Crimes of Patriots by Jonathan Kwitny
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 weren't.
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 criminal investigation.
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 lawyers.
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
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 testimony, 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 times.
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
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
operative 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
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, or 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 dollars.
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") Houghton.
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 intelligence.
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, liquorless, 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 shortly after each payday. We
'investors' would turn over Saudi riyals to be converted 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 Claus.
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
spokespeople in Washington have professed ignorance of the situation,
and DEA agents in the field have been prevented by the superiors from
discussing it with reporters.
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
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 make deposits.
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
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, outlining the
white letters C-L-A-S-S-I-F-I-E-D.
Wilkie was calmly feeding the documents into the shredder as he spoke,
taking each batch of shreddings out and putting them through a second
"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 international heroin syndicates and evidence of mammoth fraud
against U.S. and foreign citizens. But many questions about the bank's
operations remain unanswered.
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,
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
peripheral characters in this case suggest there was a political side to
much 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.
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 many:
* Shortly 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
correspondence between the two men indicates that their relationship
was well established and friendly.
* 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.
* 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
* 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 U.S. citizens.
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 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 operation.
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 Secord.
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
Intelligence 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
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 shipments.) 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 judgment 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 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."
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 likely explanation.
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 exchange favors.
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
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
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
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, legitimate security interests will be seriously and
repeatedly damaged by the twisted values of self-appointed "patriots."