Elias Alias
Part Two: Nugan Hand Bank
Fri Jun 27 15:30:18 2003

Although it has never been clearly established what, if any, arms were actually shipped from Australia, there is no doubt about the sincerity of Michael Hand's intentions. In Pretoria, South Africa, Hand incorporated a trading company, Murdoch Lewis Proprietary Ltd., to take delivery of the arms shipments. At ione point Hand summoned his Sydney employee Wilhemus Hans to Africa and met him in Rhodesia for discussions about formation of a helicopter squadron for the white settlers. Hand also made frequent phone calls to another bank employee, Frank Ward, later charged with arms dealing by Australian authorities in court proceedings that remained classified. While Hand waited in southern Africa to take delivery of arms, his close friend Bernie Houghton flew to Washington DC, with two Nugan Hand employees to arrange shipments. Significantly, Houghton made direct contact with CIA agent Edwin Wilson, then working for Task Force 157, a covert action arm of the Office of Naval Intelligence (ONI). With vast profits from his contract covert operations work, Wilson had purchased Mt. Airy Farms, a thousand-acre estate in northern Virginia where he often entertained his close comrades Thomas Clines and Theodore Shackley, Hand's former CIA superiors back in Laos who were now rising fast in the agency's Langley headquarters. After fifteen years as a career CIA officer, Wilson had transferred to Task Force 151 in 1973 and was operating from the offices of a cover company, World Marine Inc., at 1425 K Street in Washington. It was there that Wilson would meet Houghton and the two Nugan Hand men to arrange the African arms deal.

Australia's Joint Task force investigating the bank later learned details of the meetings from Dennis Schlachter, a World Marine employee whose evidence as a protected federal witness would lead to Wilson's 1982 conviction for illegal arms sales to Libya. Sometime in 1975 or early 1976 Schlachter first learned of the African arms deal when two CIa agents based in Indonesia, James Hawes and Robert Moore, called on Wilson at World Marine in Washington to discuss "an African arms deal" that, in these agents' words, "had to be put together". Sometime later, Houghton arrived from Sydney and came into World Marine's offices with the two Nugan Hand men to order the arms. Schlachter recalls chauffeuring Wilson and Hawes out to the agency's headquarters in Langley while the two discussed using Nugan Hand Bank to finance the shipments. Under the "cover of Task Force 157," ammunition, 3,000 weapons including machine guns, M-1s, carbines and others". With an end-user's certificate showing World Marine as the purchaser and an Australian company as the buyer, the arms left the United States from Boston for southern Africa in three separate shipments.

The Australian Joint Task Force found that Ed Wilson and Bernie Houghton were also involved in the ONI operation to transfer a highly classified spy ship to the Shah of Iran. Soon after joining Task Force 157 in 1973, Wilson had earned a $500,000 fee by delivering an earlier spy ship to Iran under the cover of World Marine. According to the witness Schlachter, in 1975 the U.S. Navy assigned Wilson to deliver another high-technology spy ship to Iran. Schlacter recalls that Houghton "was involved" in this deal, working with "funds...and...payouts". Significantly, Australian immigration records show that Houghton flew to Iran in March 1975 in the company of a U.S. Army Colonel. Working through Task Force 157, Wilson purchased the ship and ordered it to sail from England around Africa to Iran. When some "mix-up" developed, Schlachter recalls that "Wilson flew to Iran to correct it." Australian immigration records show that in January 1976 Wilson flew into Sydney and stayed in Australia for three days before flying on to Iran."

After fourteen months in Africa, Michael Hand returned to the bank's Sydney headquarters in March 1976 and dedicated his trade skills to a new constituency---Australia's leading international heroin smugglers.After nearly fifty years without a serious narcotics problem, Australia showed signs of spreading addiction in the late 1970s as Sydney's criminal syndicates began organizing regular heroin shipments from Southeast Asia. In a March, 1977 report, for example, Sydney's Crime Intelligence Unit monitored a series of meetings between the city's leading illegal bookmaker, George Freeman, and California crime figure Danny Stein: "Information was received that Stein was here for the purpose of organizing a network for the reception of heroin into this country from the Golden Triangle and for subsequent distribution on thelocal market and in the United States."

Would-be Sydney heroin smugglers faced Australia's stringent currency control laws that made it difficult to export the hard cash for heroin buys in Bangkok. After two years of active money laundering through Hong Kong, Nugan Hand was becoming nown in the underworkd as a reliable money mover. Sometime in early 1976 George "the Duke" Countis, an American crime figure who "owned" a gaming table in an illegal Sydney casino, brought Murray Riley to the headquarters of Nugan Hand Limited. A former Sydney constable, Riley had quit the police to become a "patron" in the criminal underworld and a close associate of leading criminals like George Freeman. Just back from Africa, Hand quickly develoed what the Australian police Joint Task Force called "a close business and social relationship with Riley".

Starting in April 1976, only four weeks after his arrival from Africa, Hand made five cash transfers to Hong Kong for Murray Riley totalling $295,000. After each transfer, one of Riley's underlings would call at Nugan Hand's Hong Kong office to pick up the money, later using the cash to take delivery of a heroin shipment. Through this procedure, Nugan Hand handled $4.3 million ni identifiable drug money for twenty-six known dealers between 1976 and 1980. Studying Hand's memorandum to his Hong Kong office about a $60,000 cash transfer for Riley's October shipment, the Task Force concluded "that Hand was aware that Riley was involved in significant illegal activity". As an indication of their closeness, in late 1986, acting on Riley's advice, Hand opened bank branches in Thailand, in the words of his Chiangmai branch manager, "to attract drug money". Two years later, when a yacht was sezied south of Sydney with 4.3 tons of high-grade cannabis and Riley was charged, Michael Hand ordered the bank's Hong Kong office to destroy all incriminating records of Riley's money transfers. Reviewing this period in the bank's history, Australia's Joint Task Force concluded: "Throughout 1976 Hand was knowingly involved in drug activity with the 'Riley' group in that he permitted and even encouraged the use of Nugan Hand facilities for the movement of 'drug' money.

In October 1976 Hand decided to leave the Sydney office to Frank Nugan and move to Hong Kong, where he could build the bank's international division. Over the next two years, Hand worked with some success to develop a global network of twelve branches that covered Asia, Africa, and the Americas. After months of failure, Hand's break had come in June 1976 when the Cayman Islands, a British colonial tax haven in the Caribbean, decided to charter the Nugan Hand Bank, finally giving the company the legal right to advertise itself as a "merchang bank".

As the bank expanded dramatically in 1977-1978, Michael Hand recruited some of the most famous names in U.S. national security circles to join the bank as employees or associates. The key figure in making these contacts for Hand was Bernie Houghton, who had taken a more active role in the bank in 1976 after his bar business went bankrupt with debts of nearly a million dollars. In early 1977 Houghton recruited an old friend, Admiral Earl Yates, retired chief strategist for the U.S. Pacific Command, to serve as president of the Nugan Hand Bank. Through the admiral's influence, a succession of such senior appointments followed:

General Leroy J. Manor, former Pentagon counterinsurgency specialist and chief of staff of the U.S. Pacific Command, manager of the bank's Manila branch;

General Edwin F. Black, former OSS officer and commander of U.S. forces in Thailand, president of Nugan Hand, Inc., of Hawaii;

Dr. Guy Pauker, Asia expert for the Rand Corporation, a research firm under contract to the U.S. Defense Department, bank consultant.

Dale Holmgren, former chairman of the CIA's Civil Air Transport, [a CIA proprietary airline similar to Air America], manager of the bank's Taiwan branch;

William Colby, retired CIA director, Nugan Hand's legal counsel.

The pattern of events surrounding this expansion indicates that Michael Hand may have realized his dream of becoming the "CIA's banker". Both Sydney police and Wall Street Journal reporter Jonathan Kwitny came away from their long investigations of Nugan Hand convinced that there may well have been some connection between the bank's sudden rise and the antecedent demise of a CIA proprietary, the Castle Bank and Trust of Nassau. After retiring from the CIA, Paul Helliwell, founder of such agency "proprietaries" as SEA Supply Inc. ofBangkok and Air America, opened a law office in Miami and formed Castle Bank offshore in nearby Nassau to cover the agency's covert money movements. In 1973 agents of the Internal Revenue Service were able to photograph the Castle Bank's customer list while a bank executive dined in a posh Key Biscayne restaurant with a woman described as an IRS "informant". Reviewing the purloined documents, IRS investigators found that the 308 Castle Bank customers on the list had moved $250 million to foreign numbered accounts. Depositors included Playboy publisher Hugh Hefner, Penthouse magazine publisher Robert Guccione, and some major organized crime figures---Morris Dalitz, Morris Kleinman, and Samuel A. Tucker. Eleated by the find, investigators formed Project Haven to make "the single biggest tax-evasion strike in IRS history." Suddenly, the IRS announced that it was dropping the investigation because of "legal problems". According to a later investigation by the Wall Street Journal, "pressure from the Central Intelligence Agency ... caused the Justice Department to drop what could have been the biggest tax evasion case of all time." The CIA invoked "national security" since it was using the Castle Bank "for the funding of clandestine operations against Cuba and other intelligence operations directed at countries in Latin America and the Far East." By the time Helliwell died from emphysema on Christmas Eve, 1976, Castle Bank had been liquidated.

Simultaneous with the closure of Castle Bank's Nassau office, Nugan Hand Bank launched its formal "banking" operations in the nearby Cayman Islands. The opening of Caribbean branches, a new area for Nugan Hand, and recruitment of retired CIA officers gave it a corporate structure similar to the collapsed Castle Bank. Indeed, a former CIA agent named Kevin Mulcahy, a key witness in the Edwin Wilson case, gave details to the National Times of Sydney "about the Agency's use of Nugan Hand for shifting money for various covert operations around the globe".

Working through Houghton, moreover, the Nugan Hand Bank deepened its contacts with the network of ex-CIA officials surrounding Edwin Wilson. After helping Hand informally with the bank's operations for the previous five years, Houghton finally joined Nugan Hand's staff in late 1978 and opened a branch in Saudi Arabia to collect deposits from American contract employees. Under Houghton's management, the Saudi branch ran the bank's biggest --- and simplest --- fraud. With introductionsfrom Beck Arabia of Dallas, a leading engineering firm with major Middle East contracts, Houghton flew into Saudi Arabia in January 1979 and rented a villa at Al-Khobar to serve as both office and residence for the bank. Over the next twelve months, Houghton and his aides circulated through the U.S. construction camps along the Persian Gulf, issuing bank receipts for cash deposits from American contract workers. Paid in cash and unable to make deposits in Saudi Arabia's backward banking system, American expatriate workers needed the deposit-taking service that Nugan Hand pretended to provide. Houghton then bought bundles of Thomas Cook traveler's checks and sent them off in commercial courier parcels to Michael Hand's new office in Singapoer. Through this simple system, Houghton and Hand collected collected at least $5 million from their fellow Americans---all of which simply disappeared when the bank collapsed a year later.

Houghton's presence in Arabia brought Nugan Hand Bank into closer contact with Wilson's network of former CIA officials, now moving its base of operations to nearby Libya. When Houghton opened his Saudi office in 1979, Wilson's network seemed a step away from unprecedented power, and Houghton apparently decided to join their rise. Within months, however, both Wilson's group and Nugan Hand were plunging precipitously toward a collapse.

After decades inside the CIA, Wilson and his closest associates were finally forced out in the late 1970s, losing the mantle of CIA protection that had long masked their operations. In February 1976, Admiral Bobby Ray Inman, the new head of the Office of Naval Intelligence, ran into Ed Wilson by chance and learned to his surprise that this wheeler-dealer was one of his own operatives in Task Force 157. When Wilson's contract came up for renewal a few months later, ONI canceled it on Inman's orders, pushing the ex-CIA man into the private sector. There he prospered. Between June and September 1976 Wilson supplied Libya with thousands of CIA-designed bomb timers and more than 21 tons of Composition C-4, the most powerful nonnuclear explosive in America's arsenal--thereby providing Colonel Muammar al-Qaddafi with a potent weapon for his terrorist campaign in Europe and the Middle East. Over the next four years, Wilson recruited U.S. Green Berets to train Libyan commandos, delivered weapons for Qaddafi's terrorists, and even arranged assassinations for the Libyan dictator. One of Wilson's employees, former CIA officer Kevin Mulcahy, became concerned by these shipments and reported them to the CIA. But Wilson's old friend Theodore Shackley, now deputy director for Clandestine Services [at CIA], blocked any internal investigation. In April 1977 The Washington Post published an article on Wilson's activities stating that he "may have had contact with one or more current CIA employees", and the agency's new director, Admiral Stansfield Turner, started asking questions. He soon learned about Wilson's close friendship with his former CIA colleagues Clines and Shackley, then high in the Langley hierarchy. Over the opposition of senior CIA bureaucrats, Turner transferred the two to secondary jobs. A year later Thomas Clines resigned from the CIA after thirty years' service, borrowed $500,000 from Wilson to set up his own company, and soon won a $71 million contract for arms delivery to Egypt. No longer heir-apparent to the post of CIA director, Theodore Shackley resigned in Septermber 1979 and followed Clines into the consulting business.


end typed section from "The Politics of Heroin" by Alfred W. McCoy. Entire article here:


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