AUSTRALIAN MYSTERY - BANKER FRANK NUGAN IN FINAL DAYS FACED A CHARGE OF FRAUD - BUT HIS VIOLENT DEATH CAME AS SURPRISE TO ASSOCIATES; HIS PARTNER DISAPPEARS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP09S00048R000100020023-6
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 3
• Document Creation Date: December 22, 2016
• Document Release Date: August 5, 2011
• Sequence Number: 23
• Publication Date: August 26, 1982
• Content Type: OPEN SOURCE

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ARTICLE APPEARED
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A. Phone Call From 'Charlie'
By JONATHAN Kwnm
Staff Report-of THE W*u. STRC= Jou uw..
SYDNEY. Australia-There were several
reasons why Frank Nugan might have
wanted to kill himself. But In January 1980,
none of them were apparent to outsiders.
The 37-year-old co-founder of the Nugan
Hand Ltd. private banking empire seem-
This is the last of a series of arti-
cles.
ingly had the world on a string. His bank
was taking in millions of dollars and had re-
cently brought in a young American with
impressive banking credentials to take some
of the load off his shoulders. Mr. Nugan was
negotiating to buy a multimillion-dollar es-
tate for his family. And he apparently-had-
whipped a serious drinking problem.
But as the fateful date of Jan. 26. ap-
proached. Mr. Nugan was confronted with
two serious ,legal problems that threatened
possible ruin for his bank. In retrospect,
moreover, there were signs of eccentric be-
havior that should have served as warn-
ings.
Mr. Nugan had stopped spending most of-
his time at Nugan Hand's Sydney headquar-
ters, and he was making more first-class jet
trips around the world on missions his asso-
ciates didn't always understand.
A Walk With Jesus
He began going to church daily and
scrawling mystical notes in his Bible, which
was always with him. A sample: "I place
this day my life, my work, my loved ones in
the Lord's hands. He is so good and it will
be a good day I believe, I believe it will be a
glorious, magical, miraculous day. He is
with me now, Jesus walks with me now. Vi.
sualize 100.000 customers worldwide.
Prayerize. Actualize." I
One of Mr. Nugan's legal problems grew
out of a 1977 scandal that had developed
over a fruit and vegetable business run by
Mr. Nugan's brother, Ken, in their home
town, Griffith. 400 miles inland from Sydney.-
Several large insurance companies had ac-
quired a 4017, interest in the business during
a 1973 stock sale to raise 5700.OO for a new
cannery. Later, they complained that Ken
Nugan was diverting funds,
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26 y'J JUST 1982
Australian Mystery
Banker Frank Nugan
In Final Days Faced
A Charge of Fraud
But His Violent Death. Came
As Surprise to Associates;
His Partner Disappears
.`Auditors discovered big cash payoffs to
people apparently linked to narcotics traffic.
Ken Nugan explained that the payments
were to fruit. farmers who wanted to remain
anonymous for tax reasons and so were us-
ing dope dealers'. names as pseudonyms.
Arvid much publicity, Ken Nngan fired' the
auditors and kicked the insurance men off
the company's board.
This was done artwo-rowdy shareholder
meetings at which drunks and thugs .with
newly issued 10-share stockholdings packed
the hall and swayed procedural votes. Frank
Nugan had helped orchestrate his brother's
strategy, and state officials filed fraud
charges against both brothers and a private
detective they hired.
Sitting With a General
. During the two years of court bearings to
see if the charges would be tried. one of the
men often at Frank Nugan's side was . U.S.
Gen. Edwin F. Black, who, after his retire-
ment as assistant Army chief of staff for the
Pacific, had taken a job as the president of
Nugan Hand Hawaii. Gen. Black says that
he attended the court hearings just to satisfy
~is curiosity.
Frank Nugan protested loudly that Nu-.
gan Hand was unconnected to the fruit and
vegetable business. But when Nugan Hand
Ltd. collapsed in April 1980. a few months
after Frank Nugan's death, John O'Brien, a
liquidator, said in his initial report that a
"third party"-known to be Ken Nugan-
had received $1.6 million that his brother
had diverted from Nugan Hand: Some $1.1
million of this is credited as having been
paid back. Nugan Hand funds also are be-
lieved to have been used to pay the Nugans'
legal bills.
There were few details in the records.
Immediately after his brother died, Ken Nu-
gan went through Frank's office and, wit-
nesses say, removed armfuls of files. A Nu-
A Problem With Price Waterhouse
The other problem probably weighing on
Frank Nugan's mind on the night of Jan. 26
was the refusal of Price Waterhouse & Co.'s
Bahamas office to sign Nugan Hand bank's
books for the year'ended June 30. 1979. (The
Bahamian office covers the Cayman Is-
lands, where the bank had legal headquar-
ters because of the soft regulatory climate
there.) Mr. Hill had taken the books to the
Caymans in October 1979. The local Price.
Waterhouse partners had approved the
books for the two previous years. but this
time there was a new Price Waterhouse au-
ditor on hand, Clive Jennings. He balked.
"There were significant gaps in the re-
cords," Mr. Jennings says.
Mr. Hill has testified that he rewrote the
'accounts annually on instructions from
Frank Nugan. He said that in 1979 his boss
ordered $4 million in customer. accounts
written off as having been paid in cash, off
the books. To clean the bank's books. these
accounts were assignee to Nugan Hand Pan-
ama, which Mr. Hill said was mostly a res-
ervoir for phony accounts needed to balance
the books. Most of the bank's S17 million Ln
stated assets were really IOUs from compa-
tiles that were secretly affiliated with it. and
these bogus assets were altered as needed to
even the numbers.
Mr. Hill has testified that he was accom-
panied on the 1979 meeting with Price Wa-
terhouse by U.S. Adm. Earl "Buddy" Yates,
a former high-rahking officer in the U.S. Pa-
cific Command who had become president
of Nugan Hand bank in 1977. Mr. Jennings
and his supervising partner, Richard Han: is.
who signed the-1978 books but was away dur-
ing Mr. Hill's visit in 1979. say that Adm.
Yates was present in 1977 and 1978 but not in
1979. Mr. Jennings says that in 1979 he sent
Nugar. Hands emissary, Mr. Hill, home
with a list of information he needed. "and
that was the last I ever heard from him."
gan Hand director, Stephen K.A. Hill, has With the problem unsolved. Mr. Nugan
said that Ken also transferred a lot of Nu- himself went to the Caymans on Jan. 14.16.
gan Hand's stock in the fruit company to the 1980. just 10 days before his death. Cayman
wives of Frank Nugan and Michael Hand, banking authorities had notified him that if
the vice chairman of the bank. Mr. Hill says 1 Price Waterhouse hadn't certified the June
he argued vainly that the stock should be an 1979 books by Jan. 31. Nugan Hand bank it
self would be decertified there. This would
asset of the bank
.
Less than a month before he died. Frank damage Nugan Hand's relationships with
Nugan learned that he and his brother would major commercial banks throughout the
be tried for fraud, a development that world. Already, because of the lapse in au-
seemed sure to affect his bank's reputation. dits, authorities in Singapore had asked or.
(Ken Nugan's trial now is scheduled for Dec. 5 to see the books. and Mr. Hand was
later this year, after many,delays.i trying to hold them off.
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Messrs. Jennings and Harris say they
went to Mr. Nugan's hotel room on Jan. 14
and asked for the necessary information,
and he told them, "You'll never guess what
happened. I came all the way from Aus-
tralia with the answers to your questions,
but then I left the file' back in Australia."
They say it would have been a bulky file.
Tl+ey say ;h, t Mr. Nugan called his secre-
tary in Sydney and told her to send,the file.
It never arrived.
Hiring a New President
Mr. Nugan was losing his grip on himself
and his job. In October 1979, an American,
Donald Beazley, had been brought in as
president of the entire Nugan Hand group of
companies. Mr. Beazley Was Nugan Hand's
first real banker. A former Federal Reserve
bank examiner, he had become the presi-
dent of Great American Banks Inc. of North
Miami, Fla., when Marvin Warner, its chief
executive. had left to become President Car-
ter's ambassador to Switzerland. When Mr.
Warner returned, Mr. Beazley left to run
Nugan Hand. Mr. Beazley is now the presi-
dent of Gulfstream Bank in Boca Raton,
Fla., whose one-bank holding company is
listed on the New York Stock Exchange.
Mr. Beazley has told interviewers- in-
cluding this newspaper-that he never really
was the president of Nugan Hand, but "was
just there on an interim basis (to) see if I
liked what I would find." He has said that
lie left when Nugan Hand couldn't produce a
satisfactory balance sheet and Mr. Nugan
died.
That isn't the way he talked, however, in
October 1979. when Nugan Hand's represen-
tatives from all over the world were flown
at huge expense to Sydney for a conference.
Mr. Beazley was presented as the new boss.
Messrs. Nugan and Hand said that they
would be reduced to broad policy maker,;
and that all orders would come from Mr.
Beazley from now on.
'Mike, Frank and Buddy'
Mr. Beazley, after being praised by Adm.
Yates as "the finest banker in the United
States under the age of 35," said, "It is a
privilege and an honor fcr me to be presi-
dent (of) this company." He said he had
"had the opportunity to see it grow" during
a close 24-year relationship with "Mike and
Frank and Buddy," and added that "the de-
cision that I would want to be associated
with this group" was "one of the best ones
I've ever made, decision-wise."
He told the group, "You're fortunate to
have probably one of the best money-market
operators that I've ever seen and certainly
one of the highest-qualified tax desk depart-
ments or divisions of firms that I've ever
seen." This, even though Nugan Hand's
money-market operations were consistent
and intentional money losers, as the bank
built up deposits by offering investors much
higher interest rates than Nugan Hand got
by investing the money for its own account.
(The Hong Kong liquidator's office has cal-
culated that from 1976 to its demise, Nugan
Hand lost $7.9 million in trading securities.)
And many of Mr. Nugan's tax schemes later
proved to be scarcely veiled frauds.
Hearing his words of praise for Nugan
Hand repeated from transcripts of tape re-
cordings obtained by this newspaper and
verified, Mr. Beazley said that it was possi=
ble that he had said such things but that he
couldn't remember. He also conceded the
possible accuracy of reports that as late as
March 1980, he had assured people. that the
bank was solid and would continue.
Lots of Gold Braid
Other leading lights at the October 1979
meeting were Adm. Yates: Gen. LeRoy .1.
Manor, the retired chief of staff for the U.S_
Pacific Command: Walter McDonald the
recently retired eputy A_ irector. and
~a er, a cons tant to variousU. de
tense ansecurity agencies. Gen. Manor
he ped run Nugan Hand's Philippine office,
an Messrs. McDonald and Pauker had be-
come consultants to the firm.
? Everyone praised Nugan Hand lavishly
and pledged tireless efforts to make it grow.
But there were some disquieting notes, too.
Representatives from Malaysia, Taiwan and
Singapore openly expressed their uneasiness
about what the Malaysia man called "our
present non-official banking activities." All
of these countries and others in the region,
including Australia, have tight restrictions
on taking money out of the country, which
was Nugan Hand's main attraction in luring
customers. Nugan Hand was allowed into
many countries only under the belief that it
was an international trade broker.
Nobody mentioned the books that Price
Waterhouse had refused to certify two
weeks earlier. Mr. Nugan seemed his
charming, chipper self. But he, like his
bank, was unraveling.
That summer his American-born wife,
Lee, had returned to her parents in Nash-
'ville, Tenn., taking the couple's two chil-
dren. Records show that she ran up $21.200
in bills on her American Express card in
nine months. Australian liquidator John
O'Brien says that she also took $1 million in
traveler's checks with her. She has resisted
numerous attempts by this reporter to inter-
view her.
Close friends- of Mr. Nugan say that he
wanted her back. He went on the wagon,
ending a bottle-a-day Scotch habit, and he
took off nearly 50-pounds-all in six months.
He spent money in manic style. He paid
about $500.000 to remodel the couple's lavish
waterfront home (sand reportedly was
hauled in for a beach) to impress his wife.
But by several accounts she was revolted by
its poor taste when she saw it on a brief trip
home to attend a wedding at Christmas of
1979.
Mr. Nugan flew back to the U.S. with her
on Jan. 9. 1980, but then was off alone to
Florida, the Caymans and Switzerland,
where he and Mr. Hand reportedly sought
United Nations money for their refugee proj-
ect. He apparently talked to former CIA Di-
rector William Colby and made plans ss to see
him the next month. He told people a he
was Fn0vi to S. and entered negotia-
tions to buy a Florida condominium.
He was back in Sydney Jan. 25. The next
day he agreed to close another purchase: a
32.2 million country estate he had'dickered
over for months-825 landscaped acres and
a mansion-"the finest in Australia," he told
its owners, a family named Darling.. The
deal was never consummated. That night he
died.
Mr. Hand and the other Americans run-
ning the bank appeared to witnesses genu-
inely surprised by his death-and the sudden
desperateness of the situation. Some big
withdrawals were made about this time.
Maurice Bernard Houghton, a mysterious
Texan who played a big part in the. bank's
affairs, withdrew 3150,000 in February; he
has said that he used the money on company
business in Europe. Mr. Beazley withdrew
3200,000, which was transferred to his ac-
count in Florida; he says he can't remem-
ber what the money was for, but that he has
repaid it though he can't prove It.
Gen. Manor Leaves Manila
When Nugan Hand's liquidation came on
April 11, 1980, Wilfred Gregory of the firm's
Manila office says that he and Gen. Manor
were warned by their lawyer, William Qua-
sha, to leave the Philippines or they "could
wind up in jail." Mr. Gregory says that he
staved but that Gen. Manor left overnight.
Gen. Manor, now running a retired officers'
association in Virginia, wouldn't'say when
or why he left the Philippines, and Mr. Qua-
sha says he can't discuss his advice to a cli-
ent. Mr. Gregory kept the office for consult-
ing work; he won't name his clients. His
new partner was Philippine President Ferdi-
nand Marcos's brother-in-law Ludwig
Rocka, until .Mr. _ Rocka's recent death.
Also as Nugan Hand's liquidation began,
Mr. Houghton notified several of the firm's
agents in Saudi Arabia to get out fast. There
had been a similar evacuation in January
when Mr. Nugan died, but when things
cooled off the salesmen returned. In April
they barely escaped. "The situation became
somewhat violent," Mr. Houghton has re-
called. "The bank branch .? . . was severely
damaged by the depositors after Mike Mur-
phy (the bank representative) left," he
said.
In June 1980, Michael Hand, the firm's
co-founder, went Into hiding in an apartment
next to a butcher shop owned by Robert W.
Gehring. Mr. Gehring, a former U.S. Army
sergeant, worked for Bernie Houghton. The
three men had been close since Vietnam
War days; Mr. Hand had been a Green Be-
ret and then an undercover operative, and
Mr. Houghton was a big trader throughout
Southeast Asia., Mr. Gehring's shop was the
place where many of Nugan Hand's records
were secreted after Mr.. Nugan's death. Mr.
Gehring has testified that Mr. Houghton
asked him to help Mr. Hand flee from Aus-
tralia.
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Mr. Gehring says that he conned an em-
ployee. Alan Winter, into lending him his
birth certificate, which Mr. Gehring then
used t obtain a passport in Mr. Winter's
name without his knowledge. Mr. Hand's
U.S. passport had been seized the previous
December by the U.S. consul in Singapore
because the Bronx-born American had be-
come an Australian citizen. He had been
warned that Australian immigration offi-
cials were under orders not to let him leave
under his own passport.
The Phony-. Passport
? Mr. Gehring has testified that a mysteri-
ous - Amnerican named -Charlie." identified
only as an old Army buddy of Mr. Hand's,
showed up.in Australia. created a disguise
for Mr: Hand and arranged forhim to travel
to the U.S.., via Fiji and Vancouver. Mr.
Hand- left in mid-June. and Mr. Gehring
says be concealed his friend's departure for
a week. Mr. Hand left his wife Helen behind,
and she is still living in. Australia.
So tar: the only charges by Australian au?
thorities in the Nugan . Hand affair are
against Michael Moloney, Mr. Houghton's
lawyer, and Patricia Swan. Mr. Nugan's
secretary, for allegedly obstructing justice
during the destruction of records after Mr.
Nugan died. Mr. Moloney concedes in an in-
terview that he advised Mr. Hand to remove
the firm's records, but he says he is betn,g
made a scapegoat in the case. Mrs. Swan
has refused to be interviewed.
in February 1981, Mr. Gehring has testa-'
fled, he was visiting his brother in San Fran-
Cisco when he got ~Chaar e. a go to They arranged for Mr.:Gehring pay telephone booth at the airport. At the
appointed time, a call came from Mr. Hand,
whereabouts unidentified. He asked about
his wife and friends and said he wasn't us-
ing Mr. Winter's identity anymore. 'That is
the last time anyone.says he has talked to
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