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Nugan Hand Bank

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Australian merchant bank

"},"successor":{"wt":""},"founded":{"wt":"{{Start date and age|1973}} in [[Sydney]], New South Wales, Australia"},"founder":{"wt":""},"defunct":{"wt":"{{End date|1980}}"},"hq_location_city":{"wt":""},"hq_location_country":{"wt":""},"area_served":{"wt":""},"key_people":{"wt":""},"products":{"wt":""},"owner":{"wt":""},"num_employees":{"wt":""},"num_employees_year":{"wt":""},"parent":{"wt":""},"website":{"wt":""}},"i":0}}]}'>Nugan Hand BankFounded1973; 53 years ago (1973) in Sydney, New South Wales, AustraliaDefunct1980 (1980)<br>Nugan Hand Bank was an Australian merchant bank that collapsed in 1980 after the suicide of one of its founders, Australian lawyer Francis John Nugan, resulting in a major scandal.[1] News stories suggested that the bank had been involved in illegal activities, including drug smuggling, arms deals, and providing a front for the United States Central Intelligence Agency. Speculation grew when it became known that the bank had employed a number of retired United States military and intelligence officers, including former CIA director William Colby.

Investors' losses and the speculation surrounding the bank's activities led to three major government investigations over the next five years. The bank's co-founder, American Michael Jon Hand, and two other bank employees were indicted for conspiring to pervert the course of justice by destroying or removing bank records. Hand fled overseas in June 1980. In 1985, a Royal Commission of Inquiry found that while the bank had committed numerous violations of banking laws, the allegations of drug-smuggling, arms dealing and involvement in CIA activities were not proven.[2][3]

Founding<br>[edit]

Nugan Hand Ltd. was founded in Sydney in 1973 by Australian lawyer Francis John "Frank" Nugan and former U.S. Green Beret Michael Jon "Mike" Hand. According to writer Alfred W. McCoy, the bank was formed with a fraudulent claim of $1m in share capital: "With only $80 in the company's bank account and just $5 in paid-up capital, Frank Nugan wrote his own company a personal check for $980,000 to purchase 490,000 shares of its stock. He then covered his massive overdraft by writing himself a company check for the same amount."[4] Kings Cross restaurateur Bernie Houghton was also involved in the bank from the beginning.[5]

The Nugan Hand Bank attracted investors with promises of up to 16% interest rates on their deposits and assurances of anonymity, tax-free accounts, specialist investment assistance, along with more surreptitious services such as money laundering. Nugan Hand rapidly gained business and expanded its offices from a single Sydney office to a global network that included branches (registered in the Cayman Islands) in Chiang Mai, Manila, Hawaii, Singapore, Hong Kong, Taiwan, Cayman Islands and Washington D.C.

According to a former employee speaking in 1980, the bank paid commission of up to 2.5% on unsecured investments of $1m or more, when the going rate was around 0.25%. Together with related costs, the bank was paying over 12% to access funds.[6] Yet the bank never became involved in traditional merchant banking activities like equity investment or mortgage financing; instead, its principals sought all manner of unconventional investment opportunities, including gun running (allegedly) and attempts to corner various commodities markets, such as Malaysian rubber and Indonesian oil.[6] Its Cayman Islands subsidiary also provided tax avoidance and evasion schemes.[6]

The Nugan Hand Bank gained respectability by the recruitment of a number of retired senior U.S. military and intelligence personnel, such as former Rear Admiral Earl P. Yates as bank president and ex-CIA head William Colby as legal counsel.[7]

Australian trucking magnate Peter Abeles was also connected with the bank.[8]

Bernie Houghton became the bank's Saudi Arabian representative;[9] but eventually had to flee that country in a hail of bullets, as depositors sought to recover their money.[10]

Michael Hand had formed a close business and social relationship with former Sydney police constable and underworld "patron", Murray Stewart Riley.[11] From April 1976, Hand initiated five cash transfers totalling $295,000 to the Hong Kong office. Riley's subordinates used these funds to buy heroin that was then shipped to Australia. Upon Riley's advice, Hand opened branches in Thailand "to attract drug money" and two years later, ordered the destruction of all incriminating records relating to Riley's money transfers.[12]

Scandal and collapse<br>[edit]

The bank's collapse was precipitated by the death of its founder Frank Nugan in the early hours of 27 January 1980.[13] Nugan, who was facing charges of...