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 4:11 am

CHAPTER SEVENTEEN: The "Mr. Asia" Murders

The Stewart Royal Commission said it agreed with the conclusions of the Joint Task Force and Corporate Affairs Commission about the role Nugan Hand played in the drug business. Then it proceeded to misstate those conclusions. The Stewart commission referred to "allegations of drug trafficking in Australia," and then said the Joint Task Force and Corporate Affairs Commission had found "that the allegations were not correct except to the extent that drug funds were being deposited with [Nugan Hand affiliates] from time to time."

That statement was seized upon by former Nugan Hand staffers, and government officials interested in papering over the embarrassing facts, as evidence that Nugan Hand was clean on the drug issue. In fact, both the Joint Task Force and the Corporate Affairs Commission had placed Nugan Hand in the critical role of surreptitiously transferring drug income overseas, where it obviously could be reinvested in more illegal drugs.

The Stewart commission itself, in its text, accepted that Nugan Hand performed exactly this function. Moreover, it agreed that Michael Hand and George Shaw, at least, knew very well that ,they were handling dope money. But the commission didn't seem to want to face the implications of this.

As it did in several sections to make its investigation appear more thorough than it was, the Stewart commission devoted a lot of space to shooting down fringe allegations that had little credibility to start with-for example, a charge that Nugan Hand officials had attended a farewell luncheon for a dope dealer and later gave $25,000 to his wife. (The luncheon, reported only in the Communist newspaper Tribune, probably never took place, and the $25,000 went to another woman with a similar name.)

After devoting seven paragraphs to repeating and analyzing these two shaggy-dog stories, the Stewart commission tossed off in a mere two paragraphs Nugan Hand's undisputed involvement with a group of people so vile they make Murray Riley look angelic by comparison: The "Mr. Asia" gang.

***

Early on a Monday afternoon, March 26, 1979-while Admiral Yates was hopping continents seeking deals as president of the Nugan Hand Bank, and General Cocke was lending his luster to the office Nugan Hand would occupy in Washington, and General Black was fishing for business in the Pacific Basin, and U.S. intelligence veterans Mike Hand, Dale Holmgren, Doug Sapper, and George Farris were baiting their own hooks here and there -- the telephone rang on the desk of George Shaw at Nugan Hand headquarters in Sydney.

The caller was John Aston, a Sydney lawyer who specialized in criminal defense work, particularly drug cases, and who was a frequent Nugan Hand client himself. By his own admission, [1] Aston let his office be used frequently by Nugan Hand as a pick-up point for various parcels. He says his law clients wanted to protect their confidentiality, and so didn't themselves want to be seen in Nugan Hand's office. Therefore, he says, they left the parcels with him for pick-up by Nugan Hand. But Aston says he was never aware of the contents of the parcels, including the ones of March 26, 1979.

Shaw has testified under a grant of immunity from prosecution [2] that the parcels Aston asked him to pick up that March 26 were two overnight bags, containing about $300,000 cash. A cousin of Shaw's and another man, a Nugan Hand client, both have testified that they drove with Shaw to Aston's office, where Shaw entered alone, then returned with the two bags.

Shaw testified that Aston told him, "I have some clients who want some money moved overseas without any fuss. There is $285,000 in those bags, plus some extra to cover your costs. We don't want this money to show up anywhere on the records."

According to Shaw's testimony, Aston told him to cable instructions to Nugan Hand's Singapore office that a man named Choo Cheng Kui be authorized to pick up the $285,000. Choo was to identify himself with his passport, with a given number. [3] Helping Shaw carry the money-laden bags to the car was Aston's law partner [4] Brian Alexander-the same lawyer police found with Ken Nugan at Frank Nugan's house the night Frank Nugan died.

Shaw drove the bags back to the Nugan Hand office, where he met Steve Hill, who also testified, providing additional verification for the story from this point. Both men say they opened the bags and counted Australian bills in $10, $20, and $50 denominations. But they were disconcerted to see that a lot of the money was marked with purple dye, and they remarked to each other that this meant it might have come from a bank robbery. They immediately reported this to Frank Nugan, who they say told them not to worry about it. Nugan ordered the money put in the safe-routine procedure when clients brought in cash deposits.

The next day, there was more routine procedure. Frank Nugan had bought a soft-drink distribution company called Orange Spot, and he used its heavy daily flow of small-bill cash to launder funds that came in to the bank. That's what he did with the Aston money.

Calls were made to the Orange Spot manager, and to an armored car service. Shaw then delivered the money from the Aston pick-up to the Orange Spot office, where it was turned over to the armored car service as if it were soft-drink receipts. The armored car service gave its check to Shaw in exchange. Thus the funds were laundered- accounted for as legitimate business receipts. [5]

The trail then leads to Singapore. Telexes have been found from Frank Nugan in Sydney to Mike Hand in Singapore, directing Hand to payout the $285,000 to Choo when he showed up with the passport that Aston had described. As in most Nugan Hand telexes, the message was conveyed in the code Mike Hand had devised. But with the help of employee manuals, the code has been broken. The telex identified the payer of the money as "our friendly solicitor John," which authorities have taken as a reference to John Aston.

The next day, March 28, 1979, the money was laundered again. Mike Hand instructed Wing-On Bank in Hong Kong to forward $300,000 from Nugan Hand's account there to its account at Irving Trust Company in New York. The next day, Irving Trust was instructed to transfer the money to Nugan Hand's bank in Singapore, Inter-Alpha Asia (Singapore) Ltd.

On April 12, Inter-Alpha was told to transfer the funds from its Nugan Hand account to an account in the name of Dong Xaoi Ltd., a Singapore company controlled by Nugan Hand. Its name may be familiar: Dong Xaoi was the name of the Vietnamese town where Mike Hand in 1965 won his Distinguished Service Cross for bravery. A mere fourteen years later it had been transformed into the name of the company he used to launder drug money.

Hand's assistant in the Singapore office, Tan Choon Seng, was signatory on the Dong Xaoi account. On what he has testified were Hand's orders, he wrote out five checks in Singapore dollars, on April 12, 1979, in amounts totaling $285,000 in U.S. currency. It was the exact amount Shaw had picked up at the Aston & Alexander law office, except for Nugan Hand's fee.

That same day, April 12, Michael Hand delivered the checks to Choo. Documents found later in Nugan Hand's Singapore office completely corroborate Shaw's testimony about this. Mike Hand had even made Choo sign a statement that "receipt of these funds by me does not constitute any breach of law or illegal activity in any country."

The original $285,000 apparently never left Sydney. Exchange control authorities weren't ever notified. The money being paid out to dope-dealer Choo in Singapore was money that unsuspecting depositors had left with the Nugan Hand Bank in Hong Kong -- Admiral Earl Yates, president.

***

All this might have appeared to be one more routine Nugan Hand money-laundering deal had it not been for a coincidence that occurred halfway around the world. Because of that coincidence, Australian police were able to see a terrible significance in George Shaw's story about the $285,000.

Six months after Choo picked up the $285,000 from Hand, a man named Errol Hincksman was arrested for drunk driving in the county of Lancashire, England. While booking Hincksman, the bobbies of Lancashire found in his pocket a passport in the name of Choo Cheng Kui. The bobbies, of course, didn't know Choo from Adam. But why, they demanded to know, was the drunken Hincksman carrying the passport of some other person-a Chinese?

Well, Hincksman explained, he was on his way to meet Choo at the home of a mutual friend. And who was the mutual friend? Terry Clark.

The police pursued the matter to the house where Clark was staying, and hauled him in, but it was still a while before they realized that in Clark they had their hands on one of the most wanted men on earth. Terence John Clark, a native New Zealander, was believed to be the number two man in the "Mr. Asia" heroin syndicate, one of the world's biggest. Actually, he had become the lead man in the syndicate-having one week earlier successfully plotted the murder of Christopher Martin Johnstone, the man known as "Mr. Asia."

For several days, though they didn't know it, the police had also had their hands on Johnstone himself, or most of him, in the form of an unidentified corpse that had been found in a quarry. Terry Clark had taken every precaution he could think of to prevent the identification of Johnstone's body. Johnstone's hands had been cut off, his teeth smashed and his guts ripped open. A multinational burial was arranged; Johnstone's severed hand would eventually be found in the Almond River in Scotland, and fingerprinted.

So slow were police to recognize what they had that they allowed Choo to pick up his passport and proceed back to Singapore. It took some time for Johnstone's body to be pieced together and identified by forensic experts. Eventually, some members of the syndicate were persuaded to testify for the Crown, against their colleagues, and in 1981, a trial was finally held.

It came out that Johnstone had been attracting so much interna tional newspaper publicity with his colorful "Mr. Asia" alias that Clark and others in the syndicate feared their business was being endangered. It was a business that brought in hundreds of millions of dollars. So they killed Johnstone. (The testimony that the gang had been endangered by constant publicity is further evidence, if any is needed, that Nugan Hand had every reason to be aware of who and what it was dealing with when it washed money for the "Mr. Asia" gang.)

Clark and several others were sentenced to life imprisonment for Johnstone's murder. Hincksman was sentenced to ten years' imprisonment on various drug charges.

British police couldn't touch Choo, who was back in Singapore. But they filed a report on the affair stating that "during our enquiries, it has become clear that Choo, known as 'Jack,' was responsible for running the Singapore end of (Clark's) business." They also said Choo's passport showed he had been in Sydney March 16 through 25, 1979 -- right up to the day before Shaw picked up the $285,000 from the Aston & Alexander office.

Given all this evidence, it would certainly appear that Nugan Hand was consciously laundering $285,000 in money used for drug purchases. Because the "Mr. Asia" syndicate dealt with Aston & Alexander for a much longer period, and Nugan Hand executives regularly laundered money picked up at the Aston & Alexander office, one might legitimately assume that Nugan Hand laundered far more than just the $285,000 Shaw picked up on March 26. Of course, Aston says he didn't know there was money in all the parcels he routinely laid out for Nugan Hand pick-up. But Nugan Hand certainly found out what was in them, and to whom they were going.

Nugan Hand dealt in dope money, all right. But there is still more evidence, and it points to worse conclusions even than that.

***

In May 1978, almost a year before the $285,000 Aston pick-up, two couriers from the "Mr. Asia" syndicate had been arrested in separate incidents at Sydney Airport. One, known as "Pommy Harry" Lewis ("Pommy" is a mildly derogatory reference to a Britisher), had some marijuana on him. The other, Duncan William Robb, was carrying an airgun and traveling under an assumed name; when police searched his home, they found heroin.

Both Lewis and Robb were subjected to long questioning by narcotics agents. Both broke down. Both mentioned the names of Johnstone and Clark, and provided other names and details.

They didn't know that the Sydney narcotics bureau was a den of corruption. They didn't know that the two narcotics officers who were hearing their stories were also in regular contact with the Aston & Alexander law office, which seemed to quickly find out everything the narcotics bureau did.

Two members of the "Mr. Asia" syndicate, including the woman Terry Clark lived with, later testified for prosecutors in: England and Australia, and said the syndicate got its information about the narcotics bureau from Brian Alexander-Aston's law partner and the lawyer who was in Frank Nugan's house the night he died.

The witnesses from inside the syndicate testified that Clark had told them that a senior Australian narcotics official was on retainer to the "Mr. Asia" group for $22,000 a year. They testified that Clark instructed various other syndicate members to get information about drug enforcement activities from Alexander, and that these syndicate members were given code names to use when calling Alexander. The code names they remembered matched names found in the Aston & Alexander telephone logs.

One of the witnesses, Allison Dine, Clark's common law wife, testified [6] that Alexander's source in the narcotics bureau "had access to a computer which was daily fed with information such as people the Narcotics Bureau knew were involved with the importation and trafficking of narcotics.... When any information came up that involved Terry Clark or any of the people who were said to be known associates of his ... the narcotics officer would then pass this information on to Brian Alexander and Brian would ring Terry to tell him that he had information."

At any rate, the syndicate knew within hours what Pommy Harry Lewis and Duncan Robb had told the police. Dine, Clark's common law wife, testified that Clark was in Singapore at the time of the Harry Lewis arrest, and ordered another syndicate member, Wayne Shrimpton, to go to Sydney to bail Lewis out.

Shrimpton testified, "I was told by Terry that I was to ask (at the court building] for Brian Alexander and he would know what I was there for.... Alexander came out and asked me how much money I had. I had a briefcase with the money in it in bundles. I opened the briefcase to show him and he said to me to close it up. He basically said, 'Don't let anybody see it.'"

Alexander then instructed Shrimpton to use a false name in filing the bail, according to Shrimpton's testimony, which was accepted as fact by the Woodward Royal Commission on Drugs. Shrimpton bailed Lewis out under a false name and immediately delivered him to Terry Clark, who within hours murdered Lewis, cut off his hands, bashed in his teeth and hid his body.

Unaware of all this, Robb began telling his story, begging the narcotics officer he was talking to for assurances that the story wouldn't get back to other members of the syndicate. According to the testimony of Allison Dine, Clark's common law wife, the story was delivered to Clark the very next day-May 29, 1978. Dine said she and Clark flew to Sydney, and Clark telephoned Alexander from the airport.

"The lawyer told Terry that it was urgent that Terry went to see him, that he had some information for Terry," Dine testified. "We caught a taxi into town, into the city.... After speaking to the lawyer, Terry came back to the taxi with the news that Duncan Robb had been leaking information about the organization and naming people in it to the police.... Terry said, 'I think we'll have to teach him a lesson.'"

Dine testified that the "information cost Terry $10,000, which Brian Alexander split with the narcotics officers."

***

Why Clark didn't eliminate Robb as thoroughly as he did his other victims isn't known. But Clark and two others in the syndicate settled for beating Robb 'unconscious with ball bats. Robb was found and treated at a hospital for several broken bones and multiple bruises.

Soon afterward, two other syndicate members, Douglas and Isobel Wilson, were arrested in Queensland, Australia. The Wilsons were a married couple who carried drugs for the group. In doing so they had become regular users of heroin themselves. In the deteriorating mental state that heroin reliance induces, the Wilsons broke down and gave long, tape-recorded interviews, telling the police all they knew. Included was the fact that Terry Clark had murdered Harry Lewis.

The Wilsons were released -- and nothing happened. Apparently no one had gotten around to bribing the narcotics office in distant Queensland. The office was so lethargic, perhaps no one had seen a need to. The Wilson tapes apparently were left sitting on a shelf for the better part of a year, and no one paid any attention to them.

Then, on March 15, 1979, Pommy Harry Lewis's mutilated body was identified in New South Wales. The Australian press was extravagant with lurid details about his heroin dealings and murder. (This is still more evidence that eleven days later, when the money was picked up, Nugan Hand management was well advised of its clients' narcotics trafficking.) Reading the papers, and apparently realizing the importance of what they had, the Queensland cops suddenly turned over the nine-month-old Wilson tapes to the New South Wales police, who were investigating Lewis's murder.

Within a week, the confidentiality of the tapes had been so widely shattered that their contents was in the hands of the press. Newspapers, eager for ways to follow up on the juicy Harry Lewis murder, ran accounts of the tapes in great detail in the editions of March 25. The stories didn't contain the Wilsons' names; apparently the cops who leaked the tapes thought they could protect the Wilsons by concealing their identity. But there was plenty enough detail in the stories for Terry Clark and those close to him to make an educated guess about who the mystery squealers were.

The next day, March 26, was when George Shaw picked up the $285,000 at the Aston & Alexander office. That was in the afternoon. Aston's calendar for that day, eventually confiscated by police, showed a mid-morning appointment with Jim Shepherd, "Mr. Asia's" principal Australian heroin dealer. [7]

Allison Dine and Wayne Shrimpton, the two witnesses from inside the "Mr. Asia" syndicate, testified that at that time, Clark received actual copies of the Wilson tapes. Dine said he bought them for about $275,000. [8] "I assume he got them through Alexander," she testified. "The tapes were long, two hours or so, apparently describing everything Doug knew," she went on. "Terry mentioned to me several times that he could not believe Doug had talked.... It was the obvious reason why he purchased the tapes, to satisfy himself that they had talked."

Dine also testified that Clark told her he paid the same amount to a hit man to kill the Wilsons. It is possible Dine confused the two, or that Clark, in talking to his moll, simply noted how much the Wilson episode had cost him in sum total, and was inconsistent or imprecise about exactly how the expenses were allocated between the tapes and the murder. In other words, there is a real possibility that the money Shaw picked up on March 26, and that Mike Hand paid out in Singapore April 12, wasn't dope money, but blood money.

On about April 13, 1979, Clark lured the Wilsons to Melbourne from Brisbane, Queensland, where they had been in a drug drying out program. They were met by a hit man, who took them to a house and shot them to death. According to Allison Dine, the hit man had promised "that there would be no traces of their bodies ever found because he was going to put them through a mincer."

***

The hit man had lied. A month after the killing, on May 18, 1979, a meat inspector taking his dog for a walk stumbled on the Wilsons' poorly buried bodies in a vacant lot.

Later, already in jail for the Johnstone murder, Clark himself talked to a Detective Piper of the Lancashire, England, police. He admitted that he had bought the Wilson tapes, though he was less precise than Dine and Shrimpton had been in their testimony.

"They have a narcotics squad out there," Clark explained in reference to Australia. "I have my contacts amongst them. They have got computers and telex machines which I have got on tap."

Asked why the Wilsons were murdered, he replied, "They were grassing. They even said I had murdered Harry Lewis. They made a tape to the police."

"How do you know that?" asked Detective Piper.

"I've had the tape," Clark replied.

"Who was the contact?"

"No names, I just paid the money."

Piper then asked him directly about Alexander, his solicitor. Clark replied, "Jeeze, the money I've paid him. That shit. He was doing well out of me."

"So if any of your people got into trouble, he would act for them?" Piper asked.

"Yeah, that's right. He would let me know what was going on." Alexander was called to testify at the inquest into the Wilsons' murder in August 1980. He refused, on the ground that his testimony might incriminate him.

The coroner accused Clark and "persons unknown" of the murders, and said he was "satisfied" that Alexander, had he testified, could have named other guilty parties. Without such testimony, however, and with Clark's only life already under sentence for another murder, no charges were filed in the Wilson case.

At the inquest, Aston testified that neither he nor Alexander had ever had clients named Terry Clark or Jim Shepherd. Asked how Shepherd's name came to appear in Aston's own handwriting in Aston's diary, Aston replied, "I have no idea in the world how that came there." He said that despite all, he trusted Alexander "implicitly."

The coroner said in his findings, "The answers given by Mr. Aston are not accepted by this court. Notwithstanding the serious allegation made against Alexander, Aston has made no effort to inquire into the truth of the matter raised." He also ridiculed Aston's attempt to reconcile Alexander's meager salary of $118 to $145 a week with his duties as "a first-class criminal lawyer." The implication was that Alexander was maintaining his handsome lifestyle with money derived from other means.

Alexander and the two narcotics officers who interviewed Lewis and Robb -- Wayne John Brindle and Richard John Spencer-were charged with conspiring with Clark to obstruct the course of justice. Magistrate C. A. Gilmore in the Court of Petty Sessions, Sydney, ruled, in May 1980, that there wasn't even enough evidence to bring the charges to trial, and threw them out. His decision was, at least, controversial.

J. R. ("Rod") Hall, the Victoria police commissioner, had been appointed by the federal minister in charge of the narcotics bureau to investigate the case. Hall publicly vented fury at Magistrate Gilmore's decision. "It was obvious Clark was tied up with Aston and Alexander," Hall says. "Could people remain naive about Aston and Alexander? I'd be surprised."

Hall notes that three times -- on June 21, 1978 (shortly after the Lewis and Robb arrests and the Lewis murder), and on March 28 and March 30, 1979 (the week the Wilson tapes were turned over to Clark) -- $11,000 was withdrawn from John Aston's account at a private bank and deposited there in another account, opened in the name of Spencer, the senior narcotics bureau official charged in the case.

The bank in which these transactions occurred was Nugan Hand.
"One of the things we couldn't understand," says Hall, "was that if the narcotics people had been getting money, what were they doing with the money. Then we found out that Spencer was depositing the money in Nugan Hand."

Aston said he thought the withdrawals from his account were to pay for some real estate that Nugan Hand was helping him buy. He acknowledged that Spencer, the narcotics officer, was a client "in several matters," but says he didn't know how Spencer's name got on the accounts. Spencer said he didn't know either, and denied receiving the $33,000. Still, the names of Spencer and Brindle, the other narcotics officer charged, appear copiously in Alexander's diary.

Aston stresses [9] that except for the one diary entry for Jim Shepherd, all connections with the dope dealers were through Alexander. "Not one of those persons have said they ever met me," he insists. "I gave Shaw one briefcase at the request of Frank Nugan. I never looked inside it. Nugan was in the habit of having things dropped at my office for delivery to him. I would phone him when they arrived. Of course, they could have contained money. I didn't look."

***

Justice Donald Stewart, the same man who later headed the Stewart Royal Commission on Nugan Hand, in 1983 headed another royal commission into drug trafficking and the "Mr. Asia" affair. That commission looked long and harshly at the way the Alexander-Brindle- Spencer obstruction of justice case had been dismissed.

Over several pages, Stewart laid out the prosecution case in a favorable light. He went out' of his way to' cite strange dealings between Spencer and Brindle on the one hand and the Wilsons on the other, and said Spencer had intentionally given false information to other officers in an apparent effort to exonerate Clark in the Harry Lewis murder.

Echoing charges made earlier by Police Commissioner Hall, Justice Stewart said several of Spencer's and Brindle's colleagues in the narcotics bureau changed their previous testimony during the hearing before Magistrate Gilmore. These other officers had stunned the prosecution by suddenly declaring that information given by informants to Spencer and Brindle had been discussed at a meeting in the bureau. This meant that others, not just Spencer and Brindle, might have leaked the names of the squealers. Stewart expressed doubt that such a meeting really took place.

Faced with these new assertions that the leaks could have come from anywhere, and not yet knowing about the Nugan Hand account in Spencer's name, Magistrate Gilmore was justified in freeing Brindle and Spencer, Stewart said. But he made plain that he believed crimes had gone unpunished.

"The evidence points strongly to Spencer being one source" for the leaks, Stewart declared. "After Spencer took over the Clark ... investigation a great deal of information" appears to have been passed on to Clark and associates through Alexander." He also accused Spencer and Brindle of a "lack of concern" for the welfare of informants. "The Commission has evidence that Spencer rang Alexander's office on 12 April 1979 and said he was coming over. On 13 April 1979, Good Friday, the Wilsons travelled to Melbourne where they were murdered," Stewart wrote.

The Alexander case, he said, was worse. Here, the magistrate had based the dismissal on his belief that testimony from Dine and Shrimpton, the two "Mr. Asia" group members, was unbelievable. Magistrate Gilmore declared that Dine "is an evil woman" and that Shrimpton's word "is suspect, if not worthless."

Said Stewart, "The Commission doubts that the decision" by Gilmore "was a proper exercise of magisterial function in a committal hearing. Unfortunately it would appear that at times the magistrate lost control of his own court."

Though Aston and Alexander had asserted they never heard of Clark, and couldn't identify photographs of Clark that were shown to them, Stewart noted that Alexander's own mother had testified that her son and Clark were associated, and that Clark sometimes picked Alexander up late at night for mysterious trips.

***

Brian Alexander, who was supposedly employed by Aston at a salary that finally peaked at $9,500 a year, had upped his bank deposits from $5,100 in 1975 to $70,000 in 1978. The next year, he shelled out $121,000 cash for a new house. That, too, is subject to a possible innocent explanation, but no such explanation has been forthcoming.

In December 1981, Alexander disappeared. Authorities presume he was murdered, though a body hasn't been found-or at least identified.

In July 1979, shortly after the Wilson murders, Aston and a friend traveled to Hawaii. Their hotel reservations were made, and the $1,600 bill paid, by General Edwin F. Black, U. S. Army, retired. General Black said [10] he didn't remember Aston, and must have paid the bill on instructions from Sydney. It was paid from the Nugan Hand Hawaii bank account, on which General Black was sale signatory.

_______________

Notes:

1. Interviews with the author.

2. In various proceedings, including before the Joint Task Force and Corporate Affairs Commission.

3. Originally, the money was to be picked up by Choo half in Singapore and the other half in Germany, but this part of the plan later changed.

4. By American terminology, Alexander was effectively an associate in the firm Aston & Alexander, of which Aston was effectively the sole partner. They were the only two professionals in the firm. In Australia, Alexander was what is known as Aston's "law clerk." That term has a very different meaning in the United States, however, referring to an intern who cannot represent clients in court and who often has not even passed the bar examination. Alexander was a fully licensed solicitor.

5. The careful reader may detect an apparent flaw in this system. By recording the money as income to Orange Spot, Frank Nugan would appear to have acquired a substantial income tax liability. This was solved, however, by having Orange Spot then issue a check to Yorkville Nominees, the Nugan Hand affiliate, with a concocted explanation for the payment that would allow it to be deducted as a business expense to Orange Spot. In the end, the money just wended its way back to Nugan Hand without ever having shown up as income to anyone.

Yorkville's only apparent purpose was to disguise the source and destination of the millions of dollars that flowed through it every month. A myriad of phony loan accounts veiled the passage of money from Yorkville to Nugan Hand and back. All this is confirmed by the records of the companies involved, and by the testimony of those concerned, including the Orange Spot manager.

6. The testimony quoted here from Dine and from Wayne Shrimpton, another syndicate member, was given at the coroner's inquest into the deaths of Douglas and Isobel Wilson. That case will be discussed later in the text, as it comes up chronologically; the inquest took place in Melbourne, Australia, in August 1980. The testimony, however, is consistent with testimony Dine and Shrimpton gave at various other proceedings in England and Australia.

7. When the calendar was seized in a police raid in March 1980, the March 26 page was mysteriously cut out. But police, using scientific means, showed by impressions on the page under the missing March 26 page that Shepherd's name had been written there in Aston's handwriting.

8. The amount that Allison Dine said Clark had paid for the tapes was 250,000 Australian dollars -- about $275,000 in U.S. currency at then-current exchange rates. Shaw reported picking up 260,000 Australian dollars, plus an undefined fee, from the Aston & Alexander office. For convenience and clarity, this sum has been convened in this book to a rounded-off $285,000 in U.S. money, at then-current exchange rates. The reader can judge how easy or difficult it would be for Dine to have confused the numbers 250,000 and 260,000.

9. Interview with the author.

10. Interview with the author.
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Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 4:17 am

CHAPTER EIGHTEEN: Bernie of Arabia

When you are living a lie, you are living in constant fear of exposure. This was true for others at Nugan Hand, of course, but Frank Nugan was the only senior figure who would have no place to flee when the lie was exposed. Hand and any other Americans involved could go home someday. Nugan was home. The lie was his whole life, not just a chapter of it. As he entered his last year, Frank Nugan was losing his grip on himself.

The beginning of the end was probably the burgeoning family fruit company scandal. Until 1973, ownership of the company lay entirely with the family. But then Frank's brother Ken had raised $700,000 for a new cannery by selling shares of stock in the company. In the stock sale, several large insurance companies acquired a 40 percent interest.

As noted in Chapter 4, the disappearance of an anti-drug campaigner in the Nugans' home town of Griffith in July 1977 led to investigations. These investigations turned up records of cash payments from the Nugan Group fruit company to various people. One was Antonio Sergi, the reputed head of the local Mafia. Another was Sergi's friend and alleged Mafia colleague Robert Trimbole. (Though officials didn't know it then, Trimbole, under the alias "Australian Bob," was also working with the "Mr. Asia" heroin syndicate.)

Ken Nugan explained that the various cash payments had really been made to fruit farmers who wanted to remain anonymous for tax reasons. He said that the names Sergi and Trimbole on his company's books were just pseudonyms for the anonymous farmers.

But the insurance-company shareholders and the fruit company's auditors wouldn't let it go at that. Although they never figured out who actually received the cash payments, they decided that money was missing, and complained that Ken Nugan had been diverting funds that belonged to the shareholders.

So Ken Nugan did what any entrepreneur would like to do in such a situation. He kicked the insl1rance company representatives off his company's board of directors, and fired the auditors.

He managed all this at two rowdy shareholders' meetings in the fall of 1977. Minority shareholders were guaranteed certain protections by law and contract, but Ken Nugan overcame these protections by turning the voting procedures topsy-turvy.

Under Australian shareholder law, meeting procedures may be voted on at the spur of the moment, with one vote for each shareholder present, rather than one vote for each share. So the hall was packed with drunks and thugs, who had been given newly issued certificates for ten shares of stock each. They railroaded through some motions Ken Nugan proposed, changing procedures to accomplish his ends.

The minority shareholders screamed, of course. And the Corporate Affairs Commission-the equivalent of the U.S. Securities and Exchange Commission-backed them up. The attorney general of New South Wales pressed criminal fraud and obstruction of justice charges against Ken Nugan and several people who had helped him pack the meeting. Ken Nugan was also ,charged with, in effect, embezzling large sums of cash from the company for his personal use.

Among the accomplices charged with corporate fraud was his lawyer, who was said to have devised the meeting-packing scheme -- Ken's brother, Frank Nugan.

In Parliament, members rose in public session, taking advantage of the scandal to vent anti-Nugan outrage they had long suppressed. One parliamentarian, John Dowd, revealed that the auditors had "been subjected to personal pressure. Certain persons have called at their homes, and the circumstances of the visits are such as to raise the greatest concern among the citizens of the state and the attorney general."

After Frank Nugan died it was discovered that he had then offered financial support to several people if they would run against the outspoken Dowd for Parliament. It was also discovered, from his files, that he had forged the signature of the attorney general, Frank Walker, on a letter to a Swiss bank, opening an account in Walker's name. The only apparent reason for writing such a letter would be to try to frame Walker, to embarrass or blackmail him. But Walker says he never heard about it until the letter was found after Nugan's death. [1]

***

Criminal proceedings against the Nugan brothers progressed throughout 1978 and 1979. So did tangled lawsuits over the future of the fruit company. But Frank Nugan assured everyone that things were all right. Both General Edwin Black and Admiral Earl Yates backed him up.

General Black attended court hearings on the case in Australia and declared his continued faith. Admiral Yates went to Sydney in May 1978 (according to newspaper accounts at the time), and assured the press that the charges against Frank Nugan "relate solely to his position as a solicitor advising his client. In this, he acted in conjunction with three legal firms in Sydney and with two Queen's Counsels."

The newspapers quoted Admiral Yates as saying, "None of the charges relate to money or assets. The legal argument is a technical one, centering around the splitting of company shares. In Australia, Nugan Hand banking activities have in no way been affected.... In fact, the deposit base has increased as a result of new deposits which have been received from customers showing their strong support for the banking group."

Les Collings sent out the clippings with a "Dear Customers & Friends" cover letter, apparently to anyone who' had expressed doubts. Admiral Yates had insisted that Nugan Hand was "in no way" involved in the court action against the Nugan brothers and the fruit company, and that "there are no financial connections between the two."

But Frank Nugan, at least, knew otherwise. Through a series of loans, concealed by intermediary companies like Yorkville, Frank Nugan was using Nugan Hand money to pay mounting legal and other bills for himself, his brother, and the fruit company. By liquidator John O'Brien's assessment, about $1.5 million was diverted during the fruit company affair.

Frank Nugan had already used more than $1 million in Nugan Hand money to buy and improve his lavish waterfront home. His expenditures on worldwide first-class jet fares and hotel accommodations were relentless. Hand, Yates, Black, and others were also jet-hopping.

A lot of money was certainly coming in to Nugan Hand. Its $1. billion-a-year publicity figure may have been exaggerated, but hundreds of millions was likely. Most of the money, however, was just going right back out again, laundered. How much Nugan Hand was collecting in laundering fees is not on record. But the bank certainly wasn't making any money in the banking business, as it told outsiders it was.

At some point, Frank Nugan must have realized that ends weren't going to meet, and that the pressures of the criminal investigation against him were hastening the denouement.

"He was helping his brother, but the bank was getting a bad reputation," explains his friend Paul Lincoln Smith. "I remember Frank telling me that some big overseas customer had canceled a big deal because of those involvements," Smith says.

The big Bank of New South Wales, which had earlier given vital references to Nugan Hand, issued a negative recommendation in July 1979, based on the fruit company case. Jerry Gilder, the sales staff manager, sent a copy to Mike Hand. Who else knew about it isn't clear, but Frank Nugan certainly did.

For some time now, he had started his whiskey consumption in the morning. His secretary added water to the bottles to try to slow the pace. He put on weight.

He told people that Mike Hand, the Christian Scientist, had advised him to lean on religion in times of trouble, so he began going to church a couple of times a day. He picked one that was particularly mystical and revivalist, and became nearly a fanatic about it. A Bible was always in his pocket, except when he took it out to consult or jot notes in.

Ken Nugan remembers Mike Hand telling him, "Frank was almost atheistic and I brought him back to religion."

But the religion didn't make him any easier to live with. In the summer of 1979, his wife Lee returned to her parents in Nashville, taking their two children. She denies she left him and says she moved only because he was traveling most of the time and could visit her more easily in Tennessee. Records of her Nugan Hand-paid American Express card show she charged off $21,200 before the year was out. She says most of this was legitimate business expense.

She told the Nashville Tennessean, "My marriage was an extremely happy one. There was never a moment's thought about leaving him.... It was a terrific relationship."

Close friends of Frank Nugan say he was beside himself wanting her back. He went on the wagon and shed fifty pounds in six months. He continued to spend money in manic style, including about $500,000 to add still more luxury to their home, hoping to entice her to return to it.

***

The bank didn't stop operating during this time. Rather, it expanded.

Probably its most brazen fraud of all was being carried out during 1979 and 1980 in Saudi Arabia. The man who ran the fraud was Bernie Houghton, the barkeep with all the military intelligence connections. Houghton himself has admitted taking $5 million in Nugan Hand deposits out of Saudi Arabia, mostly from American civilians and servicemen.

Steve Hill has recalled Mike Hand saying at one point that $6 million had been raked in from the Saudi venture. The various investigating authorities in Sydney and Hong Kong say the total easily could have exceeded $10 million. Of course, the money was never repaid to the victims-or, as they were known in those days, "investors."

Houghton, typically, has clouded the origins of the Saudi venture. The Corporate Affairs Commission, which interviewed Houghton, reported, "Admiral Yates suggested to him the prospect of expansion into Saudi Arabia."

To the Joint Task Force, Houghton said Yates had merely spent several days in the fall of 1978 persuading him to join Nugan Hand -as Mike Hand had been doing for some time-and that he came up with the Saudi idea independently while on a mission for Hand. He said Hand had sent him to Germany that fall to "review" the operations of a small private bank in Hamburg that Nugan Hand had recently boasted of acquiring, the F. A. Neubauer Bank. Houghton said he had protested that he "neither spoke German nor knew the banking business ... in Germany," but that Hand had told him "that my logic and judgment were what he wanted."

He told the task force that on the way back to Australia, he visited his native Texas and stopped in Dallas at the office of the Henry C. Beck Company, a large engineering and construction firm that does a lot of work overseas.

Houghton told the Joint Task Force that he had been asked by Frank Nugan to visit "a senior executive" of Beck for whom Nugan had done some "legal work." He said he didn't remember the executive's name. He told the Stewart Royal Commission, however, that it may not have been Nugan who sent him to Beck, but rather Admiral Yates. [2]

Houghton said the executive began describing the Saudi project Beck was undertaking, and then (as the Corporate Affairs Commission reported it) "requested Mr. Houghton to impress on Messrs. F. J. Nugan and Hand the amount of business potential in Saudi Arabia." This Houghton said he did, and on Admiral Yates as well, and soon he was on his way to the Middle East.

***

Houghton's story is further clouded by evidence that he, Admiral Yates, the Beck Company, and Nugan Hand may already have been involved together for several years.

The evidence comes from Douglas Schlachter, the witness the Joint Task Force has identified only as "J," a former aide to Edwin Wilson, the renegade CIA. and naval intelligence agent. Both the Joint Task Force and Corporate Affairs Commission said they found "J" -- Schlachter -- highly believable.

Schlachter told the task force that in late 1976 or early 1977, while he was working for Wilson in Libya, he visited Wilson in Washington at a cover office Wilson had set up for Navy Task Force 157. As Australian investigators reported it, Schlachter "accompanied Wilson to an office in that city and met Admiral Earl P. Yates. At the time, Yates was in the company of another retired senior U.S. Armed Services officer whose identity is not known. The office referred to by 'J' is believed to have been that of retired Brigadier General Erle Cocke [which later served as Nugan Hand's U.S. office]."

"The meeting," the task force reported, "is said to have dealt with the possibility of Nugan Hand involvement in port construction then being undertaken in Libya and in which Wilson was involved. One of the companies involved in that construction work with Wilson was the Dallas, Texas, based company Henry C. Beck." The task force said "nothing is believed to have eventuated" from the discussions.

After reading that, Yates wrote the task force protesting that he never attended "such a meeting with Wilson," and that "J" "must have mistaken some other person for me." As proof, Yates noted that "J" said the meeting took place no later than February 1977; Yates insisted that "I did not work for Nugan Hand until June of 1977 and would not have had authority for such discussions even then."

The Joint Task Force has since said that the date "1977" had been a typographical error, and that the end-date Schlachter gave for the meeting had been February 1978, Even so, however, there are many grounds for questioning what Yates says.

The U.S. mission in Hong Kong, in its report to the U.S. Commerce Department on Nugan Hand dated April 1977, says (as cited earlier) that Yates was Nugan Hand's U.S. representative. Moreover, the context of the report doesn't suggest that this was any kind of new development. Houghton, who was working liaison between Nugan Hand and Wilson at the time, has testified that he had been a good friend of Yates "and his family" since the early 1970s.

Based on interviews with Yates and Houghton, the task force said Yates was invited on board "in early 1977," Reporter Maxine Cheshire in the Washington Post has quoted unnamed "sources" as saying Yates began running the Washington office of Nugan Hand in February 1977.

Perhaps most telling, Frank Nugan introduced Yates at a formal, tape-recorded speech in October 1979 as having been "perhaps our most important counsellor for the last two years and ten months," putting the beginning date in either December 1976 or January 1977. Yates responded by describing his recruiting work for the bank as going on "for almost three years now," and a new officer followed by saying Yates had toured him around the Nugan Hand empire "over two-and-a-half years ago," All these descriptions time Yates's association with Nugan Hand well before the June 1977 date Yates' stated in his letter to the task force, and well within the time frame described by Schlachter.

The Stewart Royal Commission, however, didn't deal with any of this contrary information. Its report made no reference to 'J' as a source of information, or to Schlachter, or to any effort to investigate the situation. The commission apparently wasn't even impressed by its own new evidence -- a Nugan Hand document setting out Yates's employment terms, dated January 24, 1977. Stewart merely said, without explanation, "The Commission has found no evidence to support the allegations and accepts the denial made by Admiral Yates."

Houghton testified at least twice that Beck sponsored him in Saudi Arabia. The task force concluded that it did. A Beck spokesman denies that. [3]

But victims of the swindle say they, too, thought Beck was. sponsoring Houghton. L. L. Bass of Portland, Oregon, was working for a Saudi Arabian firm in June 1979 when he deposited $10,000 with Houghton -- "all I had," he describes it. "Houghton was introduced to me I think by the Beck resident manager -- I'm sure Beck was closely associated with Houghton," he says.

A call to Beck in Dallas produces Bill -- not William -- Millican, who identifies himself as a director of the company. Asked about Houghton, Millican replies, "Yeah, I've heard of him." Where? "Just conversation." Conversation with whom? "A number of people. I'm not prepared to talk about it." Does Beck ever do any work for the CIA? "Not that I know of. It would have been without our knowledge."

Later, Millican called back to say that he had talked to Beck's "man in Saudi Arabia," and learned that many Beck employees had "lost lots of money" because of Houghton. They had tried to hold Beck responsible, on the ground it had recommended him. But Millican said that Beck had been "advised by counsel" that the employees had "no case."

Indeed, everyone seems to have escaped responsibility for the Nugan Hand Saudi mess. It would be hard to think of a bigger fraud in which all the principals were known and none had been prosecuted.

***

Houghton went to Saudi Arabia for a week in November 1978, to check it out. In January 1979, he returned with some assistants, rented a villa, and started making the rounds of American workplaces. He was armed with tools Michael Hand had given him: blank international certificates of deposit, identification cards signed by Hand detailing the benefits of being a Nugan Hand client, and sample money market securities to show clients how their money would supposedly be invested.

Houghton told the Joint Task Force he continued to consider his Nugan Hand employment temporary during a couple of month-long trips to Saudi Arabia, just to set things up. He said at Mike Hand's urging he then agreed to stay on permanently, on condition that he take orders only from his friend Hand, never from the increasingly disagreeable Frank Nugan, for whom Houghton evinced much less respect.

(Ron Pulger-Frame, the courier, told the Stewart Royal Commission that he had gone to Nugan after being stopped and searched for drugs in Hong Kong in late 1977. Nugan, he said, had taken him to Houghton, and had "literally sat at his [Houghton's] feet" and asked for help. Thereupon Houghton, in the commission's words, "said he, with his connections in the United States, would get to the bottom of the matter and there was nothing to be concerned about. ")

Houghton told the task force he insisted on reporting only to Hand because he wanted it clear he was working not for the Sydney company, but for the Nugan Hand Bank of the Cayman Islands, the entity Admiral Yates was president of. He said the bank, unlike the Sydney company, was owned entirely by Mike Hand-though by the other evidence, this wasn't correct.

"Did you have any previous experience in banking?" a member of the Corporate Affairs Commission asked Houghton.

"Just borrowing," he replied.

But he joined the industry at the height of OPEC's power, the year of the biggest oil price increase ever. Saudi Arabia had been awash with money .since the first oil price jump in 1973, and now a vast new flood of money was pouring in. The Saudi government ordered all kinds of construction projects. Whole new cities were planned, and thousands of American professionals and managers were arriving to supervise the hundreds of thousands of Asian laborers who were also arriving.

To get their services, Saudi Arabia had to offer much higher salaries than either the Americans or the Asians could earn back home. Most of the Americans were going over for a couple of years, prepared to suffer the isolated, liquorless, sexless, joyless Moslem austerity in exchange for the big nest eggs they would have when they returned to the U.S.

When they got to Saudi Arabia, they faced a problem, however. Every week or two, they got paid, in cash, American or Saudi. And because Moslem law forbids the paying or collecting of interest, there were no banks in the Western sense of the word.

So what to do with all that money?

As described in a claim letter from Tom Rahill, an American working in Dhahran, Saudi Arabia, "Mr. Houghton's representatives would visit Aramco [Arabian American Oil Company] construction camps in Saudi Arabia shortly after each monthly payday. We 'investors' would turn over Saudi riyals to be converted at the prevailing dollar exchange rate, and receive a Nugan Hand dollar certificate. . . . The monies, we were told, were to be deposited in the Nugan Hand Hong Kong branch for investments in various 'secured' government bonds."

Another claim letter, from a group of seventy American workers in Saudi Arabia who among them lost $1.5 million, says that was their understanding as well.

Not only Aramco and Beck, but other large U.S. concerns are said by investors to have boosted Nugan Hand, and let salesmen hold meetings on company property and use company bulletin boards. Among them were Bechtel, the giant international construction firm then guided by George Shultz and Caspar Weinberger, and University Industries, Inc. of San Diego.

"The companies were passing down to their employees that this man was being made available, and they could put their money in and get 18 percent" interest, says Linda Geyer, now of San Diego. When she lived in Saudi Arabia, in 1979, she and her husband (who died of cancer in 1982) invested and lost $41,481 with Nugan Hand. Her son, John H. Geyer, invested and lost another $32,500. Both men worked as plumbers with University Industries on a construction job dominated by the Beck company. (Her husband was also a project manager.)

Mrs. Geyer is another victim who asserts that Beck sponsored Houghton. That, she says, is what gave him credibility. "Everybody said, Well, Beck, they're not going in with just any old guy," she says.

For its part, University Industries doesn't deny that any of this happened. "It sounds like you've got a real story," a spokesman says, after checking with a company employee in Saudi Arabia, who "basically confirmed everything you said."

Mrs. Geyer says Houghton "only worked in cash. He left Beck, Bechtel, and Aramco with so much money he could barely even carry the case," she says. "One time he had to have two briefcases. He used to brag about it. Some people I know lost $100,000 or $200,000, easy." Others remember Houghton actually using plastic garbage bags to tote away the loot.

Once he was established, with branch offices in Jeddah and Al Khobar, he could travel less. "The people, they'd come into the house from five o'clock in the morning until midnight," he told the Corporate Affairs Commission. "It was kind of like being open on a twenty-four- hour basis, because they work shifts. Strangers would come and knock on the door. As soon as one from a new company had approached you, you would suddenly get a lot of people."

By his own admission, Houghton toted off the intended savings not only of private-contract American employees, but also of U.S. Air Force personnel stationed in Saudi Arabia. In fact, the record shows, Houghton quickly made contact with two colonels, apparently air force, whom he had known from Vietnam war days. One of them, R. Marshall Inglebeck, "showed Mr. Houghton around, introduced him and explained that Mr. Houghton was a banker looking for business for Nugan Hand Bank," the Corporate Affairs Commission reported.

The other was Colonel Billy Prim. There has been speculation that Colonel Prim was the air force colonel mentioned earlier who picked up Houghton in Sydney in March 1975 and went with him to Iran, to "assist" in some business; the trip coincided with the trip to Iran of Edwin Wilson, then working for Naval Task Force 157, and the sale through him of a U.S. Navy spy vessel to Iran. According to the testimony of Bernie Houghton to the Joint Task Force, Prim had served on Yates's staff at the Pacific Command, and had introduced Houghton to Yates back in the early 1970s.

The air force won't disclose Prim's or Inglebeck's, whereabouts now, though it did agree to forward letters to them asking for comment; they haven't responded. One victimized American in Saudi Arabia, Robert Speer, testified before the Corporate Affairs Commission that Prim and Inglebeck had introduced him to Houghton as a longtime friend. Other than that, Prim's activities with Houghton in both Iran and Saudi Arabia remain a mystery-all the more a mystery because on Nugan Hand's internal staff list for January 1980 appears the name William Prim, with the communications code number 517.

***

Houghton is highly critical of normal banking channels. "The banks were just impossible. You'd go and you'd have to spend the entire day there," Houghton told the Corporate Affairs Commission. So, instead, he set up his own system for getting the money to Singapore. It involved a local money changer named "El Raji." "He was very quick," Houghton said.

Just that quick, El Raji would change the cash Houghton brought him for Thomas Cook traveler's checks in $1,000 denominations. He or his agent would sign them and make them payable to Nugan Hand Bank. Then they would bundle up the checks, along with deposit records, and send the packages via DHL air courier to Mike Hand in Singapore-holding back, according to Houghton's testimony, enough cash to pay expenses for the Saudi operation.

Houghton denies responsibility for what became of the money after he sent it to Singapore, of course. According to his testimony, he just knew that he got a 1.5 percent commission off the top on all the money he collected. This, if true, would be small potatoes for the kind of work he was doing; mutual fund salesmen routinely get 8 percent. On the other hand, legitimate bankers get salaries, not chunks of depositors' money. Anyway, Houghton said most of the money he earned was applied to repay a large loan he had received from Yorkville, the Nugan Hand affiliate, for purchase of his swank waterfront condominium.

Later, he told the Corporate Affairs Commission, he complained about the low wages. So Nugan and Hand agreed to pay him a $100,000-a-year salary and forgive his loan. But, he insisted-in testimony to the commissioners who could have demanded he give back his ill-gotten earnings-not a penny was ever actually paid him.

***

The claim letter from the group of seventy investors who lost $1.5 million says, "We were greatly influenced by the number of retired admirals, generals and colonels working for Nugan Hand."

Indeed, there is a strain that seemed to have run through a lot of investors' minds that Nugan Hand had some kind of secret government affiliation, possibly through the CIA. This would not be an unnatural feeling for an American in Saudi Arabia. Anyone would assume there was a good deal of CIA activity going on there then.

One man who inspired such thoughts was Houghton's chief assistant in Saudi Arabia, Michael Murphy. Murphy had been born in Jessup, Georgia, in 1949, and somehow landed in Australia after finishing college in the United States. He lived in Houghton's apartment, worked for the restaurants, and eventually helped manage them.

After a few years Murphy went back to the United States. By some accounts he fought in Rhodesia, but he stayed in touch with Houghton. He returned to Australia on his honeymoon, the Stewart commission said, paid for, it said, by Houghton, as a wedding present. Houghton then offered him the job in Saudi Arabia.

"We were suspicious about him," Linda Geyer says. She remembers her husband's remarking more than once, "I get the strangest impression sometimes that he's working for the government."

That impression about the whole Nugan Hand operation in Saudi Arabia was only strengthened by the way it all ended, in April 1980, as the bank went into bankruptcy in Sydney and Hong Kong.

Houghton had returned to Australia after Frank Nugan's death in January 1980 and stayed several weeks. Mike Hand then sent him back to Saudi Arabia-to resume supervision of the deposit-taking, Houghton testified. But Houghton only stayed a short while, then returned to Australia with a briefcase containing files relating to his Saudi activities, which he turned over to Mike Hand. Then he headed for the Washington, D.C., area where Yates lived and worked.

Meanwhile, Mike Murphy also flew to Singapore. He testified before the Corporate Affairs Commission that Hand admonished him about "the need for secrecy and confidentiality in the private banking records of Nugan Hand Bank maintained in Saudi Arabia." On Hand's instructions, he testified, he returned to Saudi Arabia, destroyed all the records kept there, and refrained from keeping more.

On April 12, 1980, a Middle East newspaper carried a Hong Kong report that the Nugan Hand office there was no longer redeeming deposits. At this point, the stories Murphy and Houghton told to the various investigators diverge. Murphy told the Corporate Affairs Commission that on seeing the story he called Houghton and Hand in Singapore, and was told not to worry.

But he says he was also told that any Saudi withdrawals should be from funds on hand there, as money couldn't be removed from Hong Kong. Murphy said he was suspicious about that, and called Houghton's aide in Sydney, Robert W. Gehring, the American Vietnam veteran. Gehring, he said, told him to get the whole Nugan Hand crew out of Saudi Arabia immediately, which he did.

Houghton, on the other hand, told the Joint Task Force that Murphy called him in Washington and "asked me what he should do. I suggested he contact Mike Hand," Houghton testified, "and also I stated that if it were I, I would probably leave the area. In Saudi Arabia there is a debtors' prison policy, and· the likelihood would be that Mike Murphy and his employees could remain in prison until the debt is paid, which could be for life." Although the task force interrogators didn't press him on the point, Houghton thus tacitly admitted his awareness that the depositors' funds had been dissipated, even as he tried until the last second to get more deposits.

Murphy, Houghton testified, then called Hand, who confirmed that Nugan Hand was in receivership, and also that Murphy should get out. "At the same time," Houghton testified, "depositors of the [Al Khobar] branch began demanding their money. All money on hand was disbursed to the depositors. The situation became somewhat violent and Mike Murphy and his employee, whose name I cannot recall, then abandoned the --." Houghton broke off in midsentence, and resumed, "It is my understanding that the premises in which the bank branch was located was severely damaged by the depositors after Mike Murphy left the premises."

Murphy's own story was that he booked flights for the staff out of Saudi Arabia using depositors' funds to pay for the tickets. While two staffers left on an early flight, Murphy and K. Rex Shannon used $40,000 remaining to hold off fifty or sixty depositors who had showed up. Then they ducked out to take a 3:00 A.M. British Airways flight to London. When they learned it was delayed, they took a domestic flight to Jeddah and boarded a Saudi flight to London-a lucky thing, because, Murphy testified, Saudi police were already after them and stopped and searched the British Airways flight they had been booked on.

Murphy went to Hamburg, Germany, and closed out his own account at Nugan Hand's Neubauer bank there. Then Murphy, the biggest banker in Saudi Arabia, returned to Sydney, where Gehring arranged for him to live in Houghton's penthouse condo and work as night manager at the Bourbon and Beefsteak bar.

***

One American depositor in Saudi Arabia was Jesse J. Defore, then a faculty member at the University of Petroleum and Minerals in Dhahran. He remembers the bank's collapse this way: "The Nugan Hand offices here were dismantled during the night hours, in one night, and ... Murphy has not been seen again."

But then Defore tells an amazing story: "After Murphy left," he says, "there were for several days a group of American military personnel, supposedly personal friends of Murphy, staying in the house that Nugan Hand had occupied. These men assured all comers that 'Mike has gone to see what's the problem.... He'll be back. ... Don't you worry.... We've got a lot of money in this thing, too, and we don't worry.'"

Eventually, the Joint Task Force heard about this U.S. military protection that covered Nugan Hand's escape from Saudi Arabia. The investigators went back to Houghton, who hadn't mentioned anything about this in his original description of the violent flight of Murphy. When the story was called to his attention, he replied, "I can only rely on what Murphy has told me. The air force men were on the same baseball team that Murphy was captain of. They were there socially and certainly in no official capacity."

The task force didn't buy that for a minute. Its official report concludes the Saudi chapter thus: "Whilst it might be that the military knew Murphy well, it seems unlikely that they would have compromised either their military or civil position in Saudi Arabia by acting as unofficial guards in a situation described by Houghton as being violent.

"For the reality is, [based] on Defore's account, that over several days and nights they either deliberately acted on behalf of Nugan Hand and lied to inquiring victim-clients, or had been deliberately lied to themselves by Murphy, which information they then passed on in good faith. The latter seems unlikely in view of the background of Houghton, Murphy, Hand and other former military personnel who were involved with Nugan Hand at that time [and, one might add, in view of the ridiculousness of such a story in the face of the already announced bankruptcy and other obvious facts]. In considering this, it is perhaps worthwhile reiterating the observation of some seventy U.S. clients in Saudi Arabia: 'We were greatly influenced by the number of retired admirals, generals, and colonels working for Nugan Hand.'"

***

The Stewart Royal Commission did not address this situation, or, based on its report, do any independent investigation of the Saudi affair. Astoundingly, it simply accepted what Houghton told it, and reported as fact that "No payments other than expenses were received by Mr. Houghton.... Millions of dollars (Mr. Houghton roughly estimated the total as US $5 million) in deposits were taken, but these were ultimately transmitted to the Singapore office for investment on the Asian Currency unit market at low interest rates or were otherwise squandered in the operations of the Group as a whole."

There seems to have been no consideration by the commission, in its one-paragraph treatment of the Saudi branch, or the two other paragraphs dealing with Saudi Arabia in a biographical sketch it prepared of Houghton, that any money might have been stolen. Or that Houghton might have had a motive not to tell the truth in his testimony.

The commission's report offered no evidence that any money had been legitimately invested as Houghton suggested, and no evidence that the commission had talked to any of the victims.

Houghton did tell the commission he had received $364,000 in expenses over the eighteen months he was a bank executive. But apparently expense money is not subject to taxes-or to recall by the bilked depositors.

_______________

Notes:

1. The Swiss bank Nugan used to set up a phony Frank Walker account was the Union Bank of Switzerland. Bernie Houghton was well acquainted with a traveling official of the Union Bank, and had brought him around to Nugan Hand representatives in Asia to make introductions. Union Bank was also central in the Gough Whitlam affair; a package of fake documents that was used to start a political scandal over the obtaining of Arab loans through a shady middleman (see Chapter 9) was sent off with a Union Bank cover letter. By the time the opposition parliamentarians who received the package had turned its contents over to the press, the signature had been torn off the letter. Even though the documents Were later exposed as bogus, their publication helped weaken and ultimately destroy the Whitlam government. All this mayor may not be coincidence.

2. The Stewart commission, which didn't mention the inconsistencies with Houghton's prior testimony, identified the executive as James Wheeler, apparently on Houghton's word. Beck says Wheeler left the company in 1980, and that it doesn't know how to locate him.

3. To the Corporate Affairs Commission and in an interview with the author.
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Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 4:22 am

CHAPTER NINETEEN: The Admiral's Colors

"A former Admiral commands our Private Bank," blared the headline of a full-page ad in the Far Eastern Economic Review-the most prestigious business publication in the region, which is partly owned by the publishers of the Wall Street Journal. Below the headline was a photograph of Admiral Earl ("Buddy") Yates, occupying most of the top half of the page.

The text of the ad says:

When Rear Admiral Yates exchanged the gold stripes of an Admiral for the pin stripes of a banker, he brought added strength to NUGAN HAND INTERNATIONAL-PRIVATE BANKERS. He brought the experience of a man who administered the office that controls a powerful Navy. He brought the executive experience of a man that controlled the careers of tens of thousands of men. The financial expertise of a man who has controlled multi-billion dollar budgets and programs. The business experience of a man who has dealt with the largest engineering and construction firms in the world. All this and, in corporate terms, against the toughest competition in the world. 'Bud' Yates, like all NUGAN HAND executives, gets out and sees his clients on their own ground, face to face. He says, 'That's where you find the clients' problems and that's where you will find the solutions.'


But because Admiral Yates's activities were more scattershot than Frank Nugan's or Bernie Houghton's, and seem to have involved politically sensitive matters, there is no thorough catalog of them.

One strange and elusive piece of business he sought for Nugan Hand was to create and run a central banking system for Brunei, a sultanate the size of Delaware, located on the north coast of Borneo. Brunei has been self-governing since 1971, though until 1983 its foreign affairs remained linked to those of its colonizer, Britain. Brunei is a tiny spot, but it was a valuable listening post near the volatile Malaysian-Indonesian border. And life for its 220,000 souls, almost all of them pledged to Allah, had been considerably improved by the discovery of oil.

Many interests covertly sought the sultan's ear as the rich little nation emerged. One was the United States Government. Just how much intimacy the United States achieved was suggested in December 1986, when it was revealed that the sultan had secretly helped the Reagan administration evade a Congressional ban on aid to the Contra rebels fighting to overthrow the Government of Nicaragua.

In Congressional investigations of the affair, it was revealed that the sultan had agreed to donate $10 million to the Contras at the State Department's urging. Ironically, it was also revealed that U.S. operatives had lost the whole $10 million while trying to transfer it to the "private" Contra arms network being run by Bernie Houghton's old friend, "retired" air force General Richard Secord. National Security Council staff member Oliver North gave Assistant Secretary of State Elliott Abrams the wrong Swiss bank account number, and the sultan's $10 million wound up in the pocket of a Swiss businessman who was no doubt delighted with his windfall. In May 1987, after a five-month search, the geniuses who run the U.S. Government finally located the businessman, and went to court to try to get the money back from him.

Still unresolved was the possibly more important mystery of just what the United States had done to induce the sultan toward such generosity in the first place. Nugan Hand's involvement with the sultan certainly reveals he had long been inclined towards secret business dealings with allegedly private concerns that had links to the U.S. Government and promised under-the-table benefits. What he sought from Nugan Hand was assurance that if he were chucked out of office, either by his subjects or by one of his country's large neighbors, he could take Brunei's public treasury along with him as a retirement benefit.

In March 1978, Brunei's state finance officer, Pehin John Lee, and an advisor to the sultan, Pehin Dato Isa, agreed to a deal under which Nugan Hand was to "submit ... an initial draft of an enactment to be known as 'The Central Bank of Brunei Enactment of 1978,'" and then would become the central bank's management advisor. Nugan Hand also sought the personal accounts of the sultan and other top officials.

Financial officer Lee was assured in a letter from Nugan Hand representative Graham Steer, who worked directly under Michael Hand in Singapore, that "we are presently advisers to and are acting for a number of Government and semi-Government bodies throughout the world." These weren't specified.

On May 19, 1978, according to surviving bank records, Admiral Yates was dispatched to Brunei to meet with His Highness the Sultan about the bank and about something referred to as Admiral Yates's "own 'project.'" [1] This "project" was apparently too sensitive to describe in Admiral Yates's marching orders from Steer, a copy of which was found in Nugan Hand's remaining files even though the orders are headed "CONFIDENTIAL" and "Please Destroy After Perusal." But from the context, the "project" seems to have more to do with intelligence about future political alignments in the region than with banking.

The memo leaves little doubt about Nugan Hand's main selling point, noting, "We would provide his Highness the Sultan a Bank structure and Depository system which he alone can control should any change of Government take place, together with top security for deposits held in Nugan Hand Bank to ensure confidentiality in all matters."

Regarding financial officer Lee, the instructions to Admiral Yates say, "It would seem that we would have to run one more conversation with him of private personal advantage to him." The memo does not clarify whether this means a bribe.

"As to your own 'project,'" the memo continues, "you will notice from the recent press release that both Malaysia and Indonesia are taking more than a close look at Brunei, and we were advised that the [result of the] closed session between the prime minister of Malaysia and the president of Indonesia was that Indonesia would not stand in the way of Malaysia should it wish to incorporate this State in their own federation, There is no doubt about it that the oil is the attraction for both Malaysia and Indonesia."

How Nugan Hand learned the contents of a closed meeting between the Malaysian and Indonesian heads of state is not told. But the memo notes that "under the above political circumstances surrounding Brunei, your own proposed 'project' should be warmly received not only by the British High Commission but also by the Sultan, and in particular his advisor."

No known files reveal what came out of Yates's trip to Brunei. It may have failed, or it may have succeeded so well that the results were among the records that Admiral Yates and other Nugan Hand managers saw fit to remove from the office in the week after Frank Nugan's death. The Stewart Royal Commission didn't look into it.

But Yates continued to travel for the cause. John Owen, the Nugan Hand representative in Bangkok, remembers Yates arriving there, pulling a flask of brandy out of his pocket and adding it to his morning coffee. [2] Others remember Yates talking about a big petroleum reprocessing deal, but nothing like that eventuated.

Some correspondence found in Nugan Hand's own files indicates that Yates went to Beirut for the bank in 1979 -- and was searched by customs on his arrival into Washington. On the continuing flight, he wrote angrily to Mike Hand back in Singapore, "They stopped me, pulled me out of line, searched me from head to toe and questioned me about my banking activity dealing with overseas banks." From the context, Yates had been in Beirut on behalf of a Nugan Hand client in the Far East, but the specifics weren't disclosed.

The note from Yates was found in the files with a memo attached, carrying Mike Hand's handwritten reaction. "Adverse news preceded Buddy to Washington," it said, noting that the bank's client was very unhappy over losing money on Yates's mission. Yates had paid several thousand dollars on the client's behalf, the memo says, though it doesn't say what for.

An official of the Hong Kong liquidator's office says that from what he can tell from the surviving records, "Yates was off trying to make deals with big shots that never came off. He stayed away from day-to-day operations. The thing was actually run by Hand and Nugan, and later Hand and Houghton."

As long as the question of Nugan Hand's relationship to the U.S. Government stays open, however, one has to question whether Yates's seemingly fruitless journeys can all be chalked up to foolishness and incompetence. Brunei, Beirut, and Southeast Asia were all war zones or prospective war zones. What Yates could have been doing is open to the imagination, but if he were running government missions, or government-approved missions, under cover of a private company, he would hardly have been the first person to do so.

Nugan Hand's valued friends at the ANZ Bank certainly suspected Nugan Hand did CIA business. A memo in ANZ's files says an ANZ officer brought the matter up in conversation with the owner of a large Hong Kong bank, General S. K. Yee, former head of Chiang Kai-shek's Kuomintang army. The memo says that General Yee, who might be expected to know a thing or two about CIA connections, and who had just been talking to Admiral Yates about the possible sale of his bank to Nugan Hand, assured the ANZ officer that the connections were real.

***

One project Admiral Yates worked on intensely with Mike Hand throughout 1979 and even into 1980 was, at least ostensibly, the transfer of thousands of Indochinese refugees from Asia to the Caribbean. It was hoped to obtain millions of dollars in grants from the United Nations High Commission on Refugees, and perhaps other quasi-government funding, which would flow through Nugan Hand-although everyone who discussed the project insisted that it was motivated by charitable, not profit, impulses.

But the whole idea seems a bit bizarre, and it was pursued through some curious channels. There have been official and unofficial suggestions that an ulterior motive lay behind the refugee project. Moreover, there are discrepancies in the accounts that have been given of the affair even some involve plans for a coup d'etat in Haiti.

Discussing it later, Admiral Yates has attributed the project to Mike Hand's long-standing humanitarian concern for the fate of the allies who loyally fought alongside him in Vietnam. That raises the question, however, of why for counsel on the project Yates decided to turn immediately to Mitchell WerBell III, of Powder Springs, Georgia, who is not a man best known for his charitable pursuits. WerBell is, rather, better known as a longtime trainer of terrorists, and inventor and seller of mini-machine-guns and other terrorist equipment, on contract to, among others, the CIA.

Admiral Yates gave this explanation to the Joint Task Force for his choice of consultants: "As I recall, WerBell had extensive experience in Central America, according to the information [we] had. At the time we were involved in trying to get refugees housed into various western hemisphere countries and we thought that WerBell might be able to help us with some insights into getting them accepted."

When a task force investigator asked who arranged the WerBell contact, Yates said, "I don't know. It might have been Roy Manor," the Nugan Hand general who was an expert in guerrilla warfare. (Manor, for his part, says he met WerBell through Yates, though he says he's seen WerBell since then.) "I was aware that WerBell was in the soldier-of-fortune business," Yates explained to the task force.

And, boy, was he-with a lust for fighting communism that was actually nurtured in the Russian Revolution! This is how the task force summed up WerBell's incredible career:

A U.S. citizen born 8 March 1918, WerBell is the son of a white Russian emigre who served in the U.S. as the Czar's liaison officer. WerBell graduated in 1938 from Fork Union Military Academy in Virginia and served with the Office of Strategic Services (O.S.S.) in China during World War II.

He retired as a lieutenant colonel and ... commenced his own public relations firm offering 'geopolitical p.r.' to such people as the Dominican Republic's then president Hector Bienvenido Trujillo Molina and Cuba's Fulgencio Batista [two dictators the. United States Government supported, with continuing unpleasant repercussions]. Following the rise to power of Fidel Castro, WerBell led anti-Castro missions, his teams comprising for the most part ... exiled Cubans and former U.S. military personnel....

During the early 1960s WerBell was active in the Southeast Asian conflict and served as a training advisor to the Special Forces in Vietnam. . . .

WerBell has been and still is involved in a number of U.S. companies which under the descriptions of 'defence' and 'physical security' offer advice on guerrilla warfare [the task force reported]. He is a former licensed firearms dealer and has been reputedly involved in the sale of arms to anticommunist or anti-left wing forces....

In December 1974 U.S. authorities seized a large. quantity of weapons owned by one of WerBell's companies. Subsequently his son and an associate were indicted on charges of conspiring to sell 2,000 submachine guns and 1,000 silencers.... All charges were dismissed....

Since the late 1970s WerBell has owned and operated a private training facility for counter-terrorism and counter- insurgency in Powder Springs, Georgia. . . . Facilities at the center ... include a gun laboratory, two firing ranges, high-speed driver training track and a parade ground. Attendees have included serving U.S. military and enforcement/secret service personnel, private individuals and foreign nationals....

WerBell is credited with the design of the world's smallest sub-machine gun, the Ingram and the Ingram silencer.


Finally, the task force said, "WerBell is widely accepted as having been since the 1950s through the 1970s until possibly the present day, a contract agent for the CIA and many of his actions have been carried out on their behalf, though neither the precise nature of that relationship nor extent of his sanctioned actions is known."

Asked about this, WerBell says, "Not so! I never worked for 'em. I've worked with the CIA, but I never got paid by 'em." Does that mean he did it for free? No, he says, he got paid. But the money came from "a group of well-minded private citizens" he would prefer not to identify.

The task force also provided, by way of exhibit, an advertising brochure for his training camp that lists twenty-six major covert actions WerBell has been associated with-including General Manor's raid on the Sontay prison camp in 1970. "I have no idea where the hell that came from," WerBell says; "it certainly didn't come from here." Manor says WerBell "had zero to do with Sontay."

***

Why would Admiral Yates, whether or not on General Manor's advice, consult a man like WerBell about a refugee-aid project? Well, the answer may be that the refugee project wasn't the real, or at least the only, reason they were meeting.

Whereas Yates told the task force that his chat with WerBell was arranged by someone else, possibly Manor, and "was my one and only meeting and discussion with him," according to the task force, WerBell "said that he knew Yates through their connection with the U.S. Armed Services."

Then WerBell told the task force that he and Yates actually discussed promoting a possible revolution in Haiti. WerBell had some experience with Haitian revolutions. In 1967, WerBell had been indicted by a Miami, Florida, federal grand jury for his involvement in an attempt by Haitians, Cuban exiles, and others to mount an invasion of Haiti from Florida.

The indictment was dropped, which, WerBell says, [3] shows that the U.S. Government sanctioned the operation. He says the invasion he organized wasn't intended to really happen, but was a ruse to bluff Haitian dictator Francois ("Papa Doc") Duvalier into a more moderate course, and to test Fidel Castro's responses.

The task force, after interviewing WerBell on June 12, 1982, reported, "Yates indicated that he wished to meet with WerBell as there were some matters affecting Haiti which could be to their mutual benefit.... Within a short period of time, WerBell met with Yates, 'some other U.S. military personnel' whom WerBell declined to name, and Clemard Charles, [4] an exiled Haitian."

Charles had been a banker and bagman for Haitian dictator Duvalier, until one day the mercurial Duvalier decided Charles had been overrewarding himself, and so seized the bank and jailed Charles. After some years, Charles was released and exiled, but his animosity toward the Haitian leadership continued, even after Duvalier died and his son, Jean-Claude ("Baby Doc") Duvalier, took over. WerBell, on the other hand, in the wake of his bluffed invasion of Haiti, claimed to have maintained such good relations that Baby Doc had hired him to train his private security force.

Now, in 1979, WerBell answered Yates's call and flew to Washington. Nugan Hand covered his expenses. (The canceled check Yates wrote to WerBell led the task force to discover the incident.) According to the task force, Yates proposed a plan to move Mike Hand's former Vietnamese comrades, now refugees, to an island in the bay of Port-au-Prince, Haiti. There they would be set up in a fishing village.

"Because of WerBell's knowledge of Haiti and the fact that he knew 'Baby Doc,''' the task force reported, "they [Yates, Charles, and the other, unnamed, military men] wanted WerBell to go to Haiti with the plan and to add to it the threat that if 'Baby Doc' did not grant them the island camp there would be an attempt made to oust him and to have [Charles] installed as president by 'popular vote.' In return for his efforts, if 'Baby Doc' granted them the island, WerBell was to have been given the contract for providing a security force for the island. If 'Baby Doc' refused, WerBell was to have been responsible for the takeover of Haiti and the subsequent security of the whole of Haiti.

"WerBell discussed the proposals over the two days he was in Washington," the task force went on, "but said that from the outset (the time of Yates's telephone call) he thought it was an unrealistic proposition, largely because he did not see it as the type of action that would have any support from the U.S. Government. WerBell turned down the offer."

Yates, needless to say, was sorely distressed to read the task force's findings. He quickly went to WerBell, got a signed statement conforming to yet another version of the events, and presented that account in a letter to the task force. Under this version, Mike Hand had met with Charles and devised a plan whereby Charles would borrow $250,000 from Nugan Hand for the refugee project. Yates called WerBell to Washington to obtain an independent opinion as to Charles's qualifications.

Then, the new Yates-WerBell story goes, WerBell flew on to New York alone, where Charles-not Yates-proposed the plan about overthrowing the Haitian government. WerBell decided the proposal was impractical, and returned to Washington with this news. Yates took his advice, paid him, and saw no more of WerBell or Charles-if you accept this new version of events.

But that's still not the end of it.

***

About the same time, the fall of 1979, Frank Nugan, Mike Hand, and Admiral Yates were also pursuing what they said was a plan to move the refugees to the Turks and Caicos Islands-thirty dots of British-owned land, six of them inhabited, near the Bahamas. The main exports are salt, crayfish, conch shells, and cocaine.

Nugan and Hand were in Geneva regularly to try to wheedle money out of the U.N. refugee commission for the move. They also wanted help from Washington. There, they and Yates took advantage of an ally who was already on board, 'in a sense: General Cocke, the native Georgian, who was not reticent about letting potential public relations clients know who else in town shared his home state: the president and all his cronies.

"Admiral Yates wanted to meet somebody in the White House because he wanted to talk about a refugee program," General Cocke recalls. [5] So Cocke introduced Yates to John G. Golden, the former college roommate and, in the words of the Washington Post, "favorite partying companion" of Hamilton Jordan, who, in turn, was the closest advisor of the President of the United States. Through Golden, then a "consultant," Yates and Nugan each bought $1,000 tickets to a Democratic fund-raising dinner. Golden seated them at his table and, Maxine Cheshire reported in the Post, was so eager to satisfy Nugan's wish to meet Jimmy Carter that he spilled a bottle of wine on the table while introducing them.

Another evening, Yates, Nugan, Cocke, and Golden dined at the Four Seasons Hotel in Washington with some other men; Yates told Cheshire he "doesn't remember" their names, and "doesn't recall" what was discussed. But Cheshire found "another source who was present" who recalled that Nugan wanted Golden to help Nugan Hand in Panama, where Hamilton Jordan had been conducting negotiations over the Panama Canal and other matters with dictator General Omar Torrijos.

According to this source, "He [Golden] bragged about Hamilton's connections with Torrijos. He said General Torrijos would do anything for Hamilton-they're very, very good friends."

Asked about this, Cocke says, "I might have been there. I'd hardly say it was a major dinner. It was one of those things where people went in and out all evening." He does remember, however, that Nugan Hand "wanted to salvage military equipment on the islands."

Yates told the task force that the U.S. Navy was closing its base on Grand Turk Island on March 31, 1980, and that Nugan Hand wanted to use the base for its refugee settlement. Others recall that Nugan Hand wanted the navy to leave behind as much equipment as possible, for use or salvage. Wilf Gregory, George Shaw, and General Black all remembered Yates pursuing the deal energetically, but said they didn't understand how it would make money.

Nugan Hand signed a preliminary agreement with' the Turks and Caicos Government in early 1980. In exchange for rights to the soon-to-be-abandoned navy base, the bank pledged to provide at least $1 million capital for maintaining the base's airport and port facilities, improving the deep-water harbor, building roads, and so forth. The bank collapse made the agreement null almost before the ink was dry.

All this prompted considerable speculation from the task force, which said Nugan Hand probably couldn't have raised the necessary capital for the port improvements and that the islands lacked enough food and water even for their present populations.

"The above considerations pose the ,question of the existence of hidden motives for the project," the task force declared.

One possibility is that Hand/Nugan, Hand envisaged the future use of the Turks and Caicos Islands as a tax haven.... Another possibility is that they expected [an] influx of government ... United Nations and private funds following the commencement of the program and from which funds they would be able to benefit either by way of commissions or manipulation. A third option is that it was simply a wild scheme with little real possibility of ever eventuating.


"There is, however, a fourth and far more sinister option," the task force wrote.

The proximity of the Caribbean and Central America to a number of South American drug source countries makes them a natural transit point for illicit drug shipments destined to the North American market. The Turks and Caicos Islands are a significant transshipment point along the line of route. Drugs are usually transported in small, private aircrafts or seagoing vessels, which put into the islands in order to refuel or to change the drugs over to another courier method. Lack of habitation on some islands enables aircraft to land and ships to unload or load in secret. Traffic is organized primarily by Colombians and North Americans, though a number of local individuals are also involved.


In 1985, several senior officials of the Turks and Caicos Government were convicted in U.S. federal courts of taking bribes from major cocaine syndicates to allow refueling and storage rights.

No final conclusion is available to the task force" [it said.]

But one option the task force feels it can reject is that put forward by the friends of Hand, that it was a project based on Hand's humanitarian concern for the refugees of Southeast Asia. Certainly there is no evidence in the past activities of Hand or in the WerBell/Haitian episode ... that reflect[s] for Hand a humanitarian image. The deception of employees by Nugan and Hand has been previously referred to and it should be stressed here that the task force makes no assertion whatsoever against Yates in relation to drugs or proposed drug-related activity.


Another possibility is that the United States Government, having dragooned the Montagnards into a hopeless twenty-year fight, having left many of them dead and more of them abandoned, genuinely felt an obligation to do something to help the rest-and at the same time saw the possibility of using them further. An analogy might be the Cuban Bay of Pigs veterans who were later hired on in great numbers by Uncle Sam to work on all sorts of secret and not-so-secret projects here and abroad.

A nearby colony of a similar Third World group who were orphaned of their own country by their dedication to fighting communism might have appealed to certain minds at the CIA and Pentagon, or even at the White House. That idea might have met the desire of a private bank with strong government connections to make some money and put itself on the map. The men in government and their career colleagues at the bank might have made a secret deal to cooperate, each being mindful of the goals of the other.

The private company helps the government pursue policy goals, and the government helps the private company make money. Such deals are routine procedure-note the case of Paul Helliwell's companies, already described in these pages, or the constant cooperation between the CIA and international banks, airlines, and big and little military equipment manufacturers. Note also many arrangements revealed in the Iran-Contra arms scandal of 1986-87.

If such secret cooperation occurred in the Nugan Hand refugee affair, it certainly would not constitute an oddity. But without a public investigation, we'll never know. The Stewart Royal Commission, which took its testimony in secret, didn't report on it.

***

The same possibility of secret cooperation could have applied to many Nugan Hand ventures. For example, the company maintained an interest in the international arms business through its last year, though solid evidence of completed sales hasn't turned up. Correspondence was found in surviving files showing that Mike Hand was working with Prince Panya Souvanna Phouma, America's longstanding hope to take over the Laotian throne once occupied by his father.

Prince Panya kept himself busy running an arms company that sought Hand's help in finding customers. Among products Prince Panya listed in his correspondence with Haud are Hughes helicopters, various Italian-made handguns and machine guns, French combat aircraft, British armored vehicles, Chrysler tanks, and "missiles of various types."

A Washington man named Joseph Judge has asserted to several newspaper reporters that Nugan Hand financed numerous arms sales Judge helped arrange while working with the Central Intelligence Agency. Unable or unwilling to supply documentation to support this, Judge might be passed off as a totally unreliable source-except for two things. First, he clearly was working for a U.S. Government- sponsored front company set up by Edwin Wilson during Wilson's CIA/Naval Intelligence days. And second, he knows too much about Mike Hand and Bernie Houghton to have invented his acquaintanceship with them. [6]

"We were told to use Nugan Hand as international bankers for various deals," Judge asserts, but then says he can't reveal the details because "it would be against the jaw. I was with the agency then." He remains one more unfittable piece in the Nugan Hand puzzle. [7]

Judge has also contended that Nugan Hand, working with Wilson and with the blessing of the CIA, helped move some of the Shah of Iran's money to safe havens in the late 1970s. He describes deals in which road-building materials were sold to the Iranian Government at grossly inflated prices, so that hundreds of millions of Iranian Government dollars could be diverted to Swiss accounts. But, again, Judge is unable or unwilling to supply documentation.

Again, however, there is just enough independent evidence to keep the curiosity afloat. In its investigation, the Corporate Affairs Commission came across correspondence and even eyewitness accounts verifying that Nugan Hand-Iranian discussions were held throughout the second half of 1978 and into early 1979, the year the Shah was chased from power.

These discussions were carried out at first with a Swiss financial broker, Peter Busse, who claimed access to the Shah's funds. Also participating was a purported Iranian princess named Madame Nambah. Later, telexes refer to a mysterious "Mr. X" whose identity and bona fides as an Iranian contact seemed to be known to and accepted by Michael Hand. The negotiations were carried out by Karl Schuller, an Australian who had earlier been a partner in a financial planning business with Wilf Gregory, Nugan Hand's Manila representative. Schuller himself had worked briefly for Nugan Hand.

The deal involved a series of loans that would launder funds in the hundreds of millions, in some cases even billions, of dollars-sums so large that the negotiations might seem ludicrous if they hadn't involved so much of Mike Hand's attention.

The financial world is always awash with brokers claiming access to the most famous fortunes of the day, and many of these brokers rum out to be schemers or dreamers who fail to produce any money when called on. Nugan Hand's Iranian negotiations may have been just such a bubble.

On the other hand, the Corporate Affairs Commission found telexes into 1980 indicating that Mike Hand was making serious efforts to unload large amounts of Iranian currency. There was also a telex dated June 22, 1979, from General Black with copies to Frank Nugan, Mike Hand, and Admiral Yates, stating that Black's wife was "arranging special dinner our house" the next day for Charles El Chidiac, a Middle Eastern financier, "and Gen. Moinzadeh, senior member Shah's staff." [8]

Concluded the commission, "Whether these telexes relate to the above Iranian fund venture remains an open question."

_______________

Notes:

1. On May 17, 1987, a Sunday and the day before the already type-set galleys of this book were to be sent to the printing and binding plant for the last time, Admiral Yates responded to five years of queries, the latest request having been mailed to him in January, 1987, when, he says, he was on a boat trip from which he just returned. Several specific discrepancies are footnoted.

Admiral Yates says he never went to Brunei. "I remember some discussion of it. I was interested in it. I don't remember the details of it," he says. He says he doesn't remember why he didn't go, or whether someone else from Nugan Hand went in his stead.

2. Yates says he never drinks spirits.

3. This is what he told the task force, and repeated in an interview with the author.

4. The task force reported the name as Charles Clement, possibly because that was the way WerBell remembered it. Some research into Haitian politics, and a phone call to a Charles ally in New York, left no doubt in this author's mind as to who was being talked about.

5. A desire for White House influence doesn't comment one way or the other on what possible continuing links Nugan Hand may have had to U.S. intelligence. Plenty of people in government seek such influence to promote their special projects. A real mover like Edwin Wilson constantly plied prominent senators and White House staffers to help strengthen his hand while he was a career officer both at the Central Intelligence Agency and in the Office of Naval Intelligence.

6. Admiral Yates says he met Judge through a friend and that Judge was with the CIA, but only before Nugan Hand existed. So, be says, Judge couldn't have been told to use Nugan Hand on CIA deals.

7. For what it's worth, Judge fits a profile also fit by several other people in this book -- Peter Wilcox, and Neil Evans, for example. They are men who have had an intelligence connection, whether or not by chance, and who arrive at the scene of scandals involving the CIA, poisoning press accounts with exaggerated and undocumentable claims. Doing this, they invariably make a legitimate story appear "kookie."

That such characters may be evidence of conscious efforts by the CIA to defuse problems in this manner is purely speculation on the part of the author. There are other entirely plausible explanations for their remarks, and the truth about Judge or any of them is something I can't provide.

8. The telex was disclosed in the Corporate Affairs Commission report of 1983, after the author's interview with Black and shortly before his death. To the best of my knowledge, he was never asked about it.
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Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 4:25 am

CHAPTER TWENTY: Men of Substance

During the summer of 1979, as Bernie Houghton hauled away bags of cash from U.S. civilians and servicemen in Saudi Arabia, and police around the world struggled to solve the "Mr. Asia" dope murders, four extremely heavy hitters from the United States intelligence community got involved with Nugan Hand.

They began coming on board about the time of an international conference in Manila June 24-29. Called the International Congress on New Enterprise, or ICONE, the conference was supposedly privately organized. But it bore the clear fingerprints of the U.S. Government, and it allowed Nugan Hand extraordinary prominence and promotional leverage.

The organizer, William McCrea, was identified as an American businessman. But before he began the business of organizing ICONE, he had been working under contract to the State Department arranging trade with developing countries. Before that, he had worked for the National Aeronautics and Space Administration, and before that for the engineering department of Pratt & Whitney, a major defense contractor. In other words, his career was entirely consistent with that of a well-regarded CIA officer, though, of course, he may not have been one. [1]

For ICONE, McCrea obtained financial sponsorship from the World Bank and a few affiliated regional banks dominated by the United States Government. Original co-sponsors included several U.S. Government agencies, the Philippine Government, two otherwise unidentified private sources, and Control Data Corporation -- the company Admiral Bobby Ray Inman later left the number two job at the CIA to go to work for.

At the conference, to this rather exclusive group of co-sponsors was added the name Nugan Hand. And the five hundred businessmen who shelled out $995 each to attend couldn't have overlooked the company's presence. Frank Nugan and other executives from the group were featured on panels. Nugan Hand hired Mercedes cars to ferry dignitaries around, rented a lavish penthouse suite, and held cocktail receptions graced by Marcos family members -- in fact, Imelda Marcos is said by some to have attended, although that is denied by others.

Also among the participants in the conference was Guy Pauker, one of the most important foreign policy advisors the U.S. Government has had over the past thirty years. Pauker says he came to the conference at the suggestion of his old friend Admiral Yates, whom he used to advise while Yates was on active duty in charge of planning for the U.S. Pacific Command.

Pauker told the Stewart commission that Yates had introduced him to Bernie Houghton in the early 1970s, and that Houghton had "displayed kindness in inviting him to use the facilities of his penthouse and dine at the Bourbon and Beefsteak." In Hawaii in 1977, Yates introduced Pauker to Frank Nugan and Mike Hand. Two years later, on the eve of ICONE, Pauker says Yates again wanted him to meet the two owners of Yates's bank. Indeed, the bank was a heavy presence in the official program.

The list of participants in the ICONE conference session of June 25 begins with the names Earl Yates, Guy Pauker, and Donald Beazley- a Florida banker who was also destined soon to join Nugan Hand. Interviewed in 1982, [2] Pauker at first denied he had ever worked as a consultant for Nugan Hand. When some of his own tape-recorded statements from 1979 were read back to him, however, he agreed that his words would justify the assertion that he was a Nugan Hand consultant. "I didn't know they had recorded this," he explained.

***

Pauker has also denied over and over that he works for the CIA. To pursue the question, as some journalists have, is to be a little naive about how intelligence relationships work. Pauker doesn't deny get- ting paid for dealing in secret information with people in the military and foreign policy apparatus. His career has been that of a professor at the University of California and a staff member at Rand Corporation, a think tank heavily relied on by the government (and vice versa). Whether or not Rand is a CIA cover for Pauker is significant only for Rand's bookkeeping purposes.

Pauker, friends say, had frequent personal access to White House National Security Advisors Henry Kissinger and Zbigniew Brzezinski. He is one of the government's leading experts on many matters, particularly Southeast Asia. Before the fall of Saigon in 1975, Pauker has acknowledged spending a lot of time in Vietnam, Laos, and Cambodia.

His best known expertise, however, is with Indonesia-going back to the 1950s, when the United States organized covert military operations to overthrow the socialist government of President Sukarno there. Although an amphibious Bay of Pigs-style invasion we organized in 1958 failed, in 1965 we succeeded in having installed in Indonesia a military regime under President Suharto that, with U.S. counsel, massacred hundreds of thousands of Indonesian citizens.

Admiral Yates told the Stewart commission, it said, "that Dr. Pauker ... had been involved in Indonesia when President Suharto succeeded President Sukarno." For his part, Pauker has openly boasted that the head of the CIA's Asia section "became a very dear friend of mine," who later thanked Pauker for saving him "many millions of dollars" in some unexplained way.

Fletcher Prouty, a longtime military intelligence official who served as the Pentagon's liaison to the CIA during some of the Indonesian operations, and has since quit in disgust, says he remembers Pauker serving as a diplomatic missionary to cover for the military operations. "I worked with Pauker a lot in my job as CIA liaison officer," Prouty told the Australian Financial Review, adding, "There is no question in my mind that he worked for the agency with Rand as a cover."

Whatever the case, one can certainly say that Pauker has -- to use Mitchell WerBell's distinction -- worked with the CIA if not for it.

Pauker himself says he got to know Yates years ago "in connection with my normal duty, consulting the Pacific Command. Buddy Yates and I are friends. We've stayed in each other's houses." Yates, he says, is the one who invited him to speak at ICONE -- further indication of the close connection Nugan Hand had with the planning of the conference.

There in Manila, Yates re-introduced Pauker to Frank Nugan, and they evidently made quite an impression on each other. Yates (or maybe it was General Manor, Pauker says) told Pauker that Frank Nugan "was the most brilliant young tax lawyer in Australia." Nugan was impressed that Pauker knew "everybody in Southeast Asia." One of the people Pauker knew was Australian Prime Minister Malcolm Fraser, who later acknowledged in Parliament that he had met Pauker on several occasions going back many years.

After the ICONE conference was over in Manila, Nugan tagged along with Pauker to an energy conference in Bali, Indonesia, where Pauker had also been invited to speak. Soon Pauker was assigned his own secret code number on the Nugan Hand staff. (After the debacle, he maintained that he never authorized that.)

***

At the conference in Bali, Pauker introduced Nugan to another man he calls his "good friend," Walter McDonald, a career CIA officer since 1952. By his own account, McDonald has served the agency in some forty countries. He rose to head the economic research branch, occupying one of the deputy director jobs that are the second-highest in the CIA, reporting straight to the director, then James R. Schlesinger.

When Schlesinger left government in 1979 to pursue big bucks at Lehman Brothers, a Wall Street investment firm, McDonald decided it was time for him, too, to branch out on his own. He declared himself "Consultant and Lecturer on International, Economic and Energy Affairs." Nugan Hand became his first and biggest client. By his own account, he spent most of his time with Nugan Hand. He traveled the United States and Europe with Frank Nugan and talked to him daily, if not in person then by telephone. It was McDonald, along with Yates, who arranged for a former CIA director, William Colby, to become legal counsel to Nugan Hand.

Pauker remembers going home and getting a "very excited" call from McDonald, saying the former CIA economic division chief had stopped off in Sydney on the way back at Nugan's invitation, and decided to accept a job representing the bank in Washington.

"They had a big office, three stories in a high-rise next to the Sydney Opera House," McDonald says. "It looked like any brokerage house that you go into, very up and up, lots of busy-looking people doing lots of things." McDonald says he went from office to office of the bank to see how it was run. "It really looked like a real viable bank. I was surprised as anyone to see it go down the tubes."

In an interview with the Wall Street Journal March 15, 1982, McDonald said he hadn't heard rumors about Nugan Hand's being involved with drugs until after Frank Nugan died. He also said he was unaware of Hand's CIA connections. "He certainly wasn't the type," McDonald said of Hand. "Where he made a lot of money, he and Frank invested in real estate."

But eighteen months earlier, in a September 30, 1980, interview with Inquiry magazine, McDonald said he had been aware of both the drug and CIA matters. [3] He said Frank Nugan had showed him legal files on the drug allegations, and offered to open the bank up to him and show him any other records "to disprove this sort of thing. He was very forthcoming," McDonald said. Moreover, McDonald said he had checked with two banks, both of which told him Nugan Hand was "sound and responsible."

As for the CIA connection, McDonald revealed to Inquiry that he was well aware Hand and Nugan had handled money for Air America pilots during the Vietnam War. And he told the Stewart commission that Pauker had "vouched for the credibility of the Nugan Hand operation."

McDonald signed an employment contract giving him $120,000 a year, use of company credit cards, and office expenses of up to $40,000 a year. Pauker told the Stewart commission that shortly afterwards, McDonald called him and reported taking his old boss, Bill Colby, out sailing on his boat with Frank Nugan, during which time it was decided Colby would represent Nugan Hand.

(Colby remembers talking at about the same time to Admiral Yates, who also knew him from Vietnam War days. But he thinks McDonald approached him first. For that matter, General Black also knew Colby from the Vietnam campaign.)

Colby's bills show that he, McDonald, Hand, Nugan, and Bud Yates spent a lot of time meeting on the Caribbean refugee resettlement project, on negotiations to purchase a bank in Homestead, Florida; and on the tax consequences Nugan would face if he resettled in the United States. The bills also refer to unspecified work Colby's firm, Reid & Priest, did for Nugan Hand in Panama.

Like McDonald, Colby says all his work for the bank was straightforward and businesslike. He acknowledges he had heard stories about the bank's involvement in the drug traffic, but says he checked one or two references who thought the bank was reliable, and discounted the stories.

***

The fourth major U.S. intelligence figure Nugan Hand linked up with in 1979 was Theodore G. Shackley, who may have had as much to do with U.S. covert operations in the Cold War as any man alive. Before he announced his retirement from the CIA after thirty years' service in September 1979, Shackley had led the secret war against Cuba and the secret war in Laos. Later, as station chief in Saigon at the height of the Vietnam War, he commanded CIA activities throughout the region. Finally, he became number two man running the clandestine services division worldwide, at CIA headquarters in Langley, Virginia.

Looking at the list of disasters Shackley has presided over during his career, one might even conclude that on the day the CIA hired Shackley it might have done better hiring a KGB agent; a Soviet mole probably could not have done as much damage to the national security of the United States with all his wile as Shackley did with the most patriotic of intentions.

Between Shackley's Cuban and Indochinese campaigns, more dope dealers were probably put onto the payroll of the United States Government, and protected and encouraged in their activities, than if the government had simply gone out and hired the Mafia -- which, in the case of the Cuban campaign, it did.

Shackley was the CIA officer Edwin Wilson gave reports to during his service with Naval Task Force 157, and afterwards, when he was supplying arms and terrorist equipment to Muammar Qaddafi. It was Shackley who almost torpedoed Kevin Mulcahy's attempt to blow the whistle on Wilson. And Shackley was also the CIA officer who on November 8, 1975, notified the Australian Security Intelligence Organization that the CIA was gravely concerned about the actions of Australian Prime Minister Gough Whitlam; three days later, Whitlam was removed from office.

Despite the announcement of Shackley's retirement in September 1979, he stayed active enough to playa critical role in the Iran-Contra affair. In November 1984, he met in West Germany with two Iranians who had been important officials in SAVAK, the Shah's secret police, and yet who were influential with the Ayatollah Ruhollah Khomeini's government as well.

They were General Manucher Hashemi and Manuchehr Ghorbanifar, and they used Shackley to relay to the White House the cockamamie notion that President Reagan could prevent Iran from falling into the Soviet camp by delivering sophisticated U.S. missiles to "moderates" in Iran-people like Hashemi and Ghorbanifar, for example. They even suggested that they had contacts through which the U.S. could ransom for cash and weapons the American hostages, including CIA station chief William Buckley, who had been seized by Palestinian groups in Lebanon.

Shackley first took this news to the State Department and got no positive response. He tried General Vernon Walters, the Top-secret U.S. national security emissary and later United Nations ambassador; there still was no positive response. He continued to meet with the Iranians. Finally, in May and June 1985, Shackley got their message through to consultant Michael Ledeen and Lieutenant Colonel Oliver North in the White House.

The rest is history. Shackley also worked as consultant to a company that General Richard Secord used to fund the Contras with White House help in defiance of an act of Congress.

Against this background, we return to the fall of 1979, immediately after Shackley's resignation from the CIA, to find him hobnobbing with Michael Hand-apparently an old friend, or at least acquaintance.

"Dear Ted," Hand wrote to Shackley on November 27, 1979, "I finally returned home on Saturday the 24th, in the morning and after greeting my wife who thought I was a stranger, settled down to try and catch up on my sleep and at long last feel alive and well again. The opportunity of meeting you again on different terms was very enjoyable and I sincerely trust that something worthwhile businesswise may surface and be profitable for both of us."

Meeting you again on different terms?

"I just checked with Dale Holmgren," Hand went on, throwing out a name Shackley probably had known in CIA days, "with regard to the equipment query which you gave me, and [am] on-forwarding by telex. He advised me that some of the items could be supplied from Taiwan and he has already forwarded a catalogue to you.

"If there is anything else which we may be able to exchange ideas on, or any avenues in S.E. Asia which we may be of assistance to you on, please feel free to call or write. I would be very happy to get something worthwhile going. Maybe next time I am in Washington, we may be able to have the opportunity to sit down and have a bit of lunch together with Bernie Houghton."

Houghton is not otherwise identified to Shackley; apparently, he didn't need to be.

Did Hand somehow hear that Shackley was loose from the agency and on the trail to make some money, then get in touch with him? Did the veiled reference to a change in relationship mean something else? There is no further evidence of how they got together.

Could Shackley have been dealing with Michael Hand for years the same way he dealt with Ed Wilson, after Wilson went off into private business? If so, was his relationship ordered by, approved by, or even known by anyone else in the CIA? Did it even need to be? Despite much bandying about in the courts and the press, we still don't know the answer to those questions in regard to Shackley's relationship with Wilson. In regard to his relationship with Hand, apparently no one in position to ask Shackley under oath about it has thought to do so.

On December 10, Shackley wrote back to Hand in a way that provides no real clues. "Dear Mike," he began, "I enjoyed our Washington discussion and look forward to seeing you again, either here or out in your part of the world." Shackley wrote that he had already exchanged telexes with Dale Holmgren, and referred to a "Mexican oil deal" he had obviously discussed with Hand, which he did not otherwise explain.

Shackley declines to talk about this episode in his life. He wasn't accused of any illegal activity by Australian investigators, though the Joint Task Force listed him as one of the leading characters whose "background is relevant to a proper understanding of the activities of the Nugan Hand group and people associated with that group." Much of his connection to Nugan Hand involves Europe, and a discussion of that requires the introduction of yet another character, the last major new figure in the Nugan Hand saga.

***

Donald E. Beazley was born in 1942, and, according to his biography as generally given, [4] went through military school and Virginia Polytechnical Institute. After, the army, he began a banking career in a not extraordinary way, as an examiner for the U.S. Federal Reserve Bank in Virginia.

He became a junior officer at the First National Bank of Atlanta in the early 1970s, then vice-president with Flagship Banks, a Florida chain. His big break came in 1977.

Beazley somehow caught the eye of Marvin Warner, a big, fast- rising bank wheeler-dealer who liked to hobnob with the politically powerful and was able to contribute enough money to the Democratic Party to do so. President Carter, the object of much of Warner's political munificence, appointed him ambassador to Switzerland. And while Warner was away, he needed someone to watch his bank chain, then known as American Bancshares, now as Great American Banks.

So Beazley became president of Great American, a big Florida-based company whose shares were traded on the New York Stock Exchange. "When I left, he assumed the position," Warner says. "I don't recall the transitions or what he was offered, but we considered him to be a good banker, a very responsible, able fellow. I have a lot of respect for Don."

But, of course, not so much respect that when Warner returned from Switzerland he didn't want his old job back. So in 1979, Beazley needed another chair. And maybe just as well; barely a year after he left, Great American Banks was caught up in a drug-money-laundering scandal involving a big Colombian cocaine cartel that brought in bags of cash and came away with cashier's checks in the U.S. or overseas, much as the Mr. Asia syndicate did at Nugan Hand. The bank chain and some officers (not Beazley or Warner) were indicted for conspiring to defraud the government by not filing, or falsely filing, required reports of currency transactions totaling some $97 million. The bank paid a fine of $500,000.

In 1987, Warner himself was convicted in state court, Cincinnati, of banking and securities violations in connection with the 1985 collapse of his Home State Savings Bank; that collapse had caused a run on savings and loan institutions throughout Ohio.

As for Beazley, after leaving Warner's Great American Banks he tried consulting, then joined Nugan Hand. Admiral Yates once said that his daughter had worked for Beazley awhile. Beazley says Admiral Yates, acting on behalf of Nugan Hand, had approached him back in 1977 to buy a Great American subsidiary, the Second National Bank of Homestead, Florida, location of a major U.S. Air Force base. Negotiations are said to have dragged on stubbornly and unsuccessfully for two years.

Though it's difficult to confirm after many ownership changes, the Second National Bank of Homestead is said by some to have been an interest, years ago, of none other than Paul Helliwell, the career CIA man whose supposedly private business, Sea Supply Corporation, ran guns and dope for the CIA in Thailand, and whose other supposedly private business, Castle Bank, was involved in fraud and political money movement in the Bahamas. Helliwell had also been paymaster for the Bay of Pigs operation.

Beazley says he's never knowingly worked for U.S. intelligence, or for anyone he knew was involved with U.S. intelligence.

***

In early 1977, shortly after Yates approached Beazley about buying the Homestead bank, he took Beazley to Sydney to meet Frank Nugan and Mike Hand. Then the admiral escorted Beazley on a tour of other Nugan Hand offices -- quite a treatment for a stranger from Florida who already had a good job. Beazley says he was pursued off and on for two years by Yates and Frank Nugan to sell the Homestead bank and come to work for Nugan Hand. He assures everyone he avoided any association.

But among the undestroyed records of Nugan Hand, authorities found a June 1978 list of commissions paid to representatives who solicited deposits. Most of the names on the list are those of full-time staffers, like Jerry Gilder, Graham Steer, John McArthur, and John Owen. But one name stands out: "Mr. Donald Beazley ... $5,000."

"The payment," commented the Corporate Affairs Commission in its report, "indicates a much earlier association in which he [Beazley] obviously introduced depositors to Nugan Hand Bank and received a commission."

And sometime by October 1979, Beazley had agreed to become president and chief executive of Nugan Hand -- the first real banker the organization had ever had. It was widely agreed that one was needed.

It may have been put best by Jill Lovatt, the office manager in Hong Kong who now describes herself as "only a secretary," although Nugan Hand literature described her as a "Monetary Specialist ... with a strong background gained from working with a Hong Kong finance house...." As to why Nugan Hand needed Beazley, she says, "They felt they should have someone in with qualifications, instead of having it run by people like me with no qualifications."

_______________

Notes:

1. Attempts to locate him failed.

2. By the author.

3. The Inquiry editor who interviewed McDonald, and later wrote the first solid account of the Nugan Hand mess to appear in the United States, was Jonathan Marshall. I have known and admired Marshall as a reporter, writer, and editor since 1982. He is meticulous about detail, and I trust his work. He has shared with me his original interview notes. Obviously, I did the McDonald interview for the Wall Street Journal.

4. Though Beazley agreed to telephone interviews with the Wall Street Journal in 1982, he hung up when approached with questions for this book.
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Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

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CHAPTER TWENTY-ONE: What the Tape Recorder Heard

Beazley was introduced to the staff in grand style at a big conference for several dozen Nugan Hand executives from around the empire. At an estimated cost of $500,000, they were flown to Sydney, stashed at a good hotel, and wined and dined for several days, October 13-15, 1979.

Beazley and Yates have used that conference to try to belittle their affiliation with Nugan Hand. In effect, they have put themselves on opposite sides of the same coin. Beazley says Yates persuaded him to come to the conference and look around. "I was just there on an interim basis," he says. "I said I'd go in there and see if I liked what I'd find. They were going to produce a consolidated financial statement. They never were able to produce one." So, he says, he walked out and isn't responsible for what happened later.

Yates, on the other hand, says he resigned at the conference and that Beazley came on board to replace him. "I introduced my relief," Yates says, in admirals' lingo. So, by this explanation, he also isn't responsible for what happened later.

Fortunately for the truth, the conference was secretly tape-recorded, and the tapes have been found. They make clear that Beazley had agreed to be president of the Nugan Hand holding company, in charge of daily operations. Mike Hand and Frank Nugan were going to be co-chairmen, in general oversight positions.

And there was no indication that Yates intended to do anything other than stay on as president of the Nugan Hand Bank; certainly there were plenty of plans for his activities with Nugan Hand in the coming months. The Stewart Royal Commission said Yates was made vice-chairman of the group, and that his salary was soon increased to $100,000 a year.

Frank Nugan began the conference by telling the group, "Admiral Earl P. Yates . . . who has been perhaps our most important counsellor for the last two years and ten months has gone to a great deal of difficulty and effort in guiding us and in himself assisting in recruiting a very fine new president."

There followed a long, rambling discourse, in which Nugan jumped between past, present, and future, began anecdotes he didn't complete, and generally gave every indication of owning a mind three months away from suicide. But at the same time he promised "a new day and a new firm." He concluded, "We are' handsome, we are lucky and we are winners, and we intend to be the most successful Asian banking firm there is."

Hand, too, gave a long, rambling speech, not at all the kind that would lead one to believe he could run a large international bank. His speech seemed to have no beginning, middle, or end, and at times to contradict itself. A sample:

"We have a reality to face today, and since you people are all in the seniority of this organization we must deal with trying to effectively develop a better system. We seriously need to take a very agonizing appraisal of this word called lack of communication. It does exist at all levels of this organization. At the top, the side, the middle, the bottom and everywhere else. I would like to wipe over the situation by saying, oh, heck, it's just a matter that there's not enough time for everybody to do it. But we've all got to set down guidelines in all of our areas, be it legal, trade, finance, administration, to deal with keeping the other people totally and unequivocally informed of developments which may affect them, and I underline which may affect them. We also because of the very nature of our business as private bankers cannot and will not and do not feel it's practical to expose every situation to every employee, to have what we would classify as secrets, which we deal with on a need to know basis. Compartmentation is important for our clients, be it a trade matter, a legal matter, a financial matter-so please exercise discretion upon receipt of information-passing information through to the next person and also on a standardized basis informing other people who may somehow become affected by your situation as to what you're doing....


And so on. Eventually he turned to religion for some quotes, and ended with a plea to "please love one another." Then he introduced Yates, "the toughest guy we know."

***

Yates introduced Beazley, who, he said, "has been courted consistently by this firm for almost three years now." He was lavish in his praise, even asserting that the U.S. Federal Reserve Board had described Beazley as "the finest banker in the United States under the age of thirty-five."

Then Beazley-who now says he never really joined Nugan Hand at all-told how impressed he had been during his first visit to Nugan Hand early in 1977. "Watching the company grow, then I became even more impressed," he said. "Listening to Buddy and Frank and Mike over a period of two to two and a half years I was able to make the decision that I would want to be associated with this group. It was an opportunity and a challenge that I think is probably one of the best ones I've ever made, decision-wise. . . . I am looking forward to a long and fruitful relationship. . . . It is a privilege and an honor for me to be president [of] this company."

He said that he and "people like Walt McDonald who are going to assist me will be meeting with you privately, and discussing and getting your honest opinions of where you think the company should be." Then Beazley shoveled out some really appalling misinformation about Nugan Hand's money-market operation-which existed only as a small, money-losing front for what the bank was really doing -- and about the tax law background of Frank Nugan, whose tax advice was in fact little more than counsel to commit fraud. Beazley told the assemblage:

"You're fortunate to have probably one of the best money-market operators that I've ever seen, and certainly one of the highest qualified desk tax departments or divisions of firms that I've ever seen.... Having the size group which we have here, and having the expertise available is a rarity, and it gives us a competitive advantage." It is hard to believe that a major bank executive, or even a banker of modest skills, could be so fooled about things like that. Why he said it can only be speculated on.

He announced plans for Nugan Hand to try to acquire commercial banks, particularly in Asia and Miami, and concluded by asking the group "to give me the same type of loyalty and dedication that you were able to give to Mike and Frank, and confide in me, call me and talk with me. It's a privilege and an honor working with you and I hope to know each one of you better shortly." [1]

***

The assemblage was also treated to blunt admissions that Nugan Hand branches in Singapore, Malaysia, and Taiwan were operating illegally as banks.

Tan Choon Seng, the administrator in Singapore, complained that other Nugan Hand offices were risking exposure by giving him "as little as two days to raise U.S. hundred thousand. And we have no choice but to raise it in small notes, and when-if you can just imagine what it comes to, ten dollar bills, hundred thousand dollars would come out in a big basket. So if all of you could help us, try to eliminate having pay-outs to clients in cash, because it's really risky business. And it's also not very good for us to do so in Singapore, since we don't have banking status....

"Now, in terms of deposits," Tan said, "that's even a more sensitive issue, because we literally ... function like a bank, though we try to do as much [by] legal methods as possible." He urged his colleagues to strive to arrange for deposits to be made in local Singapore currency as much as possible. In all this, he seemed oblivious to the fact that the illegal part of the operation was what was attracting the clientele.

As he continued to wash this laundry, Tan was interrupted by a strange bit of byplay. In response to something going on in the room, he broke off, saying, "That's got to be the signal for me to stop." There followed general laughter, and an unidentified voice saying, "That's ASIO telling you, not --." This, too, was followed by general laughter, indicating that everyone was familiar with the acronym of the Australian Security Intelligence Organization. Tan then continued his talk.

Graham Steer, the Malaysian representative, referred to "our present, non-official banking activities.... We're only registered there as a trade service company.... We cannot have the term banker on our door, or our letterheads or business cards." In a question period, someone asked, "Do you feel, I mean, are you personally uncomfortable about it?" And he conceded that "naturally it does create a lot of uneasiness when you are presenting a case, particularly first up." It is hard to interpret such remarks, however euphemistic, as other than a frank admission that Steer was soliciting illegal deposits.

Dale Holmgren, the CIA veteran running the office in Taiwan, bluntly noted that "it is illegal to take money from Taiwan," while also noting that he had just talked to his wife by telephone and learned that she had just sold a $15,000 .certificate of deposit on the Nugan Hand Bank, whose headquarters, everyone knew, was in the Cayman Islands. Holmgren said Nugan Hand had just moved into a new, 3,000-square-foot office on Taiwan, and employed seven people.

John Charody, the East European immigrant who was close to Sir Paul Strasser, also spoke. He was identified as a consultant to Nugan Hand, like Walt McDonald and Guy Panker. (Only his innocuous opening and closing remarks were recorded; his substance, if any, was lost while someone changed the tape.)

Then came General Manor -- most of whose remarks have already been summarized (see Chapter 12). He urged the group to form a stricter organizational chart. He encouraged more planning, as opposed to the prevailing philosophy of "you know, if we throw enough mud against the wall some of it will stick." He cited his extensive contacts in the Philippines, said he hoped he would make more, and added, "I can assure you that I will contribute in any way that I can. You have an extremely challenging mission. You're dynamic. You're growing."

His partner in the Manila office, Wilf Gregory, emphasized the need for secrecy. In the Philippines, he said, under his friends the Marcoses, "the telephone is monitored, the telex is monitored, the mail that leaves our office-90 percent of it is opened when it goes overseas. Practically every piece of paper that comes into my office from overseas is opened. . .. I cannot put things down on paper because I'm afraid when that paper goes overseas that somebody is going to open it and read it." He recommended a better in-house courier service.

***

Frank Nugan, introducing Guy Pauker, minced no words about the fact that his work on Indonesia and Southeast Asia "has been supported by the United States Government," and that the Rand Corporation that employed him "advises only components of the U.S. Government or acts otherwise in the public interest.... I introduce to you one of the major intellectual and data banks of the United States, that is at the present time a consultant to your firm, Dr. Guy Pauker."

Pauker, who has since denied he was a consultant to Nugan Hand, didn't deny it then. Instead, he said, "I am really thrilled to be here, and I have first of all to express my gratitude to Buddy Yates who first introduced me to Frank and Mike.... Now, I really hope to be able to be useful to your group."

In his mostly mundane discussion of Nugan Hand's possible future agenda, he repeatedly mentioned his links to the U.S. Government. Advocating Nugan Hand participation in an ethanol-from-sweet- potatoes project in Sumatra, he noted that he was executive director of the Asia Pacific Energy Studies Consultative Group, formed by about fifteen countries including the United States. The group, he said, had sponsored a series of workshops in which "my good friend Walt McDonald, at that time still a high U.S. Government official, participated."

In advocating a Pacific Basin free-trade zone modeled on the European Economic Community, he noted, "The State Department [is] very much interested in this, and, off the record, having sent some quite senior officials throughout the area just a few weeks ago to explore this with the interested countries, wants a major conference to be held on this topic some time in late 1980. And I've been asked together with two or three other people to prepare this conference."

As for Indonesia, his specialty, he said, it might be ready for a political transition. "One of the ways in which I could be useful to the group is to help you be more successful than the U.S. Government seems to be in dealing with the problems of transitions in the countries in which it has influence," Pauker said, adding, "They are not very good at that."

On the subject of his dedication to Nugan Hand, Pauker concluded, "Nothing would give me more personal pleasure than to have the phone ring in the middle of the night, wherever I happen to be, in California or elsewhere, and somebody saying, you know, this is on my mind, do you have anything to say which will be of use. . . . I may not have the answer right away if somebody cares to call me in the middle of the night, but I might be able to come back a couple of weeks later with something."

Another day during the conference, Pauker was called back for a more detailed lecture on Indonesia. What transpired was a rambling, sometimes contradictory diatribe in which Pauker sounded more as if he should be advising the Politburo than the world's strongest democracy. Displaying the cynicism that all too often underlies U.S. policy in the Third World, he announced himself, foursquare for continued military dictatorship in Indonesia--a dictatorship he, after all, had helped establish.

"I have very, very little respect for Indonesian politicians," he said. "I certainly believe that the United States of America [and] Australia should be democracies," Pauker assured everyone. "But we have a very different tradition, a very different history, a very different background. In Indonesia under the Dutch there was no opportunity to learn how to manage civilian party-controlled politics, and the politicians are really pretty worthless characters. They have no experience," Pauker said.

"They" -- the potential civilian leaders of Indonesia -- "have not got much civic commitment," Pauker complained to this gathering of executives of a company engaged in heroin financing, tax fraud, investor fraud, and indirectly, by much evidence, contract murder-a company to which Pauker, despite his later protests, had now become a consultant of almost boundless zeal.

Pauker, the trusted advisor to Kissinger and Brzezinski, even justified the system of bribery and corruption by which the military establishment has effectively controlled the Indonesian economy for two decades, enforcing their own monopoly on many industries, insisting on ownership shares in other businesses, suffocating free enterprise and keeping the Indonesian population impoverished. [2]

"I have considerable respect for them," Pauker said of the ruling generals. Military pay was only a few hundred dollars a month. "I cannot expect a man who has served his country for thirty years and more, who has risen to the rank of general officer, or an admiral, or an air marshall, to live like a coolie." So Pauker evidently didn't begrudge the military men the chance to extort tribute from economically productive citizens.

"What they have," Pauker said, apparently keeping a straight face as he said it, "is what they call a system of extra budgetary revenue [emphasis added]. This is not visible to the naked eye, but the pattern is a well-understood one, and a fairly orderly one.... They consider themselves very bluntly the guardians of the nationhood of Indonesia. And they have done an incredibly good job in my opinion."

So much for bribery.

Pauker then revealed an opinion of free enterprise that equalled his opinion of democracy. "Ninety percent of the Indonesian economy is really state-controlled," he commented enthusiastically. And more might be better, judging from his praise of the state-monopoly oil company and airline, and the state-run plantations. No objections were heard from the U.S. flag officers and CIA men.

Pauker on racism: "Anybody who knows the country realizes that when a Chinese gets a credit from the state bank he will plow every penny ... into developing his business, and the Indonesian will consider that not as a credit, but as a gift from heaven and go out and buy himself a home, buy himself a Mercedes, and take his wife on a trip to Europe, or to Hong Kong at least. And he will assume that he will never have to pay this money back."

Pauker on influence-peddling: "I first went to Indonesia not knowing where the heck that it was on the map in 1954-55. I was either lucky or had good taste in selecting my friends. My friends are running the country today, and this is true both on the military side and on the civilian side, especially the so-called Berkeley Mafia. . . . I talked them into coming to Berkeley because I was the chairman of the Center for Southeast Asian Studies at Berkeley, and these were bright, young Indonesians and fun to have around. Now these are the people who are today the deputy prime minister, the minister for economic affairs, the minister for finance, the minister of trade, et cetera, et cetera." Apparently Pauker didn't mind having just a few "worthless politicians" as friends.

"I have pretty good connections in Indonesia," he summed up, "and as I said before, anybody who needs anything specific about Indonesia is welcome to call me at any hour of the day or night and I'll be really pleased to be of service."

Somehow Pauker sang a different tune when the Stewart Royal Commission asked him about whether he had helped Nugan Hand get involved in the Indonesian oil business as Frank Nugan requested. "Dr. Pauker told the Commission that as an employee of the Rand Corp. and as a matter of principle he regarded it as improper to use his friendship and influence with government officials in such a way," Stewart reported.

Then, revealing as clearly as ever what his investigation was made of, Stewart wrote, "The Commission accepts Dr. Pauker's evidence in this regard." If the commission bothered to check the readily available transcripts of Pauker's remarks at the 1979 conference, it made no mention of that in its report.

Furthermore, the Stewart report says, "Dr. Pauker ... told the Commission that the Rand Corp. is not linked to the CIA. There is no evidence before the Commission which contradicts Dr. Pauker's evidence concerning these allegations and the Commission accepts Dr. Pauker's evidence."

During the speech introducing Walt McDonald, apparently by Jerry Gilder [3] the CIA situation came up. "I hope Walt can help you in understanding how to deal with allegations about the connection with the CIA," Gilder said. "The CIA has got a damn sight better people, as he can tell you;- to use for its purposes.... They hardly have any occasion where they could get some assistance from us. We would be honored to do anything for them, and I think that's the approach, but I hardly think they'll ever ask."

McDonald did not deny his CIA connection. He did assure everyone that he and Pauker were friends of James Schlesinger, Henry Kissinger, and Zbigniew Brzezinski. "Guy [Pauker] could walk in the White House ... any time he wanted and talk to those guys, and they wanted to hear what he had to say," McDonald added.

Then he told how, of late, he had been spending most of his own time on Nugan Hand. Frank Nugan, he said, had gone into "his American period, where he decided to spend most of his time in America, so I had the pleasure of our boss every day-flying here and there, London, Connecticut, and what have you."

McDonald spent most of his time discussing the world oil situation- expounding the scenario advertised by his old CIA branch, that Soviet oil production was decreasing, which would cause ever higher oil prices and maybe war in the Middle East. (The CIA later reversed its assessment of Soviet oil production, and oil prices have nosedived.)

***

Speakers spent much time glorifying each other. Jerry Gilder introduced Admiral Yates as "a very remarkable human being.... His physical capability is that of Clark Kent." The admiral passed the favor on to Pauker, calling him his favored advisor while Yates was vice chief-of-staff of the U.S. Pacific forces. "The people in Washington, at the CIA and the State Department, shared those views," he said-thus admitting a knowledge of the CIA and State Department that he would later deny.

"Guy, it is a real pleasure for me to be serving with you again," said one man to the other, each of whom would later deny he was serving at all.

Of General Manor, Admiral Yates said, "He's recognized as a leading U.S. military authority on internal insurgency, and, I might add, insurgency and strike operations" -- certainly unusual talents to bring to what is supposedly a banking group.

Yates praised Walt McDonald's advancement through the ranks of the CIA, "one of the toughest bureaucracies in the world." He said that although many people weren't aware of the CIA's economic division, which McDonald headed, it was-in a curious phrase" acknowledged in this world of grass politics, drug events and battles, and it starts generally in the area where Walt is going."

Finally, Yates got around to his work. He disclosed that he had been working with the Overseas Private Investment Corporation, a $700 million U.S. Government agency designed to finance small and medium U.S. companies in foreign ventures. He said that with Nugan Hand paying his fare, he had traveled with OPIC leaders "to tour all of Southeast Asia ... and make a report to the president on any type of business in Australia."

He also talked of consulting with Robert McNamara, then head of the World Bank, and Mike Hand's idea of sponsoring a think tank on investment. To be known as Foreign Investment Development Research Program, or FINDER, it would have a blue-ribbon board of representatives of big U.S. corporations who would "identify the opportunities, the products, and technologies in these Asian countries and develop these internationally."

All Yates's grandiose efforts died with Nugan Hand.

At one point, Yates checked to see if his time was up. A voice from the audience seemed to leave no doubt about whether Yates had surrendered command to Beazley: "You're president of Nugan Hand Bank," the voice said, and Yates continued.

***

Frank Nugan's second speech was so disjointed it's difficult to imagine anyone in attendance taking him seriously. The Corporate Affairs Commission commented, "Based on the transcript only, Mr. F. J. Nugan did not appear to be coherent at this point." The session ended with Admiral Yates calling for all the papers left around to be locked up while everyone went to lunch.

There were announcements about developments in the branches. In Manila, an unidentified woman had deposited $1 million. In Germany, Nugan Hand had acquired the small-but-licensed F. A. Neubauer Bank, which would issue a new kind of international certificates of deposits, for worldwide sale, backed by the Deposit Security Fund of the Federal Association of German Banks.

One representative after another got up over the several days and told about the millions, or tens of millions, of dollars his branch had brought in. Then Bernie Houghton got up and told the assemblage about the gold mine in Saudi Arabia. "One of our clients approached us on a $70 million contract and was apologetic because it wasn't more," he said, as if serious.

"It's a totally cash society," he added. "We get garbage bags full of money over there." Since the largest-denomination riyal note is worth only $30, he said, "they take these big, black garbage bags, the plastic ones, and they'll come in and dump these bags on you. Very common in Saudi for the people to draw a million dollars at a time in cash out of the banks.... Under the Islamic law ... if they catch anybody stealing, they'll cut their hands off.... There's not supposed to be any liquor over there, but I guarantee you in Nugan Hand's house over there, it's got a closet full."

Houghton also gave his listeners a hint why he didn't feel any remorse for all the money he was stealing: "I don't think Saudi Arabia is going to last that long," he said. "It's totally surrounded by the Russians and the Russians are creating as much strife as they can in that area. You've lost Iran, which basically means that it's pro-Russian. If they are not with you, they are against you. Pakistan and Afghanistan have also gone. On the southern tip of Saudi Arabia in Yemen, well there's a big Russian Navy base there." Houghton continued to paint a bleak geopolitical picture. He said the Saudis were basically giving up and sending all their money out of the country anyway.

Then he gave a lesson on how he became Nugan Hand's most successful representative so fast-a Houghton primer on theft, as it were: "You can't talk quickly to people when you're going to take their money," Houghton explained. "In every movie and play that you've seen, the city slicker comes in and begins talking rapidly and trying to thrust a pen in somebody's hand. So you need to take a little backward attitude I think ... speak softly and slowly, repeat what you're saying maybe three or four times, so you're sure it's penetrating, because they don't listen all the time."

"I always repeat the same pitch maybe from three or four different angles," Houghton said. "Each time I see them, and generally two or three times during approaching them, and telling them the advantages. And if they ask me can they lose their money, I say of course you can lose your money. I say I don't see how you can, because we basically deal in commercial bills. They are bank-endorsed. We take those commercial bills that are bank-endorsed, and they're guaranteed by the central banks in each of the three countries that we used the money market operations in. So basically, you've got a central bank that guarantees the bill, plus its member bank, and of course our bank, which is international. So the fact is, that you can't lose any money. We don't deal in the commodities exchange. We don't take any equity positions in anything. So basically we're not at risk. We state that we earn our fees from accounting services, from legal fees, and maybe one or two percent on certificates of deposit. So basically we do a lot of business, but make small funds, but we're readily liquidable...."

And on and on.

Don Beazley, who later said he just came to investigate, explained to the group from a more technical standpoint how Nugan Hand made its money on the money market. "The money market situation is nothing more than the past ten years of experience that Frank [Nugan] and Steve [Hill] and Mike [Hand] have in taking advantage of different interest rate movements in the money market. And it's been very successful, extremely successful. That is a hidden asset. It doesn't show up on any balance sheet. It doesn't show up in anywhere else. You couldn't place a dollar figure for it. That, along with the volume of transactions that takes place in the money market, I think you do between a billion and two billion dollars worth, or three billion dollars worth of book transactions a year-it really gives you some kick. As the number of deposits increase, your importance in the money market increases also," so that Nugan Hand could make a profit from what Beazley called "volume discount."

There had to be money somewhere, because Beazley was certainly planning on spending some of it, as he got the hang of the operation: "I'd like to go to Hong Kong at the end of this week," he said, "and then I have some obligations to my former employer [Great American Banks] that I have to go back to first, to the United States for a short period of time, then I would like to come out and in the first part of next month to visit your operation over in Germany and also London again, and then come back over and spend about a month going around -- we'll be taking people with us -- Walt and Buddy and some other people...."

Dale Holmgren then asked where the funds were coming from to pay the expense accounts. "We have, Dale, made a great deal of money out of tax avoidance," Mike Hand answered, adding that money market profits and legal fees were also important.

Mike Hand certainly knew that the tooth fairy would be as reliable a source of income as Nugan Hand's profits from legitimate business. How many of the other people in the room shared his knowledge, and to what degree they shared it, can only be presumed.

_______________

Notes:

1. Beazley's prepared remarks were later printed and circulated to the entire Nugan Hand staff. They began: "As the newly installed President and Chief Executive officer of the Nugan Hand Group of Companies it is my privilege and pleasure to join with Frank and Mike in welcoming you to this management conference. . . . In addition to the formal program, Walter McDonald and I plan to meet most of you privately to discuss both individual and company concerns."

2. Once again, the author must refer readers who doubt such sweeping statements to Endless Enemies for documentation.

3. The Corporate Affairs Commission identified the speaker as Gilder. The author's copy of the transcript doesn't identify the person giving the introduction.
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Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 4:33 am

CHAPTER TWENTY-TWO: The Wilson Connection

A month after the meeting in Sydney, according to the Joint Task Force report, Admiral Yates attended a meeting in a London hotel; with him was Frank Terpil, former CIA officer and the partner of Edwin Wilson in the sale of U.S. military equipment, including plastic explosives, to Libya. Also present, the task force says, were the source known as "J" -- a Wilson employee named Douglas Schlachter -- and another retired senior U.S. military officer, unnamed.

"Discussions, at times between Yates and 'J,' centered around the possibility of Nugan Hand becoming involved in the financing and handling of finances for Libyan airport shelters and hangars," the task force said. "The contract potential for this construction work was three to four hundred million dollars. 'J' is not aware if there were other meetings between Yates, the unnamed officer and/or Terpil, or precisely how the above described meeting came about. He is aware, however, that the unnamed officer and Yates knew one another previously, and from the conversations that took place, [he] formed the view that Yates and Terpil had at least met one another before. It was not long after this meeting that Terpil was arrested when he attempted to import the machine guns to South America," the task force said.

After reading the task force report, Yates exploded with denials. In reference to the November 1979 meeting "J" described, he wrote the task force, "I attended no such meeting, do not know Terpil, and discussed no involvement of Nugan Hand in financing such activity." His very next sentence, however, may indicate his state of truthfulness at the time of writing: "I resigned from Nugan Hand officially on October 12, 1979, and had no authority whatsoever to discuss such matters."

At the time he wrote, the admiral was evidently unaware of the tape recordings of himself, and of others in his presence, at the Nugan Hand executive meetings, which took place October 13, 14 and 15, 1979. Obviously, neither Yates nor anyone else talked of his resigning. To the contrary, Yates and everyone else talked of the many tasks he would work on in the months ahead, including setting up a Nugan Hand-sponsored think tank to encourage industry in the Pacific, and touring Don Beazley around the empire.

In January, two months after the alleged meeting with Terpil, Yates flew to Sydney on Frank Nugan's death. Steve Hill has testified that Yates was still a director of the company when it went into bankruptcy. Even the accepting Stewart commission, which seemed to take on blind faith almost anything else Yates told it, found that he was vice-chairman of the company into 1980.

Yates's attempt to move up the date of his departure from Nugan Hand appears to parallel his attempt, already discussed, to say he didn't join Nugan Hand until June 1977, when there is abundant evidence he joined much earlier. One must remember these statements when evaluating his further denial to the task force: "I do not know Wilson nor Terpil, have never done business with them, and to my knowledge have never even met them."

Schlachter, in a 1987 interview, says that for years he held onto the business card, which he vividly recalls Yates gave him at the meeting with Terpil.

***

Whatever conclusion one may come to about whether Yates met Terpil that November, there were certainly many other meetings in Europe over the winter of 1979-80 between Nugan Hand's senior managers -- including Bernie Houghton-and associates of Edwin Wilson. Among those associates was Ted Shackley, who the task force said was meeting occasionally with Michael Hand in Washington. Shackley had just retired as CIA deputy director of operations; and had stayed in regular contact with Wilson after Wilson left the CIA.

Shackley had gone to work for a new company called A.P.I. Distributors, Inc., based in Houston, founded by Thomas Clines, a CIA official who had worked directly under Shackley (on the anti- Cuban campaign, among other things), and who had taken his CIA retirement a few months earlier. Clines founded A.P.I. with a large loan provided by Wilson, the task force said. (Reporters Edward T. Pound and Walter S. Mossberg had already reported in the Wall Street Journal that Wilson had arranged a $500,000 loan from a Swiss source to an intermediary company in Bermuda that funneled money to Clines.)

Clines and Bernie Houghton knew each other independent of Shackley. They had been brought together by Major General Richard V. Secord, then still serving with the U.S. Air Force.

***

SECORD: Operational head of the covert "private" arms network created from 1984 to 1986 under the aegis of CIA Director William Casey and National Security Council operative Oliver North. The object of the network was to try to keep Congress and the public from finding out about arms sales to Iran and the Nicaraguan Contras, since some sales were contrary to policy and others to law.

Secord, a 1955 West Point graduate, has been involved in intelligence- type work since the war in Indochina. He commanded the U.S. military mission to Iran from 1975 to 1978, then directed all U.S. military sales worldwide, from the Pentagon. In the first few months of 1980 -- while his friends Clines, Shackley, Wilson, and Houghton were discussing various business deals to exploit what remained of Nugan Hand -- Secord was involved in planning the disastrous mission to rescue U.S. hostages in Iran, and was deputy commander of a second rescue plan which was never implemented. His longtime friend and eventual business partner in the Iran-Contra deals, Albert Hakim, worked on the mission from inside Iran. Hakim later hired Wilson and Shackley in his private business.

From 1981 to 1983, Secord served as deputy assistant secretary of defense for Africa, the Middle East, and Central Asia. He left that job in a scandal involving his relationships with Wilson and Clines in which he narrowly escaped indictment by a federal grand jury. Wilson, Clines, Secord, Shackley, and another Pentagon official had met over a deal to make substantial money hauling U.S. military material to Egypt. Secord and the other official directed the shipments as part of their Pentagon jobs; the goods were carried by a company Clines owned in partnership with an Egyptian, and which he founded with Wilson's money. The Pentagon paid $71 million.

Correspondence between Wilson, his lawyer, and Clines's lawyer -- first unearthed by Peter Maas for his book Manhunt-shows that Wilson expected a cut of the action. A January 18, 1979, memo from his lawyer says stock will be owned by a foreign corporation-apparently to be controlled by Wilson-and four "individual U.S. citizens." Wilson, his bookkeeper-girlfriend, and a woman friend of Mr. Clines's offered testimony that the four citizens were Clines, Secord, Shackley, and the other Pentagon official, and that they planned to share in the profits. But prosecutors were uncertain that these witnesses had sufficient character to stand up to the denials of prominent officials. Since the scandal seemed to have terminally stained the remaining public careers of those involved-at least until the Iran-Contra affair -- personal indictments weren't sought.

In an agreement to end the investigation, Clines, on behalf of his company, pleaded guilty to filing $8 million in phony invoices to the Defense Department, and was identified as part of a criminal scheme. The holding company Clines was associated with paid a $10,000 fine and $100,000 in civil settlements, and the operational company he had formerly been co-owner of repaid $3 million of the illegal profits. Some investigators in the case still think justice was subverted.

In Congressional testimony in May 1987, Secord said that in 1984, soon after his Pentagon retirement, Colonel North asked him to start forming the covert arms network. Secord testified that he knew so little about the market for small weapons that he immediately brought Tom Clines in as his deputy; he knew Clines as an expert in the field and as "a very close associate of mine from CIA days," he testified.

Secord testified that when the U.S. Congress forced the CIA to pull out of the Contra war in 1984, the Contras were left "in dire straits ... starting from scratch" without trained logistics or supply or maintenance officers-indicating that the operation had been more American than Nicaraguan from the start. He, his business partner Hakim, Clines, and some other recently retired military officers set up companies designed to earn a 20 to 30 percent profit, he testified, filling the Contras' needs. When the Iranian opening came, they were given that assignment, too.

The arms were shipped from allied countries like Portugal, and even Communist countries like Poland and Rumania. To persuade these foreign governments to allow the shipments, without disclosing that the weapons were going to the Contras in defiance of Congress, the Secord-Clines companies submitted forged documents making it look as if the arms were going elsewhere. (They may have relied on Clines's experience filing phony documents with the Pentagon for profit in the Egyptian arms case Secord was involved in.)

The Secord-Clines operation bought airplanes. It hired pilots, mechanics, and cargo-handlers, mostly veterans of other U.S. clandestine operations, to move the weapons. Secord received a coded communications device by which he could talk securely to North at the White House or to the CIA station chief in Costa Rica, where part of the Contra effort was being organized.

Clines helped North obtain a ship, the Erria, that not only ferried arms but also was used in a vain attempt to ransom the hostages in Lebanon with funds from data processing tycoon H. Ross Perot; according to the Los Angeles Times, Clines went along on board the Erria for the mission. When Clines was due in court in Virginia in a civil matter in 1986, some. one from the National Security Council called to excuse him by saying he was on assignment with the government.

When the first planeload of U.S. weapons was delivered to Iran, Secord flew with the mission to the Middle East, though he remained behind in Israel to monitor the situation while National Security advisor Robert ("Bud") McFarlane, who came over with him, continued on to Tehran with the missiles, a cake, and a Bible inscribed by President Reagan. Secord was also put in charge of the Swiss bank accounts through which the money flowed.

***

Secord told the Joint Task Force in Australia that he had met Houghton in 1972, at the home of Colonel William Prim. Prim, as has been noted, (a) was a former member of Yates's military staff, (b) was the air force officer whom Houghton contacted in Saudi Arabia, (c) is believed by some to be the officer Houghton flew to Tehran with in 1975 in connection with the sale of a spy ship to Iran, and (d) was listed on a Nugan Hand internal document as a staff member in January 1980. (He has not responded to a letter the air force agreed to forward to him.)

The task force reported that Secord saw Houghton occasionally and socially in Washington, D.C., Saudi Arabia, and the Netherlands throughout the middle and late 1970s. Secord said Houghton had talked about Nugan Hand, and in 1979 brought him together with Clines.

By that time, the general was close enough to Edwin Wilson to regularly use Wilson's twin-engined Beechcraft free of charge. Clines sold Secord an investment property in Washington, and when it flopped Wilson bailed the deal out with cash. (Secord's lawyer told the Wall Street Journal, which exposed all this, that his client was totally innocent of any wrongdoing. Lawyers for Clines and Shackley told the Journal their clients hadn't done anything wrong, either, .but wouldn't let them be interviewed.)

General Secord having made the introduction, Clines and Houghton met repeatedly with Shackley in Washington, which eventually led to a deal with A.P.I. to sell Philippine-made jeeps to Egypt. Apparently, the deal never produced any sales.

***

Houghton was also meeting often with Edwin Wilson in Geneva during the fall and winter of 1979-80 to discuss some financial laundering work regarding military sales. Libya had given Wilson a $22 million letter of credit, but the document specifically identified certain military hardware that was forbidden to Libya under U.S. law.

So it was proposed that Nugan Hand would issue small letters of credit, naming textiles and other goods as the items of purchase to mask the military purchases. But despite what the task force said was several days of discussions with Clines and others, there was no evidence the letter-of-credit matter was ever resolved. Houghton tried to minimize these dealings, and denied that Wilson was a Nugan Hand client. But the task force said Houghton was being "deliberately misleading" in saying that, and the Corporate Affairs Commission said it didn't believe Houghton, either.

In the Stewart commission, however, Houghton finally found a mark. The commission simply said it "accepts the evidence [testimony] of Mr. Houghton that the negotiations were unsuccessful''- as it also accepted his testimony that he didn't keep any of the money he carried off in Saudi Arabia (except "expenses").

Houghton said he was introduced to Wilson by a lawyer representing Wilson in Geneva, whom he had been told to see by either Mike Hand or Frank Nugan. If the commission bothered to ask him who the lawyer was, or how Hand or Nugan found out about the deal, it did not record the question or answer in its report.

In addressing the question of Nugan Hand's involvement in arms dealings, the Stewart commission again adopted the technique of meticulously shooting down some bizarre rumors, without doing any real research on the more likely leads. Sources of serious allegations were never called to account under oath. There is no mention, for example, of Prince Panya, or Doug Schlachter, or John Owen's detailed military reports.

The Stewart report does note an "allegation" in the Wall Street Journal that "Nugan Hand files show that Nugan Hand worked on big international arms deals, although it is not clear what, if anything, was shipped." It dismisses the "allegation" as "vague and imprecise," and says it was "based at least in part on information given to that newspaper by Mr. J. D. Owen," who it earlier doted had left Nugan Hand in a nasty salary dispute. Actually, the Journal's evidence consisted mostly of documents found in Sydney, which Owen hadn't mentioned in an interview. [1]

"The Commission has found no evidence to support allegations that the Nugan Hand Group had been involved in arms dealing," the Stewart report says, though it later acknowledges that Nugan Hand tried to be.

Houghton was playing with large amounts of cash in the winter of 1979-80, as he flitted back and forth between Europe and Saudi Arabia. His explanations of how he got it were not very believable. There was, for example, a puzzling journal entry in the Nugan Hand records -- "funds in Switzerland, $465,000," [2] with a reference to Houghton. When the Joint Task Force asked Houghton about it, he explained, "A gentleman delivered it to me in the hotel. ... The man gave me no documentation to sign and did not identify himself. He just says, 'Are you Bernie Houghton?' And I say, 'yes.' And he handed me the envelope" -- which contained $465,000.

An easy way to make a living, it sounds.

Houghton testified that he assumed the man was a law client of Frank Nugan's. He said he took the money to a bank and telexed it to Singapore.

There was another witness who reported seeing him take several hundred thousand dollars in U.S. $100 bills out of a safety deposit box, bundle it up in his coat, and walk casually to a nearby bank to deposit it and telex it. It isn't known whether it was the same money.

Hand and Nugan also appeared in Switzerland at about this time. They rendezvoused with Houghton, who says their mission was to see the United Nations High Commissioner for Refugees in regard to the Caribbean project. But Hand, at least, also met with some of the Wilson men. Houghton recalls meeting both Nugan and Hand in Geneva within the week preceding Nugan's death.

***

One other deal that brought all the Nugan Handers to Europe was the planned acquisition of a bank there, London Capital Securities Ltd., which became available for purchase after its former owner, a onetime British member of Parliament named John Stonehouse, defalcated. Perhaps lacking Frank Nugan's true grit, Stonehouse only faked his suicide; he was found alive and well in Australia, and was returned to England and jailed.

Ernest C. L. Wong, a former Nugan Hand executive who says he worked on the deal, claims Nugan Hand was to be reorganized around a legitimate international commercial bank like the one in London, then sold to another old CIA and Pentagon pal, ex-president Somoza of Nicaragua, who was in and out of Miami back then. Wong says the Somoza deal was set to go in June 1980; no one else has said anything about it.

Beazley, Hand, and Nugan negotiated a tentative purchase agreement for the London bank, but the deal crumbled-because of Frank Nugan's death, Beazley said. Houghton, on the other hand, told the Corporate Affairs Commission that "Frank and the gentleman over there, whose name I forget, had a big argument and the fellow said he would not do business with Frank Nugan."

Houghton also said that after Nugan died, "Mike says, well, he couldn't go ahead with it because they couldn't afford to lose the capital. So I says, 'Well, what if one of my clients withdraws his funds and buys the bank? ... Then you could still manage the bank.'"

According to Houghton, Hand replied that the idea of using a behind-the-scenes money man to make the purchase "was acceptable to him.... It was to be purchased in the name of Don Beazley, who was going to be the head of it."

But the client Houghton put forward as the behind-the-scenes man turned out to be another CIA operative, Ricardo Chavez. According to what Beazley told the task force, Houghton did not disclose Chavez's true identity. Beazley said Houghton told him that "Chavez was a wealthy Mexican who wanted to diversify his assets out of Mexico, largely because of an anticipated peso devaluation."

Ricardo Chavez was no Mexican. He was Cuban. He had been a CIA contract agent off and on since 1961 when he worked on the Bay of Pigs invasion. His case officer on that operation: Thomas Clines, the CIA officer who ran the illegal Egyptian arms deal with Edwin Wilson's money.

Another Chavez associate and CIA operative was Rafael ("Chi-Chi") Quintero.

***

QUINTERO: A Cuban-American veteran of the Bay of Pigs who became a protege of Clines in the CIA's long, clandestine war against the Cuban Government, conducting sabotage and terror missions. In 1976 he signed on with Edwin Wilson to assassinate international terrorists, and in particular a political opponent of Libyan dictator Muammar Qaddafi, who, along with U.S. Navel Intelligence, was employing Wilson; Quintero later explained that he thought the missions were sanctioned by the CIA (and Who, really, can be sure they weren't?), and that he ultimately didn't carry them out.

When Clines was hired by General Richard Secord to be his deputy in the Iran-Contra covert arms network, which was being run under the aegis of the CIA and White House through National Security Council staffer Oliver North, Clines brought Quintero on as his deputy. Quintero was based in Coral Gables, Florida, but spent much of his time in Central America, hiring, paying, and directing pilots and flight crews for the Contras.

About the time of Frank Nugan's death, Clines and Quintero happened to drop by Wilson's Geneva office. According to task force witnesses, they found a travel bag full of documents left by Bernie Houghton. Clines and Quintero rifled Houghton's bag, found a document concerning General Secord, and removed it, the task force reported.

"We've got to keep Dick's [presumably General Secord's] name out of this," Clines said, according to the task force report. (Assistant U.S. Attorney Lawrence Barcella in Washington, who supervised the prosecution of Edwin Wilson, confirms the gist of this story.)

About a year later, General Secord was appointed by President Reagan to be deputy assistant secretary of defense-chief weapons advisor for Caspar Weinberger for the Middle East and south Asia. About the time he was due to get his third star, though, the Wilson scandal caught up with him and forced his resignation. What his reputation had been doing several years earlier in Bernie Houghton's travel bag has never been explained.

***

In early March 1980, Houghton delivered about $300,000 to the Britisher who was selling London Capital Securities after the Stonehouse debacle. The money was to pay for a 50 percent interest.

Most of the $300,000 was in the form of Thomas Cook traveler's checks, the kind Houghton learned to use in Saudi Arabia. Houghton told the Corporate Affairs Commission he just didn't remember where he had bought the traveler's checks. "The delegates do not accept Mr. Houghton's recollection," the commission report said. "One would envisage that a transaction of this magnitude soon after the death of Mr. F. J. Nugan would be indelibly imprinted on the mind of the participant." The commission determined that Nugan Hand's general funds were used to buy the London bank.

The commission found records of a $100,000 advance to Beazley at about this time, which he has said was used for the bank deal. The commission reported that while it was "not able to state positively that the funds were applied in the acquisition of the London bank," it inferred from the ledger entry that the money was intended to be used that way.

Dennis Mosselson, the British businessman who was selling the bank, told the London police that over the next few months Houghton cashed $57,000 in traveler's checks at the bank, all with the. approval of Beazley, whom Mosselson said he called in Washington.

Beazley told the task force he flew back and forth to London, talked occasionally with Chavez, and met him once at the Miami airport. But he said he resigned his position at London Capital Securities in October 1980. He said the bank wasn't profitable enough to justify the work and travel, and besides, he had just been offered another job--as president of Gulfstream Bank, Boca Raton, Florida, a bank big enough that its shares were traded on the New York Stock Exchange. [3]

That was the job he held when the task force interviewed him-in the United States and not under oath -- March 12, 1982. However big a banker Beazley was, the task force didn't think much of him as a witness. "Beazley appeared to be vague and distant from those matters which one would reasonably expect a person of his profession to be conversant and particularly familiar with," 'it said. "There appears to have been a distinct lack of formality and background knowledge which one tends to expect from conservative bank administrators. . . . Whether this is a deliberate attempt to minimise his own role in the matter or whether it is simply the nature of Beazley, the Task Force has not and need not determine. [sic]"

The task force also didn't believe the story about Chavez's buying the bank with funds from his Saudi Arabian account. "Task Force inquiries in the U.S. reveal that Chavez had no known connections, commercial or otherwise, in Saudi Arabia and is most unlikely to have had sufficient funds of his own to purchase the bank," the task force reported. It noted that Clines, Quintero, and Chavez had "a close relationship ... and generally the view is that many of the business partnerships and dealings so far as Quintero and Chavez were concerned were little more than nominee situations [fronts] for Clines.

"It is thought that quite possibly this was the case in the London Capital Securities purchase. Obviously one of the reasons that Houghton misled authorities in respect of the London bank and in particular his connection with Chavez, was to hide his connections with Clines and Wilson."

People very close to the intelligence apparatus of the United States were trying to hide something. Whether it was money Wilson was taking illegally out of Libya, or money Bernie Houghton was taking illegally out of Saudi Arabia, or both, was a mystery the task force wanted to solve, (Considering Clines's importance to U.S. policy in the 1980s, one would think American investigators might be interested, too.)

The task force talked to two business associates of Wilson and Clines, whose names it didn't disclose, who said they had been told that Clines had put close to $1 million (several million, by one account in Nugan Hand. But there was no way to find out.

The Corporate Affairs Commission also expressed frustration at not knowing the source of Chavez's alleged $325,000 account with Nugan Hand, or the significance of the Chavez-Houghton-Hand-Wilson associations, or the truth of the contention that Nugan Hand was going to be turned over to Somoza.

None of these items "has been sufficiently investigated to finally report," the commission said. "It is difficult to imagine that this could be done without enquiries in England and the U.S.A."

***

That such inquiries haven't come about may well be the result, at least in part, of the incredible influence Bernie Houghton continued to wield. John Walker, the CIA station chief, remembers Houghton hosting a visiting contingent from the Army War College. In January 1980, just a couple of weeks before Frank Nugan's death, Houghton was opening his barroom doors to a five-man delegation (and their wives) from the U.S. House of Representatives Armed Services Committee, out on a tour of U.S. military installations.

Representative Bob Wilson of California, then the ranking Republican on the committee, says he had met Houghton on a previous trip to Australia several years earlier. He says he had been urged to drop in and see the barkeep by a friend of his wife's, who owned a Sydney hairdressing salon. The Wilsons, along with another member of the Armed Services Committee, had lunch with Houghton at his Texas Tavern in the Sydney honky-tonk zone, he says.

They evidently liked it, because they returned, Representative Wilson says. And when Houghton then invited the whole contingent of ten or twelve members of the committee, and their staffs, to dinner at the Bourbon and Beefsteak, well, how could they refuse?

So, Wilson, Richard Ichord (a Missouri Democrat and then chairman of the Research and Development Subcommittee of the Armed Services Committee), and three other committee members flew into Sydney late on the afternoon of January 7, 1980. After they were greeted by officials from the American Embassy and whisked to the local Hilton, it was just natural for them to head on down to the Bourbon and Beefsteak-despite having to run the gauntlet of prostitutes and sex-show barkers.

"It wasn't odd," Representative Wilson says. "It was our first night in Sydney and nothing had been scheduled. Also a lot of people were out of town due to holidays."

Wilson says he was on the House intelligence subcommittee for twenty-six years. "I usually tried to interview on my own any operatives" he found in the places he visited, he says. "But I didn't know any in Australia." So he settled for Houghton.

"Bernie is a kind of typical Texas bullshitter," Representative Wilson confides. "All he talked about was his business. He didn't talk of military or defense."

But he did talk of Michael Hand over dinner. "He said, 'If you stop off in Singapore, you should meet my associate,' " the congressman remembers. [4]

On January 11, the committee delegation's first day in Singapore, Representative Wilson was introduced to Mike Hand by a U.S. consul. The next night Wilson, one other congressman, and their wives dined with Mike and Helen Hand at a restaurant. Wilson says they talked of business, not public affairs, and that he invited Hand to visit him on his next trip to the United States.

That trip turned out to be a quick one, on the occasion of Frank Nugan's death. And on the next trip, Hand had good reason to pass up the Wilsons' kind invitation. That trip waS in June 1980, and Hand was by then a fugitive from justice, traveling under a false passport.

***

Perhaps the final blow to Nugan Hand came in the fall of 1979, from Price Waterhouse & Company, the Big Eight accounting firm that had given Nugan Hand its cachet. Robert Moyle, the Price Waterhouse auditor who signed the Nugan Hand Bank's books for the year ended June 1977, had left. [5] His successor, Richard Harris, who had worked on the '77 books and then signed off on the June 1978 books himself, suddenly started balking.

Although Nugan Hand advertised that the bank's books were audited by Price Waterhouse, the actual balance sheets and income statements were seldom shown. They might have looked suspicious. Considering the big sums of cash that were flowing in and out of Nugan Hand, the actual asset and liability figures certified by its auditors, including Pollard & Brincat in Sydney, were relatively small.

For example, a balance sheet from Pollard and Brincat for the Sydney holding company, dated January 31, 1979, shows assets of $13.7 million and a net worth of $2.3 million. The assets shown consist almost entirely of top-grade securities: $9.2 million in commercial bills of exchange, $3.2 million in negotiable certificates of .deposit, and some government bonds. Other balance sheets have been 'found showing assets of more than $27 million.

There isn't any indication on any of the balance sheets of what had really happened-that the securities originally bought had been traded in, the money taken, and the securities replaced in the company's vaults by IOUs from the affiliated companies that Frank Nugan and Mike Hand and their associates had set up.

Steve Hill has testified that he routinely rewrote his books before giving them to the auditors. Hill added or subtracted $4 or $5 million at a stroke, merely on Frank Nugan's word that certain accounts had been paid, or certain assets were on hand. To clean the bank's books at year's end, accounts were sometimes assigned to Nugan Hand, Inc. Panama, which Hill has testified was mostly a reservoir for phony accounts needed to balance the books. Phony assets -- usually IOU notes from companies that were secretly affiliated with Nugan Hand-were supplied as needed, and sometimes altered, to even the numbers. Price Waterhouse apparently just took all this down and signed it.

The Corporate Affairs Commission found documents showing, for example, that on August 5, 1978, Pric~ Waterhouse requested confirmation from the Sydney office that $4.7 million in securities were really held by that office on behalf of the Hong Kong and Cayman-based Nugan Hand Bank. On August 9 and 11, 1978, Frank Nugan and Mike Hand telexed Price Waterhouse that the securities were indeed there, collateralizing a debt owed by Nugan Hand, Inc. Panama-and so the matter appeared on the audit that Price Waterhouse signed.

On October 10, 1978, the commission reported, Price Waterhouse telexed Sydney for more details on the debts allegedly owned to Nugan Hand Bank by Nngan Hand, Inc. Panama. Hill replied by telex two days later that Nugan Hand Bank had a claim on securities held by Nugan Hand Ltd. for Nugan Hand Panama, Hill, the commission reported, "stated the matter had been discussed in full the previous year with Messrs. Harris and Moyle of Price Waterhouse. He stated the basis of the scheme was to ensure profitability and security for Nugan Hand Bank."

That explained nothing. Commented the commission, "To the reader today, the reply appears not particularly helpful from the perspective of supplying an answer to the request for information from Price Waterhouse." Nevertheless, the commission reports, "Price Waterhouse accepted the explanation of Mr. Hill." A year earlier, the commission noted, Frank Nugan himself had given the assurances.

Admiral Yates went to the Caymans to sign the 1977 and 1978 audits, according to Hill. Clive Jennings of Price Waterhouse (an associate who was assigned to help Harris on the 1979 audit) -- who answers questions hesitantly, after long pauses -- says the same. Yates told the Stewart Royal Commission, it said, that he "thought that he had only signed the 1977 accounts," leaving the 1978 situation uncertain. Hill told the Stewart commission that in his opinion the admiral would have been "totally unaware" the books were phony.

***

The Corporate Affairs Commission also reported doing its own audit of the securities listed by Hill. The results, it said, showed that the securities held by Nugan Hand Ltd. weren't assets at all, but had already been pledged against debts owed to those corporate Nugan Hand depositors who demanded and got collateral for their accounts.

The commission found other inaccuracies and obvious inconsistencies in the figures that Price Waterhouse had accepted. But the commission-rather shockingly-admitted it never interviewed the Price Waterhouse auditors. "They may well have been misled in circumstances of which the investigation is uninformed," the commission said.

Trevor Gorman, senior partner at Price Waterhouse, says [6] no one from the firm is aware of any discrepancies in the 1977 or 1978 audits. "No one has ever questioned our audits of those years," he insists.

The Stewart Royal Commission did more than just question the audits-it flat-out state that "the accounts of Nugan Hand Ltd. in no way presented a true and fair view of the financial state of the company."

The commission took expert testimony on "the duties of an auditor, with particular regard to the auditor's duty to detect fraud." And the commission reported finding "little or no consensus of opinion in relation to this aspect of an auditor's duty.... The distinction seems to be whether the auditor is under a duty to detect fraud, that is, to specifically search for fraud, or whether, on the other hand, it is enough for the auditor to plan his audit so that he has a reasonable expectation of detecting material misstatements," the commission said.

It found that "the latter view appears to be echoed in this country" by auditing professionals, while client companies and businessmen who wanted to rely on audited financial statements believed they were getting more protection. "In the view of the Commission there is a need for the legislature to define precisely the auditor's duty to detect fraud," the report said.

(A similar dispute is raging in the United States, where, under pressure from the courts and Congress, the accounting profession is trying to strengthen standards to increase the auditor's role in detecting fraud.)

The men at Price Waterhouse -- Gorman, Harris, and Jennings -- contend that they raised new questions in 1979 because there were wholly different circumstances from those surrounding the 1977 and 1978 audits. To an outsider, it is hard to understand what those different circumstances may have been, except possibly the introduction of a skeptical Clive Jennings.

Hill has said that he thinks the auditors became more skeptical in 1979 because of the bad publicity Nugan Hand was receiving over the Nugan Fruit Group scandal in Australia, though he didn't account for how the news might have reached the Caribbean.

Jennings, for his part, asserts, "There were significant gaps in the records" that Hill brought with him for the October 1979 auditing session-as if this were a stunning new development. "He said he'd been rushed when he came," Jennings says. So Jennings gave Hill a list of items that would be required to satisfy the auditors. "And that was the last I ever heard from him" except for telexes, Jennings says.

Hill has testified that the queries dealt with the receipt and payment of funds from Nugan Hand Panama, and that he telexed Frank Nugan for information but got no satisfactory answers. Hill has also testified that Yates joined him and his wife at the October 1979 audit, too. "Mr. [sic] Yates was present during all the discussions with the auditors," he said, specifically referring to Clive Jennings.

In January 1980, Frank Nugan himself showed up. He "said he would handle it personally," Jennings says. But on January 15, when the auditors appeared at Nugan's hotel room, they were told, "You'll never guess what's happened. I came all the way from Australia with the answers to your questions, but then I left the file back in Australia."

Nugan made a show of phoning his secretary and telling her to send the file. Jennings and Gorman say Nugan stayed two nights, then left on a morning flight. Jennings and Harris talked hours with Nugan, had dinner with him. What was said? Jennings seems very reluctant to be specific.

What information was being sought?

"Routine questions that any auditor asks his client."

For instance?

"I don't think that's appropriate."

But, Jennings says, "An inspector had told him it [the bank] would be decertified if he didn't produce the accounts. I think that's what prompted his visit here."

Indeed there was evidence that Singapore banking authorities had been giving deadlines for certification of the books, and that Hong Kong authorities might be waking up to the problem, too. "He seemed worried about decertification," Jennings say. But when Nugan flew out, "his attitude was that all the information we needed to our satisfaction would be forthcoming."

Two weeks later he was dead.

_______________

Notes:

1. The Journal stories were researched and written by the author of this book.

2. 420,000 Australian, as roughly convened to U.S. dollars at then-current rates.

3. The shares were traded through its one-bank holding company. of which Beazley was executive vice-president and chief administrative officer.

4. This quote, beginning with the words, "He said," and the "It wasn't odd" quote originally appeared in The Australian of August 16-17, 1980, and were confirmed by me in my own interview with Wilson, June 17, 1982, whence derived the other quotes.

5. Moyle, now working for another firm, declines to comment, citing "pending litigation."

6. Interview with the author, who also talked to Harris (who referred queries to Clive Jennings), and to Jennings.
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Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

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CHAPTER TWENTY-THREE: The Explosion

Lee Nugan returned to Australia over Christmas 1979 -- the ostensible occasion being Steve Hill's wedding. Her husband had spent several hundred thousand dollars of the depositors' money refurbishing their already resplendent waterfront home. By several accounts, she wasn't pleased with his taste.

Guy Pauker, of all people, brought his wife and son to spend the Christmas and New Year's holidays visiting the Nugans. He told the Stewart commission, "Nugan and his wife seemed to be not on very good terms, and he was definitely clearly depressed.... He would bounce that little girl of theirs on his knees very wistfully and talk to the little boy.... The way he was talking to those children, in particular, almost in retrospect of course, looked as if he was saying goodbye to them."

(Lee Nugan denies what Pauker said, and says her husband was just nervous because of Pauker. "Frank did not want him there," she says. "He asked him, but then he changed his mind.")

On January 7, 1980 -- the day Bernie Houghton was entertaining the Republican head of the House Armed Services Committee -- Nugan walked into a store, and with speed that startled the storeowner, bought a rifle. To anyone's recollection, it was the only gun he'd ever owned.

Two days later, Nugan flew back to the United States with his wife. But then he was off alone to Florida, the Caymans, and Switzerland. He apparently visited Colby in the United States, and made plans to see the former CIA director in Asia the next month. He told people he was moving to the United States, and entered negotiations to buy a Florida condominium.

He was back in Sydney January 25. Bernie Houghton told police he stopped by Nugan's office to say hello that day-a bit odd, considering Houghton's outspoken distaste for Nugan -- and saw nothing untoward. Hill says he and his boss had a confrontation over the audit that night -- that Nugan tried to tell him everything had been taken care of at Price Waterhouse, and that Hill didn't believe it. Hill says he resigned, which certainly looks good for Hill; there's no way to prove it, and Hill was back at work when the disaster hit the next week.

On Saturday, January 26, Nugan agreed to purchase a $2.2 million country estate he had been dickering over with the owner. The estate contained 828 landscaped acres and a mansion. It was, he told the prospective seller, "the finest in Australia." He agreed to close on it the next day.

Instead of keeping the appointment, he put the rifle in his Mercedes and made his trip to Lithgow.

***

Pat Swan, Frank's secretary, has said she got a call about noon on Sunday, January 27, from Ken Nugan. Steve Hill has testified that Pat Swan called him that day. [1] Bernie Houghton says Hill woke him up with a phone call, "told me that Frank was dead and that I should get the people out of Saudi Arabia." Houghton did, though soon they all went back.

The next day, Monday, was a legal holiday. By the available evidence, Hill, Swan, Ken Nugan, and perhaps others went into the office and began removing files.

On Tuesday, Houghton seemed to take over. Hand and Yates were due in from the United States, and Shaw from the Philippines. Houghton brought Mike Moloney, his lawyer with the checkered past, to the airport for the big homecoming -- "to handle the press," Houghton has testified. But as soon as everyone got to the office, Moloney -- whom Hill and others in the organization had never seen before-began barking orders.

Houghton introduced Moloney to the crowd, saying, "He is a good guy, and will help us." Then Hand declared that Moloney was operating with Hand's express authority. Hand seemed to be taking signals from Houghton, who, for his part, recalls, "It was bedlam down there, everybody crying and wringing their hands, and the phones were ringing."

Hill and Shaw have recalled being startled by Moloney's sudden ascendancy, especially when the lawyer began leveling his heavy-handed threats that their wives might be cut up in little pieces and returned to them in boxes if they didn't cooperate. Hill also wondered at how Moloney had suddenly become so thoroughly aware of Nugan Hand's entire business, as his remarks revealed him to be.

Hill testified before the Corporate Affairs Commission, "Mr. Moloney moved into our office and was conducting his legal practice for all intent and purpose from our office. From that time onwards, Mr. Moloney took over the management of the company, which included issuing instructions to the staff."

As for the man who had recently been vice-commander of the combined air, sea, and land might of the United States Armed Forces over more than one-third the world, Admiral Yates contends he just sort of stood around, as if nothing unusual were happening. Moloney, however, says he and Yates "were great mates," and that the admiral concurred with the decision to remove the files and helped carry them.

"Frank had been making loans to everyone without recording it on the books-just his handwritten notes," Moloney says. "And people on the staff were removing this and removing that. If I had an IOU for $50,000 in there, I would have been the first one to it."

At the decision-making meetings the rest of the week, the same pecking order continued. Houghton recalled to the police that some staffers objected to his taking part in the meetings because he wasn't officially on the board of Nugan Hand. But Houghton said he sat in anyway, because Mike Hand wanted him to.

Tuesday night, the Stewart commission reported, Admiral Yates met at Hill's house with Hill, his wife, and the two Australian auditors, Pollard and Brincat -- further evidence that Yates was actively involved in events and certainly aware of them. [2] Under questioning from the auditors, Hill revealed that Nugan Hand owed $20 million overseas with "hardly anything" there to pay, and $1.5 million to unsecured depositors in Australia with $50,000 in the bank. The debts, of course, were just those Hill was aware of; Hand, Nugan, Houghton, and Shaw, and possibly others, kept records of their own deals.

According to the Stewart commission, "Reference was made by Mr. Hill to the possibility of fraud on the part of Messrs. Hill and Brincat, and Mr. Pollard suggested that Mr. Hill should see a lawyer."

Next morning at the office, Hand, Houghton, Yates, Shaw, Hill, and Jerry Gilder heard Brincat announce that Nugan Hand's worth was overstated by $5 million because of the internal IOUs that were passing for assets. He urged bankruptcy proceedings. "This was strongly resisted by Michael Hand and Michael Moloney, who suggested bringing in funds from overseas," Hill testified before the Corporate Affairs Commission.

***

The search for funds of all kinds certainly never stopped. And funds were found. They were not, however, applied to Nugan Hand's solvency problem. Everyone seemed out to protect himself, and it was clear there were two classes of clients. Some privileged ones were getting their money out, while others were being recruited afresh, with new lies, to replenish the coffers.

More than $1 million -- no one knows for sure how much more -- was handed out in the week after Nugan's death to clients brought in by George Shaw. Many of these clients identified themselves by nothing more than Shaw's word that they were owed the money. No records had been kept. Some $1.3 million, all unsecured deposits, were retrieved at the same time by the owner of a food store chain who had dealt with Steve Hill.

One dentist was paid off, Shaw testified, [3] after a third party, representing the dentist, summoned Shaw and Nugan Hand staff lawyer Graham Edelsten to a hotel lobby. The middleman slugged Edelsten a couple of times, Shaw testified, and announced "that he had a pistol in the glove box of his car that he was not afraid to use, and if we did not compensate Dr. Shalhoub within five days that our lives would be at stake." The dentist was paid.

Two brothers who had deposited money with Nugan Hand visited Shaw's house and left him a threatening note, Shaw testified. They were paid. Some clients of a Nugan Hand representative named Andrew Wong were paid through Moloney, after death threats were issued against Wong, according to the liquidator John O'Brien.

According to Shaw, threats were flying almost indiscriminately. Immediately after Frank Nugan died, he testified, "There were pressures applied by Michael Hand, Michael Moloney and others that I should go to the Philippines with great haste, so as to make myself unavailable for any interviews by investigators. 1 was threatened [by Hand] and warned, and with great pressure applied involving injuries ... not only to myself ... but to my family, that under no circumstances" would Shaw identify any clients to authorities.

Hand even called Shaw's wife, Shaw testified. Houghton's name was used to underscore the danger. "Arrangements can be made through his [Houghton's] connections," Shaw quoted Hand as saying.

Claiming that he felt "bewildered" and "apprehensive" about all this, Shaw said he sought legal representation. But of all the lawyers in Sydney he could have gone to, he picked John Aston, the lawyer for the "Mr. Asia" heroin syndicate. According to Shaw, Aston said he couldn't represent Shaw because it would be a conflict of interest.

Aston, Shaw testified, then volunteered some startling advice. As the task force summed it up, Aston said that Frank Nugan "had been involved in a number of questionable dealings, that he had been involved with people of questionable background, and that no one should ever know about the cash transferred to Singapore because should that eventuate the lives of Mr. Shaw and his family would be in danger."

"Shaw maintained that he took this statement to be intimidation in the form of a death threat," the task force reported-not an unreasonable interpretation. Shaw said Aston specifically told him to destroy all files "relating to his, Aston's, transactions and those of Rich ard Spencer," the narcotics officer Aston dealt with-or give them to Aston for destruction.

Added the task force, "After cautioning Shaw about his responsibilities as a director, Aston advised him to give as little information concerning the affairs of Nugan Hand or its clients as possible if questioned by the authorities."

Bob Gehring, Houghton's employee and friend, remembers driving Mike Hand to Shaw's house once during this period. (Gehring eventually testified before the task force, in exchange for a grant of immunity from prosecution for his own actions. By the time he testified, both Hand and Houghton had long since fled Australia.) Gehring said that Hand had declared, "Shaw is getting pretty nervous. I'm just going to calm him down." The two of them went to a basement room alone for ten minutes or so, Gehring testified.

When they emerged, Gehring said he remembered Shaw pleading, "What am 1 going to do?" and Hand saying, "You are a mess. You should see a doctor." Shaw said he had been to a doctor.

"I have never seen anyone so emotionally upset," Gehring re called. "I remember him mentioning that he had changed his phone and got a silent [unlisted] number, and he was still getting calls." As Gehring and Hand prepared to go, Gehring testified, "George Shaw ... came out to our car, he was crying and hanging onto Michael Hand, and then we left."

***

The politically powerful local organizations that had invested with Nugan Hand, such as the football leagues clubs and town councils, by and large got their money out before the bankruptcy filing.

As late as mid-March, at least two other depositors were able to reclaim their funds -- Elizabeth Marcos, sister of Philippine President Ferdinand Marcos, and her husband Ludwig Peter Rocka. Elizabeth Marcos was also the appointed governor of a large province in the Philippines. Between them, she and her husband had deposited a total of $3.5 million, according to records Wilf Gregory slipped to Mike Hand by personal courier March 17, 1980, on the eve of a visit to Sydney by Rocka to retrieve the money. For whatever reason, the missive from Gregory was left around for authorities to find.

***

Meanwhile, Bernie Houghton, having seen how easy the pickings were in Saudi Arabia, couldn't resist raising some money the same way when he got back to Australia. He persuaded a police sergeant with the Victoria Police Force, of all people, to withdraw $80,000 from his pension account on January 22, just five days before Frank Nugan died.

The sergeant had answered a newspaper advertisement for gold bullion investments placed by a former employee of Houghton's, and wound up talking to Houghton. Unfortunately for him, he decided he preferred the security of a Nugan Hand deposit to the vagaries of the bullion market. He started out small, with a few thousand dollars, and cleverly tested the system on a trip to Asia. As he had been promised he could, he withdrew $500 in Hong Kong from Jill Lovatt, and $500 more in Manila from General Manor.

Thus convinced of the soundness of the scheme, he went home and put in his whole stake. He lost every penny. The paperwork from his big deposit was still being processed as George Brincat, the accountant, declared Nugan Hand was insolvent. It was shortly after that that the sergeant's money went into an account in the name of a corporation whose directors were Bernie Houghton and Robert Gehring, Houghton's employee and friend.

Nationality was no barrier for Houghton. Tucker T. Coon was a fellow American, working temporarily in Melbourne. He had an account with the same commodities dealer the police sergeant had contacted, and also decided to make the change to Nugan Hand. On January 31, the day after Brincat had declared Nugan Hand insolvent, Coon liquidated his commodities account, which brought him $23,000.

But, as earlier suggested by Houghton and the commodities dealer, instead of cashing his check he merely endorsed it over for deposit in Nugan Hand -- only, for reasons he was told had to do with foreign exchange, he endorsed the check directly to a company called Arnim Proprietary Ltd., the signatories on whose account were Houghton and Gehring.

Houghton was so unscrupulous that, according to the Corporate Affairs Commission, he even cheated Dr. Tom Wall, a $300,000 loser in Nugan Hand, by misappropriating a $25,000 check sent to Dr. Wall through Nugan Hand by a bank in Singapore. Houghton deposited the check to the account of a corporation he controlled, with an endorsement that Dr. Wall says is forged.

Houghton told the Corporate Affairs Commission that Nugan Hand had given him the check made out to Dr. Wall as repayment of an alleged loan Houghton had given Nugan Hand. He said he assumed Dr. Wall's signature on the back was genuine. In fact, Houghton admitted he took several deposits intended for Nugan Hand and put the money in corporate accounts he controlled -- but said he did so because Mike Hand had warned him that Nugan Hand might fold!

Mike Hand was telling different things to different people. In early February, just about the time Houghton was protecting Dr. Wall's check by stealing it, Dr. Wall tried to withdraw his funds from Nugan Hand, he told the commission. But he was informed by Mike Hand "that the whole bank had closed down, that the funds had been frozen."

Dr. John K. Ogden, who lost more than $600,000, says he flew to Sydney as soon as he heard Nugan had died. "Mike Hand kept reassuring me that all was well, and there was no reason to take my money back. Hand and Beazley, they both reassured me that there was absolutely no reason to worry about my deposit."

But perhaps the most imaginative stalling tactic Hand devised was this: On March 11, I980, a depositor named Ah Chuan Liau, of the town of Carlingford in New South Wales, wrote asking to borrow $30,000 against his much larger deposit. In reply, he got a letter from Hand, stating, "On occasion, clients of our bank, as we are sure happens with clients of other banks, make requests to prematurely break deposits or to borrow against their deposits. Each transaction is studied on an individual basis.

"At present we are in a period of extreme escalating interest rates," Hand went on, "and are viewing a market fall in the price of precious metals, such as gold and silver. It would not be prudent of us to advance low-interest-rate loans at the time when money could be laid off throughout the world at extremely high rates of interest."

However, Hand went on, "we are prepared to allow you to benefit by the increased interest rates in existence throughout the world." So, Hand informed him, the interest rate on his deposit would be increased from 11 percent to 16 percent from March 28 until its maturity in June. There is no record of whether Ah Chuan Liau was satisfied with this offer.

***

Some other people did get money out of Nugan Hand, however. John McArthur, then managing the Hong Kong office, reports that on orders from Hand and Beazley he sent $200,000 to an account in Florida in the name of DEB/NHI, and $400,000 to a German bank. There was a notation by the $200,000, "Payout to Bernie Houghton's clients in the U.S."

Beazley, whose initials are D.E.B., says some money was sent to him for purchase of a Florida bank, and that he returned it when the deal didn't work out. Liquidators in Sydney and Hong Kong say there is no record of his return of the money. (Beazley hung up when a reporter called to ask if he had proof he returned the money.)

Like Beazley, Houghton denies receiving any improper payments. McArthur, however, says Houghton took $50,000 in expense money in October 1979, and $150,000 more in February 1980.

McArthur says another American banker Beazley hired to assist him left Hong Kong with $94,000 in expense money and some documents. In a rare recorded case of FBI cooperation with Australian- Asian authorities investigating Nugan Hand, the FBI found the missing banker and retrieved the documents-but not the money, which the banker denied he took.

McArthur says that even after bankruptcy papers were filed in April, Hand continued to instruct him to transfer hundreds of thousands of dollars out of the legally frozen accounts; McArthur says he drew the line then, and refused.

McArthur says Shaw, like Houghton, was still soliciting deposits after the pay-outs had stopped. So was General Manor, though Manor says that up in Manila he wasn't aware of the pay-out problem.

On March 17, 1980, a Hong Kong company named Anchor Promotions Ltd. sued Nugan Hand for about $800,000 that it claimed it had deposited, and that the bank, as of February 7, refused to pay back. Anchor said Frank Nugan had agreed a year earlier to make the payments to an affiliated company in Australia, and had already paid out more than $350,000 there, the latest chunk being $130,000 paid on January 15, 1980. Three weeks later, the suit alleged, Nugan Hand had refused to recognize Anchor's deposit in Hong Kong.

Anchor asked the court to appoint a receiver for Nugan Hand, which caused a furor in the Hong Kong financial press. The suit became the lead item for a local scandal sheet called Target Financial Service. Target continued to headline Nugan Hand's troubles in expose fashion the rest of the spring.

On March 25, Elizabeth Thomson, the in-house counsel at Nugan Hand's Hong Kong office, tried to deal with the situation in a staff memo, claiming the problem was just "a legal technicality," and "a normal part of commercial business." Her memo urged staffers not to talk to the press about the matter, since it was in litigation.

Nevertheless, more lawsuits followed from other depositors who were unable to recover their money. On April 28, the Hong Kong Financial Secretary appointed Peat, Marwick, Mitchell & Company to investigate Nugan Hand's affairs, and one day later Peat, Marwick reported back that it believed the company was insolvent.

No wonder. "Six million was cleaned out of [the Nugan Hand account at] Irving Trust in the last two weeks" before the bankruptcy proceedings, Moloney says now. In fact, he says, he personally supervised the importation of $2 million from Hong Kong into Australia on the Tuesday after Frank Nugan died.

Les Collings says he thinks Hand and Houghton raided the bank after Nugan died. "That Houghton is still tending bar, I think it's criminal," Collings says, adding that less than a month before the bankruptcy, Hand and Houghton had been falsely reassuring him, too, about the bank's rosy future. They "were up here telling me that Nugan had been undergoing treatment for cancer" before his suicide, Collings says.

***

In bankruptcy cases, a receiver, or trustee, takes over management of a company during a period of investigation and negotiations aimed at an amicable settlement between the company and its creditors. When the court determines that further negotiation is fruitless, and that the company should be liquidated and the assets distributed to creditors, a liquidator is appointed. In Hong Kong, all these functions are performed by a government office.

In Australia, as in the United States, receivers are private professionals, and the person filing the bankruptcy petition often influences the court as to who is appointed. In the case of Nugan Hand in Australia, Moloney filed the papers. His and Mike Hand's choice of receiver (or "provisional liquidator" as it was called) was the accounting firm B. O. Smith & Company. Moloney was retained as attorney for routine work, while courtroom representation was entrusted to the business partner of a right-wing Parliament member Frank Nugan knew and had supported financially.

In an initial report in the Hong Kong court, the Hong Kong receivers said they had met with Smith, the Australian receiver, and "were not very satisfied with his attitude, which seemed to be to reach an early settlement by selling off available assets rather than pursuing claims to recover assets." In other words, Hand and Moloney were trying to wrap the case up without an effort to trace the missing money and recover it for the depositors. Furthermore, the Hong Kong receivers reported, "the lawyers in the Cayman Islands acting for Nugan Hand (Bruce Campbell & Company) are not cooperating voluntarily."

Steve Hill has testified that Mike Moloney received more than $96,000 in fees from Nugan Hand between February 1 and April 16. "On several occasions I endeavoured to determine what was the basis of payments made to Mr. Moloney, without success," he testified. He also testified that Moloney, in Hand's presence, lied about the location of company records to investigators from the Corporate Affairs Commission, who were on the case by mid-February.

So cowed were the investigators that Moloney was able to stall them, and sometimes literally fight them off. Months passed before it was publicly known that the fraud was not just a minor or technical one.

***

To protect his wife from angry creditors, he said, Michael Hand secretly moved into some unoccupied rooms over Bob Gehring's butcher store, where the company records were also secluded. Gehring was fully trusted by Hand and Houghton, as a nominee (or front man) of Houghton's companies, Gehring sometimes had signing power over Houghton's money.

According to Michael Moloney, Gehring had even applied to the CIA, and used to tell a story about it. The marine from Dayton "had no academic credentials," Moloney relates, but the CIA "liked his attitude. 'The world is full of commie bastards and all I wanted to do at that time was kill, kill, kill,'" Moloney quotes Gehring as having said.

"They told him to report to a place in California. But he heard first from Bernie. This was in the late '60s. Bernie didn't say what it was, but Gehring said he decided to come to Sydney because it was quiet." While waiting for his CIA appointment, Moloney says, Gehring had taken up reading in the library on Guam, and even developed a habit of quoting a lot from Shakespeare. (This account, of course, begs the question of whether Houghton might have been Gehring's CIA appointment.)

Gehring had done all he could for his friends through the crisis after Nugan's death. As he remembered it in his task force interview (which he gave in exchange for immunity from prosecution, and only after Hand and Houghton were long out of the country), Hand had walked into the Bourbon and Beefsteak bar and asked Gehring's help in storing the records. "I said I'd only be too happy to help him."

That very night, Gehring testified, he, Bernie Houghton, George Shaw, and a butcher-shop employee moved the records in the meat van to the butcher shop, from a temporary office location where they had been stored. "There were files in manila folders, there were cash books, journals, and ledger-type books," Gehring said. Later, "with the assistance of all my employees," he said, he moved the files again, for convenience's sake, scattering them among a couple of nearby locations he owned for his meat and provisions businesses.

Eventually, Hand and Houghton turned to Gehring again, this time entrusting him with their plots to escape Australia.

Houghton left with a blue-ribbon escort on his getaway flight. The task force found out about it when the detectives happened to interview a Houghton associate, Gerard W. J. Matheson. Matheson recalled he was having a drink at the Bourbon and Beefsteak June 1 or 2, when Gehring "announced that he had to go to the airport to meet someone."

As the task force related it, "Matheson accompanied him and there they met an American who Matheson described but could not name. The three went from the airport to the Bourbon and Beefsteak, where they met Houghton a short time later. Matheson said that from the tenor of the conversation that was had, he formed the view that this man was connected with U.S. intelligence and/or the military. There was also mention of arms sales.

At Houghton's request, Matheson then made inquiries about the availability of seats on a flight to the Philippines. He believes that that evening or the following day, Houghton and the unnamed man departed Australia together for the Philippines.

"From the description supplied by Matheson and an examination of airline and immigration records," the task force reported, "the unnamed American has been identified as being Thomas Clines."

Former senior CIA official Tom Clines was a principal figure in the White House approved Iran-Contra arms transfers of the mid-1980s.

During his Acapulco interview in June, 1981, Houghton told the task force he had spent his year abroad traveling on a business deal "involving an American company and the sale of jeeps to Egypt." He refused to identify his associates. But at exactly this time, a company owned by Clines, who had been working with Ted Shackley after borrowing seed money from Ed Wilson, was reaping a tidy $71.4 million from the U.S. Treasury, in commissions as shipping agent for the sale of jets, tanks, missiles, and other arms to Egypt.

As already noted, at least $8 million of those billings, approved under the Supervision of General Richard Secord, were phony. Houghton's name never publicly surfaced in the investigation, and it isn't known exactly what role he played.

***

Houghton having departed Australia in the company of President Reagan's eventual weapons maneuverer, Clines, Hand was left in Sydney. Houghton had been inquiring about false passports in Europe, but apparently didn't find one for Hand. Hand told Gehring "there was a 'stop' on him at the airport and he needed a passport in another name," according to Gehring's testimony.

In investigating this, the task force found several irregularities in the way Hand had obtained his original Australian passport in 1973. For one thing, he hadn't been forced to turn in his U.S. passport. The task force also found that a folio had been mysteriously "torn away from the Sydney file" on Hand's application, indicating that some information may have been unlawfully removed. Finally, the task force observed, the application had been approved by the same immigration officer who had granted citizenship to Harry Wainwright, the lawyer and dope trafficker.

The Nugan Hand people were no strangers to tampering with the customs and immigration process, but now that Hand's back was against the wall, his efforts weren't working. "Mike ... told me he was attempting to get an Australian passport in another name ... but everything failed," Gehring said. "The situation was becoming impossible, and I felt he had to get out of the country because of the threats he was getting."

Gehring said Hand had told him about at least two death threats from depositors. "Even if he sorted out the problems in Australia, the newspapers suggested he would be extradited to Singapore," Gehring added. "I decided to help him by getting a passport in the name of one of my employees who was about his age and had the same color hair.

"So I got some birth certificates of my employees by telling them I needed them for the superannuation [pension] scheme," Gehring said. From these, he chose a butcher named Alan Glen Winter as fitting the age and hair requirements. He obtained the application forms for Australian passports, while Hand had pictures taken of himself with a beard, mustache, and different-style hair.

Then Gehring went to a trusted travel agent and bought a roundtrip ticket from Brisbane to Fiji and then on to Canada. On June 5, as an accommodation to a customer, the travel agent applied for, and soon afterwards he got, the passport for Hand.

But Michael Hand had not entrusted his departure to amateurs. At the time of the passport application, Gehring was introduced to the mastermind of the scheme, an American identified to him only as "Charlie." All Gehring knew about the name was that it was "not his correct name.... Mike Hand said he knew him from the army or somewhere like that," and "told me that Charlie had come out to help him get out of the country."

It was Charlie who provided the false beard and mustache, and Charlie who took the photographs. And it was Charlie who got on the train from Sydney to Brisbane with Hand, and left the country with him.

"I only saw him about five times. They acted very secretively," Gehring said. "I wasn't told where he was staying, and he appeared as if he didn't wish to be seen in company with Michael Hand."

Two days before they departed, Hand visited Gehring at the butcher shop. "He came in and shook my hand, and said, 'I won't see you anymore.' He told me that he intended going to Fiji, flying into Canada and then traveling by land from Canada into the United States.... He wouldn't require a visa to enter America from Canada."

***

Hand left at the beginning of a three-day weekend in June, Gehring said, "and every day for about a week I would put fresh food in the fridge, wet down his sox and toothbrush, flush the toilet, run the shower for a while and stomp around and bang some doors for the benefit of the neighbors.... Ultimately Michael Moloney rang me and said he wanted to contact Hand in relation to some court case. Hand had told me to tell no one about his disappearance, and I told Moloney I hadn't seen him for a couple of days, and I told him I would leave a note on his mirror in the bathroom. I did this. Michael Moloney kept ringing each day, and I put two or three notes on the mirror."

Eventually, Gehring returned a call to Moloney but got someone else at the Nugan Hand office. He left the message that Hand hadn't been seen for over a week. Before Moloney returned, the person Gehring had talked to had passed the news on to one of the journalists who was besieging Nugan Hand, and, as Gehring testified, "the rest is history."

Hand immediately took on the usual "missing-man" celebrity. "Missing Banker In Rio, Says Interpol," screamed a headline in the Sunday Telegraph (which also reported that its "efforts yesterday to locate him [there] were unsuccessful"). "Missing Banker Feared Murdered," read another headline. And there was even, based on an optimistic forecast from a lawyer Moloney was working with, "Michael Hand May Return."

Target Financial Service, the gossipy Hong Kong newsletter that claimed to have first exposed the Nugan Hand affair, led its November 17, 1980, issue with an "EXCLUSIVE" report that not only was Michael Hand living in South America, helped there by his "friends" -- former CIA employees -- but that Frank Nugan was living in South America, too.

The late Mr. Nugan was occasionally the subject of reports that he had been seen in bars in places like Atlanta and Kansas City. Suspicion grew so wild that in February 1981, officials ordered Nugan's body exhumed, just to put everyone's mind at ease. There was grisly television and newspaper coverage.

The headline over the top of the front page of The Australian, the next day, said, "Body Was Nugan's, But How Did He Die?" Reporter Nicholas Rothwell wrote, "The nation looked on through the lenses of countless press and television cameras as the investigators who dogged international banker Frank Nugan until January 26, 1980, the date his death was recorded, pursued him to the grave."

The exhumation took three hours, the stench occasionally driving back the crowd. A "police scientific expert" was lowered into the reopened grave to examine the coffin before it was hauled up.

"Some are dry, some are wet," one weary gravedigger told interviewers by way of complaining that Nugan was "wet," and therefore "very messy." A dentist finally identified his remains.

That same month, February 1981, Gehring spoke again with Michael Hand. "I went to America and visited my mother and my brother, who both live in Dayton, Ohio," he has testified. "Eventually I got a phone call from my brother when I was in San Francisco. He gave me a telephone number and the name Charlie, and told me that Charlie wanted me to contact him urgently.... I looked up the area code and it was somewhere in Wyoming."

"I asked for a man named Charlie," Gehring testified, "and the person on the phone said, 'There is no Charlie here.' There was a pause, and he said, 'Wait a minute,' and the man Charlie came to the phone," Gehring said, adding that he recognized Charlie's voice from their meeting in Sydney.

"Charlie said that Michael Hand wanted to talk to me, and asked for a phone number.... I told him I was leaving from the San Francisco airport." Charlie took the number of the pay telephone Gehring was using, and moments later Hand called.

"He was looking for news about himself, and the investigation over here [in Australia]. He also asked me about Helen, his wife, and also if I had gotten into any trouble over the false passport. He also asked me if I had seen Bernie Houghton [who was also on the lam then], and I told him I had.

"I asked him how he was doing, and he said he was doing a bit better, and getting it together," Gehring said. But he said Hand didn't reveal where he was, or what he was doing -- except to report that he was no longer relying on the alias of Alan Winter.

***

In March 1983, the task force reported:

"Inquiries have revealed that "Charlie" is identical with James Oswald Spencer, a U.S. citizen born 22 September 1940, presently resident in Arizona. Spencer is a former member of the U.S. Special Forces, and like Hand was loaned to the Central Intelligence Agency during the latter half of the 1960s for operations in the Southeast Asian conflict. Hand and Spencer became close at that time."

Obviously they still were. In applying for a visa at the Australian consulate in Los Angeles before going to rescue Hand, Spencer had listed his purpose as "sightseeing" and "medical treatment." For a contact address, he listed "H. Boreland, P.O. Box 2045, G.P.O., Sydney." That box was rented out to Helen Boreland, who was also Mrs. Michael Hand.

Spencer arrived in Australia May 14, 1980, and left June 14, on the same Fiji-bound flight as Michael Hand, traveling under the name Alan Winter.

While task force investigators were in the United States in November 1982, they persuaded the FBI to interview Spencer. Besides apprehending the American banker who had taken some documents out of the Hong Kong office, the interview with Spencer was the only instance of cooperation that Australian or Asian authorities have received from the FBI in the investigation of Nugan Hand. (A Justice Department prosecutor, Lawrence Barcella, who put Edwin Wilson in jail, did arrange for the task force investigators to talk to "J," and other witnesses against Wilson, many of whom were sequestered in protective custody.)

Spencer told the FBI he had last seen Hand "several years ago when Hand was in the CIA." He denied helping Hand leave Australia, refused to say whether or not he had ever been to Australia, and otherwise declined to answer any questions "regarding when, where or under what circumstances he last saw Michael Hand." Spencer couldn't be located by reporters.

Concluded the task force, "Taking into account all the available information, the Task Force rejects outright Spencer's denial, and concludes that Spencer is 'Charlie.'"

The task force also listed the whole "Charlie" episode among various pieces of evidence that "suggest that Hand retained his U.S. intelligence ties -- whatever they might have been -- throughout the 1970s and probably into the 1980s."

And where is Michael Hand? Says Wilf Gregory, who ran the Manila office with General Manor, "All I can imagine is that Mike Hand has been transferred to another CIA operation and he's taken the money with him."

_______________

Notes:

1. The Stewart commission says instead he was called by Ken Nugan, at 4 P.M.

2. The commission said Yates "did not recall attending this meeting but said that he could have been there." The commission reported it as fact, however, based on Pollard's write-up of the events in his diary and other accounts.

3. Before the Corporate Affairs Commission.
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Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 4:41 am

CHAPTER TWENTY-FOUR: Thwarting the Investigators

Some dedicated people have worked years trying to solve the Nugan Hand mystery. The staff of the Joint Task Force, and Geoffrey Nicholson, the independent counsel eventually hired by the Corporate Affairs Commission to produce its two-volume report, are obviously among them. So are the Hong Kong liquidators' office and John O'Brien, the outside liquidator finally appointed by the Australian courts in July 1980.

No one was more clever or persevering or did more to inform the public about both the truth and the mystery of Nugan Hand than Marian Wilkinson, reporter for the National Times in Sydney. Rising above the sensationalism of many of her colleagues, she was consistently accurate and kept the heat on the official investigators.

But there was only so much all these people could do against a well-coordinated cover-up -- particularly since they lacked authority to compel sworn testimony from the many suspects who weren't Australian. Even Bernie Houghton, who was making his home in Australia, never had to testify under oath.

The initial inspectors sent out by the Corporate Affairs Commission after Frank Nugan's death were ridiculously inept. They allowed themselves to be shoved around and intimidated by Michael Hand and Michael Moloney until the evidence was dissipated.

For example, the commission's report describes how one afternoon the inspectors cooled their heels for four hours, fruitlessly waiting to be admitted to see documents and mumbling threats of legal action. Then, the report says, "Mr. Moloney removed a large envelope containing documents, stating he would have it photocopied prior to production. Neither the records or photocopies of them were subsequently produced to the delegates."

When the investigators finally did get their invitation to enter, they seemed surprised to find many of the file drawers empty. They came across a box of check stubs and deposit slips from Yorkville Nominees' bank account; according to the report, Pat Swan, Nugan's private secretary, initially allowed them access to the box, but Moloney immediately took it from them.

For an American, used to FBI efficiency, it is hard to imagine cops so spineless that they let criminal suspects carry evidence away right under their noses, while waiting for permission to examine it.

Geoff Nicholson was brought in to put the commission's investigation on a professional setting. He eventually did manage to reconstruct a balance sheet for the Nugan Hand holding company, but the document wasn't worth much. It showed $17.2 million in assets, of which $16.8 million consisted of "Inter-group companies' accounts." (Actually, there was about $1 million in honest assets by the commission's reckoning, but much of this was offset by a $746,000 checking account overdraft.)

The unpaid and unpayable claims appeared to approach $50 million. It was assumed that a great deal more money had been lost by people who had too much to hide to file a claim. This was the money not just of drug dealers and obvious criminals. One of Nugan Hand's main lures was helping people avoid their countries' foreign exchange control laws. Filing a claim for money that had been illegally sent out of the country in the first place would be asking for heavy trouble in Malaysia, Indonesia, Thailand, the Philippines, Taiwan, and a lot of other places -- even Australia.

Also, early seekers got no hopeful responses that might have encouraged others to write in. Those who wrote Admiral Yates's Nugan Hand Bank in the Cayman Islands got replies from a Bruce Campbell & Company, whose address was a box number there, saying it merely acted as "the registered office" for Nugan Hand and had no meaningful information. The liquidators in Sydney and Hong Kong offered little cheer either, as they faced years of investigation with few assets in sight.

The Corporate Affairs Commission's effort to apply normal accounting methods to the corpse of Nugan Hand was futile. In Singapore, Tan Choon Seng, who supposedly kept books there for the Cayman bank, explained that he had got his job through George Brincat, the totally manipulated accountant in Sydney. Tan Choon Seng said he had learned his bookkeeping methods from-of all people -- Brincat and Steve Hill, who have testified that they routinely altered their figures as Frank Nugan or Mike Hand told them to -- the accounting equivalent of "Hello, Sweetheart, get me rewrite."

The commission found there was no control register listing the bank's international certificates of deposit in order of serial number. "Mr. Brincat agreed under examination ... that in the absence of such a register it was quite possible that a representative accepting a deposit and issuing an International Certificate ... could simply pocket the deposit if it had been made in cash," the commission reported.

Though the point wasn't raised, the deposit also could be pocketed by having the client make out the check to a separate corporate front, as Houghton did at times. "Mr. Brincat could not recall ever seeing a reconciliation between deposits accepted and International Certificates of Deposit issued," the commission said.

***

John O'Brien was able to raise $1.2 million from the sale of Frank and Lee Nugan's house, which had clearly been bought and refurbished with depositors' funds. He also raised about $40,000 from the sale of various furniture. But, as is the case in many bankruptcies, the fees for the investigation ate up much of the money the investigation produced.

O'Brien drew a whole list of people and companies that appeared to owe Nugan Hand money as a result of receiving loans from Nugan Hand. But as O'Brien well knew, and acknowledged in private, these "borrowers" weren't really borrowers at all -- just people having their "deposits" returned to them in a way Frank Nugan said would mean they didn't have to pay taxes on the money. Instead of taxes, they paid Nugan Hand a fee, often as high as 22 percent.

Collection proved next to impossible. People denied they received the loans -- and there was no evidence to prove they had, except for some notation, often cryptic, that O'Brien had found among Nugan Hand's records.

Moreover, many of these "borrowers" were suddenly represented by counsel of a curious sort-John Aston, and his new partner, Alex Lee. In some ways, Lee could be considered a Nugan Hand insider. He was the husband of councilwoman Yolanda Lee, who had arranged government deposits for Nugan Hand. Soon Lee joined Aston's law firm, and also became a director of the Nugan fruit and vegetable group.

Dr. Ogden, the $600,000 loser, also went to Lee for advice, but in his case, he says, Lee "just told me not to try to get anything back, that it was useless."

In some cases, corporations had been created as fronts, to help people borrow back their money anonymously. But when O'Brien tried to collect on these corporate loans, he could never get anyone to admit to any continuing involvement with the corporation that borrowed the money. Often, the address of these front companies was care of some lawyer or accountant, who would respond that he no longer worked for the company and didn't know who did.

Pollard and Brincat, the accountants for Nugan Hand itself, were involved in representing these front companies. They would respond to O'Brien's formal demand letters with, for example: "Further to your letter dated 8th August, 1980, we advise that we no longer act in any capacity at all for Garcia Hardware Proprietary Limited. Yours faithfully, Pollard & Brincat."

What was O'Brien to do? Money had been turned over to Garcia Hardware, but Garcia Hardware was nowhere around. The money in all likelihood had flowed to some person for whom Garcia was a front, but how was O'Brien to prove it did, or find out who the person was?

***

Another problem that stymied the liquidators was the conflict of jurisdictions. O'Brien was liquidating seven Nugan Hand-related companies domiciled in Australia, while the Hong Kong liquidators' office was handling companies based there. Hong Kong and the Cayman Islands both claimed jurisdiction over the Nugan Hand Bank.

So O'Brien refused to accept many claims from depositors who thought their money was being supervised by Nugan Hand in Sydney, but who could not prove that their money ever actually arrived in Australia. One Filipino depositor who was in this bind hired Peat, Marwick's Sydney office to represent him. Peat, Marwick wrote O'Brien that "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."

The Filipino was turned down. So was an American who wrote a poignant letter arguing that since Hand and Houghton took the money, and they were in Australia, O'Brien ought to be able to lay hands on them. Even some Australian depositors were refused, on the ground that because they had received international certificates of deposit on the Nugan Hand Bank, their money had gone to the Cayman Islands and they had no claim against the companies O'Brien was liquidating. The one consolation for such people, if you can call it that, was that O'Brien didn't have enough money in the till to pay them anything meaningful even if their claims had been ruled valid.

An unfortunate chill developed between the two liquidators' offices. Seeking official authority to question Irving Trust Company, the U.S. correspondent bank for Nugan Hand, O'Brien says he asked M.D.M. (Mike) Woollard, a lawyer in the Hong Kong liquidators' office, for permission to become co-liquidator of the Cayman bank. "And he basically told me to go to hell," O'Brien says.

The Hong Kong liquidators say they are duty-bound to protect only the creditors of those entities they are liquidating. "The duty a banker has toward customers to confidentiality does not cease when the bank goes into liquidation," one asserted. And the Hong Kong authorities complained in their internal memos that the Corporate Affairs Commission in Australia had stonewalled them on requests for information.

The Hong Kong office began making formal demands of O'Brien. The books of Nugan Hand Bank in Singapore showed $6 million had been transferred to the parent company, whose own books, of course, showed that the money hadn't been received. "The view we take is that the Singapore books are substantially correct," a Hong Kong liquidator says. So, despite the fact that those books were subject to the same totally arbitrary rewriting as the Australian books were, basically by the same people, Hong Kong was demanding that O'Brien send back the $6 million -- which, of course, he didn't have.

Hong Kong also demanded that O'Brien account for 500,000 shares of stock in one of the Hong Kong companies, saying that no capital investment had ever been paid in to obtain the stock. Of course, Frank Nugan and Mike Hand apparently never paid in genuine capital for any of their companies. For the liquidators to be arguing over who owned the stock to this or that subsidiary, and whether the stock had been legitimately obtained, seems ludicrous. All the Nugan Hand companies were a tangled interlock of lies.

***

Despite the mishandling of the investigation in Australia, and the conflicts with Hong Kong, the most frustrating impediment to a solution of the Nugan Hand case has been the refusal of American authorities to cooperate.

The Australian investigative teams were absorbed with the American role almost from the beginning. One prosecutor working on the Nugan Hand case in Sydney had eleven books on the shelf by his desk the day a reporter stopped in. Three of them were related to the CIA and American politics: Philip Agee's CIA Diary, Edward Epstein's Legend, and John Stockwell's In Search of Enemies.

If that was the concern of the Australian Government, one can imagine the concern of the Australian press. The National Times petitioned the FBI under the U.S. Freedom of Information Act for information it had on Nugan Hand. The newspaper was told that of some 151 pages of material in the FBI files, it could see seventy-one.

But when the papers arrived, they resembled a collection of Rorschach tests, with page after page blacked out in heavy ink and bearing the notation "B-1," indicating that disclosure would endanger U.S. "national defense or foreign policy." What was left was a few pages of more or less routine information, such as the incorporation papers of Nugan Hand's Hawaii branch.

The Joint Task Force, the Corporate Affairs Commission, and the official liquidators all tried the same thing and got the same result. Mike Woollard, lawyer for the Hong Kong receiver, wrote a four-page, single-spaced plea to the legal liaison office of the American consulate in Hong Kong. In painstaking detail, Woollard enumerated the many reasons for suspecting that the U.S. Government had, or certainly should have had, important information about Nugan Hand that it wasn't disclosing.

After noting that the bank operated branches in the United States, and that many extremely high-ranking U.S. military and intelligence personnel were involved in its management, Woollard's letter assailed the withholding of FBI material.

It is clear from my investigation to date" [Woollard wrote], "that NHB [Nugan Hand Bank] and Nugan Hand's companies in general conducted the following activities in which I would expect the Federal Bureau of Investigation to take an interest:

1) They dealt with persons having known or suspected connections in dealings with drugs, and they are known to have assisted in making funds available for such persons in various jurisdictions in a way which makes the payees and recipients of those funds difficult to identify.

2) They maintained an active interest in banking in Florida and in particular in Dade County. They employed as their adviser and later chief executive a person who had been a president of a banking group centered on Dade County. They maintained an account with a bank which in February 1981 was the subject of a raid by officials of the Revenue, Drugs Task Force and Customs services.

3) They engaged in transactions having the effect of transfer- ring funds from one jurisdiction to another under conditions of some secrecy.

4) They were actively involved in negotiations relating to the supply of military equipment to various countries and persons who might have difficulty in openly acquiring such equipment.

In addition to the above indications of Federal Bureau of Investigation interest in NHB, there is also evidence both circumstantial and to an extent direct of Central Intelligence Agency or other U.S. intelligence agencies' involvement with NHB.


Woollard then listed ten examples, from the one-time CIA personnel on the Nugan Hand staff to the intelligence community veterans Nugan Hand dealt with on the outside.

"I should make it clear that as liquidator I have no interest in the activities of U.S. agencies except in so far as they assist in my primary task of locating assets," Woollard wrote. "Accordingly, the above connections both known and circumstantial are not the result of any systematical investigation by me of U.S. Government involvement in NHB. They have merely come to my attention as part of my general investigation of NHB affairs."

Saying he expected the Nugan Hand liquidation to go on for years, Woollard offered to negotiate with the American Government to get the facts he wanted under terms that would protect the U.S. desire for secrecy.

He was flatly turned down.

***

John O'Brien, Woollard's counterpart in Sydney, has been even more frustrated. "There's lots of questions to be answered," he says. "I wrote to the prime minister's office, the Commonwealth police, the American embassy here in Canberra," trying to obtain U.S. Government cooperation, he says. "But they don't want to answer my letters. The Americans, after prodding, said they had lost my letter. Then they had to send back to the U.S. for instructions."

Finally, in April 1982, more than a year after O'Brien (as well as the task force, Corporate Affairs Commission, and others) had begun requesting cooperation, the State Department sent a two-man FBI delegation to Sydney. But the G-men just stonewalled everyone, saying the FBI had already given its information to an appropriate Australian agency. They wouldn't say which agency they had dealt with, and they wouldn't re-release the information.

Both the Australian federal police and New South Wales police -- each of which participated in the Joint Task Force-say they've never received the information. The only other likely recipient would appear to be ASIO, the secret counterspy group with close ties to the CIA.

Asked if it was ASIO, Stephen King, a senior officer responding for that organization, will say only, "I can't imagine anyone in ASIO having authority to request information on Nugan Hand of the FBI." ASIO deals only in "sabotage, espionage and related areas," King says. "There is no law enforcement" function.

Says O'Brien, "They sent the FBI out here to tell me there was nothing doing. I still can't understand why they sent them here to tell me that."

One of the FBI agents who came was John Grant, who was serving as legal attache at the U.S. Embassy in Manila. On the mostly blacked-out documents that the FBI had supplied to Australian investigators, about the only thing left visible was a notation that some of them had been prepared by the legal attache in Manila. The other agent, O'Brien recalls, was named Leahy.

"It was a very hot day and Leahy had on a wool coat and vest and wouldn't take them off," O'Brien remembers. "John Grant was most emphatic that all the FBI had done was make inquiries at the request of the Australian and Hong Kong police and that 'all information has been given to the Australian police, ask them.'" In fact, O'Brien had already written to the commissioner of the Commonwealth police for the alleged FBI dossier; the letter back stated, "If such a file exists, then the Australian Federal Police certainly does not have a copy."

O'Brien was amazed by the FBI men's lack of curiosity about information O'Brien tried to offer them. After Grant said he wouldn't supply O'Brien any information, O'Brien says he tried to show Grant a letter from William Colby describing work Colby did for Nugan Hand, as evidence of American involvement in a criminal endeavor.

"Grant refused to look at it," O'Brien says. "I finally just tossed it on the desk, but he still wouldn't look at it. Neither Hand nor Houghton is sought by the U.S. The FBI has no interest in investigating. I believe that the FBI got themselves in the middle of something political. It has obvious overtones that someone is covering something up.

"I can't understand what the problem is about answering my simple questions," O'Brien says. "If you ask a simple question and they don't want to answer it, you begin to think it's not a simple question. Then, if you push and push and push and they give you a simple answer, you begin to wonder if you can believe the answer."

O'Brien's colleagues at the Corporate Affairs Commission were fairly scathing in their final report. "That there is a Nugan Hand file maintained by the United States Department of Justice ... is beyond dispute," began the section of the report on U.S. cooperation. Commenting on the U.S. refusal to turn the file over on grounds of national defense or foreign policy, the commission said, "Without access to the material actually deleted it is difficult if not impossible to conceive the reason for the classification and deletion of the subject material."

The commission disclosed that Hong Kong police had tried to investigate Nugan Hand's drug connections, but had been refused cooperation by the U.S. Government. A U.S. Treasury agent had said his office was "interested in the activities of Nugan Hand," but that prosecution was unlikely because "they were too careful. Much of the money is carried by couriers and even if the couriers are apprehended, it would still prove impossible to tie them to Nugan Hand." Impossible? The Australians had already done it.

"It does not seem unreasonable," the Corporate Affairs Commission concluded, "that the United States Government be requested to supply all information known to it or its agencies concerning Nugan Hand to an Australian Government-appointed investigation."

Privately, an official at the top of the commission's investigation was livid. "There's supposed to be intelligence cooperation between the countries," he said. "There's an alliance. We want to know if it [Nugan Hand] was a way of giving money to operatives. That doesn't mean we're trying to identify operatives. We're not.

"It's very hard for me to understand how a request for information from Hong Kong is of national security importance for the United States. Or from Australia. Or the activities of an American in Australia-unless, of course, he had a link with the security agencies. At least, that's the inference I draw. How can the activities of private individuals acting privately outside the United States of America possibly relate to American national security?"

Of course, as the Iran-Contra affair showed again in 1987, the acts of "private individuals" roaming the world certainly can relate to American national security, at least as Washington views it. But that is precisely the point. As the theory of perpetual covert action is exercised, our national security. is perpetually in the hands of criminals.

***

The Joint Task Force, in the introduction to its report, said, "It will be seen from the report that at times those links [to U.S. intelligence organizations] appear to have been an intrinsic part of the then ongoing activity and have the appearance of the direct involvement of the U.S. intelligence community itself.... Because of the links disclosed and the nature of some allegations, the task force forwarded a request through normal channels to the U.S. Government seeking information from the Central Intelligence Agency, the Drug Enforcement Agency (as it then was), the Federal Bureau of Investigation and more generally from 'any agency or bureau within that country which might have information of assistance.'

"No replies were received," the task force said, "and in mid-1982 a further request seeking urgent replies was forwarded.... To date, no reply has been received...."

Federal prosecutor Lawrence Barcella, who put Edwin Wilson in jail, objects to this characterization. Barcella says he did arrange for the task force to meet some witnesses he knew about relating to Wilson, and that he even supplied an FBI agent to help the Australians. But while this example of cooperation is a valid footnote to the Australian complaints, it is too isolated and minimal to rebut them. Barcella's own upstream struggle to bring some measure of justice to the Wilson case against a powerful current flowing from other forces in government is testimony to the tendency toward cover-up that the Australians were complaining about.

***

A Wall Street Journal reporter [1] was treated no better.

Reporters and law enforcement officers often swap information on crime stories where confidential sources aren't involved. Each side believes it can further its own end this way, and if things are proper their ends are not incompatible. In investigating the Nugan Hand affair, the Journal reporter found his relationship with Australian officials typical of that spirit-in marked contrast with the hostility accorded by American officials.

The U.S. Drug Enforcement Administration (since merged into the FBI) provided a helpful briefing in Washington on the Asian drug situation in general as the project started. But as for Nugan Hand, John J. O'Neill, Far East regional director of the DEA, insisted, "That bank has never come under any scrutiny by us as a result of any investigation we have done."

Yet, overseas, the reporter encountered foreign nationals who said they had been interviewed by DEA agents about Nugan Hand. When the overseas DEA agents whose names and phone numbers were given to the reporter by O'Neill's office were approached, they refused to talk on any terms.

James Wilkie, the senior U.S. Customs investigator in Hong Kong, agreed to meet. His was the only U.S. law enforcement agency that acknowledges it even briefly looked into Nugan Hand (despite considerable evidence that others did, too).

But as Wilkie waved the reporter in for the scheduled interview, on his desk was a shredding machine, and beside him was a large carton of papers bearing a red horizontal strip, outlining the white letters "C-L-A-S-S-I-F-I-E-D."

Wilkie was calmly feeding the documents into the shredder as he spoke, taking each batch of shreddings out and putting them through a second time.

"We can't comment on anything that's under investigation or might be under investigation," he said.

Was Nugan Hand under investigation?

"There wasn't an investigation. We did make some inquiries. We can't comment," he said.

The reporter asked what was being shredded.

"It's none of your business what's being shredded," Wilkie replied.

***

In Bangkok, Richard Virden, a press attache with the International Communications Agency of the State Department, instructed the DEA men in Thailand not to cooperate with the Journal reporter. But he did much more than that. First, Virden went out of his way to prevent a consul at the embassy from issuing a routine credential the consul had agreed to provide to help the reporter deal with the Thai Government. (Later, Virden issued the credential, after causing much delay and inconvenience in a tight reporting schedule.)

Then, Virden thwarted what might have been a real breakthrough.

When the reporter went to Chiang Mai, Thailand, the financial capital of the Golden Triangle drug center, DEA agents seemed genuinely enthusiastic about getting a list of Thai citizens who were alleged in Australia to have invested drug money in Nugan Hand. The agents offered to swap their own information on these people, to the extent it wasn't confidential.

The agents were well aware Nugan Hand had occupied virtually the same office suite as the DEA in Chiang Mai. One, who identified himself only as "Connie," said, "It always seemed like such a coincidence that all the way up here they would wind up so close to us." Another agent, Greg Korniloff, said he thought the DEA and the reporter could help each other, but first he had to clear it with Bangkok.

But when the reporter returned with the Nugan Hand depositor list, there was bad news. Virden had issued instructions not to talk with the reporter, Agent Korniloff said with apparent disappointment.

"I had hoped we could work something out," he said, "but Bangkok specifically ordered me not to talk to you." He said the orders had been delivered by David Knight, an embassy official in Bangkok, but had come from the press attache -- Virden.

Asked if he was aware of this, Knight replied, "I might be, but I am not willing to talk to you about it."

***

In Manila, the reporter called up John Grant, the FBI agent and legal attache who had visited Australia with the FBI's stonewall message for Australian investigators. "I'm a very nice guy and a friendly person," Grant said. "But I can't do it [discuss Nugan Hand]. Nothing will make me change my mind, so please don't insult my intelligence by giving me some arguments to make me think I should."

So the reporter tried Michael Armacost, the U.S. ambassador, who has since become one of the highest State Department officials, under secretary of state for political affairs. A press liaison said Armacost was too busy to see the reporter. So the reporter wrote a long impassioned plea to Armacost, saying that although the ambassador was new to his post, and might not be familiar with Nugan Hand, his embassy contained information about an organization run largely by American citizens that had committed a series of crimes against other American citizens, as well as foreigners.

The reporter's letter mentioned the names, the heroin, the contract murders, the investment fraud against Americans, and the cover-up. "I have asked John Grant to talk to me about the bank and he has refused, those being his instructions," the letter said. "Can you, as his supervisor, re-evaluate that policy?"

There was no reply.

The reporter did talk to the one U.S. official who has acknowledged looking into Nugan Hand, Victor J. Renaghan, Jr., a customs officer once stationed in Hong Kong. "It was one of those things where you knew something was going on, but there was no evidence of violation of a U.S. law," Renaghan said. "I was trying to find out all I could about an organization that was extremely suspect. It would have taken more men and time than I had. Only the FBI would be geared up to do something like this."

Could he start out now?

"With the principal witness dead and the other two guys pretty tough characters, I don't know how much you could hope to get on them. Black is a general and Yates is an admiral, and this implies a certain degree of sophistication. The CIA is not a monolithic organization. I would love to go out and interview these guys," Renaghan said.

But he didn't.

***

In addition to the refusal of the U.S. Government to cooperate, some strange things were happening in Australia.

For example, in December 1980, there was a bizarre night break-in at the investigative section of the Australian Tax Department. The burglars struck the exact spot where some recovered Nugan Hand records and other materials from the Nugan Hand investigations were being analyzed to see what back taxes the department might levy. Supposedly, only a few dozen people knew the documents were there. Though the papers appeared to have been left intact, what may have been removed or altered couldn't really be determined.

News of the break-in was restricted. The investigation was carried out secretly by ASIO, the intelligence service, and by the federal police (which, under Conservative Party leadership, was far less inquisitive about Nugan Hand than was the Labor-controlled New South Wales government, whose Corporate Affairs Commission was kept in the dark about the break-in for several weeks).

One large newspaper, the Sun-Herald, reported that the ASIO and federal police investigators had refused requests by Tax Department officers to take fingerprints from file folders, leading to "speculation ... that the break-in may have been the work of intelligence agencies themselves." The case was never solved.

Then O'Brien learned something that gave him a chill, and made him (he says) wonder if he was growing paranoid-or if, perhaps, paranoia was justified. Shortly after O'Brien's firm, Pegler, Ellis & Company, had started handling the Nugan Hand liquidation, an accountant he knew in Melbourne recommended an associate to help in the investigation. O'Brien accepted, and the accountant switched firms.

A year or so went by before O'Brien accidentally discovered something the new accountant hadn't told him in all that time -- that the accountant was a former Australian intelligence officer, had served in Vietnam and had known Michael Hand there. O'Brien tried to be very careful after that in monitoring what information his aide received.

Still, that was nothing compared to what O'Brien found out in 1982. An official of the government-run telephone company disclosed to him that spring that Frank Nugan's telephone conversations had been secretly recorded the last two years of his life, by a device installed at the telephone company. The phone company's cooperation almost certainly meant that a government agency was behind the taping.

O'Brien says the official -- whom he declines to identify -- told him that the recorded tapes, which might solve a lot of the Nugan Hand mysteries, aren't at the company anymore. Wiretap authority is tightly restricted in Australia. The federal police can get a warrant from a judge to wiretap only in connection with drug offenses. The federal police say they don't know anything about a wiretap on Frank Nugan -- as do New South Wales state police, who are never allowed to wiretap under Australian law anyway.

There is, of course, an exception to these restrictions-the same exception that applies to the United States' careful wiretapping laws: national security. In Australia, the federal attorney general is authorized to issue wiretap warrants for ASIO on national security grounds.

Asked [2] if he authorized such a wiretap, Attorney General Peter Durack issued this statement through a spokesman: "The only agency the attorney general is responsible for in this context is ASIO. It has been a longstanding practice by attorneys general not to disclose any of the activities of ASIO, including details of phone tapping or information received by the organization. I do not intend to depart from that practice."

Nothing more is known about the Nugan tapes, where they are, or what was on them -- except to any government agents who took them.

***

So worried had many Australians become by 1982 that the opposition Labor Party leader in Parliament, Bill Hayden, rose to demand that' a royal commission be appointed. He said he wanted the commission to look into "all activities of the Nugan Hand Bank, and persons or organizations associated with it, including drug trafficking, arms trafficking, laundering of money, involvement in organized crime, and the relationship between Nugan Hand and the operations of foreign intelligence agencies in or through Australia."

Prime Minister Malcolm Fraser replied that he believed the current investigation was "wide enough."

When Vice-president George Bush visited Australia in April 1982, Labor Party leader Hayden used his thirty-minute meeting with Bush mostly to press for the release of details in the Nugan Hand and Gough Whitlam affairs. Bush would only give his personal assurances that the CIA wasn't involved in either matter. Bush, in 1976, had succeeded Colby as Director of Central Intelligence.

Finally, the CIA was pushed to issue a statement: "The agency rarely comments on such allegations," the statement said, "but in this case we emphatically deny the charges. The CIA has not engaged in operations against the Australian Government, had no ties with the Nugan Hand Bank, and does not involve itself in drug trafficking."

Obviously, the CIA did engage in operations designed to alter the course of Australian domestic affairs; the Chris Boyce spy case established that. Even more obviously, the CIA for more than thirty-five years has involved itself in drug trafficking. If that is not a policy ever officially approved by a Director of Central Intelligence, it is still a practice so widely known that it can be considered an approved policy by the mere fact that no director has put a stop to it. The fact that the CIA probably happened onto its drug connections by coincidence rather than intent doesn't make the connections any less momentous, or less outrageous.

In the face of that, the CIA's Nugan Hand denial can be taken for whatever it's worth.

And if you accept it, how then do you explain Nugan Hand -- a thoroughly corrupt and fraudulent organization staffed by all those generals, admirals, and intelligence officers?

"What you're left with," says an official in charge of one of the major Australian investigations, "is saying, here are all these patriots who have served their country faithfully for years, suddenly saying, 'Let's all become criminals. Let's forget our war service, our heroism, and go out and commit crimes against the very country we've been working for.'"

_______________

Notes:

1. Obviously, the author.

2. By the author.
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Re: The Crimes of Patriots: A True Tale of Dope, Dirty Money

Postby admin » Sat Dec 16, 2017 4:44 am

CHAPTER TWENTY-FIVE: "Everybody Left Alive Is Innocent"

Donald Beazley, working to resurrect his respectable American banking career, continued to try to disassociate himself from the scandal. He told the Wall Street Journal [1] that Nugan Hand's only U.S. business was arranging mergers and acquisitions, and that he had quit the bank because "the merger and acquisition market went to hell." The Journal, at that early stage, was unaware of the American deposit-taking.

George Farris, the Nugan Hand Washington representative who was reached in 1982 through the switchboard at Fort Bragg, North Carolina, where he was on secret assignment for the army, remembered Beazley in charge of the company. "After Frank Nugan's death, all things came out over Beazley's signature," Farris said. This lasted "at least through March [of 1980]."

According to the Stewart Royal Commission, Nugan Hand employee Andrew Wong talked February 4 in Hong Kong with Beazley, "who gave him the impression that the Nugan Hand Group was financially stable and that there was no need for concern about the future of the organization." The Stewart commission said that "in order to forestall any run on the bank following Mr. Nugan's death Mr. Beazley had made public statements in Hong Kong to the effect that the bank was sound." But it accepted his word that he was dissatisfied with the information available in Sydney, gave Hand his resignation, and left Australia February 13, 1980.

Says George Farris, "I know he said he submitted his resignation, but I know when he came to town [Washington] at the end of February he was still assuming his role as the big shot, reassuring me that everything was all right. Nugan Hand was still going to go on to great things." Questioned about what Farris said, Beazley acknowledges it is "possible." [2]

In August 1982, Beazley left his. job as president of Gulfstream Banks and became president of City National Bank of Miami. City National was once one of Miami's largest banks, though it had begun to fade. The bank's new owner, who hired Beazley, was Alberto Duque, a Colombian coffee heir. Duque's, and the bank's, lawyer happened to be Stephen W. Arky, son-in-law of Marvin Warner, Beazley's old boss and benefactor at Great American Banks.

But a year after Beazley went to work for the Colombian, Duque's empire was in collapse as banks and other creditors sued him for fraud. He had pledged nonexistent coffee as collateral for some very big loans. In 1986, Duque was convicted in federal court, Miami, of sixty counts of fraud and conspiracy involving $108 million; he was sentenced to fifteen years in prison.

Beazley found himself once more defending a besieged institution. "City National Bank is a strong, solid financial institution," he insisted to the press (as quoted by reporter Mike Langberg of the Fort Lauderdale News/Sun-Sentinel in August 1983). Duque might lose his controlling interest, Beazley asserted, but the bank would do fine. Would the scandal cost Beazley yet another job? "It depends on who buys the bank," he replied.

Meanwhile, as late as March 1984, Stephen Arky's law firm continued to represent Beazley in threatening a libel action against a Wall Street Journal reporter [3] for articles published in that newspaper. Arky told the Journal it could mitigate damages by retracting the articles. The articles weren't retracted, and the suit wasn't brought.

***

General LeRoy Manor wouldn't cooperate with the Journal reporter while a series of stories was being prepared in 1982. He asserted that he never had anything to do with Nugan Hand. But nine months after that series of articles, when the reporter was preparing another series based on the work of the Australian Joint Task Force, the general changed his stance.

Howard Landau, a retired colonel who, in the air force, had been Manor's personal public relations man, invited the reporter to meet the general at the general's comfortable but not palatial home in the Virginia suburbs of Washington. Sitting himself amidst a veritable museum of memorabilia attesting to a career as a fighter ace and honored commander, Manor ruminated that "It's demoralizing to have five months of your life really destroy a lot of that."

He recalled that he and Admiral Yates had worked and played tennis together in the military. He described conversations in which Yates seduced him into Nugan Hand. He told how impressed he was by the Nugan Hand offices, and by the October 1979 conference. He insisted he was never paid more than expense money.

He praised Wilf Gregory, his colleague in Manila, and Beazley, "a very highly respected individual in the banking business. I said, 'Don, you have very fine credentials. You know what my background is. Would I be over my head?' He said, 'No, give it a try.' He said, 'Even at your age there's a possibility of moving up in an organization like this, because we're going to expand. And if I didn't think that way I wouldn't be in it."

Manor told how he tried to work on commercial deals for Nugan Hand -- a Swedish knitting mill, a Chinese plastic toy business, an Australian coconut oil sale -- none of which ever came off. He insisted that soliciting deposits was "a very minor part of it. We weren't told to push that."

He says people like Colonel H. Kirby Smith and Colonel Jimmy Maturo, whose deposits he took, volunteered to invest, after hearing him talk about the bank. Why did he continue taking deposits after the bank was in collapse? The night he learned of Frank Nugan's death, he said, "I sat up late at night talking with Gregory, who assured me everything had to be okay." Still, General Manor said, he vowed not to do any business "till I got an explanation." He said he met Beazley in Bangkok, and Beazley told him, "I'm sure everything's all right, but I'm going to Australia and find out. And I'll come back and tell you."

Instead, Manor said, Beazley sent his regrets and went on to England. Mike Hand came instead, and said, "Let me assure you that our books have been examined. We have the backing of large financial institutions in Australia. As far as liquidity is concerned, you have no problems."

So, Manor said, he told Colonel Maturo it was okay to put in some more money in March 1980 -- the general added an "unfortunately" after recalling this fact. But he insisted that by the same token, his caution had protected the money of a pilot who served in the C-130 wing that Maturo commanded. Because he suspected trouble, Manor said, he had warned the pilot against making a deposit, and the pilot didn't.

"Nobody told Jimmy to invest," he said of Maturo. "I told him I had confidence in it. You can invest in stocks and lose everything, too."

Wilf Gregory says General Manor left the Philippines on the advice of William Quasha, their lawyer. Quasha, who calls himself an "old friend" of Manor, declines to comment on that statement, citing the attorney-client privilege. Manor, at his home, said he didn't flee at all. He said he went to the United States on leave, intending to return, but was prevented from doing so when he got the assignment to investigate the Iranian rescue mission.

"I just wish I hadn't been involved with it at all," he said of Nugan Hand. "But I can see why I made the decision. It looked good. Until Frank Nugan died, I enjoyed the work."

How could a three-star general not be smart enough to see through a fraud as thinly veneered as this one, he was asked. "I've asked myself that question a lot of times," Manor replied.

What does he think of Admiral Yates now? "I think he was taken in as I was. He's an honest individual. A hard worker. I don't think he was the kind of person painted in that [the Wall Street Journal's] article. He's very capable."

The admiral himself, president of the Nugan Hand Bank, told one reporter, "I was just an employee." "They never let me know what was going on," he told another. He said he didn't trust reporters enough to talk to them further. One time he said he didn't have time to talk because he wanted to take his wife sailing on Chesapeake Bay. But he stuck to his story that he had resigned effective with Beazley's appearance.

***

The Nugan Hand suite in a largely U.S. Government-occupied building by Manila Bay stayed open under the name International Planning & Development Corporation. Wilf Gregory kept his old office and ran it. An office in the suite was occupied by International Planning & Development Corp.'s chairman, Ludwig Peter Rocka, who also happened to be Ferdinand Marcos's brother-in-law.

"I took the office over because they owed me money," Gregory said in 1982. "We [International Planning] get involved in some of the things Nugan Hand used to be involved in." Asked to say what that might be, Gregory replied, "That's private information. I'd get in trouble."

***

A year after Manor welcomed the reporter into his home, his client, Colonel Smith was still trying to get his $20,000 back. On May 7, 1984, he wrote Manor, praising the accuracy of stories that had appeared in the Wall Street Journal, and again asking for his money:

I invested with you after your "pitch" for Nugan Hand Bank during your speech as the guest speaker before the PACAF/JAG [Pacific Air Force, Judge Advocate General, or military law] Conference at Hickam Air Force Base Officers' Club in December of 1979. My wife and I invested with you because I had been taught through the years and at the Air Command and Staff College as well as the Air War College that general officers obtain their respected rank based on hard work, intelligence, honesty, integrity, etc....

As my investment broker at that time for Nugan Hand Bank, you owed me, my wife and all your other investors a fiduciary relationship to reveal Frank Nugan's murder/suicide as quickly as possible. You knew of Nugan's death when you gave me Nugan Hand Bank's International Certificate of Deposit for $20,000 at the Visiting General Officers Quarters at Clark Air Base in February of 1980! ... Why didn't you tell me?


Colonel Smith went on to recall that Manor "departed Manila quickly in late April," and later sent Colonel Smith a letter asking him to contact other depositors about sums exceeding $100,000. The letter, Colonel Smith said, was written "23 June 1980 from the Bolling Air Force Base, D.C., while you were heading up the Iranian Rescue Debacle Investigation."

The reply to Colonel Smith's letter came from a lawyer named Donald G. Smith, of Fairfax, Virginia. The lawyer said, "I represent Lieutenant General LeRoy Manor.... The charges that you have made in your letter are unfounded and may be libelous. Your insinuation that General Manor is less than an honorable man must be retracted immediately. Your request for payment of $20,000 is ludicrous and will not be made in whole or in part."

Colonel Smith wrote the lawyer back a more detailed and blistering letter, containing some labels for Manor that almost certainly were libelous, if they were not true. The next day he wrote the Journal reporter, complaining bitterly about the disinclination of the air force to respond to his complaints, and the difficulties under international law of trying to bring suit about a deposit taken in the Philippines, even if the deposit was suggested at a U.S. air base during a military function. He also said he thought the CIA was "probably" involved in covering the matter up.

And he seemed especially bitter that General Manor, having completed his report on the Iranian rescue mission, had been made executive vice-president -- the full-time staff head -- of the Retired Officers' Association, a prestigious armed forces alumni group that carries considerable political weight.

Colonel Smith enclosed a copy of Manor's message to the association's membership upon assuming office. "During recent years ... we have witnessed a trend of diminishing respect and support for our military establishment," the message said. "This trend must be reversed ... if our nation is to remain strong and continue a meaningful leadership role among the other nations of the free world."

***

Les Collings, the Nugan Hand Hong Kong representative, went to work for a company there that claimed to have perfected an engine that would burn grass. "It's a company that's about to be very big and well-known," Collings declared in 1982.

***

Kevin Shirlaw, a representative of the Australian provisional liquidator B. O. Smith, visited Hawaii a month after the bankruptcy. He later wrote a report of what he had found.

His first stop was to see Douglas Philpotts, Nugan Hand's account supervisor at Hawaiian Trust Company (as well as vice-president and treasurer of Hawaiian Trust). Shirlaw learned from Philpotts that the financial data for Nugan Hand Hawaii was prepared under the same standard George Brincat and Steve Hill had used. Regardless of the money actually paid and owed by the Hawaiian unit, Shirlaw's report said, in preparing the financial statements "he [Philpotts] and his associates had followed instructions from Frank Nugan."

Then Shirlaw visited poor Colonel Maturo. He reported telling Maturo "that there was little that I could do as it would appear that he is a creditor of Nugan Hand Cayman Islands Bank and should therefore contact the authorities" in the Caymans -- who were already reported to be not cooperating.

The liquidator then went to General Black, old pal of Allen Dulles and Richard Helms, undercover agent against the Chinese, military advisor to the National Security Council, commander of all U.S. forces in Thailand during the Vietnam War, and executive director of the Freedoms Foundation.

Black "asked me who he should direct the depositors to contact," Shirlaw reported, and again Shirlaw suggested the Cayman Islands. Black "then advised me that it was his understanding that all deposits which had been taken were invested in commercial paper in Australia.... I advised him that the provisional liquidators had not come across any short-term paper."

"He expressed some surprise at this," Shirlaw reported.

Two years later, at an outdoor lunch with the Journal reporter in the garden of the general's private club, Black declared his conscience was clean. The reporter brought up a letter written to Black by Edward F. Pietro, who said he had served with Black in the European Theater in World War II. After seeing a brochure with Black's picture in it as a representative of the bank, Pietro had deposited and lost $4,900 in Saudi Arabia April 8, 1980 -- more than two months after Nugan's death. "We need some help, General. Can you shed any light on the situation?" the letter said.

General Black had sent Pietro a handwritten note expressing his regrets over the bank's demise, and saying Black would forward Pietro's letter to the liquidators, which he did.

To the reporter, General Black replied, "Nobody I know ever gave me any money. I never took any deposits. Some soldier who served with me in Vietnam may have read my name and deposited money in the Philippines. But my name isn't well enough known around the world to convince many people. They were putting their money in to get higher interest and avoid tax. If somebody had given me money and this happened, I'd feel personally liable to pay them back, if it was a friend of mine. But I don't feel guilty that because of me some guy got swindled."

_______________

Notes:

1. Reporters E. S. ("Jim") Browning and Chris Pritchard.

2. My interviews with Farris and Beazley on this point came prior to the Stewart commission's interviews. John McArthur also told me that Beazley had telephoned him in Hong Kong from the United States on Nugan Hand business as late as March 21, 1980, still acting as if in control.

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

Postby admin » Sat Dec 16, 2017 4:48 am

CHAPTER TWENTY-SIX: The Agency's Assets

In June 1985, Royal Commissioner D. G. Stewart completed more than two years of work on Nugan Hand by submitting his two-volume report to the governor-general of Australia. That his effort would fail to solve the Nugan Hand mystery was predictable almost from the start. Stewart had rejected the help of investigators like Geoffrey Nicholson of the Corporate Affairs Commission and Clive Small of the Joint Task Force, who had carried the ball halfway downfield and knew the yardage still to be covered. Stewart preferred his own neophyte staff.

Even so, the thoroughness of the failure was astonishing. There was an almost total lack of investigative effort to resolve major issues raised by the earlier investigations. Stewart apparently never tried to compel publicly accountable testimony from Douglas Schlachter, or William Prim, or the many people who had observed Bernie Houghton in Southeast Asia or who helped him leap to wealth and influence almost overnight in Australia-just to name a few obvious examples.

Stewart's report was full of elementary factual errors. Mike Hand was credited with a degree from Syracuse University he never got. Ed Wilson, the merchant of death, was identified as a U.S. Congressman. General Black, who had been dead two years, was described as "currently engaged as a consultant." There were dating errors of a kind unlikely to have been typographical, and other mistakes, some of which have already been noted.

More important was the whitewashing of various CIA connections. Long-identified CIA operatives like Ricardo Chavez were referred to without identification, as if they were ordinary businessmen. Dale Holmgren was said to have "managed all in-flight services for a group named Civil Air Transport," without any indication that Civil Air Transport was a wholly owned proprietary company of the CIA. William Colby was said to have gone to Vietnam for the State Department with the rank of ambassador; no doubt that was an effective cover for his real work in the 1960s, but to maintain that cover story in print in light of what is now known is absurd.

Frank Terpil, the CIA veteran who has been shown in and out of court to have reaped a fortune supplying all sorts of weapons to such lunatic dictators as Idi Amin and Muammar Qaddafi, was identified only as "a reputed arms dealer." Although Stewart claimed that his commission received full cooperation from the U.S. Government, he reported, "Whether Mr. Hand's assertions that he was employed by the CIA are true, the Commission has no way of knowing." Identifying Thomas Clines and Edwin Wilson (in a different section from the one identifying him as a congressman), the commission says they "are alleged to have been CIA agents."

The commission certainly lashed out at Nugan Hand as a corporate entity, which at least countered the continuing efforts of some right-wing groups in the United States to defend the bank. One such organization, called Accuracy In Media, asserted that Nugan Hand was really an honest but hard-luck banking organization that had been maligned by an anti-military press.

Said Stewart, Nugan Hand "depended upon a multitude of frauds and deceptions the like of which may not have been seen before, in this country [Australia] at any rate.... The ... audited accounts were nothing other than gross untruths published year after year from the very first set of accounts as at 30 June 1974 to the last finalized set as at 30 June 1979.... Nugan Hand Ltd. was at all times insolvent (and in all probability so were all the other Australian companies within the group)....

"The group simply flouted the provisions of the legislation as it then stood in that large volumes of currency were moved in and out of Australia," the commission said. In Hong Kong, it said, "activity was recognized, even by the employees of the company, as being a blatant breach of the Banking Ordinance, in that Nugan Hand (Hong Kong) and the Nugan Hand Bank were carrying on a banking business in Hong Kong....

"It is evident that at least until March 1977 the staff of Nugan Hand (Hong Kong) were involved in activities which were in breach of the local Securities Ordinance.... There is also evidence that Mr. Collings sent information concerning deposits to the company direct to Mr. Nugan for the purpose of rewriting" the accounts.

In general, however, the commission made shocking little effort to try to fix any blame except on men who were beyond the reach of legal action. It allowed Yates, Houghton, and McDonald to go on record, unchallenged, blaming Nugan for the fall of the bank. Contrary to all previous investigations, but apparently not based on any new evidence, it singled out the missing Mike Hand as "responsible for the shredding of documents ..., the instruction of others to shred documents and the concealment of records...."

The commission freely laid blame on Hill and Shaw, who had already made their deal with authorities and testified, and on Brincat, who the commission said might be unprosecutable because of flaws it said needed to be remedied in the law regarding accountants. But other characters were allowed to claim that they simply believed what Hand and Nugan told them. While the commission didn't always say it believed them, neither did it marshal challenges.

The commission did write a section on who it thought should be prosecuted for violating the laws of Australia or New South Wales. The section consisted of 208 paragraphs. All but the first two introductory paragraphs were deleted from the report as released to the public.

***

On the subject of the CIA, the commission simply gave up the game by default. "It is difficult to imagine that a professional group such as the CIA would use or even think of using such a Group [as Nugan Hand] without first making a thorough check of its bona fides," Stewart wrote. "Even a cursory check would have revealed shortcomings which would undoubtedly make the CIA shy away from having anything at all to do with such a Group."

The commission never attempted to resolve the double standard by which it said the CIA would have recognized Nugan Hand's shortcomings as obvious from "a cursory check," while all the former CIA and Pentagon bosses who were engaged in promoting Nugan Hand were allowed to plead ignorance.

On the issue of whether the CIA used Nugan Hand, the commission quotes Admiral Yates saying, "It was too small for one thing, it was too visible for another ... and if the CIA had been involved in it they certainly would not have let it fail." It quotes General Black saying that the CIA wouldn't use "a little fly-by-night operation like Nugan and Hand's bank."

"The Commission accepts the evidence of these witnesses," Stewart wrote. "None of these witnesses is contradicted by any credible evidence."

Apparently the commission hadn't heard of Paul Helliwell's Castle Bank -- or of the Hawaiian investment banking firm of Bishop, Baldwin, Rewald, Dillingham & Wong.

***

In 1976, Ronald R. Rewald, who would become chairman of Bishop, Baldwin, Rewald, Dillingham & Wong, was convicted in state court, Wausau, Wisconsin, of theft and the illegal sale of franchises. Essentially, Rewald and an associate had conned two high school teachers into investing in a sporting goods business under false pretenses.

Rewald was ordered to pay $2,000 restitution and spend a year on probation. In 1978, both the sporting goods business and Rewald personally were declared bankrupt in federal court, Milwaukee. He had personal debts of $224,987.93 against assets of $1,429.50, and his company had debts of $126,559.19 against assets of $27,326, the court records show.

That same year, 1978, Rewald opened an investment concern in Honolulu. And the United States Central Intelligence Agency helped pay his office expenses and gave him work as a message relay station and a cover for covert operatives. His investment concern was originally called CMI Investments, but soon changed its name to Bishop, Baldwin.

And by 1983 it was thick with CIA and other intelligence menone of them working on its payroll in his retirement. A couple of air force generals bearing a total of seven stars graced its roster of backers. That was the year Bishop, Baldwin, like the sporting goods business before it -- and like Nugan Hand three years earlier-went into bankruptcy.

This time more than a hundred investors lost a total of more than $23 million. Most were Americans. Many were suckered in by the presence of so many military/intelligence heroes, just as the victims were at Nugan Hand. Once again, as at Nugan Hand, there were blatant lies, false financial statements, and gross theft of customer funds.

This time, however, there was no question that the CIA was involved with Rewald's business -- though to what degree is still in debate. Rewald claims that Bishop, Baldwin was created and run by the CIA, and that everything he did at Bishop, Baldwin was on CIA orders. That is very unlikely, and as a defense it certainly failed to keep Rewald from being convicted of fraud. He was found guilty in federal court, Honolulu, in 1985, and sentenced to eighty years in prison.

But many boxes of records from the Rewald case were sealed at the CIA's request for national security reasons. And still, enough got on the public record to make a strong case that the CIA gave Rewald the credibility he needed to run his big fraud, and that the CIA knew or should have known what was going on.

Rewald says he was recruited by the CIA in the 1960s while a student at MIT: on questioning, that turns out to be the Milwaukee Institute of Technology, a two-year school from which he failed to graduate. He says he was hired to spy on campus war protesters, which the CIA was indeed doing then. The dean who Rewald says introduced him to the CIA flatly denies having done so, and Rewald has lied so much his word is worthless.

But if Rewald is lying about being a CIA man on campus in the 1960s, he told the same lie to friends and relatives back at the time. Rewald says that when he decided to relocate to Honolulu, his CIA contacts from those early days arranged for him to meet Eugene J. Welch, chief of the CIA office in Hawaii.

At Rewald's trial, Welch testified that Rewald called out-of-the-blue to the CIA's listed phone number in Honolulu in 1978 and volunteered his services. Of course, the word of Welch and other CIA men may not be worth any more than that of Rewald; Welch also testified that he thought his CIA secrecy oath protected him from prosecution for perjury if he lied in court. (Among other things, he also testified that the CIA hadn't reported on student dissidents in the United States, which it had, and that he had never heard of covert operatives being provided with false background credentials, which they have been.)

However the initial contact was made, Rewald wound up lnnching with CIA chief Welch, welcoming Welch and his wife to his house for dinner, and meeting Welch's replacement, John C. (Jack) Kindschi. Rewald, new CIA chief Kindschi, and their wives became very close. Kindschi testified that from the fall of 1978, when they came to Hawaii, to 1983, the Kindschis were together socially with the Rewalds an average of two or three times a month.

"The [Rewald] children looked upon us sort of as almost grandparents," Kindschi testified. He participated with the Rewald family in backyard basketball and tennis games, he said.

Meanwhile, Rewald was put to work for his country. Welch testified that the CIA's Hawaii office wasn't a covert station, such as existed overseas, but rather a field office such as existed in cities around the United States to collect data volunteered by American citizens traveling abroad. The office was supposed to be "discreet, perhaps, but not secret."

Rewald and his growing staff at Bishop, Baldwin were jet-hopping the globe, seeking investors and trade deals-often involving arms-from Argentina to India to the Philippines. So Welch, Kindschi, and Rewald made a deal whereby the Bishop, Baldwin staff would collect intelligence for the CIA. They would get questions, sometimes in writing, from Kindschi before leaving, then return with lengthy reports.

Welch testified that he asked CIA headquarters in Langley, Virginia, for a name check on Rewald, seeking derogatory information. Despite the criminal conviction and bankruptcies, Welch said nothing showed up, and a CIA file card on Rewald shows that he was approved for a "secret" security clearance in September 1978, and continued with it until the Bishop, Baldwin bankruptcy five years later.

Welch made no bones about the CIA's limited criteria for trustworthiness: he testified that the purpose of the name check was to make sure there was "no derogatory information on file-he is not a Communist, in other words." Mitchell P. Lawrence, Jr., the CIA's deputy director for personnel security and investigation, a thirty-year veteran of both undercover and administrative posts, testified that "based on the volume of work" the FBI didn't like to search criminal records for the CIA unless it was given a fingerprint card, and so normally checked only "what we referred to as the subversive files."

Theft, never mind.

Rewald's clearance meant he could participate in discussions of information classified as "confidential" or "secret," but not "top secret." Kindschi testified that when CIA headquarters asked him to provide a cover for covert operatives in Asia, he suggested Rewald; and headquarters approved the choice on November 6, 1978.

A phony company was established in Rewald's office, with telex and telephone. The CIA paid the bill. Messages could be passed back and forth, and whenever someone called to check on an agent's bona fides, Rewald and his staff would give a positive response.

Then in May 1979, Rewald got involved with the foreign resources section of the CIA, whose job is to recruit foreign nationals visiting the United States to spy on their own countries for the CIA when they go home. Charles Richardson, chief of the foreign resources section in the western United States, asked the CIA for a substantial international company to serve as cover employer for his attempts to persuade foreign nationals. Kindschi was asked for a suggestion, and volunteered Rewald. This time, instead of a phony 'company, the cover was to be CMI, the actual Rewald investment concern, which became Bishop, Baldwin.

This was a still more sensitive assignment, and the CIA dispatched John H. Mason, a twenty-five-year veteran formerly in the clandestine services, now assigned to headquarters, to check Rewald and his company out. Kindschi forwarded a glowing report, falsely asserting such nonsense as that "Former clients have ranged from Elvis Presley to professional athletes and millionaires."

A new security check was done. This time, the FBI evidently wasn't too busy to cooperate, and the franchise violation was discovered (though apparently not the theft or bankruptcy cases). Moreover, Rewald told Mason and other CIA officials that he had worked for the CIA as a student spy. In fact, he said that so much bad publicity had come upon him when the student spying operation was exposed that he wanted the CIA to forgo the usual questioning of his former neighbors while doing this new check. And the CIA men testified that they agreed!

Deputy Director Lawrence testified that CIA files were checked and showed that Rewald hadn't, as he said,' spied for the agency as a student. Despite that discrepancy, despite the criminal record, and despite such easily checkable lies on Rewald's resume as that he graduated from Marquette University and played football for the Cleveland Browns (neither of which was remotely true), the CIA renewed his secret clearance and okayed him for the new, more sensitive work.

As for CMI, the only checking that the officials of the free world's greatest spy agency said they did was to order a Dun & Bradstreet report. They relied on it, even though veteran agent Mason agreed that a typical D & B report "only reflects what the individual company submits to D & B."

Testified Deputy Director Lawrence, "We had to weigh what we had against the need for Mr. Rewald." The work, he testified, was "very important." Agent Mason had argued that the cover was "needed badly."

So much for the contention that the CIA would not have needed Nugan Hand because larger companies were available! Nugan Hand may not have been Chase Manhattan, but it was big enough to dwarf Rewald's operation. And yet Rewald's Hawaiian company had been "needed badly."

Mason introduced Rewald to secret agent Richardson, who was using the alias Richard Cavanaugh. Rewald evidently met other covert operatives, but Kindschi, not having a need to know, testified that he didn't get further involved with that.

***

While covering for agents and taking in millions from duped investors, Rewald was hardly living in the obscurity that people like Royal Commissioner Stewart say they expect of the CIA. Rewald spent about $400,000 a month to keep lavish offices around the world and a high-salaried staff of prominent Hawaiians, including lawyers and CPAs. He spent $250,000 a month to please himself and his family.

He owned a fleet of twelve limousines and other luxury cars worth up to $50,000 each (an Excalibur, a Jaguar, two Mercedes, a Rolls, a Continental, and three Cadillacs, among others), and he hired chauffeurs not just for himself but also to take his five children to baseball practice, or to lessons with their $9,000-a-month private tutors.

He owned ranches, and polo clubs, and an oceanfront villa with its own lagoon and gardens. He displayed fine art and antiques, threw eye-popping parties, and surrounded himself with gorgeous women, some of whom were supplied with their own Mercedeses.

His CIA contacts didn't seem to be dummies. Welch had joined the CIA in 1952, and spent a career procuring and managing overseas safe-houses and running several domestic intelligence collection offices. Kindschi had been a State Department foreign service officer in Moscow and Cairo, then entered the CIA's clandestine services branch in 1957, and stayed there until he got the Honolulu job for his last two years before retirement. (He also testified that he was forced out of the clandestine services in part because CIA turncoat Philip Agee exposed him as a CIA man.)

When retirement came, in 1980, Kindschi became a $60-an-hour consultant for Bishop, Baldwin, with an office in the firm's luxury suite and plenty of expense-account travel. Eventually he began receiving a $4,000-a-month salary on top of the consultant's fees. He brought an old friend from his CIA days in Stockholm onto the staff as a business consultant, too.

Kindschi's replacement as head of the Hawaii CIA office, Jack W. Rardin, went into the CIA immediately upon graduation from the prestigious Georgetown University School of Foreign Service in 1950. He worked first in foreign broadcast operations, then in the domestic collection division. From the time he arrived in Hawaii, he was frequently seen in the swank Bishop, Baldwin office, conferring with Rewald.

Among other matters, they discussed the influential millionaire businessmen Rewald was soliciting investments from in Indonesia, the Philippines, and elsewhere-men Rewald would also milk for political gossip. They also discussed the arms deals Rewald was trying to finance in India and Taiwan, apparently without success.

On official reports, Rardin rated Rewald "from good to excellent" as a source, and on what he acknowledged was "a number of occasions" he called Rewald's information "excellent." For example, about the time of the British-Argentine war over the Falklands in 1982, Rewald visited Argentina armed with a list of CIA questions. Under the guise of Bishop, Baldwin business, he queried Argentine bankers about their financial plans.

Rewald also reported to a CIA man identified in court only as "John Doe 5" at a "Far East location." More than a dozen CIA "John Does" were involved in the Rewald trial.

As time passed, several other Bishop, Baldwin staffers were referred for security clearances to the "secret" level. Some of them, it turned out, already had it. Rardin testified that when he applied for clearance for Captain Edwin Davis Avary, retired chief pilot of Pan American World Airways, and now a Bishop, Baldwin consultant, he was told that Avary was already in a relationship with the agency. Avary [1] gives a sly no-comment on whether he did CIA work at Pan Am. But he says he and others wrote "damned good reports" for the CIA while on trips for Bishop, Baldwin. (He cites an analysis he did of German election prospects.) He also worked on the Taiwanese arms deal.

Sue Wilson, Rewald's blond executive assistant (with check-writing authority), had-after being a semifinalist in the Miss Teenage America pageant-served nine years with the National Security Agency (the CIA's high-technology twin) in Washington and Honolulu before joining Bishop, Baldwin. Her resume shows she handled highly sensitive cryptoanalysis, missile trajectory data, and space data.

One lawyer on the Bishop, Baldwin staff, Lieutenant Clarence Gunderson, was a reserve air force intelligence officer. On the investment firm's collapse, he was quickly back in uniform, giving intelligence briefings to the commander-in-chief of the air force's Pacific Command, and dealing in highly classified Soviet data. [2]

One commander Gunderson briefed was three-star General Arnold Braswell, who was widely identified as among Rewald's circle of allies. Braswell acknowledges [3] he was weighing going to work for Bishop, Baldwin when he retired from the air force. He filed a six-figure claim in bankruptcy court for loss of his savings, which he said he had invested with the firm.

A prior air force Pacific Commander, four-star General Hunter Harris, the highest-ranking officer in Hawaii, was close to Rewald and frequently in his office. Through Harris, Rewald met an aide of Lieutenant Colonel James ("Bo") Gritz, who was raising money with Pentagon help for a secret expedition into Laos to look for U.S. prisoners of war Gritz believed were still being held there; the mission was highly publicized after it failed.

General Harris and the Gritz aide say Rewald merely donated $2,000 of Bishop, Baldwin money to the cause. Rewald told investors and potential investors that he was financing the Gritz mission, and they were impressed when they read about the mission in the newspapers months after Rewald had confided to them that it was going to occur.

***

Clients who lost fortunes in the Bishop, Baldwin fraud say Rewald would call them aside privately, either in his office or at his lavish parties at the private polo club he bought, and would point out the high government officials around. He would single out CIA and FBI personnel for particular attention. He would note that Bishop, Baldwin was part of the CIA, though cautioning the clients never to repeat it.

The CIA connection proved their money was safe, he assured them. "If you can't trust the government, who can you trust?" they recall him saying.

His parties were attended not only by federal officials, but by Governor and Mrs. George Ariyoshi and other Hawaiian dignitaries. The office of then Lieutenant Governor, now Governor John Waihee, has acknowledged that Waihee received a $10,000 canceled check to him that Rewald has shown around. (The governor's staff says the check was a down payment on a business transaction that was never completed, and that the money was returned to Rewald.)

Were all these officials and service leaders suckered in by Rewald's fraud? As with Nugan Hand, that explanation requires one to believe that people who are supposed to be experts in intelligence, who are charged with protecting the United States from the deceptive practices of the Kremlin, are pretty easily led.

For example, while operating for three years directly in the eye of CIA officials, Rewald advertised that Bishop, Baldwin's deposits were protected by the Federal Deposit Insurance Corporation for up to $150,000 for each depositor. The FDIC, of course, insures only banks, not private investment firms like Bishop, Baldwin, and its limit was $100,000 for each depositor, as any bank advertisement would have revealed.

Kindschi recalled at the trial that he had asked Rewald about this, and was told, "Well, we have a special relationship with the banks to increase it to $150,000." Kindschi acknowledged that after that, he had reassured Bishop, Baldwin clients who asked about the FDIC limit. Kindschi testified that he didn't question Rewald further because "I trusted him."

This was the same fearless and resourceful covert operative who also told the jury, "When you serve overseas under deep cover, you do not have the full force of the United States behind you.... You are on your own. So if things had gone a-cropper in places where I served, I would have been left to get out of that situation with my own wits, and I understood that."

Kindschi, employing those wits at Bishop, Baldwin for $60 an hour, eventually helped prepare brochures containing some of the more outrageous Rewald lies. Though the CIA men knew Rewald had just come to Hawaii in 1978, Kindschi acknowledged that he. "edited" a brochure calling Bishop, Baldwin "one of the oldest and largest privately held international investment and consulting firms in Hawaii.... Over the last two decades we have served the investment and consulting community with an average return to our clients of 26% a year."

Merely the name of the firm was a gross deception. Bishop, Baldwin, and Dillingham are old-line aristocratic names in Hawaii, as almost everyone there knew. It was as if someone had started a firm in New York City with the name "Rockefeller, Vanderbilt, Rewald, Roosevelt & Mellon."

Kindschi testified that he believed Rewald's explanation that somehow Bishop, Baldwin "came directly from the bowels of the old Bishop Investment Company."

Asked why he wrote, "The brick and mortar foundation of Bishop, Baldwin, Rewald, Dillingham & Wong has been deeply rooted in Hawaii for more than four decades," he testified, "It could have been just a typographical error."

He wrote -- or "edited" -- that the company's clients had an average worth of $4 million, and that 90 percent of those who tried to invest with the firm were turned down. (Rewald made it seem a personal favor to people, done out of friendship, to take their mere five-figure investments.) Bishop, Baldwin "has served the last four national administrations as White House consultants on subjects ranging from small business matters to the complex international relations of Asia," the brochure Kindschi edited said.

He told the jury he simply accepted Rewald's word for all this. He also testified that he was aware by 1979 that Rewald had a court record in Wisconsin for franchise violations. And he acknowledged that the brochures he helped prepare showed CIA agent Richardson as a Bishop, Baldwin consultant.

Bishop, Baldwin also advertised widely that its investment accounts "have been available since Territorial days," and that the firm worked for committees of both houses of Congress and "a former president of the United States," all of which was nonsense.

Bishop, Baldwin offered two financial statements with figures differing by one decimal place, apparently geared to differing levels of gullibility. One statement, for example, put accounts receivable at $187.9 million and total assets at $1.42 billion, while another put accounts receivable at $18.7 million and total assets at $142 million. (There hasn't been any evidence that Kindschi helped prepare the financial statements.)

Neither statement had a standard auditor's certification letter; one statement said "audited by Price-Waterhouse" under the figures, and the other just said "audited by a 'Big Eight' accounting firm." Apparently neither Price Waterhouse nor anyone else audited Bishop, Baldwin. The bankruptcy trustee said its checkbook was never even balanced.

Rewald says the CIA ordered the phony statements and approved them; he did produce documentary evidence that the CIA concocted a phony financial statement for the phony company that was set up in Rewald's office to serve as a cover for CIA operatives in the Far East. But the CIA men who testified all denied telling Rewald to do anything fraudulent in connection with Bishop, Baldwin.

Rewald told investors and his adulators in the local press that the company had two dozen offices with multimillion-dollar investments scattered around the world. Captain Avary, who prepared reports for the CIA while on Bishop, Baldwin's staff at $4,000 a month, says he helped establish "mail-drop" offices for Bishop, Baldwin in various cities by hiring an executive "front" firm to collect mail or telephone calls at a prestigious address. CIA documents produced iu court show that unspecified Bishop, Baldwin offices overseas were in contact with CIA stations there.

***

Surely the case of Rewald is enough to disprove the Stewart commission's contention that someone who had real CIA connections would never advertise them. Rewald was the least secret agent imaginable. He cultivated his reputation for being wired into the agency. He acquired title to his first Honolulu home from former Cambodian Prime Minister Lon Nol, and spread the word that the house was really a CIA-owned "safe house." When he moved to his oceanfront villa, he deeded the supposed "safe house" over to Russell Kim, a Bishop, Baldwin consultant from Korea, whom Rewald says is a Korean intelligence agent, and who did receive a security clearance from the CIA up to the "secret" level.

A typical victim, Nella Van Asperen, says her impression that Rewald was an important CIA figure led her and her parents to invest-and lose-$400,000 in the firm, mostly her parents' retirement money. Mrs. Van Asperen -- a commercial artist and another gorgeous blonde -- had been approached by Rewald to design advertisements for a sporting goods chain he was starting in Honolulu.

Right after the Soviet invasion of Afghanistan, she was introduced to a traveling Afghan jeweler who was desperate to extend his thirty-day visa to the United States so he wouldn't have to return home. Says Mrs. Van Asperen, "Ron had told me he was with the CIA, and I thought if anybody can help he could." Rewald arranged a meeting for the Afghan with "the CIA," under conditions worthy of a Graham Greene spy novel.

"You will walk down this block, you will turn here, you will wait at this place," Mrs. Van Asperen says he told her. She and the Afghan wound up at an outdoor cafe with Rewald and two strange men. The Afghan, now working in San Diego, says he was asked a lot of questions about his father, an army general, and about the use of chemical weapons and Chinese arms. Then, he says, a "Mr. Anderson" gave him a business card and told him to take it to the U.S. immigration office, where he would be given political asylum. He says the immigration office seemed to recognize the card and gave him a long-term visa, and that he never heard from "Mr. Anderson" again.

"It's hard for me to believe someone would set all this up as a charade," says Mrs. Van Asperen. She saw Rewald all too often after that, as he persuaded her and her father to deposit their cash. Often she and Rewald had lunch, but she says he always excused himself in time to return for what he said was his daily 3:30 P.M. briefing from the CIA. Once, she says, he even invited her to join the CIA, but he later advised her not to because of the danger." (He did sign up two men, however, administering secrecy oaths to them; the CIA officials who testified at his trial said the oaths and ceremonies were worthless.)

***

More tragic was the case of Mary Lou McKenna, a blonde former Playboy model who had just moved to Hawaii because of devastating medical problems. Living in Los Angeles, divorced and raising three children, she had undergone cancer surgery. Then her back was broken in two places in a car accident, leading to spinal fusion operations that were only partially successful, and left her hampered in movement and requiring long-term therapy. Finally, she contracted a rare, life-threatening lung disease that required her to live in a warm, non-smoggy climate.

With about $150,000 put together from savings and from the jury award in her accident case, she moved her family to Hawaii, and happened to land in the same apartment building where Jacqueline Vos lived. Vos, a Farrah Fawcett look-alike, was keeping books for Rewald. [4] Soon, McKenna was being invited' to polo parties where Vos and Rewald introduced her to General Harris and Governor Ariyoshi, and pointed out "all these men in dark-looking suits" as being CIA and FBI agents.

Soon, Rewald had Mary Lou McKenna's nest egg. On advice from his legal staff, she sold some property in California, so this, too, could be invested in Bishop, Baldwin. When the firm collapsed, she was forced to move out of her Honolulu apartment, sell her furniture, stop the physical therapy, and take a store clerk's job that caused her severe back pain. She was visibly aching and despondent.

There were scores of other cases.

***

In 1982, the Internal Revenue Service smelled something fishy and started a criminal investigation of Rewald and his company. When Rewald was asked to produce records, Rardin, with Kindschi's help, had the CIA intervene with the IRS to hold up the audit. Rewald told Rardin he had received not only business expense money from the CIA, but also funds for passing to various people around the globe.

Two officers from CIA headquarters in Langley, Virginia, visited Hawaii in January 1983. In front of them, Rewald changed his story, saying that the only money he had received was for business expenses. The flip-flop didn't bother Rardin. The CIA gave Rewald phony cover stories to tell both the IRS and his accountant about the source of the money. Asked at the trial why Rewald's status continued unchanged, Rardin simply testified, "At the time, we trusted Mr. Rewald's integrity."

The CIA says its hold-up of the IRS criminal investigation was merely temporary, to allow time to create a cover story for the small amounts of expense money it gave him. But, the fact is that ten months after the IRS had moved to investigate, the investigation was still frozen, and Rewald was still stealing.

At that point, in late July 1983, a local consumer protection agency, troubled by Rewald's FDIC claims, subpoenaed his books and records. Moreover, it leaked its suspicions -- along with its discovery of Rewald's bankruptcy record in Wisconsin -- to a local TV news reporter. The reporter confronted a Rewald aide with a camera crew and played the embarrassing interview on the air.

That day, Kindschi withdrew $170,000 of what he said was $291,000 that he and his mother had on deposit at Bishop, Baldwin. (The bankruptcy court later forced him to return it. He filed a claim for the money, but the court-appointed trustee filed a counterclaim against him. The trustee argued that almost all the money that Kindschi claimed was still on deposit represented fictitious interest and dividends that Rewald had credited to the Kindschis' accounts, or else was money that Kindschi had in effect already reclaimed through the high fees and salary he was collecting. The case is still pending.)

For his part, Rewald, after hearing about the TV interview, quickly emptied out Bishop, Baldwin's bank account with a $200,000 check to his lawyer, apparently as a defense fund, and sent his wife and children back to Wisconsin. His security guards began removing files from the Bishop, Baldwin office.

Rewald checked into a large Waikiki hotel. The next afternoon, the hotel's assistant manager, making her routine rounds of rooms whose occupants were due to check out but hadn't, found Rewald amidst a lot of blood. His wrists and forearms had been slit by a razor found nearby. Police took him to a hospital, where doctors described the wounds as "superficial" and said no vascular or nerve damage had been done.

He had reacted like a gutless Frank Nugan. He may well have known about Nugan. Remarkably, police later said they never checked to see if the blood found in the room had come from Rewald's body or had been brought there.

As the huge scandal dominated the Hawaiian press, efforts were made to cover up all traces of the CIA. Rardin denied to the police that he even knew Rewald. A federal judge put blanket restrictions on visitors to Rewald in prison, where he was held on an astronomical $10 million bail. The judge issued gag orders barring Rewald's lawyers from repeating what he told them. Case records, normally public information in a criminal matter, were sealed from public view, and Rewald was ordered not to talk about the CIA. The CIA won't comment on whether it disciplined any of its agents.

Most remarkably, the U.S. Attorney in Hawaii, Daniel Bent, turned this, his biggest case, over to a brand new lawyer on his staff, John Peyton. Peyton had come to work at the office just days after Rewald slashed his wrists. Peyton's grand jury investigation of the Rewald case was distinguished by its careful avoidance of any reference to the CIA; Rardin, for example, was identified to the grand jury as just a federal civil servant.

Once you learn Peyton's background, however, none of this seems so strange. From 1976 to early 1981, it turns out, Peyton had been chief of the litigation section of the CIA. After that, he had worked on the government's narcotics task force in Florida, which intelligence community sources say was heavily laced with CIA personnel. Suddenly, then, Peyton decided to seek work as an assistant prosecutor in Hawaii.

Peyton insists that it was just "pure, utter coincidence" that he wound up on the Rewald case. [5] The U.S. Government's explanation for both the Bishop, Baldwin and Nugan Hand cases, to the extent it has provided one at all, seems to rely in large part on an almost mystical faith in the power of "pure, utter coincidence."

***

Late in 1986, American citizens got still better evidence of the damage wrought by their government's foreign policy of perpetual covert war. For the second time in eight years, Iran humiliated the United States and crippled a president.

We had given Iranians every reason to want to do that. Back in 1953, at the behest of an oil monopoly, and blinded by a foreign policy that mistakes other countries' independence for communism, the United States overthrew the only even semi-democratically elected government in Iranian history. In its place, we installed a brutal and unpopular dictatorship. That all this was done covertly merely kept the American electorate from finding out about it; the Iranians knew damn well that the U.S. was behind the restoration and maintenance of the Shah.

Among those American officials who did the most to help the Shah preserve his regime of repression and torture was General Richard Secord, who headed the U.S. military assistance program there while palling around with the likes of Bernie Houghton and Edwin Wilson. There was a certain delicious irony in the fact that it was Secord who organized and went along on the arms-running mission with national security advisor Bud McFarlane that the Iranians used to entrap President Reagan. But as an American, it's hard to get much satisfaction from it.

From the day he took office President Reagan had preached about the need to isolate "terrorist states," and specifically identified Iran as one of them. We must, he repeated at every opportunity, refuse even to bargain with hostage-takers, let alone pay ransom to them. Then, it turns out, he arms them. And with the arrival of the Secord-McFarlane arms shipment, an Iranian-influenced group in Lebanon releases one American hostage while holding on to a half-dozen others. And soon seizes more.

At first the president denied the arms shipments were ransom for hostages. Then he rather acknowledged they could be fairly interpreted that way.

At first he insisted that only a few "spare parts" were involved. Then he acknowledged that we shipped Iran planeloads of "defensive" antiaircraft missiles (which could just as well attack a 747) and antitank missiles (which could just as well attack an American official's bulletproof limousine).

For purposes of deception -- not of the Soviets, but of Congress and the American public -- the income from these sales and other money was channeled through numbered Swiss bank accounts. Among those deceived, inadvertently, were two of the plotters, Colonel Oliver North and Assistant Secretary of State Elliott Abrams, who lost $10 million by getting the account numbers wrong.

And who was put in charge of the secret Swiss accounts? Why, General Richard Secord, who two years earlier had resigned from the Pentagon under a cloud for his involvement with Edwin Wilson in what former CIA officer Thomas Clines admitted in federal court was a fraud against the U.S. Government; Clines's various companies paid more than $3 million in fines and penalties for the fraud. And who did Secord hire as his chief aide in the Iran-Contra mission? Why, Thomas Clines, of course-the same Thomas Clines who, in the wake of the Nugan Hand collapse, jetted to Australia and accompanied Bernie Houghton on his flight from the country so he could hide out until the heat was off.

By his own testimony before Congress, Secord (or the company he owned 50-50 with his partner Hakim) collected $30 million from Iran for weapons he simultaneously bought from the U.S. Treasury for $12 million. Of the difference, he testified, only $3.5 million went to help the Contras (some of whom complained they hadn't received a dime). Secord testified that the Contras were desperately short of funds and that Colonel North was scrounging for donations for them; yet he testified that $8 million from the arms sales remained unspent in the Swiss account he controlled (not to mention the $10 million from the Sultan of Brunei that was lost in transit). Why wasn't the $8 million sent to the Contras if Secord and his partner didn't intend to keep it? The question was never satisfactorily answered.

Of even more concern to common decency was the hiring of assassination experts like Chi-Chi Quintero and Luis Posada from Clines's old anti-Cuban campaigns to work in the supply program in Central America. Posada, a CIA operative, had been in jail in Venezuela for blowing up a Cuban civilian airliner in mid-flight over Barbados, killing seventy-three persons. (Venezuelan justice had not seen fit to bring him to trial in nine years, but the evidence against him, including tape-recorded telephone conversations, was substantial.) Though the CIA disclaimed responsibility for that terrorist act, when Posada escaped his Venezuelan jail (apparently through bribery, not derring-do), the CIA, or the Secord-Clines network it set in place, hired him back to help kill Nicaraguans.

Meanwhile, evidence was building that the Contra program was supported not just by arms shipments to Iran, but also by dope trafficking. In October 1986, a Contra supply plane crashed in Nicaragua killing most of its crew and leaving one a prisoner in Managua. Reporters found all sorts of links between th~ plane and the CIA, from its registration to the phone numbers found in the cockpit. They also discovered that it was the same plane that convicted dope dealer Barry Seal had used to fly cocaine in while he was working as part of a federal "sting" operation. Witnesses then placed Seal in the Contra supply program while he was earning a self-declared $50 million running cocaine into the U.S.

Other witnesses reported seeing cocaine stored at a south Florida house where Contra arms were warehoused before being shipped out. One woman reported seeing cocaine being loaded in Colombia onto a Contra supply plane that had dropped off weapons in Central America and was headed back to the U.S. Gerardo Duran, a pilot who ferried arms and personnel around for many Contra groups, was named by Costa Rican and American authorities as a cocaine trafficker. (He wasn't charged in court.)

Costa Rican-based Contras were also involved in a 400-pound cocaine seizure in San Francisco in 1983., Two Nicaraguan natives convicted in the case, Carlo Cabezas and Julio Zavala, who are brothers- in-law, later claimed that at least $500,000 of their drug profits was sent to Contras in Costa Rica. Some $36,000 found by federal agents in Zavala's house-along with cocaine, a military rifle, and a grenade- was seized as drug profits. But amazingly, the money was returned to Zavala by the Justice Department on certification by a Contra group in Costa Rica that the money belonged to it. (And the person whose signature was on the certification later claimed it was forged.)

The most clear-cut case of all involved a Costa Rica-based Contra group that struck a deal with George Morales, a multimillionaire Colombian-born cocaine kingpin living in Miami, right after Morales was indicted on multiple federal drug charges in 1984. According to both Morales and members of the Contra group, the Contras promised to use their CIA connections to take care of Morales's case if he helped them out.

Federal Aviation Administration and other aviation records confirm that Morales provided the Contras at least two aircraft, one of them costing $264,000 and the other of undetermined value, as well as trained pilots (including Duran). There is some corroboration for his statements that he also provided large amounts of cash, both his own drug money and contributions he solicited in the Miami Cuban community.

Aircraft maintenance receipts show that while Morales awaited trial, and while he continued to bring large amounts of cocaine into the U.S. (according to federal charges he was later convicted on), an airplane he gave to the Contras regularly refueled at Ilopango Air Force base in EI Salvador. The receipts show that the fuel was supplied by the Salvadoran Air Force, though the base is under joint American-Salvadoran security. Ilopango has been a main transshipment point for arms going from the U.S. to the Contra bases in southern Honduras and northern Costa Rica.

In the spring of 1987, a variety of House and Senate committees plunged hastily and at first, at least, ineptly into investigations that might answer some questions about the Contra operations. Somewhere in the files of one such panel, the Senate Intelligence Committee, however, there is probably still a list of other unanswered questions. The author of this book provided the list at the committee's request after a series of articles he wrote about Nugan Hand appeared in the Wall Street Journal in 1982.

Robert Simmons, then chief counsel to the committee, praised the list as "extremely valuable" and said it formed the basis for closed-door testimony the committee took from CIA director William Casey and others. "Unfortunately," Simmons explained, "the answers can never be made known to you." They were all secret.

An edited set of the questions is appended on the pages following. Some original questions, whose answers have since been tracked down independently and are published in this book, are deleted from the list.

_______________

Notes:

1. Interview with the author.

2. Author interviews with Gunderson and others in Hawaii.

3. Interview with the author.

4. She says she believed what he said as everyone else did, and she hasn't been charged with a crime.

5. Interview with the author.
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