Merchant banker Frank Nugan viewed the world of high finance like a game of chess. For every move there was always a countermove — until checkmate. If outmanoeuvred when actually playing chess, he would sit back imperiously and utter his favourite saying: ‘so I’m in a corner. So what?’ If he lost he was eager to play again, to try to win another game.
But checkmate came for Frank Nugan on a lonely road west of the Blue Mountains, near Sydney, early on the morning of Sunday, 27 January 1980. A passing police patrol car found his body slumped across the front seat of his white Mercedes sedan. His right hand rested neatly on the butt of a .30 mm rifle, his left hand on the barrel, with the muzzle centimetres away from the side of his bullet-holed head.
Later a coroner found that Nugan, crushed by the strain of walking a business tightrope, had committed suicide.
Like his merchant banking activities, Nugan’s death at first appeared a mystery. There was suspicion that he may have been murdered, but the weight of evidence does point to suicide. An audit of the Nugan Hand Bank books was due within a week and Frank Nugan knew his global billion-dollar empire would be exposed for what it was — an empty sham.
During those last few weeks, Nugan’s behaviour became more frenetic. Already facing conspiracy charges resulting from alleged irregularities in the affairs of a fruit- and vegetable-packing company run by his brother Ken, he now also faced a forced admission of failure and, more shattering, allegations that he had plundered millions of dollars of clients’ funds.
Two days before his death, at least one director threatened to resign unless Nugan could produce securities to match depositors’ funds.
An immensely proud man with an obsession for appearances, Nugan was told he would have to put up his Vaucluse mansion and other assets. He replied: ‘I may as well shoot myself.
Both Nugan and his partner, Michael Jon Hand, who has disappeared, turned to religion as their problems grew. Nugan believed that, all else having failed, he could get God onside. Inside the cover of a pocket edition of the New Testament and Psalms found on his body, he had written: ‘God is our partner — GNH and Co. Isaiah 41.10’. GNH apparently meant God, Nugan, Hand and Co.
The extraordinary cast of people associated with the bank — from a former head of the CIA to prominent members of the Sydney underworld — Nugan’s death, the coroner’s inquiry, the sensational collapse of the bank and Hand’s disappearance have aroused tremendous interest and comment. But so far little information has come forward which explains these events fully.
Days before his death, Nugan went to communion at St. Andrew’s Cathedral, Sydney, where other communicants noticed him sitting by himself, weeping quietly.
Nugan had befriended a lay preacher, Paul Owens, who would often receive a call to go to Nugan’s Macquarie Street office to pray, or spend time with him after morning church services which Nugan attended sometimes three times a week. Once, he confided to Owens: ‘Paul, I’m working my guts out and I just don’t seem to be getting anywhere’.
Owens gave Nugan a Bible, inscribed ‘To Frank from your friend Paul. Mathew 16 — Lo, I am with you always’.
The coroner, Mr Derek Hand SM, found that Nugan had committed suicide because of an ‘accumulation of strain’ which had pushed him beyond breaking point. The inquest had been told of ‘gross and systematic defalcation of gargantuan proportions’.
However, at the inquest, Michael Hand claimed that the prospect of being discovered would not have caused him to commit suicide. ‘I don’t believe he could have given up the ship . . . Frank Nugan was a fighter and I do not believe he would have taken his own life’.
The Nugan Hand Bank was involved extensively in drug activities, including the laundering of drug money.
The explanation for this lies in Frank Nugan’s ambition to make $100 million. To achieve this end he believed the bank would grow quickly with the right ‘front’ — connections with prominent people. He flaunted success in the firm belief — common to many self-made men — that the appearance of success breeds success.
Nugan luxuriated in a chauffeur-driven Mercedes, a yacht and his water-front home at Vaucluse.
These trappings were immensely important to him and were reflected in his remarkably gauche suggestion to a Financial Review journalist in 1978: ‘Any time you want to be picked up in front of the Herald (the Sydney Morning Herald) building by the driver and the Merc, just give us a hoy and I’ll send him straight around. That’ll show your mates you’re cutting it with the big time’.
But even though Frank Nugan was unreliable, pushy and boastful, people liked him. The fact that his insecurity and vulnerability were so close to the surface gave him curious charm and appeal. As he said: ‘I’m just a poor Spanish boy battling to make a quid’.
One former employee said: ‘It was quite a sight to see Frank at the end of a day, in full flight, with the best part of a bottle of Johnny Walker Black Label under his belt, cursing his enemies, giving his views on the state of the world or seeking advice from colleagues on how best to tackle his problems — advice which he rarely had the patience to hear all the way through’.
On the other side, the decade of the Nugan Hand Bank paralleled the explosion of illegal drug trafficking into Australia and the increasing financial sophistication of organised crime in Sydney.
Francis John Nugan, the son of immigrant parents from Valencia, Spain, was born in Griffith, NSW, where his father set up his own fruit-packing and distribution business. Frank and his brother, Ken, did well at school and went to Sydney University. Ken graduated in economics and took over the running of the family fruit-packing business.
Frank finished law and, following a stint with the prominent Sydney firm of Dawson Waldron as an articled clerk, gained a Masters Degree in Law at the Berkeley campus of the University of California. From there he began studying for a doctorate in Canada and, though he never completed the degree, years later he would on occasion introduce himself as ‘Dr Nugan’.
Returning to Australia in 1968, aged twenty-six, Nugan spent a year with Freehill, Hollingdale and Page, a large Sydney law firm. Lured by the mining boom, Nugan helped to float Meekatharra Minerals, capitalising his investment after the shares moved from 10 cents to $7.
Flush with his first million, Nugan met Michael Jon Hand. A year older, Hand was a forestry graduate from Syracuse University in New York State and had served as a Green Beret in the US special forces in Vietnam. According to contemporary reports, Hand was one of six survivors of a 200-member unit which held out against 1200 North Vietnamese at Dong Xoai, 135 kilometres north of Saigon, in one of the first major battles of the Vietnam War. He was awarded America’s second highest gallantry award, the Distinguished Service Cross.
In 1969, Hand established a local company, Australasian and Pacific Holdings Ltd, ostensibly to promote tourism and business in the Pacific area. Shareholders included four other Americans — Grant Walters, Robert Petersen, David Houston and Spencer Smith — who all gave as their address the San Francisco office of Air America, since identified as a CIA-controlled airline used for clandestine operations in Vietnam and Laos.
Hand introduced Nugan to some associates whose names have since cropped up in the various royal commissions established to investigate organised crime in NSW and the State’s burgeoning illicit drug trade.
In 1970, Nugan and Hand formalised their relationship by establishing Yorkville Nominees Pty Ltd, an investment advisory company. Three years later they launched Nugan Hand Ltd as a public company, with paid-up capital of $1 million, increased to $2 million four years later.
The new venture was established as an investment banking firm and took over the clients and business developed by Yorkville Nominees.
After less than twelve months, the two expanded to Asia and established Nugan Hand [Hong Kong] Ltd, although it was not until 1976 that they registered the company with the Hong Kong Commissioner of Banking as a deposit-taking company. At the same time, the Nugan Hand Bank was incorporated in Grand Cayman, a British dependency and offshore tax haven in the West Indies.
The Cayman operation was established soon after another venture, the Castle Bank, had been forced to close following revelations that it had been used as a conduit for CIA funds used in undercover operations. According to the Wall Street Journal, the US Internal Revenue Service also found evidence that the Castle Bank had been used for tax evasion by American organised crime.
An investigation by Internal Revenue was abandoned, according to the paper, after the CIA intervened on the grounds that the probe could jeopardise national security. The head of the CIA at that time was William Colby, who subsequently became a legal representative for Nugan Hand in Washington.
However, so far no link has been made between Colby’s CIA role and his legal appointment.
In 1978, Nugan Hand acquired control of the small F. A. Neubauer Bank in Hamburg. The bank now had branches in Sydney, Hong Kong, the Cayman Islands and Germany, operating under the umbrella of a master company, Nugan Hand International, headquartered in Singapore.
Representative offices were also established in Malaysia, the Philippines, Thailand, Taiwan, Saudi Arabia, Panama, Chile, Argentina, Britain and the US.
Nugan modelled his operation on the secretive banks which handled the private affairs of wealthy clients in 18th century Europe.
Once clients passed money to the bank they were identified solely by a numbered code. Frank Nugan and Michael Hand had their own numbers — 536 and 537. A tiny red dot alongside the code indicated a sensitive client.
A special code was used for money transfers between Sydney and overseas offices, ‘hides’ being used for Australian dollars, ‘latest’ for US dollars, ‘glassware’ for Singapore dollars, ‘radies’ for gold, ‘televisions’ for silver, and ‘raw material’ for cash.
On the surface, Nugan Hand operated the same as any other merchant bank — accepting deposits, re-investing the money, arranging the transfer of money and advising on takeovers. According to bank publicity, it concentrated on the short-term money market. However, the generous rates — offering interest on depositors’ funds three or four per cent higher than ruling rates — was one of the initial reasons for rousing the suspicions of other bankers who speculated openly that Nugan Hand was not engaged in legitimate activities.
Since the collapse of the bank, it has become apparent that much of the money was not re-invested but simply disappeared. On the surface it was all accounted for, but Nugan, in fact, was playing the oldest commercial trick — robbing Peter to pay Paul.
The fiction was developed through the employment of prestigious ‘front’ staff and extraordinary publicity. In 1976, the bank’s Australian turnover was claimed to be $26 million. A year later, according to bank handouts, it had increased eightfold to reach $220 million. Less than twelve months later, Nugan was proclaiming it had passed $1000 million.
However, it was not until late in 1977 that Nugan Hand [Hong Kong] Ltd, supposedly the bank’s biggest money-spinner, secured its first deposit of $1 million. This inclusion gave the group such a boost that Nugan telexed his congratulations and gave the local representative, Leslie Collings, a directorship and salary of $50000 a year. Shortly afterwards, eyebrows were raised in the Hong Kong banking fraternity when it was reported in a radio news broadcast that the group had accepted a deposit of $700 million. The true figure was $700000.
Bank staff in Hong Kong witnessed little first-hand evidence of the billion-dollar turnover. What money they did see arrive was transferred quickly to Sydney, Singapore or the Cayman Islands. The balance sheet for the Hong Kong office at the end of December 1977 disclosed the holding of only $953 903 in deposits.
Although the transactions confused official investigators, the process of one particular deposit in Sydney, unearthed by my investigations, provides an insight into the operations of the bank.
A Sydney security firm, K. & R. Cash, was called to Nugan’s office to deliver a large amount of cash to the South Hurstville branch of the Commercial Bank of Australia. Once the cash was deposited, cheques were made out at Nugan’s direction. For one consignment of $350000 — $300000 in $50 notes and $50000 in $20 notes — Nugan directed K. & R. Cash to make out two cheques in favour of F. J. Nugan. One, dated 4 November 1977, was for $250000 and the other, dated 7 November, was for $100000.
When K. & R. Cash had deposited $109000 for Nugan Hand with the CBA Bank seven months previously — on 4 April 1977 — it had made out the cheque to Nugan Hand. On presentation to the bank, the cheque had been changed, with Nugan Hand altered to Yorkville Nominees Pty Ltd, Frank Nugan’s private company. Other cheques covering deposits for similar amounts were changed in the same way. Thus Yorkville Nominees became the major conduit for the extraction of funds placed with Nugan Hand companies.
It has been discovered that, through Yorkville, Nugan took $500000 to buy his mansion in Coolong Road, Vaucluse, at least $400000 to remodel and furnish it and an estimated $900000 to mount a defence against charges involving his brother Ken’s fruit- and vegetable-packing company at Griffith.
Frank and his brother Ken, along with two ex-NSW detectives Fred Krahe and Keith Kelly, were charged in May 1978 with conspiracy to defraud the Nugan Group Ltd, the family fruit and vegetable empire at Griffith. The charges against Krahe and Kelly were later dismissed, but a magistrate found that a prima facie case existed against Frank and Ken Nugan. Final hearings against the brothers were scheduled when Frank was found dead. Ken Nugan was subsequently convicted and served a gaol sentence.
The remarkable lack of interest in the fate of much of the money lodged with the bank has been attributed by official investigators to the fact that much of it was ‘black’, or obtained illegally.
The involved financial transactions apparently did not stop after Nugan died. Among other deposits under claim in Hong Kong is one for $HK1250000 accepted from Whitehall Finance on 28 January 1980 — the first business day after Nugan’s body was discovered.
Lodged with the group for investment at short notice at an interest rate of 14·75 per cent, it was apparently transmitted from Hong Kong to the Cayman Islands. According to Mr Mike Woollard, a banking expert in the Official Receiver’s Office in Hong Kong, Nugan Hand’s Hong Kong operation acted merely as a ‘conduit of funds for the Cayman Island company’.
In a ‘strictly private and confidential’ report tendered before the Hong Kong Supreme Court by the Colony’s Financial Secretary, Mr David Jefferson, it is disclosed that no record of some deposits existed in company books.
However, to impress and maintain appearances, both Nugan and Hand promoted political connections. As the Washington Post has reported, Nugan arranged to be photographed with President Jimmy Carter. In the Philippines, he befriended President Marcos and in late 1970s the bank hosted an international congress on new enterprises in Manila, Nugan outlaid $75 000 on one Manila ‘bash’ — hiring helicopters to fly in guests from surrounding islands. He announced he was working out details of loans for Filipino firms amounting to $200 million but nobody could explain where the money was coming from.
In another incident involving the bank’s office in Thailand, elaborate arrangements were made to ship about $100 million in gold out of Bangkok. As a former employee relates the story, the deal was arranged through a contact of Imelda Marcos, wife of the Philippines President. Nugan Hand’s Hong Kong office sent an armed van to the Hong Kong airport to take delivery of the expected shipment but it failed to arrive.
Throughout 1977 and 1978, the bank maintained an office not only in Bangkok but also in Chiang Mai, at the heart of the Golden Triangle, the notorious source of much of Asia’s heroin, which lies at the meeting point of Burma, Thailand and Laos. Curiously, its Chiang Mai office was next door to the office of America’s Drug Enforcement Agency.
Nugan Hand’s man, Neil Evans, and DEA’s man, Chuck Wilson, answered each other’s phones and played cards together.
Suspicions about the bank’s involvement in laundering drug money were privately voiced for years and can now be supported in some detail. Police found on Nugan’s body a 15-page list of 194 names of companies and individuals. The money mentioned in the list amounted to several million dollars. Various names were repeated and next to them were comments such as ‘uncollectable’, ‘nil’ or ‘paid in’. Fearing the approaching bank audit, Nugan apparently had prepared the list in a desperate bid to call up funds.
Names in the list included Reg Parkin, gaoled with former NSW policeman Murray Stewart Riley over the much-publicised importation of $46 million worth of buddha sticks from Thailand in the yacht Anoa in 1978. Two references were made to a Ken Dooley — an alias for Kenneth Derley, also convicted with Riley over the Anoa deal. James Randolph Sweetman, who also appears in the list, was convicted in 1970 with Stanley John Smith, better known as ‘stan the Man’, over the attempted sale of amphetamines following a haul from a May & Baker warehouse in Sydney.
Riley and Dooley were observed by authorities entering Nugan Hand’s Sydney office, yet the former denied to the NSW Woodward Royal Commission on drugs that he had any dealings with Nugan Hand. Riley had extensive dealings with the bank in both Sydney and Hong Kong. On his first visit to the Hong Kong office he called himself ‘Mr Murray’ and on his following visit ‘Mr Riley’. When asked what his real name was he replied that it was both, if put together. Riley finally became so well known to the staff that he was given the nickname ‘Mr Blue Eyes’.
Parkin is also remembered well by the bank’s former Hong Kong staff. He left a printed calling card. On his first call, he is believed to have collected $8000 transmitted from Sydney.
On a subsequent visit, he discussed the purchase of a boat with Hand. The Sydney office arranged the transaction of $18000 to Hong Kong for the purchase of a boat — a twin-diesel motor cruiser known as ‘Mashkee Two’. Parkin told the royal commission he had never met Nugan but when the Hong Kong staff refused to advance him money for the boat without authority, he said: ‘I’ll go down to Sydney and see Frank’.
These anecdotes reflect the schizophrenic nature of the operation. At one end there was a legitimate bank with honest, dedicated employees; at the other, a secretive structure designed to work outside the law. As one former employee put it, ‘It often seemed that there were two distinctive operations — the fledgling merchant bank with all its ancillary services, and Frank’s activities, about which little was known’.
The mystery surrounding Nugan continued after his death. At his funeral, as the body was lowered into the grave, Hand turned to an associate and said: ‘I could have sworn I heard the bastard laughing at me’.
from Connections 1 by Bob Bottom
Illustrations by Michael Fitzjames
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