Part 8: The Crimes of Patriots...The "Mr Asia" Murders...Bernie of Arabia

The Crimes of Patriots

A True Tale of Dope,

Dirty Money & The CIA

By Jonathan Kwitny 

CHAPTER SEVENTEEN 

The "Mr. Asia" Murders 

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

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

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

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

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

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

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

*Interviews with the author.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

So slow were police to recognize what they had that they allowed Choo to pick up his passport and proceed back to Singapore. It took some time for Johnstone's body to be pieced together and identified by forensic experts. Eventually, some members of the syndicate were persuaded to testify for the Crown, against their colleagues, and in 1981, a trial was finally held. It came out that Johnstone had been attracting so much international newspaper publicity with his colorful "Mr. Asia" alias that Clark and others in the syndicate feared their business was being endangered. It was a business that brought in hundreds of millions of dollars. So they killed Johnstone. (The testimony that the gang had been endangered by constant publicity is further evidence, if any is needed, that Nugan Hand had every reason to be aware of who and what it was dealing with when it washed money for the "Mr. Asia" gang.) 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The next day, March 26, was when George Shaw picked up the $285,000 at the Aston & Alexander office. That was in the afternoon. Aston's calendar for that day, eventually confiscated by police, showed a mid-morning appointment with Jim Shepherd, "Mr. Asia" 's principal Australian heroin dealer.* 
*When the calendar was seized in a police raid in March 1980, the March 26 page was mysteriously cut out. But police, using scientific means, showed by impressions on the page under the missing March 26 page that Shepherd's name had been written there in Aston's handwriting. 
Allison Dine and Wayne Shrimpton, the two witnesses from inside the "Mr. Asia" syndicate, testified that at that time, Clark received actual copies of the Wilson tapes. Dine said he bought them for about $275,000.** "I assume he got them through Alexander," she testified. "The tapes were long, two hours or so, apparently describing everything Doug knew," she went on. "Terry mentioned to me several times that he could not believe Doug had talked.... It was the obvious reason why he purchased the tapes, to satisfy himself that they had talked."
**The amount that Allison Dine said Clark had paid for the tapes was 250,000 Australian dollars—about $275,000 in U.S. currency at then-current exchange rates. Shaw reported picking up 260,000 Australian dollars, plus an undefined fee, from the Aston & Alexander office. For convenience and clarity, this sum has been converted in this book to a rounded-off $285,000 in U.S. money, at then-current exchange rates. The reader can judge how easy or difficult it would be for Dine to have confused the numbers 250,000 and 260,000.  
Dine also testified that Clark told her he paid the same amount to a hit man to kill the Wilsons. It is possible Dine confused the two, or that Clark, in talking to his moll, simply noted how much the Wilson episode had cost him in sum total, and was inconsistent or imprecise about exactly how the expenses were allocated between the tapes and the murder. In other words, there is a real possibility that the money Shaw picked up on March 26, and that Mike Hand paid out in Singapore April 12, wasn't dope money, but blood money. 

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

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

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

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

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

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

"I've had the tape," Clark replied. 

"Who was the contact?" 

"No names, I just paid the money." 

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

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

"Yeah, that's right. He would let me know what was going on." 

Alexander was called to testify at the inquest into the Wilsons' murder in August 1980. He refused, on the ground that his testimony might incriminate him. 

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

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

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

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

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

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

The bank in which these transactions occurred was Nugan Hand.  

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

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

Aston stresses* that except for the one diary entry for Jim Shepherd, all connections with the dope dealers were through Alexander. "Not one of those persons have said they ever met me," he insists. "I gave Shaw one briefcase at the request of Frank Nugan. I never looked inside it. Nugan was in the habit of having things dropped at my office for delivery to him. I would phone him when they arrived. Of course, they could have contained money. I didn't look." 
*Interview with the author.  
Justice Donald Stewart, the same man who later headed the Stewart Royal Commission on Nugan Hand, in 1983 headed another royal commission into drug trafficking and the "Mr. Asia" affair. That commission looked long and harshly at the way the Alexander-Brindle-Spencer obstruction of justice case had been dismissed. 

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

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

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

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

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

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

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

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

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

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

CHAPTER EIGHTEEN 

Bernie of Arabia 

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

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

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

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

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

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

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

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

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

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

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

After Frank Nugan died it was discovered that he had then offered financial support to several people if they would run against the outspoken Dowd for Parliament. It was also discovered, from his files, that he had forged the signature of the attorney general, Frank Walker, on a letter to a Swiss bank, opening an account in Walker's name. The only apparent reason for writing such a letter would be to try to frame Walker, to embarrass or blackmail him. But Walker says he never heard about it until the letter was found after Nugan's death.* 
*The Swiss bank Nugan used to set up a phony Frank Walker account was the Union Bank of Switzerland. Bernie Houghton was well acquainted with a traveling official of the Union Bank, and had brought him around to Nugan Hand representatives in Asia to make introductions. Union Bank was also central in the Gough Whitlam affair; a package of fake documents that was used to start a political scandal over the obtaining of Arab loans through a shady middleman (see Chapter 9) was sent off with a Union Bank cover letter. By the time the opposition parliamentarians who received the package had turned its contents over to the press, the signature had been torn off the letter. Even though the documents were later exposed as bogus, their publication helped weaken and ultimately destroy the Whitlam government. All this may or may not be coincidence. 
Criminal proceedings against the Nugan brothers progressed throughout 1978 and 1979. So did tangled lawsuits over the future of the fruit company. But Frank Nugan assured everyone that things were all right. Both General Edwin Black and Admiral Earl Yates backed him up. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Houghton told the Joint Task Force that he had been asked by Frank Nugan to visit "a senior executive" of Beck for whom Nugan had done some "legal work." He said he didn't remember the executive's name. He told the Stewart Royal Commission, however, that it may not have been Nugan who sent him to Beck, but rather Admiral Yates.* 
*The Stewart commission, which didn't mention the inconsistencies with Houghton's prior testimony, identified the executive as James Wheeler, apparently on Houghton's word. Beck says Wheeler left the company in 1980, and that it doesn't know how to locate him. 

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

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

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

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

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

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

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

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

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

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

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

Houghton testified at least twice that Beck sponsored him in Saudi Arabia. The task force concluded that it did. A Beck spokesman denies that.* 
*To the Corporate Affairs Commission and in an interview with the author.
But victims of the swindle say they, too, thought Beck was sponsoring Houghton. L. L. Bass of Portland, Oregon, was working for a Saudi Arabian firm in June 1979 when he deposited $10,000 with Houghton—"all I had," he describes it. "Houghton was introduced to me I think by the Beck resident manager—I'm sure Beck was closely associated with Houghton," he says. 

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

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

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

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

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

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

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

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

"Just borrowing," he replied. 

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

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

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

So what to do with all that money? 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The commission's report offered no evidence that any money had been legitimately invested as Houghton suggested, and no evidence that the commission had talked to any of the victims. Houghton did tell the commission he had received $364,000 in expenses over the eighteen months he was a bank executive. But apparently expense money is not subject to taxes—or to recall by the bilked depositors. 

next
The Admiral's Colors

FAIR USE NOTICE

This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. As a journalist, I am making such material available in my efforts to advance understanding of artistic, cultural, historic, religious and political issues. I believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law.

In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. Copyrighted material can be removed on the request of the owner.