Part 3: The Crimes of Patriots...Sleight of Hand....Terrorists and Patriots...Into Africa

The Crimes of Patriots

A True Tale of Dope,

Dirty Money & The CIA

By Jonathan Kwitny

6 

Sleight of Hand 

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

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

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

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

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

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

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

*Interview with the author. 

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

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

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

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

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

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

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

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

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

**Interview with the author.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The minutes of September 22, 1970, say, "It was noted that Mr. F. J. Nugan had not repaid the first loan of $16,000 and that repayment of the second loan of $3,500 was due to be paid on 17 October 1970. The secretary was authorized to effect immediate repayment."

There is no evidence repayment was made, however, and during 1971 Australian and Pacific made $8,500 in new loans to Nugan. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Special needs? 

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

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

And that's as detailed as it went. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The money came mostly in two ways: from high fees charged for performing illegal (or at least very shady) services, and from the fraudulent procurement and subsequent misappropriation of investments from the public. 

7

Terrorists and Patriots 

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

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

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

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

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

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

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

In south Florida, by the 1970s, police could scarcely arrest a dope dealer or illegal weapons trafficker without encountering the claim, often true, that the suspect had CIA connections. Perhaps the largest narcotics investigation of the decade, the World Finance Corporation case, involving scores of federal and state agents, had to be scrapped after a year because the CIA complained to the Justice Department that a dozen top criminals were "of interest" to it.* 
*Assertions made in this section are all documented at length in Endless Enemies. I regret any annoyance created by these references to a prior book. They are here not for self-promotion, but to assure the reader that certain strong statements made here as background to the Nugan Hand affair are not being made without proper documentation. It seems silly to repeat tangential details in this text that are available elsewhere, but the reader should be assured that they exist. 
All this accomplished by 1975, more work lay ahead. There are two well-known missions that the Kissinger-Colby-Shackley team undertook that year: first, making sure that friendly governments stayed in power over the long term in Iran and Afghanistan, and second, making sure that a Soviet-allied government did not come to power in Angola when Angola achieved independence from Portugal. 

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

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

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

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

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

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

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

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

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

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

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

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

To facilitate 157's work, the navy allowed the men and women who did the spying to set up business fronts on their own and to recruit foreign nationals as agents. Says one former 157 operative,* "My job was to find out what the Soviet Navy was doing here, here, and here [pointing to locations on a make-believe map]. I had a great deal of leeway in how to go about it. If I wanted to set up a shipping company, I became president of a shipping company." Beginning with about thirty naval officers and seventy civilian spies, its payroll grew to include more than eight hundred human sources of intelligence. 
*One of many the author interviewed, who agreed to the interviews on condition their names not be disclosed. 
There is no record of 157's ever engaging in any covert operations to change the events it reported on. Admiral Thomas H. Moore, then chief of naval operations, says that during the Vietnam War the task force penetrated the North Vietnamese transport industry and provided precise shipping schedules that helped plan the mining of Haiphong harbor. But 157 didn't get involved in the mining; it merely produced an accurate schedule of ship traffic. 

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

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

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

His associates in these firms included some big names, like Robert Keith Gray, President Eisenhower's appointments secretary and now an influential Republican Party figure who served in 1981 as co-chair of the Reagan inaugural committee.** The clients of Wilson's front companies included such firms as Control Data Corporation. 
**Gray told Inquiry magazine in November 1981 that he didn't know his name appeared on the board of directors of a Wilson company. But Wilson's biographer, Peter Maas (Manhunt,) established close personal and professional links between the two.
Some say Wilson was used by 157 as a specialist in procuring fancy spy gear (unusual boats, or electronic equipment, for example) for its worldwide needs. Others say his specialty was setting up corporate covers for others to use. Witnesses say he showed up only occasionally at 157 headquarters. It is hard to believe, however, that his bosses at 157 weren't aware—as so many others in Washington were—that Wilson, who was paid less than $35,000 a year for his spy work, lived as a multimillionaire on a fabulous estate he had recently acquired in Virginia. 

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

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

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

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

When the task force's own budget came up for renewal in 1977, Inman simply scrapped the operation. He says the reason was that overall budget cuts forced him to use the naval officers employed by 157 in other jobs. Wilson, who was already under investigation by the Justice Department, couldn't have been out of Inman's mind, however.* 
*The shutdown of 157 provoked such bitterness among former civilian members of the task force that many sued the government claiming that their job rights had been violated. In order to preserve the secrecy of 157, the navy refused for a while to acknowledge that its civilian members had ever been employed there, causing them problems in claiming government pension and pay rights and in getting new jobs. 

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

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

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

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

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

But in September 1976, one former CIA analyst who had gone to work for Wilson, Kevin Mulcahy, developed serious qualms about what Wilson was doing. Mulcahy called headquarters and asked if Wilson's operation really was agency-approved.* 
*Mulcahy's story was revealed in a stunning series of articles by Seymour Hersh in the New York Times, June 14—21, 1981. Even before Hersh's stories ran, the Boston Globe team of Stephen Kurkjian and Ben Bradlee had exposed the gist of what Wilson was doing. I talked to Mulcahy many times after those articles appeared, confirming them and additional information. 
What finally drove Mulcahy to question Wilson's bona fides was seeing Wilson export high explosives and other dangerous weapons to Libya. Using a company Mulcahy was titular president of, Wilson had provided Libyan President Muammar Qaddafi with heat-seeking ground-to-air missiles of a type that could shoot an airliner out of the sky, and training programs covering "espionage, sabotage and general psychological warfare."

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

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

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

Wilson's friend Shackley hadn't even reported Mulcahy's call at the CIA.* 
*In several places in this passage I have stuck very close to the language of Hersh's articles simply because that language apparently passed the scrutiny of all involved. 

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

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

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

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

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

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

In 1982, Paul Cyr, a former Energy Department official, told a federal court in Washington that he attended several meetings in the late 1970s between Wilson and Shackley. These meetings, he said, left him with the same impression Mulcahy got watching Wilson and Shackley together: that even after Admiral Inman had separated Wilson from the navy, Wilson was operating with the CIA's okay.* 
*Cyr made these statements as he was about to be sentenced for the crime of taking between $3,000 and $6,000 in bribes from Wilson for introducing some Energy Department colleagues—procurement officers—to representatives of Wilson's client Control Data Corporation, which wanted to sell computers to the government; the company wasn't charged with any crime. Judge John H. Pratt evidently accepted Cyr's word about the Shackley connection and its implication of CIA approval for Wilson's operations, because the judge dealt Cyr a particularly lenient probationary sentence. 
Wilson met Cyr through the friendship of their children, and, Mulcahy said, "Paul [Cyr] got Ed some contracts." According to Mulcahy, Wilson not only bribed his way into the Energy Department via Cyr, but also sent a paid mole into Army Materiel Command meetings to "find out what kind of stuff the army would be buying."

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

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

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

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

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

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

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

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

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

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

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

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

When Mugabe came to power, he didn't turn to Soviet Communism. Instead, he left the whites their property and turned for aid to the most logical sources, the people who had it to give: the United States and Britain.* 
*Mugabe did announce the intention of eventually creating the kind of one-party "African socialist" state that most other countries in Africa had created on independence and that many still had. 
This "African socialist" system has severely hurt economic development on the continent, but hasn't posed any security threat to the United States. Not only do many of our best friends on the continent operate through the one-party "African socialist" system, but in Zaire and possibly elsewhere the CIA helped install the system! And Mugabe, preoccupied with achieving racial and tribal peace at home and good relations with the rich Western countries, put all plans for this system on long-term hold anyway. 
Ironically, it was largely Britishers and Americans who had aided Smith. Some of the aid the Smith regime had received in its fight against Mugabe and Nkomo was given for mercenary reasons, some for ideological. Probably most of the aid, from people like Michael Hand, was motivated by a little of both. But despite the wishfulness of some in Washington, none of the aid to the Smith war machine was ever shown to have come from the U.S. Government. 

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

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

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

Further complicating things was the legacy of our earlier interventions in the land just north of Angola, the vast country of Zaire. Through a series of American-run coups, the United States had installed a dictatorial and hugely corrupt one-party government in Zaire, with a nationally controlled, socialist-type economy. The dictator we installed, Mobutu Sese Seko, had a cousin* who aspired to rule Angola, and for many years the U.S. had financed this cousin in the training of an army. 
*Relationships in African extended families are hard to correlate with Western usage. "Cousin" conveys the idea.

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

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

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

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

Holden Roberto (Mobutu's cousin). 

To keep the supposedly Communist MPLA and UNITA out of power, the U.S. launched a direct, U.S.-run military operation in support of Roberto. It was intended to be covert, but by year's end it was all over the newspapers (thanks again to Seymour Hersh and the New York Times). Our intervention was described by Kissinger as a response to Soviet and Cuban intervention, but in fact it preceded (and could logically be seen as provoking) Soviet and Cuban intervention.* 
*Detailed documentation of these events is given in Endless Enemies
When Roberto's army crumbled, the CIA began recruiting U.S. and European mercenaries and sending them into Angola to fight. Still, by independence day in November 1975, it was obvious that our force didn't stand a chance against the much bigger Mbundi population of Angola, the MPLA. The other main force, the Ovimbundu— UNITA—sought to wrest power for itself, which was nothing new since the two tribes had fought for centuries over the best farmland. But the MPLA group dominated the capital city, and Mao Tse-tung, an early backer of UNITA, was fading. 

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

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

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

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

Despite this aid, our side was wiped out in early 1976, leaving behind only some U.S. and European mercenaries in Angolan prisons and cemeteries. South African blacks, who would one day run their country, had been given sobering evidence that the United States of America, which should have been their friend, wasn't.* 
*Trapped by their own predictions about the dire consequences of an MPLA victory, the U.S. foreign policy-makers decided to join league with South Africa in support of the UNITA rebels. This in turn required them to write UNITA's "Communist" origins out of history and to let UNITA wear the mantle of democracy and free enterprise that Mobutu's cousin was no longer able to shoulder. All this has been accomplished under the Reagan administration with a facility Stalin would have marveled at.  
The Mbundi government in Angola maintained a primary alliance with the Soviet Union, as its only lifeline in a sea of American and white South African hostility. But it was practical enough to maintain commercial ties to U.S. companies, and sell the U.S. Angola's main product, oil—a blessing during the 1979 oil crisis. By the mid-1980s, the Soviets had proven themselves such ill-humored and ill-equipped friends that a U.S.- Angolan deal to the benefit of both countries was still a possibility, even under Mbundi rule. 

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

8

Into Africa

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

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

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

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

Military Weapons Rhodesia 
Pay in Gold 
Recoilless Rifles 
Mortars 60/80 ml 
M79 Grenade launches [sic: "launchers"?] 
Quad 50 Calibre machine guns 

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

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

The back says: 
"Les [underlined] 
(1) HK [Hong Kong] importer of hand guns or sporting fire arms Singapore 
(2) NHHK [Nugan Hand Hong Kong] Ltd. purchases hand guns direct from US for re export SE Asia 
(3) Charter planes capable of flying one ton or less to S.A. [South Africa] 100 lbs Initial under 100 
3 brand names 
Smith & Wesson Colt Ruger 
All models .357 magnum .44 magnum 
In 4 and 6 inch barrels 50/50 
Some ammunition for each [indecipherable word] 1,000 rounds per gun 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Kevin Mulcahy, the former CIA analyst who served as president of one of Wilson's companies and later blew the whistle on him, said Wilson treated Schlachter "like the son he never had."* Wilson's two real sons "weren't like Doug, who could hunt and shoot," Mulcahy said. He said Wilson gave Schlachter a horse farm, and trusted him with business matters. He said Schlachter had even been seen with members of a Libyan hit team in Europe. "Schlachter was privy to everything Wilson was doing. He'd be a tremendous witness." 
*The information in this paragraph came from an interview Mulcahy gave to agents of the Bureau of Alcohol, Tobacco and Firearms. The information is consistent with what Mulcahy said in interviews with me, but couldn't be confirmed because I obtained the ATF report after Mulcahy's mysterious death in October 1982, outside a Virginia motel room he had rented by the month. His was one of the two mysterious deaths that frightened Schlachter, according to Schlachter's lawyer. 

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

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

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

The official task force report continues: 

"There was a number of meetings between Wilson, Houghton and the others over a relatively short period of time. Subsequently, under the cover of Task Force 157, Wilson placed an order for something like '10 million rounds of ammunition, 3,000 weapons including machine guns, M-1's, carbines and others.' The shipment is believed to have left the U.S. from Boston. The End Users' Certificate indicated that World Marine was the U.S. purchasing agent while the middle company or buyer's agent was an Australian company but not Nugan Hand. The name given as the buyer was Portuguese, and was a name that had been used previously and possibly after by World Marine in other unrelated covert operations. 'J' [Schlachter] said that the shipment never formally entered Portugal, but was re-directed to Africa, possibly South Africa, where someone was waiting to receive it. 'J' believes that the weapons were then moved up the African continent and were eventually delivered to U.S. intelligence-supported forces in Angola. 

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

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

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

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

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

Ironically, the Penthouse article had been excerpted from a book chapter, and both Penthouse and the book publisher later conceded that without their knowledge the author had lifted her information, at times almost word for word, straight from the Wall Street Journal, which published the first detailed American accounts of the Nugan Hand investigations. Thus the Stewart commission bypassed the task force's formal finding, and the report of the more respected Wall Street Journal, and pinned the "allegation" on Penthouse, making it much easier to dismiss.* 
*Both Penthouse and the book publisher, Doubleday & Company, issued gracious apologies and published acknowledgments. 
Without further discussion of specifics, the commission report merely says, "None of these allegations [from Penthouse regarding Africa and from other publications regarding other places] fell within the terms of reference [the commission's authority]." Evidently, this meant that the allegations, even if true, still wouldn't involve violation of Australian law, and therefore needn't be looked into. But the commission went on, "However, in the course of examining the material before it, the commission has found that there is not the slightest evidence to support them." The commission didn't mention "J," or Schlachter.* 
*The commission at times came dangerously close to sophistry to explain away its disinclination to pursue leads. For example, the notes found in Nugan Hand files about an ivory-for-arms trade were summed up as an "allegation . . . that Mr. Hand corresponded with Mr. Nugan from South Africa about arms sales to be paid for with Rhodesian ivory." Without adding any new information, the commission reported, "The only connection between 'ivory' and 'arms sales' arises from Mr. Hans' interview with the Joint Task Force and from the fact that notes on both subjects were made, apparently by Mr. Nugan, on the same sheet of paper. The Commission has not located any correspondence between Mr. Nugan and Mr. Hand in relation to such matters. Accordingly the Commission finds that the allegation is without substance." 
For his part, Schlachter** differs from the task force report only in that he says the ammunition and the machine guns were shipped separately, and that he was aware of at least three shipments in all, each sent as the task force describes. He says Hawes and Moore were working under cover as telephone systems installers in Indonesia, and regularly visited Wilson at the office of his Navy Task Force 157 front. 
**Interviews with the author, February 1987. 
Schlachter recalls in vivid detail chauffeuring Hawes, sometimes with Wilson, to CIA headquarters in Langley, Virginia, sometimes accompanying them inside to an office, but then leaving them off and picking them up later in the day. He says Nugan Hand came up frequently between Wilson and Hawes as a financing facility. 

The U.S. armed support for the Zairian-backed minority faction in Angola didn't collapse until late February 1976, with the rout of some U.S. mercenaries. The mercenaries had been recruited via local American newspaper publicity by a man named David Floyd Bufkin. Although the CIA "had never signed a piece of paper with him" (according to John Stockwell, the CIA officer who ran the Angolan mission***), Bufkin was transported and instructed by CIA officers who knew everything he was doing, he stayed in CIA safe houses, and was paid by Roberto with CIA money. This kind of practical, unofficial arrangement illustrates the kind of relationship the CIA has with many cooperating private citizens and may have had with Nugan Hand. 
***In interviews; Stockwell has provided the best history of the whole Angolan episode in his book, In Search of Enemies (1984). 

The Joint Task Force report on Nugan Hand continues: 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Richard Bissell, who ran the CIA's clandestine services section when Marchetti, Shackley, and Colby all worked there, once said, "It is possible and desirable, although difficult and time-consuming, to build overseas an apparatus of unofficial cover. This would require the use or creation of private organizations, many of the personnel of which would be non-U.S. nationals, with freer entry into the local society and less implication for the official U.S. posture."* 
*At a discussion on Intelligence and Foreign Policy, January 8, 1968, according to official minutes reprinted in Marchetti's and Marks's book. 
Asked about that on the same Australian radio program, Marchetti replied, "Bissell was making a point that proprietaries were a very dangerous instrument, they're hard to control, they're easy to be exposed. He was advocating the use of private institutions, and he meant not only independent little operations that would get started up and grow into something big, but also banks and other business corporations that had offices overseas, and working through them, putting people into them, and putting... people from other countries in as cutouts and agents for the CIA." 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

And that, apparently, was enough about that. 

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

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

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


next
The Spooking of Australia