Nov 20, 1987

First bank and mistrust company: Deposits and withdrawls of the spooks | by Jerry Meldon | Published in The Boston Phoenix on November 20, 1987 [incomplete]

 Shortly before dawn on Sunday, January 27, 1980, two Australian police officers discovered the bloodied body of 37-year-old Frank Nugan, rifle in hand, an apparent suicide victim, in the front seat of his Mercedes sedan. In stumbling upon the body, the country constables unwittingly unlocked a Pandora’s box of bank fraud, laundering of heroin profits, and machinations by elements of the CIA shadow network that would later engineer the Iran-contra debacle.

            Nugan was co-owner of the Sydney-based Nugan Hand Bank, with 22 branches worldwide. When he died, he was carrying the business card of former CIA director William Colby, who performed legal services for the bank. No sooner did word of the corpse in the car reach London than the bank’s other owner, Bronx-born former Green Beret and onetime CIA operative Michael Hand, hopped a plane to Sydney. There he was joined by Admiral Earl “Buddy” Yates (US Navy, retired), former chief of staff for plans and policy of the entire US Pacific Command, then the president of the Nugan Hand bank.

            At bank headquarters, Hand and Yates hosted a shredding party that would have brought tears to the eyes of Lieutenant Colonel Oliver North and his faithful secretary, Fawn Hall. As you read The Crimes of Patriots: A True Tale of Dope, Dirty Money, and the CIA (Norton, 424 pages, $19.95), by Jonathan Kwitny, you can also imagine Kwitny’s pupils moistening – for a different reason – each time he ponders what those documents might have revealed.

            Kwitny, investigator par excellence for the Wall Street Journal and author of earlier studies of Mafia penetration of legitimate businesses and of US foreign policy, has spent the last five years trying to figure out what Admiral Yates and other military and CIA brass were doing on the payroll of a bank that “engaged in heroin financing, tax fraud, investor fraud, and indirectly, by much evidence, contract murder.” He leaves us with a wealth of evidence suggesting that Nugan Hand was indeed part of a US intelligence operation. But Kwitny is a most careful reporter. With no smoking gun, he won’t be the one to say the CIA was behind the bank. And therein lies the frustration of this important and timely book: the resistance to reaching definitive conclusions in the absence of a confession.

            In retrospect, it should have seemed fishy in 1969 when Michael Hand – recipient of the Distinguished Service Cross for “almost single-handedly [holding] off a fourteen-hour Vietcong attack on the Special Forces compound at Dong Xoai” – founded Australian and Pacific Holdings, in Sydney, with the stated goal of developing a resort on the Great Barrier Reef. Australian and Pacific’s stockholders were an odd lot. Of 37 listed, four worked for Air America, one for Continental Air Service, and five for the US Agency for International Development (AID), employers that had been providing cover in Indochina for CIA agents.

            Author Kwitny discovered that in reality, Australian and Pacific had done little other than make Frank Nugan, a Berkeley-trained Australian lawyer, successive loans of $16,000, $3500, and $8500. The total of $28,000, roughly the initial stockholder investment, was apparently never repaid.

            Having discovered the formula for creative and profitable accounting, Hand and Nugan raised the stakes. In June 1973 they incorporated Nugan Hand Needham, in Sydney. According to a brochure, “This company’s purpose is to act as a trusted Investment House to make all of its services and facilities available to all persons and enterprises, large or small.”

            What the brochure really meant was that Nugan Hand – to which the name was later shortened – would just as gladly rip off little guys as big ones. Reports Kwitny, “The money came mostly in two ways: from high fees charged for illegal [or at least very shady] services, and from the fraudulent procurement and subsequent misappropriation of investments from the public.”

            High on the list of shady services were the financing of narcotics deals and laundering of the profits. Nugan Hand’s clients in this area included Australian Olympic medalist in sculling and former police detective Murray Riley. In 1978 police collared Riley and nine accomplices for shipping a ton and a half of Thai “Buddha sticks” – concentrated marijuana – on a boat out of Hong Kong. Enforcement officials also established that Riley had been sending a hundred pounds of heroin annually to the United States via Australia.

            In 1980, having begun a 10-year jail sentence, Riley testified before an Australian commission of inquiry into the Nugan Hand bank, whose demise followed shortly upon that of Nugan. The bank, Riley asserted, had moved his drug money around the Far East.

            Moving drug money did not distinguish Nugan hand from myriad other banks worldwide. However, Nugan Hand went one step beyond most. In 1976 it opened an office in Chiang Mai, Thailand, the gateway to Indochina’s Golden Triangle, the world’s major source of the opium from which heroin is derived.

            The Commonwealth-New South Wales Joint Task Force on Drug Trafficking, in volume two of its report, issued in June 1982 (all 512 pages are devoted to Nugan Hand), revealed that Michael Hand had decided to open shop in Thailand on the advice of his drug-trafficking client Murray Riley. The Chiang Mai office was housed in the same building – on the same floor – as that of the US Drug Enforcement Administration (DEA), a coincidence yet to be explained. Nugan Hand’s Chiang Mai manager, Neil Evans, told the joint task force, “I was never under any illusion … that I was to go over there for any other purpose but to seek out drug money.”

            Evans’s sensational charge is one of many that Kwitny takes with a grain of salt. Kwitny, who went through extensive efforts to locate all the actors in the drama, never found Evans. However, he did get wind of the claim that Evans had received $10,000 from an Australian TV station for an interview. The Australian station later sold the interview to CBS, and on a September 1982 CBS Evening News program with Dan Rather, Evans stated, “We were to become paymasters for the CIA around the world.”

            “The [$10,000] payment alone,” Kwitny writes, “casts some doubt on Evans’s veracity.” [unclear] reasonable assumption. [Section missing.]

[…]parently considered an expert in failed assaults, having planned and commanded the infamous 1970 raid on a North Vietnamese POW camp. Kwitny reminds us, tongue in cheek, of Manor’s later statement to the press that the onslaught was “a complete success with the exception that no prisoners were rescued.” In 1979 General Manor joined Nugan Hand’s Manila office. Like the branch in Chiang Mai, Thailand, this one was under the same roof as the US Drug Enforcement Administration.

            Kwitny offers two explanations for the presence of such heavies, neither very comforting: the men were either fools or accomplices.

            Once inside the bank how dumb would you have to be to stay duped? Could that level of stupidity be ascribed to high officials who only recently were responsible for supervising billions of dollars in U.S. taxpayer funds – hundreds of thousands of troops and whole fleets of aircraft and aircraft carriers, who specialized in, of all things, “intelligence?” … Now suppose, on the other hand, that the brass wasn’t innocent at all … Did this mean that the U.S. Government had promoted to the highest offices, a bunch of thieves? … Or was it more likely that they weren’t, at least most of them, thieves – that there was some political motive behind their work?

            Throughout the book, particularly the chapter “The Wilson Connection,” Kwitny lays out evidence for the latter. The inescapable conclusion: 1) Nugan Hand was, to an as-yet-undetermined extent, an instrument of the “rogue” US intelligence network whose most notorious member, former CIA agent Edwin Wilson, is now serving half a century behind bars for among other things, shipping explosives to Libya’s Colonel Qaddafi; and 2) the network also included Major General Richard Secord (USAF, retired) and former high-ranking CIA officers Theodore Shackley and Thomas Clines – who all became key players on Oliver North’s Iran-contra secret team.

            When Nugan Hand was incorporated, in 1973, Wilson was running dozens of proprietary-business fronts for the top-secret Task Force (TF) 157. TF157, originally set up to monitor Soviet shipping, was officially under the aegis of the Office of Naval Intelligence (ONI). In actuality, it reported, through Wilson, not to the ONI but to CIA Deputy Director Ted Shackley, according to FBI files cited by Joe Trento in the Wilmington, Delaware, News Journal in September 1981. (TF157 was shut down in 1977 when ONI chief Bobby Ray Inman figured out that Wilson was actually in business for himself.)

            What makes this very interesting are the Wilson-Shackley-Clines connections to Nugan Hand in that same era, connections that are discussed at length both by Kwitny and in volume four of the report by the Australian joint task force.

            The full extent of how the Wilson team used Nugan Hand is unlikely to be revealed. The joint task force, however, learned a good deal from a Wilson associate it referred to only as “J” but whom Kwitny identified as Douglas Schlachter, a former employee at World Marine, a TF157 entity set up by Wilson.

            Schlachter described several meetings during the late ‘70s in World Marine’s Washington office between Wilson and Nugan Hand’s number-three man, American Bernard Houghton, whose current whereabouts, like Michael Hand’s, are unknown. Following the Houghton-Wilson meetings at World Marine, Wilson, under cover of TF157, “placed an order” – with a private arms manufacturer, the financing for which was done by Nugan Hand – “for something like 10 million rounds of ammunition [and] 3,000 weapons … The shipment is believed to have left the U.S. from Boston.” Schlachter told the joint task force he believed the weapons were “delivered to U.S. intelligence supported forces in Angola.” (This would have occurred just as the Senate was about the pass the Clark Amendment, banning US involvement in Angola. A direct analogy can be drawn to the later circumvention of the 1984 Boland Amendment, banning support of the contras, by the same Wilson gang, though Wilson himself was by then behind bars.)

            The Australian joint task force concluded that “the [Angola] operation is considered likely to have been carried out as a result of private entrepreneurial activity as opposed to one officially sanctioned and executed by U.S. intelligence authorities, specifically Task Force 157.”

            The Australians, without realizing it, had gotten wind of the “off the shelf” intelligence operation that Reagan CIA director William Casey would turn to for the Iran-contra operations. As Kwitny writes, “The [Australians’] final judgement … shows some naivete for how the CIA has actually conducted covert operations.”

            Besides examining the covert shipment of weapons to Angola, Kwitny reviews evidence linking the Wilson-Shackley gang – through Nugan Hand – to the 1975 undermining of the left-of-center Australian Labor government, an abortive 1979 plan to take over a Miami bank in partnership with deposed Nicaraguan dictator Anastasio Somoza, and the successful takeover of a London bank in 1980. Regarding that London bank, the Australian inquiries determined that the man pulling the strings in the takeover was Wilson’s business partner, Thomas Clines (by then no longer with the CIA – both Clines and his boss, Shackley, left the agency following the indictment of Wilson).

Shackley would later be the first semi-official US contact of the Iranian businessman Manucher Ghorbanifar, and thereby lead the way to the Iran-contra affair. Clines would arrange arms shipments to both Iran and Central America through his contacts in Europe. Secord, who had introduced Clines to Bernard Houghton of Nugan Hand while still on active duty with the Air Force, would manage the whole show for Oliver North – together with his partner, the Iranian-born Albert Hakim, on whose payroll, at one time, were Wilson and Shackley...


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