Title Nugan Hand Group - Royal Commission of Inquiry (Hon. Mr Justice D.G. Stewart) - Final report, dated 28 June 1985 - Report - Volume 1
Source Both Chambers
Date 27-11-1985
Parliament No. 34
Tabled in House of Reps 27-11-1985
Tabled in Senate 02-12-1985
Parliamentary Paper Year 1985
Parliamentary Paper No. 368
System Id publications/tabledpapers/HPP032016002666


Nugan Hand Group - Royal Commission of Inquiry (Hon. Mr Justice D.G. Stewart) - Final report, dated 28 June 1985 - Report - Volume 1

The Parliament of the Commonwealth of Australia

ROYAL COMMISSION OF INQUIRY INTO THE ACTIVITIES OF THE NUGAN HAND GROUP

Final Report

Volume 1

June 1985

Presented 27 November 1985 Ordered to be printed 28 November 1985

Parliamentary Paper No. 368/1985

mm

The Government of the Commonwealth of Australia and

The Government of the State of New South Wales

ROYAL COMMISSION OF INQUIRY INTO THE ACTIVITIES OF THE NUGAN HAND GROUP

Commissioner: The Hon. Mr Justice D.G. Stewart

FINAL REPORT - VOLUME ONE June 1985

Australian Government Publishing Service Canberra 1985

© Commonwealth of Australia 1985

ISBN 0 644 01334 6 This Volume

ISBN 0 644 01336 2 Set

NOTE

This Report has been edited to remove material which may be prejudicial to prosecutions or fair trial. Blank spaces therefore appear in certain parts of the Report.

Printed by C. J. THOMPSON, Commonwealth Government Printer, Canberra

ROYAL COMMISSION OF INQUIRY INTO THE ACTIVITIES OF THE NUGAN HAND GROUP

Commissioner: T he H on. M r. J ustice D. G. Stewart Secretary: Mr. G. R. L innane

G.P.O. Box 2528 Sydney N.S.W. 2001 Australia

Telephone: (02) 358 2488

28 June 1985

Your Excellency,

Pursuant to Letters Patent issued to me on 28 March 1983 by the Government of the Commonwealth of Australia I now have the honour to present to you the final report of my inquiry into the activities of the Nugan Hand Group.

Yours sincerely,

(D.G. Stewart) Royal Commissioner

His Excellency the Right Honourable Sir Ninian Stephen, A.K., G.C.M.G., G.C.V.O., K.B.E., K.St.J. Governor-General and Commander-in-Chief Government House

CANBERRA A.C.T. 2600

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ROYAL COMMISSION OF INQUIRY INTO THE ACTIVITIES OF THE NUGAN HAND GROUP

Commissioner: T he H on. M r. J ustice D. G. Stewart Secretary: M r. G. R. L innane

G.P.O. Box 2528 Sydney N.S.W. 2001 Australia

Telephone: (02) 358 2488

28 June 1985

Your Excellency,

Pursuant to Letters Patent issued to me on 28 March 1983 by the Government of New South Wales I now have the honour to present to you the final report of my inquiry into the activities of the Nugan Hand Group.

Yours sincerely,

(D.G. Stewart) Royal Commissioner

His Excellency Air Marshal Sir James Rowland, K.B.E., D.F.C., A.F.C., K.St.J. Governor of New South Wales Government House

SYDNEY N.S.W. 2000

.

- vii -

TABLE OF CONTENTS

Volume 1 Page H o .

PAPm ONE : INTRODUCTORY MATTERS 1

Section 1 Establishment and Conduct of the Commisson 3

Section 7 Construing the Commission's Terms of Reference 16

Section 3 Other Matters 31

PART TUP : PROFILES 35

Alphabetical Listing of Personal Profiles 37

Explanatory Tables 40

Personal Profiles 42

Aiphabetical Listing of Company Profiles 299

Company Profiles 301

PART THPEF : COMPENDIUM 381

Section 1 Overview 383

Section 2 In the Reainnina - A Dismal Performance (The years 1973 to 1974) 403

Section 3 The Slide Continues - The Timely Emergence of Nugan Hand (Hong Kong) Ltd (The period 1 July 1974 to 31 January 1976) 418

Section 4 The Myth is Established (The years 1^76 to 1977) 444

Section 5 Expansion Continues - But Falters in the Face of Adverse Publicity (The year 1978) 482

Section 6 Problems Multiply - Group Insolvency Accelerates - But Appearances Maintained Until the End 502

(The year 1979)

Section 7 The Death of Mr Nugan 520

Section 8 The Aftermath : 'Bedlam' 529

Section 9 The Concealment and Destruction of Documents 573

Volume 2

PART FOUR : DISCRETE TOPICS 627

Section 1 Nugan Hand (Hong Kong) Ltd 629

- viii -

Page H o .

PART FOUR (Cont'd)

Section 2 The Nugan Hand Bank 677

Section 3 The Alleged Involvement of the United States Central Intelligence Agency 739

Section 4 Access to Relevant Records Denied - the Effect of Cayman Islands Law 755

Section 5 The Auditors 763

Section 6 Bankers' Opinions 777

Section 7 An Unusual Relationship 801

PART FIVE : RECONSTRUCTING THE PUBLISHED ACCOUNTS OF NUGAN HAND LTD : 1974-1979 807

PART SIX : ALLEGATIONS OF COMPLICITY IN DRUG DEALINGS 857

PART SEVEN : ALLEGATIONS OF PARTICIPATION IN THE ILLEGAL MOVEMENT OF ARMAMENTS 891

PART EIGHT : ALLEGATIONS OF BREACHES OF EXCHANGE CONTROL LANS 939

PART NINE : ALLEGATIONS OF MONEY LAUNDERING AND TAX EVASION 989

PART TEN : BREACHES OF CRIMINAL LAW IDENTIFIED 999

PART ELEVEN : SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS 1095

APPENDICES 1101

A. (i) Commonwealth Letters Patent, 28 March 1983 1103

(ii) New South Wales Letters Patent, 28 March 1983 1113

B. Nugan Hand Representative Offices 1121

C. Allegations as to the Connection between the

Nugan Hand Group and the United States Central Intelligence Agency (C.I.A.) 1173

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Page N o .

APPENDICES (Cont'd)

D. Examples of Advertisements Used by the Nugan

Hand Group to Recruit Overseas Representatives 1179

E. Examples of Internal Bills of Exchange 1185

F. Exchange of Letters between the Government of

the United Kingdom of Great Britain and Northern Ireland and the Government of the United States of America Concernina the Cayman Islands, 26 July 1984 1189

INDEX 1205

Table of Cases Cited 1231

X

EXPLANATORY NOTE

Throughout this report:

A. The expression 'the Nugan Hand Group' is a reference to some or

all of the individuals and companies included within that

expression as defined in the Commission's terms of reference,

[see Appendix A]

R. IJhere not otherwise stipulated the currency referred to is

Australian dollars.

C. The word 'Limited' in company titles is abbreviated to 'Ltd'.

ENDNOTES - EXPLANATORY NOTE

A. Cm ..... , Jones, is a reference to the confidential transcript

of evidence heard by the Commission and the name of the relevant

witness.

T ...... , Jones, is a reference to transcript of a public

hearing of the Commission. The numerals following the

abbreviations indicate the relevant pages of the transcript of

evidence.

R· CD.... is a reference to a Commission document. The numerals

following the abbreviation indicate the relevant number

allocated to the Commission document.

C. A brief description of the Commission document and relevant

folios is niven in most cases. For example: '... Letter

Jones/Brown 15/6/77' indicates that the document relied upon was

a letter dated 15 June 1977 from Nr Jones to Nr Brown.

- xi

For convenience the names of companies have where possible been

abbreviated in the document descriptions mentioned above. For

example 'NHL' is a reference to Nugan Band Ltd

'NHHK' is a reference to Nugan Hand (Hong Kong) Ltd

'NHB' is a reference to the Nugan Hand Bank

'CAC 7th Interim Report1 is a reference to the March 1983

Seventh Interim Report of the Corporate Affairs Commission of

New South Wales special investigation into the affairs of Nugan

Hand Limited and other companies.

'JTF Report' is a reference to the four volume Report of the

Commonwealth-New South Wales Joint Task Force on Drug

Trafficking.

'Interim Report No. 1' is a reference to this Commission's

Interim Report number 1 delivered on 13 October 1983. That

Report dealt with the Commission's inquiry in relation to

paragraphs (e), (f) and (g) of the Commonwealth terms of

reference. [Appendix A(i)]

'Interim Report No. 2' is a reference to the Commission's

Interim Report number 2 delivered on 13 December 1984. That

Report dealt with the Commission's inquiry in relation to terms

(b), (c) and (d) of the respective terms of reference.

[Appendix A]

'JTF ROI Jones' indicates that the document relied upon is the

Joint Task Force record of interview of Hr Jones.

'Jones evidence to CAC' means that the document relied upon is

the transcript of evidence of Mr Jones to the delegates of the

New South Wales Corporate Affairs Commission in the course of

the special investigation by that Commission into the Affairs of

Nugan Hand Limited and other companies.

A reference to the 1 Bangkok conference' is a reference to the

Nuoan fane1 Group International conference held in Pangkok in

January 1978.

A reference to the 'January 1979 conference' is a reference to

the Nugan Hand International Conference held at the Wentworth

Hotel, Sydney in January 1979.

A reference to the 'October 1979' conference is a reference to

the Nugan Hand International conference held at the Gazebo

Hotel, Kings Cross, Sydney in October 1979.

'RCIDT' is an abbreviation for the Royal Commission cf Inquiry

into Drug Trafficking.

A reference to the 'Moloney/Swan committal proceeding' is a

reference to the committal proceedings against Nr M.J. Moloney

and Ns P.M. Swan arising out of the special investigation by the

New South Wales Corporate Affairs Commission referred to above.

A .... is a reference to an administrative file held by the

Commission. The numerals following the abbreviation indicate

the number allocated to the Commission document.

PART ONE

INTRODUCTORY MATTERS

r

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SECTION 1 : ESTABLISHMENT AND CONDUCT OF THE COMMISSION

A. Constitution of the Commission

Brief general background

1.1.1 The Royal Commission of Inquiry into the Activities of the Nugan

Hand Group was established pursuant to Letters Patent issued by the

Commonwealth and New South Wales Governments on 28 March 1983. The

Letters Patent extended existing Letters Patent issued by those

Governments which related to investigations of certain drug trafficking

and associated matters and upon which the Royal Commission had presented

its principal report on 25 February 1983.

1.1.2 Concern about aspects of the activities of companies within the

Nugan Hand Group and persons associated with the Group commenced in the

late 1970s. Following the death of Mr F.J. Nugan some of the Nugan Hand

group of companies were placed in provisional liquidation and on

18 February 1980 the New South Wales Corporate Affairs Commission was

appointed as Inspector under Part VIA of the Companies Act 1961 (NSW) to

investigate the affairs of Nugan Hand Limited (hereafter referred to in

this report as 'Nugan Hand Ltd') and other companies. From 1 July 1982

the investigation was continued pursuant to Part VII of the Companies

(NSW) Code. After presenting a number of interim reports, the Corporate

Affairs Commission presented the main report on this investigation (its

Seventh Interim Report) in March 1983.

1.1.3 There had, in the meantime, been references in the course of

other official inquiries to the activities of Nugan Hand related

companies and persons associated with them. The Eon. Mr Justice

P.M. Woodward in the further report of the New South Wales Royal

Commission into Drug Trafficking in May 1980 considered allegations of

involvement in drug trafficking and the movement of funds by the Nugan

Hand Group and recommended that the evidence heard by the Royal

- 4 -

Commission be referred to appropriate law enforcement bodies for further

investigation.

1.1.4 Allegations concerning the activities of Nugan Hand related

companies and persons also came before the Hon. Mr Justice E.S. Williams

in the course of the Australian Royal Commission of Inquiry into Drugs,

which reported in December 1979. That Commission caused certain

inquiries to be carried out under the direction of the then Commonwealth

Police Force including inquiries through official channels directed to

United States law enforcement authorities.

1.1.5 Following upon joint recommendations by Royal Commissioners

Mr Justice Woodward and Mr Justice Williams the Commonwealth and New

South Wales Governments established in 1979 the Commonwealth-New South

Wales Joint Task Force on Drug Trafficking. The Joint Task Force, based

in Sydney, commenced operating in July 1979. The Governments

subsequently agreed to assign to the Joint Task Force responsibility for

the investigation and reporting of the matters touching the Nugan Hand

Group referred to by Mr Justice Woodward. Volume One of the report of

this investigation was presented in January 1982. Volume TWo, dealing

specifically with Nugan Hand aspects, was presented in June 1982. Volume

Three was presented in October 1982 and Volume Four, the final volume

relating to the Joint Task Force investigation was presented to the

Governments in March 1983. Volumes TWo, Three and Four were subsequently

published in an edited form.

1.1.6 The February 1983 report of the Stewart Royal Commission of

Inquiry into Drug Trafficking also referred to evidence it had heard

concerning the involvement of Nugan Hand Group personnel in the movement

of moneys and other matters.

1.1.7 During the whole of this period there were frequent references

in the Australian media of allegations concerning the activities of Nugan

Hand and persons associated with the Group. Articles were also published

in the United States and Asian press speculating about the operations of

the Group and the associations of persons involved with it. On a number

5

of occasions during March 1982, allegations concerning Nugan Hand were

the subject of questions and debate in the Australian House of

Representatives. A number of related documents were tabled by the then

Leader of the Opposition.

1.1.8 In April 1982 the Commonwealth Government released a joint

opinion by the Attorney-General and Solicitor-General which concluded

that a widening of the Royal Commission's terms of reference would be

necessary to enable a corrprehensive investigation into Nugan Hand related

matters to be undertaken. The Commonwealth Government also indicated

that it considered a further inquiry into Nugan Hand would be best

handled by the Royal Commission of Inquiry into Drug Trafficking under

extended terms of reference rather than by a new Royal Commission and

that consultations with the Governments of New South Wales, Victoria and

Queensland, commissioning Governments of that Royal Commission, had been

commenced.

Nugan Hand inquiry

1.1.9 On 29 March 1983 the Governments of the Commonwealth and of New

South Wales announced that Letters Patent had been issued to the Hon.

Mr Justice Stewart extending his terms of reference to include the making

of wide ranging inquiries into the activities of the Nugan Hand Group.

The following statement for the media was released jointly by the Prime

Minister and Premier of New South Wales:

'The Prime Minister, Mr Hawke, and the Premier of New South Wales, Mr Wran, today announced the extension of the terms of reference of the Royal Commission, headed by Mr Justice Stewart, to allow him to inquire into certain activities of the Nugan

Hand Croup.

Under terms of reference issued by both the Commonwealth and the New South Wales Governments, the Royal Commissioner will be able to inquire whether the Nugan Hand Group engaged in activities involving contravention of laws of the Commonwealth or laws of

New South Wales.

In particular, Mr Justice Stewart will be able to inquire whether the Nugan Hand Group contravened laws relating to the importation, exportation or possession of drugs or armaments,

- 6 -

breached exchange control regulations, or contravened laws relatina to local government authorities.

The Commissioner will also be able to inquire whether the Nugan Hand Croup or any other body interfered with the investigations of any Australian law enforcement body into the activities of the Nugan Hand Group.

Mr Wran and Mr Fawke said the inquiry provided the best

opportunity to examine allegations concerning the activities of the Nuqan Hand Group.

Mr Justice Stewart is to report on his inquiry before

31st December, 1983.'

1.1.10 These Letters Patent, reproduced as Appendix A to this report,

covered a number of apparently disparate matters and the Commission's

first task was to decide an appropriate starting point for its

inquiries. The Commission chose the area covered by the Commonwealth

terms (e), (f) and (g). The Commission's report on these matters

(Interim Report No. 1) was presented on 13 October 1983.

1.1.11 The Commission next concentrated on terms (b), (c) and (d)

contained in both the Commonwealth and New South Wales terms of

reference. The Commission's report on those terms of reference (Interim

Report No. 2) was presented on 13 December 1984.

1.1.12 This final report deals with the remaining matters specified in

the Commonwealth and New South Wales terms of reference. These matters

are explained in Section 2 of this Part.

1.1.13 It was apparent at an early stage in the Commission's

investiqations that because of the breadth, complexity and scope of the

investigations to be undertaken under the terms of reference that the

inquiry could not adequately be undertaken by the proposed original

reporting date. After consideration by the Commonwealth and New South

Wales Governments, a revised reporting date of 30 June 1984 with a review

of progress towards the end of this period was agreed upon.

1.1.14 On 12 June 1984 the Commonwealth Government announced that it

proposed the appointment of the Hon. Mr Justice Stewart as inaugural

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Chairman of the National Crime Authority, the appointment to take effect

from 1 July 1984. The announcement indicated that discussions were to

take place on the most practical way to continue the Royal Commission

investigations remaining to be concluded. The Governments subsequently

extended the reporting date for the Royal Commission to the end of 1984

and finally to 30 June 1985.

B. Cooperation with other investigatory bodies and government

departments

1.1.15 It was evident from the outset of the Commission's

investigations that it would need to work in cooperation with other

Australian law enforcement bodies, government departments and agencies as

well as seeking the assistance of certain overseas governments and

agencies of those governments.

1.1.16 The Commission continued to have available to it from the Royal

Commission of Inquiry into Drug Trafficking a small team of police

investigators drawn from the Australian Federal Police and the police

forces of New South Wales and Queensland which provided the Commission's

necessary police investigatory capacity.

1.1.17 As the documentary material to be examined involved a

considerable amount of financial analysis and investigation, the

secondment of a further two officers from the New South Wales Corporate

Affairs Commission was arranged to supplement the group of three

financial investigators seconded for the purposes of the Commission's

drug trafficking investigations.

1.1.18 Both the police and financial investigators were encouraged to

regard themselves as members of the Royal Commission staff first. They

were of course able to provide the Commission with very good contacts

with their parent organisations and these contacts greatly assisted the

Commission's work.

1.1.19 Over the period of the inquiry formal liaison was established

with the various police forces, the Commonwealth-New South Wales Joint

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Task Force on Drug Trafficking, the Reserve Bank of Australia, the

Australian Taxation Office, the Australian Customs Service, the

Department of Immigration and Ethnic Affairs, the Department of Foreign

Affairs and the Few South Wales Corporate Affairs Commission. The

assistance and cooperation of these agencies in the Commission's work is

acknowledged.

1.1.20 The Commission established liaison with the Hong Kong Registrar

General1s Department. Officers of the Official Receivers Office within

the Department had been appointed liquidators of the Nugan Hand Bank and

Nugan Hand (Hong Kong) Ltd. Following representations by the Royal

Commission, access was provided to certain material held by the

liquidators in Hong Kong.

1.1.21 The Commission examined documentation from a number of agencies

including the Royal Commission on the Activities of the Federated Ship

Painters and Dockers Union, the Commonwealth-New South Wales Joint Task

Force on Drug Trafficking, other Royal Commissions, the reports of the

Corporate Affairs Commission special investigation and the available

reports of the Australian liquidators, Mr J.W. O'Brien and Mr I.D.

Ferrier.

1.1.22 Liaison was established with the United States Federal Bureau of

Investigation through its Australian liaison officer. The Bureau had

conducted a number of inquiries in the United States in relation to Nugan

Hand matters and provided further assistance to the Commission in the

course of its investigation [see 4.3.37].

1.1.23 The Commission acknowledges the essential administrative support

provided by the Commonwealth Department of Local Government and

Administrative Services (formerly the Department of Administrative

Services) and the Department of the Special Minister of State.

1.1.24 The Commission continued to use and develop for its own purposes

certain computer based applications available on the computer system

maintained by the Department of the Special Minister of State.

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1.1.25 The Commission was assisted in its work by the Commonwealth

Reporting Service, which provided court reporting services to the

Commission in Sydney. The Australian Federal Police made staff available

to provide hearing room security services as required. To these

organisations and others who assisted the Commission in its task, the

Commission expresses its gratitude.

C. Overseas visits

1.1.26 The Royal Commissioner accompanied by Senior Counsel and the

Commission Secretary visited Hong Kong in October 1984 and the United

States in January 1985.

Hong Kong

1.1.27 The visit to Hong Kong enabled the Commissioner to take evidence

from persons who had been involved there in substantial and significant

operations of the Nugan Hand Group.

1.1.28 The Commissioner also had discussions with senior officers and

officials of government agencies involved in the liquidation and

investigation of the Nugan Hand group of companies and other related

matters. As a result of these discussions further material was made

available from official sources in Hong Kong.

United States of America

1.1.29 The Commissioner, together with Senior Counsel and the

Commission Secretary visited the United States in January 1985 to take

evidence and hold discussions with relevant government agencies.

1.1.30 A number of important witnesses were heard in Los Angeles and

Washington D.C.

1.1.31 While in Washington D.C. the Commission party met with senior

officials from the Federal Bureau of Investigation, the United States

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Justice Department and the Permanent Sub-COmmittee on Investigations of

the Senate Committee on Governmental Affairs. These discussions were of

great value and are referred to as appropriate elsewhere in the body of

this report.

D. Acknowledgements

1.1.32 The extension of the Commission's terms of reference to

encompass the investigation of matters relating to the Nugan Hand Group

required essentially a continuation of the existing Royal Commission

resources. Accommodation, facilities, equipment and many of the

Commission's personnel were therefore retained for the further inquiry.

1.1.33 However, the Nugan Hand inquiry was a considerably different

type of investigation from that which preceded it. It was necessary for

the Commission to collect and assess a very large volume of documentary

material, much of it requiring financial investigation and analysis.

Consequently the Commission adjusted its staffing resources, made

necessary changes to its organisation and, over the period of its

inquiry, developed certain computer based applications to reconstruct and

analyse the accounts of Nugan Hand and companies associated with it.

1.1.34 The Royal Commission has been exceptionally well served by its

Secretary and by the lawyers, accountants, police, researchers and

clerical staff appointed to assist the Commission. Together, and often

working very long hours, they have carried out the difficult tasks

involved in the gathering and sifting of evidence, including analysing

the large quantity of documentary evidence referred to at paragraph

1.1.39, and the recording of relevant information in the Commission's

computerised systems. Many of these staff have been appointed to

positions with the National Crime Authority.

1.1.35 in particular the Commission wishes to pay tribute to the work

of Mr P.J. Moss Q.C. who has been Senior Counsel Assisting the Commission

from November 1983. His contribution has been in the highest traditions

of the Bar.

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E. Hearings and statistics

1.1.36 The Commission's intention to hold public hearings was notified

in the national press on 9 April 1983. The first hearing under the Nugan

Hand terms of reference was held on 19 April 1983. The evidence upon

which this final report is based was heard in camera. The reason that

this course was adopted is explained, as to a particular part of the

evidence, at 3.9.7-3.9.9. However it became obvious that the whole of

the evidence should be heard in camera due to the publicity which would

otherwise have attended the hearings because of the sensational nature of

some of the allegations made and because of the intense interest

displayed by the media in the alleged activities of the Nugan Hand

Group. Thus, the Commission concluded, albeit reluctantly, that in order

to avoid the likelihood of serious harm being caused to the reputation of

persons as a result of the publication of unsubstantiated allegations,

and the risk that such publication might affect the right of persons to

fair trials in the future, that the whole of the evidence should be heard

in camera.

1.1.37 Public and confidential hearings were all conducted in Sydney,

with the exception of overseas hearings. The Commissioner sat to hear

evidence in Australia for 187 hearing days and heard 267 witnesses.

1.1.38 The Commission took evidence in Hong Kong in 1984, and in the

United States in 1985. Twelve witnesses were heard in Hong Kong. In the

United States one witness gave evidence in Los Angeles and five in

Washington.

1.1.39 The transcript of evidence received in Australia totalled

11 900 pages. Documentary exhibits together with documentary material

not tendered into evidence totalled 11 830 files comprising some 948 200

folios.

F. Research techniques

1.1.40 As mentioned in 1.1.39 the Commission had before it a very large

quantity of documentation relating to its inquiry.

- 12 -

1.1.41 The task of researching and analysing this material was

considerable. The Commission had available to it computer systems

developed to support the work of the Royal Commission on the Activities

of the Federated Ship Painters and Dockers Union, certain of which were

adapted to suit the Commission's particular purposes, techniques and

methodology.

1.1.42 An economic and relatively stringent approach was developed for

the analysis and assessment of information. Only those matters

considered to be of significance to the Commissions's terms of reference

were entered on the computer system. In order to assess the material a

multi-disciplinary approach was adopted involving lawyers, accountants,

police investigators and research officers together examining records and

analysing material for use in the Commission's investigations.

1.1.43 The Commission's investigating accountants developed a suitable

computer based method of reconstructing company accounts (balance sheets

and profit and loss statements). As the Nugan Hand Ltd journal was not

available for examination, the journal was reconstructed from entries in

the Nugan Hand Ltd general ledger by using an electronic spreadsheet

program. Records were reconstructed for the period 1974 to 1979 and from

these records financial statements drawn and compared with statements

published by Nugan Hand Ltd for the same period.

1.1.44 The Commission also developed a system of keywording the

official transcript of hearings in order to facilitate reference by staff

to the transcript. In addition, much of the transcript from key

witnesses taken over lengthy periods was summarised according to subject

matter, paginated and indexed to assist legal staff and Counsel

(CD10947).

G. Interim reports

1.1.45 The Commission presented two interim reports. The first,

dealing with Commonwealth terms of reference (e), (f) and (g) was

presented to the Commonwealth Government on 13 October 1983 and tabled in

- 13 -

the Commonwealth Parliament on 6 December 1983. Interim Report No. 2

concerning the Commonwealth and New South Wales terms of reference

(b), (c) and (d) was presented on 13 December 1984 and tabled in the

Commonwealth and New South Wales Parliaments on 20 March 1985.

Interim Report No. 1

1.1.46 The general allegation identified and examined in this report

was that investigations conducted by an Australian law enforcement body,

namely the Federal Narcotics Bureau into the activities of the Nugan Hand

Group had been improperly interfered with or inhibited. The general

allegation was comprised of a number of specific allegations which were

detailed in the report, including allegations concerning politicians and

senior government officials.

1.1.47 The issues raised for investigation were summarised as follows

in the interim report:

1 (i) Is there any evidence that any person, organisation or body

associated with the Nugan Hand Group

(a) directly or indirectly made or offered any payment or inducement

for, or in connection with, or endeavoured by means of a threat

to procure, the disclosure by any Commonwealth officer or any

person who was formerly a Commonwealth officer of information

relating to either or both these investigations?

(b) procured or received, directly or indirectly, from any

Commonwealth officer or any person who was formerly a

Commonwealth officer information relating to either or both of

these investigations?

(ii) Is there any evidence that any person, organisation or body

improperly interfered with, inhibited or endeavoured to

interfere with or inhibit either or both of these

investigations?'

- 14 -

1.1.48 The Federal Narcotics Bureau had been disbanded in November 1979

following recommendations by Royal Commissioner the Hon. Mr Justice

E.S. Williams. In the main its functions were transferred to the

Australian Federal Police.

1.1.49 The Commission in its investigation of these allegations found

evidence that as a result of major deficiencies within the Narcotics

Bureau, the Bureau investigations were inadequate and ineffective and

that the Bureau failed to evaluate information over a period of time.

The Commission also found that the Bureau's decision, and the events

surrounding it, to cease investigations into the Nugan Hand Group invited

criticism, but that no member of the Bureau had behaved dishonestly or

improperly.

1.1.50 The Commission found no credible evidence to support allegations

concerning named Members of the House of Representatives and concluded

that such allegations were unjustified and false.

Interim Report No. 2

1.1.51 This report concentrated on matters related to the Commonwealth

and New South Wales terms of reference (b), (c) and (d). In essence

these terms concerned whether any activities engaged in, directly or

indirectly, by the Nugan Hand Group with local government authorities in

the State of New South Wales involved contravention of a law of the

Commonwealth or the laws of that State.

1.1.52 The Commission found that Nugan Hand Ltd published to the

Councils accounts that were false for the purpose of inducing the

Councils to invest with the company and that it failed to hold a

requisite dealers licence under the Securities Industry Act 1975 (NSW)

but that apart from these matters there was no evidence that the

activities engaged in by the Nugan Hand Group with local government

authorities involved any contravention by any person, organisation or

body, of a law of the Commonwealth or the laws of the State of New South

Wales.

- 15 -

1.1.53 The Commission recommended however that serious consideration be

given to the legal position of councils vis a vis the Local Government

Investment Service Pty Ltd when making deposits with that company [see

page 323 of that report].

1.1.54 The Commission also recommended that the New South Wales

Department of Local Government be requested to consider ways in which the

investment of surplus funds by councils might be better monitored.

1.1.55 In relation to the Secret Commissions Prohibition Act 1919 (NSW)

it was recommended that the appropriate authorities consider whether the

Act should be amended to lengthen the period of limitation of time for

the institution of prosecutions (see section 14(3) of that Act), for

provision to be made for heavier penalties and to correct what appear to

be drafting errors in the legislation.

- 16 -

SECTION 2 : CONSTRUING THE COMMISSION'S TERMS OF REFERENCE

1.2.1 Often the agitation for a Royal Commission is based upon nothing

more than general, allegation and rumour. Accordingly the drafting of the

terms of reference becomes a matter of great importance, the desired

result being to keep the Commission within reasonable bounds yet not to

fetter a proper inquiry. The Salmon Royal Commission expressed this

requirement as follows:

'In view of the inquisitorial nature of the proceedings ... the terms of reference require careful consideration and should be drawn as precisely as possible.Ί

1.2.2 This requirement is particularly important when the matters to

be inquired into by a Royal Commission are allegations of crimes triable

in the ordinary courts. Unless such terms of reference are drawn with

precision defining exactly the allegations to be inquired into and

reported upon, the Commission itself is compelled to interpret or place a

construction upon its own terms of reference and in doing so to take into

account those matters which appear to the Commission necessary and

permissible in respect of such an exercise. Unfortunately, the rule

stated above is all too often overlooked or departed from as is shown by

the reports of a series of Royal Commissions and Boards of Inquiry (the

Victorian eouivalent) which had terms of reference requiring

2

investigation into alleged criminal conduct.

1.2.3 Matters which such a Royal Commission may, and indeed, should

take into account when the need arises to construe its terms of reference

include the very fact that a Royal Commission has been set up to conduct

the inquiry, making it unlikely that the terms should be construed so

that matters of a trivial nature are required to be reported o n , a n d

that an inquiry by a Royal Commission 'is a valuable method of

corrprehensive and authoritative fact finding on which to base

wide-ranging proposals for legislative and administrative reform.'^

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1.2.4 In the course of carrying out such an exercise, questions of

relevance often arise for consideration. Here, too, problems of

definition may arise for it has been said that in the case of a Royal

Commission what is relevant may in fact be what the Commission bona fide

believes will assist it in its inquiry.^ Where the Royal Commission,

compelled to construe its own terms, perceives that it is clearly not

possible for it to inquire into every allegation contained within a

literal interpretation of the terms, it must, of necessity, read down the

terms to practical limits*’ or be selective as to which of the total 7

allegations within the terms of reference it will inquire into.

1.2.5 Obviously, it is highly desirable for the terms of reference to

be so expressed that there can be no doubt about the meaning to be given

to them and no doubt about their ambit. If the terms of reference are

not thus drawn so that the Commission itself is compelled to place a

particular interpretation upon some part of them there is a risk that the

Commission's interpretation might be held subsequently to have permitted

inquiries outside the terms of reference on their proper construction.

There is a risk, too, that such an exercise on the part of the Commission

itself might result in an interpretation being placed on the terms which

is contrary to that which the Executive had anticipated would be the

subject of the report.

1.2.6 Notwithstanding these risks, the Commission has concluded that

its terms of reference (so far as relevant to the subject ratter of this

final report) do require the Commission to place a particular

construction upon them having regard to their width and lack of

particularity.

1.2.7 This, the final report of the Commission® is made pursuant to

its terms of reference but excluding term (b) in each of the Letters

Patent and excluding terms (e), (f) and (g) which appear only in the

Commonwealth Letters Patent. The Commission's terms of reference are

reproduced in full in Appendix A(i) and (ii).

1.2.8 As to paragraph (a): the Commission took the view that it

should read the paragraph as requiring its inquiries to be confined to

- i r ­

relevant contraventions of the criminal law of New South Wales and the

Commonwealth. First, it seemed to the Commission highly improbable that

the Commission would be required to inquire into breaches of the civil

law. Second, the Commission took the view that it is not required to

inquire whether there have been relevant breaches of any criminal law no

matter how minor. It seems to the Commission that it should read the

terms as requiring inquiries into relevant contraventions of a kind which

most people would regard as a serious breach of criminal law and which

carry with them a sanction indicating they should be so viewed.

1.2.9 This being the construction the Commission placed upon term (a)

the inquiries called for by that paragraph are seen to be: whether the

Nugan Hand Croup (as defined in the terms of reference) contravened any

criminal law (falling within the category described above) of New South

Wales or the Commonwealth.

1.2.10 When the definition of the Nugan Hand Group is examined

(paragraph (e) of the New South Wales terms of reference), it will be

observed that included in the definition are twenty nine named

corporations (as well as Mr F.J. Nugan, Mr M.J. Hand and any other

corporation which the Commission might identify as falling within

paragraph (e)(iv)).

1.2.11 The inclusion of these twenty nine corporations raises a further

question of interpretation. A corporation can do an act or omit to do an

act but only through the agency of a natural person. A corporation can

be convicted of most crimes, (but not offences which provide imprisonment

as the only penalty) even crimes requiring as an element a guilty mind.

Where a corporation is so convicted the conclusion that the corporation

itself has committed the offence is arrived at by the application of the

doctrine of identification; in other words, those who control or manage

the affairs of the corporation are regarded in a sense as the company

itself. It has been held that the acts of a controller are attributed to

the company even when the controller is acting in fraud of the

9

company." It is necessary to distinguish this result, that is the

identification of natural persons with the company itself, from the many

situations in which the company acts through natural persons who are

viewed merely as the agents of the corporation.

- 19 -

1.2.12 Where a corporation is convicted of an offence the relevant

director or controlling officer will in most cases be a principal or

accessory in respect of the offence. Thus in inquiring whether any of

the twenty nine nominated corporations have contravened a relevant

criminal law the Commission must necessarily inquire into the activities

of those who acted on behalf of those corporations in a relevant way. To

the extent any of the corporations are identified by the Commission as

having contravened a re]evant criminal law the Commission construes term

(a) to mean that it should also include in its report the identity of the

persons whose conduct has led to the conclusion being formed in respect

of the corporation. Indeed, the Commission takes the view that where its

inquiries lead it to conclude that directors or other relevant persons

have themselves contravened a relevant criminal law even though in the

result the corporation itself may not have done, then the contraventions

by those persons should be reported upon provided the contravention has a

sufficient connection with the Rigan Hand Group and the activities of the

Group.

1.2.13 The Commission takes the view that such construction is required

by necessary implication. It cannot be that the Executive's prime

concern is to know whether or not the twenty nine corporations as such

contravened relevant criminal laws. To stop there (or even to conduct a

detailed inquiry) would be to report information of little value. None

of the corporations are now of any importance in that those that were

important in the activities of the Nugan Hand Group have all been wound

up. Further, the various liquidators' reports conclude that they were

hugely insolvent and their creditors remain unpaid to the extent of many

millions of dollars. To the extent that any of the twenty nine

corporations have not been wound up they have ceased trading and their

assets, if any, are minimal.

1.2.14 As to paragraph (c): the requirement to report the nature and

extent of the activities identified pursuant to paragraph (a) supports

the interpretation of paragraph (a) contended in paragraphs 1 .2.8 to

1.2.13. In other words, a detailed picture is required, not merely bare

detail.

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1.2.15 As to paragraph (d): the requirement to report whether in the

course of any activity identified pursuant to paragraph (a) the Nugan

Hand Group used, was used by or cooperated with any person etc. casts a

wide net covering principals, agents, co-adventurers, accessories and the

like.

1.2.16 Another factor suggesting a generous, rather than a narrow,

interpretation is called for in relation to the construction of the

Commission's terms of reference, is the direction contained in them that

1 in conducting your inquiry and making your recommendations' the

Commission 'have regard to' certain reports of third parties including

relevant reports of the Corporate Affairs Commission of New South Wales.

These reports themselves were wide-ranging. In order to have proper

regard to them the Commission must regard its own terms as requiring an

interpretation which will permit the direction to be followed adequately.

1.2.17 Quite apart from the necessity of placing its own construction

on the terms of reference, the Commission was also left to determine for

itself two further very important questions, namely, what standard of

proof should be applied before it concluded that a relevant law had been

contravened and what evidence should be relied upon in reaching any such

conclusion. In determining these matters the Commission had regard to

relevant deliberations by several earlier Royal Commissions and Boards of

Inquiry into alleged crimes.

1.2.18 The first of these inquiries to which the Commission had regard

was one conducted in the United Kingdom in 1948 and 1949 into allegations

that Ministers of the Crown and public servants had taken bribes and the

like. The Inquiry was chaired by Mr Justice Lynskey, a Judge of the

Queen's Bench Division, the other members being two Senior Counsel at the

English Bar. The Inquiry was conducted pursuant to the Tribunals of

Inquiry (Evidence) Act 1921.

1.2.19 After adverting to the fundamental distinction [see 1.2.26 -

1.2.27] between such an inquisitorial inquiry and proceedings in a Court

and after observing that in an inquisitorial inquiry all evidence

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relating to the making of relevant allegations is relevant, the Report

then dealt with the question of what particular evidence it should rake

findings upon. It arrived at the following conclusion:10

'In coming to a conclusion as to the conduct of any individual witness and in particular whether any allegation made in

reference to him has been justified,, we have had regard only to such evidence as would properly be admitted in a case in which he was a party and his conduct was in question.'

1.2.20 The Jenkinson Board of Inquiry into allegations of criminal

conduct on the part of warders at Pentridge Prison in Victoria

(1973-1974) concluded that in view of the fact that it was required to

report upon whether certain persons appeared to have committed criminal

offences it would refrain from making any such report:

'Unless the Board was satisfied of the commission of the act to the extent which would be required in a civil proceeding of law.'

1.2.21 After observing that the legal rules of evidence had generally,

but not always, been observed in admitting evidence in the course of the

Board's Inquiry the report dealt with the question of what evidence

should be relied upon in respect of a finding of criminal behaviour in

the following terms:11

'The Board has not consciously based any finding of ill

treatment by an identified prison officer on evidentiary material which would not have been admissible against him in a civil legal proceeding to which he was a party and in which the issue was that upon which the finding by the Board has been made, without noting in this report the legally inadmissible

evidence and recording its opinion that the evidence would have been inadmissible in such a legal proceeding.'

1.2.22 In the case of some Royal Commissions and Boards of Inquiry the

terms of reference have included an express direction as to the relevant

standard of proof and the nature of the evidence which ray be relied

upon. The terms of reference of the Kaye Inquiry into allegations of 12 police corruption in Victoria required the Board to:

- 22 -

inquire and report as to whether there is credible evidence raising a strong or probable presumption ...'

that certain police had been guilty of criminal offences. The Board

found it necessary to arrive at its own interpretation of the meaning of

the words quoted above. After considering some relevant case law and

after emphasising the fundamental distinction between its task and that

of a Magistrate giving due consideration whether to commit a defendant to

a criminal trial, it decided that in coming to its conclusions it would

weigh the whole of the evidence adduced before it:"^ a

'... before determining whether it considers that it is probable that any particular police officer has committed a criminal offence.1

1.2.23 The terms of reference of the Beach Inquiry into allegations of

criminal behaviour on the part of certain Victorian p o lice^ contained

a direction in the same wording as that contained in the Kaye Inquiry

quoted above [1.2.22]. The Beach Inquiry came to a conclusion in line

with that of the Kaye Inquiry and reported that it had refrained from

making a finding against a particular police officer unless it had:

1... been satisfied that he has been guilty of the act

complained of to the extent which would be required in the given circumstances in a civil proceeding at law.'

1.2.24 Included in the terms of reference of the Winneke Royal

Commission inquiring into allegations of breaches of Commonwealth and 14

Victorian law by members of a certain Trade Union and of the Costigan

Royal Commission^ was a direction that any finding that a relevant

person had engaged in conduct amounting to a criminal offence:

'... be made only on evidence, admissible in a Court of Law,

sufficient to place [a relevant person] on trial for that offence.1

Commenting on the meaning to be given to these words the Hon. Mr Justice

Mason of the High Court said"*"® that this was not a provision requiring

a finding on evidence amounting to a prima facie case only but was one

which:

23 -

requires the commissioner not to make a finding that an activity is contrary to law in the absence of evidence

admissible in a court of law sufficient to establish a prima facie case ... If the commissioner concludes that there is a

prima facie case against an individual, it is then for the Crown to decide whether it will prosecute in the ordinary courts.1

The Commission observes that such a direction included in the terms of

reference of a Royal Commission acting pursuant to the Commonwealth Royal

Commissions Act may give rise to further difficulties in interpretation

of the terms of reference in that insofar as an adverse finding against a

witness is based in whole or in part on evidence given to the Commission

by that witness such evidence is subject to the provisions of section

6DD. This aspect is dealt with elsewhere in this Section [see 1.2.29­

1.2.31],

1.2.25 Whilst it appears that not every Royal Commission inquiring into

allegations of criminal offences having been committed has discussed in

its report the standard of proof it has adopted and the nature of the

evidence relied upon in coming to conclusions, this Commission takes the

view that such information should be included because it is information

of which the Executive should be aware in assessing the report and the

possible consequences of the Commission's findings.

1.2.26 These observations of the Royal Commissions and Board of Inquiry

cited above (leaving aside the two with expressed and explicit directions

in their terms of reference [see 1.2.24]) arrive at a broadly uniform

conclusion in relation to the appropriate standard of proof to be applied

and the nature of the evidence to be relied upon where an opinion is to

be formed whether or not a relevant person has so conducted himself that

he has contravened a relevant criminal law. The approach adopted is

consistent with and rests upon the fundamental differences between such

inquiries and a Court dealing with a criminal trial. As was said by the

Salmon Royal Commission in 1966:^

'There are important distinctions between inquisitorial procedure and the procedure in an ordinary civil or criminal case ... The Tribunal directs the inquiry and the witnesses are necessarily the Tribunal's witnesses. There is no plaintiff

- 24 -

or defendant, no prosecutor or accused; there are no pleadings defining issues to be tried, no charges, indictments or

depositions. The inquiry may take a fresh turn at any moment. It is therefore difficult for persons involved to know in

advance of the hearing what allegations may be made against them.'

1.2.27 Recent observations by the Chief Justice of the High Court in a

case involving an inquiry by the National Companies and Securities

Commission18 are also apt. In that case the Chief Justice in drawing

the distinction between such an inquiry and a Court of law said that such

an inquiry was not required to proceed as though it were conducting a

trial. He said:

'If the Commission were to accord to all persons whose

reputation might possibly be affected by the hearing a right to cross-examine the witnesses and call evidence as though they were in a court of law, the hearings might become so protracted as to render it practically futile.1

For these reasons, and bearing in mind the obvious desirability of such

opinions of criminal behaviour by various inquiries being based on some

uniform standard, the Commission decided to apply the civil standard of

proof to evidence which the Commission believes would be admissible in a

case in which the relevant person was a party and his conduct was in

question. In view of the omission from the Commission's terms of

reference of any direction in this regard it did not seem that the

Commission was at liberty to insert of its own motion a direction

requiring a finding of a prima facie case [1.2.24], The Commission felt

bound to assume that such omission was not an oversight but rather had

been deliberately omitted from its terms in view of the express insertion

of such a direction into earlier Royal Commissions acting pursuant to the

Commonwealth Royal Commissions Act, one such Commission being conducted

more or less contemporaneously with this Commission.183

1.2.28 However, it is necessary for the sake of clarity to make two

further explanations in regard to this approach. The first is that the

Commission's understanding of the civil standard of persuasion is most

clearly expressed in the following words of Sir Owen Dixon:

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'The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can he found. It cannot be found as a

result of a mere mechanical comparison of probabilities

independently of any belief in its reality. No doubt an opinion that a state of facts exists may be held according to indefinite gradations of certainty; and this has led to attempts to define

exactly the certainty required by the law for various purposes. Fortunately, however, at common law no third standard of

persuasion was definitely developed. Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established

independently of the nature and consequence of the fact or facts to he proved. The seriousness of an allegation made, the

inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable

satisfaction of the tribunal. In such matters "reasonable satisfaction" should not be produced by inexact proofs, indefinite testimony, or indirect inferences. Everyone must feel that, when, for instance, the issue is on which of two

dates an admitted occurrence took place, a satisfactory

conclusion may be reached on materials of a kind that would not satisfy any sound and prudent judgment if the question was whether some act had been done involving grave moral delinquency ... This does not mean that some standard of persuasion is fixed

intermediate between the satisfaction beyond reasonable doubt required upon a criminal inquest and the reasonable satisfaction which in a civil issue may, not must, be based on a

preponderance of probability. It means that the nature of the issue necessarily affects the process by which reasonable satisfaction is attained. When, in a civil proceeding, a question arises whether a crime has been committed, the standard

of persuasion is, according to the better opinion, the same as upon other civil issues ... But, consistently with this opinion, weight is given to the presumption of innocence and exactness of

proof is expected.'

1.2.29 The second explanation is directed to precisely what is meant by

the Commission in the statement above [1.2.27] that it proposes to base

such opinions on evidence which the Commission believes would be

admissible against the relevant person in a court of law. In this

context it is necessary to set out the provisions of section 6DD of the

Commonwealth Royal Commissions Act 1902. That section is as follows:

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Ά statement or disclosure made by any witness in the course of giving evidence before a Commission is not (except in

proceedings for an offence against this Act) admissible in evidence against that witness in any civil or criminal

proceedings in any court of the Commonwealth, of a State or of a Territory.'

1.2.30 It seems to the Commission that in deciding whether particular

evidence would be admissible against a relevant person in a court of law

it should apply the rules of evidence that a court would apply in the

absence of such a provision as section 6DD. Otherwise the very strange

result would follow that the witness's own evidence would be excluded

from the Commission’s deliberations on whether he has contravened a

relevant criminal law. In other words, the Commission construes the

expression 'evidence admissible in a court of law' as meaning the

ordinary everyday rules of evidence applied in Courts; a party's own

evidence is clearly admissible in a Court, if relevant, and may implicate

or exculpate him in respect of the conduct alleged against him.

1.2.31 Both Letters Patent issued to the Commission call for:

'a report of the results of your enquiry and your

recoinmendations.'

The Commission does not understand this to refer to recommendations in

respect of the prosecution of any person who has been identified as

having contravened a relevant criminal law and, accordingly, the

Commission has made no such specific recommendation. Having formed such

views of criminal behaviour by applying the civil standard of proof the

Commission considers it would serve no useful purpose to recommend

prosecutions and would be clearly outside its function. As has been

mentioned above the Commission has not attempted to conduct the inquiry

according to all the rules applicable to a criminal trial. As well there

are factors to be taken into account in deciding whether to prosecute a

particular matter which fall outside the Commission's role: the

seriousness of the allegations must be weighed, the passage of time since

the relevant date is obviously a relevant matter and there is also the

effect of the exclusion from any such prosecution of the evidence to

- 27 -

which section 6DD applies. In respect of any of the relevant

corporations there is the further consideration that there m y be no

practical justification for any proceedings against them or any of them,

those companies now either being in liquidation or having ceased to trade

and possessed of assets of little, if any, value. The Commission is

strengthened in this opinion by the fact that of the inquiries reviewed

above which contained in their terms a requirement to make

'recommendations' not one interpreted that to mean recommendations in

respect of prosecutions. Indeed, Mr Justice A.E. Woodward expressly

declined to make such recommendations on grounds similar to those put 20

forward by the Commission in this paragraph. In any event, it would

seem as a matter of principle that it is not for a Royal Commission to

recommend prosecutions, that function being properly one for the Crown

[see 1.2.24].

1.2.32 Finally, the Commission includes here a statement of the

attitude it has adopted in respect of the question of the application to

the Commission's proceedings of the principles known as the rules of

natural justice. Such principles have been explained in an often quoted

passage in the following terms:

'The requirements of natural justice must depend on the

circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the subject matter that is being dealt with, and so forth.'

This passage was recently referred to with approval by the Chief Justice

of the High Court in the case mentioned above [see 1.2.27] where the

Chief Justice went on to say that:

'the authorities show that natural justice does not require the inflexible application of a fixed body of rules; it requires fairness in all the circumstances ... and may also vary from case to case although each be conducted before one and the same tribunal or person.' [emphasis added]

1.2.33 It does not appear to have been finally settled by the courts

whether or not the rules of natural justice apply to inquisitorial

procedures such as Royal Commissions. The basis for the proposition that

- 28 -

such rules might not be applicable was recently re-stated by a Judge of 21 the Federal Court as follows:

'However, bearing in mind that the function of a Royal

Commissioner is merely to investigate and report and that any recommendation he may make does not affect the rights of any person, it must be a serious question whether the rules of

natural justice apply to proceedings before him.1

1.2.34 However whilst it is true that legal rights are not affected in

a technical sense, it may be that such an approach does not sufficiently

take into account that the proceedings of a Royal Commission and the

publication, if any, of its report may gravely affect the lives and

fortunes of those the subject of adverse comment or finding. Thus, it

has been observed by high authority that to be compelled by a Royal

Commission to answer questions is a serious interference with civil

liberty.22 So, too, it has been acknowledged by the courts that the 23

publication of a Commission's report may:

'... inflict great and perhaps irremediable harm upon those of whom it speaks ill, ...'

In the Commission's view it is at least arguable that having regard to

such possible consequences such inquiries should incorporate the rules of

natural justice into their procedures at least to the extent of ensuring

'fairness in all the circumstances'.

1.2.35 Indeed, it may be that recent cases suggest a change is

approaching or has even arrived and that in future courts will be more

inclined to the view that the rules of natural justice, properly

understood, should apply to inquisitorial inquiries or at least those 24 inquiring into alleged crimes.

1.2.36 Assuming the rules of natural justice to be applicable to Royal

Commissions, in deciding what is fair in all the circumstances regard may

be had to the fact that a trial is not being conducted and that the

inquiry has only a limited time in which to report. It seems to the

Commission that, generally, the rules of natural justice will be

- 29

satisfied in such a context if before concluding and reporting that a

particular person has contravened a relevant criminal law he is made

aware of the risk of such a report being made and is given an opportunity

to be heard. As the Privy Council said in the case cited above^ such

a witness:

'... should not be left in the dark as to the risk of the

finding being made and thus deprived of any opportunity to adduce additional material of probative value which, had it been placed before the decision-maker, might have deterred him from making the finding even though it cannot be predicted that it would inevitably have had that result.1

Within the constraints to which, of necessity, it was subject, the

Commission has attempted to observe this principle in its proceedings.

ENDNOTES : PART 1 - SECTION 2

(See explanatory note at front of report)

1 Royal Commission on Tribunals of Inquiry 1966, Report of the

Commission under the Chairmanship of The Rt Hon. Lord Justice Salmon (Great Britain, 1966, Cmnd 3121), abbr. Salmon Royal Commission, p30 para.77. 2 Report of the Board of Inquiry into allegations of corruption in the Police Force in connection with illegal abortion practices

in the State of Victoria, Mr VJ. Kaye Q.C., (Victoria, 1971), abbr. Kaye Inquiry, Pt.l, Ch.l, p.7 et seq. Board of Inquiry into allegations of brutality at H.M. Prison Pentridge, Mr K.J. Jenkinson Q.C., (Victoria, Pari. Pap.

1973-74, Vol.3 No.40) abbr. Jenkinson Inquiry, Pt.l Ch.l pp.8 et seq.

Report of the Board of Inquiry into allegations against members of the Victoria Police Forced Mr B. Beach Q.C., (Victoria, 1 October 1976, printed 1978 in 3 vol.), abbr. the Beach

Inquiry, ch.3. Report of the Royal Commission into Australian Meat Industry, The Hon. Mr Justice A.E. Woodward, Commissioner, (Commonwealth, September 1982), abbr. Woodward Royal Commission (Commonwealth)

1982, Appendix A(l), pp.286-88. Report of the Honourable Mr Justice Moffitt Royal Commissioner, Allegations of Organised Crime in Clubs, (N.S.W., 1974), Pt.III

at p.ll para.40, Pt.VIII at p.135-36 para.317. L.A. Hallett Royal Commissions and Boards of Inquiry (The Law Book Company Ltd, Sydney, 1982), pp.51 et seq. 3 Jenkinson Inquiry, ibid., p 8

4 State of Victoria v. Australian Building and Construction

Employees' and Builders Labourers' Federation, abbr. Victoria v. BLF, (1982) 41 ALR 71 at p!20, per Mason J. ' "

- 30 -

5 Ross v. Costigan (No.2) (1982) 41 ALR 337 at p351

6 Woodward Royal Commission (Commonwealth, 1982), op. cit., p27 para.2.39.

7 Beach Inquiry, op. cit., ch.4 at pp.21 et seq. 8 Two Interim Reports having previously been delivered. Interim Report Mo.1, which dealt with Commonwealth terms of reference (e), (f) and (g) was delivered on 13 October 1983, and Interim

Report No.2 which dealt with terms of reference (b), (c) and (d) was delivered to both Commissioning Governments on 12 December 1984 9 Moore v. I. Bresler Ltd [1944] 2 All ER 515

10 Tribunal appointed to inquire into allegations reflecting on the official conduct of Ministers of the Crown and other Public Servants'] G.J. Lynskey, Judge of the High Court of Justice (England), Mr G.R. Vick K.C. and Mr G.R. Upjohn K.C., (Great Britain, 1948, Qnd 7616), p3 para.12. .11 Jenkinson Inquiry, op. cit., pi2 12 Kaye Inquiry, op. cit., p7

12a ibid., pi3

13 Beach Inquiry, op. cit., p7

14 Report of Commissioner appointed to inquire into activities of the Australian Building Construction Employees' and Builders Labourers' Federation, Commissioner Mr J.S. Winneke Q.C., (Commonwealth and Victoria, May 1982) 15 Royal Commission on the Activities of the Federated Ship

Painters and Dockers Union Final Report Commissioner Mr F.X. Costigan Q.C. (Commonwealth and Victoria, October 1984), Vol.l p3. 16 Victoria v. BLF, loc. cit., pll6

17 Salmon Royal Commission, op. cit., pll7 para.30 18 National Companies and Securities Commission v. News Corporation Ltd (1982) 52 AIR 417 at p429 18a The question of this Commission's approach to the standard of

proof was touched upon briefly in its Interim Report No.2

(Commonwealth and New South Wales, December 1984), at ppl6 and 17.

19 Briginshaw v. Briginshaw and Anor (1938) 60 CLR 336 at p361-63 20 Woodward Royal Commission (Commonwealth) 1982, op. cit. p47 para.2.117 21 Harper v. Costigan 50 ALR 665 per Morling J. at p.677. In

addition to the authorities there referred to, see Testro Bros. Pty Ltd v. Tait (1963-64) 109 CLR 349 at p366, per Kitto J. 22 The Attorney-General for the Commonwealth of Australia v. The Colonial Sugar Refining Company Ltd (1913-14) 17 CLR 644 at

p651, per viscount Haldane L.C., who gave the judgment of the Judicial Committee of the Privy Council. 23 Victoria v. BLF, .loc. cit., pp97-98 per Stephen J. 24 See Mahon v. Air New Zealand [1984] AC 808, a decision of the

Judicial Committee of the Privy Council. In National Companies and Securities Commission v. News Corporation Ltd, op. cit., pp429-30, Gibbs CJ appeared to treat this decision as applicable to Royal Commissions generally. 25 Mahon v. Air New Zealand, loc. cit., p821 per Lord Diplock, who

gave the judgment of the Judicial Committee of the Privy Council.

- 31

SECTION 3 : OTHER MATTERS

Some Practical Results

1.3.1 The following information has been gathered for several

reasons. First, it provides a catalogue of the Commission's contribution

to law enforcement agencies and prosecutions in criminal trials by the

provision of relevant information (usually in the form of transcripts of

evidence and other documents) at the request of these recipients.

Second, it demonstrates the extent to which the usefulness of a Royal

Commission inquiring into criminal allegations has been enhanced by the

introduction of section 6P into the Commonwealth Royal Commissions Act

1902 giving a Commission the power to provide such information to law

enforcement agencies in a proper case. Prior to the introduction of this

section on 1 February 1983 a Royal Commission's sole function was to

carry out its inquiries and report to government. Clearly, all future

Royal Commissions inquiring into criminal allegations should have this

additional function. The Commission therefore recommends that the New

South Wales Royal Commissions Act 1923 be amended accordingly.

1.3.2 The content of this section also demonstrates the need for some

provision to be made in respect of future Royal Commissions inquiring

into criminal allegations so that such Commissions are not, upon the

presentation of the report, instantly and completely wound up and thus

unable to assist in any way those law enforcement agencies and others who

might be delegated the task of following up particular recommendations

made by the Commission. As this Commission's experience has shown since

the delivery of its principal report on drug trafficking and related

matters of February 1983, in particular, some procedure must be available

to enable the Commission to provide further information and

documentation, as part of the follow up exercise. In fact, this

Commission found it necessary to provide the services of one member of

the Commission's staff on a full time basis to satisfy the inquiries and

- 32 -

requests for information which followed the delivery of the February 1983

report. This staff member was engaged in those duties for a period in

excess of twelve months on a full time basis and from time to time after

that. In addition, the Commission's premises have very often been

visited by law enforcement agencies, not only from Australia but also New

Zealand for the purpose of inspecting Commission documents or seeking

particular information. However, these services were able to be provided

only because the Commission continued in existence due to the extension

of terms of reference which required it to make inquiries into other

matters. But for this fortuitous circumstance, it is probable that the

practical results of the Commission's inquiries in relation to drug

trafficking and related matters would have been considerably less.

Law enforcement agencies to which information has been provided by

the Commission pursuant to section 6P of the Commonwealth Royal

Commissions Act

1.3.3 Name of recipient and number of times information provided to

recipients:

Australia

Australian Federal Police 10

Australian Taxation Office 33

Commonwealth Attorney-General's Department 3

Commonwealth/New South Wales Joint Prosecution Team 54

Commonwealth-New South Wales Joint Task Force on Drug Trafficking 4

Corporate Affairs Commission of Victoria 1

Department of Immigration and Ethnic Affairs 2

Department of Industry and Commerce 4

National Crime Authority 12

New South Wales Corporate Affairs Commission 7

New South Wales Department of the Attorney-General and of Justice 6

New South Wales Police 27

New South wales State Crown Solicitor's Office 4

- 33 -

Reserve Bank of Australia

Royal Commission on the activities of the

1

6

Federated Ship Painters and Dockers Union

Special Prosecutor's Office/DPP, Melbourne

Victoria Police 15

60

[New Zealand

The Commission has, in addition to the above information

provided pursuant to section 6P of the Commonwealth Royal

Commissions Act, provided relevant information to and at the

request of the following authorities in New Zealand:

Auckland District Law Society 6

New Zealand Police Task Force 6

New Zealand Reserve Bank 1]

1.3.4 The Commission had intended, at this part of the report, to set

out examples of results flowing from the provision to law enforcement

agencies of the information referred to above. The intention was, by

appropriate means, to disguise the identity of the persons involved where

to disclose their identity might cause prejudice to pending or current

inquiries or legal proceedings. However, the Commission decided not to

proceed with this course because it appeared that notwithstanding that

the examples did not identify relevant persons, the detail supplied was

such that there was a risk of identification in any event.

PART TWO

PROFILES

%

- 37 -

ALPHABETICAL LISTING OF PERSONAL PROFILES

Page No.

ARESON, William Henry 105

ATTKISSON, Randall L. 107

BACHMANN, Jurgen 109

BATES, Arthur Edward 111

BEAZLEY, Donald Elgin 112

BLACK, General Edwin Fahey 115

BRINCAT, George Frederick 117

BURTON, Noreen Fay 123

CALDER, Brian William 124

CLASEN, Peter Jurgen 125

COCKE, General Erie 128

COLBY, William Egan 130

COLLINGS, Clive Leslie Hillary 132

CONRICK, Edward Thomas 136

COURTNEY-SMITH, George Anthony 138

DUNN, Peter Milton 141

EBERT, Manfred 145

EDELSTEN, Graham Arthur Leighton 146

EVANS, Neil 149

GALICEK, George Vaclav 152

GEHRING, Robert Wallace 155

GEORGE, Quentin Douglas 157

GILDER, Jeremy Mackenzie 159

GREGORY, Wilfred Patrick 167

- 38 -

Page No.

HAND, Michael Jon 63

HANS, Wilhelmus 169

HARLAND, Edward Patrick 171

HEALEY, Mark 173

HEUSCHKEL, Carl Louis 175

HEWITT, Anthony Peter 177

HILL, Graeme Hunter 179

HILL, Stephen Kenneth Alexander 182

HOLMGREN, Dale Oscar 187

HOUGHTON, Maurice Bernard 190

KWOK, Dr Albert 194

LEE, Alexander 197

LEE, Yolanda 201

LOOMIS, Patry Gene 201

LOUEY, Edward Craig 203

LOUIS, Raymond Albert Sidney 205

LOUIS, Raymond Sidney Albert (Jnr) 207

LCVATT, Gillian 209

LOWE, Derrick 211

MANOR, General Leroy Joseph 212

McAr t h u r , John 214

MCDONALD, Walter Joseph 216

MOLONEY, Michael John 219

MORISSET, Brian Keith 223

MURPHY, Robert Michael 224

NEEDHAM, John Charles 228

NUGAN, Francis John 42

- 39 -

Page No.

NUGAN, Kenneth Leslie 232

a TEN, John Desmond 234

PAUKER, Dr Guy Jean 237

PAYNE, Michael John 241

PITTARD, Denis John 242

POLLARD, Warwick Michael 244

PRIOR, Anthony James 247

PULGER-FRAME, Ronald Adam 246

RUSH, John Robert 252

RUTTER, Haydn M. 253

SAUNDERS, Robert Muir 255

SCHULLER, Karl Fritz 256

SCOTT-KEMMIS, Leigh 258

SHAW, George Thomas 259

SHESLOW, Richard Myron 264

SPEAKMAN, Neil William 265

STEER, Graham Reginald 266

STILES, Leonard Ross 269

SWAN, Patricia Mary 271

TAN, Choon Seng 274

THOMSON, Elizabeth Louise 277

WARD, Francis Dennis 280

WONG, Andrew Heck-Ling 285

WONG, Ernest 288

YATES, Admiral Earl Preston 291

YEAR, Kee Aik 295

YOUNG, George Richard 296

- 40 -

PERSONAL PROFILES

This section comprises the profiles of the various individuals who played

a part in the operations of the Nugan Hand Group. By way of introduction

to these profiles, the following table places individuals in categories

according to the role they played in the Group's activities, whether as

director, employee, consultant, auditor, lawyer or representative. Some

individuals necessarily appear in several categories. However, others

whose profiles are included in this section do not appear in the table as

they do not fall within any of these categories. The fact of the

inclusion of a person's profile in this section does not necessarily mean

the Commission considers that person to have been involved in any

wrongdoing.

Nugan Hand Ltd Directors Nugan Hand Ltd Employees/

~ ' Consultants

Calder, B.W. 2.11 Burton, N.F. 2.10

Ceilings, C.L. 2.15 Clasen, P.J. 2.12

Dunn, P.M. 2.18 George, Q.D. 2.24

Edelsten, G.A. 2.20 Hans, W. 2.27

Gilder, J.M. 2.25 Harland, E.P. 2.28

Hand, M.J. 2.2 Healey, M. 2.29

Hill, S.K. 2.33 Hewitt, A.P. 2.31

Needham, J.C. 2.51 Louey, E.C. 2.40

Nugan, F.J. 2.1 Louis (Jnr), R.S.A. 2.42

Shaw, G.T. 2.65 Pittard, D.J. 2.56

Ward, F.D. 2.73 Rush, J.R. 2.60

Wong, A . H . 2.74 Swan, P.M. 2.70

Yates, E.P. 2.76

Young, G.R. 2.78

Nugan Hand Bank Directors Nugan Hand Bank Employees/

Consultants

Collings, C.L. 2.15 Attkisson, R.L. 2.4

Dunn, P.M. 2.18 Beazley, D.E. 2.7

Gilder, J.M. 2.25 Black, E.F. 2.8

Hand, M.J. 2.2 Gregory, W.P. 2.26

Hill, S.K. 2.33 Lovatt, G. 2.43

Nugan, F.J. 2.1 Manor, L.J. 2.45

Rutter, H.M. 2.61 Owen, J.D. 2.53

Ward, F.D. 2.73 Steer, G.R. 2.68

Yates, E.P. 2.76 Tan Choon Seng 2.71

- 41 -

Nugan Hand Hong Kong Nugan Hand Hong Kong

Directors Ercployees/Consultants

Collings, C.L. 2.15 Bates, A.E. 2.6

Dunn, P.M. 2.18 McArthur, J. 2.46

Hand, M.J. 2.2 Pulger-Frame, R.A. 2.59

Hill, S.K. 2.33 Thomson, E. 2.72

Nugan, F .J . 2.1 Yates, E.P. 2.76

Ward, F.D. 2.73

Wong, E. 2.75

Overseas Representatives United States Personnel

Courtney-Smith, G.A. 2.17 Attkisson, R.L. 2.4

Evans, N. 2.21 Beazley, D.E. 2.7

Galicek, G.V. 2.22 Black, E.F. 2.8

Gregory, W.P. 2.26 Cocke, E. 2.13

Hewitt, A.P. 2.31 Holmgren, D.O. 2.34

Holmgren, D.O. 2.34 Houghton, M.B. 2.35

Houghton, M.B. 2.35 Manor, L.J. 2.45

Louey, E.C. 2.40 McDonald, W.J. 2.47

Manor, L.J. 2.45 Murphy, R.M. 2.50

McDonald, W.J. 2.47 Yates, E.P. 2.76

Morisset, B.K. 2.49

Murphy, R.M. 2.50

Owen, J.D. 2.53

Payne, M.J. 2.55

Prior, A.J. 2.58 F.J. Nugan Legal Practice

Saunders, R.M. 2.62

Schuller, K.F. 2.63 George, Q.D. 2.24

Steer, G.R. 2.68 Lee, A. 2.37

Stiles, L.R. 2.69 Needham, J.C. 2.51

Yates, E.P. 2.76 Nugan, F.J. 2.1

Yeap Kee Aik 2.77

Hong Kong Auditors Australian Auditors

Areson, W.H. 2.3

Speakran, N.W. 2.67

Brincat, G.F. 2.9

Heuschkel, C.L. 2.30

Pollard, W.M. 2.57

F.A. Neubauer Bank Orange Spot

Bachmann, J. 2.5 Calder, B.W. 2.11

Ebert, M. 2.19 George, Q.D. 2.24

Hewitt, A.P. 2.31 Louis (Snr) R.A.S. 2.41

- 42 -

2.1 NUGAN, Francis John

2.1.1 Francis John Nugan died, having taken his own life near Lithgow,

New South Wales on 27 January 1980. The story of his life from the time

he commenced to practise as a solicitor on his own account in 1970 was

bound up with the history of the Nugan Hand Group of which he was a

founder. That story (and also Mr Hand's) is set out in summary form in

the Compendium in Part 3. Specific aspects of his activities are the

subject of other parts of the report.

2.1.2 This profile attempts to paint a picture of the man himself,

whereas the report generally concentrates more on aspects of his

activities so far as are relevant.

2.1.3 He was born on 30 December 1942 in Griffith, a country town in

the Riverina district of New South Wales. He graduated in Law from the

University of Sydney in 1963 and later obtained a Masters degree in Law

from the University of California at Berkeley. In 1965 he went to Canada

and commenced studies there for a Doctorate in Law but returned to

Australia in 1968 without completing that degree. While in Canada he did

some work for a parliamentary committee in Ontario.1

2.1.4 Mr Nugan was obsessed with achieving success as he saw it. To

him it was essential to be seen to be successful and wealthy. He gave

the appearance of being both. Once he joined forces with Mr Hand he set

them both on a course which was to have widespread repercussions for many

people both here and abroad.

2.1.5 According to Mr Nugan he first met Mr M.J. Hand [2.2] in 19682 3 and they became good friends. Mr J.C. Needham [2.51] and Mr B.W.

Calder [2.11] told the Commission that Mr Hand had said he first met

Mr Nugan when Mr Hand was a security guard working for a company named

Meekatharra Minerals Ltd [2.112], a company in which Mr Nugan had a

considerable interest and which had been formed to mine for metals in

Western Australia. [For further details of the circumstances under which

Mr Nugan and Mr Hand first met see 2.2.11 to 2.2.13 and for details of

their continuing relationship see 2.2.53 to 2.2.65.]

- 43 -

2.1.6 Mr Nugan professed to have made a considerable amount of money

from this company^ and according to The Financial Review of 30 December

1977 Mr Nugan's 'entry into the banking world was via a small fortune

amassed during the mining boom'. It is however open to conjecture 5

whether the accounts of his success in this field are true. [For

further details of Meekatharra Minerals and Mr Nugan's and Mr Hand's

involvement therewith see 2.2.13 and 2.2.112.]

Land Dealings in the Early Days

2.1.7 In March 1970 Mr Nugan formed a company named Yorkville Nominees

Pty Ltd [2.108] and with Mr Hand and others commenced dealing in land

[see 2 . 2 . 1 4 ] One of the stated objects of the company was to 'carry

on business as merchant bankers'.

2.1.8 Both Messrs Nugan and Hand continued dealing in land and in 1973

Mr Nugan formed another company, P.M. Shelley Pty Ltd [2.100], which

bought and sold land at Brunswick Heads, New South Wales.'7 * 9 *

2.1.9 Some of this land was subsequently sold by yet another company

formed by Mr Nugan, Nugan Hand Needham Ltd [2.97], This company was

incorporated on 6 July 1973 and by change of name on 22 August 1974

became Nugan Hand Ltd [2.97]. As Nugan Hand Ltd, it was to become the

parent company of the Nugan Hand Group.

2.1.10 A newspaper report in 1977® reported 'After liquidating his

property portfolio he [Mr Nugan] and his partner Michael Hand had around

$1 million in capital', but, as has been mentioned above these claims are

open to conjecture.

SIRE, PNB and NARM

2.1.11 In April or May 1973 Mr Nugan and Mr Needham were interested in

a Queensland company called Secured Income Real Estate (Australia) Ltd

(SIRE) [2.118] of which Mr Needham and Messrs Hand and Calder [2.11] were 9 directors. In late 1973 this company acquired a company which had

- 44 -

been incorporated by Mr Nugan called PNB Rubber and Plastic Industries

Pty Ltd (PNB) [2.117] which had itself acquired a Brisbane footware

manufacturing company called North Australian Rubber Mills Ltd (NARM)

[2.113] in September 1973.^ Mr Needham told the Commission that

SIRE's acquisition of NARM involved a cash payment to Mr Nugan by

Mr Needham of $182 000.44

Nugan Hand Needham Ltd

2.1.12 Prior to the incorporation of Nugan Hand Needham Ltd Mr Nugan

had discussed with Mr Needham the prospect of establishing a company to

act as a merchant bank in Sydney. He told Mr Needham it was his

intention that the company be formed with a view to advising clients on

corporate matters, arranging finance, giving tax advice, arranging 12

company takeovers and engaging in real estate marketing. It was

because Mr Needham was well known in Sydney business circles that 13

Mr Nugan wanted Mr Needham's name included in the company's title.

2.1.13 In late August 1973 NUgan Hand Needham Ltd established an office

on the 8th floor of 55 Macquarie Street Sydney [2.2.17].* 1 2 1 3 14 1 5 * * * *

Attempts to establish a 'Money Market Division'

2.1.14 At the time Mr Nugan had discussed the proposal to establish a

merchant bank with Mr Needham he also discussed the proposal with

Mr Young [2.78], a money market dealer who had previously worked for the

merchant banks, CitiNational Securities Corporation Ltd (as it then was)

and National Discount Corporation [see Part 4 Section 7]. Mr Young

commenced with Nugan Hand Needham Ltd in August 1973 in the capacity of

general manager of the proposed 'Money Market Division', and commenced

very limited dealings on the money market in securities on behalf of the 15

company in September of that year [3.2.11-3.2.15],

2.1.15 Despite the fact that Mr Nugan had assured Mr Young that he

(Mr Young) would have $1 million to use as capital for money market

dealings the reality was that Mr Young had no capital with which to deal

- 45 -

and, devoid of such, bought and sold securities on credit relying on

nothing more than his reputation."*"6

2.1.16 According to Mr Young Mr Nugan was entirely ignorant of the

workings of the Australian money market. He said the absence of capital

meant that he was trading under more or less inpossible conditions. He

agreed (after examining the cash books of Nugan Hand Needham Ltd) that

the company's turnover on securities trading during the period he was 17 there was $2.4 million. He agreed that while day to day operations

of the securities trading might on some occasions have been profitable

the overall result for the year was a loss to the company of $18 373.

The company sold its portfolio at a loss in order to quit the

market. Thus ended the Nugan Hand Group's first attempt at trading

in securities on the money market.

2.1.17 Consistent with the observations of other employees of the

Group, Mr Young soon discovered that Mr Nugan's drinking habits were such

that he was rarely sober after 11 a.m. and as the day progressed he 19

became slurred in speech and grandiose in ideas.

Trading in Precious Metals

2.1.18 Early in 1974 Mr Nugan turned his interest to the marketing of

silver bullion and gold coins [see profile Solingen Australia Pty Ltd

2.104] and traded in silver bullion under the business name Pacific

Silver Commodities and in gold coins under the name Macquarie Coin

D e a l e r s . T h e evidence is that this venture, too, was unsuccessful.

Mr Needham Resigns * 2 1

2.1.19 At this time Mr Needham who had taken no part in the operations

of Nugan Hand Needham Ltd, became disillusioned (as had Mr Young), and

resigned from the company on 29 June 1974. The company subsequently

changed its name to Nugan Hand Ltd on 22 August 1974 [2.2.17-2.2.18],

Mr Calder, who also had taken no part in the company's activities 21 resigned about the same time.

- 46 -

Mr Nugan's Law Firm

2.1.20 Despite his resignation from Nugan Hand Needham Ltd,

Mr Needham's association with Mr Nugan continued for a number of years.

Between 30 April 1976 and 27 November 1978, Messrs Nugan and Needham were

in partnership as solicitors, the firm being called Nugan Needham, which

Mr Nugan operated from his Nugan Hand Ltd offices in Macquarie Street,

Sydney. Mr Needham saw this as an arrangement which enabled him to

satisfy the conditions for retaining a practising certificate in New

South Wales, since he had by this time moved to Brisbane to work with 22 HARM. He seems to have been under the mistaken belief that the

partnership did not, at any time, have any clients as there were no 23

transactions recorded in the partnership's trust account.

2.1.21 Contrary to Mr Needham's understanding, the firm employed other

solicitors namely Mr Q.D. George [2.24] and Mr J. Hughes and engaged 24

almost wholly in tax planning for clients of the firm. For further

details of tax schemes offered by the firm see Part 9.

2.1.22 In addition to his association with Mr Nugan's law firm

Mr Needham also continued his association with Mr Nugan in respect of the

Nugan Hand Group's operations overseas. By June 1975 an office had been

established in Hong Kong [see Part 4 Section 1] and at Mr Nugan's request

Mr Needham visited Hong Kong in early 1977 to establish appropriate 25

accounting and office procedures on a consultancy basis.

Developments in Hong Kong and the Cayman Islands

2.1.23 In September 1974 Mr Nugan engaged Mr C.L. Collings [2.15].

Mr Collings was employed as an investment representative on a commission

basis selling silver bullion and gold coins on behalf of Pacific Silver

Commodities and Macquarie Coin Dealers. In December 1974 Mr Collings

went to Hong Kong at Mr Nugan's request to collect deposits on behalf of

a mutual fund established by Mr Nugan called 'Ingold Growth' [see

3.3.6-3.3.10, 3.3.12] , ^ Mr Collings told the Commission that after a

few months he received instructions from Mr Nugan to discontinue that

- 47 -

. . 27

activity, Mr Nugan told Mr Ceilings that he had 'a merchant banking

company in Panama called Nugan Band Inc.1 [2.115] and instructed

Mr Collings either to refund money invested in the 'Ingold1 venture or to

transfer the money to Nugan Hand Inc. Panama, according to the investors' • u 28 wishes.

2.1.24 Nugan Hand (Hong Kong) Ltd had been incorporated under another

name in Hong Kong in October 1972. In early 1975 Mr Collings was

instructed by Mr Nugan to put all his efforts into attracting deposits

from Hong Kong residents for placement with Nugan Hand Ltd in

29

Sydney. In the following year, on 21 July 1976, the Nugan Hand Bank

and Trust Company was incorporated in the Cayman Islands and a banking

licence in respect of this company was issued on 25 August 1976. (The

name of the company was later changed to the Nugan Hand Bank.) Messrs

Nugan and Hand then instructed Mr Collings that wherever possible

deposits collected by Nugan Hand (Hong Kong) Ltd were to be collected on

behalf of the Nugan Hand B a n k . [ F o r Mr Hand's involvement with the

Nugan Hand Bank see 2.2.31 to 2.2.34.]

2.1.25 These overseas developments have been examined in detail in

Part 4 Section 1 in respect of Nugan Hand (Hong Kong) Ltd and Part 4

Section 2 in respect of the Nugan Hand Bank.

Mr Nugan's Objectives

2.1.26 The Commission's evidence concerning Mr Nugan's objectives is

largely that of one witness, namely Mr S.K.A. Hill [2.33] who, after

Mr Hand, was most conversant with Mr Nugan's thoughts on the operations

of the Nugan Hand Group. The Commission has however had access to

certain documentary evidence which supports some of Mr' Hill's assertions.

2.1.27 According to Mr Hill Mr Nugan expressed an intention to set up

an operation locally to fund and underwrite a business and ultimately

bring in partners of substance with sufficient money to build the

operation into a merchant bank.

- 48 -

2.1.28 Mr Hill told the Commission that the credit squeeze of 1973/1974

put paid to these plans and that in 1974 and 1975 Mr Nugan confined his

operations to trading in precious metals and coins and in 1976 conceived

the idea of establishing a banking structure as an asset for sale rather

than as a fully operative concern capable of generating a substantial

income.64

2.1.29 This evidence is corroborated to some extent by correspondence 33

in 1978 concerning the acquisition of the F.A. Neubauer Bank [2.109],

2.1.30 In Australia in 1976 Nugan Hand Ltd was seeking deposits from

local councils and corporations [3.4.2-3.4.6 ] and Mr Nugan's personal

efforts were directed to the provision of legal advice concerning

taxation matters in particular.

2.1.31 According to Mr Hill the Wing On Bank and Ayala Finance (Hong

Kong) Ltd were seriously considering the purchase of the Nugan Hand Group

when the New South Wales Corporate Affairs Commission commenced its 34

investigation of the Nugan Fruit Group in late 1977 [see 3.4.95],

However, other evidence throws considerable doubt on this evidence so far 35 as the Wing On Bank is concerned.

2.1.32 Following the Corporate Affairs Commission investigation Messrs

F.J. and K.L. Nugan [2.52] were charged with offences relating to the

conduct of the affairs of the Nugan Fruit Group [2.114] and on 5 November

1979 the presiding magistrate found that both had a case to answer. The

matters were adjourned to 5 May 1980 for hearing of the defence case.36

2.1.33 The effects of this investigation and subsequent committal

proceedings on Mr Nugan personally were described by one witness in terms

of paranoia. He expressed the view that it was a personal attack on

himself by the Attorney-General, and his heavy drinking which had for

some considerable time been a matter of general comment among the staff . 39

at 55 Macquarie Street Sydney had become a matter of serious concern.

- 49 -

The American Connection

2.1.34 A further phase of the Group's development came with the

decision to enlist the services of United States ex military personnel

who had retired after having held high rank and who had seen service in

South East Asia with a view to the Group gaining respectability generally

and benefiting from their knowledge of South East Asia.40 4 1 This was a

joint decision of Messrs Nugan and Hand although it would appear that

Mr Hand was primarily responsible for the decision and its

implementation. [For some details of this matter see 2.2.49 to 2.2.51.]

Mr Nugan's Business Methods

2.1.35 On the question of salaries it is clear that Mr Nugan paid

extravagantly high salaries to persons with no particular expertise. On

occasions in addition to higher salaries large bonuses plus overriding

commissions were paid, sometimes to avoid granting appointees shares in a 41 particular company.

2.1.36 There were a number of staff members who at one stage requested

some degree of control in the business of the Group and in lieu thereof

Mr Nugan appointed them to directorship» which were purely nominal

appointments.42 4 3

2.1.37 Mr Nugan's manipulation of the directors of the various Nugan

Hand Group companies was not restricted to their appointments and

subterfuges as to shareholdings. He also fabricated the minutes of board

meetings with the assistance of others. [See Mr Brincat's profile 2.9

and Mr Hill's profile 2.33. ] Mr Hill told the Commission that he could

not recall attending a meeting at which minutes were taken and further,

that Mr Nugan was in the habit of preparing documentation on other 43 matters as and when it suited him.

2.1.38 The evidence before the Commission supports this statement most

notably in the area of accounting records. Further details concerning

Mr Nugan's role in misrepresenting the accounts are contained in Part 4

- 50 -

Section 2 in respect of the Nugan Hand Bank and in the Compendium and

Part 4 Section 5 in respect of Nugan Hand Ltd.

General Character

2.1.39 Evidence before the Commission concerning Mr Nugan1s character

is remarkably diverse. Mr Hill and Miss P.M. Swan [2.70] both of whom

knew Mr Nugan from early days and whose association with him was

comparatively close stated in evidence that he was difficult to get to

k n o w . Mr P.R. Lincoln-Smith, a Sydney solicitor, who considered

Mr Nugan a very close friend commented that he was the type of man to 45 conceal his emotions. Other witnesses observed him to possess

46

charismatic qualities. Mr Nugan was also described to the Commission 47 as a 'pathological liar'. The evidence unequivocally confirms this

latter assessment to the hilt.

2.1.40 Several witnesses commented on Mr Nugan's verbosity and his

inability to convey his thoughts in writing. Many documents in evidence

written by Mr Nugan demonstrate that his prose was unwieldy and often

ungrammatical.

2.1.41 Other witnesses described Mr Nugan variously as brash, arrogant,

overbearing, excitable as well as persuasive, knowledgeable, capable and 48

dynamic. Some found him to be kind, warm, dignified and honourable.

2.1.42 It was towards the end of 1977 that signs of irrational

behaviour became apparent. For example there was a curious incident

about September 1977 when Mr Nugan learnt that Mr R.A. Pulger-Frame

[2.59] had been searched for drugs at the Hong Kong airport. The two of

them visited Mr M.B. Houghton [2.35] and in a response which seemed to

indicate that he saw Mr Houghton as his salvation in this affair he . 49 literally 'sat at Mr Houghton's feet'.

A Self Portrait

2.1.43 Mr Nugan's own words may perhaps provide a glimpse of his many

sided character and the following are extracts from a record of

- 51 -

Mr Nugan's address to a meeting of the Nugan Hand Group legal division on

3 October 1979.50 During the course of the meeting Mr Nugan explained

to the legal officers what activities the Group had pursued in the past,

and in the course of his explanation, detailed the types of illegal

transactions previously undertaken. He professed to want to change the

image of the Group and to steer the companies away from illegal

transactions in the future.

2.1.44 Besides providing admissions of past breaches of taxation,

foreign exchange and fraud laws, the transcript provides a graphic

picture of the nature and extent to which criminal conduct permeated the

financial services of the Nugan Hand Group, as a matter of company

policy. The following extracts, evidence, in Mr Nugan's words, the 50a

Group's illegal activities in general terms:

'There are legitimate and illegitimate activities in each of these categories.' [Thereafter follows a list of 15 categories of business.]

This will mean that we will have to go through quite a lot of

files and find all the secret bank accounts that are secret for reasons unacceptable to us ... we are even thinking of passing most of the illegitimate clients off to other banks ... I know of many of these that you people don't know of, so there's more

to get rid of than you would think, simply because I have been the main guilty party for some reason in years gone by, but what little you people have assisted me with, we will also cut out so that we don't have any ... look if you are shocked, let me tell

you that I am determined to achieve this at whatever cost. This company costs about $10 million a year to run - Nugan Hand - and it's going to toss off a lot of illegitimate cash flow and

business, and hopefully I can get legitimate work, or smaller

2.1.45 With regard to Mr Nugan's more specific admissions, that is, in

respect of foreign exchange breaches and tax evasion, the reader is

referred to Parts 8 and 9 respectively.

2.1.46 Apart from these admissions of illegality, Mr Nugan touched on

more personal matters:^

'At present there's F.J. Nugan, the general councillor to the entire firm and in charge of amongst other things, absolutely

- 52 -

and autocratically, both the Nugan and company law firm, such as it is and the entire Nugan Hand group of companies and banks world wide, such as they are.

The problems in the firm basically stem from the top, rather than from the bottom. We've got people who at present get away with murder and never give a damn, because at one time or

another you were either inside a bottle of Scotch or in a church or whatever in this period.

We are reborn, those sons of bitches who were passing under our name, prior to today, including me. We are different people.

I am bigger and smarter than Alan Bond.

High quality people like me who got paid $100 000 a day to work something like that out.

Now secondly, because I am a lawyer I've got to not have him as a client in my law firm, right? Because I can't have him as

another client in my law firm, is another reason why my law firm never has any clients. Number two, I can't do anything that would be unprofessional or infamous conduct.

I have a theory that I espouse but it may be inaccurate or it

may be hallucinating but I operate with a fragmentation theory of thinking.

... but I am probably wrong because I have been wrong on so

many things all my life and maybe my theory is just vanity...

I am an architect of fact.'

2.1.47 In contrast to these revealing statements, often of a self

critical nature, Mr Nugan derided others who had at one time or another

expressed similar criticisms. Mr W.J. McDonald [2.47] gave evidence to 52 . .

the Commission concerning a document which Mr Nugan, while in the

United States, had dictated to Mr McDonald's secretary for despatch to

the Bank of New South Wales in Sydney. Mr McDonald said he could only

describe the document as 'an absolute diatribe' and he told his secretary

not to send it.

2.1.48 The document was entitled 'An Insignificant Commercial "Tragedy"

on the Rim of the World'. It comprised a list of grievances against

individuals or groups of individuals including those involved in the

takeover of the Nugan Fruit Group, parliamentarians, senior government

officers, the media generally and certain journalists in particular, and

- 53 -

the Australian banking and merchant banking community in general. His

allegations v/ere of 'disgraceful conduct', 'swearing a false oath',

'illegal provision of secret information', 'breaches of the Companies

Act', 'innuendo', and 'rew heights in "amateurism" and "low standards"' .

He referred in particular to the Bank of America and the Chemical Bank as

believing:

'the media and built on the shaky innuendo and edifice of

superficially sober criticism and support for the gutter press. Australian United Corporation, merchant bankers Bank of New South Wales, National Bank and others in Australia, Bank of America, Chemical Bank etc in the United States etc and others

elsewhere in the world demonstrated clearly their disregard for facts (they print a good story) and probably most importantly that even humans in big banks are sometimes fallible. They should be forgiven their horrifyingly false references and opinions on Nugan Hand because we will have to live with them in the future and they will improve and raise their standards only very slowly.'

With reoard to this letter, Nr McDonald observed that Mr Nugan was

'really unbalanced' at this time.-^

2.1.49 In the latter part of 1979, it came to Mr Nugan's attention,

through negotiations for the purchase of a share in London Capital

Securities Ltd [2.111], that the other parties to the negotiation had

obtained an unfavourable opinion concerning the Nugan Hand Group from

Australia. This opinion is set out in full in Part 4 Section 6 of the

report. Mr Nugan mistakenly attributed this unfavourable opinion to the

Bank of New South Wales and wrote on more than one occasion to the Bank

complaining that the Nugan Hand Group had been treated unfairly. He

subsequently discovered that the true author of the opinion was the

Australian merchant bank, Australia United Corporation (which no doubt

explains its inclusion in the passage quoted in the preceding

paragraph). In his response, on 2 October 1979 Mr Nugan affected an air 54 of one unjustly accused:

Ί would like you to understand that it is very hurtful to

Michael Hand and myself who are the owners of this Group, and extremely hurtful to the 130 or so executives who have worked very hard for the Group over the past ten years in its embryonic

- 54

stages ... It is not a matter which we propose to refer to our

solicitors, since it is against our religious beliefs to

commence actions other than for recovery of debt in the normal course of business.' [emphasis added]

Tax Expertise * 5 5 * * * 5 9

2.1.50 Mr Nugan made many extravagant claims of expertise of one kind

or another which have been shown to be unfounded. His most recurrent

boast was that concerning his tax expertise. He told 'everyone' he was 55 the best tax lawyer in the world. He boasted that he had collected

$1 million in pay for advice on tax avoidance and that by the end of 1979

he was earning $100 000 per month in this respect.^

2.1.51 Furthermore, when he addressed the Group's conference held at

the Wentworth Hotel in January 1979 on the subject of 'Taxation

Services', he attributed the success of the Nugan Hand Group to his

subsidisation of it from the substantial fees purportedly earnt by him in

the provision of tax advice, a claim he was often to repeat on later . 57

occasions. It was clear from evidence to the Commission that this

unsubstantiated claim had been accepted as the truth by representatives

of the Group and other parties.

2.1.52 One person who was impressed by Mr Nugan's ability in this

respect, who observed Mr Nugan in the process of providing tax advice,

was General E. Cocke [2.13]. Based on his observations at the time he 59

concluded that Mr Nugan was a 'first class tax lawyer'.

2.1.53 However, Mr E.P. Bar land [2.28] who informed Mr George that when

he had worked for the Taxation Office, they had regarded Mr Nugan as one

of the best tax lawyers in Sydney (which was why Mr Bar land went to work

for Mr Nugan) later changed his mind and informed Mr George that Mr Nugan

had a 'narrow understanding of the overall operation of the Act', meaning

for instance that he 'probably could not give conventional accounting tax

advice but he was very aggressive and very inventive'.^

2.1.54 It was impossible for the Commission to quantify the fees earnt

by Mr Nugan in the provision of tax advice but it is quite clear from the

- 55 -

evidence that claims as to the extent of the fees earnt and his

subsidisation of the Group were grossly exaggerated. While he ray have

obtained satisfactory results at the height of certain sections of the

public's interest in various tax avoidance arid evasion schemes, there is

certainly no evidence before the Commission that Mr Nugan earnt large

sums.

Mr Nugan's Lifestyle * 6 5

2.1.55 Mr Nugan's lavish tastes and lifestyle were legendary. lie lived

at Coolong Road, Vaucluse in Sydney [see 3.4.38-3.4.42] in a most

prestigious residence overlooking the harbour which he liought anti

decorated at great expense, though the expense was borne by Nugan Hand

Ltd and not himself. ®4 He had his visitors chauffeured around

Sydney*^ in fleets of Mercedes Penz motor vehicles which he had

regularly on standby. He gave executives the use of expensive motor

cars. In the words of one: 'they gave me a car, they gave me a

Mercedes. They gave everybody a Mercedes'.®4

2.1.56 Overseas, notably in The Philippines, his lifestyle was nothing

short of ludicrously ostentatious. One witness observed that they were

greeted at The Philippines airport by the Minister of Commerce, their

arrival was televised and they were chauffeured from the airport without 65 having passed through Customs.

2.1.57 It was at the I CONE conference in Manila in July 1979 however,

that Mr Nugan made his most ostentatious display. He hired a luxurious

penthouse suite at the Philippines Plaza Hotel, at a cost of 'thousands

of dollars a day', he hosted lavish cocktail parties, he hired two

Mercedes vehicles to wait outside the Hotel 24 hours a day, and publicly

announced a donation of some US$12 000 to a Social Welfare Fund.®®

Understandably, his conduct during the course of the conference gave rise

to a great deal of criticism with references to his 'vulgar display of

ostentation', his 'gauche and totally immature' behaviour®/ and his

'incredibly embarrassing splash'.68

- 56 -

2.1.58 Mr Nugan fuelled the image of personal wealth based on his

affluent lifestyle by blatantly false claims that he possessed

considerable capital. Thus at the January 1978 conference he announced

that Mr Hand and he had private funds which became available on

10 October 1977 by which the capital of Nugan Band Ltd was increased from

$1 million to $2.2 million. ^ [For a description of the second capital

injection into Nugan Hand Ltd, see Part 5. ]

Mr Nugan's Drinking Habits

2.1.59 Mr Nugan's excessive drinking from early morning to late

afternoon was common knowledge among the staff employed at the Nugan Hand

Ltd premises in Macquarie Street. That his early morning drinking was

regular was confirmed by Mr G.T. Shaw [2.65], who referred to an ever

present glass of whisky on Mr Nugan's desk, and Mr F.D. Ward [2.73],

who attributed Mr Nugan's ambivalence or morose nature in the afternoon

to his consumption of alcohol. In a minute from Mr Nugan dated

16 February 1976 reference to the closure of the bar at the company's

offices between 9.00 a.m. and 5.00 p.m. was interpreted by Mr Ward as

perhaps being a promise by Mr Nugan to 'go on the straight'.7i Similar

references to Mr Nugan's drinking habits were made by a number of other 72 witnesses.

2.1.60 .Such was the concern of Mr J.M. Gilder [2.25] at the extent of

Mr Nugan's reliance on alcohol that he asked Mr G.A. Courtney-Smith

[2.17], who claimed experience in the treatment of alcoholics, to assess 73

the extent of Mr Nugan's drinking problem. Mr Courtney-Smith

discussed the matter with Mr Nugan and concluded that while Mr Nugan was

not an alcoholic, he was highly dependent on a large intake of

alcohol.7^

2.1.61 It is clear from correspondence that Mr Hand preferred to ignore 75 the problem at this time but he was later to give physical expression

to his disapproval by knocking the ever present whisky glass, a constant

reminder of his partner's alcoholic state, from Mr Nugan's desk

[2.2.64].76

- 57 -

Mr Nugan finds Religion

2.1.62 To the observance of associates Mr Nugan stopped drinking about

April 1979 and embraced religion with a conspicuous intensity. He

attended church each morning, afternoon and lunchtime and although his

general behaviour remained the same, there was a sanctimonious tone in 77 his dealings with the staff. Mr Shaw recalled occasions when

Mr Nugan returned from St. Andrew's Cathedral and stated that he had

prayed for Mr Shaw and his f a m i l y . A n o t h e r witness described how

Mr Nugan arrived at the conference held at the Gazebo Hotel in October 79 1979 in the following terms:

'Nugan arrives at the meeting, may be a little late, shining eyes, saying, "Oh I feel so good, I have just been to church. I took communion. I feel really good".'

2.1.63 Mr Nugan's interest in religion continued until his death. The

full extent of this was intimated at the funeral when the rector

disclosed that he had given Mr Nugan religious instruction on a regular

basis and they had become firm friends.80

Behaviour in 1979

2.1.64 During the last twelve months of his life there were any number

of incidents of extreme, erratic or inappropriate behaviour on the part

of Mr Nugan. His behaviour had its effects upon the staff of the Group

as well as third parties.

2.1.65 One witness told the Commission that during the last 12 months

of his life, Mr Nugan frequently insulted and humiliated the staff ,8· * "

Another spoke of his great concern when contrary to the facts, Mr Nugan

had, without consulting him, included his name in a new brochure as a

person who had recently joined the Group.8^ In May 1979, a Malaysian

government official, distinctly upset by Mr Nugan's brazen and

insensitive approach to business, had cause to complain that the Group

had falsely claimed to be acting for his government in relation to sales

of rubber, that the Group was a potential political liability and that

- 58 -

Messrs Hagan and Hand had subjected the official to heavy sales

pressure.

2.1. 66 Admiral F.P. Yates [2.76] referred to Mr Rigan's erratic

behaviour in reversing two previously agreed staffing decisions.

Mr Rigan had agreed that Admiral Yates would negotiate the conditions of

Mr D.E. Beazley's [2.7] appointment to the Bank and immediately

negotiated the arrangements himself. Mr Nugan had also instructed

Admiral Yates to dismiss General E.F. Black [2.8] and, having done so,

Mr Rigan immediately re-engaged him.®4

2.1.67 Mr Rigan's constant obsession with prestige and appearances and

his vulgar display of money also manifested itself during this time.

Reference has already been made to Mr Rigan's lavish entertaining at the

Manila conference [2.1.57], So too, in the United States, Mr Nugan

attended the Democrat National Committee fund raising dinner at US$1 000

a head in order to meet and shake hands with President Carter. His

subsequent quest for the photographs of this event achieved, in the

opinion of one witness, the level of a fetish.®®

2.1.68 In Asia and elsewhere Mr McDonald, referring to Mr Rigan's

business activities at this time, described how:®®

'Mr Nugan created the impression running all over Asia and everywhere else that he had tons of money and all you have to do is clear your crazy projects with wait McDonald and if he said its OK I'll be there with the money bags.'

2.1.69 A striking illustration of Mr Nugan's disturbed state of mind at

this time was given in evidence by Mr McDonald in the context of

negotiations with The Philippines government for the purchase of the

Santa Innes iron ore mine. He said Mr Nugan became:®

'incredibly disorientated and left ... He'd become incoherent, his speech made no sense. He'd go off on a tangent. He'd go

into ten minutes of self aggrandizing speech, that kind of thing. As a matter of fact he was so bad - he left by the way

and told me to continue on.'

59 -

As has been mentioned at 2.1.47, Hr McDonald, unbeknown to Mr Nugan,

declined to post a letter written by Hr Fugan, on the basis that the

contents were 1 an absolute diatribe'.

2.1.70 Mr G.A. Edelsten [2.20] said he eventually came to the view that ,, „ 88

Mr Nugan was:

'stark raving mad, and he was painting pictures in the sky of things and schemes and obviously they never intended to

eventuate or nay he lie was so paranoid that he thought they would eventuate.1

2.1.71 So too, Dr G.J. Pauker [2.54], summarising his views of Mr Nugan

in the last month of his life, said he was not a man of sober judgment 89

but a man with a very unbalanced mind. ‘ Mr Nugan' s peculiar behaviour

seems not to have escaped Mr Hand's notice either. In fact Mr Hand asked

Mr McDonald to escort Mr Nugan on his various visits to ensure that he

confined himself to matters of a legal nature and left major projects

alone. It would seem that Mr Hand entertained serious doubts about

Mr Nugan's rationality and staff management from as early as December 90 1978 or January 1979 ' and at one stage in 1979 he contemplated closing

the Sydney office thereby effectively curtailing Mr Nugan's activities 91 save in the legal sphere.

Final Days

2.1.72 By Christmas 1979, Mr Nugan was clearly depressed and in

reference to his children, one observer commented 'he would bounce that

little nirl of theirs very wistfully on his knees and talk to the little

boy in a way that suggested, in retrospect, that he was saying goodbye to

then'. In the first week of January, Mr G.F. Princat. [2.9] told

Mr Nugan that unless the internal bills v/ere repaid, he would qualify the . 93

accounts thus exposing the company's state of insolvency. It was at

this tine that Mr Nugan renewed his shooter's licence, purchased a

rifle94 and subsequently left for two weeks in the United States with 95 ’

his wife,'" where he gave her various legal documents including an

insurance policy on his life.

- 60 -

2.1.73 He then visited Germany^ to reassure Mr J. Bachmann [2.5] of

the F.A. Neubauer Bank that money for the Group's acquisition of the Bank

would be forthcoming. Given the desperate circumstances of the Group and

his own personal plight, it is impossible to reconcile the activities of

the man.

2.1.74 Following this untimely visit to Germany, he then returned to 97

Sydney only to hear news of Mr Hill's proposed resignation and the 98

Taxation Commissioner's rejection of certain tax schemes.

2.1.75 It would seem that the 'massive fraud' (as Mr Nugan's actions

over the years were described by the Coroner in his finding at the first

inquest into Mr Nugan's death) perpetrated by Mr Nugan on the Nugan Hand

Group, his wounded pride at the thought of exposure as a financial

failure and his generally unbalanced frame of mind led him to take his

own life.

2.1.76 On the Friday evening before his death he was said by his friend

Mr Lincoln-Smith to be 'laughing drunk'. Notes concerning his wife and

children and phrases such as 'this is my most wonderful day' left in 99

Mr Nugan's bible were reminders of his religious fervour at this time.

2.1.77 As mentioned earlier in this profile his body was found with a

bullet wound to his head at 4.00 a.m. on Sunday, 27 January 1980 in a

Mercedes car parked near Lithgow, New South W a l e s . A verdict of

suicide was reached by one inquest and subsequently confirmed by another

following an exhumation of Mr Nugan's body."*·1 ^

2.1.78 For further details concerning these final days of Mr Nugan's

life the reader is referred to Part 3 Section 7.

VO CO "~Ι ^ CO M

- 61 -

Endnotes

1 JTF Vol. 2 p 288, CD3774 folio 45; CD4127 folio 59; CT23975-6,

K. Nugan CD3719 Hand's speech to Bangkok Conference January 1978 CT22510, Calder CT22408, Needham CD9571 folios 1-2

CT22311a-312, Swan JTF Report Vol. 2 p 293; CD5609 folio 3 The Financial Review, 30 December 1977 CT22407-08, Needham 10 CT22410, Needham

11 CT22411, Needham

12 CD1308 JTF ROI Needham; p294 JTF Report 13 CD1308 JTF ROI, Needham; p294 JTF Report; CT22409, Needham 14 CT24844, Young

15 CT24829, CT24843, Young 16 CT24845-8, Young

17 CT24860, CT24864, CT24880, CT24858, Young 18 CT24870-71, CT24874, Young 19 CT24829-30, CT24873, Young 20 CD6233 folio 48; CD6360 folio 51; CD919 folio 11

21 CT22412, Needham

22 CD6436 folios 80 and 96; CT22412, Needham 23 CT22412-13, Needham 24 CT19462, Smiles; CT15518, CT21485, Hill 25 CT22415, Needham

26 CT22781, Collings; JTF Report Vol 2 p296 27 CT22781, Collings

28 CT22782, Collings

29 CT22800, CT22804, Collings 30 CD4533 folio 47

31 CT21493, Hill

32 CT21494, Hill

33 CD9926 folio 52

34 CT21496, Hill

35 CD11529 folio 83, Letter Kwok/Commission 9/4/85 36 CD2199 Box 1 folio 118

37 CT22346-7, George

38 CT22346-7, George

39 CT24830, Young; CT25024; CT23230, Ward; CT22333, Swan;

CT19945-6, Moloney; CT22214-16, Gilder 40 CT22245, Gilder; CD1311 folio 173, Gilder JTF ROI 41 CT21503, Hill

42 CT21507, Hill

43 CT24322, Hill

44 CT20302, Swan; CT116254-5, Hill 45 CD2803 folio 2

46 CT22609; CT21247, Houghton; CT22373; CT22376, George 47 CT22373; CT22376, George 48 CT18772, CT18868, CT18895, Evans; CT21597-98, CT25198-99, Brincat; CT22428, CT22432, Needham, CT24829, Young; CT25024,

Shaw; CT24036, Dunn

49 50 50a 51 52 53

54 55 56

57 58 59 60

61 62 63 64 65

66 67 68

69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86

87 88 89 90 91 92 93 94 95 96 97 98

99

100 101

- 62 -

CT22707, Pulger-Frame CD10950 CD10950 folios 8,11,14,24,25,102 CD10950 folios 3,6,37,48,49,53 CD11524 CT24684, McDonald CD232 folios 1-2 CD1308, JTK ROI, Moloney and George CD1308, JTF ROI, Moloney and George CD45 folio 14

CT22921, McArthur CT24603, Cocke CT22359-60, George CT24510, Pauker

CT22320-2, Swan CT24510, Pauker CT20469, Edelsten CT24687-88, McDonald

CT24263, CT24291, Yates CT24263, CT24291, Yates CT24679, McDonald CD10252 folio 15

CT25024, Shaw CT23230, Ward CT22333-34, Swan; CT19945-46, Moloney CT22214-16, Gilder

CT22105, Courtney-Smith CD6186 folio 4 CT22214-6, Gilder CT23988, George

CT25024, Shaw CT24511, Pauker CD2803 CT22217, Gilder CT24512, Pauker CD8628 folio 14

CT24261, CT24265, Yates CT24295, Yates CT24710, McDonald

CT24683, McDonald CT18706-7, Edelsten CT24532-33, Pauker CT24262, Yates CT22541, Houghton

CT24522, CT24533, Pauker CT23749, CT23924, Brincat CD1414 folios 362-3 CD1177 CT22128-33, Hewitt CT22211-12, Hill; CD1414 folios 395-96 CT20832, CT22367, George CD2803 CD1609 folio 14 CD1609

- 63 -

2.2 HAND, Michael Jon

Introduction

2.2.1 In 1968 Michael Jon Hand and Francis John Nugan [2.1] met for

the first time in Sydney. It was a meeting that was to have some quite

remarkable consequences, not only in commercial and financial circles

within Australia but in various countries throughout the world. Indeed

some seventeen years later serious and wide ranging allegations of

misconduct concerning the activities of these two men are still being

asserted both in Australia and overseas; the winding up of companies

incorporated by Mr Hand and Mr Nugan continues both in Australia and in

Hong Kong.

2.2.2 Their backgrounds had little in common and, in particular,

neither had by training or experience any qualifications relevant to the

setting up and the operation of a banking organisation, merchant or

otherwise. Nor did either of them have anything like the funds

ordinarily required for such an undertaking. Notwithstanding this,

between them they formed an international group of companies, some based

in Australia, which advertised themselves throughout many countries as

carrying on merchant banking activities and offering financial and

investment advice and other services.

2.2.3 Following the death of Mr Nugan in January 1980, Mr Hand, who

was in London with Admiral E.P. Yates [2.76] at that time returned to

Australia briefly only to flee the country a few months later and

disappear. The circumstances of Mr Hand's disappearance and subsequent

contact with him are described in paragraphs 2.2.92 to 2.2.100.

Personal details and qualifications

2.2.4 Mr Hand was born in New York City in the United States on

8 December 1941. His early schooling was completed in New York and in

1961 he graduated from the University of Syracuse, New York with a degree

in Forestry. He was a full-time resident of the United States from 1941

to 1964.1

- 64

Service in Vietnam

2.2.5 He enlisted in the United States Army ir, 1963 and served until

May 1966. He served in the Special Forces Airborne Division during a

tour of duty in Vietnam and was highly decorated for bravery in respect

of that service. He was awarded the Silver Star, and the award was later

upgraded to that of the Distinguished Service Cross, (the second highest 2

decoration for bravery in combat awarded by the United States Army ) 3

for 'extraordinary heroism' at Dong Xaoi in June 1965. He was also

awarded the Vietnamese Cross of Gallantry.^ While in Vietnam Mr Hand c .

was a member of the Green Beret Unit."' This was described by a witness

before the Commission as a special elite airborne unit, generally

recruited from the Airborne Division, whose mission in Vietnam was to

work with the hi .11 tribes of the central mountains to combat the

infiltration of supplies and personnel from the North.

2.2.6 Mr Hand told Mr W.E. Colby [2.14], the former head of the United

States Central Intelligence Agency ('C.I.A.'), and other witnesses, that

while he was a rentier of the Green Beret Unit, he had some loose

7

connection with the C.I.A. One witness told the Commission that, in

his view, it was possible that the C.I.A. had at that time worked with g

the Green Berets in conjunction with the hill tribes of Vietnam.

Mr Hand also told Mr Colby and another witness that his association with

the C.I.A. continued while working in another job after he left the

United States Army.^ [Allegations concerning Mr Hand's involvement

with the C.I.A. are further referred to at paragraphs 2.2.105-2.2.109 of

this profile, and are dealt with in detail in Part 4 Section 3 of this

report. ]

2.2.7 Claims have been made that after leaving the United States Army,

Mr Hand was employed in the late sixties in Laos and Vietnam, by either

Continental Air Services or Air America. He was said to have flown

unmarked aeroplanes which 'dropped food to the natives' .

2.2.8 While in Vietnam in the late sixties Mr Hand met Mr Paul

Stocker, an American lawyer, who was at that time selling land through

- 65 -

his company, Ocean Shores Pty Ltd, to American servicemen in Laos. This

land was situated on developments known as Ocean Shores anci Cabarita in

the Brunswick Heads area of northern New South Wales.11 Mr Hand was

later employed for several months as a salesman by Mr Stocker, and was

very successful in selling this land to United States servicemen

stationed in Laos and Saigon.

Early Activities in Australia

2.2.9 Hr Hand had cone to Australia in the late sixties on Rest and Recreation leave and met Nr F.B. Houghton [2.35] the proprietor of the 12 Bourbon and Beefsteak bar and restaurant at Kings Cross in Sydney.

In September 1967 Nr Hand migrated to Australia and took up full-time

residence.11 His initial employment included employment for a few

months by Parkes Developments, selling land on the north coast of New

South Wales.14 This job was obtained for him by Mr Houghton.15 From

about 1967 until 1969, Mr Hand was employed as a Sales Manager for

Wendell West Australia Pty Ltd, the company which had bought out

hr Stocker's interest in Ocean Shores. This company continued to be

involved in land development in the Brunswick Heads area.11 Mr Hand

retained his employment when Wendell West sold its interests to Princess

Properties in 1970.11

2.2.10 In December 1968, Mr Hand married an Australian citizen named

Helene Mary Boreland.1^

First contact with Mr Hugan - Early joint ventures - Incorporation of

Yorkville Nominees Pty Ltd * 1 9 2 0 2 1

2.2.11 Mr Hand first met Mr Nuqan in 1968, when he (Hand) was involved 19

in the purchase and sale of real estate in northern New South Wales.

Evidence before the Commission indicates that they soon established a 20 very close relationship. For a time they shared a flat together in 21

the Eastern Suburbs of Sydney.

2.2.12 In August 1969 Mr Hand together with Mr John Foley and Mr Clive

Lucas, formed a company called Australasian and Pacific Holdings Ltd

- 66 -

[2.80], Mr Hand became the company's managing director. The company was

described as an investment company, set. up to develop a beach resort in

Queensland, it did very little in the way of trading other than some

stock market trading handled by Mr Hand.22 Mr Hugan became associated

with the company in early 1970, and subsequently borrowed a laroe amount - . 23 "

of money from it. The company did little business after 1973,

although Mr Hand remained a director until 1977.2^

2.2.13 In January 1970 Mr Nugan together with Mr Donald O'Callaghan

formed a company called Meekatharra Minerals ML [2.112]. The company was 25

formed to mine for nickel, copper and cobalt in West Australia.

Mr Hand worked as a security guard for Meekatharra M i n e r a l s . H e told

one witness before the Commission that he met Mr Nugan while he was 27 engaged in this work. In a letter from Mr O'Callaghan to the Sydney

Stock Exchange dated 17 March 1970 Mr Hand was said to be the holder of

20 000 shares in this c o m p a n y . M r Hand held no office in the

29

company, but Mr Nugan remained a director until 23 July 1973.

2.2.14 In March 1970, Mr Nugan formed a company called Yorkville

Nominees Pty Ltd [2.108], Mr Hand was associated with Mr Nugan in

relation to the activities of this company, which v/as involved in buying

and selling real estate. Mr Hand was a director of Yorkville Nominees

from 17 March 1972 until 21 June 1972.^ His involvement with Mr Nugan

in land dealings continued during the period 1970 to 1973 and

31

beyond. An associate of Messrs Hand and Nugan during their early

joint ventures suggested that they made about half a million dollars from 32 their joint land deals.

2.2.15 In August 1971 Mr Hand became a foundation director and joint

managing director of Secured Income Real Estate (Australia) Ltd ('SIRE')

[2.117], [For further information as to the role of this company see

3.2.9.] This company carried on business as a property developer in 33 Queensland. During Mr Hand's involvement with SIRE he travelled

extensively in New South Wales to purchase real estate. In conjunction

with others he bought a property at Cowra in the name of Langenfelder Pty

Ltd of which he was a director, and of which Mr Nugan later became a

- 67

shareholder. As approval for subdivision of the Cowra land was not

granted, the venture was unsuccessful; those involved received about

$1 DOn each and Langenfelder Pty Ltd subsequently went into liquidation.

Mr Hand ceased to be a director of SIRE in July 1972. Evidence before

the Commission suggests that Mr Hand resigned because he took the view 34

that SIRE was in financial difficulty and might collapse.

2.2.16 Mr Hand and his wife were also directors of Carlyle Investments

Pty Ltd, (later the name was changed to Garcia Pros Hardware Pty Ltd

[2.83]), a company apparently involved in share trading and investments.

According to the evidence before the Commission, by 1973-74, Messrs Hand

and Nugan together appeared to control a group of 'four companies involved

in property development and share investment; their activities included 35

the strata titling and renovation of old flats for resale.

Establishment of Nugan Hand Ltd * 3 7

2.2.17 Nugan Hand Needham Ltd [2.97] was incorporated on 6 July 1973.

It was soon to change its name to Nugan Hand Ltd. Its first directors

were Messrs Nugan and Hand, Mr John Charles Needham [2.51] and Mr Brian

William Calder [2.11]. The name of the company was changed to Nugan Hand

Ltd [2.97] on 22 August 1974, Mr Needham having ceased to be a

shareholder and director.36 In late August 1973, Messrs Hand and Nugan

established an office of the company on the 8th floor at 55 Macquarie 37 Street, Sydney. It appears that Mr Hand's activities during the

early days of the company were confined to the sale of real estate and

silver bullion and that he was at this stage also ' involved in property

up and down the coast'.

2.2.18 Until December 1973 the company was mainly involved in the sale

of land at Brunswick Heads in northern New South Wales. A major

development with which it was concerned was Ocean Shores, which involved

the re-purchase of between seventy and eighty blocks of land from United

States servicemen who had originally bought them and the resale of these

blocks at a profit. There is evidence before the Commission that in the

early days of the company, it was controlled by Mr Nugan and that

- 68 -

Mr Hand's involvement was limited to specific areas in which he was

interested; for example the Ocean Shores development was described as a 39 pet hobby1 of Mr Hand's. There is evidence before the Commission

that Mr Hand was also involved in selling silver bullion on behalf of

Pacific Silver Commodities^ [see 2.104], Mr Hand was not involved in

the limited money market operations of the company carried out by

Mr Young [2.78] in August 1973, except in relation to formalities such as

signing the dealing book. An employee of the company in these early days

described Mr Hand as a 'very cold impersonal employer who wished to

isolate himself from his staff as much as possible', whose dealings with 41

clients were conducted 'very much on a closed door basis'.

2.2.19 In late 1973 Mr Hand was involved with Mr Nugan in the takeover

of North Australian Rubber Mills Ltd ('HARM') [2.113] by PNB Rubber and

Plastic Industries Pty Ltd, [2.116] and with the subsequent 'rescue

operation' conducted in respect of NARM. NARM was a Queensland footware

and manufacturing company. Messrs Hand and Nugan became directors of

this company on 30 October 1973, at the conclusion of the takeover. 42

Shortly afterwards their interest in NARM was purchased by Mr Needham.

Knowledge of first capital injection into Nugan Hand Needham Ltd -

Signature of 1974 Accounts 4 3 * 4 5

2.2.20 Mr Hand and Mr Nugan were each allotted one ordinary $1 share in 43

Nugan Hand Needham Ltd on 9 July 1973. On 18 July 1973 Mr Nugan was

allotted a further 20 000 shares.^ The minutes of a meeting of

directors of Nugan Hand Needham Ltd dated 17 August 1973 record that

Messrs Nugan and Hand submitted applications for 490 000 shares each and

that Mr Nugan submitted his cheque for $980 000 in respect of these 45 applications. It was resolved that Messrs Nugan and Hand each be

issued with 490 000 shares. Attached to the minute are applications for

the shares signed by Messrs Nugan and Hand and dated 17 August 1973. ^

2.2.21 This was a device of Mr Nugan's designed to give the appearance

that Messrs Nugan and Hand had contributed $1 million in capital to the

company. The mechanics are described in Part 5 paragraphs 5.76-5.87 and

- 69 -

are not repeated here. Mr Hand's involvement in this dishonest scheme at

this early stage is significant. As a result of this scheme a claim was

made in the published accounts that paid up capital was $1 000 005.

2.2.22 Mr Hand also signed the Statement by Directors and the Directors

Report attached to the accounts of Nugan Hand Needham Ltd for the period 47

ended 30 June 1974 on 25 October 1974, again demonstrating that he

was quite prepared to publish false statements.

Mr Hand's Absence - December 1974 to March 1976 - Activities in South

Africa

2.2.23 Mr Hand departed Sydney en route to San Francisco on 17 December

1974.^ After visiting Panama, Arizona, London and Spain, Mr Hand 49

travelled to South Africa on 14 March 1975. He was granted permanent 50

resident status on 19 December 1975. Apart from one visit to

Australia between 17 and 31 July 1975 he and his wife apparently remained

in South Africa until 16 March 1976, when they returned to Australia.51

2.2.24 On 7 July 1975 Mr Hand formed a company in South Africa called

Nugan Hand (S.A.) Pty Ltd. Mr Hand was the sole shareholder of this

company and gave his occupation at the time of its formation as 'property

consultant'. The business of the company was said to be that of 'a

management consultant and general investment adviser'. The company had a

paid up capital of one South African rand. The company carried out no

business transactions during the period of its existence. On 13 October

1976 Mr Hand advised his solicitor in South Africa to take action to 52

de-register the South African company.

2.2.25 There has been considerable speculation as to the reasons for

Mr Hand's departure and return and as to his activities while in South

Africa. Mr Hand himself told the delegates of the Corporate Affairs

Commission that he and Mr Nugan 'separated company' for 'about fifteen

months' in January 1975. He said that he and Mr Nugan had settled this

in Hawaii in early January 1975, and that he then resigned from the

boards of all Nugan Hand Group companies with which he had been

- 70 -

associated. He told the delegates that he was paid out by Mr Nugan over

a period of time for the 410 000 shares which he held in Nugan Hand Ltd.

Of his return to the Nugan Hand Group, Mr Hand told the delegates that

when he returned to Australia in March 1976, Mr Nugan said, 'Can you help

me? I am here all by myself and we will put things back on the same

footing', whereupon Mr Hand agreed to re-join the company.^ Contrary

to Mr Hand's account of his absence, the minute book of Nugan Hand Ltd

records Mr Hand as being overseas 'on company business' on 4 June 1975,

25 June 1975, 7 August 1975 and 12 August 1975. However, as much of the

contents of the minutes were sheer fabrications very little reliance can

be placed on such a record. The records lodged by the company with the

Corporate Affairs Commission indicate no change in the directors and

shareholders to support Mr Hand's assertions.

2.2.26 Mr F.D. Ward [2.73] told the Commission that about January 1975

Mr Nugan returned from a trip with Mr Hand to Hawaii, called the staff

together for a meeting and advised them that Mr Hand would not be coming

back because he bad retired. Mr Nugan said that Mr Hand was spending 56

some time with his wife in South Africa. Mr Ward understood that 5 7 57

Mr Hand intended to establish a turkey farm in the United States.

Mr C.L. Col lings [2.15] told the Commission that Mr Nugan told him that

he had bought out Mr Hand for half a million dollars in Hawaii on

16 December 1 9 7 4 . Mr P.M. Dunn [2.18] told the Commission that he

understood from Mr Hand that he left the company because 'he had sort of

burnt himself out in the earlier stages of the business and was very

happy to withdraw and was looking at all kinds of restful occupations.

He had had enough of the fast life and thought about becoming a turkey

farmer in the United States. He travelled a bit and could not find a

base, found himself in South Africa, and then wanted to return to the rat

race'. Mr Hand told another witness who gave evidence to the

Commission that he left Mr Nugan because of Mr Nugan's drinking

p r o b l e m . T h e r e is also evidence before the Commission that Mr Hand

left the company because he was 'sick of the problems associated with the

bank [Nugan Hand Ltd] and wanted some time to himself' and that Mr Nugan

had begged him to return to the company. The real reason for his

departure in December 1974 may simply have been due to the dismal

performance of the Group at this stage [see paragraph 3.3.1].

- 71 -

2.2.27 Other evidence before the Commission suggests that during this

period Mr Hand lived for some time in Rhodesia and spent some time

touring South Africa.6^

2.2.28 Mr Hand and Mr t'ugan apparently maintained a good relationship

during Mr Hand's absence, and they were constantly in touch by

telephone.68 While in South Africa, Mr Hand was in communication with

members of the Nugan Hand Group organisation in relation to a variety of

'business and trading opportunities' in South Africa.* * * * * * 64 There is

evidence before the Commission that while in South Africa Mr Hand made

requests for the supply of a number of commodities, including bullets,

carburettors, canned fruit,65 hand-guns and pistols, and that Mr Nugan

instructed Nugan Hand Group staff to make various trade inquiries on

Mr Hand's behalf. Allegations concerning Mr Hand's involvement in the

shipment of arms to South Africa and other transactions relating to

armaments during this period are further referred to at 2.2.102-2.2.104

of this profile and in Part Seven of this report. The Commission is

satisfied that no transactions involving the export of armaments to South

Africa were concluded.

Role after return to Australia

2.2.29 Mr Hand returned to Australia in March 1976 and apparently

resumed his role as equal partner in the affairs of Nugan Hand Ltd. The

company's access to funds had improved dramatically since the

establishment of Nugan Hand (Hong Kong) Ltd [see Part 4 Section 1 ].

Mr Dunn told the Commission that Mr Nugan reacted to Mr Hand's return as

'a pleasant surprise'.66 * Mr Hand soon caused the removal of the then

managing director Mr Dunn from that position.68 Mr Dunn told the

Commission that he resianed as managing director of Nugan Hand Ltd upon

Mr Hand's return, because he perceived that the real power in the

organisation would then lie with Messrs Hand and Nugan.68 Mr Collings

was told after Mr Hand's return that Mr Hand had renegotiated and 'bought

back in'.6<3 It appears that Mr Hand's activities upon his return to

the Nugan Hand Group concerned the collection of deposits on behalf of

Nugan Hand Ltd, and approaches to potential clients. 80 His role at

- 72 -

this time was described by Mr Ward to the Commission as that of 'a

salesman out collecting deposits'.7· 1 ·

Signature of back dated internal bills of exchange

2.2.30 The introduction of the so called internal bills of exchange

into the published accounts of Nugan Hand Ltd is dealt with at paragraphs

3.3.46 to 3.3.48. It was a scheme designed to camouflage the growing

deficiency in the funds of Nugan Hand Ltd. The close nature of Mr Hand's

relationship with Mr Nugan and the fact that he had by this time acquired

knowledge of the level of activity in Nugan Hand Ltd and already shown

himself willing to be a party to false accounts leads the Commission to

conclude that Mr Hand was well aware of the multiple deceptions practised

by Mr Nugan in relation to the production of false published accounts

[see Part 5],

Establishment of Mugan Hand Bank - Mr Hand moves to Hong Kong * * * * 7 2 7 3 7 4 7 5 * 7 7

2.2.31 The Nugan Hand Bank and Trust Company (later the Nugan Hand

Bank) was incorporated in the Cayman Islands on 6 July 1976. [For

further information on the role of this Bank see Part 4 Section 2. ]

Mr Hand became a director and Vice-President of the Bank on 21 July 1976 72

and a shareholder on 9 August 1976. On 25 August 1976 the company

73

was granted a hanking licence. The name of the company was later

74

changed to The Nugan Hand Bank.

2.2.32 From the time of its establishment, the Bank became Mr Hand's

prime concern. A plan for the development of the Bank, said by Mr J.M. 75

Gilder- [2.25] to reflect the ideas of Mr Hand and Mr Nugan, suggests

countries in which representative offices of the Bank should be

established, the type of operation to be conducted by those offices, the

services to be offered by the Bank and the administrative procedures to

be adopted.7® Mr Hand was responsible for the employment of Mr Gilder

because he wanted to 'get somebody who could really drive the bank 77 along'. At Mr Hand's instigation, Mr Gilder engaged a number of

persons to represent the Bank in various parts of world.7® Mr Hand was

- 73 -

the motivating force behind the establishment of representative offices

of the Bank in South Fast Asia, the United States, South America and 79 Europe. In October 1976, Mr Hand announced that he intended to open

offices of the Bank in Bangkok, Chiang Mai and Phuket. It was

subsequently decided that Mr Collings should go to Thailand to open the

Thai offices and that Mr Hand would replace Mr Collings in the Hong Kong

office of the Nugan Hand Group.88

2.2.33 Mr Hand left Sydney and moved to Hong Kong in about October

1976.®·*· From the time of his move to Hong Kong, Mr Hand 'more or less

took responsibility' for the South East Asian operations of the tJugan

Hand Group.82 He remained in Hong Kong until August. 1977 when he moved

to Singapore.88 According to Mr Dunn, Mr Hand was responsible for the

administration of the Hong Kong office and had an intimate knowledge of 84 its activities. From the time that Mr Hand went to Hong Kong he was

1 thereafter only a visitor to Australia'.88

2.2.34 Mr Hand was concerned to ensure that the Bank offered a highly

confidential banking service. To that end, he devised a system whereby

clients were allocated a client number and referred to in hank records by

number only. The identity of many of the Bank's clients was known only

to himself and Mr Collings.8(1 He was also responsible for the

introduction of a system of codes which were used in the transmission of

messages between Nugan Hand offices. The Nugan Hand Manual reflects

Mr Hand's obsession with secrecy, 0 in that it details steps to be

taken to ensure the client's privacy, which include 'maximum security'

applications for sensitive clients, allocation of code words and numbered

accounts, and the forwarding of correspondence in envelopes having no

conpany markings or return address. It was this section of the Manual

which Mr Hand instructed Nugan Hand staff to shred after Mr Nugan's 89 death " [see Part 3 Section 9].

2.2.35 Mr Needham was invited to join the Nugan Hand Bank as a

director, and went to Hong Kong in May 1977 to inform himself as to the

Bank's Hong Kong operation. Mr Needham said that it was apparent to him

from the books of Nugan Hand (Hong Kong) Ltd [see Part 4 Section 1] that

- 74 -

there was a shortfall of some US$3 million in the company. ^

Mr Needham expressed his concern about the shortfall to Mr Hand and

subsequently a meeting with Messrs Hand and Nugan was arranged in

Singapore. Mr Hand did not contribute much to this conversation and it

was Mr Needham's view that Mr Hand did not understand much about the

financial affairs of the Nugan Hand Group,93

Unusual Circumstances in which Mr Hand granted Australian citizenship

2.2.36 Mr Hand applied for Australian citizenship at the Sydney office

of the Department of Immigration on 17 January 1977. He was at that time

married to an Australian citizen. Mr Hand was interviewed by a

departmental officer on the same day that he applied for citizenship.

Police and security checks were requested on 24 January 1977 and

clearances received on 29 January 1977 and 3 February 1977 respectively.

On 8 March 1977 the Migration office in Hong Kong cabled the Sydney

office of the Department of Immigration requesting the citizenship

certificate in respect of Mr Hand, as Mr Hand had approached the Hong

Kong office requesting that he be granted Australian citizenship while

overseas. The Hong Kong cable suggested that the reason for Mr Hand's

request was that he intended to stay in Hong Kong for the next six

months. However, movement records disclose that Mr Hand returned to

Australia on five occasions between March and November 1977, each visit 92 lasting several days. The certificate was sent to Hong Kong and

citizenship was subsequently conferred on Mr Hand in Hong Kong on 17 May

1977.93

2.2.37 Mr Hand was granted Australian citizenship as the spouse of an

Australian citizen pursuant to section 14(8) of the Australian

Citizenship Act 1948. Mr Hand appears to have met all the technical

requirements for the grant of citizenship. However, shortly after the

grant of citizenship it became apparent to the Immigration Department

that Mr Hand had been granted citizenship under irregular circumstances.

Those circumstances were as follows:

. Immigration officers did not collect Mr Hand's United States

passport for return to the United States authorities at the time

75

that Mr Hand was interviewed in relation to his application for

citizenship. No explanation was recorded at the tine as to why

the passport was not collected. A departmental officer later

said that the passport was not collected because the applicant

wished to travel to Hong Kong; and

. the speed with which Mr Hand's application was processed, in

particular, the fact that he was interviewed on the same day

that he made the application and that police and security checks

were obtained very quickly. In addition, a folio had been torn

from the Sydney file of the Immigration Department in respect of

Mr Hand's application for citizenship. The missing folio should

have been placed on the file immediately above the processing

record and may have indicated the reason for the extremely

expeditious processing of the application.

2.2.38 An internal inquiry was conducted into the matter, which

concluded that the circumstances of Mr Hand's obtaining Australian

citizenship were unusual, but recommended that no further inquiry be

undertaken.^

2.2.39 The United States authorities subsequently demanded that Mr Hand

relinquish his United States passport. Mr Hand wished to retain his

United States citizenship and informed the American consul in Australia

in February 1978 that his decision to become an Australian citizen was

made 'strictly on commercial grounds' and that he planned to return

permanently to the United States to continue his business within five to ας seven years. Mr Hand sought legal advice from Mr Colby, a United

States lawyer, and former head of the C.I.A. in relation to the

circumstances in which he could retain his United States

96

citizenship. There is evidence before the Commission that Mr Hand

told one witness that he was forced to take up Australian citizenship in

order to preserve his Australian business interests, during a period of 97 'anti-Americanism' in Australia.

- 76 -

Mr Hand's Knowledge of Second Capital Injection

2.2.40 In August and October 1977 at a time when Mr Hand was in

Australia Messrs Nugan and Hand carried out a further fraudulent scheme

of a complicated nature designed to give the appearance that the paid up

capital of Nugan Hand Ltd had been increased to $2 million. The details

are explained in Part 5.

2.2.41 Mr Hand's close relationship with Mr Nugan, his prior

participation in the purported first 'capital injection' and the nature

of the transactions [see Part 5] establishes clearly Mr Hand's knowledge

of and continuing involvement in Mr Nugan's fraudulent scheme.

Establishment of Singapore office

2.2.42 In August 1977 Mr Hand moved to Singapore and established an

office of Nugan Hand International Holdings Ltd. The Singapore office

became the administrative headquarters of the Nugan Hand Bank and of the

various companies in the Nugan Hand Group incorporated outside

Australia. The original records relating to the Nugan Hand Bank were

held there, as were documents relating to the receipt and repayment of

deposits in Hong Kong, Manila and Thailand, and other countries where

Nugan Hand had established a presence.

2.2.43 Mr Hand indicated in a memorandum to all Nugan Hand executives

and representatives dated 26 August 1977 that he intended to 'take care

of all business and administration' from Singapore. ® In 1978 Mr Hand

combined his Singapore office with that of Mr G.R. Steer [2.68], the

Nugan Hand representative in Singapore, in new premises at ColIyer Quay.

Together they established Nugan Hand Singapore (Pte) Ltd.^ After

several months Mr Hand decided that there was a conflict of space and

responsibilities between himself and Mr Steer, and he moved his office to

the Straits Trading Building. He then established a company called Nugan

Hand (Management) Pty Ltd. The office staff included an accountant named

Mr Tan Choon Seng [2.71]. His office was primarily the head office of

the Nugan Hand Bank; it was also responsible for the funding of the

- 77 -

Singapore enterprise, and the payment of accounts and retainers to

overseas representatives of the Group.

2.2.44 According to Mr Collings, in late 1977 he was instructed by

Mr Hand to remove the names of the beneficial owners from all files in

the Hong Kong office and to treat each file as a number. Mr Collings

carried out this instruction."^ Another witness told the Commission

that after the arrest of Mr Nugan, Mr Collings was instructed by Mr Hand

that the names of all clients were to be removed from the Hong Kong

records. This instruction was carried out by office staff who either cut 102

or whited out the clients' names from the records.

2.2.45 Further evidence of Mr Hand's activities emerges from an address

he gave to a conference of Nugan Hand representatives held in Bangkok

in January 1978. The conference was attended by Messrs Nugan, Collings

and Gilder, and representatives of Nugan Hand stationed in South America, 103 West Germany and South East Asia. The subject matter of Mr Hand's

address indicated that he was familiar with the operation and functions

of the Nugan Hand offices in Hong Kong and Singapore, and had a detailed

knowledge of the staff employed by them and the functions of those staff;

for example Mr Hand outlined in detail the requirements for

representatives transferring money on behalf of clients, and announced

the provision by the Hong Kong office of nominee companies. Mr Hand

indicated that the accounts for the Nugan Hand Bank and other Nugan Hand

regional companies, such as Thailand, Malaysia and Singapore, were being

written up in Singapore. He implied that he was more familiar than

Mr Nugan with what was transpiring in the overseas offices of Nugan

Hand. He referred to Mr Nugan as having a very large workload and it

being impossible for him to know everything that was going on in the

overseas offices. He referred to a past direction that information and

documents involving the overseas operation be sent through Singapore or 104 Hong Kong, and not through Sydney.

Association with Mr Houghton - F.A. Neubauer Bank - Saudi Arabia

2.2.46 Mr Hand met Mr M.B. Houghton [2.35], the proprietor of the

Bourbon and Beefsteak bar and restaurant in Kings Cross, in the late

78

sixties when he (Hand) visited Sydney during a period of leave from his

military service in Vietnam. Mr Houghton obtained employment for Mr Hand

at Parkes Developments when he came to Australia, and Mr Hand later

formed a close association with him. "*"°^ In about September or October

1878 Mr Hand requested Mr Houghton to travel to West Germany and to give

him an assessment of the F.A. Neubauer Bank [2.109] in Hamburg, which had 10G

recently been acquired by t-lugan Hand." . In late 1978 Mr Hand

requested Mr Houghton to travel to Saudi Arabia to determine the

feasibility of conducting banking business on behalf of the Nugan Hand

Bank in Saudi Arabia."*07 Mr Houghton acceded to Mr Hand's request,

discovered that there were very good prospects for deposit taking in

Saudi Arabia and collected some deposits. He sent the deposits collected

to Mr Hand in either Singapore or Hong Kong and reported that the

prospects for deposit taking were good.7 At Mr Hand's request,

Mr Houghton made further trips to Saudi Arabia. In April or May 1979, on

Mr Hand's instructions, a Nugan Hand Bank representative office was

established in Alkohar, and a further office was later opened at Jeddah.

Mr Houghton and other Nugan Hand representatives visited construction 109

sites to collect deposits from expatriate construction workers.

[For further information see Part 4 Section 2. ]

2.2.47 When Mr Houghton requested access to a balance sheet of the

Nugan Hand Bank in connection with his deposit taking in Saudi Arabia,

Mr Hand told him that, as the Nugan Hand Bank was a Cayman Islands

comfviny, it was illegal to issue balance sheets. Mr Hand instructed

Mr Houghton and other representatives in Saudi Arabia that clients

requesting balance sheets were to be told that the issue of balance

sheets for Cayman Islands companies was illegal."*"70

2.2.48 There is evidence before the Commission that Mr Houghton

delivered money collected from depositors in Saudi Arabia to Mr Hand in

Switzerland during the winter of 1979. Mr Houghton told the delegates of

the Corporate Affairs Commission that he 'vaguely recalled' meeting

Mr Hand in Switzerland on another occasion and aiving him money, but was 112

unable to recall the amount or the purpose.

- 79 -

Engagement of former United States military personnel

2.2.49 Mr Hand was primarily responsible for the employment by the

Hugan Hand organisation of a number of high ranking, former members of

the United States military as representatives of the Nugan Hand Bank.

[For further information see Part 4 Sections 2 and 3. ] Mr Hand's reason

for the engagement of such personnel was that they were 'gentlemen of

status', who would greatly assist in building the reputation of the Nugan 113 Hand Group. Mr Hand was confident that, despite their lack of

banking expertise, these men would bring substantial trade and bank

custom to the Group through their connections in South East Asia. 4

2.2.50 Mr Hand was introduced to Admiral E.P. Yates [2.76] by

Mr Houghton in early 1977. Shortly afterwards Admiral Yates accepted a

position as Director and President of the Nugan Hand Bank and

representative of Nugan Hand Ltd, the Bank and Nugan Hand (Hong Kong) Ltd

in the United States. " Admiral Yates said that he was recruited to

the Nugan Hand organisation by Mr H a n d . H e developed a very close

association with Mr Hand, and felt ' very devoted to him' Admiral

Yates told the Commission that he was responsible for the recruitment of

a number of former United States military officers as advisers to the

Nugan Hand B a n k . W i t h the approval and encouragement of Mr Hand,

Admiral Yates engaged General Leroy Manor [2.45] as the Nugan Hand 119

representative in The Philippines. ' Admiral Yates also engaged 1 20 General E.F. Black [2.8], and arranged with General E. Cocke [2.13] ■ 121

that he provide office space for Nugan Hand in Washington D.C. He

introduced Mr Hand to Dr G.J. Pauker [2.54] who in turn introduced 122

Mr W.J. McDonald [2.47] to the Nugan Hand Group. Admiral Yates was

responsible for the introduction of Mr D.E. Beazley [2.7] to Messrs Nugan 123

and Hand. Mr Beazley later accepted a position with the Group.

2.2.51 In his address to the Group's Bangkok conference in January

1978, Mr Hand praised Admiral Yates as a great asset to the company with

an unbelievable capacity for work. He defended his engagement of

military personnel on the basis that they were hard working, disciplined

in their thinking, methodical, had valuable background knowledge of the

- 80

South East Asian area, and assisted the credibility of the Group because

they were well connected and well respected, and provided a means of

introduction to the American expatriate community.^

Refugee Program

2.2.52 In about March 1979 .Mr Hand requested Admiral Yates to work on a

special project for him, which involved the resettlement of Vietnamese

refugees in Centra] and South America. Admiral Yates travelled

extensively to meet heads of government throughout this region to gain 125 support for this project. ~ Mr Band asked Admiral Yates to evaluate a

proposal made to him that the Island of Jacmal was available for refugee

resettlement. Admiral Yates subsequently recommended that this not be

pursued. Mr Band also employed Mr Colby together with a number of

others to advise on the project. Mr Colby attributed Mr Hand's interest Ί 27

in the project to the fact that he had served in Vietnam. He

described Mr Band as 'almost obsessed' with the project. Mr Colby

consulted at length with local experts and representatives of candidate 128 'host' governments. " Mr Co]by and Mr Hand met with officials of the

Turks and Caicos Islands to discuss the resettlement of refugees."^®

In ear]y 1980 Admiral Yates signed a preliminary agreement to resettle

the refugees in the Turks and Caicos Islands in the C a r i b b e a n . A t

the time of Mr Nugan's death Mr Hand was in London with Admiral Yates for

the purpose of meeting British foreign office officials in connection

with the resettlement program.

Relationship between Mr Nugan and Mr Hand - Personality of Hand * 1 3 2

2.2.53 Evidence before the Commission indicates that Mr Hand and

Mr Nugan formed a very close relationship soon after their meeting in

] % 8. According to the evidence of one witness to the Commission, 132

Mr Nugan had no other close associates. The evidence indicates that

until perhaps 1978 or 1979 the two remained extremely close friends and,

subject to the constraints of distance, spent time together socially in

addition to the time spent on their business interests. They remained in

close and regular communication during the period of Mr Hand's absence

- 81 -

ITT

overseas from late 1974 until March 1976, and again after Mr Hand

left Australia in October 1976.134

2.2.54 Their regard for each other appears to have remained

undiminished at least until the Group's Bangkok Conference in January

1978 at which Mr Hand said of Mr Nugan:-1 ·45

' there is nobody I would prefer to remain back to back with and I think Frank has had the same affection for me over the years. I think Frank and I have probably over the years spent more time together than we have spent with our wives. I would like to

thank you for the good and bad years together.'

'Same from me' came from Mr Nugan in response.155 Their relationship

soured during 1979 as a result of Mr Hand's disapproval of certain of

Mr Nugan's activities and the damaging effects of the criminal charges

laid against Mr Nugan in 1978. This is further referred to at paragraphs

2.2.59 to 2.2.65 of this profile.

2.2.55 It appears from evidence before the Commission that the

personalities of the two men were quite different. Mr Hill described

them in evidence as being 'as different as chalk and cheese'. He said

that Mr Hand was ' very much a motivator, a gung-ho pusher of people',

whereas Mr Nugan was very reticent, did not know how to deal with people 137 and was not very much a mixer. General Black described Mr Hand as

having an entirely different type of personality from that of Mr Nugan;

he described Mr Hand as a 'sort of soldier type', whereas Mr Nugan had

experience and expertise in the business world.4 55 He described

Mr Hand as playing 'more of a promotional role in the Nugan Hand

139

Bank'. Mr Colby described Mr Hand as a very energetic, good

140

American fighting man now making a life in business.

2.2.56 Admiral Yates told the Commission that Mr Hand appeared to be a

very religious man, at the stage when he knew him. According to Admiral

Yates, Mr Hand was a practising Christian Scientist. He told the

Commission that whenever he travelled with Mr Hand they would attend a

church service on both Wednesday and Sunday, at which times Mr Hand

- 82 -

sometimes addressed the congregation. Admiral Yates also said of

Mr Hand:141

'In the mornings when we would travel he would ask me to come up to his hotel room ... and have devotional, and he would take a

reading from his religious doctrine and put it on the tape

recorder, and we would listen to the tape and have a moment of silent prayer and then charge off for the day.1

2.2.57 Mr Hand apparently considered Mr Nugan to be intellectually

superior and referred to his own expertise at the time he met Mr Nugan as . 142 ’

having been primarily in selling. In his speech to representatives

at the Nugan Hand Gazebo Conference in October 1979 in Sydney [see

3.6.13] he described himself and Mr Nugan as being people with different

skills who complemented each other. He inferred that in the early days

of their association, Mr Nugan had the technical expertise and he (Hand)

had the ability to deal with people. He contrasted this with the

position as it existed then and stated that their roles had altered to

the extent that he was now 'a first class pencil pusher1 and 1 Frank has 143 turned into a Dale Carnegie’.

2.2.58 Admiral Yates described Mr Hand as having 'delusions of

grandeur' and as becoming involved in 'pie in the sky schemes' and

'chasing rainbows'. Admiral Yates cited billion dollar oil deals, bank 144

loans and weapons sales as examples of such schemes. He was

instructed by Mr Hand to negotiate the purchase of the United Chinese

Bank from General S.K. Yee [see 3.5.40], After lengthy and expensive

negotiations involving Admiral Yates, General Black and other members of

the Nugan Hand staff agreement was reached with General Yee; at this

point Mr Hand indicated that the $30 million needed for the purchase was 145

not available and instructed Admiral Yates to drop the project.

Discontent with the activities of Mr Nugan

2.2.59 During 1978 and 1979 the evidence suggests Mr Hand became

disillusioned with Mr Nugan because of certain activities being pursued

by Mr Nugan.

- 83 -

2.2.60 In late 1978 or early 1979 Mr Hand made disparaging comments

about Mr Nugan and his brother, Mr K.L. Nugan [2.52], as a result of the

bad publicity attracted to the Nugan Hand Group by the committal

proceedings against the Nugans in connection with the Nugan Fruit 146 Group [2.114 - see also Part 3 Section 4], Mr Hand described the

Fruit Group case in a letter to Mr Hill in February 1979 as 'a mess' and

said, 'the whole thing is like cancer' ,"*"1 ^

2.2.61 In December 1978 or January 1979, Mr Hand told Admiral Yates

that he had a plan whereby he was going to ease Mr Nugan out of the Nugan

Hand organisation. He told Admiral Yates that he did not believe that

Mr Nugan was being rational or that he was 'handling his people

■ u m 1 4 8

right'.

2.2.62 Mr Houghton gave evidence to the Commission that during 1979

Mr Hand had told him that he wanted to close the Sydney office because he

was not happv with the way it was being run. Mr Hand expressed the view

that Mr Nugan was not operating the office properly and that he should 149 stick to legal work. '

2.2.63 In the latter half of 1979 Hr Hand expressed concern to

Mr McDonald, an employee of Nugan Hand, in relation to some of the

projects in which Mr Nugan had been engaged, and in particular, the

London Bank [this is a reference to London Capital Securities Ltd - see

profile 2.111], the office that Mr Nugan had apparently tried to set up

in Frankfurt and some mining deals. Mr Hand told him, 'Frank can only

make money doing that legal stuff. That other stuff he should stay away

from'. Mr Hand asked Mr McDonald to accompany Mr Nugan on trips to South

East Asia because he wanted to try and keep Mr Nugan doing legal work and

away from other things that he had been getting involved in. It was

evident to Mr McDonald at that time that Mr Hand was trying to

circumscribe Mr Nugan's activities."*"^*·*

2.2.64 Mr Gilder told the Commission that Mr Hand was strongly opposed

to Mr Nugan's drinking [see Nugan profile 2.1] and he recalled an

occasion in 1979 when Mr Hand knocked whisky glasses off Mr Dugan's

- 84 -

151

desk. In a letter dated 29 October 1977 from Mr Hand to Mr Gilder

1s?

the following appears:

'Jerry, one final point - please do not discuss Frank with

regards to drinking again. We all do things in life which do not make others happy - but that is our own business - Frank is a big boy now and he will do it his way.'

2.2.65 In the latter half of 1979, perhaps as a result of his

disenchantment with Mr Nugan, Mr Hand indicated boredom with the affairs

of the Nugan Hand Bank and raised the possibility of retiring from it.

Mr McDonald told the Commission that Mr Hand said that he wished to get

out of the banking business and discussed with him the option of

organising Nugan Hand into a respectable organisation, turning it into a 153 public company and selling it.

Knowledge of financial irregularity in Nugan Hand Group

2.2.66 Evidence of Mr Hand's knowledge of and participation in

Mr Nugan's many fraudulent schemes has been adverted to in paragraphs

2.2.20 to 2.2.22, 2.2.30, and 2.2.40 to 2.2.41 of this profile. The

following matters further implicate Mr Hand in other fraudulent

practices. In 1977, 1978 and 1979 the records of the Nugan Hand Bank

were rewritten by Mr G.F. Brincat [2.9] in accordance with instructions

received from Mr Nugan. Mr Brincat visited Mr Hand's Singapore office

for several days in each of those years for the purpose of obtaining the

information necessary to bring into existence a new set of records for

the Bank. The new set of records was finalised in Sydney and was the

basis for the formulation of the annual accounts of the Nugan Hand Bank,

which were presented to the auditors in the Cayman Islands. Mr Hill said

in evidence to the Commission that Mr Hand was fully aware of the annual 154

rewriting of the Nugan Hand Bank records between 1977 and 1979, and

that Mr Hand had discussed with Mr Nugan the changes that were to be made

in the accounts of the Nugan Hand Bank. He said that Mr Hand was present

when the records of the Bank were being rewritten in Singapore.^

[For further information on the rewriting of the Nugan Hand Bank records

see Part 4 Section 2 of this report.]

- 85 -

2.2.67 Mr Hill told the Commission that he raised with Mr Hand in

Sinqapore in early 1979 the problems associated with the presence of the

internal bills of exchange in the annual accounts of Nugan Hand Ltd, and

in particular the fact that reference to the internal bills should be

removed and be replaced by appropriate entries in the balance sheet to

explain the true dispersal of funds [see 5.34-5.55], Mr Hand told

Mr Hill in early 1979 that he would ensure that Mr Nugan rectified the 156 balance sheets. Mr Hill also said in evidence that he raised the

matter of the internal bills with Mr Col lings, and that Mr Collings also 1 ''l took the matter up with Mr Hand.

2.2.68 Further irrefutable evidence of Mr Hand's knowledge of the

financial mess the Group was in despite the very different picture

painted, is to be found in Mr Hand's letter of February 1979 to

Mr Hill. In response to an observation of Mr Hill's that the Nugan

Hand company would be wiped out (as a result of the adverse publicity in

relation to the Fruit Group case), Mr Hand wrote in contemptuous vein

'how can you wipe out nuthin'. In his letter Mr Hand noted that Malaysia

and Germany represented 'two real chances to survive', (a reference to

the F.A. Neubauer Bank [2.100] and the representative office in Malaysia)

which suggests that he was aware that there was a real problem in

relation to the ability of the Nugan Hand Group to continue. Mr Hand's

awareness of the dire position of the Group is suggested by the nature of 159

the alternatives he saw as available to him:

i

Ί . Quit go to France have a new face/passport etc. 2. Resign impossible to leave the years of responsibility 3. BARI KARI

4. Be declared legally INSANE 5. Swing harder tomorrow! 6. and keep on.' [Mr Hand's erphasis]

2.2.69 In 1979 he told Mr Houghton that the Sydney office was not

making money and that it was very expensive to have people travelling

between Australia, Hong Kong and Europe, the latter two places being

where the main business activities were taking place. He complained to

Mr Houghton that the Sydney office had asked for funds from South East

Asian operations to prop up the Sydney operations and said that he would

«

- 86 -

not furnish these funds as requested and he was also critical during 1979

of Mr Nugan's spending money on the purchase and furnishing of his house

and the acquisition of the Orange Spot Group, [2.116] which Mr Hand

regarded as an unwise investment."*"® Mr Hand told Mr Houghton in 1979

that Mr Nugan had taken in excess of $1 million to pay the legal costs of

the conspiracy case which had been commenced against him and his brother

in connection with the Nugan Fruit Group [2.114], Mr Hand had also

mentioned during 1979 that Mr Nugan had spent 6500 000 or 6600 000 on the

acquisition of his Vaucluse property and about $300 000 building a beach

and decorating his home. Mr Hand also told him that Mr Nugan had

acquired the Orange Spot group of companies for about $1 million. He

expressed concern about Mr Nuaan's expenditure of these sums of

161

money.

2.2.70 Mr Hill said in evidence that on more than one occasion he spoke

to Mr Hand about depositors' moneys which were outstanding. In these

conversations Mr Hand equivocated, his general attitude being that it was

all under control, and that he and Mr Nugan 'could fix anything up'.

Mr Hill told the Commission that Mr Hand was aware of the fact that

Mr Nugan had used depositors' funds to purchase his home.-*62

Death of Mr Nugan - Mr Hand's response to - Mr Hand's return to Australia

2.2.71 On 27 January ]980 the body of Mr Nugan was located with a gun

shot wound to the head in a motor vehicle near Lithgow, New South Hales.

Mr Hand was then in London with Admiral Yates in connection with his

refugee resettlement program [see 2.2.52]. Mr Hand said in a statement

to the Mew South Wales Corporate Affairs Commission that as a result of a

message from his wife in Singapore he telephoned Mr Hill in Sydney. He

was informed of Mr Nugan's death and asked, allegedly, 'What do we do

now?'. Mr Hill allegedly replied, 'If I were you, I would keep on going

because this thing is going to explode'. Mr Hand said that he replied,

Ί am not running away, I'm coming back to Australia on the first

available plane'."*62

2.2.72 Mr K.L. Nugan said in evidence to the Commission that on the

evening of 27 January 1980 he telephoned Mr Hand in London and advised

#

- 87 -

him of Mr Nugan's death. Mr Hand responded, 'The little fucker, he has

gone and got out of this mess and left me to clean it up' .164

2.2.73 Mr Hand instructed Mr Beazley to go to Hong Kong, and requested

Admiral Yates to accompany him to Sydney. Mr Hand and Admiral Yates left

London on the evening of 27 January 1980. Fn route to Australia, they

stopped in Singapore and were joined by Mrs Hand. Mr Hand said nothing

to Admiral Yates during the flight to Sydney to suggest that there would

be problems in terms of deficiency of funds in either Nugan Hand Ltd or

the Nugan Hand Bank. Mr Hand encouraged Admiral Yates during the flight

to write press releases for distribution in Sydney and to the overseas

offices.165

2.2.74 Mr Hand was met at Sydney airport by a number of members of the

Nugan Hand staff. He appeared to be very distressed.166 He travelled

with Mr Gilder and Mr M.J. Moloney [2.48] from the airport to the Nugan

Hand office at 55 Macquarie Street Sydney. En route, Mr Gilder informed

Mr Hand that Mr Nugan had stolen £3 million from Nugan Hand Ltd. Mr Hand

expressed incredulity at this information. His response was, 'That could

not be right; it is not possible'. When Mr Gilder assured Mr Hand that

this was the case, Mr Hand became quite excited and said, 'How could he

do this to me ... why didn't he tell me ... why didn't I spend more time

in Sydney ... why didn't Hill know ... why didn't Hill tell me'.

According to Mr Gilder, Mr Hand's response basically was, 'Why have I

been kept in the dark?' ,167

2.2.75 Mr Hand described Tuesday, 29 January 1980, at the Nugan Hand

offices as 'a shambles'.168 He remained in a very distressed state and

was particularly upset that he was unable to ascertain the financial

position of the company and that there appeared to be insufficient funds

available to meet withdrawal requests from depositors.16

2.2.76 Mr Hand chaired a number of meetings at the Nugan Hand office,

but appeared to be passive and lacking in direction.170 According to

one account, Mr Hand told one meeting, Ά terrible thing lias happened. I

have found out my partner has taken moneys without my knowledge'.

- 68 -

Mr Hand told the meeting that he had no prior knowledge of what had

1 71

occurred and asked Mr Hill to explain the situation. In fact the

true position was that Mr Hand knew in 1979 of amounts taken by Mr Nugan

and had in 1979 complained to Mr Houghton that he had been asked for

funds from the South East Asian operations to prop up the Sydney

office.172

2.2.77 On 30 January 1980 Mr Brincat, the Nugan Hand Ltd accountant,

reported to Mr Hand that an amount of $1.5 million was owed to unsecured

depositors of Nugan Hand Ltd, and that only $400 000 to $500 000 was

available to depositors. He also reported that there was an overall cash

shortage of approximately $5 million due to internal bills of exchange

drawn on Yorkville Nominees and Nugan Hand International Holdings Pty 173 Ltd. Although Messrs Hill and Brincat raised the prospect of

liquidation of Nugan Hand Ltd during the first week after Mr Nugan's

death, Mr Hand said that there were plenty of funds available

174

overseas. On 30 January 1980 Mr Hand arranged to borrow US$700 000

from the Nugan Hand Bank using the Hong Kong office to provide liquidity

for Nugan Hand Ltd. Arrangements were made to borrow a further

US$500 000 on the following Monday.17-’

2.2.78 According to one account, at a meeting on 30 January 1980,

Mr Hand threatened directors that if they did not 'cooperate1 with him in

the administration of the Nugan Hand Group, dissatisfied clients could

cause them all to 1 finish up [with] lead boots ... concrete shoes' and

that they would be 'liable to find [their] wives being delivered to

[them] in pieces' ,"1 "76 This evidence is not supported by those alleged 177

to have been present on this occasion, although another witness also

alleged that Mr Hand sought to reinforce his fears about threats received

from clients, apparently to ensure that he followed his (Hand's)

instructions.17®

2.2.79 On 31 January 1980 Mr Hand attended a meeting of the directors

of the Nugan Hand Bank. According to the minutes for that meeting, the

directors had received by telex a trial balance for the Nugan Hand Bank

as at 24 January 1980 and expressed concern at the amount of moneys

- 89 -

payable by interrelated companies, as it appeared that these were

substantial. The directors resolved to have up to date audited accounts

prepared in relation to all interrelated companies to ascertain whether 1 79 or not the debts could be paid.

2.2.80 On 1 February 1980 Mr Hand attended a meeting of the directors

of Nugan Hand Ltd. Minutes of this meeting record that the directors

'discussed the results of their investigations into the affairs of the

company and were distressed to find many of the actions in the conduct of

the company's affairs may have been done improperly' but that in all such

matters the directors had followed the advice of Mr Nugan, a qualified

solicitor.*88 The true position was that Mr Hand had been aware since

1973, of irregularities caused by sham injections of capital, the use of

internal bills to conceal inter-company debts, and falsities in the

accounts, and had complained to Mr Houghton in 1979 that the Sydney

office was not being run properly.*8*

2.2.81 Despite his knowledge to the contrary, Mr Hand assured

Mr Houghton that the overseas operations of Nugan Hand were sound. On

the strength of this assurance Mr Houghton advised Nugan Hand

representatives, who had left Saudi Arabia after the death of Mr Nugan, 182

to return to Saudi Arabia and subsequently returned there himself.

According to one account Mr Hand also made reference to a '$15 million

deal' which Mr Houghton was about to complete and which would, Mr Hand

claimed, end any financial problems for the Group.*88

2.2.82 During the following weeks Mr Hand continually assured the

Sydney staff that Nugan Hand Ltd would continue to trade and that

substantial funds were available from the Group's overseas companies

should they be required. Mr Hand gave this false assurance to delegates

of the Mew South V7ales Corporate Affairs Commission when they attended

the Nugan Hand offices on 12 February 1980 and confirmed it when examined

by the delegates on 28 February 1980. He told the delegates on that

occasion that the Nugan Hand Bank and the F.A. Neubauer Bank could easily

introduce $1 million each into the Australian operation pursuant to an

existing standby agreement, although he said that he had spoken to

- 90 -

Mr Vi.M. Pollard [2.57] and believed Nugan Hand Ltd to be 'buoyant1 ,184

About 29 February 1980 Mr Hand formally advised Mr Bill by letter that

draw down facilities of a £2 million each were available from

F.A. Heuhauer Pank, the Nugan Hand Bank and Nugan Hand International

Holdings Ltd on twenty four hours notice of call. Mr Hill subsequently

signed a letter to the Corporate Affairs Commission dated 29 February

1980 to this effect.185

2.2.83 Throughout this period Mr Hand assured Sydney staff and overseas

representatives such as Mr Houghton (Saudi Arabia) and General Manor (The

Philippines) that the Group's overseas operations remained sound.188

However, in late March and early April Mr Hand, on one account, told a

witness that there was a shortfall in liquidity in Nugan Hand Ltd, and

asked the witness whether he could interest anyone in buying shares in tu 187

the company.

2.2.84 Mr Hand went to Hong Kong in late March 1980 and met with Mr N.

Speakman [2.67] and Mr McDonald of Speakman & Company, the Group's Hong

Kong auditors. Mr Hand declared that he was completely satisfied with

the financial position of the Group and gave assurances that negotiable

certificates of deposit held by Nugan Hand Ltd in Australia on behalf of

Nugan Hand (Hong Kong) Ltd were the sole property of the Hong Kong

company and were in no way the subject of any 'double usage'. This

assurance was a blatant untruth.18 [For further details in relation

to this subject matter see 4.1.66 to 4.1.73.] While in Hong Kong Mr Hand

asked Mr John McArthur [2.46] to assume responsibility for the Hong Kong

operations. Mr McArthur agreed to do so after Mr Hand had 'sworn to him

that the company overall was sound although it had a liquidity problem

which could be overcome'. On 4 April 1980 Mr McArthur requested funds

from Mr Hand to meet maturities due on 8 and 9 April 1980, and was

189

informed that these could not be provided.

2.2.85 During this period and until the appointment of a provisional

liquidator of Nugan Hand Ltd, Mr Hand participated in negotiations for

the sale of the Nugan Hand Group. These negotiations involved, inter

alia, a Malaysian consortium headed by Mr Lee Ming Tee. Mr Hand was

- 91 -

apparently very keen about the proposal by Lee Ming Tee. Ultimately none 190

of these negotiations for takeover of the Group proceeded.

2.2.86 Oi 11 April 1980 the Hong Kong High Court appointed the Offical

Receiver as receiver of the Nugan Hand Bank. On the same day Mr Hand, as

Chairman of the Board of the Nugan Hand Bank, announced that as a result

of 'legal and administrative problems' resulting from the death of

Mr Nugan, the Bank would not accept further deposits or effect repayments 191

until audited balance sheets were available.

2.2.87 During the week following the appointment of the Hong Kong

Official Receiver as receiver of the Nugan Hand Bank, Mr Hand attended

for examination by the delegates of the New South Wales Corporate Affairs

Commission. On 17 April 1980 Mr Hand informed the delegates that in his

view Nugan Hand Ltd was not solvent and that a provisional liquidator 192 should be appointed. At a directors' meeting of Nugan Hand Ltd held

later that afternoon, Mr Hand tabled a statement of assets and

liabilities of the company which disclosed a deficiency of

$4.25 million. On the following day, on the application of Nugan

Hand Ltd, the Supreme Court of New South Wales ordered the appointment of

provisional liquidators to that company, Yorkville Nominees Pty Ltd and 194

Nugan Hand International Holdings Pty Ltd.

2.2.88 The Nugan Hand Bank representatives in Saudi Arabia continued to

receive deposits from clients until April 1980 when word of the Bank's

difficulties in Hong Kong reached that country. Mr Hand then advised the 195

representatives to leave Saudi Arabia. The Hong Kong Official

Receiver was appointed liquidator of the Nugan Hand Bank on 13 May 1980,

and the Hong Kong Supreme Court ordered that the company be wound up on 196 17 May 1980. °

Concealment and Destruction of Documents

2.2.89 After Mr Nugan's death, Mr Hand was responsible for the

shredding of documents relating to the Nugan Hand Group, the instruction

of others to shred documents, and the concealment of records relating to

- 92 -

the Group from the delegates of the New South Wales Corporate Affairs

Commission. [This subject matter is dealt with in detail in Section 9 of

the Compendium (Part 3)].

2.2.90 Mr Hand lied to the delegates of the New South Wales Corporate

Affairs Commission, when he said in evidence on 15 April 1980 that he was

unable to produce to them any further documents relating to Nugan Hand 1 97 Ltd. During further evidence to the delegates Mr Hand denied that

he had access to the records relating to companies within the Group

between the date on which they were uplifted from the AMP Centre (late

February early March 1980) and the date on which they were delivered to 198

the office of Mr M.J. Moloney, Solicitor (12 May 1980). Mr Hand

denied that he had caused further records or documentation to be given to

Mr R.W. Gehring [2.23] for storage with records already removed from the

company's premises to the AMP Centre. In fact, within the records

eventually delivered to Mr Moloney's office were records which postdated

the date on which Mr Hand said that he and Mr Gehring moved the records

from the AMP Centre to an address in Pyrmont. Mr Hand offered no

199

explanation for this inconsistency.

2.2.91 Mr Hand gave false evidence to the coronial inquiry into

Mr Nugan's death on 23 April 1980,2*"^ in that he explained his

knowledge of documents missing from the offices of Nugan Hand Ltd on the

basis that he had seen cabinets with labels on them but which had no

papers in them. In fact Mr Hand was aware that papers were missing

because he had assisted in their removal.2 Ο·*·

Hie Disappearance of Mr Hand * 2 0 2

2.2.92 Upon his return to Australia, Mr Hand and his wife resided at

Mr Houghton's Elizabeth Bay unit in Sydney for several weeks, and then 202

moved to an address in Ithaca Road, Elizabeth Bay. About mid May

1980 Mr Hand rented an upstairs flat at 31 Union Street, Pyrmont, Sydney,

from Mr Gehring. According to Mr Gehring, Mr Hand took these premises

because he had received threats to his life and wished to live apart from

his wife so that she would not also be in danger.2^

- 93 -

2.2.93 In late May 1980 Mr Hand told Mr Gehring that he had

unsuccessfully attempted to obtain an Australian passport in another

name. Mr Gehring offered to assist Mr Hand by obtaining a passport for

him in the name of one of his employees. Mr Gehring obtained the birth

certificate of Alan Glen Winter, an employee of his, informing Mr Winter

that the certificate was required for superannuation purposes.

Mr Gehring obtained the necessary application forms and gave these to

Mr Hand. About this time an ex-military associate, who had apparently

served with Mr Hand in Vietnam, came to Australia to assist Mr Hand in

his endeavour to leave the country. Mr Gehring knew this person only as

'Charlie'. 'Charlie' arranged for passport photographs of Mr Hand to be 204

taken depicting him with glasses, a false goatee beard and moustache.

2.2.94 Mr Hand completed a passport application in the name of Alan 205 Glen Winter. Mr Hand gave the application to Mr Gehring, who took

it to a travel agent in Dixon Street, Sydney and requested the agent to

obtain the passport and to book a return ticket from Brisbane to Canada

via Fiji in the name of Mr Winter. Mr Gehring later collected the ticket

and passport and gave these to Mr Hand. Mr Hand travelled to Brisbane by

train and departed Australia on 14 June 1980 from Brisbane. Mr Gehring

believed that Mr Hand was accompanied by 'Charlie'. Mr Hand told

Mr Gehring that he would be able to drive from Canada into the United

States without the need for a visa.

2.2.95 Mr Hand arranged with Mr Gehring to 'buy him enough time to get

into the United States by putting fresh food in the "fridge", wetting his

socks and toothbrush, flushing the toilet and generally making noise, at 207

31 Union Street, Pyrmont, for the benefit of the neighbours'. On

30 June 1980 members of the 'Willesee at 7' television program attended

the premises at Union Street and were admitted by Mr Gehring. On 1 July

1980 members of the Corporate Affairs Commission and the police attended

the premises and a police investigation into Mr Hand's disappearance

commenced.

2.2.96 Subsequent investigations by the Joint Task Force in relation to

the person 'Charlie' revealed that James Oswald Spencer, a United States

- 94 -

citizen arrived in Australia on 14 May 1980. His contact address was

given as a post office box leased in the name of Mr Hand's wife. He

departed Australia on 14 June 1980 on the same flight as Mr Hand. When

interviewed by F.B.I. agents in November 1982, Mr Spencer admitted to

having known Mr Hand at one time but denied having helped him leave

Australia. It seems probable however that Mr Spencer was the person 209 known to Mr Gehring as 'Charlie'.

2.2.97 For some months after Mr Hand's disappearance Mr Gehring

remained in contact with him by leaving messages with Mr Gehring's

parents or brother in Ohio. Mr Gehring told the Joint Task Force that

his last contact with Mr Hand was during a trip to the United States in

February 1981 when Mr Hand telephoned him at San Francisco airport

In evidence to this Commission Mr Gehring confirmed that he had not 211

subsequently had any further contact with Mr Hand.

2.2.98 Mr Houghton also had contact with Mr Hand subsequent to his

disappearance when Mr Hand telephoned him in September/October 1980 while

Mr Houghton was staying in a hotel on the east coast of the United

States. Mr Hand sounded upset and apologised for what he had done to

Mr Houghton and others. He offered to meet Mr Houghton but Mr Houghton

declined and terminated the conversation. Mr Houghton told the

2i 2

Commission that he has had no further contact with Mr Hand.

2.2.99 Following an interview between officers of the Joint Task Force

and Mr Houghton in Acapulco in June 1981, Mr Houghton met them in San

Francisco and was given a letter to deliver to Mr Hand. Mr Houghton

sought to deliver this letter by leaving it with Mr Hand's father,

Mr Oscar Hand, in New York. Mr Houghton did not receive any response 21 3 from Mr Hand regarding the letter.

2.2.100 The Commission sought to make contact, through an intermediary,

with Mr Hand while hearing evidence in the United States in January

1985. After giving evidence to this Commission in December 1984 Admiral

Yates sought to induce Mr Hand to give evidence to the Commission by

recording a cassette tape and sending the tape to Mr Hand's father,

95 -

Mr Oscar Hand, asking him to pass the tape on to Mr Hand. In the tape

Admiral Yates said that he had been given a 'fair shake1 by the

Commission and sought to convince Mr M.J. Hand that it would be in the

best interests of all parties if he cooperated fully. In January 1985

Admiral Yates spoke to Mr Oscar Hand who said, 1 the matter is dead and

buried and I have no intention of digging it up'. He would not disclose

his son's address or telephone number.2·^ Admiral Yates advised the

Commission in May 1985 that he had still received no response to his

tape. He also advised that similar written pleas to Mr Hand had met with 21 c no response.

Allegations of Mr Hand's Involvement with Drugs

2.2.101 Numerous allegations have been made in the media and elsewhere

that Mr Hand was involved in drug trafficking both before and during his

association with the Nugan Hand Group. [For a detailed account of these

allegations involving Mr Hand and the Commission's findings in relation

to them see Part Six of this report. ] The main allegations concerning

Mr Hand are as follows:

a. that he was involved in drug trafficking before his association

with Nugan Hand and continued in this activity during the early 216

1970's with Messrs Stocker and King;

b. that he actively pursued the drug trafficking industry for

business; ^

c. that he met Golden Triangle warlord, Khun Sa, in Sydney and

discussed the importation of five hundred pounds of heroin into 218

the United States via Australia; and

d. that he told Andrew Wellington Lowe and Khun Sa that heroin had

been smuggled into the United States in the bodies of servicemen 71 9 killed in Vietnam.

The Commission found that there was no evidence to support the

allegations (a) and (b) above. The Commission did not accept the

- 96 -

evidence of Mr A.W. Lowe which supported allegations (c) and (d) [6.14 to

6.16]. The Commission reported in its Interim Report No. 1, that it had

serious doubts concerning the credibility of much of Mr Lowe's evidence.

For that reason the Commission considered that the alleged visit to

Sydney of Khun Sa was highly improbable having regard to the information

available concerning this so called warlord.

Allegations of Mr Hand's Involvement in Arms Transactions

2.2.102 Numerous allegations have been made as to Mr Hand's involvement

in transactions relating to armaments during his association with the

Nugan Hand Group. [These allegations and the Commission's findings in

relation to them are referred to in Part Seven of this report. ] The

major allegations concerning Mr Hand are as follows:

a. that while resident in South Africa during 1975/76, Mr Hand 220

attempted to arrange arms shipments;

b. that Mr Hand corresponded with Mr Nugan from South Africa about

arms sales to be paid for with Rhodesian ivory;

c. that Mr Edwin Wilson used the cover of Task Force 157 to obtain

weapons which were subsequently delivered to Mr Hand, who

delivered them to the United States intelligence supported 222 forces in Angola or Rhodesia;

d. that Mr Edwin Wilson went to Bangkok to discuss arms deals with 221 Mr Hand; and

e. that in 1979 Mr Hand attempted to organise a transaction

224

involving shipment of howitzers to Libya.

2.2.103 The Commission is satisfied that Mr Hand continued to have some

form of business relationship with the Nugan Hand Group while he was

absent from Australia during 1975-76. It appears that during this time % 225

he remained on cordial terms with Mr Nugan and that Mr Nugan

- 97 -

instructed his staff to make various trade inquiries on Mr Hand's

behalf.^® Other inquiries by Nugan Hand staff were carried out as a 227

result of direct requests from Mr Hand, The Commission accepts that

during 1975 personnel connected with the Nugan Hand Group arranged for

the export of ten second hand pistols from Sydney for and on behalf of

Mr Hand. The Commission is satisfied that the proposed export did not

take place. Tire Commission is also satisfied that while Mr Hand was

resident in South Africa, representatives of the Nugan Hand Group made

inquiries in relation to the possible export of pistols and other

firearms to South Africa at Mr Hand's request. The Commission also finds

that inquiries were conducted at the request of either Mr Nugan or

Mr Hand or both by various personnel of Nugan Hand regarding the supply

of bullets for export to South Africa. However, the Commission is not

satisfied on the available evidence that this export took place.

2.2.104 The Commission found that there was no substance to the

allegation that Mr Hand corresponded with Mr Nugan from South Africa

about arms sales to be paid for with Rhodesian ivory, and that there was

no evidence to substantiate the remaining allegations made against

Mr Hand.

Allegations concerning Mr Hand's involvement in the C.I.A.

2.2.105 It has been alleged in the Commonwealth Parliament, the media

and elsewhere, that Mr Hand was at one time an agent of the Central

Intelligence Agency ('C.I.A.').228 [For further information in

relation to the C.I.A. see Part 4 Section 3 of this report.]

2.2.106 As previously mentioned [2.2.5] Mr Band served in the Special

Forces Airborne Division of the United States Army between 1963 and May 229

1966 and while in Vietnam was a member of the Green Beret Unit.

Mr Hand told Mr Colby, the former head of the C.I.A. and other witnesses

who gave evidence to the Commission, that while he (Hand) was a member of 230

the Green Beret unit, he had some connection with the C.I.A.

- 98 -

2.2.107 Mr Evans told the Commission that he was told by Mr Hand that

while he (Hand) was in Vietnam he was sent by the C.I.A. to the north

regions of Thailand and to Cambodia for the purpose of investigating the

allegation that drugs were being sent from these regions and smuggled

back into the United States using the corpses of servicemen killed in

action. (As noted elsewhere [6.6.2] the Commission does not accept

the evidence of Mr Evans unless it is supported by independent objective

evidence.) Mr Dunn said that. Mr Hand told him that upon his return to

tiie United States from Vietnam, he became disenchanted with the treatment

accorded returning veterans and went off to a remote place, possibly 232

India or Africa, where he worked with the C.I.A. According to the

evidence of Mr Calder, Mr Hand told him that he worked 'as a special 233

agent of some description' in Vietnam. Mr Hand told Mr Colby that

his association with the C.I.A. continued while working in another job ?34

after he left the United States Army.

2.2.108 Whether Mr Hand's assertions that he was employed by the C.I.A.

are true, the Commission has no way of knowing. General Black told the

Commission that it was possible that the C.I.A. worked during the Vietnam

War with the Green Beret Unit in conjunction with the hill tribes of

Vietnam. 3

2.2.109 Mr Hand told Mr Dunn that it was his ambition that Nugan Hand

become the banker for the C.I.A. However Mr Dunn was not aware of any

steps taken by Mr Hand to get access to C.I.A. business, nor did Mr Hand

say how he intended to achieve this a m b i t i o n . A further witness

confirmed that Mr Hand said that he would have liked the Group to attract

funds from the C.I.A., but saw no evidence that this had occurred. ^

Mr Evans told the Commission that Mr Hand told him in May 1977 that he

had made an arrangement with Congressman Ed Wilson whereby the Nugan Hand

Bank would be responsible for the disbursement of funds on behalf of the

C.I.A. throughout the South East Asian area.^' Other witnesses

alleged to have been present on this occasion have denied that such a 239 conversation occurred.

99 -

Directorships and Shareholdings

2.2.110 Mr Hand was a director of the following companies referred to on

the schedule to the Commission's terras of reference (Appendix A)

Company Appointed Resigned

Distravite Pty Ltd 15. 8.69 23.10.72

Medevac Shipping Pty Ltd 24. 9.76

Newcourt Financial Services Pty Ltd

4. 5.76

Nugan Hand (Hong Kong) Ltd

Nugan Hand, Inc.

26.11.74

Hugan Hand International Holdings Pty Ltd 3. 5.76 8. 1.79

Nugan Hand Trade Services Pty Ltd 20.10.76

The Nugan Hand Bank 21. 7.76

Yorkville Nominees Pty Ltd

17. 3.72 21. 6.72

2.2.111 Mr Hand was a director and shareholder of the following

companies referred to in the

reference:2^"*"

schedule to the Commission's terms of

Company Appointed Resigned

Australasian and Pacific Holdings Ltd 15. 8.69 21.10.77

Garcia Bros Hardware Pty Ltd

28. 1.72

Hidex Pty Ltd 5. 5.76

Leasefast Pty Ltd 23. 9.76

NHN Management Pty Ltd 9. 7.73

Nugan Hand (Dealers) Pty Ltd

9. 7.73

Nugan Hand Ltd 9. 7.73

R. B. Cody Pty Ltd 7. 6.73 24.11.75

Solingen Aust Pty Ltd 11. 6.74 2. 6.75

Profiles for each of these companies are set out in Part 2.

- 100 -

Conclusion

2.2.112 Although the liquidator appointed to the Nugan Hand Bank advised

the Commission in April 1985 that he was unwilling to comment on the

extent of the assets available for distribution to creditors, it is

apparent that these will fall short by millions of dollars (U.S.) of the 242

amount of US$15 million claimed by creditors of the Bank to date.

The ultimate whereabouts of the millions of dollars taken from the Bank

is unknown, except to the extent of approximately A$l.l million owed by

Nugan Hand Ltd to the Bank as at 31 January 1979.242 In the light of

Mr Hand's disappearance and having regard to the major role that he

played in the activities of the Bank, the conclusion is inevitable that

Mr Hand, together with Mr Nugan and other persons unknown, are

responsible for the disappearance of these moneys.

Endnotes

1 CD2308 folio 45, Curriculum vitae, Hand 2 CT24545, Black

3 CD1311 folio 647, Citation for Bravery; CD2308 folio 45,

Curriculum vitae, Hand 4 CT24545, Black; CT24292, Yates; CD2308 folio 45, Curriculum

vitae, Hand

5 CT18841, Evans; CT24292, Yates; CT24545-46, Black; CT24619, Colby 6 CT24546, Black

7 CT18842, Evans; CT22466, Dunn; CT24620, Colby 8 CT24546, Black

9 CT22466, Dunn; CT24620, Colby 10 CD1306 folios 401-02, JTF ROI, Paul Menville Stocker 11 CD1306 folios 401-02, JTF ROI, Stocker 12 CT22528, Houghton

13 CD2308 folio 45, Curriculum Vitae, Hand 14 CT22608-09, Houghton 15 CT22528, Houghton

16 CD1306 folios 401-02, JTF ROI Stocker 17 CT22489, Calder

18 CD1250 folio 336; CD10960 19 CD1311 folio 672 JTF ROI Ceilings; CD10252, Hand's speech to

Bangkok conference January 1978 20 CT22510, Calder

21 CT22313, Swan

22 CD1250 folios 475-76, JTF ROI, O'Callaghan 23 CD1311 folios 556-57, JTF ROI, O'Callaghan 24 CD10690 Schedule of Companies in terms of reference

- 101 -

25 CD1308, JTF ROI, O'Callaghan 26 CT22410, Needham; CT22509, Calder 27 CT22410, Needham

28 CD6175 folio 34

29 CD10095, CAC Company Searches 30 CD10690, Schedule of companies in terms of reference 31 CT22312, Swan; CT24873, Young 32 CD1311 folio 547, JTF Statement Confidential Informant 33 CD2308 folio 45, Curriculum vitae, Hand; CAC diazo document

5530N

34 CT22491, CT22508-09, Calder 35 CT23285, CT23309, Pollard 36 CD10690 Schedule of Companies in terms of reference 37 CT24844, Young

38 CT24841, Young

39 CT22427, Needham

40 CT23365, Shaw

41 CT24828, CT24830, CT24873, Young 42 CT24828-29, Young; CD3088 folio 426 CAC Diazo 43 CD3736 folio 1, Minute book, Nugan Hand Ltd 44 CD3736 folio 4

45 CD3736 folio 8

46 CD3736 folios 9-10

47 CD10015

48 CD1337 folio 240, Hand's Outgoing Passenger Card 49 CD1250 folio 294

50 CD2704

51 CD1250 folio 264; CD1311 folio 337, Notes of travel movements found in Hand's passport; CD1337, Hand's Incoming Passenger Card 52 CD2704

53 CD3037 folio 3, Hand's evidence to CAC 54 CD3736

55 CD10015 CAC diazos

56 CT23165, CT23189, Ward 57 CT23189, Ward

58 CT22805, Ceilings

59 CT24456, Dunn

60 CT23297, Pollard

61 CD1250 folio 4394, JTF Statement - G.P. Farris 63 CT24510, Pauker

64 CT24031, Dunn

65 CT23189, Ward

66 CT24456, Dunn

67 CT22806, Collings 68 CT22456-57, Dunn

69 CT22806, Collings 70 CD4821 folio 126, refers to a meeting between representatives of Ku-ring-gai Council and Mr Hand in relation to money market investments in June 1976 71 CT23179, Ward; CD4821 folios 3-5, memo from Dunn, undated but

written about August 1976, indicates that Mr Hand is aware of the current position in relation to his depositing clients and potential clients, and will follow up a number of the clients referred to.

- 102 -

72 CD4467 folio 132

73 CD10805 folio 598

74 CD6942 folio 3

75 CD7358

76 CT22213, Gilder

77 CT22810, Collings

78 CT22214, Gilder

79 CD1311 folio 167, Gilder JTF ROI

80 CT22809, Collings

81 CD1250 folio 294, Hand's travel movements 82 CD1311 folio 672, Collings JTF ROI 83 CD6522 folio 40, Hand memo 26/8/77 84 CT22460, Dunn; CD1308, Dunn JTF ROI 85 CT24375, Hill

86 CD10252 Hand to Bangkok conference January 1978 87 CD10978 folio 4, Lovatt's statement to Commission investigators 88 CD7832 folios 113-30

89 CT20434, Gilder

90 CT22420, Needham 91 CT22423, Needham 92 CD1250 folio 264; CD1311 folio 337, Notes of travel movements found in Hand's passport 93 CD1311 folios 804-05, Hand's passport application. Mr Hand

applied for an Australian passport on the same day that

Australian citizenship was conferred on him. 94 CD1311 folios 754-55, Internal minute to Director of the

Department of Immigration and Ethnic Affairs 7/10/80. 95 CD1311 folios 455-57, Hand letter to American Consul 7/2/78. 96 CT24618-19, Colby 97 CT24707-08, McDonald 98 CT20063, Steer; CD6522 folio 40 99 CT20063, Steer

100 CT22064-65, Steer 101 CD4445, Collings JTF ROI 102 CD10978 folio 3, Lovatt Commission ROI 103 CD10252

104 CD10252

105 CT22237-38, CT22608, Houghton 106 CT22523-24, Houghton 107 CT22527, Houghton 108 CT21239, Houghton 109 CT22534, Houghton 110 CT22538, Houghton 112 CD10624 folio 59, Houghton, CAC evidence 113 CT22245, Gilder

114 CD1311 folio 173, Gilder JTF ROI 115 CT24240, Yates; CD11322 folio 27 116 CD11345 folio 25

117 CT24266, Yates

118 CD11345 folio 27

119 CT24256-57, Yates; CT24664, Manor 120 CT24542, Black

121 CT24258, Yates

122 CT24258, Yates

123 CT24263-64, Yates; CD11345 folio 25 124 CD10252

- 103 -

125 CT24270-71, Yates 126 CD10542 folios 188-89, Letter Yates/JTF 127 CT24619, CT24628, Colby 128 CD1311 folio 658, Colby JTF ROI

129 CT24628, Colby

130 CT24301, Yates

131 CD11345 folios 28,31, Yates 132 CT22510, Calder

133 CT23189, Ward; CT24031, Dunn; CT25038, Shaw 134 CT24378, Hill

135 CD10252 folio 44

136 CD10252 folio 44

137 CT16254-55, Hill

138 CT24545, Black

139 CT24552, Black

140 CT24632, Colby

141 CT24266-67, Yates 142 CD10252, Hand speech to NHG Bangkok Conference 143 CD1429

144 CD11345 folio 27

145 CT24253, Yates

146 CT24378, Hill

147 CD1297 folio 24

148 CT24262, Yates

149 CT22541, Houghton 150 CT24684-85, CT24688, McDonald 151 CT22216, Gilder

152 CD6186

153 CT24692-93, McDonald 154 CT21903, Hill

155 CT24376, Hill

156 CT21870-71, Hill; CT25362, Brincat 157 CT21867, CT21870, Hill 158 CD1297 folio 24-28

159 CD1297 folio 28

160 CT22541, Houghton 161 CT22542, Houghton 162 CT24376, Hill

163 CD1311 folios 374-78, Hand Statement to CAC 21/5/80 164 CT20926-27, K. Nugan

165 CT24274, CT24284, Yates 166 CT19950, Moloney; CT22539, Houghton 167 CT19952, Moloney; CT22211, Gilder 168 CD3037 folios 41-45, Hand evidence to CAC 23/5/80 169 CT22539, CT22541, Houghton 170 CT22211, Gilder; CT25128, Shaw 171 CT19954, Moloney

172 CT22541-42, Houghton 173 CD1614

evidence folios 2246-55, MHS Committal Proceedings, Br incat's 174 CD1614 folios 2246-55, MHS Committal Proceedings, Brincat's evidence; CD3008 folios 86-88, CAC 23/10/80 175 CT19955, Moloney; CT25130-31, Shaw 176 CT21007-09, Hill

177 CT20003, Moloney; CT20732, Shaw

- 104 -

178 CT20731, Shaw

179 CD4968 folios 13-14

180 CT20016, Moloney; CT25131, Shaw; CD4968 181 CT22541, Houghton 182 CT22542, Houghton 183 CT25131, Shaw

184 CT19760-61, Purdon; CD3037 CAC folio 19, Hand to CAC 185 CT19760-61, Purdon; CT21835-38, Hill 186 CT22542, CT22550, Houghton; CT24659, Manor 187 CT20569, Wong

188 CT22994, Speakman 189 CD4460 folio 3

190 CT21496, Hill; CT25134, Shaw 191 CD1373 folio 198 The Age 18/4/80; CD8384 folio 4 192 CD3499 folio 61, Hand evidence to CAC 193 CD5044

194 CD4354 folios 51-53

195 CT21244, CT22550-51, Houghton 196 CD11034

197 CD3037 folios 60-61, Hand evidence to CAC 198 CT20741, Shaw; CD1308, Gehring JTF ROI Answer 39; CD3037; CD3049 199 CD3037 folio 52, Hand evidence to CAC 200 CD3509, Hand evidence to Nugan coronial inquiry 23/4/80 pl27 201 CT20006, Moloney; CD3037 folios 61-62 202 CT22529, Houghton 203 CD1308 folio 59, JTF interview Gehring 3/6/81 204 CD1250; CD1308 folio 59, JTF interviews Gehring 3/6/81 and

17/2/82

205 CD1250, Statement of Sergeant Wardrobe 5/5/82 206 CD1308 folio 59, JTF interview Gehring 3/6/81 207 CD1308 folio 59, JTF interview Gehring 3/6/81 208 JTF Report p 468

209 CD1308 folios 31,148; JTF Report pp 778-79 210 CD1308 folio 59, JTF interview Gehring 3/8/81 211 CT20203-04, Gehring 212 CT22562, Houghton 213 CT22561, Houghton 214 CD11370

215 CD2077

216 The Wall Street Journal folios 1, 26-27, 24/8/82 217 CT18843-44, Evans ~

218 The Australian 26/5/83, RCIDT Vol. 3, folio 360; The Age

26/5/83, RCIDT Vol. 3 folio 362; The Sydney Morning Herald, 26/5/83, RCIDT Vol. 3, folio 365; Interim Report No. 1 paras 4.25-4.32 and 5.33-5.36 219 The Australian, 26/5/83 RCIDT Vol. 3, folio 360; The Age,

26/5/83 RCIDT Vol. 3, folio 362 220 CD11011 folios 650, 656; Sun Herald, 3/4/83 221 The Asian Wall Street Journal, 17/8/83 222 CD1526 folios 698, 812; The Asiyi Wall Street Journal, 17/8/83 223 The Wall Street Journal, 24/8/82 224 The National Times, 21/2/82 225 CT23I8y, Ward; C'i'24031, Dunn 226 CT23190-91, Ward; CT25121, Shaw; CD3082 folio 14 227 CD3025 folios 14-17, Hans to CAC; CD3082 folio 14, Ward

- 105 -

223 Hayden, Hansard page 926, 11/3/82; Newman, Hansard page 1567, 20/4/82; Hayden, Hansard page 1571, 20/4/82; The Aqe 10/11/82 RCIDT Vol. 2 page ΈΗ9 ------~

229 CT18841, Evans; CT24292, Yates; CT24545-46, Black; CT24619, Colby 230 CT18842, Evans; CT22466, Dunn; CT24620, Colby 231 CT18842, Evans

232 CT22466, Dunn

233 CT22489-90, Calder ·

234 CT24620, Colby

235 CT24546, Black

236 CT22466-68, Dunn

237 CT22428, Needham

238 CT18839, Evans

239 CT22467-68, Dunn; CD1308 JTF ROI Pulger-Frarae 10/9/81 folio 7 240 CD10690

241 CD10690

242 A173 Letter Liquidator of NHB/Commission 2/4/85

2.3 ARESON, William Henry

2.3.1 Mr William Henry Areson was born on 10 October 1941. At the

time he gave evidence on 23 August 1984 he held a United States (New York

State) Accounting Certificate and conducted an accounting practice in

Hong Kong. Although Mr Areson was a qualified accountant his certificate

was not recognised by the Hong Kong authorities for the purpose of

certifying audits of companies in the colony. " * ■

2.3.2 In evidence Mr Areson stated he was introduced to Mr C.L.

Ceilings [2.15] by Mr J.A. Marks, who later worked in the Hong Kong O office of Nugan Hand. In approximately June 1975, Mr Col lings asked

Mr Areson if he would do the accounting work for the Nugan Hand companies

based in Hong Kong. Mr Areson agreed and completed the accounting work

for Nugan Hand (Hong Kong) Ltd [2.94] and some of the associated

companies. Documents in the possession of the Commission, however, would

seem to indicate that Mr Areson's association with the Nugan Hand group

of companies commenced earlier than stated. On 11 December 1974

Mr Areson wrote to Mr M.J. Hand [2.2] and accepted appointment as the

accountant for Nugan Hand (Hong Kong) Ltc, Ingold Growth Ltd and Ingold

Management Ltd.^

2.3.3 Mr Areson's accounting duties included the incorporation of

companies. Mr Collings in his evidence said Mr Areson handled all the

106 -

bookkeeping records except those of the Nugan Hand Bank [2.106],4

Mr Areson said he drew up accounting records for Nugan Hand (Kong Kong)

Ltd to reflect incoming and outgoing funds. He had difficulty eliciting

sufficient information from Mr Collings to enable him to complete these

records as he only had bank statements and deposit slips to rely upon for

details. Mien the accounting records prepared by Mr Areson were

completed they were forwarded to Sydney for approval. The records which

were subsequently returned to Hong Kong had been rewritten and recorded

information not previously known to Mr Areson.®

2.3.4 Mr Areson said Mr pollings had suggested that he refer clients

to the Nugan Hand group of companies as the deposits would receive

favourable interest rates and he would receive a commission. However,

when Mr Areson questioned Mr Collings about the interest rates he was

informed that instructions had to come from Sydney in relation to these 7 matters. Mr Areson did not refer any of his clients to the Nugan Hand

Group although one of his clients, Lighthouse International Ltd did

invest with Swiss Pacific Bank & Trust Company (later known as the Nugan

Hand Bank).®

2.3.5 In July 1976 Messrs J.C. Needham [2.51] and Hand suggested to

Mr Areson that he correspond with the auditors of Nugan Hand Ltd [2.97]

with a view to establishing a working relationship. On 28 July 1976

Mr Areson wrote to the firm of Heuschkel & Pollard [see 2.30 and 2.57],

Mr Areson stated he could not recall receiving a reply to his letter and 9 no relationship was established.

2.3.6 In 1977 Mr Needham travelled to Hong Kong and requested

Mr Areson's assistance in ascertaining the financial position of the

Group. Mr Areson told the Commission Mr Needham did not tell him of any

alleged US$3 million shortfall within the Group [2.51.11]. Mr Areson

said he was unaware of that claim and would not have had sufficient

information to comment on such an allegation.4®

2.3.7 As Mr Areson was not qualified to certify audits in Kong Kong

his services were terminated and on 15 November 1977 he received a

107 -

letter from Mr Ceilings advising him that Speakman & Co. (a Hong Kong

firn of accountants [see 2.67]) v/ould be completing future audits of the

Nugan Hand companies.'*""*'

Endnotes

1 CD7082 folios 62-65, Letter Areson/Heuschkel and Pollard

28/7/76; CD10979 folios 1-2, Areson, statement 15/8/84 to Commission 2 CT22952, Areson

3 CD7082 folios 62-65

4 CT22859, Collings

5 CT22954-55, Areson

6 CI22960-61, Areson

7 CT22965-66, Areson

8 CD10979 folio 2

9 CD7082 folios 62-65; CD10979 folio 2 10 CT22420, Needham

11 CD10979 folio 2

2.4 ATTKISSON, Randall L.

2.4.1 Mr Attkisson did not give evidence before the Commission. The

information herein relies upon documents produced to the Commission in

the course of its inquiries including material supplied by other

investigatory bodies.

2.4.2 Mr Randall L. Attkisson is a United States citizen residing in

Kentucky, U.S.A. In late 1979 Mr Attkisson was approached by a friend,

Mr n.E. Beazley [2.7], concerning possible employment with the Mugan Hand

Bank [2.106]. Mr Beazley was assessing the Bank's viability and had said

if it could be made a going concern he would assume management of the

Nugan Hand Group. Mr Attkisson had heard rumours that the Croup was

involved in illegal activities and mentioned these to Mr Beazley who

assured him the allegations could not be substantiated. Based on this,

Mr Attkisson agreed to assist Mr Beazley in assessing the viability of

the organisation.

- 108 -

2.4.3 On 26 November 1979 Mr Beazley held a management conference in

Singapore. He invited Mr Attkisson to attend, saying that it would

enable the latter to meet Nugan Hand personnel and gather information on

the solvency of the Nugan Hand Group. Mr Attkisson subsequently returned

to Miami, Florida and was later introduced to Mr F.J. Nugan [2.1] at Palm 2 Beach, Florida.

2.4.4 In a letter to Tan Choon Seng [2.71], Mr Beazley stated

Mr Attkisson had been appointed Regional Director for Asia and from

1 January 1980 was to have his salary of US$55,000 per annum paid by the

Hong Kong office. Before this, Mr Attkisson had received payment from

the Miami office of Nugan Hand International.^

2.4.5 On 23 January 1980, Mr Attkisson arrived in Hong Kong to

continue the assessment of the Nugan Hand Group operation as well as

attempt to improve its performance by implementing better management 4 methods. While in Hong Kong he decided the organisation was not

viable and was doomed to failure. He determined the Group's initial

prosperity was from its currency trading but when the market altered it

lost large amounts of funds through mismanagement.^ [For information

regarding the early years of operation of the Nugan Hand Group see Part 3

Section 2 and in particular 3.2.11 to 3.2.17.]

2.4.6 In early 1980 Mr Attkisson visited the Singapore office and told

Mr G.R. Steer [2.68] that he intended to alter the entire structure of

the Nugan Hand Group operation in the Asian region.^ However,

Mr Attkisson heard of Mr Nugan1 s death and also heard that a company in

Australia had commenced litigation against Nugan Hand. Mr Attkisson

contacted Mr Beazley who advised him to claim funds due to him and return

to the United States, which he did.^

Endnotes

1 2 3

CD10859 folio 2 CD9934 folio 4, Telex Reazley/H.K. staff 25/1/80; CD10859 folio 3 CD7940 folio 25, Letter Beazley/Tan Choon Seng

- 109 -

4 CD10326 folio 9, Memo Thomson/NHI staff 18/1/80; CD10859 folio 3 5 CD10859 folio 3

6 CD3076 folios 1,10-12, Steer evidence to CAC 17/6/80 7 GDI0859 folios 3-4

2.5 BACHMANN, Jurgen

2.5.1 Mr Jurgen Bachmann did not give evidence before the Commission.

The information herein relies upon other witnesses' evidence and

documents produced to the Commission in the course of its inquiry.

2.5.2 Mr Bachmann was born in Germany on 16 February 1937. In 1965 he

went to work for his father and Dr Neubauer in the F.A. Neubauer Bank

[2.109], He was also active in real estate transactions."^

2.5.3 In December 1977 negotiations were underway for the purchase of

F.A. Neubauer Bank by Nugan Hand International Holdings Ltd

[Appendix P ]. Mr Bachmann was, at that time, the general partner of

F.A. Neubauer Bank and owned the bank's licence to conduct general

business.^

2.5.4 An agreement was entered into between Mr Bachmann, Mrs E.

Toepfer (nee Bachmann) and Nugan Hand International Holdings Ltd, Hong

Kong, in December 1977. In accordance with this agreement Mr Bachmann

'sold' and transferred to Nugan Hand International Holdings Ltd for

DM900 000 a partial share of his holdings in F.A. Neubauer Bank,

remaining general partner, holder of the banking licence and Chief-

Executive. The DM19 000 share retained by Mr Bachman earned him interest

of eight per cent per annum and he received DM4 000 per month in

consideration for his services to F.A. Neubauer Bank. Mrs Toepfer sold

her total share of DM820 000 to Nugan Hand International Holdings Ltd .

Mr Bachmann and Mrs Toepfer were to receive DM250 000 each over and above 3 the worth of their shares. Documentary evidence suggests that

DM500 000 was paid into a Trust Account and finally released to

Mr Bachmann and Mrs Toepfer in January 1979. However the balance of

purchase money which was secured by a pledge of the shares was never

paid.'*

- 110 -

2.5.5 Mr Bachmann as chief executive of F.A. Neubauer Bank was

responsible among other things for all administrative aspects of the day

to day running of the office, the supervision of staff and overseeing the

preparation and maintenance of bank records and documentation.

Mr Bachmann was to work with Mr A.P. Hewitt [2.31], a representative of

Nugan Hand Ltd [2.97] and consult him on a regular basis on all aspects 5

of the bank's activities and development. In October/November 1978

Mr Bachmann accompanied Miss E.L. Thomson [2.72] on a visit to the Nugan

Hand Group offices in Sydney, Singapore and Bangkok.®

2.5.6 Correspondence from Mr J.M. Gilder [2.25] to Mr Bachmann in

November 1978 mentions Mr Bachmann's wish to remain involved with

F.A. Neubauer Bank after disposal of his major shareholding and his 7

willingness to act as second manager for the Bank. In January 1979 an

agreement was made between Mr Bachmann and Nugan Hand International

Holdings Ltd in which Mr Bachmann agreed to continue acting as general

partner of F.A. Neubauer Bank and as licence holder in accordance with

German banking laws. The appointment was for two years from January 1979

and Mr Bachmann was to receive an annual salary of DM120 000. ®

2.5.7 Mr Hewitt gave evidence that the shares acquired by Nugan Hand

International Holdings Ltd from Mr Bachmann and Mrs Toepfer were pledged

back to them as security for a loan of the purchase price. According to

Mr Hewitt, Mr Bachmann was nervous as the pledge had not been finalised

and Mr F.J. Nugan [2.1] visited Germany several times to placate him.

Mr Hewitt said that Mr Nugan visited on either 22 or 23 January 1980 as

Mr Bachmann had become 'rather insecure' about the failure to finalise

the pledge. Mr Hewitt said Mr Nugan was able to satisfy Mr Bachmann

about the loan repayment but ultimately the Nugan Hand group of companies

collapsed and the loans were never repaid. He said after his departure

F.A. Neubauer Bank carried on as before and at the time of giving

evidence to the Commission, he believed it was still operating with a 9 Swiss bonking partner.

- Ill -

Endnotes

1 CD4428 folio 12, Bachmann resume 2 CT22126, Hewitt

3 CD6469 folios 11-13, FAN establishment - NHL and NHIH a/cs 4 CT22129, Hewitt; CT24602, Cocke; CD6469 folios 11-13; CD6156 folio 14, Telex Voss 27/1/78; CD6469 folios 3-4, Minute Thomson 9/2/79

5 CD6476 folios 69-75, Bachmann/FAN responsibilities 6 CD1109 folios 21, Telex Thomson/Gilder 24/10/78, folios 30-31, memo Gilder/Sydney staff 20/10/78 7 CD1109 folios 7-9, Letter Gilder/Bachmann 15/11/78

8 CD6469 folios 11-13, Agreement Bachmann/NHIH Ltd 9 CT22128-33, Hewitt

2.6 BATES, Arthur Edward

2.6.1 Mr Bates did not give evidence before the Commission. The

information herein relies solely upon material contained in documents

produced to the Commission in the course of its inquiry.

2.6.2 Mr Arthur Edward Bates was born in Britain on 14 January 1940.

Before commencing his employment with the Nugan Hand Group, Mr Bates had

been employed by Sun Life Assurance Company of Canada, in Britain. In

this position he was involved in recruiting, training and motivating his

own team of insurance sales persons.

2.6.3 On 1 November 1978 Mr Bates commenced employment as an account

executive with Nugan Hand (Hong Kong) Ltd [2.94], His charter was to

solicit depositors for the company and he was to receive HK$6 000 per

month salary. In August 1979 his terms of employment were reviewed

and his salary increased to HK$10 000 per month. In addition he received

HK$5 000 housing allowance, entertainment expenses and a performance

bonus. This bonus was based on the performance of the division to which

he was attached, deposits made by clients secured as a result of his

introductions and deposits arising from trade activities of other

divisions.^

2.6.4 In December 1978 Mr Bates applied to the Hong Kong Securities

Commission for an investment representative's licence. This application

- 112 -

was endorsed by Mr C.L. Collings [2.15] for Nugan Hand (Hong Kong)

Ltd. During this same month Mr Bates wrote a memo to Mr Collings

suggesting the establishment of Nugan Hand Life and Pensions Services Ltd

which would provide life assurance and pension services to clients. 5

There is no evidence of anything concrete arising from his suggestion.

2.6.5 In September 1979 Mr Bates returned to Britain due to the death

of his father. While he was there he arranged meetings with prospective

clients and former colleagues who may have been in a position to refer

clients to the Nugan Hand Group.® Notes of these contacts were sent by

Mr Rates to Mr J.M. Gilder [2.25] in Australia. Mr Bates later returned

to Hong Kong and continued working for Nugan Hand (Hong Kong) Ltd until

at least February 1980.^

Endnotes

1 CD10524 folio 236, A.E. Bates' Curriculum Vitae 2 CD10524 folio 229, Letter Collings/Bates 25/10/78 3 CD10524 folios 224-25, Letter Collings/Bates 17/8/79

4 CD11038 folios 138-47, Bates1 application for registration as representative 22/12/78 5 CD6476 folios 182-87, Memos Bates/Collings 4/12/78 and 18/12/78 6 CD6157 folios 12-25, Memo/reports re U.K. trip 10/9/79 7 CD754 folio 5, Memo Bates/Gilder 10/9/79; CD10449 folios 14-15,

Memo Attkisson/Personnel File 21/2/80

2.7 BEAZLEY, Donald Elgin

2.7.1 Mr Beazley did not give evidence before the Commission. The

information herein relies upon the evidence of other witnesses and upon

documents produced to the Commission including material supplied by other

investigative bodies.

2.7.2 Mr Donald Elgin Beazley is a United States citizen born in

Edinburgh, Virginia on 4 October 1942. In 1965 he graduated from

Virginia Polytechnic Institute with a Bachelor of Science degree in

Economics. From 1965 to 1970 he was employed as a Bank Examiner with the

- 113 -

Federal Reserve Bank, Richmond, Virginia. Within this period he also

served in the U.S. Army in Germany as an officer in the Infantry Branch,

obtaining his commission through the Reserve Officers Training Corps, and

was honourably discharged. Between 1970 and 1973 he was employed as

Assistant Vice President of the First National Bank of Atlanta, Georgia.

From 1973 to 1977 Mr Beazley was the Vice President of Flagship Banks

Incorporated and from 1977 to 1979 he was the President and Chief

Executive Officer of American Bancshares Incorporated. In 1979 he worked

in his own banking consultant group in Miami, Florida."1 "

2.7.3 Mr Beazley told the Commonwealth-New South Wales Joint Task

Force on Drug Trafficking (Joint Task Force) that he first met Admiral

E.P. Yates [2.76] and Mr F.J. Nugan [2.1] in late 1976. Both were in

Miami, Florida, representing the Nugan Hand Bank [2.106] and discussed

with Mr Beazley the possible purchase of a South Florida bank. After

this initial contact, Admiral Yates periodically called Mr Beazley

concerning the potential acquisition of a bank. Mr Beazley later met

Mr M.J. Hand [2.2] in connection with the potential purchase of a bank in

Hong Kong. In August 1979, Admiral Yates offered Mr Beazley a position

with the Nugan Hand Group and a few weeks later Mr Nugan contacted Mr

Beazley and repeated the offer. Mr Beazley finally agreed to the

appointment but placed a number of conditions on his acceptance including 2

the verification of the financial status of the Nugan Hand Group.

Admiral Yates told the Commission that he approached Mr Beazley by 3

telephone in 1977 and later introduced Mr Beazley to Mr Nugan.

Mr Beazley became President and Chief Executive of the Nugan Hand Group

and was introduced as such in October 1979 at a conference of company

executives in Sydney.^

2.7.4 He was assigned responsibility for analyzing the existing

organisation and providing recommendations for personnel changes and

restructuring. He enlisted the help of Mr R.L. Attkisson [2.4] to assist

in the evaluation task. During the course of his employment Mr Beazley

conducted acquisition analyses of three financial institutions in the

United States for the Nugan Hand Group. Mr Beazley said that during his

negotiations, it was necessary to have the ability to offer a 'good faith

- 1.14 -

deposit'. To this end he requested and received US$200 000 fron

Mr Hand. In a letter to the Joint Task Force Mr Beazley claimed the

negotiations were unsuccessful and accordingly he returned the 'good

faith money', after deducting his expenses, to Mr Nugan during January

1980.5

2.7.5 Mr Beazley travelled extensively throughout Europe and Asia in

an attempt to evaluate the Nugan Hand Group companies' balance sheets but

had trouble reconciling them. He scheduled a meeting for February 1980

at which all Nugan Hand Group accountants were to be present in an

attempt to resolve the balance sheet reconciliation problems he was

experiencing. This meeting never eventuated due to Mr Nugan's death in

January 1980. Mr Beazley stated Mr Nugan's death complicated the

reconciliation process and as 'some things didn't add up' he

resigned.®

2.7.6 Towards the end of his association with the Nugan Hand Group,

Mr Beazley took over negotiations for the purchase of a share in the

English merchant bank, London Capital Securities Ltd [2.111], on behalf

of the Nugan Hand Group,. After Mr Nugan's death, Mr Beazley was

contacted by Mr M.B. Houghton [2.35] and was asked if he was interested

in continuing negotiations for the purchase of the bank. Mr Beazley

claimed Mr Houghton said he was making this request on behalf of a

7

Mexican, Mr Ricardo Chavez, who wished to purchase the bank. Mr

Houghton told the Commission that Mr Chavez was a depositor with the

Nugan Hand Group in Saudi Arabia with whom he had discussed the possible

purchase of London Capital Securities Ltd. He told Mr Chavez that 'Nugan

Hand would direct the Saudi deposits to this new bank'. According to Mr

Houghton, Mr Chavez instructed him to withdraw funds from his account for

the purchase of equity in London Capital Securities Ltd. This

Mr Houghton did and in the company of Mr Beazley delivered the funds to

Mr D. Mosselson of London Capital Securities Ltd. A share certificate in

favour of Mr Beazley was then endorsed by Mr Beazley in favour of

Mr Chavez. This endorsement, according to Mr Houghton, was not recorded

by London Capital Securities Ltd and resulted in Mr Chavez not being

listed as a shareholder. The share certificate was later delivered by

- 115 -

Mr Houghton to Mr Chavez in Switzerland. Mr Beazley subsequently became

a director of London Capital Securities Ltd. In October 1980 he resigned

this position and had no further contact with the bank.®

2.7.7 Despite repeated requests to Mr Beazley and his attorneys in the

United States, Mr Beazley declined to make a statement or give evidence

to this Commission.

Endnotes 1 2 3 4 5 6 7 8

1 CB1176 folio 273; CD6930 folio 3, Letter Beazley re educational qualifications 2 CD1176 folios 274-76; 0)1290 folios 6-14 3 CT24263-65, Yates

4 CT22553, Houghton; CD1429 folio 26, Sydney Conference 1979 5 CD1176 folio 285, Letter Beazley/JTF 26/1/82; CD10859 folio 2 6 CD1176 folio 275

7 CD1176 folios 278-79

8 CT22552-56, Houghton; CD10525 folio W

2.8 BLACK, General Edwin Fahey

2.8.1 General Edwin Fahey Black was born in the United States on

17 August 1915. He attended the United States Military Academy, West

Point and gained a Bachelor of Science degree in Civil Engineering.

After graduating in 1940 he served in various command and staff positions

during World war II, and the Korean and Vietnam Wars. Staff assignments

included duty with the United States National Security Council and the

Office of the Secretary of Defense. Command assignments included working

for the Office of Strategic Services (O.S.S.), Commander of the United

States troops in Thailand during the Vietnam war and later Assistant Army

Chief of Staff for the Pacific. General Black obtained a Master of

Science degree in International Relations from George Washington

University, Washington, D.C. in 1962. He retired from the United

States Army in 1970 and subsequently held directorships in various 2 3

companies. He is currently engaged as a consultant.

- 116 -

2.8.2 In October 1977 General Black, despite the fact he had no

banking experience, was asked by Admiral E.P. Yates [2.76] if he would

join the Nugan Hand Group. He subsequently met Messrs F.J. Nugan [2.1]

and M.J. Hand [2.2] who said they wanted hin to be their representative

in Hawaii and help them meet influential people in South East Asia.

General Black wrote to Mr Hand on 31 October 1977 stating he was joining

forces with the 1 bank1 on 1 November 1977 and that he had tried to get

instructions from Admiral Yates but was unable to contact him.'* In

March 1978 he again wrote to Mr Hand and said at that time he and Admiral

Yates had not reached a satisfactory agreement as to the running of the

Honolulu office or as to his work contract.6

2.8.3 At the time he joined the Nugan Hand Group, efforts were being

made to purchase the United Chinese Bank in Hong Kong. General Black

joined the team that was finalising the negotiations for the purchase of

the Bank and visited Hong Kong with Admiral Yates. The proposed purchase

never eventuated due to lack of funds on the part of the Nugan Hand

Group.6

2.8.4 General Black suggested to Mr Nugan that his best contribution

to the Nugan Hand Bank would be to handle special projects. He believed

large joint ventures with capital raised by the Nugan Hand Group, if

successful, would ultimately generate large amounts of cash which would

benefit the Bank. General Black worked on a number of projects but

nothing materialised as the Nugan Hand Group was unable to arrange the

necessary finance.^

2.8.5 The New South Vales Corporate Affairs Commission in its Seventh

Interim Report referred to General Black's possible involvement in

negotiations over helicopters, fragmentation bombs and ammunition and the

sale of shelters for combat aircraft to Thailand and South Korea. It

also referred to knowledge of these matters on the part of Messrs Hand,

Nugan and Admiral Yates.® General Black's evidence to this Commission

in relation to these matters is discussed in Part 7.

2.8.6 In January 1979 Admiral Yaces, acting on the instructions of 9

Mr Nugan dismissed General Black from the Nugan Hand Bank. He was at

- 117 -

that stage employed on a salary of US$25 000 per year plus expenses.1 2 3 4 5 6 7 8 9 10 1 1

General Black subsequently contacted Mr Nugan who reinstated him and in

February 1979 wrote to him regarding his new arrangement with the Group.

He was to represent Nugan Hand International [Appendix B] for all

commercial and trade services in Hawaii and was to be paid US$1 500 on a

month to month basis in accordance with the directions of Mr Nugan. He

was to bear all expenses unless otherwise authorised. General Black

considered himself to be, until the collapse of the organisation, the

Nugan Hand Group representative in Hawaii.12

Endnotes

1 CT24542, Black

2 CD1144 folio 1, Black's background, folio 10, AFP/Black's

particulars; CD1955 folio 44, E.F. Black's background 3 CT24538, Black

4 CD1955 folio 163

5 CD1955 folio 81, Letter Black/Hand 16/3/78

6 CT24551-52, Black; CD1250 folios 2577-79, JTF ROI Black 11/12/82 7 CT24551, CT24553, Black; CD1250 folios 2577-79 8 CAC 7th Interim Report pp660-62 9 CT24261, Yates

10 CD1250 folios 2577-79

11 CT24550, Black; CD6212 folios 13-14, Letter Nugan/Black 13/2/79 12 CD1250 folios 2577-79

2.9 BRINCAT, George Frederick

2.9.1 Mr George Frederick Brincat was born on 30 October 1950 in

Sydney. In 1968, he commenced work with Charles J. Berg & Partners, a

firm of public accountants, in George Street, Sydney. He worked for this

firm for a period of five years and during this time he studied Commerce

part time at the NSW Institute of Technology. He completed that course

in November or December 1973 and received a Diploma in Commerce early in

1974.1 Following the award of his Diploma he gained full admission as 2

an Associate of the Australian Society of Accountants.

2.9.2 While studying, he worked as an accounts clerk and then, in

1973, in a position he described as a 'Senior Level "B"'3 carrying out

I

accounting, taxation, secretarial and audit work under supervision.^

He worked on the audit of two public companies5 providing assistance in

vouching and verifying assets and liabilities. He was not required to

finalise these audits nor was he qualified to sign the respective audit

certificates.® Mr Brincat described his audit experience prior to 1974

as limited, particularly in relation to newly incorporated companies.^

2.9.3 In May 1974 at the age of 23, Mr Brincat joined the firm of

Heuschkel and Pollard.® Messrs C.L. Heuschkel [2.30] and W. Pollard

[2.57] had also worked for Charles J. Berg & Partners and had met

9

Mr Brincat there during their mutual period of employment. A month or

so after his appointment, Mr Brincat was instructed by Mr Pollard to

provide accounting services for Nugan Hand Needham Ltd [2.97] (as it then

was) and its associated companies. More specifically, he was instructed

to finalise the books of account, so that financial statements and

taxation returns could be prepared, and to verify assets and

liabilities."*"*^ At this time he had not previously had responsibility

for the audit of a public company. " * " " * "

2.9.4 When Mr Brincat first attended the offices of Nugan Hand Needham

Ltd it was towards the end of its first year of business. No financial

statements had yet been published and some accounting records had yet to

be established. He introduced the appropriate records and carried

out bookkeeping services which were later provided by Miss P.M. Swan

[2.70] and thereafter by Miss N.F. Burton [2.10]."*"5 He carried out

some verification work in respect of the 30 June 1974 accounts for Nugan

Hand Needham Ltd in about July or August of that year but as Mr Brincat

was not then a partner of the firm Mr Pollard signed the relevant audit

certificates"*"^ [see Part 4 Section 5J. Mr Brincat became a registered

auditor during 1974 and was subsequently admitted as a partner in the

firm on 1 July 1975."*"^

2.9.5 From and including the financial year ending 30 June 1975,

Mr Brincat prepared the accounts, conducted the audit and, moreover,

signed the audit certificate, in respect of Nugan Hand Ltd [2.97]. That

is to say, Mr Brincat occupied the position of both accountant and

- 118 -

- 119 -

auditor in respect of each of the five annual accounting periods of Dugan

Hand Ltd, and as such, was in a crucial position to determine the final

form of the company's accounts. In certifying those accounts each year

he says he simply accepted Mr F.J. Dugan's [2.1] version of various

transactions. He also prepared the accounts and carried out an audit in

respect of a number of associated companies. Details of companies, the

accounts of which he prepared and audited, are set out at the conclusion

of this profile.

2.9.6 In addition, Mr Brincat was a director of Distravite Pty Ltd

(from 25 November 1976 to 1 February 1978) and Illarangi Investments Pty

Ltd (appointed 15 November 1977) at a time when the companies were not

trading. He was also a secretary of Leasefast Pty Ltd (appointed

2 December 1977) and S.L. Notwist Pty Ltd (appointed 30 September

1976).17

2.9.7 During his time with the firm of Heuschkel & Pollard, Dugan Hand

Ltd was the only public company for which Mr Br incat performed the

services of auditor. Aside from this and accounting work for Nugan Hand

Ltd and associated companies, he provided accounting, taxation and

secretarial services for a number of family companies. Based on

estimates by various parties of Mr Brincat's times of attendance at the

offices of Nugan Hand Ltd at Macquarie Street, Sydney, he clearly spent a

considerable proportion of his time on Nugan Hand Group business."*"®

His own estimates included one that he attended every day for a period of

one or two hours and at times remained for more than five hours each 19 day and another, that he attended 50 to 60 per cent of his time

20

overall, with attendances on two or three days a week or more.

Mr Brincat estimated the income from the Nugan Hand group of companies to

be 30 per cent of total income of the firm.2"* The Nugan Hand group of 22

companies was the firm's largest client.

2.9.8 Mr Brincat's audit working papers in relation to the Nugan Hand

Ltd accounts for each financial year were central to the Commission's

examination of the company's financial circumstances. One significant

feature of the company's accounts was the use of internal bills of

exchange to represent inter-company debts [see 3.3.46-3.3.47, 5.34-

- 120 -

5.55], At the time the internal bills were introduced into the accounts,

neither Mr Brincat nor his partners had experience in their use. As a

result, Messrs Pollard and Heuschkel sought legal advice from an

independent firm of solicitors. Mr Nugan intervened at this point and

persuaded the partners including Mr Brincat to accept the view of his own

solicitor, Mr J.L. Aston, that the use of internal bills was not

inappropriate although it should be the subject of a suitable note to the 21 accounts.

2.9.9 The use of the internal bills continued to be the subject of

frequent discussions between Mr F.J. Nugan [2.1] and Mr Brincat until, at

a meeting three weeks before Mr Nugan's death, Mr Brincat said he would

qualify the audit report for the year ending 31 January 1980 to the

extent of writing off between $4-5 million against the internal bills, 24

thus exposing Nugan Hand Ltd as hopelessly insolvent.

2.9.10 In addition to the accounts of the Nugan Hand group of companies

in Australia, Mr Brincat also played a major role in the production of a

set of records for the Nugan Hand Bank which were submitted to the Bank's

auditors in the Cayman Islands in 1977, 1978 and 1979. In the process,

the original records maintained in the Group's Singapore office were

rewritten, principally by Mr Brincat, on instruction by Mr Nugan. These

accounts were passed by the auditors in the years 1977 and 1978 but in

1979 the auditors queried the accounts and subsequently advised the

Banking Commissioner that the accounts could not be presented to the

Commissioner in accordance with the requirements of Cayman Islands 25 law. [Further details of the accounts and audit of Nugan Hand Bank

are provided at paragraphs 4.2.117 to 4.2.177.]

2.9.11 Mr Brincat described Mr Nugan as a strong willed and overbearing

person who exerted considerable influence over Mr Brincat. ® By all

accounts, Mr Brincat was particularly shocked by the news of Mr Nugan's 27 death. On Tuesday, 27 January 1980, he attended a meeting at the

Nugan Hand Ltd offices in Macquarie Street where he and Mr S.K. Hill

[2.33] were the only two with any knowledge of the Group's financial

situation. Later in the evening he visited Mr Hill's home together

- 121

with Mr Pollard and Admiral E.P. Yates [2.76] where he discussed with

Mr Pollard the question of approachinq a solicitor for legal

29 "

advice.

2.9.12 A week later, on Tuesday 5 February 1980, Mr Brincat informed

Mr Pollard of irregularities in the Nugan Hand Group accounts including

the fact that negotiable certificates of deposit belonging to Nugan Hand

(Hong Kong) Ltd [2.94] had been used to secure deposits in Nugan Hand

Ltd. After discussions with his solicitor on the following day,

Mr Pollard took over control of the January 1980 audit to the exclusion

of Mr B r i n c a t . F u r t h e r details concerning the accounts of Nugan Hand

Ltd are contained in Parts 3 and 5 and, on the subject of audit

procedures, the reader is referred to Part 4 Section 5 of the report.

2.9.13 In addition to Nugan Hand Ltd, Brincat also prepared the

accounts and was the auditor of the following associated companies:

Australasian and Pacific Holdings Ltd [2.80] - accounts and audit from June 1977 to June 1979. Distravite Australia Wide Servicing Company Pty Ltd [2.81] - accounts and audit from date of incorporation. Distravite Pty Ltd [2.82]

- accounts and audit from date of incorporation. Garcia Bros Hardware Pty Ltd [2.83] - accounts and audit from 1974 to 1975. Hidex Pty Ltd [2.84]

- accounts and audit from date of incorporation. Illarangi Investments Pty Ltd [2.85] - accounts and audit for June 1978. Leasefast Pty Ltd [2.87]

- accounts and audit from date of incorporation.

Medevac Shipping Pty Ltd [2.89] - accounts and audit from date of incorporation. Naretha Pty Ltd [2.90] - accounts and audit from date of incorporation. Newcourt Financial Services Pty Ltd [2.91]

- accounts and audit from date of incorporation. Nugan Hand (Dealers) Pty Ltd [2.93] - accounts and audit from date of incorporation. Nugan Hand International Holdings Pty Ltd [2.96]

- accounts and audit from date of incorporation to June 1978. Nugan Hand Ltd [2.97] - accounts and audit from June 1975 to January 1979.

NHN Management Pty Ltd [2.92] - accounts and audit from date of incorporation.

^ l o kd co σ\

- 122 -

Nugan Hand Trade Services Pty Ltd [2.98] - accounts and audit from 1974 or 1975. Pacific Continental Ltd [2.99] - accounts and audit from 1974 or 1975. P.M. Shelley Pty Ltd [2.100] - accounts and audit from 1974 or 1975. R. B. Cody Pty Ltd [2.101] - accounts and audit from 1974 or 1975. Skah Pty Ltd [2.102] - accounts and audit from date of incorporation. S. L. Notwist Pty Ltd [2.103] - accounts and audit from date of incorporation. Solingen Aust Pty Ltd [2.104] - accounts and audit from date of incorporation. Swiss Pacific Pty Ltd [2.105] - accounts and audit from date of incorporation. W.V. Tennyson Pty Ltd [2.107]

- accounts and audit from 1974 or 1975. Yorkville Nominees Pty Ltd [2.108] - accounts and audit from 1974 or 1975.16

Endnotes

1 CT23763-64, Brincat; CD3008 Part 1 folios 94-95 2 CD3008 Part 1 folio 94

3 CD3008 Part 1 folio 95

CT23763-64, Brincat CD3008 folio 97 CT23764, Brincat CD9009 folio 14 CD9009 folio 1 CT23763-4, Brincat; CT23286, CT23310, Pollard 10 CT23765, Brincat

11 CT23770, Brincat

12 CT23766

13 CT23766, Brincat

14 CT23764, CT23769, Brincat, CD9009 folio 1 15 CT23308, Pollard; CD3008 Part 1 folio 95 16 CT25527, Brincat; CD3008 Part 1 folio 108-110 17 CT25319; CT25320, Brincat 18 CT23919, Gaudry; CT22316-8, Swan; CT23354-6, Pollard 19 CT23767-68

20 CT23769, Brincat

21 CT23767-68, Brincat 22 CT23769, Brincat

23 CT23867-84, Brincat; CT23878-84, Aston 24 CT23749, CT23924, Brincat 25 CT21903-04, Hill

26 CT25198-99, CT25576-67, Brincat 27 CT23919, Gaudry; CT20879, Moloney 28 CT20997, CT21001, Hill 29 CT23291, Pollard

30 CT23294, Pollard; CT20313, Brincat

- 123 -

2.10 BURTON, Moreen Fay

2.10.1 In mid June 1976, Miss Noreen Fay Burton commenced work with

Nugan Hand Ltd [2.97] as a bookkeeper following an interview with Mr W.

Pollard [2.57] of Heuschkel & Pollard, accountants. Mr G.F. Brincat

[2.9] instructed her on the duties of the position.* These duties

included responsibility for writing up the cash books of Nugan Hand Ltd

and some of its associated companies and keeping those cash books up to 2 date at all times. She was also required to record all deposits and

withdrawal details (including interest paid to clients) in the cashbooks

and clients' ledger cards as well as arrange the banking and drawing of 3 cheques. Miss Burton also prepared daily cash reports. She contacted

the banks where various companies within the Nugan Hand Group kept

accounts and checked the daily balances of all such accounts. She

maintained a sheet showing all deposits and repayments and the balance 4 during the course of the day. At the end of each day she gave a

1 summary of transactions' sheet to Mr S.K. Hill [2.33]. Miss Burton

also maintained the records relating to Mr F.J. Nugan's [2.1] personal

bank account at the ANZ Bank, Pitt and Hunter Streets branch including

records relating to payments from Yorkville Nominees Pty Ltd [2.108] to

his personal account.®

2.10.2 In mid 1977 Miss Burton was required to assist in the recording

of matters pertaining to bills of exchange [see Part 3 Section 3]. The

securities registers, in which all external and internal bill details 7

were recorded, were maintained by Mr Hill, Mr Brincat or herself. She

also kept a summary of outstanding bills and noted the dates of

maturity. She would inform Messrs Hill or Brincat when the bills were

due for repayment or rollover and organised the purchase of duty stamps

from the post office as required.®

2.10.3 During 1978 Miss Burton became an authorised signatory for the 9 . .

cheque accounts of Nugan Hand Ltd. She was also authorised to sign

and endorse bills of exchange on behalf of Nugan Hand Ltd."*·®

2.10.4 Miss Burton was employed by Nugan Hand Ltd until April 1980,

when the company was placed in provisional liquidation.'*''*' After this

- 124 -

she assisted the provisional liquidator until early July 1980.

Miss Burton was at the time she gave evidence to the Commission employed 13

as a bookkeeper by a firm of Sydney solicitors. * 1 2

Endnotes

1 CT20136, CT23513, Burton 2 CT20137-41, CT23517, Burton 3 CT23516, Burton

4 CT23520, Burton

5 CT23537, Burton

6 CT23519, Burton

7 CT23522, CT23536, Burton 8 CT23513-15, Burton

9 CT23519, Burton

10 CD3010 folio 19, Burton evidence to CAC 11 CT20136, Burton

12 CT20137, Burton; CD3727 folio 1, Burton Statement to CAC 28/4/82 13 CT20136, CT23511, Burton

2.11 CALDER, Brian William

2.11.1 Mr Brian William Calder was born in Australia on 22 December

1930 and was educated in Brisbane. He qualified as an accountant in

Queensland and was employed by the ES&A Bank (as it then was) for

12 years in the Overseas Bills Department. His position, when he

resigned in 1958, was Assistant Manager in the Bills Department of the

Brisbane office. Mr Calder subsequently joined Corrie & Co, Stockbrokers

of Brisbane. In 1960 he was appointed Branch Manager and held this

position until 1970 when he took up a position with Sydney stockbrokers

Lance Jones & Co.

2.11.2 Mr Calder first met Mr M.J. Hand [2.2] about 1970 shortly after

commencing employment with Lance Jones & Co as Mr Hand was a client of

that firm.^ Mr Hand introduced him to Mr F.J. Nugan [2.1] in 1971.^

Between September 1972 and February 1977, Mr Calder was a director and

secretary of Langenfelder Pty Ltd, a land acquistion and disposal

company. Mr Hand was also a shareholder and director of the company 4 during that period.

- 125 -

2.11.3 Mr Calder was one of the original subscribers of Secured Income

Real Estate (Australia) Ltd ('SIRE') [2.117], a real estate development 5

and investment company of which Mr Hand was a founding director.

Mr Calder was appointed inaugural secretary in August 1971 and became a

director in May 1972.® In 1972 Mr Calder left his position with Lance

Jones & Co. as that firm was closing its Sydney office and he wished to 7

remain in Sydney to continue his involvement with SIRE.

2.11.4 Between July 1973 and November 1974 at the request of Messrs

Hand and Nugan, Mr Calder held the positions of secretary and director in

tiie following companies: Nugan Hand Needham Ltd (later Nugan Hand Ltd

[2.97]), NHN Nominees Pty Ltd (later Nugan Hand (Dealers) Pty Ltd

[2.93]), NHN Management Pty Ltd [2.92] and NHN Funding Pty Ltd.8

2.11.5 In late 1973, SIRE gained a controlling interest in North

Australian Rubber Mills Ltd ('HARM') [2.113]. Mr Calder was appointed a

director of HARM in December 1973 and held this position until February

1978. He became secretary of HARM in June 1974 and resigned in June Q 1975. Mr Calder was fully engaged in the business of SIRE and HARM

for some years in both Brisbane and Sydney, and moved to Brisbane in

1976.10

2.11.6 In December 1977 Mr Calder terminated his employment with SIRE

and NARM and returned to Sydney. However, the company records of SIRE

indicate that his resignation as director was not formalised until June

1979. Mr Calder approached Mr Nugan for a job, and commenced work with

Nugan Hand Ltd in January/February 1978.11 According to Mr Calder,

Mr Nugan asked him to form a couple of companies for 'the express purpose

of going into vitamins and orange juice distribution business'.

Mr Calder arranged for Apollo Land and Developments Pty Ltd to change its

name to Distravite Pty Ltd [2.82] and incorporated Distravite Australia

Wide Servicing Company Pty Ltd [2.81]. Mr Calder had one share in each

company which he held in trust for Mr Hand. In fact the primary purpose

of these companies was that they be used in the implementation of a

taxation scheme which Mr Nugan was making available to clients [see

Part 9], Mr Calder's role was to locate outlets for the distribution of

- 126 -

packaged vitamins and fruit juice. He was made secretary and director of

Distravite Pty Ltd and Distravite Australia Wide Servicing Company Pty 12 Ltd in February 1978. From August 1978, he held directorships in the

Orange Spot group of companies [2.115] which were also involved in

taxation schemes devised by Mr Nugan. Mr Calder did not perform any

duties in relation to this group of companies.1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 13

2.11.7 Between October 1978 and October 1979 Mr Calder was also

secretary and director of Solingen Aust Pty Ltd [2.104], In October 1978

he assisted Mr Q.D. George [2.24] and Mr O.T. Shaw [2.65]; the latter was

at this time establishing Mars Road Investments Pty Ltd [2.88], a company

in which Mr Calder subsequently held the positions of company secretary, 14

director, public officer and principal accounting officer. However,

Mr Calder told the Commission that he took no part in the operations of

Mars Road Investments Pty Ltd, although as a director he did sign a

number of blank cheques which he gave to Mr Shaw.13

2.11.8 Mr Calder resigned from Distravite Pty Ltd, Distravite Australia

Wide Servicing Company Pty Ltd and from the Orange Spot group of

companies in June 1979 and purchased a small business.16 He is

π

currently employed as an accountant by a large Australian company.

Endnotes

1 CD3944 folio 292, Calder's application for a seat on the Sydney Stock Exchange; CD6112 folios 9-10, Calder's Curriculum Vitae 2 CT22489, Calder

3 CD3011 folio 3, Calder evidence to CAC transcript 4 CT22508, Calder; CD10719 folio 136 5 CT22407, Needham; CT22490-91, Calder 6 CD10719 folio 77

7 CT22493, Calder

8 CT22492-93, Calder; CD10719 folios 128, 151, 156-58 9 CD10932 folios 1-2, North Australian Rubber Mills Ltd CAC

microfiche

10 CT22493, Calder

11 CT22494, Calder

12 CT22495-96a, Calder 13 CT22501-03, Calder

- 127 -

14 CT22495, Calder; CD5468 folio 1, Minutes Mars Road Investments Pty Ltd 11/10/78 15 CT22505-07, Calder 16 CD3011 folio 32

17 CT22488, Calder

2.12 CLASEN, Peter Jurgen

2.12.1 Mr Peter Jurgen Clasen first met Messrs F.J. Nugan [2.1] and

M.J. Hand [2.2] in 1974 or 1975."*" He was later offered employment by

Mr Nugan and commenced working for Nugan Hand Ltd [2.97] in Sydney in

February 1975. Although, according to his own evidence, Mr Clasen had

very few qualifications for the task, Mr Clasen was employed to collect

funds from depositors for investment in Nugan Hand Ltd. Mr Clasen said

his attempts to collect deposits were unsuccessful.3

2.12.2 Mr Clasen said he was later asked by Mr Nugan to sell some real

estate owned by him. The real estate was called Golden Beach and was

part of the Ocean Shores Development located on the border of New South

Wales and Queensland. Mr Clasen negotiated for the sale of only one

block of land in the development but ultimately this did not proceed and 4 the purchaser's money was refunded.

2.12.3 In February 1976, Mr Clasen held discussions with executives of

the Asien-Pazifik-Bank, in Hamburg, West Germany. They discussed whether

the Asien-Pazifik-Bank would be prepared to guarantee deposits collected

in West Germany on behalf of Nugan Hand Ltd and the feasibility of that

bank and Nugan Hand Ltd representing each other in their respective

countries. Mr Clasen also approached a German chemical company, with a

view to having it appoint Nugan Hand Trade Finance Ltd as its

representative in trade negotiations with China. Neither of these 5 proposals came to fruition.

2.12.4 While in West Germany, Mr Clasen spoke by telephone to Mr Hand

who was in South Africa and was interested in obtaining a supply of

several million bullets suitable for use in a .303 rifle [see Part 7].

Mr Clasen then made some telephone inquiries in relation to the bullets.

The following day Mr Clasen was advised by Mr Hand not to pursue the

- 128 -

matter further. Mr Clasen told the Commission that as far as he knew

nothing resulted from his inquiries in West Germany.6

2.12.5 From Germany Mr Clasen returned to Nugan Hand Ltd in Sydney and

left the employ of that company in early 1976.^

Endnotes

1 CT21151-52, Clasen

2 CT21160-61, Clasen; CD6112 folio 33, Clasen expenses

Feb.1975-Feb.1976 3 CT21151-53, Clasen

4 CT21153, CT21161, Clasen 5 CT21154-56, Clasen; CD6112 folios 35-37, Report Clasen/Nugan and Ward 6 CT21156-58, Clasen 7 CT21160-61, Clasen 8 CD6112 folio 26 Note to Hand; folio 27, Real Estate proposal by

Clasen 12/4/76; folio 33

2.13 COCKE, General Erie

2.13.1 General Erie Cocke Junior volunteered to give evidence to the

Commission. He was interviewed by the Commission in the course of its

inquiries in the United States in January 1985.

2.13.2 General Cocke was born in Dawson, Georgia, U.S.A. on 10 May

1921. He is a graduate of the University of Georgia and the Harvard

University Graduate School of Business Administration. He holds a Master

of Science degree from George Washington University and honorary

doctorates from Mercer University (Laws), Missouri Valley College

(Letters) and Presbyterian College (Business Administration). He is a

highly decorated United States serviceman and achieved the rank of major

by the end of World War II. He retired from military service as a

Brigadier General of the Georgia National Guard.*'" General Cocke

enjoyed an extensive business career both in the public and private

sectors. He was appointed by President Kennedy as U.S. Alternate

Executive Director of the World Bank. He served as consultant to two

defence secretaries and was involved in presidential appointments to

- 129 -

international committees. He served as a United States delegate to the

United Nations with the rank of ambassador. Since 1966 he has conducted

a management consultancy service in Washington and is a well known

lobbyist. He is a past Vice-President of Peruvian Airways and has served

in executive positions and on boards of directors of several

2

organisations.

2.13.3 In mid 1977 General Cocke was approached by Admiral E.P. Yates

[2.76], whom he had known for some years, who suggested that he act as an

occasional consultant for the Nugan Hand Group.^ Admiral Yates told

the Commission that General Cocke worked as a consultant for the Nugan

Hand Group, while maintaining his private consultancy. General Cocke

told the Commission that he advised the Nugan Hand Group not to buy an

American bank or try to start one as they would encounter regulatory A problems. Admiral Yates said General Cocke was well placed in

Washington to arrange contacts and introduce prospective investors to the

Group. Admiral Yates said he used General Cocke's name to register the

office of Nugan Hand International [Appendix B], with the United States

Treasury Department. He also said while he was in Asia representing the

Nugan Hand Group, General Cocke's Washington office was his official 5

headquarters as the Group rented part of that office. General Cocke

said his office was also used by Mr M.B. Houghton [2.35] on several

occasions.® Mr Houghton told the Commission he used the office as a

place to repay the deposits of American clients returning from Saudi

Arabia. He also said General Cocke attended an International Monetary

Fund meeting in Yugoslavia on behalf of the Nugan Hand Group.^

2.13.4 General Cocke made one trip in April 1978 to Taiwan and Hong

Kong to meet members of the Nugan Hand Group including Messrs F.J. Nugan

[2.1] and M.J. Hand [2.2], neither of whom appeared. Again in mid 1979

he visited Hong Kong to meet Messrs Nugan and Hand but they failed to

attend this meeting also. General Cocke then told them that they would

have to travel to Washington to meet him. He said that the expenses for

the two trips to Asia were not met by the Nugan Hand Group.®

General Cocke ultimately met Mr Hand in Washington and Mr Nugan some time

later. He told the Commission that he thought Mr Hand was a good

- 130 -

international banker and Mr Nugan was 'a very fine, qualified lawyer,

particularly a very fine tax lawyer1 1 1 . The latter was based' on his

observations of Mr Nugan1s handling of a legal problem concerning the

Ringling Brothers and Barnum & Bailey Circus.®

2.13.5 In a letter dated 19 April 1979 to Mr Hand Admiral Yates stated

that General Cocke would receive US$2 000 per month plus commission on

any business he brought to the Group. In evidence however Admiral Yates

said General Cocke was not paid for his consultancy by the Nugan Hand

Group but gave such assistance as a favour to him (that is Admiral

Yates) Mr Houghton said General Cocke had mentioned to him that the

Nugan Hand Group owed him US$60 000 for telex and other expenses relating

to the running of the Washington office.^ General Cocke told the

Commission about his financial arrangements with the Group. He said the

payments for office space were accumulated in Hong Kong and General Cocke

was issued with certificates of deposit issued by the Nugan Hand Bank in

the Cayman Islands which were now worthless. General Cocke claimed he 12

never received any other payment from the Nugan Hand Group.

Endnotes

1 CT24597, Cocke; CD4426 folios 3-4, Cocke biographical information ■ 2 CT24597-98, Cocke; CD4426 folios 3-7 3 CD1120 folio 1, JTP ROI Cocke 20/11/82 4 CT24595, Cocke

5 CT24258, Yates

6 CT24596, Cocke

7 CT22577, Houghton

8 CT24594-96, Cocke; CD1120 folio 1 9 CT24603-04, Cocke

10 CD2026 folios 82-83, Letter Yates/ Hand re Cocke 19/4/79 11 CT22578, Houghton 12 CT24594, Cocke; CD1120 folio 2

2.14 COLBY, William Egan

2.14.1 Mr William Egan Colby volunteered to give evidence to the

Commission. He was interviewed by the Commission in the course of its

inquiries in the United States in January 1985.

- 131 -

2.14.2 Mr Colby is a former Director of the United States Central

Intelligence Agency ('C.I.A.'). He worked for the Office of Strategic

Services (the predecessor in some ways of the C.I.A.) during World War II

and joined the C.I.A. in 1950. In 1962 he became Chief of the Far East

Division of the C.I.A. In 1968 he went to Vietnam for the State

Department with the rank of Ambassador. He returned to the United States

in 1971 and became Executive Director of the C.I.A. In September 1973 he

was sworn in as the Director of the C.I.A., and remained in that position

until January 1976.1

2.14.3 After leaving the C.I.A. Mr Colby joined the legal firm of Reid &

Priest. Mr Colby said that it was through the legal firm that he came

into contact with the Nugan Hand Group. He said that approximately six

months before Mr F.J. NUgan's [2.1] death Mr W.J. McDonald [2.47]

contacted him and said the Nugan Hand group of companies needed some

advice about United States law. Mr McDonald then arranged for Mr Nugan to 2 meet Mr Colby. Mr Colby also met Mr M.J. Hand [2.2] who had been

referred to him by Mr McDonald to discuss the legal problems associated

with Mr Hand's wish to retain his United States passport although he was

an Australian citizen.3

2.14.4 Mr Colby in his interview with the Joint Task Force said that

Mr Nugan had requested him to research the 1 taxation consequences' for

Americans who invested in overseas ventures and the 'taxation

consequences' of both Messrs Nugan and Hand becoming resident aliens in

the United States. He was also asked to advise on the establishment of a

Refugee Resettlement Fund. Mr Colby believed the idea and finances

supplied for the Refugee Resettlement Program in the Turks and Cacios 4 Islands were attributable to Mr Hand.

2.14.5 Mr Colby said his firm received a US$10 000 retainer for the work

they were to undertake for the Nugan Hand Group. The retainer fee was

paid by a cheque drawn on 'a German bank' which was subsequently lost.

Despite repeated requests Reid & Priest did not receive a replacement

cheque. As a result an account has been submitted to the Official

Receiver in Hong Kong.5

- 132 -

2.14.6 Mr Colby told the Commission that he last saw Mr Nugan in January

1980 and told him that he would be travelling to South East Asia in March

1980 and suggested 'V7hy don't we get together if you happen to be in

Singapore or Hong Kong?1 2 3 4 5 . Mr Colby said he wrote the dates that he would

be overseas on his card and gave it to Mr Nugan. It was this card that

Mr Colby believes was found on the body of Mr Nugan at Lithgow on

27 January 1980.6

Endnotes

1 CT24613-14, Colby

2 CT24615-16, Colby

3 CT24299-300, Yates; CT24707-08, McDonald; CT24619, Colby 4 CT24618-19, Colby; CD1250 folios 4376-80 5 CT24631, Colby

6 CT24626-27, Colby

2.15 COLUNGS, Clive Leslie Hillary

2.15.1 Mr Clive Leslie Hillary Ceilings was born on 10 January 1937 in

London, England. He was educated at Hardy's Grammar School, Dorchester

between 1948 and 1954, then at the King Edward VII Nautical College until

1955 when he was employed as a deck officer. In 1957 he joined the Royal

Air Force and was discharged in 1959. He then worked in a family

business for twelve months and emigrated to Australia in 1960. He

entered the real estate business and in 1961 completed the course in Real

Estate Valuation and Practice at the University of Sydney. In 1962

Mr Ceilings commenced his own real estate company in Sydney and for the

next ten years worked in all facets of property development and

management. During this period he became director of a number of

companies and was made a Fellow of the Society of Real Estate Agents and

Valuers.

2.15.2 Mr Collings and Mr S.K. Hill [2.33] became associated in either

1970 or 1971 in a company called Freight Distribution Industries Ltd of

which Mr Collings was a shareholder and Mr Hill the accountant. On 2

Mr Hill's advice the company was eventually put into liquidation.

- 133 -

2.15.3 As a result of a real estate transaction Mr Collings came into

contact with the Australian Investment Management Corporation which he

said was the offshore company controlling the Fund of Australia [2.110].

In 1972 Mr Collings was recruited to the Fund of Australia Group by

Mr J.M. Gilder [2.25] and commenced employment as a representative

selling units in the property trust. Also working for the company were

Messrs P.M. Dunn [2.18], G.A. Edelsten [2.20], W. Hans [2.27], F.D. Ward

[2.73] and J.A. Marks (who later worked with Mr Collings in the Hong Kong

office of companies within the Nugan Hand Group). In September 1972

Mr Collings was sent to The Philippines by Fund of Australia and remained

there until 1974. It appears that Fund of Australia was illegally

carrying on business in The Philippines and Mr Collings commenced

proceedings to have the company legally registered. This occurred in May

1974. In July 1974 however, 'they [the company] stopped redemptions' and

Mr Collings' commission ceased so he had 'absolutely no money'.^

2.15.4 Following his experience with Fund of Australia Mr Collings

learned from Mr Ward that Mr Hans was working for the Nugan Hand Group.

Mr Hans introduced Mr Collings to Mr G.T. Shaw [2.65], In a statement to

the Joint Task Force on 10 December 1981, Mr Collings said he was

employed in September 1974 by Messrs F.J. Nugan [2.1] and M.J. Hand [2.2]

as 'an investment representative on a commission basis selling silver

bullion and gold coins on behalf of Pacific Silver Commodities [2.104]

and Macquarie Coin Dealers [2.104] ... In November the same year Hand

and Nugan told me of a proposed mutual fund called ' In gold Growth' which

they had formed ...'.^ Subsequently, Mr Collings induced Mr Ward to

join the Nugan Hand Group specifically because Messrs Nugan and Hand were

intending to set up the 'mutual fund called Ingold Growth'. According to

Mr Collings, Mr Ward was a 'real expert in handling representatives

working o v e r s e a s ' M r Collings told the Commission that he encouraged

people such as Messrs Ward, Dunn and Edelsten to join the Nugan Hand

Group because they 'were some of the greatest salesmen in the world'.®

2.15.5 On 31 December 1974 Mr Collings arrived in Hong Kong, initially

to sell units on behalf of the 'Ingold Growth' fund. One depositor with

'Ingold Growth' was the Wing On Group which invested US$10,000. ^ Its

- 134 -

Chief Manager, Dr A. Kwok [2.36], met Mr Ceilings and according to

Mr Dunn, Mr Collings developed a very close relationship with

Dr Kwok.® In 1975 Mr Collings was instructed by Mr Nugan to cease

selling on behalf of the fund (due to the instability in the price of

gold) and to begin collecting deposits on behalf of Nugan Hand Inc.

Panama [2.95]. Mr Collings did so and issued certificates of deposit on g behalf of that company.

2.15.6 About this time, Mr Collings also began collecting deposits on

behalf of Nugan Hand Ltd [2.97]. In April 1975, Mr Collings approached

Dr Kwok 'with a view to discussing possible ways in which the Wing On

Bank could assist Nugan Hand Ltd by acting as its agent for the

transmission of funds from Hong Kong depositors to Nugan Hand Ltd in

Australia, and by giving (at its sole discretion) security to depositors,

who requested security'^® [3.3.40]. During these discussions (which

took several months), Mr Collings received advice about the matter from

Messrs terd and Hill in Sydney. Mr Collings claimed that the guarantee

arrangement with the Wing On Bank 'was probably the whole reason for

Nugan Hand who were developing internationally' Dr Kwok informed

the Commission that the agreement was finalised during July 1975 and that

he 'permitted Wing On to enter into the arrangements with NHL [Nugan Hand

Ltd] in return for commitment fees and commissions payable by NHL [Nugan

Hand Ltd ], and also for the purpose of generating foreign exchange 12 business for Wing On' . In a memo to Mr Ward, dated 11 September

1975, Mr Collings stated he had collected US$1 million in deposits in

four weeks and said 'As long as Albert [Kwok] keeps on taking our paper, 13 you will all smile anyway' [see also 4.1.27-4.1.55].

2.15.7 Mr Collings said that the deposits were collected by Nugan Hand

(Hong Kong) Ltd as a representative office on behalf of both Nugan Hand

Ltd and the Nugan Hand Bank [2.106], and therefore Nugan Hand (Hong Kong)

Ltd was not required to be licensed by the Hong Kong banking

14

regulations. In July 1976 Nugan Hand (Hong Kong) Ltd obtained a

deposit taking licence from the Hong Kong banking authorities. However,

according to Mr Collings, that company did not commence collecting

deposits until late in 1977 and in fact, only collected approximately

- 135 -

twenty deposits on its own behalf.^ This was due to the restrictions

imposed by the Hong Kong banking regulations (including a 15 per cent

withholding tax applied to interest earned on deposits).·1 ·6

2.15.8 In July 1976 the Nugan Hand Bank [2.106] was incorporated in the

Cayman Islands."1^ Mr Col lings' efforts were then mainly directed to

collecting deposits for the Nugan Hand Bank because of the restrictions

on the Hong Kong company and also because the Wing On Bank guarantee

arrangement did not apply to deposits collected on behalf of the Nugan

Hand Bank. This meant lower overheads in that the commission charged by

the Wing On Bank was not applicable.· * · 6

2.15.9 Mr Ceilings said that during a visit to Sydney in 1976, Messrs

Nugan and Hand had told him they wanted to get somebody who could really

'drive the bank along' and he had suggested Mr J.M. Gilder [2.25],

Messrs Nugan and Hand subsequently employed Mr Gilder to help promote the IS bank and 'find the right people' . Mr Col lings said that in 1976 both

he and Mr Hill were told by Messrs Nugan and Hand ' the two of you are

20

going to be equal with us on everything outside Australia'.

2.15.10 In February 1977 Mr Collings went to Thailand and managed the

office there for nine months before being summoned to Hong Kong by

Mr Hand to manage that office as Mr Hand was dissatisfied with the

21

current manager, Mr Dunn.

2.15.11 In August 1979 Mr Collings was offered a position as managing

director and deputy chairman of a company engaged in developing new 2? engine technology. He subsequently resigned from the Nugan Hand 23 Group on 12 October 1979. When he gave evidence to the Commission he

was working in Hong Kong as a director of an information company.

2.15.12 During his employment with the Croup, Mr Collings was a director

of Nugan Hand Ltd, Nugan Hand (Hong Kong) Ltd, Nugan Hand International 74

Holdings Pty Ltd [2.96] and the Nugan Hand Bank.

- 136 -

Endnotes

1 CD7153 folio 45, Collings resume 2 CT22777-78, Collings 3 CT22768-69, CT22774-75, Collings 4 CD4445 folio 62, Statement Collings/JTF 10/12/81 5 CT22779-80, Collings 6 CT22768-69, Collings 7 CT22781, CT22783, CT22791, Collings; CD6491 folio 19 8 CT22460, Dunn

9 CT22781-82, Collings 10 CD11529 Letter Kwok/Commission 16/4/85 11 CT22789, Collings

12 CD11529 folio 86

13 CD6509 folio 464, Memo Collings/Ward 11/9/75 14 CT22784, Collings

15 CT22805, Collings

16 CT22822, Collings

17 CT22805, Collings

18 CT22819, CT22822, CT22825-26, Collings 19 CT22810-12, Collings 20 CT22809, Collings

21 CT22860, Collings

22 CD10835

23 CD3736

24 CT22809, Collings

2.16 CONRICK, Edward Thomas

2.16.1 Mr Edward Thomas Conrick is a chartered accountant, holding a degree in Commerce. From 1 July 1979 until 25 November 1983 Mr Conrick

was employed by B.W. Atkinson & Associates, Chartered Accountants.

2.16.2 On 16 February 1980, Mr Q.D. George [2.24] and Mr M.J. Moloney

[2.48] engaged the services of B.W. Atkinson & Associates to write up a

set of accounting records for Mars Road Investments Pty Ltd [2.88] from

its date of incorporation, 11 October 1978, up to the latest possible 2 date. Mr Conrick said he received instruction from Mr Atkinson

concerning the work to be done for the new client. Mr Conrick was

'pretty certain' Mr Atkinson said: 'Quentin George is a young solicitor,

he has been employed by the Nugan Hand group'. Mr Conrick commented that

Mr George 'was apparently just a puppet director of one of those

companies, and he was very concerned that he would be seen as being

- 137 -

negligent in complying with the requirements of the Companies Act as a

director of Mars Road1.

2.16.3 Mr Conrick worked from records provided to him by Mr George

including cheque butts, cheque requisitions, deposit books, bank

statements, presented cheques and a file 'in the nature of office

expenses ...'. He also sought and received explanations from Mr George

where insufficient supporting data was available.'* Mr George said in

evidence that he did not give Mr Conrick the blue and red cash books kept

or held by Mr G.T. Shaw [2.65], because he was of the opinion that they 5

were already missing from the Nugan Hand Group records. Ultimately,

Mr Conrick produced a cash summary highlighting payments and receipts of

Mars Road Investments. He also produced the beginnings of a journal, a

trial balance and a pro forma ledger. ® Mr George said that the set of

accounts Mr Conrick drew up for Mars Road Investments was incomplete

because of the lack of documentation.^

2.16.4 In a letter dated 6 May 1980, Mr Conrick reported his findings

to the directors of Mars Road Investments. These findings included: "The

company did not follow proper procedures for receipting monies deposited

with it nor has sufficient documentary evidence been produced to us to

explain the nature of receipts banked to the company's account.

Substantial cash sums were both deposited and withdrawn from the

company's bank account which have been posted to a Cash Suspense Account

in the Ledger pending further clarification ... There is virtually no

information available supporting these cash transactions except in a few

instances the names of individuals to whom cash cheques were apparently

issued have been noted on cheque butts.'®

2.16.5 All accounting records used by Mr Conrick were returned to the

directors at that time and his association with the Nugan Hand Group 9

ceased on the presentation of his report.

- 138 -

Endnotes

1 CT19503, Conrick

2 CDS477 folio 1, Letter B.W. Atkinson and Associates/Mars Road Investments Pty Ltd 6/5/80 3 CT19508, Conrick

4 CT19508-10, Conrick 5 CT20839, George

6 CT19516-18, Conrick 7 CT20823, George

8 CD5477 folio 1

9 CT19517-18, Conrick

2.17 COURTNEY-SMITH, George Anthony

2.17.1 Mr George Anthony Courtney-Smith was born on 3 November 1923 and

now resides in Sydney. When he gave evidence to the Commission he said

that he was a professional punter.1

2.17.2 In 1942 Mr Courtney-Smith went to New Guinea as a member of the

Australian Army. He remained in New Guinea after the war and managed a 2

rubber and coconut plantation, returning to Australia in 1959.

Mr Courtney-Smith was employed by Legal and General Insurance from 1959

to 1966 as an insurance representative. He met Mr J.M. Gilder [2.25] who

was also employed at Legal and General during this period.1 In 1965

Mr Courtney-Smith was involved in land developments in New South Wales

and South Australia.

2.17.3 Mr Courtney-Smith first met Mr F.J. Nugan [2.1] early in 1977.

He was requested by Mr Gilder to assess whether Mr Nugan was an

alcoholic. The reason put forward for this request was that

Mr Courtney-Smith had an ongoing interest in the treatment of alcoholism

and a long association with the Langton Clinic in Sydney which was

concerned with such matters. Mr Courtney-Smith's opinion was that

Mr Nugan was not an alcoholic, but that he was a person highly dependant 4 on a large intake of alcohol.

2.17.4 Subsequent to the meeting with Mr Nugan, Mr Courtney-Smith was

invited by Mr Gilder to become a representative of the Nugan Hand Bank

- 139 -

(Swiss Pacific Bank and Trust Company as it was then known) [2.106] and

he commenced a contract of employment with that company in April

1977.^ Before commencing work as a representative, Mr Courtney-Smith

received instructions as to policy and office procedures. He was also

provided with Nugan Hand literature, including a manual of operations.

He then travelled to the Cayman Islands and spoke with Mr H.M. Rutter

[2.61], an attorney whose services were retained by the Nugan Hand Bank

in the Cayman Islands. Mr Rutter told him that the Bank was registered

and was functioning according to law.6

2.17.5 Mr Courtney-Smith commenced work as a Nugan Hand Group sales

representative in Argentina in June 1977. He remained in Argentina until

August 1978, except for his return to Australia during the period from

December 1977 to February 1978. His aim in Argentina was to generate

trading transactions between South America and other countries, with a

view to eventually attracting cash deposits from his trade clients to the

Nugan Hand Bank. He said that he was totally unsuccessful in achieving

these aims as he did not attract any trade clients to the Nugan Hand Bank

and collected only two deposits of minimal amounts. He attributed his

lack of success to the inability of Nugan Hand to assist clients in the

financing of trade deals and to compete with the services and facilities 7

offered by the larger established banks in Argentina.

2.17.6 Mr Courtney-Smith said that during 1977 and 1978 he did not

receive a monthly salary from the Nugan Hand Bank. His contract of

employment stated that he would receive a percentage of brokerage in

respect of deposits, or a percentage in respect of trade deals.

Mr Courtney-Smith leased an office in the offices of Tedin and Co,

Attorneys in Buenos Aires for which he was reimbursed by the Nugan Hand

Bank.® The Nugan Hand Group paid for Mr Courtney-Smith's return air

fare between South America and Australia, and most, but not all of his

expenses; he told the Commission that he was ultimately 'out of

9

pocket'.

2.17.7 Upon his return to Sydney in August 1978, Mr Courtney-Smith

worked for the Nugan Hand Group on a very casual basis.'1 '0 In April

- 140 -

1979 he commenced work for the Group in Hong Kong as a sales

representative. His job was to collect deposits from Hong Kong residents

and companies, and if possible to generate trading transactions."*'"*' He

said he had probably thirty or forty clients in Hong Kong and estimated

he collected a total of thirty deposits on behalf of the Nugan Hand Bank

and Nugan Hand (Hong Kong) Ltd [2.94], the local deposit taking company.

He also serviced existing clients. Clients came into the Hong Kong

office to make deposits after seeing advertisements placed by the Group

in the local pre.ss. Mr Courtney-Smith showed potential depositors the

monthly reports issued by the ANZ Banking Group in respect of the Nugan 12 Hand group of companies.

2.17.8 After the resignation of Mr C.L. Collings [2.15] in September

1979, Mr Courtney-Smith became jointly responsible, with Mr J. McArthur

[2.46], for the Group's operations in Hong Kong."*^ In late 1979 or

early 1980, Mr D.E. Beazley [2.7], vAo had recently been appointed Chief

Executive of the Nugan Hand Bank, visited Hong Kong and asked

Mr Courtney-Smith whether he would return to Australia to promote the

relationship between the Bank and Australian trading banks.

Mr Courtney-Smith requested some conditions be met before departure and 14

received no answer from Mr Beazley. Later, Mr Courtney-Smith was

advised by Mr Beazley that his services were no longer required. He

ceased to be employed by the Nugan Hand Group in early February 1980.

2.17.9 Mr Courtney-Smith1s contract of employment in Hong Kong was with

Nugan Hand Management Services Ltd [Appendix B]. Pursuant to this

contract, he received a salary and an accommodation allowance, but no 15 commission. He later made a claim on the Group for holiday and

severance pay and other expenses which he had incurred but no payment was

forthcoming."*"6

2.17.10 In April 1980 Mr Courtney-Smith was contacted by Mr McArthur who

stated that there were difficulties concerning the repayment of

depositors' funds and asked him if he would assist in answering

depositors' inquiries on an honorary basis. Mr Courtney-Smith agreed and

spent three or four weeks answering clients' queries. During this time

- 141 -

he was interviewed in the Kong Kong office on several occasions by

Mr Robertson of the Hong Kong Registrar-General1s Department.

Mr Courtney-Smith returned to Australia in May 1980.

2.17.11 In April 1979 Mr Courtney-Smith invested A$35 000 with Illarangi

Investments Pty Ltd [2.P5], This money was the proceeds of the sale of

his home. He said he made this investment because he was told by Mr S.K.

Hill [2.33] he would receive twenty percent interest on the

investment."*"® When he gave evidence to the Commission he had received

no return on his investment and had lodged a claim with the liquidator of 19 Illarangi Investments Pty Ltd.

Endnotes

1 CT22085, Courtney-Smith 2 CT22089, CT22101, Courtney-Smith 3 CT22101, Courtney-Smith 4 CT22102-05, Courtney-Smith 5 CT22105-06, Courtney-Smith; CD6123 folios 5-9, Courtney-Smith

employment contract 14/4/77 6 CT22090-91, Courtney-Smith 7 CT22091, Courtney-Smith 8 CT22107-08, Courtney-Smith 9 CT22108-10, Courtney-Smith 10 CT22092, Courtney-Smith 11 CT22092-93, Courtney-Smith 12 CT22109-13, Courtney-Smith 13 CT22094, Courtney-Smith 14 CT22094, Courtney-Smith 15 CT22109, Courtney-Smith 16 CT22095, Courtney-Smith 17 CT22095, Courtney-Smith

18 CT22119, Courtney-Smith; CD10635, documents produced by

Courtney-Smith

19 CT22097, Courtney-Smith

2.18 DUNN, Peter Milton

2.18.1 Mr Peter Milton Dunn was born on 12 September 1933 in

Gillingham, Kent, England. Between 1960 and 1965 he was employed with a

United Kingdom management consulting firm and its Australian subsidiary.

In 1966 he established his own management consulting company, Peter Dunn

- 142 -

& Co, in Australia and was self employed until 1971. During 1971 to 1975

Mr Dunn worked as a commission agent for the Fund of Australia [2.110],

in Europe, North and South America and Australia."*·

2.18.2 In 1975 Mr Dunn was introduced to Mr F.J. Nugan [2.1] by Mr F.D.

Ward [2.73], and was offered employment with the Nugan Hand group of

companies. He initially declined this offer because he considered that

the structure of the organisation was too loose, and that many of its

employees were not professional people. He eventually joined Nugan Hand

Ltd [2.97] in September 1975. He was subsequently employed as a sales

representative and held an investment representative's licence on behalf 3 of Nugan Hand Ltd. His main function was to attract corporate

investors to Nugan Hand Ltd. In this regard he said he enjoyed some

early success; he estimated in evidence before the Commission that he was

responsible for attracting deposits in Australia worth between $4 million

and £6 million in a three month period.'* Mr Dunn also sought deposits,

on Mr Nugan1s instructions, from Sydney councils. [See also Interim

Report Ho. 2 paragraphs 4.30 and 6.20-6.23.]

2.18.3 Perhaps as a result of his apparently spectacular early efforts,

in February 1976 he was appointed Managing Director of Nugan Hand Ltd in

Sydney. However, shortly afterwards he relinquished this position, the

new Mercedes car and 'all the perks with it', when Mr M.J. Band [2.2]

returned from South Africa to resume his involvement with Nugan Hand

Ltd.6 Mr Dunn continued to collect deposits on behalf of Nugan Hand

Ltd after Mr Hand's return, but operated from his home rather than the

Nugan Hand Ltd offices. The reason advanced by Mr Dunn for his decision

to work from his home was that he perceived the real power in Nugan Hand

Ltd was retained by Messrs Nugan and Hand. He felt it was inappropriate

to be styled Managing Director when he was 'nothing more than a glorified 7 office boy at that time'.

2.18.4 Mr Dunn was appointed a director of the Nugan Hand Bank [2.106]

on 21 July 1976, and a director of Nugan Hand (Hong Kong) Ltd [2.94] on

9 August 1976.® In approximately August 1976, at the request of

Messrs Nugan and Hand, Mr Dunn went to South East Asia for the purpose of

- 143 -

seeking deposits on behalf of the Sydney and Hong Kong offices of Nugan 9 Hand. He was based in Hong Kong but travelled throughout South East

Asia. He told the Commission that he was not successful. About February

1977, Mr C.L. Collings [2.15] moved to Thailand and Mr Dunn temporarily

replaced him as Manager of the Hong Kong office. His main job in Hong

Kong was to attract deposits to the Nugan Hand Bank and Nugan Hand (Hong

Kong) Ltd from local financial institutions, deposit-taking companies and

banks. He also attempted, without success, to negotiate trading

transactions on behalf of Nugan Hand.·*"*"1 On 8 March 1977 Mr Dunn was

appointed a director of Swiss Pacific Trade Ltd. (This company

changed its name to Dartman Ltd on 19 August 1977.)

2.18.5 Mr Dunn submitted his resignation to Mr Hand in September 1977.

He told the Commission that he resigned because he felt he should have

been a partner, and that his negotiations with Messrs Nugan and Hand to

that end 'kept falling down'. He said that both Messrs Nugan and Hand 12

encouraged him on different occasions to become a partner. Documents

in the possession of the Commission indicate that Mr Dunn resigned his

directorships of Nugan Hand Ltd, the Nugan Hand Bank and Nugan Hand (Hong

Kong) Ltd on 6 September 1977, and his directorship of Dartman Ltd on

6 October 1977.^

2.18.6 Mr Dunn told the Commission that during the period of his

directorships of the above companies he had little or no understanding of

his responsibilities and statutory duties as a member of the board of

directors. He said that he took no steps to satisfy himself as to the

correctness of the annual accounts published by Nugan Hand Ltd for the

period ending 31 January 1977. Mr Dunn said that during the period when

he was Managing Director he had no access to Mr Nugan's records as

Mr Nugan said he believed he retained some protection under the law as

long as he denied others access to the files. Mr Dunn also said that he

took no steps in his capacity as director of Nugan Hand (Hong Kong) Ltd

to assure himself that the books of that company were properly kept or

that its accounts were accurate. In relation to his role as a director

of the Nugan Hand Bank, he told the Commission he believed that he was

asked to lend his name as a director because he was a relatively

- 144 -

presentable person who 'presented something of a clean cut image for the

Bank', and that he had no other function as a director.14

2.18.7 The commission and salary arrangements applicable to Mr Dunn

during his employment with Nugan Hand Ltd were extremely generous. He

earnt approximate]y $50 000 during the period September 1975 to July

1976, and approximately $60 000 during the period August 1976 to February

1977. In addition he incurred 'expenses' of approximately $40 000 in the

latter period. The arrangement with Mr Nugan was 'a very loose

arrangement'.1" During his term as manager of the Hong Kong office,

Mr Dunn received monthly remuneration of US$2 000, his own commission and

an over-riding commission in respect of the deposits collected by

representatives under his direction. The commission rate applicable to

him was as follows:

10% on 7 year deposit

9% on 5 year deposit

8% on 4 year deposit

7% on 3 year deposit

5% on 2 year deposit

3% on 1 year deposit

2% on 6 months deposit

1% on 3 months deposit1®

Mr Dunn received US$77 164 in commission during the period March -

September 1977.17

2.18.8 Mr Dunn subsequently joined Ward Pierce International in March

1978 and on 6 July 1978 became a director of Ward Knight & Dunn Ltd. He

resigned from this position on 24 September 1979 and was a self-employed

sales consultant when he gave evidence to the Commission.1®

- 145 -

Endnotes

1 CT22444, CT24025-26, Dunn; CD10321 folios 20-21, Dunn's

2 3 4 5 6 7

8

Curriculum Vitae written by Nugan to the Governor of Grand Cayman; CD10969, Letter Fund of Australia Ltd/Commission 24/9/84 CT22444-45, Dunn CD2303 folio 14, Dunn/CAC application for licence CT22455, Dunn CT22447-52, Dunn CT22455, Dunn CT22455, CT22458, CT24457, Dunn

CD8857 folio 70, 'Alphabetical list of events re NH Inquiry' stating Dunn's appointments as Director 9 CD4821 folio 114, Memo Nugan and Hand/All staff re Dunn's

appointment 30/7/76 10 11 12

13

CT22458-64, Dunn CD10007 folio 3, Dartman Ltd company information CT22462, Dunn; CD6380 folio 1

CD6112 folio 3, Letter Dunn/Hand re Dunn's resignation from NHHK directorship 6/9/77; CD7009 folio 3, Letter Dunn/Hand re Dunn's resignation of directorship from NHG 6/9/77 ; CD10007 folio 3 14 15

16

CT24026-29, CT24034-35, Dunn CD3015 folio 18-19, Dunn evidence to CAC 12/3/82 CD6523 folios 4-8, Handwritten memo from Dunn re his overseas appointment 14/2/77; folio 13, Summary of points agreed between Hand and Dunn circa 21/2/77 17 18

CD6112 folio 8 CT24025, Dunn

2.19 EBERT, Manfred

2.19.1 Mr Manfred Ebert neither gave evidence before the Commission nor

was he the subject of other witnesses' evidence. Thus, the information

herein relies solely upon documents produced to the Commission in the

course of its inquiry.

2.19.2 Mr Ebert was born on 27 May 1929 in Hainichen, Saxony, West

Germany. He was employed by the DGL-Bank, West Germany in 1956 and was

Head of the General Administration and Finance Department between 1966

and 1978. He was a member of the board of directors between 1963 and

1967.1

2.19.3 Mr Ebert joined F.A. Neubauer Bank, Hamburg [2.109] on 1 June

1978 as Head of the Finance and Bookkeeping Department.2 His salary

- 146 -

was DM5905 per month, which included health, unemployment and pension

insurance.^

2.19.4 A Manual of Reporting, Operations and Procedures for

F.A. Neubauer Bank, prepared by Miss E.L. Thomson [2.72] on 31 October

1978, includes an organisation chart showing Mr Ebert as Director of

Accounting and Office Manager, responsible to Miss Thomson in Hong Kong 4

and Mr A.P. Hewitt [2.31], (NHI Group Representative) in Hamburg. The

manual also detailed Mr Ebert's essential daily routines and described

his position as being in charge of financial and statistical matters and

reporting in respect of those matters. In addition, he was in charge of 5

the F.A. Neubauer office in the absence of Mr Hewitt. A memo from

Mr Hewitt to Mr J.M. Gilder [2.25] indicates that Mr Ebert was a

signatory to the Nugan Hand International Holdings Ltd [2.96] account

with the Deutsche Bank, Hamburg.®

Endnotes 1 2 3 4 5 6

1 CD10241 folio 12, Ebert's curriculum vitae 2 CD10241 folio 12

3 CD1587 folio 67, Schedule of FAN employees and their salaries 4 CD5852 folio 4, NHIH procedures manual for F.A. Neubauer Bank, communication and reports chart 5 CD5852 folios 6-7, Description of Ebert's position 6 CD8475 folio 48, Memo Hewitt/Gilder re NHIH signatures 26/10/78

2.20 EDELSTEN, Graham Arthur Leighton

2.20.1 Mr Graham Arthur Leighton Edelsten was born in Canada on 22 June

1943. He studied Arts and three years of Law at Sydney University. He

deferred his final law year to work in the kangaroo fur manufacturing

business he had built up. Between 1969 and 1979 Mr Edelsten lived

overseas, first in Nigeria and from 1976 in London. He initially went to

West Africa as a salesman for Fund of Australia [2.110] where his job was

to sell shares in 'Australian property unit trust' to expatriates. In

1973 he formed a number of companies in various parts of the world

including Africa, United Kingdom, Italy and Switzerland. Those companies

- 147 -

were involved in the transportation and distribution of consumer goods.

Mr Edelsten formed property development companies in Noosa, Queensland

during the 1970's and while he was overseas these were conducted by a

partner."*

2.20.2 While living in London Mr Edelsten spoke with Mr J.M. Gilder

[2.25] regarding the possibility of working for the Nugan Hand Group.

Both men had previously worked together in the Fund of Australia group of

companies. Mr Edelsten commenced work with the Nugan Hand Group in June

1979 operating primarily in the United Kingdom and Europe. While in

England he was involved in the negotiations for the acquisition of London

Capital Securities Ltd [2.111] by the Nugan Hand Group.**

2.20.3 On Mr Edelsten's return to Australia, Mr Gilder arranged a

meeting between Mr Edelsten and Mr F.J. Nugan [2.1] at which Mr Edelsten

was offered the job of General Manager of Nugan Hand Ltd [2.97]. After

reading the balance sheet and obtaining a report on Nugan Hand Ltd from

Dun & Bradstreet, Mr Fdelsten accepted the position, commenced work in

September 1979^ and remained there until January 1980.4 Mr Edelsten

did not believe his position as General Manager was ever formalised as he

never received any signatory powers nor did he have access to bank 5 records. He informed the Commission he did not have a great deal to

do and was 1 really General Manager of nothing'.

2.20.4 While working for Nugan Hand Ltd, Mr Edelsten said part of his

work was to develop the money market business; this he did by obtaining

deposits from some large corporations.7 He enrolled at the Security

Institute to learn the money market business. Mr S.K. Hill [2.33] was to

assist him but was seldom available.® It appears from available

documentation that while Mr Edelsten was General Manager of Nugan Hand

Ltd he introduced the Nugan Hand Commodity Trading Syndicate, a

professionally managed commodity syndicate, and attempted to introduce

the Nugan Hand Real Estate Syndicate or Real Estate Portfolio Management

section both designed to manage portfolio investments in Australian real g estate. Another of Mr Edelsten's duties was the supervision of

certain executives, including Mr M. Healey [2.29], Mr R.M. Sheslow [2.66]

- 148 -

and Mr J.R. Rush [2.60] as well as the secretarial pool on the 4th floor

at 55 Macquarie Street, Sydney.10

2.20.5 After the death of Mr Nugan, Mr Edelsten attended a number of

meetings at the Nugan Hand Group offices and was appointed Managing

Director on 4 February 1980 following the resignation of Mr Gilder.11

[For a description of the weeks following Mr Nugan's death and

allegations concerning the removal and destruction of the Nugan Hand

Group records refer to Part 3 Sections 8 and 9.]

2.20.6 Mr Edelsten received a salary of approximately 62 000 per month

while he was General Manager of Nugan Hand Ltd. This was paid through

Nugan Hand (Dealers) Pty Ltd [2.93]. He also received two commission

payments for money market business he generated. This was an amount

between 63 000 and 65 000 and was paid into his account with

F.A. Neubauer Bank [2.109],12

2.20.7 Mr Edelsten wrote to the Board of Directors of Nugan Hand Ltd

(by then renamed Nuhan Ltd) in mid April 1980 and advised them he would

only remain as Managing Director of the company until he had located some

documents for the Corporate Affairs Commission and would then formally

tender his resignation.11 Mr Edelsten's taxation group certificate

shows he was employed until 23 April 1980.14 He currently lives and 15 works in Queensland.

Endnotes 1

1 CT18709-11, Edelsten? CD6400 folios 12-15, Edelsten's curriculum vitae 2 CD968 folio 223, Memo Gilder/all Staff introducing Edelsten 21/6/79; CD10262 folio 230, Telex Edelsten/Gilder re London

Capital Securities 3/7/79; CD11441 folio 3, Interview of Edelsten by Commission investigators 3 CT18704, CT18711-13, Edelsten 4 CT20464, Edelsten 5 CT20479, Edelsten

6 CT18704, CT20465, Edelsten 7 CT18708, Edelsten

8 CT18705, CT20465, Edelsten

- 149 -

9 CD167 folios 14-20, Memo Edelsten/Hand re ancillary Products of NHL 30/11/79 10 CT18704-06, CT20466, Edelsten 11 CT19974, CT20023, Moloney; CT20111-12, Pearce; CT21929, Hill 12 CT18706-08, CT18713, CT20469, Edelsten 13 CD1250 folio 2180, Letter Edelsten/Nuhan 17/4/80 14 CD10083, Edelsten, Taxation Returns 15 CT18703, Edelsten

2.21 EVANS, Neil

2.21.1 Mr Neil Evans was born on 1 November 1937 in Brisbane. He told

the Commission that his present occupation is that of a professional

punter. Mr Evans has no formal qualifications. He has held the position

of State Manager for an Australian publishing firm in Brisbane. In the

early 1970's, he commenced his own business as a broker for tax

schemes.

2.21.2 Mr Evans first met Mr F.J. Nugan [2.1] in 1973 and over the next

four years dealt with him on a number of occasions in relation to the tax 2

problems of various clients of Mr Evans. Mr Nugan introduced Mr Evans

to Mr M.J. Hand [2.2] in mid 1974. Mr Hand subsequently informed

Mr Evans that he and Mr Nugan intended to establish a bank called the

Swiss Pacific Bank and Trust Co. (which later changed its name to the

Nugan Hand Bank [2.106]) and recommended that he apply for a position in

an overseas office of the Bank. Mr Evans later submitted an application

for a position advertised in "The Australian' newspaper and was

interviewed by Mr J.M. Gilder [2.25] at the Sydney office of Nugan

Hand.6

2.21.3 In February 1977 Mr Evans was employed as a Nugan Hand sales

representative^ and travelled to Thailand to establish a Nugan Hand

office in Chiang Mai. Mr Evans initially conducted business from his

Chiang Mai apartment. He later acquired an office adjacent to that of

the United States Drug Enforcement Agency in Chiang Mai6 . He told the

Commission it was put to him by Mr Hand that he should seek out deposits

for the Nugan Hand Bank from people who were involved primarily in the

drug trafficking trade.^ Mr Evans said he was responsible to Mr Hand

and was instructed to liaise only with him.6

- 150 -

2.21.4 Mr Evans said that, at the suggestion of Mr Hand, he made his

initial approaches to several American tobacco companies in the

Chiang Mai area, with a view to arranging re-invoicing transactions

through Hong Kong on their behalf, and obtaining deposits for the 9 Bank. Mr Evans told the Commission he was successful in obtaining

deposits from about seven clients in Bangkok and three in Chiang Mai but

was unable to estimate the total amount of deposits collected by him10

[see paragraphs 6.62 to 6.75]. Mr Evans said he periodically received

telexes from Hong Kong informing him of the prevailing rates of interest

offered by the Bank. "*"* He told the Commission it was his practice to

advise Mr Hand and Mr R.A. Pulger-Frame [2.59] in Hong Kong each time a

deposit was about to be made. "*"^ He said Mr Pulger-Frame arranged the

physical transfer of the deposit from Bangkok to Hong Kong. In his

evidence to the Commission Mr Pulger-Frame has repudiated this

assertion."*"^

2.21.5 Mr Evans told the Commission he went to Singapore at Mr Hand's

request to meet representatives of the Moscow Narodny Bank, and discuss

with them an arrangement whereby the Bank would guarantee deposits

collected on behalf of Nugan Hand in Singapore. Nothing came of these

discussions. "*""

2.21.6 In July 1977, Mr Evans decided to leave Thailand and the employ

of Nugan Hand."*"® He told the Commission the reasons for this decision

were that he did not have a good relationship with Mr Collings [2.15], he

wished to be re-united with his family, and he felt he was in danger in 17 Thailand. Mr Evans obtained a doctor's certificate which falsely

stated he had hepatitis. He returned to Australia, advised Mr Gilder he

was ill, and telephoned Mr Hand to inform him he wished to quit the

Nugan Hand organisation. Mr Evans said he had no further contact with

the organisation."*"®

2.21.7 Mr Evans said in evidence to the Commission he obtained a work

visa for Thailand shortly before he departed Thailand in July 1977. For

the majority of the time that he was in Thailand, Mr Evans was working

illegally."*"9

- 151 -

2.21.8 Mr Evans' arrangement with Nugan Hand was that he was to receive

commission in respect of deposits collected and an amount to cover 20 expenses, but no salary. He told the Commission he received a total

of $60 000 in commission, the bulk of which was paid in cash to his

21

father in Australia. The balance of his commission was directed to 22

his bank accounts in Bangkok and Chiang Mai. He also received a

small amount from Mr Hand to cover expenses and this was banked to an 23 account with the Thai Military Bank.

2.21.9 Upon his return from Thailand, Mr Evans resumed his previous. 24

occupation as a broker for tax schemes. In early 1981 he appeared in

a televised program concerning Nugan Hand which was the subject of 25 defamation litigation.

Endnotes

1 CT18761-62, Evans

2 CT18761, Evans

3 CT18772-74, Evans

4 CT18778-79, Evans; CD1308 folio 3 JTF ROI Evans 6/1/81 5 Although Mr Evans told the Commission that he commenced

employment with Nugan Hand in February 1976, (CT18778) it appears from other evidence to the Commission, that the correct date is February 1977. Mr Evans told the JTF that his

commencement date was February 1977. (CD1308 folio 3) 6 CT18793, CT18819, Evans

7 CT18853, Evans

8 CT18786, Evans

9 CT18853, CT18861, Evans

10 CT18791-92, CT18883, Evans 11 CT18794, Evans

12 CT18824, Evans

13 CT18795-9, Evans

14 CT22695, Pulger-Frame 15 CT19063, Evans

16 CD1308 folio 25; Although Mr Evans told the Commission that he decided to leave Nugan Hand's employment in July 1976, (CT18832) it appears from other evidence to the Commission that the correct date is July 1977. Mr Evans told the JTF that his

employment terminated in July 1977. 17 CT18832, Evans

18 CT18833, CT18837, Evans 19 CT18909, Evans

20 CT18778-79, Evans

- 152 -

21 CT18888, Evans

22 CI18800-01, CT18814, CT18885, Evans 23 CT19062, Evans

24 CT18873-74, Evans

25 CT22401, CT22404, Evans

2.22 GALICEK, George Vaclav

2.22.1 Hr George Vaclav Galicek was born in Czechoslovakia on 19 May

1933. He is an accountant and economist. Before coming to Australia he

was employed in the International Trading Section of the Czechoslovakian

Ministry of Foreign Trade. He was in charge of overseas subsidiaries for

International Trade in Argentina from 1962 to 1965 and in Chile from 1966

to 1970. Mr Galicek arrived in Australia in 1972 and gained employment

with a meat exporting company. In 1975 he joined the Sydney office of a

South American company and later became a partner in that company.^

2.22.2 In December 1976, Mr Galicek answered an advertisement in a

Sydney newspaper. The advertisement was headed '$60,000 a year man' and

invited applications for positions as representatives for a 'small though

rapidly expanding Banking Group'. Mr Galicek replied to the Hong Kong 2

address listed and was contacted by Mr J.M. Gilder [2.25] in Sydney.

After being interviewed by Mr Gilder on two or three occasions, he

received a letter in March 1977 inviting him to join the Swiss Pacific

Bank and Trust Company (later known as the Nugan Hand Bank [2.106])

Shortly afterwards, Mr Galicek commenced that employment and for

approximately two months he attended seminars conducted by Mr Gilder on

the subject of banking. Mr Galicek was subject to Mr Gilder's

supervision throughout most of the period of his employment with the

Bank.^

2.22.3 Due to his previous experience in South America, Mr Galicek was

asked to visit Brazil, Argentina and Chile to determine whether the

opening of a Nugan Hand Group office in that region was a viable

proposition. Mr Galicek understood his initial role in South America was

to act as a broker in respect of trading transactions; he was to try to

locate companies and persons who had goods to sell and match them up with

- 153 -

buyers, and vice versa. He thereby aimed to earn commission for the Bank

and himself. He was instructed to send his trade enquiries to the Nugan

Hand Group offices in Sydney and Hong Kong. Mr Galicek also understood

he was to advise the persons that he contacted in the course of his trade 5

negotiations of the banking services offered by the Nugan Hand Bank.

2.22.4 Mr Galicek left Australia in September 1977 and travelled to

Brazil. After several weeks he decided that Brazil was not a suitable

place for the establishment of an office and travelled to Buenos Aires.

There he met Mr G.A. Courtney-Smith [2.17] who was also employed by the

Nugan Hand Group. Mr Galicek' s main activity in Argentina was to send

trade inquiries to the offices in Hong Kong and Sydney. He also

introduced Mr Courtney-Smith to many of his business contacts. ® At the

end of October 1977 Mr Galicek travelled to Chile where he contacted all

the people he knew and outlined the banking services of the Nugan Hand

organisation to them. He said he flooded the Sydney and Hong Kong

offices of the Group with trade inquiries and offers of exports, but no

trading transactions came to fruition by the end of 1977, nor had

Mr Galicek collected any deposits on behalf of the Nugan Hand Bank during

his first four months in South America.^

2.22.5 At the end of 1977 Mr Galicek returned to Australia to discuss

the South American situation with Messrs Nugan [2.1], Hand [2.2] and

Gilder.^ They were disappointed that no trading transactions had been

organised and were undecided whether to open an office in either

Argentina or Chile. Mr Gilder told Mr Galicek that if Mr Galicek could

come up with two small trade transactions, it would assist Messrs Nugan g

and Hand in deciding to open a South American office.

2.22.6 In February 1978 Mr Galicek returned to South America. He spent

most of 1978 in Chile. Again Mr Galicek forwarded many inquiries and

offers of exports to Mr J. McArthur [2.46] in Hong Kong and Mr Gilder in

Sydney*"® but was not successful in concluding any trade

transactions."*""*· Nor did he collect any deposits in South America

during 1978, although one Chilean sent a deposit direct to the Nugan Hand 12 Bank. Cn 24 October 1978 he registered the company name, Nugan Hand

- 154 -

13

(Chile) Inc. [Appendix B] but an office was never opened in Chile.

At the end of 1978 Mr Galicek returned to Australia.lz*

2.22.7 While employed in .South America, Mr Galicek received a monthly

retainer of US$1 500 from the Bank which also paid his air fares to and

from South America.15 By January 1979, Mr Galicek was overdrawn in

advances from the Bank to the extent of US$22 2 9 6 . 6 8 . This debt was 17

subsequently written off by Mr Nugan.

2.22.8 In 1979 Mr Galicek did not return to South America. He was

instructed to continue his South American trade negotiations from Sydney

by the use of telexes. He successfully organised some small trade

transactions and also collected deposits from some Australian residents.

Mr Galicek understood that these deposits were collected on behalf of the

Nugan Hand Bank.1 2 ^

2.22.9 In August/September 1979, Mr Galicek was sent to the Thailand

office to complete a transaction involving the export of rice from

Thailand to Chile.1® The transaction was completed in December 1979

and yielded a commission for the Group of US$39 000. Mr Galicek also 20

received commission in respect of the transaction. He returned to

Sydney in mid December 1979 but, at the request of Mr Hand, went back to

Thailand in January 1980, pending the arrival of a new Nugan Hand

representative.

2.22.10 Towards the end of torch or early April 1980, Mr Hand asked

Mr Galicek to return to Australia. He was informed that the company had

passed into provisional liquidation and that he should seek other 21 employment. Shortly afterwards he gained employment as an accountant 22 with a company in Sydney.

Endnotes

1 CT22004, Galicek; CD9846, Galicek statement to Commission 2 CT22016, Galicek; CD7142 folio 21, Galicek's reply to

advertisement

- 155 -

3 CD7142 folio 17, Offer of employment to Galicek 4 CT22005, CT22012, CT22016-17, Galicek 5 CT22027-29, Galicek 6 CT22006, Galicek; CD9846, Galicek statement to Commission

7 CD9846 folio 3

8 CT22006, Galicek; CD10554 folio B 9 CD9846, folio 3

10 CT22022, Galicek; CT22916, McArthur 11 CT22005-07, Galicek; CT22025, McArthur 12 CT22006, CT22022, Galicek; CD1934 folios 19-21, NHB list of

Australian clients 13 CD9846 folios 3-5; CD7664 folio 4, Corporate information for NH Chile 14 CT22006-07, Galicek 15 CT22023, Galicek; CD10544 16 CDS651 folio 6, NH Reps brokerage, expenses, statement of

balance owed to NHB 17 CT22031-32, Galicek 18 CT22007, CT22021, CT22033-35, Galicek; CD600 folio 82A, Minute Galicek/Gilder; CD1934 folios 3-5,

19 CT22007, CT220036, Galicek; CD8647 folio 52, Minute Galicek/Tan re outstanding expenses 20 CD8647

21 CT22008, Galicek

22 CT22003, Galicek

2.23 GEHRING, Robert Wallace

2.23.1 Mr Robert Wallace Gehring was born in Dayton, Ohio, United

States on 18 September 1946.^ He served in the United States Marines

from September 1964 to August 1968, spending the last three years in

Vietnam.2 Mr Gehring arrived in Australia in November 1968 on a

temporary entry permit and was not granted permanent resident status

until July 1975.^ Mr Gehring first met Mr M.B. Houghton [2.35] at the 4

Bourbon and Beefsteak bar and restaurant in 1968. He was later

employed by one of Mr Houghton's companies, Argus Investments Pty Ltd.

In November 1968 Mr Gehring commenced employment with the Bourbon and

Beefsteak bar and restaurant, initially as a trainee and later as a

manager.'’ Later, Mr Gehring became a wholesale butcher and the

proprietor of Gehring's Providers Pty Ltd, Pyrmont, Sydney.

2.23.2 Mr Gehring is a shareholder and director of numerous companies

controlled by Mr Houghton by way of a discretionary trust.7 While in

- 156 -

the employ of Mr Houghton, Mr Gehring met Mr M.J. Hand [2.1] and Mr M.J.

Moloney [2.48].®

2.23.3 In late 1979 Mr Gehring accompanied Mr Houghton on a trip from

London to the United States via Canada. Mr Gehring told the Corporate

Affairs Commission delegates that the purpose of his accompanying

Mr Houghton was to carry a suitcase containing a large amount of

9

money.· That allegation was put to Mr Houghton by this Commission.

Mr Houghton said he did take a large sum of cash and travellers cheques

between Singapore and London for the purchase of London Capital

Securities Ltd [2.111], These funds remained in London and were not

conveyed to the United States. Mr Houghton suggested that Mr Gehring

would not have been aware of this fact and probably presumed that the

suitcase still contained the funds.

2.23.4 In early March 1980, Mr Gehring with the assistance of his

employees, moved Nugan Hand Group documents from the AMP Centre to his

premises in Pyrmont where they were stored [see Part 3 Section 9].

Before his departure overseas Mr Hand stayed at

Mr Gehring's Pyrmont address.

Endnotes 1 2 3 4 5 6 7 8 9 1 0 1 1

1 CD1274 folio 121, JTF Dossier on Gehring 2 CD1559 folio 42, JTF Report on Gehring's immigration status 3 CD1559 folio 46

4 CD3608 folio 4, Gehring evidence to CAC 3/6/80 5 CT22599, Houghton; CD1559 folio 75 6 CT20197-98, Gehring 7 CT22521, CT22571, Houghton 6 CT20203, Gehring; CD3608 folio 11, Gehring evidence to CAC 3/6/80 7 CAC 7th Interim Report pp 554-56

8 CT22557-58, Houghton 9 CAC 7th Interim Report pp 554-56; CD5764 Gehring unsworn

interview with CAC 13/5/82 10 CT22557-58, Houghton 11 CD1274 folio 32, JTF ROI Gehring 3/6/81

- 157 -

2.24 GEORGE, Quentin Douglas

2.24.1 Mr Quentin Douglas George was born on 2 October 1953. He is a

solicitor now in private practice in Brisbane."*· Mr George first met

Mr F.J. Mugan [2.1] through a mutual friend and client in September

1976. From November 1976 to January 1977 and for the two subsequent

university Christmas vacations he was employed by Nugan Needham as a law

clerk. After completing his law degree in Perth, Mr George commenced 2

full time as a law clerk for Nugan Needham in January 1978. From June

to December 1978 he was absent from the practice without pay while

attending the College of Law in Sydney. Mr George was admitted as a

solicitor of the Supreme Court of New South Wales, with a restricted

practising certificate, on 21 December 1978. In February 1979 Mr George

was employed by the firm of solicitors, Nugan & Company as a

solicitor.® In November 1978 the legal practice known as Nugan Needham

had been dissolved and the firm had changed its name to Nugan &

4

Company. Mr George continued to be employed as a solicitor for this

firm until the death of Mr Nugan.5 In March/April 1980 Mr George

commenced employment with M.J. Moloney & Associates, solicitors, and

remained with that firm until 20 October 1980.6

2.24.2 While working for Mr Nugan's law firm, Mr George was concerned

with taxation planning for clients of Mr Nugan.® It was Mr George's

role to draft documents and research legal problems or

technicalities.® He incorporated a number of shelf companies for the

firm and became a director of a number of companies associated with

Nugan Hand Ltd including Distravite Pty Ltd [2.82], Distravite Australia

Wide Servicing Company Pty Ltd [2.81] and Mars Road Investments Pty Ltd

[2.88].® From time to time Mr George also undertook legal work for the

Nugan Hand group of companies. This consisted mainly of commercial

drafting, especially trust partnerships and joint venture arrangements

which were then submitted to senior counsel for approval before

. 10

implementation.

2.24.3 During the time he was employed by Mr Nugan's law firm,

Mr George received a salary of $2 500 a month. To gain a tax advantage,

- 158 -

he opened an account in Singapore in August 1979 and arranged for A$1 000

a month to be paid into that account from his salary. This situation

existed until February 1980 but Mr George claimed the account was never

used due to the collapse of the Nugan Hand o r g a n i s a t i o n . M r George

also received various payments from Nugan Hand Ltd [2.97] and on one 12

occasion from Nugan Hand International Holdings Pty Ltd [2.96].

2.24.4 Mr George told the Commission he believed that he was the last 13

of the Nugan Hand employees to see Mr Nugan alive. On Saturday

26 January 1980 Mr George attended a meeting at the offices in

55 Macquarie Street to discuss taxation matters. After the meeting

Mr George remained and 'spoke to Frank Nugan about borrowing his Mercedes

motor vehicle for a wedding that I was attending that evening. The

previous afternoon he agreed, however on Saturday he told me that he

needed the vehicle for the weekend. I then left the office which was the

last time I saw him'

2.24.5 Mr George was a director of Mars Road Investments Pty Ltd from

its incorporation in 1978. He agreed that following the death of

Mr Nugan, he attempted to get the books of Mars Road Investments Pty Ltd

into order as he had not previously taken any steps to see that proper

books were kept in relation to the affairs of that company.16 During

January and February 1980 Mr George, Mr M.J. Moloney [2.48] and an

accountant, Mr J. Smiles, attempted to sort out the accounting records of

Mars Road Investments Pty Ltd.16 Acting on the advice of a barrister,

Mr George engaged the accounting firm of B.W. Atkinson and Associates, to

attempt to write up a set of books. When it was established that

satisfactory records of account could not be prepared, Mr George caused

the company to be placed into liquidation on 6 May 1980.^

Endnotes

1 CT23986, George

2 CT18661, George

3 CT18661, CT20820, George; CD5498 folio 17, JTF running sheets

and interviews extracts (copies)

- 159 -

4 CD6436 folio 105, Letter Nugan/Law Society of NSW 1/12/78;

folio 110, Minutes meeting 25/11/78 5 CT20820, George; CD3627 folio 58, George evidence to CAC March 1980 to September 1981 6 CT20820, George; CD3627 folio 32 7 CF18662, George

8 CT18666-68, George

9 CT18661-62, CD5498 folio 18 10 CD5498 folio 18

11 CT20831, George; CD4556 folio 2, Listing of deposit and interest from 15/8/79 to 15/2/80 for George 12 CD10766 folio R, Observations that George received moneys from NHL and NHIH, folio S, List of money paid to George from NHL and

NHIH

13 CT22371, George

14 CT20821, George

15 CT20836, George

16 CD20823, George

17 CD3627 folio 65

2.25 GILDER, Jeremy Mackenzie

2.25.1 Mr Jeremy Mackenzie Gilder was born in Mudgee, New South Wales

on 2 June 1936.·*· When he gave evidence to the Commission he was a

2

grazier residing at Dalgety, New South Wales. There can be no doubt

Mr Gilder played a leading role in the expansion of the tiugan Hand Group,

particularly in South East Asia. He was a highly paid senior executive

who, in matters relating to personnel management and marketing ranked in

importance next after Messrs Nugan and Hand. The evidence suggests he

was not involved in either the formulation of policy, financial

, 3

management or the overall administration of the Group.

2.25.2 During the years 1958 to 1967 Mr Gilder was employed by Legal

and General Assurance Society Ltd as a supervisor/representative selling

life assurance policies.^ In 1968 or 1969 he founded and became a

director of Fund of Australia Services Ltd which managed the Fund of

Australia Unit Trust [see 2.110]. About 1971 Mr Gilder was appointed to

the board of Property Bonds Australia Ltd. That company's object was to

raise money from the Australian public for investment in property

developments. Mr Gilder's role with the Fund of Australia Group was

similar to his later role with the Nugan Hand Group in that his primary

functions related to marketing and personnel, including the recruitment

of sales staff whose function it was to induce the public to deposit

- 160 -

moneys as an investment. When he began with the Nugan Hand Group he put

in train much the same operation as that at the Fund of Australia Group.

With the Nugan Hand Group, as with the Fund of Australia Group Mr Gilder

was paid a salary in addition to an 'over-riding commission', that is to

say a commission calculated as a percentage of the commission earned by

the salesmen under his control."’

2.25.3 Mr Gilder told the Commission that in about 1974 Property Bonds

of Australia Ltd suspended redemptions due to the failure of the

Australian property market and the company finally collapsed in 1978 or

1979. About 1976 Mr Gilder resigned as a director of Fund of Australia

Services Ltd and other companies in the group, primarily because he

disagreed with the policy then being pursued by management.® Also

employed by the Fund of Australia Group were Mr P.M. Dunn [2.18], Mr F.D.

Ward [2.73], Mr C.L. Collings [2.15], Mr G.A. Edelsten [2.20] and Mr Neil

Harris. With the exception of Mr Edelsten each left the Fund of

Australia Group to join the Nugan Hand Group prior to Mr Gilder.

Mr Edelsten joined after Mr Gilder.^

2.25.4 Mr Gilder was first attracted to the Nugan Hand Group when he

received an invitation from Mr Collings to meet Messrs F.J. Nugan [2.1]

and M.J. Hand [2.2]. There followed a series of meetings culminating in

J.M.S. White Pty Ltd, a company of which Mr Gilder was a director,

entering into an employment contract with Nugan Hand Ltd [2.97].® The

agreement, dated 19 November 1976, provided for payment of 62 500 per g month to J.M.S. White Pty Ltd. This amount was paid into the

company's account at the Pitt and Hunter Streets branch of the ANZ Bank,

Sydney. ^ About the same time Mr Gilder entered into a contract of

employment on his own behalf with the Nugan Hand Bank and Trust Company

[2.106], under which he was to receive [JS62 466 per month in addition to

25 per cent of all commissions paid to representatives recruited by him

and working overseas.^ Such moneys were paid into Mr Gilder's account 12

at the Singapore branch of the Banque Nationale de Paris. From a

document in the possession of the Commission Mr Gilder identified as

correct the sum of US647 239 as the amount of consultancy fees paid to 13

his Singapore account between June 1978 and December 1979. He also

- 161 -

identified as 'generally accurate1 the sum of US$94 173 as the amount

paid to him by way of commissions during the same period. In addition an

over-riding commission of US$15 625 was paid to Mr Gilder in respect of a

trade transaction conducted by Mr J.D. O e n [2.53] in October 1978.14

About January 1980 Mr Gilder sought, through the facilities of the Nugan

Hand Group, to repatriate the funds held in the Singapore account to

Australia.

2.25.5 Documents in the possession of the Commission refer to Mr Gilder

as a director of Nugan Hand Ltd, Nugan Hand International Holdings Ltd (a

Hong Kong company), and the Nugan Hand Bank and Trust Company.45

Indeed Mr Gilder informed the Commission he wanted the 'prestige, status

and kudos' of a directorship in relation to his activities including

those abroad.4® Although appointed as a director of Nugan Hand Ltd in

September 1977, Mr Gilder could not recall signing any statutory

documents in respect of this appointment but did recall that the

appointment was conditional upon him signing an undated form of

resignation as director of Nugan Hand Ltd.42 He resigned as a director

of Nugan Hand Ltd on 4 February 1980. Mr Gilder informed the delegates

of the Corporate Affairs Commission that he was a director of the Nugan

Hand Bank from July 1979 to 4 February 1980 and Nugan Hand International

Holdings Ltd from 1978 to 4 February 1980. On 4 February 1980 Mr Gilder

also resigned from 'all offices and positions' in Nugan Hand Singapore

(Pte) Ltd [Appendix B] and Nugan Hand (Malaysia) Sdn. Bhd.

[Appendix B].4® Mr Gilder expressed some doubts to the Commission as

to whether or not he held these directorships and contended he was a

director in name only. However, he agreed that he had no such doubts in

respect of Nugan Hand Ltd, the Nugan Hand Bank and Nugan Hand

International Holdings Ltd up to and including his resignation on

4 February 1980.4^ To his knowledge he was described as such in

literature as early as 1977. Mr Gilder told the Conmission that from

time to time he handed out business cards which identified him as a

director of 'Nugan Hand International' and in so doing was intending to

represent that he was a director of either Nugan Hand International or

Nugan Hand Ltd.214 He also signed numerous pieces of correspondence

between 1977 and 1979 as a director.21 In support of his contention

- 162 -

that he was a director in name only, Mr Gilder pointed to the fact that

he did not act as a director in the sense of being a member of the

board. He claimed he was a 'director' in the loose commercial sense of

being the coordinator of marketing and personnel.22

2.25.6 Before Mr Gilder joined Nugan Hand Ltd he was informed by Messrs

Nugan and Hand that the company was a merchant bank receiving deposits

from the Australian public, offering attractive returns in respect of

those deposits and, in the case of institutional deposits, providing

security.23 At the time the Group's only overseas office was in Kong

Kong and Mr Gilder understood his principal role to be the recruitment of

representatives with a view to the international expansion of

24

operations. He described his role as a 'personnel function' and said

he thought such matters took up about 80 per cent of his time.23

Representatives were often recruited from press advertisements on the

basis of their potential to solicit deposits, this being the criterion

considered most important by Messrs Nugan and Hand.26 In this capacity

Mr Gilder recruited Mr A.P. Hewitt [2.31] who subsequently worked in West

Germany, Mr G.V. Galicek [2.22] (Chile), Mr G.A. Courtney-Smith [2.17]

(Argentina), Mr G.R. Steer [2.68] (Singapore), Mr E.C. Louey [2.40]

(Malaysia), Mr J.D. Owen [2.53] (Thailand), Mr B.K. Morisset [2.49]

(Singapore), Mr Warren Tapp (Singapore), Mr N. Evans [2.21] (Chiang Mai)

and Mr L.R. Stiles [2.69] (Korea). He also recruited Mr R.M. Sheslow

[2.66] who managed the Trade Services division of the Sydney office,

Mr Don Paegle the representative in Hamburg and Mr James Auyeung, the 27 representative in Kuala Lumpur. Mr Gilder claimed he played no part

in the appointment of 'senior American Service personnel'. When he asked

Messrs Nugan or Hand the reason for their engagement he was told that

they were '... gentlemen of status who would greatly assist in the group,

improving its reputation, building its reputation'. Mr Gilder stated the

foregoing comment was more attributable to Mr Hand than Mr Nugan.2®

2.25.7 In an effort to provide a broader support base for his overseas

representatives Mr Gilder was involved in the production of a newsletter

on economic matters (with the assistance of Mr M. Healey [2.29]) and

re-established Nugan Hand Trade Services Pty Ltd [2.98], a previously

- 163 -

existing company, by the appointment of Mr Sheslow. One of that

company's functions was to assist the overseas representatives with their

inquiries about trade matters. Mr Gilder also assisted Mr Nugan with the

drafting of the Nugan Hand International Group Manual.30 He also

organised and coordinated overseas conferences for the benefit of

overseas representatives [3.5.43-3.5.46, 3.6.12-3.6.15].33 Indeed at a

conference held in Bangkok in January 1978 Mr Gilder delivered an address

titled 'The Year Behind The Year Ahead'. In that address he spoke of the 32

growth of the Nugan Hand Group in the following terms:

29

'First there was the creation of the concept in 1976 by

Frank Nugan and Mike __

Then there was action. First the action of applying for a

Banking licence in Cayman. Then the action of putting up a

sizeable chunk of money to support the Licence application. Then the action of allocating a further substantial sum for the development of the Bank internationally ...

Then a series of highlights. Development of a marketing

strategy for the Bank. Our first booklet, our first brochures, our first manual, our first advertisement - "Are you a 60 000 a year man?" Our first appointment, Karl. Four hundred

applicants and one hundred and twenty five interviews, then our first Seminar. The moving departure of a number of you men from Australia. Our first deposit (Graham). Approval for our first Representative Office in Germany. Approval for our office in

Thailand. Placement of our first funds, our first big trade fee, our first consultancy fee. The emergence of a spirit

between us all and now our first full Conference together.'

33

Mr Gilder concluded:

'It is quite remarkable that in our first year we have achieved what we have. To enter the Banking world on an international scale equipped as we were with little more than a silver booklet and a wheelbarrow full of determination, yet to have captured a

number of clients in different countries and to achieve

substantial deposits, healthy trade profits and consulting fees, is impressive ... '

2.25.8 Mr Gilder was involved in the marketing of the Nugan Hand Group

and its services. He played an important part in the layout and design

of many of the advertising brochures. He corrected the drafts v/ritten by

Mr Nugan which Mr Gilder said were usually verbose and contained

- 164 -

grammatical errors. Upon Mr Nugan's final approval Mr Gilder ensured the

printing was of a satisfactory standard and that the brochures were . . 34

distributed overseas. Mr Gilder said although he was not the author

of the brochures some of his ideas may have been included but only with

the approval of Messrs Nugan or Hand.35 He had no input into any of

the brochures produced overseas.35

2.25.9 On 20 October 1976 Mr Gilder wrote a letter to Mr Dunn in which

he described himself as having been engaged in coordinating and

37

establishing the early operations of the Cayman Islands bank. To his

knowledge he was advertised as the ran who put the Nugan Hand Bank 'on

the rap'.38 Mr S.K. Hill [2.33], in evidence, described Mr Gilder as 39

the main person involved in the Nugan Hand Bank and this evidence was

corroborated by that of Mr Ceilings who said:^8

'... the first brochure was a beautiful silver-looking brochure - a very impressive thing which Gilder arranged. Bank

application cards, application forms. Gilder was churning out all this printed material for promoting the bank ...'

and later

'... so the bank started to promote itself with Jerry Gilder being the rain person. Gilder was the rain person to promote the Bank - that's absolutely the way it was.'

2.25.10 This allegation was denied by Mr Gilder who said his main 42

concern was the appointment of people to represent the Bank. He did

however, assist Messrs Nugan and Hand and had discussed with them how the 43 44

Bank might operate. Of the Cayman Islands bank Mr Gilder said:

'... the project was languishing when I joined the company. I think Hand had applied for a licence and the pair of them had a brochure half-written and a few thoughts as to places to operate and the like prepared, but there were follow through things to do - in particular, to make sure that there was some brochure to hand out to prospective depositors ...'

2.25.11 Mr Gilder said the early deposit taking efforts of a number of

the overseas representatives he recruited certainly helped to put the

- 165

Nugan Hand Bank 'on the map'. He said this result was the inevitable

consequence of his successful carrying out of his specific duties.45

2.25.12 In 1977, on behalf of the Nugan Hand Group, Mr Gilder travelled

to London where he established a representative office involving the

incorporation of a company called Nugan Hand (u.K.) Ltd [Appendix B].

From the United Kingdom he went to West Germany and assisted in

negotiations for the purchase of F.A. Neubauer Bank [2.109],45

2.25.13 As part of Mr Gilder's marketing and personnel functions he was

assigned the task by Messrs Nugan and Hand of organising and coordinating

overseas conferences for the benefit of overseas representatives. In a

'Nugan Hand Newsletter' there appears a photograph of Mr Gilder and

others taken at the January 1978 conference in Bangkok.4^ The caption

describes them as 'Chief Executives of Nugan Hand International'. The

same newsletter subsequently describes Mr Gilder as the 'Banking and

financial administrator, systems and controls expert'. Mr Gilder said

this newsletter was probably produced by Burson-Marsteller (an

advertising agency in Hong Kong) thereby implying he had no knowledge of

the content of the document at the time of publication and did not

48

approve its content.

2.25.14 [For a description of Mr Gilder's involvement in the aftermath

of Mr Nugan's death and his role in the destruction and removal of

documents from 55 Macquarie Street, Sydney, refer to Part 3 Sections 8

and 9].

Endnotes

1 CD1178 folio 100, Gilder's application for an Australian

passport 25/1/77 2 CT18656, Gilder

3 CD11378, Gilder submissions to Commission; CD8620 folio 29, Telex Nugan and Hand/Gilder, Copy of letter King of Tonga re a meeting in Sydney 4 CT23045, Gilder

5 CT20410-14, Gilder

6 CT20383-85, CT23047, CT23077-78, Gilder; CD11378; CD7153 folios 25-26, Gilder's resume

- 166 -

7 CT23048, Gilder

8 CT18699, Gilder

9 CT18699, CT20443, Gilder; CD9851 folio 723, Letter J.M.S. White Pty Ltd/Nugan 16/11/76 10 CT20414, Gilder

11 CD9851 folio 726, Letter Gilder/Nugan and Hand 19/11/76 12 CT20414-15, CT23063-64, Gilder 13 CT20415, Gilder; CD5303 folio 13, Memo Tan Choon Seng/Hand re Gilder 11/2/80

14 CT23054, Gilder; CAC 7th Interim Report p 395 15 CT20402, Gilder; CD4803, Letter of resignation Gilder/Hand 4/2/80; CD8460 folios 7, 9, Nugan Hand International Group Manual; CD9851 folios 713, Letter Department of Finance and

Development Grand Cayman/Bruce Campbell and Co. 9/7/79, folio 714, Minute of NHIH 29/6/78 16 CT23088, Gilder

17 CT20402, Gilder

18 CD4803

19 CT20399, CT23048, Gilder; CD11378 20 CT20410, Gilder

21 CT20400, Gilder; CD3320 folios 2-8, Letter Gilder/several London businesses 22 CD11378

23 CT23079-80, Gilder 24 CT23080, Gilder

25 CT20386a, CT20443, Gilder 26 CT20447, Gilder

27 CT20389, Gilder; CD3022 folio 75, Gilder evidence to CAC; CAC 7th Interim Report pp 387-88 28 CT22244-45, Gilder 29 CT20388, CT23088-89, Gilder 30 CT20431, Gilder; CD8460, Nugan Hand International Group Manual 31 CD11378

32 CD3719, Proceedings of Bangkok conference 1978 33 CD3719

34 CT20388, CT23089, Gilder 35 CT23090, Gilder; CD11378 36 CT23049, Gilder

37 CD65 folios 7-8, Letter Gilder/Dunn 20/10/76 38 CD917 folio 34, NHI printed newsletter, Vol. 1 No. 3 39 CT21822, Hill

40 CT22812, Collings 41 CT22818, Collings 42 CT22212a, Gilder

43 CT22213, Gilder; CD7358, NHB Cayman blueprint by J. Gilder 44 CT23093, Gilder

45 CD11378

46 CT20387, Gilder

47 CD3713 folio 4, NHI newsletter 48 CT23052, Gilder

- 167 -

2.26 GREGORY, Wilfred Patrick

2.26.1 Mr Wilfred Patrick Gregory did not give evidence before the

Commission. The information herein relies upon the evidence of other

witnesses and upon documents produced to the Commission in the course of

its inquiry.

2.26.2 Mr Gregory was born in England on 25 February 1924 and gained

his formal education at Francis Xavier College of Technology, Manchester,

England. Upon leaving college, he served a mechanical and electrical

apprenticeship followed by design work to engineer status with

Metropolitan Vickers and A.V. Roe. Mr Gregory also undertook advanced

management studies at project engineer level and was the personal

assistant to the Managing Director (Production) for Hawker Siddeley

aircraft between 1962 and 1966. He migrated to Australia in 1966 and

settled in Perth where he became involved in estate planning, business

management consultancy and investment counselling. Mr Gregory is an

Associate member of the Institute of Mechanical Engineers and an

Associate Fellow of the Australian Institute of Management.

2.26.3 In late 1977 while Mr Gregory was in Malaysia and still employed

by Karl F. Schuller and Associates Sdn. Bhd., Mr M.J. Band [2.2]

approached Mr Gregory and discussed the possibility of his joining the

Nugan Hand Group. ^ However, in a telex to Mr Hand on 6 December 1977,

Mr J.M. Gilder [2.25] stated 'my recommendation is that Wilf. not be paid

salary by Group or formally appointed as he has activities other than

Group's and granting him appointment status denigrates our image'.

Mr Gregory commenced employment with the Mugan Hand Bank on approximately

15 January 1978 and was to receive a salary of US$1 500 plus US$500 in . 4

expenses per month as well as commissions.

2.26.4 Mr Gregory initially worked from the Hong Kong office but

later moved to The Philippines. Admiral E.P. Yates [2.76] assisted

Mr Gregory in organising the opening of the office and in an interview

reported upon in the Manila Times on 10 May 1978, stated 'the proposed

head of the Manila office, Wilfred Gregory, has been in Manila for some

weeks surveying the situation'. ®

- 168 -

2.26.5 In August 1978, Mr Gregory obtained an option on office premises

in the Ramon Magsaysay Centre, Manila and the regional headquarters of 7

Nugan Hand International [Appendix B] was established at that location.

2.26.6 In January 1979, Mr Gregory attended the Nugan Hand

International conference in Sydney [3.5.45]. He presented a paper on The

Philippines and discussed the Nugan Hand Group's activities in that

country. Mr Gregory said that the Philippines office had cultivated

centres of influence including private business, banking and diplomatic

circles.® Mr Hand was not satisfied with Mr Gregory heading the

Philippines office. In his evidence to the Commission, Admiral Yates

said Mr Hand wanted him to head the Manila office but he declined and

suggested General L.J. Manor [2.45] as a possible alternative. General

Manor subsequently joined the Nugan Hand Group and worked in the

. . 9

Philippines office. Mr Gregory also attended the Nugan Hand

International conference held in Sydney in October 1979."*"®

2.26.7 While he was employed by the Nugan Hand Bank, Mr Gregory

researched and presented a paper called 'Tax Haven Facilities'. This

paper discussed the criteria for deciding on tax havens as well as

outlining those countries that offered low taxation, tax exemptions and

special incentive privileges."*""*"

2.26.8 The Nugan Hand Group operation in The Philippines ceased in mid

1980 following the collapse of Nugan Hand Ltd [2.97] and Nugan Hand (Hong

Kong) Ltd [2.94].

Endnotes

1 CD6933 folio 242, Biographical data - qualifications and

experience of Gregory 2 CD6933 folios 246-47, Memo Hand/Nugan 22/12/77, folio 250,

Letter Gregory/Hand 3/11/77 3 CD649 folio 175, Telex Gilder/Hand 6/12/77 4 CD1561 folios 59-60, Memo Tan Choon Seng/Hand and Steer 4/4/79; CD4432 folio 12, Questionnaire - includes details of Gregory's

salary etc.; CD6933 folios 243-44, Memo from Hand re Gregory's commission & bank and Memo Hand/Nugan 22/12/77; folios 246-47

/

- 169 -

5 CD7305, NHB - Gregory, W.

6 CT24253-54, Yates; CD6933 folios 226-27, Excerpt from Manila Times 10/5/78 ------

7 CD1561 folio 78, Telex Steer/Dugan, Hand, Gilder, Hill, Shaw & Collings 27/2/79; CD6933 folio 59, Note made by Gregory 8 CD8449 folio 26, Transcript of Tape - Sydney Conference 3/1/79 9 CT24256, Yates

10 CD1429 folio 364, Transcript of Tape - Sydney conference 13/10/79 11 CD1561 folios 55-57, Paper by Gregory entitled 'Tax Haven

Facilities'

2.27 HANS, Wilhelmus

2.27.1 Mr IJilhelmus Hans was born in Holland on 20 December 1927 and

presently resides in Queensland. He holds a ground and flight engineer's

licence as well as a pilot's licence endorsed for agricultural

flying. Before joining the Nugan Hand Group Mr Hans was employed by 2

Fund of Australia [2.110] and operated out of Indonesia.

2.27.2 Mr Hans in his interview with the Joint Task Force said he

answered an advertisement placed by Pacific Silver Pty Ltd (probably

Pacific Silver Commodities [2.104]) and that this company's objective was

to launch a silver bullion company called Ingold Growth Ltd (later Nugan

Hand International Holdings Ltd [Appendix B ]). He said that 'Ingold' was

Mr M.J. Hand's [2.2] idea and that Mr F.J. Nugan [2.1] assisted with the

legal and financial aspects. Due to the falling price of gold, the

company did not succeed. Mr Hans then began work attracting depositors

to Nugan Hand Ltd [2.97].^ Mr S.K. Hill [2.33] in evidence before the

Commission stated that Messrs F.D. Ward [2.73] and Hans were involved in

soliciting deposits from councils, clubs and semi-governmental type 4 institutions.

2.27.3 In his evidence to the Corporate Affairs Commission Mr Hans said 5

he was employed by the Group from August 1974 until December 1975 , yet

documentation indicates that Mr Hans was employed on 21 August 1976®

and that he received regular payments from Nugan Hand Ltd until at least

February 1976.7

- 170 -

2 . 2 1 Λ Documents obtained by the Commission suggest that while he was a

representative of Nugan Hand Ltd, Mr Hans received a commission of two

per cent on unsecured deposits and one half per cent on secured deposits

that he attracted. In addition, he was paid director's fees of $1 000

for a six month period as well as consultation fees.

2.27.5 Mr Hans was also associated with two other companies within the

Nugan Hand Group. Corporate Affairs Commission records show that Mr Hans

and his wife were directors of NHN Funding Pty Ltd from 25 June 1975

until 17 November 1976 and of F.N. Spenser Pty Ltd from 22 June 1975

until 25 November 1976.^

2.27.6 Mr Hans told the Joint Task Force, that at Mr Nugan's request,

he travelled to Rhodesia in 1975 to set up a conduit to transfer funds

out of that country. He said he also travelled to Angola, Mozambique and

South Africa and spent a total of approximately six weeks in Africa.

Mr Hans said no funds were removed from Rhodesia even though a company

was set up for that purpose. While in Africa, Mr Hans said he discussed

the current market in helicopters and guns with Mr Hand.10 Mr Ward in

evidence before the Commission, said that while Mr Hand was in South

Africa, Mr Hans was involved in gathering information from around the

world on munitions and weapons at Mr Hand's request.11 Mr K.J. Loy, of

the loy Arms Corporation Pty Ltd in Sydney, told the Joint Task Force in

an interview in July 1982, that initial inquiries from the Group

12

regarding the purchase of pistols came from Mr Hans. [The

Commission's examination of the Nugan Hand Group's alleged involvement in

arms dealing and associated matters may be found in Part 7 of this

report.]

Endnotes

1 CD768 folio 20, Hans resume; CD2242 folio 2, statement to

Commission 17/8/83 2 CD3025 folio 4, Hans evidence to CAC 3 CD1308 Part 72 folios 1-2, JTF ROI Hans 20/7/82 4 CT21459, Hill

5 CD3025 folio 38

- 171 -

6 CD6112 folio 53, Personnel file: commission details for W. Hans 21/8/76 7 CD3802 folio 44, NHL No. 1 Account - Cash Receipts/Payments

27/7/73-30/6/76 8 CD6112 folios 52-53

9 CD8730 folios 33, 37, NHN Funding Pty Ltd - Minutes; CD8707

folios 31, 45, F.N. Spenser Pty Ltd - Minutes 10 CD1308 Part 72 folio 8, JTF ROI Hans

11 CT23151, Ward

12 CD1308 Part 72 folio 7

2.28 HARLAND, Edward Patrick

2.28.1 Mr Edward Patrick Harland gave evidence to the Corporate Affairs

Commission on 17 June 1980. That is the only evidence of Mr Harland's

available to this Commission as he died on 8 August 1980. The

information contained herein has been compiled from the transcript of

that evidence and from other evidence and documents before the Commission.

2.28.2 Mr Harland, an accountant, was employed by Mr F.J. Nugan [2.1]

for specialist taxation advice. He had been employed by the Australian

Taxation Office for approximately twenty years and had worked in the

assessing, investigating and legal branches of that Office. In February

1973 he left the Australian Taxation Office and in early 1974 he met

Mr Nugan.^

2.28.3 According to Mr Q.D. George [2.24], Mr Harland had said that

while he was with the Australian Taxation Office Mr Nugan had been

regarded as one of the best tax lawyers in Sydney and that is why he went 2 and worked for him. However, Mr Harland told the Corporate Affairs

Commission that he did not think Mr Nugan was a brilliant corporate and

tax lawyer even though he advertised himself as such. He said Mr Nugan

did not keep up to date with developments in the income tax law and for

this reason Mr Harland believed he was retained by Mr Nugan as a

consultant.^

2.28.4 Mr Harland said that from January 1976 he worked as a taxation

consultant for Nugan Hand Ltd [2.97]. In July 1979 this arrangement

ceased and he became consultant to Nugan & Company, Solicitors. After

- 172 -

Mr Nugan's death Mr Harland was asked by the directors of Nugan Hand Ltd

to remain and advise the company and its directors on 'any matters that

might arise with specific relation to interpretation of income tax

laws'. He remained as a consultant until March 1980. while he was a

consultant to Nugan Hand Ltd Mr Harland received a retainer of $15 000

per annum and as a consultant to Nugan & Company he received $10 000 per 4 annum.

2.28.5 Mr Harland told the Corporate Affairs Commission that his duties

were 'to advise on interpretation of the Income Tax Act in relation to

the affairs of Nugan Hand Ltd and its clients, specific clients who may 5 have specific tax problems'. He said he had advised St George Leagues

Club and had also acted as a tax agent for the directors of that

Club. Mr Harland said he also had discussions with Mr G.R. Steer

[2.68] about advisory facilities which could be offered to clients of the 7 Nugan Hand Group in Singapore.

2.28.6 As a specialist consultant, Mr Harland gave a lecture at the

Nugan Hand International conference in Sydney in January 1979 [3.5.45].

He discussed tax evasion and tax minimisation, advocated taxation

planning and outlined tax avoidance schemes used by international

corporations.®

2.28.7 Evidence has been received by the Commission of various taxation

schemes offered by Nugan Hand Ltd [Part 9]. Mr A. Lee [2.37] said

Mr Harland handled most of the tax schemes and Mr S.K. Hill [2.33]

said Mr Harland dealt in tax advice matters. 0 Mr George gave evidence

to the Commission about a meeting which was attended by Messrs Harland,

Nugan, A. Lee, G.A. Edelsten [2.20], Miss E.L Thomson [2.72] and himself

on 26 January 1980 to discuss tax matters. Mr George said the tax

schemes concerning Distravite Pty Ltd [2.82] and the Orange Spot Group

[2.115] had been disallowed by the Commissioner of Taxation. He believed

that Mr Harland was going to draft objections but he did not know what

ultimately happened."*''*'

2.28.8 Mr Harland told the Corporate Affairs Commission that to his

knowledge Nugan Hand Ltd 'was never involved in tax minimisation plans or

- 173 -

schemes of any type and consequently I was never asked to advise on tax 12

minimisation plans or schemes of that nature1.

Endnotes

1 CD45, Harland's speech at Nugan

January 1979

Hand International conference

2 CT22359-60, George

3 CD3029 folio 22, Harland evidence to CAC 17/6/1980 4 CD3029 folios 8-11

5 CD3029 folio 9

6 CD3029 folio 13

7 CD3029 folio 20

8 CD45

9 CT18616, A. Lee

10 CT15518, Hill

11 CT22367, George

12 CD3029 folio 9

2.29 HEALEY, Mark

2.29.1 Mr Mark Healey was born in Sydney on 19 October 1950. He is

currently employed as a personnel manager with an Australian company.

Mr Healey completed a Bachelor of Economics degree at Sydney University

in 1973 and was employed between 1973 and 1975 at the Ford Motor Car

Company under the Ford Graduate Training Program. Between 1975 and 1978

he was an Industrial Officer with a large Australian company.3

2.29.2 Mr Healey was visiting a friend Mr J.R. Rush [2.60], at the

Sydney office of Nugan Hand Ltd [2.97] when he met Mr F.J. Nugan [2.1].

Mr Healey mentioned he held an honours degree in economics and had been

employed by major companies in the personnel field. Mr Nugan suggested 2

Mr Healey become a personnel consultant with Nugan Hand Ltd.

Mr Healey accepted Mr Nugan’s offer and commenced employment with Nugan

Hand Ltd on 24 April 1978. He remained with that company until

5 February 1980 when his employment was terminated by Mr G.A. Edelsten

[ 2. 2 0 ] . 3

- 174 -

2.29.3 Hr Nugan informed Mr Healey his salary would be $17 000 per

annum. After one year this was increased to $24 000 following an

4

approach by Mr Healey to Mr Nugan. Mr Healey said he was later

offered the position of joint general manager of Nugan Hand Ltd by

Mr Nugan. Although Mr Healey rejected the offer, Mr Nugan increased his

salary to $36 000 per annum.

2.29.4 Mr Healey's work with Nugan Hand Ltd involved 'personnel

service', which he understood to mean provision of personnel

administration and advice on industrial matters for clients he

secured.® However, shortly after Mr Healey commenced with Nugan Hand

Ltd, a warrant was issued for the arrest of Mr Nugan. This caused

Mr Healey to believe he had made a mistake in joining Nugan Hand Ltd and

as a consequence he did not seek out clients for a few months. Responses

that Mr Healey subsequently did receive from prospective clients were

negative.^

2.29.5 Mr Edelsten gave evidence that Mr Healey was 'purportedly

working with Mr Nugan on the free trade zone which was to be set up in

The Philippines'. He identified Mr Healey as one of the executives on g

the 4th floor who in his view did not know what they were doing.

Mr Healey was questioned on whether the activities on the 4th floor were

legitimate to which he replied, '... it was not very successful, and

people wondered at times how we could stay employed ...'

2.29.6 According to Mr J.M. Gilder [2.25], Mr Healey 'gleaned

interesting economic material' for the production of a newsletter on

economic matters. " * " " * ■ Mr Healey assisted Mr Gilder in assembling the

Nugan Hand International Manual for use by representatives as well as

coordinating Nugan Hand Ltd's participation in the International Congress 12

on New Enterprise ('ICONE') in The Philippines [3.6.14]. This

conference considered possible joint ventures which Mr Healey tried to

organise in The Philippines such as a sewerage treatment plant. These

projects, however, did not come to fruition.^

- 175 -

Endnotes

1 CD6087 folio 2, Healey resume; CD9821 Healey statement and

taxation group certificates 1977 to 1980 2 CT19119, Healey

3 CT19111, CT20355, Healey 4 CT19120, CT19127, Healey 5 CT19127-28, Healey

6 CT19119-19a, Healey 7 CT19120-21, Healey

8 CT18705, Edelsten

9 CT20465, Edelsten

10 CT20373, Healey

11 CT20388, Gilder

12 CT19119-22, Healey; CD9821 13 CT19122, CT20355, Healey

2.30 HEUSCHKEL, Carl Louis

2.30.1 Mr Carl Louis Heuschkel is a qualified and registered accountant

and auditor. From 1964 to 1971 he was employed as a junior accountant

and then senior accountant by Charles J. Berg & Partners an accounting

firm in Sydney. It was while working for Charles J. Berg & Partners that

Mr Heuschkel met Mr W. Pollard [2.57] and Mr G.F. Brincat [2.9]. All

three did their professional training at Charles J. Berg & Partners.1

From 1971 to 1973 Mr Heuschkel was employed by Boyded Pty Ltd as

assistant company secretary, company secretary and then group

accountant.^

2.30.2 In May 1973 Mr Heuschkel and Mr Pollard commenced their own

accounting practice, Heuschkel & Pollard, and subsequently Mr Brincat

commenced work for the firm as an employee. Mr Br incat later became an

equal partner of the firm with Messrs Pollard and Heuschkel.3

2.30.3 In early 1974 Mr Heuschkel first met Mr F.J. Nugan [2.1]. This

came about because Mr Pollard was doing accountancy work for Mr M.J.

Hand's [2.2] companies. Mr Heuschkel was introduced first to Mr Hand and 4 later to Mr Nugan. Subsequently, Heuschkel & Pollard commenced

accounting work for the Nugan Han.d group of companies. Mr Heuschkel said

- 176 -

he would have been involved in the decision that Mr Brincat should

undertake the audit for Nugan Hand Ltd [2.97] for 30 June 1974. He said

the practice was expanding and Mr Brincat was brought into the firm to

help with the work load and this was just one of the areas that was

handed over to him. Initially the small companies of Mr Nugan were 5

handed over and later the public company (Nugan Hand Ltd) as well.

2.30.4 Mr Heuschkel stated he did not assist in the preparation of the

1974 audit and did not work with Mr Brincat in connection with the audit

of 'any of the Nugan Hand Group of companies'. He said he was not

involved in actual audit checks, the preparation of the audit program or

submission of the audit results. He said he may have signed the annual

accounts for Mr Nugan' s personal companies but did not sign the annual

accounts for any of the companies associated with the Nugan Hand

Group.6

2.30.5 Mr Heuschkel said he first became aware of the internal bills of

exchange problem [3.3.46] in approximately August/September 1977. He

said Mr Brincat told him there were bills drawn between Nugan Hand Ltd

and Yorkville Nominees Pty Ltd [2.108], (which Mr Heuschkel understood

from Mr Brincat was a company owned by Mr Nugan) and that from Yorkville

Nominees Pty Ltd there was a loan to Mr Nugan. As this was a director's

loan the accounts would have to be qualified in relation to it, or the

loan had to be secured or repaid. Mr Heuschkel stated that Mr Brincat

indicated that the problem had recently arisen following the last

balancing date, 31 January 1977.^

2.30.6 A meeting was held between Messrs Pollard, Brincat and Heuschkel

to discuss the internal bill problem. Following this meeting Messrs

Heuschkel and Pollard discussed the problem between themselves to the

exclusion of Mr Brincat and decided to seek legal advice without telling

Mr Brincat. Mr Heuschkel had at that time professional contact with an

accountant, Mr Phillip Finn who suggested Mr J.L. Aston as an appropriate

lawyer to use for advice on corporate matters.6 Cm 16 September 1977

Messrs Heuschkel and Pollard had a meeting with Mr Aston who told them he

acted for Mr Nugan. Mr Aston said, according to Mr Heuschkel, that since

- 177 -

there was a conflict of interest he would not advise them and recommended

they seek advice from Mr Michael Rosser's firm of solicitors, and

specifically from Miss Dianne Truss, to give them independent legal 9 advice. On 19 September 1977 Messrs Heuschkel and Pollard met

Miss Truss and discussed what they perceived to be their problems

regarding the inter-company loans and internal bills. A meeting was

later held between Messrs Nugan, Pollard, Heuschkel and Miss Truss.

After this meeting Mr Heuschkel stated he played no further role in the

audits of the Nugan Hand accounts. A second meeting was ultimately

held with Mr Aston attended by Messrs Nugan, Pollard and Brincat where it

was agreed that the advice of Mr Aston was to be followed. He advised

that a note should be included in the accounts referring to the use of

internal bills. Miss Truss was not consulted again.^

2.30.7 In May 1978 Mr Heuschkel resigned from the partnership, due, he

said, to family commitments. At the time he gave evidence he was

12

conducting his own accountancy practice.

Endnotes 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2

1 CT23555, Heuschkel

2 CT23550, Heuschkel

3 CT23550, Heuschkel

4 CT23556, Heuschkel

5 CT23557-58, Heuschkel 6 CT23550-51, Heuschkel 7 CT23560-62, Heuschkel 8 CT23551, CT23563-64, Heuschkel 9 CT23566, Heuschkel 10 CT23553, CT23573, Heuschkel 11 CT23286-88, Pollard; CT23493, Truss; CT23567-68, Heuschkel;

CT23868, CT23872, Brincat 12 CT23554, CT23576, CT23581, Heuschkel

2.31 HEWITT, Anthony Peter

2.31.1 Mr Anthony Peter Hewitt was born in Sydney on 8 October 1939.

From 1961 until 1967 and from 1972 until 1976, he was employed as a sales

representative and sales manager by several Sydney insurance companies,

- 178 -

and also established his own insurance brokerage firm. In 1976 he became

a marketing and sales consultant.1

2.31.2 Mr Hewitt joined Nugan Hand Ltd [2.97] in May 1978 after being

approached by Mr J.M. Gilder [2.25] with whom he had worked in the

insurance industry. He had no prior experience in merchant banking.

Mr Hewitt spent the first few months of his employment in Sydney trying,

unsuccessfully, to interest his contacts in the insurance business in 2 investment with Nugan Hand Ltd. After several months Mr Hewitt was

sent to West Germany to conduct a three month survey of the F.A. Neubauer

Bank [2.109] in Hamburg, which the Nugan Hand Group was at that time 3 negotiating to purchase. His task was to look at the Bank's

respectability, and its domestic and international potential, and to

report whether it was worthwhile to proceed with the purchase. On his

return to Australia Mr Hewitt reported it would be difficult to make the

F.A. Neubauer Bank a successful project as it required a substantial

injection of capital and results would only be achievable in the long . 4

term.

2.31.3 In October 1978 Mr Hewitt returned to West Germany to act as the

representative of the Nugan Hand Group in that country and to act as a

representative of the F.A. Neubauer Bank. His job was to enlist deposits

for Nugan Hand International Holdings Ltd, Hong Kong, from some of the

German banks and the non-German people in the area, particularly British 5 and Australians. He successfully attracted a number of depositors and

also attempted to attract prominent Germans to an advisory board for

F.A. Neubauer Bank.® Mr Hewitt told the Commission his role was

largely to establish a good relationship with Mr J. Bachmann [2.5], a 7

partner in F.A. Neubauer and owner of the banking licence.

2.31.4 For Mr Hewitt's services to the Nugan Hand Group, his consulting

company in Sydney, A.P. Hewitt Investment Services Pty Ltd, received

initially A$1 000 per month and later A$1 500 a month.8 Mr Hewitt

received the balance of his remuneration 'off-shore'; part was paid into

his account with the United Overseas Bank in Singapore and part was paid

into a West German Bank account. Mr Hewitt severed his connection with

\

- 179 -

F.A. Neubauer Bank and returned to Sydney, shortly after the death of

Mr F.J. Nugan [2.1].^ At the time he gave evidence to the Commission

he was employed in marketing by a large company"^ and had lodged a

proof of debt with the liquidator of Nugan Hand Ltd in respect of salary

owed to him.

Endnotes

1 CD10279 folios 18-20, Hewitt Resume; CD4428 folio 14 2 CT22122-25, Hewitt

3 CT22124-25, Hewitt

4 CT22128-29, Hewitt

5 CT20391, Gilder; CD8622 folio 27,

20/3/80

Memo HewittAan Choon Seng

6 CT22130-32, Hewitt

7 CT22129, Hewitt

8 CD76 folio 168, Letter Hewitt/Gilder 21/11/78 9 CT22132, CT22134, Hewitt 10 CT22121, Hewitt

11 CT22134-35, Hewitt

2.32 HILL, Graeme Hunter

2.32.1 Mr Graeme Hunter Hill is a chartered accountant and at the time

he gave evidence to the Commission was a partner in the accounting

practice of Hill Rogers & Associates, chartered accountants, Sydney.^

2.32.2 According to Mr Hill 'Nugan Hand' was first mentioned to Hill

Rogers & Associates by one of their clients who had deposited money with

Nugan Hand Ltd and was impressed by the high interest rates being paid by

the company. Subsequently Mr Hill's firm was approached by Mr E.P.

Harland [2.28] to do some accounting work for him. When Mr Harland

learnt that the firm was interested in investing with Nugan Hand Ltd he

undertook to keep them informed of the company's stability and credit

worthiness. Mr Harland later introduced Messrs G.T. Shaw [2.65] and

F.J. Nugan [2.1] to the partners of Hill Rogers & Associates.2

2.32.3 Mr Hill said Hill Rogers & Associates:

'made the usual enquiries from other banks etc. and received the company's audited balance sheet to satisfy ourselves that the

- 180 -

company was what it purported to be. These checks continued throughout our dealings with the company and at no time before Frank Nugan's death were we not satisfied by the information sought and given.'3

2.32.4 Certain of Mr Hill's clients deposited funds with the Nugan Hand

Group. According to Mr Fill, if a client asked him where he was

investing his own money, he would tell them the alternatives, 'including

Nugan Hand who circularised a monthly letter ... that set out their

rates'. Mr Shaw handled these investments. Mr Hill said:

'those clients received a better rate of interest on their money, personal service from George Shaw who would, on a phone call, deliver or collect withdrawals or deposits personally.'

Mr Hill said Mr Shaw offered an introductory commission of one half to

one per cent. On a few subsequent occasions Mr Shaw did tender seme

money, based on this arrangement, but according to Mr Hill, it was

considerably less than the costs incurred. Mr Hill said the commissions

were declared as taxable income by Hill Rogers & Associates. Mr Hill

also liaised with employees of the Nugan Hand Group on the basis of 4

mutually referring clients and cooperating in taxation matters.

2.32.5 Mr Hill deposited both his own funds and those of his family

company, Hunthill (Holdings) Pty Ltd, with Nugan Hand Ltd.^ Records

show Mr Hill deposited $4 500 with Nugan Hand Ltd in November 1977 which

was repaid soon after.® Hunthill (Holdings) Pty Ltd made a deposit of

$30 000 in August/September 1979 which earned interest of approximately

$1 100; a repayment of $25 000 was made on 22 January 1980.^

2.32.6 Records show that an International Certificate of Deposit for

HK$20 000 was issued to Mr Hill on 10 November 1978. HK$8 000 was

withdrawn in July 1979 and in October 1979 a request was made for the

balance to be repaid. A cheque to cash for HK$13 717.95 was issued on

14 November 1979.® Mr Hill told the Commission that he presumed that

this money belonged to one of his clients who for convenience had

deposited in Mr Hill's name. (An International Certificate of Deposit

was a piece of paper issued by the Nugan Hand Bank to a client as a

I

- 181 -

receipt for a deposit and an acknowledgement of the debt of the Nugan

Hand Bank to that client for the amount of the deposit plus interest. It

normally showed the amount of the deposit, the term and interest rate

applicable, the place the deposit was received and the name or number of

the client.)

2.32.7 Mr Hill told the Corporate Affairs Commission he had no problems

with investments lodged with the Nugan Hand Group until shortly after

Mr Nugan's death when cheques began to be dishonoured.111 In evidence

before the Corporate Affairs Commission Mr Hill said he personally lost

about $13 000 and his family company $5 000 on the collapse of Nugan Hand

Ltd.11

2.32.8 In September 1977 Mr Hill travelled to South East Asia,

apparently with 'financial support' from Nugan Hand Ltd. While there he

visited Jakarta, Singapore, Kuala Lumpur, Hong Kong and Manila. He

renewed friendships with business associates and was able to make both

direct and indirect introductions to the Nugan Hand "Group. Mr Hill told

the Commission that Mr Shaw paid his fares and accomodation for a number

of trips to Manila where Mr Hill introduced Mr Shaw to a number of

12

depositors who were personal friends.

2.32.9 Hill Rogers & Associates were also 'offered the opportunity to

consult with either Mr Frank Nugan or Ted Harland [2.28], a former

taxation officer, on any matters of a taxation nature'. Mr Hill said

'Mr Harland's knowledge was well known and Mr Nugan was introduced to us

by Ted Harland as a most innovative and imaginative tax planner'. In

October 1979 Mr Hill went to see Mr Nugan to discuss a taxation

minimisation scheme for one of Hill Rogers & Associates' clients. When

he arrived he found that Mr Nugan was conducting a seminar for the Nugan

Hand Group's solicitors. Mr Hill said he 'learned nothing' which could

not have been learned from the local newspapers and taxation

14

publications.

2.32.10 Mr Hill said in evidence before the Corporate Affairs Commission

that he was only involved in one tax scheme arranged by Mr Nugan. This

- 182 -

involved the deposit of an amount less than $30 000 with Mars Road

Investments Pty J j i 6 [2.88].*"^

Endnotes

1 CD3032 folio 2; G.H. Hill evidence to CAC; CD11385 folio 5, G.H. Hill statement to Commission 13/3/85 2 CD9580 folio 1, Interview of Hill by Commission investigators; CD11385 folio 5 3 CD11385 folio 5

4 CD11385 folios 6, 9; CD3032 folios 11-13; CD3654 folio 126, Shaw evidence to CAC 5 CD3032 folios 3-4

6 CD497, Hill - NH Aust. client deposit documents 1977 7 CD3234, Hunthill (Holdings) - deposit NHL 8 CD4564 folios 8, 12, 19, 28, NHB client file re Hill 9 CD11385 folio 7

10 CD9580 folio 1

11 CD3032 folio 5

12 CD6296 folios 39-42, Letter Hill/Nugan Hand Ltd 6/10/77; CD11385 folios 4,9 13 CD11385 folio 6

14 CD10950, Transcript of a meeting of Legal Division chaired by Mr Nugan; CD11385 folios 8-9 15 CD3032 folios 6-7, 16; CD5474, Mars Road Investments Pty Ltd - cheque butts

2.33 HILL, Stephen Kenneth Alexander

2.33.1 Mr Stephen Kenneth Alexander Hill was born in Ireland on

6 January 1946. He left Ireland in 1964 or 1965 for New Zealand where he

studied accountancy part time at Auckland University. Mr Hill worked for

several employers during this time. In 1970 he migrated to Australia."*·

2.33.2 O n e of the positions Mr Hill held after arriving in Australia

was that of accountant to a freight forwarding company formed by Mr C.L.

Collings [2.15] and associates, called Freight Distribution Industries,

although he held that position for only three months.

2.33.3 In 1972 Mr Hill was working as Operations Manager for

CitiNational Securities Corporation Ltd (as it then was) and its

- 183 -

associated company National Discount Corporation Ltd. It was in the

course of this employment that he met Mr Leigh Scott-Kemmis [2.64] and

subsequently developed a relationship with him that had important

consequences for the Nugan Hand Group [Part 4 Section 7], In this

position Mr Hill organised settlements and maintained account records.

Mr G.P. Young [2.78], the senior trader of CitiNational Securities

Corporation Ltd left that company in 1973 and subsequently gained

employment with Nugan Hand Needham Ltd [2.97] commencing in August 2 1973. He invited Mr Hill to assist him in an attempt to set up the

company's money market division.® According to Mr Young, he did the

trading on the money market, while Mr Hill did the 'leg and book work'

with particular responsibility for the day to day settlement of

transactions.^

2.33.4 After several weeks the money market operation which was always

very small, was scaled down and Mr Hill became involved in Mr F.J.

Nugan's [2.1] takeover of North Australian Rubber Mills Ltd ('NARM')

[2.113]. At the conclusion of this takeover, Mr Hill took a position

with NARM in Brisbane.6 The money market operations of Nugan Hand Ltd,

conducted by Mr Young ceased and Mr Young became General Manager of

NARM. Subsequently Mr Hill returned to Sydney where for a brief period

he performed liaison duties between NARM in Brisbane and its new parent

company Security Income Real Estate (Australia) Ltd. He then worked for

several months as an accounts clerk for a Sydney motor dealer.6

2.33.5 In April ]975, in response to an approach by Mr Nugan, Mr Hill

returned to Nugan Hand as Money Market Manager. He was to stay with

Nugan Hand Ltd until its liquidation in April 1980 and, in the process,

became the third most important executive of the company and, with

Mr Hand's [2.2] departure overseas in 1976, he became, in effect, second

in charge of the Group's operations in Sydney. He was in fact the

longest serving director of Nugan Hand Ltd after Messrs Nugan and Hand,

and subscribed his name to the directors' reports on behalf of the board,

in the years 1976 to 1979 inclusive.®

2.33.6 Mr Hill brought to the Nugan Hand Group, qualifications in

accountancy which enabled him, more so than any other person apart from

- 184 -

Mr G.F. Brincat [2.9], to understand the accounts and accounting

procedures used. He was, in addition, the only one in Nugan Hand Ltd,

after the departure of Mr Young, who had any expertise in trading in

securities on the money market. Mr Young departed at the end of 1973 and

it was not until Mr Hill's return in April 1975 that the arrangements

were entered into between Mr Hill and Mr Scott-Kemmis which are the

subject of comment in Part 4, Section 7.

2.33.7 The money market trading which Mr Hill recommenced on his

return, was of a very limited nature as is explained at 3.3.36. Mr Hill

was permitted to buy and sell securities solely for the purpose of

securing deposits. In order to attract prestigious depositors, such as

local government councils, Mr Nugan authorised him to offer one per cent

above the going rate notwithstanding that this resulted in a loss.

2.33.8

2.33.9

2.33.10 Mr Hill was also a director of Nugan Hand (Hong Kong) Ltd [2.94]

and the Nugan Hand Bank [2.106], Mr Collings, who considered Nugan Hand

(Hong Kong) Ltd to be 'his very special company' consulted Mr Hill during

the course of his negotiations with the Wing On Bank, which negotiations

resulted in that bank guaranteeing Hong Kong depositors in respect of

- 185 -14

their deposits with Nugan Hand Ltd. In November 1977, Mr Hill,

together with Mr Brincat, visited the Hong Kong office to establish an

internal accounting system for Nugan Hand (Hong Kong) Ltd.'*·'’ Further,

Mr Hill advised Nugan Hand (Hong Kong) Ltd and the auditors of that

company, that negotiable certificates of deposit were held by Nugan Hand

Ltd on behalf of Nugan Hand (Hong Kong) Ltd which he knew to have been 15

pledged by Nugan Hand Ltd to its own depositors. When the company

auditors visited Sydney to examine the negotiable certificates of deposit

Mr Hill arranged for the certificates to be temporarily uplifted from the

ANZ Bank, where they were held for Nugan Hand Ltd's own depositors, for

the purposes of the inspection. [Further details of these events are

provided in Part 4 Section 1.]

2.33.11 As far as the Nugan Hand Bank was concerned, Mr Hill was closely

involved with the production of a set of records and financial statements

for submission to the Bank's auditors in the Cayman Islands. In the

process, the accounts prepared by the Bank's accounting office in

Singapore were rewritten, principally by Mr Brincat in accordance with

instructions from Mr Nugan. In each of the years 1977, 1978 and 1979,

Mr Hill travelled to Singapore with Mr Brincat to check the accounting

records and to make arrangements for the records to be made available in

Sydney. After the records were rewritten, and a set of financial

statements prepared based upon the rewritten records. Mr Hill took them

to the Bank's auditors in the Cayman Islands."*"® In 1977 and 1978 the

accounts were passed by the auditors. In 1979, however, the auditors,

alerted by adverse publicity, sought an undertaking from Mr Hill that the

accounts reflected the true position of the Bank's finances. Mr Hill

declined to give the undertaking and consequently the auditors advised

the Banking Commissioner that the accounts could not be presented to the

Commissioner in accordance with the requirements of Cayman Islands law.

[This matter is considered in detail at paragraphs 4.2.117 to 4.2.177.]

2.33.12 According to Mr Hill, he proffered his resignation in 1978 in

order to further his legal studies and, though his resignation did not

take effect, he claimed to be less involved in the Group's 'day to day 19 activities' during 1979. It was Mr Brincat who, on learning of

- 186 -

Mr Hill's proposed resignation in early 1979, sought Mr Hill's assistance

in persuading Mr Nugan to cease using the device of the internal

. 20

bills. Discussions concerning this matter continued and culminated

in a conversation between Mr Hill and Mr Nugan on the Friday before his

death. During this conversation, which is reported in full at paragraphs

3.7.6 to 3.7.9, Mr Hill spoke of resignation and Mr Nugan spoke of

committing suicide as Mr Nugan's only way out of his problems.

2.33.13 Mr Hill's activities following Mr Nugan's death and his role in

the concealment and destruction of records are reported in detail in

Part 3 Sections 8 and 9.

2.33.14 He finally tendered his resignation as a director of Nugan Hand

Ltd on 5 April 1980.21

2.33.15 Finally, it should be noted that apart from his position as a

director of Nugan Hand Ltd, Nugan Hand (Hong Kong) Ltd and the Nugan Hand

Bank, Mr Hill held a number of positions with the following companies:

Australasian and Pacific Holdings Ltd [2.80] - director from 21 October 1977 Hidex Pty Ltd [2.84] - director from 5 May 1978 Newcourt Financial Services Pty Ltd [2.91]

- director from 16 October 1978 S.L. Notwist Pty Ltd [2.103] - director from 30 September 1976 Illarangi Investments Pty Ltd [2.85]

- director and secretary from 17 November 1977 Leasefast Pty Ltd [2.87] - secretary from 23 September 1976 to 2 December 1977 NHN Management Pty Ltd [2.92]

- director and secretary from 1 August 1977 Nugan Hand (Dealers) Pty Ltd [2.93] - director and secretary from 1 August 1977 Nugan Hand International Holdings Pty Ltd [2.96]

- director from 2 February 1976 to 1 August 1979 and secretary from 28 October 1975 to 1 August 1979 Nugan Hand Trade Services Pty Ltd [2.98] - director and secretary from 20 October 1976.22

- 187 -

Endnotes

1 CT15490, CT15511-12, Hill

2 CT24847, Young

3 CT15490, Hill

4 CT24847, CT24850, CT24852-53, Young 5 CT1490a, CT21721, Young; CT21721, Hill; CD11339 6 CT16256, Hill

7 CT20140-41, Burton; CT23958, K. Nugan 8 CT25765, Hill

9 CT16223-29, Hill; CT21507, Hill; CD3667 folio 148 10 11 12

13 14 CT22816, Collings 15 CD11153, folio 80

16 CT22849, CT24808, Hill; CD10083 folio 30 17 CT24082-84, Hill

18 CT21630, CT21814-15, Hill 19 CT15490a, Hill

20 CT15719, Hill

21 CT21856, Hill

22 CD10690

2.34 HOLMGREN, Dale Oscar

2.34.1 Mr Holmgren did not give evidence before the Commission. The

information herein relies solely upon material contained in documents

produced to the Commission in the course of its inquiry, including

documents produced by other investigative bodies.

2.34.2 Mr Dale Oscar Holmgren was born 16 April 1935 and is a United

States citizen. He graduated from Kansas State University in 1958 with a

Bachelor of Science degree and later attended Quartermaster's School

Fort Lee, Virginia, where he completed six months basic training. As

part of his military training program Mr Holmgren was assigned to the

Military Assistance Advisory Group in Taiwan where he conducted the

Officers Mess. On completing his tour of duty in Taiwan, Mr Holmgren

returned to the United States, where he was discharged. He then returned

to Taiwan and managed all in flight services for a group named Civil Air

- 188 -

Transport. Mr Holmgren held this position from 1960 until 1965. After

leaving Civil Air Transport Mr Holmgren commenced a company called

Oceanic Engineering which was involved in the repair and maintenance of

ships. He later became president of Oakwood International Corporation,

Taiwan which undertook diecasting and the manufacture and export of

mopeds.1

2.34.3 In an interview with the Joint Task Force on 15 December 1982,

Mr Holmgren said he met Mr M.J. Hand [2.2] at a cocktail party in m y

1978. After discussions with Admiral E.P. Yates [2.76] in Taiwan,

Mr C.L. Collings [2.15] in ftong Kong and Mr Hand in Singapore,

Mr Holmgren agreed to 'assist' the Nugan Hand Group in November 1978.

Mr Holmgren said that at a meeting with Mr Hand, the possibility of an

office being opened in Taiwan had been discussed. At a subsequent

meeting Mr Hand had raised the possibility of Mr Holmgren acting as the

Taiwan representative for the Group. Mr Holmgren told the Joint Task

Force that when he decided to assist the Nugan Hand Group, the agreement

was that he was not to be paid, as he had other business commitments and

did not want to create a position of employment with the

organisation.2

2.34.4 Documents before the Commission, however, indicate that this was

not the case. A memo from Mr Collings to Mr Hand dated 15 June 1978,

gives details of the Taiwan office and lists an address in Taipei and

private information relating to Mr Holmgren.3 Also, two letters from

Mr Collings to Mr Holmgren (both dated 19 June 1978) indicate that

Mr Holmgren was employed by the Nugan Hand Bank before November 1978.

The first letter confirms Mr Holmgren's employment as 'a representative

of the Nugan Hand Bank and Manager of the Taiwan office', details the

terms of his employment, including the payment of US$1,000 per month in

salary, and gives his commencement date as 1 June 1978.4 The second

letter authorises Mr Holmgren to 'fulfill the function of

"representative" in furthering the business activity of all parts of

Nugan Hand International'.3

2.34.5 In his interview with the Joint Task Force, Mr Holmgren said he

was neither responsible for the recruitment of depositors to the Group

- 189 -

nor the payout of any money. He claimed he was not aware of any deposits

being taken in or paid out in Taiwan. 0 However, in a memo from

Mr Collings to Mr Hand dated 19 July 1978, it is stated that Mr Holmgren 7

had * 1 cracked the ice already' with a deposit for US$1 850. In a

letter to Mr Hand on 9 September 1978, Mr Holmgren said he was confident

that deposits would be coming in to the Taiwan office in the near

future.0 Also a memo from Mr Tan Choon Seng [2.71 ] to Mr Holmgren on

29 October 1979 details the brokerage due to him for deposits he had

solicited and advises that the funds would be credited to his

account.®

2.34.6 Mr Holmgren attended the Sydney conference of Nugan Hand

International representatives in January 1979 [3.5.45] where he gave a

report on Taiwan.10 In October 1979, he attended the Sydney conference

held at the Gazebo Hotel [3.6.13] where he met Messrs D.E. Beazley [2.7]

and M.B. Houghton [2.35].11 Mr Holmgren subsequently spoke with

Mr Beazley in Hong Kong and expressed uneasiness about the Nugan Hand

Group. Shortly after this, Mr Hand informed Mr Holmgren of Mr Nugan1s

death.^

2.34.7 Mr Holmgren then asked Mr Hand for the US$35 000 in expenses

which was owed to him. Mr Holmgren told the Joint Task Force that he

only received US$24 000 of this amount before the Nugan Hand Group's

collapse.11

Endnotes

1 CD4431 folio 3, Promotional literature for Oakwood; CD1162 folio 1, JTF ROI Holmgren 15/12/82 2 CD1162 folios 2-3

3 CD1563 folio 24, Memo Collings/Hand 15/6/78 4 CD1819 folio 3, Letter Collings/Holmgren 19/6/78 5 CD4431 folio 7, Letter Collings/Holmgren 19/6/78 6 CD1162 folios 3-4

7 CD1819 folio 34, Memo Collings/Hand 19/7/78 8 CD4431 folios 24-25

9 CD8655 folios 3-10, Holmgren brokerage documents 10 CD11135

11 CD1429 'Last Supper' tapes and transcript 12 CD1162 folio 4

13 CD1162 folios 3-4

- 190 -

2.35 HOUGHTON, Maurice Bernard

2.35.1 Mr Maurice Bernard Houghton was born in Texas, the United States

on 25 July 1920. He was studying business management at University when

the United States went to war. He enlisted in the Air Force Cadet

Training Program and was discharged in 1946. Mr Houghton told the Joint

Task Force that following his military discharge he 'went into business,

restaurants, clubs, surplus war material and miscellaneous' occupations

until 1964 when he then travelled to South East Asia. For the next

three years Mr Houghton was employed by a Mr William Green whose business

involved port, airport and military base construction. He travelled to

places such as Saigon and Bangkok 'contacting construction purchasing 2

departments [for the] procurement of construction materials'. In this

role he made contact with many United States military personnel involved

in the Vietnam War.

2.35.2 He came to Australia on 1 January 1967 and commenced work as a

real estate salesman with Parkes Development Pty Ltd. In November 1967

he opened the Bourbon and Beefsteak bar and restaurant in Kings Cross,

Sydney. The premises were partly owned by Comserv (No.86) Pty Ltd, a

company controlled by Mr Houghton. In February 1968, Mr Houghton

purchased shares in Argus Investments Pty Ltd which owned a private hotel

at Potts Point, Sydney. That hotel subsequently became the Texas 3 Tavern. It was at the Bourbon and Beefsteak and the Texas Tavern that

many of the people who later became associated with the Nugan Hand Group

first met.^

2.35.3 Due to his experience in the liquor industry, Mr Houghton

assisted at David Lynn Pty Ltd, a liquor store at Waterloo which

according to Mr Houghton was experiencing financial difficulty in the

early 1970's, and later, in partnership with Mr John Charody, Sir Paul

Strasser and Mr Robert Whyte opened 'Harpoon Harry's', a restaurant in

Sydney. He left this partnership in January 1974. He told the

Commission that in partnership with Mr Lesley Senes and Mr Charody he

purchased the premises of the Aquatic Club in Potts Point which were then

leased back to the Aquatic Club. Mr Houghton subsequently withdrew from 5 this partnership.

- 191 -

2.35.4 Mr Houghton first met Mr tend in the late 1960's when the latter

came to Australia. During Mr Hand's visits to the Bourbon and Beefsteak,

he became friendly with Mr Houghton. Subsequently Mr Houghton borrowed

money from Mr Hand on several occasions; interest free and without

security. These loans by Mr tend were made by cheques drawn on various

Nugan Hand companies. The first was in approximately October 1977 when a

cheque for $35 000 was drawn on Yorkville Nominees Pty Ltd [2.108] in

favour of Poziers Pty Ltd, another of Mr Houghton's companies.®

2.35.5 In evidence to the Commission, Mr R.A. Pulger-Frame [2.59]

referred to a meeting that he had with Mr Nugan in late 1977. En route

to Sydney from Hong Kong Mr Pulger-Frame had been stopped in Hong Kong

and searched for drugs and Mr Nugan was visibly upset when he heard this

on Mr Pulger-Frame's arrival in Australia. After this arrival

Mr Pulger-Frame went to Mr Houghton's apartment in Elizabeth Bay, Sydney

where, according to Mr Pulger-Frame, Mr Nugan 'literally sat at his

[Mr Houghton's] feet' and requested Mr Houghton's assistance. According

to Mr Pulger-Frame Mr Houghton said he, with his connections in the

United States, would get to the bottom of the matter and there was 7 nothing to be concerned about.

2.35.6 In October 1978 Mr Hand offered Mr Houghton an all expenses paid

trip to Europe in return for an opinion on the viability of the

F.A. Neubauer Bank [2.109] in Hamburg which was being purchased by the

Nugan Hand Group. En route to Germany Mr Houghton visited Hong Kong

where he was joined by Miss E.L. Thomson [2.72]. They visited the

Frankfurt office of the NUgan tend Group which was managed by Mr K.F.

Schuller [2.63]. Mr Houghton later advised Mr Hand to close this

office. In respect of F.A. Neubauer Bank and its Hamburg office,

Mr Houghton reported to Mr Hand that there appeared to be no activity in

the office which would generate business, no money changing hands, few

telephone calls and no customers entering the office. He recommended

that the personnel have their employment terminated.

2.35.7 Mr Houghton returned to Australia via the United States where he

visited Admiral E.P Yates [2.76] who encouraged him to join the Nugan

- 192 -

Hand Group. While in the United States Mr Houghton met with Mr James

Wheeler, an employee of Beck Arabia who informed Mr Houghton of banking

opportunities in Saudi Arabia. Oi learning this Mr Hand asked

Mr Houghton to travel to Saudi Arabia and assess the feasibility of

conducting business there. Mr Houghton agreed and on his first visit to

Saudi Arabia was successful in obtaining deposits for the Nugan Hand

Bank. He made several further trips and eventually established an office

there in April or May 1979 which he operated until April 1980.9

Mr Houghton also attracted some deposits in Australia."^

2.35.8 In return for establishing the Saudi office, Mr Houghton was to

be paid his expenses plus one and a half per cent commission on deposits

taken on a yearly basis. He told the Commission that he realised this

would not fully compensate him for the disadvantages of living in Saudi

Arabia but he had an arrangement with Messrs Nugan and Hand whereby a

loan of $35 000 made to Mr Houghton by Mr tend would be discharged once

he had provided services to that value. According to Mr Houghton this

debt was secured by a mortgage over his home unit at Elizabeth Bay.

After he had spent some time in Saudi Arabia establishing the office,

Mr Houghton raised once more with Mr Hand the matter of his remuneration

as he had not received any of the commission he had been promised. It

was agreed that from 1 January 1980 he would be paid $100 000 per annum

plus expenses and the $35 000 debt would be d i s c h a r g e d . T h e

discharge of mortgage was in fact signed by Mr Nugan and handed to

Mr Houghton. However, no payments other than expenses were received by

Mr Houghton."*"^

2.35.9 During 1979, meetings were held in Geneva, Switzerland between

Mr Houghton on behalf of the Nugan tend Group and Mr Edwin P. Wilson now

serving a prison sentence in the United States of America for illegal

arms dealing, among other offences. Mr Houghton said Mr Wilson was

looking for letters of credit worth US$22 million to enable him to supply . . 12

Korean made uniforms to Libya. Mr Houghton approached Messrs Nugan

and Hand concerning this request but Mr Wilson subsequently obtained the

letters of credit elsewhere. Mr Houghton saw Mr Wilson on several other

occasions and offered him the services of the Nugan Hand Group in the

- 193 -

banking field but to Mr Houghton's knowledge nothing eventuated.

[The matter of alleged arms dealing is dealt with in Part 7 of this

report.]

2.35.10 Between December 1979 and January 1980 the Group began

negotiations for purchase of a London bank known as London Capital

Securities Ltd [2.111]. Following the death of Mr Nugan, Mr Hand told

Mr Houghton that he could not afford to continue with the purchase.

Mr Houghton suggested that Mr Ricardo Chavez, a person who had deposited

large sums of money with the Nugan Hand Bank in Saudi Arabia, might be

interested in acquiring London Capital Securities Ltd. According to

Mr Houghton, in February 1980 he withdrew funds from the account of

Mr Chavez with the Bank and took them to London. The funds were handed

over to the vendors of London Capital Securities Ltd and a share

certificate was issued in the name of Nugan Hand Group president Mr D.E.

Beazley [2.7]. The certificate was endorsed by Mr Beazley in favour of

Mr Chavez and Mr Houghton delivered the certificate to Mr Chavez in 14 Switzerland some days later.

2.35.11 Mr Houghton was present at the Sydney office on the days

immediately following the death of Mr Nugan. He retained a solicitor,

Mr M.J. Moloney [2.48], for the purposes of dealing with press inquiries

arising out of the death of Mr Nugan. Mr Hand later sought Mr Moloney's

assistance on a range of matters. During the week following

Mr Nugan's death, depositors were asking for repayment and Mr Houghton

lent Mr Hand $20-25 000 for this purpose on a daily floating basis. The

debt was repaid within a couple of weeks."*"® [For Mr Houghton's role in

the events following the death of Mr Nugan see Part 3 section 8 ]

2.35.12 In February 1980 Mr Houghton returned to Saudi Arabia where he

passed on to his staff assurances he had received from Mr Hand that the

overseas operations were sound. He then returned to Australia via the

United States where he was contacted by Mr R.M. Murphy [2.50] who was

then a Saudi employee, and who was concerned about current newspaper

reports alleging the collapse of the Nugan Hand Group in Hong Kong. He

advised Mr Murphy to leave Saudi Arabia and go to London where they met

before returning to Australia together."*"^

- 194 -

2.35.13 Hr Houghton was summonsed to appear before the Royal Commission

on his return to Australia in April 1984 and he gave evidence on 16 April

1984 and 15 August 1984.

2.35.14 At the time of giving evidence Mr Houghton said he was currently

manager/consultant to the Bourbon and Beefsteak bar and restaurant. * 1 1 1

Endnotes

1 CD5491 folio 3, JTF interview Houghton 22/6/81 2 CD5492 folio 3, JTF interview Houghton 23/11/81 3 CD1308 part 93 folio 2, JTF ROI Houghton 9/6/81; CD1308 part 93

folio 33, JTF ROI Houghton 30/1/81, 4 CT19906 Moloney; CT22528-29, CT22599 Houghton; CD3608 folio 10, Gehring evidence to CAC 3/6/80; CD10859 folio 11 5 CT22521-23, Houghton 6 CT22528-29, Houghton 7 CT22707-08, Pulger-Frame; CD4625 folios 111-12, Official

Receiver Hong Kong interview of Pulger-Frame 8 CT22523-26, Houghton 9 CT22526-28, CT22530 Houghton; CD1308 part 92 folio 3 10 CT22584-88, Houghton 10a The evidence suggests that both Mr Houghton's salary and

the $35 000 loan were in Australian dollars. 11 CT22529-30, Houghton 12 CD10624 folio 82, Houghton statement to Commission 14/8/84 13 CD1308 Part 93 folios 39-40, JTF ROI Houghton 10/2/82;

CD10624 folio 83; JTF Report p 491 14 CT22554-56, Houghton 15 CT22540, Houghton

16 CT22545, Houghton

17 CT22550-51, Houghton 18 CT22521 Houghton

2.36 KWOK, Dr Albert

2.36.1 Dr Albert Kwok has been a Director of Wing On Bank in Hong Kong

since 1971, and Chief Manager since 1 May 1977.·*" In 1975, Dr Kwok met

Mr C.L. Collings [2.15], after the Wing On Group invested US$10 000 with

the 'Ingold Growth' fund, which Mr Callings was promoting in Hong Kong at 2 the time. According to Mr P.M. Dunn [2.18], Mr Collings developed a

very close relationship with Dr Kwok.^

- 195 -

2.36.2 In his evidence to the Supreme Court of New South Wales in

Wing On Bank Ltd v Secured Income Real Estate (Australia) Ltd and Ors1 ^

Dr Kwok said he met Mr Col lings in 1975; he agreed that they had

negotiated an arrangement between the Wing On Bank and Nugan Hand Ltd

[2.97].^ Mr Collings said in evidence before the Commission that after

discussions with Mr S.K. Hill [2.33] and Mr F.D. Ward [2.73], he put the

proposal to Dr Kwok concerning the Wing On Bank. As a result of

discussions between Mr Collings and Dr Kwok over a period of time, an

arrangement was ultimately agreed upon whereby the Wing On Bank

guaranteed to Hong Kong depositors, who placed funds with Nugan Hand Ltd,

repayment of those deposits.6

2.36.3 In late 1975, Dr Kwok was involved as a party in legal

proceedings concerning conspiracy to defraud. Mr Collings said Mr F.J.

Nugan [2.1] travelled to Hong Kong with legal precedents3 and,

according to Mr S.K. Hill, Mr Nugan assisted Dr Kwok in the

proceedings. ® Correspondence from Mr Nugan to Dr Kwok supports both of 9 these statements. Messrs Collings and Hill said in evidence that as a

result of the litigation a close relationship developed between Mr Nugan

and Dr Kwok. " * " 61 Mr Hill proffered the opinion that this led to the Wing

On Bank granting more and more facilities to the Nugan Hand Group.33

However, a telex from Mr Collings to Messrs Nugan and Hill, dated

25 January 1978, indicated that Dr Kwok would 'not go much higher' until

he had independently ascertained the convertibility of Nugan Hand paper

in Sydney, and pointed out that Dr Kwok would need to justify this with

the auditors anyway.·*·2 However, Dr Kwok in his letter addressed to the

Commission dated 9 April 1985 stated he could not 'recall any details of

changes in the arrangements made between July 1975 and January 1978'

regarding the safe custody account [see 3.3.39-3.3.41]. He also stated

he 'relied completely on references obtained from the BNSV (now Westpac)

and The ANZ Banking Group Ltd ('ANZ') in deciding to agree to the

arrangements with NHL'."*'3

2.36.4 Mr Ward said in evidence he understood that the securities being

held in Sydney on behalf of Wing On Bank would be a 'mix', but eventually

Wing Oi Bank would accept Nugan Hand Group paper. Mr Ward said it was a

- 196 -

matter for Mr Nugan and Mr Fill to determine the 'mix of

securities' nr Kwok stated:"*"^

'Winq On at ail times emphasized to NHL [Nugan Hand Ltd] and NHHK [Nugan Hand (Fong Kong) Ltd] that the amount of Nugan Hand paper which was to be accepted in the safe custody account was to he strictly limited. BNSW and ANZ did not monitor the

quality of the documents lodged in their respective safe custody accounts but Wing On kept a close watch on all switch

transactions whereby one type of security was replaced by another and I endeavoured to ensure that Nugan Hand paper was kept to a minimum as far as was possible...It was intended that additional Nugan Hand paper could only be placed in the safe custody account as part of the "within the day" arrangement.'

See 4.1.27 to 4.1.55 for details of these guarantee arrangements.]

2.36.5 Mr Hill gave evidence to the Commission that Mr Nugan's main

objective was to set up the Nugan Hand organisation and then sell it as

the nucleus of a large corporation.16 Mr Hill alleged discussions in 17

this vein had taken place between Mr Nugan and Dr Kwok. Mr Nugan's

proposal was that Wing On Bank purchase 49 per cent of the Nugan Hand

organization. Mr Hill further alleged that after Mr Nugan's death,

Dr Kwok was still considering buying the Nugan Hand Group 'to save ...

his investment [of] ... $3 million.'"1 '8 Dr Kwok stated in his letter to

the Commission, that he did not recall Mr Nugan ever having approached

him with a proposal that Wing On Bank purchase Nugan Hand Ltd or the

Nugan Hand Group. He also said he would definitely not have been

19

interested had he received such an approach.

2.36.6 The Wing On Bank had issued guarantees totalling $3 052 963 as

at 8 April 1980. At the time Nugan tend Ltd went into liquidation the

Wing Oi Bank safe custody account contained securities with a face value

of A$2.5 million. These securities comprised A$ 1 .8 million in worthless

Nugan Hand internal commercial bills, A$600 000 in Secured Income Real

Estate (Australia) Ltd ('SIRE') [2.118] commercial bills and A$100 000 in . 20

ANZ bank bills. The Wing On Bank honoured the guarantees given to 2 1 21

depositors in respect of which Nugan tend Ltd defaulted.

- 197 -

2.36.7 As noted earlier the Wing On Bank took legal action against

SIRE, to recover the $600 000 represented by the SIRE bills. The Supreme

Court of New South Wales gave judgment in favour of Wing On Bank,

however, an appeal has been lodged by SI R E . ^ This appeal had not been

heard at the time of writing this report.

Endnotes

1 CD10940 folios 40-41, Kwok evidence to Supreme Court of N.S.W. Feb 1982 2 CT22781, CT22783, CT22791, Collings; CD6491 folio 19 3 CT22460, Dunn

4 CD10940 Wing On Bank v. SIRE - Appeal Book CA152 of 1982,

CL11095 of 1981 5 CD10940 folio 41

6 CT22789-91, CT22796, Collings 7 CT22813-14, Collings 8 CT21839, Hill

9 CD6572 folios 13-15, Letters Nugan/Kwok 9/4/76, folios 25-26, Letter Nugan/Kwok 29/3/76 10 CT22813-14, Collings; CT21839, Hill 11 CT21839-42, Hill

12 CD11097 folio 65, Telex Collings/Nugan and Hill, 25/1/78 13 CD11529 folio 86, Letter Kwok/RCINH 9/4/85 14 CT23198, Ward

15 CD11529 folios 83-84

16 CT21927, Hill

17 CT21839, Hill

18 CT21496, Hill

19 CD11529 folio 83

20 CD5116 folio 8, Nuhan Ltd List of Bills

21 CD10940 folios 310-12, Affidavit of Kwok sworn 16/4/82 22 CD10940 folio 329, Judgement Wing On v SIRE 14/5/82, folios

331-36 Amended notice of appeal - SIRE (Australia) Appellant and Wing On, Calder, Swan Respondents 2/6/82

2.37 LEE, Alexander

2.37.1 Mr Alexander Lee was born in the United Kingdom and came to

Australia in 1955. In the United Kingdom he obtained a diploma in

management from the London School of Economics. In Australia he obtained

a diploma in accountancy from the Department of Technical Education and

has been registered in New South Wales as a public accountant since about

- 198 -

1962."*· Οι 1 July 1969 he and his wife, Mrs Yolanda Lee [2.38], who is

also an accountant, commenced an accountancy partnership under the

business name Alex Lee & Company. From May 1972 until April 1980 that

firm carried on business at 45 Macquarie Street, Sydney. On 1 July 1979

Mr Steven Heller, accountant, became a registered proprietor of the 3 business. Mr and Mrs Lee and Mr Heller are also shown on Corporate

Affairs Commission records as being registered proprietors (from 10 March

1980) of lee Heller & Company, an accountancy practice with the same 2

business address as Alex Lee & Company.

2.37.2 While practising as an accountant Mr Lee completed a part time

law degree at the University of New South Wales. In July 1979 he was

admitted as a solicitor with a restricted practising certificate and 4

commenced employment with Nugan & Company, solicitors. When

Mr F.J. Nugan [2.1] died in January 1980 Mr Lee commenced employment with

Mr J.L. Aston, solicitor, and remained with Mr Aston's firm until he 5

obtained his full practising certificate in July 1980. Mr Lee then

commenced practice as a solicitor under his own name and later advised

the Corporate Affairs Commission he had ceased to carry on business under

the business names of both Alex Lee & Company and Lee Heller & Company.

In January 1983 Mr J. Rigg, solicitor, became a partner with Mr Lee in

the legal firm which then changed its name to Lee Rigg & Company.®

2.37.3 Mr Lee met Mr Nugan in the early part of 1974, when they were 7

introduced by one of Mr Lee's clients. At their first meeting,

Mr Nugan offered assistance in relation to taxation matters, and for some

time thereafter Mr Lee met Mr Nugan about every month for the purpose of

obtaining advice about the taxation affairs of his (Mr Lee's)

clients.® Shortly after Mr Lee's introduction to Mr Nugan, Mr Lee

began to make deposits, on behalf of clients of his accountancy practice, 9 to Nugan Hand Ltd [2.97], Clients of Mr Lee sought taxation advice

from Mr Nugan and made deposits to the Nugan Hand Group until its

collapse in April 1980.

2.37.4 Mr Lee told the Commission that he, on behalf of his clients,

availed himself of two of the taxation schemes offered by Mr Nugan. He

- 199 -

said that about ten of his clients participated in the Yorkville Nominees

Pty Ltd [2.108] management scheme [see Part 9], and that about 6300 000

was invested by his clients in this way."*"^1 Further clients

participated in a scheme which involved the purchase of a franchise from

Distravite Pty Ltd [2.82]. " * " In addition, Mr Lee advised his clients

of the competitive interest rates offered by Nugan Hand Ltd and inquired,

on their behalf, about the interest rates available for particular 12 deposits. In return for his introduction of clients to the Group,

Mr Lee received at different times from Mr Nugan, cash payments which he

estimated variously at a total of one, two, three, four and five thousand 13 dollars. The first payment could have been made in 1976 and the

14

payments continued until the time of Mr Nugan's death. [See also the

Commission's Interim Report No. 2 at 5.90 to 5.149.]

2.37.5 In November 1978, Mr Lee attended a luncheon at Mr Nugan's home

at Vaucluse, a suburb of Sydney, at which the possibility of Mr Lee and

Mr Q.D. George [2.24] commencing employment with Nugan & Company (and

eventually becoming partners in the practice) was discussed."*"5 Mr Lee

commenced employment with Nugan & Company, as a solicitor, in July 1979,

although he had done legal work in connection with clients of that firm

from about 1 9 7 7 . Mr Lee said he considered his starting salary,

which he said was $12 000, to be too high but Mr Nugan insisted on paying

this amount and stated that it diminished his own status if his employees 17 were not well paid. From August 1979, Mr Lee, according to him at

Mr Nugan's suggestion, arranged for part of his salary to be paid

offshore; A$1 000 per month was thereafter paid into an account with the

Nugan Hand Bank in Singapore.

2.37.6 In October 1979, Mr Lee visited the Hong Kong offices of the

Nugan Hand Group at the request of Mr Nugan. He was asked to ensure that

the records of nominee companies incorporated in Hong Kong were being

correctly maintained, and that the statutory requirements had been 19

complied with. His expenses were met by Nugan Hand. After

Mr Nugan's death, Mr Lee's accountancy firm prepared rough balance sheets

and accounts, to trial balance stage, for three or four of the companies

within the Nugan Hand Group. Mr Lee was responsible for liaison between

- 200 -

20

his firm and Nugan Hand for this purpose. Mr Lee remained with Nugan

& Company for several weeks after Mr Nugan's death in order to complete 21 outstanding matters. χ

2.37.7 Mr Lee became a director of the Nugan Group Ltd, Griffith

[2.114] in 1978 and held the position of managing director during 1983.

His accountancy firm did taxation work for the Nugan Group Ltd and Mr

K.L. Nugan [2.52].22

2.37.8 Mr Lee arranged, through Nugan Hand, for transfer of funds to

London on four occasions for the purchase of coins on behalf of himself

and his clients. These funds were transferred using the Yorkville contra 23 system [see Part 8 ],

Endnotes

1 CT18478-81, A.Lee

2 CD9021, CAC information 3 CT18482, CT18593, A.Lee 4 CT18485, A.Lee; CD9037 folio 5, Law Society of New South Wales

records

5 CT18490, A.Lee

6 CT18490-91, A.Lee; CD9021, CAC information 7 CT18626, CT18639, A.Lee 8 CT18491-92, A.Lee

9 CT18494, CT18552, A.Lee 10 CT18612, A.Lee

11 CT18619, A.Lee; CD11219 Vol.3, Lee ROI questions 59-64, 129-30 12 CT18494, A.Lee

13 CT18552, CT18554-55, A.Lee; CT21207-08, CT21209, Y.Lee; CT24459, A.Lee CT24451, 14 CT18557, A.Lee

15 CT18486-89, A.Lee

16 CT24445, A.Lee; CD2687 folios 12,13,14, Information Society of New South Wales from Law 17 CT18486-88, CTl8516, A.Lee 18 CTl8536, CT18545, A.Lee; CD4559 folio 2, Letter 15/2/80 Lee/Tan

Choon Seng re Lee's accounts; folio 5, Memo Tan Choon

Seng/Karuna 6/2/80 confirming receipt of money to Lee 6/2/80; folio 14, Memo Hill/Hand and Tan Choon Seng re Lee's new account 15/8/79; CDS885 19 CT18507, CT18510-11, A.Lee

20 CT19154, CT19157, Heller 21 CT18489-90, A.Lee

22 CT18574, A.Lee; CT19160-61, Heller 23 CT18567, CT18585, CT18587-89, CT18592-92, A.Lee; CD10976; CD8885 folios 2, 3, 5, 7, 101, 141, 183, 229, 313, 414-16

- 201 -

2.38 LEE, Yolanda

2.38.1 Mrs Yolanda Lee is the wife of Mr A. Lee [2.37]. Mrs Lee was an

alderman of Ku-ring-gai Municipal Council from 1975 to 1980. She was a

member of the Finance and General Purposes Committee from 1974 to 1977

and Deputy Mayor of that Council from 1977 to 1980. " * " Mrs Lee's

evidence to the Commission and other matters regarding the Ku-ring-gai

Municipal Council's investments with Nugan Hand Ltd [2.97] has been

reported upon in the Commission's Interim Report No. 2.

2.38.2 In 1962 Mrs Lee obtained a Diploma in Accountancy from the New

South Wales Department of Technical Education and immediately commenced 2 her own accountancy practice. On 1 July 1969 Mr and Mrs Lee formed an

accountancy partnership called Alex Lee & Company."* In December 1977

Mr Steven Heller commenced work as an employed accountant for this

partnership. On 1 July 1979 Mr Heller became a partner in the firm and

remained as such until June 1983. The latter partnership was initially

called Lee Heller & Company. Mr Lee resigned on 1 July 1981 and the 4

partnership comprised Mrs Lee and Mr Heller. That partnership was

dissolved when Mr Heller left and commenced business on his own account

in June 1983.**

Endnotes

1 CT18911 Y. Lee; CD2366C

2 CT18480, CT18482, A.Lee 3 CT18482, A.Lee

4 CD9021 folio 3, CAC Information 5 CT19147-48, Heller

2.39 LOOMIS, Patry Gene

2.39.1 Mr Patry Gene Loomis was born in Wisconsin, the United States,

on 5 July 1945."*" He graduated in 1969 with a Bachelor of Science

degree, from the University of Wisconsin.^

- 202 -

2.39.2 Mr Loomis told the Commission that he was recruited as an

operations officer for the United States Central Intelligence Agency

('C.I.A.') in 1969. He served in Vietnam between 1970 and 1972 as a

paramilitary adviser, following which he had a commercial cover

assignment in South East Asia. In 1976 he returned to the United States

and worked on assignment at C.I.A. Headquarters until he resigned in

1977.3

2.39.3 Between 1977 and 1978 Mr Loomis was associated with Mr Edwin

Wilson's company, Consultants International, as an independent sales

representative. This involved sourcing supplies for overseas contracts,

which included everything from uniforms to agricultural products, for

export primarily to the Middle East. Mr Loomis moved to Ireland

following termination of this employment. He was, as at 25 October 1984

the Managing Director of a company named Lowe Alpine Systems, Tullamore, 4

Ireland which manufactures mountaineering and bush walking equipment.

2.39.4 Mr Loomis appeared before the Commission and said he was not

aware of any association between the Nugan Hand Group and the C.I.A.

Further, he stated that at the time of his association with Mr Wilson

[see Part 7] he had no knowledge of Mr Wilson's contact with either the

Nugan Hand Group or any other contacts in banking or business in

5

Australia. Mr Loomis was asked, whether at the time of his employment

at C.I.A. headquarters, he would have been likely due to his position to

know of any significant contact between the Group and the C.I.A.

Mr Loomis replied that the C.I.A. was compartmentalised even within the

operations branch and his position had nothing to do with South East Asia

or Australia. Mr Loomis did not have any knowledge of the Agency's

financing, or specifics about banks and individuals.6 In evidence

before the Commission Mr Loomis said that he had heard of the allegations

concerning the Nugan Hand Group and the C.I.A. through the media. He

agreed, however, that he had probably read these after the death of

Mr F.J. Nugan [2.1] in January 1980 [see also 4.3.35].3

- 203 -

Endnotes

1 CD11015 folio 1, Loomis statement to the Commission 25/10/84 2 CD2076 folio 25, Loomis resume, undated 3 CD11015 folio 1

4 CD11015 folio 1

5 CD11015 folio 2

6 CT23441, Loomis

7 CT23440, Loomis

2.40 LOOEY, Edward Craig

2.40.1 Mr Edward Craig Louey was born in Melbourne in 1940 of Chinese

parents. In 1963 he graduated from the University of Melbourne with an

honours degree in Commerce. He was employed as a market research

executive and a financial analyst and in 1966 assisted his family in

setting up a motel in Melbourne. In 1969 he worked as a marketing

manager promoting Australian exports and in 1971 commenced his own export

consultancy business, Export Administration A s s o c i a t e s . W h e n he gave

evidence to the Commission he said he was currently operating a business 2

which provided radio telephone equipment.

2.40.2 In January 1977 the Nugan Hand Group sought to recruit overseas

representatives by advertising in Time magazine in Australia offering

applicants the prospect of remuneration of $60 000 per annum

[Appendix D]. Mr Louey replied to this advertisement and was

subsequently employed as an overseas representative by Mr J.M. Gilder

[2.25]. Mr Louey saw this as a progression for himself and an

opportunity to work overseas for a time. He was told that he could

undertake trade work as well as his representative duties. Although

Mr Louey had no experience in the field of merchant banking he was one of

the few overseas representatives who had commerce based qualifications.^

2.40.3 After 'a few sessions' in which he was briefed on the overseas

market operations of the company and the duties of a representative

Mr Louey was posted to Singapore in August 1977. He worked there in

conjunction with Mr G.R. Steer [2.68] for about a month and started to

pursue trade opportunities. While there Mr Louey was appointed a

- 204 -

director of Nugan Hand Singapore (Pte) Ltd [Appendix B] but did not

actively serve as such.^ He was subsequently sent to Malaysia by

Mr Gilder because there was found to be no need for two representatives ■ . 5

in Singapore. While in Malaysia Mr Louey was asked to set up a

company as a business advisory service. This company was initially

called Nugan Hand Trade Malaysia Sdn. Bhd. (later Nugan Hand (Malaysia)

Sdn. Bhd. [Appendix B]) and Mr Louey became a director of this company.6

2.40.4 In a letter dated 15 September 1977 to Mr Gilder, Mr Louey

suggested that a payment of M$5 000 should be made to certain Bank Negara

(Malaysian Reserve Bank) officials in order to expedite the registration

of a Nugan Hand company in Malaysia. On the letter Mr Gilder had written

the words 'easier to pay $2000 cash1. In his evidence before the

Commission, Mr Gilder said he did not think this was an extraordinary

situation as 'Malaysia is a j p l a c e where everybody seems to pay everybody

else to get things done.' However, in evidence to the Commission

Mr Louey said the proposal to pay the officials was not put into

effect.®

2.40.5 Mr Louey's main activities in Malaysia were to attract people

who wished to invest in any of the Nugan Hand Group companies overseas.

Deposits were sent by new clients directly to Sydney, Hong Kong or

Singapore for crediting with the Nugan Hand Group.® Mr Louey enjoyed

considerable success in attracting these deposits. During 1978 he took

in excess of US$700 000 in deposits and, during the first six months of

1979, he took further deposits which probably exceeded US$1 million.

Mr Louey was paid commission on the deposits he brought in and he

estimated that in 1979 this amounted to about US$70 000 which he placed

in bank accounts in Kuala Lumpur and Singapore."*"®

2.40.6 Mr Louey was also involved in arranging back to tack loans for

clients [see Part 9]. He claimed he would not have accepted his

appointment with the Group had he known that this would be typical of the

work he would be doing. Nevertheless, he continued with his employment

at Nugan Hand because he and his family were ' under tremendous

hardship'

- 205 -

2.40.7 Mr Louey returned to Sydney towards the end of 1979 and

recommenced work with the Nugan Hand Group in mid to late January 1980.

His office was on the 4th floor at 55 Macquarie Street and his duties

were to concentrate mainly on the short term money market business by

soliciting short term funds from large companies such as the major

advertising agencies. Mr Nugan died on 27 January 1980 and Mr Louey told

the Commission that the situation in the Sydney office following

Mr F.J. Nugan1s [2.1] death was 'absolutely chaotic' [Part 3 Section 8 ].

He 'could not get any sense out of anyone' and, though he tried, he was

not able to see people like Messrs Gilder and M.J. Hand [2.2].^

Endnotes 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2

1 CT22139-40, Louey; CD649, folio 250, letter Louey re

advertisement in 'Time' 2 CT22139, Louey

3 CT22139-40, Louey 4 CT22140-42, Louey 5 CT22142-43, Louey 6 CT22144-45, Louey

7 CT22227-29, Gilder 8 CT22145-47, CT22180-82, Louey 9 CT22157-59, Louey 10 CT22160-63, Louey 11 CT22167-69, louey 12 CT22194-95, Louey

2.41 LOUIS, Raymond Albert Sidney (air)

2.41.1 Mr Raymond Albert Sidney Louis was born on 13 October 1910.1

He is the father of Mr R.S.A. Louis [2.42].

2.41.2 In August 1976, Mr Louis senior became general manager of the

Orange Spot group of companies [2.116] and his company, L.A.D.

2

Investments Pty Ltd, was appointed financial consultant to the Group

at a retainer of $1500 per month.^ Mr Louis was offered the position

of manager by his son, Mr R.S.A. Louis, who was associated with Nugan

Hand Ltd [2.97].^ On 13 December 1976, Mr Louis became a director of

Orange Spot Pty Ltd, and its eight subsidiary companies (the Orange Spot

- 206 -

5

Group). From 28 June 1979, Mr I,ouis also held one share in Orange

Spot Holdings Pty Ltd in trust for Mr F.J. Nugan [2.1].6

2.41.3 When he commenced his employment with the Orange Spot Group,

Mr Louis understood that Mr Nugan had purchased the Group, and that he

was to work for him.^ Shortly after taking up his employment, Mr Louis

sought advice from Mr Nugan regarding the business and was informed by

him that he (Mr Nugan) had nothing to do with it. This remained the

position until approximately August 1978, when litigation concerning the

Orange Spot Group was settled and Mr Nugan acknowledged that the Group

belonged to him.®

2.41.4 The business of the Orange Spot Group was the manufacture, sale

and distribution of orange juice to outlets in Sydney. The Group leased

land at Redfern on which a substantial factory existed and the Group's

assets included various items of plant. Mr Louis was unable to assess

the value of the Orange Spot Group at the time he commenced to manage it,

but informed Mr Nugan that it was not worth the $1 million that he was 9 reputed to have paid for it. The Group was in a very poor financial

state when Mr Louis commenced its management and he made drastic cuts in

staff. He believed that the Group made a very small profit about the

second or third year of his management."*"® Mr Louis remained full time

manager of the Group until Mr Nugan's death, and was then requested by

Messrs M.J. Hand [2.2] and M.J. Moloney [2.48] to continue in that

position."*""*" Ihe Orange Spot Group was subsequently sold to 'Mr Juicy',

a juice manufacturing and distributing company, for $500 000. Mr Louis

obtained $200 000 from the proceeds of the sale, in return for his

12

agreement to retire from the orange juice business.

2.41.5 Mr Louis also held the position of director of Distravite Pty

Ltd [2.82] and Distravite Australia Wide Servicing Company Pty Ltd [2.81]

from 13 December 1978. He was requested to take over the management of

these companies by Mr Nugan after the resignation of Mr B.W.Calder

[2.11].13

- 207 -

Endnotes

1 CD1217 folio 4, JTF ROI Louis, Snr 26/5/81 2 CT23252-53, Louis, Snr

3 CD9768 folio 13, Marbella Pty Ltd (previously The Orange Spot

Pty Ltd) taxation returns 4 CD10966 folio A

5 CT23257, Louis, Snr

6 CT23272, louis, Snr; CD10128 folio 17, Minutes - Orange Spot

Directors Meeting 28/6/79; CD10690, Data from CAC microfiche 7 CT23254, Louis, Snr

8 CT23255-57, Louis, Shr 9 CT23259, Louis, Snr; CD1058 folios 77-95, lease and

cor r espondence

10 CT23255, Louis, Snr

11 CT23269, Louis, Snr

12 CT23272, CT23276, Louis, Snr 13 CT23258, CT23268, Louis, Snr

2.42 LOUIS, Raymond Sidney Albert (Jnr)

2.42.1 Mr Raymond Sidney Albert Louis is the son of Mr R.A.S. Louis

(2.41]. He was first introduced to Mr F.J. Nugan [2.1] in the early

1970's by Mr J.C. Needham [2.51] for the purpose of investing funds. At

that time Mr Louis was conducting an insurance brokerage business.

Through Mr F.J. Nugan, Mr Louis met Mr K.L. Nugan [2.52] and subsequently

acted as broker for the Nugan Group Ltd and associated companies

operating in Griffith.1

2.42.2 In the course of his dealings with the Nugan Hand Group Mr Louis

invested $100 000 on behalf of Hornsby Rugby Union Club of which he was a

committee member. He later placed funds with Nugan Hand Ltd [2.97] on

behalf of several others and invested about $20 000 to $30 000 of his own

funds. Mr Louis agreed that he 'would have been promised commissions'

for investments with the Group but informed the Commission that, to the 2

best of his knowledge, he never received any such commissions.

2.42.3 In 1975 after the sale of Mr Louis' brokerage business, Mr F.J.

Nugan provided him with an office at 55 Macquarie Street, Sydney, free of

charge. Mr Louis made use of this office for about 12 months while

operating as a financial consultant and conducting a business installing

- 208 -

spa baths. During this period Mr Louis acted as a consultant for

Mr Nugan on various projects. At Mr Nugan's request he travelled to

New Guinea to investigate the market for gold coins and attended the

Nugan Hand Group office in Hong Kong to review operations there.

Mr Louis also undertook an inspection of the Orange Spot Group operations

[2.116] and reported to Mr Nugan that the purchase of the Orange Spot

business would be a 1 stupid investment1. While Mr Louis possessed no

accountancy or other specialist qualifications relevant to the areas in

which he undertook to consult, he classed himself as a 'businessman' and 4

examined the projects from that point of view.

2.42.4 Mr Louis net Mr L.P. Carter, the Town Clerk of the Council of

the City of Sydney, at the Nugan Hand office at 55 Macquarie Street,

Sydney and was aware that Mr Nugan had purchased land from Mr Carter for

subdivision and sale [see Interim Report No. 2]. Mr Louis occasionally

took telephone calls from Mr Carter regarding mortgage payments due to 5 Mr Carter from Mr Nugan. (While Mr Louis claims that this is the

extent of his knowledge of the Naretha Pty Ltd transaction, Mr M.J.

Moloney [2.48] gave evidence to the Commission that he received advice

from Mr S.K. Hill [2.33] that Mr Louis knew 'all about' this

transaction. Mr Moloney said that he subsequently contacted Mr Louis who

gave him the background information and indicated that the transaction

involved a private arrangement between Messrs Carter and Nugan.®)

2.42.5 Mr Nugan made lavish promises of remuneration for Mr Louis'

consultancy work including shares in the Nugan Hand Group and substantial

amounts of money, but ultimately Mr Louis received nothing. He was also

promised the use of a vehicle but again this never eventuated and

Mr Louis used his own car.^

2.42.6 Mr Louis believed that some of the early deposits he made on his

own behalf were invested with Yorkville Nominees Pty Ltd [2.108]. He

also borrowed $50 000 from this company secured by a mortgage over a

property that he owned on the Central Coast of New South Wales. This

mortgage was subsequently discharged, and the loan repaid, on the sale of

the property.

- 209 -

2.42,7 Mr Louis terminated his association with the Nugan Hand Group 9

before Mr Nugan's death because he was not earning sufficient income.

At the time of giving evidence he was the publican of a hotel in the

10

Hunter Valley.

Endnotes 1 2 3 4 5 6 7 8 9 1 0

1 CD10097 folios 3-4, Louis, Jnr, Interview with Commission 19/4/84 2 CD10097 folios 4-5; CD499, Hornsby Rugby Union Club - Deposit Doc's - NHL 3 CT22483-88, .Louis, Jnr; CD10097 folio 5 4 CT22484-86, Louis, Jnr 5 CT22478-79, Louis, Jnr

6 CT22289-90, Moloney 7 CD10097 folio 6

8 CD10097 folios 6-7

9 CT22486, Louis, Jnr

10 CT22477, Louis, Jnr

2.43 LOVATT, Gillian

2.43.1 Mrs Gillian Lovatt was born in Essex, England on 19 October 1931

and has resided in Hong Kong since October 1948."*" She commenced

employment with Deak & Co. (Far East) Ltd. in Hong Kong in December 1964

and remained with that company until October 1976. Her employment with

the Nugan Hand Group was initiated by Mr R.A. Pulger-Frame [2.59] who she

knew when both were employed by Deak & Co. (Far East) Ltd.

Mr Pulger-Frame introduced Mrs Lovatt to Mr M.J. Hand [2.2] and in

December 1976 she commenced employment with the Swiss Pacific Bank and

Trust Company (later known as the Nugan Hand Bank [2.106 ]).^

2.43.2 Mrs Lovatt maintained the 'certificate of deposits maturity

book' which consisted of loose sheets on which were recorded the clients'

number, amount invested, interest rate, maturity value and disbursement

instructions. She was also responsible for the client record files

(which contained correspondence, a copy of the certificate of deposit and

maturity sheet) for sending deposit acceptances to clients and for

carrying out clients' disbursement instructions upon maturity of the

deposit.^

- 210 -

2.43.3 Mrs Lovatt agreed with Mr J.C. Needham's [2.51] observations

that when he arrived in Hong Kong in 1977 the records were inadequate and

almost non existent.^ Mrs Lovatt said when she commenced work in the

office there was no bank cashbook and she began to record credit and , 5

debit transactions. She later took over the issuing of client numbers

from Mr Hand and instituted a card system to record client details. If a

client was 1 2 3 4 5 6 7 8 sensitive1, however, only the representative who introduced

the client would know the client's identity.®

2.43.4 Mrs Lovatt was a co-signatory of several of the Nugan Hand

Bank's accounts with the Wing On Bank and in Mr C.L. Collings' [2.15]

absence placed funds on the Asian Currency Unit market. Initially, Mrs

Lovatt was responsible for sending a weekly summary of operations in Hong

Kong to Sydney but this function was later taken over by the Accounts

Department.

2.43.5 In May or June 1977, Mrs Lovatt flew to Brisbane with a number

of documents which she delivered to Mr Needham. She was told by Mr Hand

they were books of account requiring audit. After handing over the

records she returned to Hong Kong.^ These records were ultimately

handed to this Commission by Mr Needham.

2.43.6 On 24 April 1980 Mrs Lovatt's employment with the Nugan Hand

Bank was terminated. She remained and on a voluntary basis assisted the

Official Receiver's Office with its inquiries. She informed the

Commission in August 1984 that she was currently employed as a treasurer

of a Hong Kong company.®

Endnotes

1 CD4458 folio 14

2 CD10978 folio 2, Lovatt, Statement to Commission 14/8/84 3 CD10978 folios 3-4

4 CT23026, Lovatt

5 CT23027, Lovatt

6 CD10978, folio 2

7 CT23029-30, Lovatt; CD10978 folio 3 8 CD10978 folio 6

- 211 -

2.44 LOVffi, Derrick

2.44.1 Mr Derrick Lowe is a Fellow of the Institute of Chartered

Accountants of England and Wales. He worked for the accounting firm of

Coopers and Lybrand in London from 1974 to 1978 and in August 1978

transferred to their Sydney office where he subsequently became audit

supervisor. Mr Lowe is not registered as a public accountant in

Australia but is eligible for registration as a consequence of his

British q u a l i f i c a t i o n s . M r Lowe was involved in several bank audits

in London. In Australia, he was involved as audit supervisor in the

audit of Barclay's Bank Australia Limited and from that audit he said 2

that he gained some knowledge of bills of exchange.

2.44.2 Following the death of Mr F.J. Nugan [2.1], Mr W. Pollard [2.57]

of the accountancy firm of Pollard & Brincat (Mr Heuschkel having left 3 the partnership in May 1978) , decided to complete the audit for Nugan

Hand Ltd [2.97] as at 31 January 1980 and contacted Coopers and Lybrand

for assistance. Mr Lowe who had been working for Coopers and Lybrand as

an audit supervisor was asked by Mr R. Lynn, a partner in that firm, to

assist in a consulting role to Mr Pollard, with specific reference to the

accounts and audit for the year ending 31 January 1980. However as

Mr Lowe had already resigned from Coopers and Lybrand it was then 4

suggested that he assist Mr Pollard on a sub-contracting basis.

According to Mr Lowe, Mr Lynn told him that Coopers and Lybrand were to

assist in the 1980 audit because Mr Pollard did not have sufficient

personal experience. Also, Mr Pollard had discovered that a number of

commercial bills were missing and when he [Mr Pollard] asked for the

originals of the internal bills for the 1980 annual accounts, the

directors had failed to produce them and Mr Pollard suspected that they

had never been drawn up. Mr Pollard had told Mr Lynn that it was his

opinion that the bills did not in fact exist. At this time, Mr Lowe said

he did not realise that the so called 'commercial bills' were in fact

internal bills of exchange.^ [See 3.3.46-3.3.48 and 5.34-5.55 for

further information about internal bills.]

2.44.3 Mr I/jwe told the Commission that he was mainly responsible for

drafting a letter dated 23 June 1980 from Pollard & Brincat to the

- 212 -

Companies Auditors Board. This letter sought consent for Pollard &

Brincat to resign as auditors of Nuhan Ltd (formerly Nugan Hand Ltd) for

which provisional liquidators had been appointed. It stated that the

firm's 'preliminary audit work has indicated that numerous significant

transactions were not properly recorded in the company's books of

account'. The letter also stated that it was 'apparent that certain

information received in the past from the company was either inaccurate

or misleading'. In addition it was said that the 'draft accounts

prepared by the company's accountant on which we have based our

preliminary audit work are deficient in many areas and the audit report

thereon would contain numerous significant qualifications.'1 2 3 4 5 6

Endnotes

1 CT23599, CT23619, Lowe

2 CT23620, Lowe

3 CT23550, CT23576, Heuschkel 4 CT23599, Lowe

5 CT23599-60, Lowe

6 CT23600, Lowe; CD4837 folios 35-36, letter Pollard & Brincat

companies' auditor board 23/6/80

2.45 MANOR, General Leroy Joseph

2.45.1 General Leroy Joseph Manor volunteered to give evidence to the

Commission. He was interviewed by the Commission in the course of its

inquiries in the United States in January 1985.

2.45.2 General Manor was born on 21 February 1921. In 1942 he

commenced his military service as an aviation cadet. He had a highly

distinguished military career and served in the Second World War, the

Korean War and the Vietnam War. He retired as a Lieutenant-General on

1 July 1978 holding the post of Chief of Staff of the Pacific Command.

He then worked for the American government as its representative in the

negotiation of military leasing arrangements with The Philippines.^ At

the time he gave evidence to the Commission, he was Vice President of the 2

Retired Officers Association, Alexandria, Virginia, U.S.A.

- 213 -

2.45.3 Fhile General to nor was working in Hawaii, Admiral E.P. Yates

[2.76] contacted him and told him he was employed by the Nugan Hand Bank

[2.106]. He suggested that a person with managerial skills such as those

of General Manor could be utilised by the Nugan Hand Group.® In early

1979, while General Manor was living in The Philippines, Admiral Yates

again contacted him and told him that Messrs F.J. Nugan [2.1] and

M.J. Hand [2.2] were travelling to The Philippines for the International

Congress on New Enterprise (1ICONE1) on 24-29 June 1979 [3.6.14] and that

he should meet them. General Manor travelled to Manila and had an 4

informal meeting with Messrs Nugan, Hand and Admiral Yates.

2.45.4 After attending the ICONE conference, Admiral Yates contacted

General Manor who was then living in Florida, and offered him a position

with the Nugan Hand Bank in The Philippines. Admiral Yates told General

Manor his expenses would be paid if he travelled to the Nugan Hand

International Conference to be held in Sydney in October 1979 [3.6.13].

Admiral Yates also told General Manor that in Sydney he would meet

Mr D.E. Beazley [2.7] a well respected banker who was to be one of the

main executives in the organisation. General Manor attended the

conference, which he found to be well conducted, and was asked by

Mr Nugan to give an address. General Manor's address criticised the lack

of organisational structure in the Nugan Hand Group and suggested that a

decision be made to attempt to clarify it. After the conference Mr Nugan

offered General Manor a position with the Nugan Hand Bank for two years

based in The Philippines. General Manor agreed to work for one year and

at its end reconsider his position. ® He was to receive US$3 600 per

month in salary plus US$1 000 per month in discretionary expenses.^

2.45.5 In The Philippines, General Manor, together with Mr W.P. Gregory

[2.26], tried on behalf of the Nugan Hand Group to develop joint business

ventures between companies there and in other parts of the world. In

evidence to the Commission, General Manor stated he never successfully

completed a trade transaction while employed by the Nugan Hand Bank.®

2.45.6 General Manor was told of Mr Nugan's death by Mr G.T. Shaw

[2.65] who was in Manila at the time.^ Being concerned about the

- 214 -

financial status of the organisation he attempted to contact both Messrs

Beazley and Hand."*"** Mr Hand travelled to The Philippines and reassured

General Manor that the finances of the company were sound."*""*" Later,

Mr Δ.Η. Wong [2.74] visited Manila and expressed his concern about the

ability of the Nugan Hand Bank to repay its depositors. As a result of

this General Manor successfully requested the repayment of a deposit to 12 '

one of his clients. He then tried unsuccessfully to contact

Mr Beazley who was in London negotiating the purchase of London Capital

Securities Ltd [2.111], By the beginning of April 1980, General Manor

had decided to resign and return to the United States. However, he

thought at that time that he would return to The Philippines and work for

the Nugan Hand Bank if the problems were solved."*·"*

Endnotes 1 1 1

1 CT24641-42, Manor; CD1526 folios 673-74, JTF final report 2 CT24638, Manor; CD1135 folio 1, JTF ROI Manor 24/11/82 3 CT24642-44, Manor; CD1135 folios 1-2 4 CT24644-45, Manor; CD1135 folio 1 5 CT24645-46, Manor

6 CT24648-49, Manor; CD1135 folio 2 7 CD6862 folios 15-16, Manor letter of appointment 18/10/79 8 CT24651-52, Manor

9 CT24656-57, Manor

10 CT240657-58, Manor 11 CT24659, Manor

12 CT24659-61, Manor

13 CT24658, CT24661, Manor

2.46 McARTHUR, John

2.46.1 Mr John McArthur was born in England on 20 December 1923 and

currently resides in Hong Kong where he is employed as managing director

of a Hong Kong based printing company. Before joining the Nugan Hand

Group he was managing director of a large construction company. His only

employment in connection with merchant banking was as a junior management

trainee in 1941."*"

2.46.2 Mr McArthur was employed by Mr M.J. Hand [2.2] on 7 February

1977 after being introduced to him by Mr Douglas Sapper, an army

- 215 -

2

associate of Mr Hand. Mr McArthur commenced working for Nugan Hand

(Hong Kong) Ltd [2.94] as an account executive seeking deposits for Nugan

Hand Ltd [2.97], the Nugan Hand Bank [2.106] and Nugan Hand (Hong Kong)

Ltd."^ He also became involved, through Mr C.L Collings [2.15], in 4

establishing back to back letters of credit for trading operations.

2.46.3 As a result of Mr Michael Laloe leaving the employ of Nugan Hand

(Hong Kong) Ltd, Mr McArthur took over the task of trade services in Hong

Kong. He, in fact, became Managing Director of Nugan Hand Trade Asia Ltd

[Appendix B] which, after the Bangkok conference of January 1978 [see

3.5.43], became responsible for the coordination of all trade

5

inquiries. Mr McArthur also dealt with Alnav Trade Asia (a nominee

company of Nugan Hand Nominees Ltd)® and Far West Aircraft Spares.

Both these companies were responsible for buying and selling aircraft and

spare parts for distribution around the world.^

2.46.4 Mr McArthur was signatory of a number of bank accounts and in

the absence of Mr Collings, would participate in management decisions.

In January 1979 he became interested in trade with China and made several

trips there in an endeavour to establish a trade relationship. Between

the time Mr Collings left Nugan Hand (Hong Kong) Ltd in late 1979 and the

time Mr Hand took over, Mr McArthur and Mr G.A. Courtney-Smith [2.17]

acted as caretaker managers but had no authority to do more than 'mind

the shop1

2.46.5 A meeting of the Nugan Hand Bank directors on 31 January 1980

resolved that Mr McArthur be instructed that all deposits to the Bank be

placed on the Asian Qirrency Unit market and securities given to the Q

client or held by Mr McArthur on the client's behalf.

2.46.6 In March 1980 Mr McArthur was approached by Mr Hand and asked to

take over the complete running of the Hagan Hand Group in Hong Kong. He

did so on the assurance that the company was solvent. Mr Courtney-

Smith said that in April 1980 he was contacted by Mr McArthur who

informed him of difficulties concerning the repayment of depositors'

funds and the inability to get satisfactory answers to inquiries directed

- 216 -

to the Nugan Hand Group executives in Australia. Mr Courtney-Smith

advised Mr McArthur to go to the Hong Kong authorities and explain the

situation."*·"*" In early May 1980 Mr McArthur spoke to Mr Hand telling

him he proposed to resign from all the positions he held within the Nugan

Hand Group. Or 23 May 1980 Mr McArthur dismissed all staff and

subsequently offered his services on a voluntary basis to the Hong Kong

authorities to assist them with their inquiries concerning the Nugan Hand 12 group of companies.

Endnotes 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2

1 CT22910, McArthur

2 CD7153 folio 42, McArthur resume

3 CT22912-3 McArthur; CD10823 Commission ROI McArthur 14/8/84 4 CD10823

5 CD10823

6 CD6562 folio 3, List of Nugan Hand Nominees Ltd nominee

companies

7 CD6491 folio 112, Record of conversation CAC/McArthur

30/8/80

8 CT22094, Courtney-Smith

9 CD4968 folio 13, NHL minutes 1980

10 CD6491 folio 114

11 CT22095, Courtney-Smith

12 CD6491 folio 123

2.47 MCDONALD, Walter Joseph

2.47.1 Mr Walter Joseph McDonald volunteered to give evidence to the

Commission. He was interviewed by the Commission in the course of its

inquiries in the United States in January 1985.

2.47.2 Mr McDonald is a United States citizen born on 20 September

1925. During World War II he served with the United States Marines in

the Pacific and was decorated. He is a professional economist and from

1952 until he retired in 1979 was employed by the United States Central

Intelligence Agency. Between 1972 and 1977 he was Head Officer for

Economic Research and was involved in the establishment of the United

States Economic Energy Department. In that department he held the

- 217 -

position of Principal Assistant Secretary for Internal Affairs as well as

serving on the National Foreign Intelligence Board.^ After resigning

he formed his own consulting group called McDonald & Associates T 2

Inc.

2.47.3 While attending a conference in Bali in July 1979, Mr McDonald

was introduced to Mr F.J. Nugan [2.1] by Dr G.J. Pauker [2.54]. At

Mr Nugan's invitation he travelled to Australia to view the Nugan Hand

Group operation. After discussing the operation and the Nugan Fruit

Group, Mr Nugan offered Mr McDonald a position as an economic

consultant. In an interview with the Joint Task Force, Mr McDonald said

that Dr Pauker 1vouched for the credibility of the Nugan Hand operation,

as did the Bank of New South Wales ... As a result [he] signed a

contract1 of employment. One of the documents supplied by Mr McDonald

to the Commission was a letter dated 24 July 1979 from Mr Nugan to

Mr McDonald outlining his terms of employment. Those terms included a

salary of US$120 000 per annum, use of company credit cards and payment

of office expenses which were not to exceed US$40 000 per annum.

Mr McDonald was to be a 'special adviser1 available exclusively to

Messrs M.J. Hand [2.2] and Nugan, or, at their request, adviser to other

executives in the Group. In addition Nugan Hand recognised that

Mr McDonald would from time to time, 'wish to exercise the right of

"private practice" in respect of an assignment or fee from a client, 4

independent of anything you do on behalf of our Group1.

2.47.4 Mr McDonald said that 1 following his return to the US [he] 5

opened a Nugan Hand office in Annapolis', Maryland. Later he

travelled to Canada to investigate the feasibility of an oil drilling

scheme. He also accompanied Mr Nugan to The Philippines to carry out a

management study of a proposed investment in the Santa Innes iron mine.

Mr McDonald decided that the transaction would be feasible if it were

government backed. Mr McDonald believed the Nugan Hand Group invested

only about $150 000 in the mine with the financial aspects being handled

by Mr G.T. Shaw [2.65].6

2.47.5 In October 1979, Mr McDonald attended the Sydney conference held

by Nugan Hand International [see 3.6.13]. At this conference both he and

- 218 -

Mr D.E. Peazley [2.7] were introduced to the other executives within the

Nugan Hand Group. Py late 1979 both Messrs McDonald and Beazley had

commenced a systematic review of the Group. According to Mr McDonald it

was obvious to both of them 'that in many instances the wrong type of

personnel had been employed as few had very little if any banking

experience, and that many aspects of the Group's operations should be

reviewed'.^

2.47.6 It has been alleged in the press that Mr McDonald was involved

in the Nugan Hand refugee resettlement program. In an interview with the

Joint Task Force in 1982 Mr McDonald denied any involvement other than

when in Thailand he once dined with Messrs Hand, Beazley, R.L. Attkisson

[2.4] and a person involved in refugee resettlement programs in the

United States.®

2.47.7 In his evidence to the Commission Mr McDonald said Mr Hand had

told him he had become an Australian citizen but wished to retain his

United States passport and was concerned about the legal problems

involved. Mr McDonald referred him to a friend, Mr W.E. Colby [2.14],

Mr Nugan later employed Mr Colby's legal firm, Reid & Priest to research g

some international taxation inquiries.

2.47.8 In late 1979 to early 1980 the Nugan Hand Group was negotiating

the purchase of London Capital Securities Ltd [2.111], Mr McDonald told

the Commission that he accompanied Mr Nugan to England for negotiations

and was present when discussions were held with Lloyds."1 "0 Following

the death of Mr Nugan, Mr Beazley contacted Mr McDonald about the

proposed purchase of London Capital Securities Ltd. He advised

Mr Beazley of the possible financial problems in the Nugan Hand Group and

said there would probably not be enough available funds for the purchase

to continue."1 " ' 1 '

2.47.9 By January 1980, Mr McDonald was working on a full time basis

assessing the feasibility of a number of different projects for the

Group. He was given assurances by Mr Hand of the continuing viability of

the Nugan Hand Group but Mr McDonald felt that this was not the case. As

- 219 -

a result, he ceased working for the Group and claims to be still owed for 12 services and expenses.

Endnotes 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2

1 CT24671, McDonald; JTF report p 673 2 CT24672, McDonald

3 CT24674-75, McDonald; CD1118 folio 6 , JTF ROI McDonald 19/11/82 4 CD11524 folio 2

5 CT24676, McDonald; CD1118 folio 7 6 CT24681-83, McDonald; CD1118 folio 7; CD1250 folio 4368 7 CT24688-90, McDonald; CD1118 folio 8-9 8 CD1118 folio 10

9 CT24299-300 Yates; CT24707-08, McDonald 10 CT24687-88, CT24690, McDonald (Mr McDonald did not specify to which entity he was referring when he named 'Lloyds'.); CD1118 folio 8 11 CD1118 folio 10

12 CT24709 McDonald; CD1118 folios 10-11

Profile 2.48 has been deleted.

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i . ‘ ' : . ;■··.- λ. '

- ■ r ■ .·:,ί

* I ; .·■·■.'. ■ ’ ·,■■■■ . ■ .

: . ■ 1'

.

·■ ■ : ' -,

. : : τ ■; . r

3 c

.

- 223 -

2.49 MORISSET, Brian Keith

2.49.1 Mr Brian Keith Morisset did not give evidence before the

Commission. The information herein relies solely upon documents produced

to the Commission, including material provided by other investigative

bodies.

2.49.2 Mr Morisset was born on 12 December 1948 in Adelaide, South

Australia. He studied land brokerage at university standard, passing

examinations in 1972 and continued with courses relating to finance and

life insurance. Mr Morisset spent six years as a bank officer (resigning

in 1972) and four years as a licenced broker and real estate agent.

Between 1975 and 1979 he conducted his own company, B.K. Morisset

Nominees Pty Ltd which sold life insurance."*"

2.49.3 Mr Morisset replied to a Nugan Hand Group advertisement placed

in The Bulletin on 6 February 1979 [Appendix D], In March 1979 Mr J.M.

Gilder [2.25] offered him a position in the Nugan Hand Singapore (Pte) 2

Ltd [Appendix B] office and he accepted. He arrived in Singapore on

20 April 1979 and was thereafter paid a retainer of A$2 000 per month

plus commission. Mr Morisset was informed by Mr G.R. Steer [2.68], his

supervisor, that his duty was to get in touch with the Australian

business community in Singapore and advise them of the manner in which

the Nugan Hand Group could assist internationally in the areas of trade,

law, tax, offshore banking and general business advice.3

2.49.4 In September 1979, Mr Morisset was issued with an employment

pass by the Immigration Department of Singapore. Oie pass stated he was

the general manager of F.A. Neubauer Management (Pte) Ltd [Appendix B].

He subsequently learned that this company had a management agreement with

- 224 -

4

Nugan Hand Singapore (Pte) Ltd. Mr Morisset selected the oil support

industries as an area in which to actively seek deposits. He claimed in

an interview with the Singapore Police Force to have about 50 clients who

had deposited approximately US$500 000 with the Nugan Hand Bank, Cayman

Islands, between April 1979 and April 1980.5

2.49.5 Mr Morisset's employment with the Nugan Hand Group ceased with

the placement of the companies into liquidation. His present occupation

is unknown. * 1 2 3 4 5

Endnotes

1 CD10524 folios 12-14, B.K. Morisset job application; CD4536

folio 49, Singapore Police ROI Morisset 2 CD4536 folio 49

3 CT20394-96, Gilder; CD4536 folio 50 4 CD4536 folio 50

5 CD4536 folio 52

2.50 MURPHY, Robert Michael

2.50.1 Mr Robert Michael Murphy did not give evidence before the

Commission. The information herein relies upon the evidence of other

witnesses, and upon documents produced to the Commission in the course of

its inquiry including material supplied by other investigative bodies.

2.50.2 Mr Murphy was born in Jesup, Georgia, United States on 6 January

1949. He is a Bachelor of Business Administration (Management) from the

University of Georgia and was a licensed real estate agent in Georgia,

United States.·*·

2.50.3 Mr Murphy arrived in Australia in December 1971. While in

Australia he worked -at Harpoon Harry's restaurant and Die Texas Tavern

restaurant in various positions, commencing as a barman and cook and

rising to assistant manager. During this period, he was an employee of

Mr M.B. Houghton [2.35]. He returned to the United States in December

- 225 -

1973 and had a variety of financial interests in tars and restaurants.

After leaving Australia, Mr Murphy maintained his friendship with

Mr Houghton who visted him when in Georgia. Mr Murphy said Mr Houghton

paid for his honeymoon (being a trip to Sydney, in January 1978) as a 2 wedding present.

2.50.4 In June 1979, Mr Murphy was contacted by Mr Houghton who offered

him a position with the Nugan Hand Group in Saudi Arabia. Mr Murphy

accompanied Mr Houghton to Saudi Arabia to 'look at the situation

there1. They then travelled to New York where Mr Murphy met Mr M.J. Hand

[2.2] who also offered him a position with the Group. Soon after this,

the Saudi Arabian office of the Nugan Hand Bank (Cayman Islands) was 3 opened. Documents obtained by the Commission show that Mr Murphy was

employed from 26 August 1979 at a gross salary of US$25 000 per annum.

This was paid into his cheque account at the F.A. Neubauer Bank [2.109]

in Hamburg, Germany until April 1980. He also received US$500 per month

living expenses.^

2.50.5, Mr Houghton said in evidence that he, and later Mr Murphy,

leased and lived in a house at Alkobar which was also used as an

office."’ Mr Houghton said Mr Murphy managed the day to day activities

of the Alkobar office, although he (Mr Houghton) would have been regarded

as the senior staff member.®

2.50.6 Mr Murphy's duty was to attract deposits. He collected deposits

in local or United States currencies, took these to the local bank or to

a money changer, and converted them into United States dollar travellers

cheques or bank cheques. These cheques were then sent by courier to

Nugan Hand Management Services (Pte) Limited [Appendix B] in Singapore

marked for the attention of Mr Hand who would telex to acknowledge

receipt. The depositor would then be issued with a certificate of

deposit.^ Mr Houghton said Mr Murphy would also have sold nominee

companies (most of which were registered in the Cayman Islands) for tax

minimisation purposes, while working for Nugan Hand in Saudi Arabia.®

2.50.7 Mr Murphy told the Joint Task Force that between September 1979

and April 1980 he sent US$2.5 million to Mr Hand in Singapore and that

- 226 -

there were about 200 clients in Saudi Arabia, most of whom were

construction workers. Mr Murphy said Mr S.K. Hill [2.33] told him the

money went from Singapore to Hong Kong where it was used to buy

9

securities on the international money market. Mr Murphy told the

Corporate Affairs Commission that the Nugan Hand Saudi operation offered

interest rates on deposits of between ten and 16 per cent with the bulk

being at around 12 to 13 per cent. Until February 1980 the office

accepted about $30 000 per week and from February 1980 to April 1980 the

office accepted $100 000 per week in deposits.^ Mr Murphy told the

Joint Task Force that he received one half per cent commission on all

deposits while he worked in Saudi Arabia.

2.50.8 Mr Houghton said Mr Murphy had a $25 000 share in a joint

venture to produce and franchise ice cream in Saudi Arabia. The other

partners were a Jordanian living in Saudi Arabia and 1 Douglas Scott1, a

pseudonym used by Mr Hand. Mr Houghton said he owned a portion of

Mr Murphy's share in the joint venture and that he, Mr Murphy or Mr Hand

signed the name Douglas Scott to the agreement. The venture failed due

to the collapse of Nugan Hand and Mr Murphy lost his money when he fled 12 from Saudi Arabia.

2.50.9 In late 1979/early 1980, Mr Joseph N. Williams, a student at the

University of Georgia with Mr Murphy, Mr Robert Hatchell who was a former

work colleague of Mr Murphy's and Mr Rex Shannon, a friend of a Nugan

Hand client in Saudi Arabia were hired to work in Saudi Arabia for Nugan

Hand. In 1980, Messrs Hatchell and Williams opened the Jeddah office of

Nugan Hand and Mr Shannon worked in Alkobar.·*·^

2.50.10 Following Mr F.J. Nugan's death [2.1], Mr Murphy as well as most

other Nugan Hand overseas representatives including Messrs Hatchell and

Williams were summoned to a meeting in Singapore convened by Mr G.R.

Steer [2.68]. Mr Murphy told the Corporate Affairs Commission that at

that meeting, Messrs Tan Choon Seng [2.71], steer and Houghton all

assured him that Price Waterhouse & Co had audited the books of the

overseas offices and found them to be sound. While at this meeting,

Mr Murphy received a phone call from Mr Hand who told him to return to

- 227 -

Saudi Arabia and resume deposit taking and to destroy the client and

office records kept in Alkobar. Mr Murphy then returned to Alkobar and 14 did as he was told by Mr Hand.

2.50.11 Mr Houghton said when he telephoned Mr Murphy from Washington

D.C. in March 1980, he was told of an article in an English language

newspaper in Saudi Arabia which described the collapse of Nugan Hand

(Hong Kong) Ltd [2.94] and its inability to pay out depositors.

Mr Houghton said Mr Murphy told him that their Saudi Arabian depositors

were already agitating for repayments.15 Mr Houghton suggested that

Mr Murphy leave Saudi Arabia immediately due to the severity of that

country's criminal laws. Mr Murphy was also advised by Mr R.W. Gehring

[2.23] by telephone, to depart Saudi Arabia.* 1 2 3 4 5 6 7 8 9 ® It appears Mr Murphy

paid off what depositors he could with the money on hand in the office,

used US$5 000 to purchase air tickets for Messsrs Williams, Shannon,

Hatchell and himself and left Saudi Arabia with the Saudi Arabian police 17 already in pursuit of them.

2.50.12 Mr Murphy arrived in London where he met Mr Houghton. He and

Mr Houghton proceeded from London to Sydney. It is thought that

Mr Murphy may have gone via Hamburg to redeem the contents of his

F.A. Neubauer Bank cheque account. After arriving in Australia,

Mr Murphy stayed in Mr Houghton's apartment. (Mr Hand was also residing

there at the time.) He worked at the Bourbon and Beefsteak bar and

restaurant from about August 1980 until early 1981 when he returned to

the United States.1®

Endnotes

1 CD3038 folios 23-28, Houghton evidence to CAC 2 CD10859 folios 11-13

3 CD10859 folio 13

4 CD7093 folio 54, Murphy-NHB client file; CDS615 folio 55, 5 CT22530, Houghton

6 CT22531, Houghton

7 CD1250 folios 746-49

8 CT22576

9 CD1250 folios 746-49

- 228 -

10 CD3053 folios 9-18; The currency was not specified but, as mentioned at 2.50.6 deposits were collected in either local or United States currencies.

11 CD1250 folios 763-64

12 CT22578, Houghton

13 CD10859 folio 14

14 CD1165 folios 61-3

15 CT22570, Houghton

16 CD1165 folio 55

17 CT21244; CD1165 folio 57

18 CD10859 folio 17

2.51 NEEDHAM, John Charles

2.15.1 Mr John Charles Needham was a practising solicitor of the

Supreme Court of New South Wales until 31 July 1979. (He notified the

New South Wales Law Society that he would no longer be practising after

that date.) He later lived for some time in Queensland and at the time he

gave evidence was a grazier in New South Wales."1 " He was introduced to

Mr M.J. Hand [2.2] by Mr B.W. Calder [2.11] in April/May 1973 and he met

Mr F.J. Nugan [2.1] several weeks later. Both Messrs Hand and Calder

were directors of Secured Income Real Estate (Australia) Ltd ('SIRE')

[2.118], Mr Needham was asked to join its board. He subsequently

obtained a controlling shareholding in SIRE in September/October 1973 and 2

became its Chairman and Managing Director.

2.51.2 In late 1973 Mr Needham, together with Messrs Hand and Nugan,

became a director of North Australian Rubber Mills Ltd ('NARM') [2.113].

About the same time SIRE took over PNB Rubber and Plastic Industries Pty

Ltd ('PNB') [2.117] which gave it a controlling interest in NARM.

According to Mr Needham SIRE's acquisition of NARM involved a cash

payment to Mr Nugan by Mr Needham of $182 000.4 Mr Needham later moved

to Brisbane to become further involved with NARM but sold his interest in 5

that company in February 1978 and his interest in SIRE in 1979.

2.51.3 Mr Needham stated in evidence before the Commission that from

1976 'normal commercial transactions' occurred between SIRE, NARM and

Yorkville Nominees Pty Ltd [2.108], SIRE and NARM deposited funds with

Yorkville Nominees Pty Ltd and Rigan Hand Ltd [2.97]; the largest amount

- 229 -

of funds on deposit at any one time was $250 000. SIRE and NARM did not

receive security for these deposits.®

2.51.4 SIRE and NARM also borrowed funds from Yorkville Nominees Pty

Ltd. These funds were secured by way of commercial bills of exchange

[3.2.9 ]. When Nugan Hand Ltd went into provisional liquidation the

current bills of exchange securing the indebtedness of SIRE and NARM were

held in a safe custody account conducted at the ANZ Bank, Pitt & Hunter

Streets, Sydney on behalf of the Wing On Bank. The bills of exchange

were presented by the Wing On Bank on maturity but were subsequently

dishonoured. The Wing On Bank commenced leoal proceedings against SIRE

in respect of the dishonoured bills of exchange and obtained judgment in

the Supreme Court of New South Wales. At the time of writing this report

SIRE had lodged an appeal against the Court's decision, but the appeal η had not been heard [see also 4.1.53-4.1.54].

2.51.5 In January 1978 Mr Needham wrote to Mr E.C.Louey [2.40]

appointing Nugan Hand (Malaysia) Sdn. Bhd. [Appendix B] as buying agents

for NARM.® Mr Louey however was unable to recall any significant 9

business being done as a result of that appointment.

2.51.6 In July 1973 the company Nugan Hand Needham Ltd (later Nugan

Hand Ltd [2.97]) was established. Messrs Needham, NUgan, Hand and

Calder, became inaugural directors of that company on 9 July 1973."*·®

Although no particular role was initially proposed for Mr Needham in the

company, he understood there would be one in due course. Mr Needham was

of the opinion that Mr Nugan wished to use his (Mr Needham's) name. He

remained a director of the company until 28 June 1974. He said that his

only positive act, while a director of Nugan Hand Needham Ltd, was to

obtain a licence as an investment representative under the Securities

Industry Act 1970 (N.S.W.J.11

2.51.7 Mr Needham was also a director of NHN Nominees Pty Ltd (later

Nugan Hand (Dealers) Pty Ltd [2.93]) and NHN Management Pty Ltd [2.92]

between July 1973 and June 1974. In both of those companies Mr Needham 12 played only a nominal role.

- 230 -

2.51.8 Hr Needham went into partnership with Mr Nugan in the law firm,

Nugan Needham, between April 1976 and November 1978. The partnership was

formed so that Mr Needham could satisfy the conditions for continuation

of his solicitor's practising certificate in New South Wales, as he was,

during that period, a resident of Brisbane. Mr Needham told the

1 -3

Commission he believed that the firm did not have any clients [see

3.4.44-3.4.47],

2.51.9 In 1977, Mr Needham was invited by Mr Nugan to become a director

of the Nugan Hand Bank [2.106], Mr Nugan suggested to Mr Needham that he

act as a consultant in the Hong Kong office of the Nugan Hand Group, in

order to examine the Bank's operations and determine whether or not to

accept the offer of employment. Mr Nugan asked Mr Needham to establish

proper books of account and statutory records for the Group's Hong Kong

companies, to liaise with its solicitors and accountants there, and to

improve the administrative procedures of the Hong Kong office. Mr

Needham commenced work in Hong Kong in March 1977 and remained there

until mid May 1977.^

2.51.10 Mr Needham's role in Hong Kong was in relation to the

administrative, legal and accounting side of the Group's operations. He

did not collect deposits, but was involved in the above activities in

relation to the deposit taking company, Nugan Hand (Hong Kong) Ltd

[2.94]."^ He gave directions to Mr W.H. Areson [2.3] and others to

write up the books of account and prepare proper statutory records for

all the Hong Kong companies.^ He also caused to be prepared a

brochure which was 'an introduction to the Swiss Pacific Group'.

2.51.11 Mr Needham was initially impressed with the office in Hong Kong

and the quality of the staff, particularly Admiral E.P Yates [2.76], and

anticipated taking up Mr Nugan's offer of employment. However, Mr

Needham told the Commission, the records of Nugan Hand (Hong Kong) Ltd,

when written up by Mr Areson, appeared to indicate a shortfall of

approximately US$3 million [2.3.6], Mr Needham brought this shortfall to

the attention of Mr Nugan, who contended that it was largely due to . 19

intercompany indebtedness. Mr Needham consequently decided against

- 231 -

joining the Nugan Hand Bank and returned to Australia. He was, however,

prepared to assist Messrs Nugan and Hand in a personal capacity from time

to time as requested.20

2.51.12 In May or June 1977 Mrs G. Lovatt [2.43] flew to Brisbane with a

number of documents which she delivered to Mr Needham. She was told by 21 Mr Hand they were books of account requiring audit. Mr Needham said that he expected these records to be collected by a Nugan Hand

representative. However, the records remained with Mr Needham until

13 August 1984 and were produced to the Commission on that date. The

records contain correspondence and statutory information on the overseas 22 companies.

2.51.13 In June 1977, at the request of Mr Nugan, Mr Needham went to

Singapore to assist Mr Hand who was experiencing administrative problems

in the newly established Nugan Hand Group office. He made further visits

to the offices in Hong Kong in July 1977 and Hong Kong and Singapore in

September 1977. The Group paid for Mr Needham's expenses in Hong Kong

and some of his travelling expenses and he charged them for services 23

rendered by him in Hong Kong and Singapore.

2.51.14 In July 1977, at Mr Nugan* 1 2 3 4 5 6 7 8 9 s request, Mr Needham became a

director of the Nugan Group Ltd, Griffith [2.114] in ret tra for which he

received director's fees. He chaired several public meetings for that 24

group of companies, and resigned shortly after August 1977.

Endnotes

1 CT22404, Needham; CD5715 folio 72, Needham evidence to NSW

Supreme Court re Wing On Bank v SIRE 2 CT22407-08, Needham 3 CT22410, Needham

4 CT22411, Needham

5 CT22412, CT22415, Needham 6 CT22413, Needham

7 CT21841, Hill; CT22413, Needham; CT25004, O'Brien 8 CD6374 folios 25-26, Letter Needham/Louey 24/1/78 9 CT22163-64, Louey

- 232 -

10 CD10243 folio 7, CAC information 11 CT22408, CT22412, Needham 12 CT22411-12, Needham 13 CT22412-13, Needham 14 CT22415, Needham

15 CT22424-25, Needham 16 CT22420, Needham

17 CT22430, Needham; CD3205 18 CT22426, Needham

19 CT22420, CT22423, Needham 20 CT22425-26, Needham 21 CT23029-30, Lovatt 22 CT22416-18, Needham; 0310805, Documents relating to NHHK

produced by Needham 23 CT22425-26, CT22432, Needham 24 CT22433, Needham; CD2203 folio 12, JTF ROI Needham 20/2/81

2.52 NUGAN, Kenneth Leslie

2.52.1 Mr Kenneth Leslie Nugan was born on 4 August 1940 and is the

brother of Mr F.J. Nugan [2.1]. He resides in Griffith and at the time

of giving evidence was employed as a consultant to the Nugan Group Ltd

[2.114] ,1

2.52.2 On 29 May 1978 a criminal prosecution was commenced by the

Corporate Affairs Commission of New South Wales against Messrs F.J.

Nugan, K.L. Nugan, and others. They were charged with 'conspiracy' in

relation to the affairs of the Griffith based Nugan Group Ltd. On

5 November 1979 a prima facie case was found against both Messrs F.J. and

K.L. Nugan.2

2.52.3 The publicity surrounding the charging of the Nugan brothers was

extensive and resulted in bad publicity not only for the Nugan Group Ltd

in Griffith but also for the Nugan Hand Group. A strategy paper for

Nugan Hand International [Appendix B] was prepared on 5 June 1978 in

which a public relations program was discussed, and the suggestion made

that the Nugan Group Ltd change its name to Nugan Fruit Group Ltd to

avoid confusion with Nugan Hand Ltd [2.97].^

2.52.4 Mr K.L. Nugan subsequently pleaded guilty to three charges of

fraudulent appropriation of property by a director, under Section 173 of

- 233 -

the Crimes Act 1900 (N.S.W.), and was convicted by the Hon. Mr Justice

Roden of the New South Wales Supreme Court on 4 August 1982. He was

sentenced to six months imprisonment on each count to be served

4

concurrently. Mr K.L. Nugan told the Commission that he did not

borrow any money from Mr F.J. Nugan to pay for his defence because at the

beginning of the proceedings Mr F.J. Nugan said: Ί want to control this

defence, it is the only way a group defence can be run and I will pay

everybody's costs provided that the defence goes the way I want it to

go' In evidence to the Commission, Mr S.K. Hill [2.33] said that

over a period of three years from 1977 approximately $760 000 was

transferred from Nugan Hand Ltd to the Nugan Group Ltd using companies

under the control of Mr F.J. Nugan. Mr K.L. Nugan told the Commission

that there were two different flows of money from Mr F.J. Nugan; one to

meet the costs of the defence and one by way of unsecured short term

financing to the Nugan Group Ltd. At the date of Mr Nugan's death,

1 $400 000 odd* 1 2 3 4 had been expended on the defence and $230 000 on short

term loans to the Nugan Group Ltd. In relation to these funds legal

proceedings were commenced by the liquidator of Illarangi Investments Pty

Ltd [2.85] and subsequently settled after the payment into court of

$231 000 by Nugan (Griffith) Pty Ltd.7

2.52.5 On 27 January 1980, Mr K.L. Nugan identified his brother's body

after it had been found in his car near Lithgow, New South Wales.

Mr K.L. Nugan subsequently proceeded to Mr F.J. Nugan's house at

Vaucluse, according to him, to search for a suicide note.® On the

following day he attended the offices of Nugan Hand Ltd, ostensibly to

look for a suicide note and to remove his 'personal and court case

defence d o c u m e n t s ' [ T h e events that occurred in the weeks following

the death of Mr F.J. Nugan are described in Part 3 Sections 8 and 9.]

Endnotes

1 CT18715, K.L. Nugan

2 CD2199 folios 48, 118-27, 136 District Court file re K.L. Nugan 3 CD8463 folios 15, 21

4 CT18626 Lee; CD2611, K.L. Nugan Sentence

- 234 -

5 6

7

CT20940, CT23963, K.L. Nugan CT15721-22, Hill

CT23959, K.L. Nugan; CD5674 folios 23-25 Short Minutes of Order Nugan (Griffith) Pty Ltd vs Illarangi Investments Pty Ltd; folio 56, Affidavit CT20923-24, CT20930, K.L. Nugan

CT20920, K.L. Nugan 8 9

2.53 OWEN, John Desmond

2.53.1 Mr John Desmond Owen was born in England on 17 January 1937. He

served for 13 years with the Royal Navy leaving in 1968 to become Systems

Manager attached to the Decca Navigation Company. In 1970 he emigrated

to Australia and joined Pioneer Concrete Ltd starting as yard labourer

and becoming manager of the main city plant. In 1971 Mr Owen formed a

development company responsible for the acquisition of land and

negotiations for development approvals. The company was liquidated in

1975 -and he joined L.J. Hooker Pty Ltd in their Sydney commercial

division.·'"

2.53.2 Mr Owen was recruited to the Nugan Hand Group by Mr J.M. Gilder

[2.25] as the result of a newspaper advertisement. He was appointed

trade representative for the Nugan Hand Bank [2.106] (then known as Swiss

Pacific Bank and Trust Company) in Thailand for a period of three years 2 from 24 February 1977. His duties were to advise and liaise with

clients and potential clients of the Bank regarding the services offered

in the areas of international banking, trust and trade services. He was

also expected to solicit deposits for the Bank.^ Mr Owen was appointed

Managing Director of Nugan Hand (Thailand) Ltd [Appendix B] in August

1978.4

2.53.3 Mr Owen initially received, as remuneration, US$2 000 on

28 February 1977 from Nugan Hand Ltd and further payments of US$2 000 on

2 April 1977 and US$1 000 on 2 May 1 9 7 7 . In March 1978 Mr Owen's base

salary was raised from US$1 500 to US$2 000 per month and in October 1978

the minutes of a purported meeting of the board of directors resolved

that Nugan Hand (Thailand) Ltd would pay him an additional US$1 000 per

month for accommodation costs and expenses.®

- 235 -

2.53.4 Mr Owen was involved in a number of transactions for the Nugan

Hand Group. Hie first of these occurred in May 1977 when a client wished

to raise a loan of US$500 000 to complete the construction of a hotel.

This transaction was subsequently completed by Mr C.L. Collings [2.15].

The second, which took place in September/October 1977, was the sale of

114 000 shares in the Jalaprathan Cement Company on behalf of Kaiser

Cement & Gypsum Corporation. This generated for Nugan Hand (Thailand)

Ltd about US$70 000 commission. The third transaction, which occurred in

1978, involved the sale of all of Kaiser Cement & Gypsum Corporation's

shares in Jalaprathan Cement Company for just over US$8 million. This

generated a commission of approximately US$400 000 for the Nugan Hand

Group. Mr Owen received about US$75 000 in commission for these

, 7

transactions of which US$60 000 was paid outside Australia.

2.53.5 In April 1979 Mr Tan Choon Seng [2.71] visited the Nugan Hand

(Thailand) Ltd office. In a memo to Messrs F.J. Nugan [2.1] and Gilder

he said that Mr Owen lacked the discipline to perform the duties

generally expected of a manager, and that Mr Owen's main line of business

did not appear to be deposit taking.® Mr CWen was the subject of

another memo written by Mr Gilder in May 1979 stating that he (Mr Owen)

had been responsible for bringing in fees of US$60 000 and US$300 000.

Mr Gilder also said in the memo that Mr Owen was an extremely critical

person and voiced his criticisms without restraint for which he had been

reprimanded. Mr Gilder added that Mr Owen had steadfastly refused to

make any efforts in the deposit gathering area. He concluded Mr Owen had

no future with the Nugan Hand Group unless he attempted to correct his

attitude.®

2.53.6 In his book 'Sleight of Hand', published during 1983, Mr Owen

stated that he met Mr Nugan in Sydney in late May 1979 and was informed

that he had three months in which to bring in some deposits or he would

be dismissed. Mr Owen returned to Bangkok and was informed in mid July

1979 that from the end of that month the Singapore office would no longer

provide operating costs for Nugan Hand (Thailand) Ltd.

2.53.7 Mr Owen said Mr Gilder rang him on 20 August 1979, informed him

that Mr Nugan wanted him to leave Bangkok and offered him a job in

- 236 -

Singapore.^ On 23 August 1979 the offer to Mr Owen of a salary of

US$3 000 per month, four weeks annual leave and full facilities and

privileges attaching to a senior executive position was confirmed. On or

about 22 August 1979 a telex to Mr Nugan stated that Mr Owen acknowledged

he had to leave Nugan Hand (Thailand) Ltd and would do so before

31 August 1979. A telex on 23 August 1979 to Mr Gilder from Mr G.R.

Steer [2.68] stated that Mr Owen would be able to take his holidays from

25 August 1979.12

2.53.8 In a letter dated 10 September 1979 to Mr Nugan, Mr Owen

requested US$100 000 as compensation for wrongful dismissal from the

Thailand office. Mr Gilder responded on behalf of Mr Nugan and said that

following the meeting in Sydney in May 1979 [2.53.6], Mr Owen had not

secured any bank clients in the specified time nor had he ceased making

derogatory comments about the organisation. It had been resolved to

request his departure from the Bangkok office and offer him a transfer to . 13

Singapore. An arrangement was finally reached between Mr Owen and

the Nugan Hand Group and an agreement was signed on 27 September 1979

pursuant to which Mr Owen received a car and US$12 000 and was to receive

commission on any transaction initiated by him and completed before

31 December 1979. It was also agreed that Nugan Hand (Thailand) Ltd pay

for airfares and transportation of household effects to Sydney provided

this occurred before 31 December 1979. Mr Owen agreed to transfer his

shareholdings from Nugan Hand (Thailand) Ltd and F.A. Neubauer Management

Ltd [Appendix B] and resign his directorships in both those

. 14

companies.

2.53.9 In November 1979 Mr Owen was visited at his new place of work by

Mr Gilder who indicated to Mr Owen that he had breached his part of the

agreement as he was still openly criticising the Nugan Hand Group and

therefore the Group was not going to pay the balance of commission due to

him. Mr Owen then arranged for a notice of debt to be served on Nugan

Hand Ltd for the amount of $10 598 on 24 December 1979. In January 1980

Nugan Hand Ltd was prepared to settle the claim in exchange for a total

and unconditional release from the agreement with Mr Owen on or before 15 25 January 1980. In the book 'Sleight of Hand' Mr Owen says

- 237 -

Mr Gilder offered him $10 000 for this release which he turned down.16

Correspondence of 29 January 1980 from Mr M.J. Moloney [2.48], solicitor

for Nugan Hand Ltd, to Mr Oven's solicitors states that Nugan Hand Ltd

disputed there were any funds outstanding to Mr Oven.11

Endnotes

1 CD7153 folios 16-17,27,38, Oven resume 2 CD10179 folio 32, Letter Ward certifying Owen is trade

representative 7/2/77 3 CD1308 folio 130-31, JTF ROI Owen 4 CD9984 folio 63, Letter Gilder/Oven 11/8/78 5 CD1893 folio 14, Account at Chartered Bank, Bangkok 24/2/77

folio 52, Memo Hand/Gilder re payments for Owen 2/3/77 folio 56, Declaration that Owen received $2000 cash from NHL 28/2/77 folio 57, Memo Gilder/Hand re payments to Owen 24/2/77 6 CDS8 folder 1, folio 61, Telex Glider/Cwen re CWen's expenses

11/10/78; CD1893 folio 29, Letter Gilder/Owen re salary 15/2/78 7 CD1308 folios 4, 6, 130

8 CD9984 folios 16-17

9 CD6242 folios 8-10, Memo Gilder/Nugan and Hand re Owen's

attitude to NH Group 24/5/79 10 CDS 8 folder 2 folio 130, Memo Owen/Hough ton re Ibraham Khoja

28/5/79; CD9634 folios 171-72, 175 11 CD9634 folios 175-78 12 CDS8 folder 2 folio 39, Telex Gilder/Owen re transfer to

Singapore 23/8/79, folio 41, Telex Steer/Gilder re Oven's holiday 23/8/79, folio 44, Telex/cable Gilder/Nugan re Oven's Singapore terms 13 CDS8 folder 2 folios 16-18, Telexes re Oven being removed from

Thailand 17/9/79, folios 25-26, Letter Owen/Nugan re Oven's 'Compensation for Wrongful Dismissal' 10/9/79 14 CD9984 folios 4-5

15 CD6243 folios 11, Letter Gilder/Hand re Owen's claims for moneys 10/1/80, folio 12, s.222 Companies Act demand 24/12/79 16 CD9634 folio 180

17 CD6158 folio 10, Letter Moloney/NHL re Oven v NHL 29/1/80

2.54 PAUKER, Dr Guy Jean

2.54.1 Dr Guy Jean Pauker volunteered to give evidence to the

Commission. He was interviewed by the Commission in the course of its

inquiries in the United States in January 1975.

- 238 -

2.54.2 Dr Pauker was born on 15 September 1916 in Bucharest,

Romania.·*· He moved to the United States in 1948 and later gained a 2

doctor of philosophy degree from Harvard University. He is a United

States citizen and now resides in California, the United States. ^

Dr Pauker has been associated with the Rand Corporation (a United States

government controlled company) since 1956, first as a consultant when he

was teaching at Harvard University, then after 1960 as a senior staff

member. In 1983 at his request, he became the senior resident

consultant.^

2.54.3 Admiral E.P. Yates [2.76] told the Commission that Dr Pauker was

a recognised authority in the field of United States strategic and

objective plans in the Pacific, and had been involved in Indonesia when

President Suharto succeeded President Sukarno. Admiral Yates said

Dr Pauker was a teacher at the University of California and was 'quite

knowledgeable of the people ... events and ... structure of every major 5 nation in the Pacific'. Dr Pauker told the Commission he first met

Admiral Yates when he travelled to Hawaii to brief Admiral Gayler on a

forthcoming trip to Indonesia. A friendship then developed and in 1977

Admiral Yates told Dr Pauker that he was working for the Nugan Hand Bank

and asked him if he wanted to make a deposit. Dr Pauker declined this

invitation to invest.®

2.54.4 Dr Pauker, in an interview with members of the Joint Task Force

in December 1982, said he met Mr M.B. Houghton [2.35] in the early 1970s,

having been introduced by Admiral Yates. Mr Houghton then introduced him

to Sir Paul Strasser and Mr John Charody. Dr Pauker said that

Mr Houghton displayed kindness in inviting him to use the facilities of

his penthouse and to dine at the Bourbon and Beefsteak bar and

restaurant.^

2.54.5 In 1979 Admiral Yates asked Dr Pauker if he would attend the

International Congress on New Enterprise ('ICONE') [3.6.14], which was to

be held in June 1979 in Manila, and talk about government in South East

Asia promoting joint ventures. By coincidence, Dr Pauker was to attend

an energy conference in Bali, Indonesia in July 1979 and agreed to attend

- 239 -

the ICONE conference.® Admiral Yates said that at the conference

Mr F.J. Nugan [2.1] asked Dr Pauker if he would assist him in becoming

involved in the oil industry in Indonesia. This request was made because

Dr Pauker was a good friend of General Alimurtopo, assistant to President 9 Suharto. Dr Pauker told the Commission that as an employee of the

Rand Corporation and as a matter of principle he regarded it as improper

to use his friendship and influence with government officials in such a

way. The Commission accepts Dr Pauker's evidence in this regard.

While in Manila, Dr Pauker was invited by Admiral Yates to attend a

cocktail party held by Mr Nugan. Present at this party was General

L.J. Manor [2.45]. Dr Pauker told the Commission he was impressed by the

presence of General Manor and Admiral Yates at the party."*"®

2.54.6 Following the ICONE conference, Mr Nugan attended the Bali

conference where he met Mr W.J. McDonald [2.47] and other important

businessmen and academics. It has been alleged in the media, notably The

Sydney Morning Herald of 26 September 1980, that Dr Pauker was a Central

Intelligence Agency ('C.I.A.') linked Rand Corporation employee who

arranged introductions for Mr Nugan to Indonesian government

officials.11 Dr Pauker denied arranging these alleged introductions

and told the Commission that the Rand Corporation is not linked to the 12 C.I.A. There is no evidence before the Commission which contradicts

Dr Pauker*s evidence concerning these allegations and, the Commission

accepts Dr Pauker's evidence.

2.54.7 After the Bali conference, Dr'Pauker flew to Sydney and visited

the Nugan Hand offices at Mr Nugan's request.11 In mid 1979

Mr McDonald, who was by then employed by the Group, contacted Dr Pauker

and asked if he would speak about business opportunities in South East

Asia, at a conference of the Nugan Hand representatives in October

[3.6.13]. Mr McDonald told Dr Pauker that apart from himself, Mr D.E.

Beazley [2.7], Admiral Yates and General Manor would be attending the 14 conference. Dr Pauker said that at this conference he was asked, for

a second time, to join the Nugan Hand Group and become the international

relations adviser. Mr Nugan said:

- 240 -

'You are an authority on South East Asia, you could be our

international relations adviser and you could introduce us ... you knot; everybody.1

hr Pauker refused to rake such introductions to the Croup and did not

accept the offer of employment. He said no serious negotiations were

entered into, no remuneration was discussed and no contract was signed at

the time of the conference. To his great annoyance, however, he was

already described in a brochure as the Nugan hand Group consultant on IS international affairs. "

2. 5 4 . 8 in late 1975 when Pr Pauker and his wife entertained fir Nugan

in Washington, P.C. Nr Nugan invited Dr Pauker and his family to visit

Australia over Christmas 1979. Pr Pauker arrived in Australia with his

wife and son and stayed near t ' r Nugan's father's home in Queensland where

Nr Nucan chartered an aeroplane and a helicopter for Dr Pauker and his

son to go scuba diving. He said the stay in Australia was most

unenjoyable, due mainly to Mr Nugan's behaviour^’ [see also 3.7.1],

2.54.9 Dr Pauker said that he sought advice concerning the Nugan Band

Group from a Nr D. Leinhach. Dr Pauker described Mr Leinbach as a Wall

Street banker of the best kind. He had been a partner in the very

distinguished Lehman Brothers firm and had, in that capacity, been

appointed financial adviser to the Indonesian oil company Pertamina.

Mr Leinbach had, on the basis of reports from his Australian contacts,

advised Dr Pauker to be very cautious. He said he did not understand how

the Group made its money and he said what he did not understand he did

not trust. Nore significantly, Nr leinbach said that he had the

impression that the Croup was engaged in a pyramid game. He said it was

not a pyramid of money hut a well known 'con' game of pyramiding people

which he found intriguing. According to this process, once people with

impressive credentials were appointed, others were likely to accept. He

considered that to be what the Australians were doing to Dr Pauker and

other appointees. He further said that Nr Beazley had an absolutely

first class reputation on Wall Street, and was considered one of the best

young bankers in the business.^

- 241 -

Endnotes

1 CT24522, Pauker

2 CT24522, CT24533, Pauker 3 CD9047 folio 2, Pauker's address 4 CT24480-81, Pauker

5 CT24258, Yates

6 CT24484-85, Pauker; CD1250 folio 4362, JTF CD1250 folios 4364-66 ROI Pauker 7/12/82 7 8 CT24486-87, Pauker

9 CT24259, Yates

9a CT24528, Pauker 10 CT24490, Pauker

11 0)8882 folio 56

1.2 CT24527, Pauker 13 CT24495-97, Pauker 14 CT24502-04, Pauker 15 CT24512, CT24529, Pauker; CPA]51, U.S.

liaison; CD1250 folio 4365

government agencies -

IP. CT24521-24, Pauker 17 CT24516-18, Pauker

2.5=; PAYNE, Michael John

2.55.1 Mr Payne did not give evidence before the Commission, nor was he

the subject of other witnesses' evidence. Thus, the information herein

relies solely upon documents obtained by the Commission.

2.55.2 Mr Michael John Payne was born in New Zealand on 28 November

1937. He js a registered accountant and a qualified member of the

Institute of Cost and Management Accountants and the Chartered Institute

of Secretaries and Administrators. He held a variety of jobs

specialising in the area of takeovers, mergers, reconstructions and

financing.^

2.55.3 Mr Payne answered an advertisement placed in The Financial

Review on 31 January 1979 and subsequently attended an interview on

20 March 1979.2 On 5 July 1979 Mr J.M. Oilder [2.25] invited him to

join the Nugan Hand International group of companies and represent them

in The Philippines. His primary role was to attract clients who would

benefit from the professional international banking and trade service

- 242 -

facilities offered by the Nugan Hand Group. He was paid a salary of

A$2 000 per month and commenced employment in August 1979.^

2.55.4 Mr Payne was with the Nugan Hand Group until its collapse, a

period of approximately seven months. A file note indicates he

introduced two clients in that time and had difficulty in adapting to his 4

position and relating to his colleagues. * 2 * 4

Endnotes

1 CD585 folios 64-66, Letter and resume from Payne answering

advertisement 2/2/79 2 CD585 folios 64-66

3 CD585 folios 69-70, letter Gilder/Payne re Payne's application 5/7/79 4 CD585 folio 8, Note listing Payne's achievements in three months and a list of frustrations

2.56 PITTARD, Denis John

2.56.1 Mr Denis John Pittard was born on 8 December 1945.^ In 1974

he was introduced to Messrs F.J. Nugan [2.1] and M.J. Hand [2.2] in the

context of some land dealings at Brunswick Heads and Byron Bay. The

introduction was made by Mr Robert Honan, who was at that time, in 2

partnership with Mr Pittard in the 'insurance business'. Sometime

later Mr Nuaan asked Mr Pittard if he would act as an agent for Nugan

Hand Ltd [2.97] and solicit deposits.^

2.56.2 From 1974 until 1980 Mr Pittard introduced clients to Nugan Hand

Ltd and received a commission for so doing. It was initially agreed that

he would be paid at the rate of one per cent for secured deposits and two

per cent for unsecured deposits, though this was later varied to half a

per cent for secured deposits and one per cent for unsecured

4

deposits. In 1978 to 1979 Mr Pittard was employed on a full time

basis for approximately six months and paid a retainer of about $150 or

$200 per week, which was to have been in addition to his commissions.

However he was not paid commissions during this period and accordingly

- 243 -

resigned on 28 June 1975.J In late 1979 Mr S.K. Hill [2.33] asked

Mr Pittard to resume his role as an agent soliciting deposits for Nugan

Hand Ltd. Mr Pittard agreed, on the basis that he would again be paid

commissions on deposits. He continued in this capacity until shortly

after the death of Mr Nugan in January 1980.

2.56.3 According to Mr Pittard, an amount of about $31 000 shown in the

records of Yorkville Nominees Pty Ltd [2.108] as a loan to him, in fact

represents the commissions earned by him during the period 1974 to 1980.

Mr Pittard said these commissions were paid to him in cash or by cheques

drawn on Yorkville Nominees Pty Ltd, Leasefast Pty Ltd [2.87] or

Illarangi Investments Pty Ltd [2.85].^

2.5(i.d In the course of Ids employment with the Nugan Hand Group,

Messrs Nugan and Hill asked Mr Pittard to approach some of the 'Labor

Party councils' to solicit deposits, because they knew of his association

with the Australian Labor Party. Three councils approached by Mr Pittard

did decide to invest with Nugan Hand Ltd. These were Leichhardt

Municipal Council, Marrickville Municipal Council and South Sydney

Municipal Council. [A detailed account of these transactions is given

in the Commission's Interim Report No.2.] Other depositors introduced to

Nugan Hand Ltd by Mr Pittard included South Sydney Junior Rugby League

Club Ltd, Randwick labor Club Ltd, the Jewel group of companies and

Marrickville RSL Club Ltd.®

2.56.5 On 8 June 1978 Mr Pittard was appointed a director of Illarangi

Investments Pty Ltd. He told the Commission he became a 'nominal

director' at Mr G.F. Princat's [2.9] request after the resignation of

Mr Peter Lavcock. Mr Pittard did not attend any meetings of directors of

Illarangi Investments Pty Ltd or carry out any duties of a director other

than to sign the 1979 annual company return. He said he had no other

knowledge of this company.^® This company was placed into liquidation

on 4 June 1980.

2.56.6 On 27 January 1980, following the news of Mr Nugan's death,

Mr Pittard accompanied Mr Hill to Mr K.L. Nugan's [2.52] unit and later

- 244 -

wont to a meeting with Mr Gillett of the Jewel group of companies

[3.8.6-3.8.10], On the following day Mr Pittard accompanied Mr Hill to

the Nugan Hand Ltd offices. [The events of that day have relevance to

the concealment and destruction of records described in Part 3 Section 9.] * 1

Fndnotes

1 CT1601P, Pittard

2 CT15977, Pittard; ΓΤ15513, CT21508, Hill; CD3653 folio 1,

Pittard evidence to CSC; CD3058 folio 3, Pittard evidence to CAC 1.4/12/81 3 CT15997, CT16D18, CT20659, Pittard 4 CT16018, CT20659, Pittard 5 CT16P16-16a, CT20659, CT20665-69, Pittard; CP4987 folio 14,

Pittard's wage record 13/7/78-28/12/78 6 CT20659, Pittard

7 CT2P660, CT20670-73a, Pittard; CD47S7 folio 3,

Yorkville-Provisional Liquidators papers - loan balances 29/4/RD; CD.5519 folio 37, Yorkville ledger - D.Pittard loan 8 CT16018, Pittard

9 CD3058 folio 26

ID CT20664, Pittard; CD3058 folio 4

2.57 POLLARD, Warwick Michael

2.57.1 Mr Warwick Michael Pollard is a public accountant and at the

time he gave evidence was practising under the name Warwick Pollard &

Company. Mr Pollard completed his accountancy examinations at the

Technical College of New South Wales in 1969 and became registered as a

public accountant, company auditor and company liquidator in 1971. After

completing the course at Technical College, Mr Pollard worked as an

accountant for a number of Sydney firms including Charles J. Berg (<

Partners where he met Messrs C.L. Heuschkel [2.30] and G.F. Brincat

[2.°].^ He worked there for 18 months doing mostly accounting and tax

work for private companies. In 1972 Mr Pollard commenced his own

practice.^

2.57.2 In 1974, Mr Pollard purchased a small practice in Narwee, a

Sydney suburb, in partnership with Mr Heuschkel. Later, Mr Brincat

- 245 -

commenced with Heuschkel & Pollard as an employee and was subsequently

made a partner. In 197Γ- the partnership opened an office in Sydney and

the practice in Narwee was sold. The city practice continued as a

partnership between Messrs Pollard, Heuschkel and Brincat until 3 Mr Heuschkel left in May 1978. It then continued with Messrs Pollard

and Brincat as sole partners. The Narwee practice had several

companies on the books when the partnership took it over in 1974. These

companies included Carlyle Investments Ptv Ltd, whose director/manager

was Mr M.J. Hand [2.2]. It was through Mr Pollard carrying out

accountancy work for Carlyle Investments Pty Ltd, that he met Mr Hand who

in turn introduced Mr Pollard to Mr F.J. Nugan [2.1]. Subsequently

Mr fiuqan asked Mr Pollard to perform general accountancy work in relation

to companies of which he and Mr Hand were directors and eventually

Mr Nugan asked Mr Pollard to audit the accounts of Nugan Hand Ltd

[2.97].5

2.57.3 Mr Pollard said when Nugan Hand Ltd was first incorporated

another firm of auditors were appointed but had later resigned. He

understood that Nugan Hand Ltd had been set up for approximately three

months and that no audits had been conducted during that time. For this

reason he did not consider it necessary to contact the firm that had

previously been nominated to act as the auditors. Mr Pollard said that

as his firm had begun to do most of the general accountancy work for

Mr F.J. Nugan's companies it seemed appropriate that they should also do

the audit work.®

2.57.4 Mr Pollard stated that his 'audit experience since practising in

partnership was not particularly great. My own practice predominantly

consisted of small private family companies involving only a small amount

of balance sheet verification work1.^ Mr Pollard commenced audit work

at the ace of 17 but always under supervision and he did not sign the

auditor's certificate. Mr Pollard said he had never signed an audit

certificate in respect of a public company before commencing the audit

work for Nugan Hand Ltd.®

2.57.5 Mr Pollard said Mr Brincat completed the audit work for the

accounts of Nugan Hand Ltd. Mr Pollard signed the annual accounts audit

- 246 -

certificate because Mr Brincat was not yet a partner and therefore not

entitled to sian. However, Mr Pollard admitted he had not looked at

Mr Brincat's working papers and so was in no position to hold the opinion

expressed above his signature (which was that the Nugan Hand Ltd accounts

for 1974 gave a true and fair view of the state of the Group's affairs)

because he himself had not done the necessary work. Mr Pollard said that

when he sinned the accounts he did not know whether they were true or

not. He said the documents were probably just put in front of him and he 9

signed them as he relied completely on Mr Brincat.

2.57.6 In 1977, Mr Brincat raised a query about the nature and extent

of the hills of exchange being used internally by the Nugan Hand Group

[3.5.6], Mr Brincat mentioned it to Messrs Heuschkel and Pollard who

decided to seek legal advice without telling Mr Brincat. A professional

acquaintance of Mr Feuschkel's, Mr Phillip Finn, suggested Mr J.L. Aston

as an appropriate lawyer for the purpose of giving advice relating to

corporate matters."*^ On 16 September 1977 Messrs Heuschkel and Pollard

spoke to Mr Aston, who said that he may have a conflict of interest

because Mr Nugan was his client. He referred then to the firm of

Mr Michael Fosser, solicitor, and specifically to Miss Dianne Truss of

Mr Posser's firm, to obtain independent legal advice."^ Messrs

Heuschkel and Pollard subsequently visited Miss Truss who said that she 12

would consult the authorities in order to provide a formal opinion.

Following the conference with Miss Truss, Mr Nugan contacted Messrs

Pollard and Heuschkel and told them that he objected to them seeking

legal advice. A second meeting with Mr Aston was ultimately held and was

attended by Messrs Pollard, Brincat and Nugan. They subsequently agreed

to be nuided by Mr Aston who advised that a note should be included in

the accounts referring to the use of internal bills. Neither Miss Truss

nor anv other independent solicitor was ever seen again by either 13

Mr Pollard, Mr Heuschkel or Mr Brincat concerning this matter.

2.57.7 After Mr Nugan's death, Mr Pollard decided to complete the audit

for Nugan Hand Ltd as at 31 January 1980 and sought the assistance of the

accountancy firm, Coopers and Lybrand. By arrangement with that firm,

Mr D. Lowe [2.44] assisted on a subcontracting basis, in consultation

- 247 -

with Mr Robert Lynn, a partner of the firm. The 1980 audit took almost 14 two months to complete.

2.57.8 Mr Pollard said that by a letter dated 18 February 1980, his

firm made a formal written report to the Corporate Affairs Commission of

suspected breaches by Nugan Hand Ltd of Section 167 of the Companies 15 Act. A Corporate Affairs Commission Special Investigator, Mr Purdon,

gave evidence before the Commission that the report by Mr Pollard was the

catalyst for the Corporate Affairs Commission's investigation of the

Nugan Hand group of companies.16

Endnotes

1 CT23310, Pollard; CT23555, Heuschkel 2 CT23283, Pollard

3 CT23554, Heuschkel

4 CT23284, RxLlard

5 CT23285, CT23309, Pollard 6 CT23285, Pollard

7 CT23284, Pollard

8 CT23309, Pollard

9 CT23316-21, Pollard; CD10015 folio 102, CAC information 10 CT23551, CT23563-64, Heuschkel 11 CT23566, Heuschkel 12 CT23493, Truss

13 CT23286-88, Pollard; CT23493, Truss; CT23567-68, CT23868, Heuschkel; CT23872, Brincat 14 CT23299, Pollard; CT23600, Lowe 15 CT23295-96, Pollard 16 CT19700, CT19702-05, Purdon

2.58 PRIOR, Anthony James

2.58.1 Mr Prior neither gave evidence before the Commission nor was he

the subject of other evidence. The information herein relies solely upon

material produced to the Commission in the course of its inquiry.

2.58.2 Mr Anthony James Prior was born in Ehgland on 10 January

1934.* 1 11 In 1978 he was Managing Director of Modular Investments Ltd, an

investment company incorporated in Hong Kong and Chairman of Modular 2

Developments Sdn. Bhd. situated in Kuala Lumpur.

- 248 -

2.58.3 In August 1978 Mr Prior corresponded with Mr G.R. Steer [2.68]

indicating he and Mr G.H. Hill [2.32] of Hill Rogers & Associates were to

be considered partners in all financial matters introduced to Nugan Hand 3

Ltd [2.97] from the South East Asian area by either of them.

2.58.4 In September 1978 Nugan Hand International * 1 formed an

association' with Mr Prior and agreed to assist his company, Modular

Developments Sdn. Bhd. in obtaining finance for its property

developments. Nugan Hand International was to receive 50 per cent of any 4 net profit earned.

Endnotes

1 CD2015 folio 3, Personal Data Sheet - Prior 2 CD2015 folio 20, Letter Gilder/Prior re association with NHI

8/9/78, folio 30, Letter Prior/Steer re agreement with G.H. Hill 1/8/78 3 CD2015 folio 30

4 CD2015 folios 20-21

2.59 PULGER-FRAME, Ronald Adam

2.59.1 Mr Ronald Adam Pulger-Frame was born in Scotland on 6 February

1928. According to the biographical data he supplied to the Nugan Hand

Group, Mr Pulger-Frame served with the Royal Navy and later with the

Royal Air Force towards the end of World War II. In 1947 he worked for

the Glasgow firm of Montgomarie Stobo & Co Ltd and was involved in sales

of oil and industrial parts. After three years he went abroad in the

employ of Duncan Brothers & Co Ltd, a tea estate management company in

North East India where he was responsible for the superintendence of a

group of tea estates. In 1967 Mr Pulger-Frame moved to Hong Kong where

he joined Kasho (H.K.) Ltd as administration manager. He remained in

this position until he joined Deak & Co. (Far East) Ltd ('Deak & CO.') in

1970. He was appointed assistant manager, specializing in foreign

exchange, money market operations and investment advice.1

2.59.2 In an interview with the Hong Kong Official Receiver on 4 June

1981, Mr Pulger-Frame stated: 'Deaks had a system which was devised by me

249

to circumvent Australian Exchange Regulations'. When this statement

was put to him by the Commission, Mr Pulger-Frame said the system was

devised by the then Managing Director of Deak & Co in Hong Kong and that

he (Mr Pulger-Frame) had implemented the system. In the first instance

with the approval of the Reserve Bank of Australia, Deak & Co. opened an

external Australian dollar bank account in Sydney. The account was for

the stated purpose of repatriating Australian currency from Hong Kong and

selling such currency, the proceeds of which were remitted in United

States dollars from Australia to bank accounts held by Deak & Co. in the

United States.^ Ostensibly for this purpose, Mr Pulger-Frame would

regularly enter Australia during the period of his employment with Deak &

Co., carrying suitcases full of Australian currency collected from Hong

Kong. The ANZ Bank was notified in advance that a courier was on the way

with Australian currency— from Hong Kong. The purpose stated by

Mr Pulger-Frame however, was t.o disguise the fact that frequently he or

some other representative of Deak & Co., once in Australia, would collect

other Australian currency from an agent and add this to the funds carried

into Australia. The total amount of currency would then be sold to the

ANZ Rank and the proceeds remitted to Deak 1 Co. U. i'ed "r.Ues accounts,

thereby exporting Australian currency without the knowledge of the

Reserve Bank of Australia.^ It would anpear that at all times the ANZ

Bank was under the impression that all the currency had been brought into

Australia and not added to here.

2.5°.3 Mr Pulger-Frame in an interview with the Official Receiver Hong

Kong, said he met Mr C.I.. Collings [2.15] before the Nugan Hand Group's

involvement in Pong Kong. Mr Pulger-Frame said he was working for Deak &

Co. when Mr rollings approached that company regarding a transaction

involving Vietnamese piastres. Although this transaction did not

eventuate, it left Mr Ceilings with some idea of Mr Pulger-Frame's

capabilities. Following the establishment of the Hong Kong office,

Mr Ceilings suggested to Mr Pulger-Frame that he leave Deak & Co. and

work for the Nuoan Hand Group. In Hong Kong Mr Pulger-Frame had

previously met Mr F.J. Nugan [2.1] who had also suggested that he join

the 'new, young, more aqoressive Group'. About a year later, in June

1976, Mr Pulger-Frame resigned his position at Deak & Co. On 19 July

2

- 250 -

1976 Mr Pulger-Frame commenced employment as Manager, Nugan Hand (Hong

Kong) Ltd [2.94].^

2.59.4 Although Mr Pulger-Frame was given the title of Manager, he was

employed to attract deposits from the public on behalf of either Nugan

Hand (Hong Kong) Ltd or the Nugan Hand Bank [2.106]. He estimated*>that

80 per cent of the deposits he collected went to the Nugan Hand Bank

because deposits collected on behalf of Nugan Hand (Hong Kong) Ltd

attracted a withholding tax on the interest earned. The same did not

apply to deposits with the Bank.®

2.59.5 Mr Pulger-Frame had several Australian clients and also used a

former agent of Deak & Co. residing in Australia to consolidate clients' 7

funds which Mr Pulger-Frame then deposited with Nugan Hand Ltd.

2.59.6 Mr Pulger-Frame said he became disenchanted with the Nugan Hand

Group in 1977 having concluded that funds were being taken from all

aspects of the operation without due regard to the distinctions between

companies. He also became aware that a large number of deposits were

placed on the Asian Currency Unit market at lower interest rates than the

Group was paying the clients. In addition there was commission payable

to himself as well as the payment of overriding commissions. He agreed

that it appeared the Nugan Hand Group 'were going out backwards'.®

2.59.7 In late 1977 or early 1978 Mr Pulger-Frame was searched at Hong

Kong Airport for drugs. He later recounted this event to Mr Nugan in

Sydney. He said that Mr Nugan went 'white, absolutely white, all the

blood drained away from him'. Mr Nugan first took Mr Pulger-Frame to see

Mr J.L. Aston who was then a solicitor practising in Sydney and then to

see Mr M.B. Houghton [2.35]. Mr Pulger-Frame said that Mr Nugan

literally 'sat at Mr Houghton's feet' and requested his assistance.

Mr Pulger-Frame interpreted this as indicating the great respect that 9

Mr Nugan had for Mr Houghton's abilities.

2.59.8 During his employment with the Nugan Hand Group, Mr Pulger-Frame

and his wife were directors of Baia Do Oriente Limitada, a company

- 251 -

incorporated in Macau which Mr Pulger-Frame believes was a vehicle used

by Messrs Nugan and M.J. Hand [2.2] to avoid taxation."*"®

2.59.9 In a memo of 21 July 1976, Mr Collings stated that

Mr Pulger-Frame was employed on a salary plus commission.11 Ihe Wing

Oi Bank was instructed to transfer HK$5 000 to Mr Pulger-Frame’s account 12 at the Chartered Bank each month. In October 1978, Mr Pulger-Frame

was in dispute with Mr Collings over the brokerage schedules and expenses

owed to him. A compromise was reached and in a memo to Mr Hand, on

17 October 1978, Mr Collings stated that for the 'special services that

Ron has performed1 he would receive a total of US$23 320."*"^ Six weeks

later Mr Pulger-Frame resigned from the Nugan Hand Group and his

resignation was accepted by Mr Collings to take effect as from 1 December 14 1978.

Endnotes 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4

1 CD7153 folio 41, Pulger-Frame's resume 2 CD4625 folio 40, Official Receiver Hong Kong ROI Pulger-Frame 4/6/81 3 CT22683, Pulger-Frame 4 CT22689, Pulger-Frame 5 CD4625 folios 3-4

6 CT22693, Pulger-Frame 7 CT22696, Pulger-Frame 8 CT22701, Pulger-Frame 9 CT22707-08, Pulger-Frame 10 CT22713, Pulger-Frame

11 CD4645 folio 6, Memo Collings/Nugan, Hand and Hill re

Pulger-Frame's appointment 21/7/76 12 CD1984 folios 144, 172, Letter Collings/WOB re Pulger-Frame Account 22/8/78 13 CD4645 folios 2-3, Memo Collings/Hand re clarification of

certain items with Pulger-Frame 17/10/78 14 CD6959 folio 88, Memo Collings/all staff re Pulger-Frame's resignation 1/12/78

- 252 -

2.60 RUSH, John Robert

2.60.1 Mr John Robert Rush was born on 31 May 1950 in Sydney. He holds

a first class honours degree in Economics from the University of Sydney.

From 1973 to 1977 he worked as a Research Graduate for the Research

Department of the Reserve Bank of Australia."1

2.60.2 Mr Rush commenced employment with Nugan Hand Ltd [2.97] on

15 August 1977 and worked full time until April 1978, receiving a salary 2

of approximately $15 500 per annum. Mr Rush was responsible for the

writing of regular weekly and monthly economic newsletters such as the

Nugan Hand International Australia Report and the Nugan Hand

International Review. These newsletters were forwarded to Hong Kong to 3

be distributed to clients of the Nugan Hand Group. Mr Rush also gave

general economic advice and performed ad hoc tasks at Mr F.J. Nugan's

[2.1 ] request such as the preparation of statistical reports on general

economic conditions and the preparation of demographic data in connection 4

with the formation of companies by Mr Nugan. Cti 9 September 1977 the

Corporate Affairs Commission granted Mr Rush a licence to act on behalf

of Nugan Hand Ltd as an investment representative. This licence was

revoked in 1979.8

2.60.3 In April 1978, Mr Rush's company, Rush Economic Research Pty Ltd

entered into a consultancy agreement with Nugan Hand Ltd pursuant to

which the company received an annual retainer of approximately

$18 000.® As a consultant, Mr Rush's employment was initially for only

one or two days per week but by the latter half of 1979 he was attending

the Nugan Hand Ltd office on a full time basis.^

2.60.4 Mr Rush was working for Nugan Hand Ltd at the time of Mr Nugan's

death. Οι 1 February 1980 Mr Rush told Messrs S.K. Hill [2.33] and

G.A. Edelsten [2.20] that he would prefer not to have any further

connection with Nugan Hand Ltd. The consultancy agreement between Rush

Economic Research Pty Ltd and Nugan Hand Ltd was then terminated by

mutual agreement.8 At present Mr Rush is employed as a senior manager 9 of a merchant tank.

- 253 -

Endnotes

1 CD7153 folio 20, Rush resume

2 CT21127, CT21130, Rush; CD4987 folio 25, NHL salary for Rush 3 CT21132-33, CT21148, Rush; CD470, 'Nugan Hand International Review1 4 CT21133, Rush

5 CD2313, CAC application for licence - J. Rush 6 CT21128, CT21136-37, Rush; CD332 folio 1, Rush - personnel

information

7 CT21132, Rush

8 CT21136-37, Rush

9 CT21130, Rush

2.61 RUTTER, Haydn M.

2.61.1 Mr Haydn M. Rutter did not give evidence before the Commission.

The information herein relies upon the evidence of other witnesses and

upon documents produced to the Commission in the course of its inquiry.

2.61.2 In 1979 Mr Rutter and Mr Peter Kandiah were partners in the

Georgetown, Cayman Islands legal practice of Bruce Campbell & Co.

Mr Bruce D. Campbell was a consultant to the practice and Mr Ian

N. Falconer was an associate.1 Mr S.K. Hill [2.33] stated in evidence

before the Commission that the registered office of the Nugan Hand Bank

[2.106] in the Cayman Islands was in the same building as the office of 2 Mr Rutter's legal firm.

2.61.3 Mr Rutter was instrumental in drawing up the Nugan Hand Bank's

memorandum and articles of association. He also arranged incorporation

of Riverstone Investments Ltd, a nominee company requested by Miss E.L.

Thomson [2.72] for transfer to Mr M.B. Houghton [2.35]. Mr G.A.

Courtney-Smith [2.17] told the Commission that before deciding to join

the Nugan Hand Group, he travelled to the Cayman Islands and spoke with

Mr Rutter, who Mr Courtney-Smith described as an attorney briefed and

retained by the Group. He said Mr Rutter assured him that the Nugan Hand

Bank was registered and functioning according to law. He said Mr Rutter

told him of the benefits of the Cayman Islands registered Bank, about the

Bank's confidentiality being protected by law and that the Cayman Islands

- 254 -

4

was a British colony and a tax haven. Admiral E.P. Yates [2.76]

stated in evidence to the Commission that in mid 1977 he and Mr F.J.

Nugan [2.1] travelled to the Cayman Islands to meet Mr Rutter and the

accountants employed by the international accounting firm Price 5

Waterhouse & Co. who were then the accountants for the Nugan Hand Bank.

2.61.4 On 1 July 1976 Mr Rutter was registered as one of the three

shareholders in the Nugan Hand Bank and Trust Company in the Cayman

Islands.6 The other shareholders shown were Mr Kandiah and

7

Mr Campbell. Mr Campbell was also a director of the Nugan Hand Bank

but on 30 January 1978 notified Mr M.J. Hand [2.2] that he was resigning

from his legal firm and as a director of the Bank. In his letter he

recommended that Mr Rutter replace him. This was effected in March 1978

and Mr Rutter remained as a director of the Nugan Hand Bank until the

appointment of a liquidator on 29 April 1980.8

2.61.5 Messrs Campbell, Kandiah and Rutter were all listed as

shareholders of Swiss Pacific Holdings Ltd [Appendix B] on 10 November

1976, and Messrs Kandiah, Falconer and Rutter were listed as the 9 directors of that company. Messrs Campbell, Kandiah and Rutter were

also listed as the three shareholders and directors of Nugan Hand

International Holdings Ltd [Appendix B] on 18 January 1978.10 At a

directors' meeting of Nugan Hand International Holdings Ltd held in

Georgetown, Grand Cayman on 24 January 1978, Mr Rutter was appointed

secretary of that company."*""'" Within the documents in the possession of

the Commission an undated letter of resignation of directorship from

Nugan Hand International Holdings Ltd, signed by Mr Rutter, was

located.^

Endnotes 1 2 3 4 5

1 CD7285 folio 3, Letter Bruce Campbell & Co/Nugan Hand Singapore Ltd 26/7/79 2 CT21640, Hill

3 CD7285 folio 21, Letter Bruce Campbell & Co/Thomson 6/6/79 4 CT22090-91, Courtney-Smith 5 CT24272, Yates

- 255 -

6 CD7675 folio 13, List of subscribers of Nugan Hand Bank & Trust

Company 6/7/76 7 CD7285 folio 3

8 CD7164 folio 5, Letter Peat Marwick Mitchell/G.P. Haddon-Cave 29/4/80; CD7006 folio 9, Letter Bruce Campbell & Co./Hand 12/4/78; CD7006 folio 12, Letter Bruce Campbell & Co./Hand 6/3/78

9 CD11221 folio 4, List of Directors - Swiss Pacific Holdings Ltd; folio 67, Signatures of Campbell, Rutter and Kandiah 10/11/76 10 CD11319 folio 64, List of subscribers of NH International

Holdings Ltd 19/1/78; folio 78, Minutes of meeting of

subscribers of NH International Holdings Ltd 24/1/78 11am 11 CD11319 folio 65, Minutes of meeting of subscribers of NH

International Holdings Ltd 24/1/78 11.30am 12 CD11319 folio 70, Letter Rutter/Directors of NH International Holdings Ltd.

2.62 SAUNDERS, Robert Muir

2.62.1 Mr Saunders did not give evidence before the Commission and was

not the subject of other witnesses' evidence. The information herein

relies upon documents produced to the Commission in the course of its

inquiry including material supplied by other investigative bodies.

2.62.2 Mr Robert Muir Saunders was born on 19 August 1936 in

Australia. He is married and has two daughters."*·

2.62.3 Mr Saunders was employed as Manager, Trade Services of Nugan

Hand Trade Asia Ltd [Appendix B] from 1 April 1979 until 10 January

1980. He received a salary of HK$10 000 per month plus a bonus payable

at the directors' discretion. These were paid into his account with the 2

Hong Kong and Shanghai Banking Corporation.

2.62.4 Documents in the possession of the Commission show that

Mr Saunders obtained from the Nugan Hand Group a personal loan of

HK$35 000 repayable at HK$2 000 per month and that at 15 January 1980, he

owed HK$33 000 of this sum.^ A memo from Mr J. McArthur [2.46] to

Ms Monica Cheung on 11 October 1979 states that the loan of HK&35 000 was

made up of an advance of two months salary (HK$20 000) and an existing

advance of HK$15 000 repayable monthly from November 1979. The memo

suggests that Mr Saunders also received an increase in rental allowance

- 256 -

from HK$5 000 to HK$9 870 from that date. These benefits, were to assist 4

Mr Saunders in establishing himself in Hong Kong.

2.62.5 Mr McArthur told the Corporate Affairs Commission that

Mr Saunders was employed in the general trade area, with Nugan Hand Trade

Asia Ltd. He was also involved in the management of nominee companies,

arrangement of back to back letters of credit for business transacted in

Hong Kong,and the handling of all trade inquiries.^

Endnotes

1 CD10524 folio 99, NH information Saunders 2 CD10524 folios 99, 115-116, Letter of appointment 31/3/79 3 CD10524 folio 87, Memo to E. Thomson re employee personal loans 18/1/80 folio 100, Memo re personal loans 18/1/80

4 CD10524 folios 103, Memo re housing allowance 11/10/79,

folio 114, Letter re financial arrangements for Saunders 1/3/79 5 CD6491 folios 107-35, McArthur evidence to CAC

2.63 SCHULLER, Karl Fritz

2.63.1 Mr Karl Fritz Schuller did not give evidence before the

Commission. The information herein relies upon the evidence of other

witnesses and upon documents produced to the Commission, including

documents produced by other investigative bodies.

2.63.2 Mr Schuller was born on 13 April 1922, in Vienna, Austria."*■

In the early 1970's Mr Schuller and his son, Mr K.H. Schuller, operated

an estate planning business known as Karl F. Schuller & Associates in

Western Australia . In 1976 Mr Schuller through this business assisted a

number of clients including Dr N.B. Scrimgeour and Wilroy Pastoral

Company Pty Ltd in financial dealings with Pacific Continental Ltd [2.99]

and Amish Keats Pty Ltd, an investment company associated with the Nugan 2 Hand Group. Mr Schuller also became involved with Pacific Silver

Commodities, a business name under which Solingen Aust Pty Ltd [2.104]

traded. He acted as a representative for the business at both his 3 Adelaide and Perth offices. Later, Mr Schuller started his own

- 257 -

4

commodity business, Western Silver Commodities. During 1976 and 1977,

Mr Schuller continued his association with the Mugan Hand Group and would 5

often accompany Mr F.J. Mugan [2.1] on trips to Griffith. Mr Schuller

had several clients in the Griffith area, some of whom were introduced to

him by Mr F.J. Mugan [2.1] and by Mr K.L. Mugan [2.52],

2.63.3 For part of 1977, Mr Schuller worked with Mr 17.P. Gregory [2.26]

in Malaysia on behalf of the Mugan Hand Bank [2.106]. In addition, he

formed his own company, Estate Finance Planning Sdn. Bbd. and opened

offices in Kuala Lumpur and Singapore, with his son managing the

Singapore office. ’ According to the Mugan Hand Bank records

Mr Schuller was next employed in the Frankfurt office of Mugan Hand 7

(Deutschland) GmbH [Appendix B] from 7 November 1977. During November

1977, Mr Schuller offered Mr Werner Witthaus the position of office

manager for Mugan Hand (Deutschland) GmbH in Frankfurt. Mr Witthaus was

told that Mr Schuller was the official representative of the Mugan Hand

Group in Frankfurt and in Mr Schuller's absence he (Mr Witthaus) was to

take control. Mr Witthaus accepted the position and moved to Frankfurt

in January 1978.9

2.63.4 In 1978 Mr M.B. Houghton [2.35] visited the Frankfurt office of

the Mugan Hand Group. He was uninpressed and advised Mr Hand to close

the office.9 In February 1979, Mr Schuller's services were terminated

and the Frankfurt office was informed that Mr Schuller was not to carry

on business using the Mugan Hand name. It was suggested in a Mugan Hand

Group minute from Miss E.L. Thomson [2.72] to Mr Hand that Mr Schuller

had obtained DM2.0 000 from a retired police department official on the

pretext that it was a Mugan Hand Bank deposit and then diverted the funds

for his own use. The Commission has been unable to check the

accuracy of this minute. Mr Schuller still resides overseas and his

precise whereabouts is unknown.

- 258 -

Endnotes

1 CD1398 folio 272, AFP details re Schuller 2 CD1398 folios 279-281, Affidavit 19/12/79 3 CD6349 folio 71, Pacific Silver Commodities - miscellaneous documents, Letter Nugan/I. Baillieu & Co. 26/6/74 4 CD1168 folio 30, Report of Western Australian Police 5/6/80 5 CD1250 folios 2971-72, Witthaus statement to JTF 13-16/1/81 6 CD27 folio 49, Nugan Hand notes on Karl Schuller; CD1250

folio 2973; CD6933 folios 246-7, Letter Hand/Nugan 22/12/77 7 CD7178 folio 67, Information re NH (Deutschland) GmbH 8 CD1250 folios 2974-75

9 CT22524, Houghton

10 CD6932 folio 94, NH (Deutschland) GmbH Telex 27/2/79; CD7130 folio 8, Memo Thomson/Hand 1/3/79

2.64 SCOTT-KEMMIS, Leigh

2.64.1 At the time of giving evidence Mr Leigh Scott-Kemmis was a

director of the Australia Bank Ltd. He was previously employed by

CitiNational Securities Corporation Ltd ('CitiNational') [See Part 4

section 7] where at one time he was settlements controller and supervisor

to Mr S.K. Hill [2.33].·*· From 1972 Mr Scott-Kemmis held primary 2

responsibility for the money market division. This position had been

previously occupied by Mr G.R. Young [2.78] who recommended that

Mr Scott-Kemmis succeed him in the position.'* In 1979 Mr Scott-Kemmis

was appointed a full director of the division.'* Corporate Affairs

Commission statutory records list Mr Scott-Kemmis as a director of

CitiNational from 20 February 1981 to 31 March 1981.

2.64.2 CitiNational was used extensively by Nugan Hand Ltd [2.97] when

buying and selling securities. Mr Hill said that one of the two traders

that he dealt with at CitiNational was Mr Scott-Kemmis.^ Mr G.F.

Brincat [2.9] confirmed that Mr Hill dealt with Mr Scott-Kemmis on most

occasions. He also told the Commission that it was his understanding

that Nugan Hand Ltd conducted most of its purchasing and selling of

securities through CitiNational and that Mr Scott-Kemmis had visited the

office on several occasions.®

- 259 -

2.64.3 On 23 September 1976 S.L. Notwist Pty Ltd [2.103] was

incorporated. Nr Hill was a shareholder and director of the company.

During 1977 and 1978 Messrs Hill and Scott-Kemmis used the company for

three bond trading transactions for approximately $ 2 million each.

Finance was obtained from the AHZ Bank for the purchase of the bonds and

the transactions and subsequent profits were recorded through

7

S.L. Notwist Pty Ltd. Mr Hill told the Commission that the

transactions had nothing to do with the Nugan Hand Group and the profits

were divided equally between Mr Scott-Kemmis and himself® [see also

3.4.35],

Endnotes

1 CT24865, Young

2 CD3067 folio 2, Scott-Kemmis evidence to CAC 3 CT24865, Young

4 CD3067 folio 2

5 CT24348-49, Hill

6 CT24112, Brincat

7 CT24358-63, CT24368, Hill 8 CT24364, CT24368, Hill

2.65 SHAW, George Thomas

2.65.1 Mr Shaw was born 21 February 1930 in Barraba, New South Wales.

He received his formal education at The Kings School, Sydney.

2.65.2 He was employed from 1950 to 1959 managing a family retail

business and subsequently he worked as an educational adviser, consultant

with Australian Fixed Trusts, finance and property consultant and, in the

period immediately before joining the Nugan Hand Group, as a property 2

consultant with a Queensland company.

2.65.3 Mr Shaw stated that in 1974 he 'was introduced to Mr Hand by Don

Lysaught, a fellow real estate agent1 2 3 4 5 6 7 8 . In April 1974 he 'accepted an

offer from Mr Hand to work for Pacific Silver Commodities' [2.104] to

market silver bullion.® Mr Shaw had no previous experience dealing in

precious metals.

- 260 -

2.65.4 In the latter part of 1974 when Macquarie Coin Dealers [2.104]

commenced operations Mr Shaw bought and sold coins on behalf of this . 5 6

firm and was paid on a commission basis.

2.65.5 In 1975 he 'became a salaried employee of Nugan Hand Ltd [2.97],

and worked as a public relations officer and investment consultant',

although he had 'no previous experience or qualifications in these

fields'.^

2.65.6 Mr Shaw, who is of I-ebanese descent, told the Commission that in

February 1975 he 'went to Lebanon with a view to establishing an office

for Nuqan Hand Inc. [His] aims were to attract deposits and to promote

Ingold Growth Inc; a company trading in gold and silver bullion'. ®

2.65.7 He returned to Australia in April 1975 without having transacted

any business and visited Lebanon again in June 1975 to participate in

negotiations for the sale of iron ore pellets. This trip was also

q

unsuccessful.

2.65.8 Mr Shaw held directorships of several Mugan Hand Group companies

between 1975 and 1980 (Nugan Hand Ltd, Nugan Hand (Dealers) Pty Ltd

[2.93], Nugan Hand International Holdings Pty Ltd [2.96], Australasian

and Pacific Holdings Ltd [2.80], Naretha Pty Ltd [2.90], Pacific

Continental Ltd [2.99], Solingen Aust Pty Ltd [2.104]) He told the

Commission that Mr Nugan asked him to sign the necessary applications for

directorship in respect of each of the companies. Mr Shaw said he

accepted Mr Nugan's instruction without any hesitation. This included

signing blank forms and, according to Mr Shaw, documents purporting to be

minutes of Nugan Hand Ltd directors' meetings although to Mr Shaw's

knowledge there were never any directors' meetings held.^

2.65.9 According to Mr Shaw, Mr Nugan and Mr S.K. Hill [2.33] often

asked him to sign blank or partially completed internal bills of exchange

in his capacity as a director of Nugan Hand Ltd. He also signed internal

bills on behalf of companies such as Illarangi Investments Pty Ltd

[2.85], or Mars Road Investments Pty Ltd [2.88]('Mars Road Investments'),

- 261 -

even though he was not an officer of either company.11 He said that as

he was asked to sign the documents, he assumed that it was in order for . 12

him to do so. [See paragraphs 5.34 to 5,55 for further information

concerning internal bills of exchange.]

2.65.10 Mr Shaw said his primary role was to attract deposits to Nugan

Hand Ltd.11 VThen Yorkville Nominees Pty Ltd [2.108] ('Yorkville

Nominees') commenced taking deposits in 1976, Mr Shaw said he was

requested to handle deposits from clients and to act upon their

instructions for withdrawals. At the same time Mr Shaw was promoting

Yorkville Nominees as a deposit taking company.1^ Mr Shaw s a i d 6

Ί /e used Yorkville Nominees on the principle of giving anonymity and confidentiality to those people who had funds that were of an obvious nature secretive, or unprepared to expose it, say for taxation purposes.'

2.65.11 Uhile a lower rate of interest was paid on deposits to Yorkville

Nominees, clients had the benefit of anonymity, tax free interest and no

identification being required. In addition, the majority of clients

deposited in cash.16 Mr Shaw described these cash deposits as 'black

money'.17 He also offered clients the benefit of the Croup's 'money

laundering' schemes such as that known as the 'Yorkville contra'.16

[For further information on Yorkville Nominees and schemes operated in

relation thereto, see Parts 8 and 9.]

2.65.12 Mr Shaw said Mars Poad Investments, which was incorporated in

1978, became the successor to Yorkville Nominees. Mr Shaw understood the

reason for its incorporation to be a segregation of deposit taking

operations from the other functions of Yorkville Nominees such as

taxation schemes.1^ Mr Hill said Mars Poad Investments was a vehicle

for receipt of cash money.16

2.65.13 Mr Shaw's function in Mars Road. Investments was the same as his 21 function in Yorkville Nominees. He was the de facto manager of the

company.

- 262 -

2.65.14 In relation to both Yorkville Nominees and Mars Road

Investments, a so called 'cash kitty' operated. According to Mr Shaw,

the Nugan Hand safe usually had a 'float' of about $10 000 which was

generally cash deposited by clients of Yorkville Nominees and Mars Road

Investments. Mr Shaw used the cash in that safe for clients of the

respective companies who sought repayment of deposits or cash payment of

interest. Mr Shaw said he made appropriate entries in a red cash book 23 and a blue ledger. Proper records were never kept [see 3.8.131].

2.65.15 According to Mr Hill, Mr Nugan instructed Mr Shaw to find

clients who had taxation or legal problems. Mr Nugan would help solve

the problems of such clients at no cost if they became depositors with 24 Nugan Hand Ltd.

2.65.16 There is evidence before the Commission that some of the cash

deposited with Yorkville Nominees and Mars Road Investments was the

proceeds of drug transactions [see Part 6 ].

2.65.17 Mr Shaw took part in the transfer from Mr J.L. Aston to Nugan

Hand Ltd of $260 000 in cash which was then laundered through the Orange

Spot Group [2.116]^ [see 6.60-61].

2.65.18 Allegations made against Mr Shaw concerning arms transactions

with the Middle East were denied by him in evidence before the Commission

[see Part 7 ].^5

2.65.19 Mr Shaw said he was 'most concerned' when he found that moneys

owing to some clients could not be repaid following the death of

Mr Nugan. He said he received threats from several clients. He said

that on one occasion he and Mr G.A. Edelsten [2.20] met a Yorkville

Nominees client who was accompanied by another person. That pierson said

he had a pistol in the glove box of his car and was not afraid to use it

and that if Mr Shaw did not repiay the client's deposit within five days,

his life would be at risk. On other occasions, Mr Shaw was visited at

hone by clients who informed him that they 'would not be responsible for 27

their actions' unless all moneys were repaid. In late December 1982,

- 263 -

Mr Shaw received a Christmas card, without any writing, containing a

newspaper clipping of the headlines 'Massacred' and 'Family Massacre'.

Mr Shaw recognised the writing on the envelope to be that of a Yorkville

Nominees client and took it to be a threat to himself

2.65.20 Generally Mr Shaw said he was a 'rubber stamp' for Mr Nugan. He

never questioned the latter's instructions and considered that Mr Nugan 29

was a man of great ability and skill who knew what he was doing.

Endnotes

1 CD6099 folio 152; CD1250 folio 1425 2 CT25027, Shaw; CD6099 folio 152 3 CT23362, CT25070, Shaw 4 CT25021, Shaw

5 CT25022, Shaw

6 CT23362, CT25021, Shaw 7 CT25070, Shaw

8 CT25074, Shaw; CD4209 folios 82-83 9 CT25074-75, Shaw

10 CT25022-24, CT25028, Shaw 11 CD11334

12 CT25119, Shaw

13 CT25072, Shaw

14 CT18732, Shaw

15 CT20754, Shaw

16 CT25030-31, CT25073, Shaw 17 CT23380, Shaw

18 CT25073, Shaw

19 CT25073, CT25076, Shaw 20 CT21913, Hill

21 CT20746, Shaw

22 CT24779, Hill

23 CT25115-16, Shaw

24 CT16230-31, Hill

25 CT25121, Shaw

26 CT15755-56, Hill

27 CT25132-33, Shaw

28 CT25065, Shaw; CD11467 29 CT25023-24, Shaw

- 264 -

2.66 SHESLOW, Richard Myron

2.66.1 Mr Richard Myron Sheslow was born in New York. In 1966 he

obtained a Bachelor of Science degree majoring in economics and finance

from the New York University School of Business and Public

Administration. After a short period with the United States Marine Corps

Reserve he became a stockbroker with a United States brokerage house. In

1970 he became General Manager, controlling share portfolios and

coordinating Euro-dollar loans to major United States corporations, for

an 'offshore' investment group based in New York. From May 1971 until

his employment with the Nugan Hand Group in January 1979, Mr Sheslow was

self employed apart from eighteen months as Vice President of a United

States vending machine company. In 1975 he became manager of Sheslow

International Pty Ltd a trading company involved in the import and export

of stockfeed, grains and consumer goods. 4

2.66.2 Mr Sheslow joined 'Nugan Hand International as Manager Trade

Services Division' on 15 January 1979 after responding to advertisements 2 in the financial press. He was seeking additional finances to expand

his trading company and assumed there was 'a fair amount of financial

substance' to the Nugan Hand Group.3 During the period of his

employment by 'Nugan Hand Trade Services' Mr Sheslow's company, Sheslow

International Pty Ltd, was paid a fee of $2 000 per month. Records

indicate this payment was made by Nugan Hand International Holdings Pty

Ltd [2.96].4

2.66.3 A memo from Mr J.M. Gilder [2.25] to Mr Sheslow dated 29 May

1979 summarised the latter's role within the Nugan Hand Group. It stated . t 5

m part:

'The scope of your trade operations is to include:

a) Giving advice in respect of trade matters and

generally to assist clients and Representatives of the Group,

b) Putting buyers and sellers together for fees,

c) Participating in exceptional projects where either Frank Nugan or Jerry Gilder approve Nugan Hand Trade Services contracting as principal with buyer or seller. '

- 265 -

2.66.4 Mr Sheslow was also required to provide a monthly report on the

status of all operative projects. This matter was raised in a minute

from Mr G.A. Edelsten [2.20] dated 21 September 1979 which was shown to

Mr Sheslow by the Commission. Mr Sheslow said he did not provide such

reports and added Ί had more important things to do than play games with

these people'.6

2.66.5 Mr Sheslow resigned from his position on 29 February 1980 and

when he gave evidence to the Commission was employed as the director of a 7 property development company.

Endnotes

1 CD1598 folio 65, Memo Gilder/all staff re Sheslow's appointment, folios 66-68, Sheslow's resume 2 CD1598 folio 65

3 CT20536-37, Sheslow 4 CT20536-37, Sheslow; CD3571, NHIH Cash Payments Book 7/76 -

1/80; CD1598 folio 64, Memo Gilder/Burton re fee to Sheslow 30/1/79 5 CD1598 folio 34, Minute Gilder/Sheslow 6 CT20541, Sheslow; CD1598 folio 15, Minute Edelsten/Sheslow 7 CT20536, CT20548, Sheslow

2.67 SPEAKMAN, Neil William

2.67.1 Mr Neil William Speakman is a chartered accountant and resides

in Hong Kong. He is currently a partner in Nelson Wheeler Speakman &

Co., a Hong Kong firm of chartered accountants . Formerly, he was the

senior partner of Speakman & Company, which conducted the audit of Nugan

Hand (Hong Kong) Ltd [2.94] and associated companies including Nugan Hand

International Holdings Ltd [Appendix B]. Mr Speakman's partner in

Speakman & Co. was Mr Leslie McDonald who has since retired and now

resides in Scotland. Mr McDonald was the partner responsible for the

relevant Nugan Hand Group companies.^

2.67.2 Speakman & Company completed the December 1978 and December 1979

audit of Nugan Hand (Hong Kong) Ltd and associated companies. Mr S.K.

- 266 -

Hill [2.33] said in evidence that Speakman & Company had been 'intimately

involved in the setup of the Hong Kong operation' and had advised Mr C.L.

Collings [2.15] on how best to arrange the accounting system for Nugan

Hand (Hong Kong) Ltd.^ Speakman & Company refused to sign the audit

certificate for Nugan Hand (Hong Kong) Ltd for the period ended December

1979. They also refused to sign the audit certificates for Nugan Hand

International Holdings Ltd for the periods ended December 1978 and

December 1979 . ^

2 . S I . 3 Mr Speakman expressed the view before the Commission that the

accounting records of Nugan Hand International Holdings Ltd were

incorrect and did not reflect the true financial position of the

4

company. On 25 March 1980 Mr Speakman attended a meeting with his

partner Mr McDonald, Mr M.J. Hand [2.2] and Miss E.L. Thomson [2.72]

regarding his firm's refusal to sign the audit certificates for Nugan

Hand International Holdings Ltd. At this meeting pressure was exerted by

Mr Hand and Miss Thomson on Mr Speakman to sign the audit certificates.

Messrs Speakman and McDonald refused to sign the certificates and the

companies were subsequently placed into liquidation. No further work was 5 completed by Speakman & Co.

Endnotes

1 CT23010-11, Speakman 2 CT15732, Hill

3 CT22993, Speakman

4 CT22995-96, Speakman 5 CT23011, Speakman

2.68 STEER, Graham Reginald

2.68.1 Mr Graham Reginald Steer was born on 9 November 1933 in

Goulburn, New South Wales.^ He studied food technology at Hawkesbury

Agricultural College, Davis University in California and the University 2 of Florida. Between 1964 and 1965 he studied business administration

in London and was later employed as a senior consultant and director to

- 267 -

various companies. Mr Steer also spent over two years in Malaysia and

Singapore in the employ of a British consultancy group.^

2.68.2 In 1977, Mr Steer answered an advertisement placed by the Nugan

Hand Group in The Sydney Morning Herald newspaper.5 He was

subsequently interviewed by Mr J.M. Gilder [2.25] who told him that the

Nugan Hand Group was expanding its operations overseas and recruiting

staff to establish offices in selected areas, particularly in South East

Asia. in March 1977, Mr Steer was offered a position as a

representative of the Nugan Hand Bank (then Swiss Pacific Bank and Trust

Company [2.106]). In May/June 1977 he visited Singapore at Mr Gilder's

request to investigate the feasibility of establishing a merchant banking

operation there and to identify whether there were opportunities to act

as a consultant to, or represent, Australian companies in the area.

Since the outcome of his survey was favourable, Mr Steer was requested to

establish a management advisory service in Singapore on behalf of the

Nugan Hand Group. In August 1977 he established a company called

7

International Management Services.

2.68.3 Mr Steer was initially involved in management consultancy and

various trade commodity transactions. Mr Gilder later appointed him

manager of the Nugan Hand Group offices in Singapore, Malaysia, Thailand 9 and The Philippines. Mr Steer was subsequently appointed Regional

Director, Nugan Hand International [Appendix B] with the region under his

control extended to include Indonesia and Brunei. This role was

essentially a supervisory one. It involved Mr Steer visiting Group

representatives and offices in each area and where considered necessary

calling upon institutions to offer the Group's services. This

supervisory role entitled Mr Steer to receive in addition to his monthly

retainer of US$2 000 over-riding commissions based on the earnings of the

representatives under his control."*"^

2.68.4 In early 1978, Mr M.J. Hand [2.2] established a separate office

in Singapore. Towards the end of 1978 this office was combined with that

used by Mr Steer, and a company called Nugan Hand (Singapore) Pte Ltd

[Appendix B] was established. " * " " * (After several months Mr Hand decided

- 268 -

that there was a conflict of space and responsibilities between himself

and Mr Steer, and he moved his office to the Straits Trading Building.)

Mr Steer held the position of director and manager of Nugan Hand

(Singapore) Pte L t d . ^ International Management Services subsequently 13 ceased trading and was deregistered.

2.68.5 Neither of the Nugan Hand Group companies established in

Singapore could legally receive deposits because the required 'deposit

taking' licence had not been obtained from the Monetary Authority of

Singapore. Mr Steer was quite successful in attracting deposits on

behalf of the Nugan Hand Bank and arranged for such deposits to be

remitted to Hong Kong so as not to breach the Singapore banking

14

regulations. Potential depositors were advised to send their funds

direct to Nugan Hand in Hong Kong. The total amount of deposits directed

to Hong Kong from Malaysia, Singapore and The Philippines between July

1977 and July 1979 was approximately US$6.5 million. Mr Steer applied 15

for a banking licence but the application was never granted.

2.68.6 In October 1979, Mr Steer attended the Nugan Hand International

conference in Sydney [3.6.13] and met Mr D.E. Beazley [2.7] who had been

appointed the new Chief Executive. In mid January 1980 Mr Beazley

visited Singapore and had discussions with Mr Steer regarding the

reorganisation of the Nugan Hand Group and the appointment of senior

executives responsible for the region."*·®

2.68.7 On 11 April 1980, Mr Steer received a telex from Mr Hand

advising him that all activities of the Nugan Hand Bank had been

suspended. He returned to Sydney shortly thereafter, learnt from Mr Hand

of the liquidity problems of the Nugan Hand Group and tendered his

resignation on 22 April 1980."*^

Endnotes

1 CD8668 folio 19, Application for Licence to operate employment agency 2 CT22063, Steer; CD7153 folio 28, Steer resume 3 CT22059, Steer

- 269 -

4 CT22063, Steer

5 CT20393, Gilder; CT22060, Steer 6 CT22060, Steer

7 CT22061-62, Steer

8 CT22062, Steer

9 CT22066, Steer

10 CT22061, CT22067, Steer; CT23057, CT23059, Gilder 11 CT22063, Steer

12 CT22063, CT22067, Steer 13 CT22077, Steer

14 CT22072, Steer; CT22226, Gilder 15 CT22072, Steer

16 CD3076 folios 10-11, Steer evidence to CAC 17/6/80 17 CT22079, Steer; CD3076 folio 9

2.69 STILES, Leonard Ross

2.69.1 Mr Leonard Ross Stiles was born on 25 November 1948 in Brisbane,

Queensland. He was educated to matriculation level at Villanova College

Queensland, after which he undertook some legal and economic studies at

the University of Queensland. He did not however obtain formal

qualifications. Mr Stiles was employed by the Department of Foreign

Affairs Consular and Administrative Service for a period of six years.

During this period he spent two years as an officer of the Australian

Embassy in Seoul, Republic of Korea. After returning to Australia,

Mr Stiles purchased a milk vending and distribution business in Canberra,

and operated that business for four years. Subsequently, Mr Stiles was

self employed as an insurance agent for five years before approaching the

Nugan Hand Group.^

2.69.2 Mr Stiles applied for a position within the Group's

International Operations advertised in The National Times newspaper 2 January 1979. He was interviewed by Mr J.M. Gilder [2.25] who

explained that they were looking for people to go to areas in South

America and South East Asia. Mr Stiles was offered a position in Korea

which he accepted. Mr Stiles was to receive US$2 000 per month and was

to act in the capacity of Trade and Group Liason Officer. He was to seek 3

deposits and develop trade relations for the Nugan Hand Group.

2.69.3 Mr Stiles said he left Australia for Seoul at the end of April

1979. He travelled to Singapore, Kuala Lumpur and Hong Kong and

- 270 -

eventually arrived in Seoul on 14 May 1979. Mr Stiles worked from a room

in his apartment in Seoul. He contacted old friends, visited the Trade

Commission and the Australian Embassy and also 'door-knocked' companies

manufacturing goods for export and importing goods. At this time

Mr Stiles began to receive trade related telexes from Mr R.M. Sheslow

[2.66] in Sydney.^

2.69.4 Mr Stiles said the Koreans were nervous about parting with their

money because of the strict exchange laws although many expatriates and

locals had invested offshore and it was this money he was trying to

attract. During his time in Seoul, Mr Stiles was unsuccesful in

5

attracting any deposits for the Nugan Hand Group. According to

Mr Stiles, Mr Gilder visited Seoul in October 1979 to assess the

viability of opening an office in Korea. Mr Stiles subsequently

contacted a solicitor as the opening of an office was a complex matter.

Also, during this time, business prospects deteriorated as President Park

was shot just before Christmas 1979. Given the political and business

upheavals, Mr Gilder suggested that Mr Stiles go to Kuala Lumpur and take

over Mr E.C. Louey's [2.40] position. Mr Stiles who did not have a work

permit for Malaysia had to spend the next couple of weeks familiarising

himself with Kuala Lumpur and the organisation. Shortly afterwards,

Mr Stiles was informed of Mr F.J. Nugan's [2.1] death and he decided to

leave the organisation.^

2.69.5 Mr Stiles returned to Australia and contacted Mr M.J. Hand [2.2]

in order to obtain the 625 000 in salary and expenses which Mr Stiles

estimated he was owed. Messrs Hand and G.A. Edelsten [2.20] offered

Mr Stiles 63 000 plus the cost of removing his furniture from Korea to

Australia. Mr Stiles, in return, was required to sign a deed of

settlement, drawn up by Mr Q.D. George [2.24] at Mr M.J. Moloney's [2.48]

instruction. Under this deed, for the sum of 63 000 Mr Stiles agreed to

release Nugan Hand International Holdings Ltd [Appendix B] and its

associated companies from all past, present and future claims arising out

of his employment. Mr Stiles also agreed therein, not to disclose to any

party any information obtained in the course of his employment, nor to 7

make statements which could damage the Group's reputation. Mr Stiles

- 271 -

stated that arrangements were never made by the Group regarding the

return of his possessions and he had to obtain a personal loan to have

them brought back to Australia.®

Endnotes

1 CD6974 folios 88-91, Stiles letter of application 2 CD6974 folios 88-91

3 CD10578 folio C; CD6974 folio 96, Letter Gilder/Korean Embassy, Canberra re Stiles employment 2/4/79 4 CD10578 folio C, Stiles statement to Commission 21/9/84

5 CD10578 folio A

6 CD10578 folio D

7 CD10578 folio E; CD9171 folios 3-4, Nugan & Co - Stiles/NHIH Ltd - deed of settlement 8 CD10578 folio E

Profile 2.70 has been deleted.

■

.

-

·

.

- 274 -

2.71 TAN, Choon Seng

2.71.1 Mr Ten Choon Seng did not give evidence before the Commission.

The information herein relies upon the evidence of other witnesses and

upon documents produced to the Commission in the course of its inquiry,

including material supplied by other investigative bodies.

2.71.2 Mr Tan Choon Seng was employed as an accountant by the Nugan

Hand Group in Singapore in 1977. Mr G.F. Brincat [2.9] was responsible

for the appointment of Mr Tan Choon Seng, as accountant, and Ms Karapagam

Karuna, as bookkeeper, and instructed them both on organising the

accounts for Nugan Hand Singapore (Pte) Ltd [Appendix B ] . This

company was responsible for the bookkeeping of the Nugan Hand Bank

[2.106], Nugan Hand (Malaysia) Sdn. Bhd. [Appendix B] and Nugan Hand

(Thailand) Ltd [Appendix B]. It operated US dollar accounts with United

Overseas Bank Ltd and Inter-Alpha Asia (Singapore) Pte Ltd and processed

the international certificates of deposit for the Nugan Hand Bank as 2 requested by the Hong Kong office.

2.71.3 On 6 July 1979 Mr Tan Choon Seng submitted a proposal to Mr M.J.

Hand [2.2] for reorganisation of the administrative functions of the

Group in Singapore. The objectives of the proposal were to 'achieve

100 % compartmentisation of Nugan Hand operations in Singapore' and to

'clearly define [the] authority chain and avoid criss-cross

responsibilities'. The proposal suggested the formation of a new

company, 'Nugan Hand International Management Services', which would take

- 275 -

over responsibility for the existing administrative contract between

Nugan Hand Singapore (Pte) Ltd [Appendix B] and Nugan Hand International

Holdings Ltd [Appendix B].^ In mid 1979 Nugan Hand Management Services

(Pte) Ltd [Appendix B] was incorporated and Messrs Hand and Tan Choon 4 Seng were appointed directors. Mr Tan Choon Seng also held one share

in trust in this company at Mr Hand's request.6 Nugan Hand Management

Services (Pte) Ltd then became responsible for the bookkeeping of the

Nugan Hand Bank and other companies which had previously been carried out

by Nugan Hand Singapore (Pte) Ltd.6

2.71.4 Mr Tan Choon Seng was the chief executive ranking immediately

below Mr Hand and Mr G.R. Steer [2.68] in Singapore and worked directly

under the control of Messrs Hill [2.33] and Hand.^ He was later

appointed Manager of Administration and Accounting in the Singapore

office. His responsibilities included supervising the day to day

operations of the staff of Nugan Hand Management Services (Pte) Ltd and 9

the processing of international certificates of deposit. He also

liaised regularly with the Hong Kong office and occasionally with the

Sydney office on matters of audit and accountability in relation to the

Singapore companies."*"61 He was an authorised signatory to the bank

accounts of the Nugan Hand Bank and other companies in the Nugan Hand

G r o u p . A l t h o u g h Mr Tan Choon Seng was not personally involved with

soliciting deposits from clients he carried out payment instructions

received from directors in the other Nugan Hand Group offices. These

payments consisted of expenses for representatives as well as repayment

of principal and interest in respect of deposits made with the Nugan Hand 12 Bank. Many payments were made utilising the facilities of the

'Yorkville contra' [see Part 8]66 at the request of either Mr G.T. Shaw

[2.65] or Mr Hand. Mr Tan Choon Seng would then instruct Ms Puay Huang

to prepare a cheque drawn to cash which was given to either Messrs Hand

or Steer for signing. The cheque would then be delivered to the client

in Singapore.

2.71.5 In 1977 Mr Tan Choon Seng assisted Messrs Brincat and Hill in

the preparation of a Kalamazoo accounting system for the Nugan Hand Bank

in Singapore."66 The reconciliation of these accounts was sent by

- 276 -

Mr Tan Choon Seng to either Messrs Brincat or Hill in Sydney."*"® During

the period 1977 to 1979 Mr Brincat visited Singapore for the purposes of

rewriting the accounting records of the Nugan Hand Bank before they were

submitted to Price Waterhouse & Co. in the Cayman Islands for audit [see

4.2.117-4.2.139]. This task amounted to rewriting the books in

accordance with the instructions given by Mr F.J. Nugan [2.1].^

Mr Brincat told the Corporate Affairs Commission that Mr Tan Choon Seng

was aware of this practice."*·®

2.71.6 In late 1979 Mr D.E. Beazley [2.7] joined the Nugan Hand Group

and attempted to verify the Group's balance sheets. He requested

information from Mr Tan Choon Seng and Mrs G. Lovatt [2.43].·*·® In his

evidence to the Corporate Affairs Commission, Mr Steer said it was

Mr Beazley's intention to move Mr Tan Choon Seng to Hong Kong to

consolidate accounts at some appropriate time in the future. He said the

records compiled by Mr Tan Choon Seng in Singapore related to various

companies within the Nugan Hand Group in addition to the Singapore 20

companies and the Nugan Hand Bank in the Cayman Islands. A copy of a

telephone message from Mr Nugan to Mr Tan Choon Seng refers to a visit to

Singapore by Mr Beazley. Mr Tan Choon Seng was instructed by Mr Nugan

'he should not disclose any matters on Nugan Hand Bank. All primary records are not to be available. All expenses record etc will be available if he requests.'

2.71.7 It has been alleged in the Corporate Affairs Commission's

Seventh Interim Report that Mr Tan Choon Seng was involved in the

concealment of records from officers of the Monetary Authority of

Singapore. Two former employees of the Singapore office, Ms Cecilia

Byreddy and Ms Puay Huang stated that officers from the Monetary

Authority of Singapore visited the Singapore office in December 1979 and

again on 11 April 1980. On both occasions, it is alleged, Mr Tan Choon

Seng instructed employees to assist in packing the Nugan Hand Bank

records, for conveyance to the Cayman Islands, while officers of the

Monetary Authority of Singapore were waiting to carry out an

22

investigation.

- 277 -

2.71.8 At the time of the collapse of the Nugan Hand Bank, Mr Tan Choon

Seng was company secretary of Nugan Hand Singapore (Pte) Ltd and director

of F.A. Neubauer Management (Pte) Ltd, Nugan Hand International Holdings

Ltd, Nugan Hand Management Services (Pte) Ltd and Nugan Hand Travel Ltd

[Appendix B]. He submitted resignations from the above positions to take

effect from 19 April 1980.22

Endnotes

1 CT25349-50, CT25393-4, Brincat; CAC 7th Interim Report p 447 2 CD4535 folios 2-3, Statement by Tan Choon Seng to Singapore

police 14/4/80 3 CD5021 folios 15-23, Memo, Tan Choon Seng/Hand 6/7/79 re

proposal for re-organisation 4 CD4535 folios 2-3

5 CD4535 folios 10-11

6 CD4535 folios 2-3

7 CU3076 folios 31-32, Steer evidence to CAC; CD4535 folios 5-6; CAC 7th Interim Report p 40 8 CD4535 folios 2-3

9 CD4535 folios 5-6

10 CD3076 folios 31-32

11 CD4535 folios 23-24

12 CD4535 folios 5-6

13 CAC 7th Interim Report p 415

14 CAC 7th Interim Report p 404

15 CD3008 folio 10, Brincat evidence to CAC 16 CD3088 folio 34; CD4535 folio 32

17 CAC 7th Interim Report p 447

18 CD3008 folio 274; CD3667 folio 274, Hill evidence to CAC 19 CD4535 folio 47

20 CD3076 folio 36

21 CD6825 folio 13, Nugan, F. - telexes 17/10/79-8/1/80 22 CAC 7th Interim Report pp 405, 409

23 CD4535 folios 2-3

2.72 THOMSON, Elizabeth Louise

2.72.1 Miss Thomson did not give evidence before the Commission. The

information herein relies upon the evidence of other witnesses and upon

documents produced to the Commission in the course of its inquiry.

2.72.2 Miss Elizabeth Louise Thomson was born in Ontario, Canada on

29 August 1948. She studied French and Philosophy at the University of

- 278 -

Western Ontario and in 1969 attended the Universite d 'Aix-en-Provence

graduating in 1971 with a Bachelor of Arts, Honours degree. Miss Thomson

later studied law at the McGill University in Montreal and graduated in

1974. She subsequently worked in law related areas and was called to the

Bar in March 1977. She moved to Hong Kong in April 1977.1

2.72.3 Miss Thomson commenced employment with the Nugan Hand Group in

Hong Kong on 28 November 1977 and was appointed 'Legal Counsel1 to the

Nugan Hand group of companies effective from 1 December 1977. Her salary

was HK$4 600 per month for advice provided locally, plus fees for

additional work required outside the Hong Kong jurisdiction. A memo on

2 October 1979 stated Miss Thomson was then in receipt of HK$10 000 per 2

month plus HK$2 000 per month for housing.

2.72.4 Miss Thomson was recruited partly to create and build Nugan Hand

Nominees Ltd [Appendix B] which occupied her fully for six months until

systems had been established and the nominee companies commenced

selling."* She established Nugan Hand Nominees Ltd as a company to be

used by clients of the Nugan Hand Group for offshore corporate and

company management services. The services ranged from the sale of

'shelf' companies (already incorporated for immediate use ) to providing

a 'full range of offshore company management, nominee, trustee, tax 4

planning and legal advice facilities'.

2.72.5 In evidence before this Commission, Mr M.B. Houghton [2.35] said

Miss Thomson formed nominee companies at the rate of about 100 on each

occasion. The names of the companies were communicated to the

representatives in the field who checked their availability before sale.

Deposits could also be lodged in nominee company bank accounts operated

by Miss Thomson, interest earned and funds made available in various

countries.^

2.72.6 Miss Thomson's role with the Nugan Hand Group expanded rapidly

after she had established Nugan Hand Nominees Ltd and she became an

in-house corporate counsel providing advice and assistance to each

department, and to staff as well as clients. Her participation in

- 279 -

management increased and she had the responsibility of helping with the

establishment of offices, problems with representatives, general overall

organisation and day to day operations. She also advised clients on

estate planning and individual tax planning.®

2.72.7 During the negotiations for the purchase by Nugan Hand

International Ltd of the F.A. Neubauer Bank [2.109] in 1978 and 1979,

Miss Thomson spent five months in Germany analysing legal, management and

commercial problems applicable to that country and the management of the

Bank until the directors could take over.^

2.72.8 In April 1980 Miss Thomson wrote to clients she had introduced

to the Group informing them of her resignation which was to take effect

from 26 April 1980. She blamed the collapse of the companies on Mr F.J.

Nugan [2.1] and said all financial information had not been made

available to the other directors. She personally assured clients that if

funds were not available then she would meet repayments herself.

2.72.9 Miss Thomson currently resides in Hong Kong and numerous 9

requests made by this Commission to interview her have been refused.

Endnotes 1 2 3 4 5 6 7 8 9

1 CD7153 folio 40, Thomson resume 2 CD4427 folio 34, Memo McArthur/Hand 2/10/79; folio 41, Advance for Thomson to Legal Inst.; folio 48, Letter Thomson/Hand 3 CD4427 folio 7

4 CD7630 folio 40, Thomson - misc. papers re trust and shelf

companies

5 CT22575-76, Houghton 6 CD4427 folio 17, Thomson job description 7 CD4427 folio 17

8 CD7220 folio 22, General correspondence 1980 9 CT22660, Moss Q.C.

- 280 -

2.73 WARD, Francis Dennis

2.73.1 Mr Francis Dennis Ward was born in Bathurst, New South Wales.

He received his secondary education at St Patrick's College, Bathurst and

subsequently studied accountancy at the Hemingway Robertson Institute

between 1957 and 1962. In 1971 Mr Ward completed a commerce diploma at

the Mitchell College of Advanced Education. From 1956 until 1968 he was

employed by Gordon Edgell Pty Ltd in various capacities, including that

of cost accountant and marketing manager. From 1968 until 1973 he was

the administration manager for the Fund of Australia [2.110] and director

of many companies within that group. While occupying that position

Mr Ward was in charge of recording investments and dealt with the local

and overseas investors of the Fund. While at Fund of Australia,

Mr Ward worked with a number of people who later worked for the Nugan

Hand Group including Messrs J.M.Gilder [2.25], C.L. Callings [2.15] and

P.M. Dunn [2.18].2

2.73.2 Mr Ward was introduced to Messrs F.J. Nugan [2.1] and M.J. Hand 3 [2.2] by Mr Ceilings. At their first meeting, Mr Nugan offered

Mr Ward a position with the Nugan Hand Group, assisting him in the day to

day activities of his companies, and as manager of the 'Ingold' mutual 4 fund. This fund collected money from the public and invested it in

precious metals. Mr Ward said that he was offered the position because 5

of his previous experience with Fund of Australia. At their initial

meeting Mr Nugan told him he wished to establish a merchant banking

operation, and Mr Ward understood that by accepting employment with the

Nugan Hand Group, he was 'getting in on the ground floor' of a viable

merchant banking operation.6

2.73.3 Mr Ward commenced employment with the Group in Sydney in

December 1974. He became a director of two companies associated with

the 'Ingold' mutual fund, namely Ingold Growth Inc. and Ingold Growth Ltd

(later Nugan Hand International Holdings Limited [Appendix B])

Mr Ward also became a signatory of the bank accounts of Macquarie Coin

Dealers [2.104] and Pacific Silver Commodities [2.104] and advised

members of the public of the services offered by them. These businesses

- 281 -

were associated with Messrs Nugan and Hand and sought investment from

members of the public in silver bars and gold coins.®

2.73.4 Mr Ward became a director of a number of companies in the Nugan

Hand Group. The records of the Corporate Affairs Commission indicate

that he was a director of Nugan Hand Ltd from 26 November 1974 to

September 1977 and a secretary of that company from 26 November 1974 to

26 February 1976.·*·® Mr Ward said in evidence to the Commission his

recollection was that he was appointed a director later than November

1974 and resigned before September 1977.11 Mr Ward also became a

director of NUN Nominees Pty Ltd, (later Nugan Hand (Dealers) Pty Ltd

[2.93]), Nugan Hand International Holdings Pty Ltd [2.96], Nugan Hand

Trade Finance Ltd, Nugan Hand Trade Asia Ltd [Appendix B] and Nugan Hand 12 Trade Services Pty Ltd [2.98]. He said that during his employment

with the Nugan Hand Group he was never invited to attend the board

meetings of these companies.11

2.73.5 Mr Ward's initial duties with the Nugan Hand Group comprised

mainly the promotion of the 'Ingold' fund. The 'Ingold1 project was

ultimately a complete failure and Mr Nugan decided to abandon it in April

19761'*. Mr Ward attributed the failure of the fund to, among other

things, Mr Nugan's failure to back the project with sufficient money, and

the lack of sophistication in the sales representatives promoting the

fund.·*·®

2.73.6 Mr Ward was then requested by Mr Nugan to make inquiries to

ascertain the best location for the establishment of an overseas bank,

and the prerequisites to its establishment. Mr Ward engaged a Panamanian

solicitor to make application to the banking authorities in Panama. He

also made inquiries in the Seychelles, the Cayman Islands and other

countries.1 On 3 June 1976 Mr Ward made a formal application to the

Governor of Grand Cayman on behalf of the Nugan Hand Group for permission

to establish a banking corporation under the laws of the Cayman

1 7

Islands. Mr Ward said that although the application was signed by

him it was written by Mr Nugan.18 A banking licence was subsequently

granted to the Nugan Hand Bank and Trust Company [2.106] in August 1976.

- 282 -

Mr Ward was then requested by Mr Nugan to work in the Cayman Islands, but 19 he declined to do so.

2.73.7 After the grant of the banking licence, Mr Nugan asked Mr Ward

to set up a trade services division for the Nugan Hand Group. Mr Nugan

intended to use trade offices established in overseas countries as a

lever to enable the collection of deposits for the Group in those

20

countries. Mr Ward said he was in favour of the concept of such a

division but was unsuccesful in establishing it and attributed this

failure to Mr Nugan's reluctance to provide funding. 2 1

2.73.8 The Nugan Hand Group established an office in Hong Kong [2.94]

in December 1974 and from July 1975 deposits were remitted from Hong Kong

to Sydney for deposit with Nugan Hand Ltd. Mr Ward was in charge of the

administration of the deposits sent to Sydney, and of the repatriation of

those funds to Hong Kong. He was responsible for obtaining the necessary

Reserve Bank approvals and tax clearance certificates and for ensuring

that there was money available for withdrawal.22 Mr Ward said he was

in close contact with Mr Ceilings during the period in which the Wing On

Bank guarantee of Nugan Hand Ltd deposits was being negotiated

[4.1.27-4.1.44 and 4.1.49-4.1.55], The arrangement was basically that

the Wing On Bank in Hong Kong agreed to guarantee the repayment of Nugan

Hand Ltd Hong Kong depositors, on the basis that Nugan Hand Ltd lodge

valuable securities in a safe custody account in Sydney as security for

the guarantee. Mr Ward travelled to Hong Kong to meet the manager of the

Bank, Dr A. Kwok [2.36], after the guarantee had been negotiated. He

said that Dr Kwok wished to be assured that the Sydney end of the Wing On 23

Bank guarantee would be handled properly. Mr Ward's subsequent

duties with the Nugan Hand Group included liaison with the Wing On

Bank.2'*

2.73.9 Mr Ward said that, as part of a public relations exercise, he

cultivated prospective clients for the Group by entertaining those

clients while they were were waiting to see Mr Nugan. Mr Ward wrote some

letters to local councils soliciting deposits, but was not successful in 25 attracting any council deposits. Mr Ward did not collect any

deposits for Nugan Hand Ltd nor did he deal on the short term money

market.2<*

- 283 -

2.73.10 In his capacity as director of Nugan Hand Ltd, Mr Ward signed

the annual accounts of the company for the balancing dates 30 June 1975 27 and 31 January 1976. Mr Ward said at the time of signing the

accounts, he was satisfied that they were correct. He said he relied

on the report of the auditors and had no reason to question the validity 29 of the accounts.

2.73.11 Mr Ward said his monthly salary at commencement with the Nugan

Hand Group was $1 000 and that he received an entertainment allowance and

use of a small car.30 Mr Ward also said the Group paid for his petrol,

car insurance, American Express and Diners Club credit cards, his home

telephone bill, and paid him director's fees and a Christmas bonus. 1

In February 1976 Mr Ward borrowed $20 000 from Mr Nugan for the purpose

of purchasing a house. He repaid $16 000 to Mr Nugan in December 1976

and the balance after he resigned from the Nugan Hand Group. Mr Whrd

denied that his salary from the Group was ever $35 000 per annum plus a

car and allowances and said that the statement to this effect apparently

attributed to him by the manager of the Bank of New South Wales (as it 32

then was) in a file note dated 20 January 1977 was incorrect.

2.73.12 Mr Ward said he decided to resign from the Nugan Hand Group

towards the end of 1976, because he became disenchanted with the attitude

of Mr Hand towards him. At the request of Mr Nugan, Mr Ward agreed to

stay on for some months longer. He started to work with Mr Anthony

J. Pierce about March 1977 and formalised his association with Mr Pierce

on 1 July 1977 under the business name Ward Pierce International.

However, Mr Nugan allowed Mr Ward to use an office at the Nugan Hand

Group offices until such time as he was ready to depart and Mr Ward

remained there until June 1977. Mr Ward said he continued to work on the

concept of a trade services division until his departure from the Nugan

Hand Group, on the basis that he was allowed to carry out other

33

activities, unassociated with the Group, at the same time. Mr Ward

agreed that as late as 21 March 1977 he had prepared a long memorandum to

Mr Nugan regarding the trade services division which urged Mr Nugan to

persevere with that division.3^

- 284 -

2.73.13 After his resignation from the Group, Mr Ward came into further

contact with the organisation on a number of occasions. Ward Pierce

International was approached by Mr Nugan and Mr B.W. Calder [2.11] to

market a tax scheme called 'Distravite' [see Part 9], but it declined to . . 35

participate. On one occasion Ward Pierce International used the

services of the Nugan Hand Group to transfer money to one of its

employees overseas.36 In late 1977 or early 1978 Ward Knight & Dunn

Ltd, a company with which Mr Ward was then associated, placed $100 000 on 37

deposit with the Nugan Hand Group in Mr Ward's name.

2.73.14 At the time he gave evidence Mr Ward was conducting a

consultancy business under his own name.3®

Endnotes

1 CT23131, CT23134 Ward, CD1731 folio 243 - Ward resume 2 CT23134-35, Ward

3 CT23135, Ward

4 CT23155, Ward

5 CT23135, Ward

6 CT23155-56, Ward

7 CT23161, Ward

8 CT23157, Ward

9 CT23232-33, Ward

10 CD10015 folios 90,92

11 CT24003, Ward

12 CT23169-70, Ward

13 CT23182, Ward

14 CT23166, CT23200 Ward; CD11731 folio 225, Memo Ward/Hand re

Ingold 15/4/76

15 CT23164-66, Ward

16 CT23168, Ward;

17 CT23168 Ward; CD10321 folios 6-11, letter Nugan Hand/Governor of Grand Cayman 3/6/76 18 CT23170, Ward

19 CT23180, Ward

20 CT23180-81, Ward

21 CT23180-81, CT23227, Ward 22 CT23201-02, CT24013-14, Ward 23 CT23197-98, Ward

24 CT23201-02, Ward

25 CT23202 Ward; CD609 folio 21, Letter Ward/accountant of

Warringah Council 15/1/76 26 CT23180, Ward

- 285 -

27 CT24004-05, Ward; CD10015 folios 143-45, Annual accounts of Nugan Hand Ltd for period ending 31/6/75; folios 184-87, Annual accounts of Nugan Hand Ltd for period ending 31/6/76 28 CT23241, Ward

29 CT23237-39, CT24009, Ward 30 CT23206-07, Ward

31 CT23209-10 Ward; CD6087 folio 22, undated handwritten note of items apparently included in Ward's salary 32 CT23217, CT23220, Ward; CD10781 folio 12, file note by manager of Bank of NSW re Ward 20/1/77 33 CT23224, Ward

34 CT23227, Ward; CD1731 folios 9-12, Memo Ward/Nugan 21/3/77 35 CT23244, Ward

36 CT23224-27, Ward

37 CT23222, Ward

38 CT23128, Ward

2.74 WONG, Andrew Heck-Ling

2.74.1 Mr Andrew Heck-Ling Wong was born on 11 November 1929 in

Singapore. He migrated to Australia in 1951 and was granted Australian

citizenship in 1956. He is married with three children and currently

resides in Sydney. Soon after his arrival in Australia, Mr Wong was

employed as an accounts clerk and later as an administration manager by

Gordon Edgell Pty Ltd. In 1970 he commenced buying and selling real

estate and in 1973 he and his family incorporated a company, Eastland

Developments Pty Ltd. Mr Wong was a shareholder and the managing

director of this company until 1979 when he resigned his directorship and

relinquished his shareholding. Eastland Developments Pty Ltd carried on

the business of buying and selling real estate, the subdivision of land

and the construction of houses. Mr Wong's experience also extends to

importing and exporting and investment consultancy work. He speaks

several Asian languages and was at the time he gave evidence to the

Commission a director of a tile and glassware importing company.1

2.74.2 Mr Wong's principal role in the Nugan Hand Group seems to have

been the introduction of friends and relatives as depositors. His

association with the Group commenced in 1974, when he met Mr G.T. Shaw

[2.65] at a social function. Mr Wong told the Conmission that a

friendship developed between them and he would occasionally visit Mr Shaw

in his office at 55 Macquarie Street. During 1975, Mr Shaw introduced

- 286 -

Mr Wong to Mr F.J. Nugan [2.1]. In 1976, Mr Wong sought and obtained

Mr Nugan's advice on the transfer of funds totalling $150 000 from Hong

Kong to Australia. Subsequently, Mr Wong received these funds by way of

a 'Yorkville contra' transaction [see 8.36-8.37] involving a loan from

Yorkville Nominees Pty Ltd [2.108] and a deed of release to extinguish

the debt.^

2.74.3 In late 1977, Mr Wong was employed by the Nugan Hand Group as a

trade consultant and initially received a monthly fee of $500. He

rendered monthly accounts and was paid by cheque drawn in his favour by

Nugan Hand Ltd [2.97]. Mr Wong's consultancy fees were soon increased to

$800 per month and in 1979 to $1 000 per month. He told the Commission

the consultancy fee was the only payment he received in respect of his

association with the Nugan Hand Group and denied that any other fees or

commissions were paid to him or to any company with which he was

associated either in or outside Australia.^

2.74.4 Mr Wong said he was not sufficiently occupied as a trade

consultant to justify the payment of his consultancy fee. Apart from

some trade inquiries, he received other inquiries from Malaysia and Hong

Kong about the requirements of overseas students applying to study in , 5

Australia. According to Mr G.A. Edelsten [2.20], Mr Wong travelled so

extensively in South East Asia that he was only in the Sydney office

perhaps once a fortnight.6 Mr Wong said he occasionally attended to

clients of Mr Shaw. On these occasions Mr Shaw left him instructions

regarding accepting or passing on envelopes of money to those clients

[see 6.44].^

2.74.5 In addition to his deposit taking activities on behalf of the

Nugan Hand Group, Mr Wong told the Commission he introduced a number of

wealthy friends and relatives as depositors to the Group. The volume

of funds deposited by these individuals totalled over HK$4 million

between 1977 and 1979. Of this amount he said that only about $125 000 g

had been recovered at the time he gave evidence. The Commission

understood this to be a reference to Australian dollars.

2

- 287 -

2.74.6 Mr Q.D. George [2.24] who was a director of Mars Road

Investments Pty Ltd [2.88] told the Commission that Mr Wong often

requested that he (Mr George) sign cheques for Mars Road Investments Pty

Ltd and that he therefore concluded that management of the company was

controlled by Mr Wong (and others) Mr said that

in the week after Mr Mugan's death, Messrs Shaw and Wong prepared a list

of clients of Yorkville Nominees Pty Ltd and Mars Road Investments Pty

Ltd who were regarded as likely to seek repayment of their deposits.

Subsequently, Mr Shaw sought repayments for clients whose names did not

appear on the list and Mr Wong would verify that the client had deposited

funds. " * " " * " Contrary to the evidence of Messrs George and ,

Mr Wong informed the Commission he had no involvement with the management

of Mars Road Investments Pty Ltd. He said his contact with that company 13

was limited to collecting its mail from the office in the AMP Centre.

2.74.7 At the Gazebo conference held in October 1979 [3.6.13], Mr Nugan

approached Mr Wong with the proposition that he join Nugan Hand Ltd as a

director. Mr Wong agreed to this suggestion on the conditions that

Mr Nugan remain the Chairman of the Board and that he (Mr Wong) be given

the opportunity to become acquainted with the Nugan Hand Group's trade 13 operations. At the conference, Mr Wong delivered a speech on trade 14 and the South East Asian region.

2.74.8 Mr Wong officially became a director of Nugan Hand Ltd on

15

3 January 1980 and resigned his directorship on 20 February 1980.

Among the reasons cited by Mr Wong for resigning his directorship of

Nugan Hand Ltd were that he considered he was not effectively fulfilling

the functions of a company director and that he had not been informed of

or invited to certain directors' meetings."*"®

2.74.9 The role played by Mr Wong in the aftermath of Mr Nugan's death

and the removal and destruction of records from the offices of Nugan Hand

Ltd is dealt with in this report at Part 3 Sections 8 and 9.

- 288 -

Endnotes

1 CT20554, A.H. Wong; CD7153 folio 39 A.H. Wong resume 2 CT20555, A.H. Wong

3 CT20555, CT20572a-73, A.H. Wong; CD3231 folio 1 4 CT20556-57, CT20559, CT20573, A.H. Wong; CD3086 folio 97 A.H. Wong evidence to CAC

5 CT20556, A.H. Wong

6 CT20465, Edelsten 7 CT20565, CT20574, A.H. Wong

8 CT20557, A.H. Wong

9 CT20568, A.H. Wong

10 CT20824, CT20841, CT20843, George 11 12 CT20565, A.H. Wong

13 CT20556, Wong

14 CD8454 Collings/Wong/Valdellon - transcript of conference 15 CD3231 folios 73-74

16 CT20556, Wong

2.75 WONG, Ernest

2.75.1 Mr Wong neither gave evidence before the Commission nor was he

the subject of evidence from other witnesses. The information herein

relies upon documents produced to the Commission in the course of its

inquiry including material supplied by other investigative bodies.

2.75.2 Mr Cheong Ling (Ernest) WOng was born in Humming, South China,

on 24 October 1934. He was educated in China and moved to Hong Kong in

1947. In 1953 he travelled to London and spent two years at the City of

London College and three years at the London School of Economics and

Political Science, where he graduated with a Bachelor of Science Honours

degree. From 1958 to 1960 he was a lecturer at Nanyang university,

Singapore and tie came the Secretary General of a special committee which

controlled that university. Mr Wong then travelled to Germany and worked

for the German financial paper, Handlesblatt for three years. In 1969 he

joined the London based investment company, Slater Walker Securities

Limited, and was sent to Asia in 1971. While working for this company he

became Director of an associate company, Haw Paw Merchant Bankers,

Singapore. He subsequently resigned from Slater Walker Securities and

became Managing Director of Wardley Thailand Limited.

- 289 -

2.75.3 Though Mr Wong was not officially employed by Nugan Hand (Hong

Kong) Ltd [2.94] until March 1979, it is apparent from the Commission's

records that he was conducting financial matters on behalf of the Nugan

Hand Group during 1978. In a telex dated 23 March 1978, Mr M.J. Hand

[2 .2 ] stated:^

'Ue hereby give our authority to Mr E. Wong, to act and

negotiate on all and any matters, specifically dealing with the initiation of all new business, to F.A. Neubauer Bank.'

On 29 April 1978, in a minute to Mr Hand, Mr J.D. Owen [2.53] discussed

Mr Wong's meetings with a group of Arab businessmen regarding equity

participation in the Nugan Hand Group. He also discussed Mr Wong's

interest ' in taking up shares in our German Bank so that they could

create an European - HK (S.E. Asian)-Saudi link. He mentioned a figure

of $1-2 million as starters'.

2.75.4 During 1979 Mr Wong was approached by Messrs Hand and

C.L. Collings [2.15] and asked to join the Nugan Hand Group. On 1 March

1979 Mr Wong was appointed a 'senior executive in corporate finance and

director of Nugan Hand (Hong Kong) Ltd'. Mr Wong was to be the financial

controller involved in special projects with the aim of assisting the

Nugan Hand Group to enter the international money market.^

2.75.5 Mr Wong's employment agreement with Nugan Hand (Hong Kong) Ltd

stated that he would receive commission from any business he initiated,

all medical care for his family would be paid for by the Nugan Hand Group

and his basic salary was to be HK$20 000 per month.^ On 1 September

1979 Mr WOng's salary was increased to HK$30 000 per month with the extra

HK610 000 being paid into his F.A. Neubauer Bank [2.109] account.®

2.75.6 Mr Wong attended the Sydney conference of Nugan Hand Group

executives in October 1979 [see 3.6.13], At this conference he referred

to the ease with which money could be moved from Thailand to Hong Kong

with the result that the black market money rate was only two per cent 7 higher than the official rate.

- 290 -

2.75.7 Mr Wong was involved in deposit taking, as well as trade and

financial negotiations on behalf of the Nugan Hand Group. One of his

first tasks was to assist in the incorporation of a new company that was

to deal exclusively with the Peoples Republic of China.8 He later

tried to acquire a listed company on the Hong Kong Stock Exchange as a

vehicle for the Nugan Hand Group.^ Notes from the agenda of a meeting

held in Hong Kong on 5 November 1979 record that Mr Wong reported that he

had been assisting Ms Manlo Cheung in regard to deposits, that HK$520 000

had been obtained and that negotiations were taking place for a further

HK$1 million. According to the notes he had been helping Mr A.H. Wong

[2.74] in regard to negotiations for a US$1 million deposit with a

'counter guarantee'. In addition the notes outlined the negotiations he

was carrying out with various trade companies. Notes from the agenda of

an earlier meeting in Hong Kong dated 30 October 1979, reported Mr Wong

as stating 'that he was dealing with highly confidential matters with

Mr n.E. Beazley [2.7] relating to the acquisition of a London company and

banking interests in the U.S.A.'

2.75.8 There is documentary evidence before the Commission that Mr Wong

resigned as director of Nugan Hand (Hong Kong) Ltd on 30 November

1979. " * ■ " * " However, a statement made to the Joint Task Force by Mr Dennis

Mosselson, who was the chairman of City Trust Ltd, (formerly London

Capital Securities Ltd [2.111]) indicated that Messrs Beazley and Wong

arrived in London on 20 or 21 January 1980 for negotiations in relation 12 to the purchase of the said company.

Endnotes

1 CD4454 folio 3, E. Wong personal particulars, folio 18, memo

Wong/Hand 7/5/79 2 CD7751 folio 125, telex HandAfong 23/3/78 3 CD1250 folios 836-7

4 CD4454 folio 20, CD7164 folios 5-6, E. Wong letter of resignation 5 CD4454 folio 23, letter Wong/Collings 19/2/79; CD6991 folio 6, letter to George - unsigned 25/10/79 6 CD6809 folios 5-6, letter Wong/Tan Choon Seng 4/10/79 re

increase of salary JTF Report p 453 7

- 291 -

8 CD4454 folio 16

9 CD4454 folio 17

10 CD7041 folios 60, 66-7, notes of agenda of meeting 5/11/79 11 CD7164 folio 6

12 CD1250 folios 2191-94

2.76 YATES, Admiral Earl Preston

2.76.1 Admiral Earl Preston Yates was born in North Carolina on

23 December 1923. He graduated from the United States Naval Academy at

Annapolis, Maryland in 1943 and served in World War II and the Korean and

Vietnam Wars. His final assignment was as Deputy Chief of Staff, United

States Pacific Command during the final withdrawal of United States

forces from Vietnam.'*' Admiral Yates studied at various military

institutes during his career and holds a number of degrees including

Bachelor of Science (Aeronautical Engineering) and Master of Science 2 (International Affairs).

2.76.2 In 1972, Admiral Yates visited Australia. An officer who worked

for Admiral Yates, Colonel Billy Prim suggested that Admiral Yates should

contact his friend Mr M.B. Houghton [2.35]. Admiral Yates did this and

was invited by Mr Houghton to visit his restaurant. A friendship between

Admiral Yates and Mr Houghton then developed.3 Admiral Yates made a

second visit to Australia as the aide to the Commander in Chief of the

Pacific Command, Admiral Gayler. On that occasion Mr Houghton gave a

cocktail party for Admiral Gayler's entourage and introduced Admirals

Yates and Gayler to several political and financial figures in the Sydney 4 area.

2.76.3 In July 1974, Admiral Yates retired from the Navy and commenced

employment as the Executive Assistant to the President of Wheelabrato 5

Frye, the parent company of Rust Engineering Co. In early 1977

Admiral Yates travelled to Sydney on behalf of Wheelabrato Frye and again

met Mr Houghton who introduced him to Messrs M.J. Hand [2.2] and

F.J. Nugan [2.1]. At that time Admiral Yates felt his employment with

Wheelabrato Frye may not be continued and when Messrs Hand and Nugan

suggested he work for them it appeared an attractive offer. Admiral

- 292 -

Yates later received a document dated 24 January 1977 outlining his

employment details as the President of the Nugan Hand Bank (then Swiss 7

Pacific Bank and Trust Company [2.106]). He was to receive US$50 000

per annum from January 1977 even though he did not effectively commence

duties until mid 1977, as -well as US$40 000 for office expenses and

US$10 000 unaccountable expenses. Admiral Yates said in addition to the

income and expenses, he was offered a twenty per cent equity in an

international holding company which was to be established in February

1980 under the direction of Mr D.E. Beazley [2.7]. In October 1979

Admiral Yates was offered the position of Vice Chairman of the holding 8 company.

2.76.4 Before Admiral Yates accepted the offer of employment with the

Nugan Hand Group, he made several inquiries about the organisation. In

his evidence he said:

Ί checked with Sir Robert Askin, with Sir Paul Strasser, with the U.S. Consul-General, with several of Nugan Hand's clients, with the manager of the ANZ Bank, Hunter Street ...'

g

He also checked with the Department of Commerce in Washington D.C.

When he returned to the United States, Admiral Yates continued his

inquiries and received adverse comments from one bank in New York. He

discussed their comments with both Messrs Nugan and Hand who expressed

their concern about the comments.^

2.76.5 Admiral Yates' duties were to represent Nugan Hand Ltd [2.97],

Nugan Hand (Hong Kong) Ltd [2.94] and the Nugan Hand Bank in the United

States. He established an office in San Francisco, although his official

headquarters in the United States were in Washington D.C., where an

acquaintance, General E. Cocke [2.13] had offered the use of space within

his own office. As a representative his role was to 'get U.S. banks

to deposit money with Nugan Hand' in what he called a 'custodial

account'. He was not permitted to solicit deposits in the United States

but merely to provide the banks with information on interest rates and

the arrangements for securing deposits. It was left to the bank to

contact Nugan Hand Ltd if it wished to deposit. Admiral Yates said he 12

approached all the major United States banks but without success.

- 293 -

2.76.6 As a representative of the Nugan Hand Group, Admiral Yates was

allocated a variety of projects. One major task was the purchase of the

United Chinese Bank in Hong Kong. Admiral Yates was told there was

613 million available for such purpose and was instructed to put together

a team that could talk to General S.K. Yee, who owned the Bank. One

member of the team was General E.F. Black [2.8] who joined the Group in

1977. Admiral Yates had finalised the negotiations when he was told by

Messrs Nugan and Hand that they did not have funds to complete the

13

purchase. In mid 1978 Admiral Yates was involved in the opening of

both the Manila and Taipei offices for the Nugan Hand Group. He assisted

the representatives, Mr W.P. Gregory [2.26] and Mr D.O. Holmgren [2.34] 14

in finding office space and obtaining government approvals. He was

also involved in Mr Hand's refugee resettlement program in which he was

responsible for organising a strategy for the movement of refugees from

Thailand and Malaysia to Central and South America [see 2.2.52]. He

travelled extensively and met with heads of government throughout that 15

region to gain support for the project which was never finalised.

Admiral Yates informed the Joint Task Force that he corresponded with

'a large number of U.S., British and French armament manufacturers and

offered them the services of Nugan Hand'. No company accepted.16

2.76.7 Two of Admiral Yates' main contributions to the Nugan Hand Group

were the use of his good name and his ability to introduce Group

personnel to important people. He featured in many advertisements and

publicity reports issued by the Nugan Hand Group and was instrumental in

introducing a number of United States personnel to the Group.11

Admiral Yates introduced General Black who was later employed because of

his thorough knowledge of the South East Asian region, his contacts and

military background. Admiral Yates approached General L.J. Manor

[2.45] and offered him a position with the Nugan Hand Group in The

Philippines. Admiral Yates did not finalise the employment of General

Manor but introduced him to Messrs Hand and Nugan at the International 19

Congress on New Enterprise in Manila in June 1979 [3.6.14]. Another

ex serviceman Admiral Yates introduced to the Nugan Hand Group was

General Cocke. He also introduced Mr Holmgren and Dr G.J. Pauker

[2.54].20

- 294 -

2.76.8 An expense account for the Nugan Hand Group was opened by

Admiral Yates at the Second National Bank of North Miami. He chose that

bank as Mr Beazley worked there and Admiral Yates wanted to attract him 21 to the Nugan Hand Group. In 1977 he approached Mr Beazley and asked

him if he wished to join the Group but Mr Beazley declined at that

stage. In 1979, however, due to a reorganisation in the bank in which he 22

was working, Mr Beazley decided he would join the Nugan Hand Group.

2.76.9 In evidence before the Commission, Admiral Yates said he signed

the accounts for the Nugan Hand Bank for the year ending 30 June 1977.

He flew to the Cayman Islands for this purpose and met Mr S.K. Hill

[2.33] whom he relied upon to explain the accounts. Admiral Yates said

he signed the accounts as a director of the Nugan Hand Bank not knowing 23 whether he was in fact a director.

2.76.10 In 1980, when Admiral Yates' original contract expired, he was

made a consultant to the Nugan Hand Group and his salary was increased to

US$100 000 per year. ^ in January 1980 he accompanied Mr Hand on his

return to Australia following the death of Mr Nugan and remained in

Australia for a short time.2'’ Admiral Yates said when the Nugan Hand

Group failed he was still owed approximately US$25 000 in salary as well

as out of pocket expenses. These amounts remained outstanding at the

time Admiral Yates gave evidence to the Commission.^®

2.76.11 In mid December 1984, Admiral Yates made a cassette tape which

he gave to Mr Oscar Hand for forwarding to his son, Mr M.J. Hand. This

tape sought the cooperation of Mr Hand with this Commission's

investigations. Admiral Yates was told by Mr O. Hand that 'the matter is 27

dead and buried and I have no intention of digging it up'. The

Commission does not know whether Mr M.J. Hand ever received the cassette

tape.

- 295 -

Endnotes

1 CD1320 folio 326, Attachment to letter Admiral Yates/B.T. Holmes undated 2 CD10542 Volume 11 folio 1, Yates, resume 3 CT24237, Yates

4 CT24238, Yates

5 CD24239, Yates

6 CT24240, Yates

7 CT24241, CT24280, Yates; CD7186 folio 57, Records re payments to Yates 8 CT24244-47, Yates

9 CT24249, Yates

10 CT24250-51, Yates

11 CT24252, Yates

12 CT24242-43, Yates

13 CT24252-53, Yates

14 CT24253-54, Yates; CD1561 folio 78, Telex re NH Manila office opening 27/2/79 15 CT24170-71, Yates

16 CT24270, Yates; CD1250 folio 2922 JTF ROI Yates 17/11/82; CD6770 folios 25-27, Letter Yates/Major Keng (Chinese Air Force) re acquisition of F104G's 14/12/78

17 CT24281-83, Yates; CD1395 folio 46 Publicity sheet for NHI

private bankers; CD2101 folio 27, Press clipping from China Post re NHB 10/5/78 18 CD10542 Volume 1, folio 8

19 CT24256-57, Yates

20 CD24259, Yates

21 CT24247-48, Yates

22 CT24265, Yates

23 CT24271-73, Yates; CD3720 folio 2, NHB financial statement 30/6/77 - 30/6/78 24 CT24247, Yates

25 CT24274, CT24284, Yates 26 CT24255-56, Yates

27 CD2077, Yates correspondence

2.77 YEAP, Kee Aik

2.77.1 Datuk Yeap Kee Aik neither gave evidence before the Commission

nor was he the subject of evidence from other witnesses. The information

herein relies solely upon documents produced to the Commission in the

course of its inquiry.

2.77.2 Datuk Yeap Kee Aik is a Malaysian citizen. He is a graduate of

Oxford University and held the position of Administrator of Sabah and

Sarawak and was Permanent Head of the Malaysian Public Service Board.1

- 296 -

2.77.3 In mid 1978 Datuk Yeap Kee Aik was made Chairman and Director of 2

Nugan Hand Holdings Sdn. Bhd. [Appendix B]. This company shared its

Kuala Lumpur office with Yeap Enterprises Sdn. Bhd., a company of which 3

Datuk Yeap Kee Aik was the Managing Director. On behalf of Nugan Hand

Holdings Sdn. Bhd., Datuk Yeap Kee Aik approached General Tan Sri Ibrahim 4

and asked him to be on that company's board of directors.

2.77.4 Datuk Yeap Kee Aik received US$500 per month in entertainment

expenses as well as brokerage for deposits which were obtained for the 5 Nugan Hand Group. Documents held by the Commission indicate that at

least until 25 February 1980 Datuk Yeap Kee Aik was associated with the

Nugan Hand Group.6

Ehdnotes

1 CD11323 folio 65, Minute Steer/Collings re Yeap Kee Aik 26/6/78 2 CD11323 folio 65

3 CD7323 folio 18, Letter Yeap Kee Aik/Steer re Nugan Hand

Holdings Sdn. Bhd. 27/10/78, folio 20, Minute Tan Choon

Seng/Yeap Kee Aik re office occupation 23/10/78 4 CD7323 folio 31, Letter Yeap Kee Aik/Gilder re Nugan Hand

Holdings Sdn. Bhd. 20/7/78 5 CD7323 folio 12, Minute Steer/Yeap Kee Aik re brokerage schedule 10/2/79 6 CD11323 folios 67-70 Steer/Hand, Beazley, Attkisson re

recommendation for physical merger of NHH Sdn. Bhd. and NH Malaysia Sdn. Bhd. 25/2/80

2.78 YOUNG, George Richard Paul

2.78.1 Mr George Richard Paul Young (who on 24 July 1975 changed his

name from Georg Jung) was born on 12 April 1940 in Germany and arrived in

Australia in I960."1 2 3 4 5 6 ' When he gave evidence to the Commission he was an

assistant credit manager for a large industrial manufacturing

2

corporation. Frcm mid 1966 until January 1973 Mr Young was employed

by National Mutual which owns National Discount Corporation. He worked

in the superannuation department and then later assisted in the New South

Wales money market operation. Between October/November 1968 and

- 297 -

September 1971 Mr Young was the senior trader (money market) for the

corporation.8 CitiNational Securities Corporation Ltd [see Part 4

section 7] started in November 19714 and from then until January 1973

Mr Young conducted the money market divisions for both National Discount 5

Corporation and CitiNational Securities Corporation Ltd.

2.78.2 In April 1973 Mr Young placed an advertisement in The

Financial Review stating that he wanted to get back into the money market

and was looking for offers. In late May 1973 Mr Young received a

telephone call from Mr F.J. Nugan [2.1] who said that he was going to set

up a merchant banking complex and asked Mr Young if he was interested in

working for him. Mr Nugan told Mr Young that he wanted to set up a local

complex and then branch out all over the world and eventually turn into a

large banking conglomerate. Mr Young discussed the plan with Mr Nugan

and told him that he would require $1 million capital to get a licence.

They parted on the basis that Mr Nugan would 'look at it and come back to

m e 1

2.78.3 In late June 1973, Mr Nugan rang Mr Young and asked to see him

again. Mr Young was asked by Mr NUgan if he would handle the setting up

of the merchant bank. He told Mr Nugan that he only knew the money

market side. It was therefore agreed that Mr Young would establish the

money market operation and that Mr Nugan would obtain the necessary

personnel to conduct any other merchant banking operations that the new 7 company would be involved in. It was also agreed that Mr Young would

receive a salary of $1 200 per month in advance. According to Mr Young

this was to be tax free as Mr Nugan was going to 'fix up' the tax by

paying whatever income tax liability was incurred. However, Mr Young

said, Mr Nugan failed to pay the tax and so he paid it himself.8

2.78.4 On 14 August 1973 Messrs Nugan and Young moved to 55 Macquarie

Street, Sydney and Mr Young was responsible for organising the office and g the bookkeeping system. Mr Young needed a security settlement officer

and with Mr Nugan's approval he persuaded Mr S.K. Hill [2.33] to join

Nugan Hand Ltd [2.97].10 Mr Hill did the 'leg and book work' while

Mr Young did the trading, buying bank bills and government securities

- 298 -

from other dealers and trading around the dealer group where everyone

knew him. When dealing with CitiNational Securities Corporation Ltd

and National Discount Ltd Mr Young dealt with Mr L. Scott-Kemmis [2.64]

who had taken over Mr Young's position with CitiNational Securities 12 Corporation Ltd. Mr Young left Nugan Hand Ltd in December 1973 or

January 1974. [Full details of Mr Young's involvement in the

establishment of the money market operation for Nugan Hand Ltd and of his

money market trading activities between August 1973 and January 1974 are

set out at 3.2.11 to 3.2.17. ]

2.78.5 In October 1973 PNB Rubber and Plastic Industries Pty Ltd

[2.117], a company which had been incorporated by Mr Nugan, successfully

took over North Australian Rubber Mills Ltd ('NARK') [2.113]. In October

1973 Mr Hill moved to Brisbane to work with NARM and Mr Young had a day

to day involvement with him in that capacity. Mr Young had discussions

with Mr J.C. Needham [2.51] about the problems associated with the 13 takeover by NARM. As a result of this, Mr Needham offered to buy

NARM and successfully took over the company in December 1973. About the

same time Mr Needham offered Mr Young the position of group financial

controller of Secured Income Real Estate (Australia) Ltd [2.118], On

8 March Mr Needham extended Mr Young's responsibilities to include full

control of NARM and so Mr Young severed his connections with Nugan Hand

Ltd. Mr Young said that when he took control of NARM, in March 1974 he 14

dismissed Mr Hill from his position with NARM.

Endnotes 1 1 1

1 CT24820, Young

2 CT24825, Young

3 CT24834, Young

4 CT24833, Young

5 CT24832a-33, Young; CD11488 6 CT24839, Young

7 CT24827, CT24838-39, Young 8 CT24839, CT24875, Young; CD11339 9 CT24828, CT24843, CT24851, Young 10 CT24830, Young

11 CT24847, Young

12 CT24865, Young

13 CT24828-32, CT24872-74, Young; CT22410, Needham 14 CT24829, CT24874, Young

- 299 -

ALPHABETICAL LISTING OF COMPANY PROFILES

Scheduled Companies

Page No.

Australasian and Pacific Holdings Limited (in liquidation) 301

Distravite Australia Wide Servicing Company Pty Limited 303

Distravite Pty Ltd 305

Garcia Bros Hardware Pty Limited 307

Hidex Pty Limited 309

Illarangi Investments Pty Limited (in liquidation) 311

K.& R. Cash Transit Pty Limited (in liquidation) 313

Leasefast Pty Limited (in liquidation) 315

Mars Road Investments Pty Limited (in liquidation) 317

Medevac Shipping Pty Limited 319

Naretha Pty Limited (in liquidation) 321

Newcourt Financial Services Pty Limited 323

NUN Management Pty Limited 325

Nugan Hand (Dealers) Pty Limited (in liquidation) 327

Nugan Hand (Hong Kong) Ltd 329

Nugan Hand, Inc. 330

Nugan Hand International Holdings Pty Limited (in liquidation) 332

Nugan Hand Limited 334

Nugan Hand Trade Services Pty Limited 336

Pacific Continental Limited (in liquidation) 338

P.M. Shelley Pty Limited (in liquidation) 340

R.B. Cody Pty Limited 342

- 300 -

Skah Pty Limited 344

S.L. Notwist Pty Limited 346

Solingen Aust Pty Limited 348

Swiss Pacific Pty Limited 350

The Nugan Hand Bank 352

W.V. Tennyson Pty Limited (in liquidation) 354

Yorkville Nominees Pty Limited (in liquidation) 356

Further relevant companies

2.109 F.A. Neubauer Bank 358

2.110 Fund of Australia 359

2.111 London Capital Securities Ltd 361

2.112 Meekatharra Minerals Ltd 365

2.113 North Australian Rubber Mills Ltd 367

2.114 Nugan Fruit Group 369

2.115 Nugan Hand Inc. Panama 373

2.116 Orange Spot Group 375

2.117 PNB Rubber and Plastic Industries Pty Ltd 376

2.118 Secured Income Real Estate (Australia) Ltd 378

- 301 -

2.80 AUSTRALASIAN AND PACIFIC HOLDINGS LIMITED (IN LIQUIDATION)

2.80.1 The following information has been compiled from various

documents within the Commission's holdings.1

DATE OF INCORPORATION: 15 August 1969

REGISTERED OFFICE: 3rd Floor, Bathurst Chambers From To

110 Bathurst St, Sydney Suite 604, 15. 8.69 12.11.73 84 Pitt St, Sydney

12th Floor,

12.11.73 21.10.77

309 Pitt St, Sydney C/- Pollard & Brincat 21.10.77 18. 7.79 9th Floor,

217 Clarence St, Sydney 18. 7.79

AUTHORISED CAPITAL: $1 000 000 (10 000 000 shares 0 10jd ea)

ISSUED CAPITAL: $2 920.50 (29 205 shares @ W ea)

SHAREHOLDERS: No. of

(as at date of Shares

last return)

Hand, M.J. 14 501

Nugan, F.J. 2 100

Yorkville Nominees Pty Ltd 12 602

Harland, E.P. 1

Shaw, G.T. 1

29 205

DIRECTORS: Date of Date of

Appointment Resignation

Hand, M.J. 15. 8.69 21.10.77

Foley, J.J. 15. 8.69 22. 7.70

Lucas, C.W. 15. 8.69 22. 7.70

O'Callaghan, D.J. 22. 7.70 6.10.77

Jeweller, J.I. 22. 7.70 21.10.77

Shaw, G.T. 21.10.77

Harland, E.P. 21.10.77 8 . 8.80

Hill, S.K.A. 21.10.77

- 302 -

SECRETARIES: Date of Date of

Appointment Resignation

Jeweller, J.I Smith, R.D. Swan, P.M.

15. 8.69 12.11.73

12.11.73 21.10.77 21.10.77

PRESENT STATUS: 10.4.81 - Mr J.W. O'Brien appointed liquidator

2.80.2 There have been allegations in the press concerning the possible

links between Australasian and Pacific Holdings Ltd and the United States

Central Intelligence Agency ('the C.I.A.'), for example, The National

Tines 10—16 Aunust 1980, The Australian 1 September 1980, The National

Times 21 February 1982, Foreign Policy, Winter 1982-3. According to the

company's Return of Allotment of Shares lodged with the New South Wales

Corporate Affairs Commission on 4 May 1970, a total of 29 200 shares were

issued between 2] October 1 9 6 9 and ]5 January 1970. Set out in the

schedule annexed to this return was a listing of the allottees of shares

in the company. Seventeen of the listed shareholders were United States

residents with ten of these being employees of Air America and

2

Continental Air Services. From time to time in the media and

elsewhere it has been alleged that both of these companies were

associated in some way with the C.I.A. It may be that these allegations

have led to a conclusion that Australasian and Pacific Holdings Ltd also

had some such association. The Commission has found no evidence of this

[refer Part 4 Section 3].

2.80.3 The accounting records of Australasian and Pacific Holdings Ltd

indicate that since the early 1970s the company has been essentially

inactive. Mr C.F. Brincat [profile 2.9] in his evidence to the Corporate

Affairs Commission stated that he prepared the accounts and completed the

audit for this company from 1977 to 1979.^

Endnotes

1 2 3

CD30; CD5593; CD5594; CD5595; CD6341; CD11546 CD30 folio 140 CD3008 folios 20-21

- 303 -

2.81 DISTRAVITE AUSTRALIA WIDE SERVICING COMPANY PTY LIMITED

2.81.1 The following information has been

documents within the Commission's holdings."*·

compiled from various

DATE OF INCORPORATION: 11 April 1978

REGISTERED OFFICE: c/- Heuschkel & Pollard, 9th Floor, 217 Clarence St, Sydney

338 Botany Rd, Alexandria 77-85 Botany St, Redfern c/-Charles M. Harvey & Co. 163 Clarence St, Sydney

From

11. 4.78 9. 5.78 7. 1.80

3.11.80

To

9. 5.78 7. 1.80 3.11.80

AUTHORISED CAPITAL: $100 000 (100 000 shares @ $1 ea)

ISSUED CAPITAL: $2 (2 shares @ $1 ea)

SHAREHOLDERS: No. of

1 Shares

Date of Acquisition Date of Disposal

George, Q.D. 1

Calder, B.W. 1

Louis, R.A.S. 1

11. 4.78 11. 4.78 28. 6.79 28. 6.79

DIRECTORS: Date of Date of

Appointment Resignation

George, Q.D. Calder, B.W. Swan, P.M. Louis, R.A.S. Van Dorp, W.M.

11. 4.78 11. 4.78 11. 4.78 13.12.78 30. 6.79

13.12.78 30. 6.79

SECRETARIES: Date of Date of

Appointment Resignation

Calder, B.W. Louis, R.A.S.

11. 4.78 30. 6.79 30. 6.79

PRESENT STATUS: Company still registered at June 1985

- 304 -

2.81.2 Distravite Australia Wide Servicing Company Pty Ltd was

incorporated on 11 April 1978 following a request from Mr F.J. Nugan

[profile 2.1] for Mr P.W. Calder [profile 2.82] to incorporate two

companies for the purpose of selling vitamins and orange juice.3 The

two companies used by Mr Calder for this purpose were Distravite

Australia Wide Servicing Company Pty Ltd, and Apollo Land and Development

Pty Ltd. (This company's name was changed to Distravite Pty Ltd

[profile 2.82] on 20 February 1978.) The two companies were created

mainly as a tax evasion/avoidance device. [For further details see 9.11

and 3.5.21 to 3.5.23.]

2.81.3 The company did engage in some legitimate business but as such

was unsuccessful, continually requiring capital injections. In its role

an a tax evasion/avoidance device the company was equally unsuccessful

following the rejection by the Deputy Commissioner of Taxation of the

taxation schemes marketed by the company for the year ended 30 June

1979.3

2.81.4 Mr G.F. Brincat [profile 2.9] in his evidence to the Corporate

Affairs Commission stated that he had completed the accounts and

conducted the audit of Distravite Australia Wide Servicing Company

Pty Ltd since its incorporation and that of Distravite Pty Ltd from

either 1974 or 1975.^

Fndnotes

1 CD402; CD4675; CD5375; CD]1546 2 CT22495, Calder

3 CT22355, George; CT23258-68, Louis (Snr) 4 CD3008 folios'20-21

- 305 -

2.82 DISTRAVITE PTY LTD

2.82.1 The following information has been compiled from various

documents within the Commission's holdings.·*·

DATE OF INCORPORATION: 15 August 1969

CHANGE OF NAME: 15. 8.69 Incorporated as Apollo Land and

Development Pty Ltd

20. 2.78 Changed name to Distravite Pty Ltd

REGISTERED OFFICE: From To

c/- Australasian and Pacific Holdings Limited 110 Bathurst St, Sydney 15. 8.69 23.10.72

Suite 902, 60 Martin Place, Sydney 23.10.72 6.12.73

c/- Heuschkel & : Pollard, 76 Broadarrow Rd , Narwee 6.12.73 26. 6.75

2 Holden St, Redfern 26. 6.75 25.11.76

c/-Heuschkel & Pollard, 9th Floor, 217 Clarence St, Sydney 25.11.76 10. 5.78

338 Botany Rd, Alexandria 10. 5.78 7. 1.80

77-85 Botany St, Redfern 7. 1.80 3.11.80

c/-Charles M.Harvey & Co., 163 Clarence St, Sydney 3.11.80

AUTHORISED CAPITAL: $10 000 (100 000 shares @ 10jz5 ea)

ISSUED CAPITAL: 2 0 f! (2 shares @ 10^5 ea)

SHAREHOLDERS: No. of Date of Date of

Shares Acquisition Disposal

Jeweller, J.I. 1 15. 8.69 15.11.72

James, G. 1 15. 8.69 15.11.72

Nugan, F.J. 1 15.11.72 15. 5.75

W.V. Tennyson Pty Ltd 1 15.11.72 15. 5.75

Scrimgeour, I.J. 1 15. 5.75 26. 6.76

Scrimgeour, N.B. 1 15. 5.75 26. 6.76

Dalton, F.J. 1 26. 6.76 25.11.76

Dalton, R.L. 1 26. 6.76 25.11.76

Pollard, W.M. 1 25.11.76 24. 1.78

Brincat, G.F. 1 25.11.76 24. 1.78

Calder, B.W. 1 24. 1.78 28. 6.79

George, Q.D. 1 24. 1.78

(Held in Trust flor F.J. Nugan)

- 306 -

SHAREHOLDERS: (Continued) No. of Date of Date of

Shares Acquisition Disposal

Louis, R.A.S. 1 28. 6.79

(Held in Trust for M.J. Hand)

DIRECTORS: Date of Date of

Appointment Resignation

Hand, K.J. 15. 8.69 23.10.72

Foley, J.J. 15. 8.69 23.10.72

Lucas, C.W. 15. 8.69 23.10.72

Rugan, F.J. 23.10.72 15. 5.75

Smith, B.D. 23.10.72 25. 6.73

Swan, P.M. 25. 6.73 15. 5.75

1. 2.78 Unknown

Scrimgeour, N.P. 15. 5.75 26. 6.75

Scrimqeour, I.J. 15. 5.75 26. 6.75

Dalton, R.L. 26. 6.75 25.11.76

Dalton, F.J. 26. 6.75 25.11.76

Brincat, G.F. 25.11.76 1. 2.78

Pollard, W.M. 25.11.76 1. 2.78

George, Q.D. 1. 2.78 13.12.78

Calder, B.W. 1. 2.78 30. 6.79

Louis, R.A.S. 13.12.78

Van Dorp, W.M. 30. 6.79

SECRETARIES: Date of Date of

Appointment Resignation

Smith, B.D. 15. 8.69 25. 6.73

Swan, P.M. 25. 6.73 26. 6.75

Dalton, R.L. 26. 6.75 25.11.76

Brincat, G.F. 25.11.76 1. 2.78

Calder, B.W. 1. 2.78 30. 6.79

Louis, R.A.S. 30. 6.79

PRESENT STATUS: Company still registered at June 1985

2.82.2 This company was incorporated in conjunction with J Distravite

Australia Wide Servicing Company Pty Ltd [profile 2.81]. The Deputy

Commissioner of Taxation rejected the 'Distravite' schemes and this was

the subject of discussion at the meeting held on the day prior to

2

Nr Nugan's death [see 3.7.14-3.7.15],

Endnotes 1 2

1 CD4672; 0)5555; CD5557; CD4727; CD11146; CD4675 2 CT20832, George

- 307 -

2.83 GARCIA BROS HARDWARE PTY LIMITED

2.83.1 The following information has been compiled from various

documents within the Commission's holdings.1

DATE OF INCORPORATION: 2 October 1970

CHANGE OF NAME:

REGISTERED OFFICE:

AUTHORISED CAPITAL:

ISSUED CAPITAL:

SHAREHOLDERS:

2.10.70 Incorporated as Carlyle Investments Pty Ltd 18. 6.73 Changed name to Hand-Pacific Nominees Pty Ltd

31.10.74 Changed name to Garcia Bros Hardware Pty Ltd

Ground Floor,

From To

391 Anzac Pde, Kingsford 5th Floor, 30/100 Elizabeth Bay Rd,

2.10.70 28. 1.72

Elizabeth Bay 20/54 Darling Point Rd, 28. 1.72 10. 5.74

Darling Point C/- Heuschkel & Pollard 10. 5.74 16.12.74 76 Broadarrow Rd, Narwee

C/- Heuschkel & Pollard 9th Floor, 217 Clarence St, Sydney

16.12.74

1.12.76

1.12.76

$10 000 (10 000 ordinary shares @ $1 ea)

$2 (2 ordinary shares @ $1 ea)

No. of Date of Date of

Shares Acquisition Disposal

Ellison, J.J. 1 2.10.70 28.1.72

Farah, N.G. 1 2.10.70 28.1.72

Hand, M.J. 1 28. 1.72

Hand, H.M. 1 28. 1.72

DIRECTORS:

- 308

Ellison, J.J. Farah, N.G. Hand, M.J. Hand, H.M.

SECRETARIES:

Farah, N.G. Hand, H.M.

Date of Date of

Appointment Resignation

2.10.70 28. 1.72 2.10.70 28. 1.72

28. 1.72 28. 1.72

Date of Date of

Appointment Resignation

2.10.70 28. 1.72 28. 1.72

PRESENT STATUS: Company's name struck off the Register and

company dissolved pursuant to section 308(4) of the Companies Act 1961 (NSW) on 18 June 1982.

2.83.2 During 1971-73 this company was used by Mr M.J. Hand [profile

2.2] for share trading mainly in Meekatharra Minerals NL [profile 2.112]

shares, (a company of which Mr F.J. Nugan [profile 2.1 ] was a

2

director).

2.83.3 Mr Hand in his evidence to the Corporate Affairs Commission on

28 February 1980, said he was going to use Garcia Bros Hardware Pty Ltd

as a property investment company utilising funds obtained from people in 3 South East Asia.

Endnotes

1 CD399; CD5463; CD5465; CD11546 2 CD4722 folios 231, 250-55

3 CD3037 folio 14

- 309 -

DATE OF INCORPORATION: 20 June 1975

2.84 HIDEX PTY LTD

2.84.1 The following information has been compiled from various

documents within the Commission's holdings."*

CHANGE OF NAME: 20. 6.75 Incorporated as B.C. Nahling Pty Ltd

26. 5.76 Changed name to Hidex Pty Ltd

REGISTERED OFFICE: 8th Floor, 55 Macquarie St, Sydney

AUTHORISED CAPITAL:

ISSUED CAPITAL:

SHAREHOLDERS:

DIRECTORS:

SECRETARY:

$10 000 (10 000 shares @ $1 ea)

$10 000 (10 000 shares @ $1 ea)

No. of Date of Date of

Shares Acquisition Disposal

Nugan, F.J. * 1 20. 6.75

4999 14. 5.76 Pre 10.76

Hand, M.J. * 1 5. 5.76

4999 14. 5.76 Pre 10.76

Swan, P.M. 1 20. 6.75 5. 5.76

Yorkville Nominees Pty Ltd 9998 Pre 10.76

(* Nominees for Yorkville Nominees Pty Ltd)

Date of Date of

Appointment Resignation

Nugan, F.J. 20. 6.75

Swan, P.M. 20. 6.75 5. 5.76

Hand, M.J. 5. 5.76

Hill, S.K.A. 5. 5.76

Date of Date of

Appointment Resignation

Swan, P.M. 20. 6.75

- 310 -

— PRESENT -STATUS: 25. 7.83 - The Corporate Affairs Commission approved that action he taken pursuant to the provisions of section 459 of the Companies (New South Wales) Code with a view to removing the name of the company from the register.

2.84.2 This company was incorporated to market 'wet-salted hides' to 2 Taiwan. The evidence shows only two trade transactions occurred.

These transactions were failures1 2 3 [see 3.4.15].

2.84.3 In his evidence to the Corporate Affairs Commission,

Mr G.F. Brincat [profile 2.9] stated that he prepared the accounts and

had completed the audits for the company since its incorporation.4

Endnotes

1 0)1976; 0)4777; 0)4781; 0)11546 2 CD3037 folio 14

3 0)197 folios 5-6; CD4220 folio 20

4 CD3008 folio 20-21

- 311 -

2.85.1 The following information has been compiled from various

documents within the Commission's holdings.* 1

2.85 ILLARANGI INVESTMENTS PTY LIMITED (IN LIQUIDATION)

DATE OF INCORPORATION: 15 November 1977

REGISTERED OFFICE: c/- Heuschkel and Pollard, 217 Clarence St, Sydney

AUTHORISED CAPITAL: $10 000 (10 000 shares @ $1 ea)

ISSUED CAPITAL: $13 (13 shares

SHAREHOLDERS:

Laycock, P. Pollard, W.M Brincat, G.F Hill, S.K.A.

Gross, J.M.

DIRECTORS:

Pollard, W.M. Br incat, G.F. Hill, S.K.A.

Laycock, P. Pittard, D.J.

SECRETARIES:

Br incat, G.F. Hill, S.K.A.

$1 ea)

No. of Date of Date of

Shares Acquisition Disposal

1 17.11.77 22.12.78

1 15.11.77 17.11.78

1 15.11.77 17.11.78

12 17.11.77

1 22.12.78

Date of Date of

Appointment Resignation

15.11.77 17.11.77 15.11.77 17.11.77 17.11.77 17.11.77 8 . 6.78

8. 6.78

Date of Date of

Appointment Resignation

15.11.77 17.11.77 17.11.77

PRESENT STATUS: 24. 4.80 - Mr I.D. Ferrier appointed provisional liquidator 4. 6.80 - Mr I.D. Ferrier appointed liquidator 1. 6.81 - Mr I.D. Ferrier resigned and Mr B.R.

Silvia appointed as liquidator

- 312 -

2.85.2 Illarangi Investments Pty Ltd fulfilled the role of a conduit

— for the movement of funds between the Nugan Hand group of companies and 2 the Nugan Fruit Group. [See profile 2.114 and paragraphs 3.4.96 to

3.4.99 and 5.114 to 5.115 for further details.]

Endnotes 1 2

1 CD395; CD5589; 0)5590; 0)11083; CD11546 2 CT21053-54, CT21057, CT24755, Hill

- 313 -

2.86.1 The following information has been compiled from various

documents within the Commission's holding.^

DATE OF INCORPORATION: 4 June 1969

2.86 K.& R. CASH TRANSIT PTY. LIMITED (IN LIQUIDATION)

CHANGE OF NAME: 4. 6.69 Incorporated as Garel Pty Ltd

11. 9.73 Changed name to R. & K. Security Alarms Pty Ltd 19. 6.78 Changed name to K. & R. Cash Transit Pty Ltd

REGISTERED OFFICE: Ground Floor, 223 Pacific Hwy,

From To

North Sydney 1st Floor, Pennant Refrigerators Bldg

10. 6.69 1. 6.70

9 Suttor St, Auburn c/- K.G. Hazzard Room 66, 6th Floor,

1. 6.70 30.11.71

72 Pitt St, Sydney 30.11.71 20. 8.73

4 Wentworth Ave, Blakehurst 20. 8.73 9. 5.75 6 Mackenzie St, Revesby 4 Wentworth Ave, Blakehurst 9. 5.75

3.12.76

3.12.76

AUTHORISED CAPITAL; $10 000 (10 000 shares @ $1 ea)

ISSUED CAPITAL: $2.00 (2 shares @ $1 ea)

SHAREHOLDERS: (last return) No. of

Shares

Lambkin, K.E. Greenhalgh, D.W.

1 1

DIRECTORS: Date of Date of

Appointment Resignation

Hazzard, K.G. 10. 6.69 16. 7.70

Hazzard, W.A. 10. 6.69 16. 7.70

Williams, P. 16. 7.70 20. 8.73

Glaser, O. 16. 7.70 20. 8.73

Glaser, K. 16. 7.70

DIRECTORS: (Continued)

- 314 -

SECRETARIES:

Date of Date of

Appointment Resignation

Charnock, G. unknown 20. 8.73

Lambkin, K.E. 20. 8.73 10. 4.75

Skinner, B.M. 20. 8.73

Becher, R.E. 10. 4.75 3.12.76

Simonson, R.J. 10. 4.75 3.12.76

Kettlewell, J. unknown 3.12.76

Lambkin, K.E. 3.12.76

Titterton, E.M. 3.12.76

Date of Date of

Appointment Resignation

Hazzard, K.G. 10. 6.69 16. 7.70

Williams, P. 16. 7.70 20. 8.73

Lambkin, K.E. 20. 8.73 10. 4.75

Becher, R.E. 10. 4.75 3.12.76

Lambkin, K.E. 3.12.76

PRESENT STATUS: 18. 4.79 I.D. Perrier appointed provisional liquidator 4. 6.79 I.D. Perrier appointed liquidator 1. 6.81 I.D. Perrier resigned and B.R. Silvia

appointed liquidator

2.86.2 K. & P. Cash Transit Pty Ltd although not one of the Nugan Hand

Group of companies in the sense that it had common directors,

shareholders, secretaries and registered offices, was included in the

schedule of companies in the Commission's terms of reference.

2.86.3 Generally speaking the business of the company involved the

removal of surplus cash from clubs and other large organisations and the 2 delivery of payroll moneys. On various occasions K. & R. Cash Transit

Pty Ltd invested surplus funds with Nugan Hand Ltd or Yorkville Nominees

Pty Ltd1 2 3 [profiles 2.97, 2.108].

Endnotes

1 CD11546

2 CD10762

3 CD787

- 315 -

2.87.1 The following information has been compiled from various

documents within the Commission's holdings.^

2.87 LEASEFAST PTY LIMITED (IN LIQUIDATION)

DATE OF INCORPORATION: 23 September 1976

REGISTERED OFFICE: 7th Floor, 45 Macquarie St, Sydney

AUTHORISED CAPITAL: $10 000 (10 000 ordinary shares @ $1 ea)

ISSUED CAPITAL: $400 (400 ordinary shares @ $1 ea)

SHAREHOLDERS:

DIRECTORS:

SECRETARIES:

No. of Date of Date of

Shares Acquisition Disposal

Hill, S.K.A. 1 23. 9.76 2.12.77

1 6.10.77 2.12.77

Spry, F. 1 15.10.76 6.10.77

Hill, P.A. 1 23. 9.76 15.10.76

Laycock, P. 1 15.10.76 Pre 11.79

79 2.12.77 Pre 11.79

Winn, T.A. 40 2.12.77 Pre 11.79

S.L. Notwist Pty Ltd 300 2.12.77

Hand, M.J. 1 15.10.76

99 2.12.77

Date of Date of

Appointment Resignation

Laycock, P. 23. 9.76 7. 8.79

Spry, F. 23. 9.76 21.11.77

Hill, S.K.A. 23. 9.76

Hand, M.J. 23. 9.76

Winn, T.A. 2.12.77 7. 8.79

Date of Date of

Appointment Resignation

Hill, S.K.A. 23. 9.76 2.12.77

Brincat, G.F. 2.12.77

- 316 -

PRESENT STATUS: 10.4.81 - Mr J.W. O'Brien appointed liquidator

2.87.2 Mr Hill told the Commission that Leasefast Pty Ltd was a leasing

brokerage firm set up by Mr Peter Laycock and himself. The company was

to act as a broker for people buying motor vehicles who wished to obtain 2 lease finance.

2.87.3 Mr G.F. Brincat [profile 2.9] told the Corporate Affairs

Commission that he had prepared the accounts and completed the audits of

the company since its incorporation. ^ On 10 April 1981, Leasefast Pty

Ltd was placed into liquidation and Mr J.W. O'Brien was appointed the

liquidator. In his first interim report, Mr O'Brien stated that there

existed a debt of £300 000 owing to the Wing On Bank. This represented

'bills of exchange which were accepted by the company and which were

subsequently given to the Wing On Bank Limited as security for deposits 4 lodqed with Nuhan Limited'. [For a description of the relationship

between internal bills of exchange and the Wing On Bank safe custody

account see paragraphs 4.1.27 to 4.1.55.]

Endnotes

1 CP28; CD5005; CD5599; CD6312; CD11546 2 CT24763, Hill

3 CD3008 folio 21

4 CD1519 folio 50

- 317 -

2.88.1 The following information has been compiled from various

documents within the Commission's holdings.

DATE OF INCORPORATION: 11 October 1978

2.88 MARS ROAD INVESTMENTS PTY LIMITED (IN LIQUIDATION)

REGISTERED OFFICE:

AUTHORISED CAPITAL:

ISSUED CAPITAL:

SHAREHOLDERS:

Suite 1709, AMP Centre, Bridge St, Sydney 4th Floor, 55 Macquarie St, Sydney

$2 (2 shares @ $1 ea)

No. of Shares

From To

11.10.78 3. 3.80

3. 3.80

Date of Date of

Acquisition Disposal

11.10.78 11.10.78

Date of Date of

Appointment Resignation

11.10.78 11.10.78

Date of late of

Appointment Resignation

11.10.78

George, Q.D. Calder, B.W.

DIRECTORS:

SECRETARY:

George, Q.D. Calder, B.W.

Calder, B.W.

$100 000 (100 000 shares e $1 ea)

PRESENT STATUS: 19. 5.80 - Mr J.E. Walker appointed liquidator

- 318 -

2.88.2 The primary function of this company was to assume the deposit

taking operations of Yorkville Nominees Pty Ltd [profile 2.108] from late

1978. Management of this company was vested in Mr G.T. Shaw [profile

2.05], who was instructed by Mr S.K. Hill [profile 2.33] to record all

the details of transactions in specified company records. These records

have not been recovered by the Commission [see also 3.8.129-3.8.136].

Endnotes

1 CD403; CD2293; CD5468; CD5469; CD11546

- 319 -

2.89 MEDEVAC SHIPPING ΡΊΎ LTD

DATE OP INCORPORATION: 6 June 1975

CHANGE OF NAME; 6. 6.75 Incorporated as G.M. Gunhill Pty Ltd

24. 9.76 Changed name to Medevac Shipping Pty Ltd

2.89.1 The following information has been compiled from various

documents within the Commission's holdings."*"

REGISTERED OFFICE: 8th Floor, 55 Macquarie St, Sydney

AUTHORISED CAPITAL: $10 000 (10 000 ordinary shares @ $1 ea)

ISSUED CAPITAL; $2 (2 ordinary shares @ $1 ea)

SHAREHOLDERS: No. of

Shares

Date of Acquisition Date of Disposal

Mugan, F.J. Swan, P.M.

1 1

6 . 6.75 6. 6.75

DIRECTORS: Date of Date of

Appointment Resignation

Nugan, F.J. Swan, P.M. Hand, M.J.

Collings, C.L.H. Tan, S.K.H. Morse, A.C. Lee, C.C.L.

6 . 6.75 6 . 6.75 24. 9.76 24. 9.76 23.11.76

23.11.76 23.11.76

24. 9.76

30.11.76 30.11.76 30.11.76

SECRETARY: Date of Date of

Appointment Resignation

Swan, P.M. 6 . 6.75

PRESENT STATUS: Company still registered at June 1985

- 320 -

2.89.2 This company was incorporated as part of a proposed joint

venture between the Nugan Hand Group and a Captain Arthur Morse, which

involved the building of medical evacuation ships. The Nugan Hand Group

was to provide financial backing for the project and market the

2

ships. The 'Medevac project' did not eventuate.

Endnotes 1 2

1 ΟΠ391; CD4662; CD46fi5; CD11546 2 CDS225 folio 39; CD10469 folio 43

- 321 -

DATE OF INCORPORATION: 11 February 1976

2.90 NARETHA PTY LTD (IN LIQUIDATION)

2.90.1 The following information has been compiled from various

documents within the Commission's holdings.^

From

Suite 92, Harrowgate House,

To

155 Castlereagh St, Sydney 11. 2.76 c/- J.H. Hughes & Associates, 7th Floor,

11. 2 76

280 Pitt St, Sydney 11. 2.76

c/- J.H. Hughes & Associates, 4th Floor,

19.11.76

55 Macquarie St, Sydney 19.11.76 9th Floor, 217 Clarence St, Sydney 11.11.77

11.11.77

$10 000 (10 000 ordinary shares @ $1 ea)

$2 (2 ordinary shares @ $1 ea)

REGISTERED OFFICE:

AUTHORISED CAPITAL:

ISSUED CAPITAL:

SHAREHOLDERS:

DIRECTORS:

Butts, H.C.

No. of Shares

1

Coonan, C.D. 1

Hughes, P.M. 1

Hughes, J.H. 1

Harland, E.P. 1

Shaw, G.T. 1

Date of Date of * 1 1 * * * 1 5 Acquisition Disposal

11. 2.76 11. 2.76

11. 2.76 11. 2.76

11. 2.76 15. 2.78

11. 2.76 15. 2.78

15. 2.78 15. 2.78

Date of Date of

Appointment Resignation

Coonan, C.D. 11. 2.76 11. 2.76

Butts, H.C. 11. 2.76 11. 2.76

Hughes, J.H. 11. 2.76 11.11.77

Hughes, P.M. 11. 2.76 11.11.77

Harland, E.P. 11.11.77

Shaw, G.T. 11.11.77

SECRETARIES:

- 322 -

Date of Date of

Appointment Resignation

Butts, H.C. 11. 2.76 11. 2.76

Graham, L. 11. 2.76 11.11.77

Shaw, G.T. 11.11.77

PRESENT STATUS: 19. 6.80 - Mr I.D. Perrier appointed Official Liquidator 1. 6.81 - Replaced by Mr B.R. Silvia

2.90.2 Naretha Pty Ltd was used by Mr F.J. Nugan [profile 2.1] as a

property development company. [This company is the subject of comment in

Interim Report No.2 pl97.]

2.90.3 Mr G.F. Brincat [profile 2.9] in his evidence to the Corporate

Affairs Commission stated that he had prepared the accounts and completed

the audits of the company since its incorporation.1 2

Endnotes

1 0)11546

2 CD3008 folio 21

- 323 -

2.91 NEWCOURT FINANCIAL SERVICES PTY LIMITED

2.91.1 The following information has been compiled from various

documents within the Commission's holdings.·*·

DATE OF INCORPORATION: 26 August 1975

CHANGE OF NAME: 26. 8.75 Incorporated as Mastep Pty Ltd

7. 5.76 Changed name to Newcourt Financial Services Pty Ltd

REGISTERED OFFICE: 8th Floor, 55 Macquarie St, Sydney

AUTHORISED CAPITAL: $10 000 (10 000 ordinary shares @ $1 ea)

ISSUED CAPITAL: $2 (2 ordinary shares @ $1 ea)

SHAREHOLDERS:

DIRECTORS:

SECRETARIES:

No. of Date of Date of

Shares Acquisition Disposal

Nugan, F.J. 1 28. 8.75

Swan, P.M. 1 28. 8.75 25. 8.76

Nugan Hand Ltd 1 25. 8.76

(From 25 August 1976 Mr Nugan held his share in trust for Nugan Hand Ltd.)

Date of late of

Appointment Resignation

Rigan, F.J. 28. 8.75

Swan, P.M. 28. 8.75 4. 5.76

Hand, M.J. 4. 5.76

Bacon, N.J. 4. 5.76 16.10.76

Grist, J.R. 4. 5.76 23. 6.77

Hill, S.K.A. 16.10.78

Date of Date of

Appointment Resignation

Swan, P.M. 28. 8.75 4. 5.76

Jennings, M.F. 4. 5.76 23. 6.77

- 324 -

PRESENT STATUS: Company still registered at June 1985

2.91.2 Newcourt Financial Services Pty Ltd was incorporated to provide

a brokerage facility for people who wished to obtain finance^ and was

registered as a finance broker in accordance with Part 6 of the

Honeylending Act 1941 (NSW) on 22 June 1976 . 3

2.91.3 Mr G.F. Brincat [profile 2.9] in his evidence to the Corporate

Affairs Commission stated that he had prepared the accounts and completed

the audits of the company since incorporation. ^ The books and records

of Newcourt Financial Services Pty Ltd indicate that there was little

trading conducted by the company to 30 June 1977 and that from this date 5

the company was to all intents and purposes inactive.

Endnotes

1 CD396; CD4654; CD4655; CD11546 2 CT24764, Hill

3 CD3590 folio 21

4 CD3008 folios 20-21

5 0)4650; CD4651

- 325 -

DATE OF INCORPORATION: 6 July 1973

REGISTERED OFFICE: From To

Suite 902,

2.92 NHN MANAGEMENT ΡΊΎ LIMITED

2.92.1 The following information has been compiled from various

documents within the Commission's holdings."*"

60 Martin Place, Sydney 8th Floor, 6. 7.73 13. 8.73

55 Macquarie St, Sydney c/- J.H. Hughes & Associates 13. 8.73 29. 5.75

280 Pitt St, Sydney c/- J.H. Hughes & Associates 29. 5.75 23. 2.77

4th Floor, 55 Macquarie St, Sydney 23. 2.77

AUTHORISED CAPITAL: $10 000 (10 000 shares @ $1 ea)

ISSUED CAPITAL:

SHAREHOLDERS:

$2 (2 shares @ $1 ea)

No. of Date of Date of

Shares Acquisition Disposal

Nugan, F.J. * 1 6. 7.73 10.12.74

Hand, M.J. * 1 6. 7.73 10.12.74

R.B. Cody Pty Ltd Yorkville Nominees 1 10.12.74

Pty Ltd 1 10.12.74

(* Nominees for Nugan Hand Ltd)

DIRECTORS:

Nugan, F.J. Hand, M.J. Needham, J.C Calder, B.W. Ward, F.D.

Hill, S.K.A.

Date of Date of

Appointment Resignation

9. 7.73 9. 7.73 9. 7.73 28. 6.74

9. 7.73 25.11.74 25.11.74 1. 8.77

1. 8.77

SECRETARIES:

- 326 -

Calder, B.W. Ward, F.D. Hill, S.K.A.

Date of Date of

Appointment Resignation

9. 7.73 25.11.74

25.11.74 1. 8.77

1. 8.77

PRESENT STATUS: Company still registered at June 1985

2.92.2 NHN Management Pty Ltd was incorporated on 6 July 1973 as a

subsidiary of Nugan Hand Ltd [profile 2.97]. Its contribution to

consolidated group income was negligible.

Endnotes

1 CD565fl; CD5651; CD11546

- 327 -

2.93.1 The following information has been compiled from various

documents within the Commission's holdings.^

2.93 NUGAN HAND (DEALERS) PTY LIMITED (IN LIQUIDATION)

DATE OF INCORPORATION: 6 July 1973

CHANGE OF NAME: 6.7.73 Incorporated as NHN Nominees Pty Ltd

17.1.78 Changed to Nugan Hand (Dealers) Pty Ltd

REGISTERED OFFICE: Suite 902,

From To

60 Martin Place, Sydney 8th Floor, 55 Macquarie St, Sydney

6. 7.73

13. 8.73

13. 8.73

AUTHORISED CAPITAL: $2 000 000 (2 000 000 shares @ $1 ea)

ISSUED CAPITAL: $100 002 (100 002 shares @ $1 ea)

SHAREHOLDERS: No. of Date of Date of

Shares

Nugan Hand Ltd 100 000

Nugan, F.J. * 1

Hand, M.J. * 1

(* Nominees for Nugan Hand

Acquisition

9. 1.78 6. 7.73 6. 7.73

Ltd)

Disposal

DIRECTORS:

Nugan, F.J. Hand, M.J.

Date of Date of

Appointment Resignation

9. 7.73 9. 7.73

Needham, J.C. 9. 7.73 28. 6.74

Calder, B.W. 9. 7.73 25.11.74

Ward, F.D. Shaw, G.T. Hill, S.K.A.

25.11.74 14. 1.75 1. 8.77

1. 8.77

SECRETARIES:

- 328 -

Date of Date of

Appointment Resignation

Calder, B.W. Ward, F.D. Hill, S.K.A.

9. 7.73 25.11.74

25.11.74 1. 8.77

1. 8.77

PRESENT STATUS: 2. 8.83 - Mr J.W. O'Brien appointed liquidator

2.93.2 This company was incorporated as a subsidiary of Nugan Hand Ltd

[profile 2.97]. Its contribution to consolidated group income was

negligible.

Endnotes

1 CD394; CD5335; CD5336; CD11546

- 329 -

2.94 NUGAN HAND (HONG KONG) LTD

2.94.1 The following information has been compiled from various

documents within the Commission's holdings.^

DATE OF INCORPORATION: 10 October 1972

CHANGE OF NAME: 10.10.72 Nugan Oil Ltd

22.11.74 Nugan Hand (Hong Kong) Ltd 28. 1.77 Swiss Pacific Asia Ltd 9. 8.77 Nugan Hand (Hong Kong) Ltd

REGISTERED OFFICE: 1110 Connaught Centre, Hong Kong

SHAREHOLDERS: Gregson Ltd

Dredson Ltd Nugan Hand, Inc. Nugan Hand International Holdings Pty Ltd Harbour Nominees Ltd

DIRECTORS: Date of Date of

Appointment Resignation

Hillory Ltd 10.10.72 30.11.74

Leedony Ltd 10.10.72 30.11.74

Hand, M.J. 26.11.74

Nugan, F.J. 26.11.74

Dunn, P.M. 9. 8.76 6 . 9.77

Ward, F.D. 29.11.74 16.12.75

Ceilings. C.L.H. 30. 7.75

Hill, S.K.A. 16.12.75 30. 5.77

Laloe, F.M.B. 1. 1.76

SECRETARY: Nuaan Hand Nominees Ltd

2.94.2 This company is the subject of a discrete topic in Part 4

Section 1 of the report.

Endnotes

1 CD5019 folio 99; CD7162; CD7178 folio 69

- 330 -

2.95 NUGAN HAND, INC.

2.95.1 The following information has been compiled from various

documents within the Commission's holdings.1

DATE OF INCORPORATION: 2 August 1974

CHANGE OF NAME: 2. 8.74 Incorporated as Nugan Hand, Inc.

7. 1.77 Changed name to Swiss-Pacific Inc. 14.10.77 Changed name to Nugan Hand, Inc.

REGISTERED OFFICE: Financial Plaza of the Pacific 4th Floor - Bank Building 111 South King St Honolulu, Hawaii

AUTHORISED CAPITAL: US$707 565

ISSUED CAPITAL: US$707 565

SHAREHOLDERS: No. of Date of Date of

Shares Acquisition Disposal

Nugan Hand Ltd 1 000 2. 8.74 4. 9.75

243 150 9. 9.74 4. 9.75

6 270 29. 7.75 4. 9.75

NHIH Pty Ltd 250 420 4. 9.75

125 945 7. 1.77

331 200 9.12.77

DIRECTORS: Date of Date of

Appointment Resignation

Nugan, F.J. 2. 8.74

Hand, M.J. 2. 8.74 27. 9.76

Philpotts, D. 2. 8.74 13. 1.75

Shaw, G.T. 27. 9.76

Harris, S.E. 28. 8.75

Black, E. about 8.78

SECRETARY: Date of Date of

Appointment Resignation

Nugan, F.J. 2. 8.74

- 331 -

2.95.2 Ibis company formed part of the Nugan Hand Group 'shell' by

providing an American 'office'. In reality, the Hawaiian Trust Company

Limited acted as the 'local agent' for Nugan Hand, Inc. with an officer

of that company acting as one of the directors until 1975, when he was 2

replaced by an officer of another trust company.

2.95.3 This company was used as a vehicle to move funds from Australia 3

as capital subscriptions for disbursement elsewhere.

2.95.4 The liquidator of Nugan Hand International Holdings Pty Ltd,

Mr O'Brien, in his interim reports stated that the funds transferred to

Nugan Hand, Inc. were ultimately disbursed to Nugan Hand (Hong Kong) Ltd

[profile 2.94], Nugan Hand Inc. Hong Kong, Nugan Hand Trust Co, Hong Kong

and Nugan Hand Inc. Panama [profile 2.115].^ A total of $395 801 was

disbursed to Nugan Hand Inc. Panama's Swiss bank account and the funds 5 have 'long since been removed'.

Endnotes

1 CD2033

folios folio 26; CD5865 folios 3, 7, 47; CD5959; CD6124 21, 23, 24; CD6126 folios 12, 63 2 CD6124 folio 14; CD6126 folios 12, 62-33 3 CD2033 folios 5-6

4 CD1519 folio 38

5 CD2664 folio 42

- 332 -

2.96.1 The following information has been compiled from various

documents within the Commission's holdings.1

2.96 NUGAN HAND INTERNATIONAL HOLDINGS PTY LIMITED (IN LIQUIDATION)

DATE OF INCORPORATION: 6 June 1975

CHANGE OF NAME: 6. 6.75 Incorporated as S.A. Swanton Pty Ltd

30. 6.75 Changed name to Nugan Hand International Holdings Pty Ltd 11. 4.80 Changed name to Nuhan International Holdings Pty Ltd

REGISTERED OFFICE: 8th Floor, 55 Macquarie St, Sydney

AUTHORISED CAPITAL: $10 000 (10 000 ordinary shares @ $1 ea)

ISSUED CAPITAL: $2 (2 ordinary shares @ $1 ea)

SHAREHOLDERS:

Nugan, F.J. Swan, P.M.

DIRECTORS:

NUgan, F.J. Swan, P.M. Ward, F.D. Shaw, G.T.

Hill, S.K.A. Collings, C.L Hand, M.J. Swan, P.M. George, Q.D.

SECRETARIES:

, P.M. , S.K.A. , P.M.

No. of Date of Date of

Shares Acquisition Disposal

1 6. 6.75

1 6. 6.75

Date of Date of

Appointment Resignation

6 . 6.75 6. 6.75 28.10.75 28.10.75 1. 8.77

28.10.75 8 . 1.79

2. 2.76 8 . 1.79

2. 2.76 8. 1.79

3. 5.76 8. 1.79 8. 1.79

8 . 1.79

Date of Date of

Appointment Resignation

6. 6.75 28.10.75 8 . 1.79

Swan Hill Swan

28.10.75 8 . 1.79

- 333 -

PRESENT STATUS: 29. 4.80 - Messrs B.H. Smith and K.R. Shirlaw appointed Provisional Liquidators 2. 7.80 - Mr J.w. O'Brien appointed as Liquidator

2.96.2 This company performed a dual function in the activities of the

Nugan Hand Group; first it was used as a conduit for the movement of

funds [see 5.117-5.118] and secondly it was one of the companies used by

Mr F.J. Nugan [profile 2.1] as a party to the internal bills scheme [see

5.34-5.55],

Endnotes 1

1 CD4434; CD7599; CD11081; CD11546

- 334 -

2.97 NUGAN HAND LIMITED (IN LIQUIDATION)

2.97.1 The following information has been compiled from various

documents within the Commission's holdings."*·

DATE OF INCORPORATION: 6 July 1973

CHANGE OF NAME: 6. 7.73

22. 8.74 11. 4.80

Incorporated as Nugan Hand Needham Limited Changed name to Nugan Hand Limited Changed name to Nuhan Limited

REGISTERED OFFICE:

AUTHORISED CAPITAL:

ISSUED CAPITAL:

SHAREHOLDERS:

Suite 902,

From

60 Martin Place, 8th Floor, Sydney 6. 7.73 13. 8.73

55 Macquarie St, Sydney 13. 8.73

$2 000 000 (2 000 000 shares @ $1 ea)

$2 million [refer 5.76-5.103]

No. of Date of Date of

Shares Acquisition Disposal

Nugan, F.J. 1 9. 7.73

20 000 18. 7.73

490 000 17. 8.73

489 997 10.10.77

Hand, M.J. 1 9. 7.73

490 000 17. 8.73

509 998 10.10.77

Needham, J.C. 1 9. 7.73 28. 6.74

Calder, B.W. 1 9. 7.73

Swan, P.M. 1 9. 7.73

Nugan, C.L. * 1 28. 6.74

(* This share was held in trust for Mr F.J. Nugan)

DIRECTORS: Date of Date of

Appointment Resignation

Nugan, F.J. 9. 7.73 27. 1.80

Needham, J.C. 9. 7.73 28. 6.74

Hand, M.J. 9. 7.73

Calder, B.W. 9. 7.73 25.11.74

Ward, F.D. 25.11.74 29. 7.77

- 335 -

DIRECTORS: (continued) Date of Date of

Appointment Resignation

Shaw, G.T. 13. 1.75

Dunn, P.M. 26. 2.76 6. 9.77

Hill, S.K.A. 26. 2.76

Collinqs, C.L.H. 26. 2.76 12.10.79

Gilder, J.M. 8. 9.77

Wong, A.H. 3. 1.80 20. 3.80

Edelsten, G.A.L. 4. 2.80

SECRETARIES: Date of Date of

Appointment Resignation

Calder, B.W. 9. 7.73 25.11.74

Ward, F.D. 25.11.74 26. 2.76

Hill, S.K.A. 26. 2.76

PRESENT STATUS: 18. 4.80 - Nuhan Limited applied to the Supreme Court of New South Wales to appoint Messrs Smith and Shirlaw Provisional Liquidators of the company.

18. 4.80 - The Supreme Court ordered Messrs Smith and Shirlaw be appointed Provisional Liquidators of Nuhan Limited.

23. 5.80 - The Hon. F.J. Walker, M.P., the then Attorney General, petitioned the Supreme Court of NSW to wind up Nuhan Limited pursuant to Section 222(1)(g) of the Companies Act 1961 (NSW).

2. 7.80 - By order of the Supreme Court, Mr J.W. O'Brien was appointed Liquidator of Nuhan Limited.

At the date of this report the company was still in the process of being wound up.

2.97.2 The financial activities of Nugan Hand Ltd are detailed at

Part 5 of this report.

Endnotes

1 CT20023, Moloney; CD3736; CD10015

- 336 -

2.98.1 The following information has been compiled from various

documents within the Commission's holdings.·*·

2.98 NUGAN HAND TRADE SERVICES PTY LIMITED

DATE OF INCORPORATION: 11 May 1976

CHANGE OF NAME: 11. 5.76 Incorporated as Kenzor Pty Limited

12.10.76 Changed name to Nugan Hand Trade Services Pty Limited

REGISTERED OFFICE: 8th Floor, 5 5 55 Macquarie St, Sydney

AUTHORISED CAPITAL:

ISSUED CAPITAL:

SHAREHOLDERS:

DIRECTORS:

SECRETARIES:

$10 000 (10 000 ordinary shares @ $1 ea)

$2 (2 ordinary shares @ $1 ea)

No. of Date of Date of

Shares Acquisition Disposal

Nugan, F.J. 1 11. 5.76

Swan, P.M. 1 11. 5.76

Date of Date of

Appointment Resignation

NUgan, F.J. 12. 5.76

Swan, P.M. 12. 5.76 20.10.76

Hand, M.J. 20.10.76

Ward, F.D. 20.10.76 10.11.77

Hill, S.K.A. 20.10.76

Date of Date of

Appointment Resignation

Swan, P.M. 12. 5.76 20.10.76

Hill, S.K.A. 20.10.76

PRESENT STATUS: Company still registered at June 1985

- 337 -

2.98.2 Mr R.M. Sheslow [profile 2.66] told the Corporate Affairs

Commission that the objectives of Nugan Hand Trade Services Pty Ltd were

to act as a principal between buyers and sellers in commodity

transactions, as agent for buyer or seller, and as broker initiating and 2 negotiating business. Mr Sheslow estimated the turnover for Nugan

Hand Trade Services Pty Ltd (which he defined as either gross receipts on

back to back transactions and/or commissions earned) during the period

January 1979 to February 1980 to be in the area of $700 000 to $800 000

and estimated the gross profit to be $25-30 000.^ However,

Messrs J.M. Gilder [profile 2.25], S.K. Hill [profile 2.33] and

G.A. Edelsten [profile 2.20] in their evidence before this Commission all

said that few transactions undertaken by Nugan Hand Trade Services Pty 4 Ltd ever came to fruition.

2.98.3 Mr G.F. Brincat [profile 2.9] in his evidence to the Corporate

Affairs Commission stated that he prepared the accounts and completed the 5

audits for Nugan Hand Trade Services Pty Ltd from its incorporation.

Endnotes

1 CD404; CD4661; CD5373; CD5370; CD11546 2 CD3068 folios 4-5

3 CD3968 folios 7-8

4 CT18709, Edelsten; CT21923, Hill; CT23056-57, Gilder 5 CD3008 folio 21

- 338 -

2.99 PACIFIC CONTINENTAL LIMITED (IN LIQUIDATION)

2.99.1 The following information has been

documents within the Commission's holdings.·*·

compiled froiri various

DATE OF INCORPORATION: 4 May 1972

REGISTERED OFFICE: From To

Suite 902, 60 Martin Place, Sydney Suite 4, Ground Floor, 4. 5.72 19.10.73

58 Margaret St, Sydney Suite 4, 2nd Floor, 19.10.73 24. 9.74 89 Berry St, North Sydney

8th Floor,

24. 9.74 19. 1.77

55 Macquarie St, Sydney 19. 1.77

AUTHORISED CAPITAL: $1 000 000 (1 000 000 shares @ $1 ea)

ISSUED CAPITAL: $205 005 (205 005 shares @ $1 ea)

SHAREHOLDERS: No. of

(last return lodged) Shares

Yorkville Nominees Pty Ltd 200 102

Mel-ok Corporation Pty Ltd 4 900

Swan, P.M. 1

Kennan, R.W. 1

Fletcher, S.A. 1

DIRECTORS: Date of Date of

Appointment Resignation

Fletcher, S.A. 9. 5.72 15. 5.72

Cowrie-Smith, I. 9. 5.72

Kennan, R.W. 9. 5.72 8 . 6.78

Smith, B.D. 15. 5.72 14. 9.73

Charles, K. 14. 9.73 19. 1.77

Nugan, F.J. 14. 9.73

Swan, P.M. 19. 1.77

Shaw, G.T. 8 . 6.78

- 339 -

SECRETARIES: Date of Date of

Appointment Resignation

Smith, B.D. Cwikar, W.R Swan, P.M.

9. 5.72 14. 9.73

14. 9.73 19. 1.77

19. 1.77

PRESENT STATUS: 10.4.81 - Mr J.W. O'Brien appointed as Liquidator

2.99.2 The evidence indicates that this company appeared to participate

in certain taxation schemes [refer Part 9].

2.99.3 From the date of incorporation the company's accounts were

audited by Price Waterhouse & Co, Accountants and Auditors. On 7 June

1974 these auditors resigned and the accounting firm of Heuschkel &

Pollard [profiles 2.30,2.57] completed the accounts and audits for the 2 company from that date until 1980. In his evidence to the Corporate

Affairs Commission, Mr G.F. Brincat [profile 2.9] stated that he prepared

the accounts and completed the audits of the company from either 1974 or

1975. 3

Endnotes

2 3

1 CD5660; CD5661; CD11546

CD5660 folios 30, 35 CD3008 folio 21

- 340 -

2.100 P.M. SHELLEY PTY LTD (IN LIQUIDATION)

2.100.1 The following information has been compiled from various

documents within the Commission's holdings."*"

DATE OF INCORPORATION: 22 May 1973

REGISTERED OFFICE: From

Suite 902, 60 Martin Place, Sydney 22. 5.73

8th Floor, 55 Macquarie St, Sydney 19.11.73 c/- Moloney Stratton & Co., 105 Bathurst St, Sydney 25.11.77

To

19.11.73

25.11.77

AUTHORISED CAPITAL: $10 000 (10 000 shares @ $1 ea)

ISSUED CAPITAL:

SHAREHOLDERS:

DIRECTORS:

$2 (2 shares @ $1 ea)

Nugan, F.J. Swan, P.M.

No. of Date of Date of

Shares Acquisition Disposal

1 22. 5.73

1 22. 5.73

Date of Date of

Appointment Resignation

Nugan, F.J. 4. 6.73

Swan, P.M. 4. 6.73

SECRETARY: Date of Date of

Appointment Resignation

Swan, P.M. 4. 6.73

PRESENT STATUS: 18.10.82 - Mr J.W. O'Brien appointed Liquidator

2.100.2 A Declaration of Trust dated 5 July 1973 shows that the share

held by Miss P.M. Swan [profile 2.70] was held in trust for R.B. Cody Pty

Ltd [profile 2.101].2

- 341 -

2.100.3 This company was originally engaged in land development but

later gained prominence as one of the companies used by Mr F.J. Nugan

[profile 2.1] as a party to the internal bills scheme [refer 5.34-5.55].

2.100.3 Mr J.W. O'Brien was appointed the liquidator of P.M. Shelley Pty

Ltd on 18 October 1982. In his second interim report Mr O'Brien

discussed the assets and liabilities of the company and it is his opinion

that all of the creditors of P.M. Shelley Pty Ltd will be paid in full."5

Endnotes

1 2 3

CR11084; CD11546 CD5609 folio 3 CR2664 folio 59

- 342 -

2.101 R.B. CODY PTY LTD

2 .101.1 The following information has been

documents within the Commission's holdings.1

compiled from various

DATE OF INCORPORATION: 6 June 1973

REGISTERED OFFICE: Suite 902, 60 Martin Place, Sydney 20/54 Darling Point Rd, Darling Point C/- Heuschkel & Pollard

76 Broadarrow Rd, Narwee C/- Heuschkel & Pollard 9th Floor, 217 Clarence St, Sydney

From

6. 6.73

19.11.73

5.12.74

1.12.76

To

19.11.73

5.12.74

1.12.76

AUTHORISED CAPITAL: $10 000 (10 000 ordinary shares @ $1 ea)

ISSUED CAPITAL: $2 (2 ordinary shares @ $1 ea)

SHAREHOLDERS: No. of

Shares

Date of Acquisition Date of Disposal

Hand, M.J. 1

Hand, H.M. 1

6 . 6.73 6. 6.73

DIRECTORS: Date of Date of

Appointment Resignation

Hand, M.J. Hand, H.M. Nugan, F.J. Swan, P.M.

7. 6.73 7. 6.73 24.11.75 24.11.75

24.11.75 24.11.75

SECRETARIES: Date of Date of

Appointment Resignation

Smith, B.D. Swan, P.M.

7. 6.73 28.11.74 28.11.74

PRESENT STATUS: Company still registered at June 1985

- 343 -

2.101.2 This company was incorporated for use by Mr M.J. Hand [profile

2.2] as a property development company.1 2 3 The evidence does not

indicate that it played a significant role in the activities of the Nugan

Hand Group.

2.101.3 The annual returns lodged with the Corporate Affairs Commission

indicate that the firm Heuschkel & Pollard [profiles 2.30, 2.57]

completed the annual returns for the company from incorporation, with

Mr Brincat [profile 2.9] signing the annual returns from the year ending

30 June 1975.3

Endnotes

1 CD399; CD5459; CD5460; CD11546 2 CD3037 folio 14

3 CD3008 folios 20-21

- 344 -

2.102 SKAH PTY LIMITED

2.102.1 The following information has been compiled from various documents within the Commission's holdings."*·

DATE OF INCORPORATION: 11 May 1976

REGISTERED OFFICE: 8th Floor, 55 Macquarie St, Sydney

AUTHORISED CAPITAL: $10 000 (10 000 ordinary shares § $1 ea)

ISSUED CAPITAL: $2 (2 ordinary shares @ $1 ea)

SHAREHOLDERS: No. of Date of Date of

Shares Acquisition Disposal

Nugan, F.J. Swan, P.M.

* 1

* 1

11. 5.76 11. 5.76

(* From 29 December 1978 these shares were held in trust for Dong Xaoi Ltd.)

DIRECTORS:

Nugan, F.J. Swan, P.M.

Date of Date of

Appointment Resignation

12. 5.76 12. 5.76

SECRETARY:

Swan, P.M.

Date of Date of

Appointment Resignation

12. 5.76

PRESENT STATUS: Company still registered at June 1985

2.102.2 This company was used to facilitate the movement of $150 000

from Hong Kong to Nugan Hand Ltd [profile 2.97].^ With this exception

the company did not play a significant role in the activities of the

Nugan Hand Group.

- 345 -

2.102.3 In his evidence to the Corporate Affairs Commission Mr G.F.

Brincat [profile 2.9] stated that he had prepared the accounts and

completed the audits of Skah Pty Ltd since its incorporation.1 2 3

Endnotes

1 CD5619; CD5620; CD11546 2 CD6064 folio 6 , CD6064 folio 7

3 CD3008 folio 21

- 346 -

2.103 S.L. NOTWIST PTY LTD

2.103.1 The following information has been compiled from various

documents within the Commission's holdings."*·

DATE OF INCORPORATION: 23 September 1976

REGISTERED OFFICE: c/- Alex Lee & Co, 7/45 Macquarie St, Sydney

AUTHORISED CAPITAL: $10 000 (10 000 ordinary shares @ $1 ea)

ISSUED CAPITAL: $2 (2 ordinary shares @ $1 ea)

SHAREHOLDERS: No. of

Shares

Date of Acquisition Date of Disposal

Hill, S.K.A. 1

Hill, P.A. 1

Gross, J.M. 1

30. 9.76 30. 9.76 31. 5.79

31. 5.79

DIRECTORS: Date of Date of

Appointment Resignation

Hill, S.K.A. Hill, P.A. Gross, J.M.

30. 9.76 30. 9.76 31.10.79 31.10.79

SECRETARY: Date of

Appointment Date of Resignation

Brincat, G.F. 30. 9.76

PRESENT STATUS: Company still registered at June 1985

2.103.2 Mr Hill [profile 2.33] told the Commission that this company was

not originally a Nugan Hand Group company but was 'set up for

transactions involving myself and Leigh Scott-Kemmis' [profile 2.64].2

It was used on one occasion by Mr F.J. Nugan [profile 2.1] to facilitate

the movement of funds.^

- 347 -

2.103.3 Since its incorporation Mr G.F. Brincat [profile 2.9] has been 4

the auditor and secretary of S.L. Notwist Pty Ltd.

Endnotes

1 CD398; 014891; CD4755; CD11546 2 CT24752-53, Hill

3 CT23964-66, Porter

4 CD3008 folios 20-21

- 348 -

2.104 SOLINGEN AUST PTY LIMITED

2.104.1 The following information has been compiled from various

documents within the Commission's holdings. " * ■

DATE OF INCORPORATION: 15 March 1973

CHANGE OF NAME: 15. 3.73 Incorporated as Electronics Research (Australia) Pty Ltd 14. 5.74 Changed name to Solingen Aust Pty Ltd

REGISTERED OFFICE: Suite 902,

From To

60 Martin Place, Sydney 8th Floor, 14. 3.73 19.11.73 55 Macquarie St, Sydney 7th Floor,

19.11.73 2. 6.75

280 Pitt St, Sydney 2. 6.75 30. 6.75

86 Hatfield St, Blakehurst 8th Floor, 30. 6.75 27.10.78 55 Macquarie St, Sydney 17 Daly St, Queanbeyan, N.S.W

27.10.78

20.12.79

20.12.79

AUTHORISED CAPITAL: $10 000 (10 000 ordinary shares @ $1 ea)

ISSUED CAPITAL: $4 (4 ordinary shares @ $1 ea)

SHAREHOLDERS: No. of Date of Date of

Shares Acquisition Disposal

Smith, B.D. 1 13. 4.73 11. 6.74

Nugan, F.J. 1 13. 4.73 2. 6.75

1 4. 7.74 2. 6.75

Hand, M.J. 1 4. 7.74 2. 6.75

1 11. 6.74 2. 6.75

Brodsky, M.H. 1 11. 6.74 4. 7.74

Stolpe, 0. 1 11. 6.74 4. 7.74

Hughes, J.H. 2 2. 6.75 30. 6.75

Wall, T.C. 2

Dalton, F.J. 2

Dalton, R.L. 2

2. 6.75 30. 6.75 30. 6.75

30. 6.75

DIRECTORS:

- 349 -

Date of Date of

Appointment Resignation

SECRETARIES:

PRESENT STATUS:

Nugan, F.J 14. 4.73 2. 6.75

Kennan, R.W. 14. 4.73

Hand, M.J. 11. 6.74 2. 6.75

Brodsky, M.H. 11. 6.74 15. 1.75

Stolpe, 0. 11. 6.74 4. 7.74

Wall, T.C. 2. 6.75 30. 6.75

Hughes, J.H. 2. 6.75 30. 6.75

Dalton, R.L. 30. 6.75 2.10.78

Dalton, F.J. 30. 6.75 Unknown

Shaw, G.T. 21.10.77

Calder, B.W. 2.10.78 22.10.79

George, Q.D. 22.10.79

Date of Date of

Appointment Resignation

Swan, P,.M. 14. 4.73 2. 6.75

Hughes, J.H. 2. 6.75 30. 6.75

Dalton, R.L. 30. 6.75 2.10.78

Calder, B.W. 2.10.78 22.10.79

George, Q.D. 22.10.79

Company still registered at June 1985

2.104.2 In the early 1970s Messrs F.J. Nugan and M.J. Hand [profiles

2.1 , 2 .2 ] were trading in precious metals using the business names

'Pacific Silver Commodities' for the silver bullion trading and

'Macquarie Coin Dealers' for the gold coin trading. Solingen Aust Pty 2 Ltd owned both business names, after purchasing 'Pacific Silver

Commodities' from Mr Hand.

Endnotes

1 2

CD5664; CD5665; CD11546 CD919 folio 11; CD4752 folio 84; CD6360 folios 151-52; CD6377 folios 9-10

- 350 -

DATE OF INCORPORATION: 26 August 1975

2.105 SWISS PACIFIC PTY LIMITED

2.105.1 The following information has been compiled from various

documents within the Commission's holdings.

CHANGE OF NAME: 26. 8.75 Incorporated as Pajo Pty Ltd

14. 5.76 Changed name to Pajo Properties Pty Ltd 17. 1.77 Changed name to Swiss Pacific Pty Ltd

REGISTERED OFFICE: 8th Floor, 55 Macquarie St, Sydney

AUTHORISED CAPITAL: $10 000 (10 000 shares at $1 ea)

ISSUED CAPITAL: $2 (2 shares @ $1 ea)

SHAREHOLDERS: No. of Date of Date of

Shares Acquisition Disposal

Nugan, F.J. 1 26. 8.75

Swan, P.M. 1 26. 8.75

DIRECTORS: Date of Date of

Appointment Resignation

Nugan, F.J. 27. 8.75

Swan, P.M. 27. 8.75

SECRETARY: Date of Date of

Appointment Resignation

Swan, P.M. 27. 8.75

PRESENT STATUS: Company still registered at June 1985

- 351 -

2.105.2 Mr F.J. Nugan [profile 2.1] used this company to retain the

right to use the name 'Swiss Pacific' registered at the Corporate Affairs . 2

Commission. Apart from an isolated use of the company as a conduit

for the movement of funds,3 it did not contribute significantly to the

Nugan Hand Group's activities.

Endnotes

1 CD392; CD5625; CD5626; CD5627; CD11546 2 CD5019 folio 163

3 CD4993 folio 2; C M S 25

- 352 -

2.106 THE NUGAN HAND BANK

2.106.1 The following information has been compiled from various

documents within the Commission's holdings. ■ * ■

DATE OF INCORPORATION: 6 July 1976

CHANGE OF NAME: 6. 7.76 Incorporated as

Trust Company

20. 1.77 Changed name to Trust Company 22. 6.77 Changed name to

The Nugan Hand Bank and

Swiss Pacific Bank and

The Nugan Hand Bank

REGISTERED OFFICE: 4th Floor, Bank of Nova Scotia Building, Grand Cayman, British West Indies

SHAREHOLDERS: Campbell, B.D

Rutter, H.M. Kandiah, P. Nugan, F.J. Nugan Hand Inc. Panama Nugan Hand International Holdings Ltd

DIRECTORS:

SECRETARIES:

Date of Date of

Appointment Resignation

Nugan, F.J. 21. 7.76

Hand, M.J. 21. 7.76

Ceilings, C.L.H. 21. 7.76 22.10.79

Hill, S.K.A. about 10.77

Ward, F.D. 21. 7.76 unknown

Dunn, P.M. 21. 7.76 10. 9.77

Rutter, H.M. 8. 7.76 21. 7.76

1. 3.78 unknown

Yates, E.P. 1. 3.77

Campbell, B.D. 8. 7.76 9. 8.76

unknown 1. 3.78

Gilder, J.M. about 7.79 11. 2.80

Kandiah, P. 8. 7.76 21. 7.76

No information

- 353 -

2.106.2 The Bank is the subject of a discrete topic in Part 4 Section 2 of

the report.

Endnotes 1

1 CD1974 folio 5; 0)8215 folio 5; 0 8 9 1 6 folio 43; O11011

folios 402-03

- 354 -

2.107.1 The following information has been compiled from various

documents within the Commission's holdings.1

2.107 W.V. TENNYSON PTY LIMITED (IN LIQUIDATION)

DATE OF INCORPORATION: 9 October 1972

REGISTERED OFFICE: Suite 902, 60 Martin Place, Sydney c/- Heuschkel & Pollard, 76 Broadarrow Rd, Narwee c/-Heuschkel & Pollard, 217 Clarence St, Sydney

From

9.10.72

6.12.73

1.12.76

To

6.12.73

1.12.76

AUTHORISED CAPITAL: $10 000 (10 000 shares @ $1 ea)

ISSUED CAPITAL: $2 (2 shares at $1 ea)

SHAREHOLDERS: NO. of

Shares

Date of Acquisition rate of Disposal

NUgan, F.J. 1

Smith, B.D. 1

Bence, A.I. 1

Yorkville Nominees Pty Ltd 1

10.10.72 10.10.72 28.11.72

Unknown

28.11.72 Unknown

DIRECTORS: Date of Date of

Appointment Resignation

NUgan, F.J. Smith, B.D. Swan, P.M.

10.10.72 10.10.72 25. 6.73 25. 6.73

SECRETARIES: Date of Date of

Appointment Resignation

Smith, B.D. Swan, P.M.

10.10.72 25. 6.73 25. 6.73

PRESENT STATUS: 10. 4.81 - Mr J.W. O'Brien appointed official liquidator

- 355 -

2.107.2 This company appears to have been used by Mr F.J. Nugan [profile

2 .1 ] to assist in the implementation of tax evasion/avoidance schemes.

The evidence, also shows certain property dealings undertaken by the

company.2

2.107.3 From its date of incorporation the accounting records of

W.V. Tennyson Pty Ltd were maintained by Heuschkel & Pollard

[profiles 2.30, 2.57], Mr G.F. Brincat [profile 2.9] in his evidence to

the Corporate Affairs Commission stated that he completed the accounts 3

and audit of the company from either 1974 or 1975.

Endnotes 1 2 3

1 CD5668; CD5669; CD11426; CD11546 2 CD6344 folio 40; CD10430 folios 299-331 3 CD3008 folio 21

- 356 -

2.108.1 The following information has been compiled from various

documents within the Commission's holdings.^

DATE OF INCORPORATION: 20 March 1970

2.108 YORKVILLE NOMINEES PTY LIMITED (IN LIQUIDATION)

REGISTERED OFFICE: From TO

8th Floor, 44 Bridge St, Sydney 20. 3.70 13. 7.71

9th Floor, 60 Martin Place, 8th Floor, Sydney 13. 7.71 19.11.73

55 Macquarie St, Sydney 19.11.73 17.11.77

C/- Heuschkel & Pollard, 9th Floor, 217 Clarence St, Sydney 17.11.77

AUTHORISED CAPITAL: $10 000 (10 000 shares @ $1 ea)

ISSUED CAPITAL: $2 (2 shares § $1 ea)

SHAREHOLDERS: No. of Date of Date of

Shares Acquisition Disposal

Hutchinson, I.F. 1 20. 3.70 20. 3.70

Graham, J.H. 1 20. 3.70 20. 3.70

Smith, B.D. 1 20. 3.70 20. 3.70

Nugan, F.J. 1 20. 3.70

Swan, P.M. 1 20. 3.70

DIRECTORS: Date of Date of

Appointment Resignation

Nugan, F.J. 20. 3.70

Hand, M.J. 17. 3.72 21. 6.72

Smith, B.D. 21. 6.72 5. 6.73

Swan, P.M. 5. 6.73

SECRETARIES: Date of Date of

Appointment Resignation

Smith, B.D. 20. 3.70 5. 5.73

Swan, P.M. 5. 5.73

- 357 -

PRESENT STATUS: 29. 4.80 - Messrs B.H. Smith & K.R. Shirlaw appointed Provisional Liquidators 2. 7.80 - Mr J.W. O'Brien appointed Liquidator

2.108.2 This company was owned and controlled by Mr F.J. Nugan [profile 2

2.1]. He used it in a variety of ways; as a real estate trader; as a

vehicle to implement tax evasion/avoidance schemes^ [refer Part 9]; as 4 a deposit taker, and finally, as a conduit for the movement of funds.

To conceal this latter use, Mr Nugan included Yorkville Nominees Pty Ltd

as one of the parties in the internal bills scheme. [For further details

concerning internal bills see paragraphs 5.34 to 5.55.]

2.108.3 Yorkville Nominees Pty Ltd accepted cash deposits which were not

generally adequately recorded and were included in the 'cash kitty'®

[see 5.9]. Mr S.K. Hill [profile 2.33] caused Yorkville Nominees Pty Ltd

to cease deposit taking in late 1978.^ Resulting from this action the

deposit taking role was assumed by Mars Road Investments Pty Ltd [profile

2.88] while Yorkville Nominees Pty Ltd continued to act as a vehicle for

the implementation of tax schemes and as a conduit for the movement of

funds.^

Endnotes 1 2 3 4 5 6 7 8

1 CD5510; CDS511; CD11546

2 CT22312, Swan; CT24830, Young; CD5509 3 CT25081-83, Shaw

4 CT25072-73, Shaw

5 CT25094, Shaw

6 CT25115, Shaw

7 CT21910, Hill

8 CT20746, Shaw

- 358 -

PROFILES OF FURTHER RELEVANT COMPANIES

2.109 F.A. NEUBAUER BANK

2.109.1 F.A. Neubauer was established as a private merchant bank in

Magdeburg, Saxony in April 1841, titled Neubauer & Porse. The bank

changed its name to F.A. Neubauer in 1869 and the branch office opened in

Hamburg in 1890, becoming the head office after World war II.1

2.109.2 In January 1978 Nugan Hand commenced a takeover of

F.A. Neubauer. Messrs Nugan and Hand [profiles 2.1, 2.2] wished to

acquire a European banking licence which would otherwise be impossible to

obtain, to increase the status of the Group. It was also to improve the

chance of selling the Group as a whole to some large consortium which the

evidence reveals was the desire of Mr F.J. Nugan. The details of the

agreement and purchase of F.A. Neubauer are described at paragraphs

3.5.35 to 3.5.37.

Endnotes

1 CD1587 folios 161-62,176-77

- 359 -

2.110.1 The Commission has received evidence that a number of Nugan Hand

employees had previously held positions with the Fund of Australia.

These were Messrs C.L. Ceilings [profile 2.15], P.M. Dunn [profile 2.18],

G.A. Edelsten [profile 2.25], W. Hans [profile 2.27], F.D. Ward [profile

2.73] and A. Marks.

2.110.2 Mr Ceilings told the Commission that he suggested Mr Gilder to

Messrs Nugan and Hand [profiles 2.1, 2.2] as a person able to recruit for

and market Nugan Hand because of his previous experience in Fund of

Australia.^ Mr Collings also said he encouraged many of the ex-Fund of

Australia employees to join Nugan Hand as they 'were some of the greatest 2 salesmen in the world'.

2.110.3 The Fund of Australia group consists of a number of companies:

. Property Bonds of Australia Ltd (in liquidation) which was

incorporated in the A.C.T. on 11 May 1971;

. Property Bonds of Australia International Ltd (in liquidation)

which was incorporated in Bermuda;

. Fund of Australia Management Company Ltd which was incorporated

in Bermuda and is the parent company;

. Fund of Australia Properties Pty Ltd which was the management

company of Property Bonds of Australia Ltd. This company

changed its name to Fapco Pty Ltd on 11 May 1981 and is still

trading;

. Fund of Australia Trading Company Pty Ltd which is still trading;

. Fund of Australia Services Ltd which was the distribution

company for Property Bonds of Australia Ltd and manages the unit

trust known as Fund of Australia."*

2.110.4 The group commenced operations in 1969 and dealt in Australian

property. It had agents who represented the group overseas and who

received a commission. Overriding commissions were also provided and

Mr Gilder was one recipient of this type of commission. (He also

2.110 FUND OF AUSTRALIA

- 360 -

received overriding commissions while in the employ of Nugan Hand.)4

During 1974, Property Bonds of Australia Ltd could not dispose of its

real estate on the Gold Coast and due to mortgage costs the company was

eventually placed into liquidation. Property Bonds of Australia

International Ltd is also in liquidation and the liquidator from Bermuda

is currently winding up the affairs of that company. That company also

owned land on the Gold Coast and suffered the same fate as Property Bonds

of Australia Ltd.^

Endnotes 1 2 3 4 5

1 CT22810, Collings

2 CT22768-69, Collings

3 CD6400 folio 3; 0)11012

4 CT23085, Gilder

5 CD11012

- 361 -

2.111.1 The following conpany information is based on a company search

completed on 10 July 1979 and information provided to the Joint Task

Force by the English authorities on 22 July 1982.'''

2.111 LONDON CAPITAL SECURITIES

DATE OF INCORPORATION: 11 September 1973

CHANGE OF NAME: 11. 9.73 London Capital Securities Limited 14. 1.81 City Trust Limited

REGISTERED OFFICE: 10 Friar Street London EC4

AUTHORISED CAPITAL: £1 500 000

ISSUED CAPITAL: £927 248 (as at 10.7.79)

SHAREHOLDERS: Not known

DIRECTORS: Date of Date of

(For the period Appointment Resignation

1978-82)

Michaels, R. 14. 4.78 22.11.79

Lorenz, A.R.D. 31.10.79

Mosselson, D. 14. 2.80

Beazley, D.E. 6. 3.80 6.10.80

Bingham, P.J. 21. 7.80

Blythman, B.D. 6.10.80

Hoffman, G.B. 3.12.81

Edelman, D.L. 3.12.81

2.111.2 From at least late 1976 the Nugan Hand Group had attempted to

establish a London representative office. On 7 February 1978 Nugan Hand

(Π.Κ.) Ltd was granted permission to incorporate as long as it did 'not

act as principals in any banking or financial transaction without the

prior agreement of the Bank of England1.^ In mid 1979 Mr G.A. Edelsten

[profile 2 .20] was told of the proposed sale of a merchant bank called

London Capital Securities Ltd (now called City Trust Ltd) by Mr Ken

Jones, a solicitor of Lorenz & Jones who had been appointed a director of

- 362 -

2

London Capital Securities Ltd. Mr Edelsten telexed Mr J.M. Gilder

[profile 2.25] in Sydney and described the company as having no creditors

and a quantified tax loss of £620 000.3

2.111.3 By September 1979 negotiations for the purchase had been

finalised and a draft agreement had been drawn up.4 Mr Edelsten

returned to Australia and was told by Mr F.J. Nugan [profile 2.1] to hand

over all negotiations to Mr D.E. Beazley [profile 2.7].3 A letter

dated 14 September 1979 was sent to Nugan Hand International Holdings Ltd

telling them of the granting of approval for the purchase of London

Capital Securities Ltd® and on 19 September 1979, £22 500 was telexed

from Hong Kong to Lorenz & Jones' bank account with Barclays Bank Ltd.7

2.111.4 ihe final negotiations for the purchase ceased in late September

1979 as there was a major disagreement between Messrs Lorenz & Jones and

Mr Nugan regarding a damaging bank reference about the Nugan Hand Group.

Mr Nugan falsely attributed this reference to the Bank of New South Wales

when in fact it was a report sent to S.G. Warburg and Co Ltd on 12 July

1979 by an Australian merchant bank.3 The text of this telex was given

by Mr Jones to Mr Nugan in confidence.® instead, Mr Nugan carried out

extensive inquiries as to the origin of the telex and in fact threatened

the Bank of New South Wales with legal action. He ultimately found the

correct source of the telex and wrote to the Bank of New South Wales

apologising for his actions.10 Cn 17 October 1979, Lorenz & Jones

wrote to NUgan Hand international regarding Mr Nugan1s action over the

bankers' reference and his breach of faith in revealing information that

had been given to him in confidence. Due to Mr Nugan's action the

negotiations ceased and a company called Roper Securities Ltd purchased

the bank instead.11

2.111.5 According to Mr Dennis Mosselson (then Chairman of London

Capital Securities Ltd), from December 1979 to January 1980 there were

negotiations between Mr Beazley and himself. It was proposed that

Messrs Beazley, W.J. McDonald [profile 2.47] and R.L. Attkisson [profile

2.4] become the new directors of London Capital Securities and their

references were sent to the Bank of England. Negotiations temporarily

- 363 -

ceased following Mr Nugan's death, but according to Mr Mosselson,

Mr Beazley returned to London on 5 March 1980 accoirpanied by Mr M.B.

Houghton [profile 2.35] wanting to continue negotiations. Mr Beazley

subsequently paid for half of the shares of the company and was made a

managing director.12

2.111.6 According to Mr Beazley, following Mr Nugan's death he resigned

from the Group and returned to the United States. He subsequently

received a phone call from Mr Houghton who said that he had a Mexican

friend, Ricardo Chavez, who wanted to purchase London Capital Securities 1 o Ltd. Mr Houghton said Mr Chavez instructed him to withdraw his

(Mr Chavez's) funds from his Nugan Hand account in Saudi Arabia.

Following discussions with Mr M.J. Hand [profile 2.2], Mr Houghton said

it was decided that the accumulated funds in Saudi Arabia could be , 14

used.

2.111.7 Mr Houghton travelled to London and handed over the money (about

£300 000) to Mr Mosselson, in the presence of Mr Beazley.15

Mr Houghton said the share certificate for London Capital Securities Ltd

was written in favour of Mr Beazley, who then endorsed it in favour of

Mr Chavez. Mr Houghton observed that the endorsement was not recorded by

London Capital Securities Ltd with the result that Mr Chavez was not

listed as a shareholder. Mr Houghton said that he later delivered the

share certificate to Mr Chavez in Switzerland.1® About October 1980

Mr Beazley met Mr Chavez in London and introduced him to Messrs Jones and

Mosselson. He then verbally resigned his position with London Capital

Securities Ltd and returned his equity to Mr Chavez. Mr Beazley said

following his return to the United States he formally resigned in writing

and since that date has had no interest in the bank.12

2.111.8 This conflicts with Mr Mosselson's statement to the Joint Task

Force. He stated Mr Beazley remained a director until 6 October 1980

when he resigned following an extraordinary general meeting.18 On

10 February 1981, Mr Mosselson said Mr Beazley arrived in his office with

Messrs Chavez and Lorenz. Mr Chavez said 'he had met Mr Beazley about

six months previously' and wanted to purchase Mr Beazley's shares.

Mr Mosselson said he later phoned Mr Chavez and told him to obtain legal

- 364 -

advice on the shares as Mr Beazley was taking legal advice regarding the

lien that had been claimed on his shares. A meeting later took place

between Messrs Chavez and Mosselson in Florida, however Mr Chavez did not

take any further action in attempting to purchase shares in London

Capital Securities Ltd or in joining the board of that company.19

Endnotes

1 CD10262 folio 243

2 CD1250 folio 2182

3 CD255 folio 98

4 CD1290 folio 84

5 CD1250 folio 2182

6 CD6286 folio 268

7 CD262 folios 33-34

8 CD4322 folio 11; CD10262 folio 129

9 CD6382 folios 106-07

10 CD4322 folio 3

11 CD6382 folios 106-07

12 CD1290 folios 76-78

13 CD1290 folios 9-10

14 CT22554-56, Houghton 15 CD1290 folio 11

16 CT22552-56, Houghton 17 CD1290 folios 12-13

18 CD1290 folios 78-79

19 CD1290 folio 79

- 365 -

2.112.1 The following information has been obtained from various

documents within the Commission's holdings.·*·

2.112 MEEKATHARRA MINERALS LTD

DATE OF INCORPORATION: 29 January 1970

CHANGE OF NAME: 29. 1.70 Meekatharra Minerals NL

29. 8.80 Meekatharra Minerals Ltd

REGISTERED OFFICE: From To

Suite 501, 17 Castlereagh St, Sydney 8th Floor, 29. 1.70 8. 6.70

44 Bridge St, Sydney 9th Floor, 8. 6.70 13. 7.71

60 Martin Place, Sydney Suite 604, 13. 7.71 12.11.73 84 Pitt St, Sydney

3rd Floor,

12.11.73 16. 2.78

93 Clarence St, Sydney 13th Floor, 16. 2.78 14. 8.78

175 Pitt St, Sydney 10th Floor,

14. 8.78 3. 5.80

175 Pitt St, Sydney 3. 5.80

AUTHORISED CAPITAL: 1981 $5

ISSUED CAPITAL: 1982 $3

000 000 (20 000 000 shares @ 25szf ea)

225 000 (12 900 000 shares @ 25^ ea)

SHAREHOLDERS: Public listed conpany

DIRECTORS: Date of Date of

Appointment Resignation

O'Callaghan, D.J. 30. 1.70 Unknown

St. John, E.H. 30. 1.70 28.11.72

Thornthwaite, W.R. 30. 1.70

Nugan, F.J. 30. 1.70 23. 7.73

Smith, B.D. 23. 7.73 9.10.78

Johnston, J. 22. 5.78

Ferguson, A. 1. 4.82

Spence, C.J. 1. 4.82

SECRETARIES:

- 366 -

Date of Date of

Appointment Resignation

Smith, B.D. Johnston, J.

PRESENT STATUS: Still trading

2.112.2 Meekatharra Minerals ML was incorporated on 29 January 1970 for

the purpose of exploring for, acquiring and developing mineral deposits.

On 5 February 1970 the corpany acquired from Messrs D.J. O'Callaghan and

F.J. Nugan [profile 2.1] their full right title and interest in four 2

mineral claims situated near Meekatharra in Western Australia.

Messrs Nugan and O'Callaghan received 1 000 000 vendor shares each in

consideration for the mining interests. They each subsequently

registered 500 000 ordinary shares in the name of Australia Recreation

Industries Pty Ltd. In July 1973 Mr Nugan resigned from the board of

directors and in July 1974 forfeited his 454 250 shares as he was unable 3

to meet a 0.05 cent call upon all Meekatharra shares.

2.112.3 Miss P.M. Swan [profile 2.70] said that she met Mr Nugan when 4

she commenced working for Meekatherra Minerals NL in 1970. The

Commission has heard evidence that Mr Nugan met Mr M.J. Hand [profile

2.2] through Meekatharra Minerals. Mr J.C. Needham [profile 2.51] said

Mr Nugan had told him that he had met Mr Hand when Mr Hand was a security

guard at Meekatharra Minerals. Mr B.W. Calder [profile 2.11] said

that Mr Hand had told him that he had been a security officer in

connection with the drilling operation in Queensland.®

30. 1.70 22. 5.78

22. 5.78

Endnotes

1 CP6193; CD11546

2 CDS874 folio 25

3 CD1308; CD9571 folios 1-2

4 CT22309-10, Swan

5 CT22410, Needham

6 CT22509, Calder

- 367 -

2.113.1 The following information was filed on behalf of the company

with the Queensland Corporate Affairs Commission and has been obtained

from that source.

2.113 NORTH AUSTRALIAN RUBBER MILLS LTD

DATE OF INCORPORATION: 11 April 1922

CHANGE OF NAMES: 11. 4.22 Incorporated as North Australian Rubber Mills Ltd. 27. 6.80 Changed name to NARM Corporation Ltd

REGISTERED OFFICE: 62 Bishop Street, Kelvin Grove, Queensland

AUTHORISED CAPITAL: $10 000 000 (20 000 000 shares @ 50jd ea)

ISSUED CAPITAL: $1 732 819

SHAREHOLDERS: Public listed company

DIRECTORS: (from 1970)

Date of Date of

Appointment Resignation

Johnston, J.E. 30. 9.54 27. 1.71

McCann, T.A.W. 31. 8.62 30.10.73

Duncan, M.J. 29.10.69 Unknown

Rosie, D. 29.10.69 30.10.73

Hawley, S.P. 20. 5.70 30.10.73

Cummins, R.J.N. 27. 1.71 30.10.73

Pennefather, A.J. 30. 8.73 26.10.73

Hand, M.J. 30.10.73 30. 6.74

Nugan, F.J. 30.10.73 30. 6.74

Needham, J.C. 30.10.73 15. 2.78

Calder, B.W. 19.12.73 15. 2.78

Austin, J.W. 15. 5.74 16.12.76

Hughes, J.H. Chadwick, B.L. Muhlberg, P. Hunter, A.C.

16.12.76 11.10.77 15. 2.78 15. 2.78

11.11.77

Galloway, H.S. 15. 2.78 15.12.78

Bird, G.J. 15. 2.78 10. 5.82

Cameron, J.W. 1. 7.80 10. 5.82

- 368 -

SECRETARIES: (from 1970)

Date of Date of

Appointment Resignation

R O S S , D.A. 13. 9.70 20. 6.74

North, R. 20. 6.74 unknown

Calder, B.U. 20. 6.74 4. 6.75

Bird, G.J. 4. 6.75 28. 2.77

Chadwick, B.L. 28. 2.77

17. 9.82

15. 2.78

Bird, G.J. 15. 2.78 17. 9.82

2.113.2 In mid 1973 PNB Rubber and Plastic Industries Pty Ltd ('PNB')

[profile 2.117] made a successful takeover bid for the company's issued 2 ordinary shares. In late 1973 SIRE Investment (Holdings) Pty Ltd, a

wholly owned subsidiary of Secured Income Real Estate (Australia) Ltd

('SIRE') [profile 2.118] acquired PNB. As a result NARM became a

subsidiary of SIRE.3

2.113.3 In February 1979 Mutual Securities Ltd successfully acquired a

controlling interest in NARM by purchasing PNB from SIRE and subsequently

restructured the company.^

Endnotes 1 2 3 4

1 CD11502

2 CT22410, Needham

3 CD4229 folio 5

4 CD5043

- 369 -

2.114.1 1Nugan Fruit Group' is a generic term covering several

companies. Those of relevance to this Commission's terms of reference

are the Nugan Group Ltd ('Nugan Group') and Nugan (Griffith) Pty Ltd

('Nugan (Griffith)').

2.114.2 The following information has been compiled from various

documents within the Commission's holdings.^

2.114 NUGAN FRUIT GROUP

COMPANY:

DATE OF INCORPORATION:

REGISTERED OFFICE:

AUTHORISED CAPITAL:

ISSUED CAPITAL:

SHAREHOLDERS

DIRECTORS:

THE NUGAN GROUP LIMITED

c/- Binder Hamlyn & Co, 11th Floor, 8-12 Bridge St, Sydney 60 Banna Ave, Griffith

c/- Forge & Partners, 10th Floor, 307 Pitt St, Sydney 60 Banna Ave, Griffith

Public company

Nugan, K.L. Reed, K.R. Davies, P.H. Nugan, F.J. Edwards, H.R.

Ellmers, J. Dowling R.N. Marks, N.G.

From To

20. 2.73 5. 3.73

5. 3.73 21. 7.77

21. 7.77 10. 1.79 10. 1.79

Date of Date of

Appointment Resignation

1 3.73 28. 5.82

1. 3.73 3. 5.77

12. 7.73 8. 4.75

12. 7.73 19. 4.74

12. 7.73 unknown 12. 7.73 8. 4.75

unknown 8. 4.75

12.12.74 8. 4.75

$2 000 000 (4 000 000 shares @ 50jzf ea)

$1 222 503 (2 445 005 shares @ 50

20 February 1973

DIRECTORS: (Continued)

- 370 -

Date of Date of

Appointment Resignation

Graham, H. 9. 9.75 19. 7.77

Tutt, L.E. 1. 3.73 13. 7.76

26. 8.76 19. 7.77

Webb, D.W. 3. 5.77 19. 7.77

Edney, B.D. 12.12.74 19. 7.77

Tam, P.W.K. 19. 7.77 5.10.77

Harland, E.P. 19. 7.77 8. 8.80

Hughes, J.H. 28. 7.77 7.11.77

Needham, J.C. 28. 7.77 10. 1.79

Lee, A. 10. 1.79

Ibbotson, T.A.S. 8. 8.80 22. 7.83

Ikin, R.E. 8 . 8.80

Nugan, M.C. 28. 5.82

Joseph, R.W. 21.10.83 8.10.84

Date of Date of

Appointment Resignation

Marks, N.G. 1. 3.73 8. 4.75

Hughes, J.H. 13. 3.75 20. 2.76

Nicolls, E.A. 20. 2.76 19. 7.77

Hughes, J.H. 19. 7.77 7.11.77

Harland, E.P. 10.11.77 8. 8.80

Lee, A. 8. 8.80 28. 5.82

Nugan, M. 28. 5.82

COMPANY: NUGAN (GRIFFITH) PTY LTD

2.114.3 The following information was filed on behalf of the company

with the New South Wales Corporate Affairs Commission and has been

obtained from that source.

DATE OF INCORPORATION: 28 February 1955

REGISTERED OFFICE: From To

Block 1142, Banna Ave, Griffith 4. 3.55 21. 7.77

C/- Forge & Partners, 10th Floor, 307 Pitt St, Sydney 21. 7.77 10. 1.79

60 Banna Ave, Griffith 10. 1.79

- 371 -

AUTHORISED CAPITAL;

ISSUED CAPITAL:

SHAREHOLDERS:

DIRECTORS:

SECRETARIES:

$50 000 (25 000 shares @ $2 ea)

$30 000 (15 000 shares @ $2 ea)

NO. of Date of Date of

Shares Acquisition Disposal

Nugan (Holdings) Pty Ltd 14 999

Nugan, M.c. 1

Nugan Group Limited 15 000

unknown 12.12.73 unknown 12.12.73

12.12.73

pate of Date of

Appointment Resignation

Nugan, A.M. 28. 2.55 16.11.65

Nugan, A.L. 28. 2.55 16.11.65

Gates, R.E. 30. 6.55 30. 4.71

Nugan, M.C. 17.11.65 16. 9.75

Howse, E.J.G. 17.11.65 7. 6.67

Nugan, K.L. 17.11.65 27. 5.82

Marks, N.G. 7. 6.67 14. 3.75

Ewen, R. 20. 6.69 20.11.69

Jones, r .l . 5. 7.71 16. 9.75

Hughes, J.H. 14. 3.75 10.12.75

Nicholls, E.A. 10.12.75 19. 7.77

Edney, B.D. 28. 6.77 19. 7.77

Graham, H.R. 28. 6.77 19. 7.77

Tutt, L.E. Jnr. 28. 6.77 19. 7.77

Hughes, j .h . 28. 7.77 7.11.77

Harland, E.P. 10.11.77 8 . 8.80

Lee, A. Nugan, M.C. Ikin, R.E. Ibbotson, T.A.S.

8 . 8.80 27. 5.82 unknown unknown 22. 7.83

Date of rate of

Appointment Resignation

mgan, K.L. 19. 6.64 16.11.65

Marks, N.G. 17.11.65 14. 3.75

Hughes, j .h . 14. 3.75 19.11.75

Nicolls, E.A. 19.11.75 19. 7.77

Hughes, j .h . 19. 7.77 7.11.77

Harland, E.P. 10.11.77 8 . 8.80

Lee, A. 8 . 8.80 28. 5.82

Nugan, M.C. 28. 5.82

- 372 -

2.114.4 The Nugan Fruit Group is a term that covers several companies

mostly based in Griffith, New South Wales. The group of companies has

its origin in a fruit packing business commenced in 1940.

2.114.5 On 29 May 1978 Messrs K.L. and F.J. Nugan, and others were

charged on several conspiracy counts in relation to the Nugan Group. On

5 November 1979 a prima facie case was found against Messrs F.J. and K.L.

Nugan. The matter was adjourned to 5 May 1980 when Mr K.L. Nugan was

committed for trial.

2.114.6 The significance of the Nugan Fruit Group is twofold. First, it

was the recipient of certain Nugan Hand Group funds [refer 5.114, 5.115],

and secondly, the publicity of the conspiracy charges combined with

confusion between it and the Nugan Hand Group affected the reputation of

the latter [see 3.4.95 to 3.4.100].

Endnotes

1 CD11546

- 373 -

2.115.1 Nugan Hand Inc. Panana w a s incorporated in Panama on the

24 January ] 975 with an authorised capita] of US$10 000 divided into

1 OOP $1 P shares. The directors were Messrs K.J. Hand [profile 2.2],

F.J. Nugan [profile 2.1] and Esteban Bernal. There w a s no registered

office in Panare however the legal firm of Arias, Fabrega & Fabreqa were

the resident agents for Nugan Hand Inc. Panana. ^

2.115.2 Nugan Hand Inc. Panana opened a Swiss bank account on 25 March

1975 with the Union Bank of Switzerland. Transactions were effected

through this account until 9 February 1977 when the Union Bank of

Switzerland cancelled the account. Alnost US$600 000 had been processed

throunh this account during this period. The Comission does not have

any details of any substantial operations through any other bank accounts 2 by Nugan Hand Inc. Panama.

2.115.3 Niraan Hand Inc. Panama did not have a licence to accept deposits

from Hong Kong or Sinoapore. Accordingly deposits which were actually

accepted by the company from these areas were disguised as being capital

subscriptions. A stock register was set up ostensibly shov/ing shares in

the company which were held by seventeen different persons (actually J 3 depositors). The total value of these shares approximates the

deposits to the Union Bank of Switzerland Bank account conducted by Nugan

Hand Inc. Panama. Since the authorised capital was only US$10 000 the

stock reoister showed overwhelming subscriptions for a company with no

apparent assets (US$590 premium per US$10 share). The entries in the

stock register are more properly interpreted as deposits accepted by

Nugan Hand Inc. Panama as the principal, value date, term, interest rate,

calculated interest and calculated maturity value, appear in the register.

2.115.4 Nugan Hand Inc. Panama acted as the forerunner to The Nugan Hand

Bank and accepted deposits, albeit illegally, from Australian and Asian

clients. Nugan Hand ltd attempted to obtain a banking licence in Panama

until their application was finally rejected in 1977. A reapplication

was nrorosed v;j th The Nugan Hand Bank instead of Nugan Hand Ltd as the

2.115 NUGAN HAND INC. PANAMA

- 374 -

4

applicant but this did not proceed. The Nugan Hand Bank was formed on

1 July 1976 and registered on 6 July 1976.^ It obtained a banking

licence from Grand Cayman and the usefulness of Nugan Hand Inc. Panama as

a trading entity diminished.

2.115.5 However, because the company did not operate in Panama and

therefore was not required to lodge financial statements with the

Panamanian authorities, the Nugan Hand Group used Nugan Hand Inc. Panama

for various fraudulent arrangements within the Group, including

arrangements to alter profitability and the fraudulent capitalisation of

some of the Group companies.

Endnotes

1 0)5026 folio 29; CD7935 folio 6

2 CD6597 folios 3,4,19,28; CD6619 folios 12,14; CD8227 folio 32 3 CD2022

4 CD1908 folio 87; 0)4342 folio 2

5 CD6597 folio 37

- 375 -

2.116.1 The group of companies that comprised the Orange Spot Group

were:"*"

2.116 THE ORANGE SPOT GROUP

The Orange Spot Pty Ltd

The Orange Spot Manufacturing Co Pty Ltd

The Orange Spot Trading Co Pty Ltd

The Orange Spot Wholesale Pty Ltd

The Orange Spot Holdings Pty Ltd

Beverley Hill Pty Ltd

Conroy's Pineapple Crunch Pty Ltd

Everest Pty Ltd

2.116.2 Mr F.J. Nugan [profile 2.1], using Nugan Hand Ltd funds [refer

5.113], acquired this group of companies for use in the implementation of

certain tax evasion/avoidance schemes. Mr J.W. O'Brien, liquidator of 2

Nugan Hand Ltd, was unable to recover any funds in relation to the

Orange Spot Group.

Endnotes

1 CD11546

2 CT25002, O'Brien

- 376 -

2.117 PNB RUBBER AND PLASTIC INDUSTRIES ΡΪΎ. LTD ('PNB')

2.117.1 The following information has been compiled from various

documents within the Commission's holdings.·™·

DATE OF INCORPORATION: 18 June 1973

REGISTERED OFFICE: 1st Floor 316 Adelaide St, Brisbane 62 Bishop St, Kelvin Grove, Queensland 34 Herston Rd, Kelvin Grove, Queensland

6 Dargie St, Everton Park, Queensland

From

18. 6.73

11. 4.75

1. 9.82

31. 5.83

To

11. 4.75

1. 9.82

31. 5.83

AUTHORISED CAPITAL: $750 000 (750 000 shares @ $1 ea)

ISSUED CAPITAL: $700 000

SHAREHOLDER: No. of

Shares

SIRE Investment (Holdings) Pty Ltd 700 000

DIRECTORS: Date of Date of

Appointment Resignation

Pennefather, A.J. 20. 6.73 26.10.73

Nugan, F.J. 20. 6.73 28. 6.74

Bence, A.I. 20. 6.73 26.10.73

Needham, J.C. 26.10.73 15. 2.78

Hand, M.J. 26.10.73 28. 6.74

Calder, B.W. 13.12.73 15. 2.78

Austin, G.W.J. unknown 16.12.76

Hughes, J.H. 28. 7.75 unknown

Muhlberg, P. Hunter, A.C.

16.12.76 15. 2.78 15. 2.78

11.11.77

SECRETARIES:

- 377 -

Date of Date of

Appointment Resignation

2.117.2 Mr S.K. Hill

North, R.A. Bird, G.J.

Chadwick, B.L. Else, J. Hunter, A.C.

[profile 2.33] told

20. 6.73 28. 6.74

23. 6.75 28. 2.77

15. 2.78 19. 8.82

28. 2.77 15. 2.78

28. 2.77 15. 2.78

19. 8.82

the Corporate Affairs

Commission that PNB was incorporated by Messrs F.J. Nugan [profile 2.1],

A.I. Bence and A.J. Pennefather to purchase North Australian Rubber Mills

Ltd (1 2 3 4 5 NARM1) [profile 2.113]

2.117.3 In mid 1973 PNB made a successful takeover bid for NARM. The

previous Board of Directors resigned and Messrs Hand [profile 2.2], Nugan

and Needham [profile 2.51] were elected to the new board of

3

directors. Mr G.R. Young [profile 2.78] told the Commission that

problems occurred in the takeover of NARM by PNB. As a result Mr Needham

offered to buy the company and this offer was accepted by Mr Nugan about 4 December 1973.

2.117.4 In late 1973 the whole of the issued share capital of PNB was

acquired by SIRE Investment (Holdings) Pty Ltd, a wholly owned subsidiary

of Secured Income Real Estate (Australia) Ltd ('SIRE') [profile 2.118]. 5

As a result of this acquisition NARM became a subsidiary of SIRE.

Endnotes

1 CD3883; CD11502

2 CD2667 folios 206-09

3 CD4229 folio 2

4 CT24829, CT24872, Young

5 CT22410, Needham; CD4229 folio 5

- 378 -

2.118.1 The following information has been compiled from various

documents within the Commission's holdings.^

2.118 SECURED INCOME REAL ESTATE (AUSTRALIA) LIMITED ('SIRE')

DATE OF INCORPORATION: 26 August 1971

CHANGE OF NAME: 26. 8.71 incorporated as Secured income Real Estate (Australia) Ltd 13. 6.84 Changed name to Barrier Pacific Resources Ltd

REGISTERED OFFICE: From

Level 3, Shaw Savill House, 8A Castlereagh St, Sydney 26. 8.71 29 Berry St, North Sydney 30. 5.73 c/- Wayland and Wayland, Accountants,

88 Pitt St, Sydney 1. 8.75

To

30. 5.73 1. 8.75

AUTHORISED CAPITAL: $10 000 000 (20 000 000 shares @ 50jd ea)

ISSUED CAPITAL: $860 610 (1 721 221 shares @ 50jz< ea)

SHAREHOLDERS: public listed company

DIRECTORS: Date of Date of

Appointment Resignation

Teulan, J.J. 28. 8.71 unknown

Hutchinson, W.J. 28. 8.71 unknown

Read, A.K, 28. 8.71 unknown

Hand, M.J. 28. 8.71 17. 7.72

Sydney-Jones, P. 28. 8.71 27. 6.72

Lan, L.C. 28. 8.71 7. 6.72

Calder, B.W. 20. 5.72 15. 6.79

Stannard, J.G. Pre 2.74 Pre 11.74

Austin, G.W.J. 1. 2.74 unknown

Needham, J.C. 23. 5.73 28. 6.80

Hughes, J.H. 28. 7.75 11.11.77

Chadwick, B.L. 11.10.77 21. 8.80

Bird, G.J. 17. 4.78 unknown

Hunter, A.C. 1. 5.80 19. 9.83

Muhlberg, P. 21. 8.80

Stevenson, S.C. 3.12.82 19. 9.83

Vost, C. 19. 9.83

Pascall, P.K.R. 19. 9.83

SECRETARY:

- 37p -

Date of Date of

Appointment Resignation

Calder, B.W. 28. 8.71

30.10.74

10. 4.74 3. 6.75

Myers, J.H. 11. 2.74 unknown

Hill, S.K.A, 10. 4.74 30.10.74

Hughes, J.H. 3. 6.75 unknown

Chadwick, p.L. unknown 15. 2.78

Bird, G.J. 15. 2.78 unknown

Keast, J.C. 8.12.78 unknown

Hunter, A.C. Muhlberg, P.

unknown 19. 9.83

19. 9.83

2.118.2 In Feptemher/Octoher 1973 Mr Needham obtained a controlling

interest in SIRE and became chairman and managing director.2 In late

1973 FTPE took over PNP Rubber and Plastic Industries Pty Ltd (1 2 3 4 PNB1)

[profile 2.116] which gave it a controlling interest in North Australian

Rubber Mills Ltd (1HARM1) [profile 2.113].'

2.118.3 As the result of an aoreement between Yorkville Nominees Pty Ltd

[profile 2.IC6] and SIRE, Mr Needham sent SIRE Croup bills of exchange

with a face value of SI million to Mr F.J. Nugan [profile 2.1]. Mr Nugan

made use of the bills in two ways. First, as security lodged in the Wing

On Park safe custody account and second, as a substitute for internal

bills of exchange drawn on Yorkville Nominees Pty Ltd [refer 5.59-5.62],

2.118.4 SIRE Croup bills of exchange with a face value of $600 COO

remained in the wing On Safe Custody account until presented for payment

at which stage they were dishonoured and litigation commenced. Following

a decision being delivered by Mr Justice Rogers on 11 March 1982 an

appeal was lodged by SIRE [see 3.8.125].

Fndnotes

1 C P U 5/6

2 CT22407, Needham

3 CT224]0, Needham

4 CD5828

' ι ■

’ -, ψ~(ι , V" · ' ; . . 1 .

• r* · P'V,..

ι *

■ . - - - . . . .

•

"·«}

PART THREE

COMPENDIUM

- 383 -

SECTION 1 : OVERVIEW

3.1.1 The intended function of this Part, as its title suggests, is to

provide a comprehensive summary, a clear and concise exposition, of the

relevant activities of the Nugan Hand Group and of the persons who

controlled the Group. This necessarily involves an examination of a

tangled web of fact and fiction which surrounded these activities during

the period from 1973 when Nugan Hand Ltd was incorporated until January

1980 when Mr Francis John Nugan died near the town of Lithgow in the New

South Wales countryside.

3.1.2 So as not to depart from the stated aim of this Part, and, in

particular, to prevent its content from becoming clogged with unnecessary

detail (unnecessary, that is to say, in such a summary), the procedure

has been followed, whenever a discrete subject matter arises demanding

lengthy or technical dissertation, of setting forth such information

about the subject matter as is sufficient for a general understanding but

providing a cross reference to that part of the report where the subject

matter is dealt with in greater detail. A reference to the Table of

Contents will indicate what specific subject matters are dealt with in

the other parts of this report.

3.1.3 The account contained in this Part is based on the evidence of

the many witnesses examined by the Commission both here, in Hong Kong and

in the United States. It is also based in part on the content of a vast

quantity of documentation. Attempts were made in the days immediately

following the death of Mr Nugan to destroy relevant documents in Sydney,

Singapore and Hong Kong. Undoubtedly relevant documents were destroyed

in Sydney [see Section 9 of this Part] and this is seen by the Commission

as having hampered its inquiries. Included in the documents concealed or

destroyed, of particular significance, were files identifying clients

regarded as sensitive and also the Nugan Hand Ltd accounting journal,

although the latter has been reconstructed [see Part 5].

- 384 -

3.1.4 The Commission's inquiries have been hampered to an even greater

extent by two further circumstances: the impossibility of hearing

evidence from the late Mr Nugan and the refusal of Mr Michael Jon Hand to

come forward and give evidence. In fact, the Commission attempted to

make contact, through an intermediary, with Mr Hand while hearing

evidence in the United States in January 1985. A tape recorded message

was delivered to Mr Hand's aged father in New York urging Mr Hand to come

forward and speak to the Commission during its sojourn in the United

States. The Commission has received no reply from Mr Hand. Thus the

story of the relevant activities of these two men has, of necessity, been

pieced together by the Commission without having had the benefit of

hearing from either of them, a difficult, but, as this report will

demonstrate, a not impossible task. Perhaps the one area where such

evidence, had it been available, might have been of particular

significance is the area of identifying those who knowingly assisted

Messrs Nugan and Hand in the perpetuation of the criminal activities

identified in this report. It may be that some of the persons who have

denied relevant knowledge and involvement and whose denials are not

contradicted on the present state of the evidence would have had a more

difficult case to contend with had Mr Hand come forward. Of course, the

fact that Mr Hand refused to do so leads to the obvious conclusion that

whoever else might have been put at risk by his evidence he himself would

not have been assisted by it as to the extent and nature of his own

involvement.

3.1.5 The story this Part attempts to unfold is a complex one spanning

several countries and involving many characters. The latter are

identified in Part 2 where each is the subject of a 'profile' providing

relevant details of his or her role in the Nugan Hand Group. The purpose

of putting together such profiles is to avoid having the frequent

interruptions to the flow of facts that would otherwise be caused by the

introduction of the characters the subject of the profiles. To avoid

this the procedure has been adopted that whenever a relevant name is

mentioned for the first time (and on other occasions where it seems

appropriate) there is simply a reference to the relevant profile.

- 385 -

3.1.6 Most of this Part (subject to what is said in the next

paragraph) comprises an attempt by the Commission to pull together the

mass of evidence into an intelligible format, generally providing a

chronological account of relevant events. Comparison is made, from time

to time, between the image sought (for the most part successfully) to be

fostered by the Group of itself and its activities, on the one hand, and

the reality of the situation, as disclosed by the evidence, on the

other. So stark is this contrast, in the view of the Commission, that it

is indeed apt to speak of the public perception of the Group as a myth, a

mere facade created by Mr F.J. Nugan [profile 2.1] and Mr M.J. Hand

[profile 2.2] and others who will be identified in these pages. Behind

this facade was a structure of conpanies and controllers wholly different

from the public face they managed to portray for some six years, albeit

with some tell-tale cracks which went largely although not entirely

unnoticed. From the account set out in this Part concerning those events

during those years it might appear that the cracks should have been more

widely recognised as clear indications that all was not as it seemed. In

fact some discerning observers reached this conclusion from their own

observations [see 4.6.30], It may be that some of these matters which

now seem so clear have attained such clarity largely because of the

benefit of hindsight.

3.1.7 In writing this Part an attempt has been made to introduce its

content in such an order as to provide, first, a brief and very general

description of the Group as it appeared to be structured and of its

activities as they appeared to be just prior to the death of Mr Nugan.

In other words not a description of its beginnings but rather a

description at a time when its end was imminent, and, having done that to

further provide, again very briefly and generally, the substance of what

the Commission has concluded lay behind such appearances. This is the

purpose of paragraphs 3.1.8 to 3.1.39 which could thus be viewed almost

as a postscript. This format has been adopted so that the reader, having

acquired such an overview, may be better equipped to understand the

chronological review of the facts and circumstances which forms the bulk

of this Part.

- 386 -

3.1.8 By the end of 1979 Messrs Nugan and Hand claimed to be in charge

of an international corporate structure offering to provide services

described as merchant banking services as well as offering to provide

financial and trading advice. In Australia there were many companies

incorporated which were under the control of either Messrs Nugan or Hand

or both. A large number of these companies, but not all, are identified

in the schedule to the Commission's terms of reference [Appendix A]. Of

these Australian conpanies there was only one of any real importance and

that was Nugan Hand Ltd [profile 2.97] itself, a public but unlisted

company. The other companies named in the schedule seem to have been

established for various purposes but save for perhaps a half a dozen of

them it will be unnecessary to say very much at all about them as they

played such a limited role with regard to relevant matters. Nugan Hand

Ltd had been incorporated in 1973 (in fact the company was incorporated

as Nugan Hand Needham Ltd but the ' Needham1 was dropped from the name

after approximately 12 months) and was at all times described by the

Group as carrying on the business of a merchant bank. It attracted some

large investors both from within Australia and from overseas (in

particular, Hong Kong, as is explained a little later in this Section

[see 3.1.11]). Within Australia it attracted a number of local

government councils within the Sydney metropolitan area (the Commission's

second Interim Report had as its subject matter the relationship between

these councils and Nugan Hand Ltd) and a number of large clubs in the

Sydney metropolitan area. It attracted these large depositors by

offering higher than usual interest rates and, in the main, by providing

the depositor with security in the form of bills of exchange. Nugan Hand

Ltd operated from premises located at 55 Macquarie Street in Sydney

(which was also the registered office of most of the other Australian

companies in the Group). Nugan Hand Ltd was at all times under the

control of Messrs Nugan and Hand, in particular the former as Mr Hand was

absent from Australia for almost the whole of 1975 and took up residence

in Hong Kong in October 1976 and thereafter Singapore with only

occasional visits to Australia. Nevertheless there is clear evidence

that even after Mr Hand's departure he remained in regular and close

contact whether by telephone or telex with Mr Nugan. Messrs Nugan and

Hand also owned the company's shareholding (with immaterial exceptions)

- 387 -

which was claimed in the annual accounts to be paid up to the extent of

$2 million.

3.1.9 One of the consequences of the fact that Nugan Hand Ltd was a

public company was that its annual accounts (its balance sheet and its

profit and loss statement) were required by law to be audited by a

registered company auditor. A great deal will be said in this report

concerning the audited accounts of Nugan Hand Ltd. Suffice it to say, at

this stage, that they were interpreted by most people (from 1976 onwards,

at least), including the company's bankers, potential depositors, and

sections of the financial press, as showing impressive growth in high

profile assets, such as commercial bills of exchange, and in the

company's deposit base. Thus The Australian on 9 November 1977

commenting on these published accounts as at 31 January 1977 reported

that they showed $20.56 million deposited with the company with assets

stated in the balance sheet to include $13.4 million in commercial bills,

$3.9 million in Treasury notes, $2.9 million in negotiable certificates

of deposit and $1.5 million in short term loans and deposits. The

Financial Review on 30 December 1977 commenting on the same set of

accounts referred to the expanding operations of 'this awesomely large

global institution' and noted the accounts showed assets exceeding

$21 million. The same article reported the company's claim to an

increase in turnover of securities trading from $26 million to

$220 million. The same newspaper in its issue of 4 February 1978

reported that the claimed turnover of the company to 31 January 1978 was

$1 000 million adding that 'at this sort of growth rate Nugan Hand will

soon be bigger than B.H.P. ...'. These contemporary observations are

quoted as some evidence of what was the public perception of the

activities of the Nugan Hand Group at the time. They are particularly

helpful in that regard, given the fact that this report has been written

years after the events occurred.

3.1.10 Turning to the Group's overseas activities, it is again

interesting to note the further observation of the The Financial Review

of 30 December 1977 that 'it is the overseas operations of the Nugan Hand

Group that attracts much of the public's imagination'. Included among

the companies in the schedule are three foreign companies incorporated

- 388 -

overseas none of which was ever registered in Australia as a foreign

company under Australian company legislation. These companies are The

Nugan Hand Bank (Cayman Islands), Nugan Hand (Hong Kong) Ltd (hereafter

referred to as Nugan Hand (Hong Kong)) and Nugan Hand Inc. (Hawaii).

Nothing need be said here about the latter company which played a very

minor role in the Group's activities. Not so in the case of the other

two each of which was a major force in the Group's expansion providing as

each did much needed access to considerable sums of money.

3.1.11 Nugan Hand (Hong Kong) is looked at in detail in Part 4

Section 1. The conpany was incorporated in Hong Kong under a different

name in 1972 changing its name in late 1974 when Mr Nugan sent one of the

directors of Nugan Hand Ltd, Mr C.L. Collings [profile 2.15], to Hong

Kong to solicit deposits. In terms of the volume of deposits collected,

Nugan Hand (Hong Kong) was an instant and continuing success. The

reasons for this success included the fact that significantly higher

interest rates were available in Sydney than those available to investors

in Hong Kong so that higher rates could be offered by Mr Collings to

potential investors in Hong Kong. Another significant attraction was the

existence of an arrangement between Nugan Hand Ltd and the Wing On Bank

of Hong Kong under which the Wing On Bank guaranteed to each depositor

with Nugan Hand Ltd the return of the deposit and interest in any event.

This remarkably favourable arrangement, from Nugan Hand Ltd's point of

view, attracted large numbers of depositors to the then almost unknown

Nugan Hand Ltd. Further details concerning this arrangement are set out

at paragraphs 4.1.27 to 4.1.55.

3.1.12 The premises occupied by Nugan Hand (Hong Kong) were luxurious

and housed a large staff some of whom were on high commission rates in

respect of deposits collected. The establishment of this company in the

highly competitive commercial climate of Hong Kong served as a

considerable impetus to the Group's progress. People were impressed.

Thus commented the The Financial Review of 30 December 1977:

'Hong Kong is by far the biggest overseas subsidiary of Nugan Hand, with a staff of 12 and a range of activities including Eurodollar bond placements, deposit taking and management consulting for clients which range from finance and insurance companies to private businesses.'

- 389 -

The apparent success of the company was continually pointed to by the

Group as proof that it had the resources and the know-how to attract

deposits in this international market and as well, seemingly, for the

company to use those funds for profitable investment on the Australian

and overseas money markets.

3.1.13 As is explained in paragraph 3.4.32 Nugan Hand (Hong Kong)

obtained a licence from the Hong Kong authorities to collect deposits in

its own right and on its own behalf but, generally, did not avail itself

of this right because it was less onerous if the company collected moneys

on behalf of Nugan Hand Ltd or the Nugan Hand Bank (after the latter

commenced operations in late 1976) for which activities Nugan Hand (Hong

Kong) appears to have required no licence and, in any event, certainly

did not possess any licence other than the one mentioned above. It is

probable that the company was in fact in breach of the Hong Kong banking

regulations in its deposit collecting activities on behalf of Nugan Hand

Ltd and the Nugan Hand Bank.

3.1.14 It was this success that prompted Messrs Nugan and Hand to set

up, or attempt to set up, similar operations in other parts of the

world. Sometimes these ventures consisted of no more than sending a

representative to a foreign country with resources sufficient only to

hire a room and a telephone. Examples of this type of operation were to

be found in Argentina, Thailand and Korea. In other cases the

organisation was more elaborate as in the case of the Group's operations

in Malaysia and The Philippines. In some cases the representative

selected was someone already established locally in business for himself

who agreed to work part time as a representative for the Group. This was

the case in Taiwan and the United States. More details of the overseas

operations are given in Sections 4 and 5 of this Part as are the

identities of the various representatives each of whom is included in the

profiles in Part 2. Some of these representatives were quite successful

in bringing funds into the Group; some were notably unsuccessful. In

almost all the countries where these representatives were sent to

operate, local currency laws prohibited activities which involved the

local depositors' moneys leaving the country. For these activities an

- 390 -

appropriate licence was required. This requirement (which usually took

tine and required disclosure of information as well as proof of financial

stability) was largely overcome by the representative taking up the

apparent position of a trade adviser offering advice on aspects of trade

and offering to find buyers or sellers in return for a commission, while

in reality he surreptitiously invited the placement of moneys with the

Group.

3.1.15 When Nugan Hand (Hong Kong) proved that access could be had to

lucrative funds overseas, Messrs Nugan and Hand redoubled their efforts,

which had commenced in 1975, to establish an offshore bank under the

protection of the laws of one of the several so called tax haven

countries throughout the world. Panama was their first choice and

although they despatched a director there in 1975 and although a company

was incorporated there under the name of Nugan Hand Inc. Panama that

company was little more than a name without an address other than that of

the Panamanian lawyers who caused it to be incorporated. When the

Group's application for a banking licence was finally refused by the

Panamanian authorities attention was turned to other suitable locations

and in July 1976 the Group was successful in obtaining a licence issued

under the law of the Cayman Islands, a British colony in the West

Indies. It was this licence that was to give the Group access to funds

which by 30 November 1979 exceeded US$22 m i l l i o n . T h e Nugan Hand Bank

is dealt with as a discrete topic in Part 4 Section 2.

3.1.16 Because the banking licence was obtained from the Cayman Islands

authorities, this allowed Messrs Nugan and Hand to offer investors the

advantages of the fiscal and financial laws of the tax free colony where

the identity of depositors with banks registered under the Cayman Islands

law were protected by laws requiring that secrecy be observed. The

effect of these laws of confidentiality is that the Cayman Islands

authorities refuse to divulge to the authorities of other countries

attempting to ascertain financial details of their citizens suspected of

having money in Cayman Islands bank accounts, any information pertaining

to those accounts or the identity of the account holder. This refusal is

maintained without exception unless there happens to be in place an

- 391 -

international agreement under which the Cayman Islands has agreed to

provide certain information, but then only in specified circumstances,

for example, in the light of evidence provided to the authorities that

the relevant moneys have come from illegal drug trafficking. As is

mentioned elsewhere in this report the Commission's own inquiries have

been partly frustrated because of the operation of these laws [see Part 4

Section 4 ].

3.1.17 The fact that the Nugan Hand Bank was operating under the laws

of the Cayman Islands did not mean that its activities were carried on

there. In fact this was never the case. The only physical connection

between the Bank and the Cayman Islands occurred once a year during the

years 1977, 1978 and 1979 when two of the directors of the Bank took what

were presented to the Cayman Islands auditors as the Bank's annual

accounts for certification by those auditors. The Bank's principal place

of business was in Singapore in that Mr Hand supervised its operations

and employed a staff including an accountant. Nugan Hand (Hong Kong),

once the Bank commenced operations, regularly collected moneys in

Hong Kong on behalf of the Nugan Hand Bank. Many of the overseas

representatives also collected moneys on behalf of the Nugan Hand Bank.

3.1.18 Among the directors of the Bank was Admiral E.P. Yates

[profile 2.76] a man who had had a very distinguished career in the

United States Armed Forces. He in turn coopted the services on behalf of

the Bank of a number of other men also with distinguished backgrounds in

the United States Armed Forces. The intent of Messrs Nugan and Hand in

this regard was to use the reputations of these men to enhance the

standing of the Bank, especially in areas where they had operated during

their military careers. In these areas, in particular, the names of

these people were used to lend an air of stability and respectability to

the Nugan Hand Bank and the Group generally and it was the intention of

Messrs Nugan and Hand, eventually, to use such reputations to assist in

getting a foothold for the Group in the United States itself. This

project was well underway at the time of Mr Nugan's death [see Part 4

Section 3]. The presence of this United States ex-military group gave

rise, apparently, to allegations that the Group was used by the United

- 392 -

States Central Intelligence Agency (hereafter referred to as the

'C.I.A.1) or was a front for it. These allegations and the Commission's

conclusions concerning them are the subject of Part 4 Section 3.

3.1.19 The Nugan Hand Bank was widely advertised overseas especially in

South East Asia and regular newspaper articles concerning its activities

appeared in local newspapers in those countries. Depositors were

attracted from all over the world including Australia. Perhaps the

Bank's most successful year was in 1979 when its funds were swelled by

moneys collected in Saudi Arabia to the extent, according to one

estimate, of US$5 million.

3.1.20 Thus, the Group was seen as being an international corporate

structure with a merchant bank operating from Sydney, a seemingly

successful operation in Hong Kong and an offshore bank which undoubtedly

attracted considerable funds with representative offices in various parts

of the world. However, as has been foreshadowed in the early part of

this Section, the appearance fostered by the Group was a far cry, indeed,

from the true situation which obtained. The evidence before the

Commission discloses that the Group depended upon a multitude of frauds

and deceptions the like of which may not have been seen before, in this

country at any rate. The fact that these frauds could have occurred in a

public company (and one claiming to be a merchant bank) subject to the

laws of the Commonwealth and of New South Wales, in particular the New

South Wales companies legislation, and continue year after year without

detection by the authorities, is obviously a matter for considerable

concern.

3.1.21 The contrivances used to work such frauds and deceptions are

described and identified in this Part as the story unfolds. An analysis

of the Nugan Hand Ltd accounts over the years is the subject of Part 5.

At this stage it is intended merely to set out the substance of the

frauds and deceptions identified by the Commission.

3.1.22 The starting point is to look at Nugan Hand Ltd, undoubtedly the

vehicle which launched the Group when it was incorporated in 1973. It

- 393 -

has already been noted that because it was a public company (although

unlisted) it was required by law to produce its accounts (that is a

balance sheet and a profit and loss statement) each year audited by a

person registered as a company auditor under the companies legislation

and to file the same with the Corporate Affairs Commission of New South

Hales. The importance of the audited accounts in respect of a conpany

such as Nugan Hand Ltd passing itself off as a merchant bank cannot be

overstated. As can be seen from the contemporary observations of the

commentators referred to above [3.1.9] almost all opinions and

assessments by bankers, potential depositors and other third parties

proposing to deal with the company were formed on the basis of the

audited accounts. The fact is (as the evidence discloses) that these

audited accounts were nothing other than gross untruths published year

after year from the very first set of accounts as at 30 June 1974 to the

last finalised set of accounts as at 30 June 1979. (The next set due was

at 31 January 1980 but these were never produced, even in draft form, due

to the chaotic situation which existed in the Group following the death

of Mr Nuoan in January 1980.)

3.1.23 In short, the Nugan Hand Ltd balance sheet overstated the amount

of the paid up share capital by approximately £2 million. On four

successive occasions between 1975 and 1977 an artificial buy back

arrangement straddling a balance date was entered into by Nugan Hand Ltd

with a well known merchant bank [Part 4 Section 7] which arrangement was

used to give the appearance of the injection of millions of dollars into

the Nugan Hand Ltd balance sheet, thereby dramatically changing its

appearance to give the impression of a conpany having considerable assets

and a large deposit base. Nothing could have been further from the

truth. (The same observation could be made of the claims made as to

enormous turnover in securities trading.) In other words the size of the

company was greatly distorted. In fact this artificial arrangement on

each such occasion existed virtually only on the date at which Nugan Hand

Ltd balanced its accounts and ceased to exist within a day or so after

the passing of the balancing date. These buy back arrangements are

explained more fully at paragraphs 5.25 to 5.31.

- 394 -

3.1.24 While these deceptions were serious enough in themselves there

were others at least as serious. There was at all times in Nugan Hand

Ltd a deficiency in funds brought about by a number of factors including

the fact that the company earned little in the way of genuine income and

certainly nothing like even the modest income claimed in its accounts.

The company's overheads and expenses were paid for out of its depositors'

funds. The depositors' funds were also used to meet various liabilities

incurred by Messrs Nugan and Hand. By 31 January 1976 an amount of

approximately $880 000 had been advanced to various companies and persons

associated with Mr Nugan. By 31 January 1979 these advances totalled

approximately $5.2 million. In the records of Nugan Hand Ltd these

outstanding moneys were treated as being owed to the company, inter alia,

by two or more of the quite unfinancial companies within the Australian

Group. This situation should have been reflected in the Nugan Hand Ltd

balance sheet; that is there should have been a disclosure that there was

a substantial debt owed to the company by a two dollar company controlled

by Messrs Nugan and Hand. Had that been done, of course, questions would

have arisen as to the collectability of the debt and as to whether the

debt should be regarded as doubtful or even written off. Accordingly, no

such disclosure was ever made in any Nugan Hand Ltd set of accounts.

Instead, a totally unjustified scheme was set in train which turned the

bad or doubtful debt into a high profile asset: these debtor conpanies

drew bills of exchange (in most cases it would be more accurate to say

the bills were not drawn at all, but merely recorded as having been in

the records of Nugan Hand Ltd) upon which they purported to make

themselves liable to Nugan Hand Ltd for millions of dollars representing

the debt, notwithstanding that these companies were unfinancial

themselves and depended almost entirely upon Nugan Hand Ltd to put them

in funds. As a result of this scheme the balance sheet of Nugan Hand Ltd

included in an entry described as 'commercial bills discounted', the

alleged current value of these valueless bills. There are other

fraudulent statements in various balance sheets but they do not require

to be detailed in this brief exposition of the major areas of fraud.

3.1.25 It will be obvious from the above that Nugan Hand Ltd was at all

times insolvent (and in all probability so were all the other Australian

- 395 -

companies within the Group). The profit that the company purported to

show in its profit and loss statement was brought about by two further

misrepresentations. The most significant was the notional calculation of

interest which was treated as accruing on the valueless internal bills

which calculation was taken into the accounts and treated as genuine

income. The other device commonly used to give an appearance of income

earned was to take into the accounts a sum said to reflect management

fees or the like earned by Nugan Hand Ltd in respect of other companies

within the Group. Once again these other companies had no resources to

pay such fees nor is there any evidence that such fees were ever incurred

or that any management was undertaken by Nugan Hand Ltd in respect of

such companies. Thus it would be true to categorise the Nugan Hand Ltd

accounts as containing far more fiction than fact. Yet it was on the

strength of these accounts that the company was able to continue year

after year.

3.1.26 It is unnecessary to say very much about Nugan Hand (Hong Kong)

in this context. Suffice to say that its funds, too, were used as and

when the Group had need of funds and it, too, was uneconomically run and

its accounts did not reflect the true state of affairs. A detailed

examination of this company is set out at in Part 4 Section 1.

3.1.27 Finally, in this context, it is necessary to mention the Nugan

Hand Bank. The preceding paragraphs have described the Nugan Hand Ltd

accounts in terms of being grossly fraudulent in content. The Commission

must also report, on the evidence before it, that much the same situation

obtained in respect of the accounts of the Nugan Hand Bank. Something

has already been said of the Bank in this Part at paragraphs 3.1.15 to

3.1.20. In each of the years 1977, 1978 and 1979, a complete set of

false records was written up in the offices of Nugan Hand Ltd in Sydney

and a set of accounts was cast on the strength of those false records, at

which stage the false records and the accounts were taken to the Cayman

Islands for signature by auditors in the Cayman Islands. These false

records and accounts made up from them bore no resemblance to the content

of the properly kept records of the Bank in its Singapore office and, in

addition, claimed that Nugan Hand Ltd in Sydney was holding millions of

- 396 -

dollars worth of securities on behalf of the Bank, a claim that was

totally false. A detailed account of these and other matters touching

the Nugan Hand Bank is given in Part 4 Section 2.

3.1.28 As well as controlling the Nugan Hand Group from 1973 until his

death in January 1980, Mr Nugan was a solicitor of the Supreme Court of

New South Wales. He practised as such on his own account from premises

in Martin Place from about 1970. As far as the evidence goes at that

time he employed only Miss P.M. Swan [profile 2.70] in a secretarial

capacity. [For further details of his early career see his profile 2.1.]

3.1.29 When Mr Nugan together with Mr Hand moved the Group's operations

to the prestigious premises at 55 Macquarie Street, Sydney about August

1973 he also moved his solicitor's office there. From 1976 to November

1978 he took a partner, Mr J.C. Needham [profile 2.51] and the name of

the legal practice was changed to Nugan Needham. This arrangement seems

to have been entered into purely to suit Mr Needham who had moved to

Brisbane but who wished to be able to continue to hold a practising

certificate in New South Wales. Mr Needham in his evidence to the

Commission said that he took no actual part in the running of the firm

and said that as far as he was aware the firm had no clients."*"3

However the latter observation is incorrect as there is clear evidence

that in fact the firm as from 1976 was incorporating shelf companies and 2

providing tax advice to various persons.

3.1.30 It appears from the evidence that Mr Nugan during these years

was offering tax schemes to those willing to pay the nominated fees: see

Part 9 which examines allegations that Mr Nugan engaged in large scale

tax evasion schemes. Mr Nugan himself claimed to several people that he

was a most successful tax lawyer and that he had earned 'millions' from 3 this source. Mr Nuqan claimed that such earnings were themselves 4 enough to keep the Group afloat. While there is some evidence that

Mr Nugan obtained large fees from time to time from his tax schemes, the

evidence falls far short of the claims made by Mr Nugan. Some of the

companies within the Nugan Hand Group were used to put into effect

Mr Nugan's tax schemes, especially Yorkville Nominees Pty Ltd [profile

- 397 -

2.108] and the two Distravite companies [profiles 2.81-2.82], Following

the dissolution of the partnership with Mr Needham in November 1978

Mr Nugan continued to practise under the name Nugan & Company. Once

again, the practice seems to have been confined mainly to the

incorporation of shelf companies and to the creation and marketing of tax 5 schemes. Mr Nugan employed two solicitors namely Mr Q.D. George

[profile 2.24] and Mr A. Lee [profile 2.37]. He also employed the late

Mr E.P. Harland [profile 2.28] who had at an earlier stage been an

assessor with the Taxation Department. Following Mr Nugan's death the

practice was investigated by an accountant at the behest of the Law

Society of New South Wales.® [See 3.4.44-3.4.47 for further details. ]

3.1.31 On the evidence before the Commission Messrs Nugan and Hand owe

much of their apparent success, at least until the latter part of 1977,

to what can only be described as sheer fortuity. The discovery of

Mr G.R. Young [profile 2.78] in 1973 who was able to commence money

market trading with no capital (albeit resulting in a comparatively small

loss); the engagement of the auditors in 1973 who, according to the

evidence, certified the 1974 accounts without checking them; the

engagement of Mr G.F. Frincat [profile 2.9] as accountant and auditor for a

the accounts from and including June 1975; the success of Nugan Hand

(Hong Kong) and, in particular, the arrangement come to with Dr A. Kwok

[profile 2.36] of the Wing On Bank of Hong Kong and the obtaining of the

banking licence in the Cayman Islands, are all examples of what appear to

be purely fortuitous circumstances. However, finally, this extraordinary

streak of luck came to an end in late 1977 in circumstances which were to

dog Mr Nugan, in particular, from that time until his death in January

198(1 and which would prove to be a major factor in the ultimate downfall

of the Group. To understand this reversal which was highly publicised at

the time both in this country and overseas it is necessary to say

something, briefly, about the Nugan Fruit Group [profile 2.114], a

corporate group then controlled by Mr Kenneth Leslie Nugan

[profile 2.52], a brother of Mr F.J. Nugan, and which was based in

Griffith, New South Wales.

3.1.32 In the latter part of 1977 the Corporate Affairs Commission of

New South Wales commenced a Special Investigation under the then New

- 398 -

South Wales Conpanies Act 1961 into the affairs of the Nugan Fruit

Group. This followed serious allegations of voting and other

irregularities surrounding a takeover bid for the company. The company

had been founded by the Nugan family some years before and Mr F.J. Nugan

had at one time himself been a director. As the investigation

progressed, further allegations arose suggesting that the Nugan Fruit

Group was involved in illicit drug movements. A Royal Commission into

Drug Trafficking which had an interest in the Griffith area of New South

Wales amongst other places was already under way under the chairmanship

of Mr Justice Woodward of the New South Wales Supreme Court. The drug

allegations concerning the Nugan Fruit Group came under investigation by

that Commission. None of the allegations were ever proved. Mr F.J.

Nugan himself and to a lesser extent the Nugan Hand Group came to be

included in these drug allegations. Mr Nugan was so concerned about the

effect of the adverse publicity arising from the allegations that he

travelled to Canberra for an interview with the then head of the now

disbanded Federal Bureau of Narcotics. The allegations were given a

great deal of publicity here and even overseas, fuelled by a political

controversy which emerged when two senior members of the New South Wales

Parliamentary Liberal Party took up opposite and very vocal sides in the

dispute one favouring the Nugans and the other fanning the heat of the

allegations against them.

3.1.33 Then, on 29 May 1978, Mr F.J. Nugan was charged with certain

criminal offences relating to the conduct of the affairs of the Nugan

Fruit Group as was his brother Mr K.L. Nugan. The committal proceedings

which followed were highly publicised and dragged on until 5 November

1979 when a prima facie case was found against both the Nugans. The

matters were adjourned to 5 May 1980, when Mr K.L. Nugan was committed

for trial, Mr F.J. Nugan having died on 27 January 1980.

3.1.34 The costs incurred by the Nugan brothers arising from the

Corporate Affairs Commission investigation as well as the legal fees

involved in the subsequent committal proceedings were channelled,

principally from Nugan Hand Ltd, through various other companies within

the Group before reaching their intended destination. In the opinion of

- 399 -

one witness very close to Mr F.J. Nugan this financial drain was a

significant factor in the collapse of the Group in January 1980."*"^

3.1.35 ' While the financial drain may indeed have had the effect

claimed, it would appear that even greater damage was caused as a result

of the adverse publicity which resulted from Hr F.J. Nugan being charged

and ultimately having a prima facie case found against him in respect of

those charges. The extent of the adverse publicity overseas may be

gauged by reference to some correspondence concerning the matter at that

time. In a letter written in April 1978 General E.F. Black [profile 2.8]

referred to the Corporate Affairs Commission investigation of the Nugan

Fruit Group and the 'long shadows' cast by that investigation and

expressed the view that it had caused 'the conservative banking community

to have their private tizzys about the [Nugan Hand] Group'. ^ He also

mentioned the alleged views of the Hong Kong Commissioner for Banking

concerning the Group which was apparently regarded with some suspicion.

In August 1978 Hr J. McArthur [profile 2.46] wrote a letter stating that

concern had been expressed in the United States over 'the problems which

our Chairman has been experiencing in Australia'. In March 1979 in a

telex to Mr Ceilings in Hong Kong Mr S.K. Hill [profile 2.33] referred to

'the long winter' when describing the effect of the committal

13

proceedings. There is evidence of bitter resentment on the part of

Mr Hand of the fact that the Nugan Hand Group became caught up in the

adverse publicity arising out of the affairs of the Nugan Fruit Group;

Mr Hand described the effect of this publicity as ' like cancer'

3.1.36 Such was the concern within the Group at the adverse publicity

emanating from the Corporate Affairs Commission inquiry into the Nugan

Fruit Group that reference to "Nugan Hand' was deleted from Nugan Hand

(Hong Kong), the Nugan Hand Bank and other companies which underwent a

name change (which was to prove temporary) by the introduction of the

words 'Swiss Pacific' into the name of the companies to replace 'Nugan

Hand'. This provoked objections in Hong Kong from a number of Swiss

banks with the result that the decision was reversed and 'Swiss Pacific'

was removed from the names of the companies involved.^ There is

evidence that this adverse publicity caused a fall off in the number of

- 400 -

local depositors placing money with Nugan Hand Ltd in Sydney and that

this stage had been reached by mid to late June 1977. ^'> In fact

Mr Pagan himself when speaking at the Nugan Hand conference in Sydney in

October 1979 said that there had been a run of around 30 per cent on

Nugan Hand Ltd 'in a couple of days following 11 November 1977' ."*^a

3.1.37 Perhaps no-one within the Group could have anticipated that this

adverse publicity was to be a direct cause in the demise of the Nugan

Hand Pank. Yet it appears from the evidence that it was. The Cayman

Islands auditors of the Bank had certified the Bank's accounts in 1977

and 1978 when they were presented to them for that purpose by directors

of the Bank, one of whom in each of those years was Mr Hill. However,

when Mr Hill presented the accounts to the auditors in November 1979 they

expressed concern over the adverse publicity and in respect of the

finding of a prima facie case against Mr F.J. Nugan that very month in

Sydney. They required assurances from Mr Hill (apparently as a result of

their expressed concern) concerning the accuracy of the accounts which

assurances they had not required in the previous years. Mr Hill was not

prepared to give such assurances. In the face of this refusal the

auditors declined to certify the 1979 Nugan Hand Bank accounts. There is

evidence before the Commission that Mr F.J. Nugan intervened at this

stage and may himself have gone to the Caymans. In any event, the 1979

accounts remained uncertified which spelt the end for the Bank because it

could not continue to function under Cayman Islands law in the face of

the auditors' refusal to certify its accounts. The evidence concerning

the Nugan Hand Bank generally and in particular the refusal of the

auditors to sign the 1°79 accounts is reported in greater detail in

Part 4 Section 2.

3.1.38 Finally something should be said here concerning the death of

Mr Nugan in January 1980. On Sunday, 27 January 1980 Mr Nugan was found

shot dead in his car near the town of Lithgow in New South Wales. He had

in fact returned from overseas only the preceding Friday and, so far as

the evidence discloses, he was last seen alive by persons associated with

the Group on Saturday, 26 January 1980 at a lunchtime meeting called by

him at the Nugan Hand Ltd offices at 55 Macquarie Street, Sydney, to

- 401 -

discuss a communication from the Commissioner of Taxation to the effect

that certain taxation schemes of Mr Nugan's which he had sold to clients

had been disallowed.16 The two inquests which were held into his death

returned a finding of death by suicide. Perhaps it is not possible to

convince everybody that these findings were correct. However it should

be said that there is a wealth of evidence before the Commission which

could have provided a strong motive for Mr Nugan to have decided to take

his own life. As well as the certain demise of the Nugan Hand Bank which

he must have known to be unavoidable following the Cayman Islands

auditors' refusal to certify the 1979 accounts, and the communication

from the Taxation Department mentioned above, Mr Nugan was facing

monumental and quite insoluble problems and could not but have been aware

that exposure was imminent in respect of his long history of serious

fraud in relation to the Group's activities since 1973. A few days

before his death Mr Nugan had been informed by Mr Brincat that the latter

would not certify the Nugan Hand Ltd accounts for 31 January 1980 unless

the outstanding moneys owed to the company and disguised by the use of

the internal bills was made good. Mr Hill, who on the evidence was

Mr Nugan's right hand man in the Sydney office, had informed Mr Nugan of

his resignation the preceding Friday again because of the state of the

Nugan Hand Ltd accounts. Thus the pressure upon Mr Nugan must have been

enormous. It might also be mentioned that there is evidence (including a

transcript of a 'talk'1 given by Mr Nugan to the staff of his legal

practice a few months before his death) which suggests that his mind had

undergone serious deterioration due, probably, to years of heavy drinking

and, perhaps, the strain imposed by the continuous need to suppress and

conceal the fact of the disastrous financial mess hidden behind the

glossy brochures issued on behalf of the Nugan Hand Group.

3.1.39 Assuming Mr Nugan did take his own life, as the evidence

strongly suggests, then it may have been not so much the fear of

apprehension and imprisonment that caused him to take that step. Rather

it may have been the fear of public exposure, unavoidable and imminent as

he must have known it to be, with the consequent shame and humiliation

that would follow the revelation of six years of infamy during which he

had inter-woven fraud upon fraud, produced grossly false company

- 402 -

accounts, made completely untrue claims of massive turnover in money

market securities, deliberately broken solemn undertakings to those who

dealt with him and trusted him, and plundered the funds entrusted to his

companies, that finally tipped the scales and caused him to take what was

the only course if such a consequence were to be avoided.

- 403 -

SECTION 2 : IN THE BEGINNING - A DISMAL PERFORMANCE

(THE YEARS 1973 TO 1974)

3.2.1 The profiles of Messrs F.J. Nugan and M.J. Hand contained in

Part Two provide information concerning their activities prior to the

incorporation of Nugan Hand Ltd [profile 2.97] (which was in fact

incorporated as Nugan Hand Needham) in July 1973. According to Mr Hand

(in a speech made by him at a conference in November 1979 at the Gazebo

Hotel, Sydney) the first meeting between himself and Mr Nugan took place

in 1968. There is evidence that at the time of this meeting Mr Hand was

a security guard employed by a mining company known as Meekatharra

Minerals Ltd [profile 2.112]. Mr Nugan claimed to have made 'a lot of

money' out of this company in which he had been a shareholder.1 (The

writer of an article in The Financial Review of 30 December 1977

reported that Mr Nugan's 'entry into the banking world was via a small

fortune amassed during the mining boom'. The source on which the

statement was based is not stated in the article.) Mr Hand had been

engaged in buying and selling land in New South Wales before he met

Mr Nugan and their first joint venture seems to have been the buying and

selling of land at Brunswick Heads in connection with a sub-division 2 known as 'Ocean Shores'.

3.2.2 There is an abundance of evidence that, at least until perhaps

1978 or 1979, the two men were extremely close friends and spent time

together socially in addition to the time spent in their business

activities. There is also evidence that some time in the late 1960's

they shared a flat together in Sydney. Their mutual regard seems to have

continued at least until January 1978 when at a conference arranged for

executives of the Group in Bangkok Mr Hand, in a speech made at that

conference, said of Mr Nugan:

'There is nobody I would prefer to remain back to back with and I think Frank has had the same affection for me over the years. I think Frank and I have probably over the years spent more time together than we have spent with our wives. I [would] like to thank you for the good and bad years together.'

- 404 -

The transcript goes on to record Mr Nugan to have responded to this by 3 calling out, 'Same from me'. Later in 1978 however, Mr Hand was not

quite so fullsome in his praise of Mr Nugan and this change seems to have

been brought about at least in part by the bad publicity which Mr Nugan

had attracted to the Group as a result of his association with the Nugan

Fruit Group and of his being charged v/ith criminal offences in mid 1978.

It appears he finally concluded that Mr Nugan was not acting

. 4

rationally. It would seem that he had decided that Mr Nugan should be

removed from his position in the Group.

3.2.3 Prior to the incorporation of Nugan Hand Needham Ltd in July

1973 a number of companies had been incorporated in New South Wales which

are now included in the schedule to the Commission's terms of reference

as being 'Nugan Hand' companies. These companies include Australasian

and Pacific Holdings Ltd (1969), Apollo Land and Development Pty Ltd

(1969) which in 1978 changed its name to Distravite Pty Ltd, R.B. Cody

Pty Ltd (1973), Solingen Aust Pty Ltd (1973) and Yorkville Nominees Pty

Ltd (1970). Profiles of each of these companies are set out in Part 2.

3.2.4 There are other companies in the schedule which were also

incorporated prior to the incorporation of Nugan Hand Needham Ltd but the

statutory details provided by the Corporate Affairs Commission indicate

that these were companies in which either Mr Nugan or Mr Hand had an

interest, but not both. For example Garcia Bros. Hardware Pty Ltd

[profile 2.83] seems to have been Mr Hand's family company which he

incorporated in 1970 under the name of Carlyle Investments Pty Ltd. The

change of name to Garcia Bros. Hardware occurred in October 1974.

Pacific Continental Ltd [profile 2.99] and W.V. Tennyson Pty Ltd [profile

2.107] seem to be companies in which Mr Nugan but not Mr Hand had an

interest. Mr Nugan is shown as a director and shareholder of these

companies. In respect of some of these early companies the name of

Miss P.M. Swan (Mr Nugan's long time secretary) [see profile 2.70]

appears as a director and/or secretary. The evidence establishes that in

all cases where Miss Swan appeared as an officer of one of these

companies she was there at Mr Nugan' s behest and her role was purely

nominal, and, indeed, she was required by Mr Nugan to sign an undated

form of resignation in respect of each such directorship.

- 405 -

3.2.5 As will appear from this report, the majority of the companies

named in the schedule to the Commission's terms of reference appear to

have played no part in any significant activities of the Nugan Hand

Group. Indeed one of the companies K. & R. Cash Transit Pty Ltd

[profile 2.86] was never within the description of a Nugan Hand company

although it did business with Nugan Hand Ltd. It is probable that many

of the companies identified in the schedule were included simply because

so little was known at that time concerning the structure of the Nugan

Hand Group and because there was no information as to what role, if any,

the large group of companies played.

3.2.6 All these early incorporated companies were two dollar companies

and their resources were at no time substantial. In fact some of them

appear to have had nil resources and never to have carried on business.

3.2.7 When Nugan Hand Ltd was incorporated on 6 July 1973 as a public

company it became the holding company for three subsidiary companies

which were incorporated the same day. These were again two dollar

companies, namely, NHN Management Pty Ltd, NHN Nominees Pty Ltd and NHN

Funding Pty Ltd. In 1978 NHN Nominees Pty Ltd changed its name to Nugan

Hand (Dealers) Pty Ltd [profile 2.93] and under that name is on the

schedule as is NHN Management Pty Ltd [profile 2.92] but not NHN Funding

Pty Ltd. In any event these companies took no part in any significant

activities of the Group.

3.2.8 Nugan Hand Ltd commenced life with a mere $5 paid up share

capital. These five $1 shares were allotted to Messrs Nugan, Hand,

Mr J.C. Needham, Mr B.W. Calder and Miss Swan. Profiles of each of these

persons are set out in Part 2. According to the Nugan Hand Ltd minute

book and the share register these shares were allotted on 9 July 1973.

The initial directors were Messrs Nugan, Hand, Needham and Calder.

Neither Mr Needham or Mr Calder played any part in the company as

directors, never attending directors' meetings nor being paid directors'

fees. To the extent that the minute book purports to record their

presence at directors' meetings during the company's first year such

minutes do not in fact reflect the true situation. This was a practice

that Mr Nugan and Mr Hand were to follow throughout the life of the

- 406 -

Group. That is, directors' meetings were not held but minutes were

brought into existence suggesting that they had been held and that

particular persons had been present. The reason for inviting Mr Needham

and Mr Calder to become directors seems to have been that Mr Nugan

considered that Nugan Hand Ltd would benefit from their association with

the company as they were well known in certain business circles.

Mr Needham ceased to be a director and shareholder just prior to the end

of the first financial year (at which stage the name of the company was

changed to Nugan Hand Ltd) and Mr Calder ceased to become a director and

shareholder in November 1974.

3.2.9 Messrs Nugan, Hand, Needham and Calder, quite apart from the

affairs of Nugan Hand Ltd, were mutually interested in certain companies

outside the Nugan Hand Group the affairs of which occupied a good part of

their attention during the financial year ending 30 June 1974. These

companies were Secured Income Real Estate (Australia) Ltd (hereafter

referred to as 'SIRE') and North Australian Rubber Mills Ltd (hereafter

referred to as 'HARM') two public companies incorporated in Queensland.

Profiles pertaining to these corporations appear in Part 2. SIRE was

said by Messrs Calder and Needham to be a property developer and Messrs

Hand and Calder had been among the inaugural directors. NARM was a

comparatively large company producing rubber goods. According to

Mr Needham he obtained a controlling shareholding in SIRE in about 5 September 1973 and became its Chairman and Managing Director. About

the same time Mr Needham became a director Of NARM and eventually gained

control of both SIRE and NARM. This involved a transaction with another

company PNB Rubber and Plastic Industries Pty Ltd in which Mr Nugan had

an interest. The acquisition of NARM involved a cash payment to Mr Nugan

by Mr Needham of $182 000.® It is unnecessary here to pursue further

the activities of these particular companies other than to mention that

from the early part of 1976 onwards SIRE and HARM deposited money with

Yorkville Nominees Pty Ltd (referred to as 'Yorkville Nominees' for

convenience - see the profile pertaining to this company in Part 2) and

with Nugan Hand Ltd. SIRE and NARM also lodged bills of exchange with

Yorkville Nominees as security for loans from Yorkville Nominees. These

bills were treated by Mr Nugan as the property of Nugan Hand Ltd. These

bills were rolled over on each maturity date until they were dishonoured

- 407 -

when presented for payirent. Eventually the bills were the subject of

litigation, after Mr Nugan's death, in the Supreme Court of Mew South

Wales.

3.2.10 In 1973 Mr Nugan gave as his reason for establishing Nugan Hand

Ltd that it would enable him to offer a wider range of services than

those he had been able to offer as a solicitor, free of the constraints

in relation to fees which he was under in his capacity as a

7

solicitor. Shortly after the company was incorporated it took up

occupation of the 8th floor at what was then regarded as one of the most

sought after commercial addresses in Sydney. One witness described the

layout of the company's premises as having 'all the trappings of an

American movie set'.® By about August 1973 the company consisted of

Messrs Nugan and Hand, Miss Swan and Mr G.R. Young [profile 2.78 -

formerly known as George Jung) an experienced money market trader who

commenced his employment about that time. As has been mentioned,

although Messrs Needham and Calder were directors and shareholders they

took no part in the affairs of the company and did not occupy any office

space at the company's premises. Within a month or so the company grew

by one when Mr S.K. Hill [profile 2.33] who had had limited experience in

money market trading also joined the company. He was to play one of the

most significant roles in the Group's future activities.

3.2.11 Perhaps the most comprehensive evidence of the company's first

six months of operation is that given to the Commission by Mr Young who

upon joining the company was described even in those early days as 9 .

'General Manager Nugan Hand Group'. Mr Young, prior to joining Nugan

Hand Ltd, had been employed by the Group which then controlled National

Discount Corporation Ltd and CitiNational Securities Corporation Ltd, two

well established merchant banks [see Part 4 Section 7]. From 1971 until

January 1973 Mr Young said he was in charge of the money market divisions

in respect of each of these merchant banking organisations. Working as a

subordinate to him was Mr Hill who has already been mentioned and Mr L.

Scott-Kemmis [profile 2.64] whose association with Nugan Hand Ltd while

employed with the CitiNational group is the subject of considerable

comment throughout this report [see in particular Part 4 Section 7],

- 408 -

3.2.12 Mr Young was approached by Mr Nugan in May 1973 as a result of

an advertisement placed by Mr Young in a Sydney newspaper in which he

sought employment in the money market area. Mr Nugan informed Mr Young

that he proposed setting up a merchant bank complex. Mr Young had a

further meeting with Mr Nugan in the latter's office which was then in

Martin Place from where he carried on his practice as a solicitor. At

this meeting Mr Nugan said that he wanted to set up a local complex and

then branch out overseas. He said he would have no trouble providing the

$1 million capital which Mr Young had informed him would be necessary to

commence money market activities. By June 1973 Mr Young had agreed to

take up employment with Nugan Hand Ltd and to operate a money market

division.

3.2.13 In August 1973 Mr Nugan took Mr Young to the 8th floor of

55 Macquarie Street, Sydney, which was to be the home of the company

during its lifetime. Mr Young organised the erection of partitions and

the installation of telephones and set up a basic set of books and

records. In about mid September 1973 operations were ready to commence.

By that time Mr Young had met Mr Hand and Mr Needham. About the same

time Mr Hill commenced to work for the company having been recommended

for the position by Mr Young.

3.2.14 Because of his long history in connection with the money market,

Mr Young was well known in money market circles and he sent out letters

advising his contacts of his new employer and seeking their support.

However when Mr Young sought to use the $1 million which Mr Nugan had

promised him he was informed by Mr Nugan that it had been used for other

purposes."*^ Mr Young identified his handwriting in the cash payments

book of Nugan Hand Ltd"*·* as being that appearing on the first three

pages of the book. In particular he identified an entry dated 17 August

1973 wherein an amount of $980 000 is recorded as being received as 12

' capital1 and recorded as being loaned out the same day to Mr Nugan.

This alleged payment is examined at 3.2.18 to 3.2.20. Mr Young agreed

the relevant entries appeared to suggest a round robin type transaction

but said he had not appreciated that at the time."*^

3.2.15 Notwithstanding the complete absence of any capital Mr Young,

relying on the goodwill which he possessed, commenced to buy and sell

- 409 -

bank bills and government securities, in effect by being extended credit

for a short period each day. He continued to do this during September to

December 1973. In most cases his dealings were with Mr Scott-Kemmis

acting on behalf of CitiNational Securities Ltd or National Discount

Corporation Ltd. The total sales appear to have amounted to

approximately $2.4 million and the result was a trading loss of

$18 373."*"^ Mr Young said that the company was unable to attract

'private money' because it was unknown. He formed the view that Mr Nugan

knew nothing about the money market."^ There is evidence before the

Commission that Mr Nugan was upset by this trading loss which he blamed

on a fluctuating bond rate. There was no further attempt at money market

trading during the balance of the financial year to 30 June 1974.

3.2.16 According to the observations of Mr Young, Mr Nugan seemed to

become more and more preoccupied with the affairs of the Queensland

companies SIRE and NARM [see 3.2.9] and the takeover, which was

apparently in train, of NARM. In fact towards the end of 1973 it appears

that Mr Hill left Nugan Hand Ltd and went to Brisbane and was engaged in

the affairs of these companies for some six months. In December 1973

Mr Young also resigned from Nugan Hand Ltd and took up employment with

NARM in Brisbane.

3.2.17 During the few months when Mr Young worked for Nugan Hand Ltd he

observed that Mr Nugan had a severe drinking problem and that he appeared

to be affected by liquor as early as 11 a.m. each day. No other witness

gave evidence of noticing this problem as early as 1973 although it has

been confirmed by a great deal of evidence of persons who observed

Mr Nugan at later times.

The alleged payment of $1 million for Nugan Hand Ltd shares

3.2.18 Although, as has been mentioned above, the company began with

paid up capital of only five dollars, the evidence makes it clear that a

plan was soon conceived by Mr Nugan, with Mr Hand a willing party,

whereby the appearance could tie given of the receipt by the company of a

further $1 million in payment for its shares. The plan was executed in

two stages. The first stage took place on 24 and 27 July 1973. On

- 410 -

24 July the relevant bank statement of Nugan Hand Ltd reflects the

crossing of two cheques one drawn by Mr Nugan in favour of Nugan Hand Ltd

for $20 000 and the other drawn by Nugan Hand Ltd in favour of Mr Nugan

for $10 000 leaving Nugan Hand Ltd with a balance of $10 000 from that

exchange. However, on 27 July Nugan Hand Ltd returned a further $9 900

to Mr Nugan so that the total moneys in fact received by the company for

shares totalled $105. This was to remain the actual paid up share

capital throughout the history of the company despite quite inconsistent

claims being made in the company's accounts. The plan was completed with

the records of Nugan Hand Ltd (minute book and share register) recording

the issue of 20 000 shares to Mr Nugan.

3.2,19 The second stage took place on 17 August 1973 when a further

transaction was effected by Mr Nugan and Nugan Hand Ltd when cheques were

exchanged in the sum of $980 000 thus making up the alleged payment of

$1 million. There was no money to cover these cheques in any relevant

bank account but the appearance was created of money movement by the

consequent credit entries in the relevant bank statement of Nugan Hand

Ltd. In the opinion of the Commission this artificial contrivance had no

other purpose than to provide some basis, flimsy though it was, to

support the claim made in the 30 June 1974 accounts and in subsequent

accounts that the company had a share capital paid up to a sum of

$1 000 005. The Nugan Hand Ltd minute book and share register solemnly

recorded that as a result of the passing of cheques in this way 490 000

one dollar shares were allotted to Mr Nugan and the same number to

Mr Hand [see also 5.76 to 5.87].

3.2.20 In the Commission's view this shuffling of cheques (without

funds to cover them) was nothing more than a sham from beginning to end.

The Commission's definition of this word is explained at 5.4 to 5.6. In

these circumstances the company cannot be viewed as a separate and

independent entity. On the evidence there was not the slightest

intention on the part of Messrs Nugan and Hand to enter into any genuine

transaction with the company whether giving rise to a loan or otherwise.

Although in the books of Nugan Hand Ltd the transaction was treated as

though a valid loan had come into being the Commission takes the view

that this was not justified for the reasons just stated. Thus the

- 411 -

Commission does not consider it appropriate to consider whether if the

transaction were to be treated as giving rise to a genuine loan the

transaction would be in breach of section 67 of the Companies Act 1961

(NSW) as it then stood.

3.2.21 The Commission's decision that the transaction was merely a sham

and nothing more is based not only on the fact that Mr Nugan had less

than $20 000 in his bank account at the time when he purported to write a

cheque for $980 000 nor that Nugan Hand Ltd had only $80 in its account

when a cheque was drawn on that company in the same amount, but also on

the fact that throughout the life of the company the only money ever in

fact paid for shares out of funds belonging to either Mr Nugan or Mr Hand

and actually received by the company remained at $105. The Commission

also relies on subsequent conduct of Messrs Nugan and Hand, particularly

that of the former, as showing that they never had at any time the

slightest intention of entering into valid commercial arrangements with

Nugan Hand Ltd which, in any event was totally under their control at all

times.

3.2.22 Until 11 June 1974 the records of Nugan Hand Ltd continued to

treat the events of 17 August as having given rise to a loan to Mr Nugan

in the sum of $980 000. However by 30 June 1974 a further transaction

had occurred which was treated as having changed this situation

dramatically. The reason for the necessity for the change is not hard to

find. Had the records of Nugan Hand Ltd continued to treat the 'loan' as

being to Mr Nugan a disclosure of this situation would have been required

in the balance sheet or the notes to the accounts. This is because of a

requirement in the companies legislation at the time that loans to

directors must be disclosed. Had this disclosure been made then the

principal asset of Nugan Hand Ltd would have been shown to have been an

unsecured loan to one of its directors and in an amount almost equal to

the alleged amount of the paid up share capital. This was obviously

unpalatable to Messrs Nugan and Hand who were intent on painting a very

different picture at the end of their first year of operation. For this

reason yet another contrivance was conceived again relying on the, by now

well tried, cheque passing (or round robin) basis which would allow

Mr Nugan to substitute one of his puppet companies as the debtor instead

of himself.

- 412 -

3.2.23 However before coming to the implementation of this contrivance,

it is necessary to address one of the most important decisions Messrs

Nugan and Hand ever took in this the first 12 months of the Nugan Hand

Ltd operation, namely, the engagement of a firm of auditors to audit the

company's accounts as at 30 June 1974. The then companies legislation

required that such accounts be audited by a registered company auditor

who was required to satisfy himself that the accounts of the conpany as

presented to him by the directors gave a true and fair view of the

affairs of the company for the preceding 12 months. The firm of auditors

engaged by Messrs Nugan and Hand for this task was the firm of Heuschkel

and Pollard. According to the Nugan Hand Ltd minute book,"*·® the

engagement took place in November 1973. At this time the firm of

Heuschkel and Pollard had two partners namely Mr W.M. Pollard [profile

2.57] and Mr C.L.Heuschkel [profile 2.30],

3.2.24 Mr Pollard had previously carried out some minor accountancy

work in respect of one or more of Mr Hand's own proprietary companies

during 1973 and had as a result met Mr Nugan as well. It was on this

basis that Mr Nugan through Mr Pollard engaged the firm of Heuschkel and

Pollard to act as the auditors in respect of Nugan Hand Ltd. The company

was described by Mr Nugan to Mr Pollard as a 'merchant bank that we have 17 just set up'.

3.2.25 However, when the time came to commence the verification

procedures and audit checks leading up to the certification of the

accounts by the auditor, such tasks were assigned to an employed

accountant who had just joined the firm of Heuschkel and Pollard, namely,

Mr G.F. Brincat [profile 2.9]. This was an assignment that was to have

far reaching consequences. Mr Brincat shortly after 30 June 1974 became a

partner in the firm and also became qualified to be registered as a

person entitled to certify the accounts as auditor. This was not the

case in respect of the 30 June 1974 accounts and in fact it was

Mr Pollard who signed those accounts as auditor in circumstances which

will be mentioned shortly. Mr Brincat, however, once he became qualified

to do so audited the Nugan Hand Ltd accounts from and including those as

at 30 June 1975 up to and including Nugan Hand Ltd accounts for 30 June

1979. He also carried out work in the capacity of an accountant in

respect of the books of Nugan Hand Ltd and this he continued to do as

- 413 -

well throughout the life of the company. In other words he became both

the company's accountant and its auditor.

3.2.26 The Commission has examined all of the working papers of

Mr Brincat prepared in connection with the auditing of the Nugan Hand Ltd

accounts including the working papers relevant to 30 June 1974. These

working papers contain a statement that as at 11 June 1974 Nugan Hand Ltd

treated Mr Nugan as owing the company the previously mentioned sum of

$980 000. However, as has been foreshadowed, by yet a further

transaction which the Commission finds again to be a complete sham, on

24 June 1974 P.M. Shelley Pty Ltd [profile 2.100] was substituted as the

debtor. That company (hereafter referred to as 'P.M. Shelley') is one of

the companies named in the schedule to the Commission's terms of

reference. Its two directors were Mr Nugan and Miss Swan and its

shareholders are shown as Mr Nugan and Miss Swan. It had been

incorporated about a month before Nugan Hand Ltd. It had no funds of its

oxm on 24 June 1974 apart from $20 in a bank account. Notwithstanding

this on 24 June 1974 a further round robin transaction between

P.M. Shelley, Nugan Hand Ltd and Mr Nugan occurred, cheques drawn on each

in excess of $1 million were exchanged, again resulting in mere debit and

credit entries in the relevant bank statements. Not only did

P.M. Shelley have no funds with which to enter into any such transactions

(other than $20) but the relevant bank statement of Nugan Hand Ltd had a

credit of merely $127 at the time the cheque was written. Similarly

Mr Nugan's bank statement shows that he had a small credit only at the

time. Thus once again a sham arrangement was entered into by parties

without real funds who were prepared to go through the empty motions of

exchanging cheques simply to achieve a quite artificial appearance of a

payment being made to support a contention that a particular transaction

had taken place. In this case the sole purpose of the charade was to

provide some justification for substituting the unfinancial P.M. Shelley

as Nugan Hand's debtor in lieu of Mr Nugan himself.

3.2.27 Thus it was, that at the end of the first 12 months of the

company's operation, a dismal performance had resulted, with the loss of

money as a result of the brief flurry in money market activities from

September to December 1973 (albeit with no capital to commence with) and

with a mere $105 having been paid up in respect of issued shares.

- 414 -

However, this dismal performance could not have been discerned from a

reading of the accounts prepared and checked by Mr Brincat and signed by

Mr Pollard. Indeed a completely contrary picture emerges from such a

reading.

3.2.28 The consolidated balance sheet as at 30 June 1974, so far as

relevant, contained the following:

SHAREHOLDERS' FUNDS

Paid-Up Capital 1 000 005

Profit & Loss Appropriation 5 813

TOTAL SHAREHOLDERS' FUNDS $ 1 005 818

Represented by

CURRENT ASSETS

Cash on Hand and at Bank 102 936

Money Market Lendings - Secured 896 807 - Unsecured 422 598

1 422 341

FIXED ASSETS

Office Equipment 452

Office Furniture & Fittings 890

1 342

INTANGIBLE ASSETS

Formation Expenses 2 148

TOTAL ASSETS 1 425 831

CURRENT LIABILITIES

Creditors - Trade 1 650

Loan 50

Money Market Borrowings 402 577

Provisions - Taxation 10 236

- Dividend 5 500

TOTAL LIABILITIES 420 013

NET ASSETS $ 1 005 818

- 415 -

3.2.29 In the 'notes’ which accompanied the accounts which were to be

read as part of such accounts, the following appeared:

'MONEY MARKET DEBTORS

Amounts Due - Secured - Unsecured

Provision for Doubtful Debts

$ 1 319 405

Security for the above amount of $896 807 is by way of Mortgages over property held by P.M. Shelley Pty Ltd and collateral

mortgages over property held by related companies of

P.M. Shelley Pty Ltd.1

The inclusion of P.M. Shelley in the balance sheet in respect of the

allegedly secured debt was the result of the round robin of 24 June

referred to above. There was no disclosure that P.M. Shelley was a

company controlled by Mr Nugan as was required by the then companies

legislation. Furthermore the evidence before the Commission establishes

that there was no security (that is, no property or collateral mortgages

held over property by P.M. Shelley), as alleged, or at all, in respect of

any such loan and that neither Mr Brincat nor Mr Pollard sighted any such

security (nor, of course, could they have sighted it) prior to the audit

certificate being signed by Mr Pollard.

3.2.30 The Commission finds that further matters in the accounts were

at the very least misleading. The entry 'money market lendings' has been

mentioned above. It seems quite inappropriate to have used that

description when the loans referred to had nothing to do with the money

market but were made to companies controlled by Mr Nugan. Similarly the

item 'money market borrowings' under 'current liabilities' was a further

misdescription as the bulk of such borrowings had nothing whatsoever to

do with the money market [see 5.139].

3.2.31 In lieu of the $1 000 005 shown as paid up share capital the

company had in fact received funds amounting to only $105. The main

asset described as a secured loan was in reality an unsecured loan to a

896 807 422 598

- 416 -

two dollar company controlled by Mr Nugan. The balance of the loans

shown as assets were unsecured and, with perhaps two exceptions, were

loans to Nugan Hand companies. This was not disclosed in the accounts.

The statement that the P.M. Shelley loan was secured was false. The

total amount of deposits (this described as money market borrowings)

totalled only $402 577. Thus having regard to this situation a loss

should rightly have been recorded in the profit and loss statement.

Instead a net profit after taxation was recorded in the sum of $11 313.

This was arrived at after bringing into account alleged income as follows:

(It should be noted that among the expenses listed and which have been

deducted from the sum of $124 053 gross income is the sum of $18 373

described as 'discounting fees'. This sum was in fact the trading loss

earlier referred to [3.2.15].)

3.2.32 Hie evidence before the Commission suggests that the majority of

the alleged income was not reflected in the receipt of funds by Nugan

Hand Ltd, that is, it was never more than 'paper' income. The evidence

does not show any source from which such moneys could have come as none

of the Group, in truth, including Nugan Hand Ltd was solvent or in any

position to make such payments to Nugan Hand Ltd. Mr Brincat was unable

to say whether any interest had actually been received or whether it was

notional only and was unable to point to any source from which the

alleged management fees were received.^ In these circumstances the

Commission concludes that there was no justification for the inclusion of

this alleged income in the profit and loss statement. The Commission

also concludes that the concept of such income was a mere concoction

having as its sole purpose the prevention of a loss being shown in the

accounts of Nugan Hand Ltd as at 30 June 1974.

Interest received Management fees received Office expenses reimbursed.

$57 003 $60 050 $7 000

$124 053

3.2.33 The question remains as to how and in what circumstances

Mr Pollard, signing on behalf of the firm of Heuschkel and Pollard,

- 417 -

certified these accounts containing as they do such substantial untruths

and misstatements. Mr Pollard claims to have made no examination of

Mr Brincat's working papers nor any other check whatsoever before

certifying the accounts. In other words, Mr Pollard says he certified

the accounts not having formed any opinion of his own as to whether they

gave a true and fair view of the company's affairs as at 30 June 1974. 19

He says he simply relied on Mr Br incat. In particular he says he

took no step whatsoever to verify the alleged payment of $1 million into

the company as capital nor did he take any step to sight the security

referred to in respect of the allegedly secured loan. He agreed when he

gave evidence on 15 November 1984 that he then knew the accounts to be on grossly false. Mr Brincat, on the other hand, claims that Mr Pollard

did check his (Mr Brincat's) working papers before certifying the 21 accounts [see Part 4 Section 5].

The consequences of the certification of the 1974 accounts

3.2.34 The importance to the plans of Messrs Nugan and Hand of having

the 1974 accounts certified, in the form in which they appeared, as

giving a true and fair view of the company's affairs as at that date, can

not be overstated. Armed with these audited accounts Messrs Nugan and

Hand were able to pass the company off to all and sundry as a fledgling

merchant bank which had made a small profit in its first year of

operations despite the fact that the company did not have the backing of

any established bank or recognised financial institution. Had they not

been able to obtain an auditor's certificate to those accounts it is

probable that Nugan Hand Ltd (and the Group) would simply have folded

there and then. There would have been no point in their persisting with

the false accounts in the absence of an auditor's certificate.

- 4.18 -

SUCTION 3 : THE SLIDE CONTINUES - THE TIMELY EMERGENCE OF NUGAN HAND (HONG KONG) LTD

(THE PERIOD 1 JULY 1974 TO 31 JANUARY 1976)

3.3.1 The performance turned in by Nugan Hand Ltd at the end of its

second year (30 June 1975) was, if anything, even more dismal in terms of

financial success than its first year, although no hint of this is to be

gleaned from its published accounts which are commented upon later in

this Section. Despite a claim in those accounts that the gross proceeds

of sale of securities was approximately $58,159 million, that claim was

entirely without foundation [see 5.40]. The evidence is that no

activities were carried on during the year which could properly be

described as merchant bank or money market activities. Rather, the

evidence suggests that the year witnessed various unsuccessful ventures

by an incompetent staff which resulted in a further loss of funds to the

company. At the end of the year the total deposits on hand stood at a

mere $537 524 all unsecured. A principal activity of the staff appears

to have been the continuing attempt to sell off the 1 Ocean Shores' land

project near Brunswick Heads although, once again, there is no hint of

this activity in the published accounts.^

3.3.2 The period saw the entry of new faces to the Group, such as

Messrs F.D. Ward and G.T. Shaw [see profiles in Part 2] who are shown as

directors as at 30 June 1975 and Messrs Hill, Dunn and Collings [see

profiles in Part 2] who are shown as directors as at 31 January 1976. It

was at the end of the 30 June 1975 financial year that the first of the

artificial 'buy back' arrangements was entered into which resulted in a

gross distortion of the company's accounts as at that date. This aspect

is examined and explained at 3.3.31 to 3.3.33.

3.3.3 The most important success for the Group during the period was

the successful take-off of Nugan Hand (Hong Kong) Ltd (hereafter referred

to as Nugan Hand (Hong Kong)) from about mid 1975. The rise and fall of

- 419 -

Nugan Hand (Hong Kong) is the subject of a discrete topic in Part 4

Section 1 and something more will be said about it as this Part

progresses.

3.3.4 It would appear from the evidence that another principal

activity during the year ended 30 June 1975 were attempts (unsuccessful)

to set up trading facilities for the buying and selling of gold and

silver. When Mr Collings joined the Group in Sydney in September 1974

the activities included selling gold coins and silver bullion.

Mr Shaw in his evidence to the Commission made mention of attempts to 2 sell gold and silver bullion. The most comprehensive evidence of the

activities during the period under review is to be found in the evidence

of Mr Ward which appears to be supported by the objective criteria

available.^

3.3.5 Mr Ward was one of a number of significant figures within the

Group who had previously been employed by the Fund of Australia group of

companies [profile 2.110]. Others included Messrs C.L. Collings,

P.M. Dunn, J.M. Gilder, W. Hans and G.A. Edelsten. Profiles of all these

people are included in Part 2. It appears that Mr Ward joined the Nugan

Hand Group as a result of his prior association with Mr Collings in the

Fund of Australia group. Mr Ward was General Manager of the Nugan Hand

Group from December 1974 until about February 1976.

'Ingold Growth'

3.3.6 A great deal of his time during that period seems to have been

taken up in trying to establish what he described as 'a mutual fund that

was based on precious metal holdings - gold, platinum, silver and

palladium'. He said that Messrs F.J. Nugan and M.J. Hand were looking

for someone with experience in that field and that he had been selected

because of his experience with Fund of Australia. Mr Ward said that he

had not heard of Messrs Nugan and Hand prior to being introduced to them

by Mr Collings. He had then made some inquiries 'around town' and found

that Messrs Nugan and Hand were 'pretty much unknown at that stage'. His

- 420 -

inquiries revealed that the two had been involved in the buying and 4

selling of real estate in a substantial way.

3.3.7 Mr Ward had one thing in common with all persons who were at any

time directors of Nugan Hand Ltd; he had no merchant banking experience

or qualifications which might at least have been expected of anyone

undertaking active directorship of a company purporting to be a merchant

bank.

3.3.8 A number of companies were incorporated in Panama as part of the

bid to promote the 'Ingold Growth' project. For example Mr Ward was a

director and secretary of one of these companies, namely, Ingold Growth

Incorporated. He was also a director of another such company Ingold

Growth Ltd.^ Not only was Mr Ward's time taken up in the attempt to

sell this concept but Messrs Shaw, Hans and Collings (and perhaps others)

were also involved. In a minute written by him dated 12 March 1975

(written, he said on the authority of Mr Nugan) Mr Ward stated 'we are

going to devote all the company's resources and energies to marketing

"Ingold" until such time as we have achieved sufficient assets under

management'. ® He said that Mr Nugan had promised to fund the project

up to half a million dollars.

3.3.9 However despite the devotion of the company's resources to the

project a further minute from Mr Ward dated 15 April 1976 announced its η demise as at that date. He said that none of the aspirations

reflected in his earlier minute had been realised and that the 'Ingold'

project was a complete failure. Indeed it appears that at the time

Mr Ward wrote his minute of 15 April 1976 there were only four clients of

the 'Ingold Growth' fund. Mr Ward said that he attributed the failure of

'Ingold' to a 'lack of sophistication' of the staff whom he described as

'a motley crew'

3.3.10 Although the evidence is not specific, there can be no doubt

that the failed 'Ingold' project must have entailed a significant loss

bearing in mind the number of persons engaged in it. Indeed, Mr Collings

was sent to Mono Kong with the initial goal of collecting deposits on

- 421 -

behalf of the 'Inqold Growth' fund. He had sold a small number of units

when be received instructions from Mr Nugan to discontinue the activity,

the reason given by Mr Nugan being that the gold price was not stable^

[see also 4.1.7 and 4.2.4-4.2.6].

3.3.11 Further light on the activities of the Group during the period

February 1975 until February 1976 is provided by the evidence of Mr P.J.

Clasen [profile 2.12]. At first he was asked to direct his time to the

selling of the real estate in the 'Ocean Shores' development in the

Brunswick Heads area. This was at the request of Mr Nugan. Mr Clasen

said that Mr Hand had sold blocks of land to American troops serving in

Vietnam while in Sydney on Rest and Recreation leave and repurchased this

land from them subsequently. This was the land that Messrs Nugan and

Hand were now attempting to sell to investors in Sydney. This selling

activity appears to have extended into 1976. If Mr Clasen's notable lack

of success is any guide then this project too was not a successful one.

His energies were then redirected into soliciting funds from potential

depositors but he said he was not qualified for this task and failed to

attract a single deposit. He was informed by Mr Nugan that the Nugan

Hand Group would pay a half per cent more interest than the going rate

for any deposits he was able to attract.·*"® His observation of the

staff at that point in time is consistent with Mr Ward's reference to 'a

motley crew'. Mr Clasen said that 'everybody wanted to do a merchant

banking operation, but none of the people there were merchant bankers'.

He said that it did not appear to be 'a very professional type of

organisation'.11 Ironically, Mr Clasen was one of those specifically

named by Mr Ward as making up what he called 'the motley crew'.

3.3.12 There is evidence that Messrs Nugan and Hand had a staff at this

stage of some 15 salespeople (not including people at management level

such as Mr Ward) who were engaged in the selling of gold and silver and

the attempted selling of the 'Ocean Shores' estate. It also appears that 12 .

the salaries paid were unrealistically high. Mr Shaw recalled being

present at a meeting of the directors of Ingold Growth Ltd on 5 December

1974 at which the establishment of the company was discussed.13

- 422 -

Mr Shaw went to Lebanon (Mr Shaw is of Lebanese descent) in order to

establish the 1 Ingold1 scheme in that country. He said his aims were to

attract deposits and to promote 1Ingold Growth' Inc. which he described

as a company trading in gold and silver bullion. Mr Nugan had supplied

him with a number of letters of introduction and he had a number of

contacts of his own made through relatives and friends in Lebanon.

Despite all this and although he received a number of promises he secured 14

no business and viewed the operation as unsuccessful.

3.3.13 Mr Ward was more successful, however, in his attempts to

establish an offshore bank for the Group. He did some 'preliminary work'

at Mr Nugan' s request trying to locate the best area for the proposed

overseas bank. The first area that he tried was Panama and he engaged a

Panamanian solicitor with a view to making an application to the banking

authorities in Panama on behalf of the Nugan Hand Group. Eventually he

took the view that it would be fruitless to pursue the application. He

then made attempts to establish such a bank in other areas, in

particular, the Seychelles. This was not successful and at that stage he 15

turned his attention to the Cayman Islands. His efforts to gain a

banking licence for the Group in the Cayman Islands were ultimately

successful when in August 1976 a licence was granted. The establishment

of the Nugan Hand Bank is treated as a discrete topic in Part 4

Section 2.

Unsuccessful ventures

3.3.14 During the period under review Mr Ward also attempted to set up

a trade services division at the request of Mr Nugan. Mr Nugan had

promised to fund such an operation but failed to do so and for this

reason Mr Ward's attempts were unsuccessful. Mr Nugan informed Mr Ward

that he wished to establish such a trade services division so that he

could extend such a service to overseas countries which would make it

less difficult to apply to the governments of those countries for a

deposit taking licence. Mr Nugan said that the intended trade services

division was to be used as a lever to enable him to conduct deposit

taking activities."*·®

- 423 -

3.3.15 Mr Ward's view that this venture too was a failure is reflected

in Mr Hand's conclusion (in early 1977) that the trade services division 17 had been a very expensive failure. Mr Shaw as part of this exercise

went to Lebanon in about June 1975 to negotiate the sale of iron ore

pellets to Iraq by an Australian supplier, Although some negotiations

took place the transaction was not successful.1® These examples of

failure in this context are multiplied as this Part progresses.

Mr Ward's successor, Mr Gilder attempted to resuscitate the trade

services division but the evidence is that he was no more successful than

Mr Ward.19

3.3.16 Mr Ward was one of many people to whom Mr Nugan claimed to be an

expert on taxation matters. He said that he was subsidizing the Group 20 from his earnings in that field.

3.3.17 During this period it appears that Messrs Nugan and Hand had

registered the business names of Macquarie Coin Dealers [see 2.104] and

Pacific Silver Commodities [see 2.104], The first appears to have

acquired and sold gold coins while the second was involved in the sale of

silver bars and their redemption. The basis of the operation of these

two firms was that investors who purchased gold coins or bars of silver

were entitled to cash them in at the price of the metal on the day that

they were cashed.21 There is no evidence as to how successful or

unsuccessful this particular venture was although from the abject failure

of the 'Ingold Growth' project itself it might be safely assumed that it

was but another unfinancial project.

3.3.18 During the period under review in this Section there is evidence

of attempts by the Group (Mr Hand, in particular,) to buy and sell

material falling within the description of 'armaments' (aircraft, bullets

etc). These attempts, as with the other trading attempts mentioned

above, also appear to have been unsuccessful. The evidence in relation

to armaments is reviewed in Part 7.

3.3.19 An early activity during this period was the incorporation of

Nugan Hand Inc. [profile 2.95] in Hawaii on 2 August 1974. The directors

- 424 -

appear to have been Messrs Nugan and Hand together with two local

nominees. The shares were said to be held by another corporate member of

the Group, Nugan Hand International Holdings Pty Ltd [profile 2.96].

Although this company was represented by the Group as having a

substantial paid up share capital once again the evidence before the

Commission suggests that that was merely an appearance brought about by

one of the many round robin transactions used by Messrs Nugan

22

and Hand.

Mr Hand departs

3.3.20 In January 1975 Mr Nugan made an announcement to a meeting of

the staff that Mr Hand had retired. A witness present at that meeting

said that Mr Nugan appeared very depressed which the witness attributed 23 to the departure of Mr Hand. Mr Hand told the New South Wales

Corporate Affairs Commission that he and Mr Nugan 1 separated company' for

about 15 months in January 1975, and that at that stage he resigned from

the boards of all Nugan Hand companies with which he had been

associated. He said that he was paid out by Mr Nugan 'over a period of 24

time' for the 410 000 shares which he held in Nugan Hand Ltd.

Mr Nugan told another witness that he, Mr Nugan, 'had bought him

[Mr Hand] out' for half a million dollars in Hawaii in December

25

1974. However, there is no evidence whatsoever to support such a

claim nor was there any change in the statutory details as to directors

and shareholders of Nugan Hand Ltd as filed with the Corporate Affairs

Commission. In any event a document dated 15 April 19762® seems to

prove that Mr Hand was back at Nugan Hand Ltd at 55 Macquarie Street,

Sydney by that date. Another witness told the Commission that Mr Hand

had said in a conversation with him shortly after Mr Hand's return

that his reason for leaving had been that he 'had had enough of the fast

life' and had considered turkey farming in the United States and other

avenues before settling temporarily in South Africa from where he had

eventually decided to return to ' the rat race'.27 Whatever the reasons

for Mr Hand's departure and whatever was the precise period of his

absence he seems to have suffered no loss of status on his return. His

- 425 -

absence may be the explanation for Mr Ward's signature, together with

Mr Nugan's, on the Nugan Hand Ltd accounts for 30 June 1975. These were

in fact signed on 7 October 1975.

3.3.21 So bad were the Group's true results as at 30 June 1975 that a

decision to cease operations and not to become further embroiled in the

necessity to perpetuate the false position reflected in the 1974

accounts, would have been the only rational decision in the

circumstances. Presumably it was the flagging performance of the Group

at that stage which led Mr Hand to take his leave of absence from about

January 1975 until April 1976. It is not absolutely clear what the

reasons were which led to this departure and on what basis Mr Hand left.

On the one hand there are the claims by Messrs Nugan and Hand referred to

above which are not supported by the evidence, while on the other the

relevant company documentation continued to show Mr Hand as a director.

For example, the directors' report shows him as a director as at 30 June

1975 while the minute book^® treats him as being overseas on company

business. Certainly there is evidence that he was in contact with

Mr Nugan and other executives such as Mr Ward during this time.

Compounding the falsehoods

3.3.22 Far from taking a decision to cease operating and to withdraw in

the face of this worsening performance Mr Nugan decided, conversely, to

produce a set of accounts for 30 June 1975 which, in terms of gross

misrepresentation, would make the 1974 accounts look rather tame by

comparison.

- 426 -

3.3.23 As published the consolidated accounts for 30 June 1975 appeared

in the following form (leaving aside irrelevant material):

SHAREHOLDERS' FUNDS

Paid-Up Capital 1 000 005

Capital Profits Reserve 73 571

Unappropriated Profits 13 569

TOTAL SHAREHOLDERS' FUNDS $ 1 087 145

Represented By:

CURRENT ASSETS

Cash on Hand and at Bank Deposit on Property Short Term Loans and Deposits

Commercial Bills Discounted Government Treasury Notes Government Bonds

708 051 31 250 910 514 5 389 205 2 942 700 1 526 550

11 508 270

INVESTMENTS

Unrelated Company

FIXED ASSETS

Office Equipment Office Furniture & Fittings

8 062

757

2 059

2 816

INTANGIBLE ASSETS

Formation Expenses 117

TOTAL ASSETS Carried Forward

$ 11 519 265

- 427 -

TOTAL ASSETS - Brought Forward

CURRENT LIABILITIES

Creditors - Trade Loan Money Market Borrowings - Secured 6 858 000

- Unsecured 3 537 524

Provisions - Taxation - Dividend

TOTAL LIABILITIES

$ 11 519 265

1 600 5 598

10 395 524 18 198 11 200

10 432 120

NET ASSETS $ 1 087 145

CONSOLIDATED PROFIT AND LOSS STATEMENT

FOR THE YEAR ENDED 30 JUNE 1975

Gross Proceeds from Sale of Securities 58 159 899

Less: Gross Cost of Securities

Gross Profit on Securities Trading

Add: Interest Received Fees Received

Gross Income

58 117 129

42 770

72 858 76 189

191 817

3.3.24 Among the notes which accompanied these accounts were included

the following:

'SECURITIES ON HAND

Commercial Bills Discounted Government Treasury Notes Government Bonds - At Cost

5 389 205

2 942 700

1 526 550

(Face Value $10 000 000) $ 9 858 455

- 428 -

MONEY MARKET BORROWINGS Borrowings Secured: $ 6 858 000

Secured over the following securities -(a) Commercial Bills Discounted 3 000 000

(b) Government Treasury Notes 1 500 000

(c) Government Bonds 2 500 000

$ 7 000 000

Above securities are listed at face value. All repayable within twelve months.1

3.3.25 It is no exaggeration to say that these accounts were almost

totally false as the following evidence shows.

3.3.26 First it will be observed that the amount of paid up capital

continued to be misrepresented (and continued to be in each subsequent

set of accounts until the accounts for 31 January 1978 when the amount

claimed as paid up capital was increased to $2 million).

3.3.27 The entry 'cash on hand and at bank $708 051' depended, to the

extent of $700 000, upon nothing more than a round robin straddling the

balancing date of 30 June 1975, between Nugan Hand Ltd, P.M. Shelley Pty

Ltd [profile 2.100] (hereafter referred to as P.M. Shelley) and Yorkville

Nominees Pty Ltd [profile 2.108], (hereafter referred to as Yorkville

Nominees) each company having a bank account at a branch of the Bank of

New South Wales (as it then was) situated at Bridge and Young Streets,

Sydney. The sole purpose of the contrivance was to bring about the

omission of P.M. Shelley from the balance sheet (P.M. Shelley having been

shown in the 1974 balance sheet as a debtor, and was still being shown as

such as at 29 June 1975 in the records of Nugan Hand Ltd).

3.3.28 The artificiality of the contrivance is appreciated when it is

observed that P.M. Shelley and Yorkville Nominees were virtually without

funds when their cheques were drawn, while Nugan Hand Ltd had a credit

balance of only $21 481.81. It was necessary for the Nugan Hand Ltd

- 429 -

cheque to be presented after 30 June 1975 otherwise the account would

have shown a debit in the sum of $700 000 which would have wiped out the

credit caused by the deposit of P.M. Shelley's unfunded cheque.

3.3.29 If further evidence is needed to demonstrate that this was a

carefully planned move involving the mere passing of cheques without the

funds to support such cheques, then the following provides such

evidence. The Yorkville Nominees cheque to P.M. Shelley was dated

25 June 1975 thus clearly indicating (assuming it was in fact dated on

the date which it bears) that the round robin was contemplated at that

time. The cheque was not presented as at that date because that would

have involved the presentation of the Nugan Hand Ltd cheque to Yorkville

Nominees which in turn would have thwarted the appearance sought to be

given in the bank statement of Nugan Hand Ltd as a result of the round

robin. The total artificiality of the contrivance can be appreciated

even further when it is recalled that both P.M. Shelley and Yorkville

Nominees shared not only the same address but the same bookkeeping staff

as Nugan Hand Ltd. What is more Mr G.F. Brincat [profile 2.9] who was

not only the accountant as well as the auditor for Nugan Hand Ltd,

performed the same functions for both P.M. Shelley and Yorkville Nominees

(as well as a large number of the other companies nominated in the

schedule to the Commission's terms of reference).

3.3.30 The further entry under 'current assets', namely 'short term

loans and deposits $910 514', with the exception of $289 000, in fact

represented loans to two dollar companies (that is to say, companies with

a paid up capital of only two dollars) within the Group of which

Mr Nugan, to the knowledge of Mr Brincat, was a director. In view of the

fact that those companies were unfinancial this should have been assessed

as a doubtful debt, at least, and the fact that the loans were to

companies controlled by Mr Nugan should have been disclosed.

3.3.31 The entries in respect of 'commercial bills discounted',

'government treasury notes' and 'government bonds' which total $9 858 455

were inserted in the balance sheet merely on the basis of a wholly

artificial 'buy back' arrangement with an established merchant bank [see

- 430 -

Part 4 Section 7]. The same arrangement is the sole basis for including

under the entry 'money market borrowings' (shown under ' current

liabilities') the sum of $9,858 million, which is reflected in the

entries under 'money market borrowings', with the exception of $537 524

included under that entry which sum is referable to the total claimed

deposits then on hand with Nugan Hand Ltd. That this is the true

29

situation can be seen by reference to Mr Brincat's working papers and

is conceded by Mr Brincat to be the case. Further those depositors were

all unsecured.

3.3.32 The $9,858 million which bloated each side of the balance sheet

was simply the result of the first of four successive such artificial

'buy back' arrangements which straddled the Nugan Hand Ltd balance date

and which were designed solely for that purpose. It is unnecessary to

decide whether in these circumstances Nugan Hand Ltd in fact gained

ownership of the securities referred to but in any event the contrivance

was reversed a day or so fo]lowing the balance date. This first buy back

arrangement straddling a balance date was with CitiNational Securities

Corporation Ltd (hereafter referred to as 'CitiNational') as were two of

the subsequent arrangements while the remaining one was with a member of

the same group as CitiNational, namely, National Discount Corporation

Ltd. The arrangements generally between Nugan Hand Ltd on the one hand

and CitiNational and National Discount Corporation on the other, which

are seen as significant in the affairs of Nugan Hand Ltd, are reported

upon at Part 4 Section 7 and paragraphs 5.25 to 5.32.

3.3.33 Once again the complete artificiality of the contrivance and the

fact that it lacked any commercial basis whatsoever is demonstrated by

the following evidence. Nugan Hand Ltd did not have the funds to

purchase securities having a current value of $9,858 million. This was

overcome by CitiNationa] purporting to lend the money to Nugan Hand Ltd

to purchase the securities with CitiNational at all times holding the

securities as security for the loan. Once again the reality of the

situation was that the whole contrivance depended upon a mere exchange of

cheques banked on the same day. Thus on 30 June 1975 the relevant bank

statement of Nugan Hand Ltd records a credit of $9,858 million reflecting

the deposit in that account of the CitiNational cheque and a debit in a

- 431 -

similar amount reflecting the presentation of Nugan Hand Ltd's cheque to

CitiNational purporting to be for the purchase of securities having that

current value. The credit showing in the Nugan Hand Ltd account

immediately before the crossing of these two cheques was $6. The

relevant Nugan Hand Ltd bank statement as at 4 July 1975 shows the

reversal of the arrangement as a result of further cheques exchanged and

banked on that day; in that a credit is recorded in the sum of

$9 867 178.65 being the current value of the securities on the 'resale1

to CitiNational and a debit in the sum of $9 866 803.29 being the

repayment of the 1loan' plus interest. The overall result was a loss to

Nugan Hand Ltd of $80. This was the pattern to be followed in the

subsequent buy backs as well.

3.3.34 The only document evidencing this arrangement forming part of

Mr Brincat's audit working papers was a letter from CitiNational to

Messrs Heuschkel and Pollard dated 7 July 1975 which Mr Brincat had noted 30

in his own handwriting as at 15 July 1975. The letter from

CitiNational makes it clear that the securities never left the possession

of CitiNational and Mr Brincat agreed that he never sighted the

securities for this reason. (In each of the subsequent buy back

arrangements the evidence was that again the securities never left the

possession of the other party to the buy back.) Having included the

$9,858 million worth of securities as assets Mr Brincat then included

that amount in the amounts shown under 'money market borrowings' as part

of the current liabilities. He did this on the basis that Nugan Hand Ltd

had borrowed $9,858 million from CitiNational to purchase the securities

in the first place. The reason that he showed only $6,858 million as

being secured money market borrowings was that the letter from

CitiNational referred to above'*® identified securities only to a face

value of $7 million which Mr Brincat discounted to $6,858 million.

Accordingly he treated the outstanding $3 million as being unsecured.

3.3.35 Thus in the light of this evidence the magnitude of the

distortion of the balance sheet can be gauged. First there is the false

statement that there was $1 000 005 by way of paid up capital when in

fact there was $105; the cash at bank position was overstated to the

- 432 -

extent of $700 000; securities were imported merely on the strength of

the artificial buy back arrangement having a value of $9,858 million,

leaving the only genuine asset in any substantial amount as the entry

'short term loans and deposits' in respect of the sum of $910 514 which,

in fact (with the exception of $289 000 placed with CitiNational

Securities), reflected loans to unfinancial companies controlled by

Mr Nugan which should have been disclosed as being loans to such

companies. Further in view of the fact that the companies were clearly

unfinancial this debt should have been regarded as at least doubtful.

However these accounts as with all the accounts of Nugan Hand Ltd were

never qualified in any way by Mr Brincat. As the Commission has already

observed, it is no exaggeration to say of this balance sheet that it was

completely untrue and gave a most misleading view of the company's

affairs, suggesting as it did that the company in the ordinary course of

its business had acquired high profile assets having a value of

$9,858 million while at the same time the company had an impressive

deposit base in excess of $10 million. This was a gross distortion of

the size of the company and in the view of the Commission would lead to a

significantly false inpression being formed by those proposing to deal

with the company on the strength of the balance sheet. When attention is

directed to the profit and loss statement the evidence shows it is a case

of more of the same.

3.3.36 According to the profit and loss statement gross proceeds from

the sale of securities totalled approximately $58,159 million and the

gross cost totalled approximately $58,117 million. Once again the

evidence before the Commission establishes that this claim was wholly

untrue. The evidence is that Mr S.K. Hill [profile 2.33] resumed his

employment with Nugan Hand Ltd (it will be recalled he left it in late

1973 [see 3.2.16]) in April 1975. Until that time there had been no

attempt by Nugan Hand Ltd to engage in money market trading in securities

during the financial year ending 30 June 1975. This is consistent, in

the absence of Mr Hill, with the fact that Nugan Hand Ltd did not possess

anyone with the necessary expertise to attempt money market trading. The

figure of $58,159 million therefore represents the results of Mr Hill's

activities after his return in April 1975. But those activities did not

- 433 -

constitute genuine money market trading activities. In fact those

figures were merely the result of the machinations of Mr Hill on the one

hand and of Mr L. Scott-Kemmis [profile 2.64] of CitiNational on the

other, who together arranged for Nugan Hand Ltd cheques in favour of

CitiNational to cross with CitiNational cheques in favour of Nugan Hand

Ltd on the same day, each cheque being in the same or very near the same

amount. By way of example the following table is provided:

Analysis of 'Securities Trading'

Date Buy Back Same Day Trade Total Sales

Transaction Transaction Value

15.4.75 5 141 900 5 141 900

18.4.75 4 880 809 4 880 809

9.5.75 10 343 634 10 343 634

27.5.75 9 931 076 9 931 076

20.6.75 1 435 574 1 435 574

20.6.75 26 426 906 26 426 906

$20 274 710 $37 885 189 $58 159 899

At 30 June 1975 Nugan Hand Ltd claimed $42 770 as 'gross profit on

securities trading'. The Commission concludes that only $14 190 of this

figure represents an increase in revenue albeit from these sham

transactions [see 5.35]. As to the claim in respect of interest received

and fees received, once again (as with the 1974 accounts) the evidence

discloses that not all the amounts claimed were genuine. Of the $74 040

interest received claimed as revenue by Nugan Hand Ltd, the Commission

concludes that only $25 986 represents a genuine claim [see 5.71]. To

the extent that either the interest or the fees are alleged to have been

received or receivable from companies such as Yorkville Nominees and the

like then it is clear that those companies did not have the resources to

pay such sums in any event.

- 434 -

Nugan Hand (Hong Kong) Ltd halts the downward slide

3.3.37 Following publication of the Nugan Hand Ltd accounts for 30 June

1975, Mr Nugan, for reasons not disclosed by the evidence, decided that

henceforth the company's accounts, required by statute to be published

annually, would balance as at 31 January each year. (In fact, accounts

continued to be balanced as at 30 June each year as well, but these were

produced for the purpose of the compilation of income tax payable by the

company. But, curiously, although they were not required to be certified

by the auditor, such accounts were in fact certified by Mr Brincat as

having been subject to his audit.) Thus the next set of accounts would

be for the period ended 31 January 1976. In the seven months that

intervened the Group's fortunes were to take a remarkable upturn which

would continue until the traumatic effect on the Group caused by the

Corporate Affairs Commission investigation into the Nugan Fruit Group

[profile 2.114] in 1977 and the criminal charges being laid against

Mr Nugan in May 1978. However, it should not be thought for a moment

that the fact that the company's operations underwent such an improvement

meant that the type of fraudulent practices already identified in

relation to the 1974 and 1975 accounts ceased or even diminished; on the

contrary, all of those practices continued and were added to for good

measure.

3.3.38 It was from Mr Col lings, sent to Hong Kong by Mr Nugan, that

word finally came of the long awaited, but thus far elusive, confirmation

that the first successful venture initiated by the Nugan Hand Group had

come to pass. Notwithstanding that all the odds would seem to have been

against this unknown Group gaining a foothold in the Hong Kong investment

market, the Group had done so. The reasons have already been mentioned

and the matter is fully reported in Part 4 Section 1 where Nugan Hand

(Hong Kong) is treated as a discrete topic. Thus it is unnecessary here

to do more than provide some basic details.

3.3.39 It appears that Mr Ceilings had gained the confidence of Dr A.

Kwok [profile 2.36], the controller of the Wing On Bank in Hong

Kong. After a number of meetings commencing in Hong Kong in April 1975

- 435 -

between Mr Ceilings and Dr Kwok, an agreement resulted that worked to a

remarkable degree in favour of Nugan Hand Ltd although that may not have

been the intent of the agreement according to its proper construction.

3.3.40 The effect of the arrangement was that the Wing On Bank would

act as agent of Nugan Hand Ltd for the transmission of funds from Hong

Kong depositors to Nugan Hand Ltd in Australia and would (at the sole

discretion of the Wing On Bank) give security to those depositors who

requested it and in return the Wing On Bank would itself receive from

Nugan Hand Ltd security in respect of its undertaking to the depositors.

It was agreed that adequate security would be lodged by Nugan Hand Ltd in

an account at its bank, the Bank of New South Wales (as it then was) at

the branch at which Nugan Hand Ltd had its principal bank account which

at that stage was situated at Young and Bridge Streets in Sydney. This

'safe custody account' as it was called was to contain bills of exchange

including bills accepted or endorsed by Nugan Hand Ltd itself, but up to

a stated ceiling.

3.3.41 The effect of this arrangement together with the fact that

Mr Col lings was instructed by Mr Nugan to offer potential Hong Kong

investors higher rates of interest than were otherwise available in

Hong Kong appears to have been a formula for instant success. This is

reflected in the content of a jubilant note from Mr Collings to

Mr Ward dated 11 September 1975 which included the information that . . 31

Mr Collings in the space of four weeks had collected US$1 million.

His note continued:

'As long as Albert keeps on taking our paper you will all smile anyway.'

The reference to 'Albert' is a reference to Dr Kwok. The reference to

'our paper' indicates that at that stage Nugan Hand Ltd was drawing bills

which it was purporting to accept and/or endorse. This 'paper' was then

being lodged in the safe custody account at the Bank of New South Wales

in Sydney as security for the Wing On Bank. In the light of the evidence

reviewed in this Part to date, it is obvious that Nugan Hand Ltd could

not have discharged the obligations under these bills had it been called

- 436 -

upon to do so. (The drawing of bills of exchange by other companies

within the Group (referred to in the records of Nugan Hand Ltd as

'internal bills of exchange1 [3.3.46-3.3.48]) was to commence in early

1976 and continued throughout the life of the Group. The purpose of

these particular bills being to disguise the fact that a large amount of

Nugan Hand Ltd funds were leaving the company via these associated

companies and thence to the ultimate intended recipient. No hint of

these loans out of Nugan Hand Ltd funds was ever disclosed in any of the

company's published accounts.)

3.3.42 The success of Nugan Hand (Hong Kong) in tapping the Hong Kong

investment market and thereby providing access to much needed funds for

the Group, provided an example of what might be done elsewhere. Mr Hill

told the Commission, 'After the Hong Kong success the proposal then was 32

to go to each of the major capital markets and do likewise'. This

concept of overseas expansion was to become a practical reality mainly

under the supervision of Mr J.M. Gilder [profile 2.25] when he joined the

Group towards the end of 1976.

3.3.43 Thus the second half of 1975 had undoubtedly seen the Group move

into a much stronger position in the sense of now having the funds from

Hong Kong at its disposal. This is not to suggest that Nugan Hand (Hong

Kong) was ever competently run or self sufficient. That this was not so

will appear as this Part progresses and it appears in further detail in

Part 4 Section 1 where Nugan Hand (Hong Kong) is dealt with as a separate

topic.

3.3.44 Before turning to the form of the Nugan Hand Ltd accounts for

the seven months ending 31 January 1976, it is necessary to mention

something that occurred during the period shortly after that date and

before those accounts were certified by Mr Brincat. It has been brought

out on more than one occasion in this Part that Nugan Hand Ltd had not,

either in its first or second year of operation, made a profit but had in

fact sustained losses in each of those years. Its dismal performance in

those years has been commented upon. As the analyses of the 1974 and

1975 accounts demonstrate, those losses were disguised in the balance

sheet. In the profit and loss statement 'paper' profits were included

- 437 -

which were not represented by the actual receipt of funds by the

company. There was, accordingly, a shortfall of funds caused by the

absence of any appreciable income on the one hand and by the dipping in

to the comparatively small amount of funds collected by the company to

pay the expenses and overheads, on the other. However with the swelling

of the deposit base as a result of the funds coming from Hong Kong, and

with the increase in local deposits collected which was to occur in 1976,

the extent of the dipping increased and reflected not only the fact that

additional funds were available for that purpose but also the ambitious

program being pursued by the Group which could be supported, inter alia,

from the funds deposited with Nugan Hand Ltd. As will be seen Mr Nugan

himself was dipping into these funds for his own purposes.

3.3.45 As at 31 January 1976 the amount said to be owing to Nugan Hand

Ltd was assessed at approximately $1,812 million.^ Although in the

records of Nugan Hand Ltd these moneys were treated as being loans to

other companies within the Group, for example Yorkville Nominees, the

amount of $1,812 million simply represented moneys taken out of Nugan

Hand Ltd, in the main to pay expenses and operating costs. It also

included the notional amount said to be owing as a result of the

arrangements involving the sham payment of share capital in August 1973

[see 3.2.18-3.2.21]. By January 1976 Nugan Hand Ltd had advanced

approximately $880 000 to persons and companies associated with

Mr Nugan. In order to milk these funds the simple device was used of

drawing cheques on Nugan Hand Ltd in favour of one or other of the Nugan

Hand controlled companies and thence to the ultimate recipient. The

companies through which these funds passed in this way were shown in the

books of Nugan Hand Ltd as being indebted to Nugan Hand Ltd in respect of

the moneys passing through. Because the moneys were thus treated as

being loans to companies controlled by Messrs Nugan and Hand or one of

them this fact was required to be stated in the accounts. The need for

such disclosure is obvious, particularly in the case of a public company

collecting public funds. Obviously a careful watch must be kept on any

loans by such companies to directors or to companies controlled by

directors. If such a disclosure had been made the question would have

arisen (for both directors and auditors) of the collectability of such

debts given that they were shown as hieing owed by companies without any

- 438 -

substantial resources of their own. However, in January 1976 or shortly

thereafter a further scheme was put in train which had the effect of

avoiding the problem completely. As a result of this scheme there was

never any disclosure of the fact that moneys of this nature were owed to

Nugan Hand Ltd.

3.3.46 This non-disclosure was brought about by Mr Brincat bringing

into existence shortly after 31 January 1976 a series of bills of

exchange which were to be executed by various people purporting to sign

on behalf of the companies alleged to be indebted to Nugan Hand Ltd.

These bills [see Appendix E for examples] were themselves valueless

because the companies issuing them were unfinancial. According to the

terms of the bills the so called debtor companies purported to make

themselves liable to pay the face value of the bills on maturity to Nugan

Hand Ltd. The bills were then back dated giving the false impression

that they had come into existence on various dates long since past. They

were then entered by Mr Brincat in the appropriate records of Nugan Hand

Ltd again giving the false impression that they were so entered on the

dates which they bore. It is unnecessary for the Commission to express a

view whether, quite apart from the inability of the companies to pay the

bills, the form of the bills in itself would have rendered them invalid.

3.3.47 This use of 1 internal bills' as they were called was to be made

throughout the life of the company to disguise the fact that large sums

of money were being taken out of Nugan Hand Ltd by being channelled

through the companies purporting to execute the internal bills. For the

most part these bills were not even brought into existence but merely

entered in the records of Nugan Hand Ltd at financial year end. They

were recorded as being rolled over when they matured and a record made

that fresh ones issued.

3.3.48 The final step in this scheme was for the notional current value

of the internal bills to be carried into the balance sheet by being

included in the entry 'commercial bills discounted'. Thus by this means

the moneys owing to Nugan Hand Ltd, which should have been disclosed for

what they were, namely, a bad debt owing to Nugan Hand Ltd, were given

the appearance of a high profile asset by being described as 'commercial

- 439 -

bills discounted'. Accordingly, the balance sheet as at 31 January 1976

within the entry 1 commercial bills discounted' included an amount of

$1,812 million representing the 'current value' of the worthless internal

bills.

3.3.49 As published, the consolidated accounts of Nugan Hand Ltd for

31 January 1976 appeared in the following form (excluding irrelevant

material):

SHAREHOLDERS' FUNDS

Paid-Up Capital Capital Profits Reserve Unappropriated Profits

1 000 005

73 571 60 950

TOTAL SHAREHOLDERS' FUNDS $ 1 134 526

Represented By:

CURRENT ASSETS

Cash on Hand and at Bank 509 458

Sundry Debtors 35 300

Short Term Loans and Deposits 1 156 764

Commercial Bills Discounted 7 353 676

AIDC Bonds 519 215

Government Treasury Notes 12 658 534

Negotiable Certificates of 475 577

Deposit Government Bonds ~

22 708 524

INVESTMENTS

Unrelated Company

FIXED ASSETS

Office Equipment 745

Office Furniture & Fittings 5 721

8 062

6 466

INTANGIBLE ASSETS

Formation Expenses _______ 117

TOTAL ASSETS Carried Forward 22 723 169

- 440

TOTAL ASSETS - Brought Forward

CURRENT LIABILITIES

Creditors - Trade 1 600

- Other 12 625

Loans 54 764

Money Market Borrowings - Secured 19 716 671

- Unsecured 1 756 761 21 473 432

Provisions - Taxation 34 572

- Dividend 11 650

TOTAL LIABILITIES

NET ASSETS $

CONSOLIDATED PROFIT AND LOSS STATEMENT

FOR THE PERIOD ENDED 31 JANUARY 1976

Gross Proceeds from Sale of Securities 26 180 522

25 981 322

199 200

53 943 39 561

Gross Income

Less:

Operating Expenses

Net Profit before Taxation Provision for Taxation

NET PROFIT AFTER TAXATION

Less:

Gross Cost of Securities

Gross Profit on Securities Trading

Add: Interest Received Fees Received

22 723 169

21 588 643

1 134 526

292 704

211 562

81 142 34 572

46 570

- 441 -

3.3.50 Among the notes which accompanied these accounts were included

the following:

'SECURITIES ON HAND

Commercial Bills Discounted AIDC Bonds Government Treasury Notes Negotiable Certificates of Deposit

Government Bonds - at Cost

7 353 676

519 215 12 658 534 475 577

(Face Value $21 500 000) $ 21 007 002

MONEY MARKET BORROWINGS Borrowings Secured

Secured over the following securities:

(a) Commercial Bills Discounted 7 500 000

(b) Government Treasury Notes 13 000 000

(c) AIDC Bonds 500 000

(d) Negotiable Certificates of Deposit 500 000

$ 19 716 671

$ 21 500 000

Above Securities are listed at face value. All repayable within twelve months.'

3.3.51 These accounts were false and misleading in the following

respects. The amount of paid up capital continued to be misrepresented

(see 3.2.18-3.2.21]. Under 'current assets' the item 'commercial bills

discounted' of $7 353 676 included valueless internal bills of exchange

totalling $1 812 451. The creation of these internal bills has been

referred to at 3.3.46. 'Commercial bills discounted' also included a

commercial bill of exchange for $1.9 million from National Discount

Corporation Ltd. This bill of exchange and the item 'government treasury

notes' of $12 658 534 were wholly attributable to an artificial buy back

arrangement between Nugan Hand ltd and National Discount Corporation Ltd

of the type which has been explained at 3.3.31 to 3.3.33.

- 442 -

3.3.52 On the liabilities side of the balance sheet, the figure of

$19 716 671 for 'money market borrowings-secured' was inflated by the

inclusion of the $14,627 million associated with the artificial buy back

transaction. (The amount of $14,627 million had been borrowed by Nugan

Hand Ltd from National Discount Corporation Ltd on 29 January 1976 to

enable it to purchase the securities which were included as assets in

this balance sheet [see 5.29-5.31], If the results of the buy back

transactions are ignored, as in the opinion of the Commission they must

be in order to obtain a view of the true position, the amount left was

$5,082 million. Included in this amount were deposits from overseas

totalling approximately $2.5 million secured by the guarantee of the Wing

On Bank. The securities which Nugan Hand Ltd had lodged in the Wing On 34 Bank safe custody account [see 4.1.27-4.1.55] included $600 000 worth

of internal bills drawn by Nugan Hand International Holdings Pty Ltd

[profile 2.96] an unprofitable Nugan controlled company with a paid up

capital of $2. The Commission finds that these internal bills were

worthless and that $600 000 worth of deposits shown as secured were in

fact unsecured.

3.3.53 According to the profit and loss statement, 'gross proceeds from

sale of securities' totalled approximately $26.18 million and 'gross cost

of securities' totalled approximately $25.98 million. Once again the

evidence before the Commission established that these claims were largely

untrue. The $26.18 million, 'gross proceeds from the sale of securities'

was inflated by 94 per cent ($24.6 million) as shown in the following

table:

Published Internal Same day guy Backs Genuine

Sale Proceeds bills trades

$

26 180 521

[see also 5.18-5.55]

$

1 500 000

$

1 916 815

$

21 183 750

$

1 579 956

3.3.54 Furthermore, the figure for 'Gross Profit on Securities Trading'

of $199 200 includes an amount for 'interest1 treated as being owed to

Nugan Hand Ltd in respect of the internal bills. As previously explained

- 443 -

[see 3.3.51], the amount of internal bills at the time of these accounts

stood at $1,812 million. Mr Brincat included an amount of $109 871.27 as

interest accruing to Nugan Hand Ltd in respect of the internal

bills.^ The Commission considers that the inclusion of this amount

was not justifiable, given the fact that the bills were worthless and

that no interest was ever received by Nugan Hand Ltd in respect of them.

There was no justification for this as the companies purporting to make

themselves liable on these bills could not, at any stage, have paid even

the interest, much less the face value of any of the bills.

3.3.55 As to the claims in respect of fees received, the evidence did

not disclose any such receipt and the Commission does not accept that

there was any foundation for the inclusion of these amounts in the profit

and loss statement. The accounts for 31 January 1976 were signed by

Messrs Hill and Ward on behalf of the board of directors on 26 February

1976. Mr Brincat signed the auditor's certificate.

- 444 -

SECTION 4 : THE MYTH IS ESTABLISHED

(THE PERIOD JANUARY 1976 TO 31 DECEMBER 1977)

3.4.1 Die Group entered 1976 with Nugan Hand (Hong Kong) Ltd firmly

established as a source of significant funds and with the promise of the

establishment of similar operations in other overseas locations. The

next two years witnessed a concerted effort to attain this goal, with the

establishment of the Nugan Hand Bank in the Cayman Islands, [see Part 4

Section 2] the opening of representative offices of the Bank in ten

overseas countries and the despatch of a dozen specially recruited

overseas representatives. This period also saw the Group concentrate on

the promotion of an international corporate image, with the production of

copious quantities of self-promoting literature offering a range of

financial and other services on an international scale.

Local councils attracted as depositors

3.4.2 A further significant development during this two year period

was the acquisition of five local government councils in the Sydney area

as depositors. In the four year period commencing in April 1976, these

councils invested a total of $14,656 million with Nugan Hand Ltd.

3.4.3 During 1976 the company attracted two Sydney councils as

depositors. Die first and most significant was the council of the

Municipality of Ku-ring-gai which began investing in April 1976 and

continued to do so during the following two years. It deposited the

greatest total amount of any of the councils: $7.6 million.^ At the

end of 1976, the council had $1.56 million on deposit with Nugan Hand 3 Ltd. Its deposits reached a peak in early November 1977 when the

4

amount on deposit totalled $3.8 million.

3.4.4 The Council of the City of Sydney was the next council to

invest, placing two deposits, the first in May 1976 and the second in

- 445 -

June 1976, making a total of $480 000. Two other councils, the

Leichhardt and Marrickville Municipal Councils, commenced to invest with

Nugan Hand Ltd in early 1977 and remained depositors until April 1980,

the date of liquidation of the company. Marrickville Council invested a

total of $4.3 million and Leichhardt a total of $1.05 million.® The

former South Sydney Municipal Council invested $1.2 million during

1978.7

5

3.4.5 Although the council deposits significantly increased the

deposit base of Nugan Hand Ltd the company sustained a loss on the

reinvestment of these deposits. First, according to the evidence of

Mr S.K. Hill, Mr F.J. Nugan made a policy decision that Nugan Hand Ltd

offer councils half a per cent to three quarters of a per cent higher

interest rate than the banks were offering.® Second, the company had

to provide the councils with genuine security rather than its own g internal paper. Third, the company did not have the capital, staff or

expertise to profitably handle transactions of this type. The Council of

the City of Sydney discontinued its investment because it found the

transactions were handled in 'an unbusinesslike' manner."*"®

3.4.6 However Mr Nugan was prepared to accept such losses in return

for the improved 'image' to Nugan Hand Ltd brought about by such

prestigious clients. " * " " * " The company's literature and Mr Nugan himself

made much of the fact that these particular depositors were among its

clients. Mr Nugan told the 1978 Bangkok Conference of Nugan Hand [see

3.5.43] that the Group had 'some of the most prestigious clients in the

world [including] ... most of the big Sydney city councils ...'.12

According to Mr Hill, Mr Nugan responded to his protests that the council . . 13

deposits were 'losing propositions' by calling them 'loss leaders .

The move to the ANZ Bank

3.4.7 In March 1976 Nugan Hand Ltd changed its principal accounts from

the Bank of New South Wales (as it then was) to the ANZ Bank at the

branch situated at the corner of Pitt and Hunter Streets, Sydney.

However the Wing On Bank safe custody account [see 4.1.27-4.1.55]

- 446 -

remained at that Bank until January 1978, at which time it too was 14 transferred to the ANZ Bank.

3.4.8 From evidence before the Commission it appears that the main

reason for this change to the ANZ, was the Bank's agreement to make

available to Nugan Hand Ltd a 'within the day' or 'daylight' overdraft

facility of up to half a million dollars - a facility which the Bank of ] 5

New South Wales had apparently refused the company. Under this

agreement, Nugan Hand Ltd was able to borrow up to half a million dollars

from the ANZ Bank each day, provided that it lodged acceptable security

for the amount borrowed and provided also that it repaid that amount by

the close of business on the same banking day. The ANZ Bank required the

company to lodge with it security in the form of government securities or

bank accepted or endorsed bills of exchange, having a face value of at

least ten per cent in excess of the amount borrowed."*·®

3.4.9 Given the ever present problems caused by lack of capital this

overdraft facility was very important to Nugan Hand Ltd because it could

be a means whereby it could offer security to its clients in respect of

their deposits, and was thus a means of attracting new clients and

further deposits. This came about in the following way. Nugan Hand Ltd

used the funds borrowed under the overdraft facility to acquire

securities, which it placed with its clients, in exchange for cash

deposits. These deposits were used by Nugan Hand Ltd, within the same

banking day, to repay the consequent overdraft and thus obtain the

release of the security lodged with the ANZ Bank. (From January 1978, by

virtue of its arrangement with the Wing On Bank [see 4.1.27-4.1.55],

Nugan Hand Ltd often obtained the security which it lodged with the ANZ

Bank by uplifting securities from the Wing On Bank safe custody account

and replacing those securities with internal bills of exchange which, of

course, cost the company nothing. Pursuant to the arrangement with the

Wing On Bank, the securities uplifted from the safe custody account were

relodged in that account at the close of the banking day, and the

internal bills released to Nugan Hand Ltd.)

- 447 -

3.4.10 The change to the ANZ Bank as its principal banker brought

another benefit to Nugan Hand Ltd of great significance, namely the

provision of very favourable bank references as to the company's

financial worth and stability. Although no copies survive it appears

that previously the Bank of New South Wales also provided bank

references. These references were used extensively by the company to

gain credibility in Australia and overseas, and were a critical factor in

its success in attracting deposits. Mr R.G. McKinnon, (now deceased) the

Manager of the Pitt and Hunter Streets branch of the ANZ Bank from March

1977 until June 1979, developed a close association with Mr Nugan17 and

in fact adopted as the content of the Bank's reference in respect of

Nugan Hand Ltd a draft written by Mr Nugan himself.18 [For further

details as to the role played by bank references see Part 4 Section 6.]

Changes in personnel

3.4.11 On 26 February 1976 Messrs Hill, Dunn and Ceilings became

directors of the company. Their profiles appear in Part Two. Despite

the appearance to the' contrary given by the minute book of Nugan Hand

Ltd, no directors' meetings were ever held by the company. Mr Nugan

required each person who was invited by him to become a director of the

company to sign an undated form of resignation at this time.

Scheduled companies

3.4.12 A number of companies which are included by name in the schedule

to the Commission's terms of reference [Appendix A] were incorporated or

underwent name changes during the first half of 1976. Naretha Pty Ltd

[profile 2.90] was incorporated on 11 February 1976. This company was

used by Mr Nugan in early 1976 for the purchase of land at Longueville

from Mr L.P. Carter, the Town Clerk of the Council of the City of

Sydney. (This transaction was extensively referred to in the

Commission's Second Interim Report delivered on 12 December 1984.) The

land was acquired for the purpose of subdivision, for which approval had

already been given by the Lane Cove Council. This land was the company's

- 448 -

only asset, and it was subsequently sold by the liquidator appointed to

the company in June 1980."^

3.4.13 Newcourt Financial Services Pty Ltd [profile 2.9], incorporated

under another name in August 1975, changed to the above name on 7 May

1976. Its directors from May 1976 were Messrs Nugan and Hand, Norman

James Bacon and John Robert Grist. Mr Grist resigned in June 1977 and

Mr Hill became a director in October 1978. The company was registered as on

a finance broker under the Moneylending Act 1941 in June 1976. This

company appears to have been associated with Mr Nugan1s efforts (notably

unsuccessful) to expand the financial services and expertise of the Nugan

Hand Group. Mr F.D. Ward ' [profile 2.73] told the Commission that about

February 1976, Mr Nugan retained a number of persons as expert advisers

including Messrs Grist and Bacon, to expand the financial expertise of

the Group and that Mr Grist's expertise was in the area of financial

advising and money raising, while Mr Bacon had worked for one of the 21 larger merchant banks. The evidence available to the Commission does

not indicate the nature of the arrangements between Nugan Hand and

Newcourt Financial Services Pty Ltd. The company appears to have ceased

any attempt to carry on business in June 1977. Mr Hill said in evidence

to the Commission that the company was established to supply finance in

return for a brokerage fee, but that it did not ever 'get off the

ground'.22

3.4.14 Skah Pty Ltd [profile 2.102] was incorporated on 11 May 1976.

Its directors and shareholders were Mr Nugan and Miss P.M. Swan

[profile 2.70], The company was one of several used as part of the

internal bills scheme. This company was merely one of several which seem

to have been incorporated not for any legitimate business purpose but

merely to provide a further corporate entity controlled by Mr Nugan and

which could be used in his various schemes as he wished. Mr Hill told

the Commission that he did not think that this company did anything at

3.4.15 Hidex Pty Ltd [profile 2.84], incorporated on 20 June 1975 under

another name, underwent a name change on 25 May 1976. It provides a good

- 449 -

illustration of the Group's notable lack of success which attended the

great majority of attempts to generate income by entering into trading

arrangements of one sort or another. On 21 June 1976 Mr Ward approached

the ANZ Bank (Hunter & Pitt Streets branch) and informed it that this

company was to undertake the export of hides to Hong Kong and that such

exports were expected to reach a figure of approximately $7 million. ^

In fact the evidence before the Commission is that the company was party

to only two trading transactions, one of which concerned the export of 25 inedible tallow to Bangladesh. The second concerned the export of

one thousand cattle hides to Hong Kong in June 1976. This shipment

resulted in a loss to Nugan Hand Ltd and was described by Mr Ward as 'an

administrative nightmare' which cost many thousands of dollars in

executive time, telex and telephone costs. The venture failed

because the staff of the Group in Sydney and Hong Kong lacked any

27

knowledge or expertise in connection with the export of goods. The

debacle arising from the first shipment was such that it was decided that

further shipments should be handled by a firm experienced in the area, in

return for a commission to Nugan Hand.^® No further transactions of

this type occurred. This example also underlines the complete lack of

'know how' which existed among the executives and later the

representatives with, perhaps, one or two exceptions.

Accounts of Nugan Hand Ltd for 30 June 1976

3.4.16 Although Nugan Hand Ltd had by now changed its annual accounting

period from 30 June to 31 January each year, it continued to publish a

set of accounts for 30 June each year. The accounts for 30 June 1976

were signed by Mr Nugan on behalf of the board of directors on 10 August

1976, and certified by Mr G.F. Brincat [profile 2.9], even though he was

not required by statute to do so.

3.4.17 The consolidated balance sheet for 30 June 1976, so far as is

relevant, contained the following:

- 450 -

SHAREHOLDERS' FUNDS

Paid-Up Capital 1

Capital Profits Reserve Unappropriated Profits

TOTAL SHAREHOLDERS' FUNDS $ 1

Represented By:

CURRENT ASSETS

Cash on Hand and at Bank 20 156

Sundry Debtors 176 800

Short Term Loans & Deposits 991 000

Commercial Bills Discounted 14 027 400 AIDC Bonds 540 501

Government Treasury Notes Negotiable Certificates of Deposit 2 148 882

Government Bonds -

INVESTMENTS

Unrelated Company

FIXED ASSETS

Office Equipment 1 157

Office Furniture and Fittings 26 203

INTANGIBLE ASSETS

Formation expenses

000 005 73 571 26 868

100 444

904 739

8062

27 360

117

TOTAL ASSETS Carried Forward $ 17 940 278

- 451 -

TOTAL ASSETS Brought forward 17 940 278

CURRENT LIABILITIES

Creditors - Trade Loans

1 602

120 230

Money Market Borrowings -- Secured 14 218 837

- Unsecured 2,469,536

Provisions - Taxation

16 688 373 17 629 12 000 - Dividend

TOTAL LIABILITIES 16 839 834

NET ASSETS $ 1 100 444

3.4.18 These accounts indicate a continuation of the dishonest

practices that characterised the earlier accounts. They were continued

in all subsequent accounts although in the subsequent accounts further

dishonest practices were also adopted. The amount of paid up capital

continued to be misrepresented by one million dollars. Of the $176 500

shown as 'sundry debtors', $168 450 was a loan by Nugan Hand Ltd to

Yorkville Nominees Pty Ltd [profile 2.108]. The fact that there was a

loan to a company controlled by Mr Nugan should have been disclosed in

the accounts, and, in view of the fact that this company was unfinancial,

this should have been viewed as a bad debt.

3.4.19 The entry for 1 commercial bills discounted of $14 027 400

included $6.95 million arising out of the second of the four artificial

buy backs straddling the balance date, this time involving CitiNational

Securities Corporation Ltd ('CitiNational') [see also Part 4 Section 7]

and also included $3.6 million worth of internal bills of exchange. On

the liabilities side of the balance sheet, 'Money Market Borrowings -

Secured', shown as $14 218 837 was inflated to the extent of $6.95

million as a result of the artificial buy back arrangement.

3.4.20 The profit and loss statement for the period ending 30 June 1976

was equally misleading and followed what at this stage can be described

as the usual pattern. The amounts shown as 'gross proceeds from sale of

- 452 -

securities' ($152 799 322) and 'gross cost of securities' ($152 211 441)

included certain of those sham transactions previously mentioned. One of

these transactions alone, on 29 June 1976, involved an amount of

29

$100 million [see 5.21-5.22], Also included in the figure for 'gross

profit on securities trading' was an amount for interest purportedly

earned by Nugan Hand Ltd on the internal bills of exchange.30

3.4.21 There are considerable differences between the statutory balance

sheets dated 31 January in each year from 1976 and the balance sheets

prepared at 30 June in each of those years, in that the amounts shown

therein as undistributed profits fall dramatically between the January

and June balance dates. For example, the non consolidated profit and

loss statement for 31 January 1976 shows undistributed profits of

$62 087, whereas that of 30 June 1976 shows undistributed profits of

$28 006. This pattern is continued in subsequent years. Dividends paid

before June in each year would explain the difference to a minor degree.

However it is clear that the company reported much less profit in the

balance sheets prepared as at 30 June. This suggests that some

adjustments were made as at 30 June which gave the appearance of a

reduced income with a consequent reduction in the amount of tax

31

payable. Ironically, these dishonest accounts declaring a

non-existent profit resulted in the company paying income tax, which it

need not have paid, because in truth the company never made a profit at

any time. The motivation for these subterfuges was of course to create a

false appearance of success.

The establishment of the Nugan Hand Bank

3.4.22 Given the reality behind the Group's carefully nurtured facade

which this report has attempted thus far to spell out, the establishment

of the Nugan Hand Bank in the Cayman Islands was a remarkable achievement

and was soon to overtake both Nugan Hand Ltd and Nugan Hand (Hong Kong)

in terms of deposits accepted. It also provided the Group with

persuasive evidence to support its claim that it had the stature and the

expertise it claimed in the area of international finance. The Nugan

Hand Bank is the subject of a discrete topic in Part 4 Section 2.

- 453 -

3.4.23 The decision to establish the Bank in the Cayman Islands

followed a preliminary examination of alternate locations, including Hong

Kong, Singapore, the Seychelles, Malta, Monaco and Costa Rica, and an

unsuccessful application to the Panamanian authorities for a banking

licence. The Cayman Islands was considered by Messrs Nugan and Hand to

be a favourable location for the proposed bank because it was a 'tax

haven' with banking secrecy based on detailed legislation, and no 32 restriction on currency transfer.

3.4.24 The Nugan Hand Bank and Trust Company (later the Nugan Hand

Bank) was incorporated in the Cayman Islands on 6 July 1976. Messrs

Nugan, Hand, Ward, rollings and Dunn were appointed directors on 21 July

1976. The Bank's later directors were Admiral E.P. Yates [profile 2.76],

Mr Hill and Mr J.M. Gilder [profile 2.25], On 25 August 1976 the company

was granted an unregistered Category B banking licence which meant that

the Bank could carry on the business of banking provided it was outside

the jurisdiction of the Cayman Islands. In its memorandum of association

the Bank claimed to have paid up capital of US$720 000. Evidence before

the Commission suggests that only an initial amount of US$250 000 was

ever subscribed to the Bank, and that it is most unlikely that this 33 amount remained subscribed. Shares in the Bank were held, so far as

is relevant, by Messrs Nugan and Hand, Nugan Hand Ltd and Nugan Hand

International Holdings Ltd.

3.4.25 An early plan for the development of the Bank which embodied the

ideas of Messrs Hand and Nugan3^ envisaged the establishment of

representative offices of the Bank throughout the world, and the

provision by the Bank and its offices of a wide range of financial

services. According to the evidence of Mr Hill to the Commission, it was

Mr Nugan' s long term plan to form an extensive corporate structure which

could be sold as an attractive asset to an organisation such as the Wing

On Bank. Mr Hill said that Mr Nugan wanted to establish a network of

self supporting 'shells' in major capital markets with a view to its sale

to a large (overseas) organisation.35 Mr Nugan in fact promised part

of the proceeds of such sale to a number of the executives apparently to

encourage them to stay on. These people included Messrs Hill, Ceilings,

Shaw [profile 2.65] and Gilder.36

- 454 -

3.4.26 From the time of its establishment, the Bank appears to have

become the prime concern of Mr Hand. He was the motivating force behind

the establishment of representative offices of the Bank throughout the

world, and was responsible for the employment in October 1976 of

Mr Gilder, because he wanted someone who 'could really drive the bank

along1 As will be seen, Mr Gilder was to play a vital role in the

establishment of the Bank and the expansion of the Group generally. It

was Mr Hand who devised the system whereby clients of the Bank were

allocated a client number and referred to by number only in the Bank's

records. He also introduced a number of codes which were used for

transmission of messages between the Bank's offices.

3.4.27 In October 1976 Mr Hand decided to open a Nugan Hand office in

Bangkok, Thailand. It was subsequently settled that Mr Collings would go

to Thailand to open the Bangkok office, and Mr Hand in October 1976,

replaced Mr Collings as manager of the Hong Kong office.^ From the

time of his move to Hong Kong Mr Hand took responsibility for the South

East Asian operation of Nugan Hand and was thereafter 'only a visitor to

Australia.

3.4.28 Despite Mr Gilder's endeavour to play down the importance of his

role when he gave evidence to the Commission, other evidence suggests 40

that Mr Gilder was central to the development of the Bank. He played

a leading role in the expansion of the Nugan Hand Group, particularly in

South East Asia, in terms of recruitment of personnel and the promotion

of the overseas operations. In matters relating to personnel management

and output of promotional material, Mr Gilder ranked next in importance

after Messrs Nugan and Hand [see profiles in Part 2].

3.4.29 When Mr Gilder joined the Group, its only overseas office was in

Hong Kong. His main role was to recruit and be responsible for the

overseas representatives. During 1977 he supervised the recruitment of a

dozen representatives who were despatched to South East Asia, South

America and West Germany to establish representative offices and to

solicit deposits on behalf of the Nugan Hand Bank. More will be said

shortly as to the manner in which this overseas expansion was achieved.

- 455 -

3.4.30 Mr Gilder was also involved in the marketing of the Nugan Hand

Group and its services and played an important part in the editing and

distributing of the many brochures and booklets produced on the Group's

behalf in Australia during this period. He told the Commission that the

Nugan Hand Bank project had been languishing at the time he commenced

employment with the Group and he set to work to finalise a brochure so

that the overseas representatives would have something to hand out to

prospective depositors.4"^ The brochures produced were well presented

high quality publications. They promoted the inage of a large successful

international organisation staffed by a team of highly skilled

professionals and offering a wide variety of financial services and

facilities. Copious quantities of similar brochures were produced in

Hong Kong, under the direction of Messrs Nugan and Hand. Separate

brochures were produced for the Nuqan Hand Bank and Nugan Hand Ltd. A

significant feature of the brochures relating to the Bank was the

complete absence of any reference to financial statements or accounts.

Further projects undertaken by Mr Gilder to assist the overseas

representatives included the production of an economic newsletter (with

the assistance of Mr M. Healey [profile 2.29]), the production of the

Nugan Hand International manual, and the organisation of three

international Group conferences. He was also responsible for an attempt

in 1979 to revive the trade division. Mr Gilder was a director of Nugan

Hand Bank, Nugan Hand Ltd, Nugan Hand International Holdings Ltd, (a Hong

Kong company) Nugan Hand Singapore (Pte) Ltd and Nugan Hand (Malaysia) 42 Sdn. Bhd.

3.4.31 Mr Gilder's contract of employment with the Bank entitled him to

receive a monthly salary and an overriding commission of twenty five per

cent of all commissions paid to representatives recruited by him and

working overseas.4^ Part of such moneys were paid into Mr Gilder's 44 account at a Singapore bank. About January 1980, Mr Gilder, through

the facilities of the Nugan Hand Group, repatriated the moneys held in

the account to Australia. The funds were ultimately paid to Mr Gilder

through a Nugan Hand Group company in Australia and another Australian

company controlled by him.44a

- 456 -

Nugan Hand (Hong Kong) obtains a deposit taking licence

3.4.32 On 12 July 1976 Nugan Hand (Hong Kong) Ltd [see Part 4

Section 1] was granted a licence under the Deposit Taking Companies

Ordinance (Hong Kong) and was thereby entitled to collect deposits on its

own behalf. Deposits collected by the company prior to the grant of this

licence had been collected only on behalf of Nugan Hand Ltd. However,

despite the grant of the licence, it was considered preferable by Messrs

Nugan and Hand that the company not collect deposits in its own right,

because this would have rendered the company subject to the strict

requirements of the Banking Ordinance (particularly the disclosure

requirements). Accordingly Mr Nugan instructed Mr Collings not to

collect deposits on behalf of Nugan Hand (Hong Kong) and this remained . , 4*5

the position until April 1977. After the grant of the banking

licence to the Nugan Hand Bank on 25 August 1976, Mr Nugan instructed

Mr Collings that so far as possible, deposits collected by Nugan Hand

(Hong Kong) were to be collected on behalf of the Bank. Deposits to the

Bank were not subject to Hong Kong withholding tax nor to the

restrictions imposed by the Hong Kong Banking Commissioner, and they did

not attract the commission charged by the Wing On Bank in respect of its

guarantee. The Bank could also offer confidentiality. The evidence

before the Commission indicates that after the establishment of the Bank,

the staff of Nugan Hand (Hong Kong) directed their main efforts to

obtaining deposits on its behalf, rather than deposits on behalf of Nugan 46 Hand Ltd. Despite this change in emphasis, deposits collected

overseas, principally by Nugan Hand (Hong Kong), on behalf of Nugan Hand

Ltd reached $3.8 million by the end of 1976.

Establishment of Trade Services Division

3.4.33 Following the incorporation of the Bank Mr Ward was requested by

Mr Nugan about August/September 1976, to establish a Trade Services

Division of the Nugan Hand Group. He said he understood that Mr Nugan1 s

rationale was that if he could establish viable trade offices in overseas

countries, then it would be easier to go to those countries and seek a

deposit taking licence on behalf of the Nugan Hand Bank.^ Nugan Hand

- 457 -

Trade Services Pty Ltd (after changing to that name in October 1976) was

the company set up to achieve this. Mr Ward said that his attempts to

establish a trade division were unsuccessful and he attributed this to

Mr Nugan1s failure to provide sufficient funds. Mr Hand viewed the trade

division as at March 1977 as a dismal and expensive failure and advocated

that its resources be devoted to another purpose.^® It was to remain a

dismal and expensive failure through the life of the Group. Mr Gilder

told the Commission that he attempted to reactivate this company in 49

January 1979 when he appointed a new manager.

Further companies incorporated

3.4.34 During September 1976, three of the companies on the schedule to

the Commission's terms of reference [Appendix A] were incorporated or

underwent name changes.

3.4.35 S.L. Notwist Pty Ltd [profile 2.103], incorporated on

23 September 1976, was a company of which Mr Hill was a major shareholder

and director. This was Mr Hill's private company, used by him for bond

trading transactions conducted with Mr Scott-Kemmis. The company's

only connection with Nugan Hand appears to have been that funds borrowed

by Mr Hill from companies associated with Nugan Hand were channelled 51 through S.L. Notwist.

3.4.36 Leasefast Pty Ltd [profile 2.87], a company established by

Mr Hill and Mr Peter Laycock, was incorporated on 23 September 1976. Its

shareholders were S.L. Notwist Pty Ltd and Mr Hand. The company arranged

lease finance for motor vehicle purchases in return for a brokerage

fee.®^ Apart from one round robin transaction in January 1978 which

concerned the rollover of bills of exchange drawn by Leasefast and

accepted by Nugan Hand Ltd, it appears that the company was not used for

purposes connected with the Nugan Hand Group.

3.4.37 Medevac Shipping Pty Ltd [profile 2.89], which was incorporated

under another name on 6 June 1975, changed to the above name on

24 September 1976. The inaugural directors of the company were Mr Nugan

- 458 -

and Miss Swan. In September 1976 Messrs Hand and Ceilings became

directors. The purpose of the company was to finance the building and

promotion of a number of special purpose boats, called Medical Evacuation

Ships, invented by Captain Arthur Morse.53 Captain Morse became a

director of the company on 23 November 1976 and resigned one week later.

It was apparently proposed that the boats be sold to South East Asian

countries under the auspices of the United Nations. Nothing came of this

proposal and Mr Nugan later withdrew from the project because it was much 54 too expensive.

Mr Nugan's Vaucluse home

3.4.38 On 16 November 1976 Mr Nugan completed the purchase (at the

expense of Nugan Hand Ltd) of an expensive residence for himself and his

family in the Sydney suburb of Vaucluse.

3.4.39 The property was situated at 29 Coolong Road, Vaucluse. The

contract price was $460 000. Contracts were exchanged between Mr Nugan

and the vendor on 15 January 1976.55

3.4.40 The acquisition of the property by Mr Nugan using Nugan Hand Ltd

funds comprised various payments by Nugan Hand Ltd through Yorkville

Nominees Pty Ltd, and thence either to Mr Nugan personally or directly

towards the purchase of the property.

3.4.41 The records of Nugan Hand Ltd falsely recorded the above

payments to Yorkville Nominees as deposit repayments, except for one

outgoing which was recorded as a bill purchase. These payments from

Yorkville Nominees were charged to Mr Nugan's loan account with that

company. This loan remained outstanding at the date of liquidation of 57 Yorkville Nominees.

3.4.42 Although Mr Nugan was the ultimate recipient of the funds from

Nugan Hand Ltd, Yorkville Nominees was treated in the books of the

company as having itself borrowed those funds. The consequent deficiency

in the funds of Nugan Hand Ltd was disguised by the use of the internal

bills scheme.

- 459 -

The foreign currency differential contract

3.4.43 The exchange risk for all deposits received from overseas was

borne by Nugan Hand Ltd (and not by the depositor) so that when the

Australian dollar was devalued 17.5 per cent on 26 November 1976, Nugan

Hand Ltd was faced with a potential cost of A$l.l million. To avoid the

necessity for disclosure of such a loss in the published accounts

Mr Nugan caused an 'agreement' to be drawn up between Nugan Hand Ltd and

Yorkville Nominees which had, of course, no funds to indemnify Nugan Hand

Ltd for this loss as was provided by the terms of the agreement.

Mr Nugan's legal practice * 5 9

3.4.44 At all relevant times Mr Nugan retained his right to practise as

a solicitor. From April 1976 until November 1978 he was a partner in a

firm of solicitors entitled Nugan Needham. This partnership was formed

to enable Mr J.C. Needham [profile 2.51] to satisfy the conditions for

the retention of his New South Wales practising certificate. He had by 59 this time moved to Brisbane. Mr Needham told the Commission that he

understood that Mr Nugan was not undertaking work in his capacity as a

solicitor during this period because there were no transactions recorded

in the partnership's trust account.^ However, this does not seem to

be correct. Other evidence before the Commission shows that Mr Nugan

offered advice in his capacity as a solicitor in relation to taxation

matters and tax avoidance schemes to clients of the Nugan Hand Group

during this period and employed Messrs George and J. Hughes. Mr A. Lee

[profile 2.37] told the Commission that from 1974 onwards he had sought

advice from Mr Nugan about the tax affairs of his (Mr Lee's) clients,

Mr Nugan having informed him that he was 'wonderful on tax matters' and

'always available' if he needed any help.®^ Mr N. Evans [profile 2.21]

told the Commission that from 1973 until 1977, he referred his clients to

Mr Nugan who arranged tax avoidance schemes for them. He said that in

1977 Mr Nugan told him that he could arrange all the schemes that were

currently in vogue, including dividend stripping schemes and schemes

involving overseas trusts.^ Mr Ward also referred to Mr Nugan having

a practice in relation to taxation matters during 1976 and 1977.®^

- 460 -

3.4.45 In January 1976, Mr E.P. Harland (now deceased) [profile 2.28]

took up a position as tax consultant to Nugan Hand Ltd, a position which

he held until July 1979 when he became tax consultant to Nugan & Company

(solicitors). Mr Harland had formerly been employed for many years as an

assessor and investigator in the Australian Taxation Office. Mr Harland

told the New South Wales Corporate Affairs Commission that Mr Nugan

considered it advantageous to Nugan Hand Ltd that it be in a position to

offer tax advice to clients and their advisors on specific problems.6^

Mr Harland's job was to give advice to clients of the Nugan Hand Group

and to act as a tax agent for specific clients. He also advised Mr Nugan

on the interpretation of the Income Tax Assessment Act 1936 and changes

in the legislation as Mr Nugan, 'although he advertised himself as a

corporate and tax lawyer1, did not keep abreast of developments in income

tax law.65

3.4.46 In November 1976 Mr Q.D. George [profile 2.24] was employed

during the University vacation as a law clerk in the legal firm. After

completing his law degree in Perth, Mr George worked as a law clerk with

the legal firm from January to June 1978. After a period of absence for

study to enable him to qualify as a solicitor Mr George commenced work as

an employed solicitor with the firm in February 1979 and remained so

employed until Mr Nugan's death. The legal practice also employed other

solicitors during 1977-1978, in particular Mr John Hughes.66 Mr George

told the Commission that he was almost wholly concerned with tax planning

for clients of the firm. Mr Nugan1 s role was to promote the tax schemes

offered by the firm, explain them to clients and to work on schemes which

involved larger amounts of money. Mr Nugan also gave advice to a number

of overseas clients and companies about tax planning.67

3.4.47 One of the standard forms of tax avoidance scheme offered by

Mr Nugan from 1974 and availed of by many Nugan Hand Group clients was

the Yorkville Management Scheme, which is mentioned in

paragraph 9.12.68 The tax avoidance schemes were based on the

artificial conversion of income into capital, thus rendering it

non-assessable or by the creation of artificial taxation deductions, thus

reducing the level of assessable income, or variations thereof. From

- 461 -

early 1978 onwards, Mr Nugan offered a further scheme involving the

purchase of a franchise from a Nugan Hand company called Distravite Pty

Ltd [profile 2.82].®^ [For further information in relation to Nugan

Hand Group tax schemes see Part 9.]

Overseas expansion * 7 0 7 1 7 2 * 7 4

3.4.48 By 1977 the Group consisted of the parent company, Nugan Hand

Ltd (and associated companies incorporated in Australia such as Yorkville

Nominees Pty Ltd and others), Nugan Hand (Hong Kong) Ltd and the Nugan

Hand Bank incorporated in the Cayman Islands, and had representation in

ten other overseas countries. This growth in terms of overseas

representation was attributable to the recruitment by Messrs Hand and

Gilder of almost a dozen new personnel, and their despatch to South East

Asia, mainland United States, West Germany and Hawaii. These

representatives were mainly recruited by using advertisements in

Australian and Hong Kong newspapers under such captions as 'Is This You? 70 A $60 000 A Year Man?' [see Appendix D], Their qualifications,

experience and work history varied (as their profiles in Part 2 show),

but all shared a lack of experience in banking matters.

3.4.49 The first of the overseas offices established in 1977 was in

Frankfurt, West Germany. It was opened by Mr K.F. Schuller [profile

2.63] in January 1977. He had been offered the position by Mr Hand in 71 August 1976. Mr Schuller commenced business from a small, sparsely

furnished and ill equipped room in the offices of a local bank, and had 72 very little success.

3.4.50 In February 1977, at Mr Hand's instigation, Mr Ceilings

established a Nugan Hand office in Bangkok, Thailand. Later in the same

month, Mr Evans [profile 2.21] established a second Thai office, this

time in Chiang Mai. Mr Evans secured his job as a Nugan Hand

representative after Mr Band suggested to him, in December 1976, that he

should submit an application to Mr G i l d e r . H e said that he was

74

responsible to Mr Hand and was instructed to liaise only with him.

Although his approaches to American tobacco companies in Thailand

- 462 -

suggested by Mr Hand were unsuccessful, Mr Evans told the Commission that

he secured deposits for the Bank from about ten Thai nationals. The

evidence as to what deposits were collected by him differs. He said that

all deposits collected were remitted to the Hong Kong office.^

3.4.51 In July 1977, Mr Evans left Chiang Mai and the employ of the

Nugan Hand Group. He left Thailand on the pretext of having contracted

h e p a t i t i s . H e told the Commission that the real reasons for his

departure were his poor relationship with Mr Collings, his wish to be

reunited with his family and his belief that he was in danger in

77

Thailand. Mr Evans obtained a work visa only shortly before his

departure from Thailand; for most of his stay he was working

i l l e g a l l y . H e received commission in respect of deposits collected,

and a small amount to cover expenses, but no salary. He told the

Commission that he earnt A$60 000 in commission, most of which was paid

in cash in Australia [see also 6.62 to 6.75].79

3.4.52 Mr J.D. Owen [profile 2.53] was employed as a trade

representative for the Nugan Hand Bank in February 1977 and joined

Mr Collings in the Bangkok office. He was unsuccessful in attracting

deposits on behalf of the Bank, and this, inter alia, led to his later

dismissal. However, he was responsible for one of the few profitable

ventures carried out by the Group, namely the sale of shares on behalf of

the Kaiser Cement and Gypsum Co. These transactions generated commission

of approximately US$400 000 for Nugan Hand. Mr Owen received a

combination of salary and commission, and some allowance for

accommodation and expenses. He received approximately US$75 000 in

commission for the Kaiser Transaction and Mr Gilder received US$15 625 79a

demonstrating how totally unrealistic the commission structure was.

3.4.53 About June 1977 the Singapore office of the Group was opened.

It later became the headquarters of Mr Hand and the administrative office

for the Nugan Hand Bank. Its first representative was Mr G.R. Steer

[profile 2.68] who was recruited by Mr Gilder in March 1977. Mr Steer

commenced business in Singapore as a management consultant and organiser

of commodity trading transactions. He later established Nugan Hand

- 463 -

Singapore (Pte) Ltd [Appendix B] and was extremely successful in

collecting deposits on behalf of the Bank. He was probably the most

successful representative in terms of obtaining deposits.88 This was

despite the fact that the Singapore company was not legally entitled to

receive deposits, because the Monetary Authority of Singapore did not at

any stage grant it representative status on behalf of the Bank.

3.4.54 Mr Steer received a monthly retainer plus commission for fees

earned and deposits collected. He was later appointed Regional Director

of the Nugan Hand offices in South East Asia (excluding Hong Kong) and

then received over-riding commission based on the earnings of the

representatives under his control.

3.4.55 In June 1977, the Nugan Hand Group sent its first sales

representative to South America. Mr G.A. Courtney-Smith [profile 2.17),

another Gilder recruit, commenced work in Argentina. He was joined in

September 1977 by Mr G.V. Galicek [profile 2.22], who had also been

selected by Mr Gilder to represent the Nugan Hand Bank in Brazil,

Argentina and Chile. Their instructions were to seek out traders and

advise them as trade consultants, with a view to earning fees and

eventually attracting deposits from their trade clients to the Bank.

Both were totally unsuccessful in achieving these aims. They attributed

their failure to the Group's inability to assist prospective clients with

finance, and its inability to compete with the services and facilities

offered by its larger and well established competitors. They complained

of inadequate office accommodation. Mr Courtney-Smith leased a room in

the office of a group of Buenos Aires attorneys, while Mr Galicek

operated, for the most part, from his hotel room.81

3.4.56 Messrs Courtney-Smith and Galicek were employed on a commission

basis. As a result of their lack of success, they earned very little.

Their travel and accommodation expenses were met by the Nugan Hand

Group.82

3.4.57 In August 1977, Mr E.C. Louey [profile 2.40] joined Mr Steer in

the Singapore office. In September 1977 he opened the Nugan Hand office

- 464 -

in Malaysia, and set up Nugan Hand (Malaysia) Sdn Bhd [Appendix B ] . His

situation was similar to that of Mr Steer. While he represented himself

as a trade consultant, Mr Louey's major activity was the collection of

deposits, for remission to Sydney, Hong Kong or Singapore. He was very

successful, remitting &US452 755 in his first four months of

o p e r a t i o n . H e was also employed on a commission basis.

3.4.58 About mid 1977 Admiral Yates opened a Nugan Hand Group office in

Washington D.C. and in October of that year, General E.F. Black

[profile 2.8] was appointed the Nugan Hand Group representative in

Hawaii. More is said later in this Section concerning the American ex

military personnel [see 3.4.83-3.4.88 and Part 4 Section 3]. In the

latter half of 1977 Mr Gilder spent four months in the United Kingdom for

the purpose of setting up a representative office in London and

incorporating a company there under the name of Nugan Hand (UK) Ltd

[Appendix B].®5

3.4.59 According to Mr Hill the timing of the overseas expansion

described earlier in this Section [see 3.4.48 to 3.4.58] was due, at

least in part, to the adverse publicity associated with the Corporate

Affairs Commission investigation of the Nugan Fruit Group which commenced

in mid 1977 [see 3.1.32], Mr Hill told the Commission that as a result

of the bad publicity, Mr Hand engaged an expensive public relations firm

in Singapore to advise him and Mr Nugan. The firm's advice was that the

company should take steps to project the size and strength of the

organisation. Mr Nugan therefore decided to expand all the

operations of the Group and 'put a big effort' into expanding the local

operation, as well as the Hong Kong and international operations.®^

Mr Hill told the Commission that the overseas expansion was principally a

public relations exercise, designed to 'get names on the map' and promote

the image of a big corporation.

3.4.60 Mr Hill told the Commission that during this period of

expansion, Mr Nugan instructed him to quote whatever interest rates were

necessary to secure the deposits of Sydney councils and major

corporations, even though this would result in losses in connection with 89

the deposits. It was a case of 'business at all costs'.

- 465 -

3.4.61 The expenses incurred as a result of this expansion program

pursued by the Group during 1976-77 were a further drain on the finances

of the Group. Even Mr Nugan conceded to the January 1978 Bangkok

conference [see 3.5.43] that the acquisition of the Nugan Hand Bank and

the establishment of the overseas offices of the Group had cost a great

deal in profitability and gone dramatically over budget. He told the

conference, 'We have had quite a number of problem areas ... over the

last five years and consequently, Mike and I certainly have been far out

of cutting even in our corporations or [of] making small profits ... an

organisation such as ours is very expensive to maintain'

Name Changes * 9 1

3.4.62 In January 1977 both the Nugan Hand Bank and Nugan Hand (Hong

Kong) underwent name changes. The Nugan Hand Bank and Trust Company, as

it then was, changed its name to the Swiss Pacific Bank and Trust

Company. Nugan Hand (Hong Kong) changed its name to Swiss Pacific Asia

Ltd. The name changes proved to be short lived as objections were raised 91 by Swiss banks in Hong Kong. On 22 June 1977 the name of the Bank

was changed to the Nugan Hand Bank and in August 1977 Swiss Pacific Asia

Ltd reverted to the name Nugan Hand (Hong Kong) Ltd.

Accounts of Nugan Hand Ltd for 31 January 1977

3.4.63 These accounts were signed by Messrs Nugan and Hill on behalf of

the board on 7 March 1977 and certified by Mr Brincat.

- 466 -

3.4.64 The consolidated accounts for 31 January 1977 as published were

in the following form (excluding irrelevant details):

SHAREHOLDERS' FUNDS

Paid-Up Capital 1 000 005

Capital Profits Reserve 73 571

Unappropriated Profits 114 534

TOTAL SHAREHOLDERS' FUNDS $ 1 188 110

Represented By:

CURRENT ASSETS

Cash on Hand and at Bank Sundry Debtors Short Term Loans and Deposits Commercial Bills Discounted AIDC Bonds Government Treasury Notes

Negotiable Certificates of Deposit Government Bonds

6 165 7 446

1 485 000

13 396 353

3 938 517 2 858 606

107 940

21 800 027

INVESTMENTS

Unrelated Company

FIXED ASSETS

Office Equipment Office Furniture & Fittings

8062

1 117

37 988

39 105

INTANGIBLE ASSETS

Formation expenses 117

TOTAL ASSETS Carried Forward $ 21 847 311

- 467 -

TOTAL ASSETS - Brought Forward

CURRENT LIABILITIES

Creditors - Trade 2 000

- Other 17 629

Loans 27 238

Money Market Borrowings -- Secured 17 096 067

- Unsecured 3 467 979 20 564 046

Provisions - Taxation 36 288

- Dividend 12 000

TOTAL LIABILITIES

21 847 311

20 659 201

NET ASSETS $ 1 188 no

CONSOLIDATED PROFIT AND LOSS STATEMENT

FOR THE YEAR ENDED 31 JANUARY, 1977

Gross Proceeds from Sale of Securities

Less:

Gross Cost of Securities

Gross Profit on Securities Trading

Add:

Interest Received Fees Received

Gross Income

Less:

Operating Expenses

Net Profit before Taxation Provision for Taxation

220 304 851

219 298 365

1 006 486

153 396 469 853

1 629 735

1 544 356

85 379 36 288

NET PROFIT AFTER TAXATION 49 091

- 468 -

3.4.65 Among the notes which accompanied these accounts were included

the following:

'SECURITIES ON HAND

Commercial Bills Discounted AIDC Bonds Government Treasury Notes Negotiable Certificates of Deposit Government Bonds - at cost

13 396 353

3 938 517

2 858 606

107 940

(Face Value $20 685 000) $ 20 301 416

MONEY MARKET BORROWINGS Borrowings Secured: $ 17 096 067

Secured over the following securities:

(a) Commercial Bills Discounted 13 685 000

(b) Government Treasury Notes 4 000 000

(c) Government Savings Bonds 100 000

(d) Negotiable Certificates of Deposit 2 900 000

$ 20 685 000

Above Securities are listed at face value. All repayable within twelve months.1

- 469 -

3.4.66 These accounts followed the same pattern of deception and

distortion as the two previous sets of accounts. The paid up capital was

again misrepresented. The entry under 'current assets' showed

'commercial bills discounted' as $13 396 353. Included in this amount

were internal bills of exchange in the amount of $5,812 million92 [see

also 5.55] Also included in the amount shown as 'commercial bills

discounted' was a CitiNational bill of exchange for $2,992 million.92

This was a consequence of the last of the artificial buy back

arrangements which straddled the balancing date [see 5.25-5.28].

3.4.67 The item 'Government Treasury notes' shown under 'current

assets' as $3,938 million was wholly attributable to the artificial buy

back arrangement between Nugan Hand Ltd and CitiNational. As mentioned

above, this was the last of the buy back arrangements which straddled the

balancing date. Mr Pill told the Commission that this came about because

he and Mr Scott-Kemmis decided that they would not enter into any further

arrangements of this type, despite Mr Nugan's wish to persist with

them. 4 However, it appears that the management of CitiNational

Securities acted to bring this arrangement to an end [see Part 4

Section 7],

3.4.68 On the liabilities side of the balance sheet, the entry 'money

market borrowings - secured' of $17 096 067 was inflated to the extent of

$6.9 million by the artificial buy back transaction referred to above.

Excluding the amount connected with the buy back, the secured borrowings

were $10,166 million.96 The alleged security included internal bills

to the extent of $1.4 million.

3.4.69 As at 31 January 1977, Nugan Hand Ltd claimed $220 304 851

'gross proceeds from sale of securities'. Included in this figure were

those sham transactions of the type referred to earlier [see 3.4.20].

3.4.70 The 'gross profit on securities trading' was shown as

$1 006 486. This amount included a significant amount in respect of

'interest' purportedly earned by Nugan Hand Ltd on the internal bills

[see 5.35].97

- 470 -

The accounts falsified further

3.4.71 By 31 January 1977 the value attributed in the accounts to the

internal bills of exchange stood at $5.8 million. Between 31 January

1977 and the balancing date for the next set of accounts, 30 June 1977,

entries were made by Mr Brincat in the records of Nugan Hand Ltd which

would reduce this amount by $1.3 million.

3.4.72 According to the evidence of Mr Brincat to the Commission,

Mr Nugan informed him 'sometime after 30 April 1977' that he personally

had repaid a number of Nugan Hand Ltd depositors 'overseas' or 'in Hong

Kong'. Mr Brincat told the Commission that he then made appropriate

entries in the books of Nugan Hand Ltd to extinguish the liability of the

company to its depositors."*"00 Mr Brincat told the Commission that he

later discovered that one of the deposits had not in fact been repaid by

Mr Nugan.10" * " Yet he made no corresponding alteration in the books of

Nugan Hand Ltd, which continued to state (incorrectly) that the deposit l n?

had been repaid on 10 February 1977.

3.4.73 The true position was, of course, as Mr Brincat has now

conceded, that Mr Nugan had not personally repaid any of the Nugan Hand

Ltd depositors. However some of those depositors were repaid by the

Nugan Hand Bank in Hong Kong, from the funds of the Bank. Mr Brincat

told the Commission that he simply accepted the assurance of Mr Nugan

that the deposits had been repaid and made the entries referred to on

that basis. He agreed he took no steps to verify any of the alleged

] 03

repayments.

3.4.74 The entries made by Mr Brincat purported to reduce the

liabilities of Nugan Hand Ltd by approximately $1.3 million. As the

depositors had not been repaid by Nugan Hand Ltd, the end result was an

understatement of the liabilities of the company by this amount. This

understatement was first reflected in the company's accounts for 30 June 104

1977. It had a continuing effect on all subsequent accounts.

- 471 -

US$3 million deficit identified In Nugan Hand (Hong Kong)

3.4.75 In March 1977, Mr Needham visited the Hong Kong office of

Nugan Hand, at the request of Mr Nugan, in a consultative capacity. His

purpose was to examine the Group's operations there and to determine

whether or not to accept an offer of employment recently made to him by

Mr Nugan. Mr Nugan had informed him that, because the operation in Hong

Kong had expanded very quickly, administrative problems had developed and

the accounting and office procedures were a shambles. Mr Nugan requested

Mr Needham's assistance in remedying this state of affairs. Mr Needham

found that Nugan Hand (Hong Kong) indeed possessed no accounting records

and no system of office administration. He engaged a number of

accountants to write up the books of account and prepare proper statutory

records for all the Nugan Hand companies in Hong Kong.105 He also

established an internal accounts department to attend to bookkeeping and

accounts.10®

3.4.76 Mr Needham told the Commission that he was initially impressed

with the operation in Hong Kong and with the quality of its staff,

particularly Admiral Yates. However, he told the Commission that at the

completion of the writing up of the books there appeared to be a

shortfall of US$3 million in funds. When Mr Needham raised this matter

with Messrs Nugan and Hand, the latter appeared to have no understanding

of the accounts. Mr Nugan rejected the proposition that there was a

shortfall, saying that many of the company's funds were involved in

inter-company loans, dealings in the Sydney money market and in funding

letters of credit.10^ Mr Needham returned to Australia in May 1977 and 109 . .

declined to join the Group. Later in 1977 Messrs Brincat and Hill

also visited Hong Kong, for the purpose of refining the internal

accounting system of the company. Mr Brincat implemented a system

whereby the expenses of Nugan Hand (Hong Kong) were written off to

various other companies in the Group.110 From late 1977, various

accounting records of the company were held in the Singapore office of

Nugan Hand. [For' further information on this company see Part 4

Section 1.]

- 472 -

Rewriting the Bank's records

3.4.77 In June 1977 Messrs Brincat and Hill travelled to Singapore to

commence what was to become an annual rewrite of the Nugan Hand Bank

records. 1-l1 [See also the discrete topic on the Bank and its

activities in· Part 4 Section 2.3 The staff of the Nugan Hand office in

Singapore kept the records of the Bank and prepared its accounts for the

period ending 30 June each year. For each of the three years commencing

1977, a second fabricated set of records and accounts was prepared in the

Sydney office by Messrs Nugan and Brincat. The cash books of the Bank

were completely rewritten, so as to give the appearance of a reduction of

the level of deposits accepted and to charge many of the expenses of the

Bank to a Nugan Hand company called Nugan Hand Inc. Panama [profile

2.115] which was simply a company incorporated in Panama but having no

assets and not carrying on business. The rewritten set of records and

accounts based upon them were submitted each year to the Bank's auditors

in the Cayman Islands. While the genuine accounts prepared in Singapore

indicated the deteriorating financial position of the Bank, those

presented to the auditors presented an unacceptable picture of the Bank's

financial position. The accounts were passed by the auditors in 1977 and

1978, but in 1979, apparently as a result of the adverse publicity

concerning Mr Nugan and his brother, Mr K.L. Nugan [profile 2.52], the

auditors declined to pass the accounts in the absence of certain

assurances as to their accuracy which they sought from Mr Hill. Mr Hill

declined to give the assurances and the accounts were not passed [see

3.6.39],

3.4.78 Those privy to this rewriting exercise were Messrs Nugan,

Brincat, Hill and Hand and to a lesser extent, the Nugan Hand Singapore

accountant, Mr Tan Choon Seng [profile 2.71]. During their first visit

to Singapore in June 1977, Messrs Brincat and Hill set up the main

records and Mr Brincat hired Mr Tan Choon Seng. The rewriting of the

1977 accounts, which were audited in September of that year, commenced 112 „ 113

during the June visit. The rewriting was completed in Sydney.

Mr Hill appears to have played little if any role in the actual rewriting

although he was certainly aware of it at the time.·1 ·14 His job was to

- 473 -

take the rewritten records and the accounts to Price Waterhouse and Co.,

the Cayman Island auditors, for certification.

3.4.79 The degree of falsity in the rewritten records becomes apparent

when they are compared with the records and trial balances prepared by

the Singapore staff. The Singapore version showed deposits collected of

US$4,287 million, assets in the form of inter-company loans of

US$2,148 million, and a net loss of US$55 087.51.115 In the version

passed by the auditors, deposits collected had been reduced to

approximately US$2.1 million, no reference was made to inter-company

loans (these having been recorded as short term deposits of

US$2,714 million) and the net loss was converted to a net profit of

US$103 566.116

Accounts of Nugan Hand Ltd for 30 June 1977

3.4.80 Nugan Hand Ltd published a set of accounts for 30 June 1977 for

submission to the Commissioner of Taxation. These accounts were

certified by Mr Brincat to represent a true and fair view of the

company's affairs. The earlier pattern of deception was continued.

3.4.81 The paid up capital continued to be falsely represented. The

asset of 'sundry debtors' of $324 699, for the most part comprised a debt

owed by Yorkville Nominees to Nugan Hand Ltd, but the accounts contained

no note to this effect. The asset 'commercial bills discounted' was

shown as $10 522 898. Almost half of this amount consisted of internal

bills which totalled $5 084 999. This figure excluded the $1.3 million

which had been removed earlier in the year·*"*"® [3.4.72-74 ]. On the

liabilities side of the balance sheet, the amount of secured deposits was

understated by approximately $1.3 million as a result of the entries made

by Mr Brincat pursuant to Mr Nugan's assertion that such deposits had

been repaid by him [3.4.72-3.4.74].119 In addition, some of the

'secured' deposits were in fact secured by internal bills having a face

value of $800 000.120

3.4.82 As in 2976, there was a marked reduction in the amount of

undistributed profit shown in the mid year accounts, as compared with

- 474 -

that in the accounts for 31 January 1977; in this case there was a

reduction from undistributed profit claimed of $114 534 to one of $48 005.

Former United States military personnel join the Group

3.4.83 The introduction to the Group of Admiral Yates in January 1977

was effected by a mutual friend of the Admiral and Mr Hand, namely,

Mr M.B. Houghton [profile 2.35]. Mr Houghton, who was the

proprietor of the Bourbon and Beefsteak bar and restaurant at Kings

Cross, Sydney, had known Mr Hand since meeting him when the latter was on

Rest and Recreation leave in Sydney during the Vietnam War. Mr Hand

became a regular customer at the restaurant and gradually formed a close

association with Mr Houghton. Later, Mr Houghton himself was

employed by the Group and acted as the representative of the Nugan Hand

Bank in Saudi Arabia where he collected deposits for the Bank.

3.4.84 Admiral Yates, formerly the Deputy Chief of Staff, United States

Pacific Command, told the Commission that he was invited to join the

Nugan Hand Group by Mr Hand, with whom he developed a very close

friendship.122 He agreed to become president of the Nugan Hand Bank

and to represent Nugan Hand Ltd, Nugan Hand (Hong Kong) and the Bank in

the United States. Before joining the Group, he made several inquiries

concerning it, including an inquiry of the Manager of the ANZ Bank, Pitt

and Hunter Streets branch.124 He commenced employment in mid 1977,

establishing offices for the Group in San Francisco and Washington D.C.

His job was to persuade United States banks to deposit money with the

Group but, although he approached all the major banks, he was

unsuccessful in his endeavours. He also participated in a number of

other projects, including the unsuccessful negotiations for the takeover

of the United Chinese Bank [see 3.5.40], and the establishment of offices

in Taipei and Manila. Some of his time was also taken up by a project

that Mr Hand was endeavouring to achieve which involved the relocation of

refugees from Vietnam to islands in the West Indies. Admiral Yates' good

reputation was used by the Group to establish its credibility and help

promote a respectable image. He was featured in many advertisements and

newspaper articles associated with it.

- 475 -

3.4.85 His major contribution to the Nugan Hand Group was his ability

to introduce Nugan Hand personnel to important people in South East Asia

and the United States; in particular he was instrumental in introducing

a number of other high ranking former United States military officers to

the organisation. In -mid 1977 he persuaded General E. Cocke

[profile 2.13], whom he had known for some years, to provide him with

office space for the Group in Washington D.C. General Cocke, who was

(and at the time he gave evidence still was) a registered lobbyist on

Capitol Hill with his own management consultancy business, later agreed

to work as a consultant for Nugan Hand (while retaining his own

consultancy practice) and assisted Admiral Yates in the formation of

Nugan Hand (International) Inc. [Appendix B] in the United States.

3.4.86 In October 1977, General E.F. Black [profile 2.8], formerly

Assistant Army Chief of Staff for the Pacific, accepted Admiral Yates'

invitation to join the Group and became the Nugan Hand representative in

Hawaii. He remained with the Group until its collapse in April 1980, and

was also part of the Nugan Hand negotiating team for the United Chinese

Bank [3.5.40].127 Mr D.O. Holmgren [profile 2.34], the Nugan Hand

representative in Taiwan in mid 1978, was also introduced to the Group by

Admiral Yates."*"2® Mr Holmgren had been an officer of the United States

Armed Forces, assigned to the Military Assistance Advisory Group in

Taiwan and was later employed by Civil Air Transport.

3.4.87 In 1977 Admiral Yates invited Mr Beazley [profile 2.7], whom he

knew as a man with banking experience, to join the organisation, but at

that time Mr Beazley refused. He accepted later and became President of

the Nugan Hand Bank in October 1979.

3.4.88 The presence of so many Americans with military backgrounds in

the organisation gave rise to speculation in the media and elsewhere that

the Nugan Hand Group had a connection with the Central Intelligence

Agency of the United States government. These allegations and the

Commission's findings in relation to them are dealt with in Part 4

Section 3.

- 476 -

Mr Ward's resignation

3.4.89 The records lodged by Nugan Hand Ltd with the New South Wales

Corporate Affairs Commission indicate that Mr Ward resigned his

directorship in July 1977. Mr Ward told the Commission that he resigned

at a much earlier date than that officially recorded by the Corporate

Affairs Commission.129 He said that he verbally resigned all

directorships in late 1976 when it was announced that Mr Hand was taking

over the international division. Mr Ward decided to leave the Group

towards the end of 1976 because he became disenchanted with the attitude

of Mr Hand towards him. After being informed of his intention, Mr Nugan 131

asked him to stay on for some months longer. A memorandum, written

by Mr Ward on 21 March 1977 in connection with the Trade Services

Division indicates that Mr Ward was still employed by the Group at that 132 date. Mr Ward told the Commission that he commenced work with

Mr Anthony J. Pierce about March 1977 and in July 1977 he and Mr Pierce

formed a company known as Ward Pierce International Pty Ltd. However, he

occupied an office in the Nugan Hand offices until June 1977, on the

understanding (with Mr Nugan) that he could carry out work for the Group 133

as well as other unrelated activities. Mr Ward assessed his major

contributions to the Group as being the introduction to it of

Messrs Ceilings and Dunn, the obtaining of the banking licence for the

Nugan Hand Bank and his part in the establishment of the Group's

134

international operations.

Mr Dunn's resignation

3.4.90 Mr Dunn resigned his directorships and ended his two year

association with the Group in September 1977. During that time he had

worked mainly as a sales representative collecting deposits on the

Group's behalf in Sydney and South East Asia, particularly Hong Kong. In

this regard, he had some early success. He told the Commission that in

early 1976 he collected between four and six million dollars (Australian)

in deposits for Nugan Hand Ltd in Sydney in a three month period.134®

He briefly held the position of managing director of the company in early

1976, and was also appointed a director of the Bank and of Nugan Hand

- 477 -

(Hong Kong). From August 1976 he travelled throughout South East Asia

seeking deposits on behalf of the Group. In February 1977 he replaced

Mr Collings as manager of the Hong Kong office, when Mr Ceilings went to

Thailand to manage the office in Bangkok. His main job in Hong Kong was

to attract deposits from corporate investors to the Nugan Hand Bank and

Nugan Hand (Hong Kong). Throughout his association with the Group, he

was paid extremely generous commission and enjoyed advantageous salary

arrangements.

3.4.91 Mr Dunn said he resigned because he felt he should have been

offered a 'partnership' by Messrs Nugan and Hand. He said his

negotiations with Messrs Nugan and Hand to that end 'kept falling 135 _

down'. He subsequently joined Mr Ward in Ward Pierce International

(later Ward Knight and Dunn Ltd)

3.4.92 Mr Dunn's response to questions put to him by the Commission

concerning his understanding of his obligations as a director of Nugan

Hand Ltd was typical of the response of the other directors, with the

exception of Mr Hill. He told the Commission that during the period of

his directorship of the various Nugan Hand companies already referred to,

he had little or no understanding of his responsibilities and duties as a

member of the board of directors. He told the Commission that he

believed he was asked to lend his name as a director of the Bank because

he was a relatively presentable person 'who cut a clean cut image'. He

had no other functions as a director

3.4.93 In August 1977 Mr Hand moved from Hong Kong to Singapore and

there established an office which became the administrative headquarters

of the Nugan Hand Bank and of the various companies of the Group

incorporated outside Australia. Mr Hand employed an accountant and some

secretarial staff. The original records (to be distinguished from those

rewritten by Mr Brincat) relating to the Bank were held in Singapore.

Second capital injection into Nugan Hand Ltd

3.4.94 Precisely why Messrs Nugan and Hand decided to 'increase' the

paid up capital of the company is not clear. Some evidence suggests it

- 478 -

may have been thought desirable as assisting in their negotiations to

purchase the F.A. Neubauer Bank in Germany [profile 2.109; see also

3.5.35-3.5.37]. Whatever the reason, the accounts as at 31 January 1978

stated that the paid up capital was now $2 million. The addition of this

further $1 million was based on an elaborate series of transactions all

designed to give the appearance of an increase in paid up capital of

$999 995. This matter is fully described at 5.88 to 5.102.

Adverse publicity emanating from the Nugan Fruit Group

3.4.95 A major problem which confronted the Nugan Hand Group from 1977

onwards was the disastrous effect of adverse publicity which, although

arising from the Corporate Affairs Commission investigation into the

Griffith based Nugan Fruit Group, nevertheless embroiled Mr F.J. Nugan,

as well as his brother Mr K.L. Nugan who controlled the Fruit Group. The

reasons for Mr F.J. Nugan becoming involved in this much publicised

controversy are explained at 3.1.32 to 3.1.33. The Corporate Affairs

Commission investigation commenced in the latter half of 1977 and in

October 1977 was upgraded to a special investigation. The resultant

adverse publicity was such that at a conference in January 1978, Mr Hand

described 1977 as 'the most trying period which Frank and I have ever 142 been through in our lives'. Mr Nugan added that shortly after

11 November 1977, there had been, on one day, 'a run' of about 30 per 143 cent on the company's total deposits.

3.4.96 In November 1977 the first of a series of payments from Nugan

Hand Ltd was made to Nugan (Griffith) Pty Ltd to cover unusual expenses

incurred by the Nugan Fruit Group [profile 2.114] as a result of the

Corporate Affairs Commission special investigation."^

3.4.97 On 29 May 1978 Mr F.J. Nugan, Mr K.L. Nugan and others were

charged with criminal offences relating to the conduct of the affairs of

the Fruit Group. The charges resulted in lengthy and very expensive

committal proceedings paid for substantially out of the funds of Nugan

Hand Ltd [see 5.114-5.115], In November 1979, a prima facie case was

found against both brothers for certain offences. Mr K.L. Nugan told the

- 479 -

Commission that, at the outset of the committal proceedings, Mr F.J.

Nugan said, 11 want to control this defence, it is the only way a group

defence can be run, and I will pay everybody's costs provided that the

defence goes the way I want it to go'. Mr K.L. Nugan agreed to this

145

course. In addition to this arrangement, in October 1978, pursuant

to a further request from Mr K.L. Nugan, Mr F.J. Nugan agreed to lend

funds to the Nugan Fruit Group to provide it with short term financing.

The Fruit Group was then experiencing financial difficulties as a result

of the adverse publicity flowing from the committal proceedings.

3.4.98 The result of these arrangements was that between November 1977

and October 1979 Mr F.J. Nugan paid a total of $1 807 500 to Nugan

(Griffith) Pty Ltd. Of this amount $1 125 000 was repaid leaving a

balance of $682 500 outstanding. A further $231 000 was paid to the 145a

liquidator leaving a net difference of $451 500. This money was

used to meet legal costs associated with the Nugan brothers defence, and

as working capital for the Fruit Group. Evidence before the Commission

establishes that the source of the bulk of this $1 807 500 was Nugan Hand

Ltd. This series of payments is a further instance of Mr F.J. Nugan 146

utilizing the funds of the company for his own private purposes.

3.4.99 Mr F.J. Nugan did not pay the moneys directly to Nugan

(Griffith). Instead, he channelled the funds of Nugan Hand Ltd to the

Fruit Group utilising a series of Nugan Hand companies, thereby

disguising the source of the money and distancing himself from the Fruit

Group.447 [See 5.114 where a diagramatic explanation appears.]

3.4.100 Mr K.L. Nugan told the Commission that early in the committal

proceedings, he and his wife signed, at Mr F.J. Nugan's insistence, a

share transfer form relating to 600 000 shares in Nugan (Holdings) Pty

Ltd, a member of the Nugan Fruit Group. He said that the share transfer

was intended by Mr F.J. Nugan to be security for the loans by him to the

Fruit Group. He said that no transfer of shares subsequently

occurred,44® Ihe share transfer form was apparently handed to Mr F.J.

Nugan's wife by him some weeks before his death.44®

- 480 -

3.4.101 At the end of 1977 the Group, as well as its established offices

in Sydney, Hong Kong and Singapore, had representation in a further eight

overseas countries including Singapore (Steer), Malaysia (Louey),

Thailand (Owen), West Germany (Schuller), Argentina (Courtney-Smith),

Brazil and Chile (Galicek). Admiral Yates had joined the Group and

established a Nugan Hand office in Washington D.C., and General Black had

been appointed Nugan Hand representative in Hawaii. A representative

office had also been established in London by Mr Gilder. Negotiations

were under way for the purchase of the F.A. Neubauer Bank [profile

2.109], a German bank, of which more is said later [3.5.35-3.5.37]. By

the end of 1977 the Group claimed to have a staff of 70, of which 24 were

based in Sydney, and the remainder overseas.

3.4.102 The major overseas offices were Hong Kong and Singapore.

Mr Hand had moved to Singapore in August 1977, making it his headquarters

and the administrative office for the Nugan Hand Bank. The Bank had by

that stage been operating for over a year. The Singapore accounts of the

Bank indicate that it had collected US$4,287 million in deposits by i κι

30 June 1977. Mr Gilder told the 1978 Bangkok conference of the

Group [see 3.5.43] that during 1977 the overseas offices had attracted

US$3 million in deposits to the Nugan Hand Bank and earned US$82 000 in 152 trade and consultancy fees.

3.4.103 The newly employed Bank representatives met with varying degrees

of success during 1977. In Chile, Brazil, Argentina and West Germany,

the representatives were totally unsuccessful in collecting deposits or

earning fees from trade transactions. The Chiang Mai office, opened by

Mr Evans in February 1977, had closed in July with his departure from

Thailand. The Bangkok office had not been successful. The

Singapore and Malaysian representatives were by far the most successful,

having collected a total of US$722 000 on behalf of the Bank by the end

of 1977.154

3.4.104 The Hong Kong office was responsible for the collection of most

of the US$3 million collected overseas on behalf of the Bank in

- 481 -

1977. Nugan Hand (Hong Kong) had also collected about US$950 000 on its

own behalf. The services offered by the Hong Kong office had been

expanded to include trade consultancy and the incorporation of nominee

companies, and there had been a corresponding increase in personnel.

- 482 -

SECTION 5 : EXPANSION CONTINUES - BUT FALTERS IN THE FACE OF ADVERSE PUBLICITY

(THE YEAR 1978)

3.5.1 As published the consolidated accounts for 31 January 1978

appeared in the following form (leaving aside irrelevant material):

SHAREHOLDERS' FUNDS

Paid-Up Capital Capital Profits Reserve Unappropriated Profits

2 000 000

85 044 139 944

TOTAL SHAREHOLDERS' FUNDS $ 2 224 988

Represented By:

CURRENT ASSETS

Cash on Hand and at Bank 14 993

Sundry Debtors 26 914

Short Term Loans & Deposits 1 623 725

Commercial Bills Discounted 10 738 351

Government Treasury Notes -

Negotiable Certificates of Deposit 2 238 501 Government Bonds 77 559

14 720 043

INVESTMENTS

Unrelated Company 5

FIXED ASSETS

Office Equipment 2 306

Office Furniture & Fittings 50 214

52 520

INTANGIBLE ASSETS

Formation Expenses 117

TOTAL ASSETS Carried Forward 14 772 685

- 483 -

CURRENT LIABILITIES

TOTAL ASSETS Brought Forward 14 772 685

Creditors - Trade 4 388

- Other 40 138

Loans 36 838

Money Market Borrowings - Secured 9 100 351

- Unsecured 3 300 892 12 401 243

Provisions - Taxation 44 090

- Dividend 21 000

TOTAL LIABILITIES 12 547 697

NET ASSETS $ 2 224 988

CONSOLIDATED PROFIT AND LOSS STATEMENT

FOR THE YEAR ENDED 31 JANUARY 1978

Operating Profit Before Income Tax 88 000

Income Tax Expense 44 090

Operating Profit 43 910

Net Extraordinary Items 11 473

Operating Profit and Extraordinary Items 55 383

Unappropriated Profits Brought Forward 114 534

169 917

Add: Taxation Adjustment Previous Year -

Dividend Adjustment Previous Year 2 500 Loan Account Written Off -

2 500

172 417

Less: Appropriations:

Transfer to Capital Profits Reserve 11 473 Provision for Ordinary Dividend 21 000

32 473

Unappropriated Profits $139 944

- 484 -

3.5.2 Among the notes which accompanied the accounts were included the

following:

'SECURITIES ON HAND

Commercial Bills Discounted 10 738 351

Government Treasury IJotes -

Negotiable Certificates of Deposit 2 238 501

Government Bonds - at cost 77 559

(Face Value $13 344 000) $ 13 054 411

MONEY MARKET BORROWINGS Borrowings Secured $ 9 100 351

Secured over the following Securities:

(a) Commercial Bills Discounted 9 051 000

(b) Government Savings Bonds 70 000

(c) Negotiable Certificates of Deposit 1 600 000

$ 10 721 000

Above Securities are listed at face value. All repayable within twelve months.1

3.5.3 These accounts continued to misrepresent the true position.

First, the amount of paid up capital, previously misrepresented as

$1 000 005, had been increased to $2 000 000. This followed the

contrivances providing for the second capital injection carried out in

August to November 1977 [described at 5.88-5.103]. In fact, the

situation had not changed since 1974 in that the company had received

funds amounting to only $105.

3.5.4 The entry 'sundry debtors' included an amount of $9 039, a debt

due from Nugan Hand Trade Services Pty Ltd [profile 2.98], a company of

which Messrs Nugan and Hand were directors. The fact of the debt being

due from a company whose board comprised directors that were common to

Nugan Hand Ltd, should have been noted in the accounts.^

- 485 -

3.5.5 The entry 1 commercial bills discounted1 included an amount of

$5,844 million which comprised internal bills. These merely disguised

the syphoning off of Nugan Hand Ltd funds through Nugan Hand

International Holdings Pty Ltd [profile 2.96] and through Yorkville

Nominees Pty Ltd [profile 2.108]. Excluded from this figure of

$5,844 million was, of course, the $1.3 million which had been removed

from the records by the exercises carried out in early 1977 [described at

3.4.71-3.4.74]. This amount of $5,844 million accounted for more than

half the bills entry in the balance sheet and moreover, constituted the

largest amount included in the commercial bills entry in respect of

internal bills over the five annual accounting periods of Nugan Hand

Ltd.2

3.5.6 Mr G.F. Brincat [profile 2.9], accountant and auditor of Nugan

Hand Ltd and the associated companies concerned, was, together with

Mr F.J. Nugan and Mr Hill, aware of the internal bills exercise. He

signed the audit certificate in respect of 31 January 1978

notwithstanding the gross distortion introduced by the internal bills.

He told the Commission that he was concerned about the use of the

internal bills and had expressed concern to his partners, Messrs Pollard

and Heuschkel [see profiles in Part 2], His partners were sufficiently

perturbed by the use of the internal bills to seek legal advice.

Mr Nugan intervened at this point and persuaded the partners to accept

the view of his own solicitor, Mr John L. Aston, that the use of internal

bills was not inappropriate although it should be the subject of a

suitable note to the accounts.2 The evidence disclosed that there had

been a note in the directors' report concerning the use of internal bills

since 31 January 1976, but this note was not incorporated in the accounts 4 themselves until 31 January 1979. Its content was entirely inadequate

and made the position no clearer to the reader of the accounts. It was

couched in the following terms:43

'niRECTORS INTERESTS

The Company entered into various transactions relating to the purchase and sale of money market securities with various Companies in which Directors have a substantial financial interest, in the course of carrying on its business. There were

also fees for services rendered received from Companies in which Directors have a substantial financial interest.1

The 'Writing Off' of $3.2 million

3.5.7 In May 1978, according to Mr Brincat, a somewhat similar

exercise was performed by him in the records of Nugan Hand Ltd to the one

he had carried out in early 1977 [see 3.4.71-3.4.74]. On this occasion

the scheme was more elaborate and brought about an apparent reduction by

$3.2 million in the level of internal bills held by Nugan Hand Ltd.

3.5.8 In brief, Mr Brincat made entries in the records of Nugan Hand

Ltd and in the records of Yorkville Nominees Pty Ltd (hereafter referred

to as Yorkville Nominees) which purported to record these 'transactions'

alleged to have taken place on 24 May 1978.J The alleged transactions

as recorded by Mr Brincat in his book entries included two alleged sales

by Mr Nugan of bills of exchange (which were not his to sell) to

Yorkville Nominees which company then purported to sell the bills to

Nugan Hand Ltd.6 Other entries set out the purported transfer from

Nugan Hand Ltd of the liability to repay two of that company's overseas

depositors, that liability being 'transferred' to Yorkville Nominees.7

Neither the depositors nor the Reserve Bank of Australia were consulted

about these alleged 'transfers' of liability.8 Yorkville Nominees was

in no position, leaving aside other matters, to assume any such liability

because it did not have the funds nor the access to funds to discharge

any such liability. Entries were then made by Mr Brincat in the records

of Nugan Hand Ltd, in particular in the Bill Control Cards, which entries

purported to record a cancelling of internal bills drawn on Yorkville 9

Nominees to the extent of $3.2 million. In fact the 'consideration'

alleged to have passed from Yorkville Nominees to Nugan Hand Ltd to bring

about this reduction fell short by an amount in excess of $700 000. This

difference was taken up by Mr Brincat by creating in the books of

Yorkville Nominees a 'special advance account' to which this difference

was transferred."*"8 In the next set of Nugan Hand Ltd accounts the

amount, which had been slightly reduced, was shown simply as a debt under

the entry 'sundry debtors' . " * " " * "

3.5.9 The records of Nugan Hand Ltd as at 31 January 1978, in

particular the Bills Placement Register, included six negotiable

- 487 -

certificates of deposit which did not belong to the company (being the

property of Nugan Hand (Hong Kong) Ltd (hereafter referred to as Nugan

Hand (Hong Kong)) but which were, notwithstanding that fact, pledged to 12

the company's depositors to secure their deposits. Mr Brincat, the

auditor, ultimately admitted that at the time he carried out the audit in

respect of the accounts of 31 January 1978, he knew that the securities

in question had been pledged by Nugan Hand Ltd to its own depositors and " ’ 13

that they were not the property of Nugan Hand Ltd.

3.5.10 The Group's arrangement with the Wing On Bank had continued

since mid 1975. In January 1978 at the request of the Group, the Wing On

Bank closed its safe custody account at the Bank of New South Wales (as

it then was) and opened a similar account at the Pitt and Hunter Streets

branch of the ANZ Bank, Sydney. Nugan Hand Ltd had already

transferred its principal accounts to this branch of the ANZ Bank in

March 1976 to take advantage of a within-the-day overdraft facility which

the ANZ Bank was prepared to offer Nugan Hand Ltd [see 3.4.7-3.4.9].

3.5.11 At the time of the transfer, the safe custody account held

securities lodged by Nugan Hand Ltd with a face value of $5.7 million. 14

Of these securities, $2.7 million conprised internal bills, drawn by

puppet companies and accepted or endorsed by Nugan Hand Ltd including

bills with a face value of $500 000 accepted by Secured Income Real

Estate (Australia) Ltd [profile 2.118] and bills with a face value of

$500 000 accepted by North Australian Rubber Mills Ltd [profile 2.113].

By the end of 1978, the total face value of securities held in the safe

custody account was $4.6 million, of which $3.1 million were internal

bills. Indeed, during 1978 the face value of internal bills varied

between $2 million and $3.1 million."*"

3.5.12 Despite the regular flow of information from the ANZ Bank in

Sydney to the Wing On Bank in Hong Kong which information was intended to

identify the securities placed in the safe custody account at any given

time, this information did not provide a qualitative monitor of the bills

concerned. The ANZ Bank merely conveyed information lacking this vital

element with the result that the Wing On Bank was not fully aware of the

- 488 -

identity of all Nugan Hand Ltd companies and was therefore not in a

position to determine whether a party to a bill lodged in the account was

associated with or independent of, the Nugan Hand Group.16 This

confusion permitted Nugan Hand 'paper1 to be lodged having a face value

above the limit agreed upon for such paper [see 4.1.49].

Adverse publicity

3.5.13 The adverse publicity arising out of the Nugan Fruit Group

[profile 2.114] investigation continued to dog the Nugan Hand Group

during the course of 1978. On 29 May 1978 it was announced in the press

that warrants had been issued for the arrest of the Nugan brothers and

others in respect of two counts of conspiracy, a conspiracy to defraud

Nugan Group Ltd and conspiracy to defraud the shareholders of Nugan Group

Ltd.16a The following day it was reported that charges had been

preferred against them following a six month investigation by the New

South Wales Corporate Affairs Commission.16*3 The committal proceedings

attracted attention in September of that year when details of the

conspiracies to defraud and offences concerning the Companies Act 1961

were aired in the daily press on several occasions during the course of 16c that month. The alleged involvement of Mr F.J. Nugan in these

matters caused adverse reaction overseas as well as in Australia [see

3.5.49-3.5.51].

The Orange Spot Group

3.5.14 Further adverse publicity arose as a result of litigation

concerning Mr Nugan1s negotiations for the purchase of the Orange Spot

group of companies [profile 2.116]. The Financial Review recorded the

commencement and settlement of the action in articles on 1 and 18 August

1978. Mr Nugan1s interest in the companies was first aroused when he

was asked to advise the proprietors whether they should be sold or

refinanced and in due course he commenced negotiations to purchase them

himself.1®

3.5.15 The Orange Spot group of companies comprised a holding company

with a number of subsidiaries the physical assets of which were basically

- 489 -

a fruit juice factory at Redfern occupying premises pursuant to a lease

due to expire within the year. The proposed acquisition was not in fact

a sound proposition because of the unprofitable nature of the factory and

the high purchase price, and Mr Nugan was advised against the purchase by 19 both Messrs Hill and Brincat.

3.5.16 The purchase was seen by Mr Nugan to be attractive for other

reasons. He wished to acquire a business capable of distributing

franchises in the metropolitan area so that he could implement a tax

scheme. The aim of the scheme was to enable his clients to obtain 'paper

deductions' in respect of expenses allegedly incurred in the course of

operating those franchises [see 9.11]

3.5.17 Mr Nugan eventually came to the conclusion that this group of

companies was not worth the purchase price he had agreed to pay for it.

According to the evidence of Mr George, Mr Nugan repudiated the contract

and the vendors sued for specific performance. In turn Mr Nugan sued for

recovery of funds already paid. The sale agreement was signed on

19 March 1976 for which the consideration was $750 000.21 Of this

amount two instalments of $35 000 had already been paid. In addition

Mr Nugan had made further substantial payments to creditors of the

companies. Mr Nugan contended, amongst other things, that the contract

was too uncertain to be binding, that the contract had been breached, and

that there had been misrepresentations inducing the contract. He further

contended that the so called instalments were loans to the Orange Spot 22 Group.

3.5.18 The action for specific performance was settled in August 1978

pursuant to terms which had, as a consequence, the outlay by Mr Nugan of . 23

an amount in excess of $1 million in relation to the purchase.

3.5.19 Payments made during the course of negotiations and at the time

of settlement were in fact made from Nugan Hand Ltd funds and passed

through a number of related companies including Yorkville Nominees and

Nugan Hand International Holdings Pty Ltd [profile 2.96]. This was

concealed in the usual way in the books of Nugan Hand Ltd by the use of 24 the internal bill scheme.

- 490 -

3.5.20 As a result of this litigation Mr Nugan was able, on

14 September 1978, to provide the ANZ Bank with a copy of the judgment

which stated that by consent the Court had ordered a verdict for the

defendant (Mr Nugan). This had the appearance, which he intended, of a

victory for Mr Nugan. As always, his major concern was to preserve

appearances and in the process, he took the opportunity to express

dissatisfaction with the way the press had reported the court case.2^

In fact the settlement represented a very expensive defeat for Mr Nugan

paid for, however, out of the funds of Nugan Hand Ltd.

The Distravite companies * 2 7

3.5.21 During the period when the Orange Spot litigation was dragging

on, with Mr Nugan refusing to complete the purchase, he put into effect

the artificial franchise tax schemes through other companies. He caused

a company named Apollo Land and Development Pty Ltd which had been

incorporated in 1969 to be renamed Distravite Pty Ltd [profile 2.82] in

February 1978, and a second company named Distravite Australia Wide

Servicing Company Pty Ltd [profile 2.81] to be incorporated in April

1978.26 Mr Calder [profile 2.11] who at Mr Nugan's request became a

director and secretary of both companies, was instructed by Mr Nugan that

the companies were to operate at two levels, first as a legitimate

business selling vitamins and orange juice and secondly as a tax evasion 27 '

device.

3.5.22 It was proposed that Distravite Pty Ltd would grant franchises

and that Distravite Australia Wide Servicing Company Pty Ltd charge fees

for 'operating' the franchise on behalf of the client. The client was

granted a franchise for a particular area subject to an annual franchise

fee based on sales or population of the area, which fees were claimed as

taxation deductions. In fact the fees, less a fee for Nugan Hand Ltd,

were returned by way of a non-repayable 'loan' or by the acquisition of

shares in the company which had been granted the franchise.2

3.5.23 In the event, the Distravite tax scheme was eventually rejected

by the Commissioner of Taxation in respect of the financial year ending

- 491 -

on 30 June 1979. This rejection was the subject of discussion by

29

Mr Nugan and others on the day before his death. According to

Mr E.P. Harland [profile 2.28], whose area of expertise was taxation,

objections to the assessment were unlikely to be successful, tax would

have to be paid and the future for any further such tax schemes was

unpromising. This was of particular significance to Mr Nugan who had

always claimed, when the profitability of other areas of the Group's

operations was brought into question, that his tax schemes were

successful and a reliable source of revenue [see Part 9].

Alleged Drug Connections * 3 1 3 2

3.5.24 Early in 1978, if not before, it came to Mr Nugan's attention

that the Federal Narcotics Bureau was investigating possible links

between the Nugan Hand Group and drug trafficking [see also Part 6].

Mr S.K. Hill [profile 2.33] gave evidence to the Commission that Mr Nugan

spoke to officers of the Bureau on at least two occasions and on each

occasion Mr Nugan requested of Mr Hill a list of depositors with the

Nugan Hand Group. On the second occasion he emphasised that the list

should include all of Mr Shaw's clients. According to Mr Hill, Mr Nugan

had the second meeting because he had been unable to convince the Bureau 31

that the Nugan Hand Group was not involved in drug trafficking [see

Interim Report No.1].

3.5.25 Mr Nugan's approach to the Bureau would seem to have been

prompted by newspaper speculation about Griffith as a centre for the

growing of marijuana and the association between the Nugan Fruit Group

and Nugan Hand Ltd. Further, Mr J.L. Aston had apparently told Mr Nugan

that the Bureau in Canberra had a large board with a diagram showing 'all 32

the drug dealers', which included Nugan Hand Ltd.

3.5.26 One meeting with the Bureau which occurred on 14 February 1978

was tape recorded by the Bureau's officers [see also 6.50]. It was clear

from the record of that meeting that Mr Nugan's objectives in visiting

the Bureau were to complain about the Bureau's investigation into the

Nugan Hand Group's activities and the unfair publicity he believed he was

- 492 -

deriving from that. In addition, he wished to dissociate himself from

the activities of the Nugan Fruit Group in Griffith which was then being

investigated by the New South Wales Corporate Affairs Commission.

Significantly, Mr Nugan recalled that he had been approached by both The

Daily Telegraph (Sydney) and The Financial Review concerning the

investigation being conducted by the Bureau into the Nugan Hand Group.

This, together with Mr Aston's comments and other press speculation

undoubtedly unnerved Mr Nugan sufficiently to prompt his approach to the 33 Bureau. In any event it would seem that Mr Nugan concluded that

certain of Mr Shaw's clients were involved in drug dealing and on his

return from the Bureau he instructed Mr Shaw to cease taking deposits

from these people3^ [see Part 6].

The 'Expansion' of the Nugan Hand Group * 1 0

3.5.27 The falsification of the books and accounts of the Nugan Hand

Bank which had commenced in 1977 continued in 1978 [ refer to Part 4

Section 2], In June 1978 Mr Brincat visited Singapore to check the

records and bring about a completely new set of records for submission by

Mr Hill to the auditors in the Cayman Islands later in the year. The

discrepancy between the real and the fabricated accounts increased with

the former accounts showing a loss of US$1,495 million while the latter

showed a profit of US$79 894.33

3.5.28 Notwithstanding the declining fortunes of the Nugan Hand Bank

(not, of course, reflected in the audited accounts), new offices were

still being opened during the course of 1978. The China Post reported on

10 May 1978 that officers of the Nugan Hand Group were meeting in Taipei

to survey the situation with a view to establishing an office in

Taipei.36 The office was subsequently opened later that month,37

with Mr D.O. Holmgren [profile 2.34] as representative.36

3.5.29 An office was opened in Chile with Mr Galicek [profile 2.22] as

representative and the name of Nugan Hand (Chile) Inc. was registered in 39

October 1978 with a view to incorporation six to eight months later

[see 3.4.55], The Frankfurt office which had been opened the previous

- 493 -

year with Mr K.F. Schuller as representative was duly incorporated as 4Π

Nugan Hand (Deutschland) GmbH in March 1978.

3.5.30 Similarly, steps were in hand during the course of 1978 to open

an office in The Philippines. Thus The Manila Times on 10 May 1978

reported statements by Admiral E.P. Yates [profile 2.76] that Mr W.P.

Gregory [profile 2.26] would be opening an office in Manila.41 Later

in August 1978 the premises were obtained though it was not until March

1979 that the building was officially opened by Ambassador Benedicto, a

member of President Marcos' Cabinet42 [see 3.5.48],

3.5.31 This activity was presented by the Group to the outside world in

terms of substantial growth but in reality, in many cases, the term

1 representative office' was applied to what was sometimes no more than a

telephone number.

Secrecy

3.5.32 The Group's concern with confidentiality saw the introduction of

a simple code for use in correspondence to indicate sums of money and a

more intricate, if not confusing, device called the account

identification card which was introduced by Mr Hand. Both were

introduced in June 1978 and supplemented the already existing code for

clients' names. The former used letters of the alphabet to represent the

amount of deposits in units of $5 000. Thus $5 000 would be represented

by A, $10 000 by B, $20 000 by C and so on, with $15 000, for example

represented by A B .42 The more complicated account identification card

had on its face horizontal lines of figures arranged sequentially from 0

to 9 with letters of the alphabet listed vertically at the edge of the

card. By marking the appropriate number on the appropriate line or the

appropriate letter, certain details of the client would be recorded, for

example, the year and month in which the account holder became a client,

the officer administering the account, the credit risk of the client as

well as the client's country of origin. This complicated device showed

an obsession with secrecy such that the accuracy of the information was 44

put at risk by the very means used to protect its confidentiality.

- 494 -

United States ex-military personnel

3.5.33 Admiral Yates continued to recruit American ex-military

personnel to the Group. General E.F. Black [profile 2.8] was recruited

by him to the Nugan Hand Bank in late 1977, although by March 1978

administrative arrangements concerning his office or indeed his contract

of employment had yet to be finalised.^ General Black had been

Commander of the United States troops in Thailand during the Vietnam war

and later Assistant Army Chief of Staff for the Pacific^®

[see 3.4.86]. Foremost in the minds of Messrs Nugan and Hand in

recruiting General Black, as with all Admiral Yates' colleagues recruited

to the Group, was his ability to help them meet, and establish

credibility with, influential people in South East Asia. They appointed

General Black as the Nugan Hand Bank's representative in Hawaii.

3.5.34 It was towards the end of 1978 that Mr M.B. Houghton

[profile 2.35], a friend of Mr Hand's for many years (and who had

introduced Admiral Yates to Mr Hand), agreed to work for the Group. This

commenced with a visit to Hamburg to assess the operations of the

F.A. Neubauer Bank [profile 2.109] for which the Group had commenced a

takeover bid in January 1978 and an exploratory visit to Saudi Arabia to

assess the market for Nugan Hand Bank operations. In common with other

employees, Mr Houghton had no banking expertise. Mr Hand had been a

regular customer of Mr Houghton's Bourbon and Beefsteak bar and

restaurant situated at Kings Cross, Sydney [see 3.4.83, 3.5.39],

Germany

3.5.35 The F.A. Neubauer Bank was a long established German bank

registered in Hamburg. Mr Houghton's assessment, formed without the

benefit of either banking expertise or an understanding of the German

language, was that there was no activity in the office which appeared to

be generating any business, there was no money changing hands, no 47

customers entering the office and few telephone calls.

3.5.36 The rationale for the purchase was, yet again, to attempt to

establish credibility and to overcome as far as possible the effects of

- 495 -

the adverse publicity. It was also a means of obtaining a banking

licence in Germany which undoubtedly would have been denied to the Nugan

Hand Bank in its own right. In addition, it was no doubt hoped that this

acquisition would make the Group a more attractive proposition to a

prospective purchaser [see 3.8.92], An agreement for the takeover was

signed on 26 January 19784® and the takeover plans proceeded

notwithstanding Mr Houghton’s unfavourable report and an earlier

equivocal report by Mr A.P. Hewitt [profile 2.31]. Following a three

month survey conducted by Mr Hewitt who later became the Group's

representative at the Bank, he described the proposal as 'terribly

difficult' and a very long term project. Although long established the

Bank was small, reportedly having only a few hundred customers at the

time.49

3.5.37 Typically the arrangements for the acquisition of the

F.A. Neubauer Bank involved little or no outlay of capital on the part of

the Group. By an agreement dated 26 January 1978 Nugan Hand

International Holdings Ltd [Appendix B], acquired a capital share from

the partners in F.A. Neubauer Bank for DMl 720 000. One of the partners

retained a nominal share of DM19 000 and the relevant banking

licence. He also continued to act as general partner. There was

provision for payment of an additional DM500 000 to the partners but it

is not clear whether this was paid. Certainly the payment for capital

never occurred as the capital was pledged back to the vendors to secure

the DMl 720 000 purchase price and this pledge was not redeemed.

Following Mr Nugan's death, Mr Hewitt left the F.A. Neubauer Bank and, it

would seem, the Bank continued to operate with a Swiss banking

51

partner.

3.5.38 The occasion of the apparent acquisition of the Bank provided an

opportunity for further posturing and myth building, this time on the

part of the Singapore office where the announcement was made. Mr Hand

was reported as saying that 'the takeover was settled for cash', that

'MHI would be injecting into the German bank the equivalent of

£a 5 million over the next 12 months', that 'since 1970 NHL says, it has

grown from a small group of lawyers, accountants, and other advisers into

- 496 -

a mini titan with more than $A20 million in assets and a turnover for the

last financial year in excess of $1000 million'.52

Saudi Arabia

3.5.39 The initial feasibility assessment of Saudi Arabia by

53

Mr Houghton proved promising and he made a further four or five trips

before permanent office premises were established in the country. The

existing financial environment was ripe for a successful deposit taking

venture. A large highly paid expatriate workforce existed who were

unable to earn money on their savings under Moslem law. Mr Houghton was

able to scoop up money from these people on the basis that the depositors

were not only promised interest but also that they could withdraw the

money from overseas countries of their choice. Mr Houghton claimed in

evidence to have obtained legal advice that his deposit taking activities

were legal though he and his staff had to leave the country at regular 53a

intervals to comply with visa requirements. A first office was

opened in Alkobar and a second one in Jeddah. The high interest rates

and the confidential, and convenient service offered by the Nugan Hand

Group in Saudi Arabia compared more than favourably with other available

banking facilities. As a result millions of dollars (Mr Houghton roughly 54

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.

United Chinese Bank proposal

3.5.40 Yet another time consuming, expensive and abortive venture was

embarked upon during 1978. That this should be done appears to show that

the Group had learnt nothing from its previous mistakes. On this

occasion negotiations took place for the purchase of the United Chinese

Bank in Hong Kong from General S.K. Yee who owned 96 per cent of the

shares in that Bank. Admiral Yates on instructions from Mr Hand, or

possibly Mr Nugan, assembled a negotiating team comprising himself,

General Black and a Chinese Hawaiian named Mr Hung Y. Ching. The

- 497 -

negotiations were successful but Messrs Nugan and Hand told Admiral Yates

to discontinue the project because they could not find the purchase

price. There is evidence that a price of US$30 million had been agreed,

of which US$20 million was intended to be borrowed from the Bank of 55

America and US$10 million to be financed by the issue of debentures.

This venture was obviously beyond the means of the Nugan Hand Group

either by using its own funds or through borrowings but such was the air

of unreality that considerable time and effort was spent in attempting to

give effect to the proposal. One circumstance that emerged from the

negotiations provides the earliest known allegation of the involvement of

the Central Intelligence Agency with the Group [see Part 4 Section 3],

Mars Road Investments Pty Ltd

3.5.41 In Sydney a new coirpany was incorporated in October 1978 under

the name of Mars Road Investments Pty Ltd [profile 2.88] with an

authorised capital of 100 000 shares at one dollar each and an issued

capital of two dollars. The directors and shareholders were Messrs

George and Calder, but the company was operated substantially by Mr G.T.

Shaw [profile 2.65]. Officially its declared purpose was to trade in,

acquire and dispose of securities and real or personal property and to

carry on business as merchant bankers, investors, and investment

consultants. Unofficially, it was specifically created by Mr Nugan to

take over the deposit taking function of Yorkville Nominees Pty Ltd so as

to segregate it from the other functions of Yorkville Nominees such as

taxation schemes and put it at arm's length from Nugan Hand Ltd.

3.5.42 Potential depositors were advised that a lower interest rate

would be paid but that in return deposits would not be disclosed to

taxation or other authorities, interest would be treated for taxation

purposes as payable to Mars Road Investments Pty Ltd by Nugan Hand Ltd.

No explanation of the source of the deposit was required. Funds could be

deposited under an assumed name and then be laundered through various

schemes or an equivalent amount could be made available overseas, without

notifying the Australian authorities, using the Yorkville contra.5®

Not surprisingly, the company failed to keep proper books and records and

no auditor was appointed.

- 498 -

Conferences

3.5.43 I-Jith the emphasis on keeping up appearances at all costs

notwithstanding the enormous deficiency in Group funds that existed, 1978

also saw the instigation of a series of conferences - to promote staff

morale in the case of the in house conferences58 and to promote the

Group in the case of other conferences.5^ The first such event was an

in house conference held in Bangkok in January 1978. It was attended by

the senior executives of the Group and by a number of representatives

from Bong Kong, South East Asia, South America and West Germany. Both

Messrs Nugan and Hand made an opening and closing address, Mr J.M. Gilder

[profile 2.25] gave a resumg of past achievements and future goals and

each representative presented a report on the area in which he was then . . 60

working.

3.5.44 This conference was marked by a series of blatant falsehoods on

the part of Mr Nugan concerning the financial status of the companies

within the Group. He also made unrealistic predictions for future

performance together with more confessional comments concerning the

problems of the Group.5" * " In contrast, the representatives painted a

uniformly bleak picture of their lack of success in the market. Perhaps

it was hoped on the part of the senior executives to relieve the gloom

and infuse a positive perspective following the adverse publicity during

the latter part of 1977 which was continuing unabated.

3.5.45 Some twelve months later, a further in house conference was

held, at the Wentworth Hotel, Sydney from 3 to 7 January 1979. The

conference was attended by senior executives and sales representatives

from .South East Asia, South America and Germany. This conference

provided an opportunity for reflection upon the events of 1978.58

3.5.46 Although advised by Mr Gilder to emphasize the positive rather

than the negative aspects of the Group's past performance,58 the

representatives in their respective addresses to the conference, made

frequent references to their difficulties and failures.

- 499 -

3.5.47 The truth was of course that the representatives were for the

most part placed in an impossible position. They were untrained,

inexperienced in banking procedures and yet required to compete with

firmly established banks and other financial institutions. Moreover,

they were required to do so without the legitimacy conferred by

appropriate banking licences which necessitated an indirect approach and

a limited profile.

3.5.48 The optimism signified by the opening of new offices was not

rewarded. In Taiwan the representative reported an involvement in a

number of projects but none had so far proved successful. Likewise

the Philippines representative referred to the 'birth pains' of the new

office. The unimportance of the Philippines office in terms of

return to the Group belied the ostentatious publicity seeking nature of 66

its official opening by a Government Minister [see 3.5.30].

Adverse publicity overseas * 2 2

3.5.49 A recurrent theme in the speeches of the overseas

representatives at the January 1979 conference was the difficulty and

embarrassment caused by the publicity concerning the arrest and charging

of Mr Nugan in respect of the Nugan Fruit Group case and the long drawn

out committal proceedings. The media reportage of these proceedings had

reached the respective offices in the United States, Hong Kong,

Singapore, Malaysia and South America.

3.5.50 This concern over adverse publicity was also evident in the

Group's correspondence throughout 1978 both on the part of the officers

of the Group themselves and on the part of business associates. Thus on

22 August 1978, Mr J. McArthur [profile 2.46], a representative in the

Hong Kong office, wrote to a business associate in California offering

reassurance in the light of concern expressed in the United States over

the charges laid against Mr F.J. Nugan. Reference was made to 'the

problems which our chairman has been experiencing in Australia' and, as

reassurance, the charges were said to 'relate to legal interpretation

only'.68

- 500 -

3.5.51 Similarly, General Black the representative in Hawaii, wrote to

Mr Nugan on 26 April 1978 attributing his failure to obtain 'the hoped

for first Hawaiian deposit' and the breakdown in negotiations for

financing the purchase of the United Chinese Bank, to allegations arising

from the Corporate Affairs Commission investigation and the doubts

expressed by the Hong Kong Banking Commissioner on the subject of the

operations of Nugan Hand (Hong Kong) Ltd [Part 4 Section 1], According to

General Black

'The allegations of possible drug and Mafia money connections raised in the Australian investigation of your brother's business cast their long shadows in the background and cause the conservative banking community to have their private tizzys about the NH Group'.

Financial decline in 1978 * 7 0

3.5.52 The deteriorating fortunes of the Nugan Hand Group affected

Nugan Hand (Hong Kong) Ltd and Nugan Hand Bank as well as Nugan Hand

Ltd. Given that the accounts for Nugan Hand (Hong Kong) Ltd were no

indication of the true financial position of the company, the net profit

of US$174 964 disclosed in the accounts as at 31 December 1978 must be

discounted [see 4.1.87-4.1.95].

3.5.53 The Bank's deteriorating position can be seen by reference to

the records in the Bank's Singapore office. According to the June 1978

accounts prepared by that office, US$7.4 million of so called assets were

debts due from related companies while only $1.6 million constituted

Asian Currency Unit investments. Total income was recorded as

US$0.4 million which was only slightly more than the sum of commissions

and brokerages paid of US$0.39 million, this being only one item of many 70

incurred in respect of marketing and administrative expenses.

3.5.54 By 31 January 1978 Nugan Hand Ltd had in reality accumulated

losses to the extent of approximately $6 million [see Part 5],

3.5.55 There was little evidence that the continuing decline of the

Group led to any effective attempt to reduce expenses with one

- 501 -

exception. This concerned the method of payment of the representatives.

Thus in a letter dated 19 December 1978 General Black was advised by

Admiral Yates that a hard cut had to be made in the budget for 1979 and

accordingly the Board had decided to pay everyone on the basis of

, . . 71

expenses plus commissions.

3.5.56 By the end of the year, despite the serious deteriorating

position of the Group and the ground swell of adverse publicity the

Group's executives were continuing to appear in the pages of the

newspapers of the international business circuit. In November 1978, the

Business Standard of Hong Kong reported that the 'private bankers', Nugan

Hand International in conjunction with a visiting delegation of American

businessmen and technical experts travelling under the auspices of the

China Trade Corporation, hosted a reception in the Mandarin Club for Hong

Kong based officials and businessmen. This determination to continue

to create an appearance of growth and soundness, notwithstanding the

disastrous financial situation that existed behind the scenes, was to be

pursued to the very end.

- 502 -

SECTION 6 : PROBLEMS MULTIPLY - GROUP INSOLVENCY ACCELERATES - BUT APPEARANCES MAINTAINED UNTIL THE END

(THE YEAR 1979)

3.6.1 As published the consolidated accounts for Nugan Hand Ltd

[profile 2.97] as at 31 January 1979 appeared in the following form:

SHAREHOLDERS' FUNDS

Paid-Up Capital Capital Profits Reserve Unappropriated Profits

2 000 000

85 044 227 474

TOTAL SHAREHOLDERS' FUNDS $ 2 312 518

Represented By:

CURRENT ASSETS

Cash on Hand and at Bank 114 064

Sundry Debtors 805 557

Short Term Loans & Deposits 263 725

Commercial Bills Discounted 9,185 205

Negotiable Certificates of Deposit 3,182 103 Government Bonds 77 056

13 627 710

INVESTMENTS

Shares in Listed Companies Shares in Unlisted Companies

FIXED ASSETS

Office Equipment Office Furniture & Fittings

57 341

16 857 5

3 635

53 706

16 862

INTANGIBLE ASSETS

Formation Expenses 117

TOTAL ASSETS Carried Forward $ 13 702 030

- 503 -

TOTAL ASSETS Brought Forward 13 702 030

CURRENT LIABILITIES

Creditors - Trade 4 647

- Other 7 642

Loans 59 998

Money Market Borrowings - Secured 7,635,522

- Unsecured 3,612,685 11 248 207

Provisions ■ - Taxation 60 368

- Dividend 8 650

TOTAL LIABILITIES 11 389 512

NET ASSETS $ 2 312 518

CONSOLIDATED PROFIT AND LOSS STATEMENT

FOR THE YEAR ENDED 31ST JANUARY 1979

Operating Profit Before Income Tax 156 548

Income Tax Expense 60 368

Operating Profit 96 180

Net Extraordinary Items _________ -

Operating Profit and Extraordinary Items 96 180

Unappropriated Profits Brought Forward 139 944

236 124

Add: Dividend Adjustment Previous Year ________

236 124

Less: Appropriations

Transfer to Capital Profits Reserve -Provision for Ordinary Dividend 8 650

8 650

$227 474 Unappropriated Profits

- 504 -

3.6.2 Among the notes which accompanied these accounts were included

the following:

'SECURITIES ON HAND

Commercial Bills Discounted Negotiable Certificates of Deposit Government Bonds - at cost

9 185 205

3 182 103

77 056

(Face Value $12 820 000) $ 12 444 364

HONEY MARKET BORROWINGS Borrowings Secured 7 635 522

Secured over the following Securities:

(a) Commercial Bills Discounted 6 400 000

(b) Government Savings Bonds 60 000

(c) Negotiable Certificates of Deposit 2 900 000

$ 9 360 000

Above Securities are listed at face value. All repayable within twelve months.'

3.6.3 The accounts as at 31 January 1979 continued the

misrepresentations which had characterised the accounts to a greater or

lesser degree since 1974.

3.6.4 Thus, the paid up capital was misrepresented as $2 million

whereas the correct figure was $105. The sundry debtors shown in the

balance sheet as $805 557 comprised $733 062 due from Yorkville Nominees

Pty Ltd [profile 2.108] and $64 438 due from Secured Income Real Estate

(Australia) Pty Ltd [profile 2.118], Again, the accounts failed to

disclose that the so called sundry debtors item in fact comprised debts

due from related coitpanies.

3.6.5 The item for commercial bills discounted, of approximately

$9.2 million, included an amount of almost $5 million in respect of

- 505 -

internal bills."*" The face value of internal bills would of course have

been greater by almost the same amount again, had the events of 24 May

1078 and those of early 1977 not had the effect of reducing the level of

internal bills held [see 3.4.71-3.4.74 and 3.5.7-3.5.8],3

3.6.6 During the course of 1979 there were a number of transactions

between related companies ultimately involving receipts by, or payments

on behalf of, Nugan Hand Ltd which had the apparent effect of reducing

the debts due from Yorkville Nominees without the device of internal

bills, or by using internal bills in the case of Nugan Hand International

Holdings Pty Ltd to conceal payments such as those for Mr F.J. Nugan's

personal use, or using Nugan Hand Management Services (Pte) Ltd as a

conduit for overseas funds from the Nugan Hand Bank to the ailing local

operations of Nugan Hand Ltd.

3.6.7 In the six months to 30 June 1979 six deposits were made to

Nugan Hand Ltd which were either directed through, or treated as though

they had been directed through, Yorkville Nominees which resulted in the

appearance that a sum of $1,192 million was removed from the debt due

from Yorkville Nominees to Nugan Hand Ltd without resorting to the use of

internal bills.3

3.6.8 On the other hand, the internal bills recorded as having been

issued by Nugan Hand International Holdings Pty Ltd were permitted to

increase by the sum of $3.65 million for the year to 30 June 1979. The

real reason for this increase was that the latter company was being used

as a conduit to disguise payments from Nugan Hand Ltd to certain third

parties. This sum included an amount of $1.28 million for Mr F.J. Nugan

[profile 2.1] for purposes such as the purchase of the Orange Spot group

of companies and legal expenses channelled through Nugan (Griffith) Pty

Ltd in respect of the Nugan Fruit Group litigation.^

3.6.9 In July 1979, an amount of $1,198 million was channelled from

Hong Kong through Nugan Hand Management Services and credited to the

Yorkville Nominees loan account of Nugan Hand Ltd in Sydney,

notwithstanding that the approved borrower according to the Reserve Bank

- 506 -

was Nugan Hand International Holdings Pty Ltd."’ The original source of

the money was the Nugan Hand Bank and the transaction had the effect of

almost extinguishing the debt due to Nugan Hand Ltd from Yorkville

Nominees and providing much needed funds to Nugan Hand Ltd. A sum of

$500 000 was in fact repaid to the Nugan Hand Bank by Nugan Hand Ltd in

October 1979. This was achieved by channelling the money through Nugan

Hand International Holdings Pty Ltd and meant that the Yorkville Nominees

loan account remained unaffected and the debt of Nugan Hand International

Holdings Pty Ltd could be disguised by further internal bills. In the

last few months before Mr F.J. Nugan's death there was a further

rerouting of money from the Nugan Hand Bank using Nugan Hand Management

Services Hong Kong, this time through Nugan Hand International Holdings

Pty Ltd (instead of Yorkville Nominees), and ultimately to Nugan Hand Ltd

to the extent of $2 million.6

Further propaganda

3.6.10 Efforts continued to foster a credible public image of the

Group. The appearance of expansion and development was maintained by the

opening of new offices or the commencement of new projects.

3.6.11 The relationship between Nugan Hand Ltd and the ANZ Bank was an

important one for the Group and Mr Nugan was clearly concerned to assure

the Bank of the Nugan Hand Group's continuing prosperity [see Part 4

Section 6], Thus on 31 May 1979 Mr Nugan attended the ANZ Bank for the

purposes of the annual review of the within-the-day facility extended by

the Bank to Nugan Hand Ltd and declared himself very happy with the

Group's operations and expressed confidence that the Group would return

its first good profit that year. He informed the Bank that the Hong Kong

operations had been extremely successful and had gone from a one man

operation to a 30 plus staff office. He said that the number of staff 7 'worldwide' exceeded 100.

3.6.12 It appears that at this stage promotion of the Group's image by

arranging conferences or by co-sponsoring them was seen as a most

- 507 -

effective method. Conferences provided the opportunity for promotion at

the staff level and at the business level. The year 1979 saw the conduct

of two in house conferences by the Group, co-sponsorship of a third and

attendance by Mr Nugan at a fourth.8

3.6.13 Reference has already been made in the previous Section to the

conference held in Sydney in January 1979 as it provided an insight into

the real fortunes of the Group as at the end of 1978 [see

3.5.45-3.5.46]. A second in house conference was held in Sydney in 9 October 1979 which was on a more lavish scale than its predecessor in

January but it showed the same stark contrast between the exaggerated

claims and falsehoods of Mr Nugan and Mr Hand and the many practical

difficulties and problems voiced by the representatives. Some candour

was expressed by Mr Nugan, but more in the sense of matters past and

allegedly overcome than matters yet to be confronted. Apparent

reassurance of the Group's bright future was provided by the appointment

during the conference of Mr D.E. Beazley [profile 2.7], reputedly a

highly successful banker from America, to the position of President and

Chief Executive of the Group. Nonetheless some criticism from the

representatives lent a degree of reality to the proceedings. Lack of

coordination, failure to offer short term funding, and their untenable

position as unofficial, indeed illegal, bankers were among the litany of

complaints."*·8

3.6.14 The conference which the Nugan Hand Group co-sponsored was an

international conference held in Manila in June 1979 to promote joint

ventures between small businessmen in developed and developing

countries. It was at this conference that Mr Nugan met Dr G.J. Pauker

[profile 2.54]. The conference, attended by prominent representatives of

government and international organisations, was used by Mr Nugan in an

ostentatious grab for publicity. He rented a penthouse suite, hired

expensive cars, held cocktail receptions and engaged a private public

relations firm to arrange maximum exposure."*'1 These extravagant

gestures again provide evidence of his faith in creating the right

appearance of success and prosperity. In fact his efforts were at least

to some extent counter productive in that they were seen by some of those 12

who Mr Nugan wanted to impress as being in very poor taste.

- 508 -

3.6.15 As a result of his meeting Mr Nugan accompanied Dr Pauker to an

Energy Conference in Bali, Indonesia in July 1979. Other participants

included the Indonesian Minister of Energy and representatives of

Indonesian and American oil companies and Japanese bankers. His ability

to impress some people even at this stage is demonstrated by the fact

that Mr W.J. McDonald [profile 2.47], an American economist and formerly

a senior Government adviser in the Central Intelligence Agency and the

United States Department of Energy whom he met at the conference, later 13

accepted employment with the Nugan Hand Group.

3.6.16 Mr Nugan1s thirst for prestige led, in October or November 1979,

to Admiral E.P. Yates [profile 2.76] arranging for Mr Nugan to attend a

$1 000 a head fund raising dinner for the American Democratic Party's

National Committee at which President Carter was present. The President

shook hands with everyone including Mr Nugan. As contributions to the

fund could only be made by private citizens, the event cost Admiral Yates

personally $2 000."^

3.6.17 The Group propaganda continued and it took several forms. In

July 1979 for example, The Hong Kong Standard newspaper reported Mr C.L.

Ceilings' [profile 2.15] address on the occasion of the opening of an

additional Nugan Hand Group office in Hong Kong. He claimed that demands

on the Group's services had developed to an extent requiring a

considerable increase in Hong Kong based staff and facilities including

the opening of an insurance division, a major expansion of the trade

services division and additional work for the legal division.

Further attempts at expansion

3.6.18 In the latter part of 1979 Messrs Nugan and Hand discussed the

acquisition of a part interest in London Capital Securities Ltd [profile

2.111], This Bank was attractive because of its licence, albeit a

limited one, in view of the fact that foreign exchange restrictions had

been lifted by the British Government and tie cause the cost of acquiring a

part share in the London bank was only $300 000. Mr Nugan had commenced

negotiations with Mr D. Mosselson, the party who was to retain a half

- 509 -

share in the bank, but they soon disagreed. Mr Mosselson had confided to

Mr Nugan that a third party had criticised him (Mr Nugan) and Mr Nugan

responded by threatening to take legal action against the party concerned

with Mr Mosselson as the principal witness. As a consequence of this

disagreement, Mr Beazley took over the negotiations. Mr Beazley attended

the Bank of England review body and was accepted as a suitable partner.

It was only after Mr Nugan's death that a realistic assessment was made

of costs for the first year of operation. This was assessed at

$1 million which included an amount for an increase in capital in order

to qualify for a new licence, an amount for new premises and a

substantial salary for Mr Beazley. By this stage Mr Hand was prepared to

accept that the Group could not afford the purchase.16

3.6.19 Even at the closing stages of the Group's existence, Mr Hand, at

least, was proceeding with substantial new projects. In December 1979 he

was negotiating with a client of Nugan Hand Trade (Thailand) Ltd for the

acquisition of the Manufacturers National Bank in Florida in the United

States by a syndicate of interested individuals, notably from South

America. Mr Beazley was proposed by Mr Hand to be the Chief

17

Executive.

The reality : Mr Hand's view

3.6.20 Despite continued attempts at propping up the facade, definite

cracks became apparent in the structure of the Group. In this context a

particularly revealing communication was sent by Mr M.J. Hand

[profile 2.2] to Mr S.K. Hill [profile 2.33] in February 1979. It

followed discussions between Messrs Collings and Hill during which

Mr Hill made a number of criticisms later relayed by Mr Collings to

Mr Hand who responded in the form of a letter to Mr Hill in which he

18

itemised Mr Hill's criticisms and commented on them, as follows:

v Ί . Your [sic] worried that FJN is going to get battered at

this trial this time.

2. The HH company (which? probably all) would get wiped out.

3. Fruit Group Shares were being transferred to Helene.

- 510 -

4. You get brow beaten by FJN.

5. FJN does not communicate with you.

6. Why the "F" can't Mike go to Malaysia without FJN.

7. Why did FJN have to stay in Germany so long, I hope I am

not quoting Les out of context - I am trying not to. Your [sic] welcome to send this letter to him when you finish - Les' purpose was only to try and help. Maybe with my

limited knowledge I can answer some of the questions altho [sic] I am sure you know more than "anyone else".

Answers to the preceding

1. You would know.

2. How can you wipe out nuthin.

3. I would cut Helene's hands off before she ever signed

another Fruit Group document - if this is happening I want to know now - I do not want to have anything to do with

that mess, I have my own problems - when FJN asked me about it, last time - I said quote "Put them in the name of the

Salvation Army - I don't want $1" - ask FJN - the whole

thing is like cancer. 4 5

4. I know

5. I know

6-7 Malaysia/Germany represent 2 real chances to survive - the problems in each are not P.R./B.S. or anything else - they are legal I think that it didn't help assist by creating even more - doubt for Les - but I am sure you had it and

are extremely frustrated/ P.O.'d etc.

Well Steve - you tell me the alternatives - 1. Quit go to France have a new face/passport etc

2. Resign impossible to leave the years of responsibility

3. HARI KARI

4. Be declared legally INSANE

5. Swing harder tomorrow! \

and keep on -

GOOD LUCK - we all have the same alternatives! Regards Mike

- 511 -

The enphases have been added, otherwise the letter is reproduced in the

form in which Mr Hand wrote it. This letter is proof of Mr Hand's

knowledge of the financial mess the Group was in. His contemptuous

response 'How can you wipe out nuthin' is most significant.

3.6.21 A subsequent telex from Mr Hill to Mr Ceilings on 23 March

19

1979 related the progress of the committal proceedings against

Mr Nugan in relation to the Nugan Fruit Group. The only matter of

substance raised in the telex was that a date for hearing had been set

down for 13 June 1979. This minor development was interpreted as a

favourable sign for Mr Nugan 'leading to a complete vindication'.

Mr Hill expressed the hope that Mr Collings would ' join with us in our

happiness that this long winter is almost spring'. Presumably this was a

reference to the charges pending against Mr Nugan, the attendant fciad

publicity, and, no doubt, to the considerable financial drain caused by

the fact that the litigation was being funded from Nugan Hand Group

resources.

3.6.22 In May 1979, General E.F. Black [profile 2.8], the Hawaiian

representative of the Nugan Hand Bank, had cause to convey to Mr Hand a

number of critical comments concerning Messrs Nugan and Hand which showed

their brazen approach to business, their disregard of another country's

sensitivities and their lack of political sophistication. The complaint

was that a Malaysian government offical had remonstrated that the Nugan

Hand Group had falsely claimed to tie acting for his government in

relation to sales of rubber and that it had a reputation for moving money

in and out of his country against government regulations. He resented

the heavy sales pressure to which he had been subjected and he perceived 20

the Nugan Hand Group as a potential political liability.

3.6.23 A revealing picture of the manner in which the Singapore

business community had come to view the Group's activities is provided by

the content of a report from the public relations firm of Burson

- 512 -

Marsteller in late September 1979. As a result of a failure to obtain

press coverage for a statement released concerning the opening of a

second office, presumably in Singapore, the public relations firm

undertook an unofficial investigation. This report included the comment

that 'NHI is just not trusted by the media who to some extent reflect the

feelings of the financial community and stock markets ... NH has no

market credibility. One senior journalist is reported as saying "If you

have to deal with these guys be careful". Another said Business Times

won't touch any Nugan Hand story ... It is reputed to employ agents who

it is felt are not to be trusted and who are supposed to be corruptible.

Another source indicated that according to talk in the business community

Nugan Hand is believed to be involved in underhand deals.1^

3.6.24 Finally, reference should be made here to the speech made by

Mr Nugan in October 1979 to his legal staff in the offices occupied by

them at 55 Macquarie Street Sydney, much of which belied the Nugan Hand

Group's claim to be a respectable banking operation. The meeting was

chaired by Mr F.J. Nugan and attended by, inter alia, Miss E.L. Thomson

[profile 2.72] and Messrs Q.D. George [profile 2.24] and A. Lee

[profile 2.37]. It was convened to hear Mr. Nugan's proposal to

discontinue conducting 'illegitimate' business. The conference showed

the extent to which criminal conduct permeated the Group's financial

services as a matter of company policy. During the course of the meeting 22 the following statements were made:

'There are legitimate and illegitimate activities in each of these categories ... [thereafter follows a list of 15 categories of business]

This will mean that we will have to go through quite a lot of files and find all the secret bank accounts that are secret for reasons unacceptable to us.

... we are even thinking of passing most of the illegitimate clients off to other banks ...

I know of many of these, that you people don't know of, so

there's more to get rid of than you would think, simply because I have been the main guilty party for some reason in years gone by, but what little you people have succeeded in assisting me with, we will also cut out so that we don't have any ...'

[See also 9.3 to 9.5 where other passages from the speech are

quoted. ]

- 513 -

3.6.25 Administrative and personnel matters were of particular

significance in the latter part of 1979. Messrs Nugan and Hand appeared

to be limiting their activities while Admiral Yates was relegated to a

subordinate position. A new President, with first class banking

experience, was appointed, namely Mr Beazley and an economist of some 23

standing, Mr McDonald, was also engaged.

3.6.26 Mr Nugan spent a great deal of his time out of Australia in the

second half of 1979. Mr George, Mr M.J. Moloney [profile 2.48], Mr K.L.

Nugan [profile 2.52], Miss P.M. Swan [profile 2.70] and Miss M.D. Doherty

all referred to his absence from the country from June or July 1979 until

his return just before Christmas. Part of the Christmas period was spent

in the company of Dr Pauker who paints a revealing picture of Mr Nugan' s

state of mind at this stage [3.7.1]. He spent a further short period 24

overseas after this, returning on the Friday before his death.

During the last six months of his life he spent some time in the company

of Mr McDonald who joined the Nugan Hand Group in July 1979. Messrs

Nugan and McDonald visited The Philippines in the latter half of 1979 in

connection with Mr Nugan' s interest in a free trade zone and a possible

investment in the Santa Innes iron ore mine. Mr McDonald stated that he

'sp at a lot of time with Frank and he spent a couple of weeks staying at

my house too',2^ Mr McDonald related an occasion when Mr Hand phoned

to request him to stay with Mr Nugan and to ensure that he only did legal

work and did not get involved with mining deals, the acquisition of the

London bank or other overseas arrangements.2® From this and other

evidence it is clear that Mr Hand's perception of Mr Nugan's ability had

changed.

3.6.27 In the period between his being hired and October 1979 when

Mr Beazley1s appointment as President was officially announced,

Mr McDonald carried out an analysis of Nugan Hand International for

Mr Beazley.2^ He stated that Nugan Hand International:2®

'is unlike any organisation I have yet encountered. It's apparently profitable, but where the profit centres are, apart from the Money Market operation and some legal work by Frank Nugan is far from clear. ... NH [International] is not a banking

- 514 -

group in the accepted sense but rather a collection of'salesmen, generally with insurance or mutual funds backgrounds. In not a few cases their backgrounds would not stand inspection by U.S. bonding firms. [This was a reference to the practice in the United States of those handling money being required to be bonded.] NH [International] is in such management and personnel disarray that fine tuning is not an issue. It needs a total

restructuring and a substantial replacement and addition of personnel.'

3.6.28 Notwithstanding these critical comments Mr McDonald had 29

concluded that Nugan Hand International was profitable. He stated:

'Cne could go on almost indefinitely with a critique of NH [International] and in the process lose sight of the central fact that the group is profitable - probably very profitable. It is therefore essential that this profitability remain largely, but not necessarily wholly intact as you restructure for future growth.1

3.6.29 Mr McDonald told the Commission that he did not base his view of 30

profitability on an assessment of the accounts. As he said:

Ί tried to find out how much the thing was worth ... Let me see

some balance sheets and I'd get all these crazy brochures. I'd get little balance sheets from this outfit and that outfit that made no sense to me.'

3.6.30 He told the Commission that he was persuaded that the Group must

be profitable because the trappings of affluence, of which the Group's

senior executives were so fond, gave the appearance 0f prosperity. His

analysis demonstrated that an objective assessment of the Group's

operations was possible only up to a point. That people with the

professional qualifications of Messrs McDonald and Beazley could conclude

that the Group was profitable, suggests that Messrs Nugan and Hand still

retained their apparently persuasive powers and that the facade they had

set up was still largely effective.

3.6.31 Religion came to play a major part in the lives of both Mr Nugan

and Mr Hand. So far as Mr Hand is concerned in this regard see paragraph

2.2.56 of his profile.

- 515 -

3.6.32 Mr Nugan developed during the last six to twelve months of his

life an interest in religion which by some accounts, was obsessive. It

apparently led to his giving up alcohol - his consumption of which

according to most accounts was hitherto certainly excessive [see

profile 2.1}. Dr G.J. Pauker [profile 2.54] recalled that during the

course of the conference in Sydney in October 1979, Mr Nugan arrived late

at a meeting and explained that he had been to church, taken communion 32 and as a result, felt very good. Mr McDonald who observed Mr Nugan

closely in the latter part of 1979, commented that he had stopped

drinking, that he had only a 'smidgen of scotch' or a 'measure of wine'

and that he (Mr McDonald) had never seen Mr Nugan drunk even though he

was with him for 24 hours on many occasions. He added that Mr Nugan was 33

'in his Bible reading stage at that time'. Mr George described the

change as occuring in April 1979 prior to which Mr Nugan 'was by any

definition an alcoholic', and after which he stopped drinking completely,

started to lose weight and became a very active 'born again Christian'.

He added that Mr Nugan started going to church every morning, every

afternoon, and at lunch time and that in his conversation he made many 34 references to God. Mr G.T. Shaw [profile 2.65] also described

Mr Nugan's reliance on whisky in the early years and his substitution of

an intense interest in religion in the last year of his life.^

3.6.33 Commenting on both Mr Nugan and Mr Hand's religious interests,

Mr Collings wrote on his departure from the Group in October 1979:

Ί respect and admire the comfort and spiritual guidance you both now enjoy resulting from your taking a devoted interest in church and religious activities.'

3.6.34 With the departure of Mr Collings the Group lost one of its key

executives. He had been a director of Nugan Hand Ltd, Nugan Hand (Hong

Kong) Ltd [profile 2.94] and the Nugan Hand Bank [profile 2.106] and had

been instrumental in establishing the Hong Kong operations.

Correspondence between Hong Kong and Sydney at this time evidences a show

of good feeling on the part of Messrs Collings, Nugan and Hand although

Mr Collings was firm in insisting that he had resigned and had not taken

leave of absence as the Sydney office wished to call his departure. He

- 516 -

has stated that his resignation had nothing to do with doubts about the

financial position of the Nugan Hand Group but rather his dissatisfaction

with the introduction of Mr Beazley to the Group and the attempt to

transfer him from Hong Kong.38a There may have been another motivation

for Mr Collings' departure: Mr Courtney-Smith apparently advised Mr Hand

by telephone that Mr Collings had spoken of misrepresentations by

Messrs Nugan and Hand and had urged other staff of the Hong Kong office

to leave the Group.3^

3.6.35 The appointment of Mr D.E. Beazley [profile 2.7], the Group's

first professional banker, was announced in October 1979 at the 39

conference held at the Gazebo Hotel in Sydney. He had been employed

by the United States Federal Reserve Bank in his early career and

subsequently held senior positions with other banks culminating in his

appointment as President and Chief Executive Officer of American Bank

Shares Inc. He was viewed as a highly qualified and highly respected

banker, and his achievements were seen to be all the more impressive

given that he was only in his mid thirties.38

3.6.36 Admiral Yates had first met Mr Beazley two years before the

conference when he was asked by Messrs Nugan and Hand to recruit a banker

to the Group, but at that time Mr Beazley was content with his banking

position in America. Mr Beazley had been described to Admiral Yates as

the finest banker under the age of 35 in the United States. Mr Beazley

finally accepted an appointment with the Nugan Hand Group when the major

shareholder of his company assumed Mr Beazley's position as chairman of

the board relegating Mr Beazley to a subordinate position. One matter

which he specified as a condition of his acceptance of the appointment 39

was that he satisfy himself as to the financial status of the Group.

3.6.37 That Mr Beazley's appointment brought with it a number of other

changes is apparent from a reading of the transcript of the speeches made

at the Sydney conference. Admiral Yates, for example, was relegated to

the position of Vice Chairman of the Group under the direction of

Mr Beazley40 and was required to attend an extensive business course

conducted in Geneva by the Harvard Business School. It was envisaged at

the conference that the company would be broken into regions - Asian,

- 517 -

European and Australian - and that Messrs Nugan and Hand would play a 41

less prominent role in the future development of the Group.

3.6.38 Mr Beazley commenced an extensive survey of the Group's

operations in Europe and Asia with a view to recommending personnel and

structural changes. He also attempted an evaluation of the the Group's

financial statements without success. According to one representative,

Mr Beazley intended to form a new company to acquire the desirable assets

of the Nugan Hand Group leaving behind shell companies which would 42 eventually be wound up. In any reasonable circumstances,

Mr Beazley's addition to the staff might have justified a note of

optimism. As it was, the Group's deterioration was too advanced and only

three months were to pass before Mr Nugan's death, which hastened the

Group's inevitable collapse.

Fabricating Group accounts

3.6.39 As in the previous two years, Mr Brincat visited Singapore in

May 1979 to examine the accounting records of the Nugan Hand Bank and to

arrange for copies of the cash sheets and associated documents to be

delivered to Sydney. In Sydney, under Mr Nugan's instructions, he wrote

a completely new set of accounting records and financial statements biased

on those records, which Mr Hill took to the auditors in the Cayman

Islands. On this occasion, however, the auditors were apparently well

aware of the adverse publicity arising from criminal charges and,

perhaps, that a prima facie case had been found against the Nugan

brothers for a number of criminal offences, and sought an undertaking

from Mr Hill that the accounts reflected the true level of deposits. In

the event Mr Hill declined to give the undertaking and consequently the

auditors advised the Banking Commissioner that the accounts could not be

presented to the Commissioner in accordance with the requirements of 43 Cayman Islands law. Mr Hill said he believes Mr Nugan may have gone

to the Caymans himself to try to persuade the auditors to reverse their

decision.

3.6.40 The final set of accounts produced by Nugan Hand Ltd were for

30 June 1979. As before, the accounts contained gross misrepresentations

- 518 -

in respect of certain entries. Paid up capital continued to be

misrepresented as $2 million dollars as opposed to the actual capital of

$105. Sundry debtors totalling $868 263 contained amounts of $128 876 in

respect of Secured Income Real Estate (Australia) Ltd [profile 2.118] and

$733 062 in respect of Yorkville Nominees Pty Ltd [profile 2.108]. These

debtors should have been disclosed in the accounts. The sum of

$9.4 million for commercial bills discounted included an amount of

$5.5 million dollars in respect of internal bills which in turn continued

to conceal inter-company debts. As far as these inter-company debts

were concerned, the situation had deteriorated further in 1979, the

improvement effected by the alleged events of 24 May 1978, having had a

temporary effect only [see 3.5.7-3.5.8].

3.6.41 The critical condition of the Nugan Hand Bank at this time can

be seen from the trial balance prepared in the Singapore office which set

out the correct position prior to the rewriting of the records effected

by Mr Br incat. The trial balance at 30 June 1979 showed a trading loss

of US$4.5 million, inter-cortpany debts of US$12.2 million and client

deposits of US$16.9 million. The deterioration continued apace and a

subsequent trial balance prepared as at 30 November 1979 showed deposits 44

accepted of US$22 million and a trading loss of almost US$5 million.

3.6.42 In the case of Nugan Hand (Hong Kong) the accounts of

31 December 1979 were not passed by the auditors following the company's

failure to answer relevant auditing queries. The evidence indicates that 45

these unaudited accounts are unreliable. Even so, they showed a loss

of US$216 686. ^ As to the level of internal bills held in the safe

custody account [3.3.40-3.3.41], records indicated that as at 31 January

1980, the internal bills amounted to $2.4 million including two bills

accepted by Secured Income Real Estate (Australia) Ltd of $100 000 and

$500 000 respectively.^

3.6.43 In marked contrast to the true state of the Nugan Hand Group's

finances, the conference at the Gazebo hotel in Sydney, held three months

before Mr Nugan's death, proceeded in a mood of optimism and

celebration. As senior executives addressing the conference expressed

- 519 -

pride in the Group, spoke of its considerable achievements, explained

criticisms as due to the pressure and strain of rapid expansion, and

generally looked to a long and bright future, there was no hint that in a

matter of months the whole structure would collapse revealing a massive

deficit in funds.

- 520 -

SECTION 7 : THE DEATH OF MR NUGAN

The weeks preceding his death

3.7.1 Dr G.J. Pauker [profile 2.54], the senior expert on South East

Asia for the Rand Corporation,"1 2 * 4 ' his wife and son spent their

Christmas/New Year period (1979-80) in Australia with Mr F.J. Nugan

[profile 2.1], his wife and Mr Nugan's parents. Dr Pauker, in evidence

to the Commission said: 'Nugan and his wife seemed to be not on very good

terms, and he was definitely clearly depressed ... he would bounce that

little girl of theirs on his knees very wistfully and talk to the little 2 boy ...1 and 1... in the light of the whole atmosphere and the

preceding weeks, I wouldn't be a bit surprised if the man really killed

himself. The way he was talking to those children, in particular, almost

in retrospect of course, looked as if he was saying goodbye to them'.^

3.7.2 Mr G.F. Brincat [profile 2.9] gave evidence to the Commission

about 'constant conversations with FJN