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The true story of Sydney's shadowy Nugan Hand Bank, and its connections in the 1970s to the CIA, arms dealing and the Asian drug trade, may be closer with the discovery of Michael Jon Hand alive and well in Idaho. By Martin McKenzie-Murray.

Nugan Hand Bank fugitive found in US

Inscription: This painting done for Helene Hand for Christmas '79 "Smiley's People", by E. Yates, friend"
Credit: SUPPLIED

Peter Butt still hadn’t found his man. For years he’d been chasing a shadow. Which wasn’t surprising. Butt’s target was a former Green Beret, CIA operative and gun runner. Michael Jon Hand was also one of Australia’s most notorious fugitives, co-founder of the Nugan Hand Bank – a funhouse of financial chicanery and a preferred laundering site for the Golden Triangle’s drug money.

Hand fled Australia after the bank’s collapse in 1980, aided by a false passport and disguise. Butt tells me the trail mostly went cold after about 1982, when declassified ASIO documents recorded a sighting of Hand on the Nicaragua–Honduras border. I have seen the cable, sent from ASIO’s Washington, DC, office to “Scorpion” – the codename for the director-general of the intelligence agency. The document reports that an Australian police officer, Inspector Paul Lawrence, was sent to the States on the trail of Hand. Lawrence wanted ASIO to confirm for him what a source had supplied – that Hand was training the Puma Battalion, a band of Nicaraguan rebels that was receiving United States support. Neither ASIO nor the FBI seemed moved to help the police officer.

Butt is an author and award-winning documentary-maker who has spent years researching the case. “I’d been looking for Hand for four years, on and off,” he tells me. “Looking through archives, public documents, photos, newspapers. I drew up a list of possible scenarios, places he might’ve been.”

There were rumours and culs-de-sac, and Butt thought he’d exhausted his options. But in March this year he decided to try one more time. “I went through US corporate documents, focusing upon states that I’d heard he’d lived in. I was hoping on the fact that he’d kept some of his original name. And I knew, for instance, that he was sighted in Washington State. Then, on the Idaho Secretary of State website, I found registration documents. Registered to a Michael Jon Fuller. His wife’s name was registered as vice-president. It was the same date of birth. I cross-referenced the signature with immigration records I had from the ’60s – it was the same. ‘Jon’ was a wonderful identifier. Then I compared handwriting – that was the same, too. He would do a reverse ‘3’ for an ‘e’. Then I found his business website, an elite knife manufacturer called TOPS.”

For all of Hand’s guile, he had erred clumsily by retaining much of his old name. “There was a firewall between him and the world for a long time,” Butt tells me. “But then he got slack. He reverted to an old signature. Perhaps over time he thought he’d gotten away with it. It’s funny, because this was the man who in 1979 told his staff to change their names, move to France or kill themselves.”

In April, Butt hired a private investigator to track Hand in the small city of Idaho Falls. The investigator trailed his target from home to work to cafes. He took long-lens snaps of Hand. When Butt saw the photos, he knew immediately who it was. “We had him.”

The next question was how to confront him? Butt realised that Hand had retained his original social security number, which suggested to him that if authorities were serious about arresting him, they would have done so a long time ago. Low on money, Butt, who is the author of a book on the case called Merchants of Menace, approached Australian 60 Minutes reporter Ross Coulthart with his tip. Coulthart had reported on the case in the 1990s.

The next part was delicate. Hand is in his early 70s now, but you don’t back a man like him into a corner. Butt knew that he often carried a gun, and the 60 Minutes team agreed it would be unwise to confront him at his factory – a place filled with “burly men” and a lot of knives. Coulthart’s team liaised with the private investigator, and when the TV crew finally approached Hand, they did so as he left a pharmacy. Barrel-chested and bearded, he looked like an old Hemingway – a man who spent his last years in the same Idaho mountains.

Stunned and silent, Hand ignored the flurry of questions, got in his car and drove off. This week, Hand’s company released a statement on his behalf: “A recent news story has surfaced from 60 Minutes Australia condemning Michael Fuller as a criminal because of an incident that occurred in Australia over 35 years ago. This is untrue and inaccurate. While we empathise with those who lost money, as with any investment, Michael Fuller is not to blame.”

Bourbon and Beefsteak

The Nugan Hand Bank affair is smoky and byzantine and has a cast of hundreds. It is a story comprising assassins and CIA spooks, drug lords and deputy premiers. Perhaps one of the most pungent characters is Sydney’s Kings Cross, which for a long time was a Petri dish for complicated vice. And it’s where the story starts.

During the Second World War, the Cross endeared itself to American military officers serving in the Pacific theatre. This was the preferred place for their rest and recreation, periodic moments of relief and violent catharsis. Darlinghurst Road would swell with sailors and sex workers. Liquor flowed. Fights spilt onto the streets. Reclaiming the Pacific from the Japanese was hard work and bloody. Recreation was favoured over rest. “After the Second World War,” Butt tells me, “the Cross became a sleepier underbelly. But it was a place melded to the psyche of Vietnam vets.”

The strip’s picaresque history would be revived during the Vietnam War. The US boys had returned to the theatre, this time engaged in a dreadful and worthless attrition, and they bore the scars. “Many Vietnam vets had drug problems,” Butt says. Some of those vets were involved in napalm and massacre, but among the opium fields they were at least close to the source of their self-medication. When the Cross resumed its role as an adult playground for the US military, the market supplied the heroin. The Cross was thick with the stuff.

One man profitably anticipated the soldiers. A garrulous Texan, the son of an oil driller, Bernie Houghton opened the Bourbon and Beefsteak on the strip – a New Orleans-style boozer that became infamous for its hedonism. Established as a mecca for the US Army’s damaged, it also attracted the city’s gangsters, crooked cops and bent politicians. There were plenty. Drug scores, solicitation and kickbacks all happened here. But Houghton was not merely a roguish proprietor. He was also a suspected CIA operative, and among the addled soldiers, working girls and clouds of hashish, he hosted the men plotting America’s shadow wars.

It was here that the Nugan Hand Bank was conceived.

Dirty money

Peter Butt spent a lot of time speaking with an old army mate of Michael Hand’s, Douglas Sapper. According to Sapper, Hand was an exceptional soldier. “There was a battle in Vietnam,” Butt tells me. “Hand had to save himself with a knife because he was out of ammunition. According to Sapper, Hand killed up to 20 people. It was a dark experience. He met death front on. Sapper told me that Hand stabbed one Vietcong soldier in the stomach, then tore the knife up through his sternum. There were pieces of bodies everywhere.”

Hand was awarded medals of valour, and was recruited by the CIA for special operations. He covertly trained rebels in South-East Asia before he wanted a change, Butt tells me. “Sydney seemed a paradise and he moved there to work in real estate. Many bought it, but never saw it. And it was in Sydney that he met his wife, Helene.”

It was also in Sydney that Hand met Bernie Houghton and an Australian lawyer, Frank Nugan. Nugan was a boorish and unstable alcoholic who clashed with Houghton, but he possessed chutzpah. In 1973, the Nugan Hand Bank was established. “The nefarious stuff started soon afterwards,” Butt says. “Hand vanished for 15 months. He was in South Africa, and he asked Nugan about the availability and cost of weapons – tens of thousands of them. It was likely part of covert CIA operations in the Angolan war. Meanwhile, Nugan was moving money into Asia. They laundered drug money. No question. There were the names of 24 drug traffickers on a ledger in Nugan’s car. And there are telexes that show Nugan Hand trying to do deals with weapons.”

Offering high interest rates on investment, Nugan Hand Bank wasn’t just attracting the CIA, despots and drug runners as clients, but regular investors.

When Hand returned from overseas, he brought ambitions to globally expand the bank. Drawing upon his lofty connections in the US military and spy networks, he hired military brass as executives and advisers, although their level of involvement was minimal. Rear-Admiral Earl P. Yates of the US Navy was appointed bank president. William Colby, the director of the CIA between 1973 and 1976, was employed as legal counsel. “Almost no one had banking experience. It was all admirals and CIA guys. But the international sphere of the bank was helped. It added gravitas.”

And yet things were unravelling. The New South Wales narcotics bureau was sniffing around. Nugan knew this because of a corrupt tipoff. The state’s attorney-general, Frank Walker, knew something was wrong. Nugan wanted to offload the dirty money and go clean – but he was alone. He was also drinking two bottles of scotch a day, and his relationship with Hand was deteriorating. “There was a big Nugan Hand conference at the Gazebo Hotel in 1979,” Butt says. “All of it was recorded. Hand and Nugan were no longer brothers in arms. When all of the Americans came on board, Nugan was sort of shifted aside. I also heard that the two had a physical fight during that conference. Psychologically, Nugan was in a position of nightmare. It’s Frank against the world. His colleagues are turning, the narcotics bureau are investigating. And Frank was the kind of person to make bad situations worse. There was the drinking. He was screaming and intimidating people. He started thinking of ways of killing problems off. Framing politicians and taking a hit out on the attorney-general. He was out of control.”

About 4.20am on January 27, 1980, Constable Cross from the Lithgow police station spotted a stationary car on a small street. He found Nugan slumped dead in the driver’s seat clutching a rifle. The names of CIA operatives and drug dealers were found in the car. Nugan was 37. A coronial inquest ruled it suicide and Butt, too, doesn’t suspect murder. “Others want to believe he was executed. Perhaps he was forced. The pressure was building up. The coroner said there were three categories of death for the purposes of investigation: accident, murder and suicide,” Butt tells me. “But I think there’s a fourth option. It’s like the Mafioso code. We give you one option: kill yourself, die with honour.”

Nugan’s death was the end. Investors lost it all. And then Hand, the great escape artist, vanished – and he remained so until Butt caught up with him.

Commission whitewash

There were multiple investigations. A joint police taskforce was established, and started pulling on threads that led to the “Mr Asia” heroin syndicate and other major traffickers. A royal commission was established in 1983. That same year, federal opposition leader Bill Hayden stood in parliament and demanded that the commission’s terms of reference be expanded to include an investigation of the CIA’s role. Hayden was fuming. “There can be no doubt that Nugan Hand was involved with the CIA and in arms dealing,” he said. “There have been firm United States denials about CIA involvement with Nugan Hand. Quite frankly, on its record the only people who would accept that sort of guarantee from the CIA would be the sort of people who would believe Ronald Biggs when he said he had never travelled by train. The CIA has a deplorable record … It has been deplorable and often out of control and can rarely be trusted.”

Three years later, when the commission’s final report was tabled, the Liberal party would exhume Hayden’s words and condemn him with them. The commission had found Nugan Hand Bank to have been grossly irresponsible, incompetent and guilty of fraud – but could find no evidence of CIA involvement or money laundering. Liberal member for North Sydney, John Spender, stood in the house. “The foreign minister of this country was equating the CIA with a bank robber. The Central Intelligence Agency is a most important agency to the United States government. It is most important to the security of that government, to the free world and to this country.”

But many thought the commission was inadequate – overly deferential to the senior US military men called to testify, and unwilling to admit the limitations of their investigation given the destruction of evidence. One of those men critical of the commission is Clive Small, a NSW detective who was part of the joint taskforce. “That taskforce uncovered information about multiple drug traffickers,” Butt says. “Small was vehemently of the belief that the royal commission report was a whitewash.”

Butt also unearthed an ASIO document, which I’ve seen, dated September 1980 and detailing a conversation between the spy agency and the Department of Prime Minister and Cabinet. While not proof of collusion, it suggests that Canberra was seeking a refutation of the CIA allegations from Washington, and that it would accept one uncritically.

Houghton remembered

The history of Kings Cross is heavy, and we lionise it weakly with euphemism. “Colourful” is the dominant, and witless, description. Witless in that it ignores the district’s great blossom of corruption. Ignores the greed and murder; the banal bravado; the theatre of cynicism that involved cops, killers and politicians. The egos of this world demanded they be thought irresistible, and we have obliged. In Sydney’s Fitzroy Gardens, a bust of Houghton sits above an adoring plaque. “Bernie’s Texan greeting is warmly remembered. He loved his adopted Kings Cross. Bernie loved people and helped those struggling in life. His Bourbon and Beefsteak bar became a local and international icon.”

After Houghton’s death in 2000 at the age of 80, the Bourbon and Beefsteak changed owners. They abandoned the “Beefsteak” and transformed the interior. It was unrecognisable – all sharp edges, clean walls and house DJs. The gentrified site has now been sold again, slated for the construction of apartments, caught in a different kind of inexorability.

Smiley’s People

There’s a painting I’ve seen, made by the former Nugan Hand president Admiral Yates and given to Helene Hand as a Christmas present in 1979 – just weeks before Frank Nugan’s death. The painting’s subject is Helene’s husband, Michael, frozen in patriotic kitsch. Our hero stands in a beige jacket, his arm gripping a compliant tiger’s neck. A snake is coiled around his hiking stick. To his right, a screeching eagle is perched on a branch. Hand is unmoved by the potential threats of this wildlife – he seems to have heroically quelled or assimilated their danger.

Behind Hand is a snow-capped mountain, and suggestions of the romantic expanse of the American west. His hair is wholesomely parted, his gaze and modest smile turned towards something distant and unseen by the viewer. Presumably it’s a glorious future.

Technically juvenile, the painting is also an intense and self-conscious compression of the tropes of American exceptionalism. But more interesting is the inscription on the back of the canvas. “This painting done for Helene Hand for Christmas ’79. ‘Smiley’s People’ by E. Yates, friend.”

It is evidence of the vain myth-making of rogue spooks. Smiley’s People was the final book in spy novelist John le Carré’s “Karla” trilogy, released that same year. It was a famous series, about two ageing, intimately opposed spymasters, George Smiley and his Russian counterpart, Karla. It was written by the “most reliable witness to the vicissitudes of international paranoia”, in the words of journalist Andrew O’Hagan. Le Carré, a former British intelligence agent himself, audited the costs of that paranoia – in blood, treasure and peace of mind – and warned of the soul death that follows studied cynicism.

Smiley was calm, grey and cerebral: a bookish professor with awesome power. He was aware of the global costs of duplicity. Spectacularly cuckolded, he was also aware of the personal. The naming of Yates’s painting for le Carré’s book seems not only incongruous, but aggrandising. Yates glibly flipped the author’s warnings into a perverse validation, proof that the zeitgeist found their adventures charming. It is Narcissus admiring his reflection in a pond of popular culture, but the self-enchantment is so great he can’t see the gross distortions cast by the ripples. If Yates and Hand were seeking avatars in pop culture, Ian Fleming’s James Bond – pregnant with male wish-fulfilment – seems the more appropriate figure.

Despite the saintly canvas, it is unlikely Hand was a sincere romantic. He was a man on the make, grateful for the state’s validation of his criminality. He was neither Bond nor Smiley, but a hustler who enjoyed the patronage of a superpower. But within that patronage was fertile soil for self-justification. William Colby accepted “necessary evil” – the sort that could make a man like Hand come to think of his crimes as useful, a grimy bulwark against communism.

At their best, le Carré’s novels are filled with painfully self-aware characters. Characters who draw their own lines of moral demarcation. We can only wonder where Hand drew his, if anywhere, but by assuming a false name for decades we might assume he realised that he had crossed someone else’s.

Paranoia reigns

One great theme of the Nugan Hand affair is paranoia, and the men who made a cult and profession from it. Paranoia was the temper of the foreign policy that encouraged and protected the likes of Hand. The history of his bank coincides neatly with the Ford White House’s vain burying of the CIA’s history of dark illegality. The agency called its secrets the “family jewels”.

The smokescreen for mercenaries such as Hand was “reds under beds” and the feared “domino effect” of communist contagion in Asia. It’s telling that even now, decades after the bipolarity of the Cold War vanished, Hand’s business is still based upon paranoia. It has just changed its source. His knife company carries the slogan “In and out of the shadows” and sells its blades not just to the US military, but civilians who pride themselves on their preparedness for the collapse of society.

Another company, onPoint Tactical, is close to Hand and endorses his knives. OnPoint offers courses in “urban escape and evasion”, providing paramilitary skills to mums and dads. Skills such as how to “get out of custody in an urban setting” by “escaping handcuffs, flexi-cuffs, rope, duct-tape, you name it”. It sells these services knowing that many Americans are responsive to imminent threat. “Last year,” one of its promotional videos says, “there were 327 kidnappings in Phoenix, Arizona. Do you think you are safe?”

“Phoenix”, coincidentally, was the name of a clandestine operation overseen by William Colby in Vietnam, involving Michael Hand, which resulted in vast torture and the killing of at least 20,000 suspected Vietcong. OnPoint’s founder, Kevin Reeve, is not one for historic shade, but he understands American anxiety. In a recent interview, he said: “I have taught SEALs, special ops, all parts of the military. But I’ve had a lot of good experiences teaching the civilian community – people who are concerned about the future of the economy, worried about future instability, those kind of reasons are why people take these classes.”

One senses with Hand that he recognised, if only on an animal level, the savage freedoms he could enjoy once paranoia was officially adopted by the state. From there he cunningly dressed his operations in the prestige of that state, lacquered a rotten structure with the associations of respected men. William Colby called his memoir Honorable Men.

ASIO files will reveal more

Peter Butt doesn’t know what happens next. He’s provided information to the Australian Federal Police and the office of the NSW attorney-general. It’s Hand’s move now. And the authorities’. Butt suspects that it took 35 years because no official was interested in finding Hand. It was all too complicated. Too messy. Too many shadowy contingencies. What Butt does know, though, is that there’s much, much more to find out. “This is just the tip of the iceberg. There are 18,000 royal commission documents on this, and only 2000 have been declassified. There are a thousand more stories. It’s huge.”

This article was first published in the print edition of The Saturday Paper on Nov 14, 2015 as "Sleight of Hand". Subscribe here.

Martin McKenzie-Murray
is The Saturday Paper’s chief correspondent.