Southeast Asia, Helliwell went to Miami and became paymaster for the Bay of Pigs operation and the subsequent anti-Castro terror campaign. He organized and ran Castle Bank. Jim Drinkhall reported in the Wall Street Journal [8] that a former federal official familiar with Castle said the bank "was one of the CIA's finance channels for operations against Cuba."

The same official said Helliwell was "deeply involved" in terror operations run out of the Bahamas against the Cuban government. (Throughout the 1960s, Cuban exiles on the CIA payroll repeatedly invaded Cuba to blow up commercial installations, sabotage agriculture and the sugar harvest, sink ships, and try to murder Fidel Castro.) [9]

Helliwell's Florida law firm represented Castle in various dealings. The Journal reported that a former law partner of Helliwell's said it was common knowledge at the firm "that Castle was a CIA account." Former law partners would not return calls made by the author of this book, though other lawyers involved in litigation over both Castle and Mercantile said they were told by numerous sources that there was CIA involvement in both banks.

***

Like Nugan Hand later, both Castle and Mercantile ran afoul of their illegal doings on matters apparently unrelated to intelligence. Castle was believed by the U.S. Internal Revenue Service to have opened its doors to people trying to cheat on their U.S. taxes, just as Nugan Hand later opened its doors to people trying to cheat on their Australian taxes.

In 1973, the IRS -- then unaware of the CIA connection -- launched a big investigation of Castle. The IRS hired a woman of great charm to lure a Castle executive to dinner one evening, while an IRS informant entered her apartment and stole the banker's briefcase. The briefcase yielded a revenuer's bonanza, including a client list of 308 names. Of course, there was nothing necessarily illegal about having an account at Castle. But among those who suddenly drew IRS attention because their names were on the list were a host of celebrities and some organized crime characters.

Suddenly, the IRS and Justice Department called off the prosecutions, saying that the surreptitiously obtained client list couldn't be used in evidence. This sounded suspicious to some people. Other evidence was available-including the same client list obtained legally in other court proceedings. Drinkhall and the Journal's editors were persuaded that the CIA connection was probably the real reason the investigation was ended. One "government official close to the investigation" was quoted as saying, "The CIA convinced Justice that exposure of Castle and, of necessity, other Helliwell dealings, would compromise very sensitive and very significant intelligence operations. It's as simple as that."

The Journal even identified a CIA lawyer, John J. Greaney, as being responsible for closing the investigation. Greaney wouldn't comment one way or the other.

One client company of Castle Bank was tied by the Journal to the laundering of $5 million for the CIA's use between 1970 and 1976. The client company was run by Wallace Groves, who had served two years in prison for one of the biggest stock frauds of the era, and then had gone into Caribbean casino operations with crime syndicate leader Meyer Lansky.

The CIA knew all this when it hired Groves "as an adviser and possible officer for one of [the CIA's] Project entities," as a CIA document puts it. Groves's general counsel in the operation was a Helliwelllaw partner, who has declined to discuss it. (What a shame that crooks like Groves, when they go to work for the CIA, never manage to do to the Kremlin what they did to the U.S. public!)

Mercantile folded after hapless depositors discovered in 1976 that most of its assets were worthless. According to the lawsuit the creditors filed, of $25.1 million in assets that Price Waterhouse certified to, $20.7 million didn't exist. The real money had been disseminated in the form of "loans" to unidentified figures. The "loans" weren't repaid.

Not only were Mercantile's cooked books signed by Price Waterhouse, but a Price Waterhouse partner, on retirement, later went to work for Mercantile. The Wall Street Journal reported he continued to do work for the accounting firm, while it continued to certify the books of his new employer, Mercantile.

The Journal, without being contradicted by any of the participants, reported that "the same group of directors and shareholders operated three other Caribbean banks, which the CIA reportedly used to launder money. A CIA spokesman says his agency never comments on such allegations."

Was Nugan Hand expanded under an arrangement with the CIA to replace the failing Caribbean front banks? We can only speculate. What can be asserted is that if Nugan Hand was operating with CIA participation, and if it collapsed because its operators were engaged in fraud, there certainly was copious precedent for it.

_______________

Notes:

1. That's the version he gave me. The Stewart Royal Commission described him as a deck officer.

2. Nugan assured many people that what they were doing was all perfectly legal when it wasn't legal at all. I've talked to a lot of those people and believe that often Nugan was just creating a mutually convenient story so that the new and unpracticed criminal would have a rationalization to use in fighting off pangs of conscience. It also gave them something to tell the tax collector if eyebrows were ever raised. If they were caught, the phony story would never work to relieve the clients of the civil responsibility to pay their taxes. But it might keep them out of jail by calling their criminal intent into question.

In at least a few cases, though, I think the people really believed it. After talking to the Ogdens, I tend to give them the benefit of the doubt. I think they were genuinely taken in.

3. The author.

4. Interview with the author, on the condition he would be identified only as official receiver, and not by name.

5. He declined numerous attempts by the author to interview him.

6. The air force located Prim (who gives his formal name as "Billy") and agreed to forward a letter to him from the author, asking for comment. He did not reply.

7. Then with Inquiry magazine, now editorial page editor of the Oakland (California) Tribune.

8. April 16, 1980.

9. Details in Endless Enemies.
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Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 3:50 am

CHAPTER ELEVEN: Laughing at the Law

Nugan Hand told the world it made money in two ways: first, by arbitraging the customers' deposits on the commercial money market (paying the customers one interest rate to get their money, then obtaining a slightly higher rate by investing the money in corporate debt notes) and second, by collecting commission for facilitating international trade deals.

Yet records indicate that the interest rates Nugan Hand earned on the money market were consistently much lower than the rates it paid to depositors. For the most part, Nugan Hand offered certificates of deposit (fixed-term, lump-sum deposits) paying 10 to 15 percent interest, then turned around and invested in similar CDs issued by legitimate Australian banks and paying 9 or 10 percent.

This is not a surefire way to make money. It is, rather, a surefire way to lose money. And the Hong Kong liquidator's office calculated that from 1976 to its demise, Nugan Hand lost $7.9 million trading securities. The much-ballyhooed international trade business also was deeply in the red.

But these banking operations were really just a polite front for the actual business of Nugan Hand. The kind of deal the company thrived on was the kind offered to L. P. Barnes and Arnold Waters, commercial farmers from near Wudinna in the state of South Australia (details as gathered by John O'Brien, the Sydney liquidator).

Each year from 1976 through 1979 (possibly except 1977), the two farmers gave Nugan Hand (via its Yorkville Nominees affiliate) an amount of money they wanted sheltered from Australian income tax. And each year, Nugan Hand would keep 22 percent of the money and return the rest along with Frank Nugan's legal opinion that the farmers did not have to declare it as income.

The legal smokescreen for the tax exemption was a phony sharecropper arrangement. Nusan, as a lawyer, formed corporations for the farmers, and had Yorkville make contracts with the corporations to engage in a joint farming venture. The money the farmers turned over to Yorkville was recorded not as deposits, but as profits to Yorkville from the farming venture. Thus it was alleged to be tax-deductible to the farmers as a business cost. The money that then flowed back to the farmers was recorded not as income, but as a loan, from the Nugan Hand International Holdings affiliate-and thus it, too, was tax-free.

Nugan provided his clients with documents releasing them from any obligation to pay back their loans. And he also put on a show· of keeping things straight inside Nugan Hand, by making book entries balancing the accounts between Yorkville and Nugan Hand International Holdings.

The amounts of money thus "sheltered" by the two farmers rose from $110,000 in 1976 to $675,000 in 1979, according to O'Brien's figures. After the records washed up in bankruptcy court in 1980, the deal was challenged by Australian tax authorities. Not only that, but O'Brien set about to try to collect on the "loans" on behalf of Nugan Hand's gypped depositors. (The outcome of the tax case is private; O'Brien says most of his cases were thrown out of court, but a few are still in contention. Barnes says he has forgotten how his tax case came out except that he wasn't fined. Waters couldn't be reached.)

***

The arrangement with the two farmers wasn't unique. In fact, it was prototypical. Nugan claimed he made $100,000 a year for the bank just in tax advice fees. But from the evidence, he was charging fees not for advice, but rather for laundering. And the "fees" usually came out to exactly 22 percent of the money being laundered, and appear to have amounted to far more than $100,000 a year.

The owner of a furniture company washed money through Nugan Hand the same way the farmers did. O'Brien found outstanding loans to the furniture dealer from Nugan Hand of $322,847-78 percent of the total originally washed, or, in other words, the original amount less Nugan Hand's 22 percent laundering fee. The dealer claimed that he had been given a satisfaction-of-debt release in September 1977, asserting that the loans were permanently taken care of.

Steve Hill, the internal accountant, testified as to just how the deal worked: "The procedure was to issue a loan agreement and a deed of release simultaneously," he said. But neither O'Brien nor the tax collectors accepted that procedure as legal, and the furniture dealer wound up in the same pickle the farmers did.

So did a businessman for whom Nugan arranged the purchase of a commodities contract in Sydney-followed by the immediate sale of a similar contract in Hong Kong. The sale was made through a front company Nugan Hand set up there for just such contracts. Until the bank collapsed and the government caught on, the businessmen thought they were cleverly exporting cash to Hong Kong around exchange control laws.

Any number of Australian pharmacists were lured into letting Nugan Hand set up phony import firms in Hong Kong and elsewhere. Pharmaceuticals being imported from Europe or the United States, instead of being shipped directly to the purchaser in Australia, would be shipped to the phony import firm. That firm would jack up the price to double or triple the true cost, then sell it to the Australian pharmacist who secretly owned the phony import firm. The result: the pharmacist was able to write off as a tax deduction a large amount of money that not only was still his, but which he had successfully moved offshore past duped Australian customs inspectors.

If the pharmacist didn't want his money overseas, Nugan Hand could easily repatriate it for him, merely by adjusting its own books to keep accounts straight between its offices in Sydney and Hong Kong (or Singapore, Bangkok, Manila, or wherever else someone might want to do business). For one pharmacist, Peter Harding, Yorkville Nominees imported the drugs right into Sydney, marking them up for resale to Harding and putting the tax-deductible "markup" in his Nugan Hand account-less Nugan Hand's fee, of course. [1]

When Dr. Bronte Norman Douglas, a Sydney pathologist, needed a Sequential Multiple Analyser with Computer machine (known in the trade as a "SMAC") for his office, he found Nugan Hand most useful. Dr. Douglas arranged financing independently, and had a friend in the United States buy the machine for $239,086.75, including delivery to Australia. But the machine was billed in the name of Nugan Hand Trade Finance Ltd., Hong Kong. Nugan Hand Trade Finance then sent its Own bill to Dr. Douglas for $317,000--one-third more than the actual cost of the machine.

From the $317,000, Nugan Hand deducted the cost of the machine and the money transfers, and its commission (apparently about 22 percent again, based on the difference between $317,000 and the real price of $239,086.75), then put the rest of the money-about $56,000-in a corporate front account it set up for Dr. Douglas in Hong Kong.

So Dr. Douglas wound up with a tax deduction on the inflated price of $317,000, and had an offshore nest egg in Hong Kong to boot. The transfer of this nest egg out of Australia had even been approved by the Australian Reserve Bank-though the approval was granted only because the bank had been lied to about what was happening. Records show that the paperwork for the transaction was handled by Les Collings under detailed instructions forwarded to him by Michael Hand in Sydney.

Dr. Douglas also had a standing arrangement with Yorkville Nominees to provide "administrative services" for a fee of 5 percent of his laboratory's gross billings. This amounted to more than $100,000 a year. Although Dr. Douglas doubtless did get some advice from his friends at Nugan Hand-and it turned out to be pretty bad advice -- the Corporate Affairs Commission concluded that "the underlying purpose behind the Administrative Services Agreement was to gain a substantial tax deduction."

Dr. Douglas deducted his payments to Yorkville as a business expense, then got a loan back from Yorkville for about 78 percent of the amount he sent in. With the loan, of course, came a document forgiving repayment. And Yorkville eventually wrote the money off on its own books as a bad debt. [2]

For clients who lacked some ready-made excuse like SMAC machine or pharmaceutical imports to cheat on their taxes, Nugan Hand in 1978 created a phony franchise scheme called Distravite Proprietary Ltd. Distravite supposedly sold franchises to Nugan Hand clients to distribute brand-name vitamins, fruit juices, or other products in a certain region.

The price of a franchise was whatever amount the client wanted to shelter from taxes in a given year. Some goods were actually distributed through a supermarket chain whose owners were. big clients of Nugan Hand. But it didn't appear that a sincere effort was ever made to profit through the sale of health products.

Something else was happening: when a "franchisee" bought his "franchise," Distravite transferred the money to Nugan Hand, under some excuse, such as a loan repayment. Nugan Hand then transferred the money to Yorkville Nominees-which was constantly shuttling money back and forth with Nugan Hand under so many business arrangements they could never be sorted out.

Yorkville would then keep the standard 22 percent and return the remaining 78 percent to the "franchisee." To shield this last transaction from the tax collector, Yorkville would book the payment as a purchase of capital stock in the client's franchise business. But the "stock purchase" had no more effect than the "loans" Nugan Hand gave in other deals. The loans weren't repaid and no equity was transferred. Paying Nugan Hand 22 percent was simply cheaper than paying the tax collector as much as 50 percent.

The difference between legitimate tax avoidance and laundering was well put by one of the liquidators assigned to Nugan Hand in Hong Kong: "A tax-avoidance scheme is one where you're able to tell everyone what happened and it still works." When the tax collectors found out what really happened at Nugan Hand, it didn't work-as Frank Nugan must have known it wouldn't all along.

Whether the customers knew the score-or the admirals, generals, spies, and sales staff-is something one can only speculate about. Certainly the customers and staff were told by Frank Nugan and Michael Hand that the tax deals, and even the shipment of money overseas without government permission, were perfectly legal-even though they were blatant frauds.

George Shaw insists, "We never thought about it when we were doing it. We never said, 'Now I'm going to break the law.' If Frank Nugan had come to us and said, 'Look, we're going to break the law, we probably won't get caught but there's a chance we will,' I wouldn't be in this."

***

Exactly how some of the international money-shuffling took place was painstakingly worked out by the Corporate Affairs Commission. From the commission's work, it seems clear that the big international banks in Hong Kong that deposited funds in Nugan Hand were in fact providing an excellent facility for an illegal scheme.

For example, on July 15, 1976, the Overseas Trust Bank of Hong Kong, after listening to Les Collings's sales pitch, bought an 8-1/2, percent certificate of deposit for $650,000 [3] from Nugan Hand Ltd. in Australia. Principal and interest on the CD were fully guaranteed by the Wing-On Bank under its standing arrangement with Nugan Hand.

The certificate was due to be paid in Hong Kong on February 10, 1977. And, in one sense, OTB got its money as promised. But in another sense, it got someone else's money-because the payment wasn't made from Nugan Hand Australia, which got the original deposit; the payment to OTB came from Nugan Hand's overseas operations, whose only funds were the non-guaranteed deposits coming in from smaller depositors.

This switch of obligations was hidden on the company books by the Same system Frank Nugan and Mike Hand had been using to hide other shady deals. Generally, cash assets that came in to Nugan Hand-like the deposit of the Overseas Trust Bank, or the cash from the many tax-avoidance deals-would be spent as needed, or embezzled. The cash would be replaced on the books by IOUs from the affiliate companies Nugan would incorporate, like Yorkville Nominees, whose accounts outsiders would never think to examine.

Periodically, the mounting IOUs from related companies grew to be an embarrassment on Nugan Hand's balance sheet. Holding too many of them as assets might-with reason-make Nugan Hand look as if it didn't have real resources to pay the depositors back. So a way was found to reduce these internal IOUs.

One such reduction occurred on February 10, 1977, the day the Overseas Trust Bank was due to collect its CD-$700,000, including interest. On that day, Nugan Hand gave Yorkville back a $700,000 IOU that Yorkville had written, in exchange for which Yorkville simply agreed to assume the responsibility to pay the Overseas Trust Bank on its CD.

The accounts appeared to even out. Nugan Hand's balance sheet was changed by the elimination of a $700,000 asset (the IOU from Yorkville), and the compensating elimination of a $700,000 debt (the debt to the OTB). But the reality was drastically altered, because the asset had been phony, and the debt had been real. The Corporate Affairs Commission said that the acceptance of the Nugan Hand bookkeeping devices by George Brincat, the young auditor, was "not merely careless, it was dishonest."

Concluded the Corporate Affairs Commission, "The debt [to OTB] incurred by Yorkville Nominees was probably paid by Nugan Hand Bank [based overseas]. Nugan Hand Bank ... probably had no net earnings available to it from which to meet the debt and simply met it by dipping into depositors' funds."

The $700,000 CD of the Overseas Trust Bank was merely one item, used here for illustration. Similar shuffling was done with the money of other banks, and even of the individual investors in Hong Kong. Nugan Hand applied for, and got, permission from the Reserve Bank of Australia to bring deposit money in for money market operations, and then to send it out again. Nugan Hand Ltd. in Sydney even paid the withholding tax due on the interest that was supposedly being shipped back to Hong Kong.

But this was all just another ruse. The money never left Australia. The money being paid out abroad was coming in from new depositors, and from other illegal transactions. Nugan Hand had obviously devised a brilliant stratagem for looting the proceeds of an international bank operating offshore, beyond the purview of Australian or American banking authorities.

The president of the Nugan Hand Bank when the OTB deposit was paid, and when other such frauds were occurring, was Admiral Earl Yates, U.S.N. (ret.). Among the bank's depositors were citizens of the United States.

***

Nugan Hand's Hong Kong office went after deposits with gusto, methodically working down lists of expatriate residents, offering high-interest Australian CDs, with no exchange control problems. So persuasive was the pitch that accountant Tony Robertson, who is now an official Hong Kong government liquidator working on the Nugan Hand case, says, "I almost put money into it myself. Somebody else in this [the liquidator's] office did."

The main object, Robertson says, "was to get money offshore in Hong Kong dollars so there would be no tax. If the money stays here, tax is withheld." What deterred Robertson, however, was that "they said they couldn't produce a balance sheet because of the secrecy laws in Cayman." That, he says, "struck me as rather odd, so I didn't do it." (This was apparently before Price Waterhouse signed a purported "audit" of the bank at the end of 1977.)

There were other warning signs. One American banker who was approached about putting in his personal money remembers, "Collings was a nice enough chap, but he was unable to explain how the company in Sydney made their profits." Still, the banker was intrigued enough to contact both Hand and Nugan personally. But, he says, they, too, failed to satisfy him. "The most disturbing thing to a banker was that they always left it for a dealer to explain how it was that they made their profits. They could not sit down and tell you." So the banker decided to leave his money where it was.

And a good thing, too, because, as it turned out, individuals were treated very differently from banking institutions. When the big banks like Overseas Trust Bank and Fidelity Bank agreed to deposit money with Nugan Hand, their deposits were guaranteed by Wing-On Bank.

In the case of the individual depositors, however, Wing-On wasn't involved. The individual depositors' money went into the Nugan Hand Bank, which was headquartered first in Panama, then in the Cayman Islands. The Nugan Hand Bank's money was tossed about among various accounts-and often just spent. Instead of being guarded by ANZ Bank, the individual depositors' money was overseen by nobody more reliable than Frank Nugan, Michael Hand, Admiral Yates, and the rest of the military-intelligence group that was coming on board.

This distinction, important as it was, was concealed from the depositors. "In my instance," says the liquidator Tony Robertson, "there was no mention of the Nugan Hand Bank until I saw the actual blue form I was to sign. If I hadn't read it, I would have thought the money was going into Nugan Hand Hong Kong, which [deposits] were all guaranteed."

***

Nugan Hand's deception was helped along by the depositors' own desire for secrecy. For many of them, the whole idea was to evade government regulation. Thus the very element that created risk also created protection.

On the back of each certificate of deposit, for example, was this message: "If to further assure banking secrecy and confidentiality the depositor wishes to observe special instructions as to correspondence, delivery of certificates of deposit to a custodian . . . or any other special services, kindly advise the bank of these special requirements by mail."

Secrecy was a byword at Nugan Hand. There were all kinds of affiliate companies through which money was moved in and out of the bank. Nugan's Yorkville Nominees was the biggest, but he and the other Nugan Hand executives developed a web of fronts. Steve Hill alone was an officer or director of: Hidex Proprietary Ltd., Frapat Proprietary Ltd., Illarangi Investments Proprietary Ltd., Leasefast Proprietary Ltd., NHN Nominees Proprietary Ltd., Nugan Hand International Holdings Proprietary Ltd., Nugan Hand Ltd., Queen of Diamonds Proprietary Ltd., S. L. Notwist Proprietary Ltd., and Nugan Hand (Trade Services) Proprietary Ltd. These companies constantly lent to and borrowed from each other to create a bewildering chain of debt.

In addition, elaborate codes were worked out, growing ever more complex as the Nugan Hand organization itself grew. This, for reasons one might guess at, was Michael Hand's department. He was rabid about adherence to the codes. Each employee was given a number, and was to refer to others in the organization only by number when using international communications. Nugan was 536, Hand 537, Houghton 538, Pat Swan (Nugan's executive assistant) 531, Admiral Yates 533, Collings 534, Shaw 541, Hill 535, General Black 532, and so on.

Then came the code for currencies. Woe to the company if the Reserve Bank ever found out that Nugan Hand was running roughshod Over exchange controls-or if the central banks found out in any of the growing list of countries where Nugan Hand operated. "We dealt in money, so that's what we'd want to hide," explains Wilf Gregory, who ran the Manila branch with General Manor.

So Hand ordered that in all communications, currencies were to be referred to by a coded commodity. U.S. dollars were "grains," Dutch guilder were "wheat," Swiss francs were "oats," Australian dollars were "soybeans," Hong Kong dollars were "cookers," and Thai baht were "washers." There were code words for dozens of international currencies-even Portuguese escudos ("berries"). When Hand fled Australia, an even more complex code of symbols was found taped to his dresser; the cryptologist who can decipher it has not yet been found.

The names of money-laundering clients -- the so-called back-to-back deals where a customer's money would be "lent" back to him supposedly tax-free for a 22 percent fee-were kept strictly confidential. Steve Hill testified that the clients "would have to have been approached by or introduced to one of the employees of Nugan Hand Ltd. or its associated companies and then in turn introduced to Frank Nugan."

Only on rare occasions would another executive or employee become involved.... By far the majority of clients would know only two people within the group of companies, Frank Nugan and the person who introduced them to the company. There was great importance placed on segregating knowledge of a client's affairs."

Records were kept cryptically. Australian clients in the Sydney office sometimes appeared as no more than mere jottings on scraps of paper in Nugan's pocket. Although the bank was headquartered legally in the Cayman Islands, most of its money came and went through the Hong Kong office. Its records were kept in a new office in Singapore, supervised by Michael Hand-who began spending much more time in Singapore and Hong Kong than in Sydney. A local accountant Hand had met and trusted, Tan Choon Seng, was given substantial record-keeping authority in Singapore. (He has ducked all attempts at interviews.)

Michael Moloney, Hand's and Houghton's Australian lawyer, describes the confusion that this system quite intentionally produced. "You could never balance the books," he says. "You can't tell what the deficiency is now, because most of the books are back-to-back deals. You can't tell what's a deposit and what's not, what's a real loan and what's not. They kept a million dollars in the safe," and there was no accounting for that money at all, Moloney says. Liquidator John O'Brien basically agrees.

Mortgage loans were given to one party, paid back by another. Who was lending or paying what to whom? You can't tell from the records, O'Brien says.

***

Former mutual fund salesmen like Les Collings were accustomed to not asking too many questions. "Our position was to get the money so they could use it to make more money," he says. "I was never in charge of investing the money.... I placed money wherever I was told to place it. And then the money market took over." He remembers that "all these banks asked why we wanted the money and what we were going to do with it. It was all sent to Australia."

Both Collings and his colleague at Nugan Hand in Hong Kong, John McArthur, say that for a brief period in 1975-1976, the system seemed logical. Interest rates were so much higher in Australia than in Hong Kong that it really did seem feasible for Nugan Hand to have paid premium rates in Asia and still made money-that is, if you '. just didn't ask how the bank got around exchange controls. But after that brief period, when interest rates again equalized, even Collings and McArthur admit that the bank's story seemed suspicious.

Says McArthur, "I asked Hand and Hill when Australian notes went below world rates, it seemed strange that we could continue to payout more money than we were able to get in interest. The answer was that we could do better with a larger book, that it was worthwhile to bring in marginal funds to keep the book big and that there was a large pool of low-interest deposits, a lot of which was Frank Nugan's own money. It was supposed to be a highly organized, very efficient banking operation. That's where the admirals and generals came in. You thought that if somebody like the admiral was involved, he surely had checked it out.

"The truth of the matter," McArthur says now, "is that at the core of the operation were a small group of people who were misappropriating funds."

Contrary to any normal banking practice, salesmen were paid not just salaries ($250 a week, Hill testified), but also commissions on the money they brought in. A list circulated in May 1977 told how the commissions were awarded. Commissions ranged from 1 percent for deposits of six months to 7 percent for deposits over ten years.

For the money-losing institutional accounts such as those of Chase Manhattan or Overseas Trust banks, the commission scale ranged from only 1/4 of 1 percent to a high of 2 percent-drastically less than for the individual, unsecured, accounts. This distinction should have been a tip-off to anyone who saw it. If all of Nugan Hand's money was to be invested in the same high-level banking instruments, why would there be such a difference in the value of deposits between those to be overseen by an outside authority and those to be overseen only by the executives of Nugan Hand? The obvious conclusion was that the individual accounts were being played with, even looted.

Yet the salesmen told customers that all investments were equal, as secure as the highest-class banking instruments. The Nugan Hand literature said so.

Says John McArthur, "I think now it was all bullshit."

Says the Hong Kong liquidator, "What they were, were salesmen. They got themselves lots and lots of money. What they didn't do was invest any of it."

***

If the commission incentives weren't enough, there was also the prod. Jerry Gilder, the former Dollar Fund of Australia sales manager, became the Sydney-based ringmaster for the team of salesmen. Gilder gave his typical pep talk in a March 24, 1977, letter to John Owen, who had just opened the Nugan Hand office in Bangkok.

"Well, John, it really is happening," Gilder wrote. "You are in Bangkok, you are talking to locals and you have now [had] a number of productive interviews. All things considered, I think that is pretty good in the time, and I am quite certain if you keep up your rate of interviews that all-important first sale will soon appear. [It was very much against Thai law for Nugan Hand, a foreign bank, to export capital by taking deposits in Bangkok. That is why the word "deposit" was habitually avoided. But there was no mistaking Owen's mission.] It is essential simply to keep up numbers of interviews," Gilder wrote, "and to continue to discuss the Group's services with everybody and anybody and making no attempt to be selective. In this way you will quickly get a feel for where your time is best spent and what constitutes a good prospect as opposed to a poor prospect.

"The interesting thing is that you are having as expected no difficulty getting appointments," Gilder wrote. "That really is 90 percent of the battle because after a while, once your skills sharpen, any person that you sit down with will be vulnerable to your sales expertise and will be very likely to buy from you sooner or later. In other businesses, such as life insurance, it is a battle even to get an appointment, so you can see the advantage that you have in this regard. Be particularly careful to leave the door open as a result of every interview, as you may well find yourself going back to these prospects at a later point.

"I am interested to note your own observation that you are not closing hard enough," Gilder continued. "You may recall that before you left ... I predicted this would be the area with which you would have the most difficulty. It will not be too long before necessity forces you to be a little less British and a little more Jewish and to [come to] the realization that it is only on a rare occasion that a person asks you to buy something. Almost invariably he has to be coaxed into it, and 'forced' to take the first step."

Then Gilder told Owen how to apply this "force": "Standard practice is to have an application form beside you while you are talking, and then instead of asking the man to give us a deposit, simply ask him a less direct question, which is far more easily answered, such as, 'When we correspond with you, where would you prefer we direct our mail?' Then write in the response he gives, under 'Correspondence' on the application form. Or, 'What period of deposit seems most appropriate for you?', and then write in beside 'Type of Account', I.C.D. [International Certificate of Deposit] 10 years, etc. Or, 'What is the currency of money you have available for investment?', and write in his response beside 'Currency of Account.'

"In other words, you do not confront the prospect head-on with a demand for a deposit, but rather sneak in through the back door," Gilder wrote. "You then proceed to complete the form to the point where you finally ask him for his signature, and then close again with another question, such as, 'Do you have a checkbook for your Hong Kong Account which we can use to finalize this deposit, or would you prefer to give written instructions to your bank to transfer funds to us?' These 'closes', by the way, are purely off the top of my head and are without any real thought or practice....

"It is a shame that there is a back-wash from Mutual Funds and previous sales organizations," Gilder lamented. "However, such organizations have no connections whatever with Banking. Banking is an altogether different business and involves ultraconservative usage of funds for the achievement of earnings as opposed to property and share mutual funds, which primarily sought capital gains with their attendant risks.

"As I indicated to you on the telephone, I should be up there within the month and look forward to going out on some calls with you.... In the mean time ... just keep moving. Soon enough sales will come, and you will find out what I already know-that John Owen is going to be extremely successful in Bangkok."

***

For all its secrecy and deviousness, Nugan Hand was becoming a high-profile organization by 1977. The client list grew to include prominent people-the host of a popular Sydney radio show, the owner of an Australian major league football club, and some star players. Nugan Hand backed a booster organization for the team. Dennis Pittard, a well-known retired football hero, was hired onto the staff.

Still, a lot of clients seemed to be hiding something. A frequent guest on the radio show and several members of the football team all got into legal trouble over their involvement in heroin deals. (One star of the team is now serving a twenty-year sentence in a Bangkok prison after being arrested with seventeen pounds of the drug-which he argued had been planted on him.) A prominent society doctor who used Nagan Hand (and eventually lost a lot of money in it) had a reputation as an illegal abortionist (though he was acquitted the only time he was ever charged and tried).

Nugan Hand served as financial intermediary on the business deals of a Sydney insurance company and its president. In 1979, the company went into bankruptcy and the president fled the country, more than $1 million missing from the company's funds. Bankruptcy officials now say they think Nugan Hand moved the money overseas, but they can't prove it.

Football team booster organizations, known as "leagues clubs," are popular in Australia, and Nugan Hand went after their bank deposits, often successfully. The "leagues club" clubhouses do a big business in booze and, frequently, slot machines, which they are legally able to offer for use by members. "Leagues club" deposits were mostly of the guaranteed type, like those of the big banks.

Because of the high interest Nugan Hand paid to get the accounts, they were-like the accounts of the big banks-surefire money-losers, acquired for prestige. Any questioning staff members were told that once the bank obtained enough large, well-known customers, it wouldn't need to pay so much interest to get deposits.

A "strictly confidential" operating manual for the Nugan Hand staff included a list of "people in banks who are friendly to us," who are "ready, willing and able to give references as required." These included not only Albert Kwok at Wing-On and Ron McKinnon, the senior manager of the huge ANZ Bank, but also several other ANZ Bank officers and David Fung, an assistant vice-president of Irving Trust.

Nugan Hand was written up regularly in newspapers and magazines. Reputable international publications like Asiaweek seemed willing to print almost any nonsense Nugan or Hand told their reporters. The news was widely published, without any verification, that Nugan Hand now had a gross annual turnover of more than $1 billion. Nugan's international legal training and Hand's war record (the Green Beret, not the CIA part) were displayed and exaggerated, and their early accomplishments in real estate were grossly puffed up.

In June 1978, Rydge's, a kind of Australian Forbes, gave Nugan Hand a real testimonial. "It is the concept of low-key conservative operations, and a commitment to permanence that has guided the group through to its present day growth," Rydge's said. Almost all the publicity was in a tone indicating that Nugan Hand wasn't seeking out publicity, but was a quiet, conservative organization that was being discovered and talked about by people in the know.

***

Nugan Hand also became involved in Australian politics. There was a mixture of commercial and ideological motives for this. As they did with the big banks and the football leagues clubs, Nugan and Hand persuaded some city councils in New South Wales to deposit the tax money they were holding. These accounts were worth as much as $5 million each.

The accounts were all guaranteed, backed up by high-grade securities. Therefore, they were money-losers for Nugan Hand, though this fact was never admitted at the time. The city council accounts helped Nugan Hand acquire prestige, and thereby bring in more business.

There can be no doubt, however, that all financial considerations aside, both Frank Nugan and Mike Hand were ideologically driven to promote antisocialist and anticommunist political causes. Their fund-raising parties and financial contributions were modestly successful toward that end. While they made connections with the more right-wing parties, their biggest inroads were with the right-wing faction of the Labor Party.

As in the United States during the Vietnam era, the biggest ideological gap was probably not between the two parties, but within the more liberal party. The Lyndon Johnson wing of the Democratic Party in the United States probably was closer ideologically to the Republicanism of Richard Nixon, Nelson Rockefeller, and Gerald Ford than it was to the Democratic wing led by Eugene McCarthy and George McGovern. So it often goes in Australia.

By associating with the more hard-hat attitudes of the right wing of Labor, Nugan and Hand may have done more to help their cause than they could by sticking to the more right-wing parties. Certainly it is a standard ploy of the CIA to work less with the most openly anticommunist parties than with the anticommunist wing of the party on the borderline.

Of course, there is also the point that many of the city councils dominated by right-wing Labor were associated with the corruption Nugan Hand fed on. The council in blue-collar Leichhardt, for example, invested millions in Nugan Hand. An important official there was later caught up in a big financial scandal and a heroin ring involving other Nugan Hand clients.

Nugan Hand also did business with Liberals, such as the deputy party leader in New South Wales, Bruce McDonald. Frank Nugan contributed to his campaigns, and Nugan Hand was involved in a deal for McDonald's business.

Yolanda Lee, mayor of the white-collar suburb of Ku-Ring-Gai, and her husband, lawyer Alex Lee, both became close to Nugan Hand. Ku-Ring-Gai put taxpayer money in the bank.

Another important political inroad was with Leon Carter, the town clerk (or chief administrator) for Lane Cove and later Sydney itself. Carter is a member of the prestigious Order of the British Empire, which ranks just below knighthood. Although elected on a "civic reform" ticket, he regularly welcomed Frank Nugan to his Sydney town office and lunched with him, according to liquidator John O'Brien.

Back in 1976, according to O'Brien, Nugan Hand (through a separately formed holding company) paid Carter $225,000, about twice the market price, for a piece of land he owned. Meanwhile, Nugan Hand got the cash accounts of both the Lane Cove and Sydney councils when Carter was clerk. An internal Nugan Hand memo O'Brien obtained credits Carter with getting Nugan Hand the Lane Cove account, which it estimates at "$20 mil per week."

The 1976 land sale was accompanied by a flurry of loans and counterloans, involving Carter, Yorkville, and an outside bank, and left Carter with continuing financial ties to Nugan Hand.

***

Another political figure who used Nugan Hand-it's never been learned exactly how-was Neil Scrimgeour, a resident of Osbourne Park, Western Australia, whose connections go beyond Australian politics. Dr. Scrimgeour, a surgeon by trade, ran an organization called the Australian Association for Freedom.

The name is much like that of the global circuit of local organizations that were funded by the CIA over many years. But Dr. Scrimgeour says he'd "rather not comment" about whether his group has a CIA connection, or why his and. the organization's names were listed as "sundry debtors" in the books of a Nugan Hand affiliate.

Another interesting thing about Dr. Scrimgeour: he was a good friend and traveling companion of General Edwin Black. "His views were very right-wing and anticommunist, which I was very sympathetic to," General Black said. "He's got very extreme views that Western Australia ought to go it alone. I'm all for him."

This is a reference to a movement, which Scrimgeour was part of, for Western Australia to secede and become a separate country. He was even a candidate for Parliament on a secessionist ticket. Black and Scrimgeour were often seen together at the preliminary hearings that resulted in criminal charges against Frank and Ken Nugan for their manipulation of the family fruit business.

_______________

Notes:

1. Detailed in the report of the Corporate Affairs Commission.

2. Detailed in the Corporate Affairs Commission report.

3. Actually $648,403.30, an odd figure because it is the converted equivalent of HK$4 million.
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Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 3:54 am

CHAPTER TWELVE: The Asia Branches

Nugan Hand's Hong Kong office grew to comprise at least a dozen full-time professionals plus support staff. Collings, the top dog when Hand wasn't in town, acquired a $20,000 Chinese junk and a $125,000 yacht, as well as a company junk used to entertain prospective clients. Former colleagues estimate he drew down $250,000 a year.

In selling the junk-named the Dolphin-as one of the few assets around, the Hong Kong liquidators say they discovered that the boat had previously been used to carry money out of Vietnam for South Vietnamese politicians before the fall of Saigon. But they say they couldn't find out who owned it then.

Douglas Sapper, Hand's old Green Beret buddy who kept running into Hand in Southeast Asia in the 1970s, became a sort of casual aide to Nugan Hand in Hong Kong. Sapper, who doesn't want to talk about whether he worked for the CIA, says he spent some of the intervening years working with an airline supplying the U.S.-supported side in Cambodia until it fell to Pol Pot in 1975. Then, he says, he helped the Drug Enforcement Administration check out aircraft for drugs.

Something-he doesn't say what-brought Sapper into the northern hills of Burma, the Shan States, where he says he got to know most of the local leaders. The Shan States were, and may still be, the world's leading source of opium and heroin. A sort of perpetual civil war waxes and wanes there among several drug-funded armies, including the old Kuomintang army of China.

Sapper even spent some time in a Nepalese jail in 1975-the result, he says, of a dispute over customs duties on five thousand wristwatches he happened to have with him. Back in Hong Kong, Sapper worked out with Hand in a gym every morning when Hand was in town ("sometimes twice a day," he says). They would also cruise on the yacht Hand had bought with depositors' money.

Into the bank's Hong Kong executive suite, Sapper brought an acquaintance, John McArthur, still an honorary captain in the British Army-the rank he held when he left active service in 1947. He went into the shipping business, wound up in Australia running a unit for the American Machine and Foundry Company there, then began investing in real estate, mining, and construction. He also held several posts in the Liberal Party.
Sapper brought McArthur into Nugan Hand in 1977, supposedly working on international trade deals, although McArthur in an interview can't cite any successful ones. Nor, by his account, did he lure any depositors. He says he spent much of his time in the People's Republic of China, "mainly negotiating on behalf of European and U.S. clients interested in supplying plant, equipment, and technology for major projects." None came about. McArthur won't identify any clients.

He does say that arms were among the commodities he unsuccessfully tried to trade on behalf of Nugan Hand. Probed for examples, he mentions negotiations contemplating the sale of bayonets to a Britisher who ran a whorehouse in Bangkok. [1] McArthur also says, "If anybody had come into Nugan Hand Trade Asia and said, 'I want twenty widowmakers' -- F-15s or F-16s -- we'd have said you could have them."

At one point, McArthur recalls, there was a lot of talk about a big shipment of gold belonging to Philippine President Ferdinand Marcos and his wife Imelda, from the Philippines into Hong Kong. "A woman set it up, a middle-aged woman, of Chinese origin, from Thailand," McArthur says. "But nothing happened. People went to the airport, but the plane never came." Still, rumors about movements of money for Marcos, the Shah of Iran, and others persisted within the Nugan Hand organization.

***

Jill Lovatt now asserts that she was "only a secretary" in the Hong Kong office. Promotional literature the bank issued in the 19705 ca1led her a "Monetary Specialist with a strong background gained from working. with a Hong Kong finance house, a major tobacco company, a Commonwealth Trade Commission and a firm of solicitors in Hong Kong." By general account, she seems to have been the equivalent of office manager, handling the bustle of paperwork- and also moving great sums of money.

"Sometimes telexes would come up from Sydney to pay So-and-so," she says. "Les Collings would say, 'Please make out a check to So-and-so, they'll be coming by to pick it up.' Sometimes we were advised by [Michael] Hand that money would be arriving in Irving Trust [the New York account], be on the lookout, make out a certificate [of deposit] when it arrived, $10,000, $100,000, or whatever. There would be telexes coming in two, three times a week, saying money was going on deposit. You were used to money going from A to B to C and back again. So there was nothing terribly unique in money going around the world all the time."

Prosaic as it was to Jill Lovatt, the Hong Kong liquidator [2] was intrigued by the way money always seemed to be changing hands, with no real indication of source or destination. "There were lots of instances that A makes a deposit and B gets the check, all out of the same client account. Many checks were coming in in Sydney and going out here," the liquidator says.

Since the accounts were all identified by coded numbers, they have. proven impossible to trace except when a client has come forward, or a participant (like George Shaw) has agreed to cooperate with authorities. In short, almost any imaginable kind of transaction could easily have been hidden.

***

In Singapore, Michael Hand opened a branch office in 1977 with Graham R. Steer, an Australian who studied at the University of California (Davis) and the University of Florida. He eventually worked as a management consultant in Malaysia and Singapore, and then with Nugan Hand.

Pitches were made to people working for foreign firms there. Two Chinese, who lost $100,000 each, wrote to John O'Brien, the Sydney liquidator, that they had turned their money over to Hand, Steer, and Tan Choon Seng, the accountant Hand hired and apparently trusted implicitly to run the office when he and Steer were away.

A third depositor, also Chinese, described himself as chief engineer for the Shell Refining Company in Negri Sembilan, Malaysia. He wrote O'Brien that he began investing in 1979 and turned Over a final $10,000 to Steer's secretary as late as March 29, 1980, after the bank was as good as dead. He says he got a letter from Steer dated March 29, promising to pay 18.5 percent interest, but not enclosing a new certificate of deposit because, Steer wrote, "we are presently awaiting details from the bank regarding your account number." He got neither the certificate nor the money back.

One common tactic the Singapore office used was promising to arrange Australian citizenship for Chinese families who wanted to emigrate there, according to John McArthur in Hong Kong and press reports. This played on a wave of racial laws that discriminated against the Chinese residents of Malaysia.

Press reports also said that Frank Nugan and Admiral Yates campaigned for the business of a Malaysian government agency that dealt with small rubber-growers, and claimed to control half the rubber production in Malaysia, the world's rubber leader. Admiral Yates was reported to have squired the agency's executive director, Dr. Mohammed Nor Abdullah, on a trip to the United States; but Dr. Nor, it was reported, ended the relationship when he arrived home.

The Stewart Royal Commission reported that a Malaysian government official had complained of Nugan Hand falsely claiming to act for the government on rubber sales. According to McArthur, in Hong Kong, Nugan Hand's attempt to take over the business "fell apart" because the Malaysian politician they were relying on "lost power or got arrested."

Michael Hand used the Singapore office to funnel Nugan Hand money and legal help to a company, called Medevac Shipping Proprietary Ltd., that announced plans to build a hospital ship. The company was run by an American who, according to the official Hong Kong liquidator, previously occupied himself running gold bullion out of Vietnam (where he was known as "Mr. Gold") and running a floating casino off the coast of Panama.

The Hong Kong liquidator also says the planned "hospital" ship seemed especially adaptable to military intelligence-gathering, and it was written up as such in the local press. It was to cost $5 million to $6 million and would be capable of landing directly on shore.

According to the Hong Kong liquidator, Medevac spent $300,000, on plans and design, but the ship was never built. [3]

Eventually independent offices were opened in Kuala Lumpur, Malaysia; Santiago, Chile; Buenos Aires, Argentina; Frankfurt and Hamburg, West Germany; London, England; and San Francisco. No major business has been reported to have occurred at any of those offices.

A branch in Taipeh, Taiwan, was more significant, not only because it garnered deposits but because of who was chosen to head it: Dale C. Holmgren, who fits the picture of a CIA careerist. A former U.S. Army officer stationed in Taiwan, he wound up manager of flight services there for Civil Air Transport, later Air America, the CIA's covertly owned airline throughout our long covert and overt wars against China and Indochina. The airline's job, according to The Pentagon Papers (the secret 1968 Pentagon war history later leaked to the New York Times), was to provide "air logistical support under commercial cover to most CIA and other U.S. Government agencies."

After helping run the CIA airline, Holmgren went into what Nugan Hand called "trading, manufacturing and investment counseling." But even then, Admiral Yates described him [4] as working with the U.S. military on Taiwan to develop "within the social structure of the Chinese in Taipei a close relationship with the U.S. military forces and the business and government community." Admiral Yates also said that Holmgren had worked for Nugan Hand without pay, at least for a while, because he had independent income.

Holmgren told Australian investigators, the Stewart Royal Commission said, that "he was not aware of any deposits being taken in or paid out in Taiwan." Numerous Nugan Hand documents contradict that declaration, however, as the Stewart commission also said.

One memo from Holmgren to McArthur, dated November 23, 1979, says his deposit-taking business "as the record shows has been increasing quite rapidly." The memo also says the work is done gingerly because it is illegal. "We must advise the client that we actually are only doing a service to them and the business will actually be processed through Hong Kong and Singapore," Holmgren wrote.

The liquidator in Hong Kong says Holmgren brought in deposits from Taiwan. Holmgren himself didn't return telephone messages from a reporter.

***

Wilfred Gregory, a Britisher, fiftyish, was picked to be the first Nugan Hand representative in the Philippines. For a year or two he commuted from Hong Kong, staying in the Philippines no more than sixty days at a time (the maximum allowed by a provision of Philippine law for certain foreign businessmen). In May 1978, Admiral Yates came to Manila ("for several days of business meetings," the press release said) and announced plans to open a permanent office.

Philippine records show the office was opened in July 1978, though Gregory says it was April 1979, before he began full-time occupancy of it-a swank, richly paneled corner suite with heavy wooden furniture and a glorious view of Manila harbor. A few months later, General Manor joined him.

 Gregory declines to talk about his past, or how he was introduced to Nugan Hand, saying just that he was involved in "estate planning." The bank's literature describes him as having "a strong financial and engineering background," saying he "held several important positions in Hawker Siddeley Aircraft ... including coordination of production at all United Kingdom factories," before moving to Perth, Australia, in 1966, where he "established his own financial and management business with offices in Australia and Kuala Lumpur."

Gregory takes but few words to define his political outlook: he calls Philippine dictator Ferdinand Marcos "the best thing that ever happened to the Philippines since it was discovered by the Spanish." He adds (in a 1982 interview) that "the Marcoses are bringing simple things to the people that you and I take for granted."

Gregory identified with the regime, and wanted Nugan Hand to work with it. "You know, I have pretty good contacts here-otherwise I would have been thrown out," he says. The public relations man he hired was well-connected enough to eventually become the newscaster on a government television station. Gregory frequently got stories about Nugan Hand into the controlled press, sometimes with himself pictured alongside some high Philippine government official.

He befriended Marcos's brother-in-law, Ludwig Rocka, whose wife, Elizabeth Marcos, was the appointed governor of a large province. Rocka even moved into the Nugan Hand office with Gregory to conduct his own business.

Records show that the Rockas deposited $3.5 million in Nugan Hand; the records were slipped to Mike Hand by personal courier from Gregory on March 17, 1980, in connection with a trip by Rocka to Sydney to retrieve the money before the impending collapse of the bank.

It's been widely rumored that President and Mrs. Marcos, and others in the family, used Nugan Hand to ship out of the Philippines some of the gold and cash they were stealing from the country's economy. But the Rocka records, which surfaced in connection with his visit to Sydney, are the only ones to have turned up. Gregory absolutely denies knowing about such deposits, and Elizabeth Marcos went to almost bizarre lengths to avoid an interview. [5] Australian authorities apparently never tried to talk to her.

The records show the Rockas withdrew $1.3 million of their deposit, but odds are they got the other $2.2 million out, too, because the relationship remained friendly enough that Rocka continued to share office space with Gregory until Rocka died in 1982.

Gregory also befriended Marcos's old friend Robert Benedicto, whom Marcos appointed to run the Philippine sugar industry, the biggest industry on the islands. Late in 1979, Benedicto attended Gregory's wedding to a prominent Filipino businesswoman. It was widely believed at Nugan Hand that the Marcoses themselves were at Gregory's wedding, but Gregory denies that-"though a lot of their close relatives were there," he says.

As with several Nugan Hand offices, the one in Manila was in a building, the Ramon Magsaysay Centre, that was popularly associated with the U.S. Government. The adjacent suite was occupied by the U.S. Agency for International Development (AID) mission, and other nearby offices included the Drug Enforcement Administration.

Gregory even thinks he has identified the CIA station chief in Manila, working under cover in another U.S. agency in the building. After a visit to the office by Walter McDonald, the CIA's chief economics and energy expert, who went to work for Nugan Hand right after his announced retirement from government, Gregory says another American in the building recognized McDonald. as an old CIA colleague.

The visit by McDonald was good for still more big newspaper publicity. Pictures in the Manila press showed him alongside Nugan, Gregory, and the Philippine trade minister. McDonald was identified correctly-though hardly completely-as a former U.S. Energy Department official. The report told of a "two-hour" meeting with the trade minister, and said Nugan Hand was engaged in joint ventures with Filipino businessmen involving waste oil recycling, waste water management, knitted garments, light engineering, electronics, cosmetics, furniture, and hardware. The idea was to "bring foreign capital into the country."

Apparently none of the joint-venture talk was true. It could have been a cover story, it could have been a dream.

***

Part of the fairy tale of justice told by the Marcos government was that foreign banking was tightly regulated. Gregory says his office was "set up under a special presidential decree, a stipulation. Deposit-taking and other cash banking wasn't permitted, he says. "We ... were not allowed to earn income in this country. This office was financed by the bank from outside sources," he insists.

At first, Gregory denies that cash ever changed hands in the office. He notes it was only four blocks from the Central Bank, which forbade such things. Then, he admits, "there was one guy, a big fat Australian," who drew cash.

Then, he admits, there were more: "I used to get involved only with Australians who were stranded here. They used to have deposits in Australia and come up here and need money. After we verified that they really had an account, we used to keep a little cash in the office here. There was one guy who had his wallet stolen."

On further probing, however, it turns out there was much more activity-and it's hard to believe that all of it took place while Marcos's brother-in-law and General Manor were out to lunch. Gregory reveals that telexes would come in from other Nugan Hand offices ordering payments to be made to this or that person who "could walk in here and show his passport and say, 'I'm here to pick something up.' Money came in from other places and was used to settle accounts."

While admitting these pay-outs, Gregory at first denies up and down that his office also took deposits. "The law here doesn't permit you to do that," he notes.

Nevertheless, according to the Hong Kong liquidator, many people were foolish enough to deposit money at the Philippine branch of Nugan Hand, and two of them lost over $1 million each when the bank went under. Another man, Bong H. Kay, lost $40,437.91, according to the statement he submitted to liquidator John O'Brien in Sydney. A receipt for a final investment of $12,000 by Kay is dated August 31, 1979, on the letterhead of the Asian Development Bank in Manila where he apparently worked. It is signed on behalf of the Nugan Hand Bank by "P. W. Gregory, regional representative for the Philippines."

Confronted with this, Gregory replies, "All those things were confidential. I don't know who made sworn testimony about this, but I think it's in very poor taste to reveal confidential information." Apparently he believes that victims like Kay should have just swallowed their losses in order to protect the reputations of men like Gregory.

According to depositor Kay's Sydney accountant, "Representatives of the Nugan Hand group in the Philippines assured him that the certificates of deposit were guaranteed by a counter deposit with the Bank of New South Wales, or other similar institutions." In other words, the depositors were told they were getting the same protection Chase Manhattan got; but they weren't.

Gregory himself is indignant, though not for the same reason Kay is. "Nugan Hand ruined a lot of good people," he says-"the people like me, who were representatives in countries overseas. Admittedly, you have people like Bernie Houghton, who were naughty boys. But Singapore, Hong Kong, Malaysian offices-they're good people who set up offices in Asia and were let down." Gregory complains that the bank still owes him $30,000 in back salary and expenses.

***

Ronald L. Donegan, a retired coconut farmer from Papua New Guinea, had settled in the Philippines and made the mistake of doing business with Nugan Hand. "In common with many others, I invested my life savings in this organization and am appalled at the present situation," he wrote liquidator O'Brien in August 1980. Donegan lost $166,782.

But it wasn't coconut money. Donegan turns out to be one of four partners, or former partners, in something called the Kangaroo Travel Club, which has a storefront opening onto a busy street in the honky-tonk Ermita section of Manila. The store front seems at first to be a travel office. The real attraction, however, seems to be upstairs at the well-appointed bar, where each of the white, male customers seems to be having a good time in conversation with not one but several scantily clad Filipino girls.

At one end of the room is a hotel desk, with a clerk, a rack of boxes, and keys. The Kangaroo Club looks like a bright, cheerful, first-class whorehouse. And all four of its partners lost large deposits with Nugan Hand. One, Stanley Whitelock, a retired aircraft engineer from Sydney, says the club also owns four "hotels" just outside Clark Air Force Base, the big U.S. installation that General Manor commanded. What goes on at the hotels? Well, says Whitelock, "We have to put a delicate approach in our advertising." But he adds, "We know what the fellows want."

Whitelock is very open about why he and his colleagues invested with Nugan Hand. They wanted to move money out of the Philippines in apparent violation of the exchange control laws-ironic, in light of Frank Nugan's publicized assurances to the Philippine trade minister that he would "continue to bring foreign capital into the country."

Two other Australian expatriates in the Philippines, both named Oslington, lost at least $285,500 that bankruptcy-claim records indicate they gave to George Shaw. Shaw made many trips to the Philippines to canvass for clients-which got on the nerves of Wilf Gregory, who complains that Shaw took too many chances.

"George is a very foolish man," Gregory says. "Taking money home in his pockets. In his luggage. If he had been caught at the airport this office would have been closed." But the bank seemed to be operating under Marcos's protection, and Gregory from time to time almost admits as much. Shaw himself, asked if the bank had a special relationship with the Marcos government that allowed it to conduct its illegal business, tells a reporter, "It would be very dangerous to print that. Gregory is still there."

***

One fellow at Nugan Hand's Manila office was certainly known to the Marcoses. He was three-star General LeRoy J. Manor, who had just spent seven months across a table from Marcos negotiating a new ten-year lease on the U.S. bases he had commanded at Clark and Subic Bay. In October 1979, at a gathering of Nugan Hand executives and sales staff in Sydney that was tape recorded, General Manor gave the following account of how he came to join the bank.

Back in 1977, he said, "I was still on active duty sitting in my office in Hawaii when my good friend Buddy Yates stopped in to have a visit with me.... I've always had a very high regard for Buddy. I saw him operate in the military, and if you think he's a go-er now you should have seen him then. Very highly respected in the military, obviously. He told me about the firm he was with, Nugan Hand, which was the first time I'd ever heard of Nugan Hand, and he said that he thought that there would be a place for me in Nugan Hand upon my retirement. I said, 'Buddy, I don't know anything about' banking. I've dedicated my whole life to the military.' ... He said, 'You can learn, can't you? ...

"So this was a great opportunity," Manor told the group. But on his retirement from active duty in July 1978, "there was another job that had to be done that I felt that I ought to accept, and that was the negotiations in the Philippines. I was asked by my government to head the negotiations for the bases. This delayed my accepting this offer However, it wasn't all lost, because during my stay in Manila, working on the negotiations, I made many more contacts, and I think that this is probably of special importance."

He went on to say that the lease agreement he had negotiated provided $500 million in aid. In addition to $250 million in military hardware-the very thing the impoverished Filipino people needed-there would be $250 million in "security assistance funds," which could "allow the Philippines Government to divert some of the funds ... from military support to some projects that will probably have a bearing-very definitely will have a bearing-on the economy of the Philippines." He mentioned power plants, or a port facility.

Thus he noted with pride that some little part of the $500 million in U.S. aid might, indirectly, reach the Philippine economy, where it could benefit people and companies. Maybe it would even help Nugan Hand. And he went on to ask, "Now how can I contribute? ... Under the tutorship of Buddy Yates, Wilf Gregory, and I'm sure many others, I hope that I will learn to be productive.... I feel very humble standing before you today, because I have been tremendously impressed with the knowledge, the professionalism, and the mission orientation that I see here in this organization. . .. As the newest member of your firm, it's a tremendous opportunity for me to be here."

Manor spoke of how much he and his wife liked living in the Philippines, and how valuable his contacts were there-all indicating that he intended to serve Nugan Hand from Manila. But Gregory insists that Manor was in Manila only temporarily, and was being groomed for a Nugan Hand management post in the United States as the bank expanded.

Gregory also says Manor kept dual offices for a few months, both at Nugan Hand and at the U.S. Embassy a few blocks away. Manor denies that, and says he didn't join Nugan Hand until he thought his government work was concluded.

Of all the people in Nugan Hand, Manor is the hardest to classify. If you had to be either a crook or a fool, it's hard to imagine what Manor was doing there. His case cries out for some other explanation.

His military career was more than merely distinguished. He was a fighter pilot hero of two wars-World War II (Europe) and Vietnam. He spanned the eras of pistons and jets. The list of medals he's won as listed on his official air force biography (coming from Korea, Vietnam, and the Philippines as well as from the United States) is so long that if he wore them all he probably couldn't stand upright.

His best-known mission, however, while honorable, was an embarrassing failure. Having been promoted to general and made commander of the U.S. Air Force special operations force in February 1970, he spent August to November of that year organizing and leading a daring commando raid to capture U.S. prisoners of war behind enemy lines in North Vietnam. At great risk, Manor and the' task force reached the Son Tay prisoner of war camp. But they found nobody home.

The raiders all managed to return safely, conceding that the camp had been empty for from three weeks to three months. Exactly what went wrong has never been established. Manor was quoted in the New York Times as calling the raid "a complete success with the exception that no prisoners were rescued."

He went on to become commander of the Philippine air bases and eventually chief of staff of the entire Pacific Command. In that role, he coordinated air force, navy, army, and marine corps operations throughout 100 million square miles from the west coast of the Americas to the east coast of Africa, and from the Arctic to the Antarctic. That was his last job before his 1978 retirement, and his call back to negotiate the Philippine base leases and perform other work the air force says is so secret it can't be talked about.

In December 1979, records show, an application was filed with the Philippine Government to change Manor's status from that of a foreign government official to that of an executive of a foreign multinational with a salary of no less than $12,000 a year. A month later, a red Ferrari arrived for him from Hong Kong and was exempted from customs duties.

That same month, General Manor pitched Nugan Hand investments during a speech at the officers' club at Hickam Air Force Base, according to Colonel H. Kirby Smith, chief judge of the U.S. Air Force Seventh Judiciary Circuit at Clark Air Force Base. On January 22, 1980, five days before Frank Nugan was shot, Colonel Smith says [6] General Manor instructed him how to deposit money in Nugan Hand by wire, which he did 00 $20,000 -- two days later. General Manor says he "wasn't soliciting, I was merely answering questions."

The next month Manor presented Smith with Nugan Hand certificate of deposit number 11531, promising 15.125 percent interest -- without telling Smith of Nugan's death, which he says he didn't learn of until the bank collapsed in April. According to his claim, this was "somewhat of a shock! Twenty thousand dollars is a lot to a military man and his wife!"

Colonel Jimmy Maturo, who has since retired, was stationed in Hawaii when he deposited $27,000 after hearing about the bank from his old boss, General Manor, they agree. Colonel Maturo deposited the last $16,000 on March 12, 1980, long after Nugan Hand insiders had rifled the files and were preparing for its demise.

"There are plenty of others around town," Colonel Maturo tells a reporter. "If you can put it to these rats, more power to you." The reporter brings up Manor's name, and Colonel Maturo will say only, "I know Manor." Then, repeating himself for emphasis, he asserts, "If you can put it on these bastards, more power to you."

Two months after Colonel Maturo unknowingly bid permanent good-bye to his last deposit-and a month after Nugan Hand entered formal liquidation proceedings-General Manor was assigned by the chairman of the Joint Chiefs of Staff to head the Pentagon's investigation into the failed attempt to rescue fifty Americans, mostly diplomats, being held hostage in Iran.

The attempt had been aborted April 26, 1980, after three of eight helicopters failed mechanically en route to the staging area in Iran. A fourth helicopter and an Air Force C-130 cargo plane crashed into each other at the staging area. Ironically, General Manor was chosen to head the inquiry, apparently because of his own previous experience leading a failed rescue mission.

The investigation completed, General Manor was chosen to be executive director of the Retired Officers Association, headquarters in Alexandria, Virginia. His biography, as issued by that organization, omits reference to his banking career. It doesn't even mention Nugan Hand. The general then undertook to start a scholarship fund for the seventeen children of the eight American servicemen killed in the Iranian raid. [7]

________________

Notes:

1. Lloyd Thomas, of whom more later.

2. The liquidator's office is a permanent government agency in Hong Kong; in the United States and Australia, courts appoint independent professional liquidators one case at a time. Two senior officials of the Hong Kong Liquidator's office were interviewed on condition that individual names wouldn't be disclosed.

3. I was unable to locate the operator of Medevac, Arthur Morse, whose real name, the Hong Kong liquidator says, is Morselino.

4. Remarks made at Nugan Hand's 1979 conference in Sydney, which will be described later.

5. At the time of my interview with Gregory, I was unaware of the Rocka records and so didn't ask about them. I got contradictory information about Ms. Marcos's whereabouts, calling her office many times and visiting her home, as she apparently moved about to avoid me.

6. In his claim filed with liquidator O'Brien and in correspondence with the author.

7. The fund, the Arthur D. "Bull" Simons Scholarship Fund, is under management of Communities Foundation of Texas, Inc., Dallas.
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Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 3:57 am

CHAPTER THIRTEEN: The US. Branches

General Edwin Black had the most thorough intelligence background of all the flag officers in Nugan Hand. He was a graduate of West Point and the National War College. In 1962, he paused to get a master's degree in international relations from George Washington University.

Black was an ass veteran. He was Allen Dulles's right-hand man, and Richard Helms's boss. (Both went on to become CIA directors.) He played tennis and chess with them.

After the war he got involved in assignments like "military assistant to the deputy for psychological policy," and the military staff of the National Security Council under President Eisenhower. He was military advisor on Philippine base negotiations in 1956, twenty-two years before General Manor conducted his own round.

Going back to the field, Black was active in the U.S. Government's anti-China undercover operations in Thailand and elsewhere in Southeast Asia. When his friend, the American "businessman" and eccentric Third World operator Jim Thompson (widely assumed to be working with the CIA), mysteriously disappeared in Malaya's jungly Cameron Highlands in 1967, causing an international furor, Black was sent to lead the search. (He came up empty-handed.)

A specialist in "special forces"-type operations, General Black commanded all army troops in Vietnam in the early stages of U.S. involvement there. When the war became big and official, he took command of all U.S. forces in Thailand. Later, he was made an assistant division commander in Vietnam itself. He was made assistant army chief of staff for the Pacific Command, then left the army in 1970 (he said because he failed to get his promotion to major general in the prescribed time).

He ran the conservative and militantly anticommunist Freedoms Foundation for a while, then took no doubt more lucrative jobs with CIA-military contractors. Eventually, he settled in Hawaii for semiretirement under the palms.

One day, he said, [1] he was approached by two admirals-Buddy Yates and Lloyd R. ("Joe") Vasey, whom Yates had replaced as chief of planning for the Pacific Command. Vasey, the son of a naval officer, was an Annapolis graduate and spent most of his early career in submarine work. But 1965 found him deputy director for operations at the National Military Command Center in Washington, and the next year he became secretary to the Joint Chiefs of Staff, work for which he was awarded the Legion of Merit.

Although Vasey officially retired in 1971, he stayed on for an extra year in his Pacific Command planning job at the navy's request. For that, he was recognized with another Legion of Merit award that says, in part, "During this turbulent period of withdrawal from the Republic of Vietnam and major forces adjustments, [Admiral Vasey] personally developed major plans and policy concepts which, when implemented, have substantially improved the progress of Vietnamization and the posture of friendly governments in Southeast Asia, and strengthened the position and influence of the United States throughout the Pacific, Indian Ocean and Asia areas."

In 1977, when Black says Vasey and Yates approached him, Vasey was running something called the Pacific Forum. It was a Honolulu-based organization promoting scholarly and cultural understanding among the Pacific countries by bringing leading citizens together. There are a lot of such organizations, some of them fronting for the CIA, probably many more of them not.

We have Vasey's word that he isn't, and never was, involved in the intelligence business-though it's hard to believe anyone who was secretary to the Joint Chiefs and head of planning for the Pacific Command was a total stranger to it. Told that the Australian Labor Party suspected U.S. agencies of having overthrown the Gough Whitlam government, Vasey replied, face totally straight, "Whitlam is a friend of mine, or he was. I wondered why he hadn't been in touch with me."

***

Vasey says Yates, his successor on the planning job, had come to him for advice on who might represent Nugan Hand in Hawaii. Vasey says he naturally thought of General Black-who had already met Yates while both worked for the Pacific Command in Honolulu. Vasey says he also gave Yates another name, that of Peter Wilcox, a British-born U.S. citizen who operates internationally out of Honolulu.

Were Wilcox's credibility more fully supported, he would rate much more space in these pages, for he later made some bold allegations about Nugan Hand, the CIA, and drugs. Wilcox, who calls himself an international investor and contractor, claims a strange and unverifiable past with British intelligence. Admiral Vasey told Admiral Yates that Wilcox was reputable and capable. General Black and the Australian police have said they were impressed by him.

On a visit to Australia in November 1977, months after he had been approached by Admiral Yates, Wilcox called a prominent member of Parliament who had been cited in newspaper reports as a leading critic of the Nugan fruit company. The story Wilcox told was so startling that the member of Parliament notified the Australian Narcotics Bureau, whose agents promptly "debriefed" Wilcox in his Melbourne hotel room. [2]

Wilcox told the narcs that he knew Vasey as the former head of a U.S. military intelligence agency where Bernie Houghton had also worked. He said Houghton was "still affiliated with the CIA."

After Vasey had told him about the possible job opportunity with Nugan Hand, Wilcox told the police, he telephoned Yates. Without their even meeting, he said, Admiral Yates arranged for him to get acquainted with the other Nugan Hand officials on his next trip to Australia and Southeast Asia.

He described a visit he made to Les Collings in Hong Kong, who he said told him the business of Nugan Hand involved "shifting bundles of money." He said Collings told him about the world-famous courier Ron Pulger-Frame, and reported the opening of a new branch in Chiang Mai, the Thai drug center.

Then, Wilcox said, he stopped in Singapore and visited Mike and Helen Hand in their "luxury $1 million penthouse, which apparently they leased from an Indonesian general who had been depositing money with the bank for placement." Hand told him the bank handled "black money" -- then was interrupted by a phone call from Frank Nugan, Wilcox said, during which they discussed the news that $200,000 had arrived in a safety deposit box in Sydney.

Next stop, Sydney. Wilcox said he was told that Nugan had just left. But he reported meeting Houghton, whom he said he had met some years earlier while Houghton was with Vasey's military intelligence unit. Then it was back to Hawaii, where he finally met Nugan.

Nugan, he says, was drunk, and insulted Wilcox and Wilcox's wife during a long afternoon in a hotel lobby. He quoted Nugan as saying of Nugan Hand, "We put people away.... We do the bastards over, anybody that gets in our way we can take care of. ... I want you for deep cover to infiltrate the other side."

Then, Wilcox said, he learned of the drug connections being made in the Australian press, and he resolved to call the chief parliamentary critic of the Nugan brothers the next time he was in Australia. This led him to the narcotics bureau. In their report, the cops wrote that Wilcox appeared "quite reasonable" and "truthful."

Wilcox certainly knew enough about the people he said he'd met to show he had, in fact, met them. And he made his statements before Colby, McDonald, and the other well-known CIA types were ever linked to Nugan Hand. When Wilcox met the cops, the newspapers were still taking pains to point out that Nugan Hand wasn't involved in the drug and financial controversy over the fruit company. The CIA connection that later dominated the headlines wasn't even being mentioned. Nor was Nugan's drunkenness a public legend at the time.

But there has been no corroboration of what Wilcox told the police about his own and others' intelligence backgrounds. Although he talked with at least one Australian reporter at first, he has lately ducked interviews. Admiral Vasey has recently downplayed their relationship, saying he met Wilcox sitting next to him on an airplane, was impressed by his knowledgeable talk of international finance, and so recommended him to Yates. Years later, General Black continued to speak highly of Wilcox, calling him "a super entrepreneur and organizer," but said Wilcox "didn't think they were giving him enough money" and so refused a job with Nugan Hand.

All this can be taken for what it's worth, which may be nothing.

By the time Wilcox met the police, General Black had long since been given the Hawaii job. Nugan, Hand, and Houghton all came to Hawaii to welcome him aboard, and, he said, Vasey and Yates were there to make the introductions. What a collection: two admirals, a general, an ex-(?)-CIA man, an Australian banker who was imbibing at least a fifth of Johnnie Walker Black Label every day, and the man who seemed able to orchestrate all of them-a quiet saloon-keeper with a strange life-long proclivity for military-intelligence intrigues and a reputation for liking nubile boys.

Black died in 1985. But in June 1982, he recalled the story to a reporter over lunch at his private club. He said that he had some doubts about taking the job because of the drug rumors. "I didn't want to have anything to do with any drugs," he said. But he traveled around with the friend he says he much admired, Dr. Neil Scrimgeour, the "right-wing" (General Black's term) Western Australian separatist whose "Association for Freedom" organization was listed as owing money to a Nugan Hand affiliate.

Black and Scrimgeour sat in on preliminary hearings in the criminal case against the Nugan brothers in the fruit company controversy. Black said he saw the favorable reference letter that the international vice-president of Fidelity Bank in Philadelphia had written Nugan about the trouble. And Black proclaimed himself "personally satisfied" that the drug rumors were false.

As president of Nugan Hand Hawaii, he drew $1,500 a month unaccountable expenses, wrote checks on the company account for other expenses, and traveled around a lot, particularly to Thailand. But it's hard to see what, if anything, he did to further Nugan Hand as a commercial banking establishment.

"Nugan Hand was going to have an office here. Money was left in escrow," Black explained. But the plan was changed "because Frank figured he couldn't get around U.S. laws."

Certainly one would have to "get around U.S. laws" to take bank deposits on American soil without subjecting oneself to regulation by the American banking system. It would seem to be plain illegal. And Black insisted, "I never took deposits."

But a 1978 letter he wrote Frank Nugan, quoted by the Stewart Royal Commission, says he was trying to. And in the 1982 interview, he said, "They were hoping I would get $1 million or $2 million in deposits. I never was able to get a deposit. Most of my friends were too smart to go putting their money out of the country for higher interest. I never really tried too hard."

Admiral Vasey, however, said General Black tried hard on him. He said Yates made the first pitch, and encouraged him to bring in his friends. "But it was my basic instinct, and my wife's, not to send money out of the country. Black urged me to see [Douglas] Philpotts [the Hawaiian Trust Company banker] to get the real facts," Vasey said. But that wasn't good enough to overcome his and his wife's "basic instinct." [3]

If Black wasn't trying "hard" to take deposits, what did he think he was doing for the bank? "I was told I would be an ambassador of good will, arrange meetings with high-level people when called on," he says. "I introduced them to some important people. I traveled around Asia. None of these things materialized, unfortunately." One business idea he helped promote, he says, was an electron machine to enhance the power of seeds. "But the Philippine Government never jumped on it the way I thought they would and the company folded."

Douglas Philpotts, vice-president and treasurer of Hawaiian Trust Company, is listed along with Frank Nugan and Michael Hand as constituting the three-man board of directors of Nugan Hand, Inc. when it was incorporated in Hawaii in 1974. At least through 1977, Nugan Hand continued to list Hawaiian Trust's address as its own in filings to state regulators. Philpotts continued to handle Nugan Hand's high-six-figure account at Hawaiian Trust until Nugan Hand's demise.

General Black: "I was never consulted by Philpotts in any of these transactions, and there was no reason I ever should have been. He [Philpotts] was a banker taking orders from a bank."

And that is exactly what Philpotts told to a representative of the Australian liquidator who went to Hawaii trying to track $700,000 that had been shipped through the Nugan Hand account there. According to the affidavit of the liquidator's man, Philpotts said he prepared the balance sheet of Nugan Hand Hawaii as Nugan instructed him, "notwithstanding that certain of the monies apparently had been paid to other recipients" than shown in the balance sheet. Philpotts then told the liquidator's man to talk to Black, who was no more helpful.

Philpotts declined to answer questions for a reporter. He says Hawaiian Trust was merely acting as agent for Nugan Hand. "All our business is confidential," he said. "We wouldn't be in business if we revealed confidences. I don't see any reason why we should talk."

***

On May 14, 1979, Admiral Yates filed a legally required form with the U.S. secretary of the treasury in Washington ("Attn: Office of International Banking and Portfolio Investment"), registering Nugan Hand International, Inc., of 1629 K Street, N.W., Washington, as the American representative office of the Nugan Hand Bank and several other Nugan Hand affiliates. The office, he submitted, was engaged in "liaison and international trade related advisory services" and "public relations."

In the space for "name of person or persons in charge of the representative office," Yates listed two names: his own, and that of Brigadier General Erie Cocke. Cocke was a Dawson, Georgia, boy, whose acquaintanceship with residents of the Georgia-dominated Jimmy Carter White House was being exploited for all it was worth in those years. Cocke's consulting business was called Cocke & Phillips International, and it had the same address as Nugan Hand International. In fact, Nugan Hand's office was in Cocke's office.

Besides his Georgia connections, Cocke had a name of his own that he could exploit. His entry in Who's Who in America includes the following passage: "Entered U.S. Army as It. Inf. [lieutenant, infantry], 1941; wounded 3 times; prisoner of war 3 times (actually 'executed' by German firing squad and delivered the coup de grace but survived, 1945); disch. as major, Inf., 1946; brig. gen. N.G. [National Guard]." There follows a list of citations eight tiny-type lines long, from the Silver Star to the Chamber of Commerce award as outstanding young man of the year, 1949.

Cocke had gone on to hold various posts at the Defense Department, was an executive at Delta Airlines, and for a while served as national commander of the American Legion.

General Cocke says he never knew that his good friend Admiral Yates had registered him with the Treasury Department as the "person in charge" of Nugan Hand's office. He says he thought Nugan Hand was just renting space from him, though he agrees they shared a phone number, address, and receptionist.

Yates told the Stewart Royal Commission that Cocke was a consultant to Nugan Hand, attended an International Monetary Fund meeting as its representative, and let Bernie Houghton use his office on bnsiness related to American clients whose money was taken in Saudi Arabia.

The commission found a letter Yates wrote to Hand saying that Cocke was to be paid $2,000 a month, though both Yates and Cocke said payments were never actually made. The commission reported as a finding of fact that Cocke "agreed to work as a consultant for Nugan Hand (while retaining his own consultancy practice) and assisted Admiral Yates in the formation of Nugan Hand (International) Inc."

Cocke acknowledges he visited Nugan Hand's office in Hong Kong, and that he welcomed Messrs. Nugan, Hand, and Houghton in Washington. He acknowledges he arranged White House meetings for Admiral Yates and Frank Nugan to advance their plans to move Indo-Chinese refugees to a Caribbean island, and to salvage U.S. military equipment. But General Cocke denies that he ever did any work for the Nugan Hand deposit-taking enterprise.

Enter Moosavi Nejad, 52, an Iranian lawyer, who says otherwise. Nejad, his wife, and their four young children sought refuge in the United States from Khomeini justice in 1979. In the Cocke-Nugan Hand suite, he gave $30,000 to Nugan Hand representative George Farris, a Green Beret veteran whom Hand had befriended in Asia. According to Farris's army records, he also served as a "Military Intelligence Coordinator."

Using his best English, Nejad wrote liquidator O'Brien that the $30,000 he gave operative Farris represented "only a saving made almost within the last 25 years in order to live." In other words, this was his life savings, carpet-bagged across the sea to the land of freedom and opportunity in hopes of parlaying it into a productive career. He had enrolled in Georgetown University for a doctorate in political science, Khomeini having rendered his law degree useless at home. Unfortunately for Nejad, George Farris enrolled at Georgetown Law School that same fall of 1979, after he returned home from Asia.

According to Farris's testimony in a deposition in federal court, Washington, after Nejad sued him, Farris had been assigned by his friends Hand and Admiral Yates to hunt up banking clients in Hong Kong. When he announced he was returning to the United States for law school, they suggested he work in the Washington office of Nugan Hand, he testified.

Farris met Nejad at a cocktail party at Georgetown, and mentioned that Nugan Hand could pay 14 percent interest on his nest egg instead of the 11 percent Nejad was making at a local bank. Farris testified that the Iranian was afraid of keeping his money in the U.S. because of the strained relations between the two countries. After considering the deal for a few weeks, Nejad decided to go ahead. On Farris's instructions, he turned over a check for $30,000, which Farris forwarded to the Nugan Hand Bank account at Irving Trust in New York City.

General Cocke flatly denies Nejad's assertions that the general reassured him time and again about the safety of the deposit, though the general agrees they met in the K Street office and talked often. Nejad says Cocke told him, "Your money is in good hands. This bank is all right. Don't worry. I have even deposited there. I have been to Hong Kong [to see the bank]."

While denying the sales pitch, Cocke does agree that he told Nejad early on that he had $30,000 of his own money invested in Nugan Hand-more than Nejad. And he agrees that after the bank's collapse, he gave Nejad the name of a Hong Kong lawyer to represent him in the bankruptcy, and that the lawyer was Nugan Hand's former in-house counsel, Elizabeth Thomson (who declines to talk to a reporter).

General Cocke says he lost the money he had invested in Nugan Hand. Nejad says General Cocke told him the deposit was retrieved after the collapse, and that Nejad could get his money, too, if he went to Hong Kong and hired Ms. Thomson. "He said, 'If you want to keep your money from going away, hire this lady.'" Nejad hired American counsel instead.

Farris talked up Nugan Hand to many potential depositors, he testified in the lawsuit Nejad filed. But he carefully denied pushing the certificates of deposit in the United States, which probably would have been illegal.

Instead, he explained his job this way: "In that it was the basic goal of the bank to do business and to make a profit, the task fell upon me to advise people on the proper way to make a certificate of deposit if they desired to do so." Again, he emphasized, this was not the same as selling them, though not everyone might find the distinction worth making. "There were times when advice was given on how a client could go about getting a certificate of deposit," he testified. "I would suppose that I gave information sixteen to twenty times in that capacity" in the fall of 1979. But he said he couldn't remember how often his advice had resulted in someone's decision to invest in a CD.

Farris said -- and U.S. District Judge Thomas P. Jackson agreed -- that he didn't know a fraud was being perpetrated, and that he wasn't a decision-maker at Nugan Hand. "My superiors weren't in the habit of consulting or confiding in me as to what they were doing," he testified. And Farris showed that after he found out Nugan Hand had failed in April 1980, he voluntarily telephoned Nejad and had the Iranian stop payment on a $10,000 check Nejad had sent off to increase his investment.

Without evidence that Farris knew about Nugan Hand's insolvent condition when he took Nejad's deposit, Judge Jackson threw out Nejad's lawsuit. Not only that, he granted a $3,000 judgment to Farris on a counterclaim that Nejad was slandering him by telling people he had stolen the money. Nejad was still officially appealing the matter in 1987, though he was unfindable around Washington.

Several years earlier, he had complained that he couldn't find a steady job. Sometimes he performed Islamic weddings, but otherwise lived off the $400 a month his son brought home working as a counterman at Gino's. "I have spent my last pennies," Nejad said.

General Cocke admits he "made a terrible mistake to have rented them [Nugan Hand] space." But he says he is still friendly with Farris-and with Admiral Yates, who he says "was just as much a victim as everybody else."

Farris, reached in 1982, said he had lost money in the collapse along with the many friends and relatives he had advised to invest in Nugan Hand. He said he wouldn't name them, or the large companies he said he dealt with on behalf of Nugan Hand, because he owed them all confidentiality.

"I think a lot of the clients who lost a lot of money aren't going to file," he declared. "I don't think there's going to be a nickel paid on the dollar." He was probably right on both counts.

Meanwhile, Farris had parted company with Georgetown Law School for reasons neither would disclose. But Farris was busy -- doing some consulting," he said. He wouldn't say on what. But the consultee was at Fort Bragg, North Carolina, the U.S. Army Special Forces headquarters. Farris was reached through the Fort switchboard.

***

There is no question that Nugan Hand bilked American citizens living on American soil.

Ruth Thierbach and Jeanne Dodds of 1912 Filbert Street, San Francisco, deposited $5,000 in October 1979, simply sending a check on their San Francisco bank account to Nugan Hand Bank in Singapore. The next month they deposited $5,000 more by telegraphic transfer to Irving Trust in New York-all according to the claim they filed with liquidator O'Brien, which, they say, hasn't gotten them a dime back.

According to his claim, Walter G. Wiedmont, 323 North Central Avenue, Ramsey, New Jersey, deposited $100,000 in the name of himself, and Jodi and Alene Wiedmont, his daughters. The money was given to Bernie Houghton.

Houghton collected $15,000 from Joe S. Rodgers, in the city of Channelview, in Houghton's native Texas. Rodgers's claim doesn't say how Houghton got the money from him. His mother, still in Texas, says Rodgers now works for the U.S. Embassy in Moscow.

There were many others across America. None of them has been paid.

***

According to several accounts, Michael Hand was an avid Christian Scientist. He was also a health fetishist, built like a wrestler, and didn't hide his strength. He worked out daily in a gym, popped vitamins, and ate health food. People noticed that he made them walk ahead of him, not behind. He sometimes frisked people before he allowed them into his office.

George Shaw: "Hand is an extremely cautious guy. The epitome of disguise. Hand could be involved in anything and nobody would ever know about it. But this is not to say anything bad about him."

The Hong Kong liquidator says Hand "was secretive to a ridiculous extent." And as for his knowledge of corporate finance, the liquidator says, "He got that knowledge somewhere else than was on his resume. There are gaps in Hand's career." The liquidator says he is persuaded that the CIA connection was more than Hand admitted- that it went beyond wartime experiences in the hills of Laos.

Wilf Gregory in Manila says he always thought Hand was "quite probably" still with the CIA-which Gregory says was just fine with him.

Michael Moloney, Hand's and Houghton's lawyer in Sydney, says, "They all the time were talking about closeness to the governments of Southeast Asia, and knew what the military were doing. When I went to Hawaii, I was taken out to Pearl Harbor, or wherever, and was introduced to the admiral in charge of the Pacific Fleet. He was sitting there with a big map behind him showing where all the nuclear submarines are, [4] with electric lights flashing. We were taken aboard a nuclear submarine."

Les Collings, in Hong Kong: "He [Hand] used to be good at sort of hinting CIA. 'When I was in Laos' [he would say], 'When I was in Cambodia .. .' But he wouldn't discuss details. I've always had the idea that once in the CIA, always in it. I used to kid Mike about it, and he used to say, 'Oh, no, no more. That was it.' But it wouldn't have bothered me. As far as I am concerned, that's not illegality. It's propriety."

_______________

Notes:

1. Black died in 1985. He was interviewed by the author in Honolulu in June 1982.

2. A copy of the "debrief" report eventually made the rounds of Australian journalists, was publicized, and has been obtained by the author.

3. When the Wall Street Journal ran a series of three page-one articles about Nugan Hand, including some of the above quotes, Black became furious and fired off a letter saying he had believed his entire conversation with the reporter, the author, was off the record.

I stand by all this material as accurate and the quoted material as verbatim. Black didn't say anything about the conversation's being off the record until midway through the lunch, and I had been taking notes the whole time. While I tried to keep him talking, I replied to his "off-the-record" requests several times by saying that I considered anything he said reportable, and I never told him anything to the contrary.

Black's letter-to-the-editor was followed by another, from Vasey, with a copy to Black, stating in full: "Regarding the [articles], I would like to clarify for the record that Gen. Edwin F. Black USA (ret.) did not try to get me to invest in Nugan Hand, or anything else for that matter." This completely contradicts what Vasey told me to my face, and that is the statement I give credence to. Black never denied he had tried to solicit depositors.

4. For the record, this interpretation of the map is of uncertain accuracy, but the description speaks for itself as to the impression that was made on Moloney and a lot of other people.
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Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 4:01 am

CHAPTER FOURTEEN: Banking in Opiumland

When the Commonwealth of Australia/State of New South Wales Joint Task Force on Drug Trafficking issued its report on Nugan Hand in March 1983, it deleted certain passages from the version that was made public. The task force said the passages were deleted because "release of material is contrary to public interest," either because "of likely interference with ongoing and/or future official inquiries" or because "disclosure is likely to identify informants or other confidential sources of information."

A few such deletions-a name, a word, or even a few sentences -- are scattered throughout the report. Then the reader comes to Chapter 34, nine legal-sized pages of text and a tenth page of footnotes. The entire chapter is marked "(DELETION)." Not one of what must have been thousands of words of text, not one of what must have been at least a dozen footnotes, was permitted to appear. Nor has it been released in all the time since then.

The title of the chapter is, "Nugan Hand in Thailand."

The heroin-fueled political corruption of Thailand long predated the arrival of Nugan Hand, to be sure. United States military and intelligence agencies were involved in the drug trade, at least purportedly for political purposes, back in the 1950s and 1960s.

And just as surely, there were reasons unrelated to drugs why Nugan Hand might have wanted to open a Bangkok branch in February 1977. Bangkok was a burgeoning commercial center hamstrung by severe currency exchange laws. It was made to order for a money-laundering tax scam.

But Bangkok was only one of the branches Nugan Hand opened in Thailand that February. The other was in Chiang Mai. Chiang Mai is the colorful market center for the hill people of northwest Thailand. Like few other cities on earth, Chiang Mai is known for one thing. Like Newcastle is known for coal, or Cognac for brandy, Chiang Mai is known for dope.

It is the last outpost of civilization before one enters the law-unto-itself opium-growing world of the Golden Triangle. John McArthur says he once visited Nugan Hand's Chiang Mai office and was taken into the countryside to see some tungsten mines. "As soon as we got out of Chiang Mai they opened up the glove box and took out the guns," he says.

If it seems strange for a legitimate merchant bank to open an office in Chiang Mai, consider this: The Nugan Hand office there was lodged on the same floor, in what appears to be the same office suite, as the United States Drug Enforcement Administration office in Chiang Mai. The offices share a common entrance, and an internal connecting door between work areas. The DEA receptionist answered Nugan Hand's phone and took messages when the bank's representatives were out.

The DEA has provided no explanation for how this came about. Its spokesmen in Washington have professed ignorance of the situation, and its agents in the field have been prevented by their superiors from discussing it with reporters.

The DEA has a history of working with the CIA here and abroad; with drug money corrupting the politics of many countries, the two agencies' affairs are often intertwined. Was that the case with the Nugan Hand office in Chiang Mai?

It was, according to Neil Evans, a young Australian, whom Nugan Hand hired to be its chief representative in town. At least one client or targeted client of Nugan Hand in Chiang Mai reports that a DEA agent visited her, and spoke favorably of Evans. After work, DEA agents played cards with him.

In recent years, Neil Evans has made daring statements to the Joint Task Force on Drug Trafficking, to Australian television, to the CBS Evening News in the United States-and for a while to anyone who would listen. He has said that Nugan Hand was an intermediary between the CIA and various drug rings. And he has said that Michael Hand sent him to Chiang Mai for the purpose of moving dope money.

Evans has said he was present when Hand and Ron Pulger-Frame -- the former Deak & Company courier who went to work at Nugan Hand-discussed the shipment of CIA money to the Middle East, Saudi Arabia, and Panama. Evans has said Nugan Hand moved $50 to $60 million at a time for the CIA, and also that Nugan Hand was involved in Third World arms deals.

For his television interviews, Evans has come up with lots of details. He has also been paid -- reportedly $10,000 from the Australia's Channel Nine, which sold its footage to CBS here. [1] The payment alone casts some doubt on Evans's veracity.

Beyond that, much of what Evans says isn't subject to verification. Much else that he says concerns transactions in Sydney and elsewhere that involve intelligence, and even if they occurred, Evans would not likely have been privy to them. Worse still, his stories have been contradictory. Both the Joint Task Force and Stewart Royal Commission rejected his testimony for some of these reasons.

In a signed but not sworn statement to the Joint Task Force, Evans said he had met Frank Nugan and Mike Hand back in 1974 while he was working as a tax consultant. He said he had heard of their ability to reduce taxes and get money out of Australia through legal loopholes. They kept in touch, he said, and Hand approached him in 1976 about going to Chiang Mai to "seek out deposit moneys from people that were involved primarily in the drug trafficking trade." Hand knew about these people, Evans said, "through his associations during the Vietnamese War ... through his association with the CIA." Hand "felt he could use his influence and his connections with the CIA to attract the business," Evans said.

He said Mike Hand told him that their conversation about this was to be private from other officials of Nugan Hand, and that Evans should just apply to Jerry Gilder for a sales job-which he did. Evans didn't mention these secret instructions from Hand when he was interviewed by Australian journalists; he told them that he wrote to Gilder after seeing an ad for salesmen in a newspaper in December 1976. [2]

But much that Evans has said is provably true, and at least one colleague, John Owen, confirms that Mike Hand, not Jerry Gilder, hand-picked Evans for the Chiang Mai job. The people Evans has described dealing with in Chiang Mai, in all his interviews, exist. They agree they dealt with him. Of course, they deny that they are dope kingpins as he alleges, but it is not likely they would admit to that if it was true.

Most significant, Nugan Hand certainly employed Evans, and it assigned him to be the lone representative in a post everyone knew was extremely sensitive. It trusted him there. In fact, Nugan Hand was very high on Evans.

***

On February 10, 1977, Jerry Gilder sent a memo to Mike Hand announcing that the two new Thai representatives were on their way. "Both guys expect to meet you in Hong Kong for a brief orientation period, take a look at the office and receive from you specific instructions that are required relating to conduct of business in the appropriate manner," Gilder wrote.

The memo described Neil Evans as if Hand didn't know him. It said Evans was "a gunslinger, he is 39 and married with one boy aged 2-1/2, years. Sales have always been his life and he has sold a wide range of products including encyclopedias, accounting systems and real estate. He appears to always have been a good earner, fluctuating between the $20,000 and $40,000 region. He could be described positively as ... friendly, likeable, gregarious" -- and, Gilder added, for what it was worth, "honest." As Gilder saw it, "Neil is willing to go anywhere he can make lots of money and will proceed on the basis of leaving his family somewhere safe and coming back to see them from time to time."

The other new man was John Owen. He had been a career officer in the British Navy, then went to work in the defense industry for a radar manufacturer. Eventually, he landed in Australia, where he took other jobs with cement and real estate companies.

There can be no assurance about secret arrangements made in advance-such as Neil Evans described to the police-or what phony documents might have been created for deception. But an application letter in Owen's handwriting was found in Nugan Hand's files, and it supports Owen's own story that he replied to one of the bank's newspaper advertisements for salesmen.

Owen laughs about it now in a Bangkok bar. "There were big ads in the paper," he says, asking, "'Are you a $60,000-a-year man?' And I said, of course I was. I came up [to Bangkok] with $5,000 and a 'See how you do.'"

Owen admits he occasionally tried to lure deposits, but he denies he ever successfully reeled one in. Deposit-taking, after all, could get Owen hauled off his barstool and taken to the hoosegow. As his former Nugan Hand colleague John McArthur has remarked, "It was very risky. In Thailand they put you in jail for twenty years and then have a trial."

Owen says the deposits were sucked up by Les Collings, who, he says, "used to come in from Hong Kong. Collings got quite a few depositors. I saw Collings literally browbeat this fellow, a Thai, into giving him $300,000. He talked to him for about four hours until the guy was literally a nervous wreck."

The really big clients, Owen says, were in the $500,000 to $750,000 range-businessmen involved in "trading, banking, hotels." He speaks of one such man who withdrew his Thai deposit in Hong Kong, but then, "against my better advice he put some money in in Sydney, and he lost it."

Like Wilf Gregory and others, Owen says his main work was fostering trade deals. He denies that he knew about any kind of drug connection or that he was involved in any intelligence work.

Now for the evidence. Owen's correspondence file at Nugan Hand, [3] much of it in his own distinctive handwriting, shows that he did take deposits. It shows that he was very worried about dope-connected people being associated with the bank-but felt unable to do anything to stop it because Mike Hand wanted the connection.

The correspondence file also shows that periodically, former naval officer Owen sent back long reports, almost tiresome in their detail, about troop movements and other military and political activities, mostly in Cambodia (which he referred to as Kampuchea), but also in Laos, Vietnam, and Thailand. The reports appear totally unconnected to any banking or business activity, and bear notations they were to be shown to Michael Hand.

***

John Owen remembers visiting Neil Evans in Chiang Mai, and "sitting in his funny little apartment at the Rincome Hotel," a main hangout for foreigners. And he remembers Evans running around "saying he had great overseas loans."

According to what Owen and many small businessmen in Chiang Mai say, Evans was operating the equivalent of an advance-fee loan scheme, long popular among American confidence men. The scheme involves telling businessmen that you have a source of loan money for them, showing them all kinds of phony documentation, and saying that you can arrange the loans if the businessmen pay brokerage fees in advance. The fees are collected, and the loans never materialize.

"I don't blame him, really," Owen says. "It was the only way he could get along."

The people at Nugan Hand, however, aimed to do more than just get along, and that's all Evans was able to do with his advance fees. From interviews with the swindled businessmen, it appears that the fees Evans obtained from them averaged only $1,000 to $5,000. Apparently the total never approached even $100,000. Evans was clearly into something bigger-at least if you consider the amazing array of U.S. intelligence veterans he hooked up with almost overnight.

For his chief aides-de-camp, in and out of the office, there suddenly appeared two Thais: Otto Suripol, who during the Vietnam War had been an interpreter for the U.S. Government at Nam Pong Air Base, and Suthin Sansiribhan, who had worked for Air America, the CIA airline. In the known interviews he gave, Evans wasn't ever asked how he found these two.

Suripol couldn't be located. Sansiribhan, living in a nice new house about an hour's drive from Chiang Mai, says he was brought in by Suripol. He proudly displays letters of high praise from Air America officials-in other words CIA men-for his work as loadmaster on planes shuttling between Udorn Air Force Base, Thailand, and Vientiane, Laos. Sansiribhan's ultimate boss back then, and Suripol's, was the commanding general of the U.S. bases in Thailand, Edwin Black.

Suripol and Sansiribhan weren't the only ones to find their way back to familiar company via Nugan Hand. Into the perceived Nugan Hand coterie, formally or informally, Evans quickly brought William and O. Gordon Young. The Youngs are sons of American missionaries in Thailand, and have served off and on as paid CIA officers in various capacities since the 1950s.

Billy Young says he "left my father's farm north of Chiang Mai" on the occasion of a coup in Laos in 1960, and went to work with the U.S. AID mission in Laos. His assigned job, he says, was helping "refugees and people about to be refugees. But, in fact, I wound up as a paramilitary officer working with the tribal people, rebels. Arming and training hill people to defend themselves," he says. "I left the service [the CIA] in 1966. I joined them again briefly in 1967. I've been here" -- in Chiang Mai -- "privately since then."

But for all his "privateness," Billy Young is no simple farmer. "I provide help to the MIA-POW [missing-in-action, prisoners-of-war] program, the group calling themselves Project Freedom," he says. Project Freedom operates in the belief that U.S. servicemen are still being held prisoner in the jungles of Indo-China, and that paramilitary operations are necessary to get them out.

Project Freedom gets a lot of support and direction from Soldier of Fortune magazine, which has half a dozen or more hairy-chested six-footers occupying a penthouse suite in Bangkok at any given time, running daring missions to do reconnaissance along the Laotian border, and at times surreptitiously crossing the border illegally.

Could Soldier of Fortune have a CIA connection, asks a reporter who has often wondered about that. "I've often wondered about that myself," says Young. "It's a perfectly obvious place."

The reporter brings up the tendency of Soldier of Fortune people to get involved with automatic rifles on U.S. soil, where it is illegal for civilians to have them. "I love weapons," Young says. "I would have twenty to thirty guns around the house. During the '73 riots [sometimes violent student-led demonstrations in Thailand] I was determined that if they came in after me I would take a lot of them along with me."

In 1977, Young occupied an apartment next door to Evans's at the Rincome Hotel. "He seemed like the ordinary nice guy," Young says of his neighbor. Young says he really never understood much about Nugan Hand's business, though he does nothing to dispel all the talk of drug deals. "They were setting up some kind of agricultural extension program," Young says of Nugan Hand. "They would layout money in return for indigenous produce. I don't know what kind of produce." (No one so familiar with Chiang Mai could be ignorant about the paramount local produce.)

Young says he got involved with Nugan Hand "because somebody recommended to my brother [O. Gordon Young] that he get in touch with them. He was looking for work at that point." Billy Young says his brother Gordon was first in the family to join the CIA, back in 1954, and worked with the U.S. operations mission in Bangkok during the 1960s.

Gordon Young, though, asserts he left the CIA in 1960. He says the Nugan Hand involvement developed this way: Back in 1977, "somebody told me I should make every effort to go over there and meet Michael Hand, meet them [the bank executives]. There was one or two letters exchanged." Who was the "somebody" who told him to do this? "Some friend of mine from somewhere -- could have been somebody back here [in the United States]," Gordon Young says. No names come to mind, he asserts.

So he talked to Mike Hand. And next thing, Gordon Young says, he was "sitting around the Rincome Hotel" with Neil Evans, talking about "selling certificates." Ultimately, he says, "no suitable post was found," and he returned to the United States. In 1982, Gordon Young was a security official at a nuclear power plant operated by Pacific Gas & Electric Company in California. The security office wouldn't precisely define his role, but the plant had been under attack by antinuclear demonstrators. It says he still works there.

A former CIA official familiar with the Bangkok station confirms that the Youngs spent a lot of time in CIA work. He says he twice fired them, only to go to another post in the Southeast Asia region and find them still on the payroll.

***

There is general agreement that the Chiang Mai office of Nugan Hand was going to have something to do with agriculture. Les Collings insists it was just going to try to finance local tobacco growing, for export to the United States. Evans, too, says there was a deal to raise and export a crop that was going to be called tobacco. But he says it was really going to be marijuana.

Evans says that in his seven months in Chiang Mai he corralled $2.6 million in deposits, from six big drug dealers. Owen and Collings both scoff at that.

There is also disagreement over why Evans left that fall. He says it was because a Thai general, a client, warned him that the government was going to have to crack down on the illegal money-moving. Collings, on the other hand, says he fired Evans because he wasn't bringing in deposits. Owen-who spent the most time with him -- says Evans left because he contracted a severe case of hepatitis. (And Billy Young also says Evans suffered some bad health problems just before he left, although, as with most things about Nugan Hand, Young says he doesn't remember the details.)

If the Nugan Hand bosses weren't pleased with Evans's work, it certainly didn't show in the performance report Jerry Gilder wrote May 17, 1977, after visiting him three months into his tour. "Neil is doing a fine job," Gilder said. "He is one of about a dozen European [white] businessmen in the area and it is a remarkable effort that he has been accepted in the way that he has by the locals."

Gilder fairly gushed about his subject. "Neil has made a point of socialising practically every night," he wrote, "and has accepted every invitation to dinner at the homes of local people. He is not pushing for business in the normal sense but is quietly baiting the traps, demonstrating knowledge and patience and forever looking for opportunities to be of service in any way.... Neil's area is poised for a boom and prospects for significant business appear encouraging."

***

There are no written records to support Evans's claim of big depositors-any more than there are clear records of any other Nugan Hand accounts, except as supplied by depositors filing claims. The purported depositors Evans named are all in business in Chiang Mai. They are all in a position to have the kind of money Evans describes. They all say they knew him and talked business with him. And they all deny they deposited money with him-which is understandable, since any Thai who admitted depositing money with him would be applying for long-term prison housing.

The people in question include some pretty impressive figures. One is General Sanga Kittikachorn, whose warning, Evans said, made him get out. General Kittikachorn is one of the most powerful figures in the Thai military, which has ruled the country since a coup in 1976. He is a former member of the Thai National Assembly. And he is also the brother of former civilian Prime Minister Thanom Kittikachorn, whose Vietnam War-era government worked closely with the U.S. military under General Black. In fact, a Thai colonel who was on Black's staff back then had been a leader in the 1976 military coup.

Both Kittikachorn brothers, Thomas and Sanga, met daily with CIA leaders at times. General Kittikachorn says the CIA and Thai General Staff "work very closely with each other. I think you know about the function of the CIA. We were very close to the American Government."

The general-who owns the Chiang Mai Hills Hotel, and whose family owns many businesses there and in Bangkok-says he met Evans "many times." Evans, he says, "came to the hotel and said he wanted to know me. He introduced himself as dealing with the money business."

Owen remembers a meeting with Evans, Collings, and General Kittikachorn at the Thai Military Bank branch in Chiang Mai. He says the general was being advanced some money for the hotel.

The manager of the Thai Military Bank in Chiang Mai, Khun Sunet Kamnuan, concedes he referred Evans to people he thought were likely prospects for Evans's business. And he concedes that several of the prospects he recommended did pay fees to Evans, without ever getting the promised loans. The manager of another bank in town tells pretty much the same story.

General Kittikachorn agrees that somehow Evans "got in with" the Thai Military Bank. He says he introduced Evans to his own friends and "other people here" because Evans was trying to lend money. He won't say who these friends and other people were. Faced with Evans's testimony that Kittikachorn deposited $500,000 with Nugan Hand to get it overseas, Kittikachorn says, "That is a very funny story. I'm not so crazy to believe people like them."

He acknowledges that the Nugan Hand team tried to sell him and others on high-interest deposits and offshore money transfers. He acknowledges that he went to the bank's office in Bangkok, as Evans said, and even that he brought "a friend" there. But he denies making deposits or knowing anyone who did.

"Most people want to borrow money, not put money into the bank," General Kittikachorn says. Why three Nugan Hand staffers would have been present at the Thai Military Bank when Kittikachorn was receiving money-unless he was withdrawing the money from a Nugan Hand account or somehow using Nugan Hand facilities- is unexplained. Moreover, several people-including Owen, who later had breakfast with him-say General Kittikachorn seemed particularly distressed when Evans left town. "Sanga was upset Evans left," Owen says.

Another Chiang Mai resident Evans identified as a Nugan Hand depositor is the woman who owns the building where Nugan Hand and the DEA had offices. (The DEA is still there.) The landlady and her husband also own mines around Chiang Mai, and, moreover, have a franchise to sell dynamite-reputedly an exclusive franchise for Thailand and certain other places in Southeast Asia. Evans has said she gave him $750,000 in Chiang Mai, and that her husband deposited even larger amounts, but dealt exclusively with Mike Hand in Bangkok.

She flatly denies this, and says she rented Evans space because "he dressed very well and showed off that he had a lot of money. Even the American DEA came in and talked to me about Evans." But she says that all along "I suspected that they were crooks. They said they had a lot of money, but instead they borrowed money."

Khun Lertsak Vatchapapreecha, a big dealer in farm equipment and other merchandise in Chiang Mai, denies Evans's story that he made a $600,000 deposit. But Lertsak, as he is called, says he did get to know Evans on the advice of the Thai Military Bank. He says they became friends. He says he fended off Evans's sales attempts.

"High interest, I think he did discuss this," Lertsak says. "But I wasn't interested. If I want to move money around I don't need any help. I have a lot of friends in Hong Kong."

Asked about Evans's testimony that he made an appointment for Lertsak to meet the Nugan Hand executives in Bangkok, Lertsak says he just doesn't remember whether the meeting took place or not.

The DEA declined to disclose the whereabouts of its agents in Chiang Mai at the time. But Evans correctly supplied their names.

***

The Stewart Royal Commission report says, "The commission finds there is no evidence to support the allegation that the office in Chiang Mai was established to attract deposits from drug producers of the so-called 'Golden Triangle.' " But, typically, the report presents no independent evidence. It just juxtaposes the lone assertion of the unreliable Evans against self-serving anti-drug statements from Collings, Gilder, and another Nugan Hand officer, Peter Dunn.

Though the commission quotes Owen in contradicting what Evans said about big deposits, it doesn't quote Owen on the purpose of Evans's mission to Chiang Mai. In an interview, Owen is very frank on the point. "There was nothing there but drug money," he says. "I'm quite sure that's what he was there for, Mike Hand sent him."

What begs proof is not the proposition that Nugan Hand went to Chiang Mai because of the drug business. What begs proof is the proposition that it might have gone there for any other reason, and the proof is lacking.

_______________

Notes:

1. Channel Nine says it "will neither confirm nor deny" the report, which came from excellent sources. CBS aired the interview on its prime news show without notice to the viewer that Evans had been paid to give it. But at least CBS pursued the story.

2. By the time the author got to Australia, Evans had delisted his phone number and was lying low. I never found him.

3. The file was somehow not destroyed in the ransacking of the files. But I obtained it after my interview with Owen in Bangkok, and so couldn't confront him with it.
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Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 4:04 am

CHAPTER FIFTEEN: Officers and Gentlemen

A month after arriving in Bangkok, on March 30, 1977, John Owen sent Jerry Gilder a list of twenty expatriate executives he said were considering a deposit with Nugan Hand. The list ranged from managing director of a TRW, Inc., subsidiary to the commercial attache of the Israeli Embassy in Bangkok.

Owen's whole correspondence file-which was somehow rescued by fate from the shredder-makes interesting reading. He was enthusiastic about working with General Black, but alarmed that Black's lack of financial wile might cause trouble.

"He certainly knows a lot of people who are important in this country, both in political and business circles," Owen said in a letter. But Owen reported that Black had caused general embarrassment" a horrified silence"-when he talked openly at a dinner in Thailand about Nugan Hand as a deposit-taking institution. Someone had to publicly point out for the record that "he could not take deposits here because it was illegal," Owen reported. Gilder, in reply, passed it off as a joke.

Despite the illegality, Owen seems to have been consumed with attracting deposits, as he told Gilder about this or that prospect in his letters. "This man rang us and asked specifically about deposits," he enthused, underlining as he went. Other prospects, he said, urged Nugan Hand "to set up a central finance and trade reinvoicing system for the whole of Southeast Asia including Australia and New Zealand." (Reinvoicing, as explained earlier in the case of the Australian pharmacists, is a method of creating phony tax deductions and currency transfers by importing goods through a front company in another country, which jacks up the price before the goods are brought into your own country.)

"We have a number of small deposits starting to flow in now," Owen wrote on November 4, noting that a depositor code-named "our cerebral friend" had just hanged over $12,000. That account was to grow considerably before the "cerebral friend" suffered a financial lobotomy when the bank folded.

But Owen's first successes at attracting deposits were overshadowed by his unique achievement in October 1977: he produced the one big, proven trade bonanza in Nugan Hand history. Owen brokered the sale of a Thai cement plant by Kaiser Cement & Gypsum Company, Oakland, California, to some local Thai shareholders. Kaiser received $650,000, and paid Nugan Hand a 10 percent commission -- $65,000 -- for, as Owen wrote Gilder, "arranging, cajoling and generally jumping up and down trying to keep the thing more or less on the rails."

This commission might be expected to please a merchant bank. But Owen reports he was shocked by the exuberant reaction he got from his bosses when he led his biweekly letter home with news of the commission.

"Absolutely stunned you didn't phone or telex me," Gilder cabled back. Owen says when he appeared for a meeting of staff, he was surprised by everyone's continued admiration over the deal (and a second one he says he completed, but for which there doesn't seem to be any verification). "We all went to Gilder's house," Owen recalls in an interview, "and [the accountant Stephen] Hill said, 'Thank Christ you brought in that money.' I found out I had the only profitable office. I couldn't understand how they could keep opening up new offices and Nugan and Hand kept jetting around the world."

***

In January 1978, Nugan Hand held the first gathering of its recently expanded staff. The Dusit Thani Hotel in Bangkok was the chosen venue for the three-day affair. John Owen was trusted to make the arrangements, from the hotel rooms and official photographer to a concluding golf outing at the Rose Garden course outside Bangkok. "We would have to be able to hire clubs at the course, and naturally we will all need the assistance of some pretty girls to help us around it," Gilder wrote, adding the warning, "I couldn't stand it if we ran into problems in any of these major areas."

Admiral Yates and his wife were on the guest list. So was General Black. So, by several accounts, was John Charody, the business associate of Australian magnate Sir Paul Strasser. Charody was described as a consultant to Nugan Hand, and was assigned code number 519 in the company's list of reference codes for use in telex and other communications.

Mike Hand impressed the conference by announcing that Sir Robert Askin, the premier (equivalent to governor) of the state of New South Wales, who was due to leave office soon, might be joining Nugan Hand as chairman. Charody reportedly said the same thing. Askin was in a social circle with Charody's friends, but there isn't any other evidence linking him with Nugan Hand.

Probably the most striking development at the conference, however, was the introduction of another man who was supposed to become a new staffer: Robert ("Red") Jantzen. Officially, Jantzen had been the first secretary of the U.S. Embassy in Bangkok. The Nugan Hand staff was aware, however, of what was supposed to be a secret: Jantzen's real job had nothing to do with being secretary of anything. He had been CIA chief of station for Thailand, the culmination of a long CIA career, though he had recently declared his retirement from government.

Jantzen is reported living near Orlando now. There is a Robert Jantzen in the Orlando area, but with an unlisted telephone number, and he couldn't be reached. But Collings's memories of the Bangkok conference include "a friend of Ed Black, ... a former CIA guy in Thailand," who "was going to help the firm develop contacts." [1] Owen remembers Jantzen by name, and describes him and Black as "two CIA guys."

Daniel Arnold, a successor CIA station chief in Bangkok, says Jantzen got involved because he had been a friend of Black and Yates. Arnold remembers Jantzen dropping by his place in Bangkok for a visit during the January 1978 meetings to discuss the Nugan Hand job.

"From what he told me, which was really all I knew, it would involve going to your friends or acquaintances and getting them to invest money, with visions of sugarplums," Arnold says. "He's a very decent man. My advice was not to get involved." (Arnold announced his own retirement from the CIA soon afterward, and went to work as a lobbyist for the Government of Thailand in Washington.)

Though Arnold didn't mention anything about drugs, Jantzen must have heard troubling reports. Frank Nugan wrote Jantzen a memo trying to explain the drug. rumors innocently. Still, Jantzen used CIA contacts to reach out to Harvey Bates, head of the Australian Federal Narcotics Bureau, to ask if Nugan Hand was under a drug investigation. Bates's reply, if any, has never become public.

But twelve days after Jantzen's indirect query, Frank Nugan visited Bates to protest that narcotics officers were embarrassing his bank. Soon afterwards, Bates's brother and second-in-command at the narcotics bureau, Brian Bates, who also attended the meeting with Nugan, wrote a "SECRET" memo to his commander in charge of the investigation.

Headed "Nugan/Hand," the memo said, "I desire that this Bureau should not for the time being engage in any active external inquiries into this matter. ... Will you please therefore ensure that, until further notice from me, no active external inquiries are embarked upon in relation to this matter...."

Several investigators who had been working on numerous leads became extremely upset. After Nugan Hand collapsed and many of its illegal activities were exposed, their inquiries were proven justified. They got hold of Brian Bates's memo, and accused the bureau of corruption-accusations that were repeated in Parliament.

The Stewart Royal Commission heard testimony from Harvey Bates that the Nugan Hand probe was called off mainly because Bates, in the commission's words, was "not convinced the Bureau had anybody capable of interpreting a merchant banker's books." Though this is hardly something an investigative agency would be proud of, the commission said it didn't find any evidence of corruption.

For whatever reason, Red Jantzen chose not to stick around Nugan Hand. Some who attended the Bangkok conference believed he had already joined the group, and he certainly seems to have been introduced there as such. But he apparently never transacted business for the operation.

***

Owen continued to try new trade deals. He arranged for Nugan Hand to handle payments on the export of fish from Thailand to the United States by an Australian-based company. He worked with General Black, who "brought in top people ... brought American business people here" to put up an ethanol plant, and to start production of energized seeds. "But the deals never came to anything," Owen complains.

The home office's enthusiasm for trade commissions faded. A typed note in Owen's correspondence file, probably from Gilder or Mike Hand, shows that the emphasis was on illegal deposit-taking. "John not closing," the note said. "Potential clients escaping. Probably overemphasising trade." When Owen requested a promotion and pay raise, Gilder wrote back that Hand and Collings had rejected the request, until Owen brought in $500,000 in deposits on his own" not as a result of introductions effected through General Black or Mr. Robert Jansen [sic]."

"We should be getting substantial deposits very soon," Owen wrote him. Bird dogs were employed to lure expatriate depositors. One was Lloyd Thomas, the owner of the Takara 2 Massage Parlor and Hairdressing Salon in Bangkok-and the man John McArthur says was trying to buy a load of bayonets through Nugan Hand.

Interviewed in his well-appointed waiting room among the scantily clad "hairdressers," Thomas boasts of knowing the CIA personnel at the U.S. Embassy, and offers several names to prove his point. (The names couldn't be verified anyway.) Asked if he got commissions for lining up customers for Nugan Hand, he says, "That might be true and it might not be true. I won't say." Internal Nugan Hand correspondence, however, says Thomas "worked" for the bank at least to the fall of 1979.

By the end of 1978, Owen had received his promotion. A note from Gilder to Hand said Owen "feels confident of producing $1 million for the year and anticipates additional good volume if current border wars persist."

Border wars made for turmoil, and turmoil made for a better business in sneaky money. Even the trade deals that continued in favor tended to be military-related. In one letter, Owen reported that "a large military sales contract" had been promised in connection with the Kaiser cement deal. An arms deal for 40-mm anti-aircraft guns was talked about for a while, but fell through.

Months were spent on a contract to establish an aircraft maintenance and repair center in Bangkok, to replace one that had been created and run by now-departed American G.I.s. Nugan Hand was trying to win the contract for UTA Industries, a big French firm represented by a captain in the U.S. Naval Reserve, who Owen described as "a longstanding client" of Collings. The aircraft maintenance deal was lost in infighting among Thai officials, and the navy captain, reached at his home in Connecticut, ducked efforts to question him.

***

One prominent figure in that deal, and other Nugan Hand activity, was former Laotian Prince Panya Souvanna Phouma, son of Prince Souvanna Phouma, for whom the United States ran a covert (and later not-so-covert) war in Laos in the very early 1960s. Prince Panya had recently fled the communist conquest of his country, and according to a John Owen letter, he "swam to freedom across [the] Mekong River in his socks." Prince Panya, Owen wrote, "has [the] reputation of being a playboy, but would appear to be a strong' negotiator. [He is] fluent in six languages and has strong connections in Thailand."

Extensive Nugan Hand files indicate that the bank helped establish Panya in a strange little airline called "Sky of Siam," ostensibly used for seeding clouds to promote rainfall (a pet project of the Thai king), as well as hauling passengers and freight. Owen's correspondence says he helped arrange bank financing for Sky of Siam, and got the aircraft for Prince Panya through the U.S. Navy captain he was dealing with. A letter from Owen to Gilder dated June 4, 1979, says the navy captain was billing the U.S. Government for his expenses, leaving the implication he was on government assignment at the time.

Panya -- who probably has been a major target of American affections, financial and otherwise, over the years-was a principal or front in many deals. A memo from Gilder to Owen June 21, 1979, says, "We put a proposal to Prince Panya in Singapore [Michael Hand's post] concerning Indonesia's military requirements, and I think this appealed to him. I have no doubt that he and Joel [Joel Boscher, a business associate of Panya's], between them could produce millions in volume for us."

The next day, Owen wrote back that Panya also was trying to get a contract to install a new water system for Pattaya City, Thailand, and wanted Nugan Hand to arrange financing. "With fees and l'argent sous la table perhaps we could get somewhere on this," Owen reported.

***

L 'argent sous la table -- money under the table -- bribes -- was apparently a specialty of Nugan Hand.

Surviving files indicate that Nugan Hand became involved in a deal to find safe overseas havens for massive amounts of graft stolen by officials at the highest level of the Thai military government. The files don't reveal how the deal wound up.

But Owen wrote a letter to Gilder about it July 3, 1979, apologizing for writing on "yellow paper as I cannot keep copies." The deal "may require some of our heavier members to come to Thailand," the letter said.

Owen talked about an intermediary, whom he referred to as "the lady with the rubber," and "our lady." He explained that the money to be moved was obtained from $400 million in loans to the Thai Government, raised on Japanese financial markets. The interest rate for the Japanese was 8 percent, Owen explained, but an extra 0.75 percent interest was tacked on to the promissory notes the Bank of Thailand issued for the loan. That was the graft -- the money the officials would keep for themselves.

"The Government officials involved have discounted [cashed in] their notes at local banks here and now want their money out," Owen wrote. "Our Lady has come to me to ask that we, NH [Nugan Hand], do this for them. It has to be discreetly done and quite frankly I do not believe that the Chinese dealers, et, al., are quite the people to handle this ... I really believe it should be a Deak's job," Owen said, in reference to Deak & Company, Ron Pulger-Frame's old employer.

"The people involved here are the government and should this get out, we would have another government," Owen stressed.

Asking the Sydney office "to fix this for us when I blow the whistle," Owen wrote that "the funds would be put away for at least two years, possibly more, and could be considerably more than the amount indicated.

"Following successful completion of this transaction we would be asked to act in a fiduciary capacity to raise another $400 million interest rates, etc., to be used in a similar manner. The time over which these funds are to be raised is within a matter of months. It must be done before there is any chance of a change in government."

Owen cautioned that he couldn't report the progress of the venture by telex" 'cause my telex is not discreet enough. If we are to use the telex then everything should be done in code and a one-time code at that. Use of words like 'latex' or 'transistors', etc. [from Mike Hand's currencies code] have been compromised long ago. Basically, we should alert Deak's or whoever and then give instructions to them verbally here in Thailand."

Owen went on to describe technical details of the next loan as would be required to allow for the padded interest rate containing the graft money. No written reply could be found among the fragmentary and badly shuffled records that survived the ransacking after Nugan's death. Gilder wouldn't talk to reporters, and the Stewart Royal Commission made no reference to the situation.

***

On January 19, 1979, Owen submitted to Gilder a single-spaced, typewritten report of three legal-sized pages. It began, "This is an evaluation of the Vietnamese capture of Cambodia as asked for by Graham Steer in Sydney last week." There is no further explanation for why former career naval officer Owen began writing a series of long, detailed reports that read like CIA or National Security Council briefing papers.

Steer, the California- and Florida-educated management consultant, had been working out of the Singapore office under Michael Hand. Hand's primary residence was Singapore by then.

Owen's first report, January 19, contains news that Vietnamese forces in Cambodia "would seem" to "have been operating under instructions from Hanoi not to close within a certain range of the Thai border," so that "people in Thailand do not seem to be particularly worried about any immediate threat." How Owen would learn this sitting in his rented banking office in Bangkok, several hundred miles from the affected areas, isn't mentioned. But in his report, he elaborated on several reasons for the rapid collapse of Cambodian resistance.

A fair example of the text: "The Vietnamese having broken through the main Cambodian forces on the Vietnamese/ Cambodian border then split up into a number of armoured thrusts which used well paved highways to approach their main, objectives of the major towns. In using the highways, they by-passed many pockets of resistance leaving those to be mopped up later. It would appear that the towns were taken by determined thrusts into' their centers to capture command posts, thus depriving Cambodian forces means of communication."

Owen said a guerrilla-type campaign planned by Pol Pot opposition forces had been forestalled by the Vietnamese blitzkrieg. He reported that "consensus of opinion [he did not say among whom] is that the Vietnamese army will probably be tied up in putting down sporadic guerrilla actions over the next 18 months to two years." He included detailed forecasts of probable relations between Vietnam and various of its neighbors, and predicted continued military skirmishing that was "unlikely" to "spill over into Thailand."

He predicted a diplomatic thrust by Vietnam "to improve her image" with noncommunist Southeast Asian countries. He recommended "forming some sort of military alliance" among those countries "whilst at the same time seeking to improve farm incomes and standards of living in those areas directly facing the Communist threat."

The next month came another missive of almost equal length, again detailing the tactics of both sides in the Cambodian fighting, and cataloging Vietnam's increasing diplomatic problems with other Third World countries as a result of the invasion.

There followed other reports of up to four legal-sized pages, in single-spaced typewriting, containing much the kind of thing a military strategist might hope to find out before entering war. They were sent to Gilder, but with directions for passing on to Mike Hand.

"Vietnam has 19 divisions in Cambodia, just about the whole of its front line army," he wrote. "This army is being supplied by air since it does not have full control of the highways. It is reported to have run short of fuel for its armoured divisions and its mobility is therefore severely curtailed. Vietnam would appear to control fully only the cities, which have no populations, and it is not in a position to bring people back to the cities since it does not have the wherewithal to feed them. In addition, in Kampuchea, there appears to be few indigenous Kampucheans remaining who can administer the country...."

Possible Soviet and Chinese responses-military, political, and logistical-were assessed. So were the prospects of a Soviet-American confrontation in the region. In all cases, Owen's emphasis was on the fighting capacity available at the scene, and that was described in detail.

"Vietnam may in the long run have aims on turning Thailand into a communist state but it is [in] no position at this point in time to put this aim into effect by military means," he summed up. He recommended that the Thai government start social programs to cure the economic inequities he said were causing "significant discontent in the countryside."

About the time Owen was writing all this, it has since been disclosed, the United States was cooperating with China in aiding the Pol Pot resistance in Cambodia.

What Owen's reports have to do with Nugan Hand's banking or trade interests is hard to fathom. In fact, many of his recommendations, in the sudden public spirit of curtailing violence, operate against the pro-violence undercurrent elsewhere in company literature. Elsewhere, Nugan Hand correspondence suggests that turmoil is good because it fosters the shady transactions that Nugan Hand profited from.

As with other foreign businesses operating in Thailand, Nugan Hand needed the patronage of a native Thai to hold the title of "chairman." The Thai who worked with Owen in this capacity from the beginning was a shipping and finance magnate named Suvit Djevaikyl, who boasts of many connections with members of the Thai government, including the finance minister. Djevaikyl says a friend in the shipping business had introduced him to Les Collings in Hong Kong, after which Frank Nugan and Michael Hand went to Bangkok to sign him on as part of the business.

And Djevaikyl brought home some bacon. "My friends had a lot of money that they deposited with them [Nugan Hand] in Hong Kong," he says. "I cannot give you their names because it is illegal to have money outside." He stresses that his friends got the privileged, Wing-On Bank-guaranteed accounts, so didn't lose their money.

Owen says Djevaikyl was particularly interested in brokering military sales to the Thai government from foreign sources, but that Nugan Hand couldn't match the prices available in Western Europe. In mid-1979, there was a falling out. Djevaikyl threatened to sever his relationship with Nugan Hand and boot Owen out of the country. Hand transferred Owen to Singapore, and replaced him in Bangkok with George Galicek, a defector from Czechoslovakia who had been representing Nugan Hand in Chile.

Galicek, an economist for the Czech Ministry of Foreign Trade, had defected after being posted to Chile from 1966 to 1970. He had been working on a deal with Owen and Djevaikyl to sell Thai rice to Chile, so the principals all knew each other.

Nugan Hand collapsed shortly after Galicek got to Bangkok. But from what Djevaikyl says, [2] he had determine to break his connection anyway. He says that during 1979, Hand proposed that Djevaikyl and his family buy a bank in Florida. (At this time, Nugan Hand was looking to take over a Florida bank, but in someone else's name.)

Apparently as a result of his efforts to check out the bank offer, Djevaikyl says, "Some of my police friends told me he [Hand] was from the CIA." Djevaikyl says he also learned from his "police friends" that "these people Ed Black [and] Red Jantzen were with the CIA. A friend of the American ambassador also told me, but that was after Frank Nugan died.

"If I know all these people were CIA, I would never let them put my name on their company," Djevaikyl asserts indignantly. "Sup- pose you're a businessman and somebody come to see you and you find out they are CIA, you would not like that. People might get the wrong idea and think I am CIA. And there are many killings. Some of these people die."

***

The CIA rumors weren't the only ones surrounding the bank. By much evidence, the Nugan Hand staff was very conscious of the narrow line the company was walking with its drug connections. A letter from Gilder to Owen November 14, 1977, expresses concern about the Chiang Mai situation, and about Otto Suripol, the former U.S. air base interpreter from Vietnam War days. Since Neil Evans had taken his hepatitis-wracked body back to Australia, Suripol had been left alone representing Nugan Hand in Chiang Mai.

Gilder thought Suripol was "not up to Group Representative standard." In the November 14 letter, Gilder asked Owen to supervise Suripol carefully, because "with the maliciousness and scurrilous remarks that have been made against the Nugan Fruit Group in Australia, Chiang Mai is a situation I am sure you will appreciate which we must be right on top of all the way [sic]." Gilder was obviously talking about illegal drug trafficking.

In a February 21, 1978, letter, Owen wrote Gilder about "one disturbing thing to me which I think you should know about." The disturbing thing was that Otto Suripol in Chiang Mai had told people that he was under instructions from Gilder "to go to the people he thought had 'hot' money from the 'trade' to see if we could look after it for them."

A year later, Owen wrote again, expressing his concern, and that of a depositor, about the presence on the Nugan Hand staff of one Ernest Wong. Wong was from a Chiang Kai-shek-associated family that had settled on Taiwan.

"Ernest has been recruited by Les and Mike to work on deals out of China," Owen wrote. Then he added, "Wong has a long and close relationship with Kuomintang Army remnants in the North of Thailand and is or was President of a Shan [States of Burma] Association in Bangkok. Their involvement with the drug trade [as already discussed earlier in this book] is a known fact as it was this way that they were able to raise money to buy arms. I am not suggesting that Wong was involved in any way, but you have to be very careful in this part of the world not to be implicated by association in any way."

But having said all that, Owen immediately cautioned Gilder not "to do anything about it nor repeat it to Les [Collings] or Mike [Hand]. I don't believe that anything I or you may say could make any difference." The clear implication of this remark is that Hand wouldn't have cared -- or might even have intended the drug connection.

Soon, one of Ernest Wong's northern Burmese neighbors -- a man born Chiang Chi-Fu, but known in his trade as "Khun Sa" -- was being exposed in the newspapers, and on television, and in the U.S. Congress, as the biggest heroin dealer in the world. Khun Sa's men had fought against the Chinese Kuomintang, and won control of most of the Golden Triangle's crop.

The ensuing truce between the two sides was still fraught with skirmishes. Like the Kuomintang (KMT), which continued to insist that it would one day re-take China, Khun Sa also claimed to be dope-peddling for a noble cause-in his case, the independence of his people in the Shan States of Burma from the Burmese majority. [3]

Nugan Hand's Ernest Wong seemed able to straddle the Shan-KMT wars, ingratiating himself with both sides. He was also reputed to have worked for British and German banks, and to have government connections in China. "Wong said he was tied to the KMT, and he was promoting for the Shan States," Owen told a reporter in 1982, shaking his head in amazement. "That's Khun Sa's army!"

_______________

Notes:

1. Collings says he thinks the man was Edwin Wilson, the CIA outlaw who sold arms to Libya and who had frequent associations with Nugan Hand executives. John McArthur also has said Wilson was at the Bangkok conference. Neither mentioned Jantzen. But from the physical and other descriptions given (such as red hair), it seems clear that Jantzen and not Wilson was the person in question. Neil Evans has said he saw Wilson in Thailand in May 1977, on some sort of arms deal, but there has been no corroboration of this.

2. Interview with the author.

3. Andrew Lowe, the Australian dopelord who was on Nugan Hand's staff in Sydney until he was sent to jail for heroin violations, put Khun Sa in Australian headlines by, alleging that among his chores for Nugan Hand was arranging a meeting between Khun Sa and Michael Hand in Sydney to discuss a heroin deal. The police were unable to find any corroboration for Lowe's story and discounted it.
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Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 4:07 am

CHAPTER SIXTEEN: The Drug Bank

Nugan Hand liked to brag about its banking relationships with the rich and famous in order to attract new depositors. But there was at least one prominent Australian figure -- a former Olympic hero and police official -- whose banking relationship was something the firm didn't much talk about with outsiders.

He was Murray Stewart Riley, and his status as a customer made big headlines when it was discovered after Frank Nugan's death. Riley, a rower on Australia's 1952 and 1956 Olympic teams (he won a bronze medal in 1956), and then a detective, had seen his fame turn to disgrace in a police corruption scandal in the 1960s. It was discovered that he had been protecting the business interests of Abe Saffron, the Sydney vicelord. He lost his job.

Riley was tied to half a dozen illegal gambling casinos and was eventually convicted of bribing a policeman. He was jailed for nine months, then went back to the vice industry, specializing in the narcotics trade. He was arrested in 1978 in a luridly publicized case when he greedily overloaded a boat, the Anoa, which he used to bring "Buddha sticks"-a concentrated form of marijuana-in from Hong Kong. Unable to reach its intended port, the multimillion-dollar cargo sailed into the hands of police. Riley was jailed for ten years, and nine others were jailed with him. The ensuing investigation established that Riley was also importing about a hundred pounds of heroin a year, some for use in Australia, the bulk for transhipment to the United States.

"He bought it for several thousand dollars a pound in Thailand, and sold it for several thousand dollars an ounce in Australia, after being cut [diluted with sugar or another harmless powder] three times," says a police investigator on the case. According to police· investigators and the staff of two royal commissions, the heroin Riley brought in was shipped to the United States on freighters that were serviced by stevedoring firms infiltrated by Riley's associates.

In 1980, in the heat of the Nugan Hand collapse, Riley sought to reduce his sentence by confessing some selected sins under oath before a royal commission on drug trafficking. He testified that Nugan Hand had moved his drug money from Australia to Hong Kong. He said it financed his purchase of at least one boat (not the Anoa) used in trafficking, and that he had sought out Nugan Hand because it could "transfer funds from Hong Kong to the United States."

With Riley's at times detailed testimony to go on, investigators from the Commonwealth/New South Wales Joint Task Force on Drug Trafficking and the Corporate Affairs Commission were able to find Nugan Hand records documenting some transactions by Riley and his friends. They showed a total of $211,000 in deposits, mostly in Sydney, and $174,000 in withdrawals, mostly in Hong Kong, all between November 1975 and December 1976.

Since the quantities of drugs Riley was handling were worth much more than that, and since Riley continued trafficking until his 1978 disaster and continued to use Nugan Hand, it is assumed there was much more money involved, and that other records were either destroyed or never kept. (When dealing with the surviving records of Nugan Hand, one must constantly be aware that they are fragmentary, selective, and often coded or understated.)

Investigators also found records of transactions for quite a few o\her dope traders. Prominent among them, of course, was Andrew Lowe, whose standing as one of Australia's leading heroin importers while on the Nugan Hand staff as a "commodities" dealer has already been described.

Other dope dealers named in these records were friends or relatives of George Shaw. As Australian lawmen began interviewing Shaw about this, one acknowledged associate of his was charged with supply and possession of 1,760 pounds of heroin. Shaw's family is said by police to have a record of drug trafficking, though it's hard to trace because of names. Shaw acknowledges that his name is a derivative of an originally Lebanese name; he insists, [1] however, that he doesn't remember what his original name was, or what his father's name was or is.

***

As laid out in the Corporate Affairs Commission and Joint Task Force reports, Nugan Hand's records showed:

-DONALD WILLIAM McKENZIE (OR MACKENZIE), who had eleven criminal convictions relating to drug offenses alone, and an additional history of other crimes, ran at least $36,180 through Nugan Hand in 1975 and 1976. One $20,000 deposit, identified by the task force as the proceeds of drug sales, came a few days after McKenzie was arrested for possession of marijuana. McKenzie dealt mostly with George Shaw.

Shaw, in his initial testimony, tried to minimize his knowledge of McKenzie and assert that he thought McKenzie was interested in the leather business. But Rona Sanchez, Shaw's secretary at Nugan Hand, testified that she thought all along McKenzie was a dope dealer.

"I could tell by the style of Don's living," she said. "He never had a job and yet he drove a new red Mercedes-Benz. He was always smartly dressed and he told me that he had sent his girlfriend on two or three cruises." Besides overhearing conversations about money "obviously ... from the sale of drugs," she reported that "Don was quite often stoned when he came in to see George."

According to testimony before the Corporate Affairs Commission from narcotics agent Denis Kelly, McKenzie was employed for a while by Jack Rooklyn, an expatriate American who came to Australia to supply slot machines to Saffron's gambling dens on behalf of Bally Corporation. Bally is a major American gambling concern that started under secret Mafia ownership, and was later financed by the Teamsters' Union's corrupt Central States Pension Fund. McKenzie, the dope dealer, was brought onto the staff of Bally's man Rooklyn in the perhaps surprising capacity of tutor for his children.

Like other dollar amounts listed here, McKenzie's deposit total of $36,000 is probably much less than what actually flowed through Nugan Hand on his account. To take his case as an example, George Shaw eventually testified that his own records showed McKenzie actually withdrew $100,000 on a day when Nugan Hand's records show him withdrawing only $1,000.

Commented the Corporate Affairs Commission about this hundredfold discrepancy, "This withdrawal of $100,000, if accurate, indicates both the size of the off-ledger cash kitty facility offered by Nugan Hand Limited through Mr. Shaw, and the likely origin of some of the funds deposited but not recorded in the official books..."

In fact, the incident could indicate that the figures for Riley and the other Nugan Hand drug clients were also grossly understated. In his own testimony, Riley was conveniently forgetful of details like dollar amounts that might have caused him a tax liability. The enormous amounts of drugs that Riley and other Nugan Hand customers were dealing in likely would have produced and required sums in the millions of dollars.

Other persons whose names were found in Nugan Hand records and listed in the Corporate Affairs Commission and Joint Task Force reports as among the bank's drug clients:

-- JAMES LEWIS WILLIAMS (ALIAS JAMES ARTHUR WATSON), who was arrested in 1981 on what the Corporate Affairs Commission called "drug cultivation related charges" (he was convicted in 1982), deposited $23,000 in Nugan Hand and withdrew $27,000 from July 1976 to June 1978, the available records showed.

-- GEORGE CHAKIRO, who has no criminal record but whom the Corporate Affairs Commission identified, based on police and underworld sources, as "deeply involved in hashish importation and distribution," deposited $13,000 and withdrew $15,000 between June 1976 and June 1979, the commission and task force said. Hawaiian records not cited by the official bodies show that a George Chakiro was a big borrower from Nugan Hand's Hawaiian Trust Company bank account as far back as 1974.

-- MALCOLM CRAIG LADD, who (in the commission's words) "was involved in the distribution of drugs since 1972," deposited more than $145,000, according to a reconstruction of records by the commission and task force. According to the task force, Ladd had convictions for possession and use of heroin and marijuana, and admitted selling them, and hashish, on a large scale.

-- CHARLES ROBERTSON BEVERIDGE, "a partner of Mr. Ladd in drug trafficking," the commission said, deposited $60,000 and withdrew a like amount between May 1976 and February 1979. The task force said Beveridge also admitted his work as a distributor, and, like Ladd, said that George Chakiro was at times his supplier. Both Beveridge and Ladd admitted to the task force that at least most of their deposits were the proceeds of drug deals, and couldn't cite any other jobs or sources of income.

-- BARRY GRAEME CHITTEM AND MURRAY DON NEWMAN from February 1978 to May 1979 ran at least $30,000 through Nugan Hand that they conceded was money made from, and reinvested in, marijuana and hashish, the commission said. Newman had been convicted for a marijuana offense. The task force said Chittem and Newman argued in testimony that only part of the money they put in Nugan Hand was from drug sales. But the task force said no other source of income could be found, and that the drug activities were on a scale to produce much more money than the amount Chittem and Newman admitted to.

Furthermore, the task force said, Chittem and Newman admitted withdrawing cash from the Sydney and Singapore offices of Nugan Hand, packing it in their luggage, and smuggling it on to Bangkok and Chiang Mai. Added the task force, "Chittem claimed that he was unaware that Chiang Mai was closely associated with drug production and distribution, which seems somewhat absurd in all the circumstances."

-- "W," a man the task force would identify only by this pseudonym, deposited at least $23,000 in Nugan Hand between July 1976 and September 1977. In February 1978, the task force said "W," who already had seven "minor criminal convictions," was sought on a warrant for growing marijuana, and escaped arrest by holding a gun on an undercover policeman. He was later captured and when the task force issued its report he was awaiting trial, apparently inspiring the pseudonymous reference.

-- BRUCE ALAN SMITHERS, another drug trafficker, deposited $43,000 in late 1977-while he was on bail on charges of cocaine and hashish trafficking. He was convicted, and deported to New Zealand in July 1979.

-- JAMES SWEETMAN, who in the words of the Joint Task Force was "a major drug trafficker in the 1960s and 70s," was apparently a client. Although direct evidence of deposits or withdrawals wasn't found, his name appeared on the client list Frank Nugan carried with him at his death. Sweetman associated with Riley and members of Riley's group. He disappeared after two drug-related arrests in Britain in 1977.

-- GEORGE SHAMOUN, a Lebanese, was arrested March 19, 1980, on a charge of trying to import into Australia twenty-two pounds of hashish oil, which police said was worth about $176,000. When he was arrested, Shamoun was carrying a receipt from Yorkville, a Nugan Hand affiliate, for $80,000. It was signed by George Shaw. Some sixteen other Nugan Hand documents were found indicating international transfers by Shamoun of about $200,000, mostly to Singapore.

Shamoun was acquitted at trial on the hashish charge. He explained his Nugan Hand deposits to the task force with "vague details of a gift from his family in Lebanon and of business dealings he claimed to have had in Singapore, Lebanon and Saudi Arabia." Shaw supported this story. Both men said the $80,000 had been a typographical error, and that the actual deposit was $8,000.

But after its investigation, the task force determined "beyond doubt" that Shamoun and Shaw were lying in "an attempt to hide their participation in drug related activity." They eventually admitted as much, after Karen Jones, a Nugan Hand secretary, testified that the Yorkville deposit was $80,000, and that "Shamoun regularly visited Shaw and ... made other substantial deposits with Shaw." [2]

During this time, Shamoun was unemployed and on welfare.

-- JAMES BLACKER, COLIN COURTNEY, STEPHEN DEMOS, JOHN BROOKING, AND JOHN CERUTO all were dope dealers brought to Nugan Hand by Andrew Lowe, the task force said. For most of their transactions no records were kept, the task force said, but it found "reliable information" that Courtney alone deposited about $400,000 cash.

From all this, the Corporate Affairs Commission drew its typically reticent conclusions: "The delegates [commission members] do not assert that Nugan Hand actively pursued the drug trafficking industry for business, although in the case of Mr. Hand this is a possibility. However it seems unlikely that the executives were completely unaware of the activities of certain clients associated with drug trafficking. As with other areas, Nugan Hand was not in the business of refusing funds associated with illicit or questionable activities. . . . Whilst it cannot be stated with confidence that Mr. Shaw was aware of the activities of these drug traffickers, or of the source of their funds, however [sic] it is reasonable to infer that he was aware the funds were not the result of normal commercial enterprise and fell within the general description of 'black money.'"

The Joint Task Force was a little more blunt, stating in its conclusions that Shaw's" 'drug' clients ... were in their early to mid 20s at the time of their dealings with Shaw. In every case," the task force said, "deposits they made were by way of cash, often in quite substantial sums, and frequently no 'official' receipt was issued.... With perhaps one or two exceptions, it can be fairly said that in neither their physical appearance nor their mannerisms did they have the appearance of legitimate successful business people. Indeed, one depositor was described by an employee as frequently having the appearance of being affected by drugs on his visits to Nugan Hand offices. Shaw's clients were quite open in their comings and goings. . . . In short, apart from any legal responsibilities Hand and Nugan had towards Shaw as their employee ... there can be little or no doubt that they were aware of Shaw's procurement of 'drug' money ... and that their failure to stop it was, if nothing more, an implied acceptance of that practice."

As for war hero and CIA man Mike Hand himself, the task force concluded, "throughout 1976, Hand was knowingly involved in drug activity with the 'Riley' group in that he permitted and even encouraged the use of Nugan Hand facilities for the movement of 'drug' money.... By 1977, Nugan Hand was well established in drug activity."

***

How much did the other executives know? Les Collings, Nugan Hand's Hong Kong representative, offers a perfectly innocent explanation of how he happened to dole out funds to dope dealer Murray Riley. "He was like any other Nugan Hand customer," Collings says. "He was a businessman and he wanted cash put out of Australia. I was told [by the Sydney office] to pay him some money. I was told to wine him and dine him. I didn't know who he was from Adam. Riley could have been anybody. Here was a nice guy coming up and giving Nugan some money."

A fine story-until you analyze it. For one thing, Riley was a wildly notorious character, especially in 1974 when Collings was still living in Sydney. Riley was all over the newspapers that year as a result of hearings by the Moffitt Royal Commission on organized crime activities.

For another thing, the Joint Task Force reported testimony from Collings that in September 1976 he got "urgent instructions" from Mike Hand to have $100,000 in U.S. cash available for Riley, who then dropped by to pick it up, or most of it. The orders were so urgent that Nugan Hand didn't have time to supply the documentation required by Hong Kong banking authorities for large bank withdrawals.

So, Collings told the task force, he had set up an account in his own name to pay Riley-clear evidence that Riley was not just "like any other customer." When Mike Hand heard about Collings's special arrangement, he was so alarmed that he shot a memo to Collings saying, "Please hold fire on using this account for pay offs. Some method totally disassociated with you and the company should be employed for payout."

The task force noted that "both Nugan and Hand frequently handled 'black' money, which caused them no particular concern, but these transactions were of particular concern to Hand." In other words, Hand knew that his customers were engaged in dope smuggling, not just routine tax cheating. Strong suspicions, at the least, might likewise be attributed to any Nugan Hand executives who got instructions like the ones Hand gave Collings.

From what it could find of records, the task force also raised the "question" of whether Nugan Hand, rather than just moving money, was lending Riley and his friends their capital, and thus financing the dope trade. Justice Philip Woodward, in his Royal Commission report in 1980, had indulged in the same speculation.

One ground for thinking that Nugan Hand was bankrolling heroin, the task force said, was that much of the money the Hong Kong office shelled out to Riley and his friends "appears never to have been reimbursed"-either through deposits or through money transferred up from Sydney. The task force also noted that Mike Hand had personally ordered the destruction of the Riley records in Hong Kong, and "regarded his relationship with Riley as being so significant that he was prepared to perjure himself in respect of it."

He certainly did perjure himself. Appearing before Woodward's Royal Commission inquiring into drug trafficking, Hand was asked, "Do you know Murray Stewart Riley?" He replied, "I do not recall meeting a person by that name." Hand then flatly denied he knew of any discussion by anyone in the Nugan Hand organization in which Riley's name even came up. He even denied that Nugan Hand ever transferred funds except "through a regular bank."

"It seems highly probable," the task force concluded, "that Hand knew Riley and [his friend Harry] Wainwright were involved in drug trafficking and that their requests for use of the Nugan Hand facilities for the movement of money were in furtherance of that activity. And knowing this, Hand assisted them not only by freely offering them the use of those facilities, but indeed encouraging that use."

***

One more aspect of the Murray Riley Case deserves to be explored before moving on to Nugan Hand's other connections with dope, and murder-for-hire. It involves both the American Mafia and Sir Peter Abeles, that knighted bastion of proper wealth, whose circle of friends kept popping up as benefactors to Bernie Houghton and Michael Hand.

Riley had a pack of expatriate American friends in Australia, with pretty unsavory pasts of their own. There was Harry Wainwright, a New Orleans native who practiced criminal defense law in San Francisco until his disbarment, and began going to Australia in 1968. Wainwright became a naturalized Australian citizen in 1973, thus escaping extradition; he was indicted that year on federal tax charges in San Francisco.

According to Justice Woodward, writing in his Royal Commission's 1980 report on drug trafficking, "Information received from the United States authorities alleges that he [Wainwright] was, while practicing as a lawyer ... , an associate of known 'Mafia' leaders. Despite his denials, I am satisfied by the evidence ... that there is substance in this allegation." Justice Woodward also reported that he had received "some evidence" that Wainwright got his Australian citizenship in ways that were "highly suspicious and obviously call for further investigation by the appropriate authorities."

In Australia, Wainwright, like Riley, became a client of Nugan Hand. Les Collings remembers wining and dining and paying Wainwright money several times in Hong Kong-but, of course, noticed nothing suspicious about him.

Justice Woodward wrote that "Wainwright came to the attention of the Commission principally because he travelled through Wings Travel Pty. Ltd.," whose services were relied on by the dope syndicate Riley was part of. Wings was owned by William Sinclair, a Labor Party politician working for a city council that deposited its money with Nugan Hand, and who was jailed in Bangkok for heroin possession. According to the Joint Task Force, Wings was "a significant vehicle for the secretion of travel movements by those involved in all levels of the drug trafficking trade."

Another Wings traveler was Kenneth Derley, a henchman of Riley's. Derley appears in Justice Woodward's catalogue of characters "who have strong links with drug trafficking." He also appears, through an alias, on the list of Nugan Hand clients found on Frank Nugan's body at his death. [3]

Tracking a courier who was "bringing back white powder from Manila," Justice Woodward wrote, led the commission to another friend of Riley's, Danny Stein, or Steinberg, an illegal gambling figure who was visiting from Las Vegas.

"New South Wales police received information which they regarded as reliable that the purpose of Stein's visit to Australia at that time [1975] was to organize importation of drugs from the 'Golden Triangle' for transshipment to the United States," Justice Woodward went on. (Woodward's commission on organized crime should not be confused with the more criticized Stewart Royal Commission on Nugan Hand.)

***

Other Riley friends included George ("Duke") Countis, who from the late 1940s or early 1950s had been an illegal bookmaker and otherwise business agent in the operations of Mafia leader Aladena ("Jimmy the Weasel") Fratianno. [4] Fratianno, a racketeer and hit man with at least two dozen murders to his credit, traveled in the glitzy Las Vegas show business world. His most famous photograph published in Life magazine, shows him bringing together Frank Sinatra and the late Boss of Bosses, Carlo Gambino. Finally, in the 1970s, boxed in by the FBI, he became a highly effective government witness.

Countis's love of casinos led him to the Abe Saffron quadrant of Sydney. There, inevitably, he got to know Murray Riley. According to the Joint Task Force, [5] it was Countis who first introduced Riley and Harry Wainwright to Frank Nugan and Mike Hand. That was in 1975 or early 1976.

Justice Woodward reported that Wainwright not only "dealt with Frank Nugan" but "became a friend of his. They played chess together. Nugan handled the transfers of money to Hong Kong" for Wainwright and Riley, Woodward said, and did so without the knowledge or consent of the Australian Reserve Bank -- in other words, illegally.

The Woodward Commission's report went on to speculate about the source of this money: "I think," Justice Woodward wrote, "that the costs involved in importing . . . would have been beyond the unaided financial resources of Riley and his group. I am convinced that there was a financier or financiers behind the importation ... and that his or their identity is known to ... Riley" and his associates. "They have kept their secret, motivated, no doubt, by fear of the consequences of disclosure. . . . Some information came into my possession implicating the Americans Wainwright and Stein in financing the Anoa venture, using the facilities of Nugan Hand. It has not been possible to verify this information. The records of Nugan Hand are in complete disarray and many of them are missing."

The Joint Task Force reported that in June 1976, at the very time Wainwright and Riley were importing a big load of heroin from Asia, "Wainwright held a lavish function at his Darling Point [an exclusive waterfront section of Sydney] penthouse. It was attended by Nugan, Hand, Hill and other Sydney-based employees of Nugan Hand, Clive [Les] Collings the then manager of the Hong Kong office, and a number of other people not identified. The attendance of these Nugan Hand people at this party certainly demonstrates a considerable degree of familiarity with Wainwright, greater than one would reasonably expect if the client was not a major one."

Riley, the task force reported, became a social friend of Mike Hand's. In fact, it said, "Hand's decision to establish offices in Thailand was substantially influenced by discussions he had with Riley, and perhaps Wainwright, during the latter half of 1976."

Riley and Fratianno's man "Duke" Countis even approached Mike Hand about financing a $23 million Las Vegas casino project. Hand was interested, but the deal died. In his memoir, The Last Mafioso, written with Ovid Demaris, Fratianno described his attempt in December 1976 to launder Mafia funds through "foreign banks ... any tax-haven bank" to build the casino, but said it never came off.

There was a far stranger deal that did come off, however, between Fratianno and his Australian connections. Riley and Wainwright, according to various accounts, were working with Jimmy the Weasel (Fratianno) on a plan to farm a purportedly new strain of marijuana, and were looking for a plot in Australia to do it. They had become friends of a man named Bela Cseidi, who, although the protege of a wealthy Sydney industrialist, had himself become something of a playboy, involved in quick stock promotions, horse racing, and other gambling.

Cseidi says Riley and Wainwright approached him to use some of his land for the marijuana farm, and made the approach through their banker-Michael Hand. On a flight back to Sydney from Hong Kong, where Wainwright and Riley had introduced him to Hand, Cseidi says Hand "proposed a serious criminal venture. Wainwright had told him I was the only one who could solve their problem."

Cseidi says he agreed to sell some land to Wainwright, but never participated in the marijuana farm-which is why he is so upset that he had to serve three years in prison for it, especially since Wainwright went free. (The courts decided it was still Cseidi's land.) [6]

But the interesting part of the story is the effect all this had on Cseidi's, mentor, the wealthy industrialist who had taken him under his wing almost as a son when Cseidi was a boy, It was Sir Peter Abeles.

***

As a familiar credit-card commercial might put it: "Do you know me? I am one of Australia's wealthiest tycoons, the boss of a worldwide shipping empire that rakes in $1.5 billion a year and has at least eighteen subsidiaries in the United States alone."

Sir Peter Abeles is chairman of Thomas Nationwide Transport -- TNT, as it's commonly called in Australia. Queen Elizabeth knows him-she knighted him in 1972. Rupert Murdoch, owner of Fox Television in the United States and publisher of the New York Post and other publications, knows him; the two men are good friends and business partners in several Australian ventures.

Sir Paul Strasser knows Sir Peter. Sir Paul, who picked up a purportedly penniless, just-arrived Bernie Houghton and got him going in Australia, is a card-playing best-buddy of Sir Peter's.

Fred Millar also knows Sir Peter. Millar, manager of the real estate business that picked up a just-arrived discharged G.I., Michael Hand, and got him going in Australia, is general counsel for TNT. He is Sir Peter's right-hand man.

***

It so happened that while Cseidi was getting to know Wainwright and Riley, Sir Peter was trying to expand his shipping and trucking empire to the United States, and was encountering problems with the Teamsters Union. Among these problems, according to a memo from the executive who was sent over to run the American operations, were "wildcat strikes, bombings, burnings, shootings and pickets at all terminals." [7]

At Wainwright's house one day in 1974, Sir Peter's friend Cseidi met Wainwright's friend from the San Francisco crime scene, Rudy Tham, head of the West Coast Teamsters. Tham-who in 1979 was sent to jail for embezzling union funds-was a friend of Jimmy the Weasel; they even owned a clothing boutique together. On that same trip to Australia, Tham also visited Sir Peter and saw the TNT transport facility.

Tham won't discuss what happened. Cseidi won't divulge all the details, either. But in 1975, he says, Sir Peter asked him to intercede in TNT's business problems. "Ever since I was a young boy I've been a close friend of Sir Peter Abeles, and he said there was this thing he couldn't quite handle, and would I go and handle it. He didn't quite know what he was getting into," Cseidi says.

Sir Peter and Cseidi (together or separately) went to California and New York in early 1975, and met Fratianno (the Weasel) and Tham. Tham and possibly Fratianno suggested that some friends of theirs could probably solve Sir Peter's Teamster problems. The friends turned out to be associates of Frank ("Funzi") Tieri, head of the former Vito Genovese crime family and at the time probably the most powerful Mafia leader in the United States. Among the new advisors Sir Peter was thus introduced to were another professional hit man called "Little Ralph," a character known as "Benny Eggs," and a dock boss who was a cousin of Frank Sinatra.

Sir Peter says that "by this time we knew Tham fairly well," and so he agreed to welcome a couple of the proposed advisors up to his hotel room. "They said, 'We are looking for profitable opportunities,'" Sir Peter recalls. Next thing he knew, Sir Peter, Jimmy the Weasel, Benny Eggs, and some others were trooping up to the Westchester Premier Theater in Westchester County, New York, a mob-connected theater that later collapsed in a bankruptcy scandal that resulted in several federal convictions. Sinatra sang there in an apparent effort to help out the mob owners.

Sir Peter says he politely turned down the men's suggestions that he buy the theater. But he ultimately. agreed to another deal designed to bring labor peace. He paid $700,000 for a little trucking business his new advisors owned, and gave them a 20 percent stake in his U.S. operations. He hired Benny Eggs and Sinatra's cousin as consultants at $50,000 a year, with the money to be paid into a series of small Cayman Island and U.S. corporations his consultants designated. So important was this arrangement that each year, Sir Peter, head of a vast international air, land, and sea transportation enterprise, took time out from his other duties to personally write out the payment vouchers and currency exchange forms for the consultants' fees.

Eventually the Justice Department charged the consultants with hiding their income from the Internal Revenue Service. But when Sir Peter refused to come to the United States to testify at the trial, the judge threw out the charges for lack of evidence that the money from the foreign corporations he paid had gone to the consultants.

Sir Peter says he was treated fairly by Tham and the others, and that all his dealings were legitimate. Cseidi says his dealings, too, were legitimate, though he's not so happy about his treatment. "I had nothing to do with drugs," he insists over an expense-account-breaking lunch topped off with Cordon Bleu cognac at his private club before heading to the track. But he had tried the same line on an Australian jury, and it had chosen instead to send him to prison for three years.

_______________

Notes:

1. Interview with the author.

2. Shamoun came clean about the $80,000 figure before the task force, and Shaw testified to it before the Stewart Royal Commission.

3. The name on the list was Ken Dooley, and the amount by his name was "$19,267." It is widely assumed-the Joint Task Force fiat-our states-that "Ken Dooley" is Ken Derley. The change may have been a crude code, or may just have resulted from Frank Nugan's slapdash accounting system. Either way, it was typical of Nugan.

4. The Joint Task Force Report, volume two, at page 317, calls Countis "one of Fratianno's illegal bookmaking agents." There are other police documents to support the association, as does Fratianno's memoir, The Last Mafioso, written with Ovid Demaris.

5. Citing testimony from Stephen Hill, among other things.

6. The Joint Task Force, following up on the openly declared suspicions of the Woodward Royal Commission, found in its published report that Wainwright was "involved in the financing of the" marijuana venture. The published report doesn't mention Fratianno by name in connection with this particular venture, though it cites him on the casino deal. The task force's detailed account of the Cseidi marijuana venture is contained in a volume of its report that has never been made public. It is said to cite Fratianno.

The Woodward commission, in 1980, came upon the Wainwright involvement too late to cause Wainwright criminal problems in the five-year-old case; several others had been convicted in 1977. But the Joint Task Force flatly declared that Wainwright was prominent in a ring of "known or reputed drug traffickers" who dealt with Nugan Hand, and both the Corporate Affairs Commission and the Stew· art Royal Commission accepted this judgment.

7. The memo was uncovered and published by Marian Wilkinson in Australia's National Times.
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