Part 11: The Crimes of Patriots.....The Explosion...Thwarting the Investigators

The Crimes of Patriots

A True Tale of Dope,

Dirty Money & The CIA

By Jonathan Kwitny

23 

The Explosion 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

*Before the Corporate Affairs Commission.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

But perhaps the most imaginative stalling tactic Hand devised was this: On March 11, 1980, a depositor named Ah Chuan Liau, of the town of Carlingford in New South Wales, wrote asking to borrow $30,000 against his much larger deposit. In reply, he got a letter from Hand, stating, "On occasion, clients of our bank, as we are sure happens with clients of other banks, make requests to prematurely break deposits or to borrow against their deposits. Each transaction is studied on an individual basis. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

"From the description supplied by Matheson and an examination of airline and immigration records," the task force reported, "the  unnamed American has been identified as being Thomas Clines." Former senior CIA official Tom Clines was a principal figure in the White House approved Iran-Contra arms transfers of the mid-1980s. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In March 1983, the task force reported: 

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

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

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

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

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

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

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

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

24

Thwarting the Investigators 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

So O'Brien refused to accept many claims from depositors who thought their money was being supervised by Nugan Hand in Sydney, but who could not prove that their money ever actually arrived in Australia. One Filipino depositor who was in this bind hired Peat, Marwick's Sydney office to represent him. Peat, Marwick wrote O'Brien that "representatives of the Nugan Hand group in the Philippines assured him that the certificates of deposit were guaranteed by a counter deposit with the Bank of New South Wales." 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

He was flatly turned down. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A Wall Street Journal reporter* was treated no better. 
*Obviously, the author.
Reporters and law enforcement officers often swap information on crime stories where confidential sources aren't involved. Each side believes it can further its own end this way, and if things are proper their ends are not incompatible. In investigating the Nugan Hand affair, the Journal reporter found his relationship with Australian officials typical of that spirit—in marked contrast with the hostility accorded by American officials. 

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

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

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

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

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

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

Was Nugan Hand under investigation? 

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

The reporter asked what was being shredded. 

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

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

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

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

The agents were well aware Nugan Hand had occupied virtually the same office suite as the DEA in Chiang Mai. One, who identified himself only as "Connie," said, "It always seemed like such a coincidence that all the way up here they would wind up so close to us."

Another agent, Greg Korniloff, said he thought the DEA and the reporter could help each other, but first he had to clear it with Bangkok. 

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

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

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

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

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

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

There was no reply. 

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

Could he start out now? 

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

But he didn't. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Next
"Everybody Left Alive Is Innocent" 

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.