Communications Connection

Almost every businessman, at one time or another, has endured the frustration of delays in having telephones connected or transferred. Not so in the illicit world of organised crime.

For Telecom, Australia’s largest government instrumentality, has been used to facilitate the shadowy network of illegal bookmaking. As quick as police have raided illegal bookmaking syndicates, they have mushroomed again — in another location, often with banks of telephones installed within twenty-four hours.

Despite repeated public exposure and official scrutiny, the Telecom Connection has continued to allow illegal bookmaking syndicates to flourish in the face of unprecedented police crackdowns in all States.

Telecom, as an income-making concern, has, of course, profited financially. After all, the turnover from illegal bookmaking amounts to a staggering $4000 million or more a year, Australia-wide. Figures given at the Conner Inquiry in Victoria put the turnover at $1800 million for NSW and $1000 million for Victoria. The rest of Australia would probably account for a third as much again.

Corruption within Telecom goes much further — with allegations of organised crime influence on elements within the Australian Postal and Telecommunications Union, Australia’s second largest public service trade union.

Forces within the union itself have alleged that organised crime influence has also extended into Australia Post, with involvement in systematic robbery of post offices and even drug trafficking.

Police concern throughout Australia developed to the stage in 1983 that some law enforcement authorities believed a special Royal Commission was necessary. As they saw it, the Telecom Connection in particular served to negate police efforts to control illegal book-making, traditionally the moneypot for organised crime funding for drug trafficking and other rackets.

With NSW alone boasting 2500 illegal bookmakers, all with ample telephones at their disposal, all totting up incalculable calls week after week, the income to Telecom (if the calls have been paid for!) has been enormous enough. But this potential loss of revenue has not seemed to be the reason for obvious high-level indifference within Telecom and illegal bookmaking syndicates.

Since police have been blitzing illegal bookmakers in recent years, after decades of police protection, at least in NSW, the corruption implicit in the Telecom Connection has assumed as much if not more significance than the perennial public outcries over police graft. In effect, illegal bookmakers have continued to operate without police protection, but not without Telecom corruption.

Organised crime influence has been just as obvious in exploiting Australia Post.

In a court hearing in October 1982, it was disclosed that the attempted robbery of $300000 worth of securities and stamps from Canberra’s Civic Post Office had been organised by a Sydney crime syndicate.

Eric Wilkinson, 37, Managing Director of a Sydney car firm, pleaded guilty to breaking into the post office with intent to steal and with assaulting a cleaner. Pleading for leniency, Wilkinson said he went to Canberra to do the robbery because he had been ‘under a fair degree of pressure to provide a service to a local criminal set in Sydney’. He had agreed to do it, he said, only after the lives of his wife and family had been threatened and he had found two sticks of gelignite under his house. Wilkinson said he was to have stolen the stamps for delivery to persons he believed wanted to exchange them for drugs.

‘I am just unfortunate that I have got a background of having certain skills in certain areas that makes you useful to people and it has been very awkward to avoid it’, he said. He said he was to have received only ‘wages’ . . . between $5000 and $6000.

When inside the post office, with an unknown accomplice, Wilkinson had been surprised by a cleaner, who was ordered into a safe that had been opened with oxyacetylene equipment. When he refused, the cleaner had been struck with a jemmy and threatened with a knife.

Declaring that he had been going straight since being released from prison in 1979, Wilkinson said he had been working long hours in the car industry and had bought a house and other real estate, and now had an interest in a marina. He had also been involved in several community services, including the volunteer coastal patrol and a police boys’ club.

Allowing Wilkinson a bond on the attempted robbery charge, and fining him $2000 on the assault charge, the magistrate, Mr Cahill, said he accepted that Wilkinson had been rehabilitating himself and that his business was legitimate and that his own funds had not come from organised crime.

In September 1981, a rank-and-file faction within the APTU published its own newspaper from the Sydney Trades Hall with a front page headline; ORGANISED CRIME IN THE APTU.

It detailed, among other things, systematic theft of postage stamps, Federal tax stamps and postal money orders from post offices throughout Australia. Five men, including two senior employees and a former postal union official, were charged over a series of thefts from four suburban post offices. The union official, who was caught paying over $16000 in a brown paper parcel to one of the other arrested men, had been an organiser for the APTU for five years.

According to the union publication, titled Communication Workers News, the organiser had been removed from office, together with another official, following an audit investigation into APTU finances. Both had been found guilty by an industrial court of misuse of members’ money and misappropriation of union funds through a bogus provident and sickness fund. And, the paper added, ‘when they were thrown out of office they left with thousands of dollars of members’ money, which the court ordered them to repay: but of course they did not’.


More than seventy post offices — forty in NSW and twenty in Victoria — had been ‘knocked off in what Communication Workers News suggested was a ‘conspiracy by the people who want to take over the industry’.

When a claim by the union faction that theft of stamps and securities amounted to $100 million was published in Australian Business magazine in July 1983, the Australian Postal Commission ridiculed it, maintaining that the face value of articles stolen from Australia Post in the previous two years would add up to only one million dollars. The commission claimed that it had no evidence, apart from a few isolated cases, of stolen stamps being traded.

Inquiries have since established that Australia Post’s ‘face value’ estimate was based on valueing stolen stamps at the cost of production, not on what they were worth if traded. This in turn led to the discovery that the stamp thefts, at least those recorded, actually amounted to $30 million.

Union sources have claimed that people associated with the notorious Nugan Hand Bank had been used to launder postal and tax stamps. In fact, one person linked to Nugan Hand and investigated by the Costigan Commission had a background with Australia Post and laundering of tax stamps.

The independent union faction newspaper suggested that turmoil and corruption in the Painters and Dockers Union underlined faction fighting for control, not of a union, but of the laundering of large amounts of money.

‘Rings a few bells!! Doesn’t it?’, the paper asserted.

Complaining that Telecom Management’s Investigation Branch had been harassing employees with widespread use of telephone bugging to catch linesmen involved in pilfering, the paper said that investigations ‘should start at the top where the real corruption goes on’.

Throughout Australia, the APTU has a total membership of nearly 50000 in both Telecom and Australia Post.

With battle lines drawn between union factions, allegations of corruption and organised crime influence have become a feature in intra-union rivalry. On the one hand, independent rebels have been branded left-wing agitators, while accusations have even been made that America’s Central Intelligence Agency is interfering in the affairs of the union. Claims have been made that union elements have been trained at a school in Virginia in the United States ‘in the skills of political warfare, intelligence, reporting, infiltration, letter intercept, bugging and bombing’.

‘Another reason why the Post Office and Telecom is a key area of CIA infiltration’, the report claimed, ‘is that certain PO personnel are engaged to spy on mail . . . Incoming and outgoing mail, private mail and consulate pouches, are intercepted, opened, read and returned to the post . . . Overseas and local telephone calls are bugged, usually from inside Telecom exchanges’.

Whatever the truth of that, there certainly have been international crime connections that are disturbing.

An official of the union, along with an ex-official, had been nominated in police files as principal figures in an international heroin racket using Australia Post.

The official reportedly made regular trips overseas to arrange for heroin to be transmitted by first-class mail from the Middle East to previously arranged fictitious addresses in Sydney.

According to police files, the heroin mail, since it bore no return address, was redirected to an inner Sydney mail centre where it is extracted from the system.

Police have been told that the heroin went to two known distribution points . . . a classy massage parlour in Surry Hills and another parlour at Burwood.

Two Australia Post supervisors, a mail sorter and four other employees were nominated as being involved in the racket.

Along with its rejection of intra-union claims on post office robberies, the Australian Postal Commission also sought to ridicule reports of Australia Post being used for heroin trafficking. The commission said that the management of Australia Post had not been informed of any police evidence of Australia Post employees being involved in heroin smuggling.

Much is on record through the Woodward, Williams and Stewart Commissions illustrating the scope of heroin trading using Australia Post.

A NSW drug dealer, Richard Mallouhi, told the Woodward Commission of making two trips to Thailand in 1975, especially to send heroin back by mail. Mallouhi shared a flat with an Australia Post employee, Alan Malzard, who worked at Concord Post Office. Mallouhi and Malzard hatched a scheme involving fictitious addresses for the suburb of Rhodes, with Malzard using his position to intercept the heroin mail when it reached Concord Post Office. In Thailand, Mallouhi bought plastic albums the size of ordinary envelopes, secreted eight grams of heroin in each, and mailed them back to the fictitious addresses. The racket made thousands of dollars. Another trafficker associated with Mallouhi, Tibor Szigethy, used Glad Wrap bags and taped six to ten grams of heroin into postcards in Thailand and sent them to Sydney addresses. Mallouhi was associated with John Edward Milligan, at one time involved with an Australian off-shoot of the French Mafia organisation Union Corse.

Australia Post has been well aware of drug rings using its system.

Before the Williams Commission, a senior officer of Australia Post disclosed that, over a four-month survey period, 236 articles found to contain narcotics had been forfeited in States other than NSW. If NSW figures had been included, he estimated the number would have exceeded 350.

In its 1978 annual report, the Australian Post Commission acknowledged co-operating with customs in detecting drugs in overseas mail, using x-ray machines and sniffer dogs. But the report made a point of stressing the importance of the privacy of the mail and drew attention to the possibility of conflict between the introduction of measures designed to increase surveillance of the mails and the need to maintain privacy.

After taking confidential evidence in most States, the Williams Commission found that groups of criminals were using the post to import drugs on an organised basis, with some groups sending thirty to forty letters a month. Heroin seizures for a survey period for the now defunct Narcotics Bureau had shown that 57·4 per cent of all heroin seizures had been at Sydney Mail Exchange.

The responsibility for detecting illegal drugs in mail rests with Customs, who attach staff to principal mail exchanges. Parcels are opened by Australia Post employees if requested by Customs. But Australia Post does not allow the opening of letters in the absence of notification of the addressee. Thus, if requested by Customs to open a letter, Australia Post holds the letter and sends the addressee a card advising him or her to call and arrange for Customs clearance.

Only when the addressee calls and presents the card is the letter released for opening by the addressee in the presence of Customs officers. Or only if the advice card is refused, or returned unclaimed, will Australia Post officials allow a letter to be opened for Customs.

Law enforcement officers naturally complain that the sending of advice cards mentioning the necessity for customs clearance simply acts as a warning to illegal importers.

The curious attitude of Australia Post to drug trafficking has been epitomised by one case detailed before the Williams Commission in which a parcel containing 1000 grams of hashish was wrongly delivered to a woman who handed it to police. Police then sought co-operation from Australia Post in arranging delivery of the parcel and surveillance of the recipient. Co-operation was refused. A demand was made by postal authorities to police to surrender the parcel (including the drugs) or risk prosecution for interfering with the mail. The police, of course, refused to comply, and continued to investigate and found five more packages containing drugs worth $60000. Several individuals were arrested overseas.

‘Although extreme’, said the Williams Commission report, ‘this example is by no means the only case of its kind learnt of by the commission . . . Such occurrences are inimical to Australia’s efforts against drug trafficking’.

At a national drug summit in April 1985, the Federal Government agreed to legislate to allow police access to check mail for drugs.

At the same time as it tended to dismiss heroin trafficking by post, the Australian Postal Commission also claimed that there was no evidence of a systematic scheme for stealing credit cards.

It quoted statistics for June 1983 attributed to a credit card organisation listing only ten cards missing and only one of them ‘lost in the post’. Within days, journalist Richard Macey revealed in the Sydney Morning Herald that the theft of credit cards from mail boxes had become so serious that at least one bank was no longer prepared to mail them to people living in high-risk suburbs. Customers living at addresses with postcodes 2010 to 2038 in Sydney had to personally collect their cards from a branch of the bank. A senior security officer for the bank was quoted as saying that fifty to sixty credit cards never reached the people they were mailed to . . . ‘and that’s on a quiet day’. According to Bob Gilman, General Manager in Australia for American Express, most cards were stolen by professional criminals, who used them on the day they were taken, well before they could be reported missing.

The vulnerability of Australia Post to interference, from within or without, was underlined by disclosure in a front page article in the Sun-Herald just one day later that the Federal Government was considering abandoning the post as a means of delivering fortnightly pension and social security cheques throughout Australia.

In NSW alone, the Government had lost $11 million through having to write duplicate cheques for original cheques lost in the mail. Instead of using mail, the Government was considering switching to paying pension money directly into bank, building society and credit union accounts. (Though such a switch would cost Australia Post about $27 million in mail revenue per year, the Federal Government acted early in 1985 to take the delivery of social security cheques away from Australia Post.)

The risk of infiltration of Australia Post and a key union such as the APTU has been pointed up by interference with union ballots conducted through the post.

Commonwealth police were called in after thousands of ballot papers went astray in the NSW branch election of the APTU in 1981.

In the Industrial Division of the Federal Court of Australia in February 1983, Mr Justice St John ruled that there had been an ‘irregularity’ in the ballot. He subsequently stipulated stricter procedures for the holding of future ballots. The ballot rigging cast doubts over the conduct of postal ballots, since this one was for a postal union and was carried out under the supervision of the Commonwealth Electoral Office.

One union faction even sought to have ballots kept right away from the postal system for fear of further manipulation, proposing instead on-the-spot polling at Telecom and Australia Post work places.

Mr Justice St John ordered the use of specially manufactured envelopes and random checks on signatures on ballot papers. Requesting the tighter procedures, the Federal Executive of the APTU proclaimed that it was ‘essential that the good name and reputation of the vast majority of members and of the union itself be protected from the actions of a small self-interested and unscrupulous minority’.

The trade union movement reacted with horror in 1979 when bombs were used to blow up cars belonging to two top officials of the APTU.

The bombings were described then as the first acts of terrorism on the Australian industrial scene for forty years.

Early on Thursday morning, 11 May 1979, a car belonging to Merv Hawkins, NSW Secretary of the union, was blown up in the driveway of his home in the Sydney suburb of Cromer. Six minutes later, another bomb blew apart a car belonging to Noel Battese, NSW President of the union, in the carport of his home forty kilometres away at Fairfield West.

Police were quoted as saying that the bombings were designed ‘only to frighten the two men’. The Hawkins-Battese axis has been only one of a multiplicity of factions within the APTU. Investigations failed to unearth any reason for the bombings, except that, at that time, a ballot was being held for the election of union representatives for the Sydney mail exchange.

The bombings brought a sharp reaction from Bob Hawke, then president of the ACTU: ‘If this sort of action continues, we are going downhill rapidly’.

The Federal Government has faced mounting pressure to order a judicial inquiry, at least into Telecom links with illegal bookmakers. During 1982, a combined meeting of all Police Commissioners called for a nationwide probe of the Telecom Connection, and they themselves considered formally seeking a Federal Royal Commission.

A previous Royal Commission, conducted in 1963 by Mr Justice R. L. Taylor into Telecom’s predecessor, the Postmaster General’s Department, found widespread malpractice and failure to co-operate with police.

Mr Justice Taylor denounced the central administration of the Department over its failure to even ensure the observance of directions issued in the name of the Prime Minister.

In its report to Federal Parliament, the commission found that employees did not take action to ascertain whether or not telephones were being used to evade the gaming laws; that they did not observe directives and instructions relating to provision of phones in unusual locations; and that they did not investigate or order an investigation into the installation of telephones proved to have been used for illegal gaming when all records relating to the installations were available.

In April 1983, another Supreme Court judge, Judge Xavier Connor, in a four-volume report of his Board of Inquiry into Casinos in Victoria, pronounced: It would appear that over the last twenty years nothing has changed except the name of the department’.

Connor heard evidence from police and other sources on the Telecom scandal.

Fred Silvester, former head of the Victoria Police Force’s Bureau of Criminal Intelligence and retired Director of the Australian Bureau of Criminal Intelligence, indicated that Victorian police were being hamstrung by Telecom. Whereas a special task force, as well as the normal gaming police, were being used to raid illegal bookmakers, the illegal networks were now ‘almost entirely conducted by telephone’. Silvester suggested that the APTU would not tolerate police interference.

Merv Beck, the NSW Police Superintendent also now retired, whose Beck’s Raiders made more than 4300 raids in recent years, says: ‘One of the biggest handicaps in trying to control SP betting operations is the astonishingly easy access they have to telephones’. He said that ‘as quickly as some phones were knocked out or operators switched premises, new phones were connected . . . often at a day’s notice’. He also added: ‘Control telephones and you just about control SP betting’.

Beck did complain to management in Telecom, but says: ‘It was always the same cry . . . “Don’t involve me; we’ll have union trouble”. A code of silence applied and nothing much was ever done’. It was commonplace, he said, to find thirty phones, the highest number being forty.

In 1981, when Beck and his men were pressuring Telecom staff for co-operation, a Telecom officer discovered two bugging devices concealed in the ceiling of his office.

Telecom has since provided two employees to liaise with police and actually go on raids with the gaming squad to collect illegally-installed phones. Many telephones have been cancelled, including that of NSW identity, George Freeman, convicted and fined $500 for SP betting in early 1983.

Telecom has shown a reluctance to back track through its records to find out who put the phones on in the first place. When Federal police attempted an investigation towards the end of 1982, seeking access to Telecom records to pinpoint those involved in graft, they were invariably told no records existed. In fact, Federal police believed they were being deliberately blocked at a high management level and, again, also because of a fear of union trouble.

But before the Connor Inquiry, the acting Federal Secretary of the APTU, Mr R. F. Arndt, declared that, although from time to time union officials had had cause to advise members under investigation of their legal rights, the union would never interfere with either a police or internal Telecom investigation of criminal behaviour. To his knowledge, there had never been any discussion between the union and management regarding the SP problem.

Arndt said that he himself had spent thirteen years as either a linesman or a line supervisor in Telecom. He said there was no way that an illegal bookmaker with a lot of telephones could be raided and closed down and then set up again quickly in another place with a large number of phones unless someone had access to a telephone exchange.

In his report, Connor concluded that a likely explanation was that ‘substantial bribes are paid to Telecom employees up to a high rank to ensure that the activities of the technicians in the exchanges who do the jobs are overlooked’.

In Sydney in late 1982, a Telecom supervisor, from an Eastern Suburbs exchange, was actually arrested running an illegal betting outlet. Apparently he absented himself to run the outlet on race days by arranging time off through Flexi-time. He was convicted and fined for illegal betting, but was allowed to return to his exchange before since retiring on health grounds. Another Telecom employee, also arrested and convicted of running an SP outlet, was found to have his home garage stacked with new telephone handsets still in their boxes.

A limited inquiry in 1984 by Mr Frank Vincent QC found no evidence of organised crime in Telecom as an organisation, but he did find evidence of corruption and criminality among employees. Vincent criticised Telecom officials for a lax attitude towards disciplining staff involved in serious crime.

According to a published statement by the NSW president of the Telecom Line Staff Council, Lin Hopkinson, some allegations, if made public, would make reports emanating from the Costigan Inquiry into the Painters and Dockers ‘look like an afternoon tea party’.


from Connections 1 by Bob Bottom