Article 6208 of alt.conspiracy:
From: rburns@finess.Corp.Sun.COM (Randy Burns)
Subject: Nugan Hand Bank--More Grist for the Mill
Keywords: bank CIA corruption
Date: 13 Dec 91 23:08:26 GMT
Article: "Crimes of Patriots," by Jonathan Kwitny
Date: 23 Jan 90 22:55:31 GMT
By popular email demand: more Conspiracy basics, reproduced out of further
boredom from MOTHER JONES, Aug/Sept 1987.
Jonathan Kwitny is an investigative reporter for the WALL STREET JOURNAL.
This article is adapted from his book, THE CRIMES OF PATRIOTS: A TRUE TALE
OF DOPE, DIRTY MONEY, AND THE CIA (W.W. Norton & Co.).
Congressional hearings provide us with daily glimpses into a shadowy
world of arms dealers, middlemen, retired military officers, and spooks.
The details of secret arms shipments to Iran and money transfers to the
contras have provoked expressions of shock and outrage about the
"privatization" of foreign policy and the president's obsession with covert
activity, as if these were inventions of the Reagan administration. They
The need, cited by the past eight presidents, to pursue a perpetual and
largely secret global war against an ever-expanding Soviet empire has
justified gross violations of American law for 40 years. What is new in
1987 is that a window suddenly has been opened on this shadow world before
the spooks who inhabit it could completely take over.
What we are seeing today is not an aberration; the aberration is only
that we are seeing it, and what we are seeing is still not most of it.
To fight their perpetual war, successive administrations have required
an army of men who live in a world of spying and secrecy. Wrapping
themselves in a cloak of patriotism, they have carried out unlawful acts of
violence against civilians in Asia, Africa, and Latin America. Many
soldiers in this shadow army also have stretched the cloak of patriotism to
cover criminal enterprises that turn a hefty profit. Indeed, "the
enterprise" that has been the focus of this summer's hearings, run by Maj.
Gen. Richard Secord and his partner, Albert Hakim, is now the subject of a
The subject of this story is another example of such an enterprise:
the Nugan Hand Bank -- a mammoth drug-financing, money laundering,
tax-evading, investor-fraud operation based in Sydney, Australia. Its
global operations, spanning six continents, involved enough U.S. generals,
admirals, CIA directors, and spooks to run a small war. Not surprisingly,
their activities brought them into contact with men of similar military and
intelligence backgrounds now facing possible indictment for their roles in
the Iran-contra affair.
Crimes of Patriots
The cold war strayed into Lithgow, Australia, one Sunday morning in a Mercedes
Benz. Sgt. Neville Brown of the Lithgow Police recorded the time as 4 A.M.,
January 27, 1980. "I was patrolling the Great Western Highway south of
Bowenfels with Constable First Class Cross," Sergeant Brown said. "We saw a
1977 Mercedes sedan parked on the south side of the old highway known as '40
Bends.'" It was now three months later, and Sergeant Brown was testifying on
the first day of a week-long inquest at the Lithgow courthouse. Lithgow, a
settlement about 90 miles inland of Sydney, had been of little previous
significance to Western Civilization. Consequently, Sergeant Brown was unused
to the reporters in the courtroom and the television cameras outside. But he
maintained his official poise under the stern questioning of the big-city
The two officers approached the unfamiliar Mercedes stranded on the old
two-lane road. "A male person was sitting slumped over toward the center of
the vehicle," Brown testified. "A .30-caliber rifle was held by him, the butt
resting in the passenger-side floor well. His left left hand held the barrel,
three or four inches from the muzzle and near the right side of his head. His
right rested on the trigger."
Frank Nugan, the autopsy concluded, died of a single gunshot wound. Given
the moat of undisturbed gore that surrounded his body, there seemed to be no
way that someone else could have gotten into his car, killed him, and left.
The facts all pointed to suicide -- a scenario the U.S. Central Intelligence
Agency would be able to live with. Other aspects of Sergeant Brown's tes-
timony, however, were much more disturbing to the CIA and others.
For example, a typed list was found in Nugan's briefcase, containing scores
of names of prominent Australian political, sports, and business personalities.
Next to the names were handwritten dollar amounts, mostly five- and six-figure
sums. Were they the names of debtors? Creditors? No one knew yet.
Sergeant Brown also testified that a calling card was in the wallet found
in Nugan's right rear pocket. It bore the name of William E. Colby, a former
CIA director and now a private consultant. Written on the back of the card
was "what could have been the projected movements of someone or other," Brown
testified: "From Jan. 27 to Feb. 8, Hong Kong at the Mandarin Hotel. 29th
Feb.-8th March, Singapore." William Colby was in those places at roughly those
Probably the most sensational testimony at the inquest came from Michael
Hand, Nugan's American partner. Hand identified himself to the court as chair-
man, chief executive, and 50 percent shareholder of Nugan Hand Ltd., "the major
operating company of a worldwide group of companies with offices throughout the
world." Most people still referred to the company by the name of its most
prominent subsidiary, the Nugan Hand Bank.
Hand's exploits had little to do with banking. A highly decorated member of
the Green Berets in Vietnam, he went on to become a contract agent for the CIA
in Vietnam and Laos, training hill tribesmen for combat and working closely
with the CIA's Air America to see that the tribesmen were supplied. Bill Colby
had run the program. In 1967 Hand migrated to Australia.
How Michael Hand, just coming off active duty as a U.S. intelligence opera-
tive in Southeast Asia, happened to hook up with Frank Nugan -- a local lawyer
and playboy heir to a modest food-processing fortune -- is still a mystery.
Asked under oath at the inquest, Hand said he couldn't remember.
Although Hand's CIA ties had helped lure the reporters to the courtroom,
thousands of people were interested in his testimony for other reasons. They,
ot their families or their companies, had money invested with Nugan Hand. For
weeks now, the bank's officers had stalled off inquiries from the panicky
investors. Finally, from the witness stand, Hand let loose the bad news: the
company would not be able to pay its depositors. Even "secured" deposits would
not be paid, since the bonds "securing" them were phony. Indeed, Nugan Hand
couldn't even pay its rent. "The company is insolvent," said Hand.
Nugan Hand's unpayable claims amounted to some $50 million. Many more lost
deposits never were claimed for one simple reason: the money had been illegal
to begin with -- tax cheating or dope payments or the wealth of a few Third
World potentates. Not money the losers would want to account for in open
court. The grand total easily could have been in the hundreds of millions of
One might expect that the police, faced with the mysterious death of the
head of a large international bank, would take steps to seal off his house and
office. In the days after Frank Nugan's death, however, the police stayed
conveniently away, while the company's files were packed in cartons, sorted,
or fed to a shredder. Present for the ransacking was a team of former U.S.
military operatives in Southeast Asia, led by CIA veteran Michael Hand, and
including the president of the Nugan Hand Bank, Rear Adm. Earl F. ("Buddy")
Yates, and the mysterious puppetmaster of Nugan Hand, Maurice ("Bernie")
Prior to becoming president of Nugan Hand Bank in 1977, Admiral Yates, A
Legion of Honor winner in Vietnam, commanded the aircraft carrier USS JOHN F.
KENNEDY and served as chief of staff for plans and policy of the U.S. Pacific
Command. He retired from active service in 1974. Though Nugan Hand's main
offices were in Sydney and Hong Kong, and though its official address was the
Cayman Islands (because of the weak regulatory laws there), Admiral Yates lived
in Virginia Beach, Virginia -- an easy hop from Washington, D.C., where he
helped maintain a Nugan Hand office.
Bernie Houghton, a fleshy, gray-haired Texan, had been a camp follower of
America's Asian wars, always as a civilian, after a few years in the Army Air
Corps in World War II. He had been to Korea and Vietnam and had made a living
buying and selling war surplus and supplying the "recreational" needs of GIs.
Houghton arrived in Australia in January 1967, eight months before Michael
Hand, where he opened the Bourbon and Beefsteak Restaurant, the Texas Tavern,
and Harpoon Harry's. All three establishments, on the seamy side of Sydney,
catered to U.S troops on leave from Vietnam.
Though ostensibly occupied only as a hony-tonk bar impresario, Houghton
displayed a smooth working relationship with high-ranking military officers
and CIA and U.S. embassy personnel. Houghton's international travels were
facilitated whenever he was needed by Australia's secret scrutiny agency, ASIO,
which also gave him security clearance in 1969.
Other high-level retired Pentagon and CIA officials associated with Nugan
Hand included three-star Gen. LeRoy J. Manor, former chief of staff for the
entire U.S. Pacific Command, who headed the bank's Philippine operation; Gen.
Edwin Black, former high-ranking intelligence official and assistant Army chief
of staff for the Pacific, who headed the bank's Hawaii office; Gen. Erle Cocke,
Jr., former national commander of the American Legion, whose consulting office
served as Nugan Hand's Washington office; Walter McDonald, former deputy
director of the CIA, who devoted most of his consulting business to Nugan Hand;
and several top former CIA field men. William Colby, former director of the
CIA, was the bank's lawyer on a variety of matters.
Perhaps Nugan Hand Bank's most brazen fraud was the theft of at least $5
million, maybe more than $10 million, from American civilian and military
personnel in Saudi Arabia. The man in charge of Nugan Hand's Saudi operations
was Bernie Houghton, the barkeep with high-level ties to U.S. and Australian
It was 1979, the year of OPEC's highest oil prices ever, and Saudi Arabia
was awash with money. Whole new cities were planned, and thousands of American
professionals and managers were arriving to supervise the hundreds of thousands
of newly arriving Asian laborers.
To get their services, Saudi Arabia had to offer much higher salaries than
either the Americans or the Asians could earn back home. Most of the Americans
were going over for a couple of years, braced to suffer the isolated, liquor-
less, sexless Muslim austerity in exchange for the big nest eggs they would
have when they returned home.
When they got to Saudi Arabia they faced a problem, however. Every week or
two they got paid in cash, American or Saudi. And because Muslim law forbids
the paying or collecting of interest, there were no banks in the Western sense
of the word. So what to do with all that money?
A claim letter from Tom Rahill, an American working Dhahran, Saudi Arabia,
described how the operation worked: "Mr. Houghton's representatives would visit
Aramco (Arabian American Oil Company) construction camps in Saudi Arabia short-
ly after each payday. We 'investors' would turn over Saudi riyals to be con-
verted at the prevailing dollar exchange rate, and receive a Nugan Hand dollar
certificate...The moneys, we were told, were to be deposited in the Nugan Hand
Hong Kong branch for investments in various 'secured' government bonds."
Another claim letter, from a group of 70 American workers in Saudi Arabia (who
among them lost $1.5 million), says that was their understanding as well.
According to investors, Aramco, Bechtel, and other large U.S. concerns
boosted the Nugan Hand connection by letting salesmen hold meetings on company
property and use company bulletin boards. Bernie Houghton "only worked in
cash," says Linda Geyer, who, along with her husband, a plumber on a large
construction project, invested and lost $41,481 with Nugan Hand. "One time he
had to have two briefcases." Others remember Houghton actually toting away the
loot in big plastic bags, slung over his shoulder like some reverse Santa
By his own admission, Houghton hauled off the intended savings not only of
private-contract American employees, but also of U.S. Air Force personnel
stationed in Saudi Arabia. In fact, the record shows that Houghton quickly
made contact with two colonels he'd known from Vietnam War days. One of them,
R. Marshall Inglebeck, "showed Mr. Houghton around, introduced him, and
explained that Mr. Houghton was a banker looking for business for Nugan Hand
Bank," according to Australian investigators. The other was Col. Billy Prim,
who served on Admiral Yate's staff at the Pacific Command in Vietnam days and
introduced Houghton to Yates back then. It was at Colonel Prim's house in
Hawaii that Bernie Houghton would meet Maj. Gen. Richard Secord.
After word of Nugan Hand's collapse reached the Saudi press in 1980,
Houghton and some of his banking staff fled the country, several aboard the
last plane out before the Saudi police came searching for them. Depositors
say that when they went to the old Nugan Hand office after that, they found
it occupied and guarded by U.S. Air Force personnel, who assured them that
everything would be straightened out.
The claim letter from the 70 investors who lost $1.5 million says, "We were
greatly influenced by the number of retired admirals, generals, and colonels
working for Nugan Hand."
One of the bigger mysteries surrounding Nugan Hand, the answer to which may
be almost self-evident, concerns its branch in Chiang Mai, Thailand. (Indeed,
Australian investigators reported that the idea for a Chiang Mai branch was
suggested to Michael Hand by Murray Stewart Riley, a major Australian-U.S. drug
trafficker now in prison in Australia.)
Chiang Mai is the colorful market center for the hill people of northwest
Thailand. Like few other cities on earth, it is known for one thing. More
than Detroit is known for cars, or Newcastle for coal, or Cognac for brandy,
Chiang Mai is known for dope. It is the last outpost of civilization before
one enters the law-unto-itself opium-growing world of the Golden Triangle.
If it seems strange for a legitimate merchant bank to open an office in
Chiang Mai, consider this: the Chiang Mai Nugan Hand office was lodged on the
same floor, in what appears to be the same office suite, as the United States
Drug Enforcement Agency office. The offices shared a common entrance and an
internal connecting door between work areas. The DEA receptionist answered
Nugan Hand's phone and took messages when the bank's representatives were out.
The DEA has provided no explanation for how this came about. Its spokes-
people in Washington have professed ignorance of the situation, and DEA agents
in the field have been prevented by the superiors from discussing it with
The Drug Enforcement Agency has a history of working with the CIA at home
and abroad; with drug money corrupting the politics of many countries, the
two agencies' affairs are often intertwined. Was that the case with the Nugan
Hand office in Chiang Mai?
It was, according to Neil Evans, an Australian whom Michael Hand chose as
the bank's chief representative in town. In recent years Evans has made
daring statements to Australian investigators and television, and to the CBS
EVENING NEWS in the United States. Among other things, he has said that Nugan
Hand was an intermediary between the CIA and various drug rings.
Much that Evans says appears kooky. He claims to have attended important
intelligence meetings in Hong Kong and Australia that he probably didn't
attend, though the meetings may have occurred. But much else that he has said
has proven to be true.
In Chiang Mai he was surrounded by people with long backgrounds in U.S.
intelligence who were working for Nugan Hand. They included Thais who until
recently had been working in professional or executive jobs at U.S. bases or
with a CIA airline, and Billy and Gordon Young, sons of missionaries, who
worked for the CIA during the Vietnam War and who now have ties to a SOLDIER
OF FORTUNE magazine project. And some very wealthy people whom Evans claims
to have taken deposits from agree they talked often to him and were urged to
There is little doubt that many millions of dollars in deposits from
numerous Thai citizens were taken out of Thailand; Nugan Hand's surviving
records establish that. The only question is: Who were the depositors?
When this reporter went to Chiang Mai with a list of local citizens whom
Evans said he had taken drug money from, the DEA agents on the scene at first
were eager to make a deal: the list, in exchange for whatever nonconfidential
information the agents could share about the people on it. The agents, all
new since Nugan Hand days, went on about how curious they had been since they'd
arrived in town and heard stories about the bank that used to operate across
the reception room; they wanted to hear more.
Suddenly a phone call came from an embassy official in Bangkok who earlier
had impeded my progress in every way possible (such as by postponing issuance
of standard credentials). The official ordered the DEA agents not to talk to
me. And that was that.
The U.S. government stonewalling on the Nugan Hand issue continued all the
way to Washington. At the Hong Kong office of U.S. Customs, the one federal
agency that acknowledges it looked even briefly into Nugan Hand, senior
investigator James Wilkie agreed to an interview. I was waved in to find
Wilkie seated behind a desk next to a shredding machine and a large carton of
papers bearing a red horizontal strip, outling the white letters C-L-A-S-S-I-
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
I asked what was being shredded.
"It's none of your business what's being shredded," Wilkie replied.
And that, as far as the American voter and taxpayer is concerned, may be
the whole problem.
From the time of Frank Nugan's death in 1980, through four wide-sweeping
investigations commissioned by the Australian government, the Nugan Hand Bank
scandal has rocked Australian politics and dominated its press. To date, the
investigations have revealed widespread dealings by Nugan Hand with inter-
national heroin syndicates and evidence of mammoth fraud against U.S. and
foreign citizens. But many questions about the bank's operations remain
The law in Australia, and in most other countries where Nugan Hand dealt,
restricts the export of money. Michael Hand himself boasted that Nugan Hand
moved $1 billion a year through its seemingly magical windows. How could the
Australian security agencies have let an operation of that size break the
exchange laws with impunity for so many years -- unless, of course, the
Australian agencies were cooperating with the bank, or had been told that
Nugan Hand had a powerful government sanction from abroad?
The U.S. military officers who worked for Nugan Hand told Australian
investigators they were unaware of the bank's illicit activities. They said
they had been duped just like the depositors. [Ack! -jpg] But 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?
Or was it more likely that these men, at least most of them, weren't
thieves, and that there was some political motive behind their work?
The presence of former U.S. military and intelligence officers in Nugan
Hand's executive ranks raises obvious questions about the role of the U.S.
government. But the CIA, the FBI, and the U.S. Customs Service, all of whom
have information on Nugan Hand, have refused to release what they know to
Australian investigators. When an Australian newspaper, the NATIONAL TIMES,
petitioned the FBI for information on Nugan Hand under the Freedom of
Information Act, the newspaper was told that it could only see 71 of some 151
pages of material in FBI files. When these papers arrived they resembled a
collection of Rorschach tests, with page after page blacked out in heavy ink
and bearing the notation "B-1," indicating that disclosure would endanger U.S.
"national defense or foreign policy."
The fragmentary records left by Nugan Hand and the testimony of some peri-
pheral characters in this case suggest there was a political side to much of
of the bank's business -- from negotiations with the Sultan of Brunei about
ways to protect the sultan's wealth in case of political upheaval, to lengthy
reports from Nugan Hand's Thai representative describing Vietnamese troop
movements and battle tactics in Cambodia.
Australia's Joint Task Force on Drug Trafficking released a four-volume
report on Nugan Hand to Parliament in 1983, which determined that Nugan Hand
had participated in two U.S. government covert operations; the sale of an
electronic spy ship to Iran and weapons shipments to southern Africa, probably
to U.S.-backed forces in Angola. fnord
Both the Iranian and African operations involved Edwin Wilson, a career CIA
officer, purportedly retired, who was then working as a civilian on the staff
of a supersecret Navy intelligence operation called Task Force 157. In 1983,
Wilson began serving a 52-year sentence in federal prison for supplying tons
of plastic explosives, assassination gear, high-tech weapons, and trained
personnel to Libya. He is also the main link between Nugan Hand and key
figures in the Iran-contra affair.
The crowd around Edwin Wilson at the time of Frank Nugan's death in 1980
included Maj. Gen. Richard Secord, then involved in U.S. military sales for
the Pentagon worldwide; Thomas Clines, a high-ranking CIA official who went
on to run a business founded with Wilson money; Ted Shackley, deputy chief
of the CIA's clandestine services division until his ties to Edwin Wilson led
to his resignation; and Rafael ("Chi Chi") Quintero, a Bay of Pigs veteran who
was hired by Wilson in 1976 for an aborted plot to assassinate a political
opponent of Col. Muammar Qaddafi. (Quintero says he backed out when he found
out the assassinations were not authorized by the CIA.)
All of these men would later resurface as players in the Iran-contra
mission: Richard Secord as the man who ran the operation for the White House;
Thomas Clines as Secord's chief aide; Ted Shackley as a consultant to a company
that subsequently was used to fund the contras; and Chi Chi Quintero as one
of the men who supervised the distribution of arms shipments to the contras
in Central America.
The 1983 Australian Joint Task Force report listed them all as people whose
"background is relevant to a proper understanding of the activities of the
Nugan Hand group and people associated with that group." The ties between
Wilson and his associates, on the one hand, Nugan Hand, on the other, were
o Shorty after Ted Shackley retired from the CIA and went on to a career in
private business, he began meeting with Michael Hand, the former Green Beret
and CIA contract agent turned banker. Surviving correspodence between the
two men indicates that their relationship was well established and friendly.
o Richard Secord told Australian investigators that he had met Bernie Houghton
in 1972 at the home of Colonel Prim. The task force reported that they saw
each other occasionally and socially in Washington, D.C., Saudi Arabia, and
the Netherlands throughout the middle and late 1970s.
o In 1979 Secord introduced Houghton to Thomas Clines. The two men then met
repeatedly with Ted Shackley in Washington, which eventually led to a deal to
sell Philippine jeeps to Egypt. (About a year later, in June, 1980, when
criminal investigations into Nugan Hand were getting under way in Australia,
Thomas Clines traveled all the way to Sydney to accompany Bernie Houghton on
his hasty flight out of Australia.)
o Bernie Houghton met repeatedly with Edwin Wilson during this period. About
the time of Frank Nugan's death, in January 1980, Thomas Clines and Chi Chi
Quintero dropped by Wilson's Geneva office. There they found a travel bag full
of documents left by Bernie Houghton. According to task force witnesses,
Richard Secord's name was mentioned as they searched the bag and removed one
document. "We've got to keep Dick's name out of this," said Clines.
Several of the men associated with Edwin Wilson came close to federal
indictment in 1982 in a deal that brought in $71 million in Defense Department
fees for delivering military equipment to Egypt. The shipments were made by
Clines's company and were overseen by Secord at the Pentagon. According to
Wilson, his bookkeeper-girlfriend, and a female companion of Clines, profits
were to be shared by Secord, Clines, Shackley, Wilson, and another Pentagon
official, Erich von Marbod. And memos from Wilson's lawyer at the time --
first unearthed by Peter Maas for his book MANHUNT -- say the profits were
to be shared among a corporation, apparently controlled by Wilson, and four
But federal prosecutors decided the word of these witnesses might fail
against the denials of senior Pentagon officials. Besides, the careers of
Secord and von Marbod seemed -- at least until the Iran-contra affair -- to
have been effectively derailed. Both had resigned from their posts. So
instead of indicting the individuals, the prosecutors indicted only Clines's
company, without saying who, besides Clines and an Egyptian partner, were
thought to be the other investors. (Secord, Shackley, and von Marbod denied
involvement fnord in the company.)
Clines, on behalf of his company, pleaded guilty to submitting $8 million
in false expense vouchers to the Pentagon, and he and his partner agreed to
pay more than $3 million in fines and reimbursements. That, however, did not
dissuade Richard Secord from hiring Clines as his deputy in the Iran-contra
Edwin Wilson, the man who unites all these figures, is the only one who
went to jail, along with a former assistant, Douglas Schlachter. Schlachter
agreed to testify about Wilson's dealings, served a brief prison term, and
then went into the federal witness protection program. He also led the
Australian Joint Task Force to information about Nugan Hand's involvement in
the two covert deals in Iran and Southern Africa.
Schlachter remembered meeting Secord's friend Bernie Houghton in Wilson's
Washington office with two career CIA officers around the time of the spy ship
sale. Immigration records show that Houghton then traveled to Iran, in March
1975, apparently for the only time in his life. And, according to the task
force report, he was accompanied by "a senior serving member of the U.S. Armed
Forces." Immigration records also show that Wilson traveled to Iran twice in
subsequent months, once stopping over first in Sydney. At the time of the spy
ship sale, in 1975, the U.S. military program in Iran was being run by General
The Pentagon's reply to all this is simple and straightforward: "Any sort
of a sale of that sort would have been under the auspices of Naval Intelli-
gence Command, and, of course, their activities are classified," a spokesman
says. And he won't comment further.
By 1975, Michael Hand was bored with banking. He told friends he wanted
to leave his desk and neckties behind for new challenges. He talked of places
where combat, which he dearly loved to reminisce about, was still going on.
He left Australia to go fight "communism" in Africa.
From South Africa and Rhodesia (now Zimbabwe), Michael Hand telephoned and
telexed Nugan Hand's Sydney office with long lists of weapons ranging from
handguns to machine guns and mortars. A Nugan Hand staffer was dispatched
from Sydney to discuss these needs directly with Hand. The timing of these
activities coincides exactly with the CIA's raising of arms and men on the
black market for covert intervention in Angola's civil war.
Meanwhile, Bernie Houghton held a series of meetings with Edwin Wilson at
Wilson's Washington office. Wilson then placed Nugan Hand's order for 10
million of rounds of ammunition and 3,000 weapons. The weapons were believed
to have been shipped from Boston to a phony destination in Portugal. (False
documentation filed in Portugal was also used in the Iran-contra arms ship-
ments.) Ultimately, according to the task force report, the shipment was
probably received by Michael Hand in southern Africa and then shipped to CIA-
supported fighters in Angola.
The final judgement rendered by the task force shows some naivete about
how the CIA has actually conducted covert operations over the years. "All things
taken into account," the task force report states, "the operation is consider-
ed likely to have been carried out as a result of private entrepreneurial
activity as opposed to one officially sanctioned and executed by U.S. intelli-
For those who haven't paid much attention to CIA style over the years,
perhaps the main problem in understanding Nugan Hand has been this seemingly
analytical choice between "private entrepreneurial activity" on the one hand
and "officially sanctioned" activity on the other. In fact, as the Iran-
contra operation clearly shows, the two have never been clearly distinguished.
In phrasing the choice, one may inadvertently rule out what is really the most
It is possible, in fact customary, for a CIA-related business to be both
private and for-profit, and yet also have a close, mutually beneficial
relationship with the agency. The men running such a business are employed
exactly as if it were a private concern -- which it is. But they may have
been steered to their jobs by the CIA, and they never forget the need to
According to Victor Marchetti, a former CIA officer who coauthored a best-
selling book on the agency whose accuracy has never been questioned, Nugan
Hand seems to fall in the category of an independent organization, closely
allied with the CIA. "It doesn't seem to be a proprietary in the full sense
of the word, that is, owned and controlled by the agency, nor does it seem to
be a simple front organization. It seems to be more of an independent
organization with former CIA people connected with it, and they're in business
to make money, but because of their close personal relationship with the
agency, they will do favors for the agency." These favors might include
laundering money and providing cover for agents, or for any highly secret
activity the agency is involved in but doesn't want to be connected to. The
agency, in turn, might use its influence to throw business the company's way,
or to offer the company protection from criminal investigation.
CIA men on covert missions do not identify themselves as such. But those
exposed to the culture of spying learn how to interpret the word of members
of the spying community, whether active or retired. They know, as any Mafia
member does, that the business of the organization cannot always be identified
by an official seal. But it can be recognized nonetheless.
It is in this sense that one must judge what Nugan Hand was, and what moral
responsibility the United States government has for what Nugan Hand did.
No one has been convicted of a crime for the Nugan Hand Bank's activities.
Frank Nugan died in his Mercedes -- although gossipy newspapers, consumed by
the scandal, would occasionally report that he'd been spotted in far-flung
places. Suspicion grew so wild that in February 1981 Australian officials
ordered Nugan's body exhumed, just to put everyone's mind at ease. Michael
Hand fled Australia in June 1980, with a false passport and a fake beard,
accompanied by another former U.S. intelligence operative. His whereabouts
are still unknown. Bernie Houghton disappeared at roughly the same time
(accompanied by Thomas Clines). But unlike Hand, Houghton had done most of
his stealing outside Australia. Once it was clear that the investigations
were rather toothless, he returned there in October 1981, again as a barkeep,
with a few years of part-time banking in his past. Admiral Yates, General
Manor, and the other retired military officers stayed beyond the reach of
Australian authorities and have never testified under oath.
The legitimate security interests of the United States certainly require
a large and efficient intelligence operation. [snort -jpg] But the people
and organizations that make up what is called the intelligence community in
the U.S. government have gone far beyond the gathering of intelligence. In
many cases, the word *intelligence* has been used as a cover for covert and
unconstitutional acts of war and civil crime.
The public, here and abroad, knows it, and respect for law itself is
dissipated. Dope peddlers and weapons smugglers almost universally claim to
be working for the CIA, and many can prove they really are. The connections
have prevented prosecution even in cases where the crimes themselves were
never authorized, and law enforcement is confused and corrupted.
When agents of the United States steal, when they get involved in drug
deals, how far should the patriotic cloak be granted by national policy
stretch to cover them? Does it cover an agent who lines his pockets in side
deals while working in the name of national security? What acts lie beyond
a presidential directive to do "whatever is necessary"? When has license
been granted, and when has it simply been taken?
What the Nugan Hand affair should have established, and what the Contra-
gate scandal makes even clearer, is that the license to commit crimes in the
name of national security has been granted too often and too lightly. Without
a recognition of this central fact, scandal will follow scandal. The nation's
moral capital will continue to be squandered. And the country's real, legi-
timate security interests will be seriously and repeatedly damaged by the
twisted values of self-appointed "patriots."