The Secret Team, Part VI: Who Did in the Prime Minister?

Down Under with The Secret Team and a Bank

By John Bacher | 1988-10-01 12:00:00

This year we have reviewed the acts of a small, powerful group of right wing Americans with ties to the CIA that were allowed by one U.S. administration after another to destabilize governments around the world that they considered unfriendly to the United States. In this group, "the secret team," two men have repeatedly been named as key participants

Thomas Olines and Theodore Shackley, who rose to become second-in-command, directing the CIA's worldwide covert operations from its Virginia headquarters. This time around, we'll review the pivotal part they played in the "constitutional coup d'etat" that overthrew the government of Australia's Labor Prime Minister, Gough Whitlam. The story involves an Australian-based international bank that failed -the Nugan Hand Bank. Only after its collapse were key facts exposed about its complicated financial and drug-peddling activities.(For more on the mystery surrounding this outfit read Jonathan Kwitny's, The Crimes of Patriots N.Y.: Norton, 1987.)

Nugan Hand Bank: A Theft Machine

The Nugan Hand Bank was founded in the early 1970s by Frank Nugan, an Australian who had studied law for a while in Toronto, and Michael Hand, an American who had formerly fought with the Green Berets in Vietnam and then had worked with the CIA airline, Air America.

In 1973, the Nugan Hand Bank quickly expanded from a $1 million capitalization to $1 billion. It never did any banking, Jonathan Kwitny says, but it offered four main services - a way to flout laws and move money overseas; tax avoidance schemes; extraordinarily high interest; and international trade connections. Its staff included almost no real bankers, but top military and intelligence officers, such as former CIA director William Colby, who was one of the bank's attorneys. Soon it had offices in 22 countries, mostly Asian. As James Nathan pointed Out in a Foreign Policy article, "Dateline Australia: America's Foreign Watergate," one of these branches was in Chiang Mai, in northern Thailand, part of the Golden Triangle area where Thai-land, Burma and Laos join. Chiang Mai is Opium City of the World. Kwitny discovered that the Nugan Hand office in Chiang Mai had been lodged in what appears to be the same office suite as the United States Drug Enforcement Administration office. The DEA receptionist answered Nugan Hand's telephone when the bank's representatives were out.

The director of the bank's Chiang Mai office admitted on Australian television that they had handled $2.6 million in six months. This money came from drug deals in the triangle. The bank, he stated, was a laundry for Meo tribesman and other opium growers. In addition to drugs, the Nugan Hand Bank was involved in various arms deals in Indonesia, Thailand, Malaysia, Brazil and the whole Rhodesian government of Ian Smith.

The Bank was also involved in outright fraud. Its Saudi Arabian branch fleeced over $10 million from Americans working there, says Penny Lernoux in In Banks We Trust.

Getting Whitlam

The Nugan Hand Bank was well placed to destabilize the government of Labor Party Prime Minister Gough Whitlam. His government had conducted such outrages (to American minds) as pulling troops out of Vietnam; ending conscription; supporting the Indian Ocean Zone of Peace proposals; attacking the U.S. bombing of North Vietnam; and interfering with Australian intelligence efforts to aid Indonesia's invasion of East Timor and the overthrow of Salvador Allende in Chile.

The Bank helped finance a clever variety of bugging and forgery operations. Nugan Hand transferred $24 million to the Australian Liberal Party through one of its many associated companies. It tried to blackmail a cabinet minister investigating organized crime by opening up a Swiss bank account in his name and threatening to leak the information. Twice during 1975 the Whitlam government was damaged through sensational scandals broken open by mysterious leaks to the press, forcing resignations of Cabinet ministers. As Kwitny notes, one of the scandals, involving negotiations for an Arab loan, was based on documents later exposed as forgeries. This "loan affair" was seized upon by the opposition Liberal Party as the excuse to have the elected Senate hold up passage of the government's budget in order to provoke an election through financial crises. Prime Minister Whitlam charged in a public statement that the CIA was interfering with the domestic politics of his country.

Like Canadians, Australians have a Governor General. Normally, this is a non-political role. However, the Australian Governor General, John Kerr (who had long ties to such CIA front organizations as the Asia Foundation) saw a chance at this time to dismiss the Prime Minister, and did so. Three days before this "constitutional coup," an ultimatum had been delivered to the Washington representative of the Australian Security Intelligence Organization by Secret Team leader Theodore Shackley. The authenticity of this message, sent on November 8, 1975, was later confirmed by the Australian parliament. It warned Australian intelligence that if the problems posed by Whitlam's government could not be resolved they did not see how "our mutually beneficial relationships are going to continue."

Some Mysteries Remain Unanswered

In 1980, five years after the ouster of Whitlam's government, the Nugan Hank Bank collapsed, $50 million in debt. Frank Nugan was found shot dead in his car, and Michael Hand disappeared without a trace. Investigations by an Australian Royal Commission, as Lernoux documents, later revealed that the bank had regularly transferred funds from Sydney to Southeast Asia for payment of heroin shipments to Australia, which were sent in containers to the U.S. West Coast. Thousands of smaller investors in the United States and Australia lost their life savings as a result of the bank's collapse, although the Generals and intelligence agents associated with the bank escaped unharmed.

Many mysteries remain unanswered. For example, although Frank Nugan's body was exhumed for investigation, it is still uncertain whether he committed suicide or was murdered. It has not been proven that any U.S. intelligence agency communicated with former Australian Governor General John Kerr just before his dismissal of Gough Whitlam. While the fact has been well established that Michael Hand and Theodore Shackley had contacts before Shackley retired from the CIA, the nature of those contacts is a secret. Finally, whether Hand has been in contact with the CIA since going missing, that too is a secret.

In fact, the CIA has denied everything. It issued this statement, for what it is worth: "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." And Nixon wasn't a crook.

John Bacher is a historian living in Toronto.