The Crimes of Patriots
A True Tale of Dope,
Dirty Money & The CIA
By Jonathan Kwitny
CHAPTER THREE
The Golden Triangle
Among the international writers who flocked to Australia at the time of the
Nugan Hand scandal was a Ph.D. from Yale named Alfred McCoy. By trade,
McCoy is a scholar, and he got a job teaching Asian history at the University
of New South Wales in Sydney. But his journalistic bent led him to take
intense interest in the Nugan Hand affair, and relate it to his studies of the drug culture
in Australia and Asia. McCoy's unique perspective allowed him to see before others did that the combination in Nugan Hand of U.S. military-intelligence men and drug-related crime was no anomaly. Rather, he knew, it was part of a pattern. And only by understanding this pattern could an investigator put himself on a footing to probe the Nugan Hand mystery intelligently.
Back in 1972, McCoy (with two assistants) had written a silent bombshell of a book, The Politics of Heroin in Southeast Asia (Harper & Row). Although the book got a lot of attention in certain circles, it was too dense to be a bestseller. And so extreme were the book's findings that even though they weren't refuted, they weren't immediately accepted, either.
In the intervening years, however, others have followed McCoy's trail into Southeast Asia's remote "Golden Triangle" area, where Thailand, Burma, and Laos converge. What they learned only bolstered his extraordinary contentions.
These new witnesses included an intrepid British television team, and the staff of the House Select Committee on Narcotics under the direction of
Washington lawyer Joseph Nellis, a veteran congressional investigator dating back to
the days of the Kefauver Committee on organized crime and the dope trade in the
1950s. In addition, with the decline of American military involvement in the region,
current and former U.S. drug enforcement officials, diplomats, and military personnel
have talked more freely about what went on.
The gist of what McCoy reported in his Politics of Heroin book is now beyond dispute. Considering that, and in view of the thoroughness of his documentation (often interviews with eyewitnesses), the whole book deserves the acceptance and honor it was not originally accorded. As Nellis, the Congressional investigator, says, "I think he [McCoy] knows more about heroin production in Southeast Asia than any man living. His book is an outstanding example of intelligence in this area."
https://exploringrealhistory.blogspot.com/2017/09/part-1-politics-of-heroin-in-se-asia.html
McCoy's thesis was that CIA operations against China in the early Communist years, and against Communist movements in Indochina later on, were responsible for creating the largest single source of heroin for the U.S. market. This was the famous "Golden Triangle." And according to McCoy, it flourished probably not by the original design of the CIA, but ultimately with the full knowledge and cooperation of the CIA.
At the close of World War II, he wrote, "with American consumer demand reduced to its lowest point in fifty years and the international syndicates in disarray, the U.S. Government had a unique opportunity to eliminate heroin addiction as a major American social problem. However, instead of delivering the deathblow to these criminal syndicates, the U.S. Government—through the Central Intelligence Agency and its wartime predecessor, the OSS— created a situation that made it possible for the Sicilian-American Mafia and the Corsican underworld to revive the international narcotics traffic."
The heroin market was revived first in Europe, with the help of two U.S. policy decisions. The decisions were secret at the time, but have been widely attested to since. First, American officials made a bargain with leaders of the Mafia to get criminal gangs to help in the invasion of Sicily. Mobsters were sprung from prison in exchange for their rallying the Mafia's covert army in Sicily and providing the ultimate in translator/guide services for U.S. military leaders. Lucky Luciano and Vito Genovese, maybe the two most powerful men in U.S. crime, both heavily into the dope business, were loosed on the world by such deals.
Then, in the late 1940s, the OSS/CIA became alarmed that the socialist leaders of the dock unions in southern France might side with Communist political movements. There was fear that strikes might redound against the Christian Democratic governments the United States was supporting. To forestall this threat, the United States conducted a vast covert operation to put control of the dock unions in the hands of Corsican gangsters, and take them out of the hands of the socialist unions.
The operation was funded by contributions that the State Department helped wheedle out of large American corporations, and it was aided further by the international division of the AFL-CIO. It concentrated particularly on the prime French port of Marseille. It worked. But besides chasing socialists out of power, the gangsters arranged the port's affairs for their own illicit business. Soon, the town's very name conjured up an association with heroin refining and exporting. The U.S.-installed dockworkers' monopoly in Marseilles became the heart of what was soon known in film and common cliche as "The French Connection."
During the 1950s, several things changed this European domination of the heroin trade. For one thing, occasional honest law enforcement inhibited the gangsters. For another, the Shah of Iran— for once, apparently, letting his religion overtake his greed—successfully ordered a stop to poppy-growing in what had been the region's largest producing country.
And, finally, the Cuban Revolution closed Havana as a free port of exchange between the Sicilian and U.S. Mafias. For a while, Turkey picked up the slack left by Iran. But events on the other side of Asia were already conspiring to transfer the focus of the world's heroin market away from Europe.
All this was basically documentable before McCoy came along, although few paid attention to it. What McCoy showed, as nobody else had, was that, in his words, "In the 1950s the Thai, Lao, Vietnamese and American governments made critical decisions that resulted in the expansion of Southeast Asia's opium production to feed the habits of the region's growing addict population and transform the Golden Triangle into the largest single opium-producing area in the world."
The first big decision came around 1950. At that time, the remnants of Chiang Kai Shek's crumbling western armies were chased out of China's Yunnan Province by the Communist Revolution. Thousands of these defeated soldiers from Chiang's Kuomintang, or KMT, government, melted into the jungles of neighboring Burma. Burma didn't want the KMT soldiers any more than their native country did. But when Burma threatened to chase the cornered KMT out, the U.S. Government decided the KMT were needed, to harass and possibly even reconquer China (or, as it was known then, "Red China").
So the CIA began supplying the KMT through two front companies: Civil Air Transport, headquartered in Taiwan, and Sea Supply Corporation, headquartered in Bangkok. Only a few people with top security clearance knew that both companies were covertly owned by the U.S. Government. They are important, not only for what they did in the 1950's, but also because they were precursors of organizations that touch directly on Nugan Hand in the 1970's.
After China was given up on, the focus of U.S. efforts in East Asia shifted to Indochina. Civil Air Transport was then transformed into (among several successor entities) Air America. That was the airline Michael Hand worked closely with as a CIA contract agent. Many of the CIA associates whose money first helped Hand get started in business in Australia were Air America employes.
Sea Supply Corporation, for its part, was founded and run by a lawyer and CIA operative named Paul Helliwell. During World War II, Helliwell had been chief of special intelligence in China for the OSS. Colleagues from those days told the Wall Street Journal's Jim Drinkhall that Helliwell, then a colonel, regularly used to buy information with five-pound shipments of opium ("three sticky brown bars," one man said). Drinkhall also reported* being told that Helliwell ran an operation code-named "Deer Mission," in which OSS personnel secretly parachuted into Indochina to treat Ho Chi Minh for malaria.
*Wall Street Journal, April 18, 1980.
After the heyday of Sea Supply in the 1950s, Helliwell moved to Miami and became an important figure in the Bay of Pigs invasion and the CIA's other battles against Castro. His Castle Bank both funneled money for the CIA and, privately, operated as a profitable tax-cheat business. Its unexpected demise in the mid-1970s directly coincided with the growth of Nugan Hand. Considering the gaggle of brass from the U.S. intelligence community who helped push Nugan Hand into orbit in the late 1970s, there has been understandable speculation that Nugan Hand was Castle Bank's successor. More on this later.
As Paul Helliwell's Sea Supply Corporation brought large amounts of arms and other supplies to Thailand in the 1950s, the CIA's airline, Civil Air Transport, ferried them up to the Kuomintang army in Burma— at first by airdrop, then, later, to makeshift airstrips. With these American-supplied weapons, the KMT held off the Burmese' attempts to evict them. But their own efforts over several years to invade China were easily rebuffed, which left them frustrated.
The KMT realized, however, that the mountainous region where they had holed up was long known for its one reliable crop: opium. So they determined to make their fortune organizing the haphazard village production. With their American arms, they did this, going so far as to collect opium taxes from villagers.
The CIA's role went far beyond giving the KMT the military means to organize the heroin trade. Alfred McCoy found Burmese intelligence reports from those early days saying that the CIA planes that dropped off military and other supplies for the KMT then flew opium out to Thailand or Taiwan.
Most of the KMT's original trade, however, seems to have been carried on by mule train to the town of Chiang Mai, whose location in northwest Thailand has made it a fabled drug bazaar for years. Even today, it is accepted on the street there that the town's economy is fueled by the drug trade. Chiang Mai is to opium what Chicago is to corn and wheat, or Detroit is to cars. Chiang Mai would eventually be the location of the strangest and least innocently explainable branch of the Nugan Hand Bank.
Back in the Chiang Mai of the 1950s, McCoy explains, "a KMT colonel maintained a liaison office with the Nationalist Chinese consulate and with local Thai authorities. Posing as ordinary Chinese merchants, the colonel and his staff used raw opium to pay for the munitions, food, and clothing that arrived from Bangkok.... Usually the KMT dealt with the commander of the Thai police, General Phao, who shipped the opium from Chiangmai to Bangkok for both local consumption and export."
Thus General Phao and the elite from his Thai national police force provided the vital link between the landlocked KMT opium lords and the sea. But after establishing this, McCoy also establishes something else: General Phao was the CIA's man in Thailand. The overwhelming evidence comes from contemporary news reports, on the scene interviews, and documents from The Pentagon Papers (the Pentagon's secret history of the Vietnam War, much of which was published by the New York Times).
Phao obtained his strong position in the factionalized Thai power structure directly from CIA backing—and in particular from the lavish arms shipments that Paul Helliwell Sea Supply Corporation sent to Phao's national police. The CIA also financed General Phao's opium purchases from the KMT. Phao and so many other players in this game were actually written up in the New York Times back in the 1950s that it is impossible to believe that the CIA—which, after all, secretly owned Sea Supply Corporation—hadn't put the picture together and didn't know what was going on.
Of course they knew. To the CIA, Phao appeared useful as a staunch antiCommunist who would employ his power to keep any Thai government from going too far left. Phao would also maintain the KMT as a well-supplied thorn in the "Red Chinese'" side.
To be sure, all this doesn't mean that U.S. policy-makers originally envisioned the final result of their script. The Washington planners may not have foreseen that the KMT would come to be virtually a country within a country in the anarchic Shan States of northern Burma, easily crossing over into the unpoliceable jungles of western Laos and northern Thailand. And Washington may not have foreseen that the efficiencies being wrought by this KMT sub-state would bring the Golden Triangle to dominate the world heroin market.
But it gradually worked out that way, under Washington's nose, and no one saw fit to stop it. Soon, just as happened in Marseilles after the gangsters took over the waterfront, refineries were springing up in the Triangle, so that pure heroin could be shipped instead of bulkier raw opium.
Readers who are too young to remember the 1950s may find it hard to understand just how shocking these revelations would have been in those times. The KMT leader, Chiang Kai-Shek, on Taiwan, had a mammoth lobbying and propaganda operation that overwhelmed the U.S. Congress and press. In a way, the United States was the victim of its own World War II propaganda. Chiang had deceived the American public into thinking he was the popular leader of a united China, when in fact he was merely preeminent among many leaders—warlords, they were sometimes called. Chiang's KMT ruled the capital of Peiping, but never, from Chiang's ascendency in 1928, a united China.
The most powerful American press voice during the Chinese Revolution and its immediate aftermath was Henry Luce, head of Time Inc. Television was in its infancy, and Time and Life magazines had no close competition. Luce, a staunch Christian moralist, and his wife, Clare Boothe Luce, were close personal friends of Chiang and Madame Chiang. They drummed their support weekly in their magazines, and the rest of the press followed.
Chiang had another powerful cheerleader in General Claire Chennault, hero of the China theater in World War II. Chennault had organized and directed Chiang's air service since 1937. The popular Chennault and his highly visible wife Anna lobbied tirelessly for Chiang. They helped see to it that public humiliation awaited any U.S. Government figure whose support flagged. During the Truman and Eisenhower presidencies—both in the administration and in Congress—Chiang was not an ally of convenience, but a sacred cause.
Loyalty to that cause led the United States to turn its initial Korean War victory into a disaster. The North Korean army almost overran South Korea after its invasion in June 1950. But by early October, the United States (acting under the auspices of the United Nations) had cleared South Korea of northern troops, secured its independence, and moved northward to provide a more defensible border. The fighting capacity of the North Korean army had been broken.
But instead of stopping there, the U.S. commander, General Douglas MacArthur, another Chiang buddy from World War II days, insisted on taking the war to China in a coordinated effort with Chiang to help the KMT reconquer the mainland. Chiang's coordinated attacks against his mainland foes were secret from the U.S. public, but not from the Chinese, who were getting shot at. It could be seen as a turning point in U.S. history—the beginning of the anticommunist folly.
The Chinese were understandably unwilling to have hostile, constantly attacking forces on their northern as well as their southern border. Having promised all along to invade North Korea if MacArthur's forces reached the Chinese frontier, they did so. The result was a tenfold increase in U.S. casualties and the conversion of the Korean War from a win into a tie.
Yet one Washington politician after another continued to talk of restoring Chiang to power. To question Chiang was to call one's own patriotism into question—and, indeed, several State Department careers were ruined for just that reason.
Yet the result of the KMT buildup in the Golden Triangle was the mushrooming of the heroin plague in the United States. By the early 1950s, the drug problem became a nationwide concern as millions of families watched the Kefauver crime hearings. A few years later, Frank Sinatra's terrifying portrayal of a junkie in the movie version of Nelson Algren's bestselling novel, The Man With the Golden Arm, made heroin addiction a stark nightmare to more millions. Soon, criminologists and police chiefs everywhere were blaming addicts, desperate for money to buy a fix, for the soaring national crime rate and the resultant spread of fear through American cities and suburbs.
Knowledge that Chiang and his KMT were constructing the world's preeminent heroin factory to support their cause would have flabbergasted almost everyone. So would the knowledge that the heads of the American Legion and the Freedoms Foundation—the very soul of American anticommunism—would help run a bank for the heroin trade (even if Generals Cocke and Black were, as they have said, unwitting of Nugan Hand's dope deals).
If such shocking news about the Kuomintang could be kept secret for twenty or thirty years, one has to wonder what might have gone on with Nugan Hand in the 1970s—or what might be going on now—that is similarly being kept secret. At any rate, the events described here all did happen. Officially, they happened only for the purpose of helping our "friends," the KMT, who never had a realistic chance of overthrowing Mao Tse-tung's new mainland government anyway.
If the petty harassment of Mao justified starting a new heroin trade, soon there was a much bigger stake. There was the Vietnam War. From 1954, with the arrival of General Edward G. Lansdale and his crack teams of CIA operatives, the United States slowly took over from France the conduct of a war against various Indochinese independence movements. The French, McCoy shows, had cooperated in the export of Golden Triangle heroin through Saigon in order to keep the cooperation of the corrupt local elite. Corsican gangsters even arrived from halfway around the world to smooth out logistics.
This intermingling of heroin traders and the government of South Vietnam only intensified under American administration, McCoy shows. He makes clear that Ngo Dinh Nhu, brother of the U.S.-selected and U.S.-installed President Ngo Dinh Diem, got rich trading dope, as did other U.S.-backed Vietnamese leaders.
The real expansion of opium production, however, was in the mountains, where the U.S. military mission had suddenly discovered some important potential allies. These were the Montagnard (or Hmong, or Meo) tribesmen, constantly lauded by U.S. Government spokesmen and the U.S. press during the Vietnam War as "heroic," "pro Western" and "our allies." And it's true that the Montagnards fought harder and more loyally with U.S. forces than did other South Vietnamese.
But our brave new allies happened to live on prime poppy-growing land. As U.S. aid and advisors came, landing strips were built for the CIA's special short-take-off and landing craft. The opium trade grew proportionately. By McCoy's and many other, first-hand, accounts, opium was regularly flown out on flights of the CIA's Air America (formerly Civil Air Transport). The Montagnard villages flourished, as intended.
But a lot of opium wound up as heroin on the streets of the United States. Some was sold directly to American G.I.'s in Vietnam. Addiction plagued the U.S. forces, to the point of reducing their fighting capacity, and when the men came home their addiction came with them. Some of the Air America crews made a lot of money on this trade.
Wilfred P. Deac, senior public relations man for the Drug Enforcement Administration, offers this explanation today: "Their mission was to get people to fight against the Communists, not to stop the drug traffic."
Adds DEA Far East regional director John J. O'Neill, "The kind of people they were dealing with up there, the whole economy was opium. They were dealing with the KMT and the KMT was involved in heroin. I have no doubt that Air America was used to transport opium."
Joe Nellis, of the special Congressional investigation: "The CIA did help bring some very powerful cheap heroin into Vietnam out of the Shan States, the northern states of Burma . . . for radio communications, intelligence. In return for that intelligence, the CIA winked at what went in its airplanes."
A former military intelligence noncom tells of a 1960 operation in which an airstrip was hastily built on Borneo as a transfer point for goods going into and out of Vietnam. Curious about the cargos that were being dropped off by the first planes out of Vietnam, awaiting shipment back home, he says he pried open a crate that was labeled "munitions" but was suspiciously light of weight. It was filled, he says, with parcels wrapped in manilla paper. Opening one, he says, he found small plastic bags of a white powder that he has no doubt was heroin.
The U.S. Government not only promoted this drug traffic, it intervened to make sure the traffic wouldn't be discovered. A former officer who did criminal investigations for the Pentagon in the Vietnam theater, and who now works on the staff of the inspector general for a major federal agency, vividly remembers political interference with criminal justice. "Some of the times when you'd be running a criminal investigation, say narcotics, you'd find out that Inspector So-and-so of your national police is involved in this," the former officer says.
"You investigate it up to a point and then you can't go any further," he says. "It would go to our headquarters and then it would go to Washington and nothing would ever happen. The intelligence gleaned from these people was more important than stopping the drug traffic." At least that's what he was told.
For many, letting the drug traffic go was also more profitable than stopping it.
Another former officer from the army's Criminal Investigation Division recalls a mammoth heroin scheme he and his colleagues uncovered by accident. He says he and four others from his unit were investigating corruption in the sale of supplies to commissioned- and noncommissioned-officers' clubs. The corrupt U.S. and Vietnamese officers they caught tried to bargain away jail terms by describing the heroin traffic involving Vietnamese politicians and senior U.S. officers. The reports checked out, the investigator says.
The investigator, now a stockbroker, says that his investigation group filed reports to the Pentagon revealing that G.I. bodies being flown back to the United States were cut open, gutted, and filled with heroin. Witnesses were prepared to testify that the heroin-stuffed soldiers bore coded body numbers, allowing conspiring officers on the other end, at Norton Air Force Base in California, to remove the booty—up to fifty pounds of heroin per dead G.I.
The army acted on these reports—not by coming down on the dope traffickers, but by disbanding the investigative team and sending them to combat duty, the former investigator says. Other reports corroborate the use of G.I. bodies to ship dope back to the United States via military channels.
This was the prevailing atmosphere when Michael Jon Hand arrived in Indochina.
The old Bronx neighborhood is now a slum, but when Hand was young it was upper middle class, and his high school, DeWitt Clinton, was considered one of the city's best. He graduated 248th in a class of 695, won a scholastic achievement award, was appointed student prefect, and was starting receiver and defensive back on the football team. He passed every class he took, and was noted for exceptional character, courtesy, cooperation, and appearance. His IQ registered an also exceptional 131.
Graduating in 1959, he stated that his ambition was to become a forest ranger. Shortly afterward, his mother died in a fall from a third-floor window; the question of accident or suicide was never resolved.*
*Thanks to an unidentified researcher for the National Times of Sydney, Australia, who dug all this out in 1981, making it much easier for me to verify later. The researcher also reported talking to former neighbors, who "have only fond memories of Hand, his father and his mother."
I tried to augment the researcher's findings, but was blocked by the New York City Department of Health, which suddenly, in 1986, perhaps because of pressure from the families of AIDS victims, banned public access to previously available death records. These records clearly seem public under the state's open information law, but there wasn't time to fight that legal battle before publication.
Mike Hand turned into a bearish man, with thick layers of muscle that melted largely to flab in later years. On the one hand, he developed an aggressive, macho, locker-room image that put more sensitive men off; on the other, he was known as a devout Christian Scientist and regular churchgoer, who rarely drank.
When Hand became a prominent banker in Australia, he told the world he was a graduate of Syracuse University, and mentioned to some that he had taught school in California before joining the army. The record shows instead that in 1961 he completed a one-year course at the New York State (forest) Ranger School. The school was attached to Syracuse University but hardly the equivalent of its B.A. program.
Hand's teacher, David Anderson, says Hand finished thirty-eighth in a class of forty-nine, though Anderson has a lasting impression of Hand as extremely personable. He must have been that, just to be remembered after all these years. Anderson says that Hand wrote from California in 1962 that he was managing a swim and sports school in the swank Los Angeles suburb of Palos Verdes Estates. The next year, Hand wrote back that he was taking Green Beret training at Fort Bragg, North Carolina. The record shows he enlisted in the army in May 1963.
In Vietnam, Hand won a Silver Star, a Purple Heart, and the Distinguished Service Cross, second only to the Congressional Medal of Honor as the nation's highest military award. On June 9, 1965— according to the Distinguished Service Cross citation—he almost single-handedly held off a fourteen-hour Vietcong attack on the Special Forces compound at Dong Xaoi.
According to newspaper accounts at the time, Hand braved a barrage of fire in an attempt to rescue a wounded buddy, then darted into a building and dragged to safety a wounded American captain— Hand's commanding officer—and another wounded soldier. Wounded by shrapnel himself, he still grabbed a machine gun and held the enemy off until the weapon jammed. Hit by another shrapnel blast, he was ordered to withdraw, but despite his wounds went under further fire to rescue one or two other wounded men. One account says he "acted as a live target to flush out enemy snipers."
A resume Hand later submitted to the State Department to keep his passport current says he left the army in May 1966. The next entry reads: "1966- 1967, worked directly for U.S. Government." Banking associates say he sometimes referred fleetingly to his undercover activities in Laos during those years, and sometimes took a perverse joy in describing the bodily mutilations the local people had liked to perform on their slain enemies.
By accounts of men who say they encountered him back then, Hand helped train the mountain people—Montagnards—and worked closely with the Air America crews that supplied them. But there are no detailed accounts of his activities. He migrated to Australia in September 1967.
About the time Nugan Hand was organized, in the early 1970s, Hand married Helen Boreland, an Australian woman nine years his senior. By all accounts, they had a close and loving relationship, though an unusual one: people remark that Helen Hand seemed more like a mother than a wife to her husband. When he finally fled in June 1980, she stayed in Australia, worked for a while in a high-priced Sydney jewelry store, then disappeared from public view. Numerous requests for an interview with her were left with acquaintances and a lawyer who had represented her, but she didn't respond.
Even more important than Hand's wife was the person he fairly adopted for a substitute father—Maurice Bernard Houghton (pronounced "How-ton"), the mysterious puppetmaster of Nugan Hand, who, while posing as a simple barkeep, moved intimately among diplomats, spies, and military brass in many countries. The circles Houghton traveled in included the covert action specialists who would become central figures in the foreign policy scandal that engulfed the Reagan Administration in 1987—air force generals Richard Secord and Harry C. ("Heinie") Aderholt, and former CIA officers Edwin Wilson and Thomas Clines.
Bernie Houghton had preceded Mike Hand to Vietnam. He then preceded Hand to Australia, by eight months, arriving in January 1967.
Today, Houghton is still there. Once again, he is ostensibly just a barkeeper, now with a few years of part-time banking in his past. A lot of people think Houghton is a spy, and he has been called one by the looser Australian press. Whatever his business, secrecy is a big part of it. And he is very good at secrecy.
A fleshy, gray-haired, outwardly unobtrusive man with eyeglasses, Houghton seems to pride himself on a quiet demeanor. He is missing a couple of fingers on one hand, and there is no explanation for it in general circulation. He will not talk to reporters. If one hangs out in his bar, or waits at the main entrance to his penthouse ocean-front condo, it doesn't help. Houghton has lookouts protecting him, a tightly knit circle of confidants. They observe visitors and profess ignorance of Houghton's whereabouts until the visitors go away.
Adopted sons, they seem to some. They work at one of his bars, or he sets them up in other enterprises. Often, one is staying at the condo with him. Some are ex-army men from Vietnam. Some are "boys" who appear to be in their late teens or early twenties. Houghton is not known as a womanizer.
Impressive as he is at avoiding reporters, Houghton is even more impressive in his ability to avoid police, even those who have subpoena power. During the most aggressive investigations into Nugan Hand, which lasted several years, he simply slipped out of Australia when the heat was on, and returned when the investigation was over. Amazingly, he alone among his colleagues at Nugan Hand continues to hang around Australia and has still stayed out of the criminal docks.
He did agree to one transcribed interview with the Joint Task Force on Drug Trafficking, a top-level police group that was mandated by the prime minister of Australia and the premier (like a governor) of the state of New South Wales to investigate the Nugan Hand collapse. But Houghton refused to go to the police. He insisted the cops come to him—in Acapulco, Mexico, where he was holing up on the twenty-sixth floor of the Princess Hotel. They did, in June 1981.
His vague and convoluted answers, as transcribed, reveal him as a master of conversational evasion—as other native Texans might put it, he is a virtuoso bullshitter—and one can only wonder at the extent to which he was simply pulling the cops' legs.
"I had come to Australia because in World War II I had served alongside Australian servicemen and had gained a great deal of fondness and appreciation for them," he said. He told the police that he had been "engaged in business activities in Southeast Asia, including Vietnam," for several years. But he never said what business. "In 1966 I became disenchanted with the activities in Southeast Asia and determined to return to the United States, but wanted first to stop off and see Australia since I had heard so much about it in my association with Australian military men."
He said he didn't meet Michael Hand until Hand arrived in Sydney in the fall of 1967. But Houghton said he'd "heard of his [Hand's] reputation as early as 1964 or 1965." Houghton said, "I had heard of Mike Hand's great combat exploits and courage, which was well-known in Vietnam. In fact, the image I had of him was comparable to that of the famous Sergeant York* in American history. He conducted himself in such a manner in the war as to receive high praise and commendation, including from the President of the United States,"** Houghton said.
*Alvin York of World War I, probably the greatest noncommissioned combat hero the United States has had.
**"Like the Sergeant York comparison, the remark must be recorded as of questionable accuracy.
Houghton said he met Hand "casually and through some social acquaintance, the
exact particulars of which I cannot now recall. . . . Since we both lived and worked in
the Kings Cross area [of Sydney], thereafter I saw him almost daily when we would run
into each other all the time."
As for himself, Houghton said he was born July 25, 1920, in Texas "and lived in various cities in the Southwest. My father was an oil driller, which meant we had to move from city to city. I graduated from ail the elementary schools and high school and was going to Southern Methodist University, studying business management, when the United States went to war. [Southern Methodist says he attended during the fall semester of 1939-40, a year before the United States went to war, and that he received no degree. It says he also spent the summer of 1946 there.]
"I enlisted in the U.S. Air Force Cadet Training Program and went to many schools," Houghton told the police. "I was discharged in 1946 and went into business, restaurants, clubs, surplus war material and miscellaneous." He said he "went to Vietnam, early in the 1960s, and I went to work for a construction material expediter [apparently in Vietnam] until such time as I came to Sydney, Australia, in January 1, 1967 [sic]."
In 1969, a problem with Houghton's visa caused him to give a statement to Australian immigration officials. He said then that he had spent the early 1960s with two San Francisco-based companies— the East India Company and J. G. Anderson, neither of which lists a telephone there now. He said he then went to Saigon to work for a Bruce Ficke "who is now a resident of Anchorage, Alaska." There is no telephone listing for a Ficke in Anchorage now.
In another brief interview with police in 1980, Houghton told a different story. He said he went to Saigon after seeing "job offers" in U.S. newspapers. "The same day I arrived," he said, "I got a job with an individual, by that I mean he ran his own company, named Green. He was later killed with his wife in Saigon."
This is how the Australian Joint Task Force on Drug Trafficking reported the rest of that police interview: "Asked to elaborate, Houghton said Green was an American whose Christian name was William. According to Houghton, his job with Green entailed 'traveling. ... I was in Saigon for a while and then I went to Bangkok and did the same thing there. All this time I was working for Green.' Houghton described this work as being involved in a minor way in the construction of airport and military bases. He maintained that he worked for no one else whilst in South East Asia.
"Later, when asked about Bruce Ficke—the person referred to in his 1969 reply to the Department of Immigration—Houghton said, 'I met him years ago in Alaska. I was working for a company called East India and he was a distributor for goods I was selling. That association goes back over twenty years.' "
Efforts by the author to locate the companies or people Houghton said he knew back then have failed.
Returning to his 1981 formal interview in Acapulco, Houghton gave this account of what happened after he landed in Australia in January 1967: "I went to work for Parkes Development as a real estate salesman and opened the Bourbon and Beefsteak Bar and Restaurant."
Even the date of the Bourbon and Beefsteak opening is mysterious. Houghton said it opened "November 4, 1967." The task force that interviewed him, however, determined in its final report that the restaurant actually opened in September. The date is significant, because the Bourbon and Beefsteak was designed to cater to the U.S. military.
To relieve the growing strain on the honky-tonk neighborhoods of Hong Kong and Bangkok, the U.S. Government had negotiated a deal with the Australian Government whereby Sydney would open its doors for U.S. soldiers to receive the rest and recreation periods their Vietnam War service entitled them to. According to the task force, Houghton somehow learned of Sydney's selection as an "R and R" center "prior to it becoming public knowledge." The task force said "Houghton did not explain how it was" that he found out early about the R and R deal. But before the first soldiers arrived, in October 1967, Houghton had arranged to be at the center of the action.
That's as far as the cops got regarding Houghton's history before Nugan Hand. It leaves out a lot.
Alexander Butterfield, a former Asian-intelligence officer, had some helpful advice for a reporter asking questions about Bernie Houghton. In 1973, Butterfield had attained instant celebrity by revealing to Congress and the world that Richard Nixon's Watergate conversations were secretly taped in the Oval Office. (Little if anything was made of the curious circumstance that a career intelligence operative had played such a pivotal role in the downfall of a president.)
Asked about Houghton, Butterfield quickly said to call Allan Parks, a retired air force colonel who now runs the flying service at Auburn University in Alabama. Sure enough, Parks remembered Houghton well, mostly, he said, from his days as intelligence officer at the U.S. Embassy in Bangkok during the war. Parks recalls constantly stumbling over Houghton's name in cable traffic.
Military secrecy still prevents Parks from telling all he knows, he says, but he remembers meeting Houghton—and he places Houghton in Asia well after Houghton allegedly retired to Australia to become a barkeep. [Military secrecy?what a big load of crap DC]
"He ferried C-47s, cargo airplanes, from Thailand," Parks says. "The man, he was running everything. Between Australia and Thailand. I met him in Bangkok in a bar. I was involved in Laos in some things I can't discuss in '70 and '71. There was traffic I read relating to that. But I can't go into it because it's all secret." It was something to do, Parks says, with "Project 404," which is still "classified." (Asked about Michael Hand, Parks has the same response: "I can't tell you. It's classified. No comment.")["classified",in other words...criminal activity DC]
But the mention of Houghton elicits reminiscences from Parks: "There's no doubt about it, he'd fly anything. The Golden Triangle, that's where he got his opium from. There was one flight, he flew in slot machines. He did some deals over in India."
Asked the name of Houghton's airline, Parks just laughs, and says, "He didn't call his planes anything. Nobody could track his airplanes. He didn't have an airline, like. The embassy was always trying to run him down. It was funny." Asked for other sources, Parks says, "Anybody who would know would give you the same answer I would."
Then he refers a reporter to General Aderholt, who he says also observed Houghton from the U.S. Embassy in Bangkok. Aderholt went on to become commanding general of the U.S. Military Assistance Command in Thailand, and, with General John K. Singlaub, ran covert air operations throughout the Vietnam-Laos-Thailand war zone. Retiring from active duty after the war, generals Aderholt and Singlaub took command of various right-wing paramilitary groups in the United States.
During the mid-1980's, when the Reagan administration was barred by Congress from supplying and directing Contra rebels trying to overthrow the Government of Nicaragua, but was determined to do so anyway, Generals Singlaub and Aderholt played important roles in keeping the Contra rebellion alive. Though they were supposedly working through private channels, their efforts were coordinated by the White House through Lieutenant Colonel Oliver North, and the source of their funds was open to question during the Contra scandal investigations of 1987.
Aderholt seems to have been in good position to know what was going on in Southeast Asia during Bernie Houghton's days there. Aderholt had combined his air force career with work on the side for little airlines and medical relief agencies overseas, creating the aura of someone involved all along in private "front" operations for the CIA or some related U.S. intelligence agency. But Aderholt's recollections of Houghton contradict with the accepted chronology of Houghton's life.
Bernie Houghton? "There was a guy named Bernie Houghton with the Nugan Hand Bank," Aderholt says. But Nugan Hand wasn't officially chartered until 1973, and really didn't begin to burgeon until 1976—well after the time Parks said Aderholt had encountered Houghton in Thailand during the Vietnam War. It was even after Aderholt had supposedly retired from the air force. But Aderholt is vague on dates.
"I had lunch with him," Aderholt recalls. Describing the lunch, he continues to set off alarm bells. Also present, he says, was an American named William Bird. Bird, the reporter knows, was the almost legendary operator of a seat-of-the-pants southeast Asian airline called Bird Air, and was involved with other concerns linked to U.S. military and secret paramilitary involvement there. Although Bird's precise relationship with the CIA has never (to the author's knowledge) been publicly documented, he is widely believed to have had such a relationship for many years.*
*Bird was always in some other country when the author tried to find him, both in the United States and in Thailand.
"Mr. Bird and I had run an airlift out of Bombay," Aderholt continues. "Houghton was with a company in Bangkok [Aderholt names a company, the Alkemal Company; it couldn't be located]. He was interested in opening a restaurant in Bangkok." Aderholt also confirms that William Young, who worked briefly for Nugan Hand in Chiang Mai, Thailand, was for many years a CIA agent (more on Young later). But Aderholt says he is unable to supply further information or leads on Bernie Houghton.
Looking into Houghton's past, all you can come up with is mystery. "He was doing something in Vietnam, but he won't say what," says Houghton's lawyer in Sydney, Michael Moloney. "Nobody really knows. He won't talk about his past."
Even for those who enjoy fairy tales, the available version of Houghton's first weekend in Australia may seem fanciful. Supposedly he was broke and on the street. The police task force report says, "Asked if he had had introductions to Sydney people on his arrival in the city, Houghton said, 'No.' "
But through a deus ex machina unworthy of a made-for-TV movie, the story has Houghton quickly falling in with a circle of Australia's leading businessmen. They were friends and business associates of transportation tycoon Sir Peter Abeles, who owns Australia's biggest trucking, shipping, and airline companies.
Sir Peter's shipping and trucking operations extend to the United States and throughout the world. Publishing and television tycoon Rupert Murdoch, perhaps Australia's premier international citizen, is Sir Peter's sometime bridge partner. Murdoch is also Sir Peter's 50-50 partner in ownership of Ansett Airlines, Australia's biggest.
Among the circle of business and card-playing associates of Sir Peter's, besides Rupert Murdoch, are another Knight of the Realm, Sir Paul Strasser, and John Charody, who, with Strasser, was involved in some real estate development companies and an oil company based in Sydney. Sir Paul remembers the weekend in January 1967, when "a friend, I can't remember who" brought Houghton into the coffee shop where Sir Paul was sitting.
Houghton told police that the "friend" was the manager of the not-particularly elegant hotel Houghton had happened to check into. The hotel was in the honky-tonk King's Cross section of Sydney, a district of B-girl bars and sex shows, where Houghton would eventually become the impresario of U.S. military R and R. What landed him at the King's Cross Hotel just off the boat? And what led him to immediately seek the hotel manager's help in finding work? Unanswered questions. But it is doubtful that everyone who stumbles into the King's Cross finds himself having coffee a few hours later with a knighted multimillionaire tycoon like Sir Paul Strasser.
Sir Paul remembers* that Houghton was described as just out of Vietnam, flat broke and desperate. "Somebody who couldn't find work, he didn't have any money," Sir Paul remembers. Yet, says Sir Paul, Houghton "gave as a reference two high ranking army people. Admiral Yates was one. Yates gave him an excellent reference."** So Sir Paul agreed to take Houghton on as a condominium salesman for one of his development companies.
*In telephone interviews with the author.
**Yates denies knowing Houghton that long ago.
The police had asked Houghton who his references were, and he had replied, "I'm sorry, I don't remember." But Sir Paul told the police that he sent two telex cables to verify Houghton's credentials, "one to the military in Hawaii and one to Washington. . . . Both cables were sent to army departments." The replies, he said, "were in glowing terms."
Later, Sir Paul said, Houghton introduced him to both General Black and Admiral Yates. Sir Paul became convinced that Houghton had a "top connection with the U.S. administration." Sir Paul has also told Australian reporters that Houghton was recommended to him by CIA associates and a "top politician in Washington."
This was a pattern that almost everyone around Houghton noticed quickly. As Sir Paul put it, "He was connected with top army people. I have no doubt about that. He was very close to the American embassy. I was once invited by him to the American embassy and he introduced me to all the top people. When [U.S.] senators or top officials came to town they would always see him. I heard he got flights to the States on U.S. military aircraft from Richmond Air Base [in Australia]."
"All the time I asked him about Vietnam," Sir Paul recalls. "But he didn't want to talk about it. He was the best salesman I ever had in my life. I always wondered. He came in literally without a penny in his pocket. I had to give him a loan on Friday [to tide him over] till Monday morning."
Houghton's arrival in Sydney in 1967 could not have been better timed for him or the military. The Bourbon and Beefsteak was soon overflowing with incoming shiploads of America's fighting men, and with the prostitutes they picked up in the neighborhood. Houghton soon opened two similar establishments nearby: the Texas Tavern, and Harpoon Harry's.
Because "loose lips sink ships," and because the toughest front the Pentagon had to face in the Vietnam War was in the press back home, Washington doubtless would have wanted eyes and ears on its vacationing troops. As much as their play could be controlled, Washington would have wanted to control it. And no one was better positioned to do that than Bernie Houghton.
Houghton became close friends with Lieutenant Colonel Bobby Keith Boyd, whom the U.S. Army assigned to be commanding officer of the R and R center in Sydney. Houghton told police, "We are both Texans and that automatically makes you friends."
Besides being a Texan, Boyd had been a former U.S. embassy military attache in Latin America, among other assignments. The prime minister's police task force concluded thus about him: "It would be extremely naive to suggest that with a military career of this type . . . that Boyd was not closely allied with U.S. intelligence, if not more directly involved." In 1971 Boyd resigned from active duty—and went to work helping Houghton run his bar-restaurants. He also occupied various positions in the corporations Houghton set up as holding companies.
During R and R, Houghton received all sorts of special benefits. When the troops came to port, Sydney residents recall that Houghton was sometimes helicoptered out to the flagship to greet his prospective customers and meet their commanding officer.
And as Houghton grew bigger and more visible, so did his friendship with Michael Hand.
Despite his denials, a circumstantial case has been made by some that Bernie Houghton was wearing the cloak of patriotism as a U.S. intelligence agent. The case is furthered by his otherwise hard-to-explain relationship with the Australian Security Intelligence Organization, a government agency best known to Australians by its acronym, ASIO. While doing for Australia some of the work that the CIA does for the United States, ASIO also functions domestically, much as the FBI's counterintelligence branch does in the U.S.
ASIO's name showed up when, after the collapse of Nugan Hand, Houghton's immigration file was investigated. Curious references were found both by the police task force and by the local press, which obtained documents through devices of its own. It was learned that on October 21, 1969, ASIO had given Houghton a security clearance; this was after he applied for permanent residency status in Australia.
Then, on February 12, 1972, ASIO did Houghton a very special favor. He had been traveling abroad—to "Saigon to check on the feasibility of buying surplus war material," he later explained. But he had neglected to obtain a re-entry visa for his passport. His original Australian visa had expired November 10, 1971. In the palaver at the airport immigration desk, he gave the officers two references, who quickly saw to it that he was admitted. One was John Charody, Sir Paul's business partner.
The other was Leo Carter of ASIO—not just an ordinary ASIO agent, but the director of ASIO for the whole state of New South Wales, the largest in Australia. Why did one of the handful of top intelligence officials in Australia, one who had direct contact with U.S. intelligence agencies, personally take time out to clear a simple barkeep for admission to Australia? Carter cannot be asked; he died of a heart attack in 1980. The immigration officer who signed Houghton in died the same year.
ASIO declined to talk about it with a reporter. In a written statement to the police task force, ASIO said it couldn't explain "the apparent references to ASIO on Bernie Houghton's Department of Immigration papers . . . since he does not appear in our records. ... It is only possible to speculate that Carter may have known Houghton privately as a restaurateur," ASIO said.
Maybe—except that when the police task force asked Houghton if he knew an Australian named Leo Carter, he replied, quite unequivocally, "No."
Not only did Houghton get admitted to Australia on Carter's word, he also received an immediate and very special "A" stamp— permission for unlimited re-entries to Australia in the future. One can imagine the embarrassment of the immigration officer who dared question Houghton as he went through the line, only to have senior government and business leaders roll out the red carpet for him on receipt of a telephone call.
Another item stands out from the police task force's report on Houghton's immigration file. There are records of Houghton leaving Australia only twice in the early years he was there. Yet if the recollections of the former U.S. military officers in Southeast Asia are correct, he must have been gone more than that. The story, relayed by Sir Paul Strasser and others, that Houghton flew in and out from a military air base on U.S. military aircraft provides one possible explanation. His apparent connection with ASIO provides another.
Nor is it likely that the regional head of ASIO, along with assorted generals, admirals, high-ranking senators and congressmen, U.S. Embassy officials, and two CIA station chiefs in Australia (Milton Corley Wonus and John Walker), all of whom socialized with Houghton, did so because of his establishments' haute cuisine and ambiance.
His Texas Tavern and Harpoon Harry's have long since folded, but around the corner from their old locations the Bourbon and Beefsteak, where all the dignitaries came to dine, still swings. Just inside the doorway to the left of the entrance are women in thick makeup, tight tops, miniskirts, and fishnet stockings. You know why they're there.
In the doorway to the right of the Bourbon and Beefsteak, through the dinner hour and late into the evening, stands a barker. Sometimes it is a man, sometimes a woman, but always the barker is advertising a sex show that occurs at the top of the stairway behind him. During the show, the barker says loudly enough for anyone entering the Bourbon and Beefsteak to hear, you can see "two young Asian girls shooting Ping-Pong balls out of their pussies."
Inside the restaurant, the lighting and furnishings are reminiscent of a steakhouse not exactly like, say, Christ Cella or Peter Luger, but more like, say, Tad's. So are the steaks—thin and greasy. No one but a sailor long marooned at sea would ever come here for the food. If there is one thing Sydney abounds with, it is truly wonderful places to eat, with seafood and fine local wine that thrill the palate and well occupy the expense account; the Bourbon and Beefsteak is not, by any stretch, one of those places.
Operating the most notable bars in King's Cross, where the biggest rush of customers in years scooped up every prostitute in sight and sought every form of vice that could be crammed into a weekend, Bernie Houghton probably needed approvals that even the U.S. and Australian Governments were unequipped to provide. Abe Saffron, the local version of the Mafia, has long run King's Cross the way that Matthew ("Matty the Horse") Iannello runs Times Square in New York.
The police task force described Saffron as "a man who by reputation has for many years dominated the King's Cross vice scene. He has been described in the Parliament of this State [New South Wales] and elsewhere as 'Mr. Sin,' and is reputedly involved in vice and other questionable activities in other states of this country.... His activities are carefully hidden behind complex corporate structures."
Judges and state governors have attested on the record to the foulness of Saffron's character, and to his role, in the words of the South Australia attorney general in 1978, as "one of the principal characters in organized crime in Australia." In a cover story headlined "Who Is Abe Saffron?," the National Times, a major Australian newsmagazine, said in 1982, "The New South Wales Licensing Courts over 30 years have heard police officers rise to their feet to argue against Saffron, his family or associates getting one more liquor license—yet he and his associates still own or control a string of licensed bars, restaurants, clubs and hotels throughout the country."
The article noted that Saffron hadn't been convicted of a crime since 1940—but then, of course, close to the same could be said until recently of Matty the Horse.
Saffron became front-page news in Australia in 1982 for two reasons. One was his meetings with high-ranking police officers caught up in a corruption scandal. But his name also kept cropping up in the Nugan Hand affair.
A royal commission assigned by Parliament to investigate crooked unions was pursuing a former Nugan Hand executive, Frank Ward. The commission turned up a memorandum written to Ward by an associate at Ward's new investment bank: "Abe Saffron phoned 8:30 A.M.—is in city—has balance sheets—wants to settle Friday. He confirmed in no uncertain terms that the fee ... is agreed at 5 cents. I have enough regard for my knees to agree! . . . I/we should clarify today to avoid future problems—physical or financial."
Before the ink from the resultant headlines had dried, news came that the police task force investigating Nugan Hand had uncovered another memo regarding Saffron. It was clearly in Michael Hand's handwriting, and said: "$50,000 Aust in H.K. to be repaid at $5000 per month for 10 months. It is Bank T.N.? Call 322215. Abe Saffron. Referred by Bernie Houghton, regarding yesterday's discussion— ABE SAFFRON."
The phone number 322215 was Saffron's headquarters.
The memo had been produced by former Nugan Hand executive Stephen Hill, who was giving investigators selective information to try to save his skin. Hill said he had no personal knowledge of the transaction referred to in the note. (Hand and Houghton had both left the country for undisclosed locations when the investigations began.) Hill said he kept the note because "I was interested in what association Saffron had with Hand."
Asked if the note indicated that Saffron wished to transfer $50,000 in Australian money overseas—the kind of illegal deal Nugan Hand specialized in—Hill replied, "That may be the case." He said, "T.N." may have referred to Treasury note, and "H.K." to Hong Kong.
Houghton's acquaintance with Saffron should have come as a surprise to no one. It seems unlikely that Houghton could have moved so heavily into the King's Cross vice district without making his peace with Abe Saffron. The buildings where Houghton's restaurants were housed had a tangle of corporate owners, but two were connected to associates of Saffron. Furthermore, the soldiers who flocked to Houghton's drinking establishments were referred for further recreation to Saffron's nearby gambling dens. When one of these dens, the Aquatic Club, declared bankruptcy in the mid-1970s to escape paying creditors, it was kept in operation by a new team of owners, including Houghton.
Houghton admitted to the police task force that he had known Saffron for many years "as a result of visits by Saffron to the Bourbon and Beefsteak restaurant." Houghton told the cops, "I would have a social drink with him. Our interests in the restaurant [business] are mutual." But, the task force report said, "Apart from one instance, unrelated to this inquiry, Houghton said that he was unable to recall ever having had any business dealings with Saffron."
Houghton recalled luncheons at which he had introduced Frank Nugan, and "visiting military personnel," to Saffron. Whether the "visiting military personnel" knew exactly whose hand they were shaking when they met Abe Saffron isn't spelled out, but the contact alone could have been embarrassing for some, if publicized. Houghton also said that Mike Hand met Saffron "under similar circumstances," after which "they had a very casual relationship."
Saffron, however, denied to the police that he had ever met Hand, and said he met Nugan only once, socially. Commented the task force, "This claim is, of course, irreconcilable with the statements of Houghton."
The police task force showed both Houghton and Saffron the memo from Michael Hand about the $50,000. "Each denied any knowledge of it," the task force reported. Saffron denied he had ever had "any association with the Nugan Hand group of companies," and Houghton said he wasn't aware of any.
The task force concluded, "It is not clear from the note whether the money was 'loaned' to Saffron or was paid by him into Nugan Hand, but there is little doubt that Saffron was at one time involved in at least this one transaction with Nugan Hand. . . . That at least Saffron chose to lie about his association with Hand, and both Houghton and Saffron chose to lie about the transaction, only adds to suspicion that there was something either illegal or improper about it," the task force said in its final report to the prime minister and governor.
That report went on:
"A number of observable strands existed within Nugan Hand.
"First... there is some evidence that Hand retained with U.S. intelligence personnel ties throughout the 1970s and into the 1980s.
"Second, on the evidence available there is little or no doubt that Houghton was until at least the early 1970s and perhaps is involved, in Australia and elsewhere, in some way with U.S. and Australian intelligence personnel.
"Third, Houghton was and still is closely associated with two other U.S. citizens resident in Sydney. Both have military backgrounds and there is strong reason to believe that at least one of them, Bobby Keith Boyd, was in the 1960s70s and perhaps is still connected in some way with U.S. intelligence activity. The other, Robert Wallace Gehring, if not at that time then later, became exposed to intelligence personnel through his close association with Houghton, Boyd and Hand, and his later role in the 'disappearance' of Hand from Sydney.
"Fourth, Houghton and Hand were extremely close by the early 1970s and there is every indication that Hand regarded Houghton as a 'father figure.' More probable than not it was because of Houghton's U.S. armed services and intelligence connections that Hand regarded him so highly. It was frequently said that Hand's view was that 'anything is all right so long as it is done in the name of America.' "
Nugan had made his bloody and widely publicized departure from corporate office in January. In April, Michael Hand had put the company under control of a bankruptcy court in order to free his own door from the line of increasingly panicky depositors, sleazy businessmen, and others Nugan Hand had dealt with who now wanted their money back. If that wasn't enough of a hint that something was terribly wrong, anyone interested had been alerted to the likelihood of scandal by Hand's testimony at the Nugan inquest later in April. Finally, at the end of June, it came out in headlines that both Hand and Houghton had vanished.
Even with all that, it wasn't until about a week later, in July, that a truly independent accountant, the newly appointed liquidator John O'Brien, was authorized by the courts to delve into Nugan Hand's books. By that time there was precious little left of them.
O'Brien's was the first of four major, official, wide sweeping investigations of Nugan Hand in Australia. (There were also countless lawsuits, death inquests, criminal complaints, tax cases, and commissions looking into this-or-that-other-problem, all of which got caught up in the Nugan Hand mess, and many of which turned up valuable information. Moreover, some of the best investigating was done by the press, which for years regarded any new crumb about Nugan Hand as the day's main meal.)
About the time O'Brien, the liquidator, plunged into the case, in midsummer 1980, a second big official effort began at the New South Wales Corporate Affairs Commission—the equivalent of the Securities and Exchange Commission in the United States, but on an individual state basis. The Corporate Affairs Commission had theoretically been investigating Nugan Hand since shortly after Nugan's death, but the early attempts were amateurish and easily manipulated by Mike Hand and other insiders. By summer, the commission had geared up its staff and hired a leading outside lawyer, Geoffrey Nicholson, to head a real inquiry. In March 1983, the Corporate Affairs Commission published its report in two hefty volumes, which were particularly helpful in unraveling the complex financial dealings of Nugan Hand.
Also in March 1983, the last of a series of reports was published by a third body of inquiry, the police Joint Task Force on Drug Trafficking—"joint" in the sense that the prime minister of Australia had ordered the federal police to join forces with the New South Wales police to investigate Nugan Hand. The investigation grew out of the frustration felt by a royal commission that had been appointed to investigate drug trafficking, but that kept running into Nugan Hand and lacked authority and manpower on its own to open that huge can of worms. The Joint Task Force attacked the problem, and was particularly active in pursuing the importance of Nugan Hand's ties to Americans, both high office-holders and racketeers.
But basic questions remained unanswered, even with the publication of the mass of details in the Corporate Affairs Commission and Joint Task Force reports. Outstanding among the unsettled issues were the significance of the Pentagon and CIA links, and the question of who should be given criminal responsibility for what everyone agreed had been vast crimes.
So a new royal commission under Justice D. G. Stewart was appointed by Parliament to carry on the work. The Stewart Royal Commission's two-volume report in June 1985 was a deep disappointment and shed little new light, for reasons best described later, in chronological sequence.
The results of all four investigations—liquidator O'Brien's reports, the Corporate Affairs Commission report, the Joint Task Force reports, and the Stewart Royal Commission report—are incorporated into this book, as, of course, are the results of the myriad of other inquiries so far as they are known, and of the author's own four-year effort.
Back in April, when Hand had been forced to turn the company over in court, he had been allowed to select the accountants who would act as liquidators. They apparently didn't press him, or Houghton, or others who might have been able to supply information or return stolen money. A mass of mail was pouring in from the bank's hapless victims, and what replies the temporary liquidators managed to get off were, judging from the ones forwarded to O'Brien, unhelpfully noncommittal.
John O'Brien was a bearlike, prematurely gray accountant and professional bankruptcy liquidator. With the Australian front pages daily full of Nugan Hand scandal, including the comings and goings of U.S. spies and generals and the horror stories of victims, a judge had picked O'Brien from an independent roster of liquidators to replace the temporary liquidators chosen by Michael Hand.
From that day in July, it was clear to O'Brien that Nugan Hand must have been the product of an intelligence beyond Frank Nugan's. If nothing else, the successful damage control carried out in the six months since Nugan's death was impressive. Either Nugan had been survived by very skillful and organized co-conspirators, or, in the only alternative, the law enforcement officials of Australia and a dozen other countries were stupid and lax beyond belief.
O'Brien got more than a few jolts reading the bills that were piling up. One, for $45,684.09 of legal work, was from William Colby, former head of the CIA. The CIA was well known in Australia, where the United States kept its most important overseas electronic spy installations. The CIA had been openly accused of helping overthrow the Australian Government in 1975. Many Australians still believed that the CIA had subverted their democracy. [Well of course they did,that's all the sociopath's have done the last 72 years,set up proxies and deal drugs to pay for their activities.Patriots were the last thing they were DC]
The cover letter for Colby's bill to Nugan Hand was addressed to Hand personally, and dated April 4, 1980, long before the bank fell under O'Brien's skeptical purview. The bill was on the stationery of the Washington office of Colby's law firm at the time, Reid & Priest (home office, 40 Wall Street, New York).
"Dear Michael," it began, "I regret to be communicating with you about the subject of our fees, but I am afraid I owe you an explanation of the attached bill. It obviously represents a summarization of the various activities that we did for Frank and separately for you over the past several months. . . .
"Obviously, we still stand ready to continue on the line Frank had intended to follow, a general consulting relationship on various matters involving United States law," Colby wrote to Hand—who had previously helped train and supply Montagnard recruits under Colby's overall supervision during the war.
"After you are able to regroup for the future in the unfortunate absence of Frank, I would hope you would find some further utility in consultation with us. If that does not work out, however, please accept my very best wishes for your success and that of the institution Frank and you started so effectively. If you do come in this area, I hope you will feel that the welcome mat is out, either professionally or personally. Sincerely, Bill."
Hand, however, apparently didn't have time to accept this offer of hospitality before he was driven underground by the several investigations and by the thousands of angry citizens of many countries who had trusted the Nugan Hand Bank. The letters they wrote asking for their money back made painful reading for O'Brien.
The assets underpinning Nugan Hand's business were supposedly lodged in accounts at major Sydney banks. But as O'Brien began unsealing these accounts, it did not take him long to discover that the purported assets—millions of dollars in highly rated commercial banking instruments—simply didn't exist. And never had. The full list of numbers wasn't in, and perhaps would never be, but the bottom line emerged to O'Brien early on.
Whatever else Nugan Hand was, it was surely a giant theft machine. Judging from the victims' letters, as O'Brien perused them, Bernie Houghton had actually gone around with a big plastic garbage bag slung over one shoulder, like some kind of reverse Santa Claus, taking bundles of cash savings from Americans serving overseas, mostly in Saudi Arabia.
The depositors were told their savings would be invested in the high-interest commercial banking instruments. But instead, the money just seemed to disappear. General Manor collected checks from his former subordinate officers at the U.S. air bases he used to command, and delivered them back Nugan Hand certificates of deposit. Those certificates were now next to worthless. Other depositors had donated their cash in various ways around the world.
Big and little victims all over Southeast Asia wrote in that they had given money to the staff at Nugan Hand, men like George Shaw. But liquidator O'Brien found no records of their accounts among the bank's files—or in some cases, he would find only a puzzling reference to the depositor in the records of some related company.
There turned out to be a dozen related companies, with strange names that neither the investors nor O'Brien had ever heard of. There were even complaints on O'Brien's desk from depositors in the United States—where Nugan Hand had no legal authority to take deposits. Letter after letter referred to the vaults of commercial banking paper that was supposed to stand behind the deposits. But O'Brien knew the paper wasn't there.
Who else knew? That was the question that bothered O'Brien, and would plague every other investigator assigned to the case. How much did the executives working for Nugan Hand know about the fraud they were perpetrating?
It was possible, of course, that people were duped into working for Nugan Hand. It was possible that they solicited deposits in the genuine belief that the money would be prudently invested. It was possible that they really believed the depositors would reap the high interest promised. That was exactly what the American military officers who worked for Nugan Hand later argued: that they had been duped just like the depositors.
But O'Brien's efforts at intellectual charity toward such fellows kept running into obstacles. Once inside the bank, how dumb would you have to be to stay duped? Could that level of stupidity be ascribed to high officials who only recently were responsible for supervising billions of dollars in U.S. taxpayer funds—hundreds of thousands of troops and whole fleets of aircraft and aircraft carriers, who specialized in, of all things, "intelligence"?
True, Colby was just a lawyer for Nugan Hand. Lawyers had somehow managed to establish years ago that they had not only the right but the ethical responsibility to maneuver with all the vigor and genius at their command on behalf of even the most palpably sinister of clients. Indeed, legal "ethics," as they are called, are said to require that lawyers be discharged of all responsibility for the injustices that may result from the successful practice of their craft. So Colby, by such measure, might stand not only discharged but a hero for his efforts on behalf of the bank.
But for nearly three years, Admiral Yates, no lawyer, had been president of the Nugan Hand Bank, the entity that took in most of the money. How much brainpower, how much clarity of observation, should one attribute to an admiral? To the former chief of staff for plans and policy of the entire U.S. Pacific Command, largest in the U.S. military? To a man who, as commander of the aircraft carrier John F. Kennedy, had been entrusted with nuclear weapons?
Now suppose, on the other hand, that the brass wasn't innocent at all. Suppose they had been in on the plot. Did this mean that the U.S. Government had employed, and promoted to the highest offices, a bunch of thieves who were now living high and mighty off the riches of defrauded investors?
Or was it more likely that they weren't, at least most of them, thieves—that there was some political motive behind their work?
O'Brien resolved to try to talk to spy chief Colby, Admiral Yates, General Manor, General Black, and all the other Yanks. But, at least for now, they were far away, on U.S. soil. They were protected from him. And if they did agree to sit down with him there, they would face no compulsion to tell him the truth (unless, of course, he could get the cooperation of the U.S. Government). The return addresses of the potential witnesses against them, the depositors, were spread all the way from Kuala Lumpur to Udhailiyah (wherever that was).
For the meantime, O'Brien set about to deal with the complainants who were right there in Australia.
A few weeks after John O'Brien was handed the Nugan Hand mess, he received a letter from Dr. John K. Ogden. Ogden was a disabled, sixty-year-old former gynecologist from Toowoomba, a town of eighty thousand souls about six hundred miles north of Sydney. "I understand from the papers that you have taken over the onerous task of winding up the affairs of the Nugan Hand Bank," Dr. Ogden's letter began. It then noted that Dr. Ogden had already submitted his and his wife's claim to the temporary liquidators; the amount—$689,000.
"As you might imagine, I am desperately worried as this was my retirement and security for my wife in old age," Dr. Ogden wrote. "Sixty years of age is too old to start again! I trusted Nugan as my solicitor and banker, and the agreement was that my funds and capital gains would be available when I wanted them. If the bank cannot cover all of this amount, one has to raise the question, Was it not insured? And if not, is not the Reserve Bank [of Australia] and the auditors to some degree culpable for allowing this sort of situation to occur?"
O'Brien knew the money wasn't insured, that the Reserve Bank would be embarrassed, and that the auditors might go to jail. But he also knew that none of the above would get John and Barbara Ogden their $689,000 back. In many ways, the Ogden's letter was typical of the sackfuls the mailman dumped on O'Brien's desk. But in size, and poignancy, their case stood out.
The Ogdens, who say they were "completely wiped out by this affair," met Frank Nugan on the advice of their banker in Sydney. "I was incapacitated with cervical spondylitis [inflammation of the vertebrae]. The insurance company wasn't paying and I needed a lawyer," Dr. Ogden recalls.* Nugan was a lawyer, and the banker recommended him as someone who could help the Ogdens with their insurance problem. He did. Then, says Dr. Ogden, "the relationship developed into advisor and finally banker. When my neck got better, we came back to Toowoomba to resume practice and used to fly down to Sydney and stay with the Nugans, and he always seemed a devoted family man and absolutely straight."
*The Ogden quotes in this book are intermingled from their correspondence with the two liquidators, which is on public record in Sydney, and interviews conducted by the author.
Nugan, in fact, was a family man, having in 1970 married Charlotte Lee Sofge
Nugan of Nashville, Tennessee—a symmetry, since his partner, American Michael
Hand, had married an Australian. Unlike the childless Hands, though, the Nugans had
two children and seemed, at least, devoted to them.
Nugan billed himself not only as a lawyer and banker, but most of all as a tax specialist. He told the Ogdens he could help them save on their tax bill by making more careful investments—such as in Nugan Hand. "He said he could get a better return for the money," Dr. Ogden says. "Frank told us that the bank never lent money and that it was absolutely secure and that the Reserve Bank audited their books every two weeks." Besides, at that point the Ogdens were putting in only their cash savings. They still had substantial life insurance investments to fall back on.
Then tragedy struck. In 1978 the Ogdens' twenty-three-year-old daughter was killed in an automobile accident, and less than a year later their twenty-nine-year-old son died in a hang glider accident in Spain. Frank Nugan reacted with a characteristic show of concern. He had Nugan Hand's office in Hamburg, Germany, fly the Ogdens' son's body home, and he personally handled the other arrangements the Ogdens were too grief-stricken to deal with.
Then he suggested the Ogdens were so grief-stricken they should turn everything over to him. Mike Hand then gave the Ogdens the same pitch. "They could manage our affairs much better than we could ourselves," Dr. Ogden says they told him. "We were so upset that we gave Frank Nugan power of attorney. We thought we were incompetent to look after our own affairs. . . . We never doubted his integrity. He was after all a Master of Law and we thought we knew him."
So, Dr. Ogden says, "I was persuaded and encouraged to sell all of my real estate and cash insurance policies. . . . All the money was put into the Nugan Hand Bank."
Did Nugan and Hand know that they were ripping the bereaved couple off? Did either of them somehow believe his own lie because the other one, and all their staff, were telling it, too? To the Ogdens, such questions are immaterial. When Frank Nugan died, Dr. Ogden raced to Mike Hand to inquire about his money. He says he "received powerful reassurance that all was well," after which "Hand pushed off to Hong Kong for a few days. I feel that if you can find Hand and Bernie Houghton, you will find a lot of money," he says.
Trying to recoup, Dr. Ogden went to the New South Wales state Law Society, the equivalent of a bar association in the United States, and applied for relief from its client protection fund. But the society rejected him, he says, "because Nugan acted as both a lawyer and a banker and it would depend on which hat he was wearing"; apparently the society decided that when Dr. Ogden's lawyer counseled him on matters other than the insurance claim, the lawyer was moonlighting as a banker, and so he was no longer the responsibility of the law society.
Then, to add insult to injury, the Australian Taxation Office decided that several of Nugan's plans to minimize his clients' taxes were illegal. The office began auditing Dr. Ogden and other Nugan Hand victims, looking to collect money the victims no longer had, to cover back taxes on income they had already been robbed of.
"Certainly we were incredibly naive and stupid to put so much trust in one person," Dr. Ogden says. Then he volunteers, "The impeccable front of the bank was immeasurably helped by having the likes of U.S. admirals and generals actively working in the bank and on the board of directors." In a letter about this, he adds a P.S.: "Don't you think the remaining directors should be brought to trial and Mike Hand located?"
Frank Nugan
There is as much mystery in his origins as in his death. His parents are widely known as Spanish immigrants who settled in Australia in 1938. Yet the January 29, 1943, birth record of Frank Nugan in Sydney shows that his father, then thirty-seven, had been born in Brackwale, Germany, and his mother, then thirty-two, had been born in Schwedt, Germany. It shows they were married in Jerusalem, Palestine, December 30, 1938—the same year that recent oral and published accounts have had them settling in Australia.
A call to the father, Alf Nugan, produces flustered, sputtering denials of the recorded evidence. He hangs up. Called a second time, Nugan again denies what is on the records, but on continued questioning concedes that he was, indeed, born in Germany.
"I was a Spanish citizen," he insists. "I left Germany as a baby. I left to find a better life." He says his mother brought him to Spain and that he married his wife in Madrid in 1930. He says they left because of the Spanish Civil War, and became Australian citizens in 1945. He says neither he nor his wife was either Jewish or Nazi. He refuses to say more and hangs up again.
They settled in Griffith, a town nine hundred miles west of Sydney. Griffith is associated in the average Australian's mind with two activities: the farming of fruits and vegetables, and the open, criminal farming of marijuana. All of Griffith's crops, legal and illegal, are raised for both domestic and export markets. In about 1941, Alf Nugan began what became one of the largest fruit and vegetable operations in the area. It is called the Nugan Group, which led to some confusion in the public's mind when Nugan Hand was started in the 1970s.
By the time of Nugan Hand, the Nugan Group fruit and vegetable business had gone public—its shares were traded on the open market. The company was run by Kenneth Nugan, Frank's older brother by two years. One of the Nugan Group's major customers, according to Ken Nugan, was the United States Government. Among other things, he says, the Nugans supplied fresh veggies to the big U.S. Navy base at Subic Bay in the Philippines. This relationship, Ken Nugan says, predated his brother's relationship with Michael Hand.
Just as Miami is known not only for its sunshine but also for its drugs, most Australians associate the town of Griffith with more than just fruit and vegetables. As a center for marijuana and the mob, Griffith has long been a national scandal.
In the mid-1970s a furniture dealer and family man, Donald Mackay, decided to speak up and organize to stop the drug traffic. He circulated a petition demanding that the New South Wales state parliament take action. So enthusiastic was the response that Mackay decided to run for public office on the issue. On July 15, 1977, Donald Mackay disappeared.
The disappearance of Mackay was roundly denounced in Parliament. An investigative authority known as the Woodward Royal Commission (after the judge who headed it) was formed. In 1979, amidst much publicity, it reported, "A secret criminal society named L'Honorata Societa, which is comprised of persons of Calabrian descent, exists within Australia. A 'cell' of this society existed and probably still does in the town of Griffith." Visiting Italian officials testified before the commission that marijuana grown in Griffith was processed by a Mafia drug network and showed up in Europe and North America.
The Woodward Royal Commission declared that Robert Trimbole of Griffith was head of the Calabrian Mafia there, and was involved in the marijuana trafficking. So, it said, was a prominent grape-growing and wine-producing family, the Sergis, which it also included in the Mafia. Big headlines told of the 1976 wedding of a Sergi daughter, where, in a scene reminiscent of the opening scenes of The Godfather, Part Two, the twelve hundred guests brought cash gifts, which were banked by the father of the bride, with the groom's blessing.
John Hatton, an independent member of the New South Wales Parliament, whose district covers Griffith, says flat out,* "The Mafia killed Mackay. I don't like to use that term because I don't generally think that organized crime is ethnic, but in Griffith's case I think it's appropriate. Donald Mackay stumbled onto a very valuable field and he persisted in making a stink about it. They brought in somebody from the outside to kill him, figuring that if they knocked off somebody with that high a profile nobody else would want to get involved in it. I think they realize now they made a big mistake. The investigation into it, the interest in it, is still going on."
*In an interview with the author, elaborating on charges he has made in public.
Among other things, investigators turned up Nugan Group checks for thousands of
dollars made out to members of the Trimbole and Sergi families. Ken Nugan argued
that these checks did not indicate payments to the Trimboles or Sergis. He said the
payee names on these checks were just phony "code names" used to cover the
conversion of corporate funds to cash for legitimate reasons, though he didn't say what
the legitimate reasons for this internal money-laundering might have been.
It seemed a strange practice to some—and an even stranger coincidence on the choice of names.
Investigators found other suspicious links between Robert Trimbole and the family of Sydney organized-crime boss Abe Saffron— Bernie Houghton's effective landlord. After Frank Nugan died, the newspapers were able to show business connections between Sergi and Houghton, and between Sergi and the U.S. Army men and Australian businessmen around Houghton.
The bad reputation of Griffith dogged both Nugan brothers in their businesses. At one point the publicity proved so hot that the Nugan Group actually flew a planeload of reporters to Griffith to try to restore some respect. The reporters were shown carrots and onions being crated, and grapefruit being squeezed by juicing machines. Then they heard Ken Nugan declare that he had never dealt with the Trimboles or Sergis. On the other hand, he said, he had known and respected Donald Mackay.
Frank Nugan got a law degree from Sydney University in 1963, then set out for North America, where he pursued two highly unusual postgraduate degrees in law. His only real achievement during his American stay, though, was constructing, with some artifice, the resume that was to lure many clients when he returned down under.
Nugan later claimed he achieved a reputation as an international tax expert—the result, he said, of his studies at the University of California, Berkeley, for a master of laws degree. Master of laws is a degree most lawyers don't think worth the trouble of obtaining, but which Nugan won in 1965. A veteran professor at the Berkeley law school, Richard Jennings, recalls Nugan as "a kind of wild fellow" who "dropped into Berkeley with an XKE, kind of a playboy type." He remembers Nugan spending time with glider airplanes, and laughs at the idea that Nugan was a tax expert. "He never even studied taxes when he was here," Jennings says.
Next, Nugan went to Toronto, where he studied for the even more arcane degree of doctor of laws (he never got it). To help pay the Jaguar's gas bills and other expenses, he worked for a corporations task force performing an overhaul of Canadian corporate law. Nugan later claimed—and it was widely believed in Australia—that he had a big hand in rewriting the Canadian legal code. In fact, the task force's report names three authors and twenty-four valuable assistants, none of whom was Frank Nugan.
Philip Anisman, a professor of law at Osgood Hall Law School of York University in Toronto, remembers that in 1967 Nugan got a clerical and research job with the task force. But Anisman says Nugan never had a hand in the task force's recommendations. Anisman says Nugan was "kind of wild, loquacious, fun." But on the main expertise Nugan claimed to bring back from North America, Anisman says, "I never heard anything about any work he did on tax." Recollections of when Nugan returned to Australia vary—from late 1967, about when Hand arrived, to early 1969. And just how did Nugan—the playboy heir to a modest food-processing fortune with strange beginnings, even stranger criminal associations, and built in part on U.S. military contracts—happen to meet Hand, just coming off active duty as a U.S. intelligence operative in Southeast Asia? Nobody seems to remember that, either. Asked under oath at the inquest, Hand declared that he didn't remember how he met Nugan—highly unlikely, considering that for better or worse they became the most important person in each other's lives.*
*The Stewart Royal Commission report offers its own typically unreliable account of the meeting. At two different places, the report says they met in 1968, while Hand was working as a security guard at a mining company (Meekatharra Minerals) Nugan had invested in. Elsewhere in the report, however, Stewart acknowledges (as corporate records attest) that Meekatharra wasn't formed until 1970, making this sequence of events impossible. (In addition, other corporate records to be cited here later, which the Stewart Commission may not have been aware of, show that Nugan and Hand had a business relationship before Meekatharra started.) There are no other accounts of Hand's working as a security guard. At yet another point, the Stewart report says Hand met Nugan while Hand was selling real estate— without bothering to note that this completely contradicts information elsewhere in the same report.
next
Sleight of Hand
The gist of what McCoy reported in his Politics of Heroin book is now beyond dispute. Considering that, and in view of the thoroughness of his documentation (often interviews with eyewitnesses), the whole book deserves the acceptance and honor it was not originally accorded. As Nellis, the Congressional investigator, says, "I think he [McCoy] knows more about heroin production in Southeast Asia than any man living. His book is an outstanding example of intelligence in this area."
https://exploringrealhistory.blogspot.com/2017/09/part-1-politics-of-heroin-in-se-asia.html
McCoy's thesis was that CIA operations against China in the early Communist years, and against Communist movements in Indochina later on, were responsible for creating the largest single source of heroin for the U.S. market. This was the famous "Golden Triangle." And according to McCoy, it flourished probably not by the original design of the CIA, but ultimately with the full knowledge and cooperation of the CIA.
At the close of World War II, he wrote, "with American consumer demand reduced to its lowest point in fifty years and the international syndicates in disarray, the U.S. Government had a unique opportunity to eliminate heroin addiction as a major American social problem. However, instead of delivering the deathblow to these criminal syndicates, the U.S. Government—through the Central Intelligence Agency and its wartime predecessor, the OSS— created a situation that made it possible for the Sicilian-American Mafia and the Corsican underworld to revive the international narcotics traffic."
The heroin market was revived first in Europe, with the help of two U.S. policy decisions. The decisions were secret at the time, but have been widely attested to since. First, American officials made a bargain with leaders of the Mafia to get criminal gangs to help in the invasion of Sicily. Mobsters were sprung from prison in exchange for their rallying the Mafia's covert army in Sicily and providing the ultimate in translator/guide services for U.S. military leaders. Lucky Luciano and Vito Genovese, maybe the two most powerful men in U.S. crime, both heavily into the dope business, were loosed on the world by such deals.
Then, in the late 1940s, the OSS/CIA became alarmed that the socialist leaders of the dock unions in southern France might side with Communist political movements. There was fear that strikes might redound against the Christian Democratic governments the United States was supporting. To forestall this threat, the United States conducted a vast covert operation to put control of the dock unions in the hands of Corsican gangsters, and take them out of the hands of the socialist unions.
The operation was funded by contributions that the State Department helped wheedle out of large American corporations, and it was aided further by the international division of the AFL-CIO. It concentrated particularly on the prime French port of Marseille. It worked. But besides chasing socialists out of power, the gangsters arranged the port's affairs for their own illicit business. Soon, the town's very name conjured up an association with heroin refining and exporting. The U.S.-installed dockworkers' monopoly in Marseilles became the heart of what was soon known in film and common cliche as "The French Connection."
During the 1950s, several things changed this European domination of the heroin trade. For one thing, occasional honest law enforcement inhibited the gangsters. For another, the Shah of Iran— for once, apparently, letting his religion overtake his greed—successfully ordered a stop to poppy-growing in what had been the region's largest producing country.
And, finally, the Cuban Revolution closed Havana as a free port of exchange between the Sicilian and U.S. Mafias. For a while, Turkey picked up the slack left by Iran. But events on the other side of Asia were already conspiring to transfer the focus of the world's heroin market away from Europe.
All this was basically documentable before McCoy came along, although few paid attention to it. What McCoy showed, as nobody else had, was that, in his words, "In the 1950s the Thai, Lao, Vietnamese and American governments made critical decisions that resulted in the expansion of Southeast Asia's opium production to feed the habits of the region's growing addict population and transform the Golden Triangle into the largest single opium-producing area in the world."
The first big decision came around 1950. At that time, the remnants of Chiang Kai Shek's crumbling western armies were chased out of China's Yunnan Province by the Communist Revolution. Thousands of these defeated soldiers from Chiang's Kuomintang, or KMT, government, melted into the jungles of neighboring Burma. Burma didn't want the KMT soldiers any more than their native country did. But when Burma threatened to chase the cornered KMT out, the U.S. Government decided the KMT were needed, to harass and possibly even reconquer China (or, as it was known then, "Red China").
So the CIA began supplying the KMT through two front companies: Civil Air Transport, headquartered in Taiwan, and Sea Supply Corporation, headquartered in Bangkok. Only a few people with top security clearance knew that both companies were covertly owned by the U.S. Government. They are important, not only for what they did in the 1950's, but also because they were precursors of organizations that touch directly on Nugan Hand in the 1970's.
After China was given up on, the focus of U.S. efforts in East Asia shifted to Indochina. Civil Air Transport was then transformed into (among several successor entities) Air America. That was the airline Michael Hand worked closely with as a CIA contract agent. Many of the CIA associates whose money first helped Hand get started in business in Australia were Air America employes.
Sea Supply Corporation, for its part, was founded and run by a lawyer and CIA operative named Paul Helliwell. During World War II, Helliwell had been chief of special intelligence in China for the OSS. Colleagues from those days told the Wall Street Journal's Jim Drinkhall that Helliwell, then a colonel, regularly used to buy information with five-pound shipments of opium ("three sticky brown bars," one man said). Drinkhall also reported* being told that Helliwell ran an operation code-named "Deer Mission," in which OSS personnel secretly parachuted into Indochina to treat Ho Chi Minh for malaria.
*Wall Street Journal, April 18, 1980.
After the heyday of Sea Supply in the 1950s, Helliwell moved to Miami and became an important figure in the Bay of Pigs invasion and the CIA's other battles against Castro. His Castle Bank both funneled money for the CIA and, privately, operated as a profitable tax-cheat business. Its unexpected demise in the mid-1970s directly coincided with the growth of Nugan Hand. Considering the gaggle of brass from the U.S. intelligence community who helped push Nugan Hand into orbit in the late 1970s, there has been understandable speculation that Nugan Hand was Castle Bank's successor. More on this later.
As Paul Helliwell's Sea Supply Corporation brought large amounts of arms and other supplies to Thailand in the 1950s, the CIA's airline, Civil Air Transport, ferried them up to the Kuomintang army in Burma— at first by airdrop, then, later, to makeshift airstrips. With these American-supplied weapons, the KMT held off the Burmese' attempts to evict them. But their own efforts over several years to invade China were easily rebuffed, which left them frustrated.
The KMT realized, however, that the mountainous region where they had holed up was long known for its one reliable crop: opium. So they determined to make their fortune organizing the haphazard village production. With their American arms, they did this, going so far as to collect opium taxes from villagers.
The CIA's role went far beyond giving the KMT the military means to organize the heroin trade. Alfred McCoy found Burmese intelligence reports from those early days saying that the CIA planes that dropped off military and other supplies for the KMT then flew opium out to Thailand or Taiwan.
Most of the KMT's original trade, however, seems to have been carried on by mule train to the town of Chiang Mai, whose location in northwest Thailand has made it a fabled drug bazaar for years. Even today, it is accepted on the street there that the town's economy is fueled by the drug trade. Chiang Mai is to opium what Chicago is to corn and wheat, or Detroit is to cars. Chiang Mai would eventually be the location of the strangest and least innocently explainable branch of the Nugan Hand Bank.
Back in the Chiang Mai of the 1950s, McCoy explains, "a KMT colonel maintained a liaison office with the Nationalist Chinese consulate and with local Thai authorities. Posing as ordinary Chinese merchants, the colonel and his staff used raw opium to pay for the munitions, food, and clothing that arrived from Bangkok.... Usually the KMT dealt with the commander of the Thai police, General Phao, who shipped the opium from Chiangmai to Bangkok for both local consumption and export."
Thus General Phao and the elite from his Thai national police force provided the vital link between the landlocked KMT opium lords and the sea. But after establishing this, McCoy also establishes something else: General Phao was the CIA's man in Thailand. The overwhelming evidence comes from contemporary news reports, on the scene interviews, and documents from The Pentagon Papers (the Pentagon's secret history of the Vietnam War, much of which was published by the New York Times).
Phao obtained his strong position in the factionalized Thai power structure directly from CIA backing—and in particular from the lavish arms shipments that Paul Helliwell Sea Supply Corporation sent to Phao's national police. The CIA also financed General Phao's opium purchases from the KMT. Phao and so many other players in this game were actually written up in the New York Times back in the 1950s that it is impossible to believe that the CIA—which, after all, secretly owned Sea Supply Corporation—hadn't put the picture together and didn't know what was going on.
Of course they knew. To the CIA, Phao appeared useful as a staunch antiCommunist who would employ his power to keep any Thai government from going too far left. Phao would also maintain the KMT as a well-supplied thorn in the "Red Chinese'" side.
To be sure, all this doesn't mean that U.S. policy-makers originally envisioned the final result of their script. The Washington planners may not have foreseen that the KMT would come to be virtually a country within a country in the anarchic Shan States of northern Burma, easily crossing over into the unpoliceable jungles of western Laos and northern Thailand. And Washington may not have foreseen that the efficiencies being wrought by this KMT sub-state would bring the Golden Triangle to dominate the world heroin market.
But it gradually worked out that way, under Washington's nose, and no one saw fit to stop it. Soon, just as happened in Marseilles after the gangsters took over the waterfront, refineries were springing up in the Triangle, so that pure heroin could be shipped instead of bulkier raw opium.
Readers who are too young to remember the 1950s may find it hard to understand just how shocking these revelations would have been in those times. The KMT leader, Chiang Kai-Shek, on Taiwan, had a mammoth lobbying and propaganda operation that overwhelmed the U.S. Congress and press. In a way, the United States was the victim of its own World War II propaganda. Chiang had deceived the American public into thinking he was the popular leader of a united China, when in fact he was merely preeminent among many leaders—warlords, they were sometimes called. Chiang's KMT ruled the capital of Peiping, but never, from Chiang's ascendency in 1928, a united China.
The most powerful American press voice during the Chinese Revolution and its immediate aftermath was Henry Luce, head of Time Inc. Television was in its infancy, and Time and Life magazines had no close competition. Luce, a staunch Christian moralist, and his wife, Clare Boothe Luce, were close personal friends of Chiang and Madame Chiang. They drummed their support weekly in their magazines, and the rest of the press followed.
Chiang had another powerful cheerleader in General Claire Chennault, hero of the China theater in World War II. Chennault had organized and directed Chiang's air service since 1937. The popular Chennault and his highly visible wife Anna lobbied tirelessly for Chiang. They helped see to it that public humiliation awaited any U.S. Government figure whose support flagged. During the Truman and Eisenhower presidencies—both in the administration and in Congress—Chiang was not an ally of convenience, but a sacred cause.
Loyalty to that cause led the United States to turn its initial Korean War victory into a disaster. The North Korean army almost overran South Korea after its invasion in June 1950. But by early October, the United States (acting under the auspices of the United Nations) had cleared South Korea of northern troops, secured its independence, and moved northward to provide a more defensible border. The fighting capacity of the North Korean army had been broken.
But instead of stopping there, the U.S. commander, General Douglas MacArthur, another Chiang buddy from World War II days, insisted on taking the war to China in a coordinated effort with Chiang to help the KMT reconquer the mainland. Chiang's coordinated attacks against his mainland foes were secret from the U.S. public, but not from the Chinese, who were getting shot at. It could be seen as a turning point in U.S. history—the beginning of the anticommunist folly.
The Chinese were understandably unwilling to have hostile, constantly attacking forces on their northern as well as their southern border. Having promised all along to invade North Korea if MacArthur's forces reached the Chinese frontier, they did so. The result was a tenfold increase in U.S. casualties and the conversion of the Korean War from a win into a tie.
Yet one Washington politician after another continued to talk of restoring Chiang to power. To question Chiang was to call one's own patriotism into question—and, indeed, several State Department careers were ruined for just that reason.
Yet the result of the KMT buildup in the Golden Triangle was the mushrooming of the heroin plague in the United States. By the early 1950s, the drug problem became a nationwide concern as millions of families watched the Kefauver crime hearings. A few years later, Frank Sinatra's terrifying portrayal of a junkie in the movie version of Nelson Algren's bestselling novel, The Man With the Golden Arm, made heroin addiction a stark nightmare to more millions. Soon, criminologists and police chiefs everywhere were blaming addicts, desperate for money to buy a fix, for the soaring national crime rate and the resultant spread of fear through American cities and suburbs.
Knowledge that Chiang and his KMT were constructing the world's preeminent heroin factory to support their cause would have flabbergasted almost everyone. So would the knowledge that the heads of the American Legion and the Freedoms Foundation—the very soul of American anticommunism—would help run a bank for the heroin trade (even if Generals Cocke and Black were, as they have said, unwitting of Nugan Hand's dope deals).
If such shocking news about the Kuomintang could be kept secret for twenty or thirty years, one has to wonder what might have gone on with Nugan Hand in the 1970s—or what might be going on now—that is similarly being kept secret. At any rate, the events described here all did happen. Officially, they happened only for the purpose of helping our "friends," the KMT, who never had a realistic chance of overthrowing Mao Tse-tung's new mainland government anyway.
If the petty harassment of Mao justified starting a new heroin trade, soon there was a much bigger stake. There was the Vietnam War. From 1954, with the arrival of General Edward G. Lansdale and his crack teams of CIA operatives, the United States slowly took over from France the conduct of a war against various Indochinese independence movements. The French, McCoy shows, had cooperated in the export of Golden Triangle heroin through Saigon in order to keep the cooperation of the corrupt local elite. Corsican gangsters even arrived from halfway around the world to smooth out logistics.
This intermingling of heroin traders and the government of South Vietnam only intensified under American administration, McCoy shows. He makes clear that Ngo Dinh Nhu, brother of the U.S.-selected and U.S.-installed President Ngo Dinh Diem, got rich trading dope, as did other U.S.-backed Vietnamese leaders.
The real expansion of opium production, however, was in the mountains, where the U.S. military mission had suddenly discovered some important potential allies. These were the Montagnard (or Hmong, or Meo) tribesmen, constantly lauded by U.S. Government spokesmen and the U.S. press during the Vietnam War as "heroic," "pro Western" and "our allies." And it's true that the Montagnards fought harder and more loyally with U.S. forces than did other South Vietnamese.
But our brave new allies happened to live on prime poppy-growing land. As U.S. aid and advisors came, landing strips were built for the CIA's special short-take-off and landing craft. The opium trade grew proportionately. By McCoy's and many other, first-hand, accounts, opium was regularly flown out on flights of the CIA's Air America (formerly Civil Air Transport). The Montagnard villages flourished, as intended.
But a lot of opium wound up as heroin on the streets of the United States. Some was sold directly to American G.I.'s in Vietnam. Addiction plagued the U.S. forces, to the point of reducing their fighting capacity, and when the men came home their addiction came with them. Some of the Air America crews made a lot of money on this trade.
Wilfred P. Deac, senior public relations man for the Drug Enforcement Administration, offers this explanation today: "Their mission was to get people to fight against the Communists, not to stop the drug traffic."
Adds DEA Far East regional director John J. O'Neill, "The kind of people they were dealing with up there, the whole economy was opium. They were dealing with the KMT and the KMT was involved in heroin. I have no doubt that Air America was used to transport opium."
Joe Nellis, of the special Congressional investigation: "The CIA did help bring some very powerful cheap heroin into Vietnam out of the Shan States, the northern states of Burma . . . for radio communications, intelligence. In return for that intelligence, the CIA winked at what went in its airplanes."
A former military intelligence noncom tells of a 1960 operation in which an airstrip was hastily built on Borneo as a transfer point for goods going into and out of Vietnam. Curious about the cargos that were being dropped off by the first planes out of Vietnam, awaiting shipment back home, he says he pried open a crate that was labeled "munitions" but was suspiciously light of weight. It was filled, he says, with parcels wrapped in manilla paper. Opening one, he says, he found small plastic bags of a white powder that he has no doubt was heroin.
The U.S. Government not only promoted this drug traffic, it intervened to make sure the traffic wouldn't be discovered. A former officer who did criminal investigations for the Pentagon in the Vietnam theater, and who now works on the staff of the inspector general for a major federal agency, vividly remembers political interference with criminal justice. "Some of the times when you'd be running a criminal investigation, say narcotics, you'd find out that Inspector So-and-so of your national police is involved in this," the former officer says.
"You investigate it up to a point and then you can't go any further," he says. "It would go to our headquarters and then it would go to Washington and nothing would ever happen. The intelligence gleaned from these people was more important than stopping the drug traffic." At least that's what he was told.
For many, letting the drug traffic go was also more profitable than stopping it.
Another former officer from the army's Criminal Investigation Division recalls a mammoth heroin scheme he and his colleagues uncovered by accident. He says he and four others from his unit were investigating corruption in the sale of supplies to commissioned- and noncommissioned-officers' clubs. The corrupt U.S. and Vietnamese officers they caught tried to bargain away jail terms by describing the heroin traffic involving Vietnamese politicians and senior U.S. officers. The reports checked out, the investigator says.
The investigator, now a stockbroker, says that his investigation group filed reports to the Pentagon revealing that G.I. bodies being flown back to the United States were cut open, gutted, and filled with heroin. Witnesses were prepared to testify that the heroin-stuffed soldiers bore coded body numbers, allowing conspiring officers on the other end, at Norton Air Force Base in California, to remove the booty—up to fifty pounds of heroin per dead G.I.
The army acted on these reports—not by coming down on the dope traffickers, but by disbanding the investigative team and sending them to combat duty, the former investigator says. Other reports corroborate the use of G.I. bodies to ship dope back to the United States via military channels.
This was the prevailing atmosphere when Michael Jon Hand arrived in Indochina.
CHAPTER FOUR
The Education of a Banker
Michael Hand was born in the Bronx, December 8, 1941. His father, a New
York civil servant, still lives in a condominium in Queens, but absolutely
will not discuss his son, or anything else, with reporters. Visitors are
barred from the building by locked doors and security guards. A sister,
reportedly severely handicapped, is also said to live in the New York area. Hand is said
to have sent home money for her care regularly over the years. The old Bronx neighborhood is now a slum, but when Hand was young it was upper middle class, and his high school, DeWitt Clinton, was considered one of the city's best. He graduated 248th in a class of 695, won a scholastic achievement award, was appointed student prefect, and was starting receiver and defensive back on the football team. He passed every class he took, and was noted for exceptional character, courtesy, cooperation, and appearance. His IQ registered an also exceptional 131.
Graduating in 1959, he stated that his ambition was to become a forest ranger. Shortly afterward, his mother died in a fall from a third-floor window; the question of accident or suicide was never resolved.*
*Thanks to an unidentified researcher for the National Times of Sydney, Australia, who dug all this out in 1981, making it much easier for me to verify later. The researcher also reported talking to former neighbors, who "have only fond memories of Hand, his father and his mother."
I tried to augment the researcher's findings, but was blocked by the New York City Department of Health, which suddenly, in 1986, perhaps because of pressure from the families of AIDS victims, banned public access to previously available death records. These records clearly seem public under the state's open information law, but there wasn't time to fight that legal battle before publication.
Mike Hand turned into a bearish man, with thick layers of muscle that melted largely to flab in later years. On the one hand, he developed an aggressive, macho, locker-room image that put more sensitive men off; on the other, he was known as a devout Christian Scientist and regular churchgoer, who rarely drank.
When Hand became a prominent banker in Australia, he told the world he was a graduate of Syracuse University, and mentioned to some that he had taught school in California before joining the army. The record shows instead that in 1961 he completed a one-year course at the New York State (forest) Ranger School. The school was attached to Syracuse University but hardly the equivalent of its B.A. program.
Hand's teacher, David Anderson, says Hand finished thirty-eighth in a class of forty-nine, though Anderson has a lasting impression of Hand as extremely personable. He must have been that, just to be remembered after all these years. Anderson says that Hand wrote from California in 1962 that he was managing a swim and sports school in the swank Los Angeles suburb of Palos Verdes Estates. The next year, Hand wrote back that he was taking Green Beret training at Fort Bragg, North Carolina. The record shows he enlisted in the army in May 1963.
In Vietnam, Hand won a Silver Star, a Purple Heart, and the Distinguished Service Cross, second only to the Congressional Medal of Honor as the nation's highest military award. On June 9, 1965— according to the Distinguished Service Cross citation—he almost single-handedly held off a fourteen-hour Vietcong attack on the Special Forces compound at Dong Xaoi.
According to newspaper accounts at the time, Hand braved a barrage of fire in an attempt to rescue a wounded buddy, then darted into a building and dragged to safety a wounded American captain— Hand's commanding officer—and another wounded soldier. Wounded by shrapnel himself, he still grabbed a machine gun and held the enemy off until the weapon jammed. Hit by another shrapnel blast, he was ordered to withdraw, but despite his wounds went under further fire to rescue one or two other wounded men. One account says he "acted as a live target to flush out enemy snipers."
A resume Hand later submitted to the State Department to keep his passport current says he left the army in May 1966. The next entry reads: "1966- 1967, worked directly for U.S. Government." Banking associates say he sometimes referred fleetingly to his undercover activities in Laos during those years, and sometimes took a perverse joy in describing the bodily mutilations the local people had liked to perform on their slain enemies.
By accounts of men who say they encountered him back then, Hand helped train the mountain people—Montagnards—and worked closely with the Air America crews that supplied them. But there are no detailed accounts of his activities. He migrated to Australia in September 1967.
About the time Nugan Hand was organized, in the early 1970s, Hand married Helen Boreland, an Australian woman nine years his senior. By all accounts, they had a close and loving relationship, though an unusual one: people remark that Helen Hand seemed more like a mother than a wife to her husband. When he finally fled in June 1980, she stayed in Australia, worked for a while in a high-priced Sydney jewelry store, then disappeared from public view. Numerous requests for an interview with her were left with acquaintances and a lawyer who had represented her, but she didn't respond.
Even more important than Hand's wife was the person he fairly adopted for a substitute father—Maurice Bernard Houghton (pronounced "How-ton"), the mysterious puppetmaster of Nugan Hand, who, while posing as a simple barkeep, moved intimately among diplomats, spies, and military brass in many countries. The circles Houghton traveled in included the covert action specialists who would become central figures in the foreign policy scandal that engulfed the Reagan Administration in 1987—air force generals Richard Secord and Harry C. ("Heinie") Aderholt, and former CIA officers Edwin Wilson and Thomas Clines.
Bernie Houghton had preceded Mike Hand to Vietnam. He then preceded Hand to Australia, by eight months, arriving in January 1967.
Today, Houghton is still there. Once again, he is ostensibly just a barkeeper, now with a few years of part-time banking in his past. A lot of people think Houghton is a spy, and he has been called one by the looser Australian press. Whatever his business, secrecy is a big part of it. And he is very good at secrecy.
A fleshy, gray-haired, outwardly unobtrusive man with eyeglasses, Houghton seems to pride himself on a quiet demeanor. He is missing a couple of fingers on one hand, and there is no explanation for it in general circulation. He will not talk to reporters. If one hangs out in his bar, or waits at the main entrance to his penthouse ocean-front condo, it doesn't help. Houghton has lookouts protecting him, a tightly knit circle of confidants. They observe visitors and profess ignorance of Houghton's whereabouts until the visitors go away.
Adopted sons, they seem to some. They work at one of his bars, or he sets them up in other enterprises. Often, one is staying at the condo with him. Some are ex-army men from Vietnam. Some are "boys" who appear to be in their late teens or early twenties. Houghton is not known as a womanizer.
Impressive as he is at avoiding reporters, Houghton is even more impressive in his ability to avoid police, even those who have subpoena power. During the most aggressive investigations into Nugan Hand, which lasted several years, he simply slipped out of Australia when the heat was on, and returned when the investigation was over. Amazingly, he alone among his colleagues at Nugan Hand continues to hang around Australia and has still stayed out of the criminal docks.
He did agree to one transcribed interview with the Joint Task Force on Drug Trafficking, a top-level police group that was mandated by the prime minister of Australia and the premier (like a governor) of the state of New South Wales to investigate the Nugan Hand collapse. But Houghton refused to go to the police. He insisted the cops come to him—in Acapulco, Mexico, where he was holing up on the twenty-sixth floor of the Princess Hotel. They did, in June 1981.
His vague and convoluted answers, as transcribed, reveal him as a master of conversational evasion—as other native Texans might put it, he is a virtuoso bullshitter—and one can only wonder at the extent to which he was simply pulling the cops' legs.
"I had come to Australia because in World War II I had served alongside Australian servicemen and had gained a great deal of fondness and appreciation for them," he said. He told the police that he had been "engaged in business activities in Southeast Asia, including Vietnam," for several years. But he never said what business. "In 1966 I became disenchanted with the activities in Southeast Asia and determined to return to the United States, but wanted first to stop off and see Australia since I had heard so much about it in my association with Australian military men."
He said he didn't meet Michael Hand until Hand arrived in Sydney in the fall of 1967. But Houghton said he'd "heard of his [Hand's] reputation as early as 1964 or 1965." Houghton said, "I had heard of Mike Hand's great combat exploits and courage, which was well-known in Vietnam. In fact, the image I had of him was comparable to that of the famous Sergeant York* in American history. He conducted himself in such a manner in the war as to receive high praise and commendation, including from the President of the United States,"** Houghton said.
*Alvin York of World War I, probably the greatest noncommissioned combat hero the United States has had.
**"Like the Sergeant York comparison, the remark must be recorded as of questionable accuracy.
As for himself, Houghton said he was born July 25, 1920, in Texas "and lived in various cities in the Southwest. My father was an oil driller, which meant we had to move from city to city. I graduated from ail the elementary schools and high school and was going to Southern Methodist University, studying business management, when the United States went to war. [Southern Methodist says he attended during the fall semester of 1939-40, a year before the United States went to war, and that he received no degree. It says he also spent the summer of 1946 there.]
"I enlisted in the U.S. Air Force Cadet Training Program and went to many schools," Houghton told the police. "I was discharged in 1946 and went into business, restaurants, clubs, surplus war material and miscellaneous." He said he "went to Vietnam, early in the 1960s, and I went to work for a construction material expediter [apparently in Vietnam] until such time as I came to Sydney, Australia, in January 1, 1967 [sic]."
In 1969, a problem with Houghton's visa caused him to give a statement to Australian immigration officials. He said then that he had spent the early 1960s with two San Francisco-based companies— the East India Company and J. G. Anderson, neither of which lists a telephone there now. He said he then went to Saigon to work for a Bruce Ficke "who is now a resident of Anchorage, Alaska." There is no telephone listing for a Ficke in Anchorage now.
In another brief interview with police in 1980, Houghton told a different story. He said he went to Saigon after seeing "job offers" in U.S. newspapers. "The same day I arrived," he said, "I got a job with an individual, by that I mean he ran his own company, named Green. He was later killed with his wife in Saigon."
This is how the Australian Joint Task Force on Drug Trafficking reported the rest of that police interview: "Asked to elaborate, Houghton said Green was an American whose Christian name was William. According to Houghton, his job with Green entailed 'traveling. ... I was in Saigon for a while and then I went to Bangkok and did the same thing there. All this time I was working for Green.' Houghton described this work as being involved in a minor way in the construction of airport and military bases. He maintained that he worked for no one else whilst in South East Asia.
"Later, when asked about Bruce Ficke—the person referred to in his 1969 reply to the Department of Immigration—Houghton said, 'I met him years ago in Alaska. I was working for a company called East India and he was a distributor for goods I was selling. That association goes back over twenty years.' "
Efforts by the author to locate the companies or people Houghton said he knew back then have failed.
Returning to his 1981 formal interview in Acapulco, Houghton gave this account of what happened after he landed in Australia in January 1967: "I went to work for Parkes Development as a real estate salesman and opened the Bourbon and Beefsteak Bar and Restaurant."
Even the date of the Bourbon and Beefsteak opening is mysterious. Houghton said it opened "November 4, 1967." The task force that interviewed him, however, determined in its final report that the restaurant actually opened in September. The date is significant, because the Bourbon and Beefsteak was designed to cater to the U.S. military.
To relieve the growing strain on the honky-tonk neighborhoods of Hong Kong and Bangkok, the U.S. Government had negotiated a deal with the Australian Government whereby Sydney would open its doors for U.S. soldiers to receive the rest and recreation periods their Vietnam War service entitled them to. According to the task force, Houghton somehow learned of Sydney's selection as an "R and R" center "prior to it becoming public knowledge." The task force said "Houghton did not explain how it was" that he found out early about the R and R deal. But before the first soldiers arrived, in October 1967, Houghton had arranged to be at the center of the action.
That's as far as the cops got regarding Houghton's history before Nugan Hand. It leaves out a lot.
Alexander Butterfield, a former Asian-intelligence officer, had some helpful advice for a reporter asking questions about Bernie Houghton. In 1973, Butterfield had attained instant celebrity by revealing to Congress and the world that Richard Nixon's Watergate conversations were secretly taped in the Oval Office. (Little if anything was made of the curious circumstance that a career intelligence operative had played such a pivotal role in the downfall of a president.)
Asked about Houghton, Butterfield quickly said to call Allan Parks, a retired air force colonel who now runs the flying service at Auburn University in Alabama. Sure enough, Parks remembered Houghton well, mostly, he said, from his days as intelligence officer at the U.S. Embassy in Bangkok during the war. Parks recalls constantly stumbling over Houghton's name in cable traffic.
Military secrecy still prevents Parks from telling all he knows, he says, but he remembers meeting Houghton—and he places Houghton in Asia well after Houghton allegedly retired to Australia to become a barkeep. [Military secrecy?what a big load of crap DC]
"He ferried C-47s, cargo airplanes, from Thailand," Parks says. "The man, he was running everything. Between Australia and Thailand. I met him in Bangkok in a bar. I was involved in Laos in some things I can't discuss in '70 and '71. There was traffic I read relating to that. But I can't go into it because it's all secret." It was something to do, Parks says, with "Project 404," which is still "classified." (Asked about Michael Hand, Parks has the same response: "I can't tell you. It's classified. No comment.")["classified",in other words...criminal activity DC]
But the mention of Houghton elicits reminiscences from Parks: "There's no doubt about it, he'd fly anything. The Golden Triangle, that's where he got his opium from. There was one flight, he flew in slot machines. He did some deals over in India."
Asked the name of Houghton's airline, Parks just laughs, and says, "He didn't call his planes anything. Nobody could track his airplanes. He didn't have an airline, like. The embassy was always trying to run him down. It was funny." Asked for other sources, Parks says, "Anybody who would know would give you the same answer I would."
Then he refers a reporter to General Aderholt, who he says also observed Houghton from the U.S. Embassy in Bangkok. Aderholt went on to become commanding general of the U.S. Military Assistance Command in Thailand, and, with General John K. Singlaub, ran covert air operations throughout the Vietnam-Laos-Thailand war zone. Retiring from active duty after the war, generals Aderholt and Singlaub took command of various right-wing paramilitary groups in the United States.
During the mid-1980's, when the Reagan administration was barred by Congress from supplying and directing Contra rebels trying to overthrow the Government of Nicaragua, but was determined to do so anyway, Generals Singlaub and Aderholt played important roles in keeping the Contra rebellion alive. Though they were supposedly working through private channels, their efforts were coordinated by the White House through Lieutenant Colonel Oliver North, and the source of their funds was open to question during the Contra scandal investigations of 1987.
Aderholt seems to have been in good position to know what was going on in Southeast Asia during Bernie Houghton's days there. Aderholt had combined his air force career with work on the side for little airlines and medical relief agencies overseas, creating the aura of someone involved all along in private "front" operations for the CIA or some related U.S. intelligence agency. But Aderholt's recollections of Houghton contradict with the accepted chronology of Houghton's life.
Bernie Houghton? "There was a guy named Bernie Houghton with the Nugan Hand Bank," Aderholt says. But Nugan Hand wasn't officially chartered until 1973, and really didn't begin to burgeon until 1976—well after the time Parks said Aderholt had encountered Houghton in Thailand during the Vietnam War. It was even after Aderholt had supposedly retired from the air force. But Aderholt is vague on dates.
"I had lunch with him," Aderholt recalls. Describing the lunch, he continues to set off alarm bells. Also present, he says, was an American named William Bird. Bird, the reporter knows, was the almost legendary operator of a seat-of-the-pants southeast Asian airline called Bird Air, and was involved with other concerns linked to U.S. military and secret paramilitary involvement there. Although Bird's precise relationship with the CIA has never (to the author's knowledge) been publicly documented, he is widely believed to have had such a relationship for many years.*
*Bird was always in some other country when the author tried to find him, both in the United States and in Thailand.
"Mr. Bird and I had run an airlift out of Bombay," Aderholt continues. "Houghton was with a company in Bangkok [Aderholt names a company, the Alkemal Company; it couldn't be located]. He was interested in opening a restaurant in Bangkok." Aderholt also confirms that William Young, who worked briefly for Nugan Hand in Chiang Mai, Thailand, was for many years a CIA agent (more on Young later). But Aderholt says he is unable to supply further information or leads on Bernie Houghton.
Looking into Houghton's past, all you can come up with is mystery. "He was doing something in Vietnam, but he won't say what," says Houghton's lawyer in Sydney, Michael Moloney. "Nobody really knows. He won't talk about his past."
Even for those who enjoy fairy tales, the available version of Houghton's first weekend in Australia may seem fanciful. Supposedly he was broke and on the street. The police task force report says, "Asked if he had had introductions to Sydney people on his arrival in the city, Houghton said, 'No.' "
But through a deus ex machina unworthy of a made-for-TV movie, the story has Houghton quickly falling in with a circle of Australia's leading businessmen. They were friends and business associates of transportation tycoon Sir Peter Abeles, who owns Australia's biggest trucking, shipping, and airline companies.
Sir Peter's shipping and trucking operations extend to the United States and throughout the world. Publishing and television tycoon Rupert Murdoch, perhaps Australia's premier international citizen, is Sir Peter's sometime bridge partner. Murdoch is also Sir Peter's 50-50 partner in ownership of Ansett Airlines, Australia's biggest.
Among the circle of business and card-playing associates of Sir Peter's, besides Rupert Murdoch, are another Knight of the Realm, Sir Paul Strasser, and John Charody, who, with Strasser, was involved in some real estate development companies and an oil company based in Sydney. Sir Paul remembers the weekend in January 1967, when "a friend, I can't remember who" brought Houghton into the coffee shop where Sir Paul was sitting.
Houghton told police that the "friend" was the manager of the not-particularly elegant hotel Houghton had happened to check into. The hotel was in the honky-tonk King's Cross section of Sydney, a district of B-girl bars and sex shows, where Houghton would eventually become the impresario of U.S. military R and R. What landed him at the King's Cross Hotel just off the boat? And what led him to immediately seek the hotel manager's help in finding work? Unanswered questions. But it is doubtful that everyone who stumbles into the King's Cross finds himself having coffee a few hours later with a knighted multimillionaire tycoon like Sir Paul Strasser.
Sir Paul remembers* that Houghton was described as just out of Vietnam, flat broke and desperate. "Somebody who couldn't find work, he didn't have any money," Sir Paul remembers. Yet, says Sir Paul, Houghton "gave as a reference two high ranking army people. Admiral Yates was one. Yates gave him an excellent reference."** So Sir Paul agreed to take Houghton on as a condominium salesman for one of his development companies.
*In telephone interviews with the author.
**Yates denies knowing Houghton that long ago.
The police had asked Houghton who his references were, and he had replied, "I'm sorry, I don't remember." But Sir Paul told the police that he sent two telex cables to verify Houghton's credentials, "one to the military in Hawaii and one to Washington. . . . Both cables were sent to army departments." The replies, he said, "were in glowing terms."
Later, Sir Paul said, Houghton introduced him to both General Black and Admiral Yates. Sir Paul became convinced that Houghton had a "top connection with the U.S. administration." Sir Paul has also told Australian reporters that Houghton was recommended to him by CIA associates and a "top politician in Washington."
This was a pattern that almost everyone around Houghton noticed quickly. As Sir Paul put it, "He was connected with top army people. I have no doubt about that. He was very close to the American embassy. I was once invited by him to the American embassy and he introduced me to all the top people. When [U.S.] senators or top officials came to town they would always see him. I heard he got flights to the States on U.S. military aircraft from Richmond Air Base [in Australia]."
"All the time I asked him about Vietnam," Sir Paul recalls. "But he didn't want to talk about it. He was the best salesman I ever had in my life. I always wondered. He came in literally without a penny in his pocket. I had to give him a loan on Friday [to tide him over] till Monday morning."
Houghton's arrival in Sydney in 1967 could not have been better timed for him or the military. The Bourbon and Beefsteak was soon overflowing with incoming shiploads of America's fighting men, and with the prostitutes they picked up in the neighborhood. Houghton soon opened two similar establishments nearby: the Texas Tavern, and Harpoon Harry's.
Because "loose lips sink ships," and because the toughest front the Pentagon had to face in the Vietnam War was in the press back home, Washington doubtless would have wanted eyes and ears on its vacationing troops. As much as their play could be controlled, Washington would have wanted to control it. And no one was better positioned to do that than Bernie Houghton.
Houghton became close friends with Lieutenant Colonel Bobby Keith Boyd, whom the U.S. Army assigned to be commanding officer of the R and R center in Sydney. Houghton told police, "We are both Texans and that automatically makes you friends."
Besides being a Texan, Boyd had been a former U.S. embassy military attache in Latin America, among other assignments. The prime minister's police task force concluded thus about him: "It would be extremely naive to suggest that with a military career of this type . . . that Boyd was not closely allied with U.S. intelligence, if not more directly involved." In 1971 Boyd resigned from active duty—and went to work helping Houghton run his bar-restaurants. He also occupied various positions in the corporations Houghton set up as holding companies.
During R and R, Houghton received all sorts of special benefits. When the troops came to port, Sydney residents recall that Houghton was sometimes helicoptered out to the flagship to greet his prospective customers and meet their commanding officer.
And as Houghton grew bigger and more visible, so did his friendship with Michael Hand.
Despite his denials, a circumstantial case has been made by some that Bernie Houghton was wearing the cloak of patriotism as a U.S. intelligence agent. The case is furthered by his otherwise hard-to-explain relationship with the Australian Security Intelligence Organization, a government agency best known to Australians by its acronym, ASIO. While doing for Australia some of the work that the CIA does for the United States, ASIO also functions domestically, much as the FBI's counterintelligence branch does in the U.S.
ASIO's name showed up when, after the collapse of Nugan Hand, Houghton's immigration file was investigated. Curious references were found both by the police task force and by the local press, which obtained documents through devices of its own. It was learned that on October 21, 1969, ASIO had given Houghton a security clearance; this was after he applied for permanent residency status in Australia.
Then, on February 12, 1972, ASIO did Houghton a very special favor. He had been traveling abroad—to "Saigon to check on the feasibility of buying surplus war material," he later explained. But he had neglected to obtain a re-entry visa for his passport. His original Australian visa had expired November 10, 1971. In the palaver at the airport immigration desk, he gave the officers two references, who quickly saw to it that he was admitted. One was John Charody, Sir Paul's business partner.
The other was Leo Carter of ASIO—not just an ordinary ASIO agent, but the director of ASIO for the whole state of New South Wales, the largest in Australia. Why did one of the handful of top intelligence officials in Australia, one who had direct contact with U.S. intelligence agencies, personally take time out to clear a simple barkeep for admission to Australia? Carter cannot be asked; he died of a heart attack in 1980. The immigration officer who signed Houghton in died the same year.
ASIO declined to talk about it with a reporter. In a written statement to the police task force, ASIO said it couldn't explain "the apparent references to ASIO on Bernie Houghton's Department of Immigration papers . . . since he does not appear in our records. ... It is only possible to speculate that Carter may have known Houghton privately as a restaurateur," ASIO said.
Maybe—except that when the police task force asked Houghton if he knew an Australian named Leo Carter, he replied, quite unequivocally, "No."
Not only did Houghton get admitted to Australia on Carter's word, he also received an immediate and very special "A" stamp— permission for unlimited re-entries to Australia in the future. One can imagine the embarrassment of the immigration officer who dared question Houghton as he went through the line, only to have senior government and business leaders roll out the red carpet for him on receipt of a telephone call.
Another item stands out from the police task force's report on Houghton's immigration file. There are records of Houghton leaving Australia only twice in the early years he was there. Yet if the recollections of the former U.S. military officers in Southeast Asia are correct, he must have been gone more than that. The story, relayed by Sir Paul Strasser and others, that Houghton flew in and out from a military air base on U.S. military aircraft provides one possible explanation. His apparent connection with ASIO provides another.
Nor is it likely that the regional head of ASIO, along with assorted generals, admirals, high-ranking senators and congressmen, U.S. Embassy officials, and two CIA station chiefs in Australia (Milton Corley Wonus and John Walker), all of whom socialized with Houghton, did so because of his establishments' haute cuisine and ambiance.
His Texas Tavern and Harpoon Harry's have long since folded, but around the corner from their old locations the Bourbon and Beefsteak, where all the dignitaries came to dine, still swings. Just inside the doorway to the left of the entrance are women in thick makeup, tight tops, miniskirts, and fishnet stockings. You know why they're there.
In the doorway to the right of the Bourbon and Beefsteak, through the dinner hour and late into the evening, stands a barker. Sometimes it is a man, sometimes a woman, but always the barker is advertising a sex show that occurs at the top of the stairway behind him. During the show, the barker says loudly enough for anyone entering the Bourbon and Beefsteak to hear, you can see "two young Asian girls shooting Ping-Pong balls out of their pussies."
Inside the restaurant, the lighting and furnishings are reminiscent of a steakhouse not exactly like, say, Christ Cella or Peter Luger, but more like, say, Tad's. So are the steaks—thin and greasy. No one but a sailor long marooned at sea would ever come here for the food. If there is one thing Sydney abounds with, it is truly wonderful places to eat, with seafood and fine local wine that thrill the palate and well occupy the expense account; the Bourbon and Beefsteak is not, by any stretch, one of those places.
Operating the most notable bars in King's Cross, where the biggest rush of customers in years scooped up every prostitute in sight and sought every form of vice that could be crammed into a weekend, Bernie Houghton probably needed approvals that even the U.S. and Australian Governments were unequipped to provide. Abe Saffron, the local version of the Mafia, has long run King's Cross the way that Matthew ("Matty the Horse") Iannello runs Times Square in New York.
The police task force described Saffron as "a man who by reputation has for many years dominated the King's Cross vice scene. He has been described in the Parliament of this State [New South Wales] and elsewhere as 'Mr. Sin,' and is reputedly involved in vice and other questionable activities in other states of this country.... His activities are carefully hidden behind complex corporate structures."
Judges and state governors have attested on the record to the foulness of Saffron's character, and to his role, in the words of the South Australia attorney general in 1978, as "one of the principal characters in organized crime in Australia." In a cover story headlined "Who Is Abe Saffron?," the National Times, a major Australian newsmagazine, said in 1982, "The New South Wales Licensing Courts over 30 years have heard police officers rise to their feet to argue against Saffron, his family or associates getting one more liquor license—yet he and his associates still own or control a string of licensed bars, restaurants, clubs and hotels throughout the country."
The article noted that Saffron hadn't been convicted of a crime since 1940—but then, of course, close to the same could be said until recently of Matty the Horse.
Saffron became front-page news in Australia in 1982 for two reasons. One was his meetings with high-ranking police officers caught up in a corruption scandal. But his name also kept cropping up in the Nugan Hand affair.
A royal commission assigned by Parliament to investigate crooked unions was pursuing a former Nugan Hand executive, Frank Ward. The commission turned up a memorandum written to Ward by an associate at Ward's new investment bank: "Abe Saffron phoned 8:30 A.M.—is in city—has balance sheets—wants to settle Friday. He confirmed in no uncertain terms that the fee ... is agreed at 5 cents. I have enough regard for my knees to agree! . . . I/we should clarify today to avoid future problems—physical or financial."
Before the ink from the resultant headlines had dried, news came that the police task force investigating Nugan Hand had uncovered another memo regarding Saffron. It was clearly in Michael Hand's handwriting, and said: "$50,000 Aust in H.K. to be repaid at $5000 per month for 10 months. It is Bank T.N.? Call 322215. Abe Saffron. Referred by Bernie Houghton, regarding yesterday's discussion— ABE SAFFRON."
The phone number 322215 was Saffron's headquarters.
The memo had been produced by former Nugan Hand executive Stephen Hill, who was giving investigators selective information to try to save his skin. Hill said he had no personal knowledge of the transaction referred to in the note. (Hand and Houghton had both left the country for undisclosed locations when the investigations began.) Hill said he kept the note because "I was interested in what association Saffron had with Hand."
Asked if the note indicated that Saffron wished to transfer $50,000 in Australian money overseas—the kind of illegal deal Nugan Hand specialized in—Hill replied, "That may be the case." He said, "T.N." may have referred to Treasury note, and "H.K." to Hong Kong.
Houghton's acquaintance with Saffron should have come as a surprise to no one. It seems unlikely that Houghton could have moved so heavily into the King's Cross vice district without making his peace with Abe Saffron. The buildings where Houghton's restaurants were housed had a tangle of corporate owners, but two were connected to associates of Saffron. Furthermore, the soldiers who flocked to Houghton's drinking establishments were referred for further recreation to Saffron's nearby gambling dens. When one of these dens, the Aquatic Club, declared bankruptcy in the mid-1970s to escape paying creditors, it was kept in operation by a new team of owners, including Houghton.
Houghton admitted to the police task force that he had known Saffron for many years "as a result of visits by Saffron to the Bourbon and Beefsteak restaurant." Houghton told the cops, "I would have a social drink with him. Our interests in the restaurant [business] are mutual." But, the task force report said, "Apart from one instance, unrelated to this inquiry, Houghton said that he was unable to recall ever having had any business dealings with Saffron."
Houghton recalled luncheons at which he had introduced Frank Nugan, and "visiting military personnel," to Saffron. Whether the "visiting military personnel" knew exactly whose hand they were shaking when they met Abe Saffron isn't spelled out, but the contact alone could have been embarrassing for some, if publicized. Houghton also said that Mike Hand met Saffron "under similar circumstances," after which "they had a very casual relationship."
Saffron, however, denied to the police that he had ever met Hand, and said he met Nugan only once, socially. Commented the task force, "This claim is, of course, irreconcilable with the statements of Houghton."
The police task force showed both Houghton and Saffron the memo from Michael Hand about the $50,000. "Each denied any knowledge of it," the task force reported. Saffron denied he had ever had "any association with the Nugan Hand group of companies," and Houghton said he wasn't aware of any.
The task force concluded, "It is not clear from the note whether the money was 'loaned' to Saffron or was paid by him into Nugan Hand, but there is little doubt that Saffron was at one time involved in at least this one transaction with Nugan Hand. . . . That at least Saffron chose to lie about his association with Hand, and both Houghton and Saffron chose to lie about the transaction, only adds to suspicion that there was something either illegal or improper about it," the task force said in its final report to the prime minister and governor.
That report went on:
"A number of observable strands existed within Nugan Hand.
"First... there is some evidence that Hand retained with U.S. intelligence personnel ties throughout the 1970s and into the 1980s.
"Second, on the evidence available there is little or no doubt that Houghton was until at least the early 1970s and perhaps is involved, in Australia and elsewhere, in some way with U.S. and Australian intelligence personnel.
"Third, Houghton was and still is closely associated with two other U.S. citizens resident in Sydney. Both have military backgrounds and there is strong reason to believe that at least one of them, Bobby Keith Boyd, was in the 1960s70s and perhaps is still connected in some way with U.S. intelligence activity. The other, Robert Wallace Gehring, if not at that time then later, became exposed to intelligence personnel through his close association with Houghton, Boyd and Hand, and his later role in the 'disappearance' of Hand from Sydney.
"Fourth, Houghton and Hand were extremely close by the early 1970s and there is every indication that Hand regarded Houghton as a 'father figure.' More probable than not it was because of Houghton's U.S. armed services and intelligence connections that Hand regarded him so highly. It was frequently said that Hand's view was that 'anything is all right so long as it is done in the name of America.' "
CHAPTER FIVE
Corporate Veils
Outsiders were kept away from the secrets of Nugan Hand until the summer
of 1980. That was six months after the supposed brains of the operation had,
literally, been splattered all over the roof of Frank Nugan's Mercedes. Nugan had made his bloody and widely publicized departure from corporate office in January. In April, Michael Hand had put the company under control of a bankruptcy court in order to free his own door from the line of increasingly panicky depositors, sleazy businessmen, and others Nugan Hand had dealt with who now wanted their money back. If that wasn't enough of a hint that something was terribly wrong, anyone interested had been alerted to the likelihood of scandal by Hand's testimony at the Nugan inquest later in April. Finally, at the end of June, it came out in headlines that both Hand and Houghton had vanished.
Even with all that, it wasn't until about a week later, in July, that a truly independent accountant, the newly appointed liquidator John O'Brien, was authorized by the courts to delve into Nugan Hand's books. By that time there was precious little left of them.
O'Brien's was the first of four major, official, wide sweeping investigations of Nugan Hand in Australia. (There were also countless lawsuits, death inquests, criminal complaints, tax cases, and commissions looking into this-or-that-other-problem, all of which got caught up in the Nugan Hand mess, and many of which turned up valuable information. Moreover, some of the best investigating was done by the press, which for years regarded any new crumb about Nugan Hand as the day's main meal.)
About the time O'Brien, the liquidator, plunged into the case, in midsummer 1980, a second big official effort began at the New South Wales Corporate Affairs Commission—the equivalent of the Securities and Exchange Commission in the United States, but on an individual state basis. The Corporate Affairs Commission had theoretically been investigating Nugan Hand since shortly after Nugan's death, but the early attempts were amateurish and easily manipulated by Mike Hand and other insiders. By summer, the commission had geared up its staff and hired a leading outside lawyer, Geoffrey Nicholson, to head a real inquiry. In March 1983, the Corporate Affairs Commission published its report in two hefty volumes, which were particularly helpful in unraveling the complex financial dealings of Nugan Hand.
Also in March 1983, the last of a series of reports was published by a third body of inquiry, the police Joint Task Force on Drug Trafficking—"joint" in the sense that the prime minister of Australia had ordered the federal police to join forces with the New South Wales police to investigate Nugan Hand. The investigation grew out of the frustration felt by a royal commission that had been appointed to investigate drug trafficking, but that kept running into Nugan Hand and lacked authority and manpower on its own to open that huge can of worms. The Joint Task Force attacked the problem, and was particularly active in pursuing the importance of Nugan Hand's ties to Americans, both high office-holders and racketeers.
But basic questions remained unanswered, even with the publication of the mass of details in the Corporate Affairs Commission and Joint Task Force reports. Outstanding among the unsettled issues were the significance of the Pentagon and CIA links, and the question of who should be given criminal responsibility for what everyone agreed had been vast crimes.
So a new royal commission under Justice D. G. Stewart was appointed by Parliament to carry on the work. The Stewart Royal Commission's two-volume report in June 1985 was a deep disappointment and shed little new light, for reasons best described later, in chronological sequence.
The results of all four investigations—liquidator O'Brien's reports, the Corporate Affairs Commission report, the Joint Task Force reports, and the Stewart Royal Commission report—are incorporated into this book, as, of course, are the results of the myriad of other inquiries so far as they are known, and of the author's own four-year effort.
Back in April, when Hand had been forced to turn the company over in court, he had been allowed to select the accountants who would act as liquidators. They apparently didn't press him, or Houghton, or others who might have been able to supply information or return stolen money. A mass of mail was pouring in from the bank's hapless victims, and what replies the temporary liquidators managed to get off were, judging from the ones forwarded to O'Brien, unhelpfully noncommittal.
John O'Brien was a bearlike, prematurely gray accountant and professional bankruptcy liquidator. With the Australian front pages daily full of Nugan Hand scandal, including the comings and goings of U.S. spies and generals and the horror stories of victims, a judge had picked O'Brien from an independent roster of liquidators to replace the temporary liquidators chosen by Michael Hand.
From that day in July, it was clear to O'Brien that Nugan Hand must have been the product of an intelligence beyond Frank Nugan's. If nothing else, the successful damage control carried out in the six months since Nugan's death was impressive. Either Nugan had been survived by very skillful and organized co-conspirators, or, in the only alternative, the law enforcement officials of Australia and a dozen other countries were stupid and lax beyond belief.
O'Brien got more than a few jolts reading the bills that were piling up. One, for $45,684.09 of legal work, was from William Colby, former head of the CIA. The CIA was well known in Australia, where the United States kept its most important overseas electronic spy installations. The CIA had been openly accused of helping overthrow the Australian Government in 1975. Many Australians still believed that the CIA had subverted their democracy. [Well of course they did,that's all the sociopath's have done the last 72 years,set up proxies and deal drugs to pay for their activities.Patriots were the last thing they were DC]
The cover letter for Colby's bill to Nugan Hand was addressed to Hand personally, and dated April 4, 1980, long before the bank fell under O'Brien's skeptical purview. The bill was on the stationery of the Washington office of Colby's law firm at the time, Reid & Priest (home office, 40 Wall Street, New York).
"Dear Michael," it began, "I regret to be communicating with you about the subject of our fees, but I am afraid I owe you an explanation of the attached bill. It obviously represents a summarization of the various activities that we did for Frank and separately for you over the past several months. . . .
"Obviously, we still stand ready to continue on the line Frank had intended to follow, a general consulting relationship on various matters involving United States law," Colby wrote to Hand—who had previously helped train and supply Montagnard recruits under Colby's overall supervision during the war.
"After you are able to regroup for the future in the unfortunate absence of Frank, I would hope you would find some further utility in consultation with us. If that does not work out, however, please accept my very best wishes for your success and that of the institution Frank and you started so effectively. If you do come in this area, I hope you will feel that the welcome mat is out, either professionally or personally. Sincerely, Bill."
Hand, however, apparently didn't have time to accept this offer of hospitality before he was driven underground by the several investigations and by the thousands of angry citizens of many countries who had trusted the Nugan Hand Bank. The letters they wrote asking for their money back made painful reading for O'Brien.
The assets underpinning Nugan Hand's business were supposedly lodged in accounts at major Sydney banks. But as O'Brien began unsealing these accounts, it did not take him long to discover that the purported assets—millions of dollars in highly rated commercial banking instruments—simply didn't exist. And never had. The full list of numbers wasn't in, and perhaps would never be, but the bottom line emerged to O'Brien early on.
Whatever else Nugan Hand was, it was surely a giant theft machine. Judging from the victims' letters, as O'Brien perused them, Bernie Houghton had actually gone around with a big plastic garbage bag slung over one shoulder, like some kind of reverse Santa Claus, taking bundles of cash savings from Americans serving overseas, mostly in Saudi Arabia.
The depositors were told their savings would be invested in the high-interest commercial banking instruments. But instead, the money just seemed to disappear. General Manor collected checks from his former subordinate officers at the U.S. air bases he used to command, and delivered them back Nugan Hand certificates of deposit. Those certificates were now next to worthless. Other depositors had donated their cash in various ways around the world.
Big and little victims all over Southeast Asia wrote in that they had given money to the staff at Nugan Hand, men like George Shaw. But liquidator O'Brien found no records of their accounts among the bank's files—or in some cases, he would find only a puzzling reference to the depositor in the records of some related company.
There turned out to be a dozen related companies, with strange names that neither the investors nor O'Brien had ever heard of. There were even complaints on O'Brien's desk from depositors in the United States—where Nugan Hand had no legal authority to take deposits. Letter after letter referred to the vaults of commercial banking paper that was supposed to stand behind the deposits. But O'Brien knew the paper wasn't there.
Who else knew? That was the question that bothered O'Brien, and would plague every other investigator assigned to the case. How much did the executives working for Nugan Hand know about the fraud they were perpetrating?
It was possible, of course, that people were duped into working for Nugan Hand. It was possible that they solicited deposits in the genuine belief that the money would be prudently invested. It was possible that they really believed the depositors would reap the high interest promised. That was exactly what the American military officers who worked for Nugan Hand later argued: that they had been duped just like the depositors.
But O'Brien's efforts at intellectual charity toward such fellows kept running into obstacles. Once inside the bank, how dumb would you have to be to stay duped? Could that level of stupidity be ascribed to high officials who only recently were responsible for supervising billions of dollars in U.S. taxpayer funds—hundreds of thousands of troops and whole fleets of aircraft and aircraft carriers, who specialized in, of all things, "intelligence"?
True, Colby was just a lawyer for Nugan Hand. Lawyers had somehow managed to establish years ago that they had not only the right but the ethical responsibility to maneuver with all the vigor and genius at their command on behalf of even the most palpably sinister of clients. Indeed, legal "ethics," as they are called, are said to require that lawyers be discharged of all responsibility for the injustices that may result from the successful practice of their craft. So Colby, by such measure, might stand not only discharged but a hero for his efforts on behalf of the bank.
But for nearly three years, Admiral Yates, no lawyer, had been president of the Nugan Hand Bank, the entity that took in most of the money. How much brainpower, how much clarity of observation, should one attribute to an admiral? To the former chief of staff for plans and policy of the entire U.S. Pacific Command, largest in the U.S. military? To a man who, as commander of the aircraft carrier John F. Kennedy, had been entrusted with nuclear weapons?
Now suppose, on the other hand, that the brass wasn't innocent at all. Suppose they had been in on the plot. Did this mean that the U.S. Government had employed, and promoted to the highest offices, a bunch of thieves who were now living high and mighty off the riches of defrauded investors?
Or was it more likely that they weren't, at least most of them, thieves—that there was some political motive behind their work?
O'Brien resolved to try to talk to spy chief Colby, Admiral Yates, General Manor, General Black, and all the other Yanks. But, at least for now, they were far away, on U.S. soil. They were protected from him. And if they did agree to sit down with him there, they would face no compulsion to tell him the truth (unless, of course, he could get the cooperation of the U.S. Government). The return addresses of the potential witnesses against them, the depositors, were spread all the way from Kuala Lumpur to Udhailiyah (wherever that was).
For the meantime, O'Brien set about to deal with the complainants who were right there in Australia.
A few weeks after John O'Brien was handed the Nugan Hand mess, he received a letter from Dr. John K. Ogden. Ogden was a disabled, sixty-year-old former gynecologist from Toowoomba, a town of eighty thousand souls about six hundred miles north of Sydney. "I understand from the papers that you have taken over the onerous task of winding up the affairs of the Nugan Hand Bank," Dr. Ogden's letter began. It then noted that Dr. Ogden had already submitted his and his wife's claim to the temporary liquidators; the amount—$689,000.
"As you might imagine, I am desperately worried as this was my retirement and security for my wife in old age," Dr. Ogden wrote. "Sixty years of age is too old to start again! I trusted Nugan as my solicitor and banker, and the agreement was that my funds and capital gains would be available when I wanted them. If the bank cannot cover all of this amount, one has to raise the question, Was it not insured? And if not, is not the Reserve Bank [of Australia] and the auditors to some degree culpable for allowing this sort of situation to occur?"
O'Brien knew the money wasn't insured, that the Reserve Bank would be embarrassed, and that the auditors might go to jail. But he also knew that none of the above would get John and Barbara Ogden their $689,000 back. In many ways, the Ogden's letter was typical of the sackfuls the mailman dumped on O'Brien's desk. But in size, and poignancy, their case stood out.
The Ogdens, who say they were "completely wiped out by this affair," met Frank Nugan on the advice of their banker in Sydney. "I was incapacitated with cervical spondylitis [inflammation of the vertebrae]. The insurance company wasn't paying and I needed a lawyer," Dr. Ogden recalls.* Nugan was a lawyer, and the banker recommended him as someone who could help the Ogdens with their insurance problem. He did. Then, says Dr. Ogden, "the relationship developed into advisor and finally banker. When my neck got better, we came back to Toowoomba to resume practice and used to fly down to Sydney and stay with the Nugans, and he always seemed a devoted family man and absolutely straight."
*The Ogden quotes in this book are intermingled from their correspondence with the two liquidators, which is on public record in Sydney, and interviews conducted by the author.
Nugan billed himself not only as a lawyer and banker, but most of all as a tax specialist. He told the Ogdens he could help them save on their tax bill by making more careful investments—such as in Nugan Hand. "He said he could get a better return for the money," Dr. Ogden says. "Frank told us that the bank never lent money and that it was absolutely secure and that the Reserve Bank audited their books every two weeks." Besides, at that point the Ogdens were putting in only their cash savings. They still had substantial life insurance investments to fall back on.
Then tragedy struck. In 1978 the Ogdens' twenty-three-year-old daughter was killed in an automobile accident, and less than a year later their twenty-nine-year-old son died in a hang glider accident in Spain. Frank Nugan reacted with a characteristic show of concern. He had Nugan Hand's office in Hamburg, Germany, fly the Ogdens' son's body home, and he personally handled the other arrangements the Ogdens were too grief-stricken to deal with.
Then he suggested the Ogdens were so grief-stricken they should turn everything over to him. Mike Hand then gave the Ogdens the same pitch. "They could manage our affairs much better than we could ourselves," Dr. Ogden says they told him. "We were so upset that we gave Frank Nugan power of attorney. We thought we were incompetent to look after our own affairs. . . . We never doubted his integrity. He was after all a Master of Law and we thought we knew him."
So, Dr. Ogden says, "I was persuaded and encouraged to sell all of my real estate and cash insurance policies. . . . All the money was put into the Nugan Hand Bank."
Did Nugan and Hand know that they were ripping the bereaved couple off? Did either of them somehow believe his own lie because the other one, and all their staff, were telling it, too? To the Ogdens, such questions are immaterial. When Frank Nugan died, Dr. Ogden raced to Mike Hand to inquire about his money. He says he "received powerful reassurance that all was well," after which "Hand pushed off to Hong Kong for a few days. I feel that if you can find Hand and Bernie Houghton, you will find a lot of money," he says.
Trying to recoup, Dr. Ogden went to the New South Wales state Law Society, the equivalent of a bar association in the United States, and applied for relief from its client protection fund. But the society rejected him, he says, "because Nugan acted as both a lawyer and a banker and it would depend on which hat he was wearing"; apparently the society decided that when Dr. Ogden's lawyer counseled him on matters other than the insurance claim, the lawyer was moonlighting as a banker, and so he was no longer the responsibility of the law society.
Then, to add insult to injury, the Australian Taxation Office decided that several of Nugan's plans to minimize his clients' taxes were illegal. The office began auditing Dr. Ogden and other Nugan Hand victims, looking to collect money the victims no longer had, to cover back taxes on income they had already been robbed of.
"Certainly we were incredibly naive and stupid to put so much trust in one person," Dr. Ogden says. Then he volunteers, "The impeccable front of the bank was immeasurably helped by having the likes of U.S. admirals and generals actively working in the bank and on the board of directors." In a letter about this, he adds a P.S.: "Don't you think the remaining directors should be brought to trial and Mike Hand located?"
Frank Nugan
There is as much mystery in his origins as in his death. His parents are widely known as Spanish immigrants who settled in Australia in 1938. Yet the January 29, 1943, birth record of Frank Nugan in Sydney shows that his father, then thirty-seven, had been born in Brackwale, Germany, and his mother, then thirty-two, had been born in Schwedt, Germany. It shows they were married in Jerusalem, Palestine, December 30, 1938—the same year that recent oral and published accounts have had them settling in Australia.
A call to the father, Alf Nugan, produces flustered, sputtering denials of the recorded evidence. He hangs up. Called a second time, Nugan again denies what is on the records, but on continued questioning concedes that he was, indeed, born in Germany.
"I was a Spanish citizen," he insists. "I left Germany as a baby. I left to find a better life." He says his mother brought him to Spain and that he married his wife in Madrid in 1930. He says they left because of the Spanish Civil War, and became Australian citizens in 1945. He says neither he nor his wife was either Jewish or Nazi. He refuses to say more and hangs up again.
They settled in Griffith, a town nine hundred miles west of Sydney. Griffith is associated in the average Australian's mind with two activities: the farming of fruits and vegetables, and the open, criminal farming of marijuana. All of Griffith's crops, legal and illegal, are raised for both domestic and export markets. In about 1941, Alf Nugan began what became one of the largest fruit and vegetable operations in the area. It is called the Nugan Group, which led to some confusion in the public's mind when Nugan Hand was started in the 1970s.
By the time of Nugan Hand, the Nugan Group fruit and vegetable business had gone public—its shares were traded on the open market. The company was run by Kenneth Nugan, Frank's older brother by two years. One of the Nugan Group's major customers, according to Ken Nugan, was the United States Government. Among other things, he says, the Nugans supplied fresh veggies to the big U.S. Navy base at Subic Bay in the Philippines. This relationship, Ken Nugan says, predated his brother's relationship with Michael Hand.
Just as Miami is known not only for its sunshine but also for its drugs, most Australians associate the town of Griffith with more than just fruit and vegetables. As a center for marijuana and the mob, Griffith has long been a national scandal.
In the mid-1970s a furniture dealer and family man, Donald Mackay, decided to speak up and organize to stop the drug traffic. He circulated a petition demanding that the New South Wales state parliament take action. So enthusiastic was the response that Mackay decided to run for public office on the issue. On July 15, 1977, Donald Mackay disappeared.
The disappearance of Mackay was roundly denounced in Parliament. An investigative authority known as the Woodward Royal Commission (after the judge who headed it) was formed. In 1979, amidst much publicity, it reported, "A secret criminal society named L'Honorata Societa, which is comprised of persons of Calabrian descent, exists within Australia. A 'cell' of this society existed and probably still does in the town of Griffith." Visiting Italian officials testified before the commission that marijuana grown in Griffith was processed by a Mafia drug network and showed up in Europe and North America.
The Woodward Royal Commission declared that Robert Trimbole of Griffith was head of the Calabrian Mafia there, and was involved in the marijuana trafficking. So, it said, was a prominent grape-growing and wine-producing family, the Sergis, which it also included in the Mafia. Big headlines told of the 1976 wedding of a Sergi daughter, where, in a scene reminiscent of the opening scenes of The Godfather, Part Two, the twelve hundred guests brought cash gifts, which were banked by the father of the bride, with the groom's blessing.
John Hatton, an independent member of the New South Wales Parliament, whose district covers Griffith, says flat out,* "The Mafia killed Mackay. I don't like to use that term because I don't generally think that organized crime is ethnic, but in Griffith's case I think it's appropriate. Donald Mackay stumbled onto a very valuable field and he persisted in making a stink about it. They brought in somebody from the outside to kill him, figuring that if they knocked off somebody with that high a profile nobody else would want to get involved in it. I think they realize now they made a big mistake. The investigation into it, the interest in it, is still going on."
*In an interview with the author, elaborating on charges he has made in public.
It seemed a strange practice to some—and an even stranger coincidence on the choice of names.
Investigators found other suspicious links between Robert Trimbole and the family of Sydney organized-crime boss Abe Saffron— Bernie Houghton's effective landlord. After Frank Nugan died, the newspapers were able to show business connections between Sergi and Houghton, and between Sergi and the U.S. Army men and Australian businessmen around Houghton.
The bad reputation of Griffith dogged both Nugan brothers in their businesses. At one point the publicity proved so hot that the Nugan Group actually flew a planeload of reporters to Griffith to try to restore some respect. The reporters were shown carrots and onions being crated, and grapefruit being squeezed by juicing machines. Then they heard Ken Nugan declare that he had never dealt with the Trimboles or Sergis. On the other hand, he said, he had known and respected Donald Mackay.
Frank Nugan got a law degree from Sydney University in 1963, then set out for North America, where he pursued two highly unusual postgraduate degrees in law. His only real achievement during his American stay, though, was constructing, with some artifice, the resume that was to lure many clients when he returned down under.
Nugan later claimed he achieved a reputation as an international tax expert—the result, he said, of his studies at the University of California, Berkeley, for a master of laws degree. Master of laws is a degree most lawyers don't think worth the trouble of obtaining, but which Nugan won in 1965. A veteran professor at the Berkeley law school, Richard Jennings, recalls Nugan as "a kind of wild fellow" who "dropped into Berkeley with an XKE, kind of a playboy type." He remembers Nugan spending time with glider airplanes, and laughs at the idea that Nugan was a tax expert. "He never even studied taxes when he was here," Jennings says.
Next, Nugan went to Toronto, where he studied for the even more arcane degree of doctor of laws (he never got it). To help pay the Jaguar's gas bills and other expenses, he worked for a corporations task force performing an overhaul of Canadian corporate law. Nugan later claimed—and it was widely believed in Australia—that he had a big hand in rewriting the Canadian legal code. In fact, the task force's report names three authors and twenty-four valuable assistants, none of whom was Frank Nugan.
Philip Anisman, a professor of law at Osgood Hall Law School of York University in Toronto, remembers that in 1967 Nugan got a clerical and research job with the task force. But Anisman says Nugan never had a hand in the task force's recommendations. Anisman says Nugan was "kind of wild, loquacious, fun." But on the main expertise Nugan claimed to bring back from North America, Anisman says, "I never heard anything about any work he did on tax." Recollections of when Nugan returned to Australia vary—from late 1967, about when Hand arrived, to early 1969. And just how did Nugan—the playboy heir to a modest food-processing fortune with strange beginnings, even stranger criminal associations, and built in part on U.S. military contracts—happen to meet Hand, just coming off active duty as a U.S. intelligence operative in Southeast Asia? Nobody seems to remember that, either. Asked under oath at the inquest, Hand declared that he didn't remember how he met Nugan—highly unlikely, considering that for better or worse they became the most important person in each other's lives.*
*The Stewart Royal Commission report offers its own typically unreliable account of the meeting. At two different places, the report says they met in 1968, while Hand was working as a security guard at a mining company (Meekatharra Minerals) Nugan had invested in. Elsewhere in the report, however, Stewart acknowledges (as corporate records attest) that Meekatharra wasn't formed until 1970, making this sequence of events impossible. (In addition, other corporate records to be cited here later, which the Stewart Commission may not have been aware of, show that Nugan and Hand had a business relationship before Meekatharra started.) There are no other accounts of Hand's working as a security guard. At yet another point, the Stewart report says Hand met Nugan while Hand was selling real estate— without bothering to note that this completely contradicts information elsewhere in the same report.
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