Site Map

THE CRIMES OF PATRIOTS -- A TRUE TALE OF DOPE, DIRTY MONEY, AND THE CIA

CHAPTER EIGHTEEN: Bernie of Arabia

When you are living a lie, you are living in constant fear
of exposure. This was true for others at Nugan Hand,
of course, but Frank Nugan was the only senior figure
who would have no place to flee when the lie was exposed. Hand and
any other Americans involved could go home someday. Nugan was
home. The lie was his whole life, not just a chapter of it. As he entered
his last year, Frank Nugan was losing his grip on himself.

The beginning of the end was probably the burgeoning family
fruit company scandal. Until 1973, ownership of the company lay
entirely with the family. But then Frank's brother Ken had raised
$700,000 for a new cannery by selling shares of stock in the company.
In the stock sale, several large insurance companies acquired a 40
percent interest.

As noted in Chapter 4, the disappearance of an anti-drug campaigner
in the Nugans' home town of Griffith in July 1977 led to
investigations. These investigations turned up records of cash payments
from the Nugan Group fruit company to various people. One
was Antonio Sergi, the reputed head of the local Mafia. Another was
Sergi's friend and alleged Mafia colleague Robert Trimbole. (Though
officials didn't know it then, Trimbole, under the alias "Australian
Bob," was also working with the "Mr. Asia" heroin syndicate.)

Ken Nugan explained that the various cash payments had really
been made to fruit farmers who wanted to remain anonymous for tax
reasons. He said that the names Sergi and Trimbole on his company's
books were just pseudonyms for the anonymous farmers.

But the insurance-company shareholders and the fruit company's
auditors wouldn't let it go at that. Although they never figured out
who actually received the cash payments, they decided that money
was missing, and complained that Ken Nugan had been diverting
funds that belonged to the shareholders.

So Ken Nugan did what any entrepreneur would like to do in
such a situation. He kicked the insl1rance company representatives off
his company's board of directors, and fired the auditors.

He managed all this at two rowdy shareholders' meetings in the
fall of 1977. Minority shareholders were guaranteed certain protections
by law and contract, but Ken Nugan overcame these protections
by turning the voting procedures topsy-turvy.

Under Australian shareholder law, meeting procedures may be
voted on at the spur of the moment, with one vote for each shareholder
present, rather than one vote for each share. So the hall was
packed with drunks and thugs, who had been given newly issued
certificates for ten shares of stock each. They railroaded through
some motions Ken Nugan proposed, changing procedures to accomplish
his ends.

The minority shareholders screamed, of course. And the Corporate
Affairs Commission-the equivalent of the U.S. Securities and
Exchange Commission-backed them up. The attorney general of
New South Wales pressed criminal fraud and obstruction of justice
charges against Ken Nugan and several people who had helped him
pack the meeting. Ken Nugan was also ,charged with, in effect,
embezzling large sums of cash from the company for his personal use.

Among the accomplices charged with corporate fraud was his
lawyer, who was said to have devised the meeting-packing scheme -- Ken's
brother, Frank Nugan.

In Parliament, members rose in public session, taking advantage
of the scandal to vent anti-Nugan outrage they had long suppressed.
One parliamentarian, John Dowd, revealed that the auditors had
"been subjected to personal pressure. Certain persons have called at
their homes, and the circumstances of the visits are such as to raise
the greatest concern among the citizens of the state and the attorney
general."

After Frank Nugan died it was discovered that he had then offered
financial support to several people if they would run against the
outspoken Dowd for Parliament. It was also discovered, from his
files, that he had forged the signature of the attorney general, Frank
Walker, on a letter to a Swiss bank, opening an account in Walker's
name. The only apparent reason for writing such a letter would be
to try to frame Walker, to embarrass or blackmail him. But Walker
says he never heard about it until the letter was found after Nugan's
death. [1]

***

Criminal proceedings against the Nugan brothers progressed
throughout 1978 and 1979. So did tangled lawsuits over the future
of the fruit company. But Frank Nugan assured everyone that things
were all right. Both General Edwin Black and Admiral Earl Yates
backed him up.

General Black attended court hearings on the case in Australia
and declared his continued faith. Admiral Yates went to Sydney in
May 1978 (according to newspaper accounts at the time), and assured
the press that the charges against Frank Nugan "relate solely to his
position as a solicitor advising his client. In this, he acted in conjunction
with three legal firms in Sydney and with two Queen's Counsels."

The newspapers quoted Admiral Yates as saying, "None of the
charges relate to money or assets. The legal argument is a technical
one, centering around the splitting of company shares. In Australia,
Nugan Hand banking activities have in no way been affected.... In
fact, the deposit base has increased as a result of new deposits which
have been received from customers showing their strong support for
the banking group."

Les Collings sent out the clippings with a "Dear Customers &
Friends" cover letter, apparently to anyone who' had expressed
doubts. Admiral Yates had insisted that Nugan Hand was "in no
way" involved in the court action against the Nugan brothers and the
fruit company, and that "there are no financial connections between
the two."

But Frank Nugan, at least, knew otherwise. Through a series of
loans, concealed by intermediary companies like Yorkville, Frank
Nugan was using Nugan Hand money to pay mounting legal and
other bills for himself, his brother, and the fruit company. By liquidator
John O'Brien's assessment, about $1.5 million was diverted during
the fruit company affair.

Frank Nugan had already used more than $1 million in Nugan
Hand money to buy and improve his lavish waterfront home. His
expenditures on worldwide first-class jet fares and hotel accommodations
were relentless. Hand, Yates, Black, and others were also jet-hopping.

A lot of money was certainly coming in to Nugan Hand. Its $1.
billion-a-year publicity figure may have been exaggerated, but hundreds
of millions was likely. Most of the money, however, was just
going right back out again, laundered. How much Nugan Hand was
collecting in laundering fees is not on record. But the bank certainly
wasn't making any money in the banking business, as it told outsiders
it was.

At some point, Frank Nugan must have realized that ends weren't
going to meet, and that the pressures of the criminal investigation
against him were hastening the denouement.

"He was helping his brother, but the bank was getting a bad
reputation," explains his friend Paul Lincoln Smith. "I remember
Frank telling me that some big overseas customer had canceled a big
deal because of those involvements," Smith says.

The big Bank of New South Wales, which had earlier given vital
references to Nugan Hand, issued a negative recommendation in July
1979, based on the fruit company case. Jerry Gilder, the sales staff
manager, sent a copy to Mike Hand. Who else knew about it isn't
clear, but Frank Nugan certainly did.

For some time now, he had started his whiskey consumption in
the morning. His secretary added water to the bottles to try to slow
the pace. He put on weight.

He told people that Mike Hand, the Christian Scientist, had
advised him to lean on religion in times of trouble, so he began going
to church a couple of times a day. He picked one that was particularly
mystical and revivalist, and became nearly a fanatic about it. A Bible
was always in his pocket, except when he took it out to consult or
jot notes in.

Ken Nugan remembers Mike Hand telling him, "Frank was almost
atheistic and I brought him back to religion."

But the religion didn't make him any easier to live with. In the
summer of 1979, his wife Lee returned to her parents in Nashville,
taking their two children. She denies she left him and says she moved
only because he was traveling most of the time and could visit her
more easily in Tennessee. Records of her Nugan Hand-paid American
Express card show she charged off $21,200 before the year was
out. She says most of this was legitimate business expense.

She told the Nashville Tennessean, "My marriage was an extremely
happy one. There was never a moment's thought about
leaving him.... It was a terrific relationship."

Close friends of Frank Nugan say he was beside himself wanting
her back. He went on the wagon and shed fifty pounds in six months.
He continued to spend money in manic style, including about $500,000
to add still more luxury to their home, hoping to entice her to
return to it.

***

The bank didn't stop operating during this time. Rather, it expanded.

Probably its most brazen fraud of all was being carried out during
1979 and 1980 in Saudi Arabia. The man who ran the fraud was
Bernie Houghton, the barkeep with all the military intelligence connections.
Houghton himself has admitted taking $5 million in Nugan
Hand deposits out of Saudi Arabia, mostly from American civilians
and servicemen.

Steve Hill has recalled Mike Hand saying at one point that $6
million had been raked in from the Saudi venture. The various investigating
authorities in Sydney and Hong Kong say the total easily
could have exceeded $10 million. Of course, the money was never
repaid to the victims-or, as they were known in those days, "investors."

Houghton, typically, has clouded the origins of the Saudi venture.
The Corporate Affairs Commission, which interviewed Houghton,
reported, "Admiral Yates suggested to him the prospect of expansion
into Saudi Arabia."

To the Joint Task Force, Houghton said Yates had merely spent
several days in the fall of 1978 persuading him to join Nugan Hand
-as Mike Hand had been doing for some time-and that he came
up with the Saudi idea independently while on a mission for Hand.
He said Hand had sent him to Germany that fall to "review" the
operations of a small private bank in Hamburg that Nugan Hand had
recently boasted of acquiring, the F. A. Neubauer Bank. Houghton
said he had protested that he "neither spoke German nor knew the
banking business ... in Germany," but that Hand had told him "that
my logic and judgment were what he wanted."

He told the task force that on the way back to Australia, he visited
his native Texas and stopped in Dallas at the office of the Henry C.
Beck Company, a large engineering and construction firm that does
a lot of work overseas.

Houghton told the Joint Task Force that he had been asked by
Frank Nugan to visit "a senior executive" of Beck for whom Nugan
had done some "legal work." He said he didn't remember the executive's
name. He told the Stewart Royal Commission, however, that
it may not have been Nugan who sent him to Beck, but rather
Admiral Yates. [2]

Houghton said the executive began describing the Saudi project
Beck was undertaking, and then (as the Corporate Affairs Commission
reported it) "requested Mr. Houghton to impress on Messrs. F.
J. Nugan and Hand the amount of business potential in Saudi Arabia."
This Houghton said he did, and on Admiral Yates as well, and
soon he was on his way to the Middle East.

***

Houghton's story is further clouded by evidence that he, Admiral
Yates, the Beck Company, and Nugan Hand may already have been
involved together for several years.

The evidence comes from Douglas Schlachter, the witness the
Joint Task Force has identified only as "J," a former aide to Edwin
Wilson, the renegade CIA. and naval intelligence agent. Both the
Joint Task Force and Corporate Affairs Commission said they found
"J" -- Schlachter -- highly believable.

Schlachter told the task force that in late 1976 or early 1977, while
he was working for Wilson in Libya, he visited Wilson in Washington
at a cover office Wilson had set up for Navy Task Force 157. As
Australian investigators reported it, Schlachter "accompanied Wilson
to an office in that city and met Admiral Earl P. Yates. At the
time, Yates was in the company of another retired senior U.S. Armed
Services officer whose identity is not known. The office referred to
by 'J' is believed to have been that of retired Brigadier General ErIe
Cocke [which later served as Nugan Hand's U.S. office]."

"The meeting," the task force reported, "is said to have dealt with
the possibility of Nugan Hand involvement in port construction then
being undertaken in Libya and in which Wilson was involved. One
of the companies involved in that construction work with Wilson
was the Dallas, Texas, based company Henry C. Beck." The task
force said "nothing is believed to have eventuated" from the discussions.

After reading that, Yates wrote the task force protesting that he
never attended "such a meeting with Wilson," and that "J" "must
have mistaken some other person for me." As proof, Yates noted
that "J" said the meeting took place no later than February 1977;
Yates insisted that "I did not work for Nugan Hand until June of
1977 and would not have had authority for such discussions even
then."

The Joint Task Force has since said that the date "1977" had been
a typographical error, and that the end-date Schlachter gave for the
meeting had been February 1978, Even so, however, there are many
grounds for questioning what Yates says.

The U.S. mission in Hong Kong, in its report to the U.S. Commerce
Department on Nugan Hand dated April 1977, says (as cited
earlier) that Yates was Nugan Hand's U.S. representative. Moreover,
the context of the report doesn't suggest that this was any kind of new
development. Houghton, who was working liaison between Nugan
Hand and Wilson at the time, has testified that he had been a good
friend of Yates "and his family" since the early 1970s.

Based on interviews with Yates and Houghton, the task force said
Yates was invited on board "in early 1977," Reporter Maxine Cheshire
in the Washington Post has quoted unnamed "sources" as saying
Yates began running the Washington office of Nugan Hand in February
1977.

Perhaps most telling, Frank Nugan introduced Yates at a formal,
tape-recorded speech in October 1979 as having been "perhaps our
most important counsellor for the last two years and ten months,"
putting the beginning date in either December 1976 or January 1977.
Yates responded by describing his recruiting work for the bank as
going on "for almost three years now," and a new officer followed
by saying Yates had toured him around the Nugan Hand empire
"over two-and-a-half years ago," All these descriptions time Yates's
association with Nugan Hand well before the June 1977 date Yates'
stated in his letter to the task force, and well within the time frame
described by Schlachter.

The Stewart Royal Commission, however, didn't deal with any
of this contrary information. Its report made no reference to 'J' as
a source of information, or to Schlachter, or to any effort to investigate
the situation. The commission apparently wasn't even impressed
by its own new evidence -- a Nugan Hand document setting out
Yates's employment terms, dated January 24, 1977. Stewart merely
said, without explanation, "The Commission has found no evidence
to support the allegations and accepts the denial made by Admiral
Yates."

Houghton testified at least twice that Beck sponsored him in
Saudi Arabia. The task force concluded that it did. A Beck spokesman
denies that. [3]

But victims of the swindle say they, too, thought Beck was. sponsoring
Houghton. L. L. Bass of Portland, Oregon, was working for
a Saudi Arabian firm in June 1979 when he deposited $10,000 with
Houghton -- "all I had," he describes it. "Houghton was introduced
to me I think by the Beck resident manager -- I'm sure Beck was
closely associated with Houghton," he says.

A call to Beck in Dallas produces Bill -- not William -- Millican,
who identifies himself as a director of the company. Asked about
Houghton, Millican replies, "Yeah, I've heard of him." Where? "Just
conversation." Conversation with whom? "A number of people. I'm
not prepared to talk about it." Does Beck ever do any work for the
CIA? "Not that I know of. It would have been without our knowledge."

Later, Millican called back to say that he had talked to Beck's
"man in Saudi Arabia," and learned that many Beck employees had
"lost lots of money" because of Houghton. They had tried to hold
Beck responsible, on the ground it had recommended him. But Millican
said that Beck had been "advised by counsel" that the employes
had "no case."

Indeed, everyone seems to have escaped responsibility for the
Nugan Hand Saudi mess. It would be hard to think of a bigger fraud
in which all the principals were known and none had been prosecuted.

***

Houghton went to Saudi Arabia for a week in November 1978,
to check it out. In January 1979, he returned with some assistants,
rented a villa, and started making the rounds of American workplaces.
He was armed with tools Michael Hand had given him: blank
international certificates of deposit, identification cards signed by
Hand detailing the benefits of being a Nugan Hand client, and sample
money market securities to show clients how their money would
supposedly be invested.

Houghton told the Joint Task Force he continued to consider his
Nugan Hand employment temporary during a couple of month-long
trips to Saudi Arabia, just to set things up. He said at Mike Hand's
urging he then agreed to stay on permanently, on condition that he
take orders only from his friend Hand, never from the increasingly
disagreeable Frank Nugan, for whom Houghton evinced much less
respect.

(Ron Pulger-Frame, the courier, told the Stewart Royal Commission
that he had gone to Nugan after being stopped and searched for
drugs in Hong Kong in late 1977. Nugan, he said, had taken him to
Houghton, and had "literally sat at his [Houghton's] feet" and asked
for help. Thereupon Houghton, in the commission's words, "said he,
with his connections in the United States, would get to the bottom
of the matter and there was nothing to be concerned about. ")

Houghton told the task force he insisted on reporting only to
Hand because he wanted it clear he was working not for the Sydney
company, but for the Nugan Hand Bank of the Cayman Islands, the
entity Admiral Yates was president of. He said the bank, unlike the
Sydney company, was owned entirely by Mike Hand-though by
the other evidence, this wasn't correct.

"Did you have any previous experience in banking?" a member
of the Corporate Affairs Commission asked Houghton.

"Just borrowing," he replied.

But he joined the industry at the height of OPEC's power, the
year of the biggest oil price increase ever. Saudi Arabia had been
awash with money .since the first oil price jump in 1973, and now a
vast new flood of money was pouring in. The Saudi government
ordered all kinds of construction projects. Whole new cities were
planned, and thousands of American professionals and managers
were arriving to supervise the hundreds of thousands of Asian laborers
who were also arriving.

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,
prepared to suffer the isolated, liquorless, sexless, joyless Moslem
austerity in exchange for the big nest eggs they would have when
they returned to the U.S.

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 Moslem 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?

As described in a claim letter from Tom Rahill, an American
working in Dhahran, Saudi Arabia, "Mr. Houghton's representatives
would visit Aramco [Arabian American Oil Company] construction
camps in Saudi Arabia shortly after each monthly 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 monies, 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 seventy American workers
in Saudi Arabia who among them lost $1.5 million, says that was their
understanding as well.

Not only Aramco and Beck, but other large U.S. concerns are
said by investors to have boosted Nugan Hand, and let salesmen hold
meetings on company property and use company bulletin boards.
Among them were Bechtel, the giant international construction firm
then guided by George Shultz and Caspar Weinberger, and University
Industries, Inc. of San Diego.

"The companies were passing down to their employees that this
man was being made available, and they could put their money in and
get 18 percent" interest, says Linda Geyer, now of San Diego. When
she lived in Saudi Arabia, in 1979, she and her husband (who died
of cancer in 1982) invested and lost $41,481 with Nugan Hand. Her
son, John H. Geyer, invested and lost another $32,500. Both men
worked as plumbers with University Industries on a construction job
dominated by the Beck company. (Her husband was also a project
manager.)

Mrs. Geyer is another victim who asserts that Beck sponsored
Houghton. That, she says, is what gave him credibility. "Everybody
said, Well, Beck, they're not going in with just any old guy," she says.

For its part, University Industries doesn't deny that any of this
happened. "It sounds like you've got a real story," a spokesman says,
after checking with a company employee in Saudi Arabia, who "basically
confirmed everything you said."

Mrs. Geyer says Houghton "only worked in cash. He left Beck,
Bechtel, and Aramco with so much money he could barely even carry
the case," she says. "One time he had to have two briefcases. He used
to brag about it. Some people I know lost $100,000 or $200,000,
easy." Others remember Houghton actually using plastic garbage
bags to tote away the loot.

Once he was established, with branch offices in Jeddah and Al
Khobar, he could travel less. "The people, they'd come into the house
from five o'clock in the morning until midnight," he told the Corporate
Affairs Commission. "It was kind of like being open on a twenty-four-
hour basis, because they work shifts. Strangers would come and
knock on the door. As soon as one from a new company had approached
you, you would suddenly get a lot of people."

By his own admission, Houghton toted 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,
Houghton quickly made contact with two colonels, apparently air
force, whom he had 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," the Corporate Affairs Commission
reported.

The other was Colonel Billy Prim. There has been speculation
that Colonel Prim was the air force colonel mentioned earlier who
picked up Houghton in Sydney in March 1975 and went with him
to Iran, to "assist" in some business; the trip coincided with the trip
to Iran of Edwin Wilson, then working for Naval Task Force 157,
and the sale through him of a U.S. Navy spy vessel to Iran. According
to the testimony of Bernie Houghton to the Joint Task Force, Prim
had served on Yates's staff at the Pacific Command, and had introduced
Houghton to Yates back in the early 1970s.

The air force won't disclose Prim's or Inglebeck's, whereabouts
now, though it did agree to forward letters to them asking for comment;
they haven't responded. One victimized American in Saudi
Arabia, Robert Speer, testified before the Corporate Affairs Commission
that Prim and Inglebeck had introduced him to Houghton as a
longtime friend. Other than that, Prim's activities with Houghton in
both Iran and Saudi Arabia remain a mystery-all the more a mystery
because on Nugan Hand's internal staff list for January 1980 appears
the name William Prim, with the communications code number 517.

***

Houghton is highly critical of normal banking channels. "The
banks were just impossible. You'd go and you'd have to spend the
entire day there," Houghton told the Corporate Affairs Commission.
So, instead, he set up his own system for getting the money to
Singapore. It involved a local money changer named "El Raji." "He
was very quick," Houghton said.

Just that quick, El Raji would change the cash Houghton brought
him for Thomas Cook traveler's checks in $1,000 denominations. He
or his agent would sign them and make them payable to Nugan Hand
Bank. Then they would bundle up the checks, along with deposit
records, and send the packages via DHL air courier to Mike Hand
in Singapore-holding back, according to Houghton's testimony,
enough cash to pay expenses for the Saudi operation.

Houghton denies responsibility for what became of the money
after he sent it to Singapore, of course. According to his testimony,
he just knew that he got a 1.5 percent commission off the top on all
the money he collected. This, if true, would be small potatoes for the
kind of work he was doing; mutual fund salesmen routinely get 8
percent. On the other hand, legitimate bankers get salaries, not
chunks of depositors' money. Anyway, Houghton said most of the
money he earned was applied to repay a large loan he had received
from Yorkville, the Nugan Hand affiliate, for purchase of his swank
waterfront condominium.

Later, he told the Corporate Affairs Commission, he complained
about the low wages. So Nugan and Hand agreed to pay him a
$100,000-a-year salary and forgive his loan. But, he insisted-in testimony
to the commissioners who could have demanded he give back
his ill-gotten earnings-not a penny was ever actually paid him.

***

The claim letter from the group of seventy investors who lost $1.5
million says, "We were greatly influenced by the number of retired
admirals, generals and colonels working for Nugan Hand."

Indeed, there is a strain that seemed to have run through a lot of
investors' minds that Nugan Hand had some kind of secret government
affiliation, possibly through the CIA. This would not be an
unnatural feeling for an American in Saudi Arabia. Anyone would
assume there was a good deal of CIA activity going on there then.

One man who inspired such thoughts was Houghton's chief assistant
in Saudi Arabia, Michael Murphy. Murphy had been born in
Jessup, Georgia, in 1949, and somehow landed in Australia after
finishing college in the United States. He lived in Houghton's apartment,
worked for the restaurants, and eventually helped manage
them.

After a few years Murphy went back to the United States. By
some accounts he fought in Rhodesia, but he stayed in touch with
Houghton. He returned to Australia on his honeymoon, the Stewart
commission said, paid for, it said, by Houghton, as a wedding present.
Houghton then offered him the job in Saudi Arabia.

"We were suspicious about him," Linda Geyer says. She remembers
her husband's remarking more than once, "I get the strangest
impression sometimes that he's working for the government."

That impression about the whole Nugan Hand operation in
Saudi Arabia was only strengthened by the way it all ended, in April
1980, as the bank went into bankruptcy in Sydney and Hong Kong.

Houghton had returned to Australia after Frank Nugan's death
in January 1980 and stayed several weeks. Mike Hand then sent him
back to Saudi Arabia-to resume supervision of the deposit-taking,
Houghton testified. But Houghton only stayed a short while, then
returned to Australia with a briefcase containing files relating to his
Saudi activities, which he turned over to Mike Hand. Then he headed
for the Washington, D.C., area where Yates lived and worked.

Meanwhile, Mike Murphy also flew to Singapore. He testified
before the Corporate Affairs Commission that Hand admonished him
about "the need for secrecy and confidentiality in the private banking
records of Nugan Hand Bank maintained in Saudi Arabia." On
Hand's instructions, he testified, he returned to Saudi Arabia, destroyed
all the records kept there, and refrained from keeping more.

On April 12, 1980, a Middle East newspaper carried a Hong
Kong report that the Nugan Hand office there was no longer redeeming
deposits. At this point, the stories Murphy and Houghton told
to the various investigators diverge. Murphy told the Corporate
Affairs Commission that on seeing the story he called Houghton and
Hand in Singapore, and was told not to worry.

But he says he was also told that any Saudi withdrawals should
be from funds on hand there, as money couldn't be removed from
Hong Kong. Murphy said he was suspicious about that, and called
Houghton's aide in Sydney, Robert W. Gehring, the American Vietnam
veteran. Gehring, he said, told him to get the whole Nugan
Hand crew out of Saudi Arabia immediately, which he did.

Houghton, on the other hand, told the Joint Task Force that
Murphy called him in Washington and "asked me what he should do.
I suggested he contact Mike Hand," Houghton testified, "and also I
stated that if it were I, I would probably leave the area. In Saudi
Arabia there is a debtors' prison policy, andĚ the likelihood would be
that Mike Murphy and his employees could remain in prison until the
debt is paid, which could be for life." Although the task force interrogators
didn't press him on the point, Houghton thus tacitly admitted
his awareness that the depositors' funds had been dissipated, even
as he tried until the last second to get more deposits.

Murphy, Houghton testified, then called Hand, who confirmed
that Nugan Hand was in receivership, and also that Murphy should
get out. "At the same time," Houghton testified, "depositors of the
[Al Khobar] branch began demanding their money. All money on
hand was disbursed to the depositors. The situation became somewhat
violent and Mike Murphy and his employee, whose name I
cannot recall, then abandoned the --." Houghton broke off in midsentence,
and resumed, "It is my understanding that the premises in
which the bank branch was located was severely damaged by the
depositors after Mike Murphy left the premises."

Murphy's own story was that he booked flights for the staff out
of Saudi Arabia using depositors' funds to pay for the tickets. While
two staffers left on an early flight, Murphy and K. Rex Shannon used
$40,000 remaining to hold off fifty or sixty depositors who had
showed up. Then they ducked out to take a 3:00 A.M. British Airways
flight to London. When they learned it was delayed, they took a
domestic flight to Jeddah and boarded a Saudi flight to London-a
lucky thing, because, Murphy testified, Saudi police were already
after them and stopped and searched the British Airways flight they
had been booked on.

Murphy went to Hamburg, Germany, and closed out his own
account at Nugan Hand's Neubauer bank there. Then Murphy, the
biggest banker in Saudi Arabia, returned to Sydney, where Gehring
arranged for him to live in Houghton's penthouse condo and work
as night manager at the Bourbon and Beefsteak bar.

***

One American depositor in Saudi Arabia was Jesse J. Defore, then
a faculty member at the University of Petroleum and Minerals in
Dhahran. He remembers the bank's collapse this way: "The Nugan
Hand offices here were dismantled during the night hours, in one
night, and ... Murphy has not been seen again."

But then Defore tells an amazing story: "After Murphy left," he
says, "there were for several days a group of American military
personnel, supposedly personal friends of Murphy, staying in the
house that Nugan Hand had occupied. These men assured all comers
that 'Mike has gone to see what's the problem.... He'll be back.
... Don't you worry.... We've got a lot of money in this thing, too,
and we don't worry.'"

Eventually, the Joint Task Force heard about this U.S. military
protection that covered Nugan Hand's escape from Saudi Arabia.
The investigators went back to Houghton, who hadn't mentioned
anything about this in his original description of the violent flight of
Murphy. When the story was called to his attention, he replied, "I
can only rely on what Murphy has told me. The air force men were
on the same baseball team that Murphy was captain of. They were
there socially and certainly in no official capacity."

The task force didn't buy that for a minute. Its official report
concludes the Saudi chapter thus: "Whilst it might be that the military
knew Murphy well, it seems unlikely that they would have
compromised either their military or civil position in Saudi Arabia by
acting as unofficial guards in a situation described by Houghton as
being violent.

"For the reality is, [based] on Defore's account, that over several
days and nights they either deliberately acted on behalf of Nugan
Hand and lied to inquiring victim-clients, or had been deliberately
lied to themselves by Murphy, which information they then passed
on in good faith. The latter seems unlikely in view of the background
of Houghton, Murphy, Hand and other former military personnel
who were involved with Nugan Hand at that time [and, one might
add, in view of the ridiculousness of such a story in the face of the
already announced bankruptcy and other obvious facts]. In considering
this, it is perhaps worthwhile reiterating the observation of some
seventy U.S. clients in Saudi Arabia: 'We were greatly influenced by
the number of retired admirals, generals, and colonels working for
Nugan Hand.'"

***

The Stewart Royal Commission did not address this situation, or,
based on its report, do any independent investigation of the Saudi
affair. Astoundingly, it simply accepted what Houghton told it, and
reported as fact that "No payments other than expenses were received
by Mr. Houghton.... Millions of dollars (Mr. Houghton
roughly estimated the total as US $5 million) in deposits were taken,
but these were ultimately transmitted to the Singapore office for
investment on the Asian Currency unit market at low interest rates
or were otherwise squandered in the operations of the Group as a
whole."

There seems to have been no consideration by the commission,
in its one-paragraph treatment of the Saudi branch, or the two other
paragraphs dealing with Saudi Arabia in a biographical sketch it
prepared of Houghton, that any money might have been stolen. Or
that Houghton might have had a motive not to tell the truth in his
testimony.

The commission's report offered no evidence that any money had
been legitimately invested as Houghton suggested, and no evidence
that the commission had talked to any of the victims.

Houghton did tell the commission he had received $364,000 in
expenses over the eighteen months he was a bank executive. But
apparently expense money is not subject to taxes-or to recall by the
bilked depositors.

_______________

1. The Swiss bank Nugan used to set up a phony Frank Walker account was the
Union Bank of Switzerland. Bernie Houghton was well acquainted with a traveling
official of the Union Bank, and had brought him around to Nugan Hand representatives
in Asia to make introductions. Union Bank was also central in the Gough
Whitlam affair; a package of fake documents that was used to start a political scandal
over the obtaining of Arab loans through a shady middleman (see Chapter 9) was
sent off with a Union Bank cover letter. By the time the opposition parliamentarians
who received the package had turned its contents over to the press, the signature had
been torn off the letter. Even though the documents Were later exposed as bogus,
their publication helped weaken and ultimately destroy the Whitlam government.
All this mayor may not be coincidence.

2. The Stewart commission, which didn't mention the inconsistencies with
Houghton's prior testimony, identified the executive as James Wheeler, apparently
on Houghton's word. Beck says Wheeler left the company in 1980, and that it
doesn't know how to locate him.

3. To the Corporate Affairs Commission and in an interview with the author.

Go to Next Page

 

Exit Survey

I am interested in:
Law and Government
Visual Arts
Cinema
Health
Music
Religion
Philosphy

I came to the Library:
To write a class paper
To do other research
To read for pleasure
Other

How I got here:
Been here before
Teacher referred me
Search Engine
Someone else referred me

How I feel about the Library:
Will return
Will refer others
Probably won't return
Skip Survey