Nugan Hand Bank

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The Nugan Hand Bank developed in that grey area of the intelligence community involving alumni, assets, allies, and affiliated companies that handle much of the CIA's covert work. Although not a propriety of the agency like the Castle Bank and Trust of Nassau, Bahamas, Nugan Hand was started by and filled up with CIA alumni and personnel. Frank Nugan, a drunk, mediocre lawyer from Australia with a wildly exaggerated resume teamed up with ex CIA operative and Green Beret Michael Jon Hand who had experience in Vietnam and with the Hmong guerrillas of Laos. The third major player in the beginning and direction of the bank was a mysterious expatriate from Texas named Bernie Houghton who was much alive in intelligence community. Many of the actions involved with the bank are shrouded by destroyed records and sudden deaths, but two things remain certain: 1) The bank employed many retired CIA operatives 2) They were heavily involved with drug trafficking.

Unable to secure all the money needed to wage covert wars around the world, the CIA has maintained front companies, banks, and illegal trades to supply the needed revenue. Connections and leverage in the outland world of drugs and weapons allows for factions within the agency and like minded interests to act outside the confines of laws to influence the futures of countries in the process of defining themselves.

The Nugan Hand Limited was established in 1973 with $80 in the company's bank account and $5 in paid up capital. Frank Nugan went ahead and wrote the company a $980,000 check out of his personal account to purchase $490,000 in shares of its stocks. Since he did not have $980,000 in his personal account, he wrote himself a check from the bank's account to cover it, claiming at the same time the company's paid up capital was a million dollars. This is not advanced accounting fraud, however it worked, and the bank continued to bring funds in through crude methods of deception.

They assured potential clients with language like "absolute security, anonymity and confidentiality" and promised customers "the utmost in personal service and attentive specialist assistance". They even offered for "valued" clients child welfare accounts that would "give faithful and attentive care and supervision to all aspects of the education, health, welfare and advancement in life of the children of the beneficiary". However when stock holders showed up for an annual meeting, Frank Nugan enlisted the help of retired police detective and crook Frederick Krahe, and they filled the meeting with a bunch of drunk thugs holding a single share each who railroaded approval of the company's questionable accounts over the dissent some minority shareholders.

By 1975, Michael Hand, with the help of Bernie Houghton had opened a branch in Hong Kong which led to more international branches finally registered as a corporation in the Cayman Islands. Their partnership in the international arena is when the bank headed into the fields of drug finance, arms trading, and support work for CIA covert activities. Hand set up shop in southern Africa for fifteen months where he coordinated guns, ammunitions and helicopters for delivery to Rhodesia (Zimbabwe) and Angola. In Pretoria, South Africa he incorporated the company, Murdoch Lewis Proprietary Ltd., to handle the delivery of these shipments.

Houghton enabled the resources of shady Edwin WIlson, a CIA agent working for Task Force 157, a covert arm of the Office of Naval Intelligence, to set up shipments out of Boston for South Africa and a spy ship for the Shah of Iran. Wilson, who bought a thousand acre farm in northern Virginia, supplied Colonel Muammar al-Qaddafi with thousands of CIA designed bomb timers, more than 21 tons of Composition C-4 and years of training for his commandos by U.S. Green Berets, was finally sentenced in 1982 to life in prison.

Bernie Houghton also brought on board Admiral Earl F. Yates, a retired chief strategist for the U.S. Pacific Command, who became the president of the bank stationed out of Sydney Australia, where it was founded. This opened the gates for more from the military intelligence communitiy to fill posts: General Leroy J. Manor (manager of the Manila branch); General Edwin F. Black (president of Hawaii branch); General Erle Cocke, Jr. (president D.C. branch); Dr. Guy Parker (an expert from the RAND Corporation who came on as a bank consultant); Richard Secord; Walter McDonald (retired CIA deputy director, headed Annapolis branch); Dale Holmgreen (former chairman CIA's Civil Air Transport, manager Taiwan branch); Theodore Shackley (former CIA deputy director for clandestine operations); Richard L. Armitage (was special consultant to the Pentagon in Thailand who oversaw the transfer of heroin profits from Indonesia to Shackley's account in Tehran, Iran)[1]; William Colby (former director of the CIA as legal counsel).

Many of these men knew each other from Vietnam and Laos, which for some, was the training ground for developing traits in covert profits, information gathering and shadow communities that relied on companies and banks to remain secure and hidden from the press and congressional oversight. The most obvious of the ties involved around the bank was the development of a new company,API Distributors Inc., which was owned by Ted Shackley and recently retired thirty year vet of the agency, Thomas Clines (a man who, upon resigning, borrowed a half million from Ed Wilson to set up a new company which won a $71 million contract for arms delivery to Egypt). API's goal had been to break into the Middle East oil market. This is certainly a clear example of former high ranking personnel in the U.S. government seeking to exert clandestine influence in the Middle East oil market via privileged connections in the intelligence, banking, law, and government communities of the United States.

The connections sewing the fabric of the bank could not continue. The bank had never made a real profit, rather it ripped people off, laundered drug money coming out of the Golden Triangle (Australia experienced their first heroin epidemic in over fifty years at the height of the bank's activities), and blocked investigations through its connections. Due to increased obviousness, the fabric rotted, Frank Nugan was found dead in his car by apparent suicide, Michael Hand escaped Australia with the help of Thomas Cline and ex-Green Beret James O. Spencer, only after months of pulling funds out and declaring the bank insolvent.

Despite the fantastic abuse of position and connections, and the immediate criminality of funneling drug money to support arm transfers to places determined to be Cold War conflicts by people who were not in a legal position to make that determination, this story was reported in the U.S. almost only by Jonathan Kwitney, a Wall Street Journal reporter who made the front page three days in a row with it, and then it was buried. Kwitney went on to write The Crimes of Patriots, a True Tale of Dope, Dirty Money, and the CIA; New York: W.W. Norton, 1987 ISBN# 0-393-02387-7 which is one of only a few studies of the Nugan Hand disaster. Alfred McCoy adds it in the second edition of his The Politics of Heroin: CIA Complicity in the Global Drug Trade New York: Harpers and Row, Publishers Inc.,1972, 1991 ISBN# 1-55652-125-1, but it is not in the later revised edition with the ISBN# 1-55652-483-8. The story was covered extensively in the then National Times of Australia, but still remains on the fringe of common knowledge in the U.S. with other bank scandals like Savings and Loan and the Bank of Credit and Commerce International ringing the memory bells.

External sources

Books

  • Jonathan Kwitney, The Crimes of Patriots: A True Story of Dope, Dirty Money, and the C.I.A. (1988)