A Secret Country

by John Pilger

  A senior Minister in the Whitlam Government, Clyde Cameron, reported a visit by Green to his office during which Green threatened that if the Labor Government handed control and ownership of US multi-national subsidiaries to the Australian people ‘we would move in’.41 When I met Green in Washington in 1987 I reminded him of his threat. He said he had been speaking in a ‘half-humorous way’ and that his words had been given ‘the wrong implication’.

  ‘Well, what did you say?’ I asked.

  ‘I said, “Well, you know in the old days, the Americans would probably send in the Marines. We don’t do things like that any more.” Just to be funny, I accompanied it with a laugh.’42

  Another Whitlam Minister, Kep Enderby, who is now a judge, told a similar story about Green. In early 1974 Green addressed the Australian Institute of Directors. The following day Enderby received a call from a member of the Institute ‘in a state of alarm’. He reported that the Ambassador’s speech had amounted almost to ‘an incitement to rise against the Australian Government’ and that Green had gone on to say that Australian business leaders ‘could expect help from the United States’, which would be similar to the help ‘given to South America’. (The CIA-orchestrated overthrow of Allende in Chile had happened only a few months earlier.) Marshall Green, now retired, returned to Australia in February 1985. At a reception at the American Consulate in Sydney, Judge Enderby confronted Green with the allegation of his ‘incitement’. Green laughed and said he could not recall the speech.43

  In April 1974 Labor was re-elected with a slightly reduced majority in the House of Representatives, with the balance held by two independents. Two months later Dr Jim Cairns was elected Deputy Prime Minister by his parliamentary colleagues. Cairns was the leader of Labor’s left wing. He had been a highly effective opponent of the American war in Vietnam and believed in Australia’s total independence from Super Power politics. Whitlam described ‘American terror’ at the thought that Cairns would have to be briefed on Pine Gap and the other ‘joint facilities’; and although Cairns never asked to be briefed, the possibility was always there, in the words of one staff member, ‘like some ulcer that could erupt any day’. For the Americans, the unthinkable was that Cairns might end up running the country.

  The discrediting of Cairns became urgent. ASIO’s leak of its ‘Cairns file’ to the Bulletin magazine in June 1974 was almost certainly timed to coincide with Cairns’s election as Deputy Prime Minister. The headline read: ‘CAIRNS: ASIO’S STARTLING DOSSIER’.44 But abuse of a popular man with an unblemished record is too crude. A few weeks later ASIO tried again, with a second file passed to journalist Peter Samuels, who frequently publishes CIA and other intelligence ‘leaks’. Under the headline, ‘The Pathway to Terrorism’, Samuels wrote that ASIO’s prime concern about Cairns was the ‘terrorist’ potential of his part in the anti-war movement.45

  In the wake of the Middle East War the cost of energy rose as never before and the Australian economy fell into extreme difficulties. By the end of 1974 inflation and the money supply were rising at an alarming rate. The Whitlam Government, however, remained determined to honour one of its main election promises and to ‘buy back the farm’ – that is, to reclaim national ownership of minerals, oil refineries, the motor car and other industries which had been sold to mostly American transnational interests. In the 1970s a source of funds for a number of Western countries was the Arab world, which then had more petro-dollars than it knew what to do with, as well as potential investors wanting to diversify their new-found wealth. Whitlam instructed two of his Ministers to scour the Middle East for what would have been the largest loan in history: $A4 billion (later to be reduced to $A2 billion).

  Enter Tirath Khemlani, a Pakistani ‘commodities merchant’ who, with others, succeeded in preparing a government for destruction.

  When Khemlani met the Minister for Minerals and Energy, Rex Connor, in November 1974, he was working for the London brokers, Dalamal & Sons. Connor asked the London bullion firm, Johnson Matthey, for an opinion of Dalamal & Sons; he received an effusive reference and so saw no reason to doubt Khemlani. But there was every reason. He was a bankrupt; he had spent most of his career as a carpetbagger without an office or a telex machine; he consorted with criminals and was an arms dealer.

  Khemlani was a con man, who had been sent to approach Connor by a Hong Kong arms firm closely associated with Commerce International, a Brussels-based armaments company with widespread links with the CIA. Commerce International was set up as a front for Task Force 157, an intelligence-gathering arm of the US navy which had evolved into a highly secretive CIA covert action or ‘dirty tricks’ organisation.46 National Times journalist Marian Wilkinson, who had established Commerce International’s role as a CIA arms dealer, was told that if she continued her enquiries into the company she could end up having her head blown off.47

  In March 1975, Jim Cairns, who was Federal Treasurer as well as Deputy Prime Minister, was introduced to a Melbourne businessman, George Harris, who had close connections in the Melbourne establishment; Sir Robert Menzies, no less, reportedly regarded him ‘as a son’. Harris, a dentist by profession, had a reputation as a property developer. According to Cairns, Harris told him that a $A4 billion loan was available ‘with a once-only brokerage fee of 2.5 per cent’. Harris showed Cairns a letter confirming the offer. The letter had come from the New York office of Commerce International. An intermediary between Cairns and Harris, Leslie Nagy, was also at the meeting. He later made a sworn statement that Cairns had described the terms as ‘unbelievable’ and the letter as a ‘fairy-tale’ and had rejected the deal.48

  However, Cairns had agreed to give Harris two letters which said that the Government was interested in raising a loan, although otherwise he made no commitment. When they left the Minister’s office, according to Nagy, Harris said, ‘Let’s get out of here,’ and produced, to Nagy’s surprise, a letter signed by Cairns, agreeing to the ‘brokerage fee’ of 2.5 per cent. Why and when did Cairns change his mind? Or more to the point: did he change his mind? Did he sign a number of letters without checking them, as Ministers often do? Or was there another explanation? Harris denied setting Cairns up. However, Cairns has steadfastly maintained he never agreed to or put his name to such an outrageous and incriminating letter.

  Two months later Harris was seen with Phillip Lynch, Deputy Leader of the opposition Liberal Party. When Lynch raised the question of the brokerage fee in Parliament, Cairns denied any agreement existed. Within days, a letter with Cairns’s signature was reproduced on the front pages of the nation’s newspapers, and Cairns was forced to resign from the Ministry for ‘misleading Parliament’. Neither Harris nor Khemlani raised a cent of the loan. The effect of their actions was to produce the kind of ‘scandal’ and relentless publicity that consumed the Whitlam Government.

  For those who doubted that the CIA stood in the shadows, a side show offered further evidence. In July 1975 the Australian media reported that the Mercantile Bank and Trust Company, based in the Bahamas, had issued a letter seeking $US4,267,365,000 ‘for and on behalf of the Government of Australia’. The bank did not claim to be acting with the approval of the Australian Government; in Canberra Cabinet Ministers had never heard of it. But the implication was enough to fill newspapers with yet another ‘scandal’. Moreover, the bank no one seemed to have heard of added on a figure of $US267 million as its ‘proposed profit’ from a deal no one had sought.49

  Mercantile Bank and Trust was set up and owned by Colonel Paul Helliwell, who had worked for the CIA’s predecessor, the OSS. Helliwell had been the CIA’s paymaster for its abortive invasion of Cuba in 1961. He built up a network of banks, including the infamous Castle Bank, which collapsed after American tax investigators found it was ‘laundering’ millions of dollars for the Mafia. When US Justice Department officers moved to prosecute, they were warned off by the CIA; laying open the affairs of the bank, it was said, would ‘endanger national security’.50

 
On July 3, 1975 the National Intelligence Daily, a top-secret CIA briefing document for the President, reported that Jim Cairns had been sacked ‘even though some of the evidence had been fabricated’.51 Much later an ASIO officer speculated publicly that ‘some of the documents which helped discredit the Labor Government in its last year in office were forgeries planted by the CIA’.52

  As the loans affair reached its climax in the spring of 1975, a ‘blizzard’ of documents, including copies of telexes, descended upon the Australian media from as far afield as the United States. Whitlam himself received a copy of a message found in an Hawaii hotel room. Handwritten, it was said to be the draft of a telex message sent to Malcolm Fraser, Leader of the Opposition. It gave detail of the ‘chaos’ which Khemlani was being ‘funded’ to cause, in an effort to bring about the ‘capitulation’ of the Government. The message included the instruction that it should be coded before transmission, by calling a Honolulu phone number. Brian Toohey called the number. It was the Hawaiian headquarters of the CIA.53 Was this a forgery and more of the ‘disinformation’ so prevalent then? Quite likely, but it is impossible to know.

  The height of farce was reached when Khemlani himself arrived in Australia weighed under by two bags bulging with more ‘copies of telex messages’ and more ‘incriminating documentation’. He was accompanied by bodyguards provided by the Opposition parties, and all his expenses were paid. He made outrageous claims in the media: Labor Ministers were to receive commissions and ‘kickbacks’ from the loans; documents proving corruption were soon to be made public, and so on. None of his documents added up to or proved anything. Not a penny was paid by anyone to the Government, nor did any member of the Government profit from the affair.

  In 1981 a CIA ‘contract employee’, Joseph Flynn, claimed he had forged some of the loans affair cables and had ‘bugged’ a hotel room where Gough Whitlam was staying. He said he had been paid by one Michael Hand, co-founder of the Nugan Hand Bank.54

  In its short life, the Nugan Hand Bank was associated with serious crime on an international scale and with CIA ‘covert’ activities in Australia and around the world. It ‘laundered’ money and dealt in arms, drugs and blackmail. In so doing, it helped to undermine the political opponents of the United States.

  Michael Hand was a former ‘Green Beret’ in the US Special Forces in Vietnam. He was assigned to Operation Phoenix, whose assassination and terror squads were responsible for the deaths of between 30,000 and 50,000 civilians. According to an American admiral who later became President of the Nugan Hand Bank, Hand was ‘such a strong believer in the Christian Science religion that he did not smoke or even drink coffee [and] had a great love for children’.55

  Hand settled in Sydney in the late 1960s after his discharge from the army. Sydney then was the most popular ‘R & R’ (rest and recreation) centre for American troops serving in Vietnam. One of Hand’s closest friends was Bernie Houghton, a US Naval Intelligence officer who worked closely with the CIA. Houghton ran three night clubs in Sydney popular with GIs – the Texas Tavern, the Bourbon and Beefsteak and Harpoon Harry’s. A large, expansive man, seldom without a bodyguard on either side, Houghton had a network which included John Walker, the CIA Station Chief in Canberra, senior ASIO officers and CIA agent Edwin Wilson, who worked with ‘Task Force 157’ (and who is today serving forty years in an American prison for ‘freelance’ arms dealing with Libya).

  Frank Nugan was a Sydney businessman/spiv whose family ran a fruit-packing business near Griffith in southern New South Wales, a district famous for its marijuana crops and gang murders. Nugan and Hand set up their bank with the dubious claim of paid-up capital of a million dollars, which Nugan said he had acquired by trading in mineral shares. Bernie Houghton became the third partner.

  It was not long before the bank was opening branches around the world, and in exotic places, such as Chiang Mai in Thailand, the centre of the ‘Golden Triangle’ drug trade. The former Nugan Hand manager in Chiang Mai, Neil Evans, later reported that he had seen millions of dollars smuggled through the branch, all of it ‘CIA money’. He said that Michael Hand had told him that ‘he’d been successful in arranging a contract with the CIA whereby the bank was to become its paymaster, for disimbursement of funds anywhere in the world on behalf of the CIA and also for the taking of money on behalf of the CIA’. Evans said he resigned because ‘the CIA are the heaviest people on this earth’.56

  One of Nugan Hand’s distinctions was that its managers had virtually no experience in banking. But they did have considerable expertise in other fields, and were described as ‘of a calibre and number to run a small sized war’.57 They included US Air Force General LeRoy Manor, Chief of Staff of the US Pacific Command and a specialist in counter-insurgency; army General Edwin Black, the Commander of US forces in Thailand; Rear-Admiral Earl Yates, former Chief of Staff for Policy and Plans of the US Pacific Command; and Patry Loomis, a CIA officer who helped Edwin Wilson recruit a team of Green Berets to train Libyans. There were numerous others who, in one guise or another, had worked for and were still working for the CIA. Notable among these was William Colby, who until 1976 had been Director of the CIA and previously had set up the CIA’s Operation Phoenix programme of political assassinations in Vietnam.

  ‘This thing is so big, it’s bigger than you can imagine,’ a former Nugan Hand executive told the Washington investigator, Nancy Grodin. The links between international crime and the intelligence services are, of course, not new. In its assault on Castro’s Cuba, the CIA used Cuban exiles organised by the Mafia. Nugan Hand’s influence extended well beyond a hive of crooks. It was, in intelligence jargon, a ‘conduit’: an influence felt by Australian politicians, trade union officials and journalists, some of whom were unaware of the source of favours and of disinformation.

  Former Nugan Hand principal Karl Schuller provided evidence that the CIA transferred a ‘slush fund’ of $A2,400,000 to the opposition parties in March 1973, four months after Whitlam’s election. Schuller made this admission to South Australian Corporate Affairs investigating officers who were convinced he was telling the truth. Former CIA officer Victor Marchetti confirmed that the CIA had funded both opposition parties.58 Schuller pointed the investigators to documented sources; but none could be found. This was not surprising, as thousands of documents were destroyed following the mysterious ‘suicide’ of Frank Nugan himself.

  At four o’clock in the morning of January 27, 1980, a police patrol car stopped beside a white Mercedes on the roadside near Lithgow, in western New South Wales. The body of Frank Nugan was slumped across the front seat with a bullet hole in the head. In his hands was a rifle he had bought two weeks earlier. The police took no photographs of the body or the car, nor were the gun and its magazine kept for fingerprints. The policeman who made the discovery determined that suicide was the cause of death and the coroner agreed. The business card of William Colby, the former head of the CIA, was found on the body. The Nugan Hand bank collapsed soon afterwards.

  When Federal investigators examined the bank’s offices in Sydney they found most of the company’s books missing. At the time of Nugan’s death 194 companies were banking with Nugan Hand, but no person or companies came forward with claims on the $US50 million owed by the bank. The bank’s principals went into hiding. In response to Freedom of Information Act requests in Washington, the FBI released less than half of a 119-page file on the bank. Most of the pages were blacked out ‘in the interests of national defence or foreign policy’.59

  In 1982 the CIA issued an unprecedented statement prior to a visit to Australia by Vice-President George Bush, who had been CIA Director following Colby’s retirement. ‘The CIA has not engaged in operations against the Australian Government,’ said the statement. ‘[The CIA] has no ties with Nugan Hand . . .’60 This was not the conclusion drawn from an investigation by a special New South Wales police task force and the New South Wales Corporate Affairs Commission. In calling for criminal charges for ‘drug, conspiracy,
perjury and passport offences’, the Commission’s cautious report said that:

  many links were found between individuals connected with [Nugan Hand] and individuals connected in very significant ways with US intelligence organisations, specifically the Central Intelligence Agency and the Office of Naval Intelligence [Task Force 157] . . . at times those links appear to have been an intrinsic part of the then ongoing activity and have the appearance of the direct involvement of the US intelligence community itself.61

  One year after Frank Nugan’s death, the Deputy Director of the CIA, Admiral Bobby Inman, was asked about the collapse of the Nugan Hand empire. He expressed deep concern that investigation of Nugan Hand would lead to disclosure of a range of ‘dirty tricks’ calculated to undermine the Whitlam Government.62

  As the Watergate scandal spread during 1974, so did news of the part played by the Nixon administration and the CIA in the destruction of the Allende Government in Chile the previous year. On the first anniversary of Allende’s murder, Gough Whitlam addressed the United Nations General Assembly. He warned against moves by states to bring about political or economic change in other countries by ‘unconstitutional, clandestine, corrupt methods, by assassination or terrorism’.

  Three months after Whitlam’s speech, Christopher Boyce, the twenty-one-year-old son of a former FBI officer, was given a special job by TRW Incorporated, a Californian aerospace company where he worked as a cipher clerk. TRW is an important CIA contractor, and Boyce was to work in the black vault, the code room where top-secret messages were received and deciphered from American bases and satellites all over the world, including Pine Gap. Only eight people had clearance to enter the specially built vault, ‘cocooned on three sides by special penetration-proof layers of concrete and on the fourth by a thick Mosler Safe door’. Here they received the CIA’s ‘deepest’ background briefing, a process actually called ‘indoctrination’.63