| Title | Nugan Hand Group - Royal Commission of Inquiry (Hon. Mr Justice D.G. Stewart) - Final report, dated 28 June 1985 - Report - Volume 2 |
| 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. | 369 |
| System Id | publications/tabledpapers/HPP032016002667 |
The Parliament of the Commonwealth of Australia
ROYAL COM MISSION OF INQUIRY INTO THE ACTIVITIES OF THE NUGAN HAND GROUP
Final Report
Volume 2
June 1985
Presented 27 November 1985 Ordered to be printed 28 November 1985
Parliamentary Paper No. 3#?/1985
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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 TWO June 1985
Australian Government Publishing Service Canberra 1985
© Commonwealth of Australia 1985
ISBN 0 644 01335 4 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
PART FOUR
DISCRETE TOPICS
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SECTION 1 : NUGAN HAND (HONG KONG) LTD
Introduction * 2
4.1.1 If it be correct to select the setting up of the Nugan Hand Bank
(Cayman Islands) [profile 2.106] as the single most significant
achievement on the part of the Nugan Hand Group [refer to Part 4 Section
2] on the basis that the Nugan Hand Group thereby gained international
recognition and was also provided with large sums of money flowing in to
the Bank, then the establishment of Nugan Hand (Hong Kong) Ltd (hereafter
referred to as 'Nugan Hand (Hong Kong)1) must, on the evidence, be seen
as a close second in terms of the Group's achievements. The
establishment of this operation in Hong Kong, given that the colony was
one of the most important commercial centres in the world, was regarded
generally as quite a feat.
4.1.2 Judged on the basis of the volume of deposits collected by the
company locally, Nugan Hand (Hong Kong) was a resounding success and
provided a lucrative source of funds to the Nugan Hand Group especially
from late 1975 until late 1977 when the Nugan Hand Bank began to overtake
Nugan Hand (Hong Kong) in terms of volume of moneys collected. During
this period, in particular, Nugan Hand (Hong Kong) was flaunted by the
Group as proof that it was financially sound and capable of competing
even in such a highly competitive market place as Hong Kong. The
company's luxurious offices together with its large staff were used as a
showpiece and clients and potential clients were invited, on occasions
when they happened to be in Hong Kong, to visit the company's premises to
see for themselves the apparent success of the operations.
4.1.3 In fact behind this impressive facade there was gross
mismanagement, and imprudent and incompetent investment policies. The
depositors' funds were used as and when the Group required funds to keep
any part of its international structure viable. However, except to the
eyes of a discerning few, Nugan Hand (Hong Kong) was perceived to tie
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irepressive proof that the Group's claims of financial soundness and
growth were indeed well founded. That this impression could have been
created is all the more remarkable when three further facts are taken
into account: first, the fact that Mr C.L. Collings [profile 2.15] who
was in charge had no experience whatsoever in banking or merchant banking
procedures or the like and had no understanding or knowledge of the money
market either in Hong Kong or elsewhere; secondly, there was only a
comparatively small amount of money available to establish and promote
the company in Hong Kong; thirdly, the Nugan Hand Group was a completely
unknown quantity in Hong Kong when the company was established there in
1975. In these circumstances the question plainly arises as to how Nugan
Hand (Hong Kong) could have achieved the apparent success that it did.
It is this question, among others, that is addressed in this section.
4.1.4 Although the audited accounts of Nugan Hand (Hong Kong) indicate
that the company earned a net profit after tax, the Commission has before
it evidence which shows that the accounts had been altered so as not to
reflect a true picture of the company's financial standing. In
particular, its overheads were transferred to an account in the Nugan
Hand Bank which paid them out of its depositors' funds.^ This was done
simply to avoid Nugan Hand (Hong Kong) being shown to be operating at a
loss, as was in fact the situation at all times. Many factors mitigated
against Nugan Hand (Hong Kong) operating as a profitable entity, in
particular, Mr F.J. Nugan's [profile 2.1] steadfast pursuit of an
investment policy which was contrary to its interests, the use of the
company as a trade advisory service by other companies in the Nugan Hand
Group (a costly and ineffective exercise), the high commission rates paid
to its salesmen and the use of its staff to pursue unrealistic trade and
business propositions none of which ever appear to have come to fruition.
Statutory Details
4.1.5 Nugan Hand (Hong Kong) Ltd was incorporated as a limited company
under the Companies Ordinance (Hong Kong) under the name Nugan Oil Ltd on
10 October 1972. Its name was changed to Nugan Hand (Hong Kong) Ltd on
22 November 1974. On 28 January 1977, its name was changed to Swiss
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Pacific Asia Ltd. The name was changed back to Nugan Hand (Hong Kong)
Ltd on 9 August 1977, pursuant to objections lodged by a number of Swiss
banks with the Hong Kong Banking Commissioner in relation to use of the
term 'Swiss'. [Note: The Nugan Hand Bank underwent a similar name
change and it too was subject to objection by the Swiss banks. See 4.2.18
for further details.]
4.1.6 Hillory Ltd and Leedony Ltd were appointed directors of Nugan
Hand (Hong Kong) on 10 October 1972 and resigned on 30 November 1974. On
26 November 1974 Nr M.J. Hand [profile 2.2] and Nr Nugan were appointed
directors of the company. Mr F.D. Ward [profile 2.73] was appointed a
director of the company on 29 November 1974 and resigned on 16 December
1975. Mr Col lings was appointed a director on 30 July 1975.
Mr S.K. Hill [profile 2.33] was appointed director of the company on
16 December 1975 and resigned on 30 May 1977. Mr F.M.B. Laloe was
appointed a director on 1 January 1976. Mr P.M. Dunn [profile 2.18] was
appointed a director on 9 August 1976 and resigned on 6 October 1977.
The ultimate shareholders of the company were Harbour Nominees Ltd, which
held one HK$10 share and Nugan Hand International Holdings Pty Ltd
[profile 2.96], which held 999 999 HK$10 shares. The company was placed
into liquidation on 3 May 1980.^
Establishment of Hong Kong office * 4
4.1.7 In February 1975, Mr Collings, having been despatched there by
Mr Nugan, opened a Nugan Hand Group office in Hong Kong which declared
itself to be a representative of the Sydney merchant bank, Nugan Hand 4
Ltd, and which operated under the name Nugan Hand (Hong Kong) Ltd.
Mr Collings had been sent to Hong Kong by Mr Nugan in December 1974 with
instructions to collect deposits on behalf of the 'Ingold Growth' fund
[see 3.3.6 and 3.3.8-3.3.10]. This was a mutual fund established by
Messrs Nugan and Hand which was set up to trade in precious metals.
Mr Collings sold a small number of units in the fund,"1 before receiving
instructions from Mr Nugan, about May 1975, to discontinue because the
gold market was not stable. From evidence before the Commission it is
apparent that this 'Ingold' project was abandoned after 16 months
- 632 -
because it was a complete failure. At the time of its demise in April
1976, the fund had only four investors.6
4.1.8 Mr Collings was instructed by Mr Nugan to return investors'
funds together with interest of ten per cent, and to offer them the
opportunity to reinvest in a merchant banking company, which he had
allegedly established in Panama called Nugan Hand Inc. Panama [profile
2.115]. This company was incorporated in Panama on 24 January 1975. Its
directors included Messrs Nugan and Hand. The company had no registered
office in Panama, but a firm of attorneys acted as its resident agent
there. The company did not have a licence to accept deposits from Hong
Kong. According to Mr Collings, some of the investors converted their
investments and were issued with a certificate of deposit on behalf of
Nugan Hand Inc. Panama.7 Documents before the Commission indicate that
deposits collected by Nugan Hand Inc. Panama from residents of Hong Kong
were disguised as capital subscriptions to the company, that is as
subscriptions for the purchase of shares. The entries in the stock
register of the company8 are more properly interpreted as deposits
accepted given that the register contains details of principal, value,
date, term, interest rate, calculated interest and calculated maturity
value. Entries in the stock register also indicate that the first
'subscription' was received on 15 May 1975 and the last on 6 November
1975.9 According to Mr Collings, he continued to collect deposits on
behalf of this company 'into 1976', but very little business was
transacted on its behalf."*·8
4.1.9 It appears that between July 1975 and February 1976 some of the
deposits collected by Nugan Hand Inc. Panama were transferred to Nugan
Hand (Hong Kong) . " * â â * â These deposits were classified in the books of the
company as subscriptions of capital, presumably because at that time
Nugan Hand (Hong Kong) was not licensed to accept deposits on its
own behalf. A letter from Messrs Nugan and Hand to the board of
directors of Nugan Hand (Hong Kong) dated 1 July 1975 informed the board
that Nugan Hand Inc. Panama (not Nugan Hand Ltd) was the company carrying
on business in Hong Kong, and was the company which maintained the
representative office in Hong Kong. The letter instructed the board that
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Nugan Hand (Hong Kong) was not to carry on business in any matter on its
own account, and that its books were to be written up so as to ensure
that it remained 'a non-active, non-operating1 company. The board was
further instructed that all expenses incurred in Hong Kong were to be
treated in the accounts of the company as incurred for and on behalf of 12 Nugan Hand Inc. Panama. " Instructions to similar effect were given to
the accountant employed by Nugan Hand (Hong Kong) in December 1975.^
The rationale for these instructions appears to have been to avoid Nugan
Hand (Hong Kong) being in breach of the Hong Kong Deposit Taking
Companies Ordinance, and to circumvent the Banking (Foreign Exchange)
Regulations whereby Nugan Hand Ltd was not permitted to conduct
transactions overseas without notifying the Reserve Bank of Australia; a 14
company incorporated in Panama was not so restricted.
Deposit Collection on behalf of Nugan Hand Ltd, the Nugan Hand Bank and
Nugan Hand (Hong Kong) Ltd
4.1.10 The principal activity of Nugan Hand (Hong Kong) from June 1975
until July 1976 was the collection of deposits in Hong Kong on behalf of 15
Nugan Hand Ltd, and the remission of those deposits to Sydney. The
first Hong Kong deposit to Nugan Hand Ltd was received on 26 June 1975.
In August 1975, Nugan Hand Ltd received its first substantial deposit
from outside Australia when Sun Kai Securities of Hong Kong made a
deposit of HK$1 million."*"^ Mr Collings enjoyed early success in
attracting Hong Kong depositors for Nugan Hand Ltd. During a four week
period ending 11 September 1975, the evidence indicates that Mr Collings
collected deposits of US$1 million on behalf of Nugan Hand L t d . ^ By
the end of 1975, Mr Collings had collected and remitted to Sydney
US$2 757 000 on behalf of Nugan Hand Ltd.·* 1 5 * * 18
4.1.11 The reasons for this early and subsequent willingness of the
Hong Kong depositors to entrust their money to the unknown Nugan Hand
(Hong Kong) for placement with the equally unknown Nugan Hand Ltd in
Sydney were threefold: first, the interest rates which could be obtained
at the time in Australia were significantly higher than the rates
obtainable in Hong Kong (which, of course, allowed the offering of a rate
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of interest above that otherwise obtainable in the Hong Kong market
place, clearly a strong selling point); secondly, Mr Collings was armed
with impressive bank endorsed opinions about the soundness of Nugan Hand
Ltd which were used to good effect; thirdly, and most importantly, the
well respected Wing On Bank in Hong Kong, because of an arrangement with
its Chairman Dr A. Kwok [profile 2.36] guaranteed to depositors who
placed moneys with Nugan Hand Ltd through Nugan Hand (Hong Kong) and the
Wing On Bank the repayment of their deposits in any event. Given these
factors it is, perhaps, not surprising that deposits began to pour into
Nugan Hand Ltd from Hong Kong.
4.1.12 In its first 12 months of operation Nugan Hand (Hong Kong)
caused the moneys which came in from the Hong Kong depositors to be
forwarded for placement with Nugan Hand Ltd in Sydney. Provided that it
could be said that Nugan Hand (Hong Kong) was not itself the deposit
taker it was argued by Mr Nugan that no licence of any kind was necessary
under Hong Kong law. In fact, on 12 July 1976 the company was granted a
licence under the Deposit Taking Companies Ordinance (Hong Kong) and was
thereby entitled to collect deposits in its own right. However, by that
time Mr Nugan had decided that it was preferrable that Nugan Hand (Hong
Kong) not collect deposits in its own right, even though licensed to do
so, because to do so meant that the company had to comply with the
provisions of the Ordinance, in particular the disclosure requirements of 19
the Ordinance, and this was unpalatable to Mr Nugan. In addition,
provided that the company refrained from collecting deposits in its own
right it was a non-taxable entity under the laws of Hong Kong.
Accordingly Mr Nugan instructed Mr Collings not to collect deposits on
behalf of Nugan Hand (Hong Kong) and this remained the position until
April 1977.
4.1.13 On 6 July 1976, the Nugan Hand Bank was incorporated in the
Grand Cayman under the name "The Nugan Hand Bank and Trust Company', and
on 16 August 1976 it obtained a banking licence [refer to Part 4
Section 2], Mr Collings then received instructions from Messrs Nugan and
Hand that, so far as possible, deposits collected by Nugan Hand (Hong 20
Kong) were to be collected on behalf of the Nugan Hand Bank.
- 635 -
4.1.14 The basis of this later instruction was that deposits to the
Nugan Hand Bank were considered to be more desirable than deposits to
Nugan Hand Ltd or Nugan Hand (Hong Kong) for the following reasons:
first, the interest on moneys deposited with Nugan Hand (Hong Kong) was
subject to a 15 per cent government withholding tax whereas interest on
deposits to offshore entities such as the Nugan Hand Bank was not;
secondly, a fee was payable by Nugan tend Ltd to the Wing On Bank in
respect of deposits to Nugan Hand Ltd which had been guaranteed by the
Wing On Bank whereas deposits to the Nugan Hand Bank were not subject to
such an arrangement and did not attract this fee [see 4.1.27 to 4.1.55
for further details in relation to the role played by the Wing On Bank ] ;
thirdly, Nugan Hand (Hong Kong) was required to file a monthly return
with the Hong Kong Banking Commissioner in relation to its deposits
whereas deposits to the Nugan Hand Bank could be kept confidential since
it was not subject to any such requirement; and fourthly, Nugan Hand
(Hong Kong) was subject to the local banking regulations which stipulated
that no more than 25 per cent of its net assets could be invested in an
associated company. This restricted the uses to which the deposits of
Nugan Hand (Hong Kong) could be put. Deposits to the Nugan Hand Bank
were not subject to any such limitation.
4.1.15 From August 1976 until April 1977 Nugan Hand (Hong Kong)
collected deposits on behalf of both Nugan Hand Ltd and the Nugan Hand 21
Bank and from April 1977 on its own behalf as well. However, the
evidence before the Commission indicates that after the establishment of
the Nugan Hand Bank, the staff of Nugan Hand (Hong Kong) directed their
main efforts to obtaining deposits on behalf of the Bank, rather than 22
deposits on behalf of Nugan Hand Ltd. The company continued to
accept deposits on its own behalf until its liquidation in April 1980.
The audited accounts of the company for the periods ending 31 December
1977 and 31 December 1978 state the deposits accepted during those
periods to be US$953 90323 and US$1 291 630 respectively.24 The
draft accounts of the company for the period ending 31 December 1979 25
state the deposits accepted for the period as US$2 330 783. On
29 May 1980, the date of the winding up of the company, there was
approximately US$4 470 020 on deposit with Nugan Hand (Hong Kong).
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4.1.16 An examination of the records of Nugan Hand (Hong Kong)
indicates that it had approximately 40 depositors, which included banks,
insurance and finance companies and individuals.27 The records also
indicate that the Nugan Hand Bank invested funds with the company on
23 occasions.
4.1.17 The company accepted fixed deposits in both Hong Kong and United
States dollars. Deposits were accepted in minimum amounts of HKS50 000
and thereafter in multiples of HK$25 000. The interest rate offered
varied with the term of the deposit and market conditions.2® The
records of Nugan Hand (Hong Kong) show that the interest rates offered
varied considerably from month to month, and even within the same 29 month. The records show that the following interest rates were
offered in Hong Kong on the dates specified:®®
Date Interest ]
26. 4.77 6.25%
18.11.77 . 7.75%
6. 6.78 8.0%
23.12.78 9.0%
1. 7.79 11.0%
30.12.79 14.3%
3. 4.80 16.1%
4.1.18 Interest rates for various amounts were published monthly.
Interest earned on moneys deposited in Hong Kong was subject to a 15 per
cent Hong Kong Government withholding tax, which Nugan Hand (Hong Kong)
was required to deduct at source. Corporate clients could, however,
elect not to have the tax deducted at source. Nugan Hand (Hong Kong)
opened bank accounts in United States dollars in Singapore and New York
for the purpose of receiving deposits outside Hong Kong. This was done
because deposits received outside Hong Kong were not subject to the Hong 31 Kong withholding tax.
4.1.19 From late 1977 onwards Mr Collings sent a record of the deposits
collected on behalf of Nugan Hand (Hong Kong) and the Nugan Hand Bank to
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Mr Hand in Singapore each week. This was apparently to enable Mr Hand to
monitor the liquidity and solvency of the Nugan Hand group of companies.
From early 1979 onwards Mr Collings sent daily telexes to Mr Hill in
Sydney in relation to the balances in the company's bank accounts.33
4.1.20 The Hong Kong office operated in a somewhat precarious fashion
with respect to the repayment of deposits when they fell due. There is
evidence before the Commission that there was often a hurried scramble to
get funds from Sydney when deposits fell due for repayment as there were
not sufficient moneys held in Hong Kong.33
4.1.21 Mr Collings said that he considered Nugan Hand (Hong Kong) to be
his 'very special company' and wanted it to develop into a strong
34
merchant bank. He thus strove to increase the number of its
depositors. Mr Collings said that his policy was at odds with that of
Messrs Hand and Nugan who 'pushed' the Nugan Hand Bank, rather than Nugan
Hand (Hong Kong).33
4.1.22 The Commission has been unable to obtain reliable figures for
the amount of deposits collected by Nugan Hand (Hong Kong) on behalf of
the Nugan Hand Bank. From such evidence as is available it would appear
that the company ultimately enjoyed its greatest success as a deposit
taker on behalf of Nugan Hand Ltd. The minutes of a meeting of the
directors of Nugan Hand Ltd indicate for example, that during 1978 Nugan
Hand (Hong Kong) collected US$5 million in deposits on behalf of Nugan
Hand Ltd and only US$2 million on behalf of the Nugan Hand Bank.33
4.1.23 The total deposits collected by Nugan Hand (Hong Kong) on behalf
of itself and Nugan Hand Ltd, and guaranteed by the Wing On Bank amounted
A$4 072 088 as at 2. 8.77
A$5 545 725 as at 26. 1.78
A$4 758 842 as at 27.12.78
A$2 668 029 as at 3. 8.79
A$2 407 641 as at 31.12.79
A$2 119 692 as at 8. 4.80
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Reasons for Success as Deposit Taker
4.1.24 As has already been mentioned [4.1.11], the principal reasons
for the success of the company in collecting deposits on behalf of Nugan
Hand Ltd and on its own behalf were threefold, namely: the difference
between the interest rates available in Hong Kong and Sydney until
December 1978; the favourable bank references concerning Nugan Hand Ltd;
and the Wing On Bank guarantee of Nugan Hand Ltd, and later, Nugan Hand
(Hong Kong) deposits.
Interest Rate Differential
4.1.25 Evidence before the Commission establishes that the interest
rates available in Sydney in 1975-1976 were appreciably higher than the
rates available in Hong Kong at that tiine.^ It is apparent from the
evidence that the Hong Kong office of the Nugan Hand Group was
established for the specific purpose of capitalising on this difference
in the interest rates. The interest rates available for deposits in
Hong Kong at that time were between four and six per cent, whereas in
Sydney, funds could be invested at between eight and ten per cent. One
of the Nugan Hand Group's main sales representatives told the Commission
that during 1977, the interest rates available in Hong Kong were
typically four to five per cent, while Nugan Hand Ltd offered eight per
ce n t . ^ It appears that Nugan Hand Ltd initially offered a very high
interest rate in Hong Kong in order to attract clients, and that it
subsequently pegged its rates at a half to one per cent above that being
offered by major institutions in Hong Kong in order to retain their
c u s t o m . D o c u m e n t s in the possession of the Commission indicate the
decline in the interest rate offered by Nugan Hand Ltd to its Hong Kong
depositors for a fixed deposit of six months to be as follows:^
Date Interest Rate
26. 3.75
27. 8.75
9%
8.5%
10.12.75
26. 5.76
24.11.76
8.5%
9.75%
6.5%
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Bank References
4.1.26 There is evidence before the Commission that bank references
provided to the Hong Kong office by the Bank of New South Wales (as it
then was) and the ANZ Bank, Sydney, as to the financial soundness of
Nugan Hand Ltd and the capacity of its directors, were an important
factor in the securing of deposits by Nugan Hand (Hong Kong)
in Hong Kong. ^ These references were available to the sales
representatives in the Hong Kong office and were shown by them to
potential depositors, as proof of the reliability of Nugan Hand Ltd.
[See Part 4 Section 6 for further details concerning these bank
references. ]
Wing On Bank Guarantee of Nugan Hand Ltd Deposits
4.1.27 In July 1975 the Wing On Bank entered into an agreement with
Nugan Hand Ltd whereby it guaranteed to Hong Kong depositors with Nugan
Hand Ltd that their deposits would be repaid, in accordance with the
terms of the deposit. This agreement was reached pursuant to discussions
which commenced in early April 1975 between Dr Kwok, on behalf of the
Wing On Bank, and Mr Ceilings, on behalf of Nugan Hand Ltd. The original
arrangement did not apply to Hong Kona depositors with the Nugan Hand ~ , 44
Bank or Nugan Hand (Hong Kong) [see 4.1.45 to 4.1.48],
4.1.28 The arrangement in writing included a stipulation by the Wing On
Bank that Nugan Hand Ltd would lodge, in an account held by the Wing On
Bank at an Australian bank and maintain therein, valuable securities
having a face value ten per cent greater than the total amount of
deposits and interest guaranteed by the Bank.^ When the Wing On Bank
was satisfied that Nugan Hand Ltd had complied with this stipulation, it
issued a document to the depositor which in effect guaranteed the
repayment of his deposit.
4.1.29 At the time this arrangement commenced in July 1975, Nugan Hand
Ltd had its bank account with the Bank of New South Wales, Bridge and
Young Streets branch, Sydney. On 28 July 1975, the Wing On Bank
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requested the Bank of New South Wales to open a safe custody account in
its name, and specified the following securities, inter alia, as
acceptable for placement in its account: bank issued certificates of
deposit, bank accepted commercial bills of exchange, and commercial bills
of exchange, including bills accepted or endorsed by Nugan Hand Ltd. The
Wing On Bank stipulated that authorised officers of Nugan Hand Ltd were
entitled to lodge, switch, replace or uplift the securities in its 46 account from time to time. The Bank of New South Wales agreed to
send a telex to the Wing On Bank each time that Nugan Hand Ltd lodged,
switched or removed securities from the account, and to indicate in the
telex the total amount of securities accepted or endorsed by Nugan Hand
Ltd which had been lodged to the account. Nugan Hand Ltd agreed to meet 47
all charges, including telex charges, associated with the account.
4.1.30 The Wing On Bank did not initially impose a formal limit on the
extent to which commercial bills accepted or endorsed by Nugan Hand Ltd
(hereafter referred to as 'internal bills of exchange1 [see paragraphs
5.34-5.55]) could be lodged in the safe custody account as security by
Nugan Hand Ltd. It is clear that from the outset Nugan Hand Ltd lodged 48
its own internal bills in the Wing On Bank safe custody account.
There is evidence before the Commission that there initially existed an
informal arrangement whereby Nugan Hand Ltd could lodge in the account
internal bills of exchange to a face value of 50 per cent of the deposits
guaranteed; the remaining 50 per cent was to be secured by other types of 49 securities.
4.1.31 In August 1976, the Wing On Bank imposed a restriction on the
extent to which Nugan Hand Ltd could lodge its own internal bills as
security for deposits guaranteed. The Bank specified that the amount of
Nugan Hand Ltd internal bills lodged in the account was not to exceed
Afl.l million. It also stipulated that the maximum amount of non-bank
securities which could be lodged as security at any one time was
A£2 478 519. In effect this meant that once the amount of deposits being
guaranteed exceeded Ai>2 478 519, the Wing On Bank required Nugan Hand Ltd
to lodge securities accepted or endorsed by banks, in the safe custody t 50
account.
- 641 -
4.1.32 The Wing On Bank subsequently eased its restriction on the
lodgement of commercial bills of exchange. In December 1976, the Bank
advised Nugan Hand Ltd that it could lodge commercial bills of exchange
to a maximum value of A$3 617 663 as security in the safe custody
account. However, the Bank required that the company not lodge more than
50 per cent of internal bills of exchange in each lodgement of securities
to the account.'â" * " By February 1977, the Wing On Bank permitted Nugan
Hand Ltd to lodge up to A$3 957 261 worth of commercial bills of exchange
in the account. At this stage, the extent to which company was permitted
to lodge its internal bills is not apparent, and Dr Kwok was unable to
assist the Commission in this regard.52 However, documents before the
Commission indicate that Nugan Hand Ltd at all times between July 1975
and January 1978 had lodged internal bills of exchange in the safe
custody account, the face value of which varied from A$600 000 to
A}?2 700 000.53
4.1.33 The Wing On Bank charged Nugan Hand Ltd a fee for its guarantee
of the company's deposits. This fee was calculated on the basis of the
quality of the securities lodged by Nugan Hand Ltd in the safe custody
account; for example in May 1976 the fees were: one per cent on Nugan
Hand Ltd internal bills, one-quarter per cent on non-bank bills, and 54 one-eighth per cent on bank bills.
4.1.34 A further facet of its agreement with Nugan Hand Ltd was that
the Wing On Bank agreed to accept an additional security for its
guarantee of the company's deposits, namely a lien over a quantity of
Asian Currency Unit (hereafter referred to as 'ACU') deposits. These
were investments purchased on the Singapore money market by Nugan Hand
Ltd, and later by Nugan Hand (Hong Kong) and the Nugan Hand Bank, using
funds which had been deposited with them in Hong Kong. Nugan Hand Ltd
agreed to lodge these ACU deposits with the Wing On Bank and to grant the
Bank a lien over them. In return, the Wing On Bank agreed to release
from the safe custody account to Nugan Hand Ltd securities of a face
value equivalent to the value of ACU deposits under lien to the Wing On
Bank. The grant of the lien to the Bank gave it the right to retain
possession of the ACU deposits until Nugan Hand Ltd paid out its debts to
- 642 -
the Wing On Bank. Whenever funds were deposited in the ACU account to be
held subject to the Wing On Bank's lien, Nugan Hand Ltd asked for the
release to it of an equivalent amount of securities from the safe custody
account in Australia. The Wing On Bank's guarantee to the company was
thus secured by securities lodged in its account in Sydney and by ACU 55 deposits over which it held a lien.
4.1.35 In January 1978, the Wing On Bank closed its safe custody
account at the Bank of New South Wales, and opened a similar account at
the Pitt and Hunter Streets branch of the ANZ Bank, Sydney. Nugan Hand
Ltd had, in March 1976, transferred its principal accounts to the ANZ
Bank. ^ On 31 January 1978 securities with a face value of
A$5.7 million were transferred from the Bank of New South Wales account 57
to the ANZ account. These securities comprised:
A$1 700 000 commercial bills of exchange accepted or
endorsed by Nugan Hand Ltd
A$2 000 000 commercial bills of exchange, including one
$500 000 bill accepted by Secured Income
Real Estate (Australia) Ltd ('SIRE') and one
$500 000 bill accepted by North Australian
Rubber Mills Ltd ('NARM')
A$2 000 000 negotiable certificates of deposit
A$5 700 000
[See 5.34 to 5.55 for further details in relation to the use of these
internal bills of exchange and their true value; see 5.56 to 5.62 for
further details in relation to the use of the SIRE bills.]
4.1.36 At the time of the transfer of the safe custody account to the
ANZ Bank, the Wing On Bank and Nugan Hand Ltd entered into a new
agreement in relation to the operation of the account. This agreement
was effective from 30 January 1978 and its terms so far as are relevant _ Ï 58
were as follows:
- 643 -
a. Nugan Hand Ltd was to lodge in the safe custody account security
in the form of bank issued certificates of deposit or better in
respect of the amount by which the Wing On Bank's guarantee of
the company's deposits exceeded A$3 839 508 (or HK$20 million).
(Exchange rate used: A$1 = HK$5.2441)
b. As to the first A$3 839 508 (or HK$20 million) worth of deposits
guaranteed, Nugan Hand Ltd was to lodge in the safe custody
account, securities in the form of commercial bills of exchange
or better. Where the amount of deposits guaranteed was less
than A$3 839 508 the face value of the securities lodged was to
equal the then outstanding amount of the guarantees.
c. Nugan Hand Ltd internal bills of exchange could be lodged in the
safe custody account in respect of (b) above to a total face
value of A$1 million, unless the 'within the day' facility was
in use. Where this facility was in use, internal bills to a
value of A$1 500 000 could be lodged.
Under the 'within the day' facility, Nugan Hand Ltd was at
liberty to lodge up to half a million dollars worth of internal
bills of exchange, that is, commercial bills of exchange
accepted or endorsed by Nugan Hand Ltd, each day, and to uplift
from the safe custody account, valuable securities of an equal
face value, without the necessity of any notification to the
Wing On Bank, provided that the original position was restored
by close of business on any day when this facility was used by
the company. (Dr Kwok advised the Commission that this facility
was requested by Nugan Hand Ltd. He understood its purpose to
be to allow the company to profit from intra-day interest rate
fluctuations by dealing in negotiable certificates of deposit
and bank issued or accepted bills of exchange uplifted from the
safe custody account, without actually affecting the value of
the security in the account. ) ^
- 644 -
d. Nugan Hand Ltd was not required to maintain securities in the
safe custody account in excess of the amount of the company's
deposits guaranteed by the Wing On Bank.
4.1.37 The documents and securities which the Wing On Bank specified
could be delivered to the safe custody account, remained the same. The
ANZ Bank agreed to advise the Wing On Bank by telex of each lodgement or
switch of securities, indicating the nature and face value of the
securities, and of each uplift of securities, other than uplifts pursuant
to the 'within the day' facility. All charges associated with the
account, including telex charges, were to be paid by Nugan Hand Ltd.
4.1.38 The overall result of this new arrangement was that Nugan Hand
Ltd gained two concessions. First, it was no longer required to maintain
securities to a face value of 110 per cent of the deposits guaranteed by
the Wing On Bank in the safe custody account. Second, and much more
important, the company was able at little cost to itself (namely the
interest on the overdraft for the day) to borrow A$500 000 per day and
utilise that money to purchase securities, which it used to secure its
own depositors.
4.1.39 This was achieved by uplifting negotiable certificates of
deposit (hereafter referred to as 'NCD's') from the safe custody account
and replacing them with commercial bills of exchange drawn and accepted
by Nugan Hand companies (that is internal bills of exchange). It then
lodged the NCD's with the ANZ Bank, as security for its withdrawal of
funds under its 'daylight overdraft facility' with the Bank. Nugan Hand
Ltd used the funds withdrawn to acquire new securities through
CitiNational Securities Corporation Ltd, and placed these securities with
its depositors, in exchange for cash deposits. These deposits were used,
within the same banking day, to repay the 'daylight overdraft facility'
and thus obtain the release of the NCD's lodged as security. These NCD's
were then returned to the Wing On Bank safe custody account, pursuant to
the 'within the day' arrangement with the Wing On Bank, and the internal
bills were returned to Nugan Hand Ltd.
- 645 -
4.1.40 The existence of the Wing On Bank guarantee thus benefited Nugan
Hand Ltd in two ways: it acted as an incentive to Hong Kong depositors to
deposit funds for remission to Sydney; and it provided a standby facility
for use by the company to secure the deposits of its clients.
4.1.41 The benefits to the Wing On Bank, though not as great, were
threefold, namely: the profit to be made on the difference in the
exchange rate between Australia and Hong Kong; the fees earned from the
commission charged by the Wing On Bank to Nugan Hand Ltd for provision of
the guarantee; and the potential introduction of new bank customers in
Hong Kong.^
4.1.42 Dr Kwok advised the Commission that in making the decision to
enter into the safe custody arrangement with Nugan Hand Ltd he relied
completely on favourable bank references concerning the company supplied
by the Bank of New South Wales and the ANZ Bank. He also relied from
time to time upon favourable credit ratings of Nugan Hand Ltd supplied to
him by other organisations. ^ It is noteworthy that the Wing On Bank
had no system established to determine whether or not the securities
lodged in the safe custody account were valid and relied entirely on
telexes from the relevant bank to establish the nature and value of the
securities lodged. Dr Kwok said himself in evidence to the Supreme Court
of New South Wales that the satisfactory operation of the arrangement
depended entirely on the honesty of the Nugan Hand Group. Dr Kwok also
said in evidence that he considered the internal bills lodged by Nugan
Hand Ltd in the safe custody account to be 'practically no security at
all'. Dr Kwok later confirmed to the Commission that he considered
that ' Nugan Hand paper merely constituted a promise to pay, not
security'. He conceded that the Wing On Bank 'was prepared to allow NHL
a reasonable amount of flexibility, and to allow itself to become
unsecured to a certain extent'.
4.1.43 It may be that the willingness of the Wing On Bank to grant
Nugan Hand Ltd the concessions referred to above can be explained in
terms of the good relationship enjoyed by both Mr Nugan and Mr Collings
with Dr Kwok. There is evidence before the Commission that Dr Kwok had a
- 646 -
high regard for Mr Nugan, probably due to the support offered to him by
Mr Nugan in late 1975. Dr Kwok was at that time charged with conspiracy
to defraud, and Mr Nugan flew to Hong Kong with two suitcases of legal
precedents for the assistance of Dr Kwok's legal advisers, and wrote a
lengthy submission on Dr Kwok's behalf.64 (Although the material
provided by Mr Nugan was not used, Dr Kwok was subsequently exonerated.)
According to the evidence of Mr Ceilings to the Commission he also had a
good relationship with Dr Kwok.6_J
4.1.44 This apparent trust placed by Dr Kwok in the Nugan Hand Group
was subsequently to cost the Wing On Bank dearly [see 4.1.49 to 4.1.55],
The Wing On Bank Guarantee of Nugan Hand (Hong Kong) Deposits
4.1.45 Nugan Hand (Hong Kong) became registered as a deposit taking
company in July 1976 and officially commenced to collect deposits in
April 1977.66 During this period, the Wing On Bank agreed to extend
its original guarantee of Nugan Hand Ltd deposits to a guarantee of
deposits collected on behalf of both Nugan Hand Ltd and Nugan Hand (Hong
Kong) in Hong Kong. The terms of the arrangement between the Wing On
Bank and Nugan Hand (Hong Kong) were the same as those specified in the
July 1975 agreement between the Bank and Nugan Hand Ltd. As in the case
of Nugan Hand Ltd, the Wing On Bank was prepared to accept as additional
security for the deposits of Nugan Hand (Hong Kong), a lien over Nugan
Hand (Hong Kong) deposits which were invested in Asian Currency Units on
the Singapore money market [see 4.1.57-4.1.59].67
4.1.46 The Wing On Bank allowed Nugan Hand Ltd to remove certain
securities from the safe custody account in Sydney on the basis that the
Bank be granted a lien over Nugan Hand (Hong Kong) ACU deposits of an
equivalent face value. The Wing On Bank was satisfied with this
extension of its original arrangement with Nugan Hand Ltd, provided that
the value of securities in the safe custody account and the value of the
ACU's on lien equalled the value of all deposits guaranteed to Nugan Hand
(Hong Kong) and Nugan Hand Ltd by the Wing On Bank. Thus, the securities
- 647 -
Ln the safe custody account in Sydney and the ACU's on lien in Bong Kong
each secured the deposits of both Nugan Hand (Hong Kong) and Nugan Hand
Ltd.
The Chase Manhattan Bank Line of Credit and the Wing On Bank Guarantee
4.1.47 On 23 November 1978, Nugan Hand (Hong Kong) entered into an
agreement with the Chase Manhattan Bank whereby the Bank agreed to supply
to the company a line of credit of HK$5 million (A$912 575) for a period
of six months. This HK£5 million was available to be borrowed by the
company in amounts determined by it at any time, provided that each loan
was of six months duration only. The loan was conditional on the Wing On
Bank's guarantee of the loan by provision to the Chase Manhattan Bank of
a standby letter of credit. The Wing On Bank agreed to supply this
letter of credit on the basis that sufficient security was maintained in
the Wing On Bank safe custody account, and/or that it was granted a lien
over a sufficient amount of ACU deposits, to cover the amount borrowed by
Nugan Hand (Hong Kong).6® According to the evidence of Mr Collings, he
suggested to Dr Kwok that the securities lodged by Nugan Hand (Hong Kong)
to support the Wing On Bank guarantee of its deposits be placed in a safe
custody account separate from that already established for securities
lodged pursuant to the agreement between the Wing On Bank and Nugan Hand
Ltd. However, Dr Kwok considered a separate account unnecessary.6^
4.1.48 Pursuant to the line of credit arrangement, Nugan Hand (Hong
Kong) borrowed HK$2.5 million (A$456 487.50) from the Chase Manhattan
Bank on 15 March 1979 and a further HK$2.5 million on 18 July 1979. Each
of these loans was renewed for a further period of six months on two
occasions. The company lodged negotiable certificates of deposit
purchased from the ANZ Bank, Sydney, as security for HKS2.5 million worth
of the loan. These securities were lodged in the Wing On Bank safe
custody account in Sydney and thus became intermingled with securities
lodged to secure Nugan Hand Ltd deposits [see 4.1.60-4.1.67).
- 648 -
Fate of Securities in the Wing On Bank Safe Custody Account
4.1.49 Nugan Hand Ltd blatantly failed to honour the terms of the
agreement with the Wing On Bank breaching the agreement in the following
ways:
a. Nugan Hand Ltd failed to ensure that the value of securities in
the safe custody account, together with the value of ACU
deposits under lien to the Wing On Bank, equalled the value of
the deposits of Nugan Hand Ltd and Nugan Hand (Hong Kong) being
guaranteed by the Wing On Bank. Between December 1979 and April
1980, Nugan Hand Ltd allowed the level of securities in the
account to fall to the extent that the Bank was A$99 411 under
secured in April 1980.^
b. Nugan Hand Ltd consistently exceeded the limit imposed by the
Wing On Bank on the amount of internal bills of exchange which
could be lodged in the safe custody account. The maximum agreed
upon was A$1 million where the 'within the day' facility was not
in use and A$l.5 million where the facility was in use.
Documents before the Commission indicate that from the outset,
namely from January 1978, until the liquidation of Nugan Hand
Ltd in April 1980, the company lodged internal bills of exchange
of a face value which far exceeded the limit stipulated. Nugan
Hand Ltd exceeded the A$1 million limit on internal bills by the
following amounts during this period: 71
23. 1.78
30. 6.78
31.12.78
31. 5.79
31. 1.80
A$l.7 million
A$l.7 million
A$2.1 million
A&2.1 million
A$1.4 million
(For the purposes of this analysis, the Commission has
classified bills of exchange accepted or endorsed by the SIRE
group of companies and NARM as internal bills of exchange.)
- 649 -
c. Nugan Hand Ltd failed to lodge valuable securities in the safe
custody account. All the commercial bills of exchange accepted
or endorsed by companies in the Nugan Hand Group (the internal
bills) lodged by Nugan Hand Ltd were worthless, since the
companies involved had insufficient assets with which to meet
their debts. From May 1976, Nugan Hand Ltd lodged in the
account commercial bills of exchange with a face value of
fcl million drawn by SIRE [profile 2.118] and NARM
[profile 2.113]. These bills were also of doubtful worth.
4.1.50 It would appear that the Wing On Bank was either unaware of, or
chose not to take any action in respect of, these breaches by Nugan Hand
Ltd. The Bank received telex advice from the Bank of New south Wales,
and later the ANZ Bank, each time that securities were lodged, switched
or uplifted from the safe custody account [see 4.1.29 and 4.1.37], These
telexes contained details of the type and face value of the securities
concerned. The Wing On Bank also received written confirmation from the
relevant bank as to the break up of securities lodged in the safe custody
account from time to time. Notwithstanding this regular flow of
information to the Wing On Bank, Dr Kwok gave evidence to the Supreme
Court of New South Wales that the Bank was not aware of the identity of
all Nugan Hand companies and was therefore unable to ascertain that Nugan
Hand Ltd had lodged internal bills in excess of the limit agreed
72
upon. Dr Kwok advised the Commission that the Wing On Bank 'at all
times emphasized to NHL and NHHK that the amount of Nugan Hand paper
which was to be accepted in the safe custody account was to be strictly
limited'. He said that it was the Bank's intention that Nugan Hand Ltd
would only place additional 'Nugan Hand paper' in the account when the
'within the day' facility was in use. He said that the Wing On Bank
closely monitored the switch of securities in the account and endeavoured
to ensure that the 'amount of Nugan Hand paper was kept to a minimum
...'. However, the Bank found it difficult and sometimes inpossible, to
determine whether an issuer of a bill lodged in the account was a Nugan
Hand associated company or an independent third party. Dr Kwok also
pointed out that, although the relevant banks provided regular
information as to the contents of the safe custody account, the banks did 73
not monitor the quality of the documents lodged.
- 650 -
4.1.51 As at 8 April 1980, the Wing On Bank had issued guarantees to
depositors of Nugan Hand Ltd and Nugan Hand (Hong Kong) amounting to
A$3 052 963. This amount consisted of:
Nugan Hand Ltd and Nugan Hand
(Hong Kong) 2 119 692
Line of credit to Nugan Hand
(Hong Kong) by
Chase Manhattan Bank 933 271
A$ 3 052 963
4.1.52 At this time, the Wing On Bank's guarantee was secured by ACU
deposits under lien to it, worth A$189 827, and by the contents of the
safe custody account at the ANZ Bank.^
4.1.53 When Nugan Hand Ltd went into liquidation on 17 April 1980, the
Wing On Bank safe custody account contained securities with a face value 75
of A$2.5 million. These securities comprised:
Commercial bills of exchange
accepted by Nugan Hand companies
(internal bills)
Commercial bills of exchange
accepted by SIRE
Commercial bills of exchange
accepted by ANZ Banking Group Ltd
A$ 2 500 000
1 800 000
600 000
100 000
4.1.54 It is evident that at liquidation the safe custody account
contained a high proportion of internal bills, and that the amount of
those bills exceeded the limit on such bills imposed by the Wing On Bank
- 651 -
by A$800 000. The internal bills with a face value of A$l.8 million
lodged in the account proved to be completely worthless. As the holder
of the bills drawn by SIRE, the Wing On Bank instituted proceedings
against SIRE for the recovery of the A$600 000 represented by the bills.
Although the Supreme Court of New South Wales gave judgment in favour of
the Wing On Bank, an appeal was subsequently lodged by SIRE.76 This
appeal has not been heard. The litigation has been settled on the basis
that SIRE (now known as Barrier Pacific Resources Ltd) has agreed to
issue to the Wing On Bank shares and options to purchase shares in SIRE
to such a value as would extinguish the indebtedness of SIRE to the
Wing On Bank. A third company has agreed to purchase the shares and the
options from the Wing On Bank within seven days of their issue for a
total purchase price of A$135 000. Completion of this agreement is
dependent upon the obtaining of requisite approvals from the shareholders 77
of SIRE and the Brisbane Stock Exchange.
4.1.55 The Wing On Bank subsequently honoured the guarantees given to
the Hong Kong depositors of Nugan Hand Ltd and Nugan Hand (Hong Kong),
and to the Chase Manhattan Bank. The Wing On Bank has lodged a proof of
debt in the amount of A$1 773 148 with the liquidator of Nugan Hand Ltd,
this being the amount paid by the Bank to Nugan Hand Ltd depositors for
which the security provided by that company proved worthless.7® The
Bank has also lodged a proof of debt with the liquidator of Nugan Hand
(Hong Kong) in respect of the HK$5 million paid to the Chase Manhattan
Bank and the amount of US$250 000 paid to Ayala Finance (HK) Ltd, a
depositor with Nugan Hand (Hong Kong), on the basis that the securities
lodged in respect of those amounts in the Wing On Bank safe custody
account also proved worthless.79
Investment of Deposits
4.1.56 Nugan Hand (Hong Kong) was restricted as to the manner in which
it could invest the deposits collected on its own behalf because it was
subject to compliance with the Hong Kong banking regulations. The
regulations stipulated that the company could not invest more than 25 per
cent of its net assets with an associated company. This limited the
- 652 -
extent to which the company could invest its deposits with either Nugan
Hand Ltd or the Nugan Hand Bank. Nugan Hand (Hong Kong) principally
invested in two types of securities, namely Asian Currency Units and bank
issued negotiable certificates of deposit. Evidence before the
Commission establishes that all major investments of the companyâs funds
were made pursuant to instructions from Messrs Nugan and Hand.80
Investment in Asian Currency Units
4.1.57 Some of the funds of Nugan Hand (Hong Kong) were placed in an
account with the Wing On Bank and transmitted by the Wing On Bank to
Singapore for deposit on the ACU market. This is the Asian equivalent of
the Eurodollar market. It is predominantly used by banks and financial
institutions for the retention of short term funds, and pays 'fairly
nominal' interest rates.8" 1 The company purchased all its ACU's through
the Wing On Bank because Hong Kong regulations permitted only registered
or licensed banks to purchase ACU's on the Singapore market. All the
ACU's purchased were of 24 hours duration to ensure that the company had
a supply of liquid funds readily available to it. Although ACU's were a
very secure form of investment, they were not a profitable one, due to
the non-competitive rates of interest offered in respect of them. There
is evidence before the Commission that the interest obtained for deposits
invested in ACU's was not sufficient to cover the interest rate offered
by the company in order to attract the deposits initially.82
Mr J.C. Needham [profile 2.51] estimated that during 1977, 90 per cent of
the deposits collected by the company on its own account were invested in
ACU's bearing an interest rate of six and a half per cent, at a time when
the company was offering 14 to 15 per cent for deposits. He attributed a
shortfall of US$3 million in the accounts of the company, which he
claimed to have identified in mid 1977, as partly due to this investment .. 83
policy.
4.1.58 During 1976-77, agreement was reached between Nugan Hand (Hong
Kong) and the Wing On Bank, whereby the Wing On Bank guaranteed the
repayment to certain depositors of their deposits with Nugan Hand (Hong
Kong). The Bank stipulated as a condition of its guarantee that the
- 653 -
Nugan Hand (Hong Kong) deposits be invested in ACU deposits, and a lien
over these deposits be granted to the Wing On Bank [see 4.1.45-4.1.46].
4.1.59 Subsequently, Nugan Hand (Hong Kong) placed its ACU's under lien
to the Wing On Bank, to offset a decrease in the value of the securities
lodged in the Wing On Bank safe custody account in Sydney. [See 4.1.29
to 4.1.55 for further details in relation to the operation of the safe
custody account.] The securities lodged in the safe custody account were
pledged to the Wing On Bank in return for the Bank's guarantee of Nugan
Hand Ltd, and later, Nugan Hand (Hong Kong) deposits. The Wing On Bank
considered that its guarantee was properly secured provided that the
value of securities in the safe custody account together with the value
of ACU's on lien equalled the value of all deposits of Nugan Hand Ltd and
Nugan Hand (Hong Kong) guaranteed by the Bank.84 Dr Kwok advised the
Commission that the Bank was not aware that the securities lodged in the
account comprised for the most part worthless internal bills of exchange
[see 4.1.49-4.1.55].
Investment in Negotiable Certificates of Deposit
4.1.60 From September 1977, Nugan Hand (Hong Kong) sent many of the
deposits collected on its behalf in Hong Kong to Sydney for investment in
bank issued negotiable certificates of deposit. Between 16 September
1977 and 18 April 1980, the company sent deposits totalling
A$2 853 714.05 to Sydney for investment in NCD's.88 The majority of
these deposits were remitted by Nugan Hand (Hong Kong) by telegraphic
transfer to the Pitt and Hunter Streets branch of the ANZ Bank, Sydney,
for investment in ANZ Bank NCD's. One amount of A$190 954.51 was
remitted in November 1977 to the National Bank of Australasia (as it then
was) for investment in the NCD's of that Bank.
Arrangement between Nugan Hand (Hong Kong) and Nugan Hand Ltd
4.1.61 The first two amounts of deposits sent by Nugan Hand (Hong Kong)
to the ANZ Bank were received on 16 and 29 September 1977 respectively.
The ANZ Bank issued eight NCD's on behalf of the company and retained
- 654 -
custody of them until 14 October 1977, on which date the Bank delivered
the NCD's to the Sydney office of Nuqan Hand Ltd. From 14 October 1977,
all NCD's issued by the ANZ Bank on behalf of Nugan Hand (Hong Kong),
together with the NCD's issued by the National Bank of Australasia, were
delivered to Nugan Hand Ltd.®®
4.1.62 Ho document before the Commission contains the terms of the
arrangement between Nuqan Hand (Hong Kong) and Nugan Hand Ltd, whereby
Ntinan Hand Ltd held the NCD's in its custody on behalf of the company. A
letter dated 14 October 1977 from Nugan Hand Ltd, signed by Mr Hill as
Director, to Mr Co]lings of Nugan Hand (Hong Kong) states that, pursuant
to the instructions of Nugan Hand (Hong Kong), Nugan Hand Ltd has
received certain NCD's from the ANZ Bank, and 'In accordance with your
instructions, we will hold these certificates in our safe custody section
on vour behalf and await your instructions concerning your future
requirements.'
4.1.63 There is evidence before the Commission that the instruction
that Nugan Hand (Hong Kong) purchase NCD's emanated from Mr Nugan, and
that the funds were remitted by arrangement with Mr Collings. There is
further evidence that once the funds were in Sydney they were under the
control of Mr Nugan.®® According to Mr Collings, he understood the
arrangement was that the NCD's held by Nugan Hand Ltd on behalf of Nugan
Hand (Hong Kong) would be sold upon maturity, and the proceeds used to
purchase further NCD's on behalf of Nugan Hand (Hong Kong). The interest
earned on the matured NCD's was to remain in Sydney on deposit with Nugan
Hand Ltd until a sufficient sum had accumulated for the purchase of
further NCD's on behalf of Nugan Hand (Hong K o n g ) E a c h month
Mr Collings filed a return to the Banking Commissioner of Hong Kong which
indicated the amount of NCD's held on behalf of Nugan Hand (Hong Kong) by
Nugan Hand Ltd. Mr Collinqs filed these returns on the basis of telexes
received from Nuqan Hand Ltd in Sydney, usually signed by Mr Hill or 90
Mr Nugan, which stated the amount of NCD's so held. As will be seen,
these telexes contained information which was patently false, as Nugan
Hand Ltd ceased to hold the NCD's on behalf of Nugan Hand (Hong Kong),
and utilized them for its own purposes.
- 655 -
4.1.64 The reason for Mr Nugan's decision to have Nugan Hand (Hong
Kono) invest in the MCP's of Sydney banks is not entirely clear. The
company was subject to the restrictions imposed by the Banking
Commissioner of Bonn Kong, in that it was not permitted to invest more
than 25 per cent of its net assets in associated companies. This limited
the extent to which the company could invest with Nuqan Hand Ltd or Nugan
Hand Bank, although the company did invest in the NCD's of Nugan Hand
Bank from time to t i m e . M r Collings attributed Mr Nugan1s decision
to the interest rate differential for NCD's between Hong Kong and Sydney
in 1977. He said that the interest rate for NCD's in Hong Kong at that
tine was between six and seven per cent, whereas the interest rate 92
available in Sydney was around nine and a half to ten per cent.
Although the difference in interest rates may explain Mr Nugan's initial
decision, it does not explain his continued investment in NCD's beyond
late 1978, when the Sydney interest rate was no lonner favourable to
Nugan Hand (Hong Kong). His continued policy of investment in NCD's was
then clearly against the interests of the company as it cost more to
attract its deposits than it was able to earn in interest from its NCD's
in Sydney.
4.1.65 Mr Hill ascribed Mr Nugan's policy to his belief that 'the money 93
was more needed in Sydney than it was in Hong Kong.' The Commission
observes here that Mr Nugan would have been aware at the time he made the
decision to invest in NCD's that NCD's were bearer securities, that is
they were made payable to bearer, and could therefore be used by the
holder as if they were the property of the holder. The fact that
Mr Nugan sold the NCD's of Nugan Hand (Hong Kona) and used the proceeds
as a source of funds for the second capital injection [see 5.88-5.103]
into Nugan Hand ltd as early as October 1977, suggests that Mr Nugan had
that purpose in mind when he decided to invest the funds of the company
in Sydney NCD's. Mr Nugan's sale of securities belonging to the company
was only possible because that property was in the form of bearer
securities.
Misuse of NCD's by Nugan Hand Ltd
4.1.66 Irrespective of Mr Nugan1s initial motivation, his decision
resulted in Nugan Hand Ltd having control of a large amount of funds
- 656 -
belonging to Nugan Hand (Hong Kong) from mid October 1977 onwards. Of
the Af2 P53 714.05 remitted by the company to Sydney for investment in
n o d 's , Nugan Hand Ltd ultimately misappropriated approximately
A£ 2 .6 million worth of NCD's.^ The proceeds of most of the NCD's of
Nugan Hand (Hong Kong) on maturity were credited to the bank account of
Nugan Hand Ltd and treated by the company as its own funds.
4.1.67 There were a number of different uses to which Nugan Hand Ltd
put the securities of Nugan Hand (Hong Kong) which may briefly be
summarised as follows:
a. NCD's were lodged in the safe custody account of the Wing On
Bank as security for deposits with Nugan Hand Ltd which had been
guaranteed by the Wing On Hank. [The operation of the Wing On
Bank guarantee and safe custody account has been referred to at
4.1.27-4.1.55. ] Documents before the Commission indicate that
A$1.4 million worth of NCD's owned by Nugan Hand (Hong Kong)
were lodged in the safe custody account during the period
February 1978 to January 1 9 8 0 . ^
b. NCD's were lodged by Nugan Hand Ltd with the ANZ Bank, as
security for the overdraft of the company with the ANZ Bank.
This result was achieved as follows: Nugan Hand Ltd uplifted the
NCD's from the Wing On Bank safe custody account pursuant to the
'within the day' arrangement with the Wing On Bank. This
arrangement gave Nugan Hand Ltd access to A$l/2 million worth of
securities from the safe custody account, provided that the
securities were relodged in the account by the close of business
of the banking day. [See 4.1.36 to 4.1.39 for further details
of this arrangement.] Nugan Hand Ltd then lodged the Nugan Hand
(Hong Kong) NCD's with the ANZ Bank, as security for its
drawings from ANZ under the 'daylight overdraft facility'.
These drawings were used to purchase securities from
CitiNational Securities Corporation Ltd (hereafter referred to
as 'CitiNational'), which were given as security to intending
- 657 -
depositors with Nugan Hand Ltd. In effect Nugan Hand Ltd used
the securities of Nugan Hand (Hong Kong) to facilitate its own
collection of secured deposits.
c. NCD's were used to secure the deposits of local clients of Nugan
Hand Ltd. On 4 January 1980, two NCD's owned by Nugan Hand
(Hong Kong), each having a face value of AS 100 000 were given to
the Marrickville Municipal Council, as security for a deposit by
the Council with Nugan Hand Ltd. As Nugan Hand Ltd did not
refund the Council's deposit on maturity, the Council presented
the NCD's to the ANZ Bank for payment in September 1980. (For a
fuller description of the Nugan Hand Group's activities with
local government bodies see the Commission's Interim Report
No. 2 concerning this subject matter.)
Although the proceeds from the NCD's were credited to the bank accounts
of Nugan Hand Ltd, the company's records do not reflect any liability to
Nugan Hand (Hong Kong). Mr Nugan sold some of the Hong Kong NCD's and
used the proceeds to fund the so called second capital injection into
Nugan Hand Ltd [see 5.88-5.103]. For further information in relation to
this topic see paragraphs 5.63 to 5.65.
False Information supplied by Nugan Hand Ltd to Nugan Hand (Hong Kong)
and its Auditors
4.1.68 The ability of Nugan Hand Ltd to utilise the NCD's of Nugan Hand
(Hong Kong) in the manner referred to above, and its ultimate
misappropriation of approximately A$2.6 million worth of them, depended
on its deception of the auditors of Nugan Hand (Hong Kong), Speakman &
Company, as to the status of the NCD's in Sydney. This deception took
the form of written advice to the auditors in 1977, 1978 and 1979 to the
effect that the NCD's were held on behalf of Nugan Hand (Hong Kong) by
Nugan Hand Ltd free of any encumbrance. The auditors were never advised
of the pledging or sale of the securities by Nugan Hand Ltd. Mr Hill has
given evidence to the Commission that he was aware that the information
provided to the auditors in respect of the NCD's between 1977 and 1979
- 658 -
96
was false. There is also evidence [see 4.1.69, 4.1.71-4.1.73] before
the Commission that Mr Nugan provided false information to the auditors,
and was a party to their deliberate deception.
4.1.69 The initial false information sent to the auditors was a letter
dated 14 October ]977 from Mr Hill, on behalf of Nugan Hand Ltd, to
Mr Collings of Nugan Hand (Hong Kong), which advised that, acting upon
the instructions of Nugan Hand (Hong Kong), Nugan Hand Ltd had received
from the ANZ Bank eight NCD's. The letter specified the serial numbers
of the NCD's received. Mr Hill further advised that these NCD's would be
held in the safe custody section of Nugan Hand Ltd pending the further 97
instructions of Nugan Hand (Hong Kong). This information was
patently false. On 6 October 1977, Nugan Hand Ltd had sold all but one
of the mo d's to CitiNational. These NCD's remained in the custody of
CitiNational until subsequently repurchased by Nugan Hand Ltd on
31 October 1977 and 4 November 1977 respectively. Mr Hill said in
evidence to the Commission that he was aware that the information
provided by him was false, and that such information was probably
provided on instructions from Mr Nugan.
4.1.70 On 21 February 1978, Mr Hill on behalf of Nugan Hand Ltd wrote
to the auditors of Nugan Hand (Hong Kong), Speakman & Company, in
response to a request for information as to NCD's held by Nugan Hand Ltd
on behalf of Nugan Hand (Hong Kong). Mr Hill advised that as at
21 February ]978, Nugan Hand Ltd held 15 NCD's on behalf of Nugan Hand
(Hong Kong) 'free from any lien', and particularised the NCD's by 99 number. The information provided was false in that nine of the
15 securities referred to were, at some point during 21 February 1978,
pledged by Nugan Hand Ltd to the Wing On Bank safe custody account as
security for deposits of Nugan Hand Ltd. Five of the NCD's were uplifted
from the safe custody account on 21 February 1978, and four NCD's were
lodged to the account on that date. The letters from Nugan Hand Ltd to
the ANZ Bank in relation to the lodgement and uplift of Nugan Hand (Hong
Kong) securities were signed by Mr Hill."*^ Mr Hill said in evidence
that the securities of Nugan Hand (Hong Kong) were probably uplifted from
the account to enable a physical inspection of the NCD's by agents of the
- 659 -
Hong Kong auditors on 21 February 1978. He agreed that other Nugan Hand
(Hong Kong) securities were lodged in the safe custody account on
21 February 1978, after such physical inspection.*01
4.1.71 On 5 January 1979, Mr Nugan sent a telex to Speakman & Company,
in response to a request for particulars of NCD's held for the account of
Nugan Hand (Hong Kong), in which he stated that, as at 31 December 1978,
Nugan Hand Ltd held 14 NCD's issued by the ANZ Bank having a face value
of A$1.4 million. The telex implied that such securities were the 102
property of Nugan Hand (Hong Kong). The information was false in
that as at 31 December 1978, all of the securities owned by Nugan Hand
(Hong Kong) were either pledged to the Wing On Bank safe custody account
or pledged to clients of Nugan Hand Ltd to secure their deposits.
Furthermore, A$400 000 worth of the securities referred to in the telex
were owned by Nugan Hand Ltd, not by Nugan Hand (Hong Kong). Mr Hill
said in evidence to the Commission that he was aware that Mr Nugan had
sent the telex and that in fact all of the securities referred to were
pledged.10"*
4.1.72 On 6 February 1979, a representative of the Sydney agents of
Speakman & Company attended the office of Nugan Hand Ltd to make a
physical inspection of the NCD's held on behalf of Nugan Hand (Hong
Kong), for the purpose of the 1978 Nugan Hand (Hong Kong) audit. At the
outset of 6 February 1979, all of the NCD's referred to in Mr Nugan's
telex of 5 January 1979 as the property of Nugan Hand (Hong Kong) were
lodged, as security for deposits with Nugan Hand Ltd, in the safe custody 104
accounts of the Wing On Bank and of a Nugan Hand Ltd depositor. To
enable a physical inspection of the NCD's to occur, Mr Hill arranged the
uplift on 6 February 1979 of securities from the safe custody accounts,
and their delivery to the Nugan Hand Ltd offices in Macquarie Street. In
order to secure the release of six NCD's from the Wing On Bank safe
custody account, Mr Hill lodged a cheque drawn on Nugan Hand Ltd for
A$600 000 in the account, pursuant to the 'within the day' arrangement
with the Wing On Bank [see 4.1.36].105 The cheque was drawn on the
Nugan Hand Ltd No.2 Account at the ANZ Bank, and at the time of lodgement
there were insufficient funds in the account to cover the cheque.100
- 660 -
After their inspection by the representatives of the auditors, the NCD's
were relodaed in the safe custody accounts from which they had been 107 uplifted. (Although the representative of the auditors claims to
have inspected all 14 NCD's referred to in Mr Nugan's telex of 5 January
1979, the records of the ANZ Bank indicate that four of the NCD's said to
have been inspected, were not uplifted from the Wing On Bank safe custody
account on 6 February 1979. Mr Hill attributed this apparent discrepancy
to an error in the ANZ Bank's records.)^®
4.1.73 It is evident that both Mr Hill and Mr Nugan misled the auditors
of Nugan Hand (Hong Kong) in relation to the true status of the company's
NCD's . It is also evident that the monthly telexes sent by Nugan Hand
Ltd to Nuqan Hand (Hong Kong) most of which were signed by Mr Hill or
Mr Nugan, in respect of the NCD's held by Nugan Hand Ltd for Nugan Hand
(Hong Kong), contained false information. This false information was
incorporated in the monthly return of the company to the Banking
Commissioner of Hong Kong.
Position of Directors and Auditors * 1 0 9
4.1.74 From the evidence before it, the Commission is unable to
determine whether Mr Ceilings and other senior staff of Nugan Hand (Hong
Kong) in Hong Kong were aware of the pledging and misappropriation of the 109 securities of the company. On 18 May 1982, Nugan Hand (Hong Kong),
then in liquidation, filed a statement of claim in the High Court of Hong
Kong in which it alleged breaches of fiduciary duty and negligence on the
part of Messrs Collings, Hill, J. McArthur [profile 2.46],
G.A. Courtney-Smith [profile 2.17] and R.L. Attkisson [profile 2.4] in
relation to their management of the funds of Nugan Hand (Hong Kong). The
company has claimed damages of approximately US$2.6 million, being the
approximate amount of securities misappropriated by Nugan Hand Ltd."^
At the time of writing, each of the defendants has been served with
process regarding these matters, and Messrs Ceilings and McArthur have
filed defences. The proceedings may come on for hearing in late
- 661 -
4.1.75 On 28 April 1984, Nugan Hand (Hong Kong) (in liquidation) issued
a writ against Speakman & Company in relation to its preparation,
presentation and audit of the accounts of the company for the year ending
31 December 1978. The writ alleges that Speaknan & Company was negligent
and claims unspecified damaaes."*·"*·^ Mr Speaknan told the Commission
that he understood it was alleged against Speakman and Company that the
methods used, to confirm that the Men's of Nugan Hand (Hong Kong) were
held by Nugan Hand Ltd on its behalf, were inadequate. The
liquidator of the company advised the Commission on 1 April 1985 that he 114
expected the writ to be served shortly.
Breaches of Banking and Tax Ordinances 1 1 5
4.1.76 The Banking Commissioner of Hong Kong required that any company
in Hong Kong which carried on the business of taking deposits in Hong
Kong be registered as a Deposit Taking Company. Nugan Hand (Hong Kong)
was so registered on 12 July 1976, but did not, according to its records, 115
collect its first deposit in Hong Kong until 26 April 1977. Until
April 1977, the company advised the local banking and revenue authorities
that: it was operating only as a representative office of Nugan Hand Ltd,
Sidney, in Hong Kong; it carried out information exchange and liaison on
behalf of Nugan Hand Ltd; and did not pursue any business on its own
account in Hong Kong."^® This was an untrue statement of the position
in two respects.
4.1.77 First, it appears that Nugan Hand (Hong Kong) had in fact
received deposits from Nugan Hand Inc. Panama as early as July 1975,
although, as previously explained [see 4.1.8-4.1.9], these deposits were
disguised in the records of the company as subscriptions of
] 17 ,
capital. A letter dated 26 September 1976 from the accountant of
Nugan Hand (Hong Kong) to Mr G. F. Brincat [profile 2.9] discloses that
the company had collected deposits from Hong Kong clients, and seeks
guidance as to how these receipts should be recorded in the books, 'since
Les doesn't want HK to be a deposit taking Company yet'.'^ (The
reference to 'I.es' is a reference to Mr Ceilings.) The evidence before
the Commission indicates that Mr Brincat was requested by Mr Nugan to
- 662 -
rewrite the cash books of Nugan Hand (Hong Kong) so as to represent these
deposits as share capital received from Nugan Hand International Holdings
Pty Ltd [see 4.1.81 ].lj·9
4.1.78 Second, the staff of Nugan Hand (Hong Kong) had been actively
engaged in collecting deposits for Nugan Hand Ltd, since June 1975, and
for the Nugan Hand Bank, since mid 1976. The staff of the coirpany had
also transferred funds into and out of Hong Kong on behalf of Nugan Hand
Ltd, dispensed information and given advice in relation to Nugan Hand Ltd
and the Nugan Hand Bank, and negotiated with clients in relation to
deposits to external bank accounts. On one view, each of these
activities amounted to the carrying on of business by the company in Hong
Kong. Mr Collings received legal advice to this effect from a Hong Kong 120 Queen's Counsel in June 1977. Deposits collected on behalf of Nugan
Hand Ltd were delivered to the Wing On Bank with an instruction that they
be remitted to the account of Nugan Hand Ltd in Sydney. This was done to
avoid these deposits being banked in Hong Kong and in an attempt to
ensure that Nugan Hand (Hong Kong) and Nugan Hand Ltd were not,
technically at least, carrying on the business of taking deposits in Hong 121 Kong. However, deposits collected by the staff of the company on
behalf of the Nugan Hand Bank, were placed in Hong Kong dollar and United
States dollar bank accounts held in the Bank's name at the Wing On Bank
in Hong Kong. Upon clearance of the deposits, staff in Hong Kong issued
Hong Kong clients with an international certificate of deposit on behalf
of the Bank. This activity was recognised, even by the employees of the
company, as being a blatant breach of the Banking Ordinance, in that
Nugan Hand (Hong Kong) and the Nugan Hand Bank were carrying on a banking
business in Hong Kong.·^
4.1.79 It is evident that at least until March 1977 the staff of Nugan
Hand (Hong Kong) were involved in activities which were in breach of the
local Securities Ordinance, which required the registration of investment
advisers and representatives. Although none of the staff of the company
was so registered, the evidence indicates they were engaged in activities
for which registration was required, including investment advice,
portfolio management advice, trade services, money market operations and
- 663 -
offshore banking transactions. The only activities in which the staff of
the company could legitimately engage, when acting on its behalf, were
those connected with the taking of fixed term deposits for periods of l 100 days or longer.
Fecords and Administrative Procedures
4.1.80 Until March 1977 Nugan Hand (Hong Kong) possessed virtually no
accounting records and no system of office administration. Although a
local accountant, Mr W.H. Areson [profile 2.3], had been engaged by
Mr Collings in 1975 to compile the books of account of the company and
establish an accounting system, he had found his task a hopeless one. He
was provided with such scant information that he was able to produce only
a very rudimentary cash book. This was prepared on the basis of bank
statements and deposit slips only, and did not identify the source or
recipient of funds. The information provided to Mr Areson was
124
insufficient for him to compile a general ledger.
4.1.81 In September 1976, Mr Areson, at the request of Mr rollings,
sent the cash book of Nugan Hand (Hong Kong) to Mr Brincat in Sydney
together with a letter seeking Mr Brincat's guidance as to where certain 125 transactions should be recorded. The letter indicates that the
company had collected deposits from Hong Kong clients, and had purported
to issue paid up shares to Nugan Hand International Holdings Pty Ltd,
which would need to be reflected in the company's accounts. Mr Brincat
agreed in his evidence to the Commission that he was being asked to
construct the books of Nugan Hand (Hong Kong) so as to represent deposits
received by the company as share capital received from Nugan Hand
International Holdings Pty Ltd.* 1 2 4 1 2 5 126 1 2 7 * 1 2 9 Mr Brincat rewrote the cash book in 127
accordance with instructions received from Mr Nugan. There is also
evidence that Mr rollings sent information concerning deposits to the
company direct to Mr Nugan for the purpose of the rewriting.'*''^ The
cash book, when returned to Mr Areson, was in a very different form and
contained among other things much more information as to the names of
depositors and amounts of their deposits, and transfers of money between 129
Nugan Hand (Hong Kong) and other Nugan Hand Group companies.
- 664 -
4.1.82 In March 1977 Mr Nugan requested Mr Needham to act as a
consultant to the Hong Kong office. Mr Nugan told him that because the
operation in Hong Kong had expanded very quickly, there was no
administrative procedure and the accounting and office procedures were a
shambles. At the time of Mr Needham's arrival in Hong Kong in March
1977, the records of Nugan Hand (Hong Kong) comprised a petty cash book
and a cash book. Mr Needham said he employed two members of Mr Areson's
firm to prepare proper books of account and statutory records for the 130 company. He also established an internal accounts department to
attend to bookkeeping and accounts.131
4.1.83 Mr Needham told the Commission that it was at the completion of
this writing up of the accounts that he identified a US$3 million
shortfall in the accounts of the company, by a comparison of total funds
on deposit with the company and total funds on deposit in the ACU
market. When Mr Needham broached this matter with Messrs Nugan and Hand,
according to Mr Needham the latter appeared to have no understanding of
the accounts. Mr Nugan rejected the proposition that there was a
shortfall, explaining that many of the company's funds were involved in
inter-company loans, dealings in the Sydney money market and in funding 132
letters of credit for various clients. (Mr Collings said that he
does not agree with Mr Needham with regard to Mr Needham's assertion
about the shortfall.)133
4.1.84 From late 1977 the accounting records of Nugan Hand (Hong Kong)
were held in the Singapore office of the Nugan Hand Group. The staff of
Nugan Hand (Hong Kong) were instructed to advise Mr Hand in the Singapore
office of the balance of the Hong Kong accounts daily and to provide him
with a summary of the company's transactions at the end of each week.
There was a weekly transfer to Singapore of the paperwork related to
these transactions.·*··^
4.1.85 Shortly before 15 November 1977 Mr Brincat and Mr Hill travelled
to Hong Kong at the request of Mr Nugan for the purpose of devising an
internal accounting system for Nugan Hand (Hong Kong). On Mr Nugan's
instructions Mr Brincat established a set of cash books and a system of
- 665 -
allocating the expenses of the company to other companies in the Nugan
Hand Group. He instructed the Hong Kong staff on the method of recording
the expenses incurred by the company in its books. At a later date 135
Mr Brincat established a system of ledgers and journals.
4.1.86 In November 1977 Areson & Company was replaced by Speakman &
Company as accountants to Nugan Hand (Hong Kong). In the same month
Areson & Company wrote to the Hong Kong Commissioner of Inland Revenue
advising him that it would not accept any responsibility for documents
filed on behalf of the company because it had learned that the books
formerly maintained by it for the company were now being written up in a
different format.136 In February 1978 Speakman & Company were also
appointed auditors of Nugan Hand (Hong Kong). Although Speakman &
Company audited the accounts for the period ended 31 December 1978, the
audit of the accounts for the period ended 31 December 1979 was not
finalised as the auditors were unable to obtain all the information and
explanations required. The inspector appointed to investigate the
affairs of the company reported on 29 April 1980 that its books and
records were incomplete and not in accordance with the draft accounts of 137 that date presented to him.
Lack of Profitability
4.1.87 The audited accounts of Nugan Hand (Hong Kong) for the years
ended 31 December 1977 and 1978 show that the company made a net profit
after tax of US$114 914 and US$174 964 respectively.138 The draft 1 39
accounts for 31 December 1979 show a loss of US$216 686.
4.1.88 The Commission is of the view that little credence can be given
to the figures shown as net profit in the audited accounts. A
representative of Speakman & Company told the Commission that he is now
of the view that the books of the company for 1978 had been
1 cooked* 1.1 * * ^8 Mr Hill gave evidence to the Commission that in order to
make the company appear to be more profitable than it was, the expenses
of the company were transferred to the Yorkville contra account of the
Nugan Hand Bank. This was achieved in the following way. Nugan Hand
- 666 -
(Hong Kong) charged the Nugan Hand Bank management fees sufficient to
cover the operating expenses of Nugan Hand (Hong Kong). The company
would then show a credit in its books in respect of management fees, and
would debit its operating expenses to the Yorkville contra account of the
Nugan Hand Bank. This system operated from 1976."*"^ [See
4.1.96-4.1.101 and 8.36-8.55 for a more detailed description of the
Yorkville contra system.]
4.1.89 Nugan Hand Inc. Panama was also used in similar transactions
designed to improve the profitability and asset position of Nugan Hand
(Hong Kong). In December 1977, for example, expenses of US$132 574
incurred by the company for office salaries and disbursements which were
payable to the Nugan Hand Bank, were transferred to Nugan Hand Inc.
Panama. All that occurred was that in the records of the Bank, a journal
entry was effected which reduced the indebtedness of Nugan Hand (Hong
Kong) to the Nugan Hand Bank by US$132 574 and increased the indebtedness 142
of Nugan Hand Inc. Panama to the Bank by that amount.
4.1.90 There is evidence before the Commission that in 1978 the
Commissioner of Banking in Hong Kong was suspicious of the activities of
Nugan Hand (Hong Kong) and was watching its operations very closely.
Although the Commissioner at that stage could find nothing wrong with the
company, he could not understand how it made enough profit to pay for its 143
expensive offices and the salaries of its large staff. It is
apparent that Mr Collings was aware of the suspicions of the Banking
Commissioner as he noted in memoranda to Mr Hand and Mr Nugan that he was
quite sure the Commissioner would be taking special notice of the monthly 144
return of the company (under the Deposit Taking Ordinance).
4.1.91 A number of factors increased the operating expenses of Nugan
Hand (Hong Kong) and militated against its becoming a profitable company.
4.1.92 First, the fact that the company was evidently conceived by
Mr Nugan as operating mainly for the benefit of other companies in the
Nugan Hand Group. As has been already referred to in this section [see
4.1.10, 4.1.12-4.1.14], the company was responsible for the introduction
and servicing of the clients of Nugan Hand Ltd and the Nugan Hand Bank,
as well as of its own clients. The Hong Kong office premises were
- 667 -
impressive and the office was regarded as a showplace to which clients
and prospective clients were often directed. Several members of the Hong
Kong staff were employed full time in entertaining visiting clients. In
addition, Mr Collings was frequently expected to perform this
entertainment function. The company also owned a large Chinese junk,
'The Dolphin One', which was used for entertaining clients."1 ·45
4.1.93 Second, Mr Nugan pursued investment policies which were contrary
to the interests of the company. Mr Nugan permitted the investment of
the funds of Nugan Hand (Hong Kong) on the unprofitable Asian Currency
Unit market in Singapore. He arranged the investment of AS2.7 million
worth of the company's deposits in bank issued negotiable certificates of
deposit in Sydney, at a time when the interest rates available for these
securities in Sydney were much lower than the rates available on
investments in Hong Kong. As is apparent from the fate of the company's
securities, these policies were implemented in the interests of Nugan
Hand Ltd, and to the detriment of Nugan Hand (Hong Kong). In December
1979 a member of the Hong Kong staff urged the newly appointed Chief
Executive of the Nugan Hand Group, Mr D.E. Beazley [profile 2.7], to
review and renegotiate the placement of the company's funds. He noted
that, of the company's purported assets of HK$19 million, HK$14 million
were held by Nugan Hand Ltd, and queried, '... what's NHL Sydney paying
NHHK for all these?'445
4.1.94 Third, the rates of commission paid to the sales representatives 147
of the company were unrealistically high. For example, during 1977
one of the company's main salesmen Mr P.M. Dunn [profile 2.18] received
commission in respect'of deposits collected by him at the following rate:
10% 7 year deposit
9% 5 year deposit
8% 4 year deposit
7% 3 year deposit
5% 2 year deposit
3% 1 year deposit
2% 6 month deposit
1% 3 month deposit
- 668 -
In addition, this representative received a monthly retainer of US$1 500
and an overriding commission in respect of the deposits collected by
salesmen under his supervision.148
4.1.95 Fourth, the staff and resources of the company were used to
pursue unrealistic trading proposals and other schemes which rarely came 149 to fruition. One example of this use of the company's staff to
pursue 'pie in the sky' objectives was the participation by Admiral
E.P. Yates [profile 2.76] and Mr Oollings, on behalf of the Nugan Hand
Group, in negotiations to purchase the United Chinese Bank from General
Yee in April 1978. After lengthy and expensive negotiations, the
purchase did not proceed because the Group could not raise the necessary
US$30 million. It is clear that there was never any prospect from the
outset of the negotiations that Mr Nugan or Mr Hand would have access to
funds of that magnitude, yet both gave instructions that the matter be
pursued [see 3.5.40],
The Yorkville Contra
4.1.96 The operation of the account styled 'Yorkville contra1 and its
significance in relation to Hong Kong is dealt with in detail in Part 8.
The subject is therefore only briefly alluded to here.
4.1.97 The term 'Yorkville contra', in the context of the Nugan Hand
(Hong Kong) operations, refers to a facility whereby money was lodged by
a depositor at the Nugan Hand Group office in Sydney or in Hong Kong, and
the same amount of money was made available for that depositor by the
office in Hong Kong or Sydney respectively. There was no physical or
notional transmission of money across national borders.
4.1.98 There is evidence before the Commission that Mr Oollings carried
out what he termed 'isolated transactions' classified as Yorkville
contras at the request of Messrs Nugan, Hand, Hill and G.T. Shaw [profile
2.65].1^0 In particular Mr oollings made a number of such payments to
Mr Murray Stewart Riley and Mr Graham Besey in Hong Kong between April
and November 1976. These payments were made on instructions from the
- 669 -
Sydney office, as a result of deposits received by Nugan Hand Ltd in
Sydney. Except in the case of the April 1976 payment to Mr Riley, Nugan
Hand (Hong Kong) did not receive reimbursement from Nugan Hand Ltd for
these payments.151
4.1.99 That the Yorkville contra system was already in use in Hong Kong
by September 1976, is confirmed by a letter dated 22 September 1976 from
Areson & Conpany to Mr Brincat. The letter referred to payments made to
clients by the company on instructions from Sydney, in respect of which
funds had not been received, and sought guidance as to what should be
done (in the books of the company) about the 'hanging debit1 thereby . . 152
created.
4.1.100 There is evidence before the Commission [see 8.36-8.55] that
Nugan Hand Ltd used the Yorkville contra as a means of transferring funds
between Hong Kong and Australia without the approval of the Reserve Bank
of Australia. Such transfers were in breach of the Banking (Foreign
Exchange) Regulations.
4.i.lQl Mr Hill told the Commission that Nugan Hand Ltd juggled Reserve
Bank of Australia approvals to facilitate transfer of funds between
Australia and Hong Kong in both directions.^51 He said that it was
possible to obtain a Reserve Bank approval to borrow funds from corrpany A
in Hong Kong, and to transfer other funds, not being the funds of
154
conpany A, to Australia. Similarly, repayment approvals were used
to transfer funds other than the funds in respect of which the approval
had been granted. In effect, Nugan Hand Ltd would claim to the Reserve
Bank to be repaying a particular depositor, when in fact the funds were 155
being transferred to Hong Kong for some other purpose. One of the
objectives of these money transfers was to cover liquidity problems in
Nugan Hand Ltd and Nugan Hand (Hong Kong). Funds were also transferred
from Hong Kong for the 'capitalisation' of Nugan Hand Ltd.156
According to the evidence of Mr Hill, the scheme was used quite
extensively, but never so as to 'use up' all the Reserve Bank approvals.
Those privy to the scheme were said by Mr Hill to be inter alia, 'the
people in Hong Kong', himself and Mr Nugan.157
Into Liquidation
4.1.102 The company received its last deposit on 3 April 1980 and made
its final repayment of a deposit on 15 April 1980. By a notice dated
28 April 1980, an inspector was appointed to investigate the affairs of
the company, pursuant to the Companies Ordinance (Hong Kong). A
Statement of Affairs of Nugan Hand (Hong Kong) as at 8 April 1980
prepared by the inspector, indicated that at that date the company held
HK611 589 819 (A$2 147 853.70) in deposits from nine depositors. Of this
total, HK$5 million (A$926 612) was owed to the Chase Manhattan Bank and
HK$1.25 million (A$231 653) was owed to Ayala Finance (HK) Ltd. Both of
these deposits were secured by the guarantee of the Wing On Bank. The
unsecured deposits totalled HK£5 339 819 (A$989 588.39)
4.1.103 On 29 April 1980, an interim report was submitted by the
inspector which stated that the company was undertaking no business and
was unable to meet current routine operating expenses. In fact, the
company had been subject to heavy demands for cash from Nugan Hand Ltd,
Sydney since the date of Mr Nugan's death. As early as 31 January 1980,
a member of the Hong Kong staff reported to the manager of Nugan Hand
(Hong Kong) that, apart from US$350 000 on ACU lien to the Wing On Bank,
the company had no funds placed on 24 hour call and 'we are pretty near
the bottom of the barrel'. 160 The inspector observed that the
company's staff had received little or no response to requests for
information from Nugan Hand Ltd in recent weeks, and had been acting
without adequate Group directives. All staff had been dismissed, and
those persons present in the office of the company were there voluntarily
merely to assist in answering inquiries. The report concluded that the
company was unable to pay its debts as at 29 April 1980, the company
having already received claims for repayment which it was unable to
meet. The report stated that the company's ability to repay its
depositors in the long term depended on its ability to realise
HK$12 804 673 (A$2 372 993) worth of negotiable certificates of deposit
held in custody by Nugan Hand Ltd. The report noted that prospects of
recovery were doubtful since the securities were bearer securities held
by Nugan Hand Ltd and that company itself was at that date in
liquidation.160
- 671 -
4.1.104 On 3 May 1980 the Hong Kong Official Receiver was appointed
provisional liquidator of Nugan Hand (Hong Kong) and on 29 May 1980 the
Supreme Court of Hong Kong made an order winding up the company upon the
petition of the Attorney General. The Official Receiver continued as
provisional liquidator and was appointed liquidator by resolution of the
first meeting of creditors on 20 June 1980. To date, no report by
the liquidator has issued.
4.1.105 On 1 April 1985 the Official Receiver advised the Commission
that the liquidation of the company was still in progress and that it was
impossible to estimate the shortfall, if any, in the liquidation at that
date. He stated however, that as at April 1985, surplus cash of
A$285 219 was available to meet the liquidation expenses, and for
distribution to creditors. Proofs of debt lodged by creditors, but as
yet unaccepted by the liquidator, totalled in excess of A$2 167 490. The
liquidator highlighted three litigation actions instituted by him, which
if successful, would have a major bearing on the funds available for
distribution to creditors. The first of these actions is a claim for
damages of approximately US$2.6 million for negligence and breach of
fiduciary duty against Messrs Ceilings, McArthur, Courtney-Smith,
Attkisson and Hill. This claim relates to the misappropriation of the
NCD's of the company by Nugan Hand Ltd which has been previously referred
to in this section [see 4.1.66-4.1.67], The second action is a claim for
negligence and breach of contract against the company's auditors which
has also been previously referred to [see 4.1.68-4.1.69, 4.1.73,
4.1.75]. The third action is a claim against Mr Riley for moneys
received by him from the company [see 4.1.98], which resulted in the
making of a sequestration order against Mr Riley's estate on 7 May 1984.
The Official Receiver was not able to indicate when these three
proceedings would be concluded. There has been no further
information forthcoming from the Official Receiver. Thus, at the time of
writing this report, it is impossible to state the extent of the
deficiency in the funds of Nugan Hand (Hong Kong).
oo^j Ch
- 672 -
ENDNOTES : PART 4 - SECTION 1
(See explanatory note at front of report)
1 CT15726-27, Hill
2 CT22439, Needham
3 CD4537 folio 19, Statement of Claim Nugan Hand (Hong Kong) v
Collings and ors 4 CD4445 folio 62, Collings statement to JTF 10/12/81 5 CD4533 folio 30, Record of conversation - Collings and CAC
27/8/80 CT23165-66, CT23200, Ward CT22781-82, Collings; CT23157, Ward CD2022, Stock Register of NH Inc. Panama 9 CD2022 folios 4,7, Stock Register of NH Inc. Panama 10 CT22788-89, CT22805, Collings 11 CD10491 folios 26-27, Nugan Hand (Hong Kong) Stock Account 12 CD1557 folios 107-09, Letter Nugan Hand Ltd/Nugan Hand (Hong
Kong) 1/7/75
13 CD10877 folio 63, Letter Ward/Areson 14 CD4609 folios 1-50, Collings evidence to Hong Kong Official Receiver 15 CT22800, CT22804, Collings 16 CD9902, Nugan Hand (Hong Kong) correspondence 17 CD6509 folio 464, Memo Collings/Ward 11/9/75 18 CD4251 folio 170
19 CT22803-05, Collings; CD10499 folio 53, Nugan Hand (Hong Kong) deposit records 20 CD4533 folio 47
21 CD10499 folio 53, Nugan Hand (Hong Kong) deposit records 22 CT22826, Collings; CT22693, Pulger-Frame; CD10978 folio 15, Lovatt ROI Commission investigators 23 CD10867 folio 15
24 CD6119
25 CD10499 folio 16
26 A173 Letter from Nugan Hand (Hong Kong) liquidator 1/4/85 27 CD10499 folios 43-53
28 CD3115
29 CD10499 folios 43-53
30 CD10499 folios 43-53
31 CD995
32 CD4533 folios 8-12
33 CD6930 folio 32, Valdellon memo 10/12/79 34 CT22803, Collings
35 CD4533 folio 53; CD4609 part 2 folio 18; CD4609 part 2 folio 70 36 CD11181 folio 186
37 CD11011 folio 356
38 CT22799, Collings 39 CT24013, Ward
40 CT22465, Dunn
41 CT22779-800, Collings; CT22420, Needham 42 CD7082 folios 83,86; CD10476 folio 83; CD10646 43 CT22801, Collings; CT22938, McArthur; CT22694, Pulger-Frame; CT22110-111, Courtney-Smith
44 45 46 47 48
49 50 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
- 673 -
CD11529 folio 87, Kwok letter to Commission 9/4/85 CD5616 folio 161 CD5616 folios 202-03 CD5616 folios 198-99 CD5615 folios 410,413,415-17 CT22794, Collings; CD5615 folio 390; CD4761 folio 15 CD5615 folio 361; CD5616 folio 142 CD5615 folios 325-26 CD5615 folio 310; CD11529 folio 86 CD5615; CD3741; CD4761; CD3750; CD3739. Note: For the purpose of this analysis, bills of exchange accepted or endorsed by the
SIRE group of companies have been classified as internal bills of exchange. CD5615 folio 387
CD5616 folio 114; CD11529 CD11529 folio 83; Dr Kwok advised the Commission that he knew of no reason for the safe custody account remaining with the Bank of New South Wales for almost two years after Nugan Hand Ltd had
transferred its other accounts. It was not suggested to him prior to January 1978 that the account should be moved. CD3750 folio 148
CD5616 folios 83,89-90 CD11529 folio 85 CDS616 folio 160; CD11529 folio 86
CD11529 CD5715, Wing On Bank Ltd v Secured Income Real Estate
(Australia) & Ors; CD10940 folios 42-43 CD11529 folio 84 CT22813-14, Collings; CT21839, Hill CT22815, Collings; CT22460, Dunn CD10499 folio 53 CD11529 folio 86 CD11529 folios 87-88 CD4533 folio 53 CD11011 folio 356
CD3739 folios 19-20; CD3750 folio 1; CD3750 folio 156; CDS215 folios 7-8 CD5715, Wing On Bank Ltd v Secured Income Real Estate
(Australia) & Ors; CD5615 folio 64 CD11529 folios 84-85 CD11011 folio 356 CD5116 folio 8 CD10940 CD10776 CD11371 CD11529 folio 72 CT22785-86, Collings; CD4609 part 2 folio 73
CT22421-23, Needham CT22421, Needham; CT22700, Pulger-Frame CT22420-22, Needham CT22839-41, Collings; CD4609 part 3 folio 89, Collings evidence
to Official Receiver Hong Kong 23/2/82, CD10978 folio 3, Lovatt CD11011 folio 467 CT21844, Hill
87 88 89 90 91
92 93 94
95 96 97 98 99
100 101 102 103 104 105 106 107 108
109 no 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137
- 674 -
CD10043 folio 264 CT24812, Hill; CD4609 part 3 folio 7 CD4609 part 3 folios 10-11 CT22849, Collings; CD6491 folio 28
CD4533 folio 23, Collings evidence to CAC 27/8/80; CD4609 part 3 folios 8-9 CD4533 folio 3, Collings evidence to CAC 28/8/80 CT24812, Hill CD11475, CDJ1476, CD11477, Reconstruction Working Papers; CD3540, NHL Cash Receipts Book for ANZ No. 2 account CD11011 folios 477-84 CT24798, CT24802-04, CT24809-11, Hill
CD10043 folio 264 CT24798, Hill CD10043 folio 267 CD10043 folios 289-300 CT24802-04, Hill CD10043 folio 302 CT24809, Hill CT24810, Porter; CD10043 folio 357 CT24810-11, Hill; CD10043 folio 392 CD10043 folio 394 CD10043 folio 357 CT24811, Hill; CD10043 folio 413; CD10043 folio 357 Statement of Grant Jennings CT24813 Hill; CD4609 part 3 folios 10-11 CD7025 A173 Letter from Liquidator 1/4/85 CD10820 CT22981, Speakman A173 Letter from Liquidator 1/4/85 CD10499 folio 53 CD7082 folio 67 CD10491 folios 26-27 CD4604 folio 2 CT25248-49, Brincat CD6512 folios 13-14 CT22784, CT22792, Collings CD11153 folio 10, Attkisson memo CD6522 folio 164, Memo Needham/Hand 23/3/77 CT22955-59, Areson; CT23027, Lovatt; CT22704, Pulger-Frame CD4604 folio 2 CT25248-49, Brincat CT25251-52, Brincat CD6791 folio 15 CT25254, Brincat CT22415-20, Needham CD10978 folio 3, Lovatt CT22423, Needham CD4609 part 2 folio 43 CD11153 folio 80 CT25252-53, Brincat CD1557 CD11060 folio 6
138 139 140 141 142
143 144 145 146 147 148 149 150 151
152 153 154 155
156 157 158 159 160
161 162
- 675 -
CD6119; CD10499 CD10499 CT22995-96, Speakman CT15726-27, Hill CD11162; CD6690 folios 68,76; CDS371 folios 8-9 CD8628 folio 78
CD10473 folios 4-5 CD4609 part 2 folio 82 CD6930 folio 32, Memo from Valdellon 10/12/79
CT22422, Needham CD6523 folios 4-6,12,13 CT22915-16, McArthur CD4533 folio 41; CD4609 part 2 folio 54; CD6491 folio 30
CD4445 folio 64 CD4604 folio 2 CT15745, Hill CT15707-08, Hill
CT21936, Hill CT15745, Hill CT21938, Hill CD11060 CD7487 folio 32, Memo Lovatt/Attkisson 31/1/80 CD11060 folio 4 CD4354 folio 2 A173 Letter from Liquidator 1/4/85
- 677 -
SECTION 2 : THE NUGAN HAND BANK
Introduction
4.2.1 It is arguable that the single most remarkable achievement of
the Nugan Hand Group was the establishment of the Nugan Hand Bank
[profile 2.106] under the law of the Cayman Islands, in 1976. This
British Colony, in common with such places as Hong Kong, Panama etc,
attracts money and investors by reason of its 'tax haven' status and
because of the confidentiality accorded to entities (and their affairs)
which gain registration under Cayman Islands law. Generally speaking the
result is that the authorities in the Colony will not furnish any
information concerning persons or activities which have been accorded
protection under the Colony's laws relating to confidentiality. One
exception is where the Colony, or the United Kingdom on behalf of the
Colony, has entered into an express agreement with another country to
provide certain limited information in specified circumstances. One such
agreement is the one recently concluded with the United States [see
4.4.14]. The Commission's efforts to penetrate these confidential laws
of the Cayman Islands in respect of the activities of the Nugan Hand Bank
were unsuccessful [see 4.4.1-4.4.13]. The information available to the
Commission is therefore incomplete, and markedly so. While it is not
possible from the documents available to the Commission to provide a
total figure for deposits received in the three years during which the
Nugan Hand Bank operated, some indication of the size of the Bank's
operations can be gained from the fact that at the time of the death of
Mr F.J. Nugan [profile 2.1] the Bank had received over US$22 million in
deposits."*"
4.2.2 It is necessary when referring to the Nugan Hand Bank to
distinguish between the use of this term to denote the Bank as a
corporate entity, that is the Nugan Hand Bank, Cayman Islands, and its
use to denote the international arm of the Nugan Hand Group, that is
Nugan Hand International. The latter was a descriptive term adopted by
- 678 -
the Nugan Hand Group to refer to the many offices which were opened in
foreign countries without the approval of the relevant overseas banking
authorities. The NUgan Hand Group referred to these offices as
representative offices or trade service organisations and their role was
described as merely representative, or that of assisting existing clients
in their international operations. Clearly, however, their main concern
was that of collecting deposits for the Nugan Hand Bank.
4.2.3 This Section of the report deals with the Nugan Hand Bank both
in its corporate sense and its operational sense, meaning by the latter
term, the overseas representative offices known as Nugan Hand
International. The section provides a brief outline of the
establishment, development and on-going operations of the Bank. As far
as specific contraventions of Australian law are concerned, it should be
noted at the outset that as a foreign company operating outside
Australia, it was not subject to Federal or State law. This does not
mean, however, that breaches of Australian laws may not have occurred in
relation to certain of the Bank's activities which took place in Sydney.
Antecedents of the Bank * 3
4.2.4 The proposal to establish the Bank was made following the
unsuccessful performance of a Nugan Hand Group precious metals trust
called Ingold Growth Incorporated [see 3.3.6, 3.3.8-3.3.10], This trust
was incorporated in Panama and was designed to place investors' funds 3
in gold, silver, platinum and palladium bullion. An associated
company, Ingold Growth Ltd, was incorporated in Hong Kong.'* Mr F.D.
Ward [profile 2.73] who was the Secretary and Managing Director of Ingold
Growth Incorporated and a Director of Ingold Growth Ltd, perceived the
Ingold venture as a means of gaining credibility and as such a first step
in Mr Nugan's primary goal of establishing a merchant banking
operation.^
4.2.5 During the operation of the trust from December 1974 to March
1976 it became apparent in the opinion of Mr Nugan that conditions were
not favourable for investment in precious metals, particularly gold, and
- 679 -
in April 1976 shareholders were being advised to redeem their holdings in
the trust and to seek an alternative form of investment.®
4.2.6 In fact the concept of the trust proved unworkable and the
result was a complete failure resulting in a loss which was probably 7
borne substantively by Nugan Hand Ltd [profile 2.97]. As a result,
the directors of Ingold Growth Ltd, at a meeting on 1 July 1976, resolved
to change its name to Nugan Hand International Holdings Ltd [Appendix B]
and to cause the incorporation of a company called the Nugan Hand Bank
and Trust Company in the Cayman Islands, British West Indies.®
Preliminary Inquiries * 1 2 1 3
4.2.7 The decision to set up the Bank in the Cayman Islands followed a
preliminary examination of alternative locations. Nugan Hand Ltd had in
fact applied to the Panamanian authorities for a bank licence as early as
September 1975. The application encountered difficulties in terms of
Panama's Cabinet Decree No. 238 of 2 July 1970^ and the need to
establish that Nugan Hand Ltd was a qualified bank in Australia.
Mr Nugan in correspondence with the Banking Commission in Panama pointed
out that there was in Australia, a distinction between
merchant/investment banks on the one hand and trading/savings banks on
the other and the licence sought by Nugan Hand Ltd in Panama was
equivalent to a licence under the New South Wales Securities Industry Act
1970 for investment banking services.^®
4.2.8 Mr Nugan sought Counsel's opinion on the question of whether
Nugan Hand Ltd's business in Australia came within the definition of
'banking business' under Panamanian l a w . ^ Counsel's opinion was in
the affirmative but it was finally concluded that the Panamanian
authorities would not accept that Nugan Hand Ltd's application accorded 12
with the requirements of Panamanian law.
4.2.9 A number of other possible locations were considered including
Hong Kong, Singapore, Seychelles, Malta, Monaco, Costa Rica and of course 13 the Cayman Islands.
- 680 -
4.2.10 In various documents prepared by Nugan Hand Ltd at the time, not
attributed to any particular officer, the benefits of the Cayman Islands
were seen to include: the absence of any taxes on income, profits,
capital gains or dividend distribution; stable government as a British
Crown Colony with no threat of a move to independence; complete banking
secrecy based on detailed and effective legislation; no restrictions on
currency transfer or conversion; a wide range of legal and accountancy
expertise locally; flexible banking laws; local currency linked to the
United States dollar; and suitable communication and accessibility. The
Cayman Islands, as a location for the proposed bank, was considered to
compare favourably with every other major tax haven on all relevant
criteria and on the more important criteria of tax, secrecy and exchange 14
control it was considered to have significant advantages.
Formal Steps to Establish the Bank
A. Incorporation and Licence Approval
4.2.11 The Nugan Hand Bank and Trust Company was incorporated in the
Cayman Islands on 6 July 1976.15 The shareholders, Messrs B. Campbell,
H. Rutter [profile 2.61] and P. Kandiah were the solicitors at the
offices of Bruce Campbell & Co, Cayman Islands who arranged for
incorporation and thus were conveniently placed to finalise matters in
the absence of Nugan Hand Ltd personnel. Each was assigned one
15a
share. At the first meeting of the company on 8 July 1976 the three
subscribers to the memorandum of association were elected directors as an
interim arrangement."*"®
4.2.12 The capital of the company was stated in the memorandum to be
US$720 000 made up of 720 000 shares of US$1.00.17 At the company's
meeting on 9 August 1976, Messrs Rutter and Kandiah resigned as
directors, their shares and that of Mr Campbell were transferred to Nugan
Hand Ltd, Mr Nugan and Mr M.J. Hand [profile 2.2], and a further 249 997
shares were issued to Nugan Hand Ltd."*"®
4.2.13 On 25 August 1976 the company was granted an unrestricted
Category B Banking Licence which meant that the Bank could carry on the
- 681 -
business of banking provided it was outside the jurisdiction of the 19 Cayman Islands. Although the name of the company was deliberately 20 chosen to provide for the trust activities of the Bank there is no
evidence that the Bank actually applied for or obtained a Trust Licence
at that stage [see 4.2.18].
4.2.14 The only evidence put to the Commission concerning the
capitalisation of the Nugan Hand Bank was by Mr S.K. Hill [profile 2.33]
who said it involved round robins [see 5.73] and was primarily carried
out in Hong Kong. He said that Mr L.H. Collings [profile 2.15] had once
asked him in what property was the Bank's capital invested in Australia.
Mr Hill then realised that because there were no investments in
Australia, that NUgan Hand Bank's capitalisation was simply a matter of 21 book entries. On the same subject and inviting the same conclusion,
Mr G.F. Brincat [profile 2.9] gave evidence to the Corporate Affairs
Commission of New South Wales that the entry in the Nugan Hand Bank
journal in respect of the 250 000 shares on 25 August 1976 contained no 22 reference to the receipt of cash.
4.2.15 Other evidence suggests that in fact a cheque for US$250 000 was
sent and banked although the drawer of the cheque was not identified.
The Corporate Affairs Commission's Seventh Interim Report states that on
12 August 1976 a credit of US$250 000 was recorded in the Nugan Hand Bank 23
account number 00241816 with the City Bank in Hong Kong. Further,
Price Waterhouse & Co., Chartered Accountants, Cayman Islands, (auditors
of the Nugan Hand Bank) informed Messrs W. Pollard [profile 2.57] and
Brincat, (auditors of Nugan Hand Ltd) in a letter dated 15 May 1980, that
'Nugan Hand Ltd became a shareholder in the bank on August 9, 1976 and
although we confirmed receipt of their capital (ie US$250 000) at that 24
date we do not know where such funds actually came from.' Aside from
this evidence, it is clear from correspondence at that time between
Bruce Cairpbell & Co, the Nugan Hand Bank's solicitors in the Cayman
Islands, and Nugan Hand Ltd that in order for the Bank to qualify for an
unrestricted Category B Banking Licence it was necessary for the Bank to
have a minimum paid-up capital of US$250 000 and the solicitors required
this amount to be lodged through the solicitors' office prior to
application for the licence being made to the Governor of the Cayman , 25
Islands.
- 682 -
4.2.16 On balance the evidence suggests that as far as the initial
capital of US$250 000 was concerned the correct amount of money was
subscribed. It is unlikely however, that the money remained subscribed,
an eventuality foreshadowed by a comment in the solicitors'
correspondence that:^
'The money subscribed for the capital is working capital and does not have to remain here and may be ued [sic] for any
purpose in the course of the company's business as a bank and/or Trust Company.'
4.2.17
B. Subsequent Change of Name * 3 1 3 2 3 3 3 4
4.2.18 On 20 January 1977 the name of the company was changed from the
Nugan Hand Bank and Trust Company to the Swiss Pacific Bank and Trust
Company. Subsequently on 16 February 1977, licences for both banking 31
and trust business were granted to the newly named company. The
change proved to be short lived as objections were raised in banking
circles in Hong Kong to the use of the word 'Swiss' given the absence of
any relevant link with Switzerland. After discussions with the Banking 32
Commissioner in Hong Kong on this subject the name of the company 33
was, on 22 June 1977, changed yet again to the Nugan Hand Bank. The
Bank was subsequently granted licences for banking and trust business on 34 6 July 1977. Nugan Hand (Hong Kong) Ltd [profile 2.94, see also
Part 4 Section 1] also changed its name at the same time to include the
word 'Swiss' in its nomenclature but it too was compelled by the
- 683 -
objections raised to resume its original title and to drop any reference
to 'Swiss' [see 4.1.5].
C. Subsequent Share Issue
4.2.19 Minutes dated 10 February 1977 purport to record an
Extraordinary General Meeting of shareholders, who at that time were
Mr Nugan, Mr Hand and Nugan Hand Ltd. Further minutes dated the same day
purport to record a meeting of the Board of Directors, that is Mr Nugan
and Mr Hand, at which it was resolved to allot 750 000 shares to Nugan
Hand International Holdings Ltd. The two minutes record that the meeting
was attended by Mr Nugan and Mr Hand who resolved to increase the
authorised capital of the company to US$5 million by the creation of a
further 4.28 million shares of US$1.0 0 . Mr J.C. Needham [profile
2.51] advised Bruce Campbell & Co, Solicitors, Cayman Islands, on 4 May
1977 that payment in respect of the shares had been made.
4.2.20 There is, however, no evidence to support this claim. On the
contrary indications are that in fact no such payment was made.
Mr Brincat gave evidence to the Corporate Affairs Commission that the
entry in the Nugan Hand Bank journal in respect of 750 000 shares on
30 June 1977 contained no reference to the receipt of cash. It involved
debiting certain accounts and in the absence of credits in those accounts 37
the paid up capital amounted to nothing more than a debt. Moreover,
the debt was recorded in the journal as due from Nugan Hand Inc. Panama
[profile 2.115] and not from Nugan Hand International Holdings Ltd which
led the Corporate Affairs Commission to surmise that the shares concerned
were allotted to Nugan Hand International Holdings Ltd but charged to the
Nugan Hand Inc. Panama loan account.38
4.2.21 Years later, when liquidation proceedings were contemplated, the
Official Receiver and Liquidator of the Nugan Hand Bank, Hong Kong, wrote
to Pegler Ellis & Co., Chartered Accountants, Sydney on 3 December 1980
stating that he understood that the original share certificates of Nuhan
Ltd (formerly Nugan Hand Ltd) and of Messrs Nugan and Hand had been
endorsed to Nugan Hand International Holdings Ltd. As the transfer had
- 684 -
not been registered he considered that legally, Nugan Hand Ltd, Mr Hand
and Mr Nugan held those shares in trust for Nugan Hand international 39 Holdings Ltd.
D. Directors
4.2.22 The precise details concerning the directors of the Nugan Hand
Bank at any given time are elusive.
4.2.23 Following the appointment of Messrs Campbell, Rutter and Kandiah
as directors on 8 July 1976, Messrs Nugan, Hand, Ward, Ceilings and
P.M. Dunn [profile 2.18] were appointed on 21 July 1976. At the same
meeting on 21 July 1976 Messrs Kandiah and Rutter resigned as directors.
4.2.24 Apart from the initial period of establishment of the Bank,
subsequent changes to the directorship were somewhat confused. There is
no mention of Mr Campbell1s resignation although on 21 July 1976, the
date of resignation of his associates (Messrs Kandiah and Rutter),
Mr Campbell wrote to Nugan Hand (Hong Kong) Ltd advising that the
directorship of the Nugan Hand Bank and Trust Company comprised
Messrs Nugan, Hand, Ward, Ceilings and Dunn with no mention of
himself.40 Mr Campbell was subsequently recorded as having resigned on
9 August 1976 and also on 1 March 1978 with no evidence of reappointment 41 in the intervening period.
4.2.25 There were minutes appointing Admiral E.P. Yates [profile 2.76] 42 43
as a director on 10 February 1977 and again on 1 March 1977.
4.2.26 The first reference to Mr Hill in the minutes occurred on
11 October 1977 where he was recorded as being present as a director (and
was treated as such in subsequent minutes) although there was no evidence 44
of an appointment having been made. Mr Hill, in fact, gave evidence
to the Commission that he did not know he was a director until after the . 45
event.
4.2.27 In the case of Mr J.M. Gilder [profile 2.25] the minutes
recorded him as resigning on 11 February 1980 but they did not indicate a
- 685 -
date of appointment although the Cayman Islands authorities gave
approval to his appointment as a director by letter dated 9 July
1979.47 He was clearly under the impression, at the time, that he was
a director as evidenced by his subsequent letter of resignation48 and
other documents containing reference to his position as a director.49
Nevertheless he told the Conmission that he had subsequently obtained
legal advice to the effect that, as a matter of fact, he was not a
director. More specifically, he was advised that he did not act in the
capacity of a director in that he did not attend board meetings, he did
not formulate policy, he did not sign accounts and received no payment as
a director.
4.2.28 More straightforward entries in the minutes occurred in respect
of Mr Dunn who was recorded as resigning on 10 September 1977, Mr Rutter
who was recorded as being appointed (although technically it was a
re-appointment) on 1 March 1978 and Mr Collings who was recorded as
resigning on 22 October 1979. It is noted that the minutes contained no
record of Mr Ward's resignation though he left the company in 1977.
E. Little further involvement with the Cayman Islands
4.2.29 According to a document entitled the 'Cayman Islands Blue Print'
[see 4.2.33-4.2.34], it seems to have been a common practice for foreign
banks such as the Nugan Hand Bank, to retain the services of a local bank
in the Cayman Islands to carry out representative functions and normal
administration. The foreign banks were known as 'cubicle banks' and they
paid an annual fee to the retained banks to perform representative
functions on their behalf.8· * " There is some suggestion in this document
that the Nugan Hand Bank proposed to retain the services of the Bank of
Nova Scotia in this way but it is not clear whether such an arrangement
was in fact concluded. What is clear, however, is that following
incorporation and the granting of a bank licence, the Cayman Islands
played little part in the operations of the Bank save on the occasion of
the annual audit of accounts by its registered Cayman Islands auditors.
[See 4.2.117 to 4.2.177 for further details in relation to the accounts
and their audit. ]
46
- 686 -
Mr Nugan's plans for the Nugan Hand Bank
4.2.30 According to evidence given by Mr Hill to the Commission, the
rapid expansion of the Nugan Hand Bank was:
a. a consequence of Mr Nugan's long term strategy of forming an
extensive corporate carcass which could be sold as an attractive
asset to the right organisation; and
b. an attempt, from 1977-1978, to outgrow the bad publicity
emanating from the Corporate Affairs Commission investigation of
the Nugan Fruit Group and the subsequent charging of Mr Nugan
and his brother with criminal offences [see 3.1.32-3.1.36,
3.4.95 and 3.4.97],
4.2.31 As expressed by Mr Hill, Mr Nugan wanted to set up a network of
self supporting shells in major capital markets with a view to its sale 52
to a large organisation equipped to run it effectively. According to
Mr Hill, Mr Nugan1s model was the Schroder Darling group of companies for
whom he did work when employed by Freehill Hollingdale & Page,
Solicitors."^
4.2.32 Mr Hill and others told the Corrmission that Mr Nugan had
promised part of the proceeds of the sale to certain Nugan Hand Group 54 personnel. Mr G.T. Shaw [profile 2.65] gave evidence that Mr Nugan
had promised him ten per cent of the proceeds if the Bank were sold. He
thought that the same incentive had been offered to Mr Hill, Mr Collings 55 and perhaps also Mr Gilder.
Early Days and the Cayman Blue Print
4.2.33 A plan for the development of the Nugan Hand Bank was prepared
entitled 'Cayman Blue Print (by J. Gilder)'.^ This document contained
sections on: the Nugan Hand group of companies; the Cayman Islands and
why they were selected as a base for the Nugan Hand Bank; suggested
countries for representative offices; selection criteria and type of
- 687 -
operation; establishment of representative offices; services to be
offered to clients; administrative procedures in relation to those
services and in particular, international certificates of deposit,
savings and cheque accounts, and corporate management procedures; terms
and conditions for the engagement of representatives; and space for
sections on procedures for education trusts, retirement trusts and
nominee services (sections which had yet to be written). This material
was revised over the ensuing years and a series of manuals for the 57
guidance of the Nugan Hand Bank representatives was produced.
4.2.34 The evidence before the Commission suggests that Mr Gilder was
central to the development of the Bank although his own assessment of his
role was modest before the Commission in contrast to his claims at the
time. He told the Commission that the 'Blue Print' reflected the
thinking of Mr Nugan and Mr Hand while he himself only assisted in the . 58
presentation of those ideas. At the time in a letter to Mr Dunn
dated 20 October 1976 he had defined his role in relation to the Bank
To coordinate the establishment and early operations of the Cayman Islands Bank - The Nugan Hand Bank and Trust Company.
To recruit, train and manage men who will establish representative offices of the Bank in various countries
When referred to this letter, he told the Commission that claiming to be
the coordinator was presumptuous and his main role was the appointment of
representatives.6<^
Publications and Promotion
4.2.35 As well as playing a part in the production of the 'Cayman Blue
Print', Mr Gilder was also seen as the driving force in advertising the
Nugan Hand Bank. Admiral Yates and Messrs G.R. Steer [profile 2.68],
M. Healey [profile 2.29] and Collings all referred to Mr Gilder's role in
this respect.61 Mr Gilder at the time, in a letter to Mr Dunn dated
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19 April 1977, referred to his (Mr Gilder's) dedication to the task of
getting the Bank operational and in the course of doing so, producing a
quality prospectus or booklet, a draft procedures manual and a world wide
marketing strategy. In evidence before the Commission, Mr Gilder
stated that his role had been limited to editorial functions and
arranging for printing and distribution.63 He told the Commission that
Mr Nugan had written various brochures entitled 'Nugan Hand International 64 Private Bankers' and the 'Nugan Hand International Group
Manual'.65 He did say, however, that the Nugan Hand Bank project had
been languishing when he arrived and he set to work to finalise the
brochure so that representatives would have something to hand out to
prospective depositors.6^
4.2.36 With regard to the advertisement in the Nugan Hand International
newsletter which pictured Mr Gilder with the caption, 'This nan put our
private bank on the map',6^ Mr Gilder's comment was that he found it
very embarrassing and only knew about it after it had been
finalised.68 He considered that the newsletter was poorly written and
made extravagant claims.6^ He agreed that not only did he not take
exception to the advertisement at the time but that he had circulated it
with other press clippings, newsletters and advertisements to all staff
in a memorandum dated 15 February 1979, as though it were his own
view.70 He preferred to interpret the advertisement as meaning that he
had been the person to influence a number of representatives to join the
Bank through whose efforts deposits were made and the Bank became
functional. He denied that it meant that he had been the mastermind
or original architect of the Bank and he specifically denied Mr Hill's 72 assertion that he was the 'main person involved' in the NUgan Hand â , 73
Bank.
4.2.37 The brochures themselves were glossy but well presented
publications and in the Commission's view do not appear to be the work of
Mr Nugan or Mr Hand each of whom, from a study of various documents
written by them, appears to have had difficulty in producing a document
written in clear and grammatical English. Separate publications were
produced for Nugan Hand Ltd, Nugan Hand International and the Nugan Hand
- 689 -
Bank. Qie such brochure on the Bank had a silver cover. It contained
text on banking, corporate, trustee, and trade services with an
introductory section on the Cayman Islands, and showed a map joining the
cities of New York, Chicago, Dallas, Los Angeles, London, Frankfurt,
Rome, Hong Kong, Bangkok, Manila, Kuala Lumpur, Singapore and Sydney to
the Cayman Islands.^ There is no explanation given for this map nor
any reference to any of the Nugan Hand Bank offices [Appendix B] other
than the Cayman Islands base. This map has been reproduced as part of
the cover of this report. It was this booklet to which Mr Gilder
referred in his speech to the Nugan Hand International conference held in 75
Bangkok in January 1978. In his concluding remarks he said:
'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 achieve substantial deposits healthy trade profits, and consulting fees, is impressive.1
4.2.38 On other occasions maps had been used to indicate representative
offices. One brochure on NUgan Hand International featured a front cover
with a Nugan Hand International gold emblem and inside a map with
pictures of the representatives linked to their respective offices. These
were the United States (Admiral E.P. Yates), Hawaii (General E.F. Black),
Chile (Mr G.V. Galicek), Argentina (Mr G.A. Courtney-Smith), Saudi Arabia
(Mr M.B. Houghton), West Germany (Messrs M. Ebert, J. Bachmann, and
A.P. Hewitt), Taiwan (Mr D.O. Holmgren), Hong Kong (Messrs C.L. Collings
and J. McArthur, Miss E.L. Thomson and Mrs G. Lovatt), The Philippines
(Mr W.P. Gregory), Thailand (Mr J.D. (Wen), Singapore (Messrs Tan Choon
Seng, M.J. Hand, E.C. Louey and G.R. Steer) and Australia (Messrs F.J.
Nugan, J.M. Gilder and G.T. Shaw). [Profiles of each of these
persons appear in Part Two, see also Appendix B.]
4.2.39 When a similar map showing Nugan Hand International offices was
produced as an advertisement, the Commissioner of Financial Institutions,
State of Virginia, United States objected to the inclusion of Virginia
Beach on the grounds that the office was not known to the authorities and
appeared to contravene the Code of Virginia. ^ The Nugan Hand Bank
- 690 -
subsequently responded that Admiral Yates whose personal address was
Virginia Beach had been relocated to Singapore and accordingly there
would be no further reference to Virginia Beach in printed material.7®
4.2.40 A significant feature of the brochures on the Nugan Hand Bank
and Nugan Hand International was the complete absence of any reference to
financial statements or accounts. This accorded with evidence given to
the Commission. Mr Houghton told the Commission that Mr Hand had
instructed himself and other representatives that it was illegal,
according to Cayman Islands law, to issue or publish balance sheets and 79
persons inquiring for such statements should be advised accordingly.
Nevertheless some statistics as at 30 June 1979 were put together and
printed in card form headed 'Nugan Hand International Group Combined
Balance Sheet', but it is not clear for what purpose.80
4.2.41 Other publications issued by Nugan Hand International were a
newsletter which concerned the activities of the Bank0 and two types
of economic newsletters entitled 'Nugan Hand International Australia
Report' and 'Nugan Hand International Review'82 which reported the
economic conditions prevailing in Australia and overseas respectively.
According to Mr Gilder the newsletter which concerned the Nugan Hand
Group was produced on no more than half a dozen occasions by an
advertising agency in consultation with either Mr Nugan, Mr Hand or
Mr Collings.8" The economic newsletters were produced by Mr J.R. Rush
[profile 2.60], an economist who was specifically engaged to prepare
various economic reports as well as the newsletters.84
4.2.42 Aside from publications, there were other means available to the
Nugan Hand Bank to gain exposure including personal influence, use of
bank references and conference sponsorship. Admiral Yates who had held
the position of Deputy Chief of Staff of the United States Pacific
Command during the withdrawal of United States forces from Vietnam and
was subsequently Aide to the Commander in Chief of the Pacific Command
was a person of some prominence in the West Pacific Region.843 Because
of general interest in his activities, his association with the Nugan
Hand Bank generated a number of press articles for example, articles in
- 691 -
the China Post newspaper. He was also in a position to introduce other
members of the Nugan Hand Bank to potential clients and people of
influence in the region. He supported General L.J. Manor [profile 2.45]
and Mr Gregory in this way85 though he was of little use to General
Black who was much better acquainted with Thailand than Admiral Yates
himself.86
4.2.43 With respect to bank references the 'Nugan Hand International
Group Manual' (for example the one dated April 1979)87 instructed
representatives on the importance of independent or third party points of
reference in establishing credibility when negotiating for deposits. The
representatives were told to advise clients to request through their own
bank an opinion from nominated officers of nominated banks. Sample
letters for use in making the request of their own banks were provided.
Messrs R.A. Pulger-Frame [profile 2.59], McArthur, Houghton and
Courtney-Smith gave evidence of the widespread use of bank opinions in
attracting clients.88 While clients were able to seek reports
themselves copies could be provided by the representatives.89 [See
Part 4 Section 6 for further details in relation to the use of ANZ Bank
references by Nugan Hand Ltd.]
4.2.44 The Nugan Hand Group co-sponsored the International Congress on
New Enterprise (ICONE) in Manila in June 1979. This conference examined
the opportunities for small businesses in developing countries. As in
the case of most sponsorship, the opportunities for self promotion were
not overlooked.98 [See 3.5.43-3.5.46 and 3.6.12-3.6.15 for further
information relating to the topic of conferences.]
Representatives and their Recruitment
4.2.45 The recruitment of appropriate staff for the overseas
representative offices was the responsibility of Mr Gilder. Mr Collings
who introduced Mr Gilder to the Nugan Hand Group said that he was hired
to find the people'. Mr Gilder described his function to the
Commission as that of locating people, seeing them into the field and 92 providing support for them. He adverted to his role in recruiting,
- 692 -
training and managing people for the Bank's overseas representative 93
offices in a letter to Mr Dunn dated 20 October 1976. The greater
part of correspondence concerning the engagement of staff was in fact 94 signed by or addressed to him. Representatives were recruited by the
placing of advertisements in major publications including Time,
The Bulletin, The National Times, The Australian, The Sydney Morning
Herald, The Financial Review under the heading of 'Is this you? A
95
$60 000 a year man?' and 'Is this you? $100 000 a year man?'
[see Appendix D].
4.2.46 In addition, a large number of staff were introduced as a result
of a previous association with Nugan Hand Group personnel. Mr W. Hans 96
[profile 2.27] introduced Mr Collings, Mr Collings introduced 97 98
Messrs Gilder and Ward, Mr Gilder introduced Mr Courtney-Smith,
Mr Pulger-Frame introduced Mrs Lovatt," Mr Houghton introduced Mr R.M.
Murphy [profile 2.50]100 and Admiral Yates introduced Generals Black,
Cocke (a consultant) and Manor.101 Previous associations were made
through: the Australian Investment Management Corporation (known as the
Fund of Australia [profile 2.110]) in the case of Messrs Dunn, Gilder, 102
Collings, Ward and G.A.L. Edelsten [profile 2.20]; the United States
military in the case of Admiral Yates, Generals Black, Cocke and Manor;
and less commonly through the Legal and General Assurance Company
(Messrs Gilder and Cour tney-Smith); and Deak & Co. (Far East) Ltd in
Hong Kong (Mr Pulger-Frame and Mrs Lovatt).
4.2.47 The qualifications and experience of the representatives was
varied. Mr E.C. Louey held a Class IIA honours degree in Economics and
Commerce from the University of Melbourne, Mr Steer held a Diploma in
Food Technology from the Hawkesbury Agricultural College and Mr Galicek
held a degree in Economics and Accountancy from a University in
Czechoslovakia. Cto the other hand Mr N. Evans [profile 2.21] had no
formal qualifications as was the case with a number of other
representatives (Messrs Houghton, Collings, Gilder and Courtney-Smith).
4.2.48 Their past work experience was also varied. Many had limited
experience in business as owner, director or manager, for example
- 693 -
Messrs Louey (motel business), Steer (business consultancy), Galicek
(export and business consultancy) and Houghton (restaurant business).
There was of course the United States ex-military contingency [see
3.4.83-3.4.88] and there was also an element with more dubious
credentials. Mr Evans described himself as a tax avoidance broker and
Mr Pulger-Frame had worked for Deak & Co. (Far East) Ltd which, he
advised, was laundering money throughout the world including
. . .. 103
Australia.
4.2.49 A considerable number of the representatives had overseas
experience or associations: Mr Louey was Chinese; Mr Steer had experience
in Singapore and Malaysia; Mr Galicek had lived in South America;
Mr Pulger-Frame had lived in the United Kingdom, India and Hong Kong and
had travelled extensively throughout Australasia; Mr Courtney-Smith had
worked in Papua New Guinea; Mrs Lovatt lived in Hong Kong; Mr Evans had
lived in Thailand; and Admiral Yates had been based in the Pacific during
his military career.
4.2.50 Incredible though it may seem, until the recruitment of
Mr D.E. Beazley [profile 2.7] in 1979 there was no one on the staff with
experience as a banker. Admiral Yates told the Commission that in the
early days of his association with the Nugan Hand Group, that is in 1977,
Messrs Nugan and Hand had discussed the need for a qualified banker in
the organisation and requested him to find a United States banker. A
friend of Admiral Yates at the United States Federal Reserve Board had
recommended Mr Beazley as the 'finest banker under the age of 35 in the
United States'. Mr Beazley was at the time, according to Admiral Yates,
the Chairman of the Board of a prominent bank holding company in Florida
and was not interested in leaving the position. It was not until two
years later, in 1979 when the principal stockholder in Mr Beazley's
company took over as Chairman, that Mr Beazley decided to join the Nugan â . â 104
Hand Group.
4.2.51 As a general rule representatives were engaged as independent
contractors with: advance payments in respect of the initial expenses of
the representative office plus brokerage in relation to deposits
received; fees in relation to trade or professional business conducted;
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and a series of allowances linked to the amount of brokerage earned. In
the case of Messrs Louey and Galicek, for example, the agreement provided
for advances amounting to a total of $5 500 over an initial three month 105 period. The Nugan Hand Bank also undertook to pay for the airline
ticket from Sydney to the proposed destination.
4.2.52 As far as training was concerned the only evidence on the
subject was from Mr Galicek who reported that in March 1977 he attended a
series of seminars on the subject of banking held, once or twice a week
over a period of two months, at the offices of Nugan Hand Ltd in Sydney.
These seminars were organised by Mr Gilder and were also attended by
Messrs Steer and Courtney-Smith.106 He said they were told about
office procedures and literature including the Nugan Hand Group . 107
manual.
4.2.53 Many representatives found that payment on the basis of
commission did not operate in their favour. Mr Courtney-Smith who was
sent to South America said that his contract provided for brokerage and
other fees but this did not operate as deposits were minimal and
accordingly, the Nugan Hand Bank paid his expenses as well as his return
fare. He said he ended up out of pocket and claimed, in vain, for
further expenses on his return.108 After returning from South America,
Mr Courtney-Smith went to Hong Kong where, because Mr Collings was not in
favour of brokerage, he was paid a salary and accommodation
109
allowance which was a significant benefit in view of the expensive
accommodation in Hong Kong.
4.2.54 Mr Evans, who was based for the most part in Chiang-Mai,
Thailand, said he fared somewhat better in terms of commission received.
He said he received a number of commissions, the largest being US$8 000
with smaller payments of US$1 000 or thereabouts which, through an
arrangement with Mr Hand, were paid in part in Bangkok and part in
Australia. Mr Evans said he received the US$8 000 in respect of a
single deposit of about US$0.5 million from a Chiang Mai client, Mr Som
Chai. Mr Som Chai had visited Mr Evans, counted the money from a
suitcase in front of Mr Evans and then departed with the money. Mr Evans
- 695 -
provided Mr Pulger-Frame with Mr Som Chai1s details and Mr Pulger-Frame
arranged for Mr Som Chai to take the money to Bangkok, where a courier
collected it and took it to Hong Kong. As arranged, his commission was
paid partly in Bangkok and partly to Australia.
4.2.55 Mr Evans1 position was less favourable in matters other than
commission. He told the Commission that his work visa was obtained only
at the time he was leaving Thailand and he had therefore worked illegally
for the whole time he was in the country. He was also distressed by a
number of arrests made for drug infringements and the fact that the Nugan
Hand Group was receiving a lot of attention from the Thai military. He
in fact left the country and the Nugan Hand Group on the false pretext of 112
a hepatitis infection which required treatment in Australia.
4.2.56 Payment of commission did operate in favour of certain
executives of the Nugan Hand Bank, who received an overrider in respect
of the commission received by representatives under their supervision.
Accordingly, Mr Gilder, who gave evidence of commissions paid to
representatives of 20 to 25 per cent in certain cases, received an
overriding commission to the extent of 25 per cent of the commission
received by each of the overseas representatives engaged by him for each
deposit they received or fee they earnt.
4.2.57 Mr Houghton's employment by the Nugan Hand Group was more in the
nature of an accommodation between friends, at least initially.
Mr Houghton told the Commission that in September/October 1978 he was
phoned by Mr Hand, whom he had known for many years, with a proposal that
he visit Europe to assess the work of the F.A. Neubauer Bank
[profile 2.109] for which his expenses would be paid. Mr Houghton
estimated that his services for the trip cost the Nugan Hand Group in the
order of $7 000 being first class return airfare and first class hotel 114
accommodation. No other remuneration was paid.
4.2.58 On his return trip via the United States, he approached a
company called Beck Arabia, at the prompting of either Admiral Yates or
Mr Nugan, and was told of the prospects for business in Saudi
- 696 -
Arabia.115 Mr Houghton told the Commission that he made an initial
feasibility trip to Saudi Arabia which proved promising and then a
further four or five trips before permanent premises were arranged in the
country. In respect of each of these trips he was paid first class
travel and accommodation expenses.11® This evidence conflicted with a
letter to him from Messrs Nugan and Hand setting out details of a
commission, varying from one to three per cent, that would be payable to
him.11^ Mr Houghton said that the letter had been given to him at the
time of his first trip to Saudi Arabia and that in fact no commission was
paid. He said that even if the commission had been paid, the deposits
were small, the terms of those deposits were short and the remuneration
would not have been high. Mr Houghton's comments in this regard were
supported by a memorandum he wrote, on or about 22 October 1979, in which
he complained about the difficulty of working only for expenses.11®
4.2.59 He came to understand that a debt of $35 000 which he owed to
the Nugan Hand Group would be offset by the commission payments. In
January 1980, following discussions, Messrs Nugan and Hand had agreed to
discharge the debt and pay him a salary of $100 000 per annum. In the 119 event no salary was ever paid. He estimated his expenses during the 120 18 month period he was with the Nugan Hand Group to be $364 000. He
considered that the expenses were high due partly to the cost of
accommodation and the need to periodically move staff out of the country 121 in compliance with visa requirements. Mr Hand paid these expenses by covering his debt with American Express or authorising Mr Houghton to 122 cash travellers cheques. Mr Houghton gave, as a very rough estimate
of the total deposits collected in Saudi Arabia, the figure of
US$5 million.
4.2.60 Admiral Yates performed the function of a representative in the
United States although he was in a different position to other Nugan Hand
Group personnel in that he was a director with the nominal title of
President of the Bank. His letter of appointment dated 24 January 1977
provided for a salary of US$50 000, initial expenses of US$10 000 for the 123
purposes of a car and continuing expenses of US$40 000 per annum.
Admiral Yates told the Commission that his real interest was in obtaining
- 697 -
equity in the Nugan Hand Group and although the terms of appointment
contemplated such an arrangement he was concerned that it was couched in 124 rather vague terms. The relevant clause provided for an equal
equity with Messrs Nugan and Hand of 20 per cent but only after 'a
measure of success' had been demonstrated by Admiral Yates. In the event
Admiral Yates was reimbursed for expenses except for the last six months
of his association with the Nugan Hand Bank. He told the Commission that
there were US$40 000 to US$50 000 expenses owing to third parties, that
he was personally owed US$25 000 to US$27 000 for out of pocket expenses 125
and that he received nothing by way of salary. The US$40 000 to
US$50 000 expenses included US$17 000 in fees for Harvard University in
respect of a course conducted by that University in Geneva. Admiral
Yates was required to attend this course following his replacement as
President of the Bank by Mr Beazley in October 1979 [see 3.6.37].
Overseas Offices
4.2.61 The Nugan Hand Group's promotional material advertised a Nugan
Hand International 'presence' in Hawaii, mainland United States, Chile,
Argentina, Germany, Saudi Arabia, Taiwan, Hong Kong, Thailand, Malaysia,
Singapore, The Philippines and Australia. There were, in addition, a
number of offices referred to in correspondence and other documentary
material whose existence, duration and nature of operations were more
uncertain.
4.2.62 The confusing state of the NUgan Hand Group's overseas affairs
was highlighted in Mr Hill's evidence to the Corporate Affairs
Commission. He said that following Mr Nugan's death, he and Mr Brincat
carried out inquiries to see if Nugan Hand Inc. Panama existed and to
what extent it was involved in the Nugan Hand Group. Mr Hill came to the
conclusion that Nugan Hand Inc. Panama did not e x i s t . T h e r e was
correspondence between Hong Kong and the resident agent in Panama which
indicated that the company was in fact incorporated on 24 January 1975
although the evidence indicates that there was no physical presence , 127
there.
- 698 -
4.2.63 Likewise, Nugan Hand (U.K.) Ltd [see Appendix B] was referred to
in many internal Group documents, in particular lists or schedules of
overseas offices, but there were few precise details concerning the
company available to the Commission. It was known that Mr Gilder was
present in London from October to December 1977 with a view to returning
to Australia in early 1978 and that, as at 22 December 1977, steps were
being taken to incorporate Nugan Hand (U.K.) Ltd.128 Accordingly on
28 December 1977 Mr Gilder wrote to the Chief of Exchange Control, Bank
of England seeking permission for 100 shares of £1.00 each in Nugan Hand
(U.K.) Ltd to be issued to Swiss Pacific Holdings Ltd [see Appendix B] of
the Cayman Islands to enable incorporation to proceed. This permission
was subsequently granted and on 28 February 1978 Mr Gilder informed the 129
Bank of England that Nugan Hand (U.K.) Ltd had been incorporated.
4.2.64 On the same level of uncertainty and the same limited scale of
operation, according to the Group's promotional and administrative
literature, representative offices were said to exist at one time or
another in Brazil, Mexico, Bahrain, Italy, Korea, South Africa and the
United States. In addition to the main office at Washington DC, offices
were said to exist at one time or another in Topanga and San Francisco in
California, Delaware, Florida, Maryland, New York and Virginia.
4.2.65 In most of the more established offices, the representatives of
the Nugan Hand Group operated from premises which were the registered
offices of companies incorporated under local law, for example, Nugan
Hand (Hong Kong) Ltd, Nugan Hand Singapore (Pte) Ltd, Nugan Hand Inc.
(Taiwan), Nugan Hand (Argentina) Inc., and Nugan Hand (Thailand) Ltd [see
Appendix B). Others, for example Korea and Chile, had no local corporate
structure and setting up an office was on a purely practical, as opposed
to legal basis.
4.2.66 The major overseas offices were Singapore and, particularly,
Hong Kong. Hong Kong was not only a representative office of the Nugan
Hand Bank but was also the head office of a number of other companies
including Nugan Hand (Hong Kong) Ltd. Singapore also was the head office
of a number of other companies but on a smaller scale.
- 699 -
4.2.67 Mr Courtney-Smith described the Hong Kong premises as being
comprised of Mr Ceilings' office as managing director, a number of other
offices and a general office in which Mr Courtney-Smith occupied a
desk.13' " 1 On his first trip to Hong Kong towards the end of 1978,
Mr Houghton described the office as busy, well organised and suave.333
The Nugan Hand Bank in Singapore on the other hand had two separate
premises which Mr Steer said was a consequence of Mr Hand's decision to 132
move for reasons of space and conflicting responsibilities.
4.2.68 Physically the offices ranged from the many roomed and
fashionable premises in Hong Kong to premises which were the
representative's living quarters. Mr Houghton said that in Saudi Arabia
he and his assistant Mr Murphy operated from combined residential and
office premises in Alkobar. Later he established a second office in 133
Jeddah on instructions from Mr Hand and employed three officers. In
Thailand, the office in Bangkok was comprised of a reception area and two 134 smaller offices. While in Chiang Mai Mr Evans initially conducted
business from a self contained unit of two storeys which was his living
accommodation, and later from an office building, which was also occupied 135
by the United States Drug Enforcement Agency [see 6.69].
4.2.69 While in Argentina, Mr Courtney-Smith shared the office of a
firm of attorneys and he contributed rent.336 Mr Galicek told the
Commission that he had no office of his own in South America and used the
phone, telex and typewriter of his friends.33^ In the United States,
the registered office of the NUgan Hand Bank was that of an old
acquaintance of Admiral Yates, General Erie Cocke [profile 2.13], who
offered him some space in his Washington DC office for use by the
4.2.70 A particularly unflattering description of one office was given
to the Commission by Mr Houghton. It referred to the office in Frankfurt
run, it would seem, fairly ineffectively by Mr K.F. Schuller
[profile 2.63]:139
'When I visited that office I found a small office, apparently conducted by Schuller, with a female assistant, who may have been his wife. In the waiting room of that office there were a
- 700 -
number of rather untidy persons who may have been Afghanis. I introduced myself to Schuller and told him that Mike Hand had asked me to call in. We arranged to have a drink at the hotel
later, however, Schuller was one hour late for that appointment and left after only a few minutes. I was therefore unable to obtain any information from Schuller personally which might assist Hand. However I reported to Hand subsequently that the office "looked like a third world enployment office."'
Overseas Operations other than Deposit Taking
4.2.71 The major concern of the representatives was the taking of
deposits although a number of other services were purportedly provided.
The Nugan Hand International Group Manual of April 1979 listed these
other facilities as nominee services, trade services, tax advice and 140 trustee services. The nominee services were essentially those of
corporate management involving the establishment and management for a
client of a corporation in any suitable country. Trade services meant
operating as the middleman in various transactions by providing letters
of credit or merely putting buyer and seller into contact in return for a
commission. Trustee services focussed on the setting up of trusts
including educational and retirement trusts. Tax advice was purportedly
provided in respect of local and international tax planning including the
use of back to back invoicing and tax havens. This advice was to tie
provided only in consultation with head office. Further information
relating to back to back transactions can be found at paragraphs 9.9-9.10.
4.2.72 Generally speaking, the alleged services played no part at all
or, at best, only a minor part in the Nugan Hand Bank's operations. Die
representatives were in any case unqualified to provide such services.
There is little or no evidence of advice given on tax or services
provided in the setting up of trusts. Nominee services appeared to be
restricted to the sale of companies with no element of management
involved while trade services took the form of endless discussions on
various proposals, a number of which are mentioned below, which foundered
almost immediately. The considerable time spent on these discussions
with little or no result meant that the Bank's venture into international
trade became a very expensive failure.
- 701 -
4.2.73 Mr Houghton described the nominee services to the Commission.
He said that Miss Thomson formed nominee conpanies in Hong Kong at the
rate of 100 on each occasion. Names were communicated to the
representatives who were required to check that a nominee company was
still available before it was sold and then advise when it had been
sold. As communications were poor in Saudi Arabia he would obtain the
necessary documents for particular nominee conpanies when he was in Hong
Kong so that he would not have to check availability. Relevant records
were provided including of course the memorandum and articles of
association. He said he sold them on a regular basis for fifteen months
and estimated the total sold as about 75. He said 'the initial price of
these conpanies was US$1 000 but subsequently management and accounting
services were included for the total price of US$2 500'. The companies
would either be registered in Hong Kong, Singapore, Panama or the Cayman
Islands.141
4.2.74 Among the many trade proposals misconceived or mishandled by the
Nugan Hand Bank was one termed the 1 ethanol project'. Mr Gilder said
this project was an idea brought to the company by General Black and the
principle was to utilise sugar cane in countries such as Thailand and The
Philippines to produce ethanol petrol. He said no processing plants were 142 ever built. Admiral Yates referred to other proposals, one for the
sale of small arms and bullet proof vests to Thailand and The Philippines
and another for the sale of C130's (military cargo aeroplanes).
Similarly these projects did not proceed.143
4.2.75 For all its activity it was, according to a number of
representatives, a policy of the Nugan Hand Bank not to directly finance
ventures (for the very good reason, no doubt, that the Bank did not have
the capital to do so). Mr Courtney-Smith commented to the Commission
that whenever he put up a proposal requiring finance the Bank was either
unable or unwilling to participate whereas the longer established banks 144
in Argentina were in a position to do so. Mr Galicek gave support
to this comment by stating that the Nugan Hand Bank's refusal to provide
finance was the reason for the failure of the South American venture.
Similarly Mr Oren the representative in Thailand, in a memorandum to 145
Mr Collings dated 30 October 1978, put his view as follows:
- 702 -
'NHI in banking circles is not really regarded at all as a
Banker or Merchant Banker. To achieve this, NHI has to develop an expertise in other banking activities. To be a successful Merchant Banker it must sooner or later be in a position to be able to take up positions in some of the deals it helps put
together. But if NHI was ever to break its rule "we do not lend money" it must either acquire staff with actuarial expertise or staff members experienced in risk assessment or, allow itself to be assisted by a partner experienced in this types [sic] of banking activity.1
4.2.76 One particular service provided by the Nugan Hand Bank which was
not advertised was the international management of money via what was
termed as the 'Yorkville contra1 [see 8.36-8.55], Under this system a
person could deposit funds, usually in Australia, and withdraw an
equivalent amount overseas, usually in Hong Kong or Singapore, there
being no actual transfer of the funds. Mr Hill commented in evidence to
the Commission that the funds withdrawn in Hong Kong were the funds of
Hong Kong depositors. He added that the system could operate in reverse
with funds being deposited overseas and withdrawn in Australia but it
operated largely out of Australia."*"'*'â3
4.2.77 Mr Houghton gave evidence which indicated that the system
operated out of Saudi Arabia as well. He said that sometimes clients
would just open an account in Saudi Arabia with the understanding that
they would operate on that account in Singapore, Hong Kong or the United
4.2.78 In Hong Kong, Mrs i/ovatt said that she would receive a
memorandum, telex or phone call from Sydney to pay out funds as
indicated. She would do so and on instruction would charge the payment 147
to an account styled 'Yorkville contra'. Mr Ceilings identified
such a telex from Mr Hand to himself as a direction to him to send off
the money and then to cause an entry to be made in the books of the Nugan
Hand Bank in respect of that money under the heading 'Yorkville
4.2.79 Mr Gilder said that he was not aware of the system but according
to a representative of Deak & Co. (Far East) Ltd whom he met in Bangkok,
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and other general comment, it would appear to be a common practice in the
banking w o r l d . T h i s practice was, of course, in breach of the then
current exchange control legislation [see 8.36-8.55].
4.2.80 Aside from the facilities provided to clients, the overseas
representatives became involved in a number of special projects on behalf
of the Nugan Hand Group management.
4.2.81 Admiral Yates told the Commission that during 1978 he was
required by Mr Hand or possibly Mr Nugan, to put together a team to
negotiate the purchase of the United Chinese Bank in Hong Kong from
General S.K. Yee who 'owned 96 per cent of the bank' and 'was very
pro-American and pro-American military'. The team he put together
comprised himself, General Black and Mr Hung Y. Ching. After satisfying
the conditions laid down by General Yee, Messrs Nugan and Hand told him
to discontinue the project because they could not find sufficient funds
to make the purchase."*^
4.2.82 Admiral Yates stated that the purchase price was $13 million,
presumably United States dollars, but this was an error according to a
letter dated 18 April 1978 from the Nugan Hand Bank to the Bank of
America. This letter requested a loan of US$20 million for the purchase
of 90 per cent of the shares of the United Chinese Bank and it advised
that the remaining US$10 million would be funded by the issue of
' subordinated debentures'.
4.2.83 This is a typical illustration of the ineffectiveness of the
Nugan Hand Bank and its lack of substantial capital. A good deal of time
and effort was spent in these abortive negotiations when it should have
been clear, at least to Messrs Nugan and Hand, that there was no prospect
of such a sum being raised.
4.2.84 There were also abortive negotiations to purchase a part share
in London Capital Securities Ltd [profile 2.111], a bank in London. Cn
this occasion the purchase price was low. The figure quoted during
negotiations was £22 500 but to this other costs needed to be added
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including the sum of £250 000 for an increase in capital for the purposes
of a general banking licence application. The bank at that stage had
only a limited licence. The total cost for the first year of
operation was estimated at '$1 million'. Discussions took place late in
1979 when the suggestion of further expansion was clearly inappropriate.
Instead the decision that the Nugan Hand Group could no longer afford to
acquire a part share in the Bank was made by Mr Hand only after
153
Mr Nugan's death.
4.2.85 The air of unreality extended not only to the cost of various
projects but also to their substance. Admiral Yates gave evidence to the
Commission concerning a project to move refugees from the squalor of
camps in Thailand and Malaysia to decent living conditions in the Central
and South American area. In October 1979 he travelled extensively to
meet with heads of government throughout the region to gain support for
the project. It was seriously considered that Mr Kissinger, Mr Habib or
Secretary Rosenthal might be persuaded to take the matter up with the 154 governments concerned.
Deposit Taking Procedure
155
4.2.86 According to procedural manuals there was an accepted
procedure for the taking of deposits which varied little over the years.
Essentially, the representative was required to record details of the
deposit and depositor and arrange with the client for the remission of
funds from his bank account to accounts maintained by the Nugan Hand
Bank. Depending on when the deposit was made and the currency of the
deposit these Nugan Hand Bank accounts might be in New York (Irving Trust
Bank), Hong Kong (Wing On Bank) or Singapore (Inter-Alpha Asia
(Singapore) Ltd). On receipt of advice that the deposits had been
received the relevant head office would assign client numbers, draw up
maturity cards and issue Nugan Hand Bank International Certificates of
Deposit ('ICD's').
4.2.87 Mrs Lovatt gave evidence that all Singapore client records were
kept by her in Hong Kong and she assigned Singapore account numbers and
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issued Singapore certificates of deposit. Relevant correspondence
concerning Singapore depositors was forwarded from Singapore to Hong
Kong. Maturity records were maintained in both Singapore and Hong Kong.
Oi the other hand the Singapore office issued client numbers in respect
of Middle East clients and ICD's in respect of all non-Singapore
. .. 156
depositors.
4.2.88 It is difficult to understand the reasons for these arrangements
but contributing factors may have been that: the accounting books for the
Nugan Hand Bank were kept in Singapore which made the issue of
international certificates of deposit from that office more appropriate;
deposit taking in Singapore from Singapore residents was illegal; and a
close association existed between Mr Houghton, the Middle East
representative, and Mr Hand who was based in Singapore.
4.2.89 In the case of Saudi Arabia special arrangements were made for
the transfer of deposits. The evidence indicates that they were made
either by transfer of cash to Hong Kong or Singapore, more particularly
the latter, by Mr Houghton or one of his staff or, later on, by
157
travellers cheques stamped to the order of the Nugan Hand Bank and
forwarded by courier.158
4.2.90 Where deposits were actually made in Hong Kong, the depositors
were given the opportunity of applying funds to Nugan Hand (Hong Kong)
Ltd or the Nugan Hand Bank. Mr Pulger-Frame told the Commission that in
80 per cent of cases deposits were made in respect of the Nugan Hand Bank
because those made in respect of the Hong Kong company were subject to 159 withholding tax. Mr Collings and Mrs Lovatt gave evidence that the
withholding tax was 15 per cent. Mrs Lovatt also confirmed that the
majority of depositors were with the Nugan Hand Bank.161
4.2.91 Mr Collings added that in the case of deposits made to Nugan
Hand Ltd which were guaranteed by the Wing On Bank, a commission was
payable to the Wing On Bank and accordingly, their main concern was to
channel deposits to the Nugan Hand Bank with its lower overheads.162
He stated that this commission was one per cent on each transaction.163
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4.2.92 It would seem from the evidence that in the case of all deposits
taken overseas, other than deposits specifically made in Hong Kong in
respect of Nugan Hand (Hong Kong) Ltd or in Germany in respect of the
F.A. Neubauer Bank [profile 2.109], the representatives were aware of
difficulties concerning the legality of their operations. Mr Steer told
the Commission that it was illegal to collect deposits in Singapore and
accordingly, funds made available in Singapore were sent to Hong Hong to 164 the Wing On Bank.
4.2.93 Mr Collings stated that before the incorporation of the Nugan
Hand Bank, he was collecting deposits on behalf of Nugan Hand Ltd and
claimed that, accordingly, the operation was not required to be licensed
under Hong Kong banking law [see 4.1.10, 4.1.12],165
4.2.94 Admiral Yates told the Commission that as far as the United
States operations were concerned neither Mr Nugan nor Mr Hand intended
him to work outside the legal limits for a bank representative of a
foreign country. His duties were to provide information and sample
letters and telexes to the major United States banks and it was up to
them to take up negotiations with the Nugan Hand Bank."*·®®
4.2.95 In a paper prepared by Mr Louey dated 29 January 1980 concerning
the Kuala Lumpur office in Malaysia, he noted that the Malaysian company
was categorised by the Ministry of Trade as a 'trading company1 which was
the only possible means of maintaining any presence at all in Malaysia.
He acknowledged that apart from a few brief trade initiatives, the
emphasis had been on discreet promotion of ICD facilities. While stating
that the office had generated US$3 million of ICD business, he went on to
say that it was: 6
'not permitted to indulge in any form of banking activities nor may we present ourselves in any way as bankers or bank
representatives. Such activities require prior approval of Bank Negara [the Central Bank], and ... we are unlikely to be
accorded such approval in the foreseeable future.'
4.2.96 In a minute from Mr R.L. Attkisson [profile 2.4] to Mr Beazley on
25 February 1980 on the subject of 'Legitimatizing our Activity in Hong
- 707 -
Kong' Mr Attkisson described the Hong Kong operations as taking deposits
and placing them into a Nugan Hand Bank Hong Kong dollar or United States
dollar account maintained at the Wing On Bank and issuing ICD's out of
Hong Kong. He concluded, 'This activity seems to blatantly violate the
ordinance of the Banking Commissioner and is a matter of concern to me'.
He recommended that the Nugan Hand Bank cease taking Hong Kong dollar
deposits and that Hong Kong dollar deposit activity be handled through
Nugan Hand (Hong Kong) Ltd, the deposit taking company.^®
4.2.97 Similarly in a minute from Mr Holmgren, the Taiwan
representative, to Mr MacArthur dated 23 November 1979, he referred to the
basis on which the Taipei office had dealt with its clients
'In the past we have always used Hong Kong as our servicing base for our Taiwan clients ... Taiwan, as you know is a SENSITIVE
area. We have just got our registration for Taiwan as Nugan Hand Inc., a branch of the US company which deals in trade. We are not and cannot in any way classify ourselves as a bank or deposit takers etc. Therefore any ICD business which,
incidentally as the record shows, has been increasing quite rapidly, has to be done "at arm's length". In fact it is better for us to have the client go to one of the other offices such as Hong Kong to open an account because then it is an absolutely legal situation. If we open any I CDs ourselves we must advise the client that we actually are only doing a service to them and the business will actually be processed through Hong Kong and Singapore. We legally cannot take money, checks [sic] or
whatever. As you know we do not deal in the money exchange
business and I refuse to get into this business.'
The Bank was also prepared to receive deposits on the basis that the
money, less an appropriate fee, be paid back to the client as a purported
loan. A standard contract was printed for use between the Nugan Hand
Bank and its depositors to evidence the deposit received and the
particulars of the so called loan. Clause 2 of the contract stated that
the 'net and legal effect in regard to the Depositor shall be that the
Depositor shall have provided its own funds for an 'apparent' loan back
to itself'. The final clause of the contract concluded with the words:
'The Depositor shall for its part agree to keep absolutely confidential at all times the fact that the Bank provides such a service as a "back to back deposit and loan" and the
- 708 -
particulars, documentation, and other circumstances surrounding the back to back loan, except so far as declaration to any
government or taxation authority of the corresponding "loan" from or through the Bank shall be essential for the customer or Depositor to benefit from the transaction.1
The tax evasion purpose of the 'back to back loan and deposit' was
170
self-evident from this contract [see 9.9-9.10],
4.2.98 Many of the representatives giving evidence before the
Commission commented on the rate of interest offered by the Nugan Hand
Bank. Mr Courtney-Smith told the Commission that a staff member was
employed in Hong Kong to check competitive rates being offered by other
banking groups. He, in conjunction with Mr Collings, would decide
what rate the Nugan Hand Group would offer in the market.171
Representatives would be instructed from Hong Kong periodically as to the
prevailing rate of interest. The Group manual indicates that rates were 172 advised monthly. Representatives quoted different figures but
uniformly attested to the level of interest rate being higher than the
market level. Mr Dunn stated that the interest offered was one quarter 173
per cent higher than the market rate. Mr Needham stated that
Mr Hand had instructed that interest rates in Hong Kong were to be one
half per cent or one per cent higher than the rate offered by Deak & Co. 174 (Far East) Ltd.
4.2.99 Mr Houghton noted that in Saudi Arabia the recognised banks
offered only one per cent interest which was considerably less than the
rates offered by the Nugan Hand Bank. Mr Evans said that the
interest rate of 12.5 per cent being offered by the Nugan Hand Bank to
depositors was too high and that interest rates offered by Australian,
Thai and Hong Kong Banks was about eight per cent.176
4.2.100 Mr Needham told the Commission that he was concerned because the
Nugan Hand Bank was earning six per cent or six and a half per cent on
the Asian Currency Unit market [see 4.1.57] and was paying in the order
of 14 or 15 per cent for deposits.177
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4.2.101 This discrepancy was, in part, the subject of a note which
Mr Brincat said was dictated to him by Mr Nugan as background information
to the Nugan Hand Bank 1977 accounts as follows:"*·78
'(3.) The interest paid by the bank on the fixed term deposits ... was at a rate higher than the bank was yielding on the
placement of the funds in question, which is referable to the fact that the bank was in its initial year of
operation. This is particularly so since Asian Currency Units ... only yield between 4% and 6%.
Funds at bank yield no interest and the money market
securities yielded between 10% and 11%. The rates paid by the bank on fixed term deposits varied between 6% and 12%.
The directors of the bank either out of conservatism or for other reasons in their business judgment offered extremely competitive rates on deposits from clients in the initial year of operation but have clearly from the manner in which
the funds in question were placed made little effort to earn high yield on the funds and placed them very
conservatively at moderate rates.'
There is no evidence that the discrepancy between interest earned and
paid changed in the ensuing years to accord more with sound commercial
practice.
4.2.102 Aside from the very advantageous level of interest rates, the
Nugan Hand Bank offered a highly confidential service. The manuals . 179
detail steps which were to be taken to ensure the client's privacy.
Client applications were described as 'general' for open business or
'maximum security' for sensitive clients. Even in the case of the
former, clients were to be allotted code words and correspondence was to
be forwarded in envelopes having no company markings or return addresses
on the outside."1 ·80 In the case of the latter, clients' applications 181
could be signed using the code name signature.
4.2.103 Mrs Lovatt referred to the system whereby clients were allocated
a client number from a hard covered exercise book kept by Mr Hand. The
book contained details of the client's name and client numbers were
issued in consecutive order. She was subsequently given responsibility
for issuing client numbers. She found the book inefficient and started a
card system.·*·8^ She told the Commission that details of names and
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addresses of some clients were not known to her: ' These were
confidential clients of the representatives and the full details would
only be k n o w to the representative. These clients were only recorded by ,183 way of client number.'
4.2.104 Mrs Lovatt also commented on the system of codes whereby
messages were transmitted between offices. With respect to the codes,
she noted that, for example, a reference to Paris meant the fourth day of
the month based on a system whereby thirty one cities of the world had
been allotted to the days of the month.
4.2.105 The Nugan Hand Bank was aided in protecting information by the
statutory requirements of the Cayman Islands which enforced the
preservation of confidentiality. For this reason the Nugan Hand Bank was
also able to claim that financial statements could not be issued because
it was against Cayman Islands law [see 4.2.40].
4.2.106 The advantages of the deposit taking procedure to clients of the
Nugan Hand Bank were perhaps highlighted by evidence given by
Mr Houghton, the representative for the Middle East, where the attractive
characteristics of the Nugan Hand Bank were married with the particular
difficulties encountered in Saudi Arabia. Among the advantages listed by
Mr Houghton were that the client would have secrecy and could withdraw at
any of the Nugan Hand Bank representative offices. While merchant banks
from Austria, Britain and elsewhere were dominated by Arabs and as such
were inefficient and understaffed (it could take four hours to complete a
transaction), the Nugan Hand Bank representatives attended construction
sites and so offered convenience. In addition the Bank offered
flexibility enabling a client to open an account in Saudi Arabia on the
understanding that he could draw on it elsewhere, for example Singapore
or Hong Kong. Also the closure of offices on religious days did not
deter the Nugan Hand Bank from transferring deposits.185
Number of Depositors
4.2.107 The Commission prepared a list of Nugan Hand Bank clients based
on the Bank's client cards, which matched names with numbers,186 and
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other documentary evidence, for example cheque requisitions, receipt
vouchers and telexes, which indicated other client numbers and names.
It was also possible to gain some idea of the country of origin of the
deposit through the Bank's practice of using a letter of the alphabet as
a suffix to the client number to indicate the client's country of
residence or address. It should be noted, however, that this system of
suffixes was not followed without exception as the Commission learned
from Mrs Lovatt who gave evidence that on one occasion she used the
letter A (normally reserved for Australian addresses) for a Chinese
family resident in Singapore whose records she considered to be very ., . 187
sensitive.
4.2.108 Bearing in mind the limitations of the list, the figures
obtained were 1006 for overseas clients, 91 for Australian clients and
some 18 clients with both overseas and Australian suffixes. The figure
for Australian clients is similar to that of 88 obtained by Mr Willis of
the Corporate Affairs Commission extracted from material provided by the
Hong Kong Official Receiver and dated August 1980.
Few Deposits and Little Income according to Representatives
4.2.109 Individual representatives presented a highly fragmented picture
of the quantity of deposits received and the income which these deposits
generated but generally speaking their perception was that of few
deposits and little income.
4.2.110 Mr Courtney-Smith reported only a couple of very small deposits
in Argentina"*"®^ while Mr Galicek reported that the only deposit from
his area of operations (South America) was $7 000 from a Chilean in 190 January 1978. In the Pacific, Mr Steer reported that for two years
to July 1979, US$6.5 million was taken from Malaysia, The Philippines and 191 Singapore. Mr Evans told the Commission of seven depositors in
Bangkok and two in Chiang Mai with deposits including US$0.5 million,
US$2.5 million, US$360 000, US$1 million, US$120 000 and certain other 192
deposits he described as thousands of thousands. It is inpossible
to state the degree of accuracy of this evidence. It is the Commission's
- 712 -
view that Mr Evans' evidence cannot be accepted without independent
corroboration. There is no such corroboration. In fact the evidence was
contradicted [see 6.62-6.75].
4.2.111 Mr Hill told the Commission that neither deposit taking nor
corporate deals were revenue producing and as far as tax schemes were
concerned 1976-1977 was the highlight in terms of profit.193
4.2.112 Mr Pulger-Frame said that he became disenchanted with the Nugan
Hand Group in 1977. He considered that the Group kept afloat simply by
taking money from any part of the operation regardless of the propriety
of such a course of action. He learned that deposits were placed on the
ACIJ market which paid eight and a half per cent while the Nugan Hand Bank
was paying ten per cent. On top of that there was commission to pay
himself and in addition overriding commissions. Mr Pulger-Frame stated
that whenever the Nugan Hand Bank had funds they would be sent to
Singapore and placed on the ACU market although the only advantage of
such placement was the security obtained. It appeared to him that the 194
Nugan Hand Bank was 'going out backwards'.
4.2.113 Mr Ward told the Commission that 'Ingold Growth' was a total 195 failure. He also said that Mr Nugan had told him that he was
injecting money into the Nugan Hand Group at an ever increasing rate.
Mr Ward agreed in evidence that, given the cost of maintaining an
overseas presence, the cost of the organisation in Sydney (which did not
appear to be profitable), early ventures such as 'Ingold' which were a
disaster, and Hong Kong which was far from being financially
self-sufficient, the Nugan Hand Group was a pretty unhealthy group of
companies, financially speaking.196
4.2.114 Mr Courtney-Smith told the Commission that after conducting a
feasibility study of business prospects in Argentina he came to the
opinion that if the Nugan Hand Bank was not in the business of lending
money to finance trade, then it could not compete against the larger
established banks who could offer this service. He said that the period
in Argentina between 1977 and 1978 was totally unsuccessful as he
- 713 -
generated no income as a middleman and attracted only a couple of very
small deposits.197
4.2.115 Mr Hill said in evidence that Thailand was the only place where
any real profit was made and referred to a commission of US$300 000
earned by the Nugan Hand Group on the sale of the Kaiser Cement & Gypsum
Corporation in Thailand.198 The Kaiser Cement transaction was a
highlight in Thai operations. In a memorandum from Mr Owen, the Nugan
Hand Bank's Thailand representative, to Mr Collings dated 30 October 1978 199 he noted that:
'Deposit gathering on its own is too shallow an objective on which to build a bank ... NHI is, apparently, regarded in
Thailand as a "money operator" and the banks look at us in a
wink wink - nod nod way and a [sic] generally regard NHI as a
rather upstart company engaged in trapping what flight capital we can. This is despite our other activities such as the Kaiser Cement & GYP3⢠Company share sale in Thailand.'
200
Mr Oven went on to say:
'Despite great success in other countries, the deposit gathering activity has not achieved the success that was hoped for in Thailand. Our image here may be against us and like bad breath even your friends won't tell you1!1.'
4.2.116 Mr Owen considered Admiral Yates' promotional work in the United
States to be unproductive. Admiral Yates said that he visited over
90 banks in the United States without success. He noted that with regard
to trade activities or corporate services there were a number of meetings
but he did not believe they came to fruition.2C2
Accounts and their Audit
4.2.117 The deteriorating financial position of the Nugan Hand Bank was
reflected in the accounts prepared in the Bank's accounting office in
Singapore during the three years of operation of the Bank in 1977, 1978
and 1979. In each of the three years in question the accounts were
completely rewritten principally, if not exclusively, by Mr Brincat on
- 714 -
instructions from Mr Nugan. The result was that in 1977 and 1978, the
accounts that were passed by the Bank's auditors in the Cayman Islands,
portrayed a radically improved picture of the Bank's financial position
which in fact was false.
4.2.118 In 1979 the accounts were again rewritten but on this occasion
the auditors were alerted because of continuing adverse publicity and
declined to pass the accounts. This spelled the end of the Nugan Hand
Bank's carefully constructed but false image of a sound commercial
operation.
4.2.119 The preparation and auditing of the accounts involved the
Singapore office as the accounting office for the Bank, the Sydney
office, as the rewriting exercise was directed from and finalised by
Nugan Hand Ltd officers, and the Cayman Islands where the audits were
conducted by Price Waterhouse & Co., the Bank's auditors.
4.2.120 Those who were fully conversant with the rewriting exercise were
Messrs Nugan, Brincat, Hill and Hand. Those with more limited knowledge
of the exercise included Mr Tan Choon Seng, the accountant in the
Singapore office.
Knowledge of the Rewriting Exercise
4.2.121 Mr Brincat, in evidence to the Commission, confirmed his earlier
evidence to the Corporate Affairs Commission that those with knowledge of
the rewriting exercise were himself and Messrs Nugan, Hand, Hill and Tan
Choon Seng. In addition, he told the Commission that he informed his
partner, Mr Pollard, of the rewriting exercise in 1977, 1978 and 1979 and
the effect of reclassifying the cash records to eliminate loans and
reduce operating expenses. He did not, however, discuss with Mr Pollard
the use of Nugan Hand Inc. Panama [see 4.2.125-4.2.126]
Mr Pollard, on the other hand, agreed that he was aware that Mr Brincat
had gone overseas to Singapore to do accountancy work but he said that
they did not discuss in detail what Mr Brincat had done while he was
away. Mr Pollard denied that he was aware that the books had been
... 205
rewritten.
- 715 -
4.2.122 Mr Brincat's evidence also conflicted with evidence given to the
Corporate Affairs Commission by Mr Tan Choon Seng. According to Mr Tan
Choon Seng's evidence, Mr Brincat had assured him that the Bank was
solvent and had discussed why expenditure on behalf of the Nugan Hand
Bank was reclassified as expenditure on behalf of Nugan Hand Inc. Panama
[see 4.2.125-4.2.126]. Further, Mr Brincat had told him that Nugan Hand
Inc. Panama was an intermediary company of the Bank. Mr Brincat denied
that he had assured Mr Tan Choon Seng of the Bank's solvency and could
not recall the discussion concerning Nugan Hand Inc. Panama. He did
agree, however, that on occasions when visiting Singapore he had told
Mr Tan Choon Seng that various kinds of accounting records had to be
rewritten to reclassify expenditure.
4.2.123 The accounts were signed in 1977 by Mr Hill and Admiral
207
Yates. Mr Hill stated that Admiral Yates also signed the 1978
accounts although Admiral Yates said he thought that he had only signed
the 1977 a c c o u n t s . H e stated that on this occasion he completely
relied on Mr Hill who explained all the entries in the books to
h i m . M r Hill stated that Admiral Yates relied entirely on the
auditors Price Waterhouse & Co., and would have been totally unaware that 210 anything was wrong. As far as Mr Hand was concerned, Mr Hill was of
the opinion that Mr Hand was fully aware of the rewriting of the Nugan
Hand Bank records^ ^ and that Mr Hand was in fact present when the
212
Nugan Hand Bank records were restructured in Singapore.
A. Mr F.J. Nugan's Instructions
4.2.124 Both Mr Hill and Mr Brincat gave evidence to the Conmission that
they travelled to Singapore in 1977, 1978 and 1979 in connection with the
rewriting of the NUgan Hand Bank accounts on instructions from Mr Nugan.
They differed, however, in their recollection of Mr Nugan's
instructions. According to Mr Hill, Mr Nugan's instructions were to the
effect that the accounts were to show a certain level of deposits and a
particular level of profit, and the accounts were to be constructed to
achieve these aims. This required a reduction in the number of
depositors, which Mr Nugan nominated and also required certain expenses
- 716 -
213
to be written off. Mr Nugan's · explanation to Mr Hill was that some
depositors had actually been repaid overseas and so the accounts should 214
reflect this situation for the purposes of the audit.
4.2.125 Further, Mr Hill said that Mr Nugan had indicated that he had
arranged with the auditors that all the depositors who had been repaid 215
would be 'taken out' of the accounts. According to Mr Hill, the
system adopted for reducing deposits and writing off expenses was to use
Nugan Hand Inc. Panama as a clearing account so that the depositors who
were to be represented as having been repaid were to be shown as having
been repaid though Nugan Hand Inc. Panama. Likewise the expenses were
charged to Nugan Hand Inc. Panama.^®
4.2.126 Mr Brincat, on the other hand, denied that Mr Nugan had said
what level of deposits and profit he wanted reflected in the accounts or
that certain deposits had in fact been repaid. Rather Mr Nugan had said
that certain deposits had been received by the Nugan Hand Bank on behalf
of Nugan Hand Inc. Panama and other companies and the Bank accounts were 217
required to reflect this situation. Mr Brincat confirmed his
earlier evidence to the Corporate Affairs Commission that Mr Nugan also
required certain expenditure of the Nugan Hand Bank to be reclassified as
having been made on behalf of Nugan Hand Inc. Panama. Mr Nugan told
Mr Brincat that it was necessary to do so as the Nugan Hand Bank was
incurring expenses on behalf of all the Group's companies.^®
4.2.127 According to Mr Brincat, Mr Nugan had said it was necessary to
rewrite the cash books because all sections of them were incorrect and it 219 would save work in the long term. The approach adopted, as pointed
out in the Seventh Interim Report of the Corporate Affairs Commission,
was of course contrary to the approach which should have been used, had
Mr Nugan's instructions been correct, of using journal entries at balance
date to adjust the accounts in respect of the various payments and 220
receipts, rather than completely rewriting the cash books.
4.2.128 Mr Brincat said that Mr Nugan's instructions that the cash books
were to be rewritten were not directed to the elimination of interÂ
company advances recorded in Singapore as assets but he agreed that this 221 was the effect.
- 717 -
B. The Nature of the R e w r i t i n g Exercise
4.2.129 A number of visits to Singapore were made by Mr Brincat and
Mr Hill in connection with the accounting arrangements for the Nugan Hand
Bank. According to Mr Brincat's diaries and to his evidence before the
Commission, he made a total of five visits to Singapore; two in 1977, in
June for five days and from 6 to 11 November; two in 1978 from 3 to
10 February and from 19 to 22 June (he specifically recalled he was not
accompanied by Mr Hill on this occasion); and one in 1979 from 11 to 222 18 May.
4.2.130 Mr Brincat said that the first conversation he had with Mr Nugan
about rewriting the accounts was about the middle of 1977 and Mr Hill may 223 have been present. He also said that on the first visit to
Singapore in 1977, he and Mr Hill hired a bookkeeper, and an accountant, 224
Mr Tan Choon Seng, and set up the main records.
4.2.131 Mr Brincat confirmed his earlier evidence to the Corporate
Affairs Commission that he and Mr Hill agreed that cash books, bank
statements and a depositors' ledger should be maintained in the Singapore
office. Mr Brincat did not establish a control register for ICD's in
order of serial number.225 If the details of the 1977 visits are
correct the rewriting exercise in respect of the 1977 accounts, which
were audited in September of that year, commenced during the visit in
June which was also the occasion of the hiring of the local accountancy
staff.
4.2.132 The purpose of each of the trips to Singapore in 1977, 1978 and
1979 according to Mr Br incat, was to get the work under way for the
writing up of the cash books, not necessarily for the work itself to be
done in Singapore. In 1979, he noted, no rewriting was done in Singapore
while in 1977 and 1978 some was done in Singapore and seme in Sydney.
Following the visits to Singapore a complete Kalamazoo set of records was
prepared in respect of each of the years 1977, 1978 and 1979 and was sent
to the Cayman Islands together with the financial statements based on
those records.226
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4.2.133 Mr Hill g a v e e v i d e n c e to the Commi s s i o n that the r e w riting
e x e r c i s e w a s a c t u a l l y carried out b y Mr B r i n c a t a n d Mr T a n c h o o n Seng.
227
Mr Hill's role was to take the accounts to the auditors. Mr Br incat
initially claimed that the rewriting exercise was carried out by himself,
Mr Hill and some of the Sydney staff of Nugan Hand Ltd. He later said
Mr Hill helped in 1977 and 1979. Mr Br incat subsequently said that
Mr Hill probably did not take part in the 1979 rewrite. Finally, he did
not dispute that Mr Hill played little if any role in the rewriting of
the Nugan Hand Bank records.
4.2.134 T here w a s con f l i c t i n g e v i d e n c e concerning w hich a c c o u n t a n c y
records kept in the S i n gapore o f f i c e w e r e c o n sulted d u r i n g the rewriting
exercise. Mr H i l l ga v e evidence to the Commi s s i o n that he a n d Mr Brincat
t r a v e l l e d to Si n g a p o r e a n d Mr Tan Choon Sen g a n d M r Br i n c a t p r e p a r e d
journal entries while in Singapore. Mr Brincat denied that he made
e n t r i e s in the N ugan H a n d Bank journal in Singapore. H e sa i d he m a y have
m a d e such entries in the journal w h i c h was part o f the Kal a m a z o o system
230
w h i c h Mr B r incat r e w r o t e in Sydney. Further Mr Hill sa i d that the
ledger w a s sent d o w n to S y d n e y for Mr N ugan's appro v a l of the draft
231
b a l a n c e sheet. Mr B r i n c a t d e n i e d that the ledger was b rought down
f r o m Singapore to S y d n e y for Mr N u gan's approval. He said that the
ledger was n o t re w r i t t e n a n d that there w a s onl y o n e ledger for the Nugan
Hand Bank which was the one brought into existence by himself as part of 232 the Kal a m a z o o s y s t e m in Sydney. Later, h o w e v e r , Mr Brincat said the
set of b ooks kept b y Mr Tan C h o o n Se n g in Singapore included a set of
233
cash books, a ledger a n d a journal. N o t w i t h standing the e x i stence
of suc h records in Singapore, Mr B r i n c a t thought that the o n l y records he
consulted were cash sheets (and not the cash books), requisition forms
a n d ban k statements. T h e ca s h sheets w e r e copied a n d used in Syd n e y to
234
ena b l e Mr Nugan to d i s s e c t a l l the entries. Mr Brincat als o stated
235
that he used old cash books to write up the new ones.
4.2.135 In evidence to the Corporate Affairs Commission Mr Tan Choon
Seng said that during 1977, 1978 and 1979 the Singapore office sent the
Nugan Hand Bank trial balances, balance sheets and profit and loss
statements to Sydney. When referred to this evidence Mr Brincat told the
- 719 -
Commission that he could only recall bank reconciliations, that is,
balances of the various bank accounts of the Nugan Hand Bank coming from
S i n g a p o r e . H o w e v e r , Mr Brincat subsequently accepted that he had
seen a trial balance prepared in Singapore in respect of the 30 June 1978 237 accounts.
4.2.136 Both Mr Hill and Mr Brincat gave evidence to the Commission that
for the period 1977 to 1979 there existed two sets of records, the
original set in Singapore and the restructured s e t . M r Brincat
supposed that the Singapore office proceeded with its records for its
everyday recording as though his records did not exist.^ 9
4.2.137 In carrying out the rewriting exercise, Mr Brincat stated that
he played a mechanical role at the request of Mr Nugan. He confirmed his
earlier evidence to the Corporate Affairs Commission that he perceived
his function as that of a bookkeeper with no independent mind and that he
had no role to question his instructions or to inquire as to the
truthfulness of the reclassification of expenses and deposits in respect , 240
of Nugan Hand Inc. Panama.
C. Presentation of the Accounts to the Auditors
4.2.138 Mr Hill said that he took the rewritten Nugan Hand Bank
accounts - cash books, ledgers, journal, balance sheet and profit and
loss statement - to Price Waterhouse & Co., the auditors in the Cayman
Islands. The auditors kept them for several days during which they
raised queries which would be checked by Price Waterhouse & Co., in
Singapore. In 1977 and 1978 the auditors had signed the accounts and
given them to Mr Hill. However in 1979 they wanted undertakings from
Mr Hill that the accounts reflected the true level of deposits. This was
the first occasion on which the auditors requested such an undertaking.
Mr Hill said that he thought the request for an undertaking stemmed from
the adverse publicity concerning charges which had been preferred against
the Nugan brothers. He said they questioned him closely about the nature
of the charges. In the event Mr Hill declined to give the undertaking.
As he explained to the Commission he had been prepared to go along with
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Mr N u g a n1 s wis h e s b u t his a p p r e c i a t i o n of the s i t uation was then such
that he d e termined not to d e l a y t h e r ectification p r ocess a n y further.
241
H e s a w no reason to go a l o n g w i t h the s h a m a n y more.
4.2.139 It was Mr Hill's impression that had he given the undertaking to 242
the auditors there w o u l d have b e e n no problem. As it was, he d i d
not giv e the undertaking, a n d s h o r t l y after, the audi t o r s a d vised the
B a n k i n g C o m missioner that the a c c o u n t s c o u l d not be p r e s e n t e d to the
Commis s i o n e r in a c c o r d a n c e w i t h the requirements of Caym a n Islands
n 243
law.
D. De t a i l s o f the A n n u a l Acco u n t s
1977 Accounts
4.2.140 The evidence before the Commission disclosed that three versions
of the 30 June 1977 accounts of the Nugan Hand Bank were prepared. One 244
v e r s i o n w a s p r e p a r e d b y s t a f f in the Singapore office, another
v e r s i o n w a s p r e p a r e d b y Mr B r i n c a t and was signed b y Mr Hill and Mr N ugan
245
on 2 September 1977 and a further version was signed by Mr Hill and
Admiral Yates a n d w a s p a s s e d b y the auditors, Price W a t e r h o u s e & Co., in
246
the Cay m a n Islands o n 16 September 1977.
4.2.141 Significant features of the S i n gapore version of the accounts
were: the inclusion in the assets o f inte r - c o m p a n y loans in the sum of
US$2 148 740.10 (which a c c o r d i n g to the trial b a lance included an amount
of US$750 000 owe d b y N Ugan Hand Inc. Panama a n d an amount of
US$322 648.17 owe d b y Yo r k v i l l e Nominees P t y L t d [profile 2.108]); the
inc l u s i o n in the l i a b ilities of client deposits in the s u m of
US$4 287 464.52; a n d a p r o f i t a n d loss statement s howing a net loss of
US$55 087.51.
4.2.142 Mr B r i n c a t at first told the Commi s s i o n that he had not seen the
Singapore trial b a lance before it w a s shown to h i m by the Corporate
A f f a i r s C o m m i s s i o n.* 2 4 4 2 4 5 2 4 6 247 He s u b s e q u e n t l y stated that he m a y hav e had
acc e s s to the docu m e n t tho u g h he had no r e collection of hav i n g done
- 721 -
so and then reverted to his original position by denying that the
Singapore figures were available to him when he was preparing his balance
sheet. His recollection was that copies of cash book sheets were
brought from or sent by the Singapore office together with cheque
requisitions and bank statements, that the cash book sheets had been
rewritten and that he had prepared the accounts based on the rewritten
cash sheets.
4.2.143 The major differences between Mr Brincat's version of the
accounts and the Singapore accounts were: the inclusion as assets, of
money market securities to the value of US$1 181 522 (which Mr Brincat
said represented debts between companies within the Group; no securities
were included in the Singapore accounts); the absence of an amount for
inter-company debts as part of the assets (as opposed to US$2 148 740.10
in the Singapore accounts); the inclusion as a liability of only
US$2 764 061 as fixed term deposits (as opposed to $4 287 464.52 as
clients' deposits); and a profit and loss statement showing a net profit
of US$103 566 (as opposed to a loss of US$55 087.51).
4.2.144 The securities were the subject of a note to the accounts which
described the secur i t i e s a n d s t a t e d that they w e r e held b y Nugan Hand Ltd
on behalf of the Bank. As Mr Br i n c a t a c k n o w l e d g e d to the Commission,
contrary to this note, Nugan Hand Ltd was not holding any securities on
behalf of the N u g a n H a n d Bank at this or a n y o ther time. He agreed that
when he prepared the balance sheet the particular securities were owned
b y N u g a n H a n d Ltd a n d p l e d g e d to a N u g a n Han d Ltd depositor. Mr Brincat
said that the not e had been d r a f t e d b y Mr Nugan and they had disagreed
about Mr Nugan's requirements that the securities be included in the 251
accounts because Mr Brincat knew that the information was false.
4.2.145 The complete absence of any mention of inter-company loans from
the accounts prepared by Mr Brincat was at variance with the work sheets
in Mr Brincat's handwriting which he agreed were written in connection
with the production of his accounts and which he described as relating to 252 s u m maries from bank accounts. T here were, for example, details
conce r n i n g loans p a i d out of the W i n g On Bank Hong Kong dollar account
- 722 -
253
totalling US$1 580 272.67 while Mr Brincat could only refer in his
work sheets to repayments in respect of the particular loans concerned of 254 2R5
US$79 372.29 and US$254 329.
4.2.146 The work she e t s d i d c o n t a i n reference to loans pai d to P eggy
Pracey, M a r g a r c o a n d Shue Sha w M i n u nder the h e a d i n g of 'Loan-Yorkville
N o m i n e e s - S y d n e y C l i e n t s.1 T h e evidence before the Commission
d i s closes that Mr Brincat m a d e e n t r i e s in the records of N u g a n Han d Ltd
a n d Yo r k v i l l e Nominees P t y Ltd in relat i o n to deposits fro m these clients
p u r p o r t i n g to treat them as n o n - r e p a y a b l e b y N ugan Hand Ltd on the basis
that Mr N u g a n h a d h i m s e l f repaid t h e m in H o n g Kong. In fact the deposits
w e r e repaid by the N ugan Hand Bank.
4.2.147 Mr B r i n c a t deni e d w h a t m i g h t ot h e r w i s e be as s u m e d f r o m his work
sheets, that he kn e w that the depo s i t s had been repaid b y the Bank. His
exp l a n a t i o n w a s that h e m a y h a v e recog n i s e d the n a m e s as clients of Nugan
Hand Ltd but thought it q u i t e p o s s i b l e that they wer e over s e a s depositors
w h o had sepa r a t e dealings w i t h the Nugan Hand Bank. It was p o i n t e d
out to h i m that these dealings co n c e r n e d not on l y the same depositors but
als o the same depo s i t s a n d that the Bank's cas h s u mmary sheets wer e
258
a v a ilable w h i c h reco r d e d these deposits. Mr Brincat said that he
did not k n o w w h ether he had acc e s s to the ca s h s u mmary sheets on his
259
visits to S i n gapore as o p p o s e d t o the cash book itself. He agr e e d
that it w a s impossible for h i m to recollect names and figures in two
compl e t e l y different sets of a c c o u n t s at different t i m e s . ^ He agreed
that there was no reference in either the N ugan Ha n d Bank or Nugan Hand
Ltd accounts to s uggest that the Bank had m a d e paym e n t s on behalf of
Nugan Hand Ltd.
4.2.148 Associated with the accounts prepared by Mr Brincat was a
memorandum to Mr Hill in Mr Brincat's writing entitled 'Background
Information to Accounts of the Nugan Hand Bank'. Mr Brincat said that
the memorandum had been dictated to him by Mr Nugan and it was his
understanding that the notes contained in the memorandum would either
form part of the accounts or would accompany the accounts to the auditors
as a separate document. He denied that the memorandum had been dictated
- 723 -
to himself because he was expected to contribute to the contents. The
memorandum stated a number of reasons for the minimal income or profit
earned by the Bank in its first year of operation. It stated, first,
that funds were left in the various bank accounts, not earning any
income. Secondly, no income had been calculated on the money market
securities because, it was claimed, income was not earned until maturity
which was after the balance date. Thirdly, the Bank had paid higher
rates of interest on fixed term deposits than it had earned on placement
of the funds in question particularly as Asian Currency Units yielded
only between four per cent and six per cent. Fourthly, certain expenses
paid by other companies within the Group had been incurred in respect of
the establishment and the operation of the Nugan Hand Bank and that the
position would have to be rectified in its first full year of operation.
In relation to the last point, the memorandum went on to state: 'Our
auditors in Australia have indicated that they would wear it in the
initial few months of operation but the auditors in Cayman should be told
that these are the facts.|2®2
4.2.149 With regard to the reference to expenses incurred on behalf of
the Bank by other companies within the Group, Mr Brincat gave evidence
that Messrs Nugan, Hill, Shaw, Ward and himself were, for example,
officers of Nugan Hand Ltd who would have worked 20 per cent of their
time on Nugan Hand Bank business. He added that the ultimate payer of
the Nugan Hand Bank expenses was Nugan Hand Ltd. In the absence of
any other evidence concerning this memorandum it can only be assumed that
it was in fact forwarded to the Cayman Islands as an explanation of the
1977 accounts prepared by Mr Brincat.
4.2.150 The version of the accounts which was finally passed by the
auditors on 16 September 1977 was similar to the accounts prepared by
Mr Brincat with the important difference that the audited version 264
contained no reference to money market securities. Instead the
asset of short term deposits was a sum of US$2 714 568 which represented
the total of both short term deposits and money market securities which
were contained as separate items on Mr Brincat's balance sheet. The only
notes to the audited accounts alleged that the Bank was a wholly owned
- 724 -
subsidiary of Rigan Hand International Holdings Ltd and that alternative
internal control procedures had been set up because of the confidential
nature of the accounts. Mr Brincat said that with regard to the former
point, it was contrary to evidence of which he was aware and in the case
of the control procedures he was not aware that there were alternative
internal control procedures.265
4.2.151 In summary, the basic changes brought about in the 1977 accounts
were that assets which were in fact inter-company debts as recorded in
the Singapore office were described as short term deposits and money
market securities by Mr Brincat and finally were described as short term
deposits without mention of money market securities in the audited
version of the accounts. At the same time, the liabilities which were
represented by client deposits were considerably reduced in the profit
and loss statement, and a loss was thus converted into a profit.
1978 Accounts
4.2.152 As in 1977, there were three versions of the 30 June 1978
accounts produced; one by the Singapore office,266 another by
Mr Brincat267 and a further one which was passed by the auditors.268
4.2.153 The significant features of the Singapore accounts were that
assets included a sum of US$7 403 524 as debts due from related companies
(which included US$2 946 140 due from Nugan Hand Inc. Panama and
US$1 600 889.16 in respect of Yorkville Nominees) while only US$1 575 000
constituted ACU investments; liabilities included the sum of US$9 430 112
as clients' deposits and US$172 643 as debts due to related companies,
mainly Nugan Hand Ltd; and a profit and loss statement showing a loss of
US$1 495 137.
4.2.154 The unprofitable nature of the Bank's operations as shown by
these accounts was highlighted by the fact that total income was
US$404 729 which was only slightly more than the sum of commissions and
brokerages of US$397 347, this being only one item of many in respect of
marketing and general administration expenses.
- 725 -
4.2.155 The Singapore accounting records also included a copy of an 9g9
account in respect of Nugan Hand Ltd" and a copy of an account termed
Yorkville Nominees. The former included entries for Nugan Hand Ltd
clients, for example, the Overseas Trust Bank and Peggy Pracey which
suggested that a payment to the Overseas Trust Bank had been made by the
Bank on behalf of Nugan Hand Ltd and that Nugan Hand Ltd had reimbursed
the Bank in respect of Peggy Pracey.271
4.2.156 Mr Brincat told the Commission that the account termed Yorkville
Nominees had nothing to do with Yorkville Nominees Pty Ltd.272 He said
that the correct description of this account could be Yorkville contra or
suspense account and it included transactions to do with both Sydney
based clients and others. He agreed that the year's transactions in
respect of this account had resulted in a debt to the Nugan Hand Bank
amounting to US$1 600 889. Mr Brincat stated that he had not seen either
the Nugan Hand Ltd or Yorkville Nominees accounts before giving evidence 273 to the Commission.
4.2.157 There was one other account included in the Singapore records 274
and this account related to Nugan Hand Inc. Panama. The account
recorded the sum of US$2 946 140 already referred to in the balance
sheet, which Mr Br incat agreed was owed by Nugan Hand Inc. Panama to the
Nugan Hand Bank as at 30 June 1978.27~*
4.2.158 According to the Singapore accounts noted above, the financial
position of the Nugan Hand Bank had deteriorated significantly from the
previous year [see 4.2.141], Mr Brincat's version of the accounts, on
the other hand, indicated that there had been only a slight reduction in
profit.
4.2.159 More specifically, Mr Brincat's accounts included only two items
as assets, that is, cash at bank US$481 956 and short term deposits of
US$5 584 408 (as compared to total Singapore assets of US$9 500 467, the
major item being US$7 403 524 for inter-company debts); liabilities
included the sum of US$4 876 904 as fixed term deposits (as corrpared to
0S$9 430 112 as clients' deposits in the Singapore accounts); general and
- 726 -
administrative expenses of US$104 929 (as opposed to general
administration and marketing expenses in the Singapore accounts of
US$964 261); and a profit of US$79 894 (as compared to a loss in the
275a
Singapore accounts of US$1 495 137).
4.2.160 Attached to the accounts prepared by Mr Brincat was a list in
his handwriting of depositors' balances which Mr Brincat identified as
the total list of fixed term deposits.278 This list comprised only 13 277
depositors as conpared to 108 in respect of the Singapore accounts.
This in dollars meant the difference between US$4 876 904 and
US$9 430 112.
4.2.161 In this connection, the Singapore accounts included two trial
balances each of which evidenced amendments to particular figures as the
accounts were being prepared in the Singapore office.278 More
specifically, the figure for deposits accepted was changed from
US$7 234 347 to US$8 723 766 to the final figure of US$9 430 112. The
trial balance which contained the figure of US$7 234 347 also
contained a pencil annotation associated with this figure stating
'Difference from actual balance of $9,430,112.37 yet to be settled. Adjn
entry to be made on Monday after discussions'. Mr Brincat identified
this pencil annotation as a note made in Mr Hill's handwriting. The
second page of this trial balance contained some writing which Mr Brincat .. ..... . . . 280
identified as his.
4.2.162 Mr Brincat had originally told the Commission that in preparing
his list of thirteen depositors in connection with the 1978 accounts, he
had consulted the cash books, the postings to the ledger contained in the
cash books and the ledger, all of which had been produced as a result of
his rewriting exercise.282 When he subsequently identified his writing
on the second page of the trial balance he told the Commission that it
was possible that he had seen the page at the time he prepared his
version of the 1978 accounts.282 Moreover, he agreed that he had
probably seen the first page of the trial balance but possibly not with
Mr Hill's note attached. He said he was not 100 per cent certain of
this.282 He told the Commission that the note was not directed to him,
- 727 -
that he did not recall discussions concerning the note and that he had no
recollection of what happened as a result of Mr Hill's note.2®'*
4.2.163 The audited version of the accounts was signed by the auditors 285 on 11 August 1978. This differed only marginally from Mr Brincat's
version with the important exception that the asset entitled 1 short term
deposits' was the subject of a note to the accounts to the effect that
the greater proportion of this item comprised money market securities
held by Nugan Hand Ltd. There was no such note contained in Mr Brincat's
version of the accounts although a reference to 'note 2' alongside the
liabilities and a reference at the base of the balance sheet to notes
being 'an integral part of the financial statements' indicated that notes
were intended to be attached.
4.2.164 Mr Brincat told the Commission that he was not sure that the
notes attached to the audited accounts were dictated to him by Mr Nugan
in the same manner as the notes for 1977 [see 4.2.101 and 4.2.144], He
said he did not remember whether he assisted Mr Nugan in formulating the
notes. He subsequently said that he did not deny that he had taken
down the notes and that it was possible that he had done so.2®^ He
later said that it was unlikely that he had a hand in the formulation of
the notes. While he was not sure that the notes were prepared by him, he
did not think they were.
4.2.165 As far as the content of the notes was concerned, Mr Brincat
agreed that Note 1 was incorrect in stating that the ultimate parent
company of the Bank was Nugan Hand Ltd, and that Note 2, which claimed
that internal control procedures were adequate, did not reflect his
view. Note 3 detailed the components of the asset entitled 'short term
deposits' as Asian Currency Units US$1 588 256 and money market
securities of US$4 009 408 making a total of US$5 597 664. The note
stated that the securities consisted 'of a share of a pool of Commercial
Bills and Negotiable Certificates of Deposits issued by Australian banks
and financial institutions and held by the ultimate parent company.'
Note 3 also stated that the face value of the securities representing the
company share of the pool was A$3 700 000.
- 728 -
4.2.166 These securities were the subject of an exchange of telexes
between the Cayman Islands and Sydney in August 1978. On 10 August 1978,
Mr Hill sent a telex from the Cayman Islands marked to the attention of
Mr Brincat in Sydney, noting certain depositors' balances which were
recorded in the audited version of the balance sheet as fixed term
deposits and requesting a client listing of securities amounting to
A$3 700 000.289 In the reply directed to Price Waterhouse & Co., on
11 August 1978, a list of securities was provided amounting to this
s u m . M r Brincat gave evidence to the Commission that the list of
securities forwarded to the Cayman Islands in connection with the audit
of the Nugan Hand Bank accounts, contained securities which were in fact
the p r o p e r t y of Nugan Hand Ltd p l e d g e d at that time to N u g a n Hand Ltd
291
depositors. He identified the same securities in a summary of
commercial bills on hand as at 30 June 1978 which was a document
contained in his working papers for that year in respect of Nugan Hand
Ltd.292
4.2.167 Mr Br i n c a t sa i d he c o u l d not remember the c i r c u mstances of the
telex r eply of 11 Augu s t 1978 a n d stat e d that he m a y hav e just bee n a sked
to o b t a i n d e tails of the securities. Later in evid e n c e Mr B r incat stated
that he had n o knowledge of the reply. He said he had not seen it before
g i v i n g evid e n c e to the C o m m i s s i o n a n d h a d no part in the exer c i s e w h i c h
resul t e d in the s ecurities of Nugan Hand L t d being listed as those of the
293
N u g a n H a n d Bank. Mr Br i n c a t a g r e e d that inclusion of these
securities in the accounts of 30 June 1978 was a misrepresentation in the
same manner as that of the previous year only the amount concerned had 294 more than doubled.
4.2.168 Although Mr Brincat saw a copy of the audited accounts for 1978
after they were certified he did nothing about this misrepresentation.
He said that he had no recollection of discussing the matter with
295
Mr Nugan. Note 3 also contained corresponding details of securities
held in respect of the 1977 accounts as a point of comparison with the
1978 figures. The 1977 figures were A$1 533 046 for Asian Currency Units
and A$1 181 522 for money market securities. It should be noted
therefore that the reference to money market securities which was
- 729 -
contained in Mr Brincat's version of the 1977 accounts and omitted in the
audited version of those accounts that year, was finally restored in a
note to the audited 1978 accounts.2953
1979 Accounts
4.2.169 There were no final or audited accounts in respect of 30 June
1979 and the few documents available to the Commission provide only the
most incomplete picture of the Bank's financial statements at this time.
4.2.170 A trial balance was prepared in the Singapore office as at
30 June 1979 which showed: a loss of US$4,586 million; an amount due to
related companies of US$516 815; an amount due from related companies of
US$12,233 million; and client deposits of US$16,970 million.295 * 2 9 7 * 2 9 9 This
reflected a considerable increase in the level of client deposits from
1978 which was acknowledged in a written communication from Mr Tan Choon 297
Seng to one of the Singapore officers.
4.2.171 It is clear that the high level of inter-company debts and the
considerable loss shown in the trial balance demonstrated the increasing
deterioration in the Bank's financial position. This deterioration
continued according to a trial balance prepared in the Singapore office
as at 30 November 1979, which showed deposits accepted of US$22 million
and a trading loss of almost US$5 million.
4.2.172 Apart from the trial balances prepared in the Singapore office,
there were available to the Commission, a number of work sheets which 299
Mr Brincat had written in preparation for the 1979 accounts.
Included in these work sheets under the heading 'NHIP Credits to
Accounts' was a list of client numbers and accounts comprising 20 entries
totalling A$3 098 707.10. Mr Brincat identified this list as one which
purported to be a list totalling all deposits received by the Bank from
deposits with Nugan Hand Inc. Panama.599
4.2.173 Mr Brincat confirmed his earlier evidence to the Corporate
Affairs Commission that he carried out similar adjustments to the 1979
- 730 -
a c c o u n t s as b e f o r e [see 4.2.129-4.2.137]. He said he last saw a
c o p y of these accounts in O c t o b e r or November 1979. He p r e p a r e d the
acco u n t s in draft fo r m a n d t hese together w i t h a set of records w r i t t e n
u p in S y d n e y w e r e se n t to the auditors. He sa i d he did not know, until
g i v i n g evid e n c e to the Commission, that the a u d i t o r s had refused to
c e r t i f y the a c c o u n t s.302
4.2.174 A letter sig n e d by Mr H i l l a n d Mr Nugan, indicates that the
Nugan Hand Bank accounts for 30 June 1979 perpetrated the same
m i s r e p r e s e n t a t i o n as in prev i o u s accounts, that is to s a y that N u g a n Hand
303
Ltd held securities on behalf of the Bank. The letter bears the
date 30 September 1979 and was addressed to Price Waterhouse & Co. in the
Cayman Islands. It confirmed that Nugan Hand Ltd held certain
securities, described in terms of drawer, acceptor, maturity and face
value, amounting to A$7 800 000. They included bills drawn by Secured
Income Real Estate (Australia) Ltd [profile 2.118] and accepted by Nugan
Hand Ltd, and other internal bills [see 5.34-5.55]. Mr Brincat
identified the majority of the securities with the exception of one, as
the same as those listed in his audit working papers for Nugan Hand Ltd
as securities held by Nugan Hand Ltd as at 30 June 1979.30^
4.2.175 Mr Brincat stated that he had not seen a copy of the letter
dated 30 September 1979 before it was shown to him while giving evidence
to the Commission, nor did he believe that the accounts prepared by him
for 1979 and sent to the Cayman Islands contained notes which referred to
securities being held by Nugan Hand Ltd on behalf of the Nugan Hand Bank.
4.2.176 Mr Brincat agreed, however, that the evidence disclosed a
p a t t e r n comme n c i n g in 1977 a n d conti n u i n g until 1979 of the N u g a n Hand
Ban k auditors b e i n g f a l s e l y to l d that N ugan Han d Ltd was holding
secur i t i e s on b e h a l f o f the Bank. He a g r e e d that this p a ttern was known
to h i m in 1977 b e c a u s e he took dow n the note w h i c h c o n tained this
information. He kne w t h e no t e w a s pa r t of the accounts to be sent to the
Cayman Islands and he kne w it w a s false. W i t h regard to 1978, h o w e v e r ,
he deni e d that he had a n y p a r t in the f o r mation of the note w h i c h was
included in that year ' s acco u n t s b u t agr e e d that he saw the 1978 accounts
301
- 731 -
after they were audited and did nothing about the false information in
the note. He was 'pretty certain' that the 1979 accounts did not include
a note referring to securities held by Nugan Hand Ltd on behalf of the
Nugan Hand Bank."
4.2.177 As far as the Nugan Hand Ltd accounts were concerned, Mr Brincat
stated that to his knowledge the records of Nugan Hand Ltd did not state
that it was holding securities on behalf of the Nugan Hand Bank.306
The Nugan Hand Bank (in liquidation)
4.2.178 P e t itions to place the N u g a n Han d Bank in liquidation wer e filed
in H o n g Kong in April 1980 a n d in the Cayman Islands in mid 1981. It
w o u l d s e e m that the Bank w a s subseq u e n t l y reinstated to the register in
order that liquidation not p r o c e e d v o l u n t a r i l y but rather under the
ausp i c e s of the C o u r t.303 Subseq u e n t l y Mr M.D.M. W o o l l a r d of the Hong
Kon g O f f i c i a l R e c e i v e r ' s O f f i c e w a s a p p ointed liquidator jointly with
Mr C.D. J o h n s o n o f the C a y m a n Islands in a liquidation ordered b y the
G rand Court of the Cayman Islands. This followed a similar appointment
by order of the H o n g K o n g C o u r t u nder the provisions relating to
u n r egistered c o m p a n i e s.300
4.2.179 In a letter to the Commission dated 2 April 1985 Mr Woollard
commented on the stage reached in the liquidators' investigation of the
Nugan Hand Bank's financial position. He stated that an unaudited
balance sheet and profit and loss account had been prepared from the
Bank's records then held in Singapore. He noted that the most
substantial part of the assets of the corrpany were represented by
inter-company loans which were largely irrecoverable by reason of the
insolvency of the other companies in the Group. Further, he noted that
the insolvency of the company clearly flowed from the extent of
inter-company lending and its management policy relating to the level of
interest on deposits and the level of expenses and commission incurred.
4.2.180 According to Mr woollard, at the time it ceased business the
Bank had received deposits from customers of US$22.79 million and had
- 732 -
suffered a trading loss of US$7.85 million. The level of inter-company
borrowing at the close of business was in the region of US$17 million.
The liquidator h a d rece i v e d cla i m s f r o m over four h u n d r e d creditors
309
totalling in the order of over US$15 million.
ENDNOTES : PART 4 - SECTION 2
(See explanatory note at front of report)
1 CD4968 folio 14 '
2 CD10490 folio 51
3 CD7620 folio 2; CD6348 folio 5
4 CD11304 folio 194
5 CT23155-56, CT23167, Shaw 6 CD7661 folios 39,181
7 CT23166, CT23200, Ward; CD761 folios 181-83; CD1731 folio 225 8 CD11304 folio 151
9 CD6905 folio 19
10 CD6905 folio 20
11 CD6905 folio 7
12 CD1908 folio 85; CD45 folio 8
13 CT23168, Ward; CD45 folio 8
14 CT22075, Steer; CD68 folios 17-21; CD1835 folios 4-11; CDS91 folios 33-40; CD45 folios 6-11 15 CDS215 folio 7; CD5239 folio 5; CD6938 15a CD8215 folio 5
16 CD10805 folio 532
17 CD8215 folio 4
18 CD4467 folio 132
19 CD10805 folio 598; CD8916 folio 173; CD5239 folio 75 20 CD5239 folios 31,76
21 CT15747-48, Hill
22 CD7467 folios 3-5, Brincat evidence to CAC 17/11/81 23 CAC 7th Interim Report p 402
24 CDS916 folio 49
25 CD5239 folio 27; CD68 folio 15
26 CDS239 folio 27
27 28 29 30 CD6941 folio 3
31 CD6940 folio 4
32 CT22439, Needham; CT18859, Evans; CD7616 folio 44 33 CD6942 folio 3
34 CD4467 folios 87,88,124,125 35 CD11322 folio 27
36 CD7006 folio 59
37 CD7467 folios 7-8, Brincat evidence to CAC 17/11/81 38 CAC 7th Interim Report p 403
39 CDS916 folio 42
40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55
56 57 58 59 60 61
62 63 6·' 65 66 67 68
69 7C 71 72
73 74 75 76 77 78
79 80 81 82 83 84 84a 85 86 87 88
89 90
- 733 -
CD4467 folio 130 CD4467 folios 92,132 CD11322 folio 27 CD4467 folio 122 CD4467 folio 100 CT21881, Hill CD4467 folio 20 CT20399, Gilder; CD4803 CD4803 CD8460 folio 9; CD3320 folios 2-8,29,66 CT20398-99, Gilder GDI0321 folio 23; CD7358 folio 23; CD5239 folio 100 CT21493-94, CT21496-97, Hill CT21927-28, Hill CT21503, Hill CT20798-800, Shaw
CD7358 CD5239 folios 84-178; CD68 CT22213, Gilder CD65 folio 7
CT22212-12a, Gilder CT22068, Steer; CT20859, George; CT22812, CT22818 CT24282-83, Yates CD65 folio 1 CT20388, CT20431, Gilder CT20388, Gilder; CD4006 CT20431 Gilder; CD8460 CT23093, Gilder CD917 folio 36 CT20408-09, Gilder CT23094, Gilder
CT23051, Gilder; CD917 folio 1 CT23092, Gilder CT21882, Gilder CT23049, Gilder CD4120 CD10252 folio 84 CD4006 CD6574 folio 72 CD6574 folio 68 CT22533, Houghton
CD4006 CD3713 folio 4 CD470
CT20397-98, CT23052, Gilder CT21132-33, Rus h CT24327, Hill; CT24238, Yates CT24217, CT24281, Y ates CT24267, Y ates CD7382 folios 43-46 CT22694, Pulger-Frame; CT22937-38, McArthur; Houghton; CT22110-11, Courtney-Smith
CT22533, Houghton; CT22110-11, Courtney-Smith CD11345 folio 31
Collings;
CT22533-34,
91 92 93
94 95 96 97 98 99
100 101 102 103
104 105
106 107 108 109 110
111 112 113 114 115
116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142
- 734 -
CT22811, Collings CT20388, Gilder CT23093, Gilder; CD65 folio 7 CD41; CD7142; CD7148 CT22016, Galicek; CT22060 Steer; CD41 file 4 folios 42,55 CT22779, Collings CT22781, CT22810, Collings CT22092, Courtney-Smith CD10978 folio 1 CT22530, Houghton CT24253, CT24256-57, Louis (Snr) CT22769, Collings CT22681, CT22683, CT22689, Pulger-Frame; CT18863, CT18865-68, Evans
CT24263-65, Yates CT22141, Louey; CT22017, Galicek; CD7142 folio 18; CD7148 folios 49-53, 65-67 CT22005, CT22019, Galicek CT22021, Galicek CT22018, Courtney-Smith CD22109, Courtney-Smith CT18800-01, CT18807, CT18811, CT18814-15, Evans; cf, 6.71-6.72 CT18792-96, CT18800-01, Evans CT18832, Evans; CD1308 folio 25; cf. 6.67, 6.71-6.72 CT20410-14, Gilder CT22523, CT22526, Houghton CT22527, Houghton
CT22528-29, Houghton CD10624 CD8611 folio 3 CT22530, Houghton CT22537, Houg h t o n CT22537, Houghton CT22577, Houghton CD7186 f olio 57 CD7186 folio 58 CT24255, CT24289, Yates CD3667 f olio 300 CD4449 f o l i o 6 CT23042, CT23090, Gilder; CD5847 folios 7-16 CD10262 folio 242-44 CT22109, Courtney-Smith CT22524, Houghton CT22062-64, Steer CT22530-31, Houghton CT22066, Steer CT18793, Evans CT22107-08, Courtney-Smith CT22022, CT22026, Galicek CT24244, Yates CT22524, Houghton CD7382 CT22575-76, Houghton CT22236-37, Gilder
143 144 145 145a 146 147 148 149 150 151 152 153 154 155
156 157 158 159 160
161 162 163
164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185
186 187 188 189
190 191 192 193 194
- 735 -
CT24270, Y ates CT22107, C o u rtney-Smith CD11323 f o l i o 154 CT15707-08, CT15733, Hill CT22534, Houghton CD10978 f olio 4 CT22881, Coll i n g s CT22237-40, Gilder CT24252-53, Yates CD7157 f olio 7 CD10262 folios 36-37 CT22551-55, Houg h t o n CT24270-71, CT24309-10, Yates
CD7382 folios 113-41; CD1896; CD5239 folios 51-72; CD10978 folio 1 CD10978 CT22536-38, Houghton CT22536-38, Houghton CT22693, Pulger-Frame CT22822, Collings; CD10978 folio 5
CD10978 folio 5 CT22819, CT22822, CT22825-26, Collings CT22791, CT22825, Collings CT22064, Steer; CT15746, Hill
CT22784, Collings CT24244, Yates CD11323 folios 60-64
CD11323 folios 233-34 CD11323 folio 272 CD6429 folios 12-14 CT22116-17, Courtney-Smith CD7382 folios 133-34 CT22446, Dunn CT22420-21, Needham CT22534, Houghton CT18878, Evans CT22421, CT22423, Needham CD3093 folios 26-28 CD7382 folios 113-30 CD7382 folio 116 CD7382 folio 118 CD10978 folio 1 CD10978 folio 3 CD10978 folio 4; CD7704 folio 105 CT22531, Houghton CD1950
CD10978 folio 4 CD5015 CT22108, C o u rtney-Smith CT22022, CT22023, CT22025, Galicek CT22076, Steer CT18791, CT18827, Evans CT21492, CT21501, Hill CT22700-02, Pulger-Frame
195 196 197 198 199 200 201 202 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249
- 736 -
CT23178, Ward CT23199-200, Ward CT22107, Courtney-Smith CT16253-55, Hill CD11323 folio 153 CD11323 folio 157 CT24243, Yates CT24268, Yates CT25371, CT25382, Brincat CT25597, CT25617-18, CT25624, Pollard CT25348-50, Brincat CT24272-73, Yates; CT21902, Hill; CD370 folio 4 CT24272-73, Yates CT24272, Yates CT21902, Hill CT21903-04, Hill CT24376, Hill CT21885, Hill CT21884, Hill CT21885, Hill CT21889, Hill CT25355-58, CT25365, Brincat CT25374, Brincat CT25355, B r incat CT25375, CT25369-70, B r incat CT25356-58, Brincat CT25368-69, Brincat CT25204, B r incat CT25205, CT25394, CT25348-49, CT25373, Brincat CT25371, CT25373, Brincat CT25354-55, Brincat CT21885-86, Hill CT25351-52, Hill CT15729, Hill CT25360-61, Brincat CT15731, Hill CT25362, Brincat CT25363-64, Brincat CT25365, Brincat CT25205, Brincat CT25366-67, Brincat CT25458, Brincat CT21895, Hill CT25365-66, Brincat CT25371, CT25375, Brincat CT21901, Hill CT21902, Hill CT21903-04, Hill CT25391, Brincat; CD3720 folios 85-88 CT25393-95, Brincat; CD3720 CT25407-08, CT25410, Brincat; CD11485 CT25370-71, Brincat CT25393, Brincat CT25397-98, Brincat
250 251 252 253 254 255 256 257 258 259 260 261 262 263 264 265 266 267 268 269
270 271 272 273 274 275 275a 276 277 278 279 280 281
282 283 284 285
286 287 288 288a
289 290 291 292 293 294 295 295a 296
297 298 299 300
- 737 -
CT25394-95, Brincat CT25399-400, Brincat CT25415, Brincat; CD11485 folios 1-12 CD11385 folio 4 CD11485 folio 8
CT25418-20, Brincat; CD11485 folio 10 CT25422, Brincat; CD11485 folio 9 CT25425, Brincat CT25424, Brincat CT25424, Brincat CT25427, Brincat CT25429-30, Brincat CD3093 folios 26-28 CT25406, Brincat CD11485 folios 2-4; CD11092 Part 11 folios 50-55 CT25371, CT25410, Brincat; CD11092 Part 11 folios 50-55
CD3720 folios 11-29 CD11486 folios 17-19 CD5050 folios 2-6 CD3720 folio 89
CD3720 folios 90-92 CT25442, Brincat CT25443, Brincat
CT25441, Brincat CD3720 folio 93 CT25446, Brincat CD3720 folios 11-12; CD11486 folios 15-16 CT25454, Brincat CD3720 folios 14-17 CD3720 folios 26-29; CD11486 folios 20-23 CD11486 folio 20 CT25455-56, Brincat; CD11092 Part 11, folio 139 CT25454, Brincat CT25457-58, Brincat CT25458, Brincat
CT25455-56, Brincat CD5050 folios 2-6 CT25461-63, Brincat CT25464, Brincat
CT25468-69, Brincat CD5050 folio 6 CD4538 folio 8 CD11092 folio 184
CT25466-67, Brincat CD4692 folio 20 CT25203, Brincat CT25466-67, Brincat CT25468-69, Brincat CD5050 folio 6; CD11486 folio 33 CT25480 Brincat; CD3552 folio 69 CT25480-82 Brincat; CD4517 folio 3
CT21888-90, Brincat; CD3552 folios 1-3 CD3313 folios 2-9 CT25473-74, Brincat; CD3313 folio 7
- 738 -
301 CT25369, CT25382, Brincat 302 CT25476, Brincat
303 CD4538 folios 1-2
304 CT25477, Brincat; CD4769 folio 10 305 CT25478, Brincat
306 CT25200, Brincat
307 CD8916 folio 30
308 A173
309 A173
- 739 -
SECTION 3 : THE ALLEGED INVOLVEMENT OF THE UNITED STATES CENTRAL INTELLIGENCE AGENCY
4.3.1 Since the death of Mr F.J. Nugan [profile 2.1] on Sunday,
27 January 1980, the list of allegations of wrong doing on the part of
himself and Mr M.J. Hand [profile 2.2] and various other persons said to
be associated with the Nugan Hand Group has reached almost unmanageable
proportions in terms of definition and source of origin. Attempts have
been made in other places in this report to identify allegations falling
into particular categories. A reference to the table of contents will
readily indicate those parts of the report dealing with specific breaches
of relevant laws.
4.3.2 However, the allegation that the United States Central
Intelligence Agency (hereafter referred to as the 'C.I.A.1) in some way
used the Nugan Hand Group and/or was used by the Nugan Hand Group falls
into a category of its own. This follows from the circumstance that
whereas all the other allegations are directed at the alleged activities
on the part of the Nugan Hand Group itself, the allegation which brings
into contention the alleged participation of the C.I.A. is directed as
well at this important and powerful intelligence agency. Obviously this
involves factors absent from the nature of the other allegations. This
allegation, perhaps, differs also in that it is a difficult charge to
prove or refute. Nevertheless, it is an allegation falling within the
Commission's terms of reference, subject to what is said below, and the
Commission also bears in mind that the allegation was raised on both
sides of the Australian House of Representatives in the early months of
1982.
4.3.3 Although it is true to say that the allegation (in its
multiplicity of forms) gained currency after the death of Mr Nugan, there
is evidence that the allegation had been raised in some places well
before that time [see 4.3.6-4.3.7] and that Messrs Nugan and Hand were
aware of such rumours.^
- 740 -
4.3.4 A sample of the various forms the allegation has taken may be
gleaned from a perusal of the material extracted from Australian and
overseas publications, in particular in the United States, which are
collected in Appendix C. From this sample it will be obvious immediately
that a great many of the assertions fall far outside the Commission's
terms of reference, which in this instance, require the Commission to
inquire whether the C.I.A. was used by or used the Nugan Hand Group in
circumstances where such activity was in contravention of relevant
Commonwealth or New South Wales criminal laws.
4.3.5 Thus, while the Commission's inquiries into the allegation have
been directed to those forms of it which fall within its terms, the
conclusions the Commission has reached are of such a kind that they are
also applicable to a consideration of whether even those forms which fall
outside the terms are likely or probable.
4.3.6 As was noted above the allegation that there was some use being
made of the Nugan Hand Group by the C.I.A. (or vice versa) had emerged
prior to Mr Nugan's death. The earliest such allegation identified by
the Commission was made in Hong Kong in February 1978 and preserved for
posterity in a notation made by the person to whom the allegation was
made. Before reproducing the relevant part of the note it is necessary
to digress in order to explain the setting in which the allegation was
made and duly recorded.
4.3.7 Among the events touched upon in the Compendium [see 3.5.40] is
an account of the abortive attempt on the part of the Nugan Hand Group to
acquire a Taiwanese bank known as the United Chinese Bank then controlled
by General S.K. Yee, who in another part of the document containing the
note referred to above is described as having been 'at one time [the]
Commander of the Armed Forces under General Chiang Kai-Shek'. The
document makes it plain that General Yee called to see a representative
of the ANZ Bank in Hong Kong a Sydney branch of which was at the time the
principal banker for Nugan Hand Ltd in Sydney. It appears from the
document that General Yee informed the bank representative of the
negotiations then current between himself and the Nugan Hand Group and
- 741 -
sought information concerning the soundness of the Group. T h e document 3 then continues:
'In discussing the Nugan Hand group generally, I commented that it was curious how many retired armed forces officers the g r o u p employs in overseas offices. Their man in Hawaii is a retired General and their man in the U S A is a retired Admiral. T h e r e
are others too - Michael Hand is a decorated Vietnam war
veteran. He agreed with me, and I then mentioned having had the opinion put to me by a member of the local business community that they might have CIA connections. The General said there is
no- might about itT1 [enphasis added J ......
4.3.8 Thus, in the Commission's view, this succinct contemporaneous
note provides the*best evidence of how the allegation emerged and gained
credence. The significant assumption inherent in the terse response
'there is no might about it' is simply left at that without any attempt
at justification.
4.3.9 The usefulness of this note does not end there. It illustrates
further the looseness of the assertion which is a characteristic to be
found in most of the variations of the allegation that have subsequently
surfaced. Thus the reference to 'C.I.A. connections'. No particular
meaning can be assigned to such a phrase. It is impossible to give a
more definite meaning to the expression other than to read it as
conveying the statement that the Nugan Hand Group 'had something to do
with' the C.I.A.
4.3.10 The content of the note was quite correct to the extent that it
made reference to retired armed forces officers being employed by the
Group. General E.F. Black [profile 2.8] was the Group's representative
in Hawaii and the other reference is to Admiral E.P Yates [profile 2.76]
who did represent the Group in the United States as well as other
places. In addition the Group also employed the services of General L.J.
Manor [profile 2.45] and General E. Cocke [profile 2.13]. However the
note when referring to 'retired armed forces officers' could not have
been implicitly referring to the latter two because their services were
not retained until very late in the piece, towards the end of 1979. The
- 742 -
reference to Mr Hand is also correct. The role that Admiral Yates and
General Black played as representatives of the Nugan Hand Bank is
explained at paragraphs 3.4,84 to 3.4.88. In the present context, it is
necessary to mention three more persons who at one stage worked with the
C.I.A., directly or indirectly, and who did come into contact with the
Nugan Hand Group, These are Mr W.E. Colby [profile 2.14], Mr W.J.
McDonald [profile 2.47] and Dr G.J. Pauker [profile 2.54]. As with
General Manor and General Cocke, these three men did not enter the
picture until mid to late 1979 and it is therefore difficult to see how
they could be said to have played any significant role in the Group's
activities.
4.3.11 The evidence of this group makes it plain that Admiral Yates was
the connecting link between the Nugan Hand Group and the other American
personnel, sometimes directly and sometimes indirectly. He was directly
responsible for the engagement of the services of Generals Black, Cocke
and Manor. He introduced Dr Pauker to Mr Nugan who in turn introduced Mr
Nugan to Mr McDonald and the latter introduced Mr Nugan to Mr Colby. It
appears that Mr Hand was primarily responsible for engaging the services
of Admiral Yates as the first President of the Nugan Hand Bank, a
decision which he was later to defend at a conference.4 Much was then
made of the fact that the Group had an Admiral as the head of the Bank.
Mr Hand then conceived the idea of enlisting the services of other United
States ex military personnel who had retired after having held high rank
and who had seen service in South East Asia. His reasons for this course
of action were twofold; first, the impression imparted as a result of the
presence of such men with distinguished careers behind them did much to
instil confidence in potential depositors with the Bank and, second,
their knowledge of particular areas of South East Asia was of practical
significance because it was in these areas that the Bank concentrated its
efforts.
4.3.12 It is, no doubt, common knowledge and it is also the evidence
before the Commission that as a result of the very senior positions held
by Admiral Yates, Generals Black, Manor and Cocke, inevitably they would
have had contact from time to time with intelligence provided by the
- 743 -
C.I.A. and, again, inevitably have met from time to time personnel
engaged in the production or dissemination of such intelligence. In
addition to this general contact, it should be mentioned that General
Black had served in the Office of Strategic Services, an organisation
which the evidence indicates, was the predecessor in certain ways of the
C.I.A. However, neither General Black nor any of the other three ever
served in any capacity in the C.I.A. To this information should be added
that during Mr Hand's military service in Vietnam in 1967 and 1968 he was
a member of the elite airborne corps known as the 'Green Berets' and
General Black told the Commission that it was 'entirely possible' and
common knowledge that this unit would have had C.I.A. support.
4.3.13 Before reviewing the evidence of these seven persons, each of
whom came forward voluntarily and gave evidence to the Commission in the
United States during January 1935, something should be said concerning
what other evidence has established about the Group generally. The
C.I.A. allegation should not be looked at in isolation. On the contrary,
it should be examined in the light of the Commission's general
conclusions concerning the activities of the Group and the principals who
controlled it. Such an exercise will provide a proper basis on which to
consider a question that must arise: why, for what conceivable reason,
would a powerful agency of the United States Government use or allow
itself to be used by the Nugan Hand Group or any of its principals?
4.3.14 The Commission has attempted to make clear in this report that
despite all the trumpeting on the part of Messrs Nugan and Hand, despite
the claims of massive turnover in securities trading by Mr Nugan, despite
the range of financial services offered in the glossy brochures, the
reality was always that of inept individuals, lacking in capital, devoid
of commercial skills and, in the case of Messrs Nugan and Hand persons
capable of the grossest forms of dishonesty. These individuals merely
created the appearance of carrying on the business of bankers and in fact
did little more than collect deposits and then use a good proportion of
the money so collected to meet personal expenses as well as to pay the
operating costs of the Group. The Group was at all times insolvent
because of these practices and neither Nugan Hand Ltd, Nugan Hand (Hong
- 744 -
Kong) Ltd nor the Nugan Hand Bank ever operated at a profit although the
accounts state otherwise. Mr Nugan for most of the period during 1973 to
1979 inclusive was a heavy drinker whose habit was to commence his
drinking mid morning. The evidence discloses that his claims to have
earned sufficient fees as a tax lawyer to keep the Group operating is a
claim entirely without foundation. Mr Hand was never more than a
salesman without any relevant professional qualifications. The evidence
about each indicates that they were neither men of learning nor
articulate. The Group was grossly mismanaged by them in all its
activities. Every opportunity was taken by them to create a totally
false picture with a consistent theme of: 'it is the appearance that
matters'. It is to this reality that the question posed above must be
addressed. While it is true that many were hoodwinked by this posturing
it is difficult to imagine that a professional group such as the C.I.A.
would use or even think of using such a Group without first making a
thorough check of its bona fides. Even a cursory check would have
revealed shortcomings which would undoubtedly make the C.I.A. shy away
from having anything at all to do with such a Group.
4.3.15 Next to be considered is the question of what, if any, objective
evidence exists to support the C.I.A. allegation in any of its forms
which fall within the terms of reference. The answer is that there is
simply no objective evidence that the C.I.A. used or was used by the
Nugan Hand Group in or in connection with any of the Group's activities
and, in particular, in circumstances where any criminal law of the
Commonwealth or the State of New South Wales was contravened.
4.3.16 The above comment does not overlook the fact that people such as
Mr N. Evans [profile 2.21] who gave evidence to this Commission have made
such claims. Mr Evans claimed in his evidence that Mr Hand had claimed
to him that he (Mr Hand) had entered into arrangements whereby the Nugan
Hand Bank would disseminate moneys for the C.I.A. and that Mr Hand had 5
told him that Mr M.B. Houghton [profile 2.35] was a C.I.A. agent.
Mr Houghton in his evidence to the Commission denied ever having had any
association with the C.I.A. He said his only military service had been
in the United States Air Force weather service from 1942 until 1946. He
- 745 -
told the Commission he knew Thomas Clines and Ed Wilson,® both of whom
are alleged to have been C.I.A. agents. There is no evidence, apart from
the statements by Mr Evans, that Mr Houghton was a C.I.A. agent and the
Commission accepts Mr Houghton's evidence in this regard. The Commission
has had the opportunity of assessing Mr Evans and finds that Mr Evans is
a person whose evidence should not be accepted unless corroborated by
other objective evidence. His evidence in this regard is not so
corroborated. On the contrary it is denied by those said by Mr Evans to
have taken part in relevant discussions (for example Messrs J.M. Gilder
[profile 2.25], J.D. Owen [profile 2.53] and C.L. Collings [profile
2.15]). Further, an examination of Mr Evans' transcript reveals
contradictions and inconsistencies and for these reasons the Commission
does not accept such evidence.
4.3.17 Apart from taking evidence in the United States, the Commission
took a number of other steps to ensure that no reasonable avenue of
inquiry was overlooked. For example, the Commission was aware that on
26 March 1982 the Public Affairs Division of the C.I.A. issued a
statement refuting any suggestion that the C.I.A. played any role in the
activities of the Nugan Hand Group and asserting that 'The CIA has not
engaged in operations against the Australian Government, has no ties with
Nugan-Hand, and does not involve itself in drug trafficking'.^ This
response was issued as a result of the allegations in the Australian
House of Representatives in the early part of 1982. Although the
response was clear and all embracing, for more abundant caution the
Commission by letter dated 16 February 1984 wrote to the Director of the
C.I.A. seeking an assurance to the Commission that the response was
accurate. The Commission received a reply dated 19 April 1984 signed by
the Principal Deputy Assistant Secretary for East Asian and Pacific
Affairs of the United States Department of State reaffirming the
'categorical denials of CIA involvement in the affairs of the Nugan Hand
Bank' and adding 'Indeed, the assurances of non-involvement already
provided by the Central Intelligence Agency and by other US Government
officials go far beyond the normal practice of not offering any comment
on allegations concerning intelligence operations'.8
- 746 -
4.3.18 The Commission was also briefed concerning an inquiry by the
United States Senate Select Committee on Intelligence as a result of
allegations appearing in The Wall Street Journal in August 1982
concerning the alleged role of the C.I.A. in the activities of the Nugan
Hand Group. As a result of that inquiry the Committee concluded that the
allegations were false and unfounded. The witnesses before that inquiry
which was in closed session included very senior officers of the
9
C.I.A.
4.3.19 The next step for the Commission was to hear the evidence of the
seven persons mentioned above so that an assessment could be made of
their credibility and so that they might be given an appropriate
opportunity to respond to any such allegation which concerned them
specifically and to respond generally to the allegation of C.I.A.
involvement. To this end, the Commission first invited Admiral Yates to
come to Sydney to give sworn evidence in confidential session. Admiral
Yates accepted the invitation and gave evidence in Sydney to the
Commission on 10 and 11 December 1984. He gave the Commission details of
his background in the United States armed services which appear in his
profile. He told the Commission that he had met Mr Houghton during the
late 1960's when he (Admiral Yates) was in Sydney overseeing the details
of the establishment of rest and recreation leave pursuant to which
scheme American servicemen serving in Vietnam would come to Sydney as
part of such leave. Subsequently Mr Houghton introduced him to Messrs
Nugan and Hand. It was the latter who persuaded him to become the first
President of the Nugan Hand Bank. He commenced to act in this capacity
about June 1977."*"^ He said that he, with Mr Hand's approval, then
approached General Black to act as a representative of the Bank in Hawaii
and later General Cocke and General Manor. He also introduced Dr Pauker
to Mr Nugan who in turn introduced Mr McDonald and the latter introduced
Mr Colby to Mr Nugan."*·"*·
4.3.20 Admiral Yates said that the first time he had ever heard the
suggestion that the C.I.A. was somehow using the Nugan Hand Group or had
some special connection with it, v/as 'certainly after Nugan Hand
failed'. He said that in his view the suggestion was ridiculous and
- 747 -
absurd. He said: 'It was too small, for one thing, it was too visible
for another; we were trying to get visibility ... He were trying to get
exposed internationally, and if the CIA had beer, involved in it they
certainly would not have let it fail, so it just does not make
12
sense'. He said he was not aware of any evidence that would support
the suggestion.
4.3.21 It was against this background of evidence that the Commission
journeyed to the United States in early January 1985 to hear the evidence
of the remaining six who have been identified above. Evidence was taken
from Dr Pauker in Los Angeles on 3 January 1985. Details of Dr Pauker's
background are included in his profile. Dr Pauker told the Commission
that he had no function whatever in the C.I.A."*"^3 He said he had known
Admiral Yates for some time and that they were still good friends. He
said that he could not be certain of the time except that it was ' before
1979' when Admiral Yates came to Los Angeles and told him that he was now
with the Nugan Hand Bank. Dr Pauker said he had never heard of the Bank
before that time. He said his next contact with Admiral Yates was in
1979 when he received a telephone call from him informing him that as
President of the Nugan Hand Bank he was involved in an important
conference to be held in Manila called the International Congress on New
Enterprise."^ He said it was a conference sponsored jointly by the
World Bank, the Asian Development Bank and a number of private
corporations for the purpose of exploring the means by which small and
medium sized investors from the western developed countries could be
brought together with local entrepreneurs of the same calibre. Admiral
Yates invited him to come to the conference as a member of a panel he was
organising and which would take part in the conference. Dr Pauker said
he accepted the invitation mainly because it was convenient in that he
was already scheduled to attend an Energy conference in Bali commencing
at the beginning of July 1979. Dr Pauker had himself invited Mr Walter
McDonald to the Bali conference."*"4 It was at the Manila conference
that Dr Pauker was introduced by Admiral Yates to Mr Nugan and to General
Manor whose name was known to him because of his senior rank in the Air 15 Force. Mr Nugan asked Dr Pauker whether he could himself attend the
Energy conference to be held in Bali the following month. At the
- 748 -
conclusion of the Manila conference Dr Pauker went to Jakarta where he
met Mr McDonald and together they finalised the paper Mr McDonald was to
deliver at the Bali conference. Mr Nugan did attend the Bali conference
and Dr Pauker introduced him to various persons attending that conference
including Mr McDonald.
4.3.22 In July 1979 Dr Pauker received a telephone call from
Mr M c D o n a l d w h o informed h i m that he had be e n o f f e r e d 'an i ncredibly
a t t r a c t i v e job' w i t h the N ugan H a n d G r o u p.16 S u b s e q u e n t l y Dr Pauker
rece i v e d a further t e l ephone call f r o m Mr M c D o n a l d invit i n g h i m t o come
to a c onference in S y d n e y to be h e l d b y the N u g a n Han d G r o u p in October
1979 and to address the conference concerning business opportunities or γη
the c l imate for b u s i n e s s investment in S o u t h East Asia. Mr McDo n a l d
infor m e d Dr Pauker that a m o n g the p e r s o n s att e n d i n g w o u l d b e General
Manor, A d miral Yates and G e neral B l a c k.16 Dr Pauker s a i d he w a s
imp r e s s e d b y this 'line up' a n d d i d a t t e n d the c onference in Sydney. B y
19
this time he had met Mr Hand as well as Mr Nugan. Mr D.E. Beazley
[profile 2.7] also attended the conference.
4.3.23 Dr Pauker told the Commission that some time after July 1979 he
h a d rece i v e d a t e l ephone call fr o m Mr McDo n a l d w h o informed h i m that he
h a d 'just' taken Mr N ugan s a i l i n g o n his boat w i t h Mr C o l b y and that
Mr C o l b y w a s v e r y p l e a s e d to m e e t Mr N u g a n b ecause the latter asked h i m
20
to d o some legal wor k for him.
4.3.24 In the course of g i v i n g h i s e v i d e n c e Dr Pauker referred to '...
the famous visit i n g card o f C o l b y that w a s found on Nugan at the time of
his death' [see 4.3.30]. He expressed the view that if, as seems to be
p a r t of the allegation, Mr Nugan had w o r k e d w i t h the C.I.A. 'the last
21
thing that he w o u l d hav e done' w o u l d be to c a r r y Mr C olby's card.
4.3.25 Dr Pauker sai d Mr N u g a n had n ever a sked h i m anyth i n g about his
22
knowledge of the C.I.A. He said that when Mr Nugan asked him in
October 1979 to work for the Group he, Dr Pauker, asked what type of work
Mr Nugan had in mind. He said Mr Nugan replied 'Well, you are an
authority on South East Asia. You could be our international relations
- 749 -
advisor [sic] the way McDonald would be our economic affairs advisor 23 [sic] and you could introduce us'.
4.3.26 The other witnesses each gave evidence to the Commission in the
Australian Embassy in Washington D.C. The first of these to give
evidence was General Black who informed the Commission of details of his
military career which are now set out in his profile [2.8]. General
Black told the Commission that he was asked by his 'old friend' Admiral
Yates in Honolulu 'in about late fall' of 1977 to assist the Nugan Hand
Bank in developing its operations in South East Asia and particularly in
Thailand where he (General Black) had served as Commander of the United 2d States forces for two years. General Black said that he accepted the
offer. Details of his role in the Bank's activities are set out in his
profile [2.8].
4.3.27 General Black told the Commission that he had never in his
dealings with Messrs Nugan and Hand detected any indication that they
were acting for the C.I.A. in any capacity and he said that in his
judgment the C.I.A. would not have used 'a little fly-by-night operation 25
like Nugan and Hand's bank for any transaction'.
4.3.28 General Cocke gave evidence to the Commission on 8 January
1985. His evidence as to his military background appears in his profile
[2.13] and his role on behalf of the Nugan Hand Bank is set out at
paragraph 3.4.85. He told the Commission that he had 'absolutely no
knowledge of any information that would link [the Nugan Hand Bank] to the
CIA'.26
4.3.29 Mr Colby also gave evidence to the Commission on 8 January
1985. Details of Mr Colby's C.I.A. background are contained in his
profile [2.14]. Mr Colby told the Commission that he had met Mr Nugan
through Mr McDonald towards the end of 1979. He said that he had seen
Mr Nugan about three or four times altogether in connection with
providing Mr Nugan, and later Mr Hand, with legal advice as to the
consequences of either or both of them taking up residence in the United 27 States and, in Mr Hand's case, in the event that Mr Hand should
- 750 -
resume American c i t i z e n s h i p . M r Colby identified a letter dated
22 October 1979 written by himself to Mr Nugan and setting out the terms
on which Mr Colby would accept a retainer to advise Messrs Nugan and 29 Hand.
4.3.30 Mr Colby said he last saw Mr Nugan about 15 January 1980 and on
that occasion Mr Colby informed Mr Nugan that he would be travelling to
South East Asia in March of 1980 and said that if, during that time,
Mr Nugan happened to be in Singapore or Hong Kong they could meet for
further discussion. He said he then took one of his business cards and
wrote the dates and the times on it in respect of his itinerary. This
was the card that was subsequently found on Mr Nugan' s body when he was
discovered dead by police, near Lithgow in New South Wales. He said this
was the full extent of his dealings with Messrs Nugan and Hand.
4.3.31 General Manor gave evidence to the Commission on 9 January
1985. Details of his military service have been collected in his profile
[2.45]. He told the Commission that Admiral Yates, whom he knew, had
approached him in Hawaii and told him about the Nugan Hand Bank and the 30
fact that he (Admiral Yates) was with the Bank. He said this was the
first he had ever heard of the Bank and that the meeting took place in 31 1979. He said that later the same year in The Philippines Admiral
Yates again spoke to him about working for the Bank and informed him that
there was a conference to take place in Manila which Messrs Nugan and
Hand would attend and that he (Admiral Yates) would like General Manor to
meet them. He said he went to the conference with Admiral Yates and
there met Messrs Nugan and Hand. (The conference referred to is the
International Congress on New Enterprise which was held in Manila in June
1979.) Subsequently Admiral Yates again contacted him and said that
Mr Nugan was offering him a job with the Bank if he was prepared to
return to The Philippines and live there but General Manor said he was
still undecided. Admiral Yates therefore suggested that he attend the
October conference of the Group in Sydney and General Manor accepted this
invitation. He said one of the pieces of information that interested him
at the conference was that the Group intended to expand to the United
States. He later said in evidence to the Commission that he wanted
- 751 -
to 'categorically state' he was not 'involved in any fashion whatsoever
with the CIA' and to his knowledge ' there was no involvement with the 33
CIA'. He also said 'I saw no evidence of any CIA involvement ...'.
4.3.32 Mr McDonald gave evidence to the Commission on 10 January 1985.
Details of his career so far as relevant appear in his profile [2.47].
He said that in 1979 he was asked to deliver a paper at a symposium in 34 Bali. (This is a reference to the Energy conference which was held
in Bali in July 1979.) Mr McDonald said that at this conference
Dr Pauker introduced him to Mr Nugan and Mr Nugan invited him to come to
Australia 'to see what kind of an operation' Mr Nugan had there and to 35
'see if you might want to be associated with us in some capacity'.
Mr McDonald said he was interested because he had not been to Australia
and accordingly he came to the conference at the Gazebo Hotel in Sydney
in October 1979. He said he eventually agreed to work part time for the
Group. Part of the agreement was that he would set up an office in
Annapolis, Maryland, which he could use for his other business as well.
He was to act as an adviser.
4.3.33 Mr McDonald said that from his observations he knew of no
evidence at all to support the C.I.A. allegation. He added: 'As a
matter of fact, the more I get into it on reflection, if the agency ever
picked someone like Nugan Hand to work with they'd be in terrible,
terrible shape. And I can't imagine them doing it, because there are so
many other ways to do it, believe me. That this is a silly way to do
it.'36
4.3.34 The Commission accepts the evidence of these witnesses. Indeed,
except for Admiral Yates and General Black, it is difficult to see how
any of the others could under any circumstances be seen to have played a
significant role in the activities of the Nugan Hand Group given the fact
that their employment on behalf of the Group did not commence until a
very late stage in the life of the Group. Furthermore, the evidence of
these witnesses is consistent with the objective evidence summarised by
the Commission above [see 4.3.15-4.3.18]. None of these witnesses is
contradicted by any credible evidence.
- 752 -
4.3.35 It has also been alleged in the media that Mr P.G. Loomis
[profile 2.39], who was employed by the C.I.A. between 1969 and 1977, had
arranged for huge sums of money to be transmitted through the Nugan Hand
Bank on behalf of the C.I.A.37 Mr Loomis gave evidence to the
Commission on 25 October 1984. He told the Commission that his only
knowledge of the Nugan Hand Bank came from his reading of newspaper t 38
reports over the years.
4.3.36 Although it was not anticipated that Mr Beazley would be
prepared to come before the Commission in the United States there were
negotiations with the latter's attorney which, in the end result, did not
prove fruitful. While the Commission regrets that Mr Beazley took this
course, it might be observed that due to the fact that his participation
in relevant activities did not begin until October 1979 his evidence
would probably have added only marginally to that already gathered. As
well, there appeared to be some chance that Mr Hand (Snr) would talk to
the Commission in New York and that perhaps through him contact could be
made with his son Mr Michael Hand. Attempts were made to this end but
proved unsuccessful.
4.3.37 The Commission was aware that the Federal Bureau of
Investigation (hereafter referred to as the 'F.B.I.1) in the United
States maintained files on the NUgan Hand Group and it was considered
that such material might assist the Commission in its investigation of
the allegations concerning the C.I.A. and the Group. Attempts by
Australian journalists to gain access to this material have in recent
years attracted considerable publicity due to the fact that the copies
provided to these journalists proved unintelligible because all but a few
pages had been blacked out. The liquidator of Nugan Hand Ltd had sought 39
access to these files without success. Accordingly, the Commission
approached the Director of the F.B.I. (Judge Webster) with a request for
access to the files. This request was readily granted and on 11 January
1985 at F.B.I. headquarters in Washington D.C., the Royal Commissioner
and Senior Counsel Assisting spent seme hours perusing the files in the
presence of an F.B.I. Special Agent. It would be a breach of the
conditions of access to the files for the Commission to report what the
- 753 -
files contained. It is more important to report what the files did not
contain and to do this is not, in the opinion of the Commission, a breach
of the confidence reposed in it. The Commission is therefore able to
report, unequivocally, that there was nothing in the files of any
significance concerning any subject matter within the terms of reference
and in particular nothing which could lend credence to the C.I.A.
allegation in any of its various forms. * 1 1 1
ENDNOTES : PART 4 SECTION 3
(See explanatory note at front of report)
1 CD2880 folios 24-25
2 CD2880 folios 24-25
3 CD2880 folios 24-25
4 CD10252 folio 20, Hand to NHG Bangkok conference 5 CT19048-50, Evans 6 CT22558, CT22572, Houghton 7 A151 folio 101
8 A151 folios 104-105
9 A141 folio 316
10 CT24245, Yates
11 CT24289, CT24299-300, Yates 12 CT24301, Yates
12a CT24529-30, Pauker 13 CT24486, Pauker
14 CT24487, Pauker
15 CT24488, Pauker
16 CT24499, Pauker
17 CT24502, Pauker
18 CT24504, Pauker
19 CT24508, Pauker
20 CT24526, Pauker
21 CT24526, Pauker
22 CT24527, Pauker
23 CT24528, Pauker
24 CT24542, Black
25 CT24585, Black
26 CT24592, Cocke
27 CT24616, Colby
28 CT24618-19, Colby 29 CT24616, Colby; CD1122 folio 74 30 CT24642, Manor
31 CT24643, Yates
32 CT24646, Manor
33 CT24661, Manor
- 754
34 CT24673, McDonald 35 CT24674, McDonald 36 CT24714, McDonald 37 CD1281 folios 3-5
38 CT23434, Loomis
39 CT25003, O'Brien
- 755 -
SECTION 4 : ACCESS TO RELEVANT RECORDS DENIED - THE EFFECT OF CAYMAN ISLANDS LAW
4.4.1 The establishment of the Nugan Hand Bank under the shelter of
the law of the Cayman Islands and the reasons why this was done have been
reported upon in Part 4 Section 2. This Section records the unsuccessful
attempts by the Commission to gain access to relevant records of the
Nugan Hand Bank, attempts thwarted by laws of the Cayman Islands relating
to confidentiality of particular information. This experience led the
Commission in January 1985, while in the United States to examine
witnesses, to confer with senior staff of the United States Justice
Department concerning this problem with the Cayman Islands legislation
and similar legislation which exists in other countries and, more
generally, the problems associated with transnational criminal litigation
and the need for the establishment of judicial assistance treaties to
overcome such problems.
4.4.2 The records of the Bank were maintained in Singapore and Hong
Kong although copies of some of these records, including the client
files, in so far as they related to Australian clients, were kept in the
Sydney office. However these were destroyed shortly after the death of
Mr F.J. Nugan [see 3.9.72]. The Singapore and Hong Kong records were
seized by the Hong Kong Official Receiver who was appointed joint
Official Liquidator of the Nugan Hand Bank by order of the Grand Court of
the Cayman Islands dated 24 March 1982, together with an accountant
resident in the Cayman Islands.
4.4.3 Obviously it was of importance for the Commission to make every
effort to obtain access to these records. Regrettably, however, access
to the records was not obtained despite the fact that they were stored in
the Office of the Hong Kong Official Receiver, in his capacity as joint
Liquidator of the Nugan Hand Bank.
4.4.4 As a result of a request in 1980 by the Corporate Affairs
Commission of New South Wales to the Official Receiver in Hong Kong an
- 756 -
application had been made in the Supreme Court of Hong Kong, for
authority to release on confidential terms, all records relating to a
group of companies collectively known as 'Nugan Hand International
Holdings1. Some only of these documents were released to the Corporate
Affairs Commission of New South Wales and the Commonwealth-New South
Wales Joint Task Force on Drug Trafficking in 1980 and 1981. These
documents are now in the Commission's possession.
4.4.5 Accordingly, by a letter dated 23 February 1984 the Commission
wrote to the Official Receiver in Hong Kong requesting access to the
relevant records and, in particular, seeking access to client cards which
would indicate details of the Nugan Hand Bank clients, their addresses
and account numbers. It was pointed out that these records were not
available from any other source. The view was expressed therein that
such records would contain information of significance to the
Commission's inquiry.
4.4.6 By letter dated 2 April 1984 the Official Liquidator for the
Nugan Hand Bank formally refused the Commission access to the records
relating to the Bank on the basis that to do so would breach Cayman
Islands law:1
'Vie have closely examined the Confidential Relationships (Preservation) Law, of the Cayman Islands (copy enclosed), and I am directed by the Registrar General to say that he would like to assist in any way possible, but that we are of the opinion that we cannot release copies of all the information you
require, unless a Disclosure Order is obtained for those documents concerning the Caymans to ensure that no offence will be committed, especially in regard to our joint liquidator.'
4.4.7 Upon receipt of this advice the Commission wrote to the
Attorney-General of the Cayman Islands, by letter dated 17 May 1984,
seeking a disclosure order in accordance with the Official Liquidator's
suggestion. The letter informed the Attorney-General that relevant
records had been destroyed in Sydney and that the Commission's
investigation would be assisted if access were to be granted to the
records in possession of the Official Receiver in Hong Kong. The
Attorney-General was further advised that it was the Commission's
- 757 -
understanding that the Hong Kong Official Receiver would act upon a
statement from the Attorney-General that the former was at liberty to
make the relevant disclosure and the Attorney-General was requested to
make such a statement to the Official Receiver. In the alternative, the
Attorney-General was asked to advise whether there was any other
procedure by which the Commission could gain access to such records.
4.4.8 The Cayman Islands Attorney-General, Mr Michael Bradley, replied
as follows by letter dated 15 June 1984:2
Î refer to your letter of May 17th, 1984 in which you make
certain requests concerning the Nugan Hand Group, and my interim reply thereto. I have consulted with the Governor in Council and the Government of the Cayman Islands is of the view that the appropriate procedure would be for the joint liquidators of the Nugan Hand Bank (Woollard and Johnson) to make an application in camera to the Grand Court of the Cayman Islands to obtain
authority and directions concerning the release of confidential information. The application would be made under section 3A of the Confidential Relationships (Preservation) Law as amended.1
4.4.9 Despite the Attorney-General's suggestion the Commission had
serious doubts as to whether the recommended litigation could achieve the
Commission's objective of obtaining access to the Bank's records.
Constitutionally the Cayman Islands is still a Crown colony but it has
responsible government with distinct executive (Governor-in-Council),
legislative (Legislative Assembly), and judicial branches (Grand Court of
the Cayman Islands). In 1979 the Legislative Assembly enacted a scheme
for the establishment of confidential and tax exempt banking facilities
in the Cayman Islands in order to encourage new economic growth. An
essential component of this legislative scheme was the Confidential
Relationships (Preservation) Law 1979, the provisions of which the
Attorney-General suggested the Liquidator should use in an application
for permission to release the bank documents in question to the Royal
Commission.
4.4.10 The right to obtain a dispensation from the restrictions imposed
upon the disclosure of information by the Confidential Relationships
(Preservation) (Amendment) Law 1979 (Cayman Islands) is set out in
section 3A of the amending Act:
- 758 -
1 (1) Whenever a person intends or is required to give in
evidence in, or in connection with, any proceeding being tried, inquired into or determined by any court, tribunal or other authority (whether within or without the Islands) any
confidential information within the meaning of this Law, he shall before so doing apply for directions and any adjournment necessary for that purpose may be granted.1
Thus the dispensation procedure applied solely to a witness in 'any
proceeding' which term was defined as:
'any court proceeding, civil or criminal and includes a
preliminary or interlocutory matter leading to or arising out of a proceeding.' [emphasis added]
The term 'court' was defined in the same sub-section to bear 'the meaning
ascribed to it in section 2 of the Evidence Law' which in turn was
defined as follows:
's. 2 Court includes, in addition to the ordinary courts and juries of civil and criminal jurisdictions, every tribunal where civil proceedings are conducted and includes the judge or person presiding over or constituting such tribunal and including also
an arbitrator and an umpire.'
This statutory definition presented two issues:
a. Was the Royal Commission an 'ordinary court of civil or criminal
jurisdiction'; or
b. a 'tribunal where civil proceedings [were] conducted'?
There is clear authority to the effect that both of these questions 3 should be answered in the negative. It followed that a witness before
the Commission, a non-judicial tribunal, had no statutory entitlement to
a disclosure order under section 3A.
4.4.11 An alternative or complementary course could have been to
initiate proceedings seeking a declaration that the Cayman Islands
statute did not apply to the documents in question (that is the bank
- 759 -
client cards containing client names, addresses and account numbers)
which were in fact physically seized by the Liquidator in Hong Kong and
Singapore although they recorded bank transactions which occurred in the
Cayman Islands. However the wide terms of the Act appeared conclusive as
to its application both in respect of (a) the documents and (b) the
Liquidator:
'This law has application to all confidential information with respect to business of a professional nature which arises in or is brought into the Islands and to all persons coming into
possession of such information at any time thereafter whether they be within the jurisdiction or thereout.1 [emphasis added]
Accordingly, it seemed clear to the Commission that it could not obtain
access to these documents by means of judicial proceedings. Although
this appeared to the Commission to be beyond argument, because of the
potential importance of the bank documents, a further opinion was sought
from W.S.Walker & Company, a firm of barristers and solicitors resident
and practising in Georgetown, Cayman Islands. This independent opinion
confirmed the Commission's conclusions in all respects.
4.4.12 There was however one other course open to the Commission. This
was under section 3(2)(B)(iv) of the Confidential Relationships
(Preservation) (Amendment) Law 1979. Under this section the executive
branch of Government, the Governor acting upon the advice of the
Executive Council, was conferred with an unfettered power to exempt
documents containing 'confidential information' in respect of 'such other
person as the Governor may authorise'. Accordingly an application was
immediately made by the Commission to the Governor-in-Council for
exemption pursuant to section 3 (2)(B)(iv). The Governor's response
conveyed to the Commission by telex on 3 September 1984 by the Cayman 4
Islands Attorney-General Mr Bradley was as follows:
'The Governor in Council considered the matter very
sympathetically and understood that a section 3A application would not succeed as your Commission is an advisory body only ... However, it was felt that any authorisation by way of
executive action should be in accordance with current procedures of cooperation with United States and Canadian authorities,
- 760 -
namely that information will be authorised to be obtained if there has been established either a prima facie case of a
criminal offence or indictments have been laid ... The
information is in all cases submitted to the Governor in Council before authority is granted to release ... If you can satisfy the Cayman Islands Governor in Council by documentary or other evidence on the above bases, Council indicated that it would assist ... '
4.4.13 The Commission, as an investigatory and advisory body, rather
than a prosecution authority, was of course unable to comply with these
criteria. Indeed the very reason access to the Bank's records was sought
was in order to ascertain whether evidence of any offences against
Australian Commonwealth or New South Wales laws was disclosed. This does
not imply any criticism of the Government of the Cayman Islands. Indeed
the Attorney-General, Mr Michael Bradley, his Department, and the
Executive Council, offered all assistance possible within the existing
framework of the laws of the colony which in this instance have been
essentially designed to protect the interests of the international
depositors in the banks of the Cayman Islands. The fact remains,
however, that the Commission's inquiry was hindered by the lack of access
to relevant documentation.
4.4.14 As the Commission noted in paragraph 4.4.1 this experience
(which occupied valuable time) led to meetings with the United States
Justice Department. The Commission was aware prior to its departure for
the United States that that country had very recently entered into an
agreement with the United Kingdom which provided for access to Cayman
Islands records where there is alleged to be an offence falling within
the scope of the agreement [see Appendix F). Generally speaking a
relevant offence must relate to narcotics activity. In a relevant case
where the procedure laid down is followed the United States
Attorney-General is entitled to production of documents in possession of
the Cayman Islands, but such documents must be used strictly within the
limits set out in the agreement.
4.4.15 The discussions also revealed that the united States, with a
view to facilitating the procedure for obtaining evidence for use in
transnational criminal litigation has entered into a number of
- 761 -
international judicial assistance agreements which, in effect, provide
for the performance of judicial acts at the request of foreign
authorities including the obtaining of admissible evidence by the use of
subpoenas, orders, warrants etc. These judicial assistance treaties are
of relatively recent origin. Most of them post-date the 1959 European
Convention on Mutual Assistance which appears to the Commission to have
been the foundation of modern judicial assistance agreements. At the
time of the Commission's discussions with the Justice Department such
treaties had been entered into by the United States with Switzerland,
Turkey and The Netherlands and further treaties were in the course of
negotiation with Colombia, Italy and Morocco.
4.4.16 It seems clear that Australian criminal prosecutions in the next
ten years or so will increasingly face similar problems to those which
have been faced in United States prosecutions in recent years where the
prosecution case involves evidence from abroad. Indeed the Commonwealth
Director of Public Prosecutions has been reported recently as being
unable to prosecute some cases successfully because of problems in 4
obtaining evidence from abroad in an admissible form.
4.4.17 The Commission therefore recommends first that the Government of
the Commonwealth give consideration to requesting the Government of the
United Kingdom to enter into an agreement with the Government of the
Commonwealth in relation to access to Cayman Islands documentation
similar to the agreement mentioned above.
4.4.18 The Commission's second recommendation, which is also directed
to the Government of the Commonwealth, relates to the setting up of
modern judicial assistance agreements to which Australia is a party.
From inquiries made by Commission staff it appears that while it is true
some work is being done to set up such treaties, the fact is that as at
the date of this report no single such treaty is in place. The
Commission therefore recommends that consideration be given to upgrading
the priority accorded to the establishment of these judicial assistance
agreements.
- 762 -
ENDNOTES : PART 4 - SECTION 4
(See explanatory note at front of report)
1 A173 folios 76-77, Letter Official Liquidator/Commission 2/4/84 2 A177 folio 59, Letter Attorney-General/Commission 15/6/84 3 R v. Arrowsmith (1950) V.L.R. 78; Johns and Waygood Ltd v. Utah
Australia Limited (1963) V.R. 70; Hallett Royal Commissions and Board of Inquiry (1982) at p23 4 A177 folio 147, Telex Attorney-General/Commission 3/9/84 5 Report in The Financial Review 21/1/85
- 763 -
SECTION 5 : THE AUDITORS
4.5.1 As this report makes plain, the inception and subsequent
progress of the Nugan Hand Group was effected by the presentation of a
public image of financial strength and commercial expertise when the
converse was in fact true. The Commission has sought to make the point
that the key to an understanding of how it was that the Nugan Hand Group
was able to be spawned in Australia and rapidly expand overseas, is to be
found in the methods used to give the published accounts of Nugan Hand
Ltd [profile 2.97] a grossly false appearance. These methods have been
described in the Compendium and also in Part 5 in which the results of
the reconstruction of these fraudulent accounts have been reported [see
5.159 and 5.160]. The extent to which the imparting of this grossly
false appearance was contributed to by others outside the Group is the
subject of paragraphs 4.7.1 to 4.7.10. However, it was the appending of
the auditors' certificate to such accounts that thereafter gave them the
status which automatically follows from the fact that a duly qualified
auditor certified them. In the ordinary course of events the audited
accounts of a public company are accepted at face value and no attempt is
made to go behind them. Well aware of this Messrs F.J. Nugan
[profile 2.1] and M.J. Hand [profile 2.2] unscrupulously published and
proffered to the world at large the accounts of Nugan Hand Ltd to gain
commercial acceptance and credibility for the company, and for
themselves, not only in this country but overseas, and, in particular, in
Hong Kong.
4.5.2 It is intended in this Section to comment, briefly, on the
duties of an auditor, with particular regard to the auditor's duty to
detect fraud. The Commission called a number of experts to give oral
evidence concerning this subject matter and, as well, had the benefit of
written reports compiled by these expert witnesses.
4.5.3 The duty of the auditor is, of course, to audit the relevant
company accounts. The word 'audit' means an 'official examination of
- 764 -
accounts with verification by reference to witnesses and vouchers'.'1 '
Of particular importance is the fundamental obligation of an auditor to 2
properly consider whether debts owing to the company are collectable.
A public company, such as Nugan Hand Ltd was, is required by law to
publish annually balance sheets and profit and loss accounts. These
accounts are required in effect to give a true and fair view of the state
of the financial affairs of the company and of the profit and loss for
the period to which the accounts are stated to relate.3 The auditor is
bound to form specified opinions as to the correctness of the accounts
which he is auditing and his certification of those accounts, unless he
qualifies his certificate, is in effect his assurance that in his opinion
the accounts do disclose the requisite true and fair view of the state of
the company's financial affairs.4 Much has been written both in this
country and overseas concerning the difficulty of interpretation of the
words 'true and fair view'. However it is unnecessary for the Commission
to add any comment to this vast array of existing commentary because on
any construction of that expression the accounts of Nugan Hand Ltd in no
way presented a true and fair view of the financial state of the company.
4.5.4 The two professional accounting bodies in Australia, namely, the
Institute of Chartered Accountants in Australia and the Australian
Society of Accountants (the latter of which Mr G.F. Brincat [profile 2.9]
was a member during the period he was the Nugan Hand Ltd auditor) from
time to time issue to their members statements of auditing standards.
During February 1977 these two bodies jointly issued a document described
as 'Statement of Auditing Standards' which had as its object the setting
of standards applicable to audits undertaken in accordance with the
provisions of the Uniform Companies Acts.3 The introduction to that
document in describing the joint view as to the main objective of the
normal company audit expressed that duty in terms which included the
following:®
'the expression of an independent professional opinion on the truth and fairness of the accounts presented to shareholders. The auditor is particularly concerned with the adequacy of the underlying records, and the detection of major distortions in the accounts arising from improperly kept records, or from the inappropriate or biased use of accounting standards and
- 765 -
methods. To provide a sound basis for his opinion, the auditor examines the credibility of the representations made by the directors in the accounts, and this involves a skilful review of the available evidence underlying the accumulation and
processing of the data on which they are based.' [emphasis added]
The introduction mentioned another matter of great importance in the
following terms:7
'It is essential that there is a clear understanding between the auditor and his client as to the extent of his duties,
particularly when there is no specific statutory duty involved.
Such understanding should be evidenced in writing.' [emphasis added]
4.5.5 A fundamental element of the auditor's duty is to remain
independent vis a vis the company and its directors. This is recognised
in the Statement of Auditing Standards where the standard to be followed
is expressed in the following terms:®
'An auditor must maintain an independent outlook and allow nothing to impair his independence It is of utmost
importance to the profession that the confidence of the general public in the independence of auditors be maintained. Public confidence is likely to be impaired if there is evidence of an actual lack of independence; it might also be impaired by the
existence of circumstances which reasonable people might believe would influence independence. An auditor must be recognised as independent and be free of any obligation to or interest in the client or its directors. The auditor should not only be
independent, in fact; he should avoid situations that may lead others to doubt his independence.' [emphasis added]
4.5.6 The evidence before the Commission suggests that when an
examination is made of the views of these accounting bodies, as well as
their counterparts in the United Kingdom and the United States, as to
precisely what is the auditor's duty to detect fraud in planning his
audit procedures and carrying out his audit, there is some confusion and
difference of opinion. In short, the evidence points to there being
little or no consensus of opinion in relation to this aspect of the
auditor's duty, not only among auditors but also among those who rely on
published audited company accounts such as those proposing to deal with
the company on the strength of its audited accounts.
- 766 -
4.5.7 Essentially this perceived difference of opinion, on the
question of what is the extent of the auditor's duty to detect fraud,
stems from two distinct interpretations of the duty which seem to be
current. The distinction seems to be whether the auditor is under a duty
to detect fraud that is, to specifically search for fraud, or whether, on
the other hand, it is enough for the auditor to plan his audit so that he
has a reasonable expectation of detecting material misstatements in the 9
financial statements resulting from irregularities or fraud. The
latter view appears to be echoed in this country in the current Statement
of Auditing Practice in respect of Fraud and Error (ADP 16) issued by the
Auditing Standards Board in June 1983. â L0
4.5.8 This difference in emphasis as to the precise scope of the duty
to detect fraud, may be reflected in the recent deletion from the content
of one of the leading text books on the subject of a statement concerning
the auditor's duty to detect fraud. The case of Pacific Acceptance
Corporation Ltd v. Forsyth11 is regarded as the leading authority in
New South Wales on the extent of the auditor's duty so far as the civil
law is concerned. The Judge in that case adopted the objects of an audit
as being those annunciated in the second edition of Irish's 'Practical
Auditing' in which one of the objects laid down was 'the detection of
fraud'. Immediately after those words the following sentence appeared in
that edition and was quoted in the judgment in that case:
'The detection of fraud is generally regarded as being of primary importance'. [emphasis added]
However, in subsequent editions of that work the underlined sentence
quoted above has been omitted.
4.5.9 To the extent that there does seem to be some uncertainty as to
the scope of this duty it is obviously a matter for some concern. It is
clearly undesirable for there to be any significant difference between
the ambit of the duty as perceived by the auditor and the understanding
held by the client and those proposing to deal with the company on the
strength of the audited accounts. In the view of the Commission there is
a need for the legislature to define precisely the auditor's duty to
- 767 -
detect fraud and whether the duty extends to third parties who can be
expected to rely on the audited accounts and to provide for penalties for
the deliberate or reckless failure to carry out such duty.
4.5.10 Apart from these general observations, it is intended in this
section to touch upon some specific matters in relation to the audit of
the Hugan Hand Ltd accounts and the role of Mr W.M. Pollard [profile
2.57] and, more importantly, Mr Brincat in relation thereto.
Essentially, it was Mr Brincat's contention in his evidence to the
Commission that he was unaware that these accounts were false when he
signed the various audit certificates in relation to them. In Part 10
the Commission reviews relevant evidence as to Mr Brincat's state of
knowledge, and conclusions are expressed as to what that state of
knowledge was, from time to time, during the relevant period. It is not
intended to repeat any of that material in this section nor to say
anything more about Mr Brincat's state of knowledge of the accounts
except where Mr Brincat has conceded that he had some particular
knowledge that the Commission considers relevant.
4.5.11
- 768 -
4.5.12 From and including 1974, Mr Brincat also carried out a
significant portion of accounting work for Nugan Hand Ltd so that from
1975 onwards he occupied this dual role of accountant and auditor in
respect of Nugan Hand Ltd. Indeed, Mr Brincat occupied the same dual
role in relation to most of the Australian companies within the Group,
each of such companies being mere puppets in the hands of Mr Nugan or
Mr Hand or both. In particular, Mr Brincat occupied this dual role in
respect of Yorkville Nominees Pty Ltd [profile 2.108], Nugan Hand
International Holdings Pty Ltd [profile 2.96] and P.M. Shelley Pty Ltd
[profile 2.100] either from 1974 or, to the extent that any of the
- 769 -
companies were incorporated after that year, from the date of that
incorporation."''® The occupation of such a dual role in respect of a
public company seems to the Commission undesirable and a threat to the
independence of the auditor. Acting as the company's accountant he has
contractual obligations with the company which may conflict with his
statutory duties as auditor. In his role as accountant he is likely to
become too close to directors and others, making it difficult for him to
maintain his independence when he acts in the role of auditor. In the
Commission's view these functions should be kept separate, at least in
the case of a public company.
4.5.13 The Nugan Hand Group was the largest client of the firm of
Heuschkel and Pollard. In order to carry out his dual role in respect of
Nugan Hand Ltd, Mr Brincat spent a great deal of his time in the office
of the company at 55 Macquarie Street, Sydney. He usually occupied
Mr S.K. Hill's [profile 2.33] office on these occasions. He spent an
average of two or three days a week in the company's office and on some
occasions in excess of that. Mr Brincat conceded that he performed tasks
which fell outside the usual role of an accountant or an auditor. He
agreed that he should have been a watchdog when he was acting as auditor,
on the look out for irregularities, frauds and falsifications in the
accounts.''"^ Yet, during 1974, he wrote out a draft directors' report
which he says was dictated by Mr Nugan."*·® When asked why he should
have undertaken such a task he replied that there were many things that
he did at Mr Nugan's request that were not within his role. He agreed
that his independence might have been compromised by carrying out these
tasks. He said that on occasions he remained on the company's premises
simply to answer the telephone in case depositors rang wishing to
withdraw funds or to place deposits. He said Mr Nugan would telephone 19
him and ask him to come and 'mind the store' for a couple of hours.
4.5.14 There is in the Commission's view abundant evidence that
Mr Br incat indeed coirpromised his independence in his capacity as auditor
of Nugan Hand Ltd. A number of aspects of the evidence illustrate this
loss of independence. For example, by 1976, on Mr Brincat's own
admission, he had become aware that there was a serious false statement
- 770 -
in the 1974 accounts in which a claim had been made that a particular
loan was secured by real estate which was untrue [see 10.43-10.49], Yet
Mr Br incat on becoming aware of that did nothing about it. He did not
complain to Mr Nugan who, he said, had misled him about the claim in the
1974 accounts nor did he report the matter to the Corporate Affairs
Commission. It was put to Mr Brincat that by doing nothing about it he
put himself in the grip of Mr Nugan. Mr Brincat agreed that his
20
independence was thereby coirpromised.
4.5.15 However there is an even more significant illustration of
Mr Brincat's loss of independence in his capacity as auditor of Nugan
Hand Ltd. Any vestige of independence that might have remained
disappeared shortly after January 1976 when Mr Brincat brought into
existence certain so called internal bills of exchange. The purpose of
these bills has been explained in the Compendium at paragraphs 3.3.45 to
3.3.47 and in Part 5 at paragraphs 5.34 to 5.55. Initially these
internal bills were actually brought into being but thereafter for the
most part they existed only as entries by Mr Brincat in the records of
Nugan Hand Ltd. The companies within the Group purporting to issue these
bills to Nugan Hand Ltd were all two dollar companies controlled by
Mr Nugan each of which had minimal if any financial standing. The
primary function of the internal bills scheme was to disguise the
deficiency in Nugan Hand Ltd funds brought about by moneys being taken
out of the company by Messrs Nugan and Hand who simply used these two
dollar companies as conduits through which to channel funds from Nugan
Hand Ltd. Instead of disclosing that these moneys were owing to Nugan
Hand Ltd, the records of that company treated these bills as having been
received at a current value estimated by Mr Brincat. The bills were
taken into the company's accounts as though they were valuable bills of
exchange. In effect bad debts due from these two dollar companies
controlled by Mr Nugan were changed, in appearance only, into high
profile assets.
4.5.16 In January 1976 'or shortly thereafter' Mr Brincat carried out a
program as itemised in his own handwriting in his working papers^ and
thereby brought into existence a number of these so called internal bills
- 771 -
of exchange. Persons such as Messrs Hand, Hill and others signed these
bills on behalf of P.M. Shelley Pty Ltd, Yorkville Nominees Pty Ltd and
Nugan Hand International Holdings Pty Ltd thereby purporting to make
those companies liable to pay according to the terms of these bills.
Mr Brincat agreed that he followed the program in his working papers and
brought into existence these documents. He then back dated them
according to the written program thus giving the false impression that
the bills had come into existence on the dates mentioned in them and in
the records in which Mr Brincat recorded them whereas, the truth was that 22 they did not exist on those dates.
4.5.17 Mr Brincat agreed, on more than one occasion, that he knew that 23
these companies could not repay the moneys out of their own resources
and that he knew that as auditor he was the one who had to make an
assessment in respect of the collectability of the moneys said to be 24
owing to Nugan Hand Ltd by these companies. He said that he believed
that Mr Nugan would repay out of his own resources the moneys represented
by these internal bills. He said he believed Mr Nugan to be a wealthy
man.
25
4.5.18 In his statement to the Commission which was incorporated
into the Commission's transcript and which Mr Brincat swore to be true
and correct,^® Mr Brincat said he had sighted each of the bills he
brought into existence in early 1976 and that they were duly stamped.
However in the course of his examination before the Commission he
admitted that when he carried out the program of introducing these bills
into the January 1976 accounts he did so knowing at the time that they 27 were in fact unstamped. He said that he had made a grave error in
his statement to the Commission.^ He agreed that it was possible that
the reason some of these original internal bills had not been duly
stamped was simply that that was an indication that nobody thought they
were worth stamping.
4.5.19 There are other clear illustrations that Mr Brincat severely
compromised his independence as auditor of Nugan Hand Ltd. However, as
it is not disputed by Mr Brincat that this was so, it is unnecessary to
- 772 -
recount all the remaining examples. Nevertheless, there is one that
should be mentioned. According to Mr Brincat, in 1977, prior to 30 June,
Mr Nugan claimed that he had out of his own resources discharged a
liability of Nugan Hand Ltd's by repaying one of the company's overseas
depositors. Mr Brincat said he then made entries in the records of Nugan
Hand Ltd and one of the other companies reflecting the alleged discharge
of this liability. Shortly thereafter Mr Brincat claimed he found out
that this deposit had not been repaid as alleged, yet he did nothing to 29
correct it in the records of Nugan Hand Ltd. He agreed that on his
own evidence Mr Nugan had told him a 'monstrous lie' about this
. .. 30
deposit.
4.5.20 At one stage Messrs Heuschkel and Pollard, unbeknown to
Mr Brincat, sought legal advice concerning the use of the internal bills
and their inclusion in the accounts of Nugan Hand Ltd. Mr Heuschkel told
the Commission that he had first learned of the existence of the internal
bills in approximately August or September 1977. This was at the firm's
office which was then in Clarence Street, Sydney. Mr Heuschkel said on
this occasion Mr Brincat seemed to tie 'agitated and fed up'
Mr Pollard was also present. On that occasion Mr Brincat, when asked
what was disturbing him, said that there were bills drawn between Nugan
Hand Ltd and Yorkville Nominees Pty Ltd and from Yorkville Nominees Pty
Ltd there was a loan to Mr Nugan. Mr Heuschkel said he then expressed
the view that the transaction was to be treated as a loan to a director
and that either the accounts had to be qualified in relation to that loan
or the loan had to be secured or repaid. Mr Heuschkel said that
Mr Brincat had informed him on that occasion that the problem had
recently arisen.32
4.5.21 Later there was a meeting between Messrs Pollard, Brincat and
Heuschkel at which Mr Heuschkel said he was confused by what Mr Brincat 33 .
was saying about the internal bills. Later still, according to
Mr Heuschkel, he and Mr Pollard conferred and Mr Pollard said that he too
was confused. They decided to seek legal advice. Eventually they sought 34
advice from Mr John Aston then a solicitor practising in Sydney.
Mr Brincat was not informed of this decision to seek legal advice
- 773 -
because, according to Mr Heuschkel, both himself and Mr Pollard came to
the conclusion that Mr Brincat was deliberately endeavouring to confuse 35 them.
4.5.22 Unbeknown to either Mr Heuschkel or Mr Pollard, Mr Aston was in
fact retained by Mr Nugan and when this fact emerged during the
conference Mr Aston advised them to seek independent legal advice.
Accordingly Messrs Heuschkel and Pollard saw another solicitor on
19 September 1977,^® however, they had only a preliminary conference
with this solicitor and left on the basis that formal advice would be
provided in due course. Before that could happen Mr Pollard received a
telephone call from Mr Nugan requesting Messrs Pollard and Heuschkel to
attend Mr Nugan's office. They found Mr Nugan annoyed at the way they
had sought legal advice concerning the internal bills. According to
Mr Heuschkel, Mr Nugan was very heated and the conversation 'went round
in circles'. Mr Brincat was present and according to Mr Heuschkel he was
upset with Mr Heuschkel and Mr Pollard for seeking legal advice without 37 his knowledge.
4.5.23 Some time later, at Mr Nugan's suggestion, a further meeting was
arranged between Messrs Nugan, Pollard, Brincat and Aston. Mr Pollard
has said Mr Aston was informed at that meeting that internal bills were
being listed as current assets and that the concern was that they were
being drawn on associated companies. Mr Pollard said Mr Aston
recommended that a note to the accounts be included and that thereafter a
note appeared as a note to the accounts in the following form (so far as
relevant)
'... and also 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.'
4.5.24 It is obvious that the note was inadequate to put the reader on
notice of the internal bills scheme. The reference to 'money market
securities' was most misleading because the internal bills were worthless
as such. It was quite misleading to suggest that genuine money market
- 774 -
securities were being purchased by Nugan Hand Ltd 'in the course of
carrying on its business.' Mr Aston told the Commission that he had not
drafted that note and that in his opinion it appeared to have been
39
drafted by Mr Nugan himself.
4.5.25 Mr Pollard said that subsequently he had been informed by
Mr Brincat that Mr Nugan had reduced the extent of the use of internal
bills and had 'repaid a considerable number of them as well' and that
there had been no default in regard to any of the internal bills that had
fallen due. He said his doubts were satisfied by this conversation and 40
by the advice received from Mr Aston.
4.5.26 Mr Heuschkel said that on one occasion after he and Mr Pollard
had attempted to receive independent legal advice on the question of
internal bills, he had received a telephone call from Mr Pollard who had
informed him that the amount of the outstanding debt was being repaid or
had been repaid and that a note would be inserted in the accounts making 41
it clear that there was a loan outstanding to a director.
4.5.27 On two occasions during the lengthy course of his evidence to
the Commission Mr Brincat said that he should have resigned as auditor of 42 Nugan Hand Ltd.
4.5.28 Apart from Mr Brincat's evidence mentioned above, Mr Brincat
claimed in evidence that while he 'now knows' the Nugan Hand Ltd accounts
were false he did not know at the time when he certified them as
auditor. He told the Commission that he was comparatively young and
inexperienced when he commenced to audit the accounts and that Mr Nugan
was reputed to be a successful solicitor and a man of considerable
wealth. He further said that he was considerably overborne by Mr Nugan.
4.5.29 In the Commission's view there are some gaps in existing
legislation relating to auditors. For example under neither the
Companies Code nor the New South Wales Crimes Act is there a penal
offence directed to the auditor as such, for certifying accounts which he
knows to be false. Instead it is necessary to prove in the particular
- 775 -
case that the auditor was an officer of the company. As the reported
cases show this is a somewhat unsatisfactory means by which to bring
criminal charges against an auditor. A somewhat belated recognition of
this difficulty may have been responsible for the amendment, in late
1979, of section 4 (the definition section) of the Crimes Act in the
following terms:
1 "Officer", in relation to a body corporate or public company, includes a person who has been appointed or acts, as an auditor of the body corporate or public company.'
However, in the Commission's view, the better course would appear to be
to have specific legislation referring to the auditor as such and
providing a penalty in a case where the auditor knowingly certifies false
accounts.
4.5.30 The matters adverted to in this section therefore raise the
following issues which the Commission believes should be the subject of
consideration by the commissioning Governments with a view to the
enactment of legislation to provide for:
. the codification of the scope of the duty of the auditor of a
public company to detect fraud in the company;
. a criminal offence constituted by such an auditor certifying
company accounts which he knows to contain false statements or
which create a false impression; and
. the separation of the roles of accountant and auditor in respect
of a public company and a prohibition against the company's
auditor also carrying out duties ordinarily performed by an
accountant.
lo vc r-
- 776 -
ENDNOTES : PART 4 SECTION 5
(See e x p l a n a t o r y no t e at front of report)
1 As defined in the Oxford English Dictionary and referred to by
Fullager J. in Shire of Frankston and Hastings v. Cohen (1960) 102 CLR 607 2 CD11027, Report to the Commission by Mr Meade, paragraph 6.2.4 3 Uniform Companies Act 1981 section 162(1)(iii); New South Wales Companies Code 4 Uniform Companies Act 1981 section 167; New South Wales
Companies Code CD11027, Report to the Commission by Mr Meade, paragraph 3.1 CD11027, Report to the Commission by Mr Meade, paragraph 3.4
ibid, paragraph 3.5 8 ibid, paragraph 3.9(1) 9 The latter is the view expressed in the standard adopted by the
auditors professional body in the United Kingdom in April 1980 10 CD10968, The Chartered Accountant in Australia, Vol. 55 No 11
June 1985 p44, The Auditor's Duty to Detect Fraud 11 (1970) 92 W.N. (NSW) 29, Supreme Court of New South Wales,
Moffitt J.
12 13 14 15 16 CT23776, Brincat
17 CT23812, Brincat
18 CT23810, Brincat; CD4768 folios 74,75 19 CT23813, Brincat
20 CT23857, Brincat
21 CD4703 folios 74,75
22 CT23945-46, Brincat 23 CT25303, Brincat
24 CT25304, Brincat
25 CD9009
26 CT23732, CT23736-63, Brincat 27 CT23942-43, Brincat 28 CT23942-43, Brincat 29 CT24899, B r incat
30 CT24900, Brincat
31 CT23560, Heuschkel 32 CT23562, Heuschkel 33 CT23562, Heuschkel 34 CT23551, Heuschkel 35 CT23564, Heuschkel 36 T h e s o l icitor was a pa r t n e r in the firm of R o s s e r and Co.
37 CT23575, Heuschkel 38 CT23288-89, Pollard 39 CT23883, Aston
40 CT23289, CT23341-42, Pollard 41 CT23582, Heuschkel 42 CT25404-05, Brincat
- I l l -
SECTION 6 : BANKERS' OPINIONS
4.6.1 T h e C o m m i s s i o n ' s interest in this matter and its justification
for focu s i n g o n this topic as a separate category, s tems from the crucial
p a r t p l a y e d b y bankers' opinions in launching the N ugan Hand G r o u p as an
international concern.
4.6.2 The evidence shows that the first step towards this launching
was the preparation of a set of accounts which misrepresented the true
financial position of Nugan Hand Ltd [profile 2.97]. The second step was
to obtain the auditors' cooperation in auditing the accounts and the
final step was the use of these audited accounts to obtain favourable
bank opinions which were then used to enhance the image of the Nugan Hand
Group abroad.
4.6.3 The following s e c t i o n d e t a i l s the available evidence on the form
of bank o p i n i o n s p r o v i d e d b y N u g a n Hand Ltd's bankers and the highly
e f f ective use of those opin i o n s b y the N ugan Hand Group. In addition
reference is m a d e to opin i o n s prepared b y other bodies, including one
h i g h l y crit i c a l of the Group, and to doubts expressed b y the Group's own
b anks c o n c e r n i n g their o p i n i o n s in the face of m o u n t i n g a d verse publicity.
F o r m of Bank Opinions
4.6.4 Until March 1976, Nugan Hand Ltd banked with the Bank of New
South Wales (as it then was), Bridge and Young Streets branch, Sydney.
As a result of that Bank's refusal to provide Nugan Hand Ltd with a
'daylight' overdraft facility [see 3.4.8-3.4.9], the company then
transferred its account to the ANZ Bank which was prepared to provide the
requisite facility."*· Thereafter the Pitt and Hunter Streets branch of
the ANZ Bank proceeded to provide, at the request of Mr F.J. Nugan
[profile 2.1], opinions on Nugan Hand Ltd. The Commission notes
incidentally, that the figures quoted in opinions provided by the ANZ
Bank in 1976 were erroneously ascribed to the June 1975 audited accounts,
whereas those figures were in fact taken from the unaudited accounts of
- 778 -
1976. This error had the effect that the value of assets and
liabilities as at the stated time of 30 June 1975 were considerably
overstated and also overstated their value when compared with the audited
accounts of 31 January 1976. Leaving that aside, the following example
which was sent to Citibank, Grand Cayman, on 19 July 1976 by Mr E.F.
Southwood (now deceased), the then manager of the Pitt and Hunter Streets
branch of the ANZ Bank, provides a sample of the form of opinion used at 3 this time:
2
'Nugan Hand Limited is a Company incorporated in New South Wales, Australia with its principal activities being the [sic] act as investment bankers, financial advisers, investment managers and custodians. Company has international division in Hong Kong, Panama and U.S.A. with several representative offices in other overseas commercial centres.
Directors are considered to be capable and reliable of good character, who would not commit the Company to engagements it could not fulfill [sic].
Present D i r ectors are: -
F rancis J o h n N U G A N - Chairman
Michael Jon H A N D - Dep u t y Chai r m a n
Francis Dennis W A R D - Director / S e c r e t a r y George Thomas S H A W -
Company's audited balance sheets and trading accounts as at 30/6/1975 reveals [sic] Effective Capital $1,134,409, Liabs. $21,588,643 and Assets $22,723,169. Subscribed capital of the Company is A$l,000,005. It is our opinion that Company would be considered safe for engagements generally.'
4.6.5 In March 1977 the manager of the Pitt and Hunter Streets branch
of the ANZ Bank was changed. On 25 March 1977 Mr R. McKinnon (who died
on 10 October 1980) wrote to Mr M.J. Hand [profile 2.2] stating that he
had recently assumed management of the branch and would appreciate a
meeting to discuss, in particular, the annual review of Nugan Hand Ltd's
'within the day' overdraft facility [see 3.4.8-3.4.91.^ Messrs Nugan 5 and H.R. Graham subsequently attended a meeting at the Bank on 1 April
1977.6
4.6.6 Following Mr McKinnon's appointment to the position of Manager,
Mr Nugan wrote to the Bank on more than one occasion seeking
- 779 -
Mr M cKinnon's agreement to the inclusion of certain information in the
Bank's opinion on Nugan Hand Ltd. On 20 May 1977 Mr Nugan requested the 7
inclusion of the following information:
'From the Audited Accounts to 31 January 1977 lodged with us, it is noted that total assets were $21,847,311, and total
liabilities were $20,659,201; Money market securities purchased during the year total $219,298,365, and gross turnover for the Group (including the securities purchases [sic]) is believed to
be substantial.
The C o m p a n y conducts an International Division operating through
Re p r e s e n t a t i v e O f fices a n d a f f i l i a t e d Merchant B a nking and
Ba n k i n g companies o v e r s e a s . '
4.6.7 This proposed additional material went beyond previous opinions
in that it quoted details of purported money market securities purchased,
claimed a substantial gross turnover and also claimed that there was an
international division. On 10 June 1977 Mr McKinnon communicated his
willingness to accede to Mr Nugan's request.®
4.6.8 More significantly, Mr Nugan wrote to Mr McKinnon on 7 September
1977 enclosing a document which was clearly intended by Mr Nugan to be g
adopted by the Bank as its reference on Nugan Hand Ltd. In his
covering letter, Mr Nugan referred to discussions with Mr McKinnon in
relation to the draft reference. He also claimed that the proposed
reference had been modelled along the lines of another bank reference on
the Group. There is no evidence to support this last contention. The
form of the proposed reference drafted by Mr Nugan was as follows:
'7 September 1977
D R A F T RE F E R E N C E
N U G A N HA N D LIMITED, A N D T H E NUGAN
H A N D GROUP
Investment Bankers, Bankers and T r a d e Services
N U G A N H A N D L I MITED W e are the Principal Bankers for Nugan Hand
SYDNEY, A U S T R A L I A L i mited Sydney, Australia, a n d have the benefit of
Investment B a nkers reported information on other Nugan Hand G r o u p
C o m panies o v e r s e a s .
- 780 -
Principal Bankers: ANZ Banking Group Limited, Pitt & Hunter Sts branch Sydney, Australia.
Nugan Hand Limited are Investment Bankers,
Financial Advisers, Trade and Commercial Advisers.
Directors: Francis John Nugan, Michael Jon Hand, Leslie
Hillary Collings, Stephen Kenneth Hill, George Thomas Shaw.
The Group originated in March 1970 as Yorkville Nominees Pty Limited, and Nugan Hand Limited has been the major operating Company in the Group since June 1973.
From audited accounts for the year to 31.1.77 lodged with us, it is noted that the total assets were $21,847,317, and total liabilities were
$20,659,201. Money market securities were
purchased by Nugan Hand Limited during the year totalling $219,298,365, and gross turnover for Nugan Hand Limited, including the securities above, is believed to be very substantial.
Directors are considered to be capable and
reliable, and well versed in their fields of
activity.
Several accounts are maintained with us and they are well conducted. We have extended to the
Group some Banking facilities on a secured basis, and this accommodation has been used in an
entirely satisfactory manner. It is considered the Directors would not commit the Company into engagements that it could not fulfil. We regard Nugan Hand Limited as a responsible organisation, good in all its normal business engagements.
G R O U P OVERS E A S COMPANIES * 1
NUGAN HAND (HONG KONG) Incorporated on 10 October 1972. Paid up capital LIMITED, Hong Kong $HK5,000,000. Referred to in Hong Kong as a
1 Finance Company'. The subject is reported to hold registration under the Deposit Taking Ordinance No. 3 of 1976 of the Colony of Hong
Kong. The Directors, being those of Nugan Hand Limited above, are considered to be capable and reliable and would not commit the Company into engagements that it could not fulfil.
THE NUGAN H A N D BANK
Cay m a n Islands
British We s t Indies
Nature of busi n e s s is Banking. The subject is
reported to hol d a Cate g o r y 'B' B a n k i n g Licence issued b y the Government of Cay m a n Islands-
B r itish Wes t Indies. The Directors, almost the
- 781 -
Other Overseas Companies
Other Bankers
same as Nugan Hand Limited, are considered to be capable and reliable and would not commit the Company into engagements that it could not fulfil.
The Nugan Hand Group maintains Trade Service Companies and Representation in USA, Thailand, Singapore, Kuala Lumpur, West Germany, United Kingdom, Panama, and Argentina.
The Trade Services Division provides a range of services in the field of Mangement Consulting, Market Surveys, Corporate Representation, Administrative Services, and similar areas.
The Group, to our knowledge, maintains
satisfactory customer relations and
satisfactorily maintained accounts with many other bankers in Australia and overseas. Amongst the primary bankers are, we are informed, Banque Nationale de Paris in Hong Kong, The Wing Cti Bank
Limited in Hong Kong, United Overseas Bank
Limited in Singapore, and many other
international Banks.1
4.6.9 The only change made to this reference was the deletion of the
words 'an entirely1 and substitution of the article 'a' in the sentence:
'We have extended to the Group some Banking facilities on a secured basis
and this accommodation has been used in an entirely satisfactory
m a n n e r . O n the basis of handwriting and other circumstances it is
clear that the alteration was Mr McKinnon's and subsequent references
reflected this change. Mr Nugan's suggested reference, with this minor
amendment became the ANZ Bank's standard form of reference on Nugan Hand
Ltd which the Bank issued in response to overseas and Australian
inquiries concerning the standing of the company.11
4.6.10 The ANZ Bank sometimes provided variations to this standard form
of reply including: an abbreviated form of reference provided by telex or
cable; those provided on forms made available by the inquiring bank
itself; and a partly printed form of reply which seems to have been used 12
by the International Division of the ANZ Bank from time to time.
4.6.11 Additional comments were provided when the ANZ Bank was asked to
comment on specific proposals in relation to which Nugan Hand Ltd was
attempting to negotiate. When those proposals involved large amounts of
- 782 -
capital it appears that the Bank felt constrained to temper its otherwise
favourable report. In a telex dated 22 May 1978 from Singer and
Friedlander Ltd, London, the Bank was asked whether it would 'consider
Nugan Hand Ltd Investment Bankers of Sydney good for a guarantee of U.S.
Dollars 11 million'. In response the ANZ commented favourably on the
directors' capability and reliability and the company's conduct of its 14 account and then added:
'However bearing in mind present capital of the company we do not see how they could enter into transaction in the multitude [sic] of 11 million US Dollars unless there are moves in train for a substantial increase in capital of which we are not aware even though close liaison is maintained with managing director Stop It would not of course be politic to approach them in the matter stop'
4.6.12 Similarly, a telex from the First Hawaiian Bank, Honolulu,
bearing date 30 December 1977 stated: 'Nugan-Hand have used your bank as
reference but we have conflicting reports about their reputation
credibility and ability to raise a purchase price of US30 million'.15
A full standard report was telexed in response on 4 January 1978 with the
following additional comment:16
'Several months ago the company received some adverse publicity in the press with the suggestion that it could be linked with marihuana growing in Australia as brought to light in a drug enquiry which is still continuing as the vehicle for investment of illicit funds but there has been no evidence given to
substantiate this at all. However this could be the reason of your having received conflicting reports as to their reputation and credibility. We can only say that the account is well
conducted and from our experience the directorate is honest and reliable. However bearing in mind the present capital of the company we do not see how they could enter into a contract of the size you mention unless there are moves in train for a
substantial increase in capital of which we are not aware even though our abovementioned branch maintains close liaison with the Managing Director, Mr Frank Nugan. It would not of course be politic to approach them in the matter'.
4.6.13 Other than the introduction of this additional information in
response to these particularly ambitious proposals, the ANZ Bank
- 783 -
references were uniformly favourable and its response at this time to
adverse publicity seems to have been to ignore it. This approach was
typified by a response to an inquiry dated 26 June 1978 on behalf of the
Fidelity Bank, Philadelphia which noted that the Bank was aware of recent
adverse publicity in the Australian press. The telexed response from the
International Division of the ANZ Bank, Sydney, stated: 'Manager Pitt and
Hunter Streets today confirms previous reports and states connection is
still regarded as most valued ... notwithstanding recent press reports 17
branch has nothing to add to previous reports'.
4.6.14 Yet another example of the ANZ Bank's willingness to adjust its
r eferences at the behest of Mr Nugan occurred in March 1979. Mr McKinnon
commented in an internal minute to the State Manager, ANZ, on 19 March
1979 that Mr Nugan had claimed that the wording in the standard ANZ Bank
reference [see 4.6.8] that the company enjoyed certain facilities on a
secured basis (paragraph 8 of the standard reference) could be
m i s i n t e r p r e t e d b y third p arties to me a n that the ANZ Bank w ould not, nor
should anyone else, lend on an unsecured basis. Accordingly, Mr McKinnon
suggested that this aspect 'could well be eliminated in future
r e p o r t s ' R e f e r e n c e to facilities on a secured basis was duly
19
omitted from subsequent opinions.
Comme n t s on the ANZ Bank Standard Reference
4.6.15 Mr McKinnon, w h o was the Manager of the ANZ Bank, Pitt and
Hunter S t reets branch at the time the Bank a d opted Mr Nugan's proposed
reference, d i e d on 10 O c tober 1980. The Commi s s i o n was therefore unable
to obt a i n evid e n c e fr o m h i m a s to the circumstances in w h i c h the Bank
ca m e to adopt the reference or, m o r e specifically, w h a t inquiries, if any
he ma d e bef o r e a c c epting (with the deletion m e n tioned in 4.6.9) the form
a n d s u b stance o f the reference d r a f t e d b y Mr Nugan himself.
4.6.16 L e aving a s i d e the u n usual practice of the managing director of
a n a l leged m e r c h a n t bank pr e p a r i n g his own bank reference, there are a
number of other aspects c oncerning the content of this reference w h i c h
call for co m m e n t :
- 784 -
The word 1 turnover1 is given an unorthodox meaning and, in fact,
accorded with the description of that term in clause (a) of the
Chairman's Report on Nugan Hand Ltd financial statements as at
30 June 1975. According to the Chairman's Report, instead of
equating the term 'turnover' with the sale price of securities
in accordance with normal usage, Mr Nugan, as Chairman, used the
term to mean 'the sum of all deposits into bank accounts of the
Group' together with 'all payments out of bank accounts of the 20 Group'. One consequence of ascribing this meaning to the
term was that Mr Nugan was able to claim, as in the suggested
reference, that 'gross turnover for Nugan Hand Limited,
including the securities above, is believed to be very
substantial'.
The reference omits any mention of the company's profit and
excludes any financial statistics which would enable the profit
to be calculated. The mention of liabilities being less than
assets is misleading in that it does not enable the reader to
distinguish between the company's capital and the company's
profit. Further, in order to calculate profit from statistics
concerning money market securities, the sales figure as well as
the purchase figure would be required, not to mention an
estimate of the operating expenses. In brief, the figures
quoted create the general impression of large turnover and
leave the comparatively small profit obscure.
General comments concerning the directors' ability and the
responsibility of Nugan Hand Ltd as an organisation are made at
large without limitation in terms of the Bank's dealings with
the individuals or companies concerned.
With regard to the material on the Nugan Hand Group overseas
companies, neither Nugan Hand (Hong Kong) Ltd nor the Nugan Hand
Bank operated accounts with the Bank and accordingly it was not
in a position to make any assessment of these companies, yet it
purported to do so. Further, the reference was incorrect in
- 785 -
stating that the directors of Nugan Hand (Hong Kong) Ltd were
the same as those of Nugan Hand Ltd although the two companies
had some directors in common, including Messrs Nugan and Hand.
4.6.17 In the light of the above comments, it is of interest to note
the, then current, ANZ Bank's internal guidelines concerning the content
of opinions in relation to requests by overseas banks. With regard to
the ability and integrity of management, the guidelines state that 'it is
important that this information be accurate. If there is necessity to
give different remarks for a particular director, the name and position
held are to be specified'. On the question of the company's financial
position the guidelines state that 'an accurate indication is required
and is to cover the working capital position and profitability'.^·
Use of Opinions
4.6.18 The evidence before the Commission discloses that the bank
references were used extensively and effectively to establish the Nugan
Hand Group's credibility in the market place. The most emphatic evidence
on this matter was given by Mr C.L. Ceilings [profile 2.15] who was
instrumental in establishing the Group's operations overseas. In his
speech to the Group's conference held in Bangkok in January 1978,
Mr Collings gave a brief history of events in the Hong Kong office from
its beginnings in 1975 to the time of the conference, and in the course 22 of his speech he said:
'Now one thing probably above all else I suppose made it happen quickly and I think because of that it is important that I
explain it to you. When you are in a country wherever you may be, and you have problems, and people won't give you money because they don't believe you or for whatever reason, I found that you have to be a bit inventive if you can. You have to try and analyse why people do not do what you want them to do and
then you have to find a way around the problem. ... and I like
things to be organised. So I used to drive Frank absolutely mad on the phone or with memos because at that time I did not even have a phone in the office because of the expense. I used to drive him mad trying to get these references from the Bank of New South Wales and the ANZ. I thought if we're so bloody good
- 786 -
T h e B a r k s a r e going to s a y a b s o l u t e l y m a r v e l l o u s things about
us. Now, the y did. But it w a s not q u i t e in the w o r d s that I
w a n t e d t h e m to use so I t h ought "well, t h e y a r e g o i n g to hav e to
c h a n g e 1 * a n d I us e d to p l a g u e F rank wi t h this . /. Anyway, I did
push the r eferences and th e y did g e t better.
Then, as the turnover got better I'd say, "well the turnover is going up you know?" I think the first year turnover was
$A11.5 million. As you know, last year it was over a billion dollars.
With references I went around to the credit offices of the main Banks, particularly Hong Kong and Shanghai Bank, Chartered Bank, Wing On Bank, of course, saw the reps, and made sure that they knew and had a copy of our references and asked them will you please write one for us. Because I wanted people to think
nicely of us, because we are nice people, and also I wanted to try and short-cut the time. At this stage, I was trying to work out a way in my own mind whereby if we're so good why can't a
local banker say we are good and even guarantee us.' [emphasis added]
4.6.19 Mr Collings reiterated his comments in evidence to this
23
Commission. H e told the Commission:
Î should like to make it quite clear that in my view if there was a single reason why we got a lot of deposits in quite
quickly, other than the banking arrangement with Wing On, it was because of the quality of the bank references that came up from Sydney. The Bank of New South Wales wrote some incredibly good references - you couldn't get better ones I don't think - and the ANZ did the same, and they were very, very good.'
The Commission has been unable to obtain any such reference which may
have been issued by the then Bank of New South Wales at this ti m e . ^ a
The Commission had available to it only one reference from the Bank of
New South Wales which is referred to at paragraph 4.6.26.
4.6.20 In relation to Mr Collings' evidence, the Commission notes
that there is some correlation between the time of the establishment of
the Hong Kong office and the time of the first of four buy back
transactions between Nugan Hand Ltd and CitiNational and National
Discount Corporation whereby securities were purchased to inflate the
balance sheet fsee 5.25-5.33]. The first of these transactions occurred
in respect of the accounts for 30 June 1975 and resulted in an extra
- 787 -
anount of $9,858 million in assets, in the form of securities, being
included in the accounts which were then stripped away only four days
later on 4 July 1975. If in fact Mr Collings had 'driven Mr Nugan mad1
in order to obtain good bank opinions it is not unreasonable to assume
that Mr Nugan in response to Mr Collings' demands instituted this
particular buy back arrangement to artificially inflate the balance sheet
which would undoubtedly result in a more impressive Bank opinion.
4.6.21 Apart from Mr Collings' evidence, documentation before the
Commi s s i o n i n c l u d e d a man u a l e n t i t l e d 'Strictly Confidential NH
International Administrative Procedure between Offices' which included 24 the following instructions:
'* In the field, it is of a great deal of importance when
n e g o t i a t i n g for s u b s tantial funds or if one of our
r e p resentative [sic] is b r e a k i n g the ice in a new ar e a to
have an independent or t hird p a r t y p o i n t of reference.
* As of today, w e have f o u n d a most high l y utilised, met h o d
of reference is that of a Bank to Bank Reference.
* Please follow these points specifically.
(1) Your client must go to his own local Bank or
another Bank with which he deals, and he must in writing ask for a reference on, e.g. Nugan Hand Bank or Nugan Hand Limited ...
(2) You should prepare a sample letter. How to
have client instruct his Bank. A basic sample letter is laid out below.'
T h e samp l e letter requested the bank concerned to seek a bank reference
from Mr R. McKi n n o n of the ANZ Bank, Pitt and Hunter Streets branch,
Sydney. The instructions continued:
'(3) When active in South East Asia and a reference is required on Nugan Hand Bank, the following persons are the correct individuals to write to at each Bank.'
T hereafter follows a list o f individuals at particular banks comprising
Mr A. Kwok (Wing On Ban k Ltd Hong Kong), Mr R. Isherwood (ANZ Finance
- 788 -
(Far East) Ltd Fong Kong), Dato L.S. Pang (United Overseas Bank,
(Singapore), Mr M. Vincent (ANZ Banking Group, (Singapore)), Mr Fung
(Irving Trust Company New York) and Mr R.C. Thomas (ANZ Banking Group
(Los Angeles)). This list is followed by the words:
' * All of the aforementioned people at the appropriate Banks, are prepared, ready, willing and able to give references as required ...'
4.6.22 The representatives of the Nugan Hand Bank were well aware of
the procedures concerning bank references. Mr E.C. Louey [profile 2.40] 25 told the Commission:
'The procedure, first of all, was that before they were prepared to invest in the Nugan Hand Group companies, whether it be in the Australian company or any of the others, the problem was to establish credibility, and all we had at our disposal at that stage was to request that they check the group through their bank through to the ANZ Banking Group in Sydney, and this was always, this line of advice was always offered before anyone did any business, and virtually throughout the whole time of my association with the group this was always done by any clients, and always a favourable reply was received from the ANZ.'
4.6.23 When asked about the standard report on Nugan Hand Ltd from the
ANZ Bank, Mr R.A. Pulger-Frame [profile 2.59] told the Commission:26
'The effect of the report was quite widely known amongst the Nugan Hand offices. And it was used as, I suppose, a gauge of our respectability in that the A.N.Z. had said such nice things about it [sic].'
4.6.24 Mr J. McArthur [profile 2.46] told the Commission that while he
did not personally show bank reports to prospective clients, he may have
indicated to depositors that if they would like to see such reports from 27
the ANZ Bank then they were available. Mr G.A. Courtney-Smith
[profile 2.17] said that the reports from the ANZ Bank in Sydney included
comments on the Nugan Hand Bank, Nugan Hand (Hong Kong) Ltd, the
directors and whether the account was being satisfactorily conducted. He
added that the idea of the reports was that they were objective.28
- 789 -
Reference to the availability of ANZ Bank opinions was also made in
correspondence from Nugan Hand Ltd or Nugan Hand International
particularly in circumstances where members of the Group were concerned
about, and seeking to overcome, the effects of adverse publicity or other 29 unfavourable comment.
Opinions Prepared by Other Bodies * 2 7
4.6.25 The d o c uments bef o r e the Commi s s i o n include a number of opinions
p r e p a r e d b y b o d i e s other than the ANZ Bank, on l y one of w h i c h is a
b a n k e r ' s opinion. G e n e r a l l y speaking the opin i o n s wer e favourable.
4.6.26 On 24 January 1977, the Hong Kong representative of the Bank of
New South Wales gave a brief reference on Nugan Hand Ltd to the director,
IFPI, Hong Kong as follows:33
'The company conducts a merchant banking business and has an international division operating through representative offices overseas. Account opened 1973 and operates with substantial turnover. Directors are considered capable and reliable and we consider they would not enter into any commitment they could not expect to fulfil.'
4.6.27 T h e evide n c e indicates that the Bank of New South W ales provided
other references a l t h o u g h those p r o v i d e d b y that Bank at a later date
w e r e r eferences o b t a i n e d f r o m the ANZ Bank and relayed to the
. . 31
inquirer.
4.6.28 Other reports were prepared by Dun & Bradstreet on 22 November
1976,32 1 November 1977,33 30 November 1977,34 29 May 1979,35
27 August 1 9 79^ and 22 April 1980."^ All of the reports quote from
the Nugan Hand Ltd published accounts and both of the reports produced in
1979 comment that on 28 May 1978 the Corporate Affairs Commission had
brought charges against Messrs K.L. Nugan [profile 2.52] and F.J. Nugan
in connection with the Nugan Fruit Group [profile 2.114]. Each of the
reports concluded, however, that Nugan Hand Ltd was in a good financial
condition. Indeed with regard to the report dated 27 August 1979 Mr G.A.
Edelsten [profile 2.20] had cause to comment to Mr Hand that he thought
the report was 'pretty good despite the fruit business at the end'.33
- 790 -
4.6.29 Extremely brief and out of date reports were prepared by
overseas institutions and where these reports contained details they had
been obtained from the Pitt & Hunter Streets branch of the ANZ Bank in
Sydney. The Bank of Nova Scotia International Hong Kong Ltd prepared a
report on Nugan Hand Ltd on 6 July 1976 which described the functions of
Nugan Hand Ltd, stated its office to be in Sydney, noted the authorised 39
and paid up capital and the management of the company. The Banque
Nationale de Paris prepared a report on the Nugan Hand Bank dated
December 1978 which noted the establishment of the Bank, its principals,
its capital, stated its business to be specialist bank and trust
services, and noted that it maintained a routine account with the Banque
without credit facilities.^ The American Foreign Service prepared a
report on Nugan Hand Ltd under the heading World Traders Data Report
using information as at 1 January 1978. The financial statistics quoted
were for 31 January 1977, however, and all relevant information had been 41
obtained from the ANZ Bank, Pitt & Hunter Streets branch.
4.6.30 A marked exception to these generally favourable or, at least,
innocuous reports is contained in a telex which was sent to S.G. Warburg
& Co. Ltd. in London on 12 July 1979. This was originally mistakenly
attributed by Messrs Nugan and Hand to the Bank of New South Wales but
they subsequently found it had been sent by the Australian merchant bank,
AUC. Witheringly perceptive and succinct, the recommendation was as _ 42
follows:
'We would not recommend Nugan Hand Limited to you. Apparently the company was started and is owned by two individuals who made some money during the mining boom in the 1960âs. Last year it was involved in a battle between some institutions and the board of a company run by Nugan's brother, the NUgan Group Limited. Auditors of this company were replaced and a number of directors of both companies resigned. Leo Tutt, Chairman of Escor
(Bowater) and Phoenix Insurance was one of these resignations. The Corporate Affairs Commission is investigating the
proceedings. The Nugan Group was accused of involvement in drugs in a recent Royal Commission on Drugs. Nugan Hand is big in advertising and small in size (eg it publicises turnover in the hundreds of millions yet has profit in the tens of
thousandsTT This approach attracts tongue In cheek press comment. The company has no establishment shareholders, no establishment directors and little business as far as we are aware. It is not viewed favourably here.1 [emphasis added]
- 791 -
4.6.31 This reference was apparently obtained during the course of
negotiations for the acquisition of London Capital Securities Ltd
[profile 2.111] by the Nugan Hand Group. The negotiating parties in
England sought the reference through S.G. Warburg & Co. Ltd., London.
During the course of the negotiations it was revealed to Mr Nugan that an
adverse report had been received concerning the Group.^ It is clear
from correspondence at that time that Mr Nugan incorrectly attributed
this damaging reference to the Bank of New South Wales.44 Although the
telex was revealed to Mr Nugan on the condition that its contents were 45 not revealed to other persons, Mr Nugan ignored this condition and
carried out extensive inquiries as to the origin of the telex. In the
process he threatened the Bank of New South Wales with legal action. He
later discovered the correct source of the telex and wrote to the Bank of 46
N e w South W a l e s apo l o g i s i n g for his actions. The content o f
Mr Nugan1s letter apart from its relevance to the present topic, is
illustrative of Mr Nugan1s prose, containing as it does illogical and
ungrammatical expressions. Several witnesses also commented on this
appa r e n t i n a b i l i t y o n the p a r t of Mr Nugan to e x press himself
adequately. He als o w r o t e to the merc h a n t bank, AUC, in the terms set
47
out below:
Î am not aware of any circumstances in the past twelve years where our firm has directly or indirectly been associated with, or come into contact with, your firm.
Thus, I cann o t conceive of c i r c u m stances w h e r e we could have so
g r e a t l y o f f e n d e d e x ecutives in your fir m as to cause such a
telex to be sent, w h ether the facts in it were correct or n o t .
In m y view, a n d I hop e it is accurate, almost e very fact stated
in the t elex is either t o tally f alse or at least misleading.
W h a t has stunned m y partner, Michael Hand, and m e about the
telex, is the intense q u a l i t y of c r i ticism levelled at our
Group. T h i s telex is o n l y o n e e x a m p l e . Over the past two
years, s ince Mr Joh n Do w d took it upon himself to make certain
s tatements under p a r l i a m e n t a r y privilege, it has occurred to us
man y t i m e s .
I 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
stages.
- 792 -
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. On the other hand, we do sincerely request you to reconsider whether this approach to our firm is justified, based on our record of success. We own a number of commercial banks and have a number of achievements over the past ten years that
might, if you were fully informed on them, be sufficient to make you more curious about our firm, and to determine the true
facts. Should you or any of your staff, including the executive who sent that telex to Nic Millward at Warburgs on 12 July 1979, care to make enquiries of me as to our firm, we would be
extremely happy to make available to you confidential
information on our size, profitability, turnover, and similar information!
In any event, we would appreciate it if you could discuss with your senior executives whether there is any matter of which they are aware in respect of which your firm has a grievance against us. We would regret having offended you if this is the case, and would like to explain the circumstances should you tell us of the facts by which we have caused such a serious breach
between our two companies.' [emphasis added]
4.6.32 There were indications in evidence before the Commission of
other unfavourable references on Nugan Hand Ltd. In a telex dated
21 June 1978 from Mr Nugan to Mr Geisz, director, Volksbank, Oftascheim, 48
West Germany the penultimate paragraph states:
'We u nderstand a client o f y o u r ban k sought an o p inion on our
G r o u p a n d w e cannot u n d e r s t a n d the origin o f a n y o p inion that
m i g h t reflect o n our integrity. Our bankers in the man y
countries w h e r e w e hav e offices, m a i n t a i n their excellent
references on us and w e w o u l d ask y o u to seek a reference from
our ba n k here, the ANZ Ba n k (Pitt & Hunter Sts, Sydney, branch)
r e g arding our g o o d reput a t i o n a n d e x c ellent s ervice to
c u s t o m e r s . '
4.6.33 There is reference to further unfavourable reports in an
unsigned and undated statement which appears to have been prepared by
Nugan Hand Ltd to brief Counsel in respect of the unfavourable AUC
opinion w h i c h N ugan Hand Ltd had erroneously attributed to the Bank of
49
N e w South Wales. The relevant p a r t of the statement is:
Î a l s o consider a n d heard reported, but not seen, that the NBA
and CBA ga v e rather h orrifying reports on Nugan Hand. As I say
I a m not a ware o f any wr i t t e n reports. W e know of one instance
some four years a g o the C o m monwealth Bank al s o gave a bad report
but it has not b e e n reported to us r e c e n t l y . '
- 793 -
G r o w i n g Co n c e r n about R e f e r e n c e s fro m ANZ Branches Over s e a s
4.6.34 There were signs of concern from the overseas branches of the
ANZ Bank in Hong Kong, Singapore and London from as early as October 1977
concerning the content of the Bank's reference on Nugan Hand Ltd and the
use made by the company of its association with the ANZ Bank. The Sydney
office of the ANZ Bank continued to provide favourable reports but made
some minor changes to the content of their opinions and the procedures
for their release towards the end of 1979. Correspondence between the
Sydney and London offices is of particular interest in revealing the
considerations which, in the view of the Sydney branch, obliged them to
provide a favourable report.
4.6.35 The following paragraphs set out in chronological order the
doubts expressed by the Hong Kong, Singapore and London offices (the
latter in some detail) and the amendments if any made to the opinions and
associated administrative procedures.
4.6.36 On 4 October 1977 the Singapore ANZ representative wrote to the
New South Wales ANZ State Manager in the following terms:50
'There is talk of them seeking to purchase a "Bank" in Hongkong [sic] and also here or in Kuala Lumpur, the figures mentioned being extremely large in relation to the company's published balance sheet. It is a little unclear as to how the group
operates elsewhere and the local market is becoming a little nervous as is the writer because ANZ Bank is being freely quoted as a source of reference.'
4.6.37 The Hong Kong ANZ representative expressed doubts in September
1978 concerning the Bank's reference in view of the Corporate Affairs
Commission investigation. In response, the International Division in
consultation with the New South Wales Acting State Manager noted the lack
of proof concerning adverse media reports and affirmed the company's
satis f a c t o r y dealings w i t h the Bank. In d oing so he advised that the
reference to the directors being capable and reliable should nevertheless
b e qu a l i f i e d to include the w o r d s 'in their dealings with the B a n k ' .
51 ----------------- ------------------
[emphasis added]
- 794 -
4.6.38 In a cable dated 14 A u g u s t 1979 f r o m ANZ London to ANZ Sydney
c o n c e r n i n g a m e e t i n g w i t h offic e r s o f the N Ugan Ha n d G r o u p and a request
by the Group for London to be a 'referral1 bank, the London office
indicated a reluctance to become involved but thought this might 52
embarrass the Sydney office. The cable stated:
'Until recently we had scarcely heard of Nugan Hand Ltd. and now we feel that we are being placed under undue pressure to play an active part in their international operations which we do not fully understand and we are concerned that the Group may be seeking to use the reputation of ANZ internationally to further its own interests.1
The branch's response denied that there would be any embarrassment,
provided a standard reference and reiterated satisfaction with
transactions to date.55
4.6.39 O n 7 N o v e m b e r 1979, the Assistant State Manager, Corporate
Banking, ANZ Syd n e y wrote to the Pitt & Hunter Streets branch noting that
the Ban k c ould not g i v e a n o p i n i o n on companies wit h w h o m the Bank h a d no
dealings a n d as a consequence, comment on overseas operations, other than
their legal status, was to be d e l e t e d.54 Following this direction the
Senior Manager International Division, ANZ directed that all future
opinions be forwarded to his Division with effect from 23 November 55 1979.
4.6.40 There was at this time also, extensive correspondence between
the London and Sydney offices concerning the Bank's opinions on the Nugan
Hand Group. On 29 November 1979 following the earlier exchange of cables
conce r n i n g use of London as a 'r e f e r r a l ' bank, the London ANZ office
w r o t e a p r i v a t e c o nfidential letter to the Assistant State Manager,
56
Corporate Banking, ANZ Sydney which is reproduced below:
Î am sorry to pursue the Nugan Hand saga, which I know has its embarrassing aspects insofar as the Bank is concerned and the giving of opinions, but felt I must drop you a further note on a personal and private basis.
(Xir F/X dealing room tell me that they hear the name of Nugan Hand being mentioned increasingly frequently in the "market" and, in particular, their role as a deposit taker in Singapore
- 795 -
where, it is understood, their deposits are accumu l a t i n g
some w h a t rapidly. I f u l l y a ppreciate this is on l y "hearsay" but
I felt tha t I should acqu a i n t y o u of the gossip, in case you had
n o t a l r e a d y h eard it. Furthermore, there is the suggestion that
"someone l a r g e (unnamed) is a bit w o r r i e d about the position."
I a p p r e c i a t e that m a r k e t talk cannot be the subject of official
ser i e s le t t e r s be t w e e n o f f i c e s and, even mor e so, that it is not
our p l a c e t o ques t i o n reports g i v e n b y another bran c h o n one of
its c u s t o m e r s . In the circumstances, I have w r itten to Pitt &
H u n t e r St r e e t s bran c h en c l o s i n g copies of diary notes ma d e at
this office. A c o p y of our letter to the branch (with
enclosures) is enclosed, fro m w h i c h you wi l l see that we have
not informed t h e m that a copy is b e i n g sent to you.
As I sai d earlier, I regret troubling y o u again but felt that
y o u sho u l d b e aware of the talk in case y o u m i g h t consider it
a p p r o p r i a t e to buy into the matter in some discreet w a y .1
(Reference to F / X is taken to be a reference to Foreign
E x c h a n g e .)
4.6.41 This letter was referred for information to the New South Wales
State Manager on 7 December 1979 who then forwarded it to the Assistant
State Manager with the comment that it 'only makes me feel more uneasy
about this Group'. The Assistant State Manager subsequently advised the
State Manager on 10 December 1979 as follows:
Î h a v e h a d reservations a bout N u g a n H a n d for some time. This
has b e e n b a s e d on fr e q u e n c y of requests for reports/information
m a d e of our peo p l e in N e w York, Ho n g K o n g and S i n g a p o r e . Also
the rapid growth and the number of non b a nkers employed.
T h e r e has b e e n m a r k e t g o s s i p in other centres as the g roup has
gone into business in each, so the Lond o n "gossip" is not
isolated. Indeed, I think o n l y to be expected - for e xample in
H o n g Ko n g there was m u c h innue n d o regarding drug trade links.
In summary, I have b e e n uneasy, a n d it is known to the branch.
However, the y have b e e n spot o n in dealings wi t h us a n d any
f acilities granted h a v e be e n s ecured - this will continue. ...
I a m c o n fident that S(P&H) doe s not issue any report wi t h o u t
reference to us. The p r esent report is couched in suitable
terms a n d it is of interest that N.H. recently a sked us again
for our current report. T h e incidence of requests for reports
has, I think, tended to s l o w over the last six mont h s or s o . '
(Reference to S(P&H) is taken t o be a reference to ANZ Pitt &
Hunter Streets branch, S y d n e y . )
- 796 -
4.6.42 Finally, the New South Wales Assistant State Manager replied to
the London office on 10 December 1979 as follows:58
'As I ha v e t o l d y o u b y t e l e p h o n e , the Bank r e l a t i o n s h i p here is
m a i n t a i n e d m o s t satisfactorily. This, o f course, is o n l y to be
e x p e c t e d as t h e y w o u l d n e e d to d o this as a favourable report is
essential to them.
As y o u know, the q u e s t i o n o f r eports n o w requires a deal of care
as customers can require us to p r o v i d e them wit h a cop y of a n y
rep o r t g i v e n o n them. Our f r i e n d s at N u g a n H a n d do this - on l y
rece n t l y t h e y a s k e d for a c o p y of a report w e have g i v e n on them.
T h o s e f a ctors aside, p e r s o n a l l y I have some reservations
a l t h o u g h h a v i n g n o t h i n g to p u t m y finger on. T h e y hav e expanded
r a p i d l y a n d it is di f f i c u l t to see h o w they o p erate and what
the y do. T h e y ha v e some p e o p l e w h o are not bankers b y
b a c k g r o u n d .
I can under s t a n d that F orex p e o p l e are h earing the name mor e
frequ e n t l y in the "market". Thi s has been the cas e in other
p l a c e s a l s o - N e w York, H o n g K o n g a n d Singapore, w here our
p e o p l e h a v e faced m a n y requ e s t s for opinions and/or other
i n f o rmation av a i l a b l e for adv i c e in confidence.
A s to report g iven b y S ( P & H ) , w e have had the text of their
report under review. However, t h e r e is n o thing in our dealings
wit h them that could justify a report in any other terms than
cu r r e n t l y issued. W e ha v e n o deal i n g s wi t h t h e m o u tside Sydney
and it w o u l d be dangerous indeed for us to include anyth i n g even
smack i n g of "hearsay" - e s p e c i a l l y as they do get copies.
I think y o u can onl y deal w i t h the m on your own terms a n d
conditions. A n y t h i n g w e extend he r e b y w a y of facilities are
secured.
I hop e this not e helps y o u u n d e r s t a n d our p o s i t i o n - we do w atch
a n d m o nitor reports, but t hese can b e based o n l y on our
e xperience u nder the banke r / c u s t o m e r relationship, avoiding
innuendo or c a ution b a s e d o n "hearsay" or "gossip" or even a
pers o n a l reservation a r i s i n g fro m such talk.' (Reference to
Forex is t aken to be a reference to Foreign E x c h a n g e )
4.6.43 Paragraph two of the above reply is taken to be a reference to
the New South Wales Privacy Committee announcement of 30 October 1978
that members of the Australian Bankers' Association, the Commonwealth
Trading Bank and the Rural Bank of New South Wales would in future on
written request, disclose to customers in New South Wales opinions given
on them to inquirers. The Privacy Committee had apparently been
- 797 -
receiving a small but increasing number of complaints that bankers would
not show customers any reports on their financial standing as provided to
others. The Committee had then suggested to the Association that
customers should be able to check reports for accuracy and completeness
to remove unjustified fears on the part of those customers that business 59
problems had been due to secret bankers' opinions. In support of
paragraph two of the above reply, the records before the Commission
disclose that Nugan Hand Ltd requested copies of bankers' opinions on a
number of occasions.®®
4.6.44 In a diary note dated 19 March 1980 the Singapore office
recorded that Mr G.R. Steer [profile 2.68] called to explain that
following Mr Nugan's death the company's reorganisation had proceeded
satisfactorily. There is the following handwritten note - 'this fellow
has never impressed me' and the final paragraph states:®"*"
Î grey area exists in our thinking of this company - but having regard to the consistantly [sic] good reports emanating from the Sydney controlling branch, we shall continue a courteous relationship. This needs to be tempered at all times by the knowledge that other Singapore banks and the MAS view them with some degree of suspicion and we need therefore to ensure we are not linked closely with them.' [emphasis added] (Reference to MAS is taken to be a reference to the Singapore Monetary
Authority.)
4.6.45 The standard ANZ Bank report [see 4.6.8 - 4.6.9], subject to the
minor amendments previously described [see 4.6.37, 4.6.39], continued to
be issued as late as January 1980.®***
4.6.46 The Commission raised the question of opinions and other matters
in conference with officers of the ANZ Bank who made the justified
response that Mr McKinnon, the Manager of the Pitt and Hunter Streets
branch, Sydney at the time that the standard reference was adopted by the
Bank, was deceased and moreover, that there were no other officers
continuing in the employ of the Bank with personal knowledge of relevant
events at the time. Accordingly, the Commission's conclusions were
reached without the benefit of such evidence although discussion of these
matters in general conference was of assistance.®^
- 798 -
C o n c lusions a n d R e c o m m e n d a t i o n s
4.6.47 The difficulties faced by the ANZ Bank in providing opinions on
the Nugan Hand Group are well illustrated in the correspondence between
the Bank's London and Sydney offices set out in the above paragraphs.
4.6.48 The reported cases touching upon this subject matter would seem
to indi c a t e that the ANZ Bank in p r e p a r i n g such opini o n s was entitled to
consider o n l y the b o o k s and a c c o u n t s w h i c h form e d the B a n k ' s records in
relation to Nugan Hand Ltd and was not required to make inquiries of
o u t s i d e s ources.®^ Non e of t h e files indicate a n y e xpression of
c o ncern on the p a r t of Bank offi c e r s conce r n i n g the c o nduct of N u g a n Hand
Ltd's accounts. Indeed the only comments made indicate satisfaction with 65 the conduct of the accounts.
4.6.49 No doubt banks often find it difficult to decide precisely where
the line should be drawn when faced with the decision as to what
information should be supplied to third parties concerning the financial
standing and reliability of their customers, especially their major
customers. Should they err in the opinion published they might be liable
for damage caused to the customer's business or reputation as a result,
or alternatively liable to third parties who have relied on the opinion
to their detriment. The policy of the Privacy Committee added to the
problem as is evidenced by the contents of the second paragraph of the
Bank's letter set out at paragraph 4.6.42.
4.6.50 Notwithstanding these considerations, for the reasons stated at
paragraph 4.6.16 the Commission finds that the standard opinion prepared
by the ANZ Bank lacked the desired level of accuracy and appropriateness
of content and, in omitting relevant information such as the company's
profit while including details over and above the Bank's direct or
independent knowledge, went outside acceptable limits. The Commission
recommends that the commissioning Governments after consultation with the
Australian Bankers Association and such other appropriate bodies as the
Government might see fit to consult, by the introduction of legislation
or the implementation of policy, provide directions to be followed by
- 799 -
Banks in issuing opinions in respect of their clients' financial standing
a n d w o r t h w h i c h the y hav e reason to suspect w i l l be relied upo n in that
regard b y t h o s e requesting suc h opinions or those to w h o m such opinions
are to be, or a r e lik e l y to be, directed.
ENDNOTES : PART 4-SECTION 6
(See explanatory note at front of report)
1 CD230 folios 14-15; CD2882 folios 112-13; CD2881 folios 104-05; CD5297 folios 76-78; CD8512 folios 3, 7 2 CD2882 folios 197-98
3 CD2887 folio 102
4 CD2881 folio 100
5 Mr Henry Richmond Graham was a consultant to the Nugan Hand
Group from November 1975 to June 1977. He had been an officer of the ANZ Bank and in that capacity he had become acquainted with Mr K.L. Nugan and through him, his brother Mr F.J. Nugan. On retiring from the ANZ Bank Mr Graham became a director of the
Nugan Fruit Group companies and a consultant to the Nugan Hand Group. He resigned as a result of the Nugan Fruit Group
problems in 1977. 6 CD2882 folio 113
7 CD2881 folio 95
8 CD2881 folio 86
9 CD2875 folios 26-28
10 CD2875 folios 26-28
11 CD69 folios 43-44; CD2875 folios 39-43, 99-103; CD2879
folios 135-36, 140-41; CD2887 folios 5-6, 11-13, 38-39, 50-51, 58-59, 65-68, 75-78, 80-81, 85-87 12 CD69 folios 2-3; CD2879 folio 134; CD2887 folios 37-38 13 CD2887 folio 9
14 CD2887 folio 8
15 CD2887 folio 94
16 CD2887 folios 11-13
17 CD2879 folios 110-11 18 CD2875 folio 30
19 CD2887 folios 76-78, 80-81 20 CD10015 folio 129
21 CD11540
22 CD10252 folios 59-60
23 CT22801, Oollings 23a CD11544
24 CD11313 folios 4-6
25 CT22158, Louey
26 CT22694, Pulger-Frame 27 CT22938, McArthur 28 CT22111, Courtney-Smith 29 CD6277 folios 13-15; CD7798 folios 102-03
30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62
63 64
65
- 800 -
CD69 folio 56 CT22801, Collings; CD4322 folio 26; CD8623 folio 47 CD1512 folio 45 CD6277 folios 144-45 CD6277 folios 142-43 CD2879 folio 72 CD6702 folio 59 CD10949 CD6702 folio 57 CD69 folio 31 CD69 folio 35 CD69 folio 38 CD4322 folio 11 CD1290 folio 76 CD10262 folio 129 CD6382 folios 106-07 CD4322 folio 3 CD232 folios 1-2 CD7798 folio 103 CD230 folio 14 CD2881 folio 75 CD2879 folios 92-93, 102 CD2866 folios 127-29; CD2875 folio 44 CD2875 folios 39-43 CD2879 folio 45 CD2882 folio 76 CD2875 folios 49-50 CD2875 folios 45-46 CD2875 folios 47-48 CD4322 folio 54 CD2875 folios 31-32; CD2879 folios 47-50, 64-65, 80 CD2880 folio 9 CD2887 folio 15, 26 March 1980; CD2887 folio 20, 18 January 1980 CD11540 Hedley Byrne & Co. Ltd v Heller & Partners Ltd (1964) A.C. 465; The Mutual Life & Citizens' Assurance Company Limited v Evatt
(1970) 122 CLR 628 at p 635 per Lord Diplock CD2870 folio 42; See CD2882 folios 192-93 for the only note of dissatisfaction arising from an incident in May 1976 which seemed to be the result of a misunderstanding.
- 801 -
SECTION 7 : AN UNUSUAL RELATIONSHIP
4.7.1 The relationship between Nugan Hand Ltd (specifically, in this
case, Mr F.J. Nugan and Mr S.K. Hill) on the one hand and Mr L.
Scott-Kemnis [profile 2.64] acting in his capacity as a senior securities
trader for CitiNational Securities Corporation Ltd (as it then was) and
National Discount Corporation Ltd, two well known merchant banks, was a
most unusual one given the standing of these latter two companies. Many
arrangements were entered into by one or other of these merchant banks,
through the agency of Mr Scott-Kemmis, with Nugan Hand Ltd [profile 2.97]
which had no genuine commercial basis at all. In such instances the sole purpose from Nugan Hand Ltd's point of view was to enable claims to be
made as to turnover and volume of securities trading which were false
[see 5.18 to 5.33] and which when included in the published accounts of
that company gave an appearance of size and worth that was totally
misleading.
4.7.2 Without these artificial arrangements designed to create a false
appearance in respect of the size and worth of Nugan Hand Ltd,
Messrs Nugan and Hand [profiles at 2.1 and 2.2] could not have passed off
the company as a merchant bank. Had they not been able to do so then the
subsequent activities of the Nugan Hand Group could not have occurred.
Three essential factors which enabled this passing off to succeed were:
first, the creation of the false appearance in the accounts substantially
by claims based on these artificial arrangements; second, the
availability of an auditor who was prepared to certify such accounts
[see Part 4 Section 5]; and third, bankers' opinions which were obtained
based upon such audited accounts and which were used to such good effect
by Messrs Nugan and Hand [see Part 4 Section 6]. Without the
availability of each of these fundamental props the myth that Nugan Hand
Ltd carried on the functions of a merchant bank and that it was a strong
and growing organisation could never have been established [see 5.16].
4.7.3 The relationship between Nugan Hand Ltd and Mr Scott-Kemmis
started shortly after Nugan Hand Ltd was incorporated in 1973. At
- 802 -
paragraphs 3.2.10-3.2.15 of the Compendium the Commission has reported
how Mr G.R. Young [profile 2.78] who had previously been in charge of the
money market divisions at CitiNational Securities Corporation Ltd
(hereafter referred to as 'CitiNational') and National Discount
Corporation Ltd worked for a short period in the latter months of 1973
for Nugan Hand Ltd in a vain attempt to establish a money market trading
division. Mr S.K. Hill [profile 2,33] had also been an employee of
CitiNational working in a position junior to Mr Young and he followed the
latter to Nugan Hand Ltd about September 1973. One of Mr Young's
subordinates at CitiNational had been Mr Scott-Kemmis and he filled the
position left vacant when Mr Young left CitiNational in January 1973.^
During the short period in late 1973 when Mr Young was attempting to set
up a money market division of Nugan Hand Ltd (although he was not
supplied with any working capital) he dealt with Mr Scott-Kemmis in the 2
comparatively few transactions that he was able to effect.
4.7.4 When Mr Hill resumed his employment with Nugan Hand Ltd in April
1975, almost immediately he entered into arrangements with
Mr Scott-Kemmis which are described at 5.18-5.33, being merely adverted
to in this section, and he continued to enter into such arrangements with
Mr Scott-Kemmis until 1978 when it appears that Mr Scott-Kemmis'
superiors took action to prevent the further continuation of these
practices.^
4.7.5 As is explained at paragraphs 5.25-5.32, on four occasions in
particular Mr Hill and Mr Scott-Kemmis put into effect a plan which the
Commission has termed an artificial 'buy back straddle'. No money
changed hands (or, on some occasions a comparatively small amount) nor
did any securities change hands. The appearance thereby created was that
substantial amounts of money had been paid by the parties in respect of
the purchase or sale of securities. Portion of the plan was carried out
a day or so prior to the balancing date for the Nugan Hand Ltd accounts
while the remaining steps were effected a day or so after the balancing
date. Each followed the same pattern, was done for the same purpose and
achieved the same result (although the resultant appearance thereby
created varied in terms of amounts). Of these arrangements perhaps the
- 803 -
most important from Mr Nugan's point of view was that effected in
relation to the accounts as at 30 June 1975 [see 3.3.23-3.3.36].
4.7.6 Mr Scott-Kemmis agreed, in his evidence to the Commission, that
the sole purpose of these artificial buy back arrangements was to improve
the appearance of the Nugan Hand Ltd accounts. ^ He agreed that these
arrangements were shams.^
4.7.7 Equally important from Mr Nugan's point of view were a further
series of sham arrangements entered into between Mr Hill and
Mr Scott-Kemmis which, once again, involved neither the movement of money
(or, on some occasions, a comparatively small amount of money) nor the
transfer of securities but which were designed merely to give the
appearance that both had occurred and very substantial amounts were
involved. The desired appearance was created by Mr Hill handing
Mr Scott-Kemmis a cheque drawn on Nugan Hand Ltd in favour of either
CitiNational or National Discount Corporation Ltd and taking from
Mr Scott-Kemmis in return a cheque drawn on either of the companies just
mentioned in favour of Nugan Hand Ltd. In describing these transactions
Mr Hill agreed that in essence 'he [Mr Scott-Kemmis] would hand you
[Mr Hill] a cheque, you would hand him a cheque and they would cross each
other out'. ® These cheques were banked the same day so that one would
offset the other.
4.7.8 Three of these arrangements entered into by Mr Hill and
Mr Scott-Kemmis, after Mr Hill returned to Nugan Hand Ltd in April 1975
and before the end of that financial year (30 June 1975), are illustrated
in the following table. The artificial nature of these arrangements
appears clearly from the detail in the table:
Da te
C i t i N ational
c h e q u e to
Nugan H a n d Ltd
N u g a n H a n d L t d
c h e q u e to
C i t i N a t i o n a l
P r o f i t / L o s s
A m o u n t in N u g a n H a n d
L t d Bank A c c o u n t
w h e n its c h e q u e drawn
15.4.75 5 141 900 5 1 4 2 000 (100) 1 0 0 4 . 0 0
18.4.75 4 880 809 4 880 809 Nil 89 6 . 0 0
24.6.75 26 4 2 6 906 26 4 26 906 Nil 5.99
- 804 -
4.7.9 The accounts published on behalf of Nugan Hand Ltd as at 30 June
1975 claimed turnover in respect of securities trading in excess of
£58 million. That claim was based entirely on sham arrangements entered
into between April 1975 and 30 June 1975. Not one dollar of that claim
for that year was genuine. These arrangements continued until 1978. The
claims of massive turnover frequently made by Mr Nugan drew the attention
of financial writers [see 3.1.9-3.1.10] and no doubt achieved for him the
type of publicity that he had in mind when he instructed Mr Hill to enter
into such arrangements with Mr Scott-Kemmis.
4.7.10 Mr Scott-Kemmis agreed that the only reason for these
arrangements was to increase the 'turnover' of Nugan Hand Ltd. ^
Nothing is more conclusive that the arrangements were entirely a sham, as
may be seen from the table above, than the fact that the first
transaction illustrated resulted in a slight loss to Nugan Hand Ltd while
the remaining two contained no profit or loss to either party. It is
clear, of course, why Mr Nugan and Mr Hill were prepared to enter into
these arrangements. This however, leaves unanswered the question of why
Mr Scott-Kemmis should be prepared to enter into such arrangements
particularly where the profit to his employer was nil. Indeed, some of
these arrangements, for reasons not clear, instead of producing a nil or
near nil result as with the examples in the table, actually caused a loss
(albeit comparatively small) to CitiNational or National Discount
Corporation Ltd. Mr Hill, in his evidence to the Commission, said that
Mr Scott-Kemmis was paid for his services in taking part in these
arrangements by Mr Nugan. He described it as 'money under the counter1
and said that in all a sum of some $10 000 to $15 000 had been paid to
Mr Scott-Kemmis.® When this was put to Mr Scott-Kemmis he denied
i t A p a r t from the fact that such arrangements were entered into by
Mr Scott-Kemmis, there is no evidence to support Mr Hill's allegation.
CO - - 4 < T > C J 1 ^ Ï ton
- 805 -
ENDNOTES : PART 4 - SECTION 7
(See explanatory note at front of report)
CT24837, Young CT24865, Young CD11497, File received from CitiNational Securities Corporation Ltd CT24396-97, Scott-Kemmis CT244407, Scott-Kemmis
CT25744, Hill CT24409, Scott-Kemmis CT24367, Hill 9 CT24413, Scott-Kemmis
<;
PART FIVE
RECONSTRUCTING THE PUBLISHED ACCOUNTS OF NUGAN HAND LTD : 1974-1979
. .
. - ·
- 809 -
RECONSTRUCTING THE PUBLISHED ACCOUNTS OF KOGAN HAND LTD : 1974-1979
5.1 The purpose of this Part of the Commission's report is to
analyse the published audited accounts of Nugan Hand Ltd [profile 2.97]
from 1974 to 1979 inclusive and to compare the picture painted in those
accounts with the situation that is revealed once the lies and deceptions
have been identified and excluded. It was the content of these published
audited accounts of Nugan Hand Ltd which presented the company as an
active growing merchant bank. It was these same accounts that bankers'
opinions concerning the company were based upon [see 4.6.1-4.6.17]. In
short, these accounts enabled Nugan Hand Ltd to gain acceptance and
credibility as a merchant bank which in turn led to the expansion (and,
indeed, made that expansion possible) of the Nugan Hand Group.
5.2 Messrs F.J. Nugan and M.J. Hand [profiles 2.1 and 2.2]
incorporated Nugan Hand Ltd for the stated purpose of carrying on the
business of a merchant bank. Within the first few months Mr Nugan set
about laying the basis, by making false records and creating the
appearance of capital being paid into the company, for the subsequent
production of false company accounts, certified by Mr G.F. Brincat
[profile 2.9] as auditor, which were published year after year.
5.3 In order to reveal the full extent, so far as this is possible,
of the degree to which the published accounts were false, the Commission
took the view that in addition to relying upon the oral and documentary
evidence concerning the accounts, a tool was required to prise open these
false constructions and, having done that, to then reconstruct a set of
accounts free from deceptions and falsehoods. Accordingly, with the
assistance of a computer program specifically adapted for the purpose,
that reconstruction of those accounts was accomplished and the results
are set out in this Part.
- 810 -
Definition of 'Sham'
5.4 Throughout this report and especially in this Part the
Commission has labelled many arrangements entered into by Messrs Nugan
and Hand and also Mr S.K. Hill [profile 2.33] as 'shams'. While this may
be considered in some contexts to be an overworked word, the Commission
is satisfied that no other word better describes the arrangements so
labelled. This report uses the word 'sham' in the sense that it has been
used in a number of reported cases in which the courts defined the term
as a matter of law.1
5.5 In this report the word is used to describe acts or omissions or
documents executed by the parties involved, which were intended by them
to give to third parties the appearance of creating between the parties
legal rights and obligations different from the actual legal rights and
obligations (if any) which the parties intended to create. An essential
element in arrangements which the Commission has described in the report
as shams was that in each and every case the parties who entered into
those arrangements had a common intention that the acts or documents were
not to create the legal rights and obligations which they gave the
appearance of creating. In other words, these parties entered into the
arrangements knowing them to be false with the intention of creating
facades which concealed their real arrangements.
5.6 The shams identified in this Part took several forms but they
had one factor in common: they were all meant to create a false
appearance on which Mr Nugan could then base specious claims as to
turnover, as to the amount of paid up share capital, as to the
acquisition of high profile assets and as to an impressive volume of
deposits held.
5.7 Where used in this Part, the term 'Nugan Hand Group' includes
the following:
. scheduled companies which are those companies contained in the
terms of reference;
- 811 -
⢠associated companies which are those companies considered not to
be at arm's length from Nugan Hand Ltd;
. directors of Nugan Hand Ltd;
. certain sundry debtors namely those persons from whom Nugan Hand
Ltd is allegedly entitled to funds because of a transaction that
does not appear to be genuine or at arm's length; and
. certain sundry creditors namely those persons to whom Nugan Hand
Ltd allegedly owes funds because of a transaction that does not
appear to be genuine or at arm's length.
Method of Reconstruction * 2
5.8 The Nugan Hand Ltd general ledger was reconstructed using
information drawn from the following sources;
. bank statements for the 18 Nugan Hand Ltd bank accounts
. bank deposit slips
. cheques
. cash receipts books
. cash payments books
. general ledgers
. audit/accounting work papers
. deposits accepted cards
. commercial bills control cards.
The general journal was not available as it was apparently one of the
casualties in the destruction of documents which took place shortly after
the death of Mr Nugan [described at Part 3 Section 9). Accordingly, it 2 was reconstructed from the actual Nugan Hand Ltd general ledgers.
From the reconstructed ledgers, financial accounts (that is, balance
sheets and profit and loss statements) were drawn up and compared with
those published by Nugan Hand Ltd for the years 1974 to 1979 inclusive.
The published accounts were those lodged annually with the New South
- 812 -
Wales Corporate Affairs Commission as required by the companies
legislation.
5.9 The reconstruction was impeded by:
Lack of documentation
a. Cash kitty system
Mr G. Shaw [profile 2.65] described a system used by Mr Nugan to
effect certain transactions in cash. The records relating to
this cash system (termed 'cash kitty') were not available to
identify those transactions directly relating to Nugan Hand
Ltd. The reconstruction has traced only such transactions as
passed through the company's 18 bank accounts.
b. Overseas bank accounts
Nugan Hand Ltd maintained four bank accounts overseas. The
Nugan Hand Ltd published accounts did not record transactions
appearing in those bank accounts. The reconstructed records do
not reflect these transactions because of lack of available
documentation.
c. Shares in the Nugan Hand Bank
Nugan Hand Ltd's 'shareholding' in the Nugan Hand Bank (Cayman 4
Islands) was not recorded in the Nugan Hand Ltd books. The
'shareholding' was not included in the reconstructed accounts
due to lack of information about the 'acquisition' of the shares
and due to the fact that the capitalisation of the Bank appears
to have been a sham.
Lack of assistance from company personnel
. The persons most directly involved with the daily activities of
Nugan Hand Ltd and the other Nugan Hand Group companies were
Messrs Nugan and Hill. The absence (through death) of Mr Nugan
hindered the reconstruction of the records.
- 813 -
5.10 The above, together with the facts that some relevant
documentation is missing and current information about transactions is
lacking, meant that inevitably, some subjective judgments had to be made
in the light of available evidence.
Subsidiaries
5.11 Nugan Hand Ltd in fact published consolidated accounts for the
period 1974 to 1979. The 30 June 1974 non-consolidated accounts
indicated ownership of three subsidiaries. However by the 30 June
1975 accounts this number had decreased to one subsidiary,® NHN
Nominees Pty Ltd [profile 2.93]. The activities of the three subsidiary
companies were insignificant; therefore in the reconstruction
consolidated accounts were not prepared.
Reconstruction Results
5.12 Restatement: the aim of the reconstruction is to present in this
Part a set of financial accounts free of deceptive schemes, and to
isolate genuine transactions from false ones. The deceptive schemes are
examined in this Part on an individual basis and their effects on the
published accounts quantified where possible.
5.13 Schedule A [5.159] is a comparison of the published profit and
loss accounts on the one hand and reconstructed profit and loss accounts
on the other, revealing that by 31 January 1979 the published 1 retained
earnings' of $224 662 have been recalculated as losses of $8.8 million.
5.14 Schedule B [5.160] is a comparison of the published balance
sheets on the one hand and the reconstructed balance sheets on the other,
revealing that the company was insolvent from its first year of
operations and at all times thereafter.
5.15 Schedule C [5.161] represents diagrammatically the sources and
applications of Nugan Hand Ltd funds for the period 1974 to 1979
inclusive. The major real source of funds to Nugan Hand Ltd was from
- 814 -
depositors ($12.4 million) of which only 53 per cent was ultimately used
to purchase income producing assets. The remainder of the funds were
applied to absorb trading losses of approximately $3.2 million, to
provide loans to the Nugan Hand Group of approximately $1.8 million, and
for the purchase of non-productive fixed assets, including Mr Nugan's
house at Vaucluse [see 5.130-5.131].
The creation of the 'Merchant Bank' myth
5.16 Mr Nugan presented the image of Nugan Hand Ltd as a merchant
bank engaged in bona fide money market operations and he purported to
offer on behalf of that company a wide range of financial and investment 7
advice, as well as financial services. In reality Nugan Hand Ltd was
nothing more than a deposit taking company offering secured and unsecured
facilities. The role of the 'money market division' as such, was solely
to purchase securities to secure deposits. Indeed, the use of the
expression 'money market division' was itself a deception which
contributed to the creation of the myth. However, the principal
deceptions used to create the image were the published accounts which
included sham money market transactions entered into by Mr Hill and Mr L.
Scott-Kemmis [profile 2.64] [see 4.7.1-4.7.10]. These were designed to
give the appearance of an increase in sales volume and turnover figures
and to distort the published balance sheet by inflating the company's
assets and the amount of deposits held.
5.17 These shams are described in this Part under the sub-headings
'same day trades' and 'buy back transactions'. Further shams are
described under the heading 'internal bills of exchange'.
'Sane day trades'
5.18 As the name suggests these transactions comprised the purchase
and sale of the same securities within a trading day and are part and
parcel of the day to day operations of a merchant bank. However, in the
case of Nugan Hand Ltd its alleged 'same day trades' with CitiNational
Securities Corporation Ltd (hereafter referred to as 'CitiNational') and N
- 815 -
National Discount Corporation Ltd (hereafter referred to as 'National
Discount Corporation') depended upon nothing more than arrangements
entered into by Mr Hill and Mr Scott-Kemmis which merely gave the
appearance that such transactions had occurred. The sole purpose was to
provide an apparent basis on which to claim sales volume and turnover
achievements. Turnover in the context of a merchant bank is normally
defined as the value of all money market securities sold during a
specified period, however Mr Nugan distorted this definition by
incorrectly including, inter alia, all bank account movements.8
5.19 The effects of the sham 'same day trades' on the Nugan Hand Ltd
published 'securities trading revenue' are detailed in Table 1.
5.20 Table 1
P E R I O D
E N D E D
R E V E N U E Z ( C O S T )
- S A M E D A Y TR A D E S
3 0 . 6 . 7 4 -
3 0 . 6 . 7 5 1 260
3 1 . 1 . 7 6 1 358
3 1 . 1 . 7 7 (14 100)
3 1 . 1 . 7 8 900
3 1 . 1 . 7 9
TO T A L $ (10 582)
5.21 As the table shows the cost to Nugan Hand Ltd of engaging in
sham 'same day trades' for the years 1975 to 1978 was $10 582. Usually
the result of these arrangements was nil cost to either Nugan Hand Ltd or
CitiNational which indicates the non-commercial nature of such
arrangements. However, on some occasions the cheques which were
exchanged under the arrangement differed, usually only in a small amount,
causing Nugan Hand Ltd to be out of pocket in the amount indicated in
Table 1. The total sales value claimed as a result of these sham 'same
day trades' for the period 1975 to 1978 was $203 195 458. The prime
example of the absurdity of these claims is to be found in the
- 816 -
arrangement relating to 29 June 1976 which resulted in a claim of an
increase in turnover in excess of $100 million. The following will
illustrate the artificial nature of this arrangement.
5.22 Table 2
DATE
C I T I N A T I O N A L
C H E Q U E TO
N U G A N H A N D LTD
N U G A N H A N D LTD
C H E Q U E TO
C I T I N A T I O N A L
P R O F I T / L O S S
B A L A N C E IN NHL BANK
A C C O U N T P R I O R T O
E X C H A N G E OF C H E Q U E S
1 1 * 1
2 9 . 6 . 7 6 100 0 1 0 000 100 0 1 0 000 N M 179 433
This resulted in a nil cost to both parties but accounted for 50 per cent
of Nugan Hand Ltd's published turnover claim for the year ended
31 January 1977.
5.23 All sham 'same day trades' were undertaken with CitiNational and
National Discount Corporation, the actors being Mr Hill and
Mr Scott-Kemmis, commencing from April 1975 when Mr Hill returned to
employment with Nugan Hand Ltd [see 3.3.36, 4.7.7-4.7.8],9 These
transactions continued until 1978 when it appears that CitiNational
refused to engage in any more transactions of this type.^9
5.24 In the reconstruction, these sham 'same day trades' were
eliminated from the turnover figure. The cost factor of $10 582 in
Table 1 was recorded separately in the profit and loss account.
'Buy hack' arrangements
5.25 As with the sham 'same day trades' Mr Hill and Mr Scott-Kemmis
entered into arrangements which merely gave the appearance of a
commercial 'buy back' transaction. Where these sham arrangements
straddled the date on which the Nugan Hand Ltd accounts balanced their
true purpose was obviously to create the false appearance of assets
- 817 -
acquired and deposits held as at the balancing date. Upon the creation
of this appearance were founded gross distortion of the accounts.
5.26 The effects of the 'buy back' transactions on Nugan Hand Ltd
piblished securities trading revenue are illustrated in Table 3.
5.27 Table 3
P E R I O D
E N D E D
R E V E N U E / f C O S T )
ON BUY BACK
30.6.75 12 930
31.1.76 -
31.1.77 (7 4 20)
T O T A L $ 5 510
5.28 Thus, the net revenue gained by Nugan Hand Ltd as a result of
engaging in these sham 'buy back' transactions was 85 510. It follows,
of course, that the cost to CitiNational and/or National Discount
Corporation was in the same amount. This raised the question as to why
either of these two merchant banks should have agreed to be a party to
such an arrangement.
5.29 The 'buy back' arrangement which straddled the 31 January 1976
balance date provides an example of how artificial these arrangements
were. The bare mechanics were as follows. On 29 January 1976
Mr Scott-Kemmis provided Mr Hill with a National Discount Corporation
cheque to Nugan Hand Ltd in the sum of $14 627 844. At the same time
Mr Hill provided Mr Scott-Kemmis with a Nugan Hand Ltd cheque in exactly
the same amount. The cheques were banked the same day. The relevant
Nugan Hand Ltd bank statement records a debit and a credit in the same
amount. The balance in the account was not altered and there was no
movement of money although such an appearance was created in the bank
statement by the debit and credit entries. On 9 February 1976 the same
cheque passing exercise took place except that each cheque on this
- 818 -
occasion was for $14 660 466. Again the cheques were banked the same
day. Again there was no movement of money. There was no profit or loss
to either party which shows the non-commercial nature of the
arrangement. Based upon this mere exchange of cheques, straddling the
balancing date of 31 January 1976, entries were made in the records of
Nugan Hand Ltd purporting to record a bill purchase from National
Discount Corporation on 29 January 1976 and the sale of the same
securities to National Discount Corporation on 9 February 1976. On the
same basis, the published accounts as at 31 January 1976 included among
the assets of the company securities in the sum of $14 627 844 which
increased the published total asset figure by 64 per cent. The same
amount was included in the balance sheet entry 'money market borrowings'
which, of course, increased the deposit base significantly. On this same
basis, in the year ended 31 January 1977 the amount of $14 660 466 was
included in turnover.
5.30 The complete artificiality of the arrangement is again
demonstrated by the nil cost result as illustrated by Table 4.
5.31 Table 4
Interest r e c e i v e d by
N u g a n H a n d L t d f r o m sale
o f s e c u r i t i e s to National
D i s c o u n t C o r p o r a t i o n 32 622
Less
Interest p a i d by N u g a n H a n d Ltd
to National D i s c o u n t C o r p o r a t i o n 32 622
Nil
5.32 In the reconstruction of the accounts these shams were
eliminated.
5.33 A further two money market trades were considered to be only
sham transactions designed to boost turnover. These were organised by
- 819 -
Mr Hill in conjunction with National Discount Corporation in May 1975 and
resulted in revenue to Nugan Hand Ltd and a cost to National Discount
Corporation of $13 Oil. In 1978 the 'buy back1 trades ceased apparently
because of the reluctance of CitiNational to engage in these schemes.^^
Internal bills of exchange
5.34 As has been explained elsewhere [3.3.46-3.3.48] the purported
drawing of such bills [see for example Appendix E] was one of the major
deceptions perpetrated. The bills were worthless because the companies
that were parties to them were unfinancial. They were included in the
balance sheets as genuine bills. Table 5 sets out a comparison between
actual income earned by Nugan Hand Ltd from the purchase and sale of
securities (and includes the cost/revenue factor resulting from the 'same
day trades' and 'buy backs') and the income claimed in the published
accounts. The total actual income of $2 051 392 amounts to only
51 per cent of the published income of $4 025 815. The difference mainly
comprises the 'revenue' claimed to have arisen from internal bills which
accounted for 46 per cent of the total of income claimed in the published
accounts. The actual income amount in column two of the table
($2 056 464) represents the revenue from the sale of those securities
used to secure deposits.
5.35 Table 5
R E C O N S T R U C T E D INC0NE PLUS
P U B L I S H E D
INCOME ENDED S E C U R I T I E S B U Y BACKS T R A D I N G
SAME DAY
T R A D E S
TOTAL INTERNAL INTEREST
B I L L S AD J U S T M E N T
30.6.74 (18 373) - - (18 373) - (18 372)
30.6.75 12 930 1 260 14 190 - 28 582 4 2 7 7 2
31.1.76 54 720 - 1 358 56 078 109 871 33 251 199 200
31.1.77 519 810 (7 420) (14 100) 498 290 468 957 39 239 1 006 486
31.1.78 755 365 - 900 756 265 6 2 3 296 10 110 1 389 671
31.1.79 744 942 - - 744 942 661 116 1 406 058
TOTAL 2 0 56 464 5 510 (10 582) 2 051 392 1 8 6 3 240 111 182 4 025 815
% 5 5 4< 100
- 820 -
5.36 In the Nugan Hand Ltd balance sheets the securities purchased by
Nugan Hand Ltd and lodged with secured depositors were classified as
'commercial bills discounted', 'government treasury notes', 'negotiable
certificates of deposit' and 'government bonds'. For comparative
purposes these classifications have been grouped under the general title
'money market securities'. However in the books of Nugan Hand Ltd these
classifications also included the sham 'buy back straddles' and the
amounts representing the alleged current 'value' of the worthless
internal bills which included notional interest accruing thereon.
5.37 Table 6, by eliminating inter alia these false claims, reveals
the actual value of securities on hand at each balancing date from 1974
to 1979 inclusive. The percentage column gives the percentage the actual
value bears to the published value.
5.38 Table 6
PER I O D
PUBLI S H E D
M O N E Y M A R K E T
S E C U R I T I E S
L E S S
R E C O N S T R U C T I O N %
ENDED INTERNAL
BILLS
B U Y BACKS
A C C R U E D
INTEREST
30. 6 . 7 4 - - - - - -
30. 6 . 7 5 9 8 5 8 455 - S 8 5 8 455 - - -
31.1.76 21 007 002 1 8 1 2 450 14 627 845 49 395 4 517 312 22
31. 1 . 7 7 20 301 416 5 8 1 2 0 0 6 6 9 3 0 300 47 468 7 511 642 37
31.1.78 13 054 411 5 8 4 4 169 - 42 911 7 167 331 55
31. 1 . 7 9 12 444 364 5 9 6 0 712 - 89 511 6 394 141 51
5.39 Table 7 compares the turnover claims in the published accounts
with the amount of turnover appearing from Nugan Hand Ltd records. The
actual turnover figures obtained from reconstruction of the accounts show
the falsity of the published claims. The initials PT refer to published
turnover.
- 821 -
5.40 Table 7
__________________________KiUGAN H A S P LTD____________________ RE.C0NSTRUCTI0N R E D U C T I O N S ____________ R E C O N S T R U C T I O N
P E R I O D
E N D E D
T U R N O V E R
P E R
P U B L I S H E D
A C C O U N T S
T U R N O V E R
PER
R E C O R D S
INTERNAL
BILLS
S A M E DAY
T R A D E S
BUY B A C K S T U R N O V E R
3 0 . 6 . 7 4 PT N O T P U B L I S H E D 2 436 771 - - - 2 436 771
3 0 . 6 . 7 5 PT 188 3 4 2 567 58 159 8 9 9 - 37 8 8 5 189 20 2 7 4 710 NIL
3 1 . 1 . 7 6 PT 136 606 065 2 6 180 521 1 5 0 0 0 0 0 1 916 815 21 183 750 1 579 956
31. 1 . 7 7 PT 2 0 0 0 0 0 000 2 2 5 125 250 6 549 197 152 181 124 21 633 367 44 761 562
3 1 . 1 . 7 8 PT N O T P U B L I S H E D 78 570 500 16 693 3 8 0 11 2 1 2 3 3 0 6 941 572 43 723 218
31.1 . 7 9 PT N O T P U B L I S H E D 53 268 111 10 616 907 - - 42 651 204
TOTAL 4 4 3 741 052 35 359 4 8 4 2 0 3 1 9 5 4 5 8 70 0 3 3 399 135 152 711
100% 8% 46% 16% 30%
5.41 The total 'turnover' for the period 1974 to 1979 extracted from
the Nugan Hand Ltd records was $443 741 052. This figure was obtained
using the standard turnover definition [see 5.18]. As Table 7 indicates,
the reconstructed turnover was 30 per cent of the Nugan Hand Ltd figures.
5.42 The Nugan Hand Ltd 'turnover' was boosted by internal bills
(8 per cent), 'same day trades' (46 per cent) and 'buy backs' (16 per
cent).
5.43 By interposing one or more of the Nugan Hand Group companies
between himself and Nugan Hand Ltd, Mr Nugan took money from Nugan Hand
Ltd to use for his own purposes.
5.44 To disguise this movement entries were made in the company
records purporting to record the drawing and acceptance of bills of
exchange by other Nugan Hand Group companies and the purchase of those
- 822 -
bills by Nugan Hand Ltd. To explain the recording and operation of the
internal bills scheme an example is detailed below using information
obtained from the Nugan Hand Ltd records.
5.45 In the example set out in Table 8 a Nugan Hand Ltd 'client
12
ledger card', dated 29 January 1976, showed that Nugan Hand
International Holdings Pty Ltd ('NHIH') [profile 2.96] had received
$430 140 from Nugan Hand Ltd. To hide this fact the card was rewritten
to include the sham 'purchase' and 'sale' of internal bills.13
5.46 Table 8
R e c o n c i l i a t i o n
$
430 140.00 B a l a n c e p e r original card
Less
Internal bills 'purchased' f r o m N H I H (847 741.80)
(417 601. 8 0 )
Plus
Internal bills 'sold' to N H I H 300 0 0 0 . 0 0
(117 601.80)
Less
P a y m e n t c h a r g e d t o N H I H on 3 0 . 1 . 7 6 2 0 0 0 . 0 0
B a l a n c e per r e w r i t t e n c a r d ($115 601.80)
5.47 As Table 8 indicates, the bogus bill purchases and sales
converted the original card balance of $430 140, which was an asset of
Nugan Hand Ltd, to a liability of $115 601.80.
5.48 The sham 'bill movements' are detailed in l&ble 9. Of five of
these bills 'purchased' by Nugan Hand Ltd from Nugan Hand International
Holdings Pty Ltd ('NHIH'), two were 'sold' resulting in 'revenue' of
- 823 -
$17 419.40. The other three bills were included in the 1 commercial bills
discounted1 figure in the published accounts.
5.49 Table 9
S H A M 'BILL M O V E M E N T S ' A C C O R D I N G T O N U G A N H A N D LTD R E C O R D S
DATE 'PURCHASE' 'SALE' 'REVENUE'
f r o m NHIH to NHIH
t * i
1. 7.75 1 8 8 38 7 . 0 7
25. 7.75 94 193.53
2 0 . 1 1 . 7 5 282 580.60
2 6 . 1 2 . 7 5 200 00 0 . 0 0 11 61 2 . 9 3
2 6 . 1 2 . 7 5 188 38 7 . 0 7
21. 1.76 100 0 0 0 . 0 0 5 80 6 . 4 7
21. 1.76 94 19 3 . 5 3
$847 7 4 1 . 8 0 $300 00 0 . 0 0 $17 41 9 . 4 0
5.50 The sham effects of this scheme from this example were as
follows:
a. The 'securities trading income1 claimed by Nugan Hand Ltd was
inflated by $17 419.40. The interest rates charged on these
bills averaged 12.5 per cent which was significantly higher than
the ruling market rate.
b. The money taken from Nugan Hand Ltd of $430 140 was disguised in
'commercial bills discounted'. In reality this money should
have been treated as a bad debt because Nugan Hand Ltd could not
recover the funds from Nugan Hand International Holdings Pty
Ltd, as that company's major source of funds was Nugan Hand Ltd.
c. Not only did Mr Nugan disguise the money taken from Nugan Hand
Ltd he also increased the value of the 'asset' by 31 per cent to
- 824 -
$565 161.20. This figure was obtained by adding the bill
'purchases' on 20 November 1975, 26 December 1975 and 21 January
1976.
d. The 'money market borrowings' figure was inflated by the amount
of $118 597.97 being the 'deposit' from Nugan Hand International
Holdings Pty Ltd of $115 601.69 plus 'accrued interest' of
$2 996.28.
e. 'Security' was created that could be lodged in the Wing On Bank
safe custody account [see 3.3.39-3.3.41, 4.1.27-4.1.55]. This
meant that Nugan Hand Ltd could release 'external' securities to
secure deposits.
f. 'Turnover1 was boosted by $300 000 being the 'sales' of the
bills.
5.51 During the financial year ending 31 January 1976 internal bills
were introduced to the Nugan Hand Ltd published accounts. There were two
reasons for the introduction of internal bills during this financial
year: first, the Wing On Bank safe custody arrangement [see
3.3.39-3.3.41, 4.1.27-4.1.55] was finalised in July 197514 permitting
Nugan Hand Ltd to lodge 'internal paper' in the account; secondly, there
was a need to disguise approximately $800 000 taken from Nugan Hand Ltd
by 31 January 1976.
5.52 Initially all bill 'movements' were recorded on the Commercial
Bills Control Card"*^ but from January 1976 Mr Brincat maintained
separate sets of cards to record internal bill 'movements' and external
bill movements.
5.53 In the reconstruction, the internal bills were eliminated. The
movement of funds from Nugan Hand Ltd to these companies was treated
simply as moneys owing to Nugan Hand Ltd. In the light of the evidence
that these companies were insolvent and could not repay the moneys owing,
a provision for bad or doubtful debts was created in the reconstruction
to cover all movement of money to the Nugan Hand Group.
- 825 -
5.54 The primary benefit to Mr Nugan of the internal bills scheme was
the concealment of the movement of $5.2 million from Nugan Hand Ltd to
the Nugan Hand Group over the period 1974 to 1979 [see 3.3.47],
5.55 The secondary benefits were as follows:
a. the artificial inflation of 'Securities Trading Income' by
46 per cent during the period 1976 to 1979 as a result of
treating the internal bills as valuable bills of exchange;
b. the inflation of assets shown in the balance sheet by the
inclusion of the internal bills as valuable bills of exchange.
Table 10 shows the percentage of bills of exchange shown in the
balance sheet represented by internal bills. The 1979
percentage would have been considerably higher but for the
events of 24 May 1978 [see 5.56].
Table 10
PERIOD
ENDED
P U B L I S H E D
C O M M E R C I A L BILLS
I N T E R N A L BILL
C O M P O N E N T t
31.1.76 7 353 676 1 81 2 450 25
31.1.77 1 3 396 353 5 8 1 2 006 4 3
31.1.78 10 7 38 351 5 844 169 54
31.1.79 9 1 8 5 205 5 9 6 0 712 65
c. by treating the internal bills as genuine in company records the
effect was to create the appearance of an increase in turnover.
The Events of 24 fey 1978
5.56 By 31 January 1978 internal bills of exchange comprised 54 per
cent of the published 'commercial bills discounted' figure [Table 10].
On or about 24 May 1978 Mr Nugan devised a plan which when put into
- 826 -
effect would cause an apparent reduction in the current 'value1 of the
internal bills of $3.2 million. (No doubt the timing was influenced by
the nearness of 30 June. The company continued to produce audited
accounts as at 30 June each year although the statutory accounts were
balanced as at 31 January each year from 1976 onwards.) On instructions
from Mr Nugan, Mr Brincat by a series of journal entries in the Nugan
Hand Ltd records, removed nine internal bills of exchange drawn on
Yorkville Nominees Pty Ltd [profile 2.108] (hereafter referred to as
'Yorkville Nominees') and substituted the following:
. SIRE Group bills of exchange with a face value of $1 million
[see 5.59],
. Negotiable certificates of deposits purchased v/ith funds from
Nugan Hand (Hong Kong) Ltd [profile 2.94; see 5.63].
5.57 In removing the bills and achieving the reduction of
$3.2 million certain other adjustments were made to various accounts
within the Nugan Hand Ltd records. These adjustments were 'book entries'
designed to help achieve the effects set out in paragraph 5.56. They
have been ignored in the reconstruction.
5.58 Notwithstanding the apparent reduction carried out as at 24 May
1978, by 31 January 1979 internal bills comprised 65 per cent of the
published 'commercial bills discounted' figure. Without the 'Events of
24 May 1978' this percentage would have been much higher.
The SIRE Bills
5.59 These bills of exchange were treated in the records of Nugan
Hand Ltd as internal bills. No attempt was made to negotiate them. For
most of the time they were lodged in the Wing On Bank safe custody
account [see 3.3.39-3.3.41, 4.1.27-4.1.55], When finally presented for
payment by the Wing On Bank they were dishonoured. Litigation by the
Wing On Bank resulted in a complicated settlement. These bills, as such,
may also be regarded as of no value. They arose from a finance facility
- 827 -
agreement between Yorkville Nominees and Secured Income Real Estate
(Australia) Ltd ('SIRE') [profile 2.118] bearing the date 15 January
1976.16a Oi 25 May 1976 Mr J.C. Needham [profile 2.51], the Chairman
of SIRE, sent to Mr Nugan SIRE Group bills with a face value of
$1 million. Mr Nugan made use of these bills in two ways; first as
security lodged in the Wing On Bank safe custody account, and secondly as
part of the plan relating to the events of 24 May 1978.
5.60 The effect of the entries in Nugan Hand Ltd records relating to
24 May 1978 was to treat the SIRE Group bills as having a current value
of $935 562 and as having become the property of Nugan Hand Ltd [see
5.56].
5.61 In the reconstruction the SIRE Group bills have been eliminated
from the accounts for the following reasons:
. The payment of money to the SIRE Group directly traceable from
Nugan Hand Ltd has been recorded as a loan from Nugan Hand Ltd
to SIRE. As with the internal bills of exchange, the
reconstructed accounts have gone behind the facade to establish
the true movement of funds.
. An examination of the available records of Yorkville Nominees
and Mr Nugan showed that there was not a movement of funds to
the SIRE Group sufficient to warrant security of $1 million.18
. On 5 November 1979 when these bills 'matured' Mr Nugan 'removed'
them from the Nugan Hand Ltd records, again by way of a journal
entry.
. There is no evidence of the bills being traded or used as
security other than in the Wing On Bank safe custody account.
5.62 Although the SIRE Group bills were 'removed' from the Nugan Hand
Ltd records on 5 November 1979, SIRE Group bills with a face value of
$600 000 remained in the Wing On Bank safe custody account until
- 828 -
presented for payment at which stage they were dishonoured. These bills
have been the subject of litigation between the Wing On Bank and the SIRE
Group.
Nugan Hand (Hong Kong) Ltd Negotiable Certificates of Deposit
5.63 The misappropriation by Mr Nugan of negotiable certificates of
deposit (hereafter referred to as 'NCDs') having a value of $1.3 million
owned by Nugan Hand (Hong Kong) Ltd is dealt with in detail at paragraphs
4.1.60 to 4.1.67. The subject is briefly alluded to here to record the
effects of that misuse in so far as those effects are significant to
Nugan Hand Ltd. They are as follows:
. the provision of $1.3 million by 31 January 1979 to Nugan Hand
Ltd for use in its activities;
. the 'removal1 of internal bills of exchange drawn on Yorkville
Nominees by the 'Events of 24 May 1978' [see 5.56];
. the 'increase' of paid up capital by the second capital
injection [see 5.98-5.102]; and
. the provision of security for use in the Wing On Bank safe
custody account, the ANZ Bank daylight overdraft facility and to
secure deposits accepted.
5.64 The Nugan Hand Ltd published accounts treated the receipt of the
$1.3 million as an increase in capital ($737 437) and as reducing the
internal (Yorkville Nominees) bills purporting to be held by Nugan Hand
Ltd by the same amount ($589 534).
5.65 The reconstructed accounts recognise Nugan Hand (Hong Kong) Ltd
as the beneficial owner of the NCDs by the raising of a loan account
between Nugan Hand Ltd and Nugan Hand (Hong Kong) Ltd to cover the
$1.3 million taken into Nugan Hand Ltd by Mr Nugan. The interest earned
on these NCDs from date of entry to Nugan Hand Ltd records has been
included as genuine securities trading revenue.
- 829 -
Use of the Short Term Money Market
5.66 From 1975 to 1978 Nugan Hand Ltd funds were placed on deposit
with various merchant banks for short periods to earn interest. In the
published accounts the amount of money on deposit at financial year end
was described as 1 Short Term Loans and Deposits'.
5.67 Table 11 compares the published and reconstructed 'Short Term
Loans and Deposits' figures. The percentage column indicates that
percentage of the Nugan Hand Ltd published figure considered to be a
genuine placement of funds.
5.68 Table 11
P E R I O D
E N D E D
N U G A N HAND L T D
P U B L I S H E D
ί
L O A N S T O
N U G A N H A N D GROUP
$
A C C R U E D
INTER E S T
*
R E C O N S T R U C T E D
$
%
.6.74 1 3 1 9 405 (1 3 1 9 405) - - -
0.6.75 910 514 (621 514) - 2 8 9 000 32
.1.76 1 156 764 (140 477) - 1 0 1 6 287 88
01.1.77 1 4 8 5 000 - 7446 1 492 446 100
3 1 . 1 . 7 8 1 5 2 3 725 100 0 0 0 9200 1 6 3 2 925 107
31. 1 . 7 9 263 725 - - 263 725 100
5.69 In the first two years after incorporation of Nugan Hand Ltd
there were little or no funds available for deposit on the short term
money market, so Mr Nugan, in pursuit of his merchant bank image,
resorted to the deceptive practice of including loans to the Nugan Hand
Group in the accounts classification 'Short Term Loans and Deposits'.
This accounted for the entire amount described in the 1974 published
accounts as 'Money Market Lendings'. The only funds on deposit by
31 January 1979 ($263 725) were those lodged with the Reserve Bank of
Australia in a non-interest bearing deposit.
- 630 -
5.70 The published accounts include interest allegedly receivable
from Nugan Hand companies in respect of Nugan Hand funds which had passed
through such companies. Table 12 compares the reconstructed interest
received figure with that published.
5.71 Table 12
PERIOD E N D E D
N U G A N H A N D LTD
P U B L I S H E D
LESS
NUGAN H A N D GROUP
INTEREST
C O M P O N E N T
P L U S
M I S C E L L A N E O U S
A D J U S T M E N T R E C O N S T R U C T E D
%
30.6.74 5 7 283 54 538 2 745 5
30.6.75 74 040 4 8 0 5 4 25 986 35
31.1.76 5 3 9 4 3 1 3 114 40 8 2 9 76
31.1.77 15 3 396 6 658 16 146 754 96
31.1.78 132 738 440 132 298 100
31.1.79 78 992 208 79 200 100
5.72 The percentage column indicates that percentage of the published
'interest received' amount considered to be genuine.
Use of Round Robins as a deceptive scheme
5.73 The term 'round robin' is commonly used to describe an exchange
of cash between two or more parties occurring almost contemporaneously
and resulting in the cash being returned to the original payer. The
usual aim of such an exercise is to create an appearance on paper
(especially in the relevant bank statements) of moneys having been paid
as though on a commercial basis. Entries are then made in records
consistent with the appearance so created.
5.74 Many round robins were organised by Mr Nugan but in all cases
they were entirely artificial as there were insufficient funds in the
relevant company bank account to cover the cheques drawn (usually the
shortfall was enormous) fsee 3.2.19, 3.2.26, 3.3.27-3.3.29]. The result
- 831 -
was that there was no movement or exchange of money, merely a cheque
passing exercise, the cheques being worthless.
5.75 Mr Nugan used the round robin technique to create certain
appearances in the published accounts. In the reconstruction the parties
to the round robins were identified and the effects eliminated from the
accounts.
Sham Capitalisation of Nugan Hand Ltd
5.76 Table 13 details the alleged shareholding of Nugan Hand Ltd
extracted from documents lodged with the New South Wales Corporate
Affairs Commission.'*'®9
5.77 Table 13
DATE F.J. N U G A N M . J . H A N D J . N E E D H A M B . C A L D E R P . S W A N C . L . N U G A N
S u b s c r i p t i o n
shares 1 1 1 1 1
9 . 7 . 7 3 20 000
1 7 . 8 . 7 3 490 0 0 0 4 9 0 000
25.11.74 (1) 1
10.10.77 4 8 9 997 509 9 9 8
999 998 999 9 9 9 - 1 1 1
On 23 July 1973 five dollars cash was deposited to Nugan
and treated as paid up capital. This money paid for
5.78
Ltd
subscription shares issued according to the details in Table 13.
the
5.79 On 24 July 1973 Mr Nugan 'paid' $20 000 to Nugan Hand Ltd as
capital.20 Nugan Hand Ltd 'repaid' $10 000 to Mr Nugan as a loan on
the same day.21 The source of the balance of the $20 000 is unknown.
- 832 -
A further $9 900 was returned by Nugan Hand Ltd to Mr Nugan on 27 July
1973 leaving $100 cash in the Nugan Hand Ltd bank account from
Mr Nugan.22
5.80 In the reconstruction this transaction was viewed as a scheme to
create the impression that Mr Nugan had 'paid' $20 000 for shares in
Nugan Hand Ltd when in reality only $100 remained in the bank accounts.
5.81 On 17 August 1973 Mr Nugan and Nugan Hand Ltd exchanged cheques
in the sum of $980 000 creating the impression in the Nugan Hand Ltd
records that the $980 000 was received as a capital subscription and that 2 3
the same amount was lent back to Mr Nugan by Nugan Hand Ltd.
5.82 Having thus created the appearance of a loan to Mr Nugan the
next step was to interpose one of the other companies as the 1 debtor1 and
thereby remove the appearance of the loan being to a director (Mr Nugan)
which would have required disclosure in the accounts. Accordingly, on
24 June 1974, P.M. Shelley Pty Ltd [profile 2.100], Mr Nugan and Nugan
Hand Ltd exchanged cheques in the sum of $1 002 000. (The cheque drawn
on the account of Mr Nugan was in the sum of $1 002 012.) There were
virtually no funds in the relevant bank accounts to support these cheques.
5.83 In the records of Nugan Hand Ltd the effect given to this cheque
exchange was to substitute P.M. Shelley Pty Ltd for Mr Nugan as the
debtor for the original loan of $980 000. This overcame the disclosure
problems in the accounts caused by the statutory requirement for separate
disclosure by a company of loans made to a director. In the 30 June 1974
published accounts this 1 debt1 was falsely stated as being secured by
mortgages over real estate.24 In later accounts this debt was
disguised by the use of internal bills.
5.84 On 30 June 1975 P.M. Shelley Pty Ltd 'paid' Nugan Hand Ltd
$700 000 to reduce this debt. The P.M. Shelley Ltd bank statement
indicated that the account was in debit in the amount of
$699 724.45.2^ The Nugan Hand Ltd published 30 June 1975 accounts
reflected the substitution of the P.M. Shelley Pty Ltd debt with
- 833 -
cash1. On 1 July 1975 the bank statement debit was ' repaid1 with a 27
cheque drawn on Yorkville Nominees. Nugan Hand Ltd purported to put
the Yorkville Nominees account in funds by a cheque presented on 1 July
1975 in the sum of $700 000.28
5.85 After the 'payment' by Nugan Hand Ltd to Yorkville Nominees of
$700 000 the indebtedness between these two companies was $841 582.2^
To reduce this balance the first internal bill drawn on Yorkville
Nominees in the sum of $941 935.34 was entered into the Nugan Hand Ltd
records.
5.86 In the reconstruction these round robins were considered to be
shams designed by Mr Nugan to create the appearance of capitalising Nugan
Hand Ltd. The cheque crossing exercises were eliminated from the
reconstruction leaving $105 paid up 'capital' in the company. Although
the $100 was sourced to Mr Nugan' s account, in this instance only it was
not treated as a loan account movement.
5.87 On 25 November 1974 Mr Needham's share was transferred to
Mrs C.L. Nugan to be held in trust for Mr Nugan. The share transfer bore 30 the date 28 June 1974. Mr Needham resigned as a director of Nugan
Hand Ltd on 28 June 1974.88
5.88 Using Nugan Hand Group funds Mr Nugan devised a further sham
arrangement in 1977 to create the appearance of the capital being
increased to $2 million. This was done in two stages involving two
amounts, first $257 700 injected in August and secondly $742 500 injected
in October 1977.
32
5.89 According to the Nugan Hand Ltd cash receipts book on
31 August 1977 Messrs Nugan and Hand contributed $128 850 and $128 650
respectively to Nugan Hand Ltd as capital. By a further entry dated
9 September 1977,88 Mr Hand's contribution was increased by $200 to
$128 850.
- 834 -
5.90 In the case of Mr Hand's contribution the $128 850 represents
funds advanced to him from Yorkville Nominees. Of Mr Nugan' s
contribution $128 650 can also be attributed to funds from Yorkville
Nominees. The balance of $200 represents funds taken from Mr Nugan1s
account.^
5.91 The amount of $257 500, being the $128 650 plus $128 850, was
drawn from a variety of funds in the Yorkville Nominees account, as
follows:37
Source of funds $
Balance in account 4 113
Funds ex Capel Court [see 5.92] 250 000 Funds ex Nugan Hand Ltd 10 000
Funds ex cash 7 800
271 913
Less cheques drawn to Nugan and Hand 257 500
$ 14 413
5.92 The funds ex Capel Court represent a mixture of the
c â . 38
following:
Source of funds $
Funds ex Nugan Hand Bank 207 911
[see 2.93] Funds ex local external source 49 290
257 201
Less cheques to Capel Court 250 000
$ 7 201
5.93 The funds ex Nugan Hand Bank of $207 911 are payments made from
the Nugan Hand Bank United States dollar account in Hong Kong. From a
mixture of funds in this account two amounts were remitted to Sydney as
follows:
- 835 -
Date Amount
US$ A$
12.8.77 90 000 81 477.46
24.8.77 140 000 126 433.66
$ 230 000 $ 207 911.12
5.94 These amounts were remitted from the Nugan Hand Bank allegedly
on behalf of Baia Do Oriente Limitada. This company has been identified
as a Nugan Hand Group company incorporated in Macau.39 On the copy of
a letter of instruction dated 24 August 1977 to the Wing On Bank,
Mr Hand, a director of the Nugan Hand Bank, issued an instruction to
remit funds (US$50 000 in this instance) from the Nugan Hand Bank United
States dollar account on behalf of Baia Do Oriente Limitada but 'without
mentioning our name'.40 The remittance of $81 477.46 was initially
banked into Nugan Hand Ltd and later transferred to Yorkville Nominees.
5.95 On 3 March and 16 March 1978 Nugan Hand Ltd paid $125 000 and
$90 000 respectively to Yorkville Nominees. Using these funds Yorkville
Nominees remitted $209 485.13 to the Nugan Hand Bank. Ihe US$237 826.31
(A$209 485.13) was placed on deposit allegedly on behalf of Baia do
Oriente Limitada.43
5.96 The effect of these movements of funds was the receipt by Nugan
Hand Ltd of $257 700 from a variety of sources. Six months after this
deposit $209 485 of Nugan Hand Ltd funds were used to repay the Nugan
Hand Bank leaving a net movement of funds to Nugan Hand Ltd of $48 215.
5.97 In the reconstruction all movements of funds between the Nugan
Hand Group and Nugan Hand Ltd were recorded on inter-company loan
accounts. The funds were not considered to represent a capital injection
from Messrs Nugan and Hand.
5.98 The second stage of this so called second capitalisation
involved the deposit of $742 500 to Nugan Hand Ltd on 10 October 1977.
This amount represented $361 350 and $381 150 advanced by Messrs Nugan
- 836 -
42
and Hand respectively. Of the total deposit Nugan Hand Ltd treated
$742 295 as a capital injection and the balance as a loan.
5.99 The source of these funds
of the following
Source of funds
Sale of HK NCD's Cash Balance in account
Less other payments
Less cheques to NHL
was Mr Nugan who drew from a mixture
$
737 437.31 13 000.00 832.28
751 269.59 1 096.20
750 173.39 742 500.00
$ 7 673.39
5.100 The effect of this transaction was to provide $742 500 to Nugan
Hand Ltd for use in its operations. The source of the funds was Nugan
Hand (Hong Kong) Ltd and Mr Nugan.
5.101 The amount of $737 437.31 represents the proceeds of the sale of
NCDs purchased using Nugan Hand (Hong Kong) Ltd funds. This matter is
referred to in paragraph 5.63 of this Part. Less than a month later
Nugan Hand Ltd repurchased these NCDs from CitiNational and treated them
as the property of Nugan Hand L t d . ^
5.102 In the reconstruction this injection of funds was treated as
moneys owing to Nugan Hand (Hong Kong) Ltd and the remaining $5 063 as
moneys owing to Mr Nugan.
5.103 As a result of these movements of funds Mr Nugan was able to
transfer Nugan Hand Group funds to Nugan Hand Ltd for use in its
activities. This funding was not considered to be a genuine capital
injection because of the source of the funds used by Mr Nugan. The only
amount treated as capital deposited to this company was the initial $105
deposited on 23 July 1973.
- 837 -
5.104 Use of Nugan Hand Ltd as a source of funds
5.105 Mr Nugan transferred Nugan Hand Ltd funds to the Nugan Hand
Group [see definition 5.7] for a variety of purposes. These payments
were not disclosed in the accounts as they were disguised by using the
methods of concealment described in paragraphs 5.44 to 5.50 of this Part.
5.106 In the reconstruction this was exposed and the extent of
payments to the Nugan Hand Group established.
5.107 Similarly Mr Nugan transferred Nugan Hand Group funds to Nugan
Hand Ltd to achieve a variety of effects. This movement, the subject of
concealment in the published accounts, was also exposed in the
reconstructed accounts.
5.108 In Table 14 funds movements between Nugan Hand Ltd and the Nugan
Hand Group are tabulated using figures obtained from the reconstructed
accounts.
5.109 Table 14
P E R I O D
E N D E D
P A Y M E N T S TO
N U G A N H A N D GROUP
R E C E I P T S FROM
N U G A N H A N D GROUP
ANNUAL
M O V E M E N T
BALANCE
* $ $ ί
3 0 . 6 . 7 4 2 6 8 949 2 4 7 000 21 949 21 949
3 0 . 6 . 7 5 611 3 8 4 6 0 7 237 (17 802) 4 147
31. 1 . 7 6 8 7 9 598 6 9 9 935 175 516 17 9 663
3 1 . 1 . 7 7 2 982 617 1 1 1 0 896 1 6 9 2 058 1 871 721
3 1 . 1 . 7 8 3 4 6 0 892 2 5 1 2 940 (923 769) 94 7 952
3 1 . 1 . 7 9 5 211 2 9 0 3 3 4 6 357 916 981 1 8 6 4 933
5.110 As shown in Table 14 a net amount of approximately
$1,864 million had moved from Nugan Hand Ltd to the Nugan Hand Group by
- 838 -
31 January 1979. This amount represents the difference between the total
funds paid to the Nugan Hand Group by Nugan Hand Ltd of approximately
£5.211 million and the total funds received by Nugan Hand Ltd from the
Nugan Hand Group of approximately $3,346 million.
5.111 Messrs Nugan and Hand used their companies as conduits to
distance and disguise this movement of money. In the reconstruction the
funds from Nugan Hand Ltd were traced through the conduits to the
ultimate destination where possible. Similarly all funds paid to Nugan
Hand Ltd from the Nugan Hand Group companies were traced to the original
source of funds where possible.
5.112 The u.ses to which the $5,211 million was put included the
following:
A. Acquisition of The Orange Spot group of companies [see 3.5.14-3.5.19]
5.113 Nugan Hand Ltd contributed approximately $1 million to the
acquisition/operation of the Orange Spot Group [profile 2.116]. The bulk
of these funds were moved through Nugan Hand International Holdings Pty
Ltd during the financial year ending 31 January 1979.
B. Nugan Group Griffith [see 3.4.98-3.4.107]
5.114 By 31 January 1979 the traceable net movement of funds from
Nugan Hand Ltd to the Nugan Fruit Group [see profile 2.114] was
approximately $307 000. The funds were moved through various companies
in the Nugan Hand Group before reaching the ultimate recipient so as to
distance Mr Nugan from the misapplication of Nugan Hand Ltd money. In
removing these funds from Nugan Hand Ltd Mr Nugan often employed a
convoluted method of transferring funds. The trace of one such movement
of £50 000 from Nugan Hand Ltd to Nugan (Griffith) Pty Ltd is detailed
below.
- 839 -
Diagram of movement of funds to Nugan (Griffith) Pty Ltd
ILLARANGI
INV E S T M E N T S
P T Y LTD
L E A S E E A S T
PTY LTD
S.L. NOTW I S T
P T Y LTD
MR F.J. N U G A N
N U G A N
(GRIFF I T H )
P T Y L T D
P T Y L T D
5.115 The following is an explanation of the transactions represented
by the numbers used in the above diagram:
14 February 1979 Movements
1: Nugan Hand Ltd paid Nugan Hand International Holdings Pty Ltd 45 $30 000.
2: Nugan Hand International Holdings Pty Ltd paid Illarangi 46
Investments Pty Ltd [profile 2.85] $30 000.
3: Illarangi Investments Pty Ltd paid S.L. Notwist Pty Ltd [profile
2.103] $30 000.47
15 February 1979 Movements
4: S.L. No twist Pty Ltd paid Leasefast Pty Ltd [profile 2.87]
$30 000;48
- 840 -
49
5: Leasefast Pty Ltd paid S.L. Notwist Pty Ltd $30 000; (There
was no documentary evidence to prove the payment from Leasefast
Pty Ltd, but in the light of evidence it appears obvious
Leasefast Pty Ltd returned the funds to S.L. Notwist Pty Ltd.)
6: S.L. Notwist Pty Ltd paid Illarangi Investments Pty Ltd
$30 000;50 *
7: Illarangi Investments Pty Ltd paid Nugan Hand International
Holdings Pty Ltd $30 000;"â" * '
8: Nugan Hand Ltd paid Nugan Hand International Holdings Pty Ltd
$20 000;52
9: Nugan Hand International Holdings Pty Ltd paid $50 000, being 53
the $30 000 plus $20 000 to Mr Nugan;
10: Mr Nugan paid Nugan (Griffith) Pty Ltd $50 000.^
C. Nugan Hand, Inc. (Hawaii)
5.116 By 31 January 1979 Nugan Hand Ltd had paid $532 496 to Nugan
Hand, Inc. (Hawaii) [profile 2.95]. Due to the lack of documentation it
was not possible to fully examine the ultimate destination of these funds.
D. Nugan Hand International Holdings Pty Ltd
5.117 By 31 January 1979 Nugan Hand Ltd had advanced $2 289 015 to
Nugan Hand International Holdings Pty Ltd. Included in this amount was
$473 395 representing a payment in December 1976 through Nugan Hand
International Holdings Pty Ltd to an unidentified destination.
5.118 A further approximate $639 000 consisted predominently of
expense payments. It is not possible to say to which Nugan Hand Group
company the expenses relate.
- 841 -
5.119 By 31 January 1979 Nugan Hand Ltd had 1 received1 approximately
$3,346 million (Table 14) from the Nugan Hand Group. The word 'received1
is used here to cover the situation where Nugan Hand Ltd received cash
from the Nugan Hand Group and also where the Nugan Hand Group paid cash
on behalf of Nugan Hand Ltd.
5.120 Included in the approximate $3,346 million are the following:
A. Funds owed to Nugan Hand (Hong Kong) Ltd
5.121 By 31 January 1979 Nugan Hand Ltd owed Nugan Hand (Hong Kong)
Ltd approximately $1.3 million. This debt arose from the misuse by
Mr Nugan of NCDs purchased using Nugan Hand (Hong Kong) Ltd funds. When
these funds were injected into Nugan Hand Ltd Mr Nugan used them to
achieve two results; first to increase capital [see 5.101] and secondly
to reduce internal bill holdings [see 5.56].
B. Funds owed to the Nugan Hand Bank
5.122 Mr Nugan used funds from the Nugan Hand Bank to pay debts of
Nugan Hand Ltd and in doing so was enabled to achieve two benefits;
first, to keep funds in Australia for use in his activities, and secondly
to create the effect in the Nugan Hand Ltd records of an apparent
reduction in Yorkville Nominees indebtedness to Nugan Hand Ltd which was
then disguised by the internal bills scheme.
5.123 Table 15 shows the extent of Nugan Hand Ltd indebtedness to the
Nugan Hand Bank from 1977 to 1979.^
5.124 Table 15
PE R I O D A M O U N T O W E D TO NHB
ENDED t
31. 1 . 7 7 437 155
3 1 . 1 . 7 8 937 246
31.1.79 1 119 253
- 842 -
5.125 This indebtedness was caused first, by the Nugan Hand Bank
paying money overseas on behalf of Nugan Hand Ltd to certain Hong Kong
depositors of Nugan Hand Ltd, and secondly, by Nugan Hand Ltd collecting
funds in Australia on behalf of the Nugan Hand Bank from clients but
retaining the funds within the company, [see Yorkville contra described
at 8.36-8.38.]
5.126 Mr Nugan used these circumstances to his advantage by claiming
in the records of Nugan Hand Ltd first, that Yorkville Nominees had
'assumed liability' for the debts paid by the Nugan Hand Bank, and
secondly, that the funds deposited in Australia on behalf of the Nugan
Hand Bank were from Yorkville Nominees.
5.127 In the reconstructed accounts all funds paid on behalf of Nugan
Hand Ltd by the Nugan Hand Bank have been treated as moneys owing by
Nugan Hand Ltd to the Nugan Hand Bank.
5.128 In those cases where Mr Nugan had 'transferred' the liability
for certain deposit repayments to Yorkville Nominees and the debt had not
been repaid, the liability to the depositor remained in the Nugan Hand
Ltd reconstructed accounts.
Bad and Doubtful Debts
5.129 No provision at all was made in the Nugan Hand Ltd published
accounts in respect of bad or doubtful debts which were in any event
concealed in the accounts. For reconstruction purposes all funds
movements to the Nugan Hand Group were fully provided for as bad or
doubtful debts. As at 31 January 1979 the provision made totalled
65.2 million.
Acquisition of Mr Nugan's house
5.130 Using his companies as a conduit, Mr Nugan misappropriated a
traceable amount of 6340 958 from Nugan Hand Ltd to acquire a residence
at. Vaucluse.
- 843 -
5.131 In the reconstructed accounts the house was recorded as a fixed
asset of Nugan Hand Ltd and excluded from the Nugan Hand Group loans
classification.
Role of Nugan Hand Ltd as a deposit taker
5.132 Messrs Nugan and Hand used Nugan Hand Ltd as a vehicle to
attract deposits from local and overseas investors. This was achieved by
offering higher than market rates of interest and presenting a strong and 56
credible image through the Nugan Hand Ltd financial statements.
5.133 The only genuine buying and selling of securities occurred when
it was necessary to buy or roll over securities lodged with secured
depositors or for lodgement in the Wing On Bank safe custody account. In
the case of the overseas depositors the security was provided under the
Wing On Bank safe custody arrangements [see 3.3.39-3.3.41,
4.1.27-4.1.55].
5.134 Nugan Hand Ltd attracted deposits from a diverse range of
persons and companies. The composition of the annual reconstructed
'deposits accepted1 figure was analysed and the results detailed in
Table 16. Depositors have been divided into the following six categories
and their percentage contribution to deposits attracted tabulated:
Category Type
1: Australian companies and individuals
2: Overseas companies and individuals
3: Insurance industry
4: Clubs
5: Councils
6: Advertising industry.
- 844 -
5.135 Table 16
P E R I O D
E N D E D
1 2
C A T E G O R Y T Y P E
3 4 5 6
3 0 . 6 . 7 4 100.0
3 0 . 6 . 7 5 99.2 0.8
3 1 . 1 . 7 6 32.0 39.0 14.0 8.0 7.0
31. 1 . 7 7 19.6 31.4 21.0 11.0 12.0 5.0
3 1 . 1 . 7 8 29.0 4 6 . 9 0.1 17.0 6.0 1.0
3 1 . 1 . 7 9 3 6 . 0 4 0 . 8 0.2 17.0 6.0
5.136 In the published accounts, deposits accepted were described as
'money market borrowings'. Table 17 compares the reconstructed 'deposits
accepted' figures with the published 'money market borrowings' figures.
5.137 Table 17
PER I O D
EN D E D
P U B L I S H E D
LESS PLUS
%
L O A N S TO
NHG
BUY
BACKS
F O R E I G N
EXCH A N G E
LOSSES
M I S C E L L Â
A N E O U S
TRAN S F E R
OF
L I A B I L I T I E S
R E C O N Â
S T R U C T E D
ί $ $ ? ί
3 0 . 6 . 7 4 402 577 290 414 - - - - 112 163 28
3 0 . 6 . 7 5 10 395 524 3 4 4 8 7 9 8 5 8 000 - (8 587) - 511 624 5
3 1 . 1 . 7 6 21 4 7 3 432 220 600 14 6 3 3 775 - 3 6 342 - 6 582 715 31
31.1 . 7 7 20 564 0 4 6 286 090 6 900 000 784 009 53 750 - 12 5 4 0 197 61
3 1 . 1 . 7 8 12 401 243 3 9 5 052 - 214 113 54 792 678 800 12 416 086 100
3 1 . 1 . 7 9 11 237 043 549 142 - - 95 774 1 821 866 12 413 993 no
- 845 -
5.138 Table 17 highlights the effects of several deceptive practices
utilized by Mr Nugan to distort the figures in the published accounts.
5.139 Included in the published 'money market borrowings' figures were
loans to the Nugan Hand Group. In 1974 these loans comprised 72 per cent
of the published figure. As external deposits increased, the Nugan Hand
Group loans component decreased, that is those loans were no longer
included.
5.140 In his relentless pursuit of a merchant banking image Mr Nugan
used the services of CitiNational and National Discount Corporation to
engage in sham 'buy back straddles' [described at 5.25 to 5.31], In
using this technique Mr Nugan not only increased his money market
securities figure in the balance sheet, he also increased the money
market borrowings figure in the balance sheet by the amount of the loan
from CitiNational or National Discount Corporation. The effect of this
increase was to present a much stronger deposit base than really
existed. The 'buy back straddles' have been eliminated from the
reconstructed figures. This shows that in 1975, for example, only five
per cent of the published money market borrowings figure represented
genuine deposits.
5.141 The acceptance of overseas deposits carried with it the effects
of foreign exchange fluctuations. 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 by 17.5 per
cent on 26 November 1976 Nugan Hand I.td was faced with a potential cost
of $1.1 million. To avoid 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 purported to transfer all liability for
exchange losses to Yorkville Nominees. Ibis 'agreement' was ignored in
the reconstruction and all actual gains or losses on repayment of
overseas deposits were included in the reconstruction of the profit and
loss account of Nugan Hand Ltd. Provision was made in the reconstruction
to cover potential foreign exchange losses at the end of each financial
year.
5.142 In 1978 and 1979 Mr Nugan purported to 'transfer' liabilities to
repay certain Nugan Hand Ltd depositors, to Yorkville Nominees. In
- 846 -
reality these deposits had not been repaid so they have been retained in
the reconstructed deposits accepted figures [see 5.122].
5.143 According to Mr Nugan, Nugan Hand Ltd was to reinvest these
deposit funds to earn a higher rate of interest than that paid to the 57 depositors. The published accounts reinforce this claim by
indicating that from 1974 to 1979 Nugan Hand Ltd made a profit of
$807 802 from this activity.
5.144 The reconstructed accounts indicate that from 1974 to 1979 Nugan
Hand Ltd incurred a trading loss of $1.17 million. This meant that the
difference between the interest paid to depositors for the use of their
funds and the interest earned by Nugan Hand Ltd from investing the
deposits was $1.17 million.
5.145 Table 18 compares the published income of Nugan Hand Ltd from
investment of depositors funds and interest paid for use of these funds
with the reconstructed figures.
5.146 Table 18
P E R I O D
ENDED
NHL R E C O N S T R U C T I O N
INCOME INTEREST P R O F I T INCOME INTEREST LOSS
PAID PAID
f f $ $ $ $
3 0 . 6 . 7 4 38 910 29 342 9 568 (15 628) 8 709 (24 337)
3 0 . 6 . 7 5 116 810 101 258 15 552 40 176 4 2 424 (2 248)
31. 1 . 7 6 2 5 3 143 149 016 104 127 96 907 1 0 9 333 (12 426)
31. 1 . 7 7 1 159 882 1 0 6 7 775 92 107 645 044 1 041 957 (396 413)
3 1 . 1 . 7 8 1 522 409 1 2 4 0 8 6 9 281 540 8 8 8 563 1 196 863 (308 300)
3 1 . 1 . 7 9 1 4 8 5 050 1 180 142 3 0 4 908 8 2 4 142 1 2 5 8 204 (434 062)
T O T A L 4 576 204 3 768 4 0 2 807 8 0 2 2 4 7 9 204 3 657 490 (1 177 786)
- 847 -
5.147 The figures in the income column represent the interest received
by Nuaan Hand Ltd first, from their limited securities trading and
secondly, from the placement of funds at call.
5.148 The interest expense represents the interest paid to the
depositors for the use of their funds. The published interest paid
amount can be subdivided into the following categories:
a. interest paid to external depositors, that is arms length
'legitimate' depositors;
b. interest paid to CitiNational as part of a sham money market
transaction; and
3. interest 'paid' to Nugan Hand Group companies.
5.149 In the reconstruction the category (a) interest was entered as a
genuine cost of borrowing. For local depositors the interest payable
calculations shown on the deposits accepted cards were assumed to be
correct. The interest payable to overseas depositors was recalculated
for two reasons: first to record in the reconstructed records the correct
amount of interest payable and second, to calculate the foreign exchange
fluctuations on the interest payable. The category (b) interest was
included in the sham money market transactions. The category (c)
interest was eliminated from the reconstructed 'interest paid' figure
because the 'deposits' accepted from the Nugan Hand Group companies were
not genuine deposits.
5.150 Assuming Mr Nugan ever intended to make a genuine profit from
accepting deposits and reinvesting them, then several factors weighed
heavily against him. These included the following:
. the need to pay higher than market rates of interest to attract
and maintain deposits;
the cost of the Wing On Bank guarantee arrangements;
- 848 -
. the cost of meeting the foreign exchange fluctuations;
⢠the cost of the withholding tax paid by Nugan Hand Ltd;
. the cost of any secret commissions paid to secure deposits; and
. the cost of the Reserve Bank of Australia requirement to lodge a
proportion of overseas funds in a non-interest bearing deposit
[see 5.69],
5.151 Inflation of income schemes
5.152 The published accounts for the years 1974 to 1979 claimed as
revenue 'fees received1. An analysis of this figure showed that it
comprised three items: office expenses reimbursed, fees relating to
Yorkville Nominees; and fees relating to external parties.
5.153 The 'office expenses reimbursed' represented a claim by Nugan
Hand Ltd on other companies in the Nugan Hand Group for 'office expenses'
allegedly incurred by Nugan Hand Ltd on behalf of those companies.
Mr Hill said that the falsification of the accounts took a number of
forms including the creation of paper 'management expenses' which were
shown as income to Nugan Hand Ltd."â® The Nugan Hand Ltd records do not
provide full details as to which office expenses were the subject of
reimbursement. The auditors' working papers do not provide any evidence
of vouching work undertaken by Mr Brincat in respect of these expenses.
5.154 The item 'office expenses reimbursed' has been eliminated in the
reconstruction.
5.155 Nugan Hand Ltd claimed as revenue 'fees' due from Yorkville
Nominees. These 'fees' fall into the same category as 'office expenses
reimbursed', being a device utilised by Mr Nugan to boost Nugan Hand Ltd
revenue to present a more healthy picture of the company's activities.
The records do not indicate the nature of the 'service provided' by Nugan
Hand Ltd to Yorkville Nominees and the audit working papers do not
- 849 -
provide any evidence to suggest that Mr Brincat examined these 'fees' as
to content and nature. The absurdity of this claim is increased by the
fact that Mr Nugan controlled both companies. In the reconstruction this
item has been eliminated.
5.156 Included in the 'fees received' were funds received from parties
external to the Nugan Hand Group. These funds represented first, money
deposited in Australia for repayment overseas [see 8.36-8.40 for details
of the Yorkville contra] and secondly funds deposited to Nugan Hand Ltd
and repaid by another company in the Nugan Hand Group or by Mr Nugan. In
the reconstruction these items were eliminated from revenue.
5.157 For comparison purposes the published 'fees received' figures
have been classified as sundry income and compared with the reconstructed
sundry income in Table 19. The percentage column indicates that
proportion of the published figure considered to be genuine sundry income.
5.158 Table 19
P E R I O D
E N D E D
P U B L I S H E D
S U N D R Y INCOME
R E C O N S T R U C T E D
S U N D R Y INCOME
%
3 0 . 6 . 7 4 55 300 48 300 87
3 0 . 6 . 7 5 76 189 82 -
3 1 . 1 . 7 6 3 9 561 87 -
31.1.77 4 6 9 853 19 965 4
3 1 . 1 . 7 8 167 785 175 413 105
31.1.79 4 4 2 208 97 915 22
TO T A L $ 1 250 896 $ 341 762 27
- 850 -
5.159 SCHEDULE A
N U G A N H A N D L I M I T E D
P R O F I T - L O S S A C C O U N T S S U M M A R Y 1974 - 1979
C O M P A R I S O N OF P U B L I S H E D A N D R E C O N S T R U C T E D A C C O U N T S
P E R I O D ENDED: 3 0 J U N E 1 9 7 4 30 J U N E 1975
NHL RECON. NHL RECON.
INCOME
R e f e r e n c e
⦠t 1 $
S e c u r i t i e s T r a d i n g
S a m e Day Tr a d e s
Buy Back
Inte r e s t - F u n d s a t Call
S u n d r y Income
5.16
5.18
5.25
5.66
5.152
(18 373)
57 283
55 300
(18 373)
2 745
4 8 300
42 770
74 040
76 189
1 260
12 930
25 986
82
94 210 32 672 192 9 9 9 40 258
Less
- I n t e r e s t E x p e n s e 5.148 2 9 342 8 709 101 258 42 424
GROSS T R A D I N G P R O F I T / f L O S S ) : 64 868 23 963 91 741 (2 166)
Less
- Doubt f u l Debts
- F o r e i g n Exch a n g e Loss
- O p e r a t i n g Expe n s e s
5.129
5.141
44 634
2 6 8 949
40 963 51 301
342 435
168 932
N E T PROFIT/(LOSS): 20 234 (285 949) 40 440 (513 533)
Less
- C o m p a n y Tax 9 611 18 198 9 126
N E T P R O F I T / t L O S S ) A F T E R TAX: 10 623 (285 949) 22 242 (522 659)
Less
- P r i o r P e r i o d A d j u s t m e n t s
- A p p r o p r i a t i o n s 5 500
(385)
12 997
5 123 (285 949) 9 630 (522 659)
Plus
- R e t a i n e d E a r n i n g s b/fwd
(acc u m u l a t e d losses)
5 123 (285 949)
R E T A I N E D EARN I N G S C/FWD: 5 123 (285 949) 14 753 (808 608)
851
31 J A N U A R Y 1976 31 J A N U A R Y 1977 31 J A N U A R Y 1978 31 J A N U A R Y 1979
NHL RECON. NHL RECON. NHL RECON. NHL RECON.
$ ? ? ί ? ? $ t
99 200 54 720 1 0 0 6 4 8 6 519 810 1 3 8 9 671 755 365 1 4 0 6 058 744 942
1 358 (14 100) 900
(7 420)
5 3 943 40 8 2 9 153 3 9 6 146 754 132 738 1 3 2 298 78 992 79 200
39 561 87 4 6 9 8 5 3 19 965 167 785 175 413 442 208 97 915
292 704 96 994 1 629 7 3 5 665 0 0 9 1 690 194 1 0 6 3 976 1 927 258 922 057
149 016 109 333 1 067 775 1 041 957 1 240 8 6 9 1 1 9 6 863 1 180 142 1 2 5 8 204
143 688 (12 339) 561 9 6 0 (376 948) 4 4 9 325 (132 887) 747 116 (336 147)
268 214 2 103 019 478 275 1 750 398
46 712 861 356
6 2 343 8 5 1 8 2 476 576 4 6 0 400 342 005 3 6 4 165 623 702 623 304
81 3 4 5 (412 447) 85 3 8 4 (3 801 723) 1 0 7 320 (975 327) 123 414 (2 709 849)
34 572 4 660 36 2 8 8 12 625 44 0 9 0 2 2 036 56 770 51 274
46 773 (417 107) 49 0 9 6 (3 814 348) 63 230 (997 363) 6 6 644 (2 761 123)
561 (16 793) 5 757 (25 692)
12 000 32 473 8 650
47 334 (417 107) 53 8 8 9 (3 814 348) 25 000 (997 363) 83 686 (2 761 123)
14 753 (808 608) 62 0 8 7 (1 2 2 5 715) 115 976 (5 040 063) 140 976 (6 037 426)
62 0 8 7 (1 2 2 5 715) 115 976 (5 040 063) 140 976 (6 0 3 7 426) 2 2 4 662 (8 798 549)
- 852 -
5.160 SCHEDULE B
N IJ G A N H H P L I M I T E D
B A L A N C E S H E E T S 1 9 7 4 - 1979
C O M P A R I S O N OF P U B L I S H E D A N D R E C O N S T R U C T E D A C C O U N T S
B A L A N C E S H E E T DATE: 30 J U N E 1974 30 J U N E 1975
NHL RECON. NHL RECON.
$ $ $ $
R e f e r e n c e
SHAR E H O L D E R S ' F U N D S
Iss u e d & P a i d Up Capital 5.76 1 0 0 0 0 0 5 105 1 000 0 0 5 105
Capital Pro f i t s R e s e r v e 7 3 571
R e t a i n e d E a r n i n g s 5 1 2 3 (285 949) 14 7 5 3 (808 608)
1 0 0 5 128 (285 844) 1 088 329 (808 503)
R E P R E S E N T E D BY:
ASS E T S :
C a s h On H a n d 8 A t Rank 1 0 2 885 176 246 708 293 11 0 7 3
M o n e y M a r k e t S e c u r i t i e s
S u n d r y D e b t o r s
5.68 9 8 5 8 455
F u n d s on D e p o s i t 5.66 1 319 4 0 5 910 514 289 000
N H G - L o a n s 5.104 351 268 949 40 369 611 384
Less Doub t f u l Debts 5 . 1 2 9 (268 949) (611 384)
F i x e d A s s e t s ί I n v e s tments 5.131 3 145 4 024 2 818 13 590
1 4 2 5 786 180 270 11 520 449 313 6 6 3
L E S S L I A B I L I T I E S
Rank O v e r d r a f t 105 451 1 705
D e p o s i t s A c c e p t e d 5.137 4 0 2 577 1 1 2 1 6 3 10 395 524 511 624
N H G - L o a n s 5 . 1 1 9 1 470 247 000 5 598 607 237
S u n d r y C r e d i t o r s
P r o v i s i o n s
1 500 1 500 1 600 1 600
- T a x a t i o n 9 611 18 198
- D i v i d e n d s
- F o r e x F l u c t u a t i o n s 5.141
5 500 11 200
4 2 0 6 58 4 6 6 114 10 4 3 2 120 1 1 2 2 166
N E T A S S E T S 1 0 0 5 128 (285 844) 1 088 329 (808 503)
853
31 J A N U A R Y 1 9 7 6
NHL RECON.
$ ί
1 0 0 0 0 0 5 105
73 571
62 087 (1 2 2 5 715)
1 135 663 (1 2 2 5 610)
31 J A N U A R Y 1977
NHL________ RECON.
* $
1 O O O 0 0 5 105
73 571
115 976 (5 040 063)
1 189 552 (5 039 958)
31 J A N U A R Y 1978
NHL RECON.
ί $
2 0 0 0 O O O 105
85 044
1 4 0 976 (6 0 3 7 426)
2 226 0 2 0 (6 037 321)
31 J A N U A R Y 1979
NHL RECON.
$ $
2 OOO OOO 105
85 044
224 662 (8 798 550)
2 309 706 (8 798 445)
509 500 511 0 7 7 5 944 41 921 15 080 15 643 114 036 117 131
21 007 0 0 2 4 517 312 20 301 416 7 511 642 13 054 411 7 167 331 12 444 364 6 394 141
35 OOO 43 4 3 9 7 446 46 306 18 239 42 911 797 500 89 511
1 156 764 1 016 287 1 485 OOO 1 492 446 1 523 725 1 632 925 263 725 263 725
879 598 2 982 617 3 4 6 0 892 5 211 290
(879 598) (2 982 617) (3 460 892) (5 211 290)
6 468 17 237 39 107 391 116 152 522 404 468 17-1 200 426 028
22 714 734 6 105 352 21 8 3 8 913 9 483 431 14 763 977 9 263 278 13 793 825 7 290 536
2 679 284
21 473 432 6 582 715 20 564 046 12 540 197 12 401 243 12 4 1 6 086 11 237 043 12 413 993
45 192 699 935 17 398 1 n o 896 27 098 2 512 940 169 747 3 346 357
14 225 1 600 19 629 2 OOO 44 526 4 388 11 909 4 647
34 572 36 288 44 090 56 770
11 650
46 712
12 OOO
867 617
21 O O O
367 185
8 650
323 700
21 5 7 9 071 7 330* 962 20 6 4 9 361 14 523 389 12 537 957 15 3 0 0 599 11 484 119 16 088 981
1 135 663 (1 225 610) 1 189 552 (5 0 3 9 958) 2 226 020 (6 037 321) 2 309 706 (8 798 445)
- 854 -
5.161 SCHEDULE C
N U G A N H A N D L I M I T E D
S O U R C E S A N D A P P L I C A T I O N S O F F U N D S
P R E P A R E D F R O M THE R E C O N S T R U C T E D A C C O U N T S
F O R T H E P E R I O D 1974 T O 1979
S O U R C E S $ 1 2 4 1 8 745
P A I D UP
C A P I T A L
$105
D E P O S I T O R S
LO C A L & O V E R S E A S
$12 413 993
S U N D R Y
C R E D I T O R S
$4 647
NHL
BANK
A C C O U N T S
$ 4 2 6 028
F I X E D A S S E T S *
$6 483 652
M O N E Y MARKET
S E C U R I T I E S
$3 263 560
T R A D I N G LOSSES
s I--------------
$ 1 1 6 847
FUNDS W I T H A
BANK
$1 8 6 4 933
_________^
$263 725
F U N D S OUT T O
NHG
X
7 FUNDS ON
DEP O S I T
A P P L I C A T I O N S $ 1 2 418 745
- 855 -
ENDNOTES : PART 5
(See explanatory note at front of report)
1 See Northumberland Insurance Co. Ltd (in lig) v. Alexander
(1984) 2 ACLC 363 and the cases cited therein, in particular, Snook v. London West Ridinq Investments Ltd (1967) Q.B. 786 at p.8U2 2 CD11518
3 CT23301, Pollard; CD6509 folio 378 4 CT23303, Pollard
5 GDI0015 folio 113
6 CD10015 folio 143
7 GDI0015 folio 130
8 CD4701 folio 33
9 CT25740, CT25744, Hill; CD6147 10 CD11497
11 CD11947
12 CD4144
13 CD9018
14 CD7711 folio 38
15 CD3744 folios 1-2
16 CD3742; CD3545
16a CD34 Part 2 folio 313
17 CD3221 folio 21
18 CD11528
18a CD10015 folios 12,86,88,95,101 19 CD3794 folio 1
20 CD5545 folio 13
21 CD5545 folio 19; CD3802 folio 1
22 CD4055 folio 47
23 CD3794 folio 1; CD5545 folio 19
24 CD10015 folio 111
25 CDS610 folio 216
26 CD10015 folio 162
27 CD5509 folio 26
28 CD4160 folio 28
29 CD9018
30 CD3736 folio 21
31 CD10015 folio 89
32 CD4140 folio 28
33 CD4140 folio 31
34 CD11328 folios 48,51 35 CD11328 folio 41
36 CD11328 folio 44
37 CD3991 folio 90; CD3569 folio 18; CD3994 folio 19 38 CD11328 folio 26; CD3569 folio 18 39 CT22714, Pulger-Frame; CD10823 40 CD6767 folio 24, Correspondence file, emphasis as in the Nugan
Hand Bank letter 41 CD11328 folios 58-61 42 CD4140 folio 33
43 CD11328 folios 85,87-88
44 45 46 47 48 49 50 51 52 53 54 55 56 57 58
- 856 -
CD11328 folios 101,105 CD3568 folio 32 CD3571 folio 46 CD3573 folio 13 CD5602 CD10184; CD4052 folio 16 CD3573 folio 35 CD3573 folio 13 CD3568 folio 32 CD3571 folio 46 CD3567 CD11476 CT16223, CT16229, Hill CT24240, Yates CT21848, Hill
PART SIX
ALLEGATIONS OF COMPLICITY IN DRUG DEALINGS
- J
j
·" â · ' : ·
-859-
ALLEGATIONS OF COMPLICITY IN DRUG DEALINGS
S c o p e o f R e f e r e n c e
6.1 Allegations that the Nugan Hand Group participated in the
illegal drug trade were rife in Australia from 1977 onwards. The
allegations seem to have started about the time the New South Wales
Corporate Affairs Commission commenced a Special Investigation under the
Companies Act 1961 (NSW) in 1977 into the Nugan Fruit Group
[profile 2.114] based in Griffith and controlled by Mr K.L. Nugan,
[profile 2.52] the brother of Mr F.J. Nugan, [profile 2.1]. This
investigation was probably the major cause of the allegations. More
bizarre allegations were made by persons such as Mr Andrew Wellington
Lowe, Mr Graham Beith, and Mr Neil Evans [profile 2.21]. As to these
allegations the Commission is satisfied that they have no foundation and
that the evidence of these three persons is not credible.
6.2 As to the a l l e g ations of d r u g tra f f i c k i n g in Australia, these
h a v e b e e n the s ubject o f i n q u i r y b y the W o o d w a r d R oyal Commission and by
a p o l i c e J o i n t Ta s k F o r c e set u p o n the recomme n d a t i o n of that Commission
to look into the allegations. The concl u s i o n of both, as will appear
f r o m the fo l l o w i n g paragraphs, w a s that the allegations were not correct
except to the extent that dru g funds w e r e b e i n g deposited w i t h Yorkville
N o m i n e e s P t y Ltd [profile 2.108] a n d Mars R o a d Investments P t y Ltd
[profile 2.88] from tim e to time. The C ommission agrees with this
conclusion. A part f r o m some evidence, largely from Mr G.T. Shaw
[profile 2.65], which is revi e w e d later in this Part [commencing 6.21],
there is no additional evid e n c e to be considered. The Commission is
s a t isfied that Mr Nugan a n d Mr M . J . H a n d [profile 2.2] were prepared to
acc e p t ca s h deposits t h rough t h e s e c o m panies regardless of their source
a n d that n o questions w o u l d b e a s k e d c oncerning the s o u r c e . The precise
e x t e n t of their k n o wledge a n d that of Mr Sha w is considered in the
following paragraphs. Apart f r o m a c o m p a ratively small number of
depo s i t s w h i c h ha v e b e e n i dentified as being drug moneys, the evidence
-860-
does not p e r m i t a n y a s s e s s m e n t to b e mad e as to w h a t propo r t i o n o f the
total c a s h m o n e y s dep o s i t e d w i t h Yo r k v i l l e Nomi n e e s and Mars R o a d
Investments w e r e drug funds.
6.3 The Hon. Mr Justice Woodward, then a Judge of the Supreme Court
of New South Wales (since retired), in his 'Further Report of the Royal
Commission into Drug Trafficking' dated May 1980 commented:'*'
'It is not m y function nor is it m y intention to investigate
her e the g e neral busi n e s s a c t i v i t i e s o f N u g a n Han d or of its
officers. N o doubt, the Co r p o r a t e A f fairs C o m m i s s i o n wil l in
d u e cour s e report on that. M y sole concern is to determine
w h e t h e r the co m p a n y or a n y of its officers we r e in a n y w a y
co n c e r n e d in drug t r a f f i c k i n g . '
In that inquiry his Honour heard evidence from a number of alleged drug 2 traffickers. He also heard the evidence of Mr S.K. Hill [profile
2.33] and Mr Hand. Having heard such evidence Mr Justice Woodward formed
the view that without a full scale investigation of the Group's affairs
he could not fairly conclude that the Nugan Hand Group or any of its
officers had actively participated in illegal or improper activities
connected with drug trafficking. However his Honour reported:^
Î a m c e r t a i n l y of the v i e w that there has bee n sufficient
evidence put befo r e m e to r aise serious misgi v i n g s as to the
g roup's involvement w i t h cr i m i n a l s and to justify a full inquiry
into its af f a i r s a n d the p a r t s p l a y e d therein b y N u g a n a n d H a n d . '
6.4 In its report to governments relating to the activities of
Terrence John Clark and his associates, this Commission found there was
evidence that a number of institutions including NUgan Hand Ltd [profile
2.97] were used to transfer money on behalf of members of the Clark
organisation. The Commission reported that the purpose of transferring
the funds appeared always to have been to make money available in a 4
different s tate or c o u n t r y w h i l e conce a l i n g its illicit source. The
Commi s s i o n h o wever took the vie w that the terms of reference p r e cluded it
fr o m m a k i n g a detai l e d i nvestigation into the a ctivities and procedures
of the N ugan Han d G r o u p in Sydney, o ther parts of Australia and o v e r s e a s .
-861-
6.5- As previously stated, [1.1.1] on 28 March 1983 the Governments
of the Commonwealth of Australia and of New South Wales issued Letters
Patent to the Commission extending its terms of reference to include the
making of wide ranging inquiries into the Nugan Hand Group. The full
text of those terms of reference is reproduced at Appendix A. The
Commission's interpretation of the terms of reference and their scope are
explained in detail at paragraphs 1.2.1 to 1.2.36 of this report.
Amongst other things the Commission's terms of reference specifically
require it to inquire:
. whether the Nugan Hand Group engaged in activities involving
contravention of laws of the Commonwealth or New South Wales
relating to drugs;
. if so, the extent and nature of those activities; and
. whether in the course of such activities, the Nugan Hand Group
used, was used by, or cooperated with any person, organisation
or body.
6.6 In conducting its inquiry the Commission has observed the
direction contained in the terms of reference that it 'have regard to'
any reports made by the Commonwealth-New South Wales Joint Task Force on
Drug Trafficking ('Joint Task Force'), the Corporate Affairs Commission
of New South Wales ('Corporate Affairs Commission') and persons holding
office as liquidator of any of the companies nominated in the schedules
to the letters Patent under an appointment made by the Supreme Court of
New South Wales.
6.7 The investigation conducted by the the Joint Task Force included
an inquiry into the alleged drug-related activities of
Mr Harry Wainwright, Mr Murray Stewart Riley, Nugan Hand Ltd and its
associated companies. Its findings are contained in a four volume report
which was presented to the Governments of the Commonwealth and New South
Wales between January 1982 and March 1983. Volume One relates to the
activities of Messrs Riley and Wainwright and their dealings with the
-862-
Nugan Hand group of companies. Volume Two relates to the Nugan Hand
Group and its dealings with known or suspected drug trafficking groups.
Volume Three contains an assessment of information gathered on Mr Riley's
associates but not referred to in Volume One. Volume Four relates to the
alleged involvement of United States citizens in the international
expansion of the Nugan Hand Group. As to the association between the
Nugan Hand Group and certain known or reputed drug traffickers the Joint 5 Task Force reported:
'The first known transactions between the Nugan Hand group of companies and known or reputed drug traffickers occurred in Sydney in 1975 and appear to have developed from two distinctly separate sources within the companies. On the one hand, there was what for convenience will be called the "Michael Hand" drug clients who comprised of what might be loosely described as the
"Riley" group. Though it appears that the initial introductions were made to Frank Nugan, it was Hand who controlled the
transactions during the "drug" period. On the other hand, there were the George Shaw clients, who comprised of a number of
individuals and groups of largely unrelated traffickers. In addition to these, there was also found a connection with the "Mr. Asia" syndicate. This appears to have been a "one off" use of the facilities of Nugan Hand in March-April 1979 to transfer money overseas. It involved Shaw, Nugan, Hand, and the Sydney solicitor John Aston and his Managing Law Clerk, Brian
Alexander.'
6.8 The delegates of the Corporate Affairs Commission on the other
hand, in seeking not to duplicate the investigation then being conducted
by the Joint Task Force did not inquire into the alleged drug
associations of the Nugan Hand Group but merely reported 'material
thought to establish links between Nugan Hand and drug traffickers' which
came to notice during the course of their investigation. Nevertheless
they reported:6
'The delegates do not asse r t that Nugan Han d a c t i v e l y p u rsued
the d r u g t r a f ficking industry for business although in the case
o f Mr. Han d this is a possibility. However it seems unlikely
that the executives w e r e compl e t e l y unaware of the activities of
ce r t a i n c l ients assoc i a t e d w i t h d r u g t r a f f i c k i n g . '
6.9 The Commission has considered, in addition to the sworn evidence
of witnesses, statements, records of interviews and other documents
obtained by the Joint Task Force and the Corporate Affairs Commission
-863-
from a number of people not s u b j e c t e d to e x a m i nation b y this Commission.
In some instances such p e rsons h a v e since die d or dis a p p e a r e d but in
o t h e r c ases the d e c i s i o n not to call th e m b e f o r e the Commi s s i o n t o give
s w o r n e v i d e n c e , w a s t a k e n h a v i n g regard to time constraints and
a s s e ssments o f the s i gnificance of such information to the Commission's
inquiries.
N a t u r e a n d E x t e n t of the All e g a t i o n s
6.10 Apart f r o m the l i mited i n q u i r y into the drug related activities
of the N u g a n H a n d g roup of companies con d u c t e d b y Mr Justice Wood w a r d and
the inquiries c o n ducted b y the Cor p o r a t e A f f a i r s Commi s s i o n and the Joint
Task Force, there has b e e n a goo d deal o f investigative journalism
b r o u g h t to bear on the allegations wit h the result that the alleged
a c t i v i t i e s of the N u g a n Hand G r o u p ha v e e ngendered considerable public
inte r e s t a n d speculation.
6.11 T hese a l l e gations are numerous a n d frequ e n t l y repetitive but
the y all fall w i t h i n the following general c a t e g o r i e s :
a. Tha t the N ugan Ha n d G r o u p w a s involved in the importation and
d i s tribution o f narcotics.
b. Th a t the Nugan Han d G r o u p w a s a financier of drug smuggling
o p erations in Australia.^
c. Th a t the N u g a n H a n d G r o u p prov i d e d services to persons
a s s o c i a t e d w i t h the dru g t rade including:
. a c ceptance of depos i t s of m oney obtained fro m drug
trafficking;
. the p r o v i s i o n of an o n y m i t y a n d secrecy in relation to their
deposits; and
. funds de p o s i t e d w i t h the N u g a n Han d G r o u p in Australia
c ould be m a d e a v a ilable overseas.
-864-
6.12 In the pages that follow the Commission has reviewed the
evidence relevant to these allegations under the following headings:
- A n d r e w W e l l i n g t o n Lowe
- T h e R i l e y g r o u p
- George S h a w a n d his clients
- T h e 'Mr Asia' a n d other drug syndicates
- The Thail a n d Offi c e
R e v i e w o f the Evidence
A n d r e w W e l l i n g t o n Lowe
6.13 Mr Andrew Wellington Lowe was born in Sydney on
16 September 1943. He was interviewed by members of the Joint Task Force
and gave evidence to the delegates of the Corporate Affairs Commission in
their Special Investigation into the affairs of the Nugan Hand group of
companies. He also gave evidence to this Commission on 26 May 1983 and
3 June 1983.
6.14 In the Commission's Interim Report No. 1, presented to
Governments in October 1983, Mr Lowe was referred to as 'Mr B'. At that
time he was awaiting trial on serious drug offences and his name was not
published in order to avoid any possibility of thereby prejudicing his
trial. He has since been convicted and sentenced to 17 years hard labour
with a minimum term of 11 years.® In that report Mr Lowe was
identified by the Commission as the sole source of allegations that
certain politicians had interfered with the investigation of the Nugan
Hand Group by the then Federal Narcotics Bureau. Such allegations were g
found on the evidence to be completely without foundation.
6.15 Mr Lowe's evidence to the Commission covered matters not limited
to the terms of reference which were the subject of Interim Report
No. 1. It included allegations that Mr Hand and Mr Nugan were
trafficking in heroin on a grand scale. Mr Lowe agreed he had passed
information to a member of the then Federal Narcotics Bureau that Messrs
-865-
Ffugan and Hand were 'bigger than anything you have ever seen here in the
heroin game'. Mr Lowe said he told the Bureau Messrs Nugan and Hand did
not actually handle the heroin but were financiers. Mr Lowe also told
the Commission of a visit to Sydney of an alleged leading drug trafficker
from the 'Golden Triangle', one Khun Sa. He said Mr Hand and Khun Sa met
in the Botanical Gardens opposite 55 Macquarie Street, Sydney and
discussed a planned importation of 500 pounds of heroin into America via
Australia from Bangkok. Mr Lowe said it was at this meeting he heard
Mr Hand tell Khun Sa how '... in Vietnam, he [Hand] used to smuggle
heroin from [sic] the bodies of dead GI's.' " * â * â *
6.16 While there is independent evidence before the Commission which
suggests Mr Lowe did pass the above information to the Federal Narcotics
Bureau, there is no evidence supporting or tending to support the
veracity of the information so passed. In the Commission's first Interim
Report his evidence about these matters was shown to be totally
discredited and without foundation.1" * ' No reliance at all can be placed
on any evidence given by Mr Lowe unless that evidence is objectively
corroborated.
6.17 Mr Lowe also gave evidence relating to Mr Shaw and his clients
and such evidence is reviewed at 6.29 to 6.34.
The Riley Group * 1 2
6.18 Mr Justice Woodward's Royal Commission into Drug Trafficking
conducted a limited inve s t i g a t i o n of an alleged association between the
'Riley group' and the Nugan H a n d g r o u p o f companies. As a result of that
12
i n v e s t igation his Honour reported:
'Despite the suspicions w h i c h I entertain concerning Nugan
Hand ' s activities, a n d the nat u r e of its assistance to Parkin
and Wainwright, I think that w i t h o u t a full scale investigation
of the group's affairs I c o u l d not fairly conclude that it or
a n y of its officers had activ e l y partic i p a t e d in illegal and
improper a ctivities co n n e c t e d wi t h drug trafficking. I was not
in a p o s i t i o n to c a r r y o u t such an investigation in v i e w of the
then c u rrent Corporate Af f a i r s Commission investigation and the
pre s s u r e s of time in a limited C ommission such as mine. I am
-866-
certainly of the view that there has been sufficient evidence put before me to raise serious misgivings as to the group's involvement with criminals and to justify a full inquiry into its affairs and the parts played therein by Nugan and Hand.'
6.19 The Joint Task Force subsequently conducted extensive inquiries
and reported its findings."*"'* Of Mr Nugan1 s association with the 'Riley 14
group' the Joint Task Force reported:
'All the circumstances suggest that at the time of their [a reference to Wainwright and Riley] dealings with Nugan Hand, Nugan knew they had "black" money and were doing "something wrong", But ÎÎ cannot Be taken beyond that. There is no
evidence to suggest that he [Nugan] knew any of the details of their transactions with Nugan Hand .. Î1 [emphasis added]
Of Mr Hand's association with the 'Riley group' the Joint Task Force
reported :"*""â
'Briefly, it seems highly probable that Hand knew Riley and Wainwright were involved in drug trafficking and that their requests for use of the Nugan Hand facilities for the movement of money were in furtherance of that activity. And knowing
this, Hand assisted them not only by freely offering the use of those facilities, but indeed encouraging that use. At the same time, it is unlikely that Hand was directly involved in the drug activities of the "Riley" group or even knew specific details of those activities.' [emphasis added]
6.20 No further inquiries are suggested or implied by these
findings. There is no evidence before the Commission which would warrant
any further inquiry into these particular allegations which have already
been the subject of such extensive examination by the Joint Task Force.
Most of the members of the 'Riley group' were gaoled following their
convictions on charges relating to the importation of buddha sticks
aboard the vessel 'Anoa'.
George Sha w and his Clients
6.21 The allegations relating to Mr G.T.
clients were investigated by the Joint Task
the Commission has made in this regard have
Shaw [profile 2.65] and his
Force. The inquiries which
generally confirmed much of
-867-
what has been reported. However the Commission has elicited additional
information from Mr Shaw. That evidence is reviewed in the paragraphs
that follow.
6.22 Mr Shaw gave evidence to the Commission on a number of
occasions. He told the Commission he was employed by the Nugan Hand
Group in April 1974 on a commission basis to buy and sell silver bullion
and in 1975 became a salaried employee of Nugan Hand Ltd. Towards the
end of that year the bullion business declined and on Mr Nugan1 s
instructions he attempted to gather deposits for Nugan Hand Ltd.
6.23 In e v i d e n c e to the C o m m i s s i o n Mr S h a w i dentified a list of
clients'*·*â in his h a n d w r i t i n g b e i n g c lients w h o deposited cash with
eit h e r Y o r k v i l l e Nomin e e s or Mar s Ro a d Investments. These included
c l i e n t s w h o s e deposits Mr S h a w either knew or s u s pected wer e the proceeds
of d r u g trafficking.*"^
6.24 Mr Shaw said the deposits of these cash clients were
acknowledged by the issue of a deposit acceptance document on behalf of
Yorkville Nominees and a copy of that document was retained in the
company's records. The accounts for these clients were from 1978 onwards
recorded in a blue book described by Mr Shaw as ' off-ledger'. Prior to
that time, such records were maintained in a lever arch file by Mr S.K.
Hill [profile 2.33]. Mr Shaw caused this record to go each month to
Mr Nugan for checking. Mr Shaw said the transactions of all of his
clients were recorded in that book which was accessible to Mr Nugan,
Mr Hill and any other senior executive.*"® Mr Shaw placed the cash in
the safe at the Group's office at 55 Macquarie Street, Sydney within a
day or so of its receipt. If there was an accumulation of cash it would
be deposited to the account of Yorkville Nominees or Mars Road
Investments and a cheque issued to either Nugan Hand Ltd or Nugan Hand
International Holdings Pty Ltd [profile 2.96], as directed by Mr Nugan. 19 The clients w e r e not a w a r e o f this.
6.25 Mr Sha w de s c r i b e d the cas h deposits as 'black money' w h i c h he
u n d e r s t o o d t o refer to 'money th a t was not being declared' for taxation
-868-
purposes. He d i d not k n o w the sou r c e of the 'black money' but said it
c ould be 'obtained in m a n y dif f e r e n t w a y s â such as gamb l i n g and the
removal of cash fro m the till w i t h o u t d e c laring it as taxable i n c o m e .
Mr S h a w sai d he u nderstood he w a s a s s i s t i n g the ca s h clients to conceal
funds f r o m the Commissioner of Taxation. In addition Mr Sh a w offered
cash c l ients the advan t a g e s of anonymity, the receipt o f interest in cash
and the p a y m e n t of funds overseas. As to the latter Mr Sha w said h e told
his c l ients 'if ever the occa s i o n arises th e y ne e d assistance in that
regard w e w o u l d p r o b a b l y h e l p t h e m . ' This facil i t y w a s offered to
20
clients who deposited by cheque as well as cash clients.
21
6.26 One of the clients whose name appears on Mr Shaw's list of
22
cash clients was interviewed b y the Joint Task Force on 19 March 1981
23 ·
and on 5 July 1983 by the Commission's investigators. This client
said he met Mr Lowe in 1974 and by mid 1975 was selling heroin for him.
The association continued until January 1976 and in that period the
client had accumulated $24 500 from the sale of heroin. He was
introduced to Mr Shaw by Mr Lowe and subsequently deposited this amount
with Yorkville Nominees. He claimed that in January 1976 he deposited a
further $20 000 cash, the proceeds of heroin sales, through Mr Shaw.
Available records however indicate this may have been a smaller amount of
less than $12 000 deposited over three dates during January 1976. This
client maintained that Mr Shaw asked him to recruit other people 'in the
business' (which the Commission understands to be a reference to the drug
trade) for the Nugan Hand Group. He said he mentioned this to several
persons who were drug sellers and believed that at least two of these
persons24 made use of the company's facilities. The client became
addicted to heroin in 1976 and during that year withdrew almost all of
the money he had invested. He was a regular visitor to the Nugan Hand
Group offices. He made about twenty visits in all and dealt mainly with
Mr Shaw. He said on occasions when Mr Shaw was absent, Mr A.H. Wong
[profile 2.74] handled the transactions on Mr Shaw's instructions.
6.27 Mr Shaw told the Commission Mr Lowe took the client to his
(Shaw's) home at Coogee one evening and introduced him as a potential
depositor. Mr Shaw discussed with the client, the deposit arrangements
-869-
but said he could not recall if the client told him the nature of his
business on that occasion. He agreed the whole purpose of the exercise
was to attract people with 'black money' and to assure them that their
anonymity would be preserved. When a person with 'black money' made a
deposit Mr Shaw would not ask the source of such money. Î suppose you
could say that I closed a blind eye'. According to Mr Shaw, the
client was a depositor for only a short time. He made one deposit of
$24 500 and withdrew it over a period of months. Mr Shaw said he only
saw the client at the office about half a dozen t i m e s . M r Shaw said
he became aware there was a strong possibility this client was involved
in drug trafficking but he may have been told this by other people. He
did not have any doubt at the time he gave evidence to the Commission
that the client's money was the proceeds of drug trafficking. Mr Shaw
was quite happy to take deposits from cash clients even though they were
drug traffickers. He was anxious to build up a deposit base and 'may not 27
have asked the questions' he should have asked.
6.28 A section of that client's record of interview''® with the
Commission's investigators was shown to Mr Shaw. In that interview the
client stated he had commented in conversation with Mr Shaw how easy it
was to make money by pushing drugs. Mr Shaw denied there was any truth
in this allegation. Mr Shaw was then directed to the following
question and answer from the same record of interview:
'Q. Do you consider that Shaw knew you we r e t r a f ficking in drugs and that the money you had deposited in the bank was the proceeds of such sales?
A. D e f i n i t e l y . '
Mr Shaw responded that he could not recall a conversation in which the
client told him the money had come from drugs. Mr Shaw said he became
aware of the client's background and that he was a drug addict after
their first or second meeting.®®
6.29 Mr L o w e gav e evidence to the C o m m i s s i o n relevant to Mr S h a w and
his clients. In his evidence Mr Lowe referred to the introduction of
over s e a s C h inese to the N u g a n H a n d Group. He said they were heroin
-870-
dealers who were receiving around $30 000-$40 000, which were the
proceeds of heroin sales. Mr Lowe said these people were in Australia
'on a visa, they had no visible means of support, and it would look
strange if they were to carry large sums of money back home on the
plane', It was Mr Lowe's function to seek a more secure way for them to
remit the money and accordingly he introduced them to the Nugan Hand
Group. He claimed Mr Shaw had told him the moneys could be remitted
overseas within 24 hours. On each occasion he took the overseas Chinese
to the Nugan Hand Group offices, he saw Mr Shaw and acted as
interpreter. Mr Lowe, said there were occasions when either Mr Nugan or 31 Mr Hand saw him with Mr Shaw.
6.30 Mr Lowe told the Commission he also introduced other drug
dealers to 'the bank' whom he described as 'Australians who used to deal
with me.' He expressed the view that Mr Shaw 'had a very good idea' he
was dealing in heroin and therefore he believed it would not have taken
lonq for Mr Nugan or Mr Hand to find out about it, either by Mr Shaw
32
telling them or as a result of their own observations.
6.31 Mr Shaw informed the Commission he met Mr Lowe in 1974. For a
short period Mr Lowe worked as an independent contractor to the Nugan â 33
Hand Group in connection with the marketing of silver bullion.
Mr Shaw told Mr Lowe, on Mr Nugan's instructions, that he would receive a
commission if he introduced clients to the Nugan Hand Group. The
commission varied from one quarter to one per cent of the deposit per 34
annum depending on the term of the deposit.
6.32 Mr Shaw said he vaguely recalled a meeting at his office in
Macquarie Street with Mr Lowe and some Chinese gentlemen. He thought
they wished to invest money in Australia and to transmit it through the
Nugan Hand Group office in Thailand or Hong Kong. He could not recall
whether the funds were coming into or going out of Australia. Nor could
he recall the source of the funds or the use to which they were to be
put."^ Mr Shaw was then referred to the following extract from an
interview between Mr Lowe and officers from the Joint Task Force
conducted and recorded on 14 April 1981:"^
-871-
'Q. Was Shaw aware of the source
transferred to Hong Kong? of the money to be
A. Yes ...
Q. Did you tell Shaw this money would
sale of drugs?
be the proceeds of the
A. Yes.'
37
Mr Shaw responded ' I do not recollect that conversation.1 He said he
first became aware Mr Lowe was a drug user and trafficker in 1976 or 1977
when Mr Lowe was arrested.^®
6.33 Mr Shaw was also referred to that part of Mr Lowe's record of
interview in which Mr Lowe alleged Mr Shaw had introduced Mr Lowe to one
of his cousins^ and that the reason for the introduction was to enable
Mr Lowe to transact business in relation to a shipment of hashish.
Mr Shaw agreed he had introduced Mr Lowe to that relative but said he was
not privy to their discussions. Asked if he recalled whether they
discussed any matters relating to drug trafficking Mr Shaw said Î would
not know, I do not recall that.' Mr Shaw told the Commission he had
never discussed the importation of hashish concealed in heavy machinery
(which was an allegation made by Mr Lowe in the record of interview) with
Mr Lowe or anybody else. He did however suspect that his cousin may have
been involved in the area of 'soft drugs' as he thought he smoked
marijuana and mixed with friends who smoked marijuana.^ Asked whether
he knew his cousin was involved in drug trafficking, Mr Shaw said he had
his suspicions about his cousin's activities. Later when again asked 41
this question, Mr Shaw replied Î must admit that.'
42
6.34 In his record of interview with the Joint Task Force Mr Lowe
also said:
'George Shaw told me if I knew anyone else involved in drugs who wanted their money handled and transferred to any part of the world to bring them in also.'
This allegation was put to Mr Shaw. He agreed he had asked Mr Lowe to
introduce clients to the Nugan Hand Group but otherwise denied the
allegation.^
-872-
44
6.35 Another client whose name appears in Mr Shaw's list as a
cash client [see 6.23] was interviewed by the Joint Task Force on
45
27 February 1981. This client admitted being involved in the
distribution of drugs from 1972 to 1980. He claimed he was a
professional photographer and was introduced to Mr Shaw who wanted some
family photographs taken. The client said he was advised by Mr Shaw that
depositors with the Nugan Hand Group were afforded secrecy and that
facilities were available for the transfer of funds overseas. The client
claimed he initially deposited $10 000 cash with the Nugan Hand Group in
early 1975 and continued to deal with the Group until its collapse in
1980. In all he claimed to have deposited a total of $20 000, $10 000 of
which he lost when Nugan Hand Ltd collapsed. However the evidence
suggests this client's initial deposit was $32 000 in May 1976 and in all
he deposited $96 150 between that date and February 1980.48 According
to this client at least half of the money he deposited was the proceeds
of drug sales. He claimed all his transactions were handled u Mr Shaw
except on a few occasions when Mr Shaw was absent. On those occasions he
was attended by Mr Wong.
6.36 Mr S h a w informed the Commi s s i o n h e was introduced to this client
47
b y his cousin. There a f t e r he said a close business relationship
d e v eloped b e t w e e n h i m (Mr Shaw) a n d this client. Mr Sha w said the client
w a n t e d to purchase a b u i l d i n g in Balmain. He had about $30 000-$32 000
in cash and was seeking advice as to how he might raise the balance of
the purchase price. This client also had 'taxation problems' and in that
regard Mr Shaw referred him to Mr A. Lee48 [profile 2.37]. Mr Shaw was
shown Commission Document 5984, a deposit acceptance slip dated 30 July
1976 bearing this client's name and showing Mr Shaw's residential address
as that of the client. Mr Shaw agreed the writing on the deposit slip
was his but he c o u l d not recall w r i t i n g it. He said he w a s surprised to
see the document and could give no reason as to why his address appeared 49 therein.
6.37 Following the arrest of this client on drug charges Mr Shaw said
he became aware of the client's involvement in drug trafficking.
Thereafter he had no doubt the money was coming from drug sources.
-873-
However Mr Shaw said he could not recall being aware of the client's
involvement with drugs at the time of their introduction and that from
what he had been told he formed the view this client used and was
trafficking in marijuana. Mr Shaw agreed this client had continued to
make cash deposits subsequent to the date of his arrest on drug
offences.50 Mr Shaw also agreed he had guaranteed a bank loan which
the client had obtained through the Bank of New South Wales. Mr Shaw
said the loan related to his client's photography business which had a
'cash flow' problem. The amount of the loan was between $2 000-$4 000.
Mr Shaw said the Nugan Hand Group was holding sufficient funds on the
client's behalf to cover the loan but he was unable to explain why the 51
client did not simply draw on these funds.
52 53
6.38 This client introduced yet another client whose name
also appears in Mr Shaw's list of cash clients [see 6.23]. The second
client Mr Shaw knew as a user of drugs but he said it was not until some
months after the client became a depositor that he became aware the
client was also a drug trafficker. Mr Shaw received deposits from this
client and made repayments to him on many occasions over a considerable
period. Mr Shaw recalled the initial deposit was $10 000 and said that
all moneys deposited and withdrawn by the client were cash transactions.
As to why this client deposited such moneys, Mr Shaw said 'the client
obviously did not want to declare his funds and I gave him the best means
of avoiding' his taxation liability.54
55
6.39 A deposit acceptance form in this client's name showed
Mr Shaw's private address as that of his client. Mr Shaw could give no
reason for this other than to say that the client came from Canberra and
had no permanent address at that time. Mr Shaw agreed however that in
other similar cases he had recorded addresses as care of Nugan Hand
Ltd.56
6.40 Mr Shaw gave evidence relating to another client57 whose name
appears in his list of cash clients [see 6.23]. This client was arrested
and charged with an offence relating to drug trafficking but was
subsequently acquitted. Mr Shaw said he first became aware of the
-874-
allegation that this client was involved in drug trafficking at the time
of his arrest. In March 1980 the client's wife contacted Mr Shaw seeking
the withdrawal of $50 000 for the purpose of obtaining her husband's
release on bail. Mr Shaw sought the approval of Mr Hand to withdraw the
money but was told there were no funds available in Yorkville Nominees.
According to Mr Shaw he then asked Mr M.J. Moloney [profile 2.48] to
release the funds but again to no avail. Mr Shaw recalled that the
client had originally deposited $80 000 and believed that, prior to his
arrest, he had withdrawn $20 000-$24 000.^®
59
6.41 Mr Lee said that on one occasion he had seen a person at the
premises at 55 Macquarie Street coming out of Mr Shaw's office and he had
recognised this person as one who had been gaoled previously in relation
to a drug offence. Only a few weeks prior to that Mr Nugan had sent a
memorandum to all staff stating he wanted nothing to do with anyone who
was involved with gambling or drugs. Mr Lee said he asked Mr Shaw what
that person was doing in the office and Mr Shaw replied he was a regular
customer depositing money. Mr Lee informed Mr Shaw that his client had
been in gaol on drug charges and that Mr Shaw should 'get him out' in
seven days or he (Mr Lee) would tell Mr Nugan. Seven days later Mr Lee
spoke to Mr Shaw and found the client was still a customer so he told
Mr Nugan. According to Mr Lee, Mr Nugan called Mr Shaw to his office and
'roasted the daylights out of him' in Mr Lee's presence. Mr Lee heard
Mr Nugan say Î told you before we do not want any of these sorts of
people around here ...'.^
6.42 Mr Lee was asked what caused Mr Nugan to issue the memorandum to
the staff. He said that Mr Nugan had said the company had been accused
of being involved in the drug scene. According to Mr Lee this was the
only conversation he had with Mr Nugan in which the subject of drugs was
mentioned. The only conversations he had with Mr Shaw about drugs were
the two occasions referred to in paragraph 6.41. Mr Lee said he had no
reason to suspect that anyone employed by the Nugan Hand Group or
Mr Nugan was involved in any way with drugs.^ Mr Shaw gave evidence
relating to this incident. He told the Commission of an occasion when
Mr Nugan informed him that one of his clients had been arrested and
-875-
char ged with drug offences. According to Mr Shaw, Mr Nugan appeared to
be upset and said words to the effect:62
'We don't want to have any more clients like this in this
organisation. I want you to desist from soliciting funds from people with this background.'
Asked whether he had discussed with Mr Nugan that he had clients who were
involved in drug trafficking Mr Shaw responded:
'No.... i mean, I would not bring it up as blatantly as all
that, obviously he was aware we had clients who were involved in drugs and things of this nature, it was left unsaid but he was fully aware of this type of client __
Mr Shaw said he relied upon Mr Nugan to arrange for the identity of these
depositors to be lost in a maze of corporate manoeuvres and for the
interest to be paid in such a way that the Taxation Department would not
know about it. Mr Shaw said he did not care where the money came from
and Mr Nugan gave no indication that he cared.64
6.43 Mr Shaw said he could only draw a conclusion that Mr Hill knew
about his drug clients because if he (Mr Shaw) was not available when
these clients came to make deposits or withdrawals, they would
automatically see Mr Hill.68 Mr Hill told the Commission:66
' ... after Frank Nugan went to Canberra he had a discussion
with George Shaw and apparently a number of George Shaw's clients were known as drug dealers ...'
6.44 Mr Wong gave evidence to the Commission inconsistent with that
of Mr Shaw. He told the Commission that on three or four occasions he
attended to clients of Mr Shaw in Mr Shaw's absence and on each occasion
Mr Shaw left Mr Wong with instructions. Mr Wong said he recalled the
names of two of Mr Shaw's clients.6^ _
6.45 Mr Shaw told the Commission Mr Hand was also aware that deposits
were being received from drug traffickers. When asked whether he
personally advised Mr Hand this was the case, Mr Shaw responded:68
-876-
' ... I would not make a special effort to bring it to his
attention, but it is only a matter of time before all these
situations start to materialize and it is very easy to pick the situation up. I mean, he was aware that obviously there was a lot of cash coining in, and where was it coming from? He was not naive in that respect.1
In considering evidence of the state of Mr Hand's knowledge it is
important to bear in mind that Mr Hand was absent from Australia from
December 1974 until approximately March 1976 and that in October 1976 he
left Australia and thereafter, so far as is relevant, resided in either
Hong Kong or Singapore making only occasional visits to Australia after
his departure in October 1976.
6.46 Mr Moloney gave evidence to the Commission in relation to
Mr Shaw's clients. Mr Moloney said he first met Mr Shaw prior to
Mr Nugan's death and at that time knew nothing adverse about him. He
understood Mr Shaw to be a public relations man for the Nugan Hand
Group. During the first week after Mr Nugan's death, Mr Moloney recalled
there were discussions at board meetings about Mr Shaw's clients but it
was not suggested that those clients were involved in illegal activity or 69 drug trafficking. According to Mr Moloney investigators of the Joint
Task Force informed him of the allegations linking the Nugan Hand Group
and Mr Shaw with drug traffickers. He said he had asked Mr Shaw on
numerous occasions whether his clients were involved in drugs but Mr Shaw
always categorically denied such involvement. Mr Moloney said Mr Shaw
would claim to know the client personally and say there was no
possibility the client was involved with drugs. At the time he gave
evidence to the Commission on this subject, Mr Moloney said he 'now
believed' Mr Shaw took in money from people that he knew were involved in
drugs and that he took in money and was party to transactions knowing 7(i
that they were in some way drug related.
6.47 Following Mr Nugan's death, Mr Moloney advised Mr Hand that no ⢠71
repayments should be made on behalf of Yorkville Nominees.
Mr Moloney said Mr Shaw showed signs of being extremely upset apparently
because of this instruction. He was 'most agitated' that his clients 72
would not be repaid immediately if they called for their money.
-877-
Mr Moloney observed that while Mr Shaw paid lip service to the
instruction it seemed he could juggle funds to suit himself. He would
claim that a depositor in Yorkville Nominees was in fact a depositor in
Mars Road Investments. On 30 January 1980, Mr Shaw was requested by
Messrs Hand and Moloney to prepare a list of Yorkville Nominees and Mars 73
Road Investments depositors with the assistance of Mr Wong . This
list proved not to be comprehensive as over the next few weeks Mr Shaw
sought repayments of deposits for clients whose names did not appear on ,, ,. , 73a
the list.
6.48 Mr Moloney informed the Commission of an occasion when Mr Shaw
sought from him authorisation to withdraw $50 000 for a client who had
been arrested on charges relating to the importation of marijuana.
Mr Shaw had said to Mr Moloney he knew the client personally and somebody
was trying to set him up. According to Mr Moloney the client had
74
deposits of about $100 000. Mr Moloney identified the client by name
but there is no doubt on the evidence that he was mistaken and that the 75
client was in fact a person other than the one he identified.
6.49 Mr Hill gave evidence to the Commission on 16, 19 and
27 September 1983 relating to Mr Shaw's clients. Mr Hill said when
Mr Shaw commenced employment with the Nugan Hand Group, Mr Nugan
instructed him to find clients who had taxation or legal problems.
Mr Nugan had said he would help such people solve those problems at no
cost if they became depositors with the Nugan Hand Group. Mr Hill
recalled hearing Mr Nugan so instruct Mr Shaw on a number of occasions.
Mr Hill said up to about 1977 Mr Shaw's transactions were recorded in the
records of Yorkville Nominees and the majority of them would have been by
cheque. Those deposits went from Yorkville Nominees to Nugan Hand Ltd
and then into the money market. The money was returned to depositors by
way of cheque and Yorkville Nominees was reimbursed. After about 1977,
Mr Shaw's clients deposited in cash.^ According to Mr Hill, Mr Shaw
was very reluctant to divulge names or details of his clients, or to keep 77 any record of their transactions.
6.50 Mr Hill told the Commission of Mr Nugan's visit to Mr Harvey
Bates, the Director of the then Federal Narcotics Bureau in Canberra on
-878-
14 February 1978.78 Mr Nugan had been informed by Mr R.A. Pulger-Frame
[profile 2.59] in Hong Kong that the Group was suspected by the Bureau of
having dealings with drug traffickers. It was this information that
caused him to go to see the Bureau's head in Canberra. On instructions
from Mr Nugan, Mr Hill prepared a list of all the Nugan Hand Group
depositors. The list was a four or five page document containing some 79 150 to 200 names. Mr Hill said sometime before this, Mr Nugan told
him (Mr Hill) that he (Mr Nugan) was going to see Mr Bates to determine
whether any Nugan Hand Ltd clients were drug dealers. According to
Mr Hill, Mr Nugan was very concerned that he was getting a reputation of
being involved in drug trafficking. At the time there was much newspaper
speculation about marijuana growing in Griffith, New South Wales and the
association between the Griffith based Nugan Fruit Group and the Nugan
Hand Group. Mr Nugan told Mr Hill the Narcotics Bureau in Canberra 'had
a large blackboard with a diagram of all the drug dealers and slap bang
in the middle of it was Nugan Hand Ltd'.88 Cn his return Mr NUgan
asked Mr Hill to prepare a second list of Nugan Hand Group clients and to
make sure that Mr Shaw prepared a list of all his clients. Mr Hill said
he asked Mr Nugan words to the effect 'Haven't we been through all this
before.' In response Mr Nugan replied he had not been able to convince
the Narcotics Bureau that the NUgan Hand Group was not trafficking in
drugs.8-1 After a second visit to Canberra, Mr Nugan instructed Mr Shaw
to 'cease dealing with all the people on his list, to get rid of them and
stop doing any transactions with them'. He told Mr Shaw they were 'all
crooks and he did not want them in his company1. After the second visit
to Canberra Mr Hill 'got the impression that a lot of George's people
were involved in illegal activities'.83 He told the Commission he 'had
not formed the opinion that George's clients were involved in illegal
activities' until Mr Nugan's second visit to Canberra.83 Subsequently
he told the Commission this was his first indication that 'a lot of the
people he [Mr Shaw] was dealing with were actually involved in the drug 84 trade'. In addition to travelling to Canberra to see Mr Bates in
February 1978 Mr Nugan was in telephone contact with Mr Bates in April
and October 1979 seeking information concerning inquiries into the
Group. As a result of the October telephone call Mr Bates caused two
senior members of the Bureau to further interview Mr Nugan and a report
of that interview is among the Commission's holdings.88
-879-
6.51 Another of the persons86 whose name appears in Mr Shaw's list
[see 6.23] as a cash client was interviewed by the Joint Task Force on
27 February 1981.8^ In a record of that interview he admitted being
involved in drug trafficking and claimed he became a depositor with the
Nugan Hand Group in the mid 1970's following his introduction to Mr Shaw
by another client. He thought the total amount deposited with the
Nugan Hand Group was about $25 000 and estimated that about seventy per
cent of his deposits came from the sale of drugs. Records available
however, indicate deposits totalling in excess of $50 000. All this
client's dealings were with Mr Shaw except for a few occasions when
Mr Wong attended him in Mr Shaw's absence.
6.52 Another person88 whose name appears in Mr Shaw's list
[see 6.23] as a cash client, and his associate®® were examined by the 90
d e l egates of the Co r p o r a t e A f fairs Commi s s i o n and interviewed by the
91
Joint Task Force. They were close friends who, during the mid to
late 1970's, were involved in the sale of marijuana and hashish. This
client88 was introduced to Mr Shaw by letter in late 1977 or early 1978 92 from another client. Subsequently this client deposited $30 000 with
the Nugan Hand Group through Mr Shaw. The associate,89 although the
owner of half the money, did not meet Mr Shaw nor did he communicate with
him. The money deposited was subsequently withdrawn. Of this money,
$4 000 was made available to the client88 in Singapore.98
94
6.53 Another person whose name appears in Mr Shaw's list [see
6.23] as a cash client was interviewed by the Joint Task Force on
95
4 February 1981. Between 1975 and 1979, this client was involved in
drug trafficking in Sydney and Melbourne. According to available records
he made a series of cash deposits through Mr Shaw totalling $43 000 in
amounts ranging between $5 000-$10 000 over a six week period commencing
22 November 1977. He was introduced to Mr Shaw by another client.96
Of the $43 000 cash deposited with Mr Shaw, the client said that $35 000 97 came from the sale of heroin.
-880-
The 'Mr Asia1 and other drug syndicates
6.54 Two specific allegations suggest a connection between the Nugan
Hand Group and other groups which were brought into existence to import
heroin into Australia. One such group was the 'Mr Asia' drug syndicate
and another was the Sinclair, Fellows and Hayward heroin ring.
6.55 The first allegation refers to the attendance of persons
associated with each of the above groups at a farewell luncheon for
Mr Paul Hayward at the Basement restaurant in Sydney prior to his
departure for Bangkok. His journey to Bangkok with Mr Warren Fellows was
for the purpose of purchasing heroin for importation to Sydney. Both
were arrested and sentenced to lengthy prison terms in Thailand. The
allegation was first published in The Tribune newspaper on 9 December
1981. The article suggested that in excess of a dozen people met at
the Basement restaurant near Circular Quay to farewell Mr Hayward.
6.56 Mr Graham Beith told the Commission in February 1983 he lunched
at a restaurant behind Circular Qja y in Sydney w i t h Mr Nugan. Upon
entering the restaurant he saw a party of some eleven people seated
around several adjoining tables. He identified the following persons as
b e i n g present: Mr K.L. Nugan, Ms M o n i q u e V a n Putten, A d miral E.P. Yates,
Mr M.J. Hand, Mr M. Farquhar, Mr F. Krahe (now deceased), Mr D. Pittard,
99
Mr J. Laws, Mr J.D. S i n gleton a n d Mis s P.M. Swan.
6.57 The Joint Task Force investigators interviewed Messrs K.L.
Nugan,100 John Laws,101 John Singleton,102 Murray Farquhar,101
Denis Pittard104 [profile 2.56] and Dr Peter Solomon105. Each denied
his attendance at the luncheon. The owner of the restaurant was also
interviewed and denied any knowledge of the luncheon.105
6.58 The Commission formed the view that Mr Beith1 s evidence was
unreliable. Having regard to the denials of those who were alleged to
have attended the restaurant, the statement of the restaurant's owner and
the total absence of any corroborating evidence, the only reasonable
conclusion is that the luncheon never occurred. The journalist who
-881-
' broke1 the story in The Tribune newspaper in Sydney was seen in
conference by one of the Counsel Assisting the Commission and an
instructing solicitor. During the conference the journalist conceded he
had used what he termed 'poetic licence' in the construction he had
placed upon his notes recording remarks made to him by Mr Beith.
6.59 Further, the Commission has found no evidence to support the
allegation that the Nugan Hand Group passed $25 000 to Mr Hayward's
wife. The explanation for this allegation may lie in the fact that there
was a depositor with the Group known as 'P. Hayward', however this was a
reference to Ms Patricia Hayward who had nothing whatsoever to do with
the matters in question. Nor is there any evidence to support the
allegation that the Nugan Hand Group funded the defences of Messrs 107
Hayward, Fellows and Sinclair in Bangkok. In its report the Joint
Task Force suggests the basis of this claim might be found in a statement
which members of the force obtained from Mr Singleton108. In that
statement Mr Singleton said he arranged for his solicitor, Mr John
Tesoriero, to go to Bangkok to look after Mr Hayward's welfare and to
' ensure that he got local legal representation and to make sure that he
got a trial'. Mr Singleton paid Mr Tesoriero's expenses and costs but
denied that he financially assisted Mr Hayward with his defence.
6.60 The second allegation seeking to show a link between the Nugan
Hand Group and the 'Mr Asia' syndicate involved the collection by Mr Shaw
of $260 000 in cash from the offices of Mr John L. Aston, solicitor, on
26 March 1979. This money was dealt with in such a manner by the Nugan
Hand Group that the equivalent in Singapore dollars was paid in Singapore
on 12 April 1979 to a member of the 'Mr Asia' syndicate responsible for
conducting the Singapore part of Terrence Clark's heroin importing
business. There is evidence which suggests the money may have been
delivered to Mr Aston's office by a leading member of the 'Mr Asia'
group.110 Mr Aston's office diary indicates an appointment with this
person on 29 March 1979. The page for that day had been removed from the
diary, but scientific examination revealed an impression of the notation
on subsequent pages. Documents found in Mr Terrence Clark's briefcase in
Britain indicate that an amount of $250 000 was sent to Singapore by
Mr Brian Alexander (then employed as a law clerk by Mr Aston) in March
1979.
-882-
6.61 The link between the Nugan Hand Group and the 'Mr Asia'
syndicate was investigated at some length and reported upon by the
Commission during its inquiry into drug trafficking.111 1 1 2 1 1 3 1 1 4 1 1 5 The Commission
concluded that the Nugan Hand Group provided facilities for the transfer
of $260 000 from Sydney to Singapore for collection by a member of the
'Mr Asia' syndicate. However, there is no evidence which suggests that
any person associated with the Nugan Hand Group knew the moneys were to
be used to purchase narcotics.
The Thailand Office
6.62 In the Commission's view Mr N .Evans [profile 2.21] is not a
witness whose evidence the Commission can accept unless it is
corroborated by objective evidence. His evidence contains a number of
inconsistencies and is contradicted by the evidence of others accepted by
the Commission as being true. He was interviewed by the Joint Task Force 112 on 6 January 1981 and examined by the delegates of the Corporate
113
Affairs Commission on 20 February 1981. He gave evidence to this
Commission in December 1983.
6.63 According to Mr Evans Mr Hand had approached him about joining
the Nugan Hand Group. He said Mr Hand had told him he would do very well
in the northern Thailand region because there was a lot of 'loose' money 114 there which was 'all drug money'. This conflicted with evidence he
had previously given to the Joint Task Force when he nominated Mr J.M. 115
Gilder [profile 2.25] as the person who had told him this. He said
that Mr C.L. Collings [profile 2.15] told him the majority of his
deposits would come from the drug industry and he warned Mr Evans not to
be involved in the handling of drugs. He claimed Mr Collings said to him
'There is only one industry in Chiang Mai and I am sure you are aware of
it and that is drugs, so do not have any illusions about where your money
is coming from',11® Mr Evans claimed Chiang Mai had been chosen
because of Mr Hand's knowledge of the area through his associations
during the Vietnam conflict. Mr Evans said Mr Hand had told him he
(Mr Hand) knew several tobacco companies involved in marijuana
cultivation and export and it was suggested Mr Evans should make his
-883-
initial approach into these areas by attempting to attract business from
the tobacco companies, 'either by way of reinvoicing for them through
Hong Kong or just by way of taking deposits and getting their money out
o f the c o u n t r y ' . Mr E v a n s sai d he a pproached three Amer i c a n tobacco
companies about the reinvoicing proposition but no transactions
occurred. Mr Evans said he had been told these companies were growing
marijuana although he did not see the marijuana because it was in an area
where one could not go due to the activities of guerillas and private . 117
armies. Mr Evans claimed he obtained deposits from about seven
people in Bangkok and Chiang Mai the sum of which was in excess of
US$4 million. (He told the Joint Task Force he had collected 'a bit over
two and one half million' in deposits."*''*'â¢3 ) Mr Evans believed some of
the deposits were the proceeds of the drug trade.·*·"*·®
6.64 Mr E v a n s was refe r r e d to i nconsistencies b e t w e e n the evidence he
gave to the Corporate Affairs Commission on 20 February 1981 and his
evidence to this Commission relating to the procedure adopted by him upon
receipt of the deposits. He claimed the Corporate Affairs Commission 119 transcript was in error. This Commission does not accept this claim.
6.65 Mr Evans was in Thailand for five months in 1977. (He
erroneously referred to 1976 throughout his evidence.) He informed the
C o m m i s s i o n h e d e cided to leave Thailand because he was concerned m a n y
Europeans were being arrested for drug offences, the Nugan Hand Group was
receiving a lot of attention from the military, he was 'not hitting it
off' w i t h Mr Collings a n d he w i s h e d to be reunited wi t h his family. He
o b t a i n e d a c e r t ificate f r o m a doctor in Bangkok to the false effect that
120
he was su f f e r i n g from h e p a t i t i s a n d returned to Australia.
6.66 Mr E v a n s said as far as he was a w a r e , neither Nugan Han d Ltd or
a n y of its assoc i a t e d co m p a n i e s or o p eratives a c t u a l l y became involved in
b u y i n g and s e lling drugs. It w a s o n l y that they we r e prep a r e d to accept
deposits fro m people w h o we r e t hought to hav e been involved in the dru g
trade. He denied any suggestion that he had been involved in drug
121
tra f f i c k i n g himself.
-884-
6.67 This evidence is completely contradicted by the evidence of
Mr G i l d e r w h o gave evid e n c e to the C o m i s s i o n in respect o f Mr Evans'
allegations. He sai d that Mr Evans h a d come to see h i m at the s uggestion
of Mr Hand the latter having proposed three offices in Thailand, namely,
at Bangkok, Phuket a n d C h i a n g Mai. Mr Gilder said he visited Mr Evans'
office in Chiang Mai in early 1977 and was not impressed with what he
p e r c e i v e d to b e a lack of b u s i n e s s potential. For a start, he said,
hardly anybody spoke English. He said Mr Evans insisted upon carrying on
whereupon Mr Gilder submitted a written recommendation against continuing 122 with the Chiang Mai office.
6.68 Mr Gilder denied ever having discussed the recruitment of drug
deposits w i t h M r Evans w h o h e s a i d 'was firmly a n d c l e a r l y instructed to
123
se e k l e g i t i m a t e b a n k i n g a n d t r a d e business'. He sai d h e w a s
i nstructed specif i c a l l y not to involve h i mself in a n y currency
transactions. Further Mr Evans fai l e d to a t tract a n y deposits nor did he
compl e t e a n y significant trade transactions. The offi c e was eventually
closed dow n due to lack o f b u s i n e s s activity.
6.69 Mr Evans' claims are also rejected by Mr Collings. Mr Collings
gave evidence to the Commission in Hong Kong in August 1984 and a record
of interview dated 15 August 1984 between Mr Collings and a Commission
investigator was incorporated into the transcript."*·^ Mr Collings said
he did not agree with the establishment of Nugan Hand Group offices in
Chiang Mai or Phuket. He said he managed to 'stop Phuket from happening'
but Chiang Mai 'went ahead' on Mr Hand's instructions. Mr Evans went to
Chiang Mai and Mr Collings approved of an office being leased on the same
floor as the United States Drug Enforcement Agency (the 'D.E.A.').
Mr Collings visited the D.E.A. before the Nugan Hand Group office opened
and introduced himself, Mr Evans and the company. Mr Collings told the
D.E.A. personnel he had instructed Mr Evans to advise them of every
person he spoke to with a view to any kind of business. Mr Collings
said, to his knowledge, Mr Evans did no business which resulted in the
company receiving a deposit, or a fee for any service or a profit on any
trade transaction. Mr Collings informed the Commission an effort was
made to encourage some of the large tobacco companies in the area to sell
-885-
their tobacco through the Hong Kong office of Nugan Hand Trade Asia Ltd,
but nothing came of it. Mr Collings said he 'fired Mr Evans because he
was incompetent.1 Mr Collings presumed this embittered Mr Evans towards
him and the Nugan Hand Group which he claimed led to 'a lot' of the
allegations made by Mr Evans.124
6.70 Mr Pulger-Frame was interviewed by the Joint Task Force in Hong 125 Kong on 11 September 1981 and was examined by the Commission in
Hong Kong on 21 August 1984. In the interview with the Joint Task Force
Mr Pulger-Frame was asked about his knowledge of the Nugan Hand Group
operations in Thailand. Mr Pulger-Frame said he met Mr J.D. Owen
[profile 2.53] and Mr Evans as they passed through Hong Kong en route to
Thailand. Mr Collings told Mr Pulger-Frame he would be frequently
required in Bangkok to change money. This forecast of business in
Thailand proved to be inaccurate. Mr Pulger-Frame said he collected
funds from Mr Owen on a few occasions but never met Mr Evans at any time
in Thailand. His opinion was that the venture in Thailand was a failure.
6.71 Mr Cwen was interviewed by the Joint Task Force in Bangkok on
29 August and 6 September 1981. Although he gave evidence to the
Commission he was not examined on this subject matter. Mr Cwen told the
Joint Task Force he was aware of three persons from whom Mr Evans
collected deposits in Chiang Mai. These deposits were approximately
10 000 baht each making a total of about 30 000 baht (approximately
A$1 200). He was not aware of any other deposits attracted by Mr Evans.
Mr Owen said Mr Evans was so short of money when he left Thailand that he
borrowed the equivalent of A$75 from him (Mr Owen). Mr Evans gave
Mr Owen a cheque for this amount but the cheque was subsequently
dishonoured. When Mr Cwen was told of Mr Evans' claim of attracting
deposits of about US$2.6 million, his reaction was to say, 'It's
bullshit'.
6.72 Mr Owen was given the opportunity to read the transcript of
127
Mr Evans' statement to the Joint Task Force. His comment was, 'The
statement seems to have been made by someone who is in waiter Mi tty
land'. Mr Owen said Mr Evans' tale of the circumstances under which he
left Thailand 'is simply not true'.126
-886-
6.73 Mr P.M. Dunn [profile 2.18] gave evidence to the Commission on
13 August 1984 and 22 November 1984. He said he did not see anything
which suggested that either Mr Hand or Mr Nugan was involved with drugs.
Mr Dunn said he was quite active on behalf of the Nugan Hand Group in
South East Asia and his brief was always not to have anything to do with
money which might be associated with drugs. His instructions were quite
specific in this regard."*"2®
129
6.74 The Joint Task Force said of Mr Evans in its report:
1 ... an exaggerator and distorter of the truth and at times an outright liar .... He was found to be an unprincipled man and
in fact admitted as much in his interviews'.
6.75 In the circumstances the Commission finds there is no evidence
to support the allegation that the office in Chiang Mai was established
to attract deposits from drug producers of the so called 'Golden
Triangle'. Similarly there is no evidence which supports Mr Evans'
claims relating to the amount of deposits he secured. * 1 1 1
ENDN O T E S : P A R T 6
(See explanatory note at front of report)
1 RCIDT (Woodward) Further Report p238 2 for example M u r r a y Riley, Regi n a l d Parkin, H a r r y w ainwright
3 RCIDT (Woodward) Further Report p244 4 RCIDT (Stewart) Report p202 5 JTF Report Vol.2 pp303-04
6 CAC 7th Interim Report p605
7 CD1461 folios 337, 554
8 CD11343
9 Interim Report No.l paras 3.2(f),4.13, 5.34, 5.4(ii) and 5.49(ii) 10 CT14131-34, CT14139, Lowe; Interim Report No.l paras 4.16 - 4.24 11 Interim Report No.l para 5.34, Appendix J 12 RCIDT (Woodward) Further Report p244 13 JTF Report Vol.2 pp329-33 14 ibid Vol.2 p329
15 ibid Vol.2 pp332-33
16 CT23366, Shaw; CD3302 17 CT23366-67, CT25061-62, Shaw; C h arles Beveridge, M alcolm Ladd,
George Shamoun, Geo r g e Makary, B ruce Smithers, B a r r y C h i t t e m and Don a l d Mackenzie
CT23367-69, Shaw 18
19 20 21 22 23 24 25 26 27 28 29
30 31 32 33 34 35 36 37 38
39 40 41
42 43 44
45 46 47 48 49 50 51 52 53 54 55 56
57 58 59 60 61 62 63 64 65 66 67 68
69 70 71 72
-887-
CT23375, Shaw CT23378-80, CT25072-73, Shaw Dona l d W i l l i a m Ma c K e n z i e
CD1293 CD2191 James Blacker, Colin Courtney CT23381-83, CT23385, Shaw
CT23383, CT23391, Shaw CT23382-85, CT23388, Shaw CD2191 folio 6
CT23389-90, Shaw CT23393, Shaw CT14128, Shaw CT14128-29, Shaw CT14123, Lowe
CT23380-81, CT23394, Shaw CT23394-95, Shaw CD1250 folios 1906-07 CT23396, Shaw CT23398, Shaw George Chakiro (alias Makary)
CT23398, Shaw CT23418, Shaw CD1250 folios 1905-15 CT23400, Shaw M a l c o l m C raig Lad d CD1308 folio 104 CAC 7th Interim Report pp618-19 G e o r g e C h akiro (alias Makary)
CT23404-07, Shaw CT23408, Shaw CT23407, CT23409-10, Shaw CT23410-11, Shaw
Malcolm Craig Ladd Charles Robertson Beveridge CT23412-15, Shaw Charles Robertson Beveridge CT23416-17, Shaw George Shamoun CT23419-21, Shaw Malcolm Craig Ladd
CT18643, Lee CT18643-44, Lee CT23421-24, Shaw CT23422-23, Shaw CT23424-25, Shaw CT23425, Shaw
CT24780, Hill CT20565, WOng; M a l c o l m C r a i g Ladd and Charles Robertson Beveridge CT23426, Shaw CT19944, CT20006, Moloney
CT22273, M oloney CT22275, M o l o n e y CT20008, M o l o n e y
73 73a 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 99 100 101 102 103 104 105 106 107 108 109
110
111 112 113 114 115 116 117 117a 118 119 120
-888-
CT25129, Shaw CT22274-75, Moloney Mr Abrahams
CT22273, Moloney; George Shamoun, CD11508 CT16231-32, Hill CT15704, Hill Interim Report No.l para 2.14 CT15736, Hill CT15737, Hill
CT15637-38, Hill CT15735-36, Hill CT15735, CT15742, Hill Interim Report No.l para 4.96 CT16232, Hill Charles R o b e r t s o n B e v e r i d g e CD1250 folios 1458-73 B a r r y Graeme C h ittem
M u r r a y D o n New m a n CD3005; CD3054 CD1308 folios 30, 127 Charles Robertson Beveridge; CD6026 CD4644 folios 11-12 Bruce Alan Smithers
CD1250 folios 3331-47 C h arles Ro b e r t s o n B e v e r i d g e CD1250 folio 3335 RCIDT (Stewart) Report p692 CT13849-50, CT13858-59, Beith CD1393 folio 22 CD1393 folio 21 CD1393 folio 17 CD1393 folio 20 CD1393 folio 23 CD1393 folio 19 CD1393 folio 15 JTF Report Vol.4 p784 CD3553 folios 11-12
This person has been committed for trial in New South Wales on charges of conspiracy to import heroin. For this reason his name is not mentioned here. Efforts are presently being made to extradite this person from the United States in relation to charges involving heroin trafficking. R C I D T (Stewart) Report pp221-28 CD1250 folios 3191-259 CD5698 CT18843-44, Evans CD1250 folio 3193 CT18781-86, Evans CT18853-55, CT18861, Evans CD1308 folio 51 CT18791-27, Evans CT19053-59, Evans CT18828, CT18836, Evans
121 122 123 124 125 126
127 128 129 130 131 132
133
134 135 136
-889-
CT18906-08, Evans CT20396-97, Gilder CD1250 folios 864-72 CT22766, Collings; CD10823 CD1250 folios 3374-75 CD1250 folios 812-28
CD1308 folio 51 CT22474, Dunn JTF Report Vol.2 p323 CT23380-83, Shaw CT23386-88, Shaw
CT23389-90, Shaw; CD2191 folio 6, McKenzie ROI Commission Investigators 12/5/83; CD1250 folios 1906-07,Andrew Wellington Lowe JTF ROI; CT23389-90, Shaw; CD2191 folio 6, JTF ROI R v White (1859) 1 Foster and Finlason, 664; R v Quillerat [1962]
Tas S.R. 371 R v Havard (1914) 11 CAR 2 R v Parker (1863) 2 SCR (NSW) 217 Interim Report No.l, para 5.33
.
P A R T SEVEN
A L L E G A T I O N S OF PART I C I P A T I O N IN T H E ILLEGAL M O V E M E N T OF ARMAMENTS
:
- 893 -
ALLEGATIONS OF PARTICIPATION IN THE ILLEGAL MOVEMENT OF ARMAMENTS
Terns of Reference
7.1 There have been widespread allegations concerning the Nugan Hand
Group and its alleged dealings in armaments, the clear inference in these
allegations being that not only did such transactions take place but they
were illegal and done surreptitiously so as to avoid the attention of
relevant law enforcement authorities at the time. In this Part those
allegations, in so far as they fall within the Commission's terms of
reference, are considered in detail and the Commission's conclusions
regarding the truth of such allegations are stated.
7.2 The Commission has commented on the construction it has placed
on the terms of reference in Part 1 Section 2 of this report. Those
tern: of reference from the Governments of the Commonwealth of Australia
and - ,-ie state of New South Wales require the Commission to inquire into
wher ier the Nugan Hand Group engaged in activities involving
contraventions of certain criminal laws. The Commonwealth terms of
reference call for specific inquiry into whether the Nugan Hand Group
engaged in activities involving contraventions of laws relating to the
importation, exportation or possession of armaments. The Mew South Wales
terms of reference call for a similar inquiry in relation to any
contravention of the relevant laws of that State, in particular laws
relating to the possession of armaments. By each of the terms of
reference the Commission is required to determine the extent and nature
of any such activity and whether the Nugan Hand Group used, was used by,
or cooperated with any person, organisation or body.
7.3 With a view to determining precisely what meaning should be
given to the expression 'armaments' for the purposes of its inquiry, the
Commission consulted appropriate authorities.^ In the light of those
authorities the Commission has adopted a broad definition of the term.
That definition includes anything which is ordinarily used in conflict
- 894 -
among armed groups, especially in warfare, and whether taking place on
land, on sea or in the air.
7.4 The Commission has also considered what are the relevant
Commonwealth and New South Wales laws and these have been identified and
commented upon in a schedule located at the conclusion of this Part [see
7.147-7.154].
Allegations
7.5 The Commission was aware at the commencement of its inquiry of
the existence of allegations that 1Nugan Hand' had been involved in
armaments dealings. Some credence appeared to be accorded to some of
these allegations when the involvement of the Nugan Hand Group in
armaments dealing was mentioned in Parliament in the course of debate
concerning the establishment *of this Royal Commission. Apart from the
New south Wales Corporate Affairs Commission and Commonweal th/llew South
Wales Joint Task Force Reports there have been media allegations (both in
Australia and the United States) of armaments related transactions by the
Group. Upon investigation it became evident that many of the media
allegations were based on information contained in one or other of these
two Reports. However further allegations were made by various
newspapers, apparently as a result of investigations conducted by those
newspapers. Into this category fall some allegations appearing in Tine
National Times (Australia) and The Wall Street Journal (United States).
7.6 It should be noted at the outset that those making allegations
have often used the non-specific term 'Nugan Hand'. Where this is the
case it is of course, not possible to know what persons or companies are
included in this expression. Usually the allegations are vague as to
when and sometimes where the relevant activity is alleged to have taken
place.
7.7 It appears that in some cases the media may have confused the
alleged activities of Ward Knight & Dunn Ltd in this regard and
attributed them to Nugan Hand Ltd [profile 2.97]. Perhaps the
explanation for this is that both Mr F.D. Ward [profile 2.73] and Mr P.M.
- 895 -
Dunn [profile 2.18] were employees of Nugan Hand Ltd prior to the
establishment of Ward Knight & Dunn Ltd. This apparent confusion has
made it difficult to clarify and investigate certain allegations.
7.8 The Corporate Affairs Commission and the Joint Task Force in
their respective reports referred to attempts by 1Nugan Hand' to become
involved in arms dealing. Specific allegations were referred to and
dealt with in both reports. The reports enphasised that some of these
dealings were 'suspicious' and speculated as to the extent of 'Nugan
Hand' involvement. However the question of the extent and nature of that
involvement was not resolved and it was recommended by both bodies that
further inquiries be instigated.
7.9 In March 1983 the delegates of the Corporate Affairs Commission
reported that one matter which may warrant further investigation was 'The
involvement of the Nugan Hand organisation and/or its executives in arms
trafficking'. Section 30 of the report, headed 'Arms Dealing
Associations of Nugan Hand', sets out the material which the delegates
considered was 'sufficient to suggest that the Nugan Hand organisation
had at least explored the possibility of arms dealing as a commercial
activity'.^ The delegates stated that it was 'unknown whether any
transactions were actually consummated' [emphasis added]. Their
conclusion was that '... There is sufficient material to suggest an
association between Nugan Hand and arms trafficking although the area
will require considerable investigation and the assistance of Messrs.
Yates and Black. Unexplained is the relationship between Mr. Houghton
and Mr. Wilson, a reputed large scale arms supplier.' ^ [Details
pertaining to Mr M.B. Houghton, Admiral E.P. Yates and General E.F. Black
are given in their profiles in Part Two of this report. See 2.35, 2.76
and 2.8.]
7.10 Between January 1982 and March 1983 three of the four volumes of
the report by the Commonwealth/New South Wales Joint Task Force on Drug
Trafficking were tabled in the Federal Parliament."â The emphasis of
the Joint Task Force investigation was on drug trafficking. However
throughout the report various matters are mentioned relating to armaments
dealing. After examining various activities and making comments such as
- 896 -
'Rigan Fane) itself had at least dabbled in [international illegal arms
deals] for some years'6 the Joint Task Force reported that:7
'There is evidence from a number of sources that Nugan Hand was involved, or attempted to become involved, in the international sale of military arms and other weaponry to government and non-government forces, though the evidence is insufficient to accurately define the extent or be certain of the success or otherwise of that activity.' [emphasis added]
7.11 Thus the Report made no finding in this regard. In many cases
the Joint Task Force did not have the opportunity to test such evidence
as it had before it. It made no specific recommendations regarding
suspected armaments dealing but recommended that its Report be referred
to this Commission.
7.12 The Royal Commission on the activities of the Federated Ship
Painters and Dockers Union dealt with the subject matter under
consideration in one of its reports. That Commission set out various
matters which suggest a connection between Nugan Hand Ltd and arms
dealing and stated that:6
'It would appear highly probable that the company [Nugan Hand Ltd] was engaged in fraud, the movement of drugs and armaments and many other forms of illegal activity.'
9
In the same Report it is stated:
'Although the Commission has now accumulated a considerable quantity of material relating to the armaments' industry centred upon ... [Mr A.] in Melbourne, and has assembled other material tending to show the involvement of Nugan Hand in those dealings, it would be distracting to set it out at length in this report. It is sufficient to say that until Mr Nugan's death there
appears to have been recognised in that part of the community concerned with such matters a facility at Nugan Hand to assist in the financial arrangements that needed to be made.'
[errphasis added]
This very imprecise language, again, does not amount to any specific
assertion or conclusion. [The evidence upon which the Royal Commission
on the activities of the Federated Ship Painters and Dockers Union based
- 897 -
its conclusions is examined below in relation to allegations (3) and (4)
at 7.35 to 7.46.]
7.13 In this Part emphasis has been placed upon specific allegations
which have been publicised in the media, repeated before this Commission,
and which went unanswered by the Corporate Affairs Commission or Joint
Task Force inquiries. Where the Corporate Affairs Commission or Joint
Task Force report is given as the source of an allegation this indicates
that the matter was referred to therein. Some such allegations were
dealt with; others were left unanswered. It is difficult to categorise
such matters satisfactorily. In any event the contents of those reports
will, if appropriate, be referred to in those paragraphs which set out
the evidence regarding each allegation. In addition to allegations found
in newspapers and in the reports of previous inquiries, there are a few
allegations which have been made for the first time before this
Commission or which have come to light during the Commission's
examination of documents.
7.14 Giving a wide rather than a narrow interpretation to its terms
of reference in this regard, the Commission has extracted from the
totality of relevant material in its possession the following specific
allegations as having been made. Included are assertions made in
Parliament which merely repeated various other allegations. Sources are
given. The allegations have been very roughly divided under subject
headings but it is unavoidable that some are related or overlap.
List of Allegations
7.15 General
Allegation (1); 'There is no doubt that some former officers,
directors and consultants to the Nugan Hand Group had military
backgrounds and links at a high level with American Intelligence
Organisations.' This allegation was made in the First Interim
Report to Creditors by Nr J.W. O'Brien of Pegler Ellis & Co.
(Official liquidator of seven companies within the Nugan Hand
Group). It was made at page 50 of his report under the heading
- 898 -
Other Activities of the Companies'. Allegations were also made
by Mr N. Evans [profile 2.21] that Nugan Hand was involved with
the C.I.A. and in arms dealing. An article in the Sydney
Sun-Herald of 15 February 1981 reported the allegations made by
Mr Evans.
(2) That Nugan Hand files show that Nugan Hand worked on big
international arms deals, although it is not clear what, if
anything was shipped."*"* [enphasis added]
(3) That the Royal Commission on the activities of the Federated
Ship Painters and Dockers Union and other inquiries have clearly
identified merchant banks such as Ward Knight & Dunn Ltd and 12
Nugan Hand as being involved in 'gun running'.
(4) That Mr Robert Pike, who in early 1976, was a representative of
Nugan Hand Ltd, 'later surfaced as a representative/associate of
the Ward Knight & Dunn organisation in a capacity suggestive of 13
arms trafficking related activities'.
7.16 Mr M.J. Hand: South African arms deals
(5) That Mr M.J. Hand's [profile 2.2] activities in South Africa
during his residence there (appear to have) included attempts to 14 arrange arms shipments.
(6) That Mr Hand corresponded with Mr Nugan from South Africa about
arms sales to be paid for with Rhodesian ivory."*®
7.17 Mr Edwin Wilson
(7) That in early 1978 Mr Edwin Wilson and Mr G.T. Shaw
[profile 2.65] were involved in the supply of small arms to
Panama."*"®
(8) That in 1979 Mr Houghton and Mr Wilson met in Geneva and
discussed the possibility of Nugan Hand breaking down and
- 899 -
re-issuing Libyan letters of credit to the value of
US$22 million for substantial quantities of military software
and hardware."^
(9) That Mr Wilson through Mr Houghton had approached Nugan Hand
about a $15 million loan. Probably Nugan Hand through
Mr Houghton, was involved with Mr Wilson in arms deals."1 "®
(10) That Mr Wilson visited Australia in an attempt to set up arms
sales to Libyan terrorists through Nugan Hand.·*·^
7.18 Sale of armaments to Thailand
(11) That Mr 'Suvit Djaisukul', one of two Thai directors of Nugan
Hand (Thailand) Ltd, was involved in arms and military hardware
negotiations on behalf of Nugan Hand and in 1977 attempted to
sell Swedish anti-aircraft guns and Australian gunboats to the 20 Thai Government.
7.19 General Black
(12) That General Black was actively involved in negotiations over
helicopters, fragmentation bombs and ammunition, and the sale of
shelters for combat aircraft to Thailand and South Korea and
that his interest in the sale of military equipment was known to 21 Messrs Nugan, Hand and Yates.
7.20 'Nugan Hand' as a financial intermediary
(13) That Nugan Hand acted as financial intermediary in multi-million 22
dollar international arms deals in Asia and South America.
(14) That there was in the United States (on 9 November 1982) prima
facie evidence that at least $30 million from an arms contract
with Argentina was laundered through 'the Nugan Hand Bank' in
Australia.* 2 0 2 1 2 2 23
- 900 -
7.21 Apart from the above the Commission identified many allegations
concerning armaments which are outside the terms of reference. These
allegations range from assertions that 'Nugan Hand executives' were
involved in weapons shipments to American aided forces in Africa24 to
allegations that Nugan Hand acted as a financial intermediary for
multi-million dollar arms deals in Asia, South America25 and
Libya.26 Major transactions involving spy ships, aircraft, howitzers,
patrol boats and various other military equipment have been suggested.
As mentioned, none of these allegations fell within the terms of
reference. However in the course of examining the material before it,
the Commission has found that there is not the slightest evidence to
support them.
7.22 In the Joint Task Force Report are mentioned allegations
regarding Admiral Yates and other allegations regarding Mr James Moulton
Hawes. Both Admiral Yates and Mr Hawes contacted the Commission to deny
expressly matters reported by the Joint Task Force, and subsequently by
the media. Although the matters fall outside its terms of reference the
Commission will deal with them briefly in order to do justice to these
denials.
7.23 Mr Hawes contacted the Australian High Commission in Singapore
and in Kuala Lumpur in order to 'officially correct' reports about him.
In particular he denied that he had attended a meeting between Mr Wilson,
a Mr Robert Moore, Mr Houghton and two unnamed Australians, in Washington
in either 1975 or 1976, at which Nugan Hand's involvement in an armaments 27
shipment to South Africa was discussed. Further Mr Hawes stated:
' [Mr Wilson] never once made any mention of the Nugan Hand Bank or any person who has subsequently been identified or connected with it. I had no idea he was in any sort of business or other relationship with that institution or those associated with it
... I have never had business, personal or other dealings
whatsoever, directly or indirectly, with Nugan Hand Bank or any of its subsidiaries, affiliates or associated companies or any persons connected with it. I do not know, nor have I ever met a Mr. Bernie Houghton and, specifically, I categorically deny having met this person in Wilson's office or anywhere else in connection with any Nugan Hand activity or any other activity
whatsoever.'
- 901 -
7.24 Mr Houghton told the Commission that he did not meet Mr Wilson
until 1979 and that the names 'James Hawes' and 'Robert Moore' meant
nothing to him. [See also the Commission's examination of
allegations (8) and (9) at 7.98 to 7.111. ] There is no evidence before
the Commission to support the allegation.
7.25 The Commission was advised that Admiral Yates wished to correct
three major errors in the Joint Task Force Report, Volume 4. Two of
those related to armaments. The first was that between August 1976 and
February 1977 Admiral Yates met Mr Edwin Wilson and an informant, ' J',
and discussed Nugan Hand involvement in Libyan port construction;^ the
second was that the same informant met Admiral Yates and Mr Frank Terpil,
a reputed arms dealer, in a London hotel about November 1979 to discuss 30
Nugan Hand involvement in financing Libyan airport shelters.
7.26 Admiral Yates stated that he did not work for Nugan Hand until
June 1977 and officially resigned on 12 October 1979. He said he did not
know Messrs Wilson or Terpil, had never done business with them and to
his knowledge had never even met them. These allegations were not
put to him by the Joint Task Force.
7.27 The Commission has been advised by the Joint Task Force that
'February 1977' was a typographical error and should have been ' February
1978'. Nevertheless, the Commission has found no evidence to support the
allegations and accepts the denial made by Admiral Yates.
The Evidence
7.28 As noted above [see 7.8-7.13] the Commission has had regard to
the contents and recommendations of reports made by the Corporate Affairs
Commission, Joint Task Force, relevant liquidators and the Royal
Commission on the activities of the Federated Ship Painters and Dockers
Union. Matters mentioned in those reports which fall within the terms of
reference have been the subject of assessment and/or further inquiry.
Documents and files in the Commission's possession relating to armaments
dealing have been examined and additional documentation has been obtained
- 902 -
where necessary. Witnesses have been examined concerning their knowledge
of any possible armaments dealing. Official inquiries were made with the
New South Wales, Commonwealth and United States Governments and with
United States agencies [see 1.1.15-1.1.31].
7.29 The evidence before the Commission in relation to each of the
allegations set out above will now be examined. For convenience, the
allegation and its source will be repeated prior to setting out the
relevant evidence.
7.30 Allegation (1): 'There is no doubt that some former officers,
directors and consultants to the Nugan Hand Group had military
backgrounds and links at a high level with American Intelligence
Organisations.' This allegation was made in the First Interim Report to
Creditors by Mr J.W. O'Brien of Pegler Ellis & Co. (Official liquidator
of seven companies within the Nugan Hand Group). It was made at page 50
of his report under the heading 'Other Activities of the Companies'.
Allegations were also made by Mr N. Evans [profile 2.21] that Nugan Hand
was involved with the C.I.A. and in arms dealing. An article in the
Sydney Sun-Herald of 15 February 1981 reported the allegations made by
Mr Evans.
7.31 The Hon. W.G. Hayden, M.P., who was then the Leader of the
Opposition referred to the above quotation from Mr O'Brien's report in
the Federal Parliament after a Ministerial statement had been made by the
then Minister for Ad m i n i s t r a t i v e Services, The Hon. K.E. Newman, M.P.,
w h e r e i n he said, inter alia, that the L a w Offi c e r s of the Crown had
formed the opinion that an extension of the terms of reference of the
R oyal Commission was wa r r a n t e d in certain respects. Mr Hayden also
32
quoted from the abovementionea article in the Sydney Sun-Herald.
7.32 The alleged association between the Nugan Hand Group and the
C.I.A. is dealt with in Part 4 Section 3 of this report. As will be
evident from that material and from the Commission's general findings at
7.140 to 7.146 the Commission has found no evidence to support
allegations that the Nugan Hand Group had been involved in arms dealing.
- 903 -
7.33 Allegation (2): That Nugan Hand files show that Nugan Hand
worked on big international arms deals, although it is not clear what, if
anything was shipped.33 [emphasis added]
7.34 The Commission's response to this allegation will also be
evident from its conclusions and general findings. It is noted here
however that the terms of the allegation are vague and imprecise. The
allegation was made in an article in The Wall Street Journal which was
based, at least in part, upon information given to that newspaper by
Mr J.D. Owen [profile 2.53].
7.35 Allegation (3): That the Royal Commission on the activities of
the Federated Ship Painters and Dockers Union and other inquiries have
clearly i dentified m e r c h a n t banks such as VZard K n i g h t & D u n n Ltd and
34
Nugan Hand as being involved in 'gun running'.
7.36 The Royal Commission on the activities of the Federated Ship
Pain t e r s and D o c k e r s U n i o n refers in o n e of its reports to 'material
tending to show the involvement of Nugan Hand in those [armaments] 35 dealings'. Although it is stated in the report that to set out this
material at length would be distracting it is implied that the conclusion
that Nugan Hand was involved in armaments dealing is based on a number of
facts and alleged associations. Many of these centre on a Mr Christopher
Sundt Brading, said to have been working with Air America in Vietnam in
the early 1970s and involved in 'ferrying illicit goods'.36
7.37 The matters relied on were:
. an allegation that 'in the early 1970s Brading contacted Michael-^ 37 Hand and Frank Nugan'. The maker of the allegation is not
named and the reasons for the alleged contact are not given;
. the fact that Mr Brading's bankruptcy papers included a letter
referring to the sale of ammunition for Russian tanks;36
. a connection said to exist between Mr Brading and a Mr A. who,
according to the report, is 'believed to be a major dealer in
armaments';3^
- 904 -
. an inspection of bankruptcy documents which revealed that
Mr Brading 'had a number of companies operating in Hong Kong,
Singapore and Thailand, including a connection with Nugan Hand 40 in Hong Kong in the mid 1970s'; and
. a 1978 police intelligence report that Mr Brading and another
had formed a company in Hong Kong for the purposes of supplying 41 military equipment to Thailand.
7.38 Secondly the report mentions an association between 'Nugan Hand'
and Mr Robert Pike. It was said that Mr Pike was an associate of Nugan
Hand in the Asian region during the 1970s and that he made proposals to
Nugan Hand for dealings which appeared to be 'in armaments.'4^ [See
also allegation (4) described at 7.41-7.46 below.]
7.39 The Royal Commission on the activities of the Federated Ship
Painters and Dockers Union produced or made available to this Commission
all files in its possession relating to the Nugan Hand Group. After a
careful analysis of the material upon which the above findings
were based, this Commission can find no substantive evidence to link
Mr Brading, Mr A. or Mr Pike with any armaments deal involving the Nugan
Hand Group. The alleged association between Nugan Hand Ltd and Mr Pike
will be examined at 7.41 to 7.46.
7.40 The Commission can find no evidence to support the suggestion
that the Nugan Hand Group engaged in any form of armaments dealing with
Mr Brading or that it was involved in 'gun running'.
7.41 Allegation (4); That Mr Robert Pike, who in early 1976, was a
representative of Nugan Hand Ltd, 'later surfaced as a representative/
associate of the Ward Knight & Dunn organisation in a capacity suggestive 43
of arms trafficking related activities'.
7.42 The basis upon which the New South Wales Corporate Affairs
Commission delegates reached this conclusion is not given. Among the
files obtained by the Royal Commission into the activities of the
- 905 -
Federated Ship Painters and Dockers Union from the Official Receiver of
the Nugan Band Bank are a number of telexes and documents referring to
Mr Pike. However, there are very few references to Mr Pike in the files
and documents obtained by the Corporate Affairs Commission.
7.43 The evidence before this Commission indicates that Mr Pike was
not at any time a representative of Nugan Hand Ltd although it appears
that he did at one stage propose to become one. In a letter written in
October 1975 Mr Pike held himself out as 'a consultant to merchant banks
in Australia'.44 According to Mr C.L. Collings [profile 2.15] Mr Pike
advised and assisted Nugan Hand in relation to proposed representative
offices in Jakarta, Singapore and Kuala Lumpur in mid 1975.45 He also
assisted Mr Collings to prepare a presentation to the Wing On Bank [see
4.1.24, 4.1.27 to 4.1.55] and was paid some fees for this. Mr Collings
told the Royal Commission into the activities of the Federated Ship
Painters and Dockers Union, that subsequently Mr Pike tried to introduce
to Nugan Hand a business transaction in Indonesia involving the purchase
of commercial bills but the proposal did not eventuate.4®
7.44 As mentioned above the Royal Commission into the activities of 47
the Federated Ship Painters and Dockers Union reported that:
'His [Mr Robert Pike's] files which have not yet been fully analysed, contain many proposals for dealings that appear to be in armaments. Some of these proposals were made to Mr Ward and Mr Knight, others to Nugan Hand.'
7.45 This Commission has examined the relevant files mentioned
above. Those files indicate that Mr Pike did make proposals to Ward
Knight & Dunn Ltd relating to armaments. However there is no evidence in
those files that the Nugan Hand Group engaged in armaments deals in
association with Mr Pike or otherwise.
7.46 On the evidence before it the Commission concludes that the
Nugan Hand Group did not engage in any armaments transactions involving
Mr Robert Pike.
- 906 -
Mr M.J. Hand: South African Arms Deals [7.47-7.91]
7.47 Allegation (5): That Mr Hand's activities in South Africa
during his residence there (appear to have) included attempts to arrange
arms shipments.^®
7.48 The Sydney Sun-Herald article of 3 April 1983 was based upon
information contained in the Joint Task Force report tabled in Federal
Parliament on 25 March 1983 and the New South Wales Parliament on
30 March 1983. The article quotes the Joint Task Force report as saying
Mr Hand 'was in South Africa arranging arms shipments but in a fashion
"which displayed little professionalism and a deal of amateurism"'. In
fact the relevant portion of the Joint Task Force report states that
'Nugan Hand itself, acting for Hand, went about the attempted purchase of
weapons in a fashion which displayed little professionalism and a deal of
amateurism'. However the Joint Task Force concluded that in some 49
respects Mr Hand's efforts were successful. [See also the
Commission's examination of allegation (6) at 7.88 to 7.91.]
7.49 The evidence before the Commission is that on 17 December 1974 50
Mr Hand and his wife left Sydney en route to San Francisco. Mr Ward
told the Commission that in January 1975 Mr F.J. Nugan [profile 2.1]
returned from a trip to Hawaii and called a staff meeting at which he
announced that Mr Hand had retired and was spending some time with his
wife in South Africa.^ Subsequently, Mr Nugan told Mr Collings 'that
he had bought him [Mr Hand] out for half a million dollars on the 16th of 52 December in Hawaii'. Mr Hand himself told the Corporate Affairs
Commission delegates that in January 1975 he and Mr Nugan 'separated
company.' He said that this had been settled in Hawaii in early January
and added Î was paid out over a period of time for the shares which I
53
had'. The evidence in relation to the alleged 'retirement' of
Mr Hand from Nugan Hand Ltd and associated companies is dealt with
elsewhere in this report at paragraphs 2.2.23 to 2.2.28.
7.50 After visiting Panama, Arizona, London and Spain, Mr Hand
travelled to .South Africa on 15 March 1975. Apart from one visit to
Australia between 17 and 31 July 1975 he and his wife apparently remained
- 907 -
in South Africa until 16 March 1976, when they returned to Australia.533
Mr Hand immediately 'rejoined' Nugan Hand.5^
7.51 There has been considerable speculation by the Corporate Affairs
Commission, the Joint Task Force, the media and by witnesses before the
Commission, as to Mr Hand's activities while he was in South Africa. The
Corporate Affairs Commission delegates reported that Mr Hand told them he
was turkey farming in South Africa,55 although there is no mention of
that in the transcript of Mr Hand's evidence to the Corporate Affairs
Commission.56 However, both Mr Ward and Mr Dunn told the Commission
that in 1975 they believed Mr Hand was going to retire and set up a
turkey farm in the United States.53 Both the Corporate Affairs
Commission and the Joint Task Force Reports conclude that Mr Hand
continued to have some form of business relationship with Nugan Hand Ltd
during the time he was in South Africa.58
7.52 The evidence suggests that Mr Hand did have an interest in arms
dealing prior to his visit to South Africa in 1975 and possibly prior to
his a s s o c i a t i o n w i t h Mr Nugan. For example, Mr Houghton told the
C o r porate A f f a i r s C o m m i s s i o n d e l e g a t e s that he had considered buying war
surplus materials in Vietnam in the early 1970s and had asked Mr Hand to
be his partner in this venture. He said Mr Hand agreed to the proposal
but wanted to make the purchases through a very complicated arrangement
a n d after Mr Houghton v i s i t e d V i e t n a m two or three times (on his own)
59
the project was abandoned.
7.53 The evidence before the Commission also indicates that during
the time he was in South Africa, Mr Hand was interested in armaments
dealing and maintained contact with individuals and companies within the
Nugan Hand Group. For example, Mr Dunn gave the following evidence to
the Commission:6^
Î know that there was communication between some members of the organization and Mike Hand during that time [the period Mr Hand was in South Africa] I know that there were one or two deals
put forward which he might have been able to negotiate down there and that sort of thing.'
- 908 -
7.54 When later asked to elaborate on this evidence, Mr Dunn said he
believed most of those communications 'were routed through Frank Ward at
this time who kept in touch with' Mr Hand, and that they related to a
variety of business and trading opportunities. He said that it seemed to
be Mr Ward's role to 'keep in touch' with Mr Hand during this time though
he (Mr Dunn) assumed that there were also many private communications
between Mr Nugan and Mr Hand.61
7.55 Mr Ward told the Commission that he could not recall being in
telephone contact with Mr Hand in South Africa during this time. He
informed the Commission that he thought Mr Hand dealt directly with
Mr Nugan.6^ However in the memo to Mr Hand referred to at 7.61 to
7.64, Mr Ward mentions information 'relayed to you through my regular
letters to Pretoria.'63
7.56 Mr Ward also told the Corporate Affairs Commission delegates
that he had no direct contact with Mr Hand during the period that Mr Hand
was absent in South Africa, but said that he recalled Mr W. Hans [profile
2.27] embarking on an information-gathering exercise concerning weapons
and munitions, as a result of some requests from Mr Hand. He said that
either Mr Hans or Mr Nugan asked him to speak to a Mr Loy, an arms
dealer, regarding the acquisition of some bullets which were Australian
Government surplus and which he understood were required in connection 64 with the South African Government.
7.57 Mr Hans gave to both Corporate Affairs Commission and Joint Task
Force investigators details of his inquiries. He told the Corporate
Affairs Commission delegates that Mr Band asked for guns and planes
without nominating the user and that he (Mr Hans) was a reluctant
participant in the canvassing of various arms dealers. He said he wrote
to various parts of the world seeking details, which he forwarded to
Mr Hand. He visited Mr Loy with Mr Shaw and then Mr Ward took over the
negotiations. He said that Mr Hand's intention was to sell weapons to
whites in South Africa and Rhodesia.65
7.58 Mr S.K. Hill [profile 2.33] told the Commission he was aware
that Mr Hand spent some time in South Africa. He said he understood that
- 909 -
Mr ward and Mr Hand investigated the possibility of shipping 1 sporting
rifles' to South Africa but to his knowledge nothing eventuated.®®
Loy Arms Corporation: proposed export of bullets and hand guns
7.59 Both the Corporate Affairs Commission and Joint Task Force
investigated the inquiries made in late 1975 by Nugan Hand personnel with
Mr K.J. Loy of Loy Arms Corporation, Surry Hills, Sydney. Those
investigative bodies found that initial inquiries regarding the
availability of pistols and firearms for export were carried out by
Mr Hans on behalf of Nugan Hand. Mr Loy gave Mr Hans details of weapons
and prices. Further discussions took place several weeks later and after
Mr Loy provided a written quotation, an order was placed for ten
second-hand pistols. However, Mr Loy did not receive any payment and
consequently the firearms were never exported.®^
7.60 Mr Loy produced to the Corporate Affairs Commission documents
relating to the proposed exportation. Included in those documents are
copies of a South African import permit dated 18 September 1975, a
Singaporean import permit dated 4 November 1975 and an Australian export
licence dated 11 November 1975. No company within the Nugan Hand Group
is named on any of the documents. The Australian export licence granted
by the Department of Customs and Excise was for Loy Arms Corporation (as
exporter) to send the revolvers to Chye Whatt Seng care of Trans Meridian
Moving Systems, Singapore. On that licence the final destination of the
goods was stated to be Singapore. However the Singaporean import permit
noted that the goods were for 1 re-export/transhipment'. The South
African import permit does not specify the country from which the
firearms were to be exported. Correspondence was addressed to 'Nugan
Hand Inc.,' and marked 'Attention Mr. Frank Ward'. Documents suggest
that it was planned to ship the arms to South Africa on behalf of
'Murdoch & Lewis Pty Ltd'.®® That company name has never been
registered with the New South Wales Corporate Affairs Commission.
7.61 Mr Ward was examined by the Commission in relation to a memo
written by him to Mr Hand with a copy to Mr Nugan.®^ Among other
- 910 -
things the memo, dated 31 August 1976, summarised Mr Ward's activities
for approximately two years prior to that date. Included was the
70
statement:
as you well know, I arranged contacts for the supply of commodities to S.A. for you, set up the network for movement, documentation and payment. Due to internal problems in S.A. the elaborate machinery we set-up never got tested1.
7.62 Mr Ward said the reference to 'S.A.1 was probably a reference to
South Africa. He was then asked 'What were these commodities you
referred to?' and he replied, 'As I recall there were a number of things
that he required. There was a supply of some bullets at one stage.'71
7.63 The questioning continued:7^
'Q. Bullets?
A. Bullets.
Q. Why did he require those?
A. I do not know. I never questioned it. I was given the
task of contacting a legitimate dealer here in Sydney.
Q. Who was that? Is that the man you told the Corporate
Affairs about?
A. I think his name was Ly or Loy.'
7.64 After telling the Commission of inquiries he made in relation to
other commodities not related to armaments, Mr Ward said he did not know
what he meant by the final sentence of that portion of the memo quoted at
7.61 but said Î should imagine it was setting up the people in Sydney to 73 supply the various requirements.1 When pressed he said this may have
been a reference to shipping requirements or obtaining the necessary 74
government documentation and approvals.
7.65 Mr Ward informed the Commission that he spoke to Mr Loy in
relation to bullets and/or hand guns after Mr Nugan instructed him to
locate any available 'outdated bullets, surplus stocks, army surplus
stocks.' He said the original contract was for a buyer in Singapore but
that he may have learned 'some time later' that the goods were to go to
- 911 -
South Africa. Mr Ward said that he suggested Mr Hans take over the
arrangement with Mr Loy 1 because it was not something I knew anything
about, nor was I desirous of becoming involved in.' He said Mr Loy later
phoned and made threats about completing a contract but he told Mr Loy it 75 was just an inquiry, not a contract.
7.66 Mr Ward's evidence was that he did not recall being involved in
any other armaments purchases or sales while he was with the Nugan Hand
group of companies. He said it was certainly not his responsibility, nor
did he have any knowledge of any armaments being shipped out of Australia
bv the Group. He said he knew of no person, other than Mr Hans, who took
an interest in the sale or purchase of that type of equipment.
7.67 Mr Shaw made a statement to the Commission which included the
following:^
Î recall that in about 1975 Michael Hand was seeking
information regarding the availability of handguns. I believe that these were intended for sale in Rhodesia either to the Government or to white farmers ... Bill Hans and I made
enquiries of Kevin Loy, an arms dealer in Foveaux Street,
Sydney, regarding handguns. As far as I recall no purchase was finalised with Loy because there were insufficient quantities of guns available.'
Bullets
7.68 Mr P.J. Clasen [profile 2.12] was examined by the Commission on
6 April 1984. He agreed that he had been employed as a representative by
1Nugan Hand' from at least February 1975 to February 1 9 7 6 . He
informed the Commission that while on a business trip to West Germany for
Nugan Hand in late December 1975 he received a telephone call from 79
Mr Hand who was in Johannesburg or Durban, South Africa. Later in
evidence Mr Clasen was unable to recall if Mr Ward had asked him to
contact Mr Hand in relation to this matter but admitted that it was a
possibility.®® In any event Mr Hand asked him to check whether he
could find anybody who was prepared to sell millions of .303 rifle
bullets.®"*· Mr Hand said he wanted to get the bullets to South Africa
but did not say why.®^
- 912 -
7.69 Mr Clasen said he told Mr Hand, in effect, that he had no
expertise in this field. However, as a result of the request he made a
number of telephone calls in West Germany. He was unsuccessful in
locating a supplier and about a day later received a telephone call from
Mr Hand telling him not to pursue the inquiry. Mr Clasen told the
Commission he understood the order had been filled by the Australian
Army.55 When questioned about information previously given to the
Commission, Mr Clasen agreed that he located someone who said they could
'organise something' and that the talk was about shipping the bullets
through a harbour, which he thought was Plotz, in Yugoslavia. However he
said the arrangement was 'loose' and when he was told by Mr Hand to
forget the matter he did not pursue it.84
2Î 000 handguns
7.70 Apart from documents relating to the proposed export of ten hand
guns, the documents produced by Mr Loy include a letter dated 14 November
1975 from Loy Arms Corporation to Nugan Hand Inc., marked 'Attention
Mr Frank Ward'. The letter submits prices for Smith & Wesson and Colt
revolvers and indicates that the supply of 20 000 revolvers per year over
an unspecified number of years had been discussed.85
7.71 Mr Loy told the Joint Task Force investigators that Nugan Hand
had made a general inquiry about the price for large quantities of
firearms and he did not know how the figure of 20 000 was arrived at. He
said that from previous discussions 'the bank' was made well aware of the
restrictions controlling the export of firearms from Australia and the
United States.85
7.72 Mr Hans told the Corporate Affairs Commission delegates that he
did not recall any inquiry by Mr Hand for 20 000 handguns but agreed
'that's what he would have had in mind. What he probably had in mind
was to sell it to whites in South Africa and Rhodesia so they could
defend themselves should it be necessary.
7.73 Mr Ward told the Joint Task Force investigators that he could
not remember the contents of the above letter and that he had no
knowledge of such an inquiry.®5
- 913 -
Notes made by Mr F.J. Nugan
7.74 A page of notes apparently handwritten by Mr Nugan,®®3 and
discovered after his death, begins: 'Military weapons Rhodesia, pay in
gold, recoiless rifles, mortars 60/80 mm, M79 Grenade launchers, quad 50
calibre machine guns'. A second note refers to ivory [see allegation (6)
at 7.88] and a third (which possibly relates to 'ivory' also) states 'Ex
factory shipment, expecting phone call ... Les Ceilings referred by Hand,
can send for inspection. Lee will take him around ...' These notes
have been frequently quoted as evidence of arms dealing engaged in by 89 'Nugan Hand'.
90
7.75 On the reverse of the page is the following:
'Les ( 1 ) HK importer of hand guns or sporting firearms Singapore (2) NHHK Ltd purchases hand guns direct from US for re
export (SE Asia) (3) Charter planes capable of flying one ton or less to S.A.
100 (indecipherable) Initial under 100 (indecipherable) Some ammunition for each (gun) 1,000 rounds per gun
3 brand names Smith & Wesson Colt Huger
All models .357 magnum .44 magnum in 4 and 6 inch barrells [sic] 50/50'
7.76 The date ' 7 August 75' appears on this document and the
Corporate Affairs Commission delegates and Joint Task Force investigators
were of the opinion that these notes were written about 1975, during the
period in which Mr Hand was a resident of South Africa [see 7.50]. On
the evidence available to this Commission this appears likely.
Armoured vehicles, guns, aircraft
7.77 As mentioned at 7.57 Mr Hans told the Corporate Affairs
Commission delegates that Mr Hand had asked for guns and aircraft while
- 914 -
in South Africa without nominating their ultimate destination. He also
told the delegates that Mr Hand had sent telephone requests and telexes 91
detailing long lists of arms required.
7.78 Mr Hans told the Corporate Affairs Commission delegates that he
made inquiries at Rex Aviation in Sydney on behalf of Mr Hand in relation
to the possibility of exporting light aircraft (non-military) from
Australia to South Africa. Mr Hans said that the proposal was found to 92
be uneconomic and nothing eventuated as a result of these inquiries.
Mr Hans also told the Corporate Affairs Commission delegates that in 1975
during a trip that he (Mr Hans) had made to Rhodesia, Mr Hand discussed
with him the establishment (by Mr Hand) of a helicopter squadron in 93 Rhodesia. Mr Hans told the Joint Task Force that the purpose of his
visit to Rhodesia was to 'set up the machinery to transfer funds out of 94 Rhodesia.' There is nothing to indicate that either of these matters
related to armaments dealing and therefore they have not been examined by
the Commission.
7.79 Mr Clasen told the Commission that there may have been a
discussion with Mr Hand about armoured vehicles and guns but 'nothing , 95
came of it'.
7.80 When asked about proposed armaments deals, Mr Oollings told the
Commission that he thought Messrs Hand and Nugan had some discussions in
Hong Kong with the then Consul-General of South Africa.
7.81 As mentioned elsewhere in this report [see 2.2.100] when the
Commission was in New York in January 1985, an endeavour was made to
contact Mr Hand. However, Mr Hand did not make himself available to
speak to the Commission. The Commission is satisfied that Mr Hand
continued to have some form of business relationship with the Nugan Hand
Group throughout 1975 while he was absent from Australia. It appears
that he remained on cordial terms with Mr Nugan during this time and that
Mr Nugan instructed his staff during this period to make various trade
inquiries on behalf of Mr Hand. Other inquiries were made as a result of
direct requests from Mr Hand to Nugan Hand Group staff.
- 915 -
7.82 The matter of the proposed export of handguns purchased from Loy
Arms Corporation was investigated fully by the Corporate Affairs
Commission and Joint Task Force and was reported in some detail in their . 97
respective reports. With the exception of minor conflicts of
evidence the basic facts in relation to that matter appear to be
undisputed. The Commission is satisfied that personnel connected with
the Nugan Hand Group arranged this proposed transaction for and on behalf
of Mr Hand.
7.83 The Commission is satisfied that representatives of the Nugan
Hand Group, including Messrs Ward, Shaw and Hans, made inquiries in
relation to the possible export of firearms to South Africa while Mr Hand
was a resident in South Africa. In particular the Commission is
satisfied that Messrs Shaw and Hans of the Nugan Hand Group approached a
Sydney arms supplier, Mr Loy of Loy Arms Corporation in 1975, inquiring
whether pistols and other firearms were available for export and
expressing interest in such transactions. The Commission accepts the
evidence that an export of ten second hand pistols was arranged and
export approval granted but that the export did not take place.
7.84 As to the contravention of relevant laws, officers of the
Department of Industry and Commerce have advised the Commission that in
1975 export of both sporting and military firearms to South Africa was
subject to restrictions. Pursuant to a delegation from the Minister of
Defence, Collectors of Customs were authorised to approve the export of
up to three personal firearms to all destinations except South Africa.
There was a total embargo on the export of sporting ammunition to South
Africa and an exporter of military ammunition was required to present to
the Collector of Customs permission in writing granted by the Minister of r 98
Defence.
7.85 The Commission finds that inquiries were conducted, at the
request of either Mr Nugan or Mr Hand or both, by Messrs Ward, Clasen and
Hans regarding the supply of bullets for export to South Africa.
Although the evidence of both Mr Ward and Mr Clasen suggests that army
surplus bullets were exported to South Africa their evidence was vague
- 916 -
and the Commission has found no supporting documentary evidence. The
Commission is satisfied on the evidence before it that this export did
not take place.
7.86 No evidence has been found to indicate that the Nugan Hand Group
became involved in the purchase, sale or export of the products described
in the notes referred to at 7.74 to 7.76. Neither is there any evidence
that aircraft, armoured vehicles or other armaments were exported or
imported by the Nugan Hand Group.
7.87 Apart from the possibility that arrangements for export of ten
handguns may have been designed to evade Customs provisions, there is no
evidence before the Commission to support the suggestion that these
activities were conducted by the Nugan Hand Group as anything other than
legitimate business activities. The Commission has found no evidence
that any individual or company within the Nugan Hand Group contravened
any of the laws of the Commonwealth of Australia or any laws of the State
of New South Wales in relation to the above matters.
7.88 Allegation (6): That Mr Hand corresponded with Mr Nugan from --------------- 99
S outh Afr i c a about arms sales to be pa i d for wi t h R h o d e s i a n ivory.
7.89 The source of this allegation is not given but it may be the
notes apparently handwritten by Mr Nugan sometime in 1975
[see 7.74-7.80], One section of those notes reads as follows:100
'Ivory..David Charles Lee Chief Admin Officer Department of National Park Wildlife Box 8365 Causeway SALISBURY Phone 707624 Auction info available
7 August 75 notice 4 categories (1) Sound (2) Weathered
(3) Damaged (4) Immature '
- 917 -
7.90 Mr Hans told the Corporate Affairs Commission delegates that he
and Mr Hand discussed the matter of trade in ivory while the latter was
in South Africa. He said ivory was available but trade was illegal and
nothing eventuated.101 Mr Hans told the Joint Task Force investigators
that when he visited Mr Hand in South Africa in 1975 [see 7.78] the
latter 'asked for helicopters and guns saying that we could be paid in
ivory and skins and asked me to get something going with the boys back in
Sydney'. z
7.91 The only evidence before the Commission in relation to this
matter is that which is described at paragraphs 7.77 to 7.80 and 7.89 to
7.90. The only connection between 'ivory' and 'arms sales' arises from
Mr Hans' interview with the Joint Task Force and from the fact that notes
on both subjects were made, apparently by Mr Nugan, on the same sheet of
paper. The Commission has not located any correspondence between
Mr Nugan and Mr Hand in relation to such matters. Accordingly the
Commission finds that the allegation is without substance.
Mr Edwin Wilson [7.92-7.111] * 1
7.92 Allegation (7): That in early 1978 Mr Edwin Wilson and
Mr George Shaw were involved in the supply of small arms to Panama.101
7.93 During his interview with investigators from the Joint Task 1 (14 Force on 6 January 1981 Mr N. Evans [profile 2.21] alleged that the
C.I.A. deposited moneys in an account in the name of Swiss Pacific Bank
and Trust Company [profile 2.106] at the New York Branch of the Irving
Trust Bank. The money was then transferred to 'the Nugan Branch in
Hong Kong' where it would be withdrawn in cash and disbursed by Mr Hand.
Mr Evans said that he was told by Mr Hand that some of this money went to
Panama 'for backing the insurgents'.106 Mr Evans said Mr Shaw and
Mr Edwin Wilson were involved in this. He said the guns supplied to
Panama were small arms, definitely came from the United States and Î
have a feeling that it was Remington...'.106
7.94 On the television program '60 Minutes' shown on Channel 9,
Sydney on 15 February 1981 Mr Evans repeated his allegation that 'The
- 918 -
Nugan Hand Bank' was to be a conduit for C.I.A. moneys."1 "07 He did not
however mention the use of this money for arms deals.
7.95 In evidence to the Commission, Mr Evans said that during a
conversation in Hong Kong in May 1977, Mr Hand mentioned 'a deal that was
g oing on ... wi t h a L a t i n A m e r i c a n c o u n t r y ' , the n a m e of w h i c h Mr Evans
could not recall. According to Mr Evans, Mr Hand said that 'there was a
big arms deal coming on' and 'we will be financing it' on behalf of the 108 C.I.A. " Later, Mr Evans said the country involved 'could have been'
Panama but he w a s una b l e to remember. W h e n the relevant p o r t i o n of his
i n t erview with the Joint Task F o r c e was read to him, he said that he
could not recall anything about Panama or insurgents but Mr Hand 'may
have discussed something about arms for Panama' and 'it is probable that 109
it was Panama we were talking about, backing insurgents'.
7.96 Mr S h a w said he did not recall ever hav i n g m e t Mr Wilson. He
has denied b e i n g involved wi t h Mr W i l s o n or anyo n e els e in discussions or
a r r a n g e m e n t s t o sell ar m a m e n t s in the Middle E a s t . 0
7.97 The Commission finds (as did the Joint Task Force) that
Mr Evans' evidence cannot be relied upon unless corroborated by objective
evidence. In relation to this matter he was unable to recall it when
giving evidence to the Commission. The Commission has found no evidence
to corroborate Mr Evans' claim that Mr Shaw was involved, in association
with Mr Edwin Wilson, in the supply of armaments to Panama. The
Commission accepts Mr Shaw's denials.
7.98 Allegation (8): That in 1979 Mr Houghton and Mr Wilson met in
Geneva and discussed the possibility of Nugan Hand breaking down and
re-issuing Libyan letters of credit to the value of US$22 million for
substantial quantities of military software and hardware.^"*"0a
7.99 This allegation was originally made by Mr Peter Randolph
Goulding when he was interviewed by the Joint Task Force. He said that
the transaction involved weapons and textiles and that Mr Houghton
arrived in Geneva in either November or December 1979. It was his
- 919 -
understanding that Mr Houghton was there on behalf of Nugan Hand and to
provide a banking facility. The object was to break down the original
letter of credit so that weapons and textiles would be dealt with
separately. The 'gentleman handling the textile side of the contract'
would then have no trouble bringing his letter of credit into the United
States. Mr Goulding said that he believed Mr Wilson had not known
Mr Houghton previously.111
7.100 The Corporate Affairs Commission delegates in their Seventh 112 Interim Report, stated:
'Mr. Houghton was acquainted with Mr. Edwin Wilson, an American with one conviction on an arms trafficking related offence and awaiting trial on more serious charges related to the same subject matter.'
The same report later stated:111
'Unexplained is the relationship between Mr. Houghton and Mr. Wilson, a reputed large scale arms supplier.'
With regard to alleged meetings between Messrs Houghton and Wilson the
Joint Task Force reported that 'The meetings must give rise to the
gravest of suspicions'.114
7.101 Mr Wilson, who was the subject of lengthy investigations by
United States authorities, has now been tried and convicted in the United
States of two offences relating to armaments dealing.
7.102 In relation to the alleged association between himself and
Mr Wilson, Mr Houghton told the Commission that he was first introduced
to Mr Wilson by a lawyer in Geneva. This occurred when he had been
instructed to go to Geneva by either Mr Hand or Mr Nugan for the purpose
of dealing with a request to provide 'letter of credit' facilities for
Mr Wilson. Mr Wilson was a client of the lawyer's and Mr Houghton said 115
he had not met Mr Wilson before and knew nothing of him. He thought
the meeting must have taken place in 1979.11®
- 920 -
117
7.103 In his statement to the Commission Mr Houghton said:
The lawyer had already made an application for a letter of credit facility to a larger bank, I think it was the Bank of
America. He had not had a response. He_ indicated that they would not be making a formal application for a letter of credit to Nuaan Hand until they had a response from the other bank. I
had been told the rate to charge in relation to this service and I think that both Nuqan and Hand visited the lawyer in Geneva. The amount involved was several million dollars. The items to
be covered by the letter of credit were military uniforms
purchased from Korea or Taiwan for supply to Libya. The F.A. Neubauer Bank was to be the drawer of the letter of credit in conjunction with its own bank the Dresdner Bank. The commission or interest to be earned by the bank for providing the facility was 2% and in addition Wilson was to deposit $1 million with the Nugan Hand Bank. Accompanied by the lawyer I went to Wilson's office which was extremely elegent and situated in Gustav on Lake Geneva. I cannot remember any other details of the
conversation with Wilson apart from what I have already
mentioned. He did tell me that he was a former C.I.A. agent.'
7.104 Mr Houghton later stated:
Î subsequently telephoned the lawyer and Wilson on several occasions in Geneva. It was sometimes difficult to contact Wilson as he spent a lot of time in Libya. The purpose of my
telephone calls was to follow up the proposed letter of credit as it represented a significant profit to Nugan Hand. However nothing came of this transaction and they ultimately got the letter of credit from the larger bank mentioned earlier.'
7.105 Mr Houghton informed the Commission he made 'in the order' of
five trips to Geneva and on each of those occasions he visited
Mr Wilson's office. He said that these visits were an attempt to
expedite the 'letter of credit' deal he was negotiating."*"*"^ He said
that during those trips to Switzerland he met Mr Goulding who 'appeared
to run Wilson's Geneva office'. They discussed the 'letters of credit',
one for $13 million and another for about $9 million, which Mr Wilson was 120
trying to obtain for the 'supply of Korean made uniforms to Libya'.
121
7.106 Mr Houghton's evidence was as follows:
'Q. In any event, the transaction that brought you in contact with Mr Wilson never came to fruition. Is that the
position?
- 921 -
A. I never did any business with him. I have no reason to
think any business was ever done with him.
Q. By the Nugan Hand organisation?
A. He â
Q. Is that right?
A. By the Nugan Hand organisation. I think that my
conversation was with him that he was trying to get two large letters of credit - seems to me like it was
Barclays or Bank of America, and they had waited for some time. Ultimately I was told that he got those letters of credit from whomever. There could have been a handsome fee had Nugan Hand been able to do that and, as I
understood it, they were trying to arrange it through the Neubauer bank in conjunction with their German banker over there but, to my knowledge, it did not come to
anything.
Q. Do you know whether Mr Wilson has been tried in the
United States?
A. Yes, I have read in the paper where he has had numerous
trials and has received many years.
Q. Many years in terms of prison sentence?
A. Yes, and is presently serving was the last newspaper clipping I read.
Q. From what you have said you did not give evidence at any
of those trials?
A. No, I was never called on to give any evidence.1
7.107 The Commission is satisfied on the available evidence that the
negotiations in relation to the 1 letters of credit' did take place but
that the transaction did not eventuate. None of the Nugan Hand Group
records held by the Commission refer to the proposed transaction and
there is no available evidence, documentary or otherwise, to suggest that
it proceeded beyond negotiation. This is not to say that there are or
were no such records in existence. The Commission has not had access to
all documents relating to overseas companies associated with the Nugan
Hand Group and many documents held in Sydney were destroyed or concealed
after the death of Mr Nugan in January 1980. [The subject of the
concealment and destruction of documents is dealt with in Part 3
- 922 -
Section 9 of this report.] However, the Commission accepts that this
allegation is true and accepts the evidence of Mr Houghton that the
negotiations were unsuccessful.
7.108 Allegation (9): That Mr Edwin Wilson through Mr Houghton had
approached Nugan Hand about a $15 million loan. Probably Nugan Hand 1 22
through Mr Houghton, was involved with Mr Wilson in arms deals.
7.109 Allegation (10): That Mr Edwin Wilson visited Australia in an ---------------- 123
attempt to set up arms sales to Libyan terrorists through Nugan Hand.
7.110 it is difficult to separate these allegations. [See also
allegation (8) which is examined at 7.98 to 7.107.] The relevance of
these matters to the Commission's inquiry is based upon the allegation
that 'Nugan Hand' presumably meaning Nugan Hand Ltd, was involved in
armaments dealings through Mr Wilson. However, apart from the matters
relating to the letters of credit [see 7.98-7.107] the Commission has
found no evidence to support the allegations.
7.111 It is a point of interest that if Mr Houghton and/or the Nugan
Hand Group were involved in any way with Mr Wilson or his companies in
any breaches of United States law, the Commission would have expected the
United States authorities to have at least interviewed Mr Houghton and
possibly personnel associated with the Nugan Hand Group. On the evidence
available to the Commission this has not been the case. Mr Houghton was
not asked by any person to give evidence at any of the Wilson trials.
Sale of armaments to Thailand [7.112-7.116]
7.112 Allegation (11): That Mr 'Suvit Djaisukul', one of two Thai
directors of Nugan Hand (Thailand) Ltd was involved in arms and military
hardware negotiations on behalf of Nugan Hand and in 1977 attempted to
sell Swedish anti-aircraft guns and Australian ounboats to the Thai â . 124
Government.
7.113 This allegation was made by Mr J.D. Owen [profile 2.53] when
Joint Task Force investigators contacted him after receiving information
that he may have additional information to that which he supplied when he
- 923 -
was interviewed by them initially. According to the Joint Task Force
notes of that conversation, Mr Owen stated that the only arms dealing he
knew o£ in Thailand was an unsuccessful attempt to sell the Thai
government a Swedish Beaufors anti aircraft gun. In relation to the
gunboats, Mr Owen said that he believed 'Mr Djaisukul' visited Garden 125
Island, Sydney but 'nothing came of it'.
7.114 Mr 'Suvit Djaisukul' was shown as a director of Nugan Hand
(Thailand) Ltd in company records"*"*^ and was later listed as a Nugan 127
Hand Bank client by the Official Receiver, Hong Kong. However, the
documents held by the Commission contain a copy of an undated telex from
'Suvit' to Hong Kong advising that he and his partner would 'withdraw our
positions as director of next week and also call off every deal as we
have discussed previously.'"*"^ The same file contains a telex from
'Suvit' to Collings dated 9 April 1979 referring to negotiations
regarding the purchase of 'M60's' from the' American Government for
Thailand."^2®
7.115 Although Mr Owen alleged that it was proposed to sell Australian
gunboats to the Thai government, the Commission has found no evidence to
support that allegation. Neither is there any apparent connection
between the Nugan Hand Group as defined in the terms of reference, and
the alleged negotiations. The Commission has not therefore examined the
matter any further.
7.116 The telex regarding the purchase of M60's from the American
Government does not reveal any activity which would fall within the
Commission's terms of reference.
General Black [7.117-7.133]
7.117 Allegation (12): That General Black was actively involved in
negotiations over helicopters, fragmentation bombs and ammunition, and
the sale of shelters for combat aircraft to Thailand and South Korea and
that his interest in the sale of military equipment was known to Messrs
Nugan, Hand and Yates."*"^
- 924 -
7.118 This allegation has been formulated by the Commission from
documents quoted and comments made in the Seventh Interim Report of the
Corporate Affairs Commission. That report refers to a telex located
among the Hong Kong records of the Nugan Hand Group. The telex dated
7 November 1978, is from General E.F. Black [profile 2.8] to Messrs Hand 131 and Yates and is as follows:
Î . Re choppers for S.A., Hung Wai checking to determine if
seller already has his own established contacts in that country. Will advise.
2. Because of embargo which I am told applies to U.S.
citizens as well as to U.S. corporations it might be
advisable for buyer and seller to work thru overseas, channel, namely N-H, rather than U.S. nationals.
3. HWC also has reliable contacts with European munitions manufacturers who offer such items as aircraft frag bombs and ammo at attractive prices. Sai Ching has full
details on this and plans to discuss with Mike in
Singapore around 20 November.
4. Sai will also discuss possibilities of N-H arranging
financial packages to accompany bids on Indonesian Government tenders. Frank worked with HWC and Sai on one such possibility while he was in Honolulu.'
7.119 In response to this telex Mr Nugan, on the same day, telexed 132 General Black as follows:
'Please be specifically advised that the entire contents of points 1, 2, and 3 of your telex are mistaken and
inappropriately sent to us. We have no interest, no facilities and no desire to assist in any situation like that outlined in your telex.
I suggest any informal enquiries generated by yourself and your associates be immediately nullified-------.
Our real business in trade and wholesale banking areas is
totally time encompassing and we have no time for nonsense activities like those.'
7.120 The delegates of the Corporate Affairs Commission commented in
their report:133
- 925 -
'Given the prev i o u s apparent involvement of Mr. Han d in attempts
to s u p p l y arms, it w o u l d appear that there m a y have b e e n a
d i v i s i o n of o p inion b e tween Messrs Bla c k , Y a t e s and Hand o n one
side and Mr. F.J. N u g a n on the other as to w h ether N u g a n Hand
ought to be involved in that p articular i n d u s t r y . '
7.121 General Black, a retired Brigadier General of the United States
Army, was interviewed by the Commission in Washington D.C. on 8 January
1985. General Black stated he was responsible for sending the above
telex dated 7 November 1978 [see 7.118]. He said Î believe it is the
only time I ever got involved in armaments' General Black told the
Commission that the reference in the telex to Î W C' related to Mr Hung
Wai Ching. He told the Commission he occupied an office in Honolulu
belonging to Mr Hung Wai Ching. Mr Ching's son, Mr Sai Ching, 'was
trying to get started under his father's auspices, and he shared the
office with me and Sai. They had an export-import business, and one of
the leads the young man came up with was these mentioned here'
7.122 G e n e r a l Black said he 'was just, ... p a s s i n g the information on
to Mik e [Mr Hand] in S i n g a p o r e ', that there was a pos s i b i l i t y of Nugan
Han d b eing able to assist. He said the telex me s s a g e he forwarded 'got
t h e m q u i t e upset be c a u s e I got a rocket back f r o m t h e m ... saying that I
shouldn't ever send messages dealing with anything involving armaments'. 137
He said he was not told why they were upset and added that:
'... This really b r ought the whole subject to an end as far as
they w e r e concerned, as far as I was concerned, and so as far as
I know, nothing ever developed in this r e g a r d . '
7.123 G e n e r a l B l a c k ' s response to the 1 r o c k e t ' was a t elex to Mr N u g a n
dated 8 November, apo l o g i s i n g for forwarding the information contained in
his telex of the p r e v i o u s day and advising that he had given a copy of
Mr Nugan's telex to Mr H u n g Wai C h i n g 'emphasising that Nugan Hand
activ i t i e s are confined e x c l usively to business in trade and wholesale
b a nking a r e a s '.
7.124 General Black was then shown a letter from himself to Mr Hand
dated 2 March 1978 which begins Î personal friend of mine here has 139
access to the following used choppers, civilian configuration ...'.
- 926 -
General Black stated he was the author of the letter but was not sure
whether this was a follow-up inquiry or whether it preceded the above
telex message. He said it referred to the same subject matter and
pointed out that on the letter, was a note in his handwriting indicating 140 that there was no response to it. The Commission notes that this
letter did precede the above telexes.
7.125 General Black was then shown a copy of an earlier telex from
himself to Dr Prasert in Bangkok dated 27 February 1978. The telex
similarly advised that a 'personal friend here has access to following
used helicopters', qave details and invited contact if Dr Prasert was ⢠] 4i
interested. General Black said this telex was part of the same
effort to assist Mr Sai Ching in finding a buyer for helicopters. He
said Dr Prasert was head of a business called Bangkok United Mechanical
Company and had a number of contacts in Thailand. General Black said he
understood that Mr Ching was acting strictly as an agent between the 142
people who had access to the used helicopters and possible buyers.
7.126 A further telex addressed to General Black referred to 'your 143 letter on aircraft'. General Black informed the Commission that
this ' related to information he had received from Mr Sai Ching and
related to the same matter'.143a
7.127 General Black said that in relation to this matter he was acting
on behalf 'of the Nugan Hand Bank' and was trying to help his friend,
Mr Sai Ching. He said he was using the Bank's facilities to do this and
told the Commission that had they been successful in finding a buyer, he
was sure the Bank would have been entitled to a commission for assisting
Mr Sai Ching. He pointed out that in 1978 Mr Hung Wai Ching assisted in
Hong Kong when 'the Nugan Hand Bank' attempted to purchase the United 144 Chinese Bank.
7.128 General Black told the Commission that no transaction was ever
entered into and the Bank received no fee or money from this exercise. 145 He also said in evidence:
- 927 -
"Ihe Bank never discussed armament sales with me. It was
entirely my initiative here for which I got a rocket, and I was doing this to help this friend of mine in Honolulu who I knew very well and had confidence in, and felt that they were acting
as an agent, and I was trying to help them find â put together a deal.'
General Black stated that at no stage was he ever requested by
Messrs Nugan or Hand to buy or sell armaments or find markets for
them.146
7.129 General Black was asked whether the allegation formulated by the
Commission was accurate in whole or in part. He said that he was sure
the helicopters referred to must be the matter discussed above which
never came to fruition. He said Î don't remember the frag, bombs,
actually. That doesn't ring a bell' but agreed that the reference to 147
'frag, bombs' may have emanated from his telex dated 7 November 1978.
7.130 General Black then volunteered that he had been involved in a
project to get the Thai Government to construct aircraft shelters for
their combat aircraft and gave details of this. General Black said he
was working as a consultant for 'Neuero', a German engineering company
which had developed a design for a bomb-proof aircraft shelter. General
Black said NATO had adopted the design and built shelters in England and
possibly the Continent. He said that he took an engineer from the
company to various meetings with the Thai Air Force where the shelter
designs were presented. He said 'Neuero' asked about making the same
presentation in South Korea, and later did so, however, he was not
personally involved.14®
7.131 General Black told the Commission that he was not acting for, or
on behalf of, the Nugan Hand Bank in relation to these aircraft
149
shelters. However, he went on to say:
'... although I intended, I am sure, to get the Bank involved in the business transaction in a banking way. In other words, if the Germans had succeeded in getting a Thai contract to build shelters, it was my intention to try and have the Nugan Hand Bank handle all of the money transactions involved in this business affair between the Germans and the Thai, as a bank, as
- 928 -
an international banking service, so since I was still working for Nugan Hand, I was looking out for getting them involved so they would get something out of this transaction.1
7.132 Various telexes relating to this matter have been summarised in
the Corporate Affairs Commission Report.155 According to that Report,
in one telex dated 22 June 1979, from General Black to Messrs Nugan,
Yates and Hand, a company named Neuero Industrieanlagen-Technik of West
Germany had agreed by letter on 18 May to pay 'Nugan Hand' three per cent
commission on sales of aircraft shelters to Thailand. The contact in
Neuero Industrieanlagen-Technik was said to have been Mr Jorgen Perwas.
This person was said to have been introduced to the Chief of Staff of the
Supreme Command, Thailand and to key air marshals in the Thai Air Force.
The telex stated that Mr Perwas had personally briefed the above Thai
officials on the advantages of these NATO-type shelters for combat
aircraft. The Thais were said to be studying how they could work such l si
shelters into their defence budget at a unit cost of US$500 000.
7.133 The Commission found General Black to be an honest and reliable
witness. His evidence and the documents available to the Commission,
indicate that the allegation is in substance true. His explanations in
relation to these matters are accepted. There is no evidence to suggest
that General Black's proposals in relation to dealing in aircraft and
armaments ever eventuated or would have contravened any relevant law if
they had.
'Nugan Hand' as a financial intermediary [7.134-7.138]
7.134 Allegation (13): That Nugan Hand acted as financial
intermediary in multi-million dollar international arms deals in Asia and
South America.152
7.135 This allegation appeared in an article in The Weekend Australian
written by Mr Patrick Lindsay and allegedly based on 'exclusive
information' provided by 'a former Nugan Hand associate' code named
'Mickey'. According to 'Mickey', Nugan Hand acted as a 'swing bank' in
the sale of armaments to Malaysian interests throughout Singapore, to the
- 929 -
Moslem movement in the Southern Philippines and to several South American
countries. As an example the informant gave details of the proposed
involvement of 'Nugan Hand' in a transaction which eventually 'fell
through'. In effect the role of Nugan Hand was to assist a party to
conceal half the gross proceeds of an armaments transaction. There is no
evidence before the Commission to support this allegation.
7.136 Allegation (14): That there was in the United States on
9 November 1982 prima facie evidence that at least $30 million from an
arms contract with Argentina was laundered through 'the Nugan Hand Bank'
in Australia.
7.137 This matter was referred to in the House of Representatives by
The Hon. L.F. Bowen, M.P., who was then a member of the Opposition, in
the course of debate concerning the presentation by the then Government
of a Joint Task Force report. On the question of whether the terms of
reference for a Royal Commission to investigate the Nugan Hand Group
should be extended, Mr Bowen noted that allegations had been made of
international arms dealing involving 'Nugan Hand', including the above
allegation. Mr Bowen said that the evidence was prima facie because it
was a verbal arrangement. He said that he wrote to the Prime Minister
(Mr Malcolm Fraser) about the matter and the Prime Minister quite fairly
replied that the Reserve Bank's records did not reveal whether any such 154 transaction had taken place.
7.138 There is no evidence before the Commission to support such an
allegation.
General evidence
7.139 On 23 June 1983 the Acting Secretary, Department of Defence
advised the Commission that thorough investigation of its records had
revealed no evidence that it had ever undertaken any investigation
concerning the involvement of the Nugan Hand Group in any activity
referred to in paragraph (a) of the Commission's terms of reference. In
addition the Department advised that there was no indication that it had
- 930 -
had referred to it any evidence that the Nugan Hand Group engaged in the 155
export from or the import into Australia of armaments.
General Findings
7.140 On the evidence before it the Commission is satisfied that the
activities of the Nugan Hand Group did not involve contravention of laws
of the Commonwealth or laws of the State of New South Wales in relation
to the importation, exportation or possession of armaments.
7.141 In so concluding, the Commission has had regard to the Corporate
Affairs Commission Seventh Interim Report, the reports of the Joint Task
Force on Drug Trafficking and the relevant report of the Royal Commission
on the activities of the Federated Ship Painters and Dockers Union. The
Commission also examined, collated and analysed the vast amount of
documentation provided by these bodies. The Commission obtained further
material relating to this subject during the course of its inguiry and
this material was treated in a similar manner. Relevant documents were
put to witnesses during Commission hearings.
7.142 The evidence before the Commission establishes that the Nugan
Hand Group attempted on numerous occasions in various countries
throughout the world to act as the 'middle man1 in arrangements between
traders covering many disparate commodities from hides to tin, and
including armaments. The real point to be made is that with one or two
exceptions these negotiations were simply an expensive waste of time and
money and came to nothing. This is not surprising. For a start the
Group had insufficient capital with which to fund their proposed
ventures. The Group was insolvent at all times, and, from 1976 onwards,
hopelessly insolvent. Add to this liability the fact that with only one
or two exceptions there was no-one within the Group who had the slightest
expertise in either banking skills, trade negotiations, or commerce. At
the very end of the life of the Group in late 1979 some people who could
be regarded as experts in their field did join the Group or agree to act
in a consultative capacity [see 3.6.13 and 3.6.15). But this has no
bearing on the subject matter under review in this Part.
- 931 -
7.143 In brief, the mere suggestion that the Nugan Hand Group could
have engineered, or been a party to, or found the necessary funds for,
the type of activities which are the subject of these allegations flies
in the face of the evidence that is overwhelmingly to the contrary. The
Commission has, of course, had the opportunity of hearing evidence from
witnesses relevant to these allegations and of assessing their
truthfulness. In particular, the Commission has had the advantage of
hearing evidence from Admiral Yates and General Black and of assessing
their truthfulness. Some of the allegations concern those two persons.
The Commission has no hesitation in reporting that it accepts the
evidence of these two witnesses which, in any event, is supported by
other objective evidence. Thus, while there is evidence that the Nugan
Hand Group attempted on occasions to become involved in armaments-related
trading, the Commission is satisfied that these attempts were
unsuccessful for the reasons stated above.
7.144 The Commission finds there was a general inability on the part
of Nugan Hand to bring about the finalisation of almost any proposal.
Many of the schemes put forward by the representatives were not feasible
or were found to be uneconomic. Such schemes have frequently been
described by witnesses as 'pie in the sky'. The Commission has heard
evidence that the trade division within the Group was often called the
'wild goose division'.
7.145 Many of the conclusions of earlier reports are based on alleged
associations or links between individuals and organisations. Many of
these links were extremely tenuous. The Commission has had the
opportunity of hearing witnesses and carefully examining the vast amount
of documentation placed before it. Those witnesses have either denied
the reported associations, or in other cases have given a satisfactory
explanation with respect to them.
7.146 There was no evidence of a credible nature to support the
allegations that 'Nugan Hand' had been involved in armament sales to any
intelligence body including the C.I.A. It is clear beyond doubt that the
Nugan Hand Group could not have offered this organisation the expertise
or service it would have required.
- 932 -
SCHEDULE A
1. Commonwealth Laws
Customs Act 1901
7.147 Since 1973 importation of goods has been dealt with in Parts III
and IV of the Customs Act and exportation of goods has been dealt with in
Part VI of that Act. Section 233(1) of the Act prohibits the smuggling
of any goods, the import of any prohibited imports, the export of any
prohibited exports, or the unlawful conveying or possession of any
smuggled goods (prohibited imports or prohibited exports).
7.148 Prohibited imports and exports fall into various categories
which are set out in the schedules to the Act. Certain items which fall
within the Commission's definition of 'armaments' have, for at least part
of the relevant period, been prohibited imports or exports under the
Customs Regulations made pursuant to Sections 50(1) and 112(1) of the
Customs Act. For the purpose of this schedule the Commission will not
list these items and the various changes made to the Act and regulations
during the period in question. It should be noted that a comprehensive
listing of 'armaments' which is now contained in schedule 13 of the
Customs (Prohibited Exports) Regulations did not come into force until
7 November 1979; only five months before Nugan Hand Ltd went into
provisional liquidation.
Control of Naval waters Act 1918
7.149 Section 30 of the Act prohibits entry by vessels with dangerous
cargoes into naval waters without permission. Regulations made pursuant
to section 4 sub-sections (c) and (d) of the Act relate to explosives and
ammunition in naval waters. However, the offences pertain to masters of
vessels carrying dangerous cargoes and are limited to 'naval waters'
which are defined as Australian naval establishments.
- 933 -
Australian National Railways Act 1917
7.150 This Act, which comprised the Commonwealth Railways Act 1917 as
amended, prohibits the sending or offering for conveyance on any railway
or Commission vehicle, without notice, any goods which in the judgement 156
of the Commission or its officers are of a dangerous nature.
Post and Telegraph Act 1901 and Postal Services Act 1975
7.151 The first of these Acts (now repealed) made it an offence to
knowingly send, or attempt to send by post, any postal article which
enclosed an explosive, dangerous, filthy, noxious, or deleterious
substance. Under the latter Act it is an offence to send by post a
postal article that encloses or contains an explosive, dangerous or
deleterious substance.
2. Hew South Males Laws
157
Dangerous Goods Act 1975
7.152 For the purposes of this Act 1 dangerous goods' are any article
or substance prescribed as such. The regulations do not refer to
armaments or arms; rather they contain lists and schedules of particular
substances, mainly chemical, which are prescribed as 1 dangerous'. The
Act provides for licensing of premises or conveyances in which dangerous
goods are to be kept or carried respectively.1 5 7 158 It is an offence to
keep dangerous goods without a licence,159 * * to carry them in an
unlicensed conveyance,1819 to sell them in a public place181 or to use
them negligently or carelessly.162
7.153 Part V of the Act provides that the Chief Inspector of Dangerous
Goods may issue licences authorising importation, manufacture or sale of
explosives. Unlicensed and unlawful possession are offences.162
- 934 -
Firearms and Dangerous Weapons Act 1973 164
7.154 This Act makes it an offence to use, carry, purchase or possess
a pistol without a pistol licence in respect of that pistol, or a firearm
without a shooter's l i c e n c e . T h e Act also prohibits the possession
of a prohibited weapon or prohibited article."*"®® A prohibited weapon
is defined as an article or device which is capable of being used to
cause serious bodily harm and of a class, type or description prescribed
for the purpose of the definition. A prohibited article is defined as an
article or device capable of being used to cause bodily harm or restrict
movement of persons, (or an imitation or replica of a firearm or
prohibited weapon) and of a class, type or description prescribed for the
purpose of the definition."*®^
ENDNOTES : PART 7
(See explanatory note at front of report)
1 Concise Oxford Dictionary (Oxford, 1982); Jowitts' Dictionary of English Law (London, 1977) 2 CAC 7th Interim Report p710
3 ibid pp649-62
4 ibid p662
5 JTF Report Volumes 2 and 4
6 JTF Report p426
7 ibid p490
8 Royal Commission on the activities of the Federated Ship
Painters and Dockers Union Interim Report No. 4 Volume 3 p59 9 ibid pi 41
10 House of Representatives Weekly Hansard 20/4/82 pp!566-71 11 The Wall Street Journal 24/8/82 12 H ouse of Repr e s e n t a t i v e s Week l y Hansard 9/11/82 p2859 13 CAC 7th Interim Report p3^5 14 JTF Report p702; The Sun-Herald, 3/4/83; CAC 7th Interim Report
pp650,656
15 The Asian Wall Street Journal 17/8/83 16 CD1250 folios 3217-20, 3226-27, JTF ROI Evans 17 JTF Report pp739,801-2,821; The Asian Wall Street Journal
18/8/83; The Wal l Street Journal 25/8/82 18 JTF Report pp423,426,450,491,494 19 The National Times 5/4/81; The National Times 21/1/82; CAC 7th Interim Report p585 20 JTF Report pp327,491
21 CAC 7th Interim Report pp661-62 22 The Weekend Australian 9/8/80; The Sunday Telegraph 10/8/80; The Hong Kong Standard 12/8/80
23
24 25
26 27 28 29 30 31 32 33 34 35
36 37 38 39 40
41 42 43 44
45 46
47 48
49 50
51 52 53
53a 54 55 56 57 58
59
60 61 62 63
64
65
- 935 -
House of Representatives Weekly Hansard 9/11/82 pp2851-55 (in particular 2853) Penthouse May 1984 The Weekend Australian 9/8/80; The Sunday Telegraph 10/8/80; The Hong Kong Standard 12/8/80 ... .............
The Wall Street Journal 25/8/82; The Sun 25/8/82 CD2809 folio 20 CT22633, CT22641, Houghton JTF Report p732
ibid p734 CP2077 Letter Yates/JTF 23/6/83 House of Representatives Weekly Hansard 20/4/82, ppl566-71 The Wall Street Journal 24/8/82
House of Representatives Weekly Hansard 9/11/82 p2859 Royal Commission on the activities of the Federated Ship Painters and Dockers Union Interim Report No. 4 Volume 3 pi41 ibid ppl40-41
ibid pi40 ibid pl40 ibid pl40 ibid pl40
ibid pi 4 4 ibid pi 42 C A C 7th Interim Report p369 CD1942 Letter Pike/H.K. Immigration 27/10/75 CD1942 Letter Collinqs/Peninsula Hotel 11/7/75 Royal Commission on the activities of the Federated Ship Painters and Dockers Union Interim Report No. 4 Volume 3 ibid pi42 JTF Report p 702; The Sun-Herald 3/4/83; CAC 7th Interim Report pp650,656 JTF Report p702 Royal Commission on the activities of the Federated ship Painters and Dockers Union Interim Report No. 4 Volume 3 p226 CT23126, Ward CT22806, Ceilings CD3037 folio 3, Hand evidence to CAC CD1250 folio 294, JTF running sheets, M.J. Hand travel movements CD3037 folio 25, Hand evidence to CAC CAC 7th Interim Report p652 CD3037 CT22456, Dunn; CT23189, Ward CAC 7th Interim Report pp650-52; JTF Report p298 CD3038 folios 15-16, Houghton evidence to CAC; see also CAC 7th Interim Report p533 CT22456, Dunn CT24301, Dunn CT23189, Ward CD6087 folio 26, NHL personnel file, memo Ward/Hand and Nugan 31/8/76 CD3082 folio 14, Ward evidence to CAC; see also CAC 7th Interim Report p656 CD3025 folios 14-17, Hans evidence to CAC; see also CAC 7th
Interim Report p658
66 67 68 69 70 71 72 73 74 75 76 77 78
79 80 81 82 83 84 85 86
87 88 88a 88b 89
90 91
92 93 94 95 96 97 98
99
100 101 102 103 104 105 106 107 108 109
110 110a
- 936 -
CT15705, Hill CAC 7th Interim Report pp652-58; JTF Report pp695-97 CD5768, Documents produced to CAC by Mr K.J. Loy; JTF Report p697 CD6087 folios 24-31, Memo Ward/Hand and Nugan 31/8/76 CD6087 folio 26 CT23188, Ward
CT23189, Ward CT23189, Ward CT23190, Ward CT23190-91, Ward CT23191, Ward CT25121, Shaw CT21161, Clasen; see also CD6112 folio 33, P. Dunn Private files on NH personnel CT21156, Clasen
CT21158, Clasen CT21156-57, Clasen CT21160, Clasen CT21157, Clasen CT21159-60, Clasen CD5768 folio 11, Documents produced to CAC by Mr K.J. Loy CD1250 folio 4178, JTF ROI Loy CD3025 folio 17, Hans evidence to CAC CD1250 folio 4195, JTF ROI Ward CD11543, Statement of P. Swan CD1250 folio 466, handwritten notes For example, The National Times 21/2/82; The Age, 10/11/82; The Sydney Morning Herald 31/3/83; The Canberra Times, 10/11/82; The Wall Street Journal 24/8/82 ..............
CD1250 folio 467 CD3025 folio 14, Hans evidence to CAC; CAC 7th Interim Report p657 CD3025 folio 14 CD3025 folio 18 CD1250 folio 4190, JTF ROI Hans
CT21158, Clasen CT22892-93, Collings CAC 7th Interim Report pp 652-55; JTF Report pp695-97 A21 material provided by Department of Industry and Commerce; See Customs Act, Schedule 13, Item 1, Customs (Prohibited Exports) Regulations Reg 13B
The Asian Wall Street Journal 17/8/83 CD1250 folios 465-67, handwritten notes CD3025 folio 15, Hans evidence to CAC CD3025 folio 19, Hans evidence to CAC CD1250 folios 3217-20, 3226-27, JTF ROI Evans CD1250 folios 3190-259, JTF ROI Evans CD1250 folios 3217-20 CD1250 folios 3226-27 CD9834 folio 7, Transcript of interview CT18845, Evans CT18847, Evans CT25121, Shaw JTF Report pp 821, 739, 801-2; The Asian Wall Street Journal, 18/8/83; The Wall Street Journal, 25/8/82 "
Ill 112 113 114 115 116 117 IIP 119 120 121 122 123
124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 143a 144 145 146 147 148 149 150 151 152
153
154 155 156 157
158 159
- 937 -
CD1308, JTF ROI Colliding 28/11/82 C A C 7th Interim Report p649 CAC 7th Interim Report p662 JTF Report p426
CT22572, Houghton CT22633, Houghton CT22572, Houghton CT22573, Houghton
CT22603, Houghton CT22602, Houghton CT22633-34, CT22602, Houghton JTF Report pp423,426,450,491,494
The National Times, 5/4/81; The National Times, 21/11/82; CAC 7th Interim Reportp585 JTF Report pp327,491 CD1250 folio 833, JTF notes of telephone conversation with Owen
CD1974 folio 6 CD7972 folio 35, Official Receiver H.K. client listing CD9912 folio 79, NHIH telexes Bangkok 78-80 CD9912 folio 381 CAC 7th Interim Report pp661-62 CD1955 folio 26, Telex Black/Hand and Yates 7/11/78 CAC 7th Interim Report p661 CAC 7th Interim Report p661
CT24557, Black CT24559, Black , CT24557, Black CT24557-58, Black CD1955 folio 30, Telex Black/Nugan 8/11/78 CD1955 folio 127, Letter Black/Hand 2/3/78
CT24558, Black CP1955 folio 129, Telex Black/Prasert 27/2/78 CT24562, Black CD8628 folio 87, Telex Hand/Black
CT24560-61, Black CT24563, Black CT24570-71, Black CT24573, Black CT24567-68, Black CT24567-68, CT24572-73, Black
CT24573, Black CAC 7th Interim Report p661 See CD8628 folio 11 The Weekend Australian 9/8/80; The Sunday Telegraph 10/8/80; The
Hong Kong Standard 12/8/80 House of Representatives Weekly Hansard 9/11/82 pp2851-55 (in particular p2853) CD1184 folio 33, Hansard in JTF Arms dossier A135 folio 136 sections 27 and 70 Date of commencement, 17 July 1978 except sections 1 and 2,
11 July 1978 Divisions 1 and 2 section 9
- 938 -
160 section 11
161 section 13
161 section 14
163 sections 18,20,23,26 164 Date of Commencement 1 August 1975 165 sections 25 and 40
166 sections 54 and 55
167 section 6
P A R T EIGHT
A L L E G A T I O N S OF B R E A C H E S O F EXCH A N G E CO N T R O L LAWS
- 941 -
A L L E G A T I O N S OF BREACHES OF EXCHANGE C O N T R O L LAWS
Scope of Reference
8.1 Prior to the inception of this Commission there were persistent
allegations that the Nugan Hand Group illegally moved large volumes of
currency into and out of Australia. The existence of these allegations
is no doubt the reason for the inclusion in the Commission's terms of
reference [Appendix A] of a direction to the Commission to inquire
specifically into whether the Group engaged in activities involving
contravention of laws relating to exchange control. In the period with
which the Commission's inquiries in this regard are concerned, namely,
the years 1976 to 1979, inclusive, Australian exchange control
legislation was primarily concerned with the regulation of capital
inflows and outflows. It is necessary to mention that since 12 December
1983 as a result of changes in Government policy exchange control has
been substantially de-regulated by means of exempting certain classes of
persons, transactions, securities and goods from the operation of the
regulations. Ironically, perhaps, this major change in policy, has
brought about a situation where participation in some of the transactions
identified in this Part which were in breach of the then foreign exchange
legislation and which entailed heavy penalties, including imprisonment,
may under the current state of the legislation be legitimately carried
on. Let it be said at the outset that the evidence clearly establishes
that during the years in question the Group simply flouted the provisions
of the legislation as it then stood in that large volumes of currency
were moved in and out of Australia either without the approval of the
Reserve Bank of Australia (hereafter referred to as 'the Reserve Bank')
which was required, or under the pretence of a particular movement being
covered by an approval which had been obtained as a result of false
information having been supplied to the Reserve Bank or under the guise
of an approval which had been granted in respect of a transaction other
than the one actually effected. The methods by which these movements of
currency were effected are identified in this Part
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a n d m a n y examp l e s a r e b r i e f l y described. T h e ea s e w i t h w h i c h t h e G r o u p
w a s abl e to escape the provi s i o n s of the leg i s l a t i o n and, in particular,
to e s c a p e d e t e c t i o n b y the R e s e r v e B a n k sugg e s t s that o b s e r v a n c e of the
l e g i slation b y p r o f e s s i o n a l 'money movers' d e p e n d e d alm o s t e n t i r e l y on
v o l u n t a r y c o m p l i a n c e rather than e n f o r c e m e n t b y authority.
8.2 The illustrations of breaches provided in the following pages
will serve to indicate the large volume of currency that was involved
over the years. Further assistance in this regard may be obtained from a
reading of certain passages contained in a transcript"*" of a talk
Mr Nugan gave to the employees of his legal practice in Sydney in October
1979. The following extracts, which are reproduced verbatim, illustrate,
as well, the style of Mr Nugan's speech and written prose which were
verbose and difficult to follow, a curious feature that has been
commented upon by more than one witness before the Commission:^
'... I should tell you that it's a question of expertise to get permission to send money out of the country, but I have found in my experience that the way of persuading the central bank to let someone transmit funds is very similar to tax dodging. You lead with your left, but first of all you need a formula, you've got
to know their guide lines, you've got to know that you've got to design the facts so that your considerations of fact and law again are right so that they can grant you appoval. So of
course I generally have followed this procedure, I say "give me your history" and if you've got a good commercial history of profit and expertise, that will help you in this country, or whatever country it" is. Then tell me a legitimate purpose
overseas that this expertise and history is usable in to
generate profits. Right, so the guy says I'm in hardware, I've got a 40 year history in my company of success in hardware,
that's how come I've got so much that I want to ship it
off-shore - here's 40 years accounts. Mow I'd like to shift a million off-shore - $250,000 off-shore - so that's it's usable by me and I say fine. Is there any reason your hardware
expertise is not usable in Hong Kong or South East Asia and the guy says "No, in fact I buy a lot of P.C. items from Korea and
South East Asia here, already". You say fine, why not establish a hardware subsidiary in Hong Kong, with a similar name to yours, wholly owned. Apply to the Reserve Bank for permission to export your expertise as a hardware merchant and say by the way, can I take some capital, I need it, otherwise the banks won't deal with me ... Do you know what they are saying,
Dalgleish and these guys, Superintendent of Exchange Control, and they say - what does he need quarter of a million for, why can't he do it with $20,000 and you say to him, listen do you
know what his turnover was last year, it was $20,000,000
- 943 -
worth of hardware that was turning over his $1,000,000 worth of capital about 20 times, do you think you can do that with the money when you've got the money in inventory, you need
overdrafts and how is he going to get an overdraft for
$3,000,000 if he hasn't got a million there. You help him get the overdraft without the money and we won't take the money, we won't need to. You guarantee him with the Australian federal bank and he'll get the overdraft. If not he's going to need the money. And of course they will understand that and will grant
the approval. O.K., very easy to get in any country the export expertise legitimately and openly and take a little capital with you. Now if you do want to do open an tax minimisation thing in that other country then it's possible to do it particularly if
the funds are coming back to Australia, it is possible to do it in an open and not clandestine way as well. Sometimes they don't bother for a while doing that and I add in the missing links later when I've worked out how to add in missing links that are openly disclosable, or when I have time to do them.
1 3
8.3 In the course of its inquiries the Commission has noted evidence
that the Group also appears to have deliberately contravened the monetary
laws of overseas countries, in particular those of Singapore, Malaysia
and Hong Kong. These matters, of course, fall outside the Commission's
terms of reference and no further mention is made of them in this Part.
8.4 Apart from the actual movement of funds in and out of Australia
as mentioned above, the Group provided an additional facility to clients
which attracted a great deal of use and which also contravened the
legislation although there was no actual movement of funds into or out of
Australia. This facility was known within the Group as 'Yorkville
Contra' although it is clear that to various persons within the Group it
had somewhat different meanings. Leaving aside some of the variations
mentioned later in this Part, the purpose of the facility was to provide
to a depositor with the Group who deposited moneys in Australia the means
to obtain a credit in an equivalent sum in a country outside Australia,
usually Singapore or Pong Kong, without any remittance of the depositor's
funds to the overseas country and without any record being made of the
transaction in the books of the Australian company with which the money
was deposited. Alternatively, such a depositor could deposit moneys in
Singapore or Hong Kong and receive the credit in Australia.
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D e f i n i t i o n and H i s t o r y of Exch a n g e Control
8.5 In Australia, exchange control is a term used to describe a
combination of legislation and Government policy directed to controlling
the country's foreign exchange resources. It was introduced under the
Commonwealth National Security Act 1939, as an emergency measure at the
outbreak of World War II. Then, the objective was to marshal receipts
and ration payments and, in the process, the major part of Australia's
international reserves were channelled into the central bank.
8.6 The national security legislation was superseded by the Banking
(Foreign Exchange) Regulations, made pursuant to section 39 of the
Commonwealth Banking Act 1959 (hereafter referred to as 'the Banking
Act'). This legislation, subject to continuing amendment, remains in
place today.
8.7 Since 1959 the most far reaching amendments to the exchange
control legislation occurred in 1973 and 1974. In December 1973
amendments to the Banking Act 1959 constituted the first attempt to use
the exchange control legislation to combat foreign transactions having
tax avoidance i m p l i c a t i o n s I n December 1974 the Banking Act and the
Banking (Foreign Exchange) Regulations were amended to overcome certain 5
deficiencies made evident by judicial decisions and to broaden the
scope of the controls. Together, these amendments, extended the base of
exchange control by taking advantage of all powers of Government in
relation to financial aspects of overseas transactions;® provided for
the Banking (Foreign Exchange) Regulations to apply to transactions
entered into outside Australia (extra-territorial application); ^
provided that for civil purposes, contracts and transactions entered into
or effected without any necessary exchange control authority would not,
for that reason, be deemed to be invalid or unenforceable;® provided a
firmer legal basis for tax screening by removing from the Reserve Bank to
the Commissioner of Taxation, the onus of deciding whether tax avoidance
or evasion was involved in any transaction;® defined the word
'resident' as meaning natural persons ordinarily resident in Australia
and corporations incorporated in Australia;"*"® and deemed the overseas
offices of Australian companies to be non-residents for the purposes of
their overseas operations and the Australian offices of overseas
- 945 -
companies to b e residents for the purposes of their Austr a l i a n
operations.
8.8 Since 1974 both the Banking Act and the Banking (Foreign
Exchange Regulations have been amended but such amendments have no
bearing on the Commission's inquiries into the activities of the Nugan
Hand Group.
8.9 T h e legal framework provided by the Ba n k i n g (Foreign Exchange)
R e g u l a t i o n s is, however, o n l y the f oundation upon which the
a d m i nistration of exch a n g e control is constructed. Built upon this
framework is a labyrinth of Government financial policy by which specific 12
transactions are controlled. In the words of one commentator:
'In no field of fiscal law - it m a y not unfa i r l y b e said in no
field or branch of A u s t r a l i a n law - is there such a mi x t u r e of
law a n d pol i c y as in the app l i c a b i l i t y of the ... Banking
(Foreign Exchange) Regulations'.
8.10 Both the Reserve Bank and the Department of the Treasury play an
active role in providing advice to the Treasurer on exchange control
policy and its implementation. In addition to domestic considerations,
policy formulation takes account of obligations assumed by Australia's
membership of international organisations such as the International
Monetary Fund and the Organisation for Economic Cooperation and
Development both of which encourage codes of liberalisation in
international trade and payments.·1 ·3
8.11 The overall thrust of exchange control policies has changed over
the years and brief reference has already been made to those changes. In
contrast to the days of 1939 when foreign exchange was marshalled and
channelled into the central bank, exchange control in the period of
concern to this inquiry, that is, 1976 to 1979 inclusive, was essentially
concerned with the regulation or supervision of the inflow and outflow of
capital.3:1
8.12 To give effect to this policy, the Regulations established the
Reserve Bank as the principal regulatory agency and prohibited certain
- 946 -
acts on the part of residents and non-residents without the Bank's
authority. The Bank was empowered to authorise otherwise prohibited
conduct either conditionally or unconditionally.'1 '5 In addition, the
Bank was empowered to approve agents and pursuant to this power trading
banks were appointed to process applications for most types of currency
payments within certain monetary limits."15 Applications outside those
limits were required to be submitted to the Reserve Bank as were most
applications involving capital transactions. These arrangements enabled
the trading banks to deal with a substantial proportion of the personal
and commercial transactions of a non-capital nature. Applications
relating to transactions involving securities also had to be submitted to
the Reserve Bank except to the extent that certain bodies were issued
with general authorities, for example, stock brokers and company share
registrars. Likewise a small number of companies engaged in travel
services held limited authorities from the Reserve Bank for travel
related transactions.
8.13 By this means, the Reserve Bank supervised the transfer of money
and other assets basically in three ways - into and out of Australia,
within Australia including transactions involving non-residents, and
outside Australia in so far as Australian residents were concerned. The
Bank sought to conserve Australia's foreign exchange resources such as
balances with overseas banks and other financial institutions; foreign
currency whether in notes, coins, bills of exchange, letters of credit,
traveller's cheques etc; and foreign securities such as shares, bonds,
deposit receipts or debts owing by overseas persons to Australian
residents.1^
8.14 Since the late 1970's, there have been a number of major
developments concerning exchange control. In September 1981 the Final
Report of the Committee of Inquiry into the Australian Financial System,
chaired by the late Sir Keith Campbell, recommended sweeping changes to
the then system of exchange control. Basically it was proposed that a
wide range of exchange control mechanisms be dismantled to permit freedom
in exchange transactions and that a monitoring and reporting system based
on the notification of transactions as they occurred be substituted.1®
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8.15 On 9 December 1983 the Treasurer, the Hon. Mr P. Keating M.P.
announced the Government's decision to float the Australian dollar and to
abolish a major part of the exchange controls. These changes were
effected by means of exempting, pursuant to Regulation 38 of the Banking
(Foreign Exchange) Regulations, certain classes of people, transactions,
securities or goods from the operation of the Regulations. Thus the
legislation remains intact but those provisions relating to exchange
control are all but inoperative by reason of the exemptions made pursuant,
to Regulation 38. The first of such changes was published in the
Commonwealth of Australia Gazette on 12 December 1983.^ Further
changes were announced in February and June 1984 and notified in the
Commonwealth of Australia Gazettes on 6 February and 25 June 1984 20 respectively. Copies of the Gazetted notices appear in Schedule A
[see 8.115].
8.16 The nature and extent of the exemptions can be seen in
Schedule B [see 8.116] which compares relevant provisions prior to and
following the recent changes. In brief, Reserve Bank authority is only
required when Australian notes and coins are sent out of Australia; when
Australian notes and coins in excess of A$5 000 are taken out of
Australia for travel purposes; and when money is invested in Australia by
or on behalf of foreign governments.
8.17 As from 28 June 1984, banks no longer act as agents of the
Reserve Bank for the purposes of the Banking (Foreign Exchange)
Regulations. Instead, banks and a number of other organisations have
been authorised to deal in foreign exchange. A general authority has
been given permitting Australian residents to enter into foreign exchange
transactions with authorised foreign exchange dealers and to undertake
other transactions with non-residents subject to tax screening
requirements.
8.18 Brief mention has already been made of the 1974 amendments
concerning exchange control and income tax. More specifically, the
legislation was aimed at certain transactions involving residents of so
called 'tax havens'. Section 39B of the Banking Act 1959 (as in 1974) in
conjunction with section 40C of the Taxation Administration Act 1953
- 948 -
provided that where approval was required for a transaction under the
Banking (Foreign Exchange) Regulations, the Bank would not grant such
approval unless a tax clearance certificate from the Taxation Department,
was produced by the applicant. On 23 December 1974 the Treasurer
published a list of the places and a list of the transactions in respect
of which a tax clearance certificate was required. A copy of the
relevant Gazette notice appears at Schedule C of this Part [8.117].
8.19 Despite the recent de-regulation such screening has continued in
respect of transactions with residents of tax havens and certain other
transactions involving payments over A$50 000 to or on behalf of
non-residents.^ Prior to 1 January 1985 a dealer proposing to
undertake such transactions was required to lodge a declaration form with
the Reserve Bank. Upon receipt of the declaration form the Reserve Bank
indicated either that the transaction could proceed or that a tax
clearance certificate was required before the transaction could be
undertaken. The Reserve Bank did not however retain any documents, the
original being forwarded to the Australian Taxation Office and the 22
du p l i c a t e then returned to the dealer. O n 18 Decem b e r 1984 the
Reserve Bank announced new arrangements for the tax screening
procedures. Since 1 January 1985 all declaration forms completed for tax
screening purposes must be forwarded by the dealer directly to the
Australian Taxation Office, there being no requirement to obtain the 23 p r i o r clearance of the R e s e r v e Bank.
8.20 As a footnote to this summary of recent changes to exchange
control, one of the important and, perhaps, inevitable consequences of
the recent change in the operation of the Regulations should be noted.
Whereas formerly records were required to be made and kept which
sometimes proved to be of assistance to investigators inquiring into
suspected transactions involving money laundering, tax evasion and the
like, such records are no longer required.
Specific Regulations in the Period from 1976 to 1979
8.21 For the purposes of the Commission's inquiry, as already noted,
the relevant Regulations were those in force in the period from 1976 to
- 949 -
1979 inclusive. The more important of these Regulations were Regulations
5, 6, 8, 9, 33, 34, 39, 40, 41 and 42. The general thrust of these
Regulations is set out below.
Regulation 5
8.22 Regulation 5 prohibited the purchase of, or other dealing with,
foreign currency. Regulation 5(a) prohibited such foreign currency
purchases, or other dealings, by any person (whether a resident or not)
where the purchase, or other dealing, occurred in Australia. Regulation
5(b) prohibited similar foreign currency purchase, or other dealing, by a
resident, where that resident was outside Australia. In all cases, the
Reserve Bank could authorise the relevant purchase, or other dealing.
Regul a t i o n 6
8.23 Regulation 6 prohibited the taking or sending out of Australia
of any Australian currency or foreign currency. Again, the Bank could
grant approval. Accordingly, the combined effect of Regulations 5 and 6
was such that, except with the approval of the Bank, a person (whether a
resident or not) could not accumulate foreign currency in Australia and,
in addition, a resident could not accumulate currency outside Australia.
Regulation 8
8.24 This was the most discussed and perhaps the most operative of
the Regulations although it had certain limitations. The Regulation was
widely drawn and, on its face, had a very broad effect. Basically, it
provided that, except with the authority of the Reserve Bank, a person
could not:
. make payment in Australia to or on behalf of non-residents;
credit A ustralian acco u n t s of non-residents;
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. draw, issue or negotiate bills of exchange or promissory notes
in favour of non-residents;
. enter into agreements (other than for the purchase of goods)
creating rights in favour of residents and non-residents to
receive payments or valuable consideration or the performance of
services;
. allot, transfer or register securities in the name of a
non-resident; and
. make compensating payments such as the payment within Australia
as quid pro quo for payments outside Australia.24
8.25 Regulation 8 purported to apply to most conceivable
transactions. The wide ambit of Regulation 8 was reinforced by
section 39A(1) of the Banking Act 1959 which stated that the Banking
(Foreign Exchange) Regulations applied both within and without
Australia. There was, however, serious doubt as to the constitutional
validity of parts of Regulation 8 and section 39A(1) of the Banking Act.
Legal commentators considered that, despite its width of language, 25
Regulation 8 was limited to acts done in Australia.^·
R e g u l a t i o n 9
8.26 Regulation 9 related to dealings between non-residents, or
persons acting on behalf of non-residents, otherwise than with Bank
authority. The Regulation prohibited the sale, loan, transfer,
mortgaging or charging of any security or land that was in Australia by
or on behalf of one non-resident to another.2®
Regulation 33
8.27 Regulation 33 prohibited the taking, sending or transferring to
any place outside Australia of any securities again, without the
authority of the Bank. The prohibition extended to both residents and
non-residents.
- 951 -
Regulation 34
8.28 Regulation 34 which complemented Regulation 33 dealt with
foreign securities. It prohibited transactions involving foreign
securities by both residents and non-residents in Australia and by
residents outside Australia. The term 1 foreign securities' was defined
in wide terms in Regulation 4(2). As well as securities proper it
included debts and money.
Regulation 39
8.29 This Regulation provided, amongst other things, that where the
Reserve Bank granted an authority subject to conditions a person must
comply with those conditions. Failure to do so invoked the criminal
sanction contained in Regulation 42.
Regulation 40
8.30 Regulation 40 prohibited the making of a statement in relation
to any matter involving the Regulations, knowing that statement to be
untrue or misleading. Again failure to comply with this Regulation
invoked the operation of Regulation 42.
Regulation 41
8.31 This Regulation prohibited a person from entering into an
arrangement the purpose of which was to evade, avoid or prevent the
operation of the Regulations.
Regulation 42
8.32 Regulation 42 provided that it was an offence to contravene,
attempt to contravene, or fail to comply with any of the provisions of
the Regulations. The penalty prescribed was a fine not exceeding Ail 000
or imprisonment for a term not exceeding six months - if the offence was
prosecuted summarily; or if the offence was prosecuted upon indictment -
- 952 -
a fine not exceeding A$100 000 or imprisonment for a period not exceeding
five years. In addition, Regulation 42(2) provided that, subject to
certain exceptions contained in Regulation 42(3) and (4), a conviction
pursuant to Regulation 42 entitled the court, if it thought fit, to order
the forfeiture of all or any of the articles in respect of which the
offence was committed.
Specific Transactions in Breach of the Regulations
8.33 The evidence disclosed a wide range of transactions which in
some measure contravened the relevant provisions of the Banking (Foreign
Exchange) Regulations. As previously mentioned, some involved the
movement of money across national borders and others involved no element
of movement and in these cases money was simply made available by a
particular company within the Group according to no other criterion than
the convenience of the client or, equally, the convenience of the Group.
The facility which was known as 'Yorkville Contra1 typifies those
transactions involving no transmission of money across borders [see 8.36
et seq].
8.34 The following paragraphs provide examples of the different
transactions and indicate the particular regulations which these
transactions have contravened. In the interests of clarity an attempt
has been made to categorise the examples in terms of whether Reserve Bank
approval was obtained or whether the approval was obtained on false
grounds or was misused. Because of the complexity of some of these
transactions, there is inevitably an overlap between the two groups.
8.35 Contraventions of exchange control were commonplace in the
Group's operations. In excess of 370 such contraventions involving a
total amount of A$16 308 938.81 have been identified by the
Commission.2®3 To avoid unnecessary detail a small number of examples
have been selected for inclusion in the text. All Yorkville contra
transactions identified by the Commission have been compiled in three
schedules, including details of the person or persons involved, which
have been provided, pursuant to section 6P of the Commonwealth Royal
- 953 -
Commissions Act, to relevant law enforcement authorities for further
investigation. Because of the particular interest in the transactions
styled 'Yorkville Contra1 the nature of this transaction and the
circumstances of its use by the Nugan Hand Group have been described
below in some detail [see 8.36-8.78].
Transactions for which no Reserve Bank Approval was Obtained
Yorkville Contras
8.36 The 'Yorkville Contra' can be described as a facility provided
by the Nugan Hand Group whereby a client could deposit money with a
particular Nugan Hand company in one country on the understanding that
the client had the right to receive an equivalent amount from a Nugan
Hand company in another country. In each case one of the countries
concerned would be Australia and there would be no transmission of money
across national borders.
8.37 The word 'Yorkville' was a reference to the fact that in the
early days of the Group the clients using this facility were treated as
clients of Yorkville Nominees Pty Ltd [profile 2.108] (hereafter referred
to as 'Yorkville Nominees') while 'contra' was, and is, a bookkeeping
term meaning 'against'. In bookkeeping terms, contra accounts arise
between two persons having mutual dealings where amounts are set off one
against the other so that only the balance is payable. Thus in a
Yorkville Contra transaction, payment to the client in one country is set
off against the client's deposit in another so extinguishing the original
liability.
8.38 The facility denoted by the term 'Yorkville Contra' has
something in common with another facility offered by the Nugan Hand Group
known as a 'back to back loan'. The common feature of the two was that
the client paid money to, and subsequently received money from, the Nugan
Hand Group. In the case of the back to back loan, however, the two parts
of the transaction occurred in the same country. It was a tax evasion
scheme which depended upon the money being received by the client as a
- 954 -
loan in respect of which the client would receive a deed of release. For
a more detailed description of back to back loans see paragraphs 9.9 to
9.10.
8.39 By way of illustration, a typical Yorkville Contra transaction
might commence with a client depositing cash with Nugan Hand Ltd [profile
2.97] in Sydney. The money would be kept in a safe in the company's
premises in Macquarie Street, Sydney and might be used to pay out a
client who required repayment in cash or, equally, to make other payments
which the company found convenient to pay in cash. The client concerned
would receive the equivalent amount, less a fee of between two and seven
per cent, from the Nugan Hand Bank [for further information on the role
of this Bank see Part 4 Section 2] in Hong Kong or Singapore, in any form
the client desired, that is, cash, cash cheque, telegraphic transfer to a
bank account anywhere in the world, demand draft, travellers cheques,
money order and the like. More specifically, the client might request
that the money be paid by cheque to the client in Australia. In this way
he could claim that the money was a loan or gift from relatives or
associates overseas (and thus not subject to income tax) and that the
relatives or associates had merely used the Bank as an intermediary.
Alternatively a client involved in the import/export business might
request payment by means of telegraphic transfer to a third party - in
another country to cover debts incurred in the course of business.
8.40 Generally speaking, Yorkville Contra transactions were conducted
between Australia and Hong Kong or Singapore, the client's deposit being
made in Australia and payment in Hong Kong or Singapore being usually
effected through the Nugan Hand Bank. Equally though, deposits could be
made in other countries for example Saudi Arabia as well as Hong Kong or
Singapore and payment, in the manner requested by the client, effected by
Nugan Hand Ltd in Sydney.
8.41 The Yorkville Contra was used to facilitate a variety of
transactions each of which was accorded the confidentiality and the
disrespect for proper accounting which were features of the Group's
operations. Ihis inevitably gave rise to confusion or over
- 955 -
simplification on the part of the representatives while the facility
itself gained a certain mystique.
8.42 Mr C.L. rollings [profile 2.15] called the Yorkville Contra a
slush fund established in Sydney and utilised from time to time for the
transfer of funds from Hong Kong or Singapore to Sydney or vice versa.
He said that it was treated as a suspense account.27 Mr M.B. Houghton
[profile 2.35] told the Commission that 'if you had money in Yorkville or
the Nugan Hand Bank you could co-mingle it.'28 Mr G.V. Galicek
[profile 2.22] observed that whoever deposited money in any Nugan Hand
office in the world could take the deposit back in any other office in
the world.29
8.43 Messrs G.T. Shaw and S.K. Hill [profiles 2.65 and 2.33] who were
closely associated with the administration of the Yorkville Contra, told
the Commission that while the transactions were recorded in the books of
the Nugan Hand Bank, records in Sydney were limited to the red cash book
and blue ledger [see 3.8.131, 3.8.132, 3.8.135 and 6.24] maintained by
Mr Shaw.30
8.44 Most of the senior executives of the Nugan Hand Group were
actively involved in Yorkville Contras in that they acted as the major
processors of the transactions either in Sydney as in the case of Messrs
Nugan, Shaw, and to a far lesser extent, Edelsten, or in Hong Kong as in
the case of Messrs Col lings and McArthur, or in Singapore as in the case
of Mr M.J. Hand. (Profiles of each of these persons are set out in
Part 2.) In Sydney Messrs Nugan and Shaw entered transactions in a blue
book (subsequently lost or destroyed), and made payments in cash or
authorised the drawing of cheques or the issuing of other forms of
payment. In Singapore, the Nugan Hand Bank accounting centre, Mr Hand
issued instructions to his staff, including Mr Tan Choon Seng [profile
2.71], the bookkeeper, as to how the Yorkville Contras should be treated
in the books and records. He also authorised the many cheques issued by
the Nugan Hand Bank to satisfy Yorkville Contra transactions. In Hong
Kong, Messrs Ceilings and McArthur instructed staff in recording the
transactions and in effecting individual payments. Also in Hong Kong,
Mrs G. Lovatt [profile 2.43] changed the relevant Nugan Hand Bank client
ledgers as instructed, to reflect payments made to depositors.
- 956 -
8.45 Mr Hill processed some Yorkville Contras but his more
significant role was that of examining and checking the accounting
records of the Nugan Hand Bank in Singapore together with Mr G.F. Brincat
[profile 2.9]. These records of course included entries made in respect
of the Yorkville Contras. Mr Brincat rewrote the Nugan Hand Bank records
each year for submission to the Bank's auditors but in his evidence to
the Commission he claimed limited knowledge of the meaning of that term
describing it as a suspense account used in Singapore for transactions
which they were uncertain how to treat.^ [See paragraphs 4.2.117 to
4.2.177 for further details concerning the rewriting of the Nugan Hand
Bank records.]
8.46 As far as the overseas representatives of the Nugan Hand Bank
were concerned, they promoted the Yorkville Contra as a facility offered
by the Group but in many cases their knowledge of the scheme was minimal
and they referred interested clients to Mr Shaw.
8.47 The Group generally charged fees for providing the Yorkville
Contra service. The fee was charged at a rate which varied from between
two per cent to seven per cent depending on the amount of money deposited 32 by the client. In practice, the client would receive 93 per cent to
98 per cent of the money originally deposited. In some circumstances,
for example where a client was already a sizeable depositor with the
Group, or where the depositor needed some form of inducement, the 33
Yorkville Contra facility was provided free of charge.
8.48 In return, the client would have money made available overseas
without attracting the attention of the Australian authorities. There
were no risks such as those associated with physically carrying money
from one country to another and there were no tell-tale records such as
bank statements. The service was also extremely efficient as far as the
client was concerned, requiring only a telex directive to obtain the
required payment.
8.49 The secrecy with which these transactions were accomplished was
of course essential to achieve the primary goal of most clients, that of
- 957 -
evading the relevant income tax laws. Not surprisingly, proper
accounting procedures were not observed. While the overseas companies
recorded receipts or payments as Yorkville Contras, they were disguised
at the end of the financial year to prevent them from being disclosed in
the financial statements of the company. In Australia, on the other
hand, the transactions were generally not recorded. In those cases where
they were recorded they were disguised, often as loans.
8.50 Inproper accounting, together with incomplete documentation
concerning the Nugan Hand Bank [see Part 4 Section 4] and other overseas
companies, and the concealment and destruction of Nugan Hand records in
Sydney [see Part 3 Section 9] have made the task of analysing and
collating the various Yorkville Contra transactions a difficult one.
Oral evidence before the Commission was of no more than limited
assistance in this task.
8.51 Nevertheless the Commission has prepared three schedules of
transactions, which satisfy the definition of a Yorkville Contra. Each
of the schedules is based on a different accounting source and should,
with one possible exception, represent different transactions. One such
schedule is a list of all Yorkville Contras which were recorded in an
account entitled 'Yorkville Contra' in the books of the Nugan Hand Bank.
It should be noted that some transactions recorded in this account do not
in fact come within the definition of Yorkville Contra and have not been
included in this schedule which has been provided, pursuant to section 6P
of the Commonwealth Royal Commissions Act, to relevant law enforcement 34
authorities for further investigation [see 8.35].
8.52 The second of these schedule prepared by the Commission
conprises a list of all Yorkville Contras included in the account
entitled 'Nugan Hand Ltd' in the books of the Nugan Hand Bank. The
majority of these transactions were of a particular type, that is,
deposits made from overseas to Nugan Hand Ltd in Sydney, the liability
for which was assumed by the Nugan Hand Bank which in due course repaid
the deposit overseas. Before July 1977 these were included in the
account styled 'Yorkville Contra'. Thereafter they were included in the
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account entitled 'Nugan Hand Ltd'. These transactions have been included
as Yorkville Contras because they satisfy the basic definition of a
Yorkville Contra although it could be argued that in the case of some of
these transactions repayment by a different company in a different
country was not so much a facility for the client's purposes but rather
an arrangement which was convenient to the Nugan Hand Group.35 This
schedule has been provided, pursuant to section 6P of the Commonwealth
Royal Commissions Act, to relevant law enforcement authorities for
further investigation.
8.53 The third such schedule includes Yorkville Contra transactions
to or from Nugan Hand Bank which were not included in the books and
records styled 'Yorkville Contra' and 'Nugan Hand Ltd'. It also includes
transactions to or from Nugan Hand Inc. Panama (before the formation of
the Nugan Hand Bank) as well as those located amongst the records of
Nugan Hand (Hong Kong) Ltd (hereafter referred to as 'Nugan Hand (Hong
Kong)') and Nugan Hand Singapore (Pte) Ltd. This schedule also has been
provided, pursuant to section 6P of the Commonwealth Royal Commissions
Act, to relevant law enforcement authorities for further investigation.
Many of the transactions were deposits received in Australia for which
International Certificates of Deposit were issued by the Nugan Hand
Bank. It should be noted that a journal entry of 30 June 1979 in the
books of the Nugan Hand Bank charged the account entitled 'Yorkville
Contra' for adjustments made to deposits accepted from clients in the
amount of US$2.3 million.
8.54 In compiling the schedules it was noted that the Nugan Hand Bank
books and records showed inconsistencies in the exchange rates adopted
from time to time. When a credit was raised in the Nugan Hand Bank's
books, in respect of a Yorkville Contra transaction, the Nugan Hand Bank
applied the middle rate on that day. When the Nugan Hand Bank purchased
or sent a draft or telegraphic transfer overseas the buying rate on that
day was applied. When the books and records were written up, the rate
applicable at the end of the month, at the end of several months, or at
the end of the financial year was used to convert Australian, Hong Kong
and Singapore dollars to United States dollars which was the currency
- 959 -
used by the Nugan Hand Bank for recording purposes. Accordingly, the
Nugan Hand Bank records sometimes reflected different United States
dollar amounts for the same transaction. Where this occurred and where
the situation was otherwise unclear, the Commission has taken the rate
prevailing on the day of the transaction.
8.55 In addition to these three schedules which contained only the
essential facts concerning each transaction, namely, date, amount, client
etc, a further schedule has been prepared. The purpose of setting out
the detailed circumstances of each of these transactions in this fourth
schedule is to enable their complexity and diversity to be appreciated
without their detail overwhelming the rest of this Part. This schedule,
too, has been provided, pursuant to section 6P of the Commonwealth Royal
Commissions Act, to relevant law enforcement authorities for further
investigation. However in order to give a sample of these transactions
in this report, examples from this fourth schedule are set out in the
following paragraphs to illustrate particular categories of transactions
and to demonstrate the manner in which the Banking (Foreign Exchange)
Regulations have been contravened. The examples which follow immediately
are Yorkville Contra transactions.
Example No. 1
8.56 In this example cash was received and placed in the safe of
Nugan Hand Ltd in Sydney and, by means of a Yorkville Contra, a Nugan
Hand Bank international certificate of deposit was issued overseas.
Repayment was subsequently effected by the Nugan Hand Bank sending the
money plus interest earned to Hawaii in accordance with the client's
instructions.
8.57 In or about November 1977 Mr R.A. Pulger-Frame [profile 2.59]
travelled to Australia and collected a total of A$350 000 on behalf of
the Nugan Hand Group. This money was placed in the safe at Nugan Hand
Ltd's premises in Sydney. One of the clients that he received cash from
was 'K'. K was introduced to Mr Pulger-Frame, by a Queensland
accountant, who was present when K obtained AS100 000 in cash and handed 37 it to Mr Pulger-Frame in Melbourne.
- 960 -
8.58 The cash which had been received in Sydney gave the client
rights to an equivalent amount overseas. Thus, on 2 November 1977 the
Nugan Hand Bank issued an international certificate of deposit for
US$106 220. This deposit was for a period of one year with an interest
rate of 8.75 per cent. K was allocated the Nugan Hand Bank client number
77-3134-A.^ (Mr Pulger-Frame told Commission investigators that the
accountant had taken A$6 000 for himself but this conflicted with a
memorandum he sent to Mr Oollings stating that the accountant had 'peeled 39
off two of the six per cent I charged so he made A$2 000 out of it' ).
8.59 On 26 February 1979 K's accountant instructed the Nugan Hand
Bank that the principal plus interest was to be transferred to a bank
account at the First Hawaiian Bank, Hawaii. On 6 March 1979
US$118 967.65 was transferred by telegraphic transfer to Hawaii
for K.41" 1 K did not give evidence to the Commission although she was
interviewed by Commission investigators.4* K told Commission
investigators that the A$100 000 was an investment by her son who wrote a
cheque in the name of his company and gave it to the accountant. The
accountant travelled to Melbourne and with K banked this cheque to her
account. K drew cash against this cheque and handed it to
Mr Pulger-Frame at her home in Melbourne. No receipt for the money was
handed to K, however, an international certificate of deposit from the
Nugan Hand Bank was forwarded to her son by the accountant on 8 February
1978. After the deposit with the Nugan Hand Bank matured, the accountant
suggested that it be transferred to K's Hawaiian bank account. K told
Commission investigators that the funds were later transferred to her
son's bank account in Honolulu and brought back to Australia by him in
1982.42
Example No. 2
8.60 in this case money was collected in Australia by two Nugan Hand
Group companies - Yorkville Nominees Pty Ltd and Nugan Hand Trade
Services Pty Ltd [profile 2.98] (hereafter referred to as 'Nugan Hand
Trade Services') - and a taxation scheme was then implemented. By means
of a Yorkville Contra, the equivalent amount of money was made available
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through the Nugan Hand Bank (either from Hong Kong or from Singapore) and
was subsequently transferred by the Bank to Switzerland.
8.61 'G' operated a company in South Australia which paid A$ll 000 to
Yorkville Nominees on 5 April 1978 and subsequently made 11 payments to
Nugan Hand Trade Services of A$8 983.33 each. The total money received
in Australia was A$109 816.63. Subsequently the Nugan Hand Bank paid out
overseas, by telegraphic transfer, one amount of A$29 600.66 on 20 April
1978 and from July 1978 to October 1979 eight payments of A$7 007 making
a total of A$85 656. The difference between the money raised in
Australia and that paid out by the Nugan Hand Bank was A$24 161 which was
22 per cent of the money deposited in Australia. This 22 per cent
probably represented the fee for the taxation scheme which essentially
involved the issue of false invoices by Yorkville Nominees and Nugan Hand
Trade Services to G's company ostensibly for services rendered.
8.62 G's company claimed expenses in their taxation returns based on
these invoices and received a corresponding tax deduction. In fact,
78 per cent of these payments to the Nugan Hand Group companies by G were
returned to him by the Nugan Hand Bank overseas. The first payment by
the Nugan Hand Bank on 20 April 1978 of A$29 600.99 was transferred to
G's account at the Swiss Credit Bank, Zurich. The subsequent instalments
of A$7 007 were paid to the same bank in Switzerland to an account in
another name.
8.63 G denied to Commission investigators that these transactions
were a taxation scheme and claimed that the payments related to increased
sales of office furniture as part of his business. However, the
Commission's inquiries found no evidence of any significant sales
assistance by the Nugan Hand Group. G denied any knowledge of the Swiss 43
bank accounts as well as the name of the second account.
Example No. 3
8.64 In this example money accumulated overseas by Î ' was
transferred to the Nugan Hand Bank and, by means of a Yorkville Contra,
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money was made available in Australia where a tax scheme was
implemented.
8.65 On 27 January 1976 a cheque for US$10 558 was deposited to Nugan
Hand Inc. Panama at the Union Bank of Switzerland in Zurich on behalf of
a holding company. This deposit matured on 27 April 1976 and together 44
with interest amounted to US$10 766.27. Further interest accrued on
1 December 1976 and a total amount of US$11 287.83 was transferred and
invested with the Nugan Hand Bank for one year under client number
76-3063-A. This deposit was broken early (on 27 May 1979) in order to
arrange a back to back loan in Australia. E also had money on deposit
with the Nugan Hand Bank under client number 77-3108-A. An amount of
US$20 989.84 from these two accounts was converted to A$18 972.55 and
after a 5 per cent fee of A$948.62 was deducted E received A$18 023.93 in 45 Australia from Yorkville Nominees. This so called loan was paid to a
firm of solicitors in order for E to purchase land at Port Macquarie.^®
8.66 E signed documents to falsely evidence that A $18 023.93 was
mortgage finance from Yorkville Nominees. However, a deed of termination
and release between the two parties was also prepared so that E did not
have any liability to repay the loan. In fact E did repay the loan on
4 May 1978 by depositing A$20 186.80 to Yorkville Nominees but received 47
this money back in cash on the same day.
Example No. 4
8.67 in this example money was placed on deposit with the Nugan Hand
Bank overseas, a Yorkville Contra was then arranged, and the equivalent
amount of money was made available in Australia. A tax scheme was then
arranged for the client in Australia.
8.68 'M' dealt with the Nugan Hand Bank and Nugan Hand (Hong Kong)
through three nominee companies. On 5 October 1977 M arranged for
US$88 112 to tie deposited with Nugan Hand (Hong Kong) in respect of one
of the nominee companies using client number 77-60420-C. This deposit
was then used as security for a back to back loan in Australia of
- 963 -
A$80 000 by Yorkville Nominees. Thus Yorkville Nominees paid A$80 000 to
the trust account of a firm of solicitors, as a purported loan to a
company controlled and operated by M in Australia.^® This company
later repaid the loan to Yorkville Nominees and the money held on deposit
with Nugan Hand (Hong Kong) on behalf of the overseas nominee company was
then released.
Summary of Examples 1 to 4
8.69 As far as the Banking (Foreign Exchange) Regulations are
concerned, examples 1 to 4 would appear, in the absence of Reserve Bank
approval, to involve breaches of the same regulations, that is
Regulations 8 and 34.
8.70 Regulation 8(3) prohibited payment to a resident in association
with a payment overseas and also a person was prohibited from, inter
alia, entering into an agreement so that a right to receive a payment in
Australia was created in favour of a resident as consideration for the
receipt by a person of a payment outside Australia.
8.71 Regulation 34(1)(b) prohibited a resident from buying or
otherwise dealing with foreign securities that were outside Australia.
By virtue of Regulation 4(2), foreign securities included a right to
receive payment of moneys in a country outside Australia.
8.72 The examples which now follow, have been termed Yorkville
Contras for the purposes of the schedules. They refer to transactions in
which the Nugan Hand Bank assumed the liabilities of Nugan Hand Ltd to
repay deposits. Although they satisfy the basic definition of a
Yorkville Contra, many of them can be distinguished from previous
examples in that they seem to have been for the convenience of the Nugan
Hand Group rather than for the client.
Example No. 5
8.73 On 16 October 1975 'M Ltd' sent HK$500 000 from overseas to
Nugan Hand Ltd in Sydney. The money was received in Australia the
- 964 -
49
following day as A$78 215. Interest of A$3 375.50 was paid on this
money which was treated as a loan by Nugan Hand Ltd on 13 April
50
1976. However, the money was not paid directly to M Ltd, instead it
was paid to Nugan Hand (Hong Kong).
8.74 Nugan Hand (Hong Kong) paid interest of HK$22 500 to M Ltd on
16 April 1976.51
8.75 A year later, the principal and interest, that is HK$550 000,
was paid to M Ltd (overseas) by the Nugan Hand Bank (not Nugan Hand Ltd) 52 on 16 April 1977. This payment was not approved by the Reserve
Bank.
Example No. 6
8.76 On 24 August 1976 'W Ltd' with Reserve Bank approval advanced
HK$2.5 million to Nugan Hand Ltd which received A$406 844.57 the
53
following day. The funds were advanced to Nugan Hand Ltd via Nugan
Hand (Hong Kong). The loan was rolled over by Nugan Hand Ltd without
obtaining approval from the Reserve Bank of Australia. The first
instalment of interest was paid out of an account in Hong Kong with the
Wing On Bank numbered 14260 in the name of Nugan Hand Ltd which was
funded by the Nugan Hand Bank. No approval was sought from the Reserve
Bank of Australia for this interest payment to be made offshore. On
31 August 1977 the next instalment was paid by Nugan Hand Ltd without
Reserve Bank approval. The amount involved was A$17 761.96. This was
paid directly to W Ltd.5^
Summary of Examples 5 and 6
8.77 In the absence of Reserve Bank approval, it would seem that a
breach of Regulation 8(1) (c) may have been involved in the case of both
examples 5 and 6.
8.78 Regulation 8(1)(c) prohibited a person from entering into an
agreement so that a right to receive a payment, whether in Australia or
elsewhere, was created in favour of a non-resident.
- 965 -
8.79 The examples also include transactions in respect of which (in
contrast to examples 5 and 6) Reserve Bank approval was obtained for
repayment to be made from Nugan Hand Ltd in Australia to the client in
Hong Kong but, contrary to that approval, payments were in fact made from
overseas companies within the Nugan Hand Group. They might more
appropriately be considered as examples of the misuse of approvals. For
convenience, however, this type has been kept in the one group and
relevant approvals noted.
8.80 The three categories which follow continue the examination of
transactions for which no Reserve Bank approval was obtained.
Movement of Money across national b o rders wi t h o u t the approval of the
R e serve Bank
55
8.81 Ac c o r d i n g to records of the R e s e r v e Bank of Australia no
approval was sought for two a m o u n t s of m o n e y w hich w e r e a d v a n c e d to Nugan
Hand Ltd b y the N u g a n Hand Bank in 1980.
8.82 First, on 17 January 1980 the Nugan Hand Bank sent US$250 000 to
Nugan Hand Management Services Ltd56 (hereafter referred to as 'Nugan
Hand Management Services'). This money was sent on to Nugan Hand Ltd on
22 January 1980.^ Nugan Hand Ltd received the money the following day
as A$225 024.75. Secondly, on 26 March 1980 US$55 480 (A$50 000) was
sent by the Nugan Hand Bank to Nugan Hand Ltd.^®
8.83 T hese moneys advanced to N ugan Hand Ltd b y the Nugan Hand Bank
or N u g a n Hand Management Services w i thout the approval o f the Re s e r v e
Bank w o u l d se e m to have been in breach of R e gulation 8(1)(c) in that they
appear to b e the subject of agree m e n t s w h e r e b y a right to repayment is
created in favour of the lender, a non-resident.
Payment of Overseas Bank Charges and Commissions
8.84 Nugan Hand Ltd operated a number of overseas bank accounts, for
example, with the Wing On Bank (account number 14260-3), with the Chase
- 966 -
Manhattan Bank (account number 68-72-161390-0) and with the First 69
National City Bank (account number 00193771).
8.85 There is little information available concerning the operation
of most of these accounts. In the case of the Wing On Bank account
however it is known that the account was funded by the Nugan Hand Bank
and was largely used for bank charges and commissions payable to the Wing
On Bank. These payments to the Wing On Bank were in respect of loans
made to Nugan Hand Ltd with Reserve Bank approval which were guaranteed
by the Wing On Bank [see 4.1.27-4.1.55],
8.86 There was no requirement to obtain Reserve Bank approval merely
to open an overseas bank account, although of course, approval would be
required to send money from Australia to that account. If money had been
sent overseas to these accounts then breaches of Regulations 6, 8(3)(b)
and 34 may have occurred. Payments by the Nugan Hand Bank in respect of
the liability of Nugan Hand Ltd to the Wing On Bank, are likely to have
involved a breach of Regulation 8(1)(c) where made pursuant to an
agreement and without Reserve Bank approval.
Extensions of Loans not Approved by the Reserve Bank
8.87 R e serve Bank approvals for overseas borro w i n g s contained
conditions, one of w h i c h w a s that if the loan was to b e exte n d e d for
further periods then a fresh approval f r o m the R e s e r v e Bank was
required. Nugan Hand Ltd often failed to a p p l y for this appr o v a l to
extend the ter m of the borrowing.
8.88 Ayala Finance (HK) Ltd (hereafter referred to as 'Ayala
Finance') advanced a sum of HK$3 million from overseas to Nugan Hand Ltd
in Sydney for a period which was subsequently extended for three months
on 23 March 1979 with the approval of the Reserve B a n k . A f t e r the
expiry of this term no further approvals were obtained or sought by Nugan
Hand Ltd in respect of this loan; however, the loan was still outstanding
at the time of the collapse of Nugan Hand Ltd in April 1980.^ The
principal and interest were repaid by the Wing On Bank after the collapse
- 967 -
of Nugan Hand Ltd under the guarantee arrangements that Nugan Hand Ltd
had with the Wing On Bank.
8.89 Similarly, Nugan Hand Ltd obtained approval on 12 July 1976 to
borrow HK$4 million from the Overseas Trust Bank Ltd (hereafter referred
to as Overseas Trust Bank'). The term of this loan was for
200 days.®^ The maturity date was 10 February 1977. In fact the loan
was not repaid by Nugan Hand Ltd but by the Nugan Hand Bank, two years
later, on 10 February 1979. No Reserve Bank approval had been sought for
the extension.
8.90 These and other examples suggest that the extension of loans
without Reserve Bank approval was of frequent occurrence, either due to
oversight as may be the case with late repayments of loans, or deliberate
disregard of the Regulations as would seem to be the case with rollover
transactions. In both cases the effect was that for various periods
there were agreements between Nugan Hand Ltd, or other Australian
companies within the Group, and overseas lenders in circumstances whereby
a right to receive a payment overseas was created in favour of a
non-resident lender without Reserve Bank approval. Such transactions
would appear to have been in contravention of Regulation 8(1)(c).
Transa c t i o n s in which R e s e r v e Ban k Approval was Misused
Lender Falsified
8.91 Reserve Bank approval was obtained for loans to be advanced to
Australia supposedly from Baia do Oriente Limitada, (hereafter referred
to as 'Baia do Oriente') a company incorporated in Macau, but contrary to
the approval, they were advanced by the Nugan Hand Bank. The first loan
was for US$90 000 to Nugan Hand Ltd and the remaining three were for
US$90 000, US$90 000 and US$50 000 respectively to Yorkville Nominees.
No money was ever advanced by Baia do Oriente.
8.92 The first loan was obtained by Nugan Hand Ltd on 18 July 1977
when A$80 056.93 was deposited with the company.®^ A journal entry was
- 968 -
made in the books of Nugan Hand Ltd to make it appear as though the loan
had been transferred to Yorkville Nominees. This had the purported
effect of reducing the indebtedness of Yorkville Nominees to Nugan Hand
Ltd. Reserve Bank approval for this purported loan was obtained on
14 July 1977 and approvals were subsequently obtained for the period of
the loan to be extended on 11 January 1978 and 19 July 1978.
8.93 Approvals were obtained for the three loans to Yorkville
Nominees on 3 August 1977, 12 August 1977 and 24 August 1977
respectively. The first loan (US$90 000) was received by Nugan Hand Ltd 6 4 on 15 August 1977 as A$81 477.46. On 17 August 1977 Nugan Hand Ltd
paid the money to Yorkville Nominees. On 16 March 1978 Nugan Hand
Ltd transferred money to Yorkville Nominees to allow Yorkville Nominees
to repay the loan plus interest. The amount repaid was A$88 105.73.66
This money was used in the second capital injection of Nugan Hand Ltd
[see 5.88-5.103).
8.94 The other two loans of US$90 000 and US$50 000 respectively
advanced to Yorkville Nominees by Baia do Oriente were received on
25 August 1977 by Yorkville Nominees as A$126 433.66.®^ This money was
also used in Australia for the second capital injection of Nugan Hand
Ltd. [see 5.88-5.103] Yorkville Nominees repaid these two loans on
3 March 1978 as A$121 379.40 to the Nugan Hand Bank.®® The money to
repay the loans was provided to Yorkville Nominees by Nugan Hand
Ltd.®^ The repayments of the three loans to the Nugan Hand Bank were
treated in the Nugan Hand Bank's records as though the money was on
deposit from Baia do Oriente. The money was still shown to be on deposit
at the time of the collapse of the Nugan Hand Bank together with interest
accrued but not paid.^®
8.95 These transactions which relate to the second capital injection,
disclose a number of possible breaches of the regulations. Payment by
the Nugan Hand Bank to Nugan Hand Ltd instead of, as approved, from Baia
Do Oriente to Nugan Hand Ltd would appear to involve a breach of
Regulation 8(1)(c). Alternatively, it could be argued that Regulation
39(2) had been breached in that a condition of the approval had been
- 969 -
contravened. In any case the application contained untrue or misleading
information in contravention of Regulation 40. With regard to repayment
of the loans by Yorkville Nominees to the Nugan Hand Bank, a
contravention of Regulation 6 would seem to have occurred in the absence
of Reserve Bank approval.
Recipient Falsified
8.96 The Reserve Bank granted Nugan Hand Ltd approval on 8 February
1979 to repay a loan to Inter-Alpha Asia (Hong Kong) Ltd (hereafter
referred to as 'Inter-Alpha Asia1) of US$1 million. In fact Nugan Hand
Ltd used this approval to provide funds to the Nugan Hand Bank to enable
the Bank to meet commitments of Nugan Hand Ltd, namely to repay principal
and interest to the Overseas Trust Bank and an interest payment to
Inter-Alpha Asia.^
8.97 On 15 July 1976 Nugan Hand Ltd received A$648 403.30 from the
Overseas Trust Bank. All payments of interest and repayment of principal
were made by the Nugan Hand Bank, using a sum of US$1 million sent by
Nugan Hand Ltd to the Nugan Hand Bank on 10 February 1978. Interest was
paid six monthly and the principal and final interest was repaid with an
amount of US$874 899.84 on 10 February 1979.
8.98 On 2 August 1977 US$500 000 was advanced to Nugan Hand Ltd by
Inter-Alpha Asia. This was increased the following year by a further
US$500 000. This loan was still outstanding with Nugan Hand Ltd at the 73 time of its collapse. Correspondence dated 1 February 1979 indicated
that the loan was to be extended for a further term. However, on 7
February 1979 Nugan Hand Ltd requested and on the following day obtained,
Reserve Bank approval to repay the loan. On 9 February 1979,
A$880 669.31 (US$1 million) was in fact sent by Nugan Hand Ltd to the
Nugan Hand Bank. Nugan Hand Ltd's records were adjusted to indicate that 74 the loan had been repaid.
8.99 Thus the Reserve Bank approval had been granted for the
repayment of the Inter-Alpha Asia loan and had been used by Nugan Hand
- 970 -
Ltd to provide funds to the Nugan Hand Bank principally to meet Nugan
Hand Ltd's commitment to the Overseas Trust Bank.
8.100 As there was either no authority or a failure to act in
accordance with such authority as was given, this complex series of
transactions would have involved breaches of Regulations 6, 8(3)(b) and
39(2). Nugan Hand Ltd had authority to repay a loan to Inter-Alpha
Asia. However, instead of repaying the loan, Nugan Hand Ltd forwarded
funds to the Nugan Hand Bank without the approval of the Reserve Bank
(and therefore in contravention of Regulations 6 and 39) in circumstances
which suggest that the transaction created a right in favour of Nugan
Hand Ltd to receive a payment of at least part of those funds in
Australia thus contravening Regulation 8(3)(b). As an alternative, it
could be argued that instead of a contravention of Regulation 6, there
was a failure to comply with a condition of the approval within the terms
of Regulation 39(2).
Interest Rates Falsified
8.101 The interest rates quoted in the requests to the Reserve Bank
were often less than the interest rates being paid to the overseas
party. In all cases where this occurred the extra interest was not paid
by Nugan Hand Ltd but was met by either Nugan Hand (Hong Kong) or the
Nugan Hand Bank.
8.102 One such example concerned the Sun Hung Kai Finance Company Ltd
which made an advance of HKfc2 million to Nugan Hand Ltd on 18 August
1977. The rate of interest quoted to the Reserve Bank was 8.25 per cent
which was increased to 9.5 per cent, with the Reserve Bank's approval a
year later, remaining at this level for a further extension the following
year, also with Reserve Bank approval.
8.103 Contrary to the approved rates of interest, the interest rate
was, in fact, tied to a 3.5 per cent margin above the Hong Kong and
Shanghai Bank's best lending rate which at that time was 4.75 pier cent
per annum. When this rate increased during the term of the loan, Nugan
- 971 -
Hand Ltd incurred a liability to repay a greater amount of interest than
had been approved by the Reserve Bank.
8.104 The Hong Kong and Shanghai Bank's prime rate increased to
5.5 per cent on 1 May 1978, 6 per cent on 17 July 1978, 7.25 per cent on
30 October 1978, 8.75 per cent on 9 November 1978, 9.5 per cent on
2 January 1979, 10.5 per cent on 19 February 1979, 11 per cent on
20 March 1979, 11.5 per cent on 10 April 1979, 13 per cent on 20 April
1979, 14.5 per cent on 21 August 1979 reaching 16 per cent on 11 March
1980. Nugan Hand Ltd was therefore ultimately incurring a liability of
19.5 per cent as at 11 March 1980 while the highest rate approved by the
Reserve Bank was 9.5 per cent, being 10 per cent less than that being 75 paid by Nugan Hand Ltd.
8.105 Regulation 40 is relevant to this example to the extent that the
application for approval would have contained untrue or misleading
information in respect of the interest rate. Regulation 6 would also
have been contravened to the extent of the interest differential.
Other Matters Affecting Overseas Borrowings by Nugan Hand Ltd
8.106 Aside from Nugan Hand Ltd's disregard for legal requirements
when they proved inconvenient, the company showed a similar disrespect
for relevant financial and procedural considerations when borrowing from
overseas.
8.107 For example, overseas borrowings were channelled through the
Wing On Bank to Nugan Hand Ltd and for this service, the Wing On Bank
would charge a fee of 4 per cent. These charges were either paid by
the Nugan Hand Bank or were paid out of a Wing On Bank account in the
name of Nugan Hand Ltd which was funded by the Nugan Hand Bank [see
paragraphs 8.84-8.85]. These costs were not taken up as expenses in
Australia by Nugan Hand Ltd.
8.108 Secondly, there were fees charged by the Wing On Bank for
providing guarantees to overseas lenders. These guarantees were secured
by Nugan Hand Ltd lodging securities in Australia in a safe custody
- 972 -
account with the Bank of New South Wales and later the ANZ Bank
[see 4.1.27-4.1.55]. The fees and charges in respect of these guarantees
granted by the Wing On Bank were either paid by the Nugan Hand Bank or
charged against a Wing On Bank account in the name of Nugan Hand Ltd
which was funded by the Nugan Hand Bank. These fees and expenses
associated with the guarantees were not taken up by Nugan Hand Ltd as
expenses, even though they were a cost of borrowing money from overseas.
8.109 Thirdly, there were costs brought about by requirements of the
Reserve Bank to lodge (on some occasions) a portion of the overseas money
received in an account with the Reserve Bank. This account did not earn
interest. A typical example of this was an overseas borrowing from W Ltd
for which Nugan Hand Ltd failed to obtain approval for the borrowing to
be rolled over for a further term. As part of the subsequent conditions
imposed by the Reserve Bank, 25 per cent of the borrowing had to be
lodged with the Reserve Bank in Australian currency on an interest free
non-assignable basis. The deposit was returnable when the repayment of
the borrowing was made with the authority of the Reserve Bank. The
effect of lodging 25 per cent of the loan in an interest free account was
that Nugan Hand Ltd only received the benefit of 75 per cent of the loan
for use in its money market activities.
8.110 Since Nugan Hand Ltd paid interest on 100 per cent of the loan
but only received three quarters of the loan, the effective interest rate 77 on that loan was much higher. The loan from W Ltd was not the only
loan from an overseas entity that was affected by this 25 per cent
variable deposit requirement.
8.111 a fourth matter affecting overseas borrowings was the
interpretation of the date that the borrowing commenced. The
arrangements between Nugan Hand Ltd and the overseas lender had the
result that the date that the lender sent the money was considered by the
lender to be the date that the loan commenced. However, Nugan Hand Ltd
found that the Reserve Bank insisted that the commencement date was the
date on which the funds were received in Australia. Officers of the
Nugan Hand Group were reluctant to approach the overseas party concerning
the discrepancy in the starting date of the loans.78 This may have
- 973 -
been an incentive for the G roup to repay loans out of funds held by the
Nugan H a n d Bank or N u g a n Hand (Hong Kong) w i t h a later reimbursement by
Nugan Hand Ltd. This p o l i c y e v e n t u a l l y led to a failure on the part of
Nugan Hand Ltd to reimburse these companies at all.
8.112 A fifth matter affecting the overseas borrowings by Nugan Hand
Ltd concerned withholding tax. In most cases Nugan Hand Ltd undertook to
pay any taxes such as withholding tax that might be incurred in respect
of the loans so that the overseas lender received the full amount of
interest without any deductions by Australian government authorities.
The obvious effect of this was to substantially increase the cost of
these overseas borrowings.
8.113 Finally, there were numerous costly inefficiencies often caused
b y a lack of c ommunication b e tween the m e mbers of the N ugan Hand G r o u p
which on some occasions led to double payments of interest to a client
and overpayment of wit h h o l d i n g tax, w hich then had to be rectified. An
example of this inefficiency occurred in the case of the first investment
b y Reterden Ltd, w h e n the use of the m o n e y was lost for the first nine
days after the loan had been made. When the loan was extended for a
further term, Nugan Hand Ltd n e g lected to include the interest component
in the approval and therefore received approval only to roll over the 79 principal of the loan. On another occasion N u g a n Han d Ltd lodged
$40 000 too muc h w i t h the R eserve Bank and had to request repayment.®^
8.114 There were also instances of approvals being granted for
overseas loans which were not utilised by Nugan Hand Ltd. One example
was an approval for US$3 million to be brought into Australia on 13 July
1979 from Nugan Hand Management Services. There is no evidence in the
Australian or overseas records of the Group to indicate that this
approval was utilised. Likewise, approval was obtained for US$3 million
on 22 September 1977 with the money supposedly coming from Baia do
Oriente. This authority was not utilised either and may have been an
attempt to have some sort of floating authority available overseas for
remission to Australia as and when the dwindling liquidity of Nugan Hand
Ltd required it.
. .
·â . .'*â $··â . - ·
975
8.115 SCHEDULE A
Commonwealth of AustraliaGazette No. S 318, Monday, 12 December 1983 Published by the Australian Governrrfent Publishing Service, Canberra SPECIAL
BANKING (FOREIGN EXCHANGE) REGULATIONS EXEMPTIONS Reserve Bank of Australia in pursuance of Regulation 38 of the Banking (Foreign Exchange) Regulations herebyâ
(1) Revokes the exemptions dated 27 September 1972 of payments to, by the order of, or on behalf of, persons resident out of Australia from the application of Regu lation 8 ( I ) of those Regulations.
(2) Revokes the exemption dated 21 October 1976 relat ing to the entering into of any contract of insurance (not being a policy as defined in sub-section 4 (1 ) of the L if e In s u r a n c e A c t , 1 9 4 5 ) and any contract of re insurance (not being a contract of re-insurance of a policy as defined in sub-section 4(1) of the L if e In  s u r a n c e A c t . 1 9 4 5 ), from the application of ReguÂ
lation 8(1) (c) of the Regulations.
(3) Exempts from the application of Regulation 8 ( I) (a) of the Regulations, the making of any payment in Australia to. by the order of, or on behalf of, a person who is not a resident, other than a person resident in a
country specified in a current notice issued by the Treasurer under section 39b of the B a n k i n g A c t , 1 9 5 9 , and the placing of any sum in Australia to the credit of any such person.
(4) Exempts from the application of Regulation 8 (1 ) (c), the entering into of any contract or agreement (not being a contract or agreement for the purchase of goods) and the acknowledgment of any debt, so that a
right (whether actual or contingent) â (i) to receive a payment, or any valuable consider ation; or (ii) to the performance of any service, whether in Australia or elsewhere, is created or trans ferred in favour of a person who is not a resident, other than a person resident in a country specified in a curÂ
rent notice issued by the Treasurer under section 39b of the B a n k i n g A c t. 19 5 9 .
Dated at Sydney this twelfth day of December 1983.
For and on behalf of the Reserve Bank of Australia.
R. A. JOHNSTON Governor
BANKING (FOREIGN EXCHANGE) REGULATIONS EXEMPTIONS Reserve Bank of Australia in pursuance of Regulation 38 of the Banking (Foreign Exchange) Regulations herebyâ
(1) Revokes the exemption dated 20 December 1978 relating to goods exported from Australia otherwise affected by Regulations 16, 17 and 19 of those Regulations.
(2) Exempts from the application of Part III of those Regulations goods exported from Australia.
Reserve Bank of Australia in pursuance of Regulation 16 also hereby revokes the approval dated 24 December 1979 in respect of goods exported from Australia, notified in the G a z e tt e on 2 January 1980.
Dated at Sydney this twelfth day of December 1983.
For and on behalf of the Reserve Bank of Australia.
R. A. JOHNSTON Governor
BANKING (FOREIGN EXCHANGE) REGULATIONS EXEMPTION Reserve Bank of Australia in pursuance of Regulation 38 of the Banking (Foreign Exchange) Regulations hereby exempts from the application of Regulation 7 of those Regulations any person taking or sending money out of Australia by means of a money order issued in Australia and payable out of Australia.
Dated at Sydney this twelfth day of December 1983.
For and on behalf of the Reserve Bank of Australia.
R. A. JOHNSTON Governor
Printed by C. J. T hompson, Commonwealth Government Printer, Canberra
15869/83 Cat. No. 83 6252 4 Recommended retail price 10c (plus postage)
- 976
Commonwealth of AustraliaGazette No. S 42, Monday, 6 February 1984 Published by the Australian Government Publishing Service, Canberra SPECIAL
BANKING (FOREIGN EXCHANGE) REGULATIONS EXEMPTION Reserve Bank of Australia in pursuance of Regulation 38 of the Banking ( Foreign Exchange) Regulations herebyâ
(1) revoke the exemption dated 12 December 1983 relat ing to Regulation 8 ( I ) (a) of the Regulations, namely, the making of any payment in Australia to, by the order of, or on behalf of, a person who is not a resident, other than a person resident in a country specified in a current notice issued by the Treasurer under Section 39b of the B a n k i n g A c t 1 9 5 9 , and the placing of any sum in Australia to the credit of any such person; and (2) exempts from the application of Regulation 8 (I) (a)
of the Regulationsâ (a) a person making any payment in Australia to, by the order of, or on behalf of, a person who is not a resident, other than a person resident in a place
specified in a notice in force issued by the Treasurer under Section 39b of the B a n k i n g A c t 1 9 5 9 : and
(b) a person placing any sum in Australia to the credit of a person who is not a resident and who is
(i) a government, an agency of a government, ora bank;or (ii) a person resident in a place specified in a notice in force issued by the Treasurer under
Section 39b of the B a n k i n g A c t 1 9 5 9 .
This instrument shall come into operation on the date of pub lication in the C o m m o n w e a l t h o f A u s t r a l i a G a z e tte .
Dated at Sydney this third day of February 1984.
For and on behalf of the Reserve Bank of Australia R. A. JOHNSTON Governor
Printed by C. J. T h o m p s o n , Commonwealth Government Printer, Canberra
10587/84 Cat. No. 84 6388 5 Recommended retail price 10c (plus postage)
977
Commonwealth of AustraliaGazette No. S 235, Monday, 25 June 1984 Published by the Australian Government Publishing Service, Canberra SPECIAL
BANKING (FOREIGN EXCHANGE) REGULATIONS NOTICE OF AUTHORITIES GRANTED TO DEALERS IT is hereby notified for public information that the Reserve
Bank of Australia has granted to the persons set out in the appendix hereunder a general authority operative from 25 June 1984, to engage in foreign currency transactions, as follows:
BANKING (FOREIGN EXCHANGE) REGULATIONS AUTHORITY Reserve Bank of Australia in pursuance of Regulation 38λ of the Banking (Foreign Exchange) Regulations hereby grants authority to (the Dealer) to:
1. buy and sell foreign currency; 2. place to the credit in Australia of a person who is not a resident
(a) any amount of currency representing cover for Australian currency, (other than notes), sold by the Dealer for taking or sending from Australia;
(b) any amount of currency for any other purpose. This authority does not apply to the placing of any Aus tralian currency at interest to the credit of any non-resident who is a government, an agency of a government or a bank, but is otherwise given on condition that, in respect of the transactions authorised above, the Dealer will:
1.
2.
3.
4.
comply with the requirements relating to tax screening set out in the Schedule to this authority; comply with such limits on its foreign exchange pos itions as may be imposed by the Reserve Bank;
provide such returns and information as the Reserve Bank may require from time to time; and comply with any directives and guidelines issued by the Reserve Bank from time to time.
SCHEDULE PART I TAX SCREENING
For the purposes of tax screening, transactions have been div ided into three categories. A, B and C, which are detailed
⢠C a te g o r y A
Transactions for any of the purposes described in Part II of this Schedule.
⢠C a te g o r y B
Amounts in excess of the equivalent of $ A 50,000 in respect
- travel expenditure; - remittances relating to futures operations overseas; - payment of any interest, dividend, service fee or royalty.
THE CONDITIONS:
1. The Dealer must conform with tax screening requirements set out below, relating to the following transactions under taken by it:
(a) the sale of foreign currency; (b) the sale of Australian currency, (other than notes), for use outside Australia; (c) the placing of any amount of currency to the credit in
Australia of a person who is not a resident.
2. C a te g o r y A tr a n s a c tio n s :
Before the Dealer undertakes any transaction described in Part II of this Schedule, it must receive an original lax clearance certificate issued by the Australian Taxation Office in respect of that transaction.
3. C a te g o r y B a n d C tr a n s a c tio n s :
A completed and signed declaration form in duplicate (in the form prescribed by the Reserve Bank) must be received by the Dealer and:
(a) if it relates to a Category B transaction, the Dealer must refer the declaration form to the Reserve Bank and may not undertake the transaction until:
(i) a clearance for it to proceed has been received from the Reserve Bank; or (ii) if required by the Reserve Bank, until an original lax clearance certificate issued by the Australian
Taxation Office in relation to the transaction has been produced to it; (b) if it relates to a Category C transaction, the Dealer may complete the transaction, but must send the origÂ
inal declaration form to the Australian Taxation Office in the Slate or Territory concerned no later than a week after the date of the transaction.
4. When Australian currency (other than notes and coin), is received from overseas for payment and does not bear any evidence that it was cleared for use outside Australia, full particulars of any item in excess of $A5,000 must be advised to the Australian Taxation Office within one
month of the dale of receipt by the Dealer.
PART II
- direct investment overseas;
- gifts (other than donations by charitable and religious bodies, the income of which is exempt from tax), susten ance and trust distributions; - loans to non-residents; - portfolio investment overseas; - repayments of borrowings from overseas.
1 C a te g o r y C
Amounts in excess of the equivalent of $ A 50,000 in respect
13445/84 Cat. No. 84 6098 I Recommended retail price 20c (plus postage)
An Act or thing for which a lax clearance certificate is required is either:
I. (a) the purchase in Australia of foreign currency by a
(b) the taking or sending out of Australia of Australian currency or foreign currency by a person; or (c) the placing of any currency in Australia to the credit of a person who is not a resident, where the currency is to be transferred to a place specified in the list of places set out at the conclusion of this Sched ule. or is to be applied for the benefit of a person who is in.
978
2 B a n k i n g (F o r e ig n E x c h a n g e ) R e g u l a t i o n s
C o m m o n w e a lth o f A u s t r a l i a G a z e tte
N o . S 2 3 5 . 2 5 J u n e 1 9 8 4
or who is a resident of, or a person on behalf of a person who is in, or who is a resident of, a place specified in that list and is either:
(i) a loan or repayment of a loan:
(ii) consideration for the acquisition of securities, land or other property or options thereto or of any interest in securities, land or other property or options thereto, whether situated in Australia or elsewhere, other than consideration for the purchase through a member of an Australian stock exchange of securities or options listed on an Australian slock exchange; (iii) payment of any royalty or licence fee; (iv) payment for the performance of any service;
(v) in relation to the creation or establishment of any trust in a place specified in the list at the conclusion of this Schedule; or
British Virgin Islands Cayman Islands Gibraltar Grenada
Hong Kong The Isle of Man Liberia Liechtenstein Luxembourg Nauru Netherlands Antilles Panama Switzerland
This instrument will come into operation on 25 June 1984. Dated at Sydney this 22nd day of June 1984.
For and on behalf of the Reserve Bank of Australia.
(vi) payment of moneys into a trust fund created, estab lished. held, managed or operated in a place specified in that list.
2. (a) the purchase in Australia of foreign currency by a person:
(h) the taking or sending out of Australia of Australian currency or foreign currency by a person; or (c) the placing of any currency in Australia to the credit of a person who is not a resident, where the currency is to be transferred to Vanuatu or is to he applied for the benefit of a person who is in. or who is a
resident of Vanuatu, or where the currency is for payment of moneys into a trust fund created, established, held, managed or operated in Vanuatu:
OTHER THAN (i) the purchase, taking or sending of currency for the purpose of travel outside Australia:
(ii) the making of a payment in relation to a policy of life assurance:
(iii) the making of donations or bequests to charitable organisations or religious bodies where such do nations or bequests would give rise to an allowable deduction in accordance with section 78 of the I n c o m e T a x A s s e s s m e n t A c t 1936:
(iv) payment of the consideration for the purchase of securities or options listed on an Australian stock exchange, purchased through a member of an Aus tralian stock exchange:
(v) the payment of any dividend or interest on securities listed on an Australian stock exchange that are regis tered in the name of a holder whose address on the register is a place outside Australia; or (vi) the making of a payment of $200 or less.
3. (a) the purchase in Australia of foreign currency; (b) the taking or sending out of Australia of Australian currency or foreign currency: or (c) the placing of any currency in Australia to the credit
of a person who is not a resident, by, or on behalf of. a person who has emigrated from Australia within the previous twelve months, or who in tends to emigrate from Australia, where the amount of currency, together with the amount of any other trans actions of the nature described in this paragraph underÂ
taken by or on behalf of that person within the preceding twelve-month period, is in excess of fifty thousand dollars in Australian currency or any equivalent in foreign cur rency of that sum.
The list of places referred to in this Schedule is as follows: Bahamas Bermuda British Channel Islands
M. J. PHILLIPS Chief Manager
International Department
APPENDIX Australia and New Zealand Banking Group Limited Australian Bank l.imiled
Bank of New Zealand Bank of Queensland Limited Banque Nationalc de Paris Commonwealth Trading Bank of Australia Launceston Bank for Savings National Commercial Banking Corporation of Australia
Limited The Rural & Industries Bank of Western Australia The Savings Bank of South Australia The Savings Bank of Tasmania State Bank of New South Wales The Stale Bank of South Australia State Bank of Victoria
West pa c Banking Corporation
AMP Acceptances Ltd Amro Australia Ltd Associated Midland Group Ltd AUC Holdings Limited
BA Australia Ltd Barclays Australia Ltd BT Australia Ltd Capel Court Corporation Ltd Chase-N.B.A. Group Ltd Chemical All-Stales Ltd Citicorp Australia Holdings Ltd
Elderâs Finance and Investment Co. Ltd European Asian of Australia Ltd Hill Samuel Australia Ltd Kleinwort Benson Australia Ltd Lloyds International Ltd Sociele Generale Australia Ltd
Wardley Australia Ltd Dated at Sydney this 22nd day of June 1984.
For and on behalf of the Reserve Bank of Australia. D. N. SANDERS Deputy Governor
BANKING (FOREIGN EXCHANGE) REGULATIONS AUTHORITY A. Reserve Rank of Australia in pursuance of Regulation 38λ of the Banking (Foreign Exchange) Regulations hereby grants a general authority to persons in Australia to:
( 1) sell foreign currency to an authorised dealer; (2) buy foreign currency from an authorised dealer;
979
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N o . S 2 3 5 . 2 5 J u n e 1 9 8 4
(3) place any amount of currency to the credit in Australia of a person who is not a resident; and (4) take or send from Australia:
(a) Australian currency purchased from an author ised dealer for use overseas; and (b) Australian currency (other than notes and coin) not purchased from an authorised dealer.
B. This authority is given subject to:
1. in respect of any transaction described in paragraphs A (2), (3) and (4) (a):
(a) where the account of the person who is not a resident referred to in paragraph A (3) is conducted in the books of an authorised dealer, an original tax clear ance certificate issued by the Australian Taxation Office must be produced to the authorised dealer by
the person carrying out a transaction pursuant to this authority:
(i) if the transaction is described in the Schedule to this authority; or (ii) if that person is requested by the authorised dealer to produce such certificate; (b) where the account of the person who is not a resident
referred to in paragraph A (3) is conducted in the books of a resident, other than an authorised dealer, an original tax clearance certificate issued by the Aus tralian Taxation Office must be obtained by the per son carrying out a transaction pursuant to this auth ority, if the transaction is described in the Schedule to
this authority; and (c) the person carrying out a transaction pursuant to this authority must produce to the authorised dealer a completed and signed declaration form in duplicate
(in the form prescribed by the Reserve Bank), if the transaction is not described in the Schedule, the amount of the transaction is in excess of $A50,000 or
its equivalent in foreign currency and the transaction is for any of the following purposes:
direct investment overseas; gifts (other than donations by charitable or re ligious bodies the income of which is exempt from tax), sustenance and trust distributions;
loans to non-residents; portfolio investment overseas; repayments of borrowings from overseas; travel expenditure; remittances relating to futures operations overseas;
payment of any interest, dividend, service fee or royalty.
2. in respect of any transaction described in paragraph A (4) (a), any person taking or sending Australian cur rency out of Australia may not use that currency except for the purpose for which it was obtained.
3. in respect of any transaction described in paragraph A (3), (but only where the account of the person who is not a resident is conducted in the books of a resident other than an authorised dealer) and in respect of any trans action described in paragraph A (4) (b), before undertakÂ
ing the transaction:
(a) the person carrying out the transaction pursuant to this authority must obtain a tax clearance certificate from the Australian Taxation Office, if the trans action is described in the Schedule to this authority.
(b) the person carrying out the transaction pursuant to this authority must produce to the Australian Tax ation Office for clearance, a completed and signed declaration form in duplicate (in the form prescribed
B a n k in g (F o r e ig n l : \ e h a n g e ) R e g u l a t i o n s 3
by the Reserve Bank), if the transaction is for an amount in excess of $ A 50,000 in respect of: direct investment overseas; gifts (other than donations by charitable or reÂ
ligious bodies the income of which is exempt from lax), sustenance and trust distributions; loans to non-residents;
portfolio investment overseas; repayments of borrowings from overseas; and (c) the person carrying out the transaction pursuant to this authority must provide to the Australian TaxÂ
ation Office within a week of the transaction's being completed, a completed and signed declaration form in duplicate (in the form prescribed by the Reserve Bank), if the transaction is for an amount in excess of
SA50,000 in respect of: travel expenditure; remittances relating to futures operations overseas; payment of any interest, dividend, service fee or
royalty.
C* In this authority, the term âauthorised dealer" shall mean any person who is authorised by a general authority issued under Regulation 38a of the Banking (Foreign Exchange) Regulations, to buy and sell foreign currency.
SCHEDULE An Act or thing for which a lax clearance certificate is required is either:
1. (a) the purchase in Australia of foreign currency by a person; (b) the taking or sending out of Australia of Australian currency or foreign currency by a person; or (c) the placing of any currency in Australia to the credit
of a person who is not a resident, where the currency is to be transferred to a place specified in the list of places set out at the conclusion of this Sched ule, or is to he applied for the benefit of a person who is in. or who is a resident of, or a person on behalf of a person
who is in, or who is a resident of. a place specified in that list and is either: (i) a loan or repayment of a loan:
(ii) consideration for the acquisition of securities, land or other property or options thereto or of any interest in securities land or other properly or options thereto, whether situated in Australia or elsewhere, other
than consideration for the purchase through a member of an Australian stock cxchangc-of securities or options listed on an Australian stock exchange; (iii) payment of any royally or licence fee; (iv) payment for the performance of any service; (v) in relation to the creation or establishment of any trust in a place specified in the list at the conclusion of this Schedule; or (vi) payment of moneys into a trust fund created, estab lished, held, managed or operated in a place specified in that list.
2. (a) the purchase in Australia of foreign currency by a person; (b) the taking or sending out of Australia of Australian currency or foreign currency by a person; or
(c) the placing of any currency in Australia to the credit of a person who is not a resident, where the currency is to be transferred to Vanuatu or is to he applied for the benefit of a person who is in, or who is a
resident of Vanuatu, or where the currency is for payment
980
4 B a n k i n g (F o r e ig n E x c h a n g e ) R e g u l a t i o n s
of moneys into a trust fund created, established, held, managed or operated in Vanuatu; OTIIKR THAN
(i) the purchase, taking or sending of currency for the purpose of travel outside Australia; (ii) the making of a payment in relation to a policy of life assurance:
(iii) the making of donations or bequests to charitable or ganisations or religious bodies where such donations or bequests would give rise to an allowable deduction in accordance with section 78 of the Income Tax Assessment Act 1936; (iv) payment of the consideration for the purchase of seÂ
curities or options listed on an Australian slock exchange, purchased through a member of an Aus tralian stock exchange; (v) the payment of any dividend or interest on securities listed on an Australian stock exchange that are regis tered in the name of a holder whose address on the register is a place outside Australia: or (vi) the making of a payment of $200 or less.
3. (a) the purchase in Australia of foreign currency; (h) the taking or sending out of Australia of Australian currency or foreign currency: or (c) the placing of any currency in Australia to the credit
of a person who is not a resident, by. or on behalf of. a person who has emigrated from Australia within the previous twelve months, or who in tends to emigrate from Australia, where the amount of currency, together with the amount of any other trans actions of the nature described in this paragraph underÂ
taken by or on behiilf of that person within the preceding twelve-month period, is in excess of lifty thousand dollars in Australian currency or any equivalent in foreign cur rency of that sum.
The list of places referred to in this Schedule is as follows: Bahamas Bermuda British Channel Islands British Virgin Islands Cayman Islands Gibraltar Grenada
I long Kong The Isle of Man Liberia Liechtenstein
Luxembourg Nauru Netherlands Antilles Panama Switzerland
This instrument will come into operation on 25 June 1984.
Dated at Sydney this 22nd day of June 1984.
Lor and on behalf of the Reserve Bank of Australia.
D. N. SANDERS Deputy Governor
BANKING (FOREIGN EXCHANGE) REGULATIONS EXEMPTION Reserve Bank of Australia in pursuance of Regulation 38 of the Banking ( Foreign Exchange) Regulations hereby exempts from the application of sub-regulation 5 (1 ) of the
Regulations (a) any person who. either on his own behalf or on behalf of another person, borrows, lends or exchanges foreign
C o m m o n w e a l t h o f A u s t r a l i a G a z e tte
N o . S 2 3 5 . 2 5 J u n e 19X4
currency in Australia or who otherwise deals (except by way of buying or selling) with foreign currency in Australia; (b) any resident, or any person acting on behalf of a resiÂ
dent. who borrows, lends or exchanges foreign cur rency outside Australia or who otherwise deals (except by way of buying or selling) with foreign currency out side Australia; (c) any person who, either on his own behalf or on behalf
of another person, buys or sells foreign currency in the form of coin in Australia: and (d) any resident, or any person acting on behalf of a resi dent. who buys or sells foreign currency in the form of
coin outside Australia.
This instrument shall come into operation on 25 June 1984.
Dated at Sydney this 21st day of June 1984.
For and on behalf of the Reserve Bank of Australia.
D. N. SANDERS Deputy Governor
BANKING (FOREIGN EXCHANGE) REGULATIONS VARIATION OF EXEMPTIONS Reserve Bank of Australia in pursuance of Regulation 38 of the Banking (Foreign Exchange) Regulations hereby varies the Exemptions dated 15 January 1981 from Regulations
5 ( I ). 5 (2) and 5 (4) of the Regulations by removing the con cluding words, as follows:
âAND conditions of the exemptions in paragraphs ( I ) and ( 2 )are that (a) the resident of Australia buying foreign currency in terms of paragraph ( I ) or receiving payment of foreign
currency in terms of paragraph (2) shall as soon as practicable sell for Australian currency that foreign currency to a bank in Australia: (b) the exemptions may not be utilised in connection with
transactions of a capital nature.â This instrument shall come into operation on 25 June 1984. Dated at Sydney this 21st day of June 1984. For and on behalf of the Reserve Bank of Australia.
D. N. SANDERS Deputy Governor
BANKING (FOREIGN EXCHANGE) REGULATIONS EXEMPTION Reserve Bank of Australia in pursuance of Regulation 38 of the Banking ( Foreign Exchange) Regulations hereby
1. revokes the exemption dated 3 February 1984 relating to sub-regulation 8 ( I ) (a) of the Regulations; 2. revokes the exemption dated 12 December 1983 relat ing to sub-regulation 8 (I) (c) of the Regulations; 3. exempts from the application of sub-regulation
8 ( I) (a) of the Regulations any person who makes any payment in Australia to. by the order of. or on behalf of a person who is not a resident: 4. exempts from the application of sub-regulation 8(1) (c) any person who draws, issues or negotiates any bill of exchange or promissory note, who enters into any contract or agreement (not being a contract or agree ment for the purchase of goods), who allots or transfers any security, or who acknowledges any debt, so that a right (whether actual or contingent)
(i) to receive a payment, or any valuable consider ation; or (ii) to the performance of any service, whether in Australia or elsewhere, is created or transferred in
favour of a person who is not a resident; and
981 -
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5. exempts from the application of sub-regulation 8 ( I) (d) any person who makes any entry in a register in Australia that recognises that a person who is not a resident is the holder of securities. This instrument shall come into operation on 25 June 1984. Dated at Sydney this 21st day of June 1984. For and on behalf of the Reserve Bank of Australia.
D. N. SANDERS Deputy Governor
BANKING (FOREIGN EXCHANGE) REGULATIONS EXEMPTION Reserve Bank of Australia in pursuance of Regulation 38 of the Banking (Foreign Exchange) Regulations hereby exempts from the application of sub-regulation 8 (3) of the Regulations:
(i) the receipt by any person of a payment, or the ac quisition by any person of any property, outside Australia: or (ii) the creation or transfer, in favour of any person,
of a right (whether actual or contingent) to re ceive a payment or acquire property outside Australia: and (b) any person who draws, issues, or negotiates any bill of exchange or promissory note, vyho enters into any con tract or agreement (not being a contract or agreement for the purchase of goods), who allots or transfers any security, or who acknowledge any debt, so that a right (whether actual or contingent) to receive a payment in Australia is created or transferred in favour of a resi dent as consideration for. or in association with, any matter referred to in sub-paragraph (i) or (ii) of the last preceding paragraph.
This instrument shall come into operation on 25 June 1984.
Dated at Sydney this 21st day of June 1984.
For and on behalf of the Reserve Bank of Australia.
D. N. SANDERS Deputy Governor
BANKING (FOREIGN EXCHANGE) REGULATIONS EXEMPTION Reserve Bank of Australia in pursuance of Regulation 38 of the Banking (Foreign Exchange) Regulations hereby exempts from the application of sub-regulation 9(1) of the Regu lations the sale, loan, transfer, mortgaging or charging of any security or land that is in Australia by. by the order of, or on behalf of, a person who is not a resident to another person who is not a resident, or to a person acting on behalf of such a
This instrument shall come into operation on 25 June 1984. Dated at Sydney this 21st day of June 1984. For and on behalf of the Reserve Bank of Australia.
D. N. SANDERS Deputy Governor
BANKING (FOREIGN EXCHANGE) REGULATIONS EXEMPTIONS Reserve Bank of Australia in pursuance of Regulation 38 of the Banking (Foreign Exchange) Regulations hereby exempts from the application of sub-regulation 33(1) of the Regu lations any person who takes, sends or transfers any securities to any place outside Australia.
This instrument shall come into operation on 25 June 1984. Dated at Sydney this 21st day of June 1984.
B a n k i n g (F o r e ig n E x c h a n g e ) R e g u l a t i o n s 5
For and on behalf of the Reserve Bank of Australia. D. N. SANDERS Deputy Governor
BANKING (FOREIGN EXCHANGE) REGULATIONS
EXEMPTION Reserve Bank of Australia in pursuance of regulation 38 of the Banking (Foreign Exchange) Regulations hereby 1. revokes the exemption dated 30 August 1973 relating to
sub-regulation 34 ( I ) of the Regulations:
2. exempts from the application of sub-regulation 34 ( I) of the Regulations (a) any person who. either on his own behalf or on behalf of another person, buys, borrows, sells, lends or
exchanges foreign securities that are in Australia or who deals otherwise with such securities that are in Australia: and (b) any resident, or any person acting on behalf of a resiÂ
dent. who buys, borrows, sells, lends or exchanges foreign securities that are outside Australia or who deals otherwise with such securities that are outside Australia.
This instrument shall come into operation on 25 June 1984.
Dated at Sydney lhis 21 st day of June 1984.
For and on behalf of the Reserve Bank of Australia.
D. N. SANDERS Deputy Governor
COMMONWEALTH OF AUSTRALIA B a n k i n g A c t 1 9 5 9
REVOCATION OF NOTICES UNDER SECTION 39b I, PAUL KEATING, the Treasurer, in pursuance of sub section 39b (2) of the B a n k i n g A c t 1 9 5 9 , hereby revoke (a) the notice in writing dated, and published in the
G a z e tt e on, 23 December 1974 directing that the acts or things therein specified are acts or things to which section 39b of that Act applies; and (b) the notice in writing dated 5 February 1981, and
published in the G a z e tt e o n 10 February 1981, varying the first-mentioned notice. Dated 19th June 1984. PAUL KEATING
Treasurer
BANKING (FOREIGN EXCHANGE) REGULATIONS REVOCATION OF THE APPOINTMENT OF AGENTS OF RESERVE BANK OF AUSTRALIA IN pursuance of Regulation 44 of the Banking (Foreign
Exchange) Regulations, the Reserve Bank of Australia hereby revokes the appointment of the persons set out in the Sched ule as Agents of the Bank in respect of all the provisions of the
Regulations.
SCHEDULE Australia and New Zealand Banking Group Limited Australian Bank Limited Bank of New Zealand
Banque Nalionalc de Paris Commonwealth Trading Bank of Australia National Commercial Banking Corporation of Australia Limited
Wcstpac Banking Corporation Dated at Sydney this 25th day of June 1984. For and on behalf of the Reserve Bank of Australia. R A. JOHNSTON
Governor
Primed by C. J. T hom pso n. Commonwealth Government Printer. Canberra
982
8. H 6 SCHEDULE B co m pa r a tiv e chart dem o n stra tin g th e e f f e c t of
RECENT CHANGES IN THE GOVERNMENTâS FOREIGN EXCHANGE POLICIES
Summary o f Che m a jo r p r o h i b i t i o n s ( s u b j e c t to
R .B .A . a p p r o v a l ) c o n ta in e d
i n th e R e g u la tio n s
Summary o f e x e m p tio n s Sutnnary o f e x e m p tio n s
G a z e t t e d o n 12 D ecem ber 198 4 G a z e t t e d o n 6 F e b r u a r y 1984
(N o. S .3 1 8 ) (N o . S .4 2 )
Summary o f e x e m p tio n s G a z e c te d o n 25 J u n e 1984
(N o. S .2 3 5 )
R e g u l a t i o n 5 p r o h i b i t s -
( a ) a p e rs o n d e a l i n g in
A u s t r a l i a w i t h f o r e i g n
c u r r e n c y , and
( b ) a r e s i d e n t d e a l i n g o u t s i d e
A u s t r a l i a w i t h a f o r e i g n
c u r r e n c y .
E xem pted e x c e p t f o r th e b u y in g
o r s e l l i n g o f f o r e i g n n o t e s ( a s
o p p o s e d t o c o i n s ) .
R e g u l a t i o n 6 p r o h i b i t s a
p e r s o n from t a k i n g o r s e n d in g
o u t o f A u s t r a l i a e i t h e r
f o r e i g n o r A u s t r a l i a n c u r r e n c y .
( N o te i t i s t h e r e f o r e n e c e s s a r y
t o o b t a i n RBA a p p r o v a l t o ta k e
o r s e n d o u t o f A u s t r a l i a e i t h e r
f o r e i g n o r A u s t r a l i a n c u r r e n c y ) .
R e g u l a t i o n 7 p r o h i b i t s th e W h o lly e x e m p te d .
t r a n s f e r o f money o r d e r s
i s s u e d i n A u s t r a l i a an d
p a y a b le o u t o f A u s t r a l i a .
R e g u l a t i o n 8 ( 1 ) ( a ) p r o h i b i t s
a p e r s o n fro m m ak in g a p aym ent
i n A u s t r a l i a t o a n o n - r e s i d e n t
o r p l a c i n g a n y sum in
A u s t r a l i a t o t h e c r e d i t o f a
n o n - r e s i d e n t .
E xem pted e x c e p t f o r a p e r s o n
who i s r e s i d e n t i n a c o u n tr y
s p e c i f i e d i n a c u r r e n t n o t i c e
i s s u e d by t h e T r e a s u r e r u n d e r
s e c t i o n 39B o f th e B an k in g
A ct (REVOKED 6 F e b ru a ry 1 9 8 4 ).
E x em pted a p e r s o n m aking a
pay m en t i n A u s t r a l i a t o a no n Â
r e s i d e n t e x c e p t f o r a p e r s o n
who i s r e s i d e n t i n a p la c e
s p e c i f i e d i n a n o t i c e i n
f o r c e i s s u e d by t h e T r e a s u r e r
u n d e r s e c t i o n 39B o f th e
B a n k in g A c t . A ls o ex em pted
a p e r s o n p l a c i n g a n y sum in
A u s t r a l i a t o t h e c r e d i t o f a
n o n - r e s i d e n t e x c e p t f o r a
g o v e rn m e n t o r b a n k o r a p e r s o n
r e s i d e n t i n a p la c e s p e c i f i e d
i n a n o t i c e i s s u e d by th e
T r e a s u r e r u n d e r s e c t i o n 39B
o f th e B a n k in g A c t. (REVOKED
25 J u n e 1 9 8 4 .
E xem pts a n y p e r s o n who m akes a
p aym ent i n A u s t r a l i a t o a n o n Â
r e s i d e n t . - ( N o te i t i s t h e r e Â
f o r e n e c e s s a r y t o o b t a i n RBA
a p p r o v a l to p la c e a sum in
A u s t r a l i a t o th e c r e d i t o f a
n o n - r e s i d e n t ) .
R e g u l a t i o n 8 ( l ) ( c ) p r o h i b i t s
th e u s e o f b i l l s o f e x c h a n g e ,
p ro m is o ry n o t e s , t h e e n t e r i n g
i n t o an y a g re e m e n t ( o t h e r th a n
o n e r e l a t i n g to g o o d s ) , t r a n s Â
f e r r i n g an y s e c u r i t y o r
a c k n o w le d g in g a n y d e b t s o t h a t
a r i g h t t o r e c e i v e p aym ent o r
t o p e rfo rm s e r v i c e s , w h e th e r
in A u s t r a l i a o r e ls e w h e r e i s
c r e a t e d i n f a v o u r o f a
n o n - r e s i d e n t .
Exem pted o n l y th o s e t r a n s Â
a c t i o n s i n v o l v i n g th e e n t r y
i n t o a n y a g re e m e n t ( n o t
r e l a t i n g t o t h e p u r c h a s e o f
g o o d s) a n d t h e a c k n o w led g em en t
o f a n y d e b t . ( N o te a n y t r a n s Â
a c t i o n s i n v o l v i n g t h e u s e o f
b i l l s o f e x c h a n g e , p ro m is o ry
n o t e s o r t h e t r a n s f e r o f a n y
s e c u r i t y s o t h a t a r i g h t t o
r e c e i v e pay m en t o r t o p e rfo rm
s e r v i c e s , w h e th e r i n A u s t r a l i a
o r e l s e w h e r e i s c r e a t e d in
f a v o u r o f a n o n - r e s i d e n t
r e q u i r e s RBA a p p r o v a l ) .
(REVOKED 25 J u n e 1 9 8 4 ).
W holly e x e m p te d .
R e g u la tio n 8 ( l ) ( d ) p r o h i b i t s
th e m ak in g o f a n e n t r y in a
r e g i s t e r in A u s t r a l i a t h a t
r e c o g n i s e s a n o n - r e s i d e n t to
be th e h o l d e r o f s e c u r i t i e s .
W holly e x e m p te d .
R e g u la tio n 8 ( 3 ) p r o h i b i t s - - - W holly ex em p ted
( 1 ) paym ent t o a r e s i d e n t in
a s s o c i a t i o n w i t h th e
r e c e i p t o f an y p aym ent o r
th e a c q u i s i t i o n o f an y
p r o p e r t y b y a n y p e rs o n
o u t s i d e A u s t r a l i a .
- 983 -
COMPARATIVE CHART DEMONSTRATING THE EFFECT OF RECENT CHANGES IN THE GOVERNMENT'S FOREIGN EXCHANGE POLICIES
pr R.3
Summary o f Che m a jo r o h l b i t io n s ( s u b j e c t t o
.A . a p p r o v a l ) c o n ta in e d
I n th e R e g u la tio n s
S urasary o f e x e m p tio n s
G a z e t t e d on 12 D ecem ber 1984
(N o . S .3 1 8 )
S u n e a ry o f e x e m p tio n s
G a z e t t e d o n 6 F e b r u a r y 1984
(N o . S .4 2 )
(2 ) paym ent t o a r e s i d e n t In
a s s o c i a t i o n w ith th e
c r e a t i o n o r t r a n s f e r in
f a v o u r o f a n y p e r s o n o f a
r i g h t t o r e c e i v e a paym ent
o r a c q u i r e p r o p e r t y
o u t s i d e A u s t r a l i a .
( 3 ) t h e u s e o f b i l l s o f
e x c h a n g e , p r o m is o r y n o t e ,
th e e n t e r i n g i n t o a n y
a g re e m e n t ( o t h e r th a n one
r e l a t i n g t o g o o d s ) , t r a n s Â
f e r r i n g a n y s e c u r i t y o r
a c k n o w le d g in g a n y d e b t s o
t h a t a r i g h t t o r e c e i v e
paym ent i n A u s t r a l i a i s
c r e a t e d o r t r a n s f e r r e d in
f a v o u r o f a r e s i d e n t in
a s s o c i a t i o n w i t h a n y m a t t e r
r e f e r r e d t o i n ( 1 ) & ( 2 )
R e g u la tio n 9 ( 1 ) p r o h i b i t s
t r a n s a c t i o n s i n v o l v i n g a n y
s e c u r i t y o r la n d i n A u s t r a l i a
by a n o n - r e s i d e n t t o a n o t h e r
n o n - r e s i d e n t .
P a r t I I I o f th e r e g u l a t i o n s
p r o h i b i t s th e e x p o r t o f g o ods
from A u s t r a l i a u n l e s s paym ent
a p p ro v e d by th e R e s e rv e Bank
I s r e c e i v e d i n A u s t r a l i a .
W h o lly ex em p ted
R e g u la tio n 3 3 (1 ) p r o h i b i t s th e
s e n d in g o f s e c u r i t i e s t o a n y
p la c e o u t s i d e A u s t r a l i a .
R e g u la tio n 3 4 ( 1 ) p r o h i b i t s -
( a ) d e a l i n g s w i t h f o r e i g n
s e c u r i t i e s c h a t a r e in
A u s t r a l i a , an d
( b ) a r e s i d e n t d e a l i n g w ith
f o r e i g n s e c u r i t i e s o u t o f
A u s t r a l i a .
Summary o f e x e m p tio n s G a z e tte d o n 25 J u n e 1984
(N o . S .2 3 5 )
W h o lly e x e m p te d .
W h o lly e x e m p te d .
W holly e x e m p te d .
984
8.117 SCHEDULE C
A u s t r a l i a n G o v e r n m e n t G a z e t t e
N o . 1 0 3 E , 2 3 D e c e m b e r 1 9 7 4
B a n k i n g 5
B a n k i n g A c t 1959-1974
NOTICE UNDER SECTION 39b I, JAMES FORD CAIRNS, the Treasurer, in pur suance of sub-section 39b (2) of the B a n k i n g A c t
1959-1974, direct that the following acts or things are acts or things to which section 39b of the Act applies:
(1) the entry by a person into a contract, agreeÂ
ment or arrangement to which a person who is in, or is a resident of, or a person on behalf
of a person who is in, or is a resident of, a
place specified in the Schedule is a party, being a contract, agreement or arrangement for or in relation toâ
(a) the borrowing or lending of money or the assignment of a debt; (b) the sale, purchase (including the granting of an option to purchase), acquisition or
disposition of securities, land or other
property, or of any interest in securities, land or other property, other than the sale or purchase through a member of an
Australian stock exchange of securities listed on an Australian stock exchange; (c) the payment of any royalty or licence fee or the making of any similar payment; or (d) the performance of any service;
(2) the creation or establishment in a place speci fied in the Schedule of any trust;
(3) the payment of moneys into a trust fund
created or established in a place specified in the Schedule;
(4) the giving or issuing by a person of a
guarantee or indemnity in respect of the repay ment of a loan made to or by a person who
is in, or who is a resident of, a place specified in the Schedule; and
(5) the doing of any act or thing:
(a) by a person in relation to:
(i) moneys or other property situated in the New Hebrides; (ii) the sending or transfer of moneys or other property to or from the New
Hebrides;
(iii) a contract, agreement or arrangement to which a person who is in, or is a
resident of, or a person on behalf of
a person who is in, or is a resident
of, the New Hebrides is a party;
(iv) the creation or establishment in the
New Hebrides of any trust; (v) the payment of moneys into a trust
fund created or established in the
New Hebrides; or (vi) the giving or issuing by a person of
a guarantee or indemnity in respect of the repayment of a loan made to
or by a person who is in, or who is
a resident of, the New Hebrides; or (b) by a person who is in, or who is a resident of, the New Hebrides; OTHER THANâ (c) the making of a payment in relation to a
policy of life assurance;
985
(i l l a n k i n x
( d ) the doing of any act or thing in relation
to the provision of moneys for the purpose of travel outside Australia; (e) the receipt in Australia of moneys in
respect of payments other than capital
payments; ( f ) the making of donations or bequests to
charitable organizations or religious bodies; (g) the acquisition or disposition through a member of an Australian stock exchange of securities listed on an Australian stock
exchange, the consequential registration on a register in Australia of any such
acquisition or disposition of securities and the despatch from Australia of any
certificate in relation to those securities; (h) the payment of any dividend or interest
on securities listed on an Australian stock exchange that arc registered in the name of a holder whose address on the register
is a place outside Australia; (i) the settlement by a bank in Australia of
local exchanges effected in the New
Hebrides; or (j) the making of a payment of an amount
of $50 or less.
A u s t r a l i a n G o v e r n m e n t G a z e t t e
N o . 1 0 3 E , 2 3 D e c e m b e r 1 9 7 4
SCHEDULE
Bahamas Bermuda British Solomon Islands Protectorate
British Channel Islands British Virgin Islands Cayman Islands Gibraltar Grenada Hong Kong The Isle of Man
Liberia Liechtenstein Luxembourg Nauru
Netherlands Antilles Panama Switzerland
Dated this twenty-third day of December. 1974.
J . F. CAIRNS
Treasurer
F. D. A tkinson. Government Printer. Canberra
- 986 -
ENDNOTES : PART 8
(See explanatory note at front of report)
1 CD4259
2 CT23089, Gilder; CT24682-83, McDonald 3 4
5
CD4259 folios 16-18 Sections 39(3), (4) & (5) Banking Act 1959 as amended by Banking Act (No. 2) 1973 (No. 193 of 1973) Dusche & Sons (UK) Ltd v Walworth Industries (Aust.) Pty Ltd
6
(1962) 62 Sk (n s w ; io5; Sykes v Stratton (i9/2) iNSWLft i4b; Fazio v Spitz (1973) WAR 164 S39(l), (2) & (3) Banking Act 1959 as amended by Banking Act
7
(No. 2) 1973 (No. 193 of 19/3) S39A Banking Act 1959 as amended by Banking Act (No. 2) 1973
8
(No. 193 of 19/3) S39(6) Banking Act 1959 as amended by Banking Act (No. 2) 1973 (No. 193 ot 19/3) 9 S39B Banking Act 1959 as amended by Banking Act 1974 (No. 132 of
1974)
10 S39 (8) Banking Act 1959 as amended by the Banking Act 1974 (No. 132 of Ϊ97Τ) " .... .. .
11 S39(5) Banking Act 1959 as amended by the Banking Act 1974 (No. 132 of 19/4) .... .. ...... .
12 Article titled 'Foreign Exchange Controls and the Overseas
Outflow of Money.1 - ALJR Vol. 57 p256 13 CD8857C, Statement of Mr M.J. Sutherland-Harris (Reserve Bank) 25/1/84 14 CD2172, Reserve Bank of Australia 1 Exchange Control1 booklet
(1980)
15 Regulation 38 Banking (Foreign Exchange) Regulations. 16 Regulation 44 Banking (Foreign Exchange) Regulations. 17 'Banking Law and Practice in Australia' Weerasooria and Coops 1976 Edit. p420
18 Australian Financial System, Committee of inquiry, Final Report para 45.45 p766-67 19 Commonwealth of Australia Gazette No S318 20 Commonwealth of Australia Gazettes No S42 & S235 21 Commonwealth of Australia Gazette No.5235 25 June 1984 22 CD8857C, Statement of Mr M.J. Sutherland-Harris (Reserve Bank)
25/1/84
23 CD8861, Reserve Bank of Australia Foreign Exchange Arrangements 24 CD2172, Reserve Bank of Australia 'Exchange Control' booklet (1980) p9
25
26 26a 27 28 29 30
31 32 33 34
35 36 37
38 39 40 41 42 43 44 45 46 47 48
49 50 51 52
53 54 55 56 57 58 59 60
61 62 63 64
65 66
- 987 -
[1962] S.R. (N.S.W.) 165 'Australian Exchange Control - 26 Civil Consequences' - Gerard Horton (1973) 47th J. pi26 Letter to the Commission dated 1 February 1983 from Parry, Ware
and Carroll relating to 'Across Border Currency Transfers' Regulations 5 (1) & (2) vide Banking (Foreign Exchange) Regulations - Statutory Rule No. 265 of 1974 which became operative on 23 December 1974. A paper delivered in 1976 by Gerard Horton titled 'Regional
Exchange Control Problems'. Letter to editor of ALJ from F.H. Callaway (Melb) 49 ALJ 640-41. Regulation 9(5) Banking (Foreign Exchange) Regulations. CD11545, Yorkville contra schedules
CT22886, Collings CT22640, Houghton CT22041-02, Galicek
CT15725, CT15733-34, Hill; CT25095, Shaw CT25371, CT25453, Brincat CT25095, Shaw CT25095, Shaw
CD4588 folios 21-26; CD6690 folios 32-37, 78; CD8361 folios 14-16; CD8888 folios 9-11 CD6690 folios 22, 50; CD8888 folios 19-20 CD8372 folio 30 CD11241 folio 2 CD6454 folio 60,61; CD6982 folio 30 CD11241 folio 2 CD8358 folios 32-33 CD10065 CD10065 CD10212 CD5986 folios 9-14 CD5986 folios 30-31,24 CD5986 folios 32-34,615-26 CD5986 folio 324 CD5983 folios 25,26,28,30,31,33,37 CD4160 folio 14 CD3529 folio 12; CD4156 folio 78 CD1557 folio 39 CD8362 folio 42 CD3971 folio 16; CD4162 folio 2 CD2899; CD3821 folio 31; CD4142; CD7229 folio 84
CD2800 CD1981 folio 39; CD8311 folio 40; CD8362 folio 7 CD1981 folio 40; CD8083 folios 432-34
CD3797 folio 4; CD4172 folio 987; CD8354 folio 114 CD6509 folios 377-78 CD3966 folio 7
CD977 folios 3,5,6 CD2800 folio 855 CD2899; CD3540 folio 34; CD5440 folio 309 CD3985 folio 31; ; CD5164; CD5532 CD2899; CD3868; CD4142; CD5440 folio 230 CD3816; CD3868; CD5148; CD5442 folio 476
67 68
69 70 71 72 73 74 75 76
77 78 79 80
988 -
CD5164; CD5533 folio 1 CD5164; CD5360; CD5523; CD5533 folio 6; CD8263 folio 139; CD8351 folio 67 CD5164; CD5533 CD7823 folio 34 CD4130 folios 44,92 CD7520 folio 21; CD8304 folio 91 CD4130 folios 18-19 CD4130 folios 18-19,44,92; CD6834 folio 8 CD5121; CD3816; CD3852 folio 13; CD7244 folios 5,45 CD3931 folios 25-26 CD3821 folios 41-42 CD10653 folio 65 CD10305 CD3821 folio 43
PAR T NINE
A L L E G ATIONS OF M O N E Y L AUNDERING A N D TAX EVASION
' - · ' Î.
' ' ; i :
ι , ι ..
⢠' : · . ' I ·
â ' · " ; · â - - " ·
' : ; · ; · . . · < : : :
: · · ;
- 991 -
M,LEGATIONS OF MONEY LAUNDERING AND TAX EVASION
9.1 Mr F.J. Nugan [profile 2.1] repeatedly boasted that he was a
very successful tax lawyer and that the fees earned by him in this regard
were of such volume that they were sufficient of themselves to pay the
operating expenses of the Nugan Hand Group.^ Witnesses before the
Commission expressed mixed views as to the alleged expertise of Mr Nugan , 2
in this field. The better view on the evidence seems to be that
Mr Nugan's schemes were, in the main, crude examples of arrangements to
avoid the payment of income tax and, to the extent that they were
successful, it was because of the misleading appearance they had when
they were presented to the Commissioner of Taxation. One of the
solicitors employed by Mr Nugan, when speaking of one such scheme said
that had the facts been laid before the Commissioner of Taxation 'there
would be no chance of the scheme working', that is, no chance of the 3 scheme being allowed. Mention has been made of the fact that Mr Nugan
carried on a legal practice on the same premises that housed Nugan Hand
Ltd [profile 2.97] (which premises was also the registered office of many
of the other Australian companies within the Group). The legal practice
employed a staff of three, and was almost exclusively devoted to the
creation and implementation of tax avoidance schemes using one or more of 4 the companies within the Group. Perhaps the most knowledgeable person
in this field employed in that practice was the late Mr E.P.Harland
[profile 2.28].
9.2 The evidence before the Commission does not permit an estimate
to be atterrpted as to the volume of income tax evaded by the use of these
schemes or the amount of fees earned by Mr Nugan as a result of putting
them into effect. However, the evidence certainly does not support
Mr Nugan's claim that he earned fees of the order claimed. On the other
hand there is evidence that he earned large fees from time to time in 5 respect of particular schemes.
9.3 In a speech which was recorded in October 1979 to the staff of
his legal practice, Mr Nugan made some candid statements about some of
- 992 -
the illegal activities he had been involved in over the previous years,
in particular, activities designed to bring about large scale evasion of
tax by persons dealing through Mr Nugan. The transcript of this speech
is lengthy and for the most part difficult to follow because it reflects
Mr Nugan' s garbled way of speaking, a fault also to be found in most
prose written by him. This lack of ability to communicate clearly was
commented upon by several witnesses before the Commission.®
Nevertheless as the following excerpts will demonstrate Mr Nugan said
enough to make it perfectly clear that he had involved himself in these
illegal schemes for some time past. In his speech there are references
to 'reform' on his part and on the part of his legal practice. In order
to understand these references to 1 reform1 it is necessary to mention (as
already appears from his profile in 2.1) that after many years of very
heavy drinking Mr Nugan about April 1979, apparently embraced religion
with a conspicuous intensity. (Curiously enough, Mr M.J.Hand [profile
2.2] appears to have undergone a similar experience a little earlier.)
The evidence before the Commission is that upon this religious conversion
Mr Nugan's heavy drinking ceased and his speech and writing became
peppered with allusions to God and biblical text. It is in this context
that the following extracts from the transcript should be viewed:
'We are reborn, those son of bitches who were passing under our name, prior to today, including me. We are different people ? ... Nugan Hand has been doing fringe banking for the past 3 or 4 years. I am just trying to think when we first - you ease
into these things slowly unfortunately - as you lose your way. You don't make a determined decision to lose your way, what happens is that it happens. So things that I view as fringe
banking, clandestine bank accounts, numbered accounts, secret documents, use of currency flow and so on, money movement: they have eased up on us and the main period they have eased up on us is when Michael Hand and I, ever since November 1977, when we were first attacked, perhaps because we are relatively weak
individuals and were very easily hurt - started to mismanage the firm. It's about two years of mismanagement as it stands at this moment; two years lack of supervision; :wo years lack of guidance or leadership; no training for anyone. The problems in the firm basically stem from the top, rather than the bottom. We've got people who at present get away with murder and never
give it a 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 ... Unfortunately, it has been profitable to follow the wrong direction ® ... there are plenty of people who want
- 993 -
to do crook business in this world we do get plenty of takers and that's what we've been on. You know, numbered bank
accounts, and secrecy and money movements and God knows what 9 ... I have, been the main guilty party for some reason in years gone by 10 Pack to back letters of credit, intercompany
invoicing, misleading switches of invoices ... all sorts of breaches of customs and tariff and banking laws and so on, all done by misleading documents of one kind or another and usually by the active and vigorous assistance of the bank concerned. We have actively and vigorously assisted certain people in drop-off L.Cs, back to back letters of credit on occasions.'H
[emphasis added]
9.4 In another part of the transcript of this speech, Mr Nugan is
recorded as saying:"*·^
'... the quality of the Australian tax department is not very high so I can get away without doing this [in] a formal way most of the time ... it's getting so easy after 15 years but I can
always have a devine [sic] inspiration as to what the fact and law was ... remember back in the first years when you started
with me, we used to prepare the objection to the assumed
disallowance at the same time we'd prepare the documents ... And you could be an architect of fact and decide every question of fact that can be presented ... we can decide in advance every
fact, we can create facts.'
9.5 Finally, at the time that this report is being prepared in mid
1985, it is of historical interest to note, bearing in mind he was
speaking in 1979, references by Mr Nugan to tax evasion schemes commonly
known today as 'Bottom of the Harbour' schemes. Of these Mr Nugan had t 13
this to say:
'There's all that other stuff, there's all sorts of tax dodges of various kinds around, you know, Frank Ward who for 3/£ in the $1.00 will give them an aeroplane or else he'll give them the Sydney Harbour company, Sydney Harbour Bottoms Pty. Ltd, which means that he'll have the income earned in the company and he'll
take it over and throw the records and the books in the bottom of the company [sic], (ha ha) That's what they do ...' [enphasis added]
9.6 The following pages of this section give brief illustrations of
the type of schemes which Mr Nugan was putting into effect, in most cases
using one or more of the companies within the Group as an essential part
- 994 -
of the scheme. It appeared from the Commission's examination of the
books and records of Nugan Hand Ltd that there were many such schemes
involved. It will be obvious that the Commission itself could not pursue
to completion inquiries in relation to these schemes, a task which may
prove to be very time consuming indeed. Accordingly, the Commission has
passed the details of these schemes and the identity of the persons
involved to the Commissioner of Taxation on the basis that they appear to
involve the commission of an offence under the Income Tax Assessment Act
1936. The Commission has been advised in a letter from a Senior
Assistant Commissioner that the material provided has been useful to the
Department particularly in relation to confirmation of the identity of
relevant taxpayers and the gathering of documentation in relation to 14 relevant transactions. The Commission in passing on such details
acted pursuant to section 6P of the Commonwealth Royal Commissions Act
1902. This is a comparatively recent provision and the Commission's
views on its usefulness and an indication of the amount of information
that the Commission has provided to law enforcement authorities pursuant
to its terms, appears in Part 1 Section 3.
9.7 It is not proposed in this report to comment any further on the
tax evasion industry of the 1970s or that a great number of entirely
artificial schemes seem to have initially evaded official scrutiny. Nor
is it intended to comment on the fact that the penalties during this time
seem to have been entirely disproportionate in that they were so low that
they encouraged persons to 'chance their arms' and enter into such
schemes. These aspects of the matter have been fully covered in recent
reports by Special Prosecutors.-*·***
Examples of the Schemes
9.8 A number of the Australian companies within the Group were used
in the implementation of these schemes. These companies included, in
particular, Yorkville Nominees Pty Ltd, Mars Road Investments Pty Ltd,
the two Distravite companies and the Orange Spot Group. Profiles of
these companies are included in Part 2. Sometimes an overseas
transaction was inserted into these arrangements making the substance of
- 995 -
the arrangement even more difficult to unravel. As has been reported in
Part 8 the Group continually flouted the then current exchange control
legislation and this aspect of the matter is, of course, relevant to any
consideration of the Group's tax evasion activity. In particular, the
Group made use of a facility known as the 'Yorkville contra' which is
explained in detail in Part 8 where examples of its implementation are
also provided.
Back to back schemes
9.9 This device formed the basis of the majority of the schemes
identified by the Commission. Essentially, a back to back scheme was an
arrangement whereby a taxpayer was apparently in possession of funds in a
form which would not incur the imposition of income tax, for example,
where funds were said to be retained in the form of a loan. A typical
example was the instance where 'black1 money would be deposited with
Yorkville Nominees or Mars Road Investments by the client who would have
the money returned to him together with documentation to the effect that
the money was a loan from the particular company to the client. In fact
the money was the return of the client's own money less a fee charged by
the Group for this service. Among the documentation creating the
appearance that the returned funds were merely a loan was a deed
purporting to release the client from the payment of the 'loan'. If the
taxpayer were called upon to explain where the moneys came from he could
produce the 'loan' agreement as evidence of its source. There were
variations of these schemes. Sometimes the recipient of such a 'loan'
would purport to pay interest thereon and then claim a tax deduction for
the interest on the apparent basis that it was interest paid on moneys
borrowed as part of a business. The 'interest' paid would, of course,
ultimately be returned to the client.
9.10 A further variation will be apparent from the following
example. Consultants were owed money in an overseas country by the Group
for consulting work. The money was paid under the guise of a 'loan' in
Australia together with a deed of release. The arrangement was not
disclosed to the Commissioner for Taxation and the income which had been
received under the guise of a loan was not declared.
- 996 -
The Distravite Scheme
9.11 The basis of this scheme depended upon the appearance being
created by documentation emanating from Mr Nugan's legal office of the
Distravite companies being seen to carry on a legitimate business
distributing vitamins and other products. This was in fact not the
case. However the appearance was given that the companies were carrying
on such a business and further that they were entering into 'franchise'
agreements with various clients who, according to documents which were
brought into existence for the purpose, were entitled to distribute the
products provided by the Distravite companies in certain areas. The
clients then made false claims for deductions in respect of these
'franchises' in particular claiming deductions for the 'franchise' fees.
These 'fees' were ultimately returned to the client under the appearance
of a 'loan' accompanied by a deed of release. There is evidence that
Mr Nugan's fee for these schemes and other schemes which created false
deductions was 'about 22 per cent'."*"^ The schemes were a complete sham
and no distribution of the products occurred. Similar schemes were
operated using the Orange Spot Group."*"®
Artificial 'Management' Schemes
9.12 Details of one of these schemes identified in the evidence
before the Commission will serve to illustrate the nature of the scheme
which led to the claiming of false deductions. Yorkville Nominees
purported to enter into an agreement with the client whereby Yorkville
Nominees would provide services of a management nature in consideration 19 for an agreed amount of money. Few or no such services were provided
by Yorkville Nominees and on the evidence before the Commission,
Yorkville Nominees was in no position to provide such services. The
money paid by the client to Yorkville Nominees for these 'services' was
returned disguised in the form of a loan with a deed of release. The
client claimed the moneys as a deduction on the basis that it represented
fees payable to Yorkville Nominees for the services allegedly rendered.
Yorkville Nominees on its part wrote off the money as a bad debt.
- 997 -
'Re- I n v o i c i n g 1 Schemes
9.13 Such schemes involved the processing of a client's purchase, for
example, of a machine, through a Nugan Hand controlled company, for
example, Nugan Hand Trade Finance Ltd in Hong Kong at a considerably
inflated purchase price. The client would claim taxation benefits based
upon the false invoice and would ultimately receive back from the company
the moneys paid over and above the actual purchase price less a fee for
the service.
Other Examples
9.14 Other examples of schemes included schemes based on alleged
losses suffered in failed option schemes, artificial losses on purchase
and sale of real estate, schemes using nominee companies (particularly
emanating from Hong Kong), false deductions claimed in respect of share
trading and commodity trading, and deductions claimed for insurance
payments. It is unnecessary to do more than mention these schemes in
this report due to the fact that relevant details in the Commission's
holdings have been passed to the Commissioner of Taxation, from time to
time, pursuant to section 6P of the Royal Commissions Act 1902.
O v e r s e a s Transactions
9.15 Where these schemes were partly carried out overseas this
introduced formidable difficulties in the way of those authorities
charged with going behind the documents and establishing the substance.
This was particularly so where the country concerned was a so called 'tax
haven' country such as Hong Kong or the Cayman Islands. In these cases
the authorities in those countries are generally uncooperative with
respect to tax evasion investigations being carried out by authorities in
other countries. As well, in a prosecution involving the proof of
overseas transactions difficulty is incurred in producing proof that
satisfies the rules of evidence applied in such prosecutions. The
Commission's inquiries have suffered to some extent by this lack of
cooperation from tax haven countries and this aspect has been reported
upon in Part 4 Section 4.
C O â] O'*
- 998 -
ENDNOTES : PART 9
(See explanatory note at front of report)
1 CT19126, Healey; CT23228, Ward; CT25082, Shaw; CD45 folio 14, Nugan to NHG Jan 179 conference; CD1429 folios 462-63, Nugan to NHG Oct.'79 conference 2 CT22359-60, George; CT23228, Ward 3 CT22357, George speaking of the Orange Spot scheme, which is
referred to at paragraph 9.11 '4 CT18662-64, George 5 CT22356-57, George For example, CT23089, Gilder; CT24682-83, McDonald
CD4259 folio 3, Transcript of meeting -legal division CD4259 folio 6, ibid
9 CD4259 folio 7, ibid
10 CD4259 folio 14, ibid
11 CD4259 folio 18, ibid
12 CD4259 folios 49-50, ibid
13 CD4259 folios 54-55, ibid
14 CD11539
15 R.V. Gyles Q.C. 30 June 1983 and 30 June 1984; R. Redlich
7 September 1983 and 12 July 1984 16 CD6342, Yorkville - Loans & correspondence; CD10857, Record of Interview. 17 CT25083, Shaw
18 CT22351, CT22356, George; CD1308 JTF ROI George 13/7/81 19 CT18608, Lee; CD4688 folio 5
PART TEN
BREACHES OF CRIMINAL LAW IDENTIFIED
!
-
- 1001 -
BREACHES OF CRIMINAL L A W IDENTIFIED
10.1 In this Part, and in this Part only, it is intended to identify
certain persons who appear to the Commission to have committed relevant
criminal offences. Thus, while other Parts of the report may set out the
facts and circumstances on which the findings in this Part are based, no
mention is made in those places as to whether or not such facts and
circumstances amount to criminal offences on the part of any person. In
coning to these conclusions as to criminality on the part of the persons
named in this Part, the Commission has applied the civil standard of
proof for the reasons explained in paragraphs 1.2.27 to 1.2.28.
10.2 The Commission's reasons for confining findings of criminality
to one Part only of the report will be obvious. While the decision to
publish all or any of this report is not a matter for the Commission, the
Commission has nevertheless taken into account, in deciding upon the
format of the report, that the commissioning Governments may wish to
publish as much of the report as possible but excluding material such as
that which nominates particular persons as having been guilty of criminal
conduct. To the extent that proceedings are taken against any or all of
the persons identified in this Part then any publication of this type of
material may prejudice the right to a fair trial. To the extent that any
or all of such persons so identified are not to be prosecuted (because of
evidentiary problems, for example) then, perhaps, the view might be taken
that fairness demands that their names not be published in such context
because there is not a sufficient basis for publicly proclaiming that
they have committed crimes in respect of which they are not even to be
charged let alone convicted. The Commission has already commented upon
the significant differences between the procedures of a Royal Commission
and a criminal trial [see Part 1 Section 2], On the other hand these
comments perhaps apply much less in the case of Messrs F.J. Nugan
[profile 2.1] and M.J. Hand [profile 2.2] as they were clearly the
protagonists in the events the subject of this report. Mr Nugan, as the
Commission has observed at paragraphs 3.1.38 to 3.1.39, chose suicide
- 1002 -
rather than face the c o n s e q u e n c e s of h i s crimes. Mr Hand, as the
Commission has reported at p a r a g r a p h 3.1.4, w a s g i v e n the o p p o r t u n i t y of
coming forward to tell his si d e of the s t o r y but d i d not respond. For
these reasons Messrs N u g a n and Ha n d m i g h t be se e n as b e i n g o u t s i d e the
principles of fairness, in this context, w h i c h w o u l d u s u a l l y b e applied.
Paragraphs 10.3 to 10.208 h a v e b e e n deleted.
PART ELEVEN
SUMMARY O F CON C L U S I O N S AND R E C O M M ENDATIONS
- 1097 -
SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS
Conclusions
11.1 In Part 10, the Commission has expressed its conclusions as to
which persons contravened Commonwealth and New South Wales criminal laws
which are relevant to the Commission's terms of reference (as construed
by the Commission [see Part 1 Section 2]). In Part 10 the criminal laws
contravened are specifically identified and the evidence relied upon
referred to. In addition, the Commission has reported, in that Part,
that a large body of information has been passed to relevant law
enforcement bodies (pursuant to section 6P of the Commonwealth Royal
Commissions Act) which may lead to further criminal offences being
identified by those bodies.
11.2 Specific allegations have been examined in Part 4 Section 3, and
Parts 6, 7, 8 and 9.
Recommendations
11.3 Set out hereunder, and shortly stated, are those matters which
have emerged out of the Commission's primary inquiry, which was to
identify contraventions of Commonwealth and New South Wales criminal law
by relevant persons, which seem to the Commission to call for legislative
intervention by one or other or both of the commissioning Governments, or
for implementation by other means. The Commission therefore recommends
that consideration be given to the following:
11.4 Royal Commissions Acts
a. Amend both the Commonwealth and New South wales Acts to provide
that in the case of Royal Commissions inquiring into allegations
of crimes triable in the courts, the rules of natural justice
apply to the proceedings of those Royal Commissions:
Part 1, section 2.
- 1098 -
b. Amend the New South Wales Act to include a provision enabling a
Royal Commission set up under the Act to inquire into
allegations of crimes triable in the courts to provide relevant
information to law enforcement agencies:
Part 1, Section 3 .
c. To provide, whether by way of legislation or in the terms of
reference, or both, in the case of a Commission inquiring into
crimes triable in the courts, for powers and procedures to
remain in force following the delivery of the Commission's
report to the commissioning government, to enable the provision
of advice and relevant material gathered in the course of the
Commission's inquiries to relevant authorities so as to
implement more effectively such of the Commission's
recommendations as have been adopted by that government:
Part 1, Section 3.
11.5 Tax Havens
That the Government of the Commonwealth request the Government
of the United Kingdom to enter into an agreement with the
Government of the Commonwealth relating to access in the
circumstances specified in the agreement to Cayman Islands
documentation, and that wherever possible similar agreements be
entered into with other tax haven countries:
Part 4, Section 4 .
11.6 Judicial Assistance Treaties
That the Government of the Commonwealth upgrades the priority
currently accorded to the establishment between Australia and
other appropriate countries of modern judicial assistance
treaties:
Part 4, Section 4.
- 1099 -
11.7 Auditors
Qiact legislation to provide for:
a. the codification of the scope of the duty of the auditor of a
public company to detect fraud in the company:
Part 4, Section 5 .
b. a criminal offence constituted by such an auditor certifying
company accounts which he knows to contain false statements or
which he knows create a false impression:
Part 4, Section 5.
c. the separation of the roles of accountant and auditor in respect
of a public company and a prohibition against the company's
auditor also carrying out duties ordinarily performed by an
accountant:
Part 4, Section 5 .
d. an appropriate amendment to the Companies Code to provide a
specific offence constituted by an auditor deliberately or as a
result of reckless indifference failing to comply with the
requirements of section 285 of the Code (relating to the duties
of auditors):
Part 10, Part 4 Section 5
11.8 Bankers' Opinions
That a committee be set up to liaise with appropriate
professional bodies, such as the Australian Bankers'
Association, with a view to establishing criteria to be followed
by banks in respect of the issuing of opinions concerning their
clients' financial standing and worth which they have reason to
suspect will be relied upon in that regard by those requesting
such opinions or those to whom such opinions are to be, or are
likely to be, directed:
Part 4, Section 6.
- 1 1 0 0 -
11.9 General
That Parts 3 and 5 and Part 4 Sections 5 and 7 be referred to
the National Companies and Securities Commission and/or other
appropriate bodies for the purpose of reviewing the provisions
of the Companies Code in the light of the evidence contained in
those p>arts of this report which detail the methods used to
falsify the accounts of Nugan Hand Ltd and the role of the
auditors in relation thereto, and to consider, in the light of
such evidence, whether there is a need for the Code to be
amended to prevent or make more difficult use of such methods,
or to prohibit any such practices.
APPENDICES
APPENDIX A (i)
Commonwealth Letters Patent, 28 March 1983
.
â
â
1105
E L I Z A B E T H THE S E C O N D , by the G r ace of God Q u e e n of
A u s t r a l i a and Her other Realms and T e r r i t o r i e s , Head
of the C o m m o n w e a l t h :
D O N A L D G E R A R D S T E W A R T
G R EETING:
W H E R E A S b y L e t t e r s Patent issued in Our n a m e by
Our A d m i n i s t r a t o r of the G o v e r n m e n t of the
C o m m o n w e a l t h of A u s t r a l i a on 25 June 1981 We a p p o i n t e d
you to be a C o m m i s s i o n e r to i n quire into and r e p o r t
upon c e r t a i n m a t t e r s r e l a t i n g to T e r r e n c e J o h n C l a r k
and p e r sons a s s o c i a t e d with him:
AN D W H E R E A S it is d e s i r a b l e that your i n q u i r y
i n clude c e r t a i n m a t t e r s that m a y not fall d i r e c t l y
w i t h i n the m a t t e r s to be inquired into under the
L e t t e r s Pa t e n t issued on 25 June 1981:
NOW T H E R E F O R E We Do, by these Our L e t t e r s P a t e n t
issued in Our name by Our G o v e r n o r - G e n e r a l of the
C o m m o n w e a l t h of A u s t r a l i a on the a d v i c e of the F e d e r a l
E x e c u t i v e C o u n c i l and in p u r s u a n c e of the .Constitution
TO
1106
of the C o m m o n w e a l t h of A u s t r a l i a , the Royal
C o m m i s s i o n s A c t 1902 and other enab l i n g p o w e r s , v a r y
the L e t t e r s P a t e n t issued on 25 June 1981 so as to
r e q u i r e that, to the e x t e n t that you are not r e q u i r e d
to do so by t h ose L e t t e r s Patent, you m a k e i n q u i r y
into the f o l l o w i n g m a t t e r s , n a m e l y -
(a) w h e t h e r the Nug a n Hand G r o u p e n g a g e d in
a c t i v i t i e s in v o l v i n g c o n t r a v e n t i o n of l a w s of
the C o m m o n w e a l t h (in p a r t i c u l a r , laws
r e l a t i n g to the i m p o r t a t i o n , e x p o r t a t i o n or
p o s s e s s i o n of d r u g s or a r m a m e n t s or laws
r e l a t i n g to e x c h a n g e control);
(b) w h e t h e r the N u gan Hand G r o u p d i r e c t l y or
i n d i r e c t l y e n g a g e d in a c t i v i t i e s w i t h local
g o v e r n m e n t a u t h o r i t i e s in the S t a t e of N e w
S o u t h W a l e s i n v o l v i n g c o n t r a v e n t i o n of a l a w
of the C o m m o n w e a l t h ;
(c) if the N u g a n Hand G r o u p e n g a g e d in a c t i v i t i e s
r e f e r r e d to in p a r a g r a p h (a) or ( b ) , w h a t
w e r e the e x t e n t and n a t u r e of those
a c t i v i t i e s ;
(d) w h e t h e r in the c o u r s e of, or in c o n n e c t i o n
with, any a c t i v i t y r e f e r r e d to in p a r a g r a p h
(a) or ( b ) , the Nugan Hand G r o u p u s e d , was
used by, or c o - o p e r a t e d with any p e r s o n ,
o r g a n i z a t i o n or body;
\
1107
(e) w h e t h e r any p e r s o n , o r g a n i z a t i o n or body
a s s o c i a t e d with the N u gan Hand Group d i r e c t l y
or i n d i r e c t l y m a d e or o f fered any p a y m e n t or
i n d u c e m e n t for, or in c o n n e c t i o n with, or
e n d e a v o u r e d by m e a n s of a th r e a t to procu r e ,
the d i s c l o s u r e by any C o m m o n w e a l t h o f f i c e r or
any p e r s o n who was f o r m e r l y a C o m m o n w e a l t h
o f f i c e r of i n f o r m a t i o n relating to an
i n v e s t i g a t i o n by an A u s t r a l i a n law
e n f o r c e m e n t b o d y into any a c t i v i t y referred
to in p a r a g r a p h (a) or (b) ;
(f) w h e t h e r any person, o r g a n i z a t i o n or b o d y
a s s o c i a t e d with the N u gan Hand G r oup p r o c u r e d
or r e c e i v e d , d i r e c t l y or indirectly, from any
C o m m o n w e a l t h o f ficer or any p e r s o n who was
f o r m e r l y a C o m m o n w e a l t h o f f i c e r i n f o r m a t i o n
r e l a t i n g to an i n v e s t i g a t i o n by an A u s t r a l i a n
law e n f o r c e m e n t body into any a c t i v i t y
r e f e r r e d to in p a r a g r a p h (a) or (b);
(g) w h e t h e r any person, o r g a n i z a t i o n or b o d y
i m p r o p e r l y i n t e rfered with, inhibited or
e n d e a v o u r e d to i n t e r f e r e w i t h or i n h i b i t any
i n v e s t i g a t i o n by an A u s t r a l i a n law
e n f o r c e m e n t b o d y into any a c t i v i t y r e f e r r e d
to in p a r a g r a p h (a) or (b) :
l .
1108
A N D W E D E C L A R E THAT, for the p u r p o s e s of these Our
L e t t e r s P a t e n t -
(h) a r e f e r e n c e to the Nug a n Hand G r o u p is a
r e f e r e n c e to any or all of the f o l l o w i n g :
(i ) F r a n k , J o h n N u g a n ;
(i i ) M i c h a e l Hand;
(iii) the c o r p o r a t i o n s s p e c i f i e d in the
S c h edule;
(iv) any other c o r p o r a t i o n w h i c h c u s t o m a r i l y
acted in a c c o r d a n c e w i t h the d i r e c t i o n s
of F r ank John N u g a n or M i c h a e l H a n d or
b o t h or of w h i c h Fra n k John N u g a n or
M i c h a e l Hand was a d i r e c t o r or
s h a r e h o l d e r or w h i c h was o t h e r w i s e
c o n t r o l l e d , d i r e c t l y or i n d i r e c t l y , by
F r a n k John N u g a n or M i c h a e l H a n d , or
b o t h ;
(j ) a r e f e r e n c e to an A u s t r a l i a n law e n f o r c e m e n t
b o d y is a r e f e r e n c e to any b o d y in A u s t r a l i a
w i t h an o b l i g a t i o n to i n quire w h e t h e r a law
of the C o m m o n w e a l t h or of a S t ate or
T e r r i t o r y has been c o n t r a v e n e d w i t h a v i e w to
laying, or r e c o m m e n d i n g the laying of, a
c h a r g e in r e s p e c t of that c o n t r a v e n t i o n :
1109
AND, w i t h o u t r e s t r i c t i n g the scope of your i n q u i r y
or the na t u r e of y o u r r e c o m m e n d a t i o n s , We d i r e c t that,
in c o n d u c t i n g your i n q u i r y and m a k i n g your
r e c o m m e n d a t i o n s , you h a v e regard to -
(k) any r e p o r t s m a d e by the C o m m o n w e a l t h / S t a t e
Joint Task F o r c e on Drug Trafficking;
(l) any r e p o r t s of the C o r p o r a t e A f f airs
C o m m i s s i o n of N e w South W a l e s a p pointed as
Ins p e c t o r under Part V I A of the C o m p a n i e s Ac t
1961 of the S t a t e of New South W a l e s to
i n v e s t i g a t e the a f f a i r s of the c o r p o r a t i o n s
s p e c i f i e d in the S c hedule; and
(m) any r e p o r t s m a d e by a p e r s o n h o l ding of f i c e
as l i q u i d a t o r of any of the companies
r e f e r r e d to in the S c h e d u l e under an
a p p o i n t m e n t m a d e by the S u p r e m e Cou r t of Ne w
South Wales:
AND WE F U R T H E R D E C L A R E that yo u are not requ i r e d
by these Our L e t t e r s P a t e n t to inquire, or to c o n t i n u e
to inquire, into a m a t t e r if yo u are s a tisfied that
the National C r i m e s C o m m i s s i o n or the C o m m i s s i o n e r
a p p o i n t e d by our G o v e r n o r - G e n e r a l on 10 S e p t e m b e r 1980
to inquire into c e r t a i n m a t t e r s relating to the
F e d e r a t e d Ship P a i n t e r s and D o c k e r s Union is
inquiring, or p r o p o s e s to inquire, into that m a t t e r :
1110
AN D WE F U R T H E R D E C L A R E that the L e t t e r s P a t e n t
issued on 25 June 1981 shall have e f f e c t as if for the
c o n c l u d i n g p a r a g r a p h there w e r e s u b s t i t u t e d the
f o l l o w i n g p a r a g r a p h s :
"AND We F u r t h e r D e c l a r e that the C o m m i s s i o n
e s t a b l i s h e d by these Our L e t t e r s Pat e n t is a
r e l e v a n t C o m m i s s i o n for the p u r p o s e s of s e c t i o n s 4
and 5 of the Roy a l C o m m i s s i o n s A c t 1902:
"AND We r e q u i r e y o u as e x p e d i t i o u s l y as p o s s i b l e
to m a k e your i n quiry a n d , not later than 31
D e c e m b e r 1983 , to f u r n i s h to Our G o v e r n o r - G e n e r a l
of the C o m m o n w e a l t h of A u s t r a l i a a r e p o r t of the
r e s u l t s of your i n q u i r y and your
r e c o m m e n d a t i o n s .".
K & R Cash T r a n s i t Ptv L i mited
(In L i q u idation)
D i s t r a v i t e A u s t r a l i a W i d e S e r v i c i n g C o m p a n y Pty L i m i t e d
D i s t r a v i t e Pty L i m i t e d
N u g a n Hand L i m i t e d (In Liqu i d a t i o n )
Nug a n Hand (Dealers) Pty L i m ited
N u gan Hand I n t e r n a t i o n a l H o l d i n g s Pty L i mited
(In L i q u idation)
S C H E D U L E
1111
Nugan Hand (Trade Services) Pty L i mited
Y o r k v i l l e N o m i n e e s Pty L i m i t e d (In Liquidation)
A u s t r a l a s i a n & P a c i f i c H o l d i n g s Pty Limited
(In Liquidation)
R B C o d y Pty Limited
G a r c i a Bros. H a r d w a r e Pty L i m i t e d
H i dex Pty L i m ited
Illarangi I n v e s t m e n t s Pty L i m i t e d (In Liquidation)
L e a s e f a s t Pty L i m i t e d (In L i q u i dation)
M e d e v a c S h i p p i n g P t y Limited
N a r e t h a Pty L i m i t e d (In Liquidation)
N e w c o u r t Fin a n c i a l S e r v i c e s Pty L i m i t e d
N Î N M a n a g e m e n t Pty Ltd
S L N o t w i s t Pty L i mited
P a c i f i c C o n t i n e n t a l L i m i t e d (In Liquidation)
P M S h e l l e y Pty Limited
Skah Pty L i mited
S o l i n g e n A u s t r a l i a Pty L i m ited
Swi s s P a c ific Pty L i m i t e d
W V T e n n y s o n Pty L i mited (In Liquidation)
M a r s Road I n v e s t m e n t s Pty L i m i t e d
(In Liquidation)
N u g a n Hand (Hong Kong) L i m i t e d
1112
N u gan Hand I n c . (Hawaii)
The N u g a n Hand B a n k (Cayman Islands)
W I T N E S S His E x c e l l e n c y the R i g h t
H o n o r a b l e Sir N i n i a n M a r t i n S t e p h e n ,
a m e m b e r of Her M a j e s t y ' s M o s t
H o n o u r a b l e P r i v y C o u n c i l , K n i g h t of
the Order of A u s t r a l i a , K n i g h t G r a n d
C r o s s of The M o s t D i s t i n g u i s h e d
Order of S a i n t M i c h a e l and S a i n t
George, K n i g h t G r and C r o s s of the
Royal V i c t o r i a n Order, Kni g h t
C o m m a n d e r of The M o s t E x c e l l e n t
Order of the B r i t i s h Empire, K n i g h t
of the M o s t V e n e r a b l e O r der of the
H o s p i t a l of S a i n t John of J e r u s a l e m ,
G o v e r n o r - G e n e r a l of the C o m m o n w e a l t h of A u s t r a l i a and C o m m a n d e r - i n - C h i e f of the D e f e n c e Force.
Dat e d this t w e n t y e i g h t h
d a y of " March 1983.
G o v e r n o r - G e n e r a l
By His E x c e l l e n c y ' s C o m m a n d
Pri m e M i n i s t e r
APPENDIX A (ii)
New South Wales Letters Patent, 28 March 1983
- 1115 -
NEW SOUTH WALES.
H
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P3C O rn
ELIZABETH THE SECOND, by the G race of God Queen of A ustralia and Her
o th er Realm s and T errito ries, Head of the Com m onw ealth.
To Our T rusty and Well-Beloved
The Honourable DONALD GERARD STEWART, A Judge of the
Supreme C ourt of New South Wales.
GREETING:
WHEREAS by Royal Com mission by L e tte rs P a te n t under the G reat Seal of
Our S ta te of New South Wales and the hand of Sir JAMES ANTHONY
ROWLAND, Our Governor of Our S ta te dated th e 24th day of June, 1981,
and recorded in the R eg ister of P a te n ts, No. 78, P. 175, you the abovenamed
the Honourable DONALD GERARD STEWART w ere authorised to inquire
into and re p o rt upon c e rta in m a tte rs relating to T errence John Clark and
persons associated with him:
AND WHEREAS it is desirable th a t your inquiry include c ertain
m a tte rs th a t may not fall d irectly w ithin the m a tte rs to be inquired into
under the L e tte rs P a ten t issued on 24th June, 1981:
NOW THEREFORE We Do, by these Our L e tte rs P a te n t issued in Our
Nam e under the G reat Seal of Our said S tate and the Hand of Sir JAMES
ANTHONY ROWLAND, Our G overnor of Our S ta te , w ith the advice of the
E xecutive Council of Our said S ta te , vary the L e tte rs P a te n t issued on 24th
June, 1981, so as to require th a t, to the e x ten t th a t you are not required to
do so by those L etters P a te n t, you m ake inquiry into the following m atters,
nam ely -
(a) w hether the Nugan Hand Group engaged in a ctiv ities involving
contravention of laws of the S tate of New South Wales (in
p a rticu la r laws re la tin g to possession of drugs or arm am ents);
(b) w hether the Nugan Hand Group directly or indirectly engaged in
a ctiv ities w ith local governm ent au th o ritie s in the S ta te of New
South Wales involving contravention of laws of the S tate;
(c) if the Nugan Hand Group engaged in a ctiv ities re fe rre d to in
paragraph (a) or (b), w hat w ere the e x te n t and n a tu re of those
a ctiv ities;
1116
(d) w hether in the course of, or in connection w ith, any a c tiv ity
re fe rre d to in p aragraph (a) or (b), the Nugan Hand Group used,
was used by, or c o -o p era te d with any person, organization or
body;
AND WE DECLARE THAT, for the purposes of th ese Our L e tte rs
P a te n t -
(e) a re fe re n c e to the Nugan Hand Group is a re fe re n c e to any or all
of the following -
(1) Frank John Nugan;
(ii) M ichael Hand;
(iii) the co rp o ratio n s specified in the Schedule;
Civ) any o th er corp o ratio n which custom arily a c te d in
accordance w ith the d irections of Frank John Nugan
or M ichael Hand or both or of which Frank John
Nugan or M ichael Hand was a d ire c to r or shareholder
or which was otherw ise controlled, directly or
in d irectly , by Frank John Nugan or M ichael Hand, or
both;
AND, w ithout re stric tin g the scope of your inquiry or the n a tu re of
your recom m endations, We d irec t th a t, in conducting your inquiry and
m aking your recom m endations, you have regard to -
(f) any rep o rts m ade by the C om m onw ealth/S tate Joint Task Force
on Drug T rafficking;
(g) any reports of the C o rp o ra te A ffairs Com m ission of New South
Wales appointed as Inspector under P a rt VIA of the C om panies
A ct, 1961, of the S ta te of New South Wales to in v estig a te the
a ffa irs of the c o rporations specified in the Schedule; and
(h) any reports m ade by a person holding office as liquidator of any
of the com panies re fe rre d to in the Schedule under an
appointm ent m ade by the Suprem e C ourt of New South Wales:
AND WE FURTHER DECLARE th a t you are not required by these Our
L e tte rs P a te n t to inquire, or to continue to inquire, into a m a tte r if you are
1117
sa tisfie d th a t the N ational C rim es Com m ission or the Com m issioner
appointed by Our G overnor-G eneral of the C om m onw ealth of A ustralia on
10th Septem ber, 1980, to inquire into c e rta in m a tte rs relating to the
F e d e rated Ship P a in te rs and D ockers Union is inquiring, or proposes to
inquire, into th a t m a tte r:
AND WE FURTHER DECLARE th a t, notw ithstanding anything
contained in the L e tte rs P a te n t issued on 24th June, 1981, or any L etters
P a te n t subsequently issued am ending them , We require you as expeditiously
as possible to m ake your inquiry and, not la te r than 31st D ecem ber, 1983, to
furnish to Our said G overnor of Our S ta te a re p o rt of th e results of your
inquiry and your recom m endations.
AND WE FURTHER DECLARE th a t th ese Our L e tte rs P a te n t shall be
read w ith Our said Com m ission:
AND WE DO FURTHER DECLARE th a t the Royal Com missions A ct,
1923, including Section 17 th e re o f, shall apply to and w ith re sp ec t to this
inquiry.
SCHEDULE.
K & R. Cash T ransit P ty. L im ited (In Liquidation)
D istra v ite A ustralia Wide Servicing Com pany P ty. L im ited
D istra v ite P ty. Lim ited
Nugan Hand L im ited (In Liquidation)
Nugan Hand (D ealers) Pty. L im ited
Nugan Hand In tern atio n al Holdings P ty . L im ited (In Liquidation)
Nugan Hand (Trade Services) P ty. L im ited
Yorkville Nom inees Pty. L im ited (In L iquidation)
A ustralasian & P acific Holdings Pty. L im ited (In Liquidation)
R B Cody P ty . L im ited
1118
G arcia Bros. H ardw are P ty. L im ited
Hidex P ty. Lim ited
Illarangi Investm ents Pty. L im ited (In L iquidation)
L easefast Pty. L im ited (In Liquidation)
M edevac Shipping P ty . L im ited
N aretha P ty. L im ited (In Liquidation)
N ew court Financial Services P ty . L im ited
N Î N M anagem ent Pty. L im ited
S L N otw ist P ty. L im ited
P a c ific C ontin en tal L im ited (In L iquidation)
P M Shelley P ty . L im ited
Skah P ty. L im ited
Solingen A ustralia P ty . Lim ited
Swiss P a c ific P ty. L im ited
W V Tennyson Pty. L im ited (In L iquidation)
Mars Road Investm ents Pty. L im ited (In L iquidation)
Nugan Hand (Hong Kong) Lim ited
Nugan Hand Inc. (Hawaii)
The Nugan Hand Bank (Caym an Islands)
IN TESTIMONY WHEREOF, We have caused these Our
L e tte rs to be m ade P a te n t, and the G reat Seal of Our S ta te
to be hereunto affixed.
1119
WITNESS O ur T rusty and W ell-beloved Sir JAMES
ANTHONY ROWLAND, K night C om m ander of Our
Most E xcellent O rder of th e B ritish Em pire, upon
whom have been conferred the D ecorations of the
D istinguished Flying Cross and the Air Force Cross,
K night of G race of the Most Venerable O rder of St.
John of Je ru sa lem , Our G overnor of Our S ta te of
New South W ales, in the C om m onw ealth of A ustralia,
a t Sydney, in Our said S ta te , this tw en ty -eig h th day
of M arch, in the year one thousand nine hundred and
e ig h ty -th re e and in the th irty -se co n d y ear of Our
R eign.
.,,
.
APPENDIX B
Nugan Sand Representative Offices
- 1123 -
NUGAN HAND REPRESENTATIVE OFFICES
The following information in relation to the representative offices of the Nugan Hand Group has been compiled from the documents in the possession of the Commission. The schedules are incomplete as a result of:
. the incomplete nature of the Commission's holdings
particularly in relation to personnel matters and company statutory information;
. the frequent movement of staff between offices;
. the Group's payment of staff via nominee companies;
. the existence of management agreements between companies within the Group; and
. the Group's practice of representing consultants or other interested parties as representatives or employees in promotional material.
The Nugan Hand Group incorporated companies in the following countries:
Argentina: Nugan Hand (Argentina) Inc.
Cayman Is: The Nugan Hand Bank
Swiss Pacific Holdings Ltd
Chile: Nugan Hand (Chile) Inc.
W.Germany:
Great Britain:
Hawaii:
F.A. Neubauer Bank Nugan Hand (Deutschland) GnbH
Nugan Hand (U.K.) Ltd
Nugan Hand, Inc. (Hawaii)
Hong Kong: F.A. Neubauer Management (Hong Kong) Ltd Nugan Hand (Hong Kong) Ltd Nugan Hand Insurance Brokers Ltd Nugan Hand International Holdings Ltd Nugan Hand Management Services Ltd Nugan Hand Nominees Ltd Nugan Hand Trade Asia Ltd Nugan Hand Travel Ltd
- 1124 -
Malaysia: Nugan Hand Holdings Sdn. Bhd.
Nugan Hand (Malaysia) Sdn. Bhd.
Panama: Nugan Hand Inc. Panama
Philippines: Nugan Hand International (Manila)
Singapore: Nugan Hand Singapore (Pte) Ltd
Nugan Hand Management Services (Pte) Ltd F.A. Neubauer Management (Pte) Ltd
Thailand: F.A. Neubauer Management Ltd
Nugan Hand (Thailand) Ltd
United States: NUgan Hand International Inc. (United States) Nugan Hand (N.Y.) Inc.
Representative offices were opened on behalf of the Nugan Hand Bank in Hong Kong and Saudi Arabia and these offices accepted deposits on behalf of The Nugan Hand Bank (Cayman Islands).
The Group also had representatives or commission agents working for 'Nugan Hand International' in the following countries:
Brazil Chile Italy Korea Mexico Taiwan
Key to abbreviations used in the following schedules.
CT = Confidential transcript CD = Commission document
Rep No = Representative number allocated by The Nugan Hand Group
- 1125 -
NAME:
DATE OF INCORPORATION:
DATE OFFICE OPENED:
TAKEOVER OF COMPANY:
REGISTERED OFFICE:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
SECRETARY:
PERSONNEL:
Name
Bachmann, Jurgen
Denzin, Gerta
Ebert, Manfred
F.A. NEUBAUER BANK
Established in 1841
Not known
31 January 1978 (CD1587 folio 163;CD5857 folio 112; CD6156 folio 40.-CD6476 folio 6)
Neuer Wall 25 D-2000 Hamburg 36 Germany Telephone: (040) 365-855/365-856 Telex: 2161750 FAN D
Cable: Fanbank
(CD4119 folio 1)
Not known
DM 6 000 000
(CD4119 folio 1)
Not known
DM 1 720 000 Shares held by Nugan Hand
International Holdings Ltd in trust for Swiss Pacific Holdings Ltd. (CD1587 folio 163)
Not known
Rep No Position
521 General
(CD4132) partner 523 (CD4119
(CD 1934) folio 4)
526 Secretary
(CD4132 (CD9975 folio 1) folio 7)
518 Director of
(CD1934) Accounting and Office Manager (CD5852
folio 4)
Known Period of Employ
1965 - 20.1.80 (CD510; CD4428 folio 12)
1.6.78 - 20.1.80 (CD1587 folio 67; CD9975 folio 7)
1.6.78 - 20.1.80 (CD10241 folio 12)
- 1126 -
PERSONNEL: (Continued)
Name Rep No Position Known Period of Employ
Haupt, Wolfgang 524
(CD4132 folio 1)
Consulting Accountant Peat Marwick Mitchell
(CD3022 folios 86-89)
1979 - 80
(CD4132 folio 1)
Hewitt, Anthony Peter 516
(CD1934)
NHI Group Represent ative
October 1978 - January 1980 (CT22124; CT22132)
Hewitt, Sue Elizabeth 516A
(CD1934)
Secretary October 1978 -
January 1980
Iwan, Peter 525
(CD4132 folio 1)
Consulting Accountant Peat Marwick Mitchell
(CD3022 folios 74-76)
1979 - 1980 (CD3022 folios 74-76; CD4132 folio 1)
Lindemann, Dieter 522
(CD8590 folio 25)
Responsible 1.2.78 - 31.12.78 for reorgan- (CD9975 folio 4) isation of FAN, employment of personnel, liaison between
NHIH and FAN (CD9975 folio 4)
Paegle, Ziedonis 522
(CD4132 folio 1)
Represent ative (CD3022 folios 86-89)
Oct 1979 (CD8467 folio 4)
Runne, Wilhelm 521
(CD8581 folio 3)
Represent ative (CD8590 folio 26)
June-Oct. 78 (CD9986 folio 9)
- 1127 -
NAME:
DATE OFFICE OPENED:
REGISTERED OFFICE:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
DATE OF INCORPORATION:
SECRETARY:
PERSONNEL:
F.A. NEUBAUER MANAGEMENT (HONG KONG) LIMITED
16 October 1979 (CD6559 folio 26)
Not known
14th Floor, South China Bid 1-3 Wyndham St Hong Kong (CD6559 folio 26)
HK$10 000 (CD6559 folio 26)
HK$10 000 (CD6559 folio 26)
Dartman Limited Scotman Services Limited (CD6559 folio 26)
Harbour Nominees Ltd Macquarie Nominees Ltd (CD6559 folio 26)
Not known
Not known
- 1128 -
NAME: F.A. NEUBAUER MANAGEMENT LTD
DATE OF INCORPORATION: 21 June 1979
(CD6559 folio 65)
DATE OFFICE OPENED: Not known
REGISTERED OFFICE: 1010 Dusit Thani Bldg
Rama IV Road Bangkok (CD6559 folio 65)
AUTHORISED CAPITAL: 10 000 Baht (100 shares - 100 Baht each)
ISSUED CAPITAL: Not known
DIRECTORS: Intorn, Vischit
Tansuthanyalack, Suporn Hand, M.J. Galicek, G.V. (CD6559 folio 65)
SHAREHOLDERS: Name No.
Intorn, Vi chit 26
Lauhabhandu, Toi 5
Derjakaisaya, Suvit 20
Nugan, F.J. 10
Hand, M.J. 9
Galicek, G.V. 30
(CD6559 folio 65)
SECRETARY: Not known
PERSONNEL: Not known
- 1129 -
NAME:
DATE OFFICE OPENED:
REGISTERED OFFICE:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
SECRETARY:
STATED PURPOSE OF COMPANY:
PERSONNEL:
Name:
Morisset, Brian Keith
DATE OF INCORPORATION:
F.A. NEUBAUER MANAGEMENT
2 May 1979 (CD6559 folio 60)
Not known
806 Ocean Building Collyer Quay Singapore 0104 (CD6559 folio 60)
S$25 000 (CD6559 folio 60)
Not known
Hand, M.J. Steer, G.R. Tan, Choon Seng, Morisset, B.
(CD6536 folio 4)
Tan, Choon Seng Hand, M.J. (CD6536 folio 7)
Not known
Banking facilities
Rep No Position
572 Represent-
(CD1934 ative folio 71) (CD6536 folio 4)
(PTE) LTD
Known Period of Employ
20. 4.79 - 10. 1.80 (CD9943 folio 5)
- 1130 -
DATE OF INCORPORATION:
DATE OFFICE OPENED:
REGISTERED OFFICE:
NAME:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
SECRETARY:
PERSONNEL:
Name
Andreason, J.E.
Courtney-Smith, George
Galicek, George Vaclav
Spalek, Jose
Not known
Opened by 6 March 1978 (CD3955 folio 3)
Lavelle 556 2' Piso "D" Buenos Aires
Telephone: 392-3583/392-7317 Telex: 122205/122781 TEXCO AR (CD4119 folio 1)
Not known
US$10 (CD5893 folio 7)
Not known
Hand, M.J. (CD6122 folio 10; CD10690)
Not known
NUGAN HAND (ARGENTINA) INC.
Rep No Position Known Period of Employ
547 (CD4132 folio 1)
Represent ative
1976 - 1980 (CD4132 folio 1)
507 (CD1934)
Sales Rep resentative June 1977 - Aug.1978 (CT22091)
508 (CD1934)
Trade Rep resentative Sept.1977 - mid 1979 (CD10544 folio B)
"
Represent ative (CD6559 folio 9)
5.11.79 - (CD6559 folio 9)
- 1131 -
NAME: NUGAN HAND (CHILE) INC.
REGISTRATION: Name registered 24 October 1978
Incorporation was to be 6-8 months later (CD7664 folio 4)
REGISTERED OFFICE: Moneda 856; 2° Piso
Santiago (CD7664 folio 4)
ADDRESS ON N.H. PUBLICITY SHEETS: Casilla 15051,
.......... . Correo 11, Santiago
Telephone: 42056//383130 Telex: 40607 SOLCI CL
Cable: goyco
This was Carlos Godoy's (CD510 folio 7; CD7664 : residence folio 3)
OTHER ADDRESS: Edificio Saratoga
San Antonio 60 Santiago - Chile (CD5019 folio 83)
AUTHORISED CAPITAL: Nil
(CD7664 folio 4)
ISSUED CAPITAL: Nil
(CD7664 folio 4)
DIRECTORS: Not known
SHAREHOLDERS: Hand, M.J.
(CD10690)
SECRETARY: Nil
(CD7664 folio 4)
PERSONNEL:
Name Rep No Position Known Period of Qnploy
Galicek, George Vaclav 508
(CD1934)
Trade Rep resentative October 1977 - mid 1979 (CD10554 folio B)
Godoy, Carlos Acting
Manager on commission basis (CD4112
folio 144; CD7664)
24.8.79 - Jan.1980 (CD174 folio 6; CD4112 folio 144)
- 1132 -
DATE OFFICE OPENED:
PERIOD OF OPERATION:
REGISTERED OFFICE:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
SECRETARY:
PERSONNEL:
Name
Schuller, Karl Fritz
Witthaus, Werner
NAME:
DATE OF INCORPORATION: 13 March 1978
(CD6559 folio 20)
Not known
November 1977 to 1 March 1979 (CD4153; CD4319 folio 35)
Mainzer Landstr. 49 D-6000 Frankfurt Am Main West Germany Telephone: 232-700 Telex: 416318 Nuhan D.l
(CD7137 folio 56)
DM20 000 (CD6559 folio 20)
DM20 000 (CD7178 folio 67)
Hand, M.J. Hewitt, A.P. (CD6559 folio 20)
NHIH Ltd - DM19 000
W.E. Verwaltungsgesellschaft mbH DM 1 000 (CD7178 folio 67)
Not known
NUGAN HAND (DEUTSCHLAND) QnbH
Rep No Position Known Period of Bnploy
511 (CD4132 folio 7)
Representative 7.11.77 -Feb. 1979 & Office (CD6932 folio 94;
Manager CD7130 folio 8;
CD7178 folio 67)
514 (CD1934 folio 17)
Office Jan 1978 - early 1979
Manager (CD1250 folios 2974-75) in the of absence Mr Schuller
(CD1250 folios 2974-75)
- 1133 -
DATE OFFICE OPENED:
REGISTERED OFFICE:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
SECRETARY:
PERSONNEL:
Name
Prior, Anthony James
Yeap, Kee Aik
NAME:
DATE OF INCORPORATION: 8 August 1978 (CDS019 folio 85; CD7178 folio 71)
February 1975
5th Floor Ming Building Jalan Bukit Nanas Kuala Lumpur
On 10 August 1978 changed to: 6th floor Oriental Plaza Jalan Parry Kuala Lumpur
(CD6673 folio 6)
M$100 000 (CD5019 folio 85; CD6673 folio 6)
M$2 (CD6673 folio 6)
Yeap, Kee Aik Hand, M.J. Nugan, F.J.
(CD6673 folio 6; CD7178 folio 71)
Yeap, Kee Aik Hand, M.J. Nugan, F.J.
(CD5019 folio 85; CD6673 folio 6)
Christine Tang Siew Yin (CD6673 folio 6)
NUGAN HAND HOLDINGS SDN. BHD.
Rep No Position Known Period of Employ
515 Represent-
(CD4132 ative folio 7)
August-Sept.1978 (CD1016 folio 10)
505 Represent-
(CD4132 ative folio 1)
19.9.78-20.1.80 (CD1016 folio 10)
- 1134 -
DATE OFFICE OPENED:
NAME CHANGES:
REGISTERED OFFICE:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
NAME:
DATE OF INCORPORATION:
SHAREHOLDERS:
SECRETARY:
STATED PURPOSE OF COMPANY:
10 October 1972 (CDS019 folio 99)
Not known
10 October 1977 - Incorprated as Nugan Oil Limited 22 November 1974 - Changed name to Nugan Hand (Hong Kong) Ltd 28 January 1977 - Changed name to Swiss
Pacific Asia Ltd
9 August 1977 - Changed name to Nugan
Hand (Hong Kong) Ltd
(CD7178 folio 70)
1110 Connaught Centre, Hong Kong Telephone: 5-263221 Telex: 83499 Nugan H4
(CD510 folio 2)
HK$20 000 000 (CD1974 folio 5)
HK$5 000 000 (CD1974 folio 4)
NUGAN HAND (HONG KONG) LTD
Hillory Ltd Leedony Ltd Hand, M.J. Nugan, F.J. Ward, F.D.
Collings, C.L.H. Hill, S.K.A. Laloe, F.M.B.
Dunn, P.M. (CD6112 folio 3; CD7162 folio 3-6)
Harbour Nominees - 1 share Nugan Hand International Holdings Pty Ltd - 999,999 shares (CD1974 folio 4; CD7178 folio 69; CD10690)
Nugan Hand Nominees Ltd (CD5019 folio 99)
Deposit-taking company (CD1974 folio 8)
From To
10.10.72 - 30.11.74 10.10.72 - 30.11.74 26.11.74 26.11.74 29.11.74 - 16.12.75 30. 7.75 16.12.75 - 30. 5.77
1. 1.76 9. 8.76 - 6. 9.77
PERSONNEL:
Name Rep No Position Known Period of Employ
Arculli, Beryl 539
(CD8028 folio 26)
Represent ative (CD6588 folios 1-5)
17. 4.79 - 18. 7.79 (CD1984 folio 129; CD10523 folio 504)
Atkins, Leslie Kenneth Account
executive (CD6591 folio 7)
3. 1.78 - 31. 3.78 (CD6591 folios 7-8)
Bates, Arthur 545
(CD1934) 407 (CD8581 folio 3)
Account executive (CD510 folio 2)
1.11.78 - Feb. 1980 (CD10499 folios 14-15; CD10524 folio 227)
Chan, Connie Secretary to
Director of NHHK (CD10524 folio 34)
November 1979 (CD1984 folio 15; CD10524 folio 34)
Cheung, Ada (Mrs) Receptionist
Interpreter (CD4279 folio 67; CD7282
folio 14)
1. 6.77 - 30. 6.77 (CD7287 folio 15)
Cheung, Manlo 583
(CD1934 folio 66)
Account executive (CD510 folio 2)
18. 6.79 - 14. 1.80 (CD510; CD10524 folio 257)
Pulger-Frame, Ronald Adam 221 (CD8581 folio 3) 223
(CD4132 folio 7) 509 (CD1934)
Represent ative June 1976 - 1.12.1978 (CD4625 folio 13-14;
CD6959 folio 88)
Wong, Ernest Cheong Ling 557 (CD4132 folio 1)
Director of Corp Devel. (CD4279 folio 66)
March-30 November 1979 (CD4454 folio 16; CD7164 folio 6)
Wong, Christine Secretary
(CD4279 folio 69)
20.7.79 - 19.2.80 (CD7475 folio 6)
- 1136 -
DATE OFFICE INCORPORATED:
REGISTERED OFFICE:
ADDRESS ON NH PUBLICITY SHEETS:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
SECRETARY:
STATED PURPOSE OF COMPANY:
PERSONNEL:
Name:
Black, Edwin Fahey
NAME;
2 August 1974 (CD6187 folio 24)
Financial Plaza of the Pacific 4th Floor - Bank Building 111 South King Street Honolulu Telephone: 546-5197 (CD4121 folio 2; CD5019 folio 98; CD6122 folio 9)
NUGAN HAND, INC. HAWAII
4910 Kahala Avenue Honolulu Telephone: (808) 732-6000 Telex: 8550 PANCO HR
(General Black's address) (CD4119 folio 1)
US$707 565 (CD5959 folio 59)
US$707 565 (CD1250 folio 187)
Harris, S.E. Nugan, F.J. Hand, M.J. Philpotts, D.
(CD1250 folios 200,205; CD5019 folio 98)
Nugan Hand International Holdings Pty Ltd - 707 565 shares.
(CD5959 folios 78-79; CD10690)
Nugan Hand Needham Ltd (CD5019 folio 98)
1 "To engage in the business of investment bankers." A general umbrella excluding deposit taking but including lending/
borrowing money, consulting, and general corporate commercial objects.1 (CD6559 folio 70)
Rep No Position: Known Period of Employ
532 Represent- Nov 1977-January 1980
(CD1934) ative (CD1250 folios 2577-79;
CD1955 folio 163)
- 1137 -
Name: Rep No Position: Known Period of Employ
Philpotts, Doug - Accountant August 1974 -
(CD1250 January 1980
folios 282-3) (CD1250 folios 282-3; CD5959 folio 139)
- 1138 -
DATE OFFICE OPENED:
REGISTERED OFFICE:
NAME:
DATE OF INCORPORATION:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
SECRETARY:
STATED PURPOSE OF COMPANY:
24 January 1975 (CD4449 folio 6)
Not known
Did not have a registered office as it was not required under Panama law. Did have a resident agent, the legal firm Arias,
Fabrega & Fabrega which had the following address, which was used in NH brochures:
Via Espana 200 Apartado 6307 Panama 5 Republic de Panama (CD4449 folio 6; CD7727 folio 7)
US$10 000 (CD4449 folio 6)
US$10 (CD6122 folio 9) Letter from Arias, Fabrega & Fabrega 5.11.79 stating that they "did not know what the
issued capital might be as the shares are issued by the resolution of the Directors, the majority of which are not in Panama." (CD4449 folio 6)
Hand, M.J. Nugan, F.J. Bernal, Esteban (CD4449 folio 6)
Letter from Arias, Fabrega stated "we have no details of the shareholding." (CD4449 folio 6)
Not known
NUGAN HAND INC. PANAMA
Financial services (CD1974 folio 10)
- 1139 -
DATE OFFICE OPENED:
REGISTERED OFFICE:
NAME:
DATE OF REGISTRATION:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
SECRETARY:
PERSONNEL:
Name
Cheng, Jerry
Holmgren, Dale Oscar
Potter, Donald L
NH Inc. Taiwan office opened in May 1978 as authorised representative office of Nugan Hand Inc. Hawaii (CD4431 folio 12; CD6494 folio 16)
May 1978
1106 Shin Tai Building 106-2 Chung Shan N. Road Section 2 Taipei (CD7178 folio 80)
On September 1979 new address was: Suite 1107, New Taihong Building, 111 Nanking East Road (2) Taipei
Telephone: 5510450/5612642 Telex: 11079 DAMEX
Cable: Nuganhand taipei (CD510 folio 7; CD4319 folio 49)
Not known
Not known
Not known
Not known
Not known
NUGAN HAND INC. (TAIWAN)
Rep No Position Known Period of Qnploy
554 (CD1934 folio 66)
Represent ative
29.2.79-20.1.80 (CD510; CD4319 folio 80)
513 (CD1934)
Represent ative
1.6.78 - Jan. 1980 (CD1162 folios 3-4)
511 (CD60 folio 5)
Represent ative
27.4.78 (CD4153 folio 10)
- 1140 -
DATE OFFICE OPENED:
REGISTERED OFFICE:
NAME:
DATE OF INCORPORATION:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
NUGAN HAND INSURANCE BROKERS LTD
17 April 1979 (CD5019 folio 96)
Not known
14th Floor South China Bid 1-3 Wyndham St Hong Kong
HK$500 000 (CD5019 folio 96)
HK$500 000 (CD5019 folio 96)
DIRECTORS:
SHAREHOLDERS:
SECRETARY:
PERSONNEL:
Name
Atkins, Leslie Kenneth
Cruz, Pedro
Harris, Mark
Humble, George
Hand, M.J. Humble, G. Collings, C.L.H. (CD5019 folio 96)
Harbour Nominees Ltd 2 500
Macquarie Nominees Ltd. 2 500 (CD5019 folio 96; CD6559 folio 30)
NUgan Hand Nominees Ltd (CD5019 folio 96)
Rep No Position
Account Executive (CD6951 folio 7)
574 Account
(CD1934 Exec. Life folio 64) Assurance Division (CD6614)
- Production
Officer (CD6708 folio B)
Known Period Of Employ
1. 7.79 - 3. 8.79
(CD6591 folio 5; CD6708 folio 15)
1. 4.79 - 14. 1.80
(CD510; CD6709 folio 5)
19. 2.79 - 15. 8.79 (CD6708 folio 7; CD7267 folio 4)
564 (CD1934 folio 80)
Man. Director 1. 3.79 - 11.12.79 (CD6491 (CD10524 folios 75,252) folios 22-3)
- 1141
Name
Lam, Moses
Leung, Catherine
Macklin, Jacqueline
Ralph, Patrick
Simpson, Morna K.
Tham, Albert
Tsang, Roger
Warde, Anthony
Wong, Alan
WU, Stella
Rep No Position
- Office Boy
(CD6614)
- Secretary
(CD4279 folio 69)
Anne - Secretary to
George Humble (CD7505 folio 5)
575 Admin-
(CD1934 istration folio 64)
- Exececutive
Secret. Financial Assistant
Documents Clerk General Insurance Division
(CD4279 folio 69)
Clerical (CD6614)
592 Account
(CD1934 Executive folio 79)
- Messenger
(CD8039 folio 3)
- Telex
Operator (CD6614)
Known Period Of Employ
14. 1.80 (CD6614)
approx March-Dec 1979 (CD7505 folio 11)
24. 7.79 - 7. 7.80
(CD6668 folio 59)
17. 4.79 - 11. 2.80 (CD10524 folios 139, 142)
May 77 - Sept 78
(CD7267 folio 4; CD10524 folio 572)
1. 8.79 - 15. 3.80 (CD1994 folios 3,7)
1. 6.77 - 25. 5.79 (CD7281 folio 7; CD7422 folio 3)
1. 9.79 - 29. 2.80 (CD7315 folio 6; CD8049 folio 22)
1. 9.79 (CD8039 folio 3)
1. 8. 19 - 14. 1.80
(CD510; CD6820 folio 4)
- 1142 -
DATE OF INCORPORATION:
NAME CHANGE:
DATE OFFICE OPENED:
REGISTERED OFFICE:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
SECRETARY:
STATED PURPOSE OF COMPANY:
PERSONNEL:
Name
Attkisson, Randall
NAME: NUGAN HAND INTERNATIONAL HOLDINGS LTD
19 May 1972 (CD1974 folio 5; CD5019 folio 93)
19. 5. 72 - Incorporated as New London (Distributing) Pty Ltd 31.12.74 - Changed to Ingold Growth Ltd 26.10.76 - Changed to Nugan Hand
International Holdings Ltd (CDS019 folio 93)
Not known
1110 Connaught Centre, Hong Kong
HK$25 000 000 (CD1974 folio 5; CD5019 folio 93)
US$5 000 000 (CD6122 folio 9)
Nugan, F.J. Hand, M.J. Collings, C.L.H. Hill, S.K.A. Gilder, J.M.
(CD1974 folio 5;
20.11.74 20.11.74 4.12.74 7. 2.77
1978 - 4.2.80 CD9915 folios 28-31) CD4803;
Hand, M.J. - 7 shares
Harbour Nominees - 1 share
(CD1974 folio 5; CD7178 folio 73; CD10690)
Rutter, H.M. 24.1.78
Nugan Hand Nominees Ltd (CD5019 folio 93; CD11319 folio 65)
Investment (CD7178 folio 73)
Rep No Position Known Period of Employ
550 Regional
(CD510 Director folio 103) of NH Asia
1. 1.80 - March 80 (CD7715; CD9934 folio 4)
- 1143 -
NUGAN HAND INTERNATIONAL - REPRESENTATIVE OFFICES
BRAZIL:
Representative: Rep No Position Known period of Bnploy
Johnson, Graham 504 Represent- 27.4.77 to at
(CD8487 ative least July 1977
folio 4) (CD6629 folio 4;
CD8487 folio 4)
ITALY:
Address:
Date Opened:
Personnel:
Gut, Pierre
Bleiker, Gary
Viale Brigate Partigiane 4/1 Genova, Italy Telephone: 010/587964 Telex: 211311 UMA I
(CD510 folios 7,24; CD4119 folio 1)
August 1979 (CDS2 folio 3)
Vice President of Primint Holding Int. (CD4119 folio 4; CD7191)
Director of Promital Spa, Italy (CDS2 folio 9; CD4119 folio 4)
KOREA:
Address: Ewkor Trading Company
GPO Box 1162 Seoul, Korea Telephone: 444 8500 Telex: 24671 Ewkor Tck
(CD510 folio 7)
Period of Operation: Mid 1979 - February 1980
(CD1721 folio 5; CD7137 folio 34)
Personnel:
Name Rep. No Position Known period of Bnploy
Stiles, Leonard Ross 576 Represent- April - December 1979
(CD4132 folio 1) ative (CD10578)
Kim, Major David (CD7355 folio 33)
- Not known Not known
- 1144 -
MEXICO:
Representative:
Lorenzino, Fred
SOUTH AFRICA:
Address:
Directors:
Rep No Position Known period of Employ
503 Represent- 21.4.77 - 24.8.77
(CD8474) ative (CDS7 folio 1; CD8474)
101/55 West Street Kempton Park 1620 Republic of South Africa P.O. Box 7955 Johannesburg 2000
(CD3174 folio 1)
Hand, M.J. Nugan, F.J. (CD3174 folio 1)
- 1145 -
DATE OF INCORPORATION:
REGISTERED OFFICE:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
OFFICES:
LOS ANGELES:
REGISTERED OFFICE:
PERSONNEL:
Name
Pauker, Dr Guy Jean
SAN FRANCISCO:
REGISTERED OFFICE:
NAME:
1 May 1978 (CD6559 folio 71)
1300 Market Street, Wilmington DELAWARE 19801 (CD6559 folio 71)
US$100 000 .
(CD6559 folio 71)
Not known
Not known
Yates, E.P. - 1 share · _
NUGAN HAND INTERNATIONAL INC. (UNITED STATES)
21423 Colina Drive Topanga, California 90290
Rep No Position Known period of Assoc
509 Consultant
(CD4132 Expert folio 1) S.E. Asia
November 1979 (CD510)
From 4 July 1977: Room 315 760 Market Street San Francisco 9410
Telephone: 781939 (CD7131 folio 6)
From 16 August 1979: 5/F, 44 Montgomery Street San Francisco
California 94104 Telephone: (415) 9822962 Tfelex: 171041 #Q SFO
(CD6779 folio 17)
- 1146
PERSONNEL:
Name
Hill, Charles
Iorenzino, Fred
DELAWARE:
DATE OFFICE OPENED:
REGISTERED OFFICE:
Rep No Position
581 Represent-
(CD1934 ative folio 32)
503 Represent-
(CD7340 ative folio 36)
1 May 1979 (CDS688 folio 5)
Known Period of Employ or Association
16.8.79 - 10.1.80 (CD510)
Mid 1977 (CD6503 folio 8)
C/- The Company Corporation 300 Main Street Wilmington, Delaware (CD8688 folio 25)
FLORIDA:
REGISTERED OFFICE:
PERSONNEL:
Name
Beazley, Donald Elgin
6610 South West 20th Lane Miami Florida, 33143 Telephone: (305) 6670604
(CD510 folio 8)
Rep No Position Known Period of Employ
or Association
514 Chief October 1979
(CD4132 Executive of - February 1980 folio 1) NH Group (CD1176 folio 275;
CD1429 folio 26)
MARYLAND:
REGISTERED OFFICE: 2510 Riva Road
Annapolis Maryland, 21401 Telephone: (301) 2665018/2618671 Telex: 908226 McDonald ANPL
(CD510 folio 8)
- 1147 -
PERSONNEL:
Name Rep No Position Known Period of Employ
or Association
McDonald, Walter Joseph 511 (CD4132 folio 1)
Economic Consultant (CD1118 folio 10)
July 1979-January 1980 (CD1118 folios 4, 10-11)
NEW YORK:
NAME: Nugan Hand (N.Y.) Inc.
DATE OF INCORPORATION: Not known
DATE OFFICE OPENED: Not known
REGISTERED OFFICE: Not known
AUTHORISED CAPITAL: Not known
ISSUED CAPITAL: US$10
(CD6122 folio 9)
DIRECTORS: Not known
SHAREHOLDERS: Hand, M.J.
(CD6122 folio 9)
SECRETARY: Not known
STATED PURPOSE OF COMPANY: Financial Services
PERSONNEL: Name Rep No Position Known Period of Bnploy
or Association
Abrams, Charles 558
(CD4132 folio 7)
Represent ative March 1979 (CD8028 folio 26)
VIRGINIA:
REGISTERED OFFICE: 108 88th Street
Virginia Beach Virginia 23451 Telephone: (804) 4225559 (804) 4222392
(CD7727 folio 8)
(office) (home)
- 1148 -
PERIOD OF OPERATION: 1977 to 2.2.79
(Closed down when Admiral Yates moved to
Washington) (CD4135 folio 7; CD4319 folio 78)
PERSONNEL:
Name Rep No Position Known Period of Employ
or Association
Yates, Earl Preston (Buddy) 533 (CD1934) Represent ative
January 1977-March 1979 (CT24244-47; CD7186 folio 4)
WASHINGTON D.C.:
REGISTERED OFFICE: Suite 306
1629 K Street N.W. Washington D.C. 20006 Telephone: (202) 2931322 Telex: 89407 UNICOVER WSH
PERIOD OF OPERATION: Mid 1979-1980
(CD1933 folio 26; CD4319 folio 78)
STATED PURPOSE OF COMPANY: Financial Services
PERSONNEL: Name Rep No Position Known Period of Employ
or Association
Cocke, Erie 577
(CD4132 folio 1)
Consultant 29.5.79 (CD2026 folios 82-83; CD7137 folio 36)
Yates, Earl Preston (Buddy) 533 (CD1934) Represent ative
March 1979-January 1980 (CT24274; CD7186 folio 4)
Phillips, Eugene Staff
associate to E. Cocke (CD7137 folio 36)
29.5.79 (CD7137 folio 36)
- 1149 -
DATE OF INCORPORATION:
KNOWN PERIOD OF OPERATION:
DATE OFFICE OPENED:
REGISTERED OFFICE:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
SHAREHOLDERS:
SECRETARY:
STATED PURPOSE OF COMPANY:
PERSONNEL:
Name
Gregory, Wilfred Patrick
Manor, Leroy Joseph
Payne, Michael John
NAME:
13 July 1978 ('according to presidential Decree1 218) March 1979 (CD6559 folio 57; CD8857)
May 1978 - 1980 (CD6862 folio 5; CD9943 folio 4)
Not known
12/F Ramon Magsaysay Centre 1680 Roxas Boulevard, Manila Telephone: 502050/502059
Telex: 54193 NUHAND PN (CD510 folio 7)
Not known
Not known
Not known
Not known
'Regional Headquarters for NHL Limited to supervision, communications and
co-ordinative costs. No income to be
derived from Philippines. (CD6559 folio 57)
NUGAN HAND INTERNATIONAL (MANILA)
Rep No Position Known Period of Employ
540 Represent-
(CD1940) ative
15.1.78 to mid 1980 (CD510 folio 10; CD4153 folio 10; CD6933 folios 246-97;
CD10576)
523 Represent-
(CD4132 ative folio 1)
Oct.1979 - April 1980 (CT24661; CD510 folio 10; CD6862)
Represent ative
folio 33)
Aug.1979 - Feb.1980 (CD510 folio 10; CD4319 folio 38)
587 (CD1934
- 1150 -
NAME:
DATE OF INCORPORATION:
NAME CHANGE:
DATE OFFICE OPENED:
REGISTERED OFFICE:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
SECRETARIES:
NUGAN HAND (MALAYSIA) SDN. BHD.
5 December 1977 (CD6673 folio 5)
5 December 1977 - Incorporated as Nugan Hand Trade (Malaysia) Sdn. Bhd. 25 July 1978 - Changed to Nugan Hand (Malaysia) Sdn. Bhd. (CD4277 folio 8)
1 July 1978 (CD6559 folio 43)
10th Floor, Oriental Plaza Jalan Parry Kuala Lumpur 04-01 Telephone: 429826/425771 Telex: 30712 Nuhand Ma
(CD4119 folio 4)
M$25 000 (CD7178 folio 84)
M$2 (CD7178 folio 84)
Name: Date of Appointment
Ceilings, C.L.H. 16.11.77
Hand, M.J 16.11.77
Nugan, R.J. 16.11.77
Jamari, R. 16.11.77
Abraham, C. 16.11.77
Steer, G.R. 2. 5.78
Louey, E.C. 2. 5.78
(CD6673 folios 4-5)
Name: No. of Shares
Jamari, Rahmat to NHIHL 1
Abraham, Cecil to NHIHL 1
Nugan Hand International Holdings Ltd 24998
(CD6673 folios 4-5)
Name: Date of Appointment
Chew, Phiak Kham Louey, E.C. (CD6673 folios 4-5)
5.12.77 4.1.79
- 1151 -
STATED PURPOSE OF COMPANY: Financial services
(CD1974 folio 9) 'To carry on the business of general
merchants ... of all kinds of works,
enterprises or projects whatsoever1 (CD6559 folio 44)
PERSONNEL:
Name: Rep No Position Known Period of Employ
Auyeung, James 546
(CD1934)
Represent ative July 1979 - March 1980 (CD8388 folio 260;
CD9874 folio 114)
Lo, Kwok Trade Adviser
(CD4119 folio 4)
Unknown
Louey, Edward Craig 510
(CD1934)
Banking Represent ative
13.9.77 - 1.11.79 (CD4153 folio 7; CD7153 folio 8)
Nor, Dr Mohd 561
(CD8028 folio 26)
Not known from 13.3.79
(CD4132 folio 7)
Phenix, Patricia 568
(CD1934 folio 61)
Represent ative
from January 1980 (CD1854 folio 7)
Stiles, Leonard Ross 576
(CD4132 folio 1)
Trade Represent ative
December 1979 to January 1980 (CD1854 folio 7; CD10578)
- 1152 -
DATE OFFICE OPENED:
REGISTERED OFFICE:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
SECRETARY:
STATED PURPOSE OF COMPANY:
PERSONNEL:
Name
Amizola, Vincente
Cheung, Monica
Courtney-Smith, George
NAME:
DATE OF INCORPORATION: 7 July 1978
(CDS019 folio 104)
Not known
1110 Connaught Centre, Hong Kong (CD5019 folio 104)
HK$10 000 (CDS019 folio 104)
Not known
Harbour Nominees Ltd Macquarie Nominees Ltd Nugan, F.J. Hand, M.J. Hill, S.K.A. Valdellon, V.
(CD5019 folio 104; CD6559 folio 32)
Harbour Nominees Ltd Macquarie Nominees Ltd (CD10690)
Nugan Hand Nominees Ltd (CD5019 folio 104)
NUGAN HAND MANAGEMENT SERVICES LTD
Not known
Rep No Position
- Corporate
Planning Executive (CD7306 folio 4)
553 Admin.
(CD4132 (CD4279 folio 1) folio 67)
Known Period of Bnploy * 1
12. 3.80 (CD7306 folio 4)
1. 2.79 - 29. 2.80 (CD6668 folio 99)
507 (CD1934)
Account 6. 4.79 - February 1980
Executive (CT22092-94) Director of Business Development
(CD6614)
Name Rep No Position Known Period of Employ
Farris, George 570
(CD7328 folio 13)
Account. Executive (CD7328 folio 13)
20. 4.79 - Aug. 1979 (CD7328 folio 13)
Ho, Danny Office Boy
(CD6614 folio 30)
2. 6.79 - 14. 1.80 (CD510; CD7318)
Kwan, Maria Secretary to
Mr Valdellon (CD7505 folio 5)
26. 2.79 - 14. 1.80 (CD7151)
Lam, Polyxena Clerical
(CD6614)
5. 3.79 - 14. 1.80 (CD6661 folio 96; CD7320 folio 4)
Lam, Rowena 565
(CD510)
Accounting 14. 1.80
(CD510)
Leung, Rowena Clerical
(CD4279 folio 67)
1. 1.80 - 29. 2.80 (CD6668 folio 116)
Morton, Mary 585
(CD4132 folio 1)
Management Accountant (CD6614)
9. 7.79 - 10. 1.80 (CD7278 folio 4)
Suen, Eliza 561
(CD10258 folio 545)
Secretary 18. 9.79
(CD7264 folio 4)
Valdellon, Vincente
528 (CD1934 folio 10)
Director Business Development (CD6614)
1. 4.78 - 14. 1.80 (CD1016 folio 9; CD10524 folio 154)
Wong, Laurence T. Administrator
(CD9941 folio 85)
1. 8.79 (CD7266 folio 3)
Yeung, Irene - Accounting,
Clerical (CD6614)
24. 7.79 (CD6668 folio 86)
- 1154 -
NAME: NUGAN HAND MANAGEMENT SERVICES (PTE) LTD
DATE OFFICE OPENED:
REGISTERED OFFICE:
DATE OF INCORPORATION:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
SECRETARY:
STATED PURPOSE OF COMPANY: "
PERSONNEL:
Name
Alfred, Mary
Byreddy, Cecilia
Chooi, Margaret
Possibly 24 October 1979 (CD6536 folio 4)
Not known
Suite 701-717 Straits Trading Building Battery Road, Singapore 0104 P.O. Box 799, Colombo Court (CD510 folio 7; CD4119 folio 4)
HK$100 000 (CD6536 folio 4)
HK$2 (CD6536 folio 4)
Tan, Choon Seng Hand, M.J. (CD6536 folio 4)
Tan, Choon Seng (held in trust for M. Hand) Hand, M.J. (CD4535 folios 10-11; CD6536 folio 4; CD10690)
Not known
Administrative duties between NH Singapore and NHIH Ltd (CD5021 folios 15-23)
Rep No Position Known Period of Employ
537(A) (CD4132 folio 1)
Secretary (CD11323 folio 6)
29.10.79 - 20.1.80 (CD510; CD6536 folio 4)
529C (CD4132 folio 1)
Client Liaison Officer responsible for Middle East Clients
(CD4536 folio 19)
23.8.79 - 29.10.79 (CD4536 folio 19; CD6536 folio 4)
529(A) (CD4132 folio 1)
Client Liaison Officer (CD11323
folio 6)
29.10.79 (CD6536 folio 4)
- 1155
Name Rep No Position Known Period of Employ
Gonzales, Bonita 529(B)
(CD4132 folio 7)
Client Liaison (CD9943 folio 5)
7.3.78 (CD4452 folio 17)
Huang, Lim Piay â Bookkeeper
(CD4452 folio 28)
7.3.78 - 29.10.79 (CD4452 folio 28; CD6536 folio 4)
Huff, Tom 567
(GDI934 folio 60)
Consultant (CD11323 folio 2)
3.10.79 - 20.1.80 (CD510; CDS610 folio 3)
Karuna, Karpagam 529
(CD1934 folio 62)
Bookkeeper/ Client Liaison Officer
(CD9943 folio 5)
27.11.77 (CD4536 folio 3; CD9943 folio 5)
Longpoetih, Khartini 527(A)
(CD4132 folio 1)
Secretary (CD11323 folio 6)
29.10.79 (CD6536 folio 4)
Phenix, Patricia 568
(CD1934 folio 61)
Represent ative (CD3076 folio 16) Consultant
(CD11323 folio 2)
not known
Tan, Audrey Junior
Secretary (CD4452 folio 32)
7.3.78 - 29.10.79 (CD4452 folio 32; CD6536 folio 4)
Tan, Choon Seng 527
(CD1934)
Manager Admin (CD4119 folio 4)
1977 - 19.4.80 (CD4535 folio 2-3)
Tan, George 515
(CD4132 folio 1)
Accountant (CD11323 folio 6)
10.1.80 (CD9943 folio 5)
- 1156 -
DATE OFFICE OPENED:
REGISTERED OFFICE:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
SECRETARY:
STATED PURPOSE OF COMPANY:
PERSONNEL:
Name
Au, Betty
Donald, Bessie Hope
Ip, Michael
NAME:
DATE OF INCORPORATION: 1 October 1976 (CD1974 folio 5)
Not known
1110 Connaught Centre, Hong Kong
HK$10 000 (CD1974 folio 5; CD9915 folio 61)
HK$20.00 (CD1974 folio 5)
From
NUGAN HAND NOMINEES LTD
Nugan Hand Hong Kong, Nugan Hand Trade Asia Harbour Nominees
Macquarie Nominees 7.10.77 Thomson, E.L.
(CD1974 folio 5; CD6559 folio 33)
19.10.76 - 7.10.77 7.10.77 7.10.77
Harbour Nominees - 1 share Macquarie Nominees - 1 share (CD1974 folio 5; CD9915 folio 61)
Lucilla Kao (CD5019 folio 106)
Nominee Services (CD1974 folio 8)
Rep No Position
Legal Secretary (CD510 folio 2; CD7125
folio 7)
Known Period of Employ
14. 1.80 (CD510 folio 2)
570 Secretary
(CD10258 (CD6614) folio 545)
14. 1.80 12.12.78 (CD510; CD8065 folio 3)
539 Company
(CD1934 Secretary folio 77) (CD6614)
15. 8.79 - 14. 1.80 (CD510; CD8064 folio 10)
- 1157
Name Rep No Position Known Period of Employ
Kao, Lucilla 529(A)
549 (CD1934 folios 62,77)
Personal Assistant (CD6614)
15. 1.76 - 14. 1.80 (CD510; CD7155 folio 7)
Lewis, Cameron Maxwell 558
(CD7066 folio 13)
Legal Counsel (CD4279; folio 68
CD6614)
27.11.79 - 15. 8.79 (CD5309 folio 12; CD7066 folio 13)
Thomson, Elizabeth Louise 512 (CD1934) Director (CD6614
folio 9)
28.12.77 - 26.4.80 (CD4427 folio 34; CD7220 folio 22)
- 1158 -
NAME:
DATE OF INCORPORATION:
DATE OFFICE OPENED:
NAME CHANGE:
REGISTERED OFFICE:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
SECRETARY:
STATED PURPOSE OF COMPANY:
NUGAN HAND SINGAPORE (PTE) LTD
24 August 1977 (CD1974 folio 6)
Not known
24 August 1977 - Incorporated as M.I.A. Services (Pte) Ltd 7 October 1977 - Changed to Nugan Hand Singapore (Pte) Ltd
(CD1974 folio 6; CD5019 folio 109)
High Street Centre 1505, 15th Floor Northbridge Road Singapore 6 Telephone: 32-20088
(CD6122 folio 9)
On 15 February 1978, moved to :-Suite 806, Ocean Building ColIyer Quay Singapore Telephone: 917255 Telex: 24157 NUHANDRS
(CD510 folio 7; CD1974 folio 6)
HK$100 000 (CD1974 folio 6; CD5019 folio 109)
HK$25 000 (CD1974 folio 6; CD5019 folio 109)
Nugan, F.J. Hand, M.J. Steer, G.R.
Louey, E.C. Gilder, J.M. resigned 4.2.80 Dyne, Henry M. (Solicitor) Pickford, D.L. resigned 20.10.77 Ceilings, C.L.H.
(CD1974 folio 6; CD6559 folio 62) CD7125 folio 27; CD7178 folio 85)
Nugan Hand International Holdings Ltd (CD1974 folio 6; CD7125 folio 27)
Tan, Choon Seng (CD5019 folio 109)
Financial services (CD1974 folio 9)
PERSONNEL:
Name Rep No Position Known Period of Employ
Auyeung, James 546
(CD1934)
Rep. (CD4119 folio 4)
20.1.80 (CD510)
Dillon, Theresa (Mrs) Secretary/
Client Liaison Officer (CD4452
folio 4)
1.8.78 (CD4452 folio 4)
Gan, Kim Hock 569
(CD510)
Internal Lawyer
not known
Heoh, Ooi Teng 50 6A
(CD510)
Secretary (CD11323 folio 2)
10.1.80 (CD9943 folio 5)
Luan, Chua Kim 584(A)
(CD4132 folio 1)
Secretary (CD11323 folio 6)
20.1.80 (CD510)
McDonald, Russell 584
(CD1934 folio 16)
Handled taxation and accounting services for the company clients
(CD4536 folio 29)
Aug.1979 - 20.1.80 (CD4536 folio 29)
Morisset, Brian Keith 572
(CD1934) folio 71)
Represent ative (CD4119 folio 4)
20.4.79 - 10.1.80 (CD4536 folio 50; CD9943 folio 5)
Steer, Graham Reginald 506
(CD4132 folio 1)
Represent ative Regional Director
(CD11323 folio 2)
27.4.77 - 20.1.80 (CD8487 folio 5)
Tapp, Warren 573
(CD1934 folio 72)
Represent ative (CD4119)
7.5.79 - 15.3.80 (CD576 folio 32; CD6984 folio 285)
Teo, Eleanor - Bookkeeper
(CD4452 folio 7)
7.3.78 (CD4452 folio 7)
- 1160 -
DATE OFFICE OPENED:
REGISTERED OFFICE:
NAME:
DATE OF INCORPORATION:
CHIANG MAI ADDRESS:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
SECRETARY:
STATED PURPOSE OF COMPANY:
22 February 1977 (CD7178 folio 82)
Not known
1010 Dusit Thani Bldg Rama IV Road Bangkok, Thailand Telephone: 2330407 Telex: 0862314
(CD1974 folio 6; CD4153 folio 7; CD7178 folio 82)
Suite "A" Rincome Centre Chiang Mai Telephone: 221044 Telex: 0864314 RINCOME TH
(CD4I53 folio 7)
1 000 000 Baht (CD6559 folio 66)
450 000 Baht (CD6559 folio 66)
Name Date of Appointment
NUGAN HAND (THAILAND) LTD
Nugan, f .J. 22.2.77
Hand, M.J. Ceilings, C.L.H.
22.2.77 22.2.77
Oven, J. Not known
Lauhabandhu, T. Not Known
Panthukamphol, V. Not Known
Sethikul, T. Not Known
Dejakaisaya, S. Not Known
Galicek, G.V.
(CD1974 folio 6; CD6559 folio 66; CD9915 folio 28)
Nugan Hand Int. Hold. Ltd 49% Thai Partners 51%
(CD7178 folio 82)
Not known
Trade Services (CD9915 folio 67)
PERSONNEL:
Name Rep No Position Known period of Employ
Ceilings, Clive Leslie Hillary 534 (CD1934)
Represent ative
Feb 1977 - Nov 1977 (CT22860; CD10775)
Evans, Neil 501
(CD7340 folio 36)
Represent ative February-July 1977 (CD1308 folios 3,25)
Galicek, George Vaclav 508
(CD9943 folio 5)
Represent ative August/Sept. 1979 to March 1980
(CT22008; CD8642 folio 52)
Owen, John Desmond 502
(CD1934)
Represent ative
24 Feb 1977 to August 1979 (CD9984 folio 63; CD10179 folio 32)
Prim, William 517
(CD4132 folio 1)
Represent ative
late 1979-early 1980 (CD7751 folio 62)
Thongves, Surapol (Otto) - RepresentÂ
ative
3.10.77 (CD511; CD4153)
- 1162 -
DATE OF INCORPORATION: 9 January 1976
......... ......... (CD1974 folio 5)
NAME: NUGAN HAND TRADE ASIA LTD
NAME CHANGE: 9. 1.76 - Incorporated as Nugan
Trade Finance Limited
19.11.76 - Changed name to Nugan
Trade Asia Ltd
(CD7178 folio 81)
DATE OFFICE OPENED: Not known
REGISTERED OFFICE: 1110 Connaught Centre,
Hong Kong
AUTHORISED CAPITAL: HK$500 000
(CD1974 folio 5; CD9915 folio 61)
ISSUED CAPITAL: HK$250 000
(CD1974 folio 5)
DIRECTORS: Collings, C.L.H. 15. 1.76
Hand, M.J. 15. 1.76
Nugan, F.J. 15. 1.76
Laloe, F.M.B. 15. 1.76 - 30
Ward, F.D. McArthur, J.N.
15. 1.76
(CD1974 folio 5; CD9915 folio 28) CD6559 folio 34;
SHAREHOLDERS: Harbour Nominees - 24,999 shares
Macquarie Nominees - 1 share (CD1974 folio 5; CD9915 folio 61)
SECRETARY: Nugan Hand Nominees Limited
(CD7178 folio 81)
STATED PURPOSE OF COMPANY: Trade Services/Trade Consultancy
(CD1974 folio 8; CD9915 folio 66)
PERSONNEL:
Name
Brown, Cheryl
Rep No Position Known Period of
578 (CD1934 folio 62) 529
(CD510 folio 5)
Personal Assistant (CD6614)
14. 1.80 (CD510)
Hand
Hand
Employ
- 1163
Name Rep No Position Known Period of Employ
Chung, Karen Secretary to
John McArthur (CD6614)
7. 8.79 - 14. 1.80 (CD510; CD6656 folio 4)
Kan, Elvan - Office Boy
(CD6614)
14. 1.80 (CD510)
Laloe, F. Michael B. Trade
Services (CD3082 folio 4)
1975 - 30. 5.77 (CD1250 folios 838-89; CD3082 folio 4)
Leung, Paul Trade
Services (CD6614)
Sept. 1979 - 14. 1.80 (CD510; CD1984)
McArthur, John 504
(CD1934)
Managing Director (CD4279 folio 66)
Jan. 1978 - March 80 (CD7287 folio 15; CD10524 folio 73; CD10823)
Ng, T. G. (William) 552
(CD4132 folio 7)
China Trade Div. Ex. (CD4279 folio 66)
15. 1.79 - 30.11.79 (CD6668 folio 76)
Sanders, Robert Muir 571
(CD1934 folio 67)
Manager (CD6614)
1. 4.79 - 10. 1.80 (CD9943 folio 4; CD10524 folio 115)
Soong, S.Y. 580
(CD7315 folio 7)
Consultant (CD7315 folio 7; CD7380
folio 88)
1. 8.79 - 27. 2.80 (CD7315 folio 7; CD10524 folio 207)
Titmas, Susan Mary Secretary
(CD7505 folio 5)
17. 7.78 - Sept 1979 (CD1984; CD6668 folio 25)
Tsang, YU Ying (Sidney) 551 (CD4132 folio 7)
Supervisor Bills Trade Dept. (CD4279
folio 68)
1.12.78 - 14. 1.80 (CD510; CD7303 folio 9)
- 1164 -
DATE OF INCORPORATION:
NAME CHANGE:
DATE OFFICE OPENED:
REGISTERED OFFICE:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
SECRETARY:
STATED PURPOSE OF COMPANY:
PERSONNEL:
Name
Cheng, Man Cheung Joe
Cheung, Monica
NAME:
8 February 1977 (CD1974 folio 5)
8 February 1977 - Incorporated as Swiss Pacific Travel Ltd 19 August 1977 - Changed name to Nugan Hand Travel Ltd
(CDS019 folio 113)
Not known
NUGAN HAND TRAVEL LTD
1110 Connaught Centre, Hong Kong (CD5019 folio 104)
HK$1 000 (CD1974 folio 5; CD5019 folio 113)
HK$20.00 (CD1974 folio 5)
Collings, C.L.H. Hand, M.J. Nugan, F.J. Steer, G.R. Tan Choon Seng
(CD1974 folio 5; CD9915 folio 30)
appointed appointed appointed appointed appointed
CD7178 folio 83;
8. 2.77 8. 2.77 8. 2.77 10. 3.78
5.10.78
Harbour Nominees - 1 share Macquarie Nominees - 1 share (CD1975 folio 5; CD7178 folio 83)
Nugan Hand Nominees Ltd (CD5019 folio 104)
Travel services (CD1974 folio 8)
Rep No Position
- Accounts
Clerk (CD6668 folio 48)
553 Reception
(CD4132 (CD510 folio 1) folio 2)
Known Period of Employ
14. 4.80 (CD6668 folio 44)
17. 4.79 - 14. 1.80 (CD510; CD7150)
- 1165
Name Rep No Position Known Period of Employ
Ceilings, Clive Leslie Hillary 534 (CD1934)
Managing Director N.H.I. Group H.K.
(CD4279 folio 66)
1. 6.77 - 27. 4.78 (CD4153 folio 10; CD7287 folio 15)
Dunn, Peter Milton 123
(CD8590 folio 26)
Represent ative for NHL
1. 9.77 - 6.9.77 (CD10524 folio 393)
Keenan, Sally - Promotions 1. 3.78 - July 1979
(CD10524 folio 412)
Kit, Kan Wai - Not known 23. 7.79
(CD6668 folio 32)
Lee, Ip Kwan 544
(CD10258 folio 545)
Office Boy (CD7279 folio 68)
18. 4.79 - 14. 1.80 (CD510; CD6668)
Omar, Jora Receptionist
(CD510 folio 2)
Not known
Poon, Susan La Chun - Secretary 4.12.78 - 1. 3.79
(CD10524 folio 466)
Sakhrani, Kishore - Accountant 10.3.80
(CD6821 folio 3)
Thompson, Yvonne 552
(CD510 folio 3)
Personnel Officer (CD6668)
20. 1 80 - 13. 3.80
(CD510; CD7315 folio 4)
Wisnioski, John 544
(CD510 folio 3)
Vice President (CD6668 folio 118)
27. 1.80 - 13. 3.80 (CD6668 folio 119; CD7315 folio 4)
Yim, Ken 551
(CD510 folio 3)
Accounting/ Banking (CD6668 folio 122)
25. 2.80 - 13. 3.80 (CD6668 folio 119; CD7315 folio 4)
- 1166 -
Consultants:
Name Rep No Position Known Period of Employ
Chiu, Paul - - 18. 8.75 - 20. 2.78
(CD10524 folio 340)
Wickens, Roger Employed as
a consultant dealing with such organis ations as UTA
(CD6668 folio 13)
1977 - 78
(CD6668 folio 13)
- 1167 -
NAME:
DATE OF INCORPORATION:
REGISTERED OFFICE:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
SECRETARY:
SWISS PACIFIC HOLDINGS LTD
17 November 1976 (CD1974 folio 6)
4th floor, Bank of Nova Scotia Building Grand Cayman, British West Indies (CD1974 folio 6)
US$100 000 (CD7178 folio 99)
Not known
Falconer, I.N. Campbell, B. Rutter, Î. M.
Kandiah, P. (CD1974 folio 6)
Campbell, B. Rutter, H.M. Kandiah, P. (CD11221 folios 4,67)
Rutter, H.M. (CD5019 folio 162)
- 1168 -
NOGAN HAND (U.K.) LTD
7 February 1978 granted permission to incorporate by Bank of England 28 February 1978 J.M. Gilder informed the Bank of England that Nugan Hand (U.K.) Ltd had been incorporated.
(CD10262 folios 242-4)
24 October 1977 (CD5847 folio 14)
6th Floor, Regent House, 54-56 Regent Street London WIR 5P J U.K. Telephone: 4394052/5 Telex: 25123 JRSHIP G
Cable: Line date W.l
(CD1974 folio 12)
Not known
£10 (CD6122 folio 9)
Not known
Hand, M.J. (CD6122 folio 9; CD10690)
NAME:
DATE OF INCORPORATION:
DATE OFFICE OPENED:
REGISTERED OFFICE:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
SECRETARY:
STATED PURPOSE OF COMPANY:
PERSONNEL:
Name
Gilder, Jeremy Mackenzie
Harris, Neil
Not known
Financial Services (CD1974 folio 12)
Rep No. Position
543 Represent-
(CD1934) ative
505 Represent-
(CD8487 ative
folio 5)
Known period of Employ
Mid 1977 (CD8260 folio 60)
Mid 1977 (CD7340 folio 36; CD8487 folio 5)
- 1169 -
NAME: THE NUGAN HAND BANK
DATE OF INCORPORATION:
DATE OFFICE OPENED:
NAME CHANGES:
REGISTERED OFFICE:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
DIRECTORS:
SHAREHOLDERS:
6 July 1976 (CD1974 folio 5; CD5019 folio 87)
Not known
6. 7.76 - Incorporated as The Nugan Hand Bank and Trust Company 20. 1.77 - Name changed to Swiss Pacific Bank and Trust Company 22. 6.77 - Name changed to The Nugan Hand
Bank
(CDS931 folio 5; CD6942 folio 345)
4th Floor, Bank of Nova Scotia Building, Grand Cayman, British West Indies.
Telephone: 92997/92648 Telex: CP302
(CD1016 folio 6; CD1974 folio 5)
US$5 000 000 (CD1974 folio 5; CD5019 folio 87)
US$1 000 000 (CD1974 folio 5; CD5019 folio 87)
Name From To
Campbell, B. 8. 7.76 9. 8.76
not known 1. 3.78
Rutter, H.M. 8. 7.76
1. 3.78 21. 7.76
Kandiah, P. 8. 7.76 21. 7.76
Collings, C.L.H. 21. 7.76 22.10.79
Dunn, P.M. 21. 7.76 10. 9.77
Nugan, F.J. 21. 7.76
Hand, M.J. 21. 7.76
Ward, F.D. 21. 7.76 not known
Yates, E.P. 10. 2.77
or 1. 3.77
Hill, S.K.A. (approx) 11.10.77 Gilder, J.M. (approx) 9. 7.79 11. 2.80 (CD4667; CD11322 folio 2)
Nugan Hand Limited 249 998 Shares
Nugan, F.J. 1 Share
Hand, M.J. 1 Share
Nugan Hand International Holdings Ltd. 750, 000 Shares
(CD8916 folio 43; CD10690)
SECRETARY: Not known
STATED PURPOSE OF COMPANY: International Banking Service
(CD7178 folio 64)
- 1171 -
NAME:
PERSONNEL:
Name
Beach, Suzi
Ceilings, Clive Leslie Hillary
Lovatt, Gillian
McDougall, Allison
Pepper, Sheila
THE NUGAN HAND BANK Hong Kong Representative Office
Rep No Position Known Period Of Employ
559 Secretary 2.10.78 - 30. 7.79
(CD4132 NHI Group HK (CD9963) folio 7) (CD4279 folio 67)
534 Managing
(CD1934) Director (CD4278 folio 66)
1. 6.77 - 27. 4.78 (CD4153 folio 10; CD7287 folio 15)
503 Client 13.12.76 - 24. 4.80
(CD1934) Service Exec. NHB (CD6614)
(CD7287 folio 15; CD10524 folio 372; CD10978 folio 6)
- Banking 1.11.79 - 21. 2.80
(CD7314 folios 3,4)
586 Client 9. 7.79 - 14. 1.80
(CD4132 folio 1) Service Typist,
(CD510; CD7308)
Accounting Assistant (CD6614; CD7308)
- 1172 -
NAME:
DATE OF INCORPORATION:
DATE OFFICE OPENED:
PERIOD OF OPERATION:
ADDRESS:
AUTHORISED CAPITAL:
ISSUED CAPITAL:
SHAREHOLDERS:
SECRETARY:
PERSONNEL:
Name
Hatchell, Robert
Houqhton, Maurice Bernard
Murphy, Robert Michael
Shannon, Rex
Williams, Joseph
/
THE NUGAN HAND BANK
Saudi Arabia representative office
Not known
Not known
Early 1979 - mid 1980 (CD1250 folios 951-52,956)
Corner Prince Salman 24th Street P.O. Box 914 Al-Khobar Saudi Arabia Telephone: (031) 47865 Telex: 671218 DIHAN SJ
(CD510 folio 12)
New office for NHI opened: 24 January 1980 C/- New Assamer P.O. Box 778 Riyadah, Saudi Arabia Telephone: 01-4657246, 01-4650189
Not known
Not known
Not known
Not known
Rep No Position Known Period of Employ
579 (CD510)
Represent ative
Feb-June 1980 (CD10859 folio 14)
538 (CD1934)
Represent ative April/May 1979 - April 1980
(CD1308 folio 4)
591 (CD1934 folio 100)
Represent ative
26.8.1979-April 1980 (CD8615 folio 55; CD10859 folio 13)
- RepresentÂ
ative
Dec. 1979 - April 1980 (CD10859 folio 14)
593 (CD1934
Represent ative
Dec.1979-1980
(CD510; CD10859
folio 106) folio 13)
APPENDIX C
Allegations as to the Connection Between the Nugan Hand Group and the
United States Central Intelligence Agency (C.I.A.)
- 1175 -
ALLEGATIONS AS TO THE CONNECTION
BETWEEN THE NUGAN HAND GROUP AND THE UNITED STATES
CENTRAL INTELLIGENCE AGENCY (C.I.A.)
1. That Nugan Hand funnelled money to C.I.A. contract operative and mercenary Mitchell Livingstone WerBell III. (The National Times, 12 September 1983)
2. That Mr M.J. Hand was a long-standing personal associate of
Mr Ted Shackley, C.I.A. covert operations boss. (The National Times, 25 March 1983)
3. That former C.I.A. officer Mr Thomas Clines lost nearly
$1 million which he had invested in Nugan Hand. (The Sydney Morning Herald, 4 April 1983)
4. That the C.I.A. used Nugan Hand to stir up domestic troubles for Gough Whitlam's Government. (Time, 13 December 1982)
5. That both the Treasury and Department of Foreign Affairs were
told of Nugan Hand's C.I.A. related dealings but took no action. (The National Times, 23 February 1981)
6. That Australian investigators link the activities of Nugan Hand with the fall of the Whitlam Government. (Foreign Policy, Winter 1982-83)
7. That Nugan Hand was a bursar for C.I.A. operations aimed at
Australia's unions and parties. The revelation of these operations may have prompted the C.I.A.'s concern over
Mr Whitlam. (Foreign Policy, Winter 1982-83)
8. That Mr F.J. Nugan served as the go-between for a $2.4 million
C.I.A. contribution to a Liberal Party slush fund to bring down the Whitlam Government. The money was allegedly laundered through one of Nugan's mining companies and passed on to a Liberal Party peer with documented links to Australian mobsters.
(Penthouse (USA), 16 January 1984, p 172)
9. That Nugan Hand financed C.I.A. bugging and forging operations that triggered a financial scandal, leading to the fall of the Whitlam Government. (Penthouse (USA), 16 January 1984, p 172)
- 1176 -
That Mr M.J. Hand arranged a contract with the C.I.A. whereby the Nugan Hand Bank was to become the 'paymaster' for the
dispersement of funds anywhere in the world on behalf of the C.I.A. Such funds included illegal funds from drugs. (The Sun-Herald, 15 February 1981; The Courier Mail, 10 November 1982; Penthouse, May 1984 p62)
That Nugan Hand registered in the Cayman Islands to replace the German 'Castle Bank', as a C.I.A. conduit for millions of
dollars earmarked for C.I.A. operations in Cuba and Latin America. (The Sydney Morning Herald, 29 September 1980)
That the Federal Narcotics Bureau tried to recruit a man working for Nugan Hand who was a C.I.A. operative. (The Australian, 17 March 1982)
That Mr M.B. Houghton of Nugan Hand had a close relationship with Mr Edwin P. Wilson, sometime operative of the C.I.A. and Task Force 157. Wilson was a supplier of arms to terrorists.
(The National Times, 4 January 1981; The National Times, 21 February 1982; The Sun-Herald, 3 April 1983; Foreign Policy, Winter 1982-83) ..........
That through association with ex-C.I.A. officer Mr Thomas Clines, Mr M.B. Houghton and Nugan Hand wâ ere linked with a subterranean business world run by former C.I.A. intelligence officers who dominated the C.I.A.'s world of dirty tricks from
the time of the Bay of Pigs until the late 70's. (The National Times, 12 September 1982)
That with Nugan Hand's help the former elite of the C.I.A.'s 'dirty tricks' division assisted international terrorism, arms dealing and possible bribery of foreign government officials. (The National Times, 8 April 1983)
That a Washington-based arms dealer had been using Nugan Hand on behalf of the C.I.A. (The National Times, 31 May 1981; The National Times,
2l February 1982)
That Nugan Hand was involved in a C.I.A. 'double deception' aimed at infiltrating the Libyan terrorist movement. (The Sun-Herald, 10 May 1981)
That Mr F.J. Nugan was a trusted member of the C.I.A. during the Vietnam War days. Mr M.J. Hand also worked for the C.I.A. in this period.
(The National Times, 23 February 1981; The National Times, 21 February 1982)
- 1177 -
19. That during the Vietnam War Mr F.J. Nugan shifted money for the C.I.A. to carry out secret military operations in Indochina. The money was partly black money, drug money or stolen. Mr M.B. Houghton was similarly engaged.
(The National Times, 23 February 1981; The National Times, 21 Feoruary iya/i)
20. That the C.I.A. used Nugan Hand to channel millions of dollars into Australia for political purposes. (The Sun-Herald, 27 April 1980)
21. That Nugan Hand was essentially a conduit for C.I.A. money. (Time, 13 December 1982)
,
- < ' Τ â '
â - νâ · .
APPENDIX D
Examples of Advertisements Used by the Nugan Hand Group
to Recruit Overseas Representatives
J
1181 -
The Australian Financial Review, 17 April 1978
IS THIS YOU 7
A $60,000 A Y E A R M A N ?
⢠Result-oriented, with a long history of achievement? ⢠Capable of negotiating successfully at all levels â from small businessman to Chairman of the Board? ⢠Pioneering type who relishes the challenge of breaking new ground, can
win and hold clients? ⢠Aware of what running a business is all about, well rounded, knowledgea ble, self-made man keen to accumulate? ⢠Physically fit, healthy, hardworking, strong sense of integrity, hagh personal
standards, independent, aged 35-45? ⢠Possessing larger vision of ability to succeed than is presently being realised? ⢠Excited by the genuine prospect of earning upwards of $A60,000 a year?
(Substantial base salary plus fees and brokerage.) ⢠We now seek several outstanding individuals to represent our Group inter nationally and in Australia.
ff you are interested in principle in this opportunity and if you feel you qualify for the position, please write, giving particulars of your background in the terms of the above, and enclose passport photo. Please post applications Express Mail.
Director International Operations Colombo Court P.O. Box 799 SINGAPORE 1
You m a y be assured all applications will be treated with complete confidentiality.
A Director will conduct all interviews in Sydney.
- 1182 -
The Sydney Morning Herald
is this
$ÎÎ?ÎΰÎÎ YEAR m a n ?e Strong dsiire or willingness to live ond work in on overseas country for 2 yeors or⢠Pioneering type who enjoys the chollenge of breaking new ground ond is not afraid to get out and sell.⢠Strong sense of integrity, high personal standards, reliable, single minded, in- depe dent.⢠History of achievement â result oriented.⢠Large vision of ability to succeeed than is presently being realised in Australia.⢠Capable of negotiating successfully at all levels â from the labourer to the Chairman of the board.⢠Able to work effectively without constant motivation.⢠Physically fit, healthy, aged between 25-40, well regarded in the community, e A keen awareness of w hat running a business is all about, an understanding ofcapitalism, a desire to accumlate.e Excited by the genuine proposal of earning upwards of $60.000 a year (from which would be deducted cost of living and taxes as applicable in the country of residence). this is us⢠We are a small though rapidly expanding Banking Group.⢠Our affiliates have recently formed a new Bank and have requested that werecruit and train personnel to operate Representative Offices for selected overseas countries. ,⢠The prime aim of the new bank is to attract substantial high earning medium term (5 year) deposits. The Bank will as well offer a full range of Banking and Trust Services.⢠The Representative will be required to render the above services in conjunction with local experts in the appointed country, commencing as a sole operator and expanding as progress dictates.If you feel you qualify for the above please write giving full particiulors of yourbackground in the terms of this ad TO:General Manager, International Division. Hong Kong, P.O. Box 8282 General Pest Office, HONG KONG.You may be assured your letter will be treated with complete confidentiality.
1183
The Sydney M orning H s rald , W ed , J a n 3 1 , 1 9 7 9 2 2
IS THIS YOU?
$ 1 0 0 ,0 0 0 A YEAR MAN?⢠Strong desire or w illingness to live and w ork in an overseas country for tw o years or more.e Pioneering type w ho enjoys the challenge o f breaking new ground, is not afraid to "g e t out and sell," can w in and develop new clients.⢠Strong sense o f integrity, high personal standards, reliable, single-minded, independent.⢠History ' tory of achievement - result-oriented.;he small businessman to the Chairman o f the⢠Larger vision of ability to succeed than is presently being realised in Australia. ⢠Capable of negotiating successfully at all levels - from tl Board and Heads o f Government.⢠Able to work effectively w ithout constant m otivation.⢠Physically fit, healthy, dynamic, aged between 35-45, w ell regarded in the community.⢠Keen awareness o f w hat running business is all about, an understanding of capitalism, a desire to accumulate. A w ell-rounded businessman.⢠Excited by the genuine proposal o f earning upwards o f SUS100.0CC a year (from which would be deducted cost o f living and taxes as applicable in the country o f residence).THIS IS US!⢠W e are a small though rapidly expanding International Banking. Trade and Commercial Advisory Group w ith offices in a num ber o f countries and concentration in S.E. Asia.⢠Successful applicant w ill be required to offer banking, trade and commercial advisory services as appropriate, w ithin the scope and lim itations o f the appointed country.If you are interested in principle in this opportunity and feel you qualify fo r the position, please writegiving full particulars o f your background in the term s o f this advert and enclose recent passportphotograph.Director International Relations P.O. Box 7 99 Colombo Court SINGAPORE 1Interviews w ill take place in Sydney, Australia.
-
APPENDIX E
Examples of Internal Bills of Exchange
â !
M aturity Date: 27.. 12,74
1 July
N? 015101
*$100,000*
ON THE 27th day of December 1974
NUGAN HAND NEEDHAM LIMITED
ONE HUNDRED THOUSAND DOLLARS ONLY
T O..NUGAN,, HAND,,NEEDHAM,, LIMITED
55 Macquarie Street, Sydney, NSW, 2000
For and on behalf of
NUGAN HAND NEEDHAM LIMITED
Face Value: $ 100,000.00
19 74
FIXED, PAY TO THE O R D E R OF
THE SUM OF
For and on behalf of P.M. Shelley Pty Limited
iP
Maturity Date: ....
Face Value: $...1OQ.,.9.Q0.,.QO. N? 015135
* 5100,000* λ ' M .............. 1 ,.J, ........ 1975. ..
ON THE... 2 6 th December 197.5..............................................................FIXED, PAY TO THE ORDER OF
NUGAN HAND LIMITED J H E S(JM Q p
ONE HUNDRED THOUSAND DOLLARS
T O NUGAN HAND LIMITED
55 Macquarie St, Sydney, 2000
For and on behalf of YORKVILLE NOMINEES
For and on behalf of NUGAN HAND LIMITED
APPENDIX 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
concerning the Cayman Islands, 26 July 1984.
si
1 ' ; .
: - < â · ο . . .
1191 -
Foreign and C o m m o n w e a l t h Office
L o n d o n S W 1 A 2 A H
26 J u l y 1984
E X C H A N G E OF L E T T E R S B E T W E E N T H E G O V E R N M E N T O F T H E UN I T E D
K I N G D O M OF G R E A T B R I T A I N AND N O R T H E R N I R E L A N D A N D THE
G O V E R N M E N T O F TH E U N I T E D S T A T E S OF A M E R I C A C O N C E R N I N G T H E
C A Y M A N I S L A N D S AND M A T T E R S C O N N E C T E D WITH, A R I S I N G
FROM, R E L A T E D TO, OR R E S U L T I N G F R O M A N Y N A R C O T I C S A C T I V I T Y
R E F E R R E D TO IN THE S I N G L E C O N V E N T I O N ON N A R C O T I C DRUGS, 1961
AS A M E N D E D BY T H E P R O T O C O L A M E N D I N G T H E S I N G L E C O N V E N T I O N ON
N A R C O T I C DRUGS, 1961
Y o u r E x c e l l e n c y ,
I h a v e the ho n o u r to refer to the r e c e n t d i s c u s s i o n s b e t ween
the G o v e r n m e n t of the U n i t e d K i n g d o m of G r e a t B r i t a i n and
N o r t h e r n I r e l a n d and the G o v e r n m e n t of the U n i t e d States of
A m e r i c a r e g a r d i n g the deep c o n c e r n of ou r G o v e r n m e n t s and
that of the Ca y m a n Islands to p r o v i d e t h a t the Cayman laws
p r o t e c t i n g c o n f i d e n t i a l r e l a t i o n s h i p s s h o u l d not p r o t e c t n a r c o t i c s t r a f f i c k e r s and to p r o p o s e , c o n s i s t e n t with the
S i n g l e C o n v e n t i o n on N a r c o t i c D r u g s , 1961 as a m e n d e d by the
P r o t o c o l a m e n d i n g the said C o n v e n t i o n (h e r e i n a f t e r c o l l e c t i v e l y ca l l e d " the C o n v e n t i o n " ), in p a r t i c u l a r A r t i c l e s 35 an d 36 t h e r e o f , the f o l l o w i n g agreement:
1. Definitions.
For the p u r p o s e of this Agreement:
1.1 " Assistor" m e ans the p e r s o n from w h o m d o c u m e n t a r y
i n f o r m a t i o n is sought under the Cert i f i c a t e ;
1.2 "C a y m a n " means "the Cayman Islands".
" U n i t e d Kingdom" means "the U n i t e d K i n g d o m of G r e a t
B r i t a i n a n d N o r t h e r n Ireland" . " U n i t e d States" m e a n s "the U n i t e d S t a t e s of A m e r i c a " ;
1.3 "Certif i c a t e " m e a n s the d o c u m e n t u s e d by the U n i t e d
S t a t e s A t t o r n e y G e n e r a l to r e q u e s t d o c u m e n t a r y information, the p a r t i c u l a r s of and form for w h i c h are p r o v i d e d in the
A n n e x to this Agreement;
1.4 " d o c u m e n t a r y information" i n c l u d e s , but is not l i m i Â
ted to, any d o c u m e n t , m e m o r a n d u m , report, record, or d a t a
c o m p i l a t i o n in any form, and any plan, g r a p h , drawing, or
p h o t o g r a p h , and any disc, t a p e , or o t h e r d e v i c e for a u d i o
r e p r o d u c t i o n or c o m p u t e r u s e , and a n y film, n e g ative, tape
or o t her d e v i c e for visual image r e p r o d u c t i o n ;
1192 -
2
1.5 " f o u n d a t i o n testimony" m e a n s w i t n e s s t e s t i m o n y solely
for the p u r p o s e of s e c u r i n g the a c c e p t a n c e as a d m i s s a b l e
e v i d e n c e in p r o c e e d i n g s in the U n i t e d S t a t e s of
d o c u m e n t a r y i n f o r m a t i o n as s p e c i f i e d in p a r a g r a p h 3.1; and
1.6 " o f f i c i a l r e c o r d s â m e a n s -
i. p u b l i c l y a v a i l a b l e r e c o r d s of the Ca y m a n
G o v e r n m e n t , its D e p a r t m e n t s and age n c i e s ; and
ii. any r e c o r d or i n f o r m a t i o n in the p o s s e s s i o n
of the Ca y m a n G o v e r n m e n t , its D e p a r t m e n t s and
a g e n c i e s not p u b l i c l y a v a i l a b l e but w h i c h the
C a y m a n G o v e r n m e n t m a y m a k e a v a i l a b l e subject to such terms and c o n d i t i o n s as it m a y specify.
2. M a t t e r s F a l l i n g W i t h i n the S c o p e of the
Agreement.
2.1 T h i s A g r e e m e n t applies to all o f f e n c e s or a n c i l l a r y
civil or a d m i n i s t r a t i v e p r o c e e d i n g s taken by the Un i t e d
S t a t e s G o v e r n m e n t or its a g e n c i e s c o n n e c t e d with, a r i s i n g
from, r e l a t e d to, or r e s u l t i n g from any n a r c o t i c s activ i t y
r e f e r r e d to in A r t i c l e 36 of the C o n v e n t i o n a n d f a l l i n g
w i t h i n the j u r i s d i c t i o n of the U n i t e d States.
3. P r o c e d u r e to S e c u r e D o c u m e n t a r y
Information.
3.1. When the A t t o r n e y G e n eral of the U n i t e d States
has re a s o n to b e l i e v e that -
i. i d e n t i f i e d p e r sons are i n v o l v e d in a m a t t e r
f a l l i n g w i t h i n the s c ope of this A g r e e m e n t ;
an d
ii. d o c u m e n t a r y i n f o r m a t i o n r e l e v a n t to the r e s o l u Â
tion of that m a t t e r is l o c a t e d w i t h i n Cayman,
he m a y issue a C e r t i f i c a t e to the A t t o r n e y - G e n e r a l of Cayman
r e q u e s t i n g that information.
1193 -
3
3 . 2 . a. Upon r e c e i p t of a C e r t i f i c a t e the C a y m a n A t t o r n e y -
G e n e r a l w i l l issue to the A s s i s t o r a n o t i c e r e q u i r i n g the
A s s i s t o r to p r o d u c e to the C a y m a n A t t o r n e y - G e n e r a l the
d o c u m e n t a r y i n f o r m a t i o n r e q u e s t e d p u r s u a n t to p a r a g r a p h 3.1 a b o v e in the A s s i s t o r 's p o s s e s s i o n , c u s t o d y or control
w i t h i n 14 d a y s of the date of the said n o t i c e unless that
p e r i o d is e x t e n d e d for good cau s e w i t h the c o n c u r r e n c e of
th e U n i t e d St a t e s A t t o r n e y G e n e r a l or is s h o r t e n e d with
the c o n c u r r e n c e of the C a y m a n A t t o r n e y - G e n e r a l .
3 . 2 . b. To e n s u r e p r o d u c t i o n of the d o c u m e n t a r y i n f ormation
C a y m a n w i l l p r o v i d e that, if the A s s i s t o r r e f u s e s to p r o d u c e
t h e d o c u m e n t a r y information, the A s s i s t o r w i l l be liable to
a s u b s t a n t i a l fine and i m p r i s o n m e n t , and that Ca y m a n will
s e i z e the d o c u m e n t a r y i n f o r m a t i o n .
3.3 T h e C a y m a n A t t o r n e y - G e n e r a l w i l l not n o t i f y the
A s s i s t o r of the issue of the C e r t i f i c a t e p r i o r to the issue
cf the n o t i c e r e f e r r e d to in p a r a g r a p h 3 . 2 . a unless the
U n i t e d S t a t e s A t t o r n e y G e n e r a l or his d e s i g n e e requests
or agr e e s in w r i t i n g to such n o t i f i c a t i o n .
3.4 Th e A s s i s t o r w i l l no t be p e r m i t t e d to n o t i f y oth e r
t h i r d p e r s o n s of the C e r t i f i c a t e , the said n o t i c e , the
d o c u m e n t a r y i n f o r m a t i o n or any c o m m u n i c a t i o n s in c o n n e c t i o n w i t h the e n q u i r y for a pe r i o d of 90 days f r o m the date of
the C e r t i f i c a t e or for a f u r t h e r p e r i o d of 90 days on
r e q u e s t of the U n i t e d States A t t o r n e y G e n e r a l or his
d e s i g n e e to the C a y m a n A t t o r n e y - G e n e r a l or for such a
f u r t h e r p e r i o d or p e r iods t h e r e a f t e r as m a y be m u t u a l l y
a g r e e d b e t w e e n the said A t t o r n e y s G e n e r a l and c o m m u n i c a t e d
to the A s s i s t o r .
3.5 The r e l e v a n t United Sta t e s G o v e r n m e n t p r o s e c u t o r may
if n e c e s s a r y liaise w i t h the A s s i s t o r to a s s i s t in the
i d e n t i f i c a t i o n of d o c u m e n t a r y i n f o r m a t i o n s u b j e c t to the p r i o r w r i t t e n c o n s e n t of the C a y m a n A t t o r n e y - G e n e r a l . The
p r o s e c u t o r m a y also liaise w i t h the C a y m a n C o m m i s s i o n e r of
P o l i c e if necessary.
3.6 P r o m p t l y upon r e ceipt of any d o c u m e n t a r y information
f r o m the Ass i s t o r , the C a y m a n A t t o r n e y - G e n e r a l will send the
same to the U n i t e d States A t t o r n e y G e n e r a l .
4. A u t h e n t i c a t i o n of D o c u m e n t a r y
I n f o r m a t i o n an d F o u n d a t i o n T e s t imony.
A. A u t h e n t i c a t i o n and A t t e s t a t i o n of
O f f i c i a l Records.
4.A.I. O f f i c i a l r e c o r d s p r o d u c e d in r e s p o n s e to the
C e r t i f i c a t e will be a u t h e n t i c a t e d in Cayman by the a t t e s Â
t a t i o n of an a u t h o r i s e d p e r s o n in the m a n n e r i n d i c a t e d in
F o r m A a t t a c h e d hereto. The a t t e s t a t i o n will be signed
by, and state the o f f i c i a l p o s i t i o n of, the a t t e s t i n g
p e r s o n , and the seal of the a u t h o r i t y e x e c u t i n g the r e quest
w i l l be a f f i x e d thereto. A u t h e n t i c a t i o n of o f f i c i a l records
w i l l be c a r r i e d o u t in C a y m a n u n d e r the p r o v i s i o n s of the
C o n v e n t i o n A b o l i s h i n g the R e q u i r e m e n t of L e g a l i s a t i o n for F o r e i g n P u b l i c D o c u m e n t s d a t e d 5 O c t o b e r 1961.
4 . B.1 D o c u m e n t a r y i n f o r m a t i o n o t h e r than o f f i c i a l records
p r o d u c e d by the A s s i s t o r in r e s p o n s e to the C e r t i f i c a t e
w i l l be a u t h e n t i c a t e d in C a y m a n by the a t t e s t a t i o n of a
p e r s o n c o m p e t e n t to do so in the m a n n e r i n d i c a t e d in Form B
a t t a c h e d hereto.
4.C.I. F o u n d a t i o n testimony, w i t h r e s p e c t to doc u m e n t s p r o v i d e d u n der this A g r e e m e n t , w i l l be by w a y of affidavit,
d e p o s i t i o n taken in Cayman, v o l u n t a r y a p p e a r a n c e by a
w i t n e s s at p r o c e e d i n g s s p e c i f i e d in p a r a g r a p h 2 a b ove in the
U n i t e d States, or such o t h e r p r o c e d u r e as m a y be m u t u a l l y
a g r e e d upon.
4.C.2. Upon the r e q u e s t of the U n i t e d States A t t o r n e y
G e n e r a l or his d e s ignee, the A s s i s t o r w i l l swear an
a f f i d a v i t in Ca y m a n c o n t a i n i n g such recitals as are
n e c e s s a r y for f o u n d a t i o n testimony.
B. A u t h e n t i c a t i o n and A t t e s t a t i o n of
D o c u m e n t a r y I n f o r m a t i o n o t h e r than O f f i c i a l Records.
C. F o u n d a t i o n Testimony.
1195
5
4.C.3. T h e U n i t e d S t a t e s A t t o r n e y G e n e r a l or his d e s i g n e e
m a y r e q u e s t , and the A s s i s t o r w i l l p r o v i d e , fo u n d a t i o n
t e s t i m o n y at a d e p o s i t i o n in C a y m a n u n der rule 15 of the
U n i t e d S t a t e s F e d e r a l R u les of C r i m i n a l P r o c e d u r e .
4.C.4. An A s s i s t o r p r o v i d i n g f o u n d a t i o n t e s t i m o n y u n d e r the p r o v i s i o n s of p a r a g r a p h 4.C.2 or 4.C.3, w i l l enj o y
the p r o t e c t i o n of C a y m a n law as r e gards immunity, s e l f Â
i n c r i m i n a t i o n , p r i v i l e g e and i n c apacity. C a y m a n will
p r o v i d e by w a y of l e g i s l a t i o n the p r o c e d u r e to be foll o w e d
w h e n such p r o t e c t i o n is i n v o k e d .
4.C.5. S h o u l d it be c o m e n e c e s s a r y for the s u c c e s s f u l c o nduct
of the p r o c e e d i n g s in the U n i t e d St a t e s that
f o u n d a t i o n t e s t i m o n y be o b t a i n e d the U n i t e d States A t t o r n e y
G e n e r a l or his d e s i g n e e m a y r e q u e s t the A s s i s t o r to attend
th e r e l e v a n t C o u r t in the U n i t e d St a t e s to p r o v i d e such
t e s t i m o n y .
4.C.6. An A s s i s t o r , wh o p r o v i d e s f o u n d a t i o n t e s t i m o n y under
a n y of p a r a g r a p h s 4.C.2, 4.C.3 or 4.C.5 w i l l enjoy,
in a c c o r d a n c e with and to the full ex t e n t a l l o w e d und e r
U n i t e d S t a t e s law, the p r o t e c t i o n of Un i t e d St a t e s law as
r e g a r d s i m munity, s e l f - i n c r i m i n a t i o n , p r i v i l e g e and i n c a p a c i t y . This p r o v i s i o n is in a d d i t i o n to and not in
d e r o g a t i o n of the p r o v i s i o n s of p a r a g r a p h 4.C.4.
4 . C . 7 T h e U n i t e d S t a t e s A t t o r n e y G e n e r a l or his
d e s i g n e e w i l l adv i s e the C a y m a n A t t o r n e y - G e n e r a l in w r i t i n g
p r i o r to any r e q u e s t being m a d e p u r s u a n t to p a r a g r a p h s
4.C.2, 4.C.3 and 4.C.5.
5. C o n s u l t a t i o n .
5.1 Th e U n i t e d States A t t o r n e y G e n e r a l or his d e s i g n e e
a n d the C a y m a n A t t o r n e y - G e n e r a l w i l l consult, as m u t u a l l y
d e t e r m i n e d by t h e m , to e n a b l e the m o s t e f f e c t i v e use to be
m a d e of this A g r e e m e n t . Such c o n s u l t a t i o n s w i l l include the
s t a t u s a n d d i s p o s i t i o n of p r o c e e d i n g s u t i l i s i n g d o c u m e n t a r y i n f o r m a t i o n s e c u r e d p u r s u a n t to this a g r e e m e n t as m a y be
l a w f u l l y d i s c l o s e d .
5 . 2 In an y case of d i f f i c u l t y e i t h e r the C a y m a n G o v e r n m e n t
or the U n i t e d States G o v e r n m e n t m a y r e q u e s t the a s s i s t a n c e
of the U n i t e d K i n g d o m G o v e r n m e n t to r e s o l v e the d i f f i c u l t y
b y w a y of co n s u l t a t i o n .
6
1196
6. E x c l u s i v i t y .
6.1 No F e d e r a l s u b p o e n a ( i n c l u d i n g a G r a n d J u r y subpoena)
r e l a t e d to d o c u m e n t a r y i n f o r m a t i o n l o c a t e d in Ca y m a n in any
m a t t e r f a l l i n g w i t h i n p a r a g r a p h 2.1 of this A g r e e m e n t will
be e n f o r c e d in the U n i t e d Sta t e s w i t h o u t the p r ior a g r e e m e n t
of e i t h e r the U n i t e d K i n g d o m G o v e r n m e n t or the C a y m a n
G o v e r n m e n t .
7.1 T h e G o v e r n m e n t s of the U n i t e d S t a t e s and U n i t e d
K i n g d o m , i n c l u d i n g Cayman, agr e e to e n t e r into n e g o t i a t i o n s
c o n c e r n i n g a L a w E n f o r c e m e n t T r e a t y b e tween the U n i t e d
S t a t e s and Ca y m a n c o n c e r n i n g c r i m i n a l matters.
7.2 If the G o v e r n m e n t s of the U n i t e d States and U n i t e d
K i n g d o m , i n c l u d i n g Cayman, are s a t i s f i e d that this Ag r e e m e n t
is w o r k i n g s a t i s f a c t o r i l y , r e p r e s e n t a t i v e s of the said G o v e r n m e n t s w i l l m e e t nine m o n t h s aft e r the d a t e this
A g r e e m e n t comes into o p e r a t i o n to n e g o t i a t e the said
T r e a t y .
7.3 The G o v e r n m e n t s of the U n i t e d States and United
K i n g d o m , i n c l u d i n g Cayman, w i l l use their best e n d e a v o u r s
to c o n c l u d e a Law E n f o r c e m e n t T r e a t y wi t h i n fifteen months
of the date this A g r e e m e n t comes into o p e r a t i o n w i t h the
i n t e n t i o n to b r i n g such a T r e a t y into force as soon t h e r e Â
aft e r as their c o n s t i t u t i o n a l p r o c e d u r e s w i l l allow.
8.1 This A g r e e m e n t will come into o p e r a t i o n on the date
the U n i t e d K i n g d o m G o v e r n m e n t n o t i f i e s the U n i t e d St a t e s
G o v e r n m e n t in w r i t i n g that the C a y m a n l e g i s l a t i o n
i m p l e m e n t i n g this A g r e e m e n t has come into effect.
7. N e g o t i a t i o n of a L a w E n f o r c e m e n t
Treaty.
8. Coming into Operation of the
Agreement.
1197
7
9. T e r m i n a t i o n of the Ag r e e m e n t .
9.1. Th e G o v e r n m e n t of e i t h e r the U n i t e d S t a t e s or the
U n i t e d K i n g d o m , i n c l u d i n g C a y man, m a y t e r m i n a t e this
A g r e e m e n t by g i v i n g one c a l e n d a r m o n t h ' s n o t i c e in w r i t i n g
to the o t h e r G o v e r n m e n t s at any time a f ter the e x p i r a t i o n of
two c a l e n d a r m o n t h s f r o m the d a t e of its c o m i n g into
o p e r a t i o n . P r i o r to i s s u i n g such n o t i c e of t e r m i n a t i o n , the
G o v e r n m e n t d o i n g so w i l l c o n s u l t w i t h the o t h e r Governments.
10.1 T h i s A g r e e m e n t w i l l e x p i r e f i f t e e n c a l e n d a r mo n t h s
f r o m the d a t e of its c o m i n g into o p e r a t i o n u n l e s s it is
e x t e n d e d by the m u t u a l a g r e e m e n t of the G o v e r n m e n t s of the
U n i t e d S t a t e s and the U n i t e d K i n g d o m , i n c l u d i n g Cayman.
I s h all be g r a t e f u l for your c o n f i r m a t i o n that the
G o v e r n m e n t of the U n i t e d States is in a g r e e m e n t with the
f o r e g o i n g and that this letter and your rep l y to that effect
w i l l c o n s t i t u t e an a g r e e m e n t b e t w e e n ou r two Gov e r n m e n t s .
10. E x p i r a t i o n of the A g r e e m e n t .
I h a v e the ho n o u r to c o n v e y to Your E x c e l l e n c y the
a s s u r a n c e s of m y h i g h e s t c o n s i d e r a t i o n ,
M a l c o l m R i f k i n d MP
M i n i s t e r of S t a t e for F o reign
and C o m m o n w e a l t h A f f airs
ANNEX
T H E C E R T I F I C A T E
1. Th e C e r t i f i c a t e w i l l -
i. be signed by the U n i t e d States A t t o r n e y General;
ii. in r e s p e c t of G r a n d J u r y p r o c e e d i n g s iden t i f y
t h ose p r o c e e d i n g s by G r a n d J u r y n u m b e r and in
r e s p e c t of an i n d i c t m e n t iden t i f y such i n d i c t Â
m e n t by c a p t i o n and d o c k e t n u m b e r ;
i i i . c e r t i f y that the U n i t e d States A t t o r n e y G e n e r a l
has reason to b e l ieve that a m a t t e r f a l l i n g wi t h i n the
s c o p e of this a g r e e m e n t has arisen;
iv. r e q u e s t that the C a y m a n A t t o r n e y - G e n e r a l secure
the d o c u m e n t s i d e n t i f i e d by the Uni t e d States Atto r n e y
General;
v. d e c l a r e that the i n f o r m a t i o n is r e l e v a n t to the
s u c c e s s f u l r e s o l u t i o n of the m a t t e r ; and
v i . u n d e r t a k e t h a t , save w i t h the c o n s e n t of the
C a y m a n G o v e r n m e n t , the i n f o r m a t i o n w i l l not be used for
any p u r p o s e s o t h e r than the re s o l u t i o n of m a t t e r s
e n c o m p a s s e d by this agreement.
2. O n l y one C e r t i f i c a t e w i l l be r e q u i r e d to e n a b l e the
p r o d u c t i o n of the d o c u m e n t a r y i n f o r m a t i o n r e l a t i n g to the m a t t e r w h i c h is the s u b j e c t of the C e r t i f i c a t e .
3. Th e C e r t i f i c a t e w i l l be d r a w n in the f o l l o w i n g manner;
C E R T I F I C A T E
G r a n d J u r y N u m b e r :/
I n d i c t m e n t C a p t i o n and D o c k e t N u m b e r :
H a v i n g re g a r d to the p r o v i s i o n s of the a g r e e m e n t
b e t w e e n the G o v e r n m e n t s of the U n i t e d States of
A m e r i c a and the U n i t e d K i n g d o m of G r e a t B r i t a i n and N o r t h e r n
I r e l a n d d a t e d .......... I, ............... . the A t t o r n e y
G e n e r a l of t h e U n i t e d St a t e s of A m e r i c a , h e r e b y c e r t i f y as
f o l l o w s :
1. I h a v e re a s o n to b e l i e v e that i n d i v i d u a l s and e n t i t i e s ,
i d e n t i f i e d by U n i t e d St a t e s l a w e n f o r c e m e n t o f ficers,
ar e i n v o l v e d in a m a t t e r f a l l i n g wi t h i n A r t i c l e 36 of the
S i n g l e C o n v e n t i o n on N a r c o t i c D r u g s , 1961, as m o r e fully
d e s c r i b e d in the ag r e e m e n t .
2. I r e q u e s t that you, the A t t o r n e y - G e n e r a l of the Cayman
I s l a n d s , s e c u r e to me, the A t t o r n e y G e n e r a l of the
U n i t e d S t a tes, that d o c u m e n t a r y i n f o r m a t i o n b e l i e v e d by m e to be h e l d by the f o l l o w i n g [Person] w h i c h is
d e s c r i b e d in the s c h e d u l e and b e l i e v e d by me to be rele v a n t
to the r e s o l u t i o n of the m a t t e r in h a n d , as w e l l as o t her
d o c u m e n t a r y i n f o r m a t i o n s u b s e q u e n t l y i d e n t i f i e d by the U n i t e d S t a t e s A t t o r n e y G e n e r a l or his d e s i g n e e as b e ing
r e l e v a n t to the r e s o l u t i o n of the m a t t e r in h a n d .
3. T h e s a i d d o c u m e n t a r y i n f o r m a t i o n w i l l not be used
or d i s c l o s e d by the U n i t e d S t a t e s G o v e r n m e n t or its
a g e n c i e s for any p u r p o s e s o t h e r than the r e s o l u t i o n of
m a t t e r s e n c o m p a s s e d by the said ag r e e m e n t w i t h o u t the
w r i t t e n c o n s e n t of the C a y m a n G o v e r n m e n t t h r o u g h the Cayman
A t t o r n e y - G e n e r a l .
S C H E D U L E
[Signed]
A t t o r n e y G e n e r a l of the
U n i t e d S t a t e s of A m e r i c a
1200
F O R M A
A T T E S T A T I O N O F A U T H E N T I C I T Y OF O F F I C I A L R E C O R D S
I, ...................... . a t t e s t that m y p o s i t i o n
w i t h the G o v e r n m e n t of the C a y m a n Islands is ...............
O f f i c i a l Title
an d that in that p o s i t i o n I am a u t h o r i z e d by the la w of
the Ca y m a n I s l a n d s / U n i t e d K i n g d o m to a t t e s t that the
d o c u m e n t s a t t a c h e d he r e t o and d e s c r i b e d below:
(1) Are true copies of o r i g i n a l o f f i c i a l records
w h i c h are a u t h o r i z e d by the l a w of the Cayman
I s l a n d s / U n i t e d K i n g d o m to be r e c o r d e d or filed
in .................................................... .
N a m e of P u b l i c O f f i c e or A g e n c y
w h i c h is a p u b l i c o f f i c e or a g e n c y .
(2) Set forth m a t t e r s w h i c h are r e q u i r e d by the law
of the Cayman I s l a n d s / U n i t e d K i n g d o m to be
r e c o r d e d or f i led and r e p o r t e d .
D e s c r i p t i o n of D o c u m e n t s :
S i g n a t u r e
Date
1201
F O R M B
A F F I D A V I T W I T H R E S P E C T T O D O C U M E N T S
O F A R E G U L A R L Y C O N D U C T E D B U S I N E S S A C T I V I T Y
NOTE: A F F I D A V I T M U S T BE E X E C U T E D BY C U S T O D I A N OF R E C O R D S OR
S U C H O T H E R P E R S O N W H O C A N E X P L A I N T H E R E C O R D K E E P I N G PROCEDURE.
I ............................................... (Swear) (Affirm) (On
P e n a l t y of P e r j u r y ) (On My O a t h ) as follows:
(1) I a m e m p l o y e d by ................................................
(Name of b u s i n e s s , a c tivity, or person
f r o m w h o m d o c u m e n t s are sought).
(2 ) ................................................
(Name of b u s i n e s s , activity, or p e r s o n f r o m w h o m
............................................ e n g a g e s in the r e g u l a r
d o c u m e n t s are s o u g h t ).
b u s i n e s s of ............................................................
(d e s c r i b e b u s i n e s s or a c t i v i t y ).
(3) My o f f i c i a l t i tle is ............................................
(4) My duties and r e s p o n s i b i l i t i e s i n c l u d e : (d e s c r i b e r e l a t i o n s h i p
to b o o k s an d r e c o r d s i e . c u s t o d i a n of b o o k s and r e c o r d s , or
s u p e r v i s i o n o v e r b o o k s and r e c o r d s , etc.).
(5) As a re s u l t of m y duties and r e s p o n s i b i l t i e s I h a v e k n o w l e d g e
of the m a n n e r in w h i c h the b o o k s and r e c o r d s are kept.
(6) Th e a t t a c h e d d o c u m e n t s are o r i g i n a l (or true co p i e s of
o r i g i n a l ) d o c u m e n t s w h i c h I o b t a i n e d f r o m the c u s t o d y and c o ntrol
of ............................................................................
(name of bu s i n e s s , activity, or person f r o m w h ich d o c uments
1202
(7) Th e a t t a c h e d d o c u m e n t s are ...............................
( d e s c r i p t i o n of d o c u m e n t s :
eg. " L e d g e r of the c h e c k i n g account of John D o e for the Month
of July, 1983")
(8) It is a r e g u l a r p r a c t i c e of this b u s i n e s s to m a k e and keep
....................................................... in the f o llowing
( d e s c r i p t i o n of do c u m e n t s ) >
m a n n e r ...................................................................
(de s c r i b e m a n n e r in whi c h d o c u m e n t s or categories of documents
are m a d e an d k e p t ).
(9) It is the r e g u l a r p r a c t i c e of the b u s i n e s s to b a s e its
r e c o r d s u p o n i n f o r m a t i o n t r a n s m i t t e d by a p e r s o n w i t h kno w l e d g e
of the m a t t e r s recorded, wh o was a c t i n g in the c o u r s e of the
r e g u l a r l y c o n d u c t e d b u s i n e s s activity.
(10) It is the r e g u l a r p r a c t i c e of the b u s i n e s s to check the
c o r r e c t n e s s of d o c u m e n t s of the k i n d a t t a c h e d h e r e t o .
(11) It is the r e g u l a r p r a c t i c e of the b u s i n e s s to rely on
r e c o r d s of th e k i n d a t t a c h e d h e r e t o .
(12) Th e e n t r i e s on the d o c u m e n t s a t t a c h e d h e r e t o w e r e made by
p e r s o n s w i t h k n o w l e d g e of the m a t t e r s r e c o r d e d , or f r o m information
t r a n s m i t t e d by p e r s o n s with such k n o w l e d g e .
(13) The p e r s o n s m a k i n g the e n t r i e s on the d o c u m e n t s or t r a n s m i t t i n
the i n f o r m a t i o n for p u r p o s e s of r e c o r d i n g it were ac t i n g in the
c o u r s e of the r e g u l a r l y c o n d u c t e d b u s i n e s s or activity.
(14) Th e e n t r i e s on these d o c u m e n t s were m a d e at or near the time
of the m a t t e r s r e c o r d e d , purs u a n t to a s y s t e m a t i c and routine
p r o c e d u r e for the c o nduct of the business.
(15) Th e d o c u m e n t s a t t a c h e d h e r e t o w e r e kept in the course
of the r e g u l a r a c t i v i t y of this b u siness.
( D a t e ) ( S i g n a t u r e )
1202
(7) The a t t a c h e d d o c u m e n t s are ...............................
( d e s c r i p t i o n of d o c u m e n t s :
eg. " L e d g e r of the c h e c k i n g account of John D o e for the Month
of July, 1 9 8 3 â )
(8) It is a r e g u l a r p r a c t i c e of this b u s i n e s s to m a k e and keep
⢠...................................................... in the following
( d e s c r i p t i o n of docume n t s ) ·
m a n n e r ...................................................................
(d e s c r i b e m a n n e r in w h i c h d o c u m e n t s or categories of documents
are m a d e an d k e p t ).
(9) It is the r e g u l a r p r a c t i c e of the b u s i n e s s to b a s e its
r e c o r d s u p o n i n f o r m a t i o n t r a n s m i t t e d by a pe r s o n w i t h k n owledge
of the m a t t e r s r e c o r d e d , wh o was a c t i n g in the c o u r s e of the
r e g u l a r l y c o n d u c t e d b u s i n e s s activity.
(10) It is the r e g u l a r p r a c t i c e of the b u s i n e s s to check the
c o r r e c t n e s s of d o c u m e n t s of the k i n d a t t a c h e d h e r e t o .
(11) It is the r e g u l a r p r a c t i c e of the b u s i n e s s to rely on
r e c o r d s of the k i n d a t t a c h e d h e r e t o .
(12) T h e e n t r i e s on the d o c u m e n t s a t t a c h e d h e r e t o were made by
p e r s o n s w i t h k n o w l e d g e of the m a t t e r s recorded, or f r o m information
t r a n s m i t t e d by p e r s o n s with such k n o w l e d g e .
(13) The p e r s o n s m a k i n g the e n t r i e s on the d o c u m e n t s or transmitting
the i n f o r m a t i o n for p u r p o s e s of r e c o r d i n g it were ac t i n g in the
c o u r s e of the r e g u l a r l y c o n d u c t e d b u s i n e s s or activity.
(14) The e n t r i e s on these d o c u m e n t s were m a d e at or near the time
of the m a t t e r s recorded, purs u a n t to a s y s t e m a t i c and routine
p r o c e d u r e for the conduct of the b u s i n e s s .
(15) T h e d o c u m e n t s a t t a c h e d h e r e t o w e r e kept In the course
of the r e g u l a r a c t i v i t y of this b u s i n e s s .
( D a t e ) ( S i g n a t u r e )
INDEX
1207
INDEX
Notes: A Table of Cases follows this index.
MJH indicates Michael John Hand.
FJN indicates Francis John Nugan.
NHG indicates Nugan Hand Group.
Alexander, Brian, 881
Alnav Trade Asia, 215
Amish Keats Pty Ltd, 256
Amro Bank, 553
ANZ Bank
facilities offered, 446-7, 560
move to, 445-7
references, 777-89, 793-7, 798
relationship with, 506
Apollo Land and Development Pty Ltd, 304, 305, 404, 490
Areson, William Henry, 105-7, 230, 663, 664
Arias, Fabrega & Fabrega, 373
armaments, definition, 893-4
armaments dealing, 893-931
allegations of, 71, 96-7, 116, 127-8, 170, 262, 423, 894-901
evidence for, 901-30
results of inquiry, 930-1
Ashby, Christine, 607
Asien-Pazifik-Bank, 127
Aston, J.L., 120, 176-7, 198, 246, 250, 262, 485, 491, 492, 772, 773,
774, 881
Atlantic Financial Services Pty Ltd, 563
Attkinson, Randall L., 107-8, 113, 218, 36 2, 660, 671, 706, 707
auditors
duties of, 763-75
recommendations about, 1099
Australasian and Pacific Holdings Ltd, 65, 99, 121, 186, 260, 301-2, 404,
559
1208
Australian Customs Service, 8
Australian Federal Police, 32
Australian National Railways Act 1917, 933
Australian Royal Commission of Inquiry into Drugs, 4
Australian Taxation Office, 8, 32
Australia United Corporation (AUC), 53, 790-2
Auyeung, James, 162
Ayala Finance (Hong Kong) Ltd, 48, 552, 651, 671, 966
Bachmann, Jurgen, 60, 109-10, 178, 521, 689
Bacon, Norman James, 448
Baia Do Oriente Limitada, 250, 835, 967-8
bankers' opinions
about group, 777-85, 789-92
recommendations about, 798-9, 1099
Banking Act 1959, 986
Bank of New South Wales, 52-3, 445, 447, 777, 789, 790, 791, 792
Barrier Pacific Resources Ltd, 378
Bates, Arthur Edward, 111-12
B.C. Nahling Pty Ltd, 309
Beach Inquiry, 22
Beazley, Donald Elgin, 112-15, 189, 213, 239, 292
appointed, 79, 475, 507, 513, 516-17
and Commission, 752
events after FJN's death, 533, 543, 544, 546-7
and Hong Kong operations, 87, 140, 667
inquiries into NHG, 107-8, 218
and London Capital Securities Ltd, 193, 214, 290, 362-4, 509, 547
reputation, 240, 693
and Singapore operations, 268, 276
Beith, Graham, 859, 880-1
Bence, A.I., 377
Bernal, Esteban, 373
Besey, Graham, 668
Beverley Hill Pty Ltd, 375
bills, internal, 438, 448, 458, 486-8, 489, 504-5, 520, 551, 770-4,
819-28, 1187-8
1209
Black, General Edwin Fahey, 58, 98, 115-17, 399, 500, 501, 689, 691,
692, 701
arms trafficking allegations, 895, 899, 923-8, 931
and CIA, 741, 742, 743, 746, 748, 749, 751
and criticisms of NHG, 511
joins Nugan Hand Bank, 79, 464, 475, 494
and United Chinese Bank negotiations, 82, 293, 496, 500, 703
Boreland, Helene Mary, 65
Brading, Christopher Sundt, 903-4
Brincat, George Frederick, 117-22, 123, 175, 176, 243, 244 , 245 , 246
and accounts, 302, 304, 310, 316, 322, 324, 337, 339, 343, 345,
347, 355, 412, 415, 416, 417, 429, 430, 431, 432, 443, 470
refuses to certify, 59, 401, 520, 525
as auditor, 412, 764, 767, 768, 769-74, 809, 550-2
events after FJN's death, 88, 535-6, 538, 539, 540
and Hong Kong operations, 185, 471, 661-2, 663, 664-5
and 'internal bills' scheme, 438, 485, 486-8, 824, 826
Nugan Hand Bank accounts, 84, 274, 275, 276, 472-3, 492, 517, 518,
681, 683, 709, 713-31
and Orange Spot group, 489, 548
and Yorkville contra, 956
Bruce Campbell & Co, 681, 683
bullion trading, 45, 46-7, 67
Burton, Noreen Fay, 118, 123-4, 539, 551
'buy back straddle', 802-4, 816-19, 845
B.W. Atkinson and Associates, 136, 158
Byreddy, Cecilia, 276
Calder, Brian William, 42, 124-6, 366, 405-6, 497
and Distravite, 206, 284, 304, 490
and Nugan Hand Needham Ltd, 45, 67, 229
and SIRE, 43, 228
Campbell , Bruce D., 253, 254, 680, 684
capital injections, 68-9, 76, 409-11, 413, 477-8, 655, 831-6
Carlyle Investments Pty Ltd, 67, 245, 307, 404
Carter, L.P., 208, 447
Cayman Islands laws, 390-1, 677, 755-61
1210
1 Charlie', 93-4, 565, 567
Charody, John, 238
Chase Manhattan Bank, 647, 651, 671, 965
Chavez, Ricardo, 114, 193, 363, 364, 547
Cheung, Manlo, 290
Cheung, Monica, 255
Ching, Hung Y., 496, 703
Ching, Sai, 924-6
CIA involvement, allegations of, 302, 391-2, 497, 739-53, 1173-7
CitiNational Securities Corporation Ltd, 182-3, 258, 297, 298, 430-1, 432,
433, 451, 469, 786-7, 801, 802, 803, 804, 814, 815, 816, 817, 819
City of Sydney, council of the, 444-5
City Trust Ltd, 361
Clark, Terrence John, 860, 881
Clasen, Peter Jurgen, 127-8, 421, 911-12, 914, 915
Clines, Thomas, 745
Cocke, General Erie, 54, 79, 128-30, 292, 293, 475, 692, 699, 741, 742,
746, 749
Colby, W.E., 64, 75, 80, 81, 97, 98, 98, 130-2, 218, 742, 746, 748, 749-50
Ceilings, Clive Leslie Hillary, 70, 71, 77, 132-5, 164, 182, 188, 249,
251, 458, 511, 630
and armaments, 913, 914
and Fund of Australia, 160, 280, 359, 419
and Hong Kong operations, 47, 73 , 105, 106, 107, 112, 133-5, 140, 194,
195, 210, 215, 282, 289, 388 , 434-5, 454, 456, 508, 631, 633,
634, 636-7, 639, 645-6, 647, 654, 655, 661, 662, 663, 666 , 667 ,
668, 671, 689, 694, 699, 702, 705, 706, 708, 785, 786
and 'Ingold Growth', 46-7, 420-1, 631-2
on internal bills, 85
joins NHG, 418, 447
negligence alleged, 660, 671
and Nugan Hand Bank, 453, 684, 685, 686, 687, 690, 692
resignation, 515-16
and Thailand operations, 73, 235, 454, 461, 462, 882, 884-5
and Yorkville contras, 955
Commonwealth Attorney-General's Department, 32
Commonwealth/New South Wales Joint Prosecution Team, 32
1211
Commonwealth - New South Wales Joint Task Force on Drug Trafficking, 4, 8
32, 564, 565, 566, 570, 859, 861-2, 866, 895-6, 897, 900-1, 907,
930
Companies Act 1961 (NSW), 3, 398, 411, 488, 550, 571, 859Companies
Auditors Board, 212
Companies Code, revisions recommended, 1002-3, 1072-3, 1100
concealment of documents see documents
conferences, use of, 498-9, 506-7
Conrick, Edward Thomas, 136-7, 563
Conroy's Pineapple Crunch Pty Ltd, 375
Control of Naval Waters Act 1918, 932
Corporate Affairs Commission of Victoria, 32
corporations in terms of reference, 18-19
Courtney-Smith, George Anthony, 138-41, 253, 692, 693, 694
in Argentina, 153, 162, 463, 689, 691, 699, 701, 711, 712, 788
and FJN's drinking, 56
in Hong Kong, 215, 216, 660, 671, 699, 708
Crimes Act 1900 (NSW), 233, 571
currency, foreign see exchange controls
currency differential contract, 459, 845
Customs Act 1901, 932
Dangerous Goods Act 1975 (NSW), 933
Darling, John, 524
Dartman Ltd, 143
Department of Foreign Affairs, 8
Department of Immigration and Ethnic Affairs, 8, 32
Department of Industry and Commerce, 32
destruction of documents see documents
Distravite Australia Wide Servicing Company Pty Ltd, 121, 125-6, 157,
303-4, 397, 490, 994, 996
Distravite Pty ltd, 99, 119, 121, 125-6, 157, 172, 199, 284, 305-6, 397,
461, 490, 994, 996
Dixon, Sir Owen, 24
'Djaisukul, Suvit', 899, 922-3
documents
concealed, 383, 542, 547, 571-2
destroyed, 383
drug trafficking allegations, 3, 4, 95-6, 262, 491-2, 859-86
Dunn, Peter Milton, 70, 71, 73, 98, 134, 141-4, 164, 194, 667, 886
and armaments allegations, 895, 907-8
and Fund of Australia, 133, 160, 280, 359, 419
joins NHG, 418, 447
and Nugan Hand Bank, 453, 684, 685, 687, 692, 708
and Nugan Hand (Hong Kong), 135, 631
resignation, 476-7
Ebert, Manfred, 145-6, 689
Edelsten, Graham Arthur Leighton, 59, 146-8, 173, 174, 252, 262, 265, 270,
286, 337, 524-5
events after FJN's death, 532, 545, 546, 547, 558
and Fund of Australia, 133, 160, 359, 419
and London Capital securities Ltd, 361-2
and Yorkville contra, 955
Electronics Research (Australia) Pty Ltd, 348
- 1212 -
Evans, Neil, 98, 149-51, 162, 459, 461-2, 692, 693, 694-5, 699, 708, 711,
744, 859 r 882â6 r 898, 902, 917-18
Everest Pty Ltd, 375
exchange controls, 944-52, 975-85
breaches of, 51, 248-9, 941-3, 952-73
Falconer, Ian N., 253, 254
F.A. Neubauer Bank, 41, 48, 109-10, 146, 165, 178-9, 191, 279, 359, 494-6,
548, 1125
F.A. Neubauer Management (Hong Kong) Limited, 1127
F.A. Neubauer Management Ltd, 1128
F.A. Neubacher Management (Pte) Ltd, 223, 236, 277, 1129
Farquhar, Murray, 880
Far West Aircraft Spares, 215
Federal Bureau of investigation (FBI) see United States Federal Bureau of
Investigation
1213
Federal Narcotics Bureau, 13-14
Fellows, Warren, 880, 881
Firearms and Dangerous Weapons Act 1973 (NSW), 934
First National City Bank, 966
F.N. Spenser Pty, 170
Foley, John, 65
Freight Distribution Industries Ltd, 132, 182
Fund of Australia Group, 133, 142, 147, 159-60, 169, 280, 359-60
Galicek, George Vaclav, 152-4, 162, 463, 492, 689, 692, 693, 694, 699,
701, 711, 955
Garcia Bros Hardware Pty Ltd, 67, 99, 121, 307-8, 404
Garel Pty Ltd, 313
Gehring, Robert Wallace, 92-4, 155-6, 545, 564-6
George, Quentin Douglas, 157-8, 171, 172, 498, 512, 524-5
after FJN's death, 532, 566
in FJN's law firm, 46, 199, 270, 397, 459, 460
and Mars Road Investments, 126, 136, 287, 497, 562-3
Gilder, Jeremy Mackenzie, 56, 77, 83-4, 159-65, 174, 337, 523
events after FJN's death, 87, 529, 533, 534, 536, 537, 538, 542,
543, 544
and Fund of Australia, 133, 159-60, 280, 359, 419
marketing responsibilities, 455, 498
and Nugan Hand Bank, 72, 453, 454-55, 684-5, 686-7, 688, 689, 690,
692, 701, 702
and overseas operations, 110, 112, 270, 436, 464, 882, 884
recruitment of representatives, 135, 147, 152, 153, 203-4, 223, 234,
235, 236, 241, 264, 267, 269, 454, 461, 463, 691-2, 694, 695
resignation of, 545-6
Gillett, Stewart, 530, 531, 535
G.M. Gunhill Pty Ltd, 319
Goulding, Peter Randolph, 918-19, 920
Graham, Henry Richmond, 778
Gregory, Wilfred Patrick, 167-8, 213, 257, 293, 557, 689, 691
Grist, John Robert, 448
1214
Hand, Michael John, 63-100
and armaments, 71, 96-7, 127-8, 170, 423, 898, 906-16
Australian citizenship, 74-5
charges against, 570-1
and CIA, 64, 97-8
Commission attempts to contact, 94-5
in Commission's terms of reference, 18, 1001-2
company well-being, assurances of, 549-50, 556, 557
deceptions, aware of, 68-9, 72, 76, 84-6, 88-90, 509-11, 534
disappearance of, 92-5, 384, 564-7
documents concealed and destroyed, 91-2, 571
and drugs trafficking, 95-6, 862, 865, 866, 875-6, 882
evidence to tribunals, 574
and FJN, 42, 56, 65, 80-1, 82-4, 366, 403-4, 513, 521
and FJN1s death, 86-91
FJN1s death, events after, 531, 533-44 passim, 548-50, 562
and Nugan Fruit Group, 399
and Nugan Hand Bank funds, 100
personality, 81-2
'retirement', 69-71, 424-5, 906
secrecy, obsession with, 73
in South Africa, 69-71
in Vietnam, 64-5, 97, 741, 743
Hand, Oscar, 94-5, 566, 567, 752
Hand-Pacific Nominees Pty Ltd, 307
Hans, Wilhelmus, 133, 169-70, 359, 419, 420, 692, 908, 909, 911, 912, 913,
914, 915, 917
Harland, Edward Patrick, 54, 171-3, 179, 524, 529, 532
tax expertise, 181, 397, 460, 491, 991
Harris, Neil, 160
Hatchell, Robert, 226, 227
Hawaiian Trust company, 331
Hawes, James Moulton, 900-1
Hayward, Patricia, 881
Hayward, Paul, 880, 881
1215
Healey, Mark, 147, 162, 173-4, 455, 546, 687
Heller, Steven, 198, 201
Heuschkel, carl Louis, 118, 120, 175-7, 244, 245, 246, 485, 768, 772-3
Heuschkel & Pollard, 106, 118, 119, 123, 245, 339, 343, 355, 412, 767,
768, 769
Hewitt, Anthony Peter, 110, 146, 162, 177-9, 495, 521, 689
Hidex Pty Ltd, 99, 121, 186, 309-10, 448-9
Hill, Graeme Hunter, 179-82, 248
Hill, Stephen Kenneth Alexander, 182-6, 243, 337
and accounts, 123, 183-6, 400, 472, 517, 521, 525, 527
on armament allegations, 908
and attempts to sell group, 552-3
and drug allegations, 491, 860, 867, 875, 877-8
and Hong Kong operations, 134, 195-6, 266, 471, 631, 654, 657-60, 664,
665, 668, 669, 671, 702
events after FJN's death, 88, 90, 120-1, 529-45 passim, 549,
551, 552, 558, 563
fraud, awareness of, 509-10, 538-9
and Freight Distribution Industries Ltd, 132, 182
and internal bills, 85
joins NHG, 418, 447'
and Leasefast Pty Ltd, 316, 457
and local government investments, 169, 243, 445
and money market, 258-9, 297-8, 407, 408, 432-3, 469, 802, 803, 804,
815, 816, 817, 819
and NARM, 183, 298, 409
and NHG business methods, 49, 50, 86, 262
and Nugan Fruit Group problems, 83, 233, 399
and Nugan Hand Bank, 253, 453, 472-3, 681, 684, 686, 714-20, 723,
726-7, 728, 730
and Orange Spot purchase, 489
and overseas operations, 464, 697, 712, 713
and purposes of group, 47-8, 448
resignation, 60, 401
and Singapore operations, 275
and S.L. Notwist Pty Ltd, 346, 457
and Yorkville contras, 955, 956
and yorkville Nominees, 357
1216
Hillory Ltd, 631
Holmgren, Dale Oscar, 187-9, 293, 492, 689, 707
Hong Kong Registrar General's Department, 8
Houghton, Maurice Bernard, 129, 130, 155-6, 189, 190-4, 224 ,238, 253,
278, 291, 691, 692, 693, 695
and allegations of CIA involvement, 744-5, 746
and arms trafficking allegations, 895, 898-9, 900-1, 907, 918-22
and events after FJNâs death, 533, 534, 535, 536, 537, 538, 540, 541,
550, 562
and FJN, 50, 250, 523
and Germany, 78, 257, 494, 495, 695
and London Capital Securities Ltd, 114, 363, 547
and MJH, 65, 77-8, 79 , 85, 92, 94, 474, 564, 566-7
and Saudi Arabia, 78, 89, 90, 225, 226, 227, 494, 496, 533, 541
556-7, 689, 690, 696, 699, 701, 702, 705,, 708, 710
and Yorkville contra, 955
Huang Puay, 275, 276
Hughes, John, 46, 460
Illarangi Investments Pty Ltd, 119, 121, 141, 186, 233, 243, 260, 311-12,
560, 839-40
income inflation schemes, 848-9
Income Tax Assessment Act 1936, 460, 994
Ingold Growth Inc, 46-7, 133-4, 260, 280, 281, 419-22, 423, 631-2, 678-9
Ingold Growth Ltd, 105, 169, 280, 420, 678-9
Ingold Management Ltd, 105
International Congress on New Enterprises (ICONE), 55, 213, 238-9, 691
Jenkinson Board of Inquiry, 21
Jewel group, 243, 244, 530, 535, 560
Jones, Ken, 361, 363
judicial assistance treaties, recommendations on, 1098
Kandiah, Peter, 253, 254, 680, 684
K. & R. Cash Transit Pty Limited, 313-14, 405
Karuna, Karapagam, 274
Kaye Inquiry, 21-2
Kenzor Pty Limited, 336
Khun Sa, 95, 96, 865
1217
King, -, 95
Krahe, F., 880
Ku-ring-gal Municipal Council, 201, 444
Kwok, Dr Albert, 134, 194-7, 282, 397, 434-5, 552-3, 558, 634, 639, 641,
643, 645-6, 647, 653
L.A.D. Investments Pty Ltd, 205
Laloe, Michael, 215, 631
land dealings, 43, 65-8, 447
Langenfelder Pty Ltd, 66-7, 124
Laws, John, 880
Laycock, Peter, 243, 316, 457
Leasefast Pty Ltd, 99, 121, 186, 243, 315-16, 457, 559, 839-40
Lee, Alexander, 172, 197-200, 397, 459, 512, 524, 534-5, 872, 874
Lee, Yolanda, 198, 201
Leedony Ltd, 631
Lee Ming Tee, 90-1, 553
Leichhardt Municipal council, 243, 445
Leinbach, D., 240
Lighthouse international Ltd, 106
Lincoln-Smith, Paul R., 50, 523-4, 526, 527
loans
back to back, 953-4, 995
short term, 829-30
local government authorities investments, 14-15, 169, 243, 444-5
London Capital Securities Ltd, 53, 83, 114-15, 156, 193, 218, 290, 361-4,
508-9, 547, 703-4
Loomis, Patry Gene, 201-2, 752
Louey, Edward Craig, 162, 203-5, 229, 270, 463-4, 689, 692, 693, 694,
706, 788
Louis, Raymond Albert Sidney (Snr), 205-6, 548
Louis, Raymond Sidney Albert (Jnr), 207-9
Lovatt, Gillian, 209-10, 231, 276, 689, 692, 693, 702, 704, 705, 709-10,
955
Lowe, Andrew Wellington, 95-6, 859, 864-5, 868, 869-71
Lowe, Derrick, 211-12, 246, 551-2
Loy, K.T., 170, 908, 909, 910, 911, 912, 915
1218
Lucas, Clive, 65
Loy Arms Corporation Pty Ltd, 170, 909, 912, 915
Lynn, Robert, 211, 247, 551
Lynskey, Mr Justice, 20
Lysaught, Don, 259
McArthur, John, 90, 140, 153, 214-16, 255, 256, 499, 541, 543, 550,
555, 660, 671, 689, 691, 707, 788, 955
McDonald, Leslie, 265, 266
McDonald, Walter Joseph, 52-3, 58-9, 79, 83-4, 90, 131, 216-19, 239, 362,
508, 513-14, 515, 742, 746, 747-8, 749, 751
McKinnon, R.G., 447, 778-9, 781, 783, 787, 797
Macquarie Coin Dealers, 45, 46, 133, 260, 280, 349, 423
Malaysian allegations against NHG, 511
Manor, General Leroy, 79, 90, 169, 212-14, 239, 293, 557, 691, 692, 741,
742, 746, 748, 750-1
Manufacturers National Bank in Florida, 509
Marks, J.A., 105, 133, 359
Marrickville Municipal Council, 243, 445
Marrickville RSL Club Ltd, 243
Mars Road Investments Pty Ltd, 126, 261-2, 287, 317-18, 357, 497, 562-4
accounts of, 136-7, 158
and drug funds, 859-60, 867, 877
internal bills, 260
and tax schemes, 157, 182, 994, 995
Mason, Mr Justice, 22-3
Mastep Pty Ltd, 323
Medevac Shipping Pty Ltd, 99, 121, 319-20, 457-8
media and NHG, 4-5
Meekatharra Minerals Ltd, 42-3, 66, 308, 365-6, 403
M.J. Moloney & Associates, 157, 219
Modular Developments Sdn Bhd, 248
1219
Moloney, Michael John, 156, 158, 208, 237, 270
and concealment of documents, 571-2
and drug allegations, 876-7
and events after FJN's death, 87, 92, 206, 533, 534, 535, 536,
537, 539, 542, 543, 544, 546, 548, 551, 558, 562, 563, 565
charges against, 273, 570-2
retained by Houghton, 193
Moneylendlng Act 1941 (NSW), 324, 448
money market operations, 44-5, 183, 184, 258, 297-8, 407-9, 432-3, 469,
802-4, 815, 816, 817, 819
Moore, Robert, 900, 901
Morisset, Brian Keith, 162, 223-4
Morse, Captain Arthur, 320, 458
Mosselson, Dennis, 362, 363, 364, 508-9
'Mr Asia' drug syndicate, 880, 881-2
Murphy, Robert Michael, 193, 224-7, 533, 541, 556-7, 692, 699
Mutual Securities Ltd, 368
Naretha Pty Ltd, 121, 208, 321-2, 447
NARM Corporation Ltd see North Australian Rubber Mills Ltd
National Crime Authority, 7, 32
National Discount Corporation Ltd, 430, 441-2, 801, 802, 803, 804, 815,
816, 817, 818, 819
Needham, John Charles, 42, 207, 228-31, 366, 545, 833
and Hong Kong operations, 46, 106, 210, 471, 652, 664, 708
and NARM, 68, 228-9, 298, 377, 406
and Nugan Hand Bank, 73-4, 230, 682
and Nugan Hand Needham Ltd, 44, 45, 46, 67, 229, 405-6
and Nugan Needham, 46, 229, 459
and SIRE, 43-4, 228-9, 379, 406
Newcourt Financial Services Pty Ltd, 99, 121, 186, 323-4, 448
newsletters, use of, 252
New South Wales Corporate Affairs Commission, 3, 7, 8, 20, 32, 567-70,
895, 897, 901, 904, 907, 930
New South Wales Department of the Attorney-General and of Justice, 32
New South Wales Police, 32
1220
New South Wales Royal Commission into Drug Trafficking, 3
New South wales State Crown Solicitor's Office, 32
New Zealand authorities, 33
North Australian Rubber Mills Ltd (NARM), 44, 68, 125, 183, 228-9, 298,
367-8, 377, 379, 406, 409, 487
Nugan, Alfred, 530
Nugan, Francis John, 42-60
admits illegal activities, 51, 512, 991-3
and armaments, 96-7
behaviour, 57-60
business methods, 49-50, 991-3
character, 50-5
in Commission's terms of reference, 18, 1001-2
death, 3, 60, 400-2, 520-8
drinking habits, 45, 48, 56, 409, 515, 523-4
and drug trafficking allegations, 491-2, 874-5, 877-8
education, 42
final days, 59-60
inarticulate, 791, 992
lifestyle, 55-6, 57
loans from companies, 437-8, 530, 537, 541-2
meets President Carter, 508
and MJH, 42, 366, 403-4
and Nugan Fruit Group, 48, 372, 398, 478-9, 568
personality, 47-8
and religion, 515, 992
and success, 42
tax work, 54-5, 396-7, 423, 459-61, 991-7
Vaucluse home, 458, 559, 842-3
Nugan, Kenneth Leslie, 200, 232-3
alleged drug involvement, 859, 881
events after FJN's death, 86, 243, 528, 529-34 passim, 541-2
loans to, 537, 541-2, 548, 560
and Nugan Group Ltd, 48, 83, 257, 372, 397, 398, 478-9, 568
Nugan & Company, 41, 157, 171-2, 198, 199, 200, 397, 460
1221
Nugan Fruit Group Ltd, 369-72,
drug trafficking allegations, 491, 492, 859
investigation, 48, 397-8, 511, 568
investigation, effects of, 48, 232, 464-5, 478-9, 488
legal costs of, 86
Nugan (Griffith) Pty Ltd, 370-2, 478, 479, 560, 838-40
Nugan Group Ltd, 232-3, 334-5, 369-70
Nugan Hand (Argentina) Inc, 698, 1130
Nugan Hand Bank, 40, 99, 186, 352-3, 1169-70
accounts, 395-6, 709, 713-31
accounts rewritten, 472-3, 517, 518, 713-20
CIA involvement, 391-2
decline, 400, 500
disappearance of moneys, 100
established, 72-3, 135, 390, 452-3, 677-85
funds misused, 841-2
Hong Kong office, 47, 134-5, 635, 1171
liquidation, 91, 554, 555-7, 731-2
operations, 390-2, 453-5, 461-5, 480, 700-13
promotion, 686-91
records protected by Caymans Islands law, 755-61
representatives, 139-40, 689, 691-7
Saudi Arabia office, 1172
Nugan Hand Bank and Trust Company, 47, 72, 281, 352
see also Nugan Hand Bank
Nugan Hand (Chile) Inc., 492, 1131
Nugan Hand (Dealers) Pty Ltd, 99, 121, 125, 186, 229, 260, 281, 327-8
Nugan Hand (Deutschland) GmbH, 257, 493, 1132
Nugan Hand Group (NHG)
attempts to sell, 48, 552-3
auditors, 41
collapse, 552-61
composition of, 386, 404-5
drug allegations, 863
frauds, 392, 837-42
image, 385, 444, 506-8, 511-12, 514, 801, 814
offices, 697-700, 1123-4
1222
nature of, 743-4
and Nugan Fruit Group problems, 398-400, 478-9, 488, 499
operations, 387-92, 419, 422, 423, 448, 456-7
personnel, 41, 420, 421, 480
recruitment advertisements, 1181-3
Nugan Hand Holdings Sdn. Bhd. , 296, 1133
Nugan Hand (Hong Kong) Ltd, 41, 90, 99, 111, 112, 140, 142, 143, 168, 184
186, 215, 227, 230, 250, 329, 331, 1134-5
accounts, 105-6, 121, 265-6, 395, 518, 630, 657-60, 663-5
decline, 500
deficit, 73-4, 471, 652, 664
employees, 41, 289, 290
establishment, 630-3
liquidation, 555, 631, 670-1
mismanagement, 629, 630, 651-3, 655-7, 667, 828, 836, 841
operations, 47, 134-5, 140, 338-9, 391, 456, 480-1, 633-7, 651-4,
661-3, 666-9, 698
success of, 71, 418-19, 434-6, 629-30, 638
Nugan Hand Inc., 99, 330-1
Nugan Hand Inc. (Hawaii), 423-4, 840, 1136-7
Nugan Hand Inc. (Panama), 47, 134, 331, 373-4, 632-3, 661, 666, 683, 697,
714, 716, 719, 720, 724, 725, 729, 1138
Nugan Hand Inc. (Taiwan), 698, 1139
Nugan Hand Insurance Brokers Ltd, 1140-1
Nugan Hand International, 677-8, 1143-4
Nugan Hand International Holdings Pty Ltd, 332-3, 679, 683-4, 840
accounts, 121, 265-6
directors, 99, 135, 186, 260, 277, 281
and F.A. Neubauer Bank, 109-10
liquidation, 91, 559
Nugan Hand International Inc. (United States), 1145-8
Nugan Hand International Management Services, 267, 268, 274-5
Nugan Hand International (Manila), 1149
Nugan Hand Ltd
accounts, 118-21, 387, 392-5, 412-13, 809
June 1974, 414-17
June 1975, 425-33
1223
January 1976, 439-43
June 1976, 449-52
January 1977, 465-9
June 1977, 470, 473-4
January 1978, 482-5
June 1978, 486-8
January 1979, 502-6
June 1979, 517-18
1980, 550-2
reconstructed, 12, 809, 811-14, 819-54
bank accounts, overseas, 965-6
capital injections, 76, 409-11, 477-8, 655, 831-6
directors, 40, 99, 135, 186, 260, 281, 287, 405, 447
employees, 40
formation of, 43, 45, 67
investigations into, 568-9
liquidation, 91, 557-61
loans to FJN, 437-8
and money market, 408-9
operations of, 386-7, 405-18, 444-5, 843-8
shams, round robin cheque, 413, 428-9
Nugan Hand (Malaysia) Sdn. Bhd., 204, 229, 274, 1150-1
Nugan Hand Management Services Ltd, 140, 225, 277, 505, 1152-3
Nugan Hand (Management) Pty Ltd, 76
Nugan Hand Management Services (Pte) Ltd, 1154-5
Nugan Hand Needham Funding Pty Ltd, 170, 405
Nugan Hand Needham Ltd, 43, 44-5, 67, 68-9, 118, 125, 334
Nugan Hand Needham Management Pty Ltd, 99, 121, 125, 186, 229, 325-6, 405
Nugan Hand Needham Nominees Pty Ltd, 125, 229, 281, 327, 405
Nugan Hand Nominees Ltd, 278, 1156-7
Nugan Hand (S.A.) Pty Ltd, 69
Nugan Hand Singapore (Pte) Ltd, 76, 204, 224, 267-8, 274, 275, 276, 277,
698, 1158-9
Nugan Hand (Thailand) Ltd , 234 , 235, 236, 274, 698, 1160-1
Nugan Hand Trade Asia Ltd , 215 , 255, 256, 281, 1162-3
Nugan Hand Trade Finance Ltd, 127, 281
Nugan Hand Trade Malaysia Sdn. Bhd., 204, 464
1224
Nugan Hand Trade Services Pty Ltd, 99, 122, 162, 186, 281, 336-7, 456-7 ,
484, 960-1
Nugan Hand Travel Ltd, 277, 1164-6
Nugan Hand Trust Co., 331
Nugan Hand (U.K.) Ltd, 165, 361, 464, 698, 1168
Nugan Needham, 46, 157, 230, 396, 459
Nugan Oil Ltd, 329, 630
Nuhan International Holdings Pty Ltd, 332
Nuhan Ltd, 148, 212, 316, 334, 335, 547-8
O'Brien, John William, 8, 559, 897, 902
O âCallaghan, Donald, 66, 271, 366
Ocean Shores Development, 65, 127, 403, 418, 421
Orange Spot Group, 41, 205-6, 262, 375, 488-90, 548, 559
purchase of, 86, 208, 489,. 838
and tax schemes, 126, 172, 994, 996
Orange Spot Holdings Pty Ltd, 375
Orange Spot Manufacturing Co. Pty Ltd, 375
Orange Spot Pty Ltd, 205-6, 375
Orange Spot Trading Co. Pty Ltd, 375
Orange Spot Wholesale Pty Ltd, 375, 548
overseas bank dealings, 965-73
Owen, John Desmond, 161, 162, 234-7, 289, 462, 689, 701, 713, 885, 903,
922-3
Pacific Continental Ltd, 122, 256, 260, 338-9, 404, 559
Pacific Silver Commodities, 45, 46, 68, 133, 169, 256, 259, 280, 349, 423
Paegle, Don, 162
Pajo Properties Pty Ltd, 350
P.M. Shelley Pty Ltd, 43, 122, 340-1, 413, 415, 428-9, 559, 768, 832
PNB Rubber and Plastic Industries Pty Ltd (PNB), 44, 68, 228, 298, 368,
376-7, 379, 406
Pauker, Dr Guy Jean, 59, 79, 217, 237-40, 293, 507, 508, 513, 515, 520,
742, 746, 747-9
Payne, Michael John, 241-2
Pennefather, A. J., 377
Pike, Robert, 898, 904,
Pinn, Phillip , 176,, 246
1225
Plttard, Denis John, 242-4, 530, 531, 532, 542, 880
Pollard, Warwick M., 90, 118, 120, 121, 123, 175, 176, 211, 244-7, 412,
414, 415, 416-17, 485, 539, 550-2, 681, 714, 767, 772-3, 774
Pollard & Brincat, 211, 212
Postal Services Act 1975, 933
Post and Telegraph Act 1901, 933
Price Waterhouse & Co., 226, 254, 276, 339, 681, 714, 715, 719, 720, 728
730
Princess Properties, 65
Prior, Anthony James, 247-8
Pulger-Frame, Ronald Adam, 50, 150, 191, 209, 248-51, 691, 692, 693, 695
705, 712, 788, 878, 885, 959-60
R. & K. Security Alarms Pty Ltd, 313
Randwick Labour Club Ltd, 243
R.B. Cody Pty Ltd, 99, 122, 342-3, 404
refugee resettlement scheme, 80, 218, 293, 704
Reserve Bank of Australia, 8, 33
Riley, Murray Stewart, 668-9, 671, 861, 862, 865-6
Riverstone investments Ltd, 253
Roper Securities Ltd, 362
Rosser, Michael, 177, 246
'round robin' schemes, 830-1
Royal Commission of Inquiry into the Activities of the Nugan Hand Group
evidence, 20-9
interim reports, 6, 12-15
letters patent, 3, 5-6, 26, 1105-9
methods, 7-12
reasons for, 3-5
and relevance, 17, 31-3
report format, 1001
terms of reference, 5, 16-29
Royal Commission of Inquiry into Drug Trafficking, 4, 7
Royal Commission on the activities of the Federated Ship Painters and
Dockers Union, 33, 896-7, 898, 901, 903-4, 905, 930
Royal Commissions Act 1902, 23, 24, 25, 31, 952, 958, 959, 994, 997 Royal Commissions Act 1923 (NSW), 31
Royal Commissions Acts , recommendations for, , 1097-8
1226
Rush, John Robert, 148, 173, 252, 532, 690
Rush Economic Research Pty Ltd, 252
Rutter, Haydn M., 139, 253-4, 680, 684, 685
St George Leagues Club, 535, 560
Salmon Royal Commission, 16, 23
same day trades, 814-16
Sapper, Douglas, 214
S.A. Swanton Pty Ltd, 332
Saunders, Robert Muir, 255-6
Schuller, Karl Fritz, 191, 256-7, 461, 493, 699-700
Scott, Douglas (pseudonym of MJH), 226
Scott-Kemmis, Leigh, 183, 184, 258-9, 298, 346, 407, 409, 433, 457, 469,
801-4, 815, 816, 817
secrecy, concern for, 493
Secret Commissions Prohibition Act 1919 (NSW), 15
Secured Income Real Estate (Australia) Ltd (SIRE), 43, 66, 125, 183,
228-9, 298, 368, 377, 378-9, 406, 409, 504, 518
bills, 196-7, 487, 560-1, 648, 649, 650-1, 826-8
Securities Industry Act 1970 (NSW), 229, 679
Securities Industry Act 1975 (N9V), 14
sham
defined, 810-11
types of, 814-19
Shannon, Rex, 226, 227
Shaw, George Thomas, 56, 57, 133, 179, 180, 213, 217, 259-63, 285,
286, 287, 418
and arms trafficking, 898, 911, 915, 917-18
and drug allegations, 491, 492, 859, 866-79
and events after FJN's death, 533, 535, 536, 538, 539, 540, 541, 542,
543, 544, 547, 558
and 'Ingold Growth1, 420, 421-2
and Mars Road Investments Pty Ltd, 126, 318, 497, 539, 540, 562-4
and Nugan Hand Bank, 453, 686, 689, 723
visits Lebanon, 422, 423
and Yorkville contras, 275, 668, 955, 956
and Yorkville Nominees, 539, 540, 562
1227
Sheslow, Richard Myron, 147, 162-3, 264-5, 270, 337, 533, 546
Shirlaw, K.R., 558
Sinclair,W.G., 880, 881
Singleton, John, 880, 881
SIRE see Secured Income Real Estate (Australia) Ltd
Skah Pty Ltd, 122, 344-5, 448
S.L. Notwist Pty Ltd, 119, 122, 186, 259, 346-7, 457, 839-40
Smiles, J.J., 158, 563
Smith, B.H., 558
Solingen Aust Pty Ltd, 99, 122, 126, 256, 260, 348-9, 404
Solomon, Dr Peter, 880
South Sydney Junior Rugby League Club Ltd, 243
South Sydney Municipal Council, 243, 445
Southwood, E.P., 778
Speakman, Neil William, 90, 265-6
Speakman & Co., 107, 265, 266, 548, 549, 657, 658, 659, 661, 665
Special Prosecutor's Office/DPP, Melbourne, 33
Spencer, James Oswald, 93-4, 567
Steer, Graham Reginald, 76, 108, 162, 172, 203, 223, 226, 236, 248, 266-8,
275, 276, 462-3, 554, 687, 689, 692, 693, 694, 699, 706, 711, 797
Stewart, Hon. Mr Justice, 5, 6-7
Stiles, Leonard Ross, 162, 269-71
Stocker, Paul, 64-5, 95
Strasser, Sir Paul, 238, 292
Swan, Patricia Mary
charges against, 570-2
and concealment of documents, 571-2
and events after FJN's death, 529, 532, 536, 537, 542, 547, 558
and FJN, 50, 366, 396, 523
and Nugan Hand Ltd , 405, 407
role in group, 118 , 404, 413, 448, 458
Swiss Pacific Asia Ltd , 329, 465, 630
Swiss Pacific Bank & Trust Company, 106, 139, 352, 465, 682
Swiss Pacific Holdings Ltd, 254, 1167
Swiss-Pacific Inc., 330
Swiss Pacific Pty Ltd, 122, 350-1
Swiss Pacific Trade Ltd, 143
- 12 28 -
Tan Choon Seng, 76, 108, 189, 226, 235, 274-7, 472, 554-5, 689, 714, 715
718-19, 955
Tapp, Warren, 162
tax
avoidance companies, 304, 306, 339, 355, 357, 396-7
evasion admitted, 51
havens, 1098
schemes, 46, 489, 490-1, 524, 953, 956-7, 960-2, 991-7
Terpil, Frank, 901
Tesoriero, John, 881
Thompson, -, 524
Thomson, Elizabeth Louise, 110, 146, 191, 253, 257, 266, 277-9, 512, 550,
689, 701
Toepfer, E., 109, 110
Tribunals of Inquiry (Evidence) Act 1921, 20
Truss, Dianne, 177, 246
United Chinese Bank, 82, 116, 293, 496-7, 703
United States Federal Bureau of Investigation, 8, 9-10, 752-3
United States Justice Department, 9-10
United States military personnel, role of, 79-80
Van Putten, Monique, 880
Victoria Police, 33
Wainwright, Harry, 861, 865, 866
Ward, Francis Dennis, 56, 70, 72, 134, 142, 169, 280-4
and armaments allegations, 894, 907-8, 909-11, 912, 915
and Fund of Australia, 133, 160, 359
and Hidex, 449
and Hong Kong operations, 195, 282, 631
and 'Ingold Growth1, 419-21, 678, 712
joins NHG, 418, 419, 692
and Nugan Hand Bank, 422, 453, 684, 685, 692, 723
resignation, 476
and trade services division, 422, 456-7
1229
Ward Knight & Dunn Ltd, 284, 477, 894-5, 898, 903, 904, 905
Ward Pierce International, 283, 284, 476, 477
Wee, Grace, 534-5
Wendell west Australia Pty Ltd, 65
Wheeler, James, 192
Wherry, K. , 558
Williams, Hon. Mr Justice E.S., 4
Williams, Joseph N., 226, 227
Wilson, Edwin P., 96, 98, 192, 202, 745, 895, 898-9, 900-1, 917-22
Wing On Bank, 251, 971-2, 965
guarantees, 134, 135, 195, 196, 282, 388, 397, 434-6, 634, 637,
639-48, 966-7
and Ingold, 133-4, 194
proposed purchase of NHG, 48, 552
securities, 196-7, 229, 316, 379, 487-8, 560-1, 648-51
Winneke Royal Commission, 22
Winter, Alan Glen, 93, 565
Witthaus, Werner, 257
Wong, Andrew Heck-ling, 214, 285-7, 290, 533, 544, 549, 553, 557, 868,
872, 875, 877, 879
Wong, Ernest, 288-90
Woodward Drug Trafficking inquiry, 3, 4, 27, 398, 859, 860, 865
W.V. Tennyson Pty Ltd, 122, 305, 354-5, 404, 559
Yates, Admiral Earl Preston, 58, 83, 230, 291-4
and arms trafficking allegations, 895, 900, 901, 923, 924, 925, 931
on CIA allegations, 746-7, 751
drug involvement alleged, 880
and events after FJN's death, 87, 121, 533, 535, 536, 538, 539, 540,
541, 542, 544
and MJH, 79, 81-2, 94-5, 294, 567
joins NHG, 79
in Manila, 293, 167, 168
and Nugan Hand Bank, 254, 453, 684, 687, 690-1, 692, 693, 695, 696-7,
699, 701, 706, 713, 715, 720, 741
recruiting activity, 58, 79, 116, 129, 130, 191, 213, 238-9, 494, 516,
742
1230
and refugee project, 80, 704
representative in U.S., 113, 293, 464, 689
role in group, 293, 391, 474-5, 508
in Taipei, 188, 293
and United Chinese Bank, 293, 496-7, 668, 703
Yeap, Kee Aik, 295-6
Yee, General S.K., 82, 496, 703, 740-1
Yorkville contras
definition of, 953-4
examples of, 200, 275, 286, 497, 544, 546, 562, 665, 668-9, 702,
943, 953-63, 995
schedules of, 957-9
Yorkville Management Scheme, 460
Yorkville Nominees Pty Ltd, 99, 122, 208, 228-9, 243, 261-2, 287, 314,
318, 356-7, 379, 404, 406, 497, 562-3, 848
accounts, 768
capital injection (Nugan Hand Limited), 833, 834, 835
drug funds, 262, 859-60, 867, 868, 874, 876-7
foreign exchange indemnity, 459, 845
formed, 43, 66
internal bills, 771, 772, 826, 827, 841
liquidation, 91, 559
'loans' to, 451, 458, 473, 485, 486, 504-6, 518, 967-9
round robin shams , 428-9
and tax schemes, 199, 396, 960-2, 994, 995, 996
Young, George Richard Paul, 44-5, 68, 183, 184, 258, 296-8, 377, 397
407-9, 802
1231
TABLE OF CASES CITED
The Attorney-General for the Commonwealth of
Australia v The Colonial Sugar Refining Company Ltd
(1913-14) 17 CLR 644 30
Briginshaw v Briginshaw and Anor (1938) 60 CLR 336 30
Dusche & Sons (OK) Ltd v Walworth industries (Aust) Pty
Ltd (1962) 62 SR (NSW) 165 986
Fazio v Spitz (1973) WAR 164 986
Hammond v Regina (1982) 42 ALR 327 622
Harper v Costigan 50 ALR 665 30
Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964)
AC 465 800
Johns and Waygood Ltd v Utah Australia Limited (1963)
VR 70 762
Mahon v Air New Zealand [1984] AC 808 30
Moloney v Law Society of NSW - Court of Appeal Judgment 223
Moore v I. Bresler Ltd [1944] 2 All ER 515 30
Mutual Life & Citizens' Assurance Company Limited v Evatt
(1970) 122 CLR 628 800
National companies and Securities Commission v News
Corporation Ltd (1982) 52 ALR 417 30
Northumberland insurance Co. Ltd (in liq) v Alexander
(1984) 2 ACLC 363 855
Pacific Acceptance Corporation v Forsyth (1970) 92 W.N.
(NSW) 29 ' 766
Ross v Costigan (No. 2) (1982) 41 ALR 337 30
R v Arrowsmith (1950) V.L.R. 78 762
R v Baker 1087
R v Havard (1914) 11 CAR 2 889
R v Parker (1863) 2 SCR (NSW) 217 889
R v Quillerat [1962] Tas S.R. 371 889
R v White (1859) 1 Foster and Finlason, 664 889
1232
Shire of Frankston and Hastings v Cohen (1960) 102 CLR 607 776
Snook v London West Riding investments Ltd (1967) Q.B. 786 855
State of Victoria v Australian Building and Construction
Employees' and Builders Labourers' Federation (1982)
41 ALR 71 29, 30
Sykes v Stratton (1972) INSWLR 145 986
Testro Bros Pty Ltd v Tait (1963-64) 109 CLR 349 30
Wing On Bank v Secured Income Real Estate (Australia)
Ltd and Ors 195, 673