When two passing patrolmen found Sydney merchant banker Frank Nugan dead in
his Mercedes on a little-travelled highway early on Jan. 27, 1980, it appeared to be a routine suicide. Nugan had returned from London two days earlier to learn of major discrepancies in his Nugan Hand bank’s accounts. Beside the dead man, as he lay slumped over the wheel, was a rifle purchased only two weeks before. But the discovery of a meat-pie wrapper tucked into a Bible beside the body dramatically altered the focus of the investigation. On it was scrawled the name of William Colby, former director of the CIA. A calling card of Colby’s was also found on Nugan.
In the 2V2 years since, detectives and journalists following the trail have turned up evidence linking Nugan’s death—and the CIA—with international trafficking in heroin and arms, tax evasion, laundered money and espionage. Almost every major scandal uncovered in Australia since then has been connected, in the public’s mind at least, with the Nugan Hand affair.
New revelations surfaced last week in a royal commission report which said that the Crown solicitor’s officethrough a combination of dishonesty, gross negligence and incompetence— had allowed the federal revenue department to be defrauded of millions, and perhaps billions, of dollars. As a result, Attorney General Peter Durack and Treasurer John Howard were the subjects of censure motions—which they survived—in both houses of Parliament. But what really titillated Australians even more was the disclosure that
Abraham Bercove, a legal officer for the Crown solicitor in Perth, had profited from a call-girl business run by his wife. The couple had even used the office telephone number in advertisements for their agency, known as Kim’s Introductions.
There is little evidence to substantiate attempts to link the royal commission’s report with continuing inquiries into the activities of Frank Nugan and his associates, many of them onetime high-ranking U.S. officials. But the ramifications of the Nugan Hand affair
Almost every major Australian scandal has been connected in the public's mind with the Nugan Hand affair
are so wide-reaching that almost anything is possible. Its major components:
The coverup: Nugan’s partner in the Nugan Hand bank—which controlled at least 22 subsidiaries around the world— was former Green Beret and known CIA agent Michael John Hand, 39. After Nugan’s death Hand rushed back to Sydney from a business trip to London. En route he linked up with the bank’s president, retired Rear-Admiral Earl (Buddy) Yates, formerly chief of staff for strategic planning with U.S forces in Asia and the Pacific, who had been in the United States. In Sydney they huddled immediately at Nugan Hand’s offices with other directors and Bernie
Houghton, the bank’s Saudi Arabian representative, since revealed as a CIA agent. What happened then was later disclosed by one of the directors, Stephen K.A. Hill, in evidence given during a conspiracy case arising from the bank’s crash in April, 1980. The conspirators proceeded to shred as many documents as they could find, he said. Others were taken in cartons to a butcher shop owned by Robert Gehring, a Vietnam veteran and associate of Houghton. According to Hill, Hand told the conspirators that terrible things would happen if police found the records. “Your wives will be cut up and sent back to you in bits and pieces in cardboard boxes,” he said.
The investigation: Many of the details of Nugan Hand’s activities were destroyed by the conspirators. Besides, Nugan Hand was highly secretive. Employees and customers were referred to by serial numbers. Codes were used for interoffice cables and currencies (Swiss francs were “oats,” U.S. dollars, “grains”). Nevertheless, many of Nugan Hand’s activities have come to light through patient inquiries by Australian investigators and evidence given by Nugan Hand associates in bankruptcy and other proceedings. For one thing, there was a direct financial scam, which claimed hundreds of victims, chiefly in the United States and Australia. Nugan Hand employees even solicited deposits among U.S. workers in Saudi Arabia. Liquidators say Nugan Hand’s shortfall could reach $50 million, but the real figure is probably much higher.
There were also discussions about arms sales—in Bangkok and elsewhere. Among the prospective recipients were Indonesia, Thailand and the white Rhodesian government of Ian Smith. Nugan Hand was also heavily involved in drugs. The bank has been linked with the $100-million “Mr. Asia” syndicate
in the importation to Australia of Golden Triangle heroin for the U.S. market. Australian Narcotics Bureau files connect Hand with a former pilot for Air America, the airline formerly run by the CIA in Vietnam. The Australian airstrip used was part of a real estate development promoted by singer Pat Boone and financed by multimillionaire Daniel Ludwig.
The Washington connection: Enough past and present U.S. military and intelligence officers worked for Nugan Hand to run a small-sized war. Besides Colby, who is said to have provided the bank with legal advice, and Yates, there was a former three-star general, LeRoy Manor, until 1978 chief of staff of Pacific Command. He had helped run Nugan Hand’s Manila office. Other employees were Gen. Erie Cockie Jr., who held various defence department posts before becoming Nugan Hand’s Washington agent; CIA career officer Walter McDonald, who on retirement became Nugan’s closest adviser; and Robert (Red) Jansen, former CIA station chief in Bangkok.
Prime Minister Malcolm Fraser has accepted state department and CIA assurances that they were not involved in Nugan Hand. Yet the CIA, FBI and U.S. Customs have refused on grounds of national security to release information that they hold on the bank’s activities. And when the Australian weekly National Times petitioned under the U.S. Freedom of Information Act for FBI records, it received only 71 of the 151 pages requested. Page after page was blacked out. Commented Nugan Hand Liquidator John O’Brien: “It has obvious overtones that somebody is covering something up.”
An unresolved question in the Nugan Hand affair is the fate of Michael John Hand. After helping dispose of the evidence he is said to have fled to the United States via Fiji and Vancouver on a false passport. But that story is substantiated only by former Nugan Hand associates, and there are suggestions that he was murdered to prevent him from talking.
Nugan’s suicide is better documented. But there was a bizarre twist earlier this year with his reported sighting in an Atlanta, Ga., bar. New South Wales Attorney General Frank Walker, whom Nugan had once tried to frame with a false Swiss bank account, ordered the exhumation of the body in Nugan’s grave.
The remains were positively identified as Nugan’s by means of teeth and a webbed foot. But, if that question has been disposed of, there are still plenty of aspects of the Nugan Hand affair left to puzzle Australia’s tireless investigators—and an even more curious public.
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