Part 1 : The Crimes of Patriots...End of The Rainbow....The Cover Up

The Crimes of Patriots

A True Tale of Dope,

Dirty Money & The CIA

By Jonathan Kwitny

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

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

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

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

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

—HARRY S. TRUMAN, 

December 22, 1963 

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

—Justice Louis D. BRANDEIS 

Prologue 

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

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

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

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

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

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

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

But actors come and go. It is the roles that stay, and that we need to be concerned with.[Sorry to say,not enough American people have come to understand the Magnitude of the problem,although this impeachment thing has the ability to bring all their crap to light and put this agency in the countries rearview DC] 

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

Jonathan Kwitny 

New York City May 1987 

Cast of Characters 

THE BANKERS 

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

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

THE YANKS IN THE BANK 

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

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

GENERAL ERLE COCKE JR. Survived an execution, headed the American Legion, ran the Nugan Hand Washington office.[this one was heavily involved with Project Hammer DC] 

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

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

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

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

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

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

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

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

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

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

THE AUSSIES (AND OTHERS) 

IN THE BANK 

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

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

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

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

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

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

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

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

JOHN MCARTHUR Worked with Collings in Hong Kong. 

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

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

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

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

PATRICIA SWAN Nugan's secretary and executive assistant. 

TAN CHOON SENG Bookkeeper-administrator Hand hired in Singapore. 

OTHERS ON THE SCENE 

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

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

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

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

LEO CARTER The Australian spy chief who vouched for Houghton. 

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

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

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

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

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

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

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

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

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

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

ABE SAFFRON The Sydney vice lord Hand and Houghton dealt with. 

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

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

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

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

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

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

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

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

THE INVESTIGATIONS 

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

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

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

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

HONG KONG LIQUIDATOR'S OFFICE A government agency, still working on the case. 

1 

The End of the Rainbow 

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

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

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

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

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

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

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

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

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

"What position?" replied Sergeant Brown. 

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

The reporters had their lead. 

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

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

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

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

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

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

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

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

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

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

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

They entered their secret world under a cloak of patriotism. They have stretched that cloak in various ways. Claiming a patriotic duty to the United States, they have carried out unlawful and scarcely believable acts of violence against civilians in Asia, Africa, and Latin America. Like the CIA's assassinations of South Vietnamese leaders, these acts repeatedly backfired, and on the whole seriously undermined the real international security and trade interests of the United States; but that's another book.* [these guys are not patriots,not even close DC]
*Jonathan Kwitny, Endless Enemies (1984). 
This book is about the attempt of these men to stretch the cloak of patriotism still further, to cover civil crimes against citizens of the United States and many foreign countries. Under the cloak of patriotism, and with the help of local bankers like Frank Nugan, hundreds of millions of dollars have been stolen by fraud from innocent investors. Billions of dollars have been moved illegally about the globe, facilitating corruption and thwarting tax collectors in the United States and many countries regarded as U.S. allies. The cost of government has often been taken off the shoulders of citizens who are privileged enough to participate in such machinations, and transferred to the shoulders of citizens who aren't. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Should any act, no matter how wrong, be covered up to avoid embarrassing our national security program? Who decides—the very people who run the program? And by what measure? Is the cover-up really to protect our country's security—or just to protect the politicians and bureaucrats who should be held to account?[Do you really have to ask? Everytime in my life I have heard them pull out that card,it has been to save their own asses DC] 

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

Is there a clear line at all between the authorized and the unauthorized national security operation? Or are there men in the middle—who play both ways? Probably the most sensational testimony at the Frank Nugan inquest came from Michael Jon Hand, Nugan's American partner. Hand identified himself to the court as chairman, chief executive, and 50 percent shareholder of Nuhan Ltd., "the major operating company of a worldwide group of companies with offices throughout the world." Most people still referred to the company by the name of its most prominent subsidiary, the Nugan Hand Bank. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

"I arrived at the office about 9:15 A.M. to find Steve Hill, Dennis Pittard, and Ken Nugan already in the office," she said. (Pittard was a well-known Australian football hero who, on retirement from the sport, went to work as goodwill ambassador for Nugan Hand.) Swan went on: "When I went into my office I found my desk drawers open—to my surprise. Only I and Frank Nugan had keys to those drawers. I can only assume Ken Nugan had obtained Frank Nugan's keys from the police. 

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

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

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

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

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

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

2.

The Cover-Up 

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

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

MANOR: A much-decorated air force pilot and combat veteran, he became special assistant to the Joint Chiefs of Staff at the Pentagon for "counter-insurgency and special activities." He designed and commanded a widely publicized 1970 raid on a North Vietnamese prison camp that failed to find any U.S. prisoners. His promotions continued, however, and in 1976 he became chief of staff for the entire U.S. Pacific Command, managing and coordinating air force, navy, army, and marine corps operations "from the West Coast of the United States to the East Coast of Africa, and from the Arctic to the Antarctic." He retired full-time active service in July 1978, to undertake new duties that the air force says are so secret that it can't talk about them. These duties are generally known to have included negotiating the 1979 agreement with the Philippine Government of Ferdinand Marcos for continuation of the U.S. military bases there (which General Manor used to command), and investigating the failed hostage rescue raid in Iran in 1980—an assignment that apparently stemmed from his own raid in North Vietnam. He joined Nugan Hand's Manila office in 1979. In June 1982, the air force replied as follows to a Wall Street Journal request for information on Manor's A  official assignments: "The standard bio is good until his retirement, but as for when he was reactivated, it's basically a no-comment type of thing. It's pretty sensitive some of the stuff he might have done. He did some work for the State Department. I couldn't find out anything about the Iranian thing. As far as the Philippines goes, I'd just have to say 'no comment' on that. I'd really like to be frank on this, but they just won't let me say too much."* 
*Interview with Peter Blume, Air Force media relations, June 21, 1982. 
According to Tony Zorilla, Nugan Hand's public relations man in the Philippines, General Manor telephoned Zorilla as soon as he learned of Nugan's death. The public relations man says Manor told him to stop the wire services from reporting the story. Zorilla says he replied that this would be unethical and impossible, and refused. "He wanted for us to see if we could persuade the Philippine media to hold off running the stories. I would not have anything to do with trying to prevent the wire services from running the story," Zorilla recalls. 

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

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

General Manor began a telephone interview with a reporter** by insisting that he "had nothing to do with the Nugan Hand Bank." When the reporter presented evidence to the contrary, General Manor said he "was brought in just to learn," and hung up. Later, confronted in person with the word of men who had served under him that he had actually enticed their deposit money on behalf of Nugan Hand—men who lost every penny—he acknowledged having done so. In fact, records show he worked and talked enthusiastically on behalf of the bank in the fall of 1979. Faced with that, he  explained that he was duped into doing so, and never knew that the bank was being run crookedly. 
**The author.
At about the time of the inquest in April, when the papers were reporting that Nugan Hand was suspending payouts and might go under, LeRoy Manor left the Philippines. Wilfred Gregory, the Nugan Hand salesman who was administering the Manila office with General Manor, says that Manor's departure was inspired by a conversation with their Manila lawyer, William Quasha. Gregory says Quasha "arranged for Manor to leave the country. He told me to go, too. He said, 'You could wind up in jail.' " The three-star general, according to Gregory, left overnight. 

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

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

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

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

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

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

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

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

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

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

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

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

Thanks to a criminal case in Australia, and the agreement of several insiders to testify, much is now known about those days that wasn't revealed at the inquest. Arriving in Sydney, Hand and Yates raced to the Nugan Hand office suites. There was sorting and sanitizing of whatever documents Steve Hill, Patricia Swan, Ken Nugan, and his lawyer Brian Alexander hadn't already made off with. 

The suites occupied two floors, and the office was being expanded to occupy more. For this new ransacking, Hand and Yates were joined by Hill, by George Shaw, and also by the mystery man of Nugan Hand, perhaps its most important figure—Maurice Bernard Houghton. In fact, it was Houghton who had met Hand and Yates at the airport. 

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

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

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

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

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

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

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

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

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

For a while, Moloney and Hand both adamantly denied taking any files out of the office. But, faced with criminal charges, Moloney later recanted. He now readily admits in an interview, "Sure, I advised Hand to take documents out of the office. I was told there were serious deficiencies in the accounts." But, he adds, "Everything I did I talked about with Yates first."* 
*Yates denies this and says he only carried one box of records. 
By various accounts, enough records to fill a small room were fed to a shredder. Others were packed in cartons, everyone helping, and carried at night down eight flights to Gilder's waiting van. Then they were driven to the back room of a butcher shop owned by Robert W. Gehring, a former U.S. Army sergeant in Vietnam who worked for Bernie Houghton's honky-tonk operation. 

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

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

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

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

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

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

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

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

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

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

Nugan Hand had enough generals, admirals, and spooks to run a small war. What were these people doing with a mammoth drug-financing, money laundering, tax-evading investor-fraud operation? 

One man wasn't around to ask. 

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

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The Golden Triangle