WFC - The Monetary System in Crisis

WFC - The Monetary System in Crisis

ECB Had 3 Accused Rate Manipulators In Crisis Focus Group

Submitted by Tyler Durden on 11/13/2015
http://www.zerohedge.com/news/2015-11-13/ecb-had-3-accused-rate-manipulators-crisis-focus-group

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Earlier this month in “Secret ‘Diaries’ Show ECB Board Members Met With Banks, Hedge Funds ‘Days’ Before Policy Meetings,” we brought you just the latest example of nefarious intermingling between central planners and a select group of private sector operators who essentially bet on policy.
As it turns out, top ECB officials met personally with “banks and asset managers” just “days” and sometimes “hours” before policy meetings. This rather disconcerting revelation came courtesy of ECB officials’ “diaries” and although you would have to be completely devoid of a healthy sense of skepticism and/or entirely naive to believe that no nonpublic information was passed at those meetings, that’s what Mario Draghi wants you to believe. Here’s an ECB spokesperson: “The same underlying principles — guarding against signalling future monetary policy — are of course applied to bilateral meetings. In any case, no market-sensitive information is disclosed by the ECB in any non-public forum.”
Right. “the same underlying principles” that led Benoit Coeure to tip off a non-public audience of hedge funds in London about PSPP frontloading.
And then of course there was the story of Martin Mallett, the BOE’s chief currency trader who was let go last year after 30 years with the bank after it became apparent that he might have known traders were rigging FX markets for years before the scandal became public but nevertheless failed to escalate the issue.
Well now, we find out that the ECB - the same ECB where policymakers like to meet with banks and asset managers before major policy meetings, actually had three of the traders accused of gaming Euribor by Britain's Serious Fraud Office on Friday in a group that helped the the bank craft its response to the financial crisis! From Reuters:

The documents on the ECB website show that former Barclays euro money market desk head Colin Bermingham and Joerg Vogt and Ardalan Gharagozlou from Deutsche Bank - three of 10 people charged by the SFO on Friday - were part of the central bank's Money Market Contact Group at the height of the crisis.

The group regularly met and held conference calls as the central bank scrambled to stabilise markets that were threatening to push debt-strained Greece, Portugal, Ireland and even Italy and Spain out of the euro in 2010 and 2011.

Amusingly, the 10 people charged include Deutsche Bank’s Christian Bittar who can’t seem to get away from his title as rate rigger par excellence (although that’s not the term Anshu Jain used, that’s the spirit of a conversation the ex-Deutsche CEO once had about Bittar with a colleague back in the good ol’ days). Here’s Bloomberg:

U.K. prosecutors charged 10 former Deutsche Bank AG and Barclays Plc employees with manipulating a benchmark interest rate, including high-profile trader Christian Bittar, with an 11th facing indictment as soon as next week.

Six traders from Deutsche Bank employees and four from Barclays were charged with conspiracy to manipulate the Euribor benchmark, the Serious Fraud Office said in a statement Friday. Another trader listed anonymously in court documents may also be charged, according to three people familiar with the case.

Alongside Bittar, those linked to Deutsche Bank are Andreas Hauschild, Joerg Vogt, Ardalan Gharagozlou,  Achim Kraemer and Kai-Uwe Kappauf. Former Barclays employees Colin Bermingham, Carlo Palombo, Philippe Moryoussef and Sisse Bohart also face charges.

Ok, so the ECB was regularly communicating with three traders who are now charged with manipulating Euribor. Here's what Francesco Papadia, head of market operations at the ECB during the financial and euro zone debt crises has to say about the group:

"They helped understand what was going on beyond what you see on the screens."

If you follow financial markets and that doesn't strike you as hilarious, then check your pulse. That is, we bet they did "help the ECB what was going on behind the screen", after all, they were the ones colluding to fix the market!
In any case, we'll have to see what the time frames were here and if there was any overlap between when the allegations stem from and when this ECB committee operated (it's probably a better bet that the manipulation took place before the euro debt crisis), but in any case, we'll close with the following amusing quote for now:

"The ECB plays no role in the setting of the Euribor rate," the ECB said in a statement.

Are you guys sure about that?...

UK prosecutors charge 10 with Euribor manipulation

By Lindsay Fortado
Financial Times, London
Friday, November 13, 2015
http://www.gata.org/node/15936

UK prosecutors have charged 10 traders from Barclays and Deutsche Bank with conspiring to manipulate Euribor, the largest group of defendants to face prosecution so far in the global rate-rigging probe.

Christian Bittar, formerly of Deutsche Bank, and Philippe Moryoussef, formerly of Barclays, are among the defendants accused of fixing the euro interbank offered rate. The suspects were ordered to appear before magistrates in London in January.

"Criminal proceedings will be issued against other individuals in due course," the Serious Fraud Office said, adding: "The investigation continues."
The charges are the first over manipulation of Euribor, one of the strands in the rate rigging probe that started with Libor. The SFO joined the sprawling global investigation in July 2012 after Barclays became the first bank to be fined by U.S. and U.K. authorities. ...

... For the remainder of the report:
http://www.ft.com/intl/cms/s/0/c3e4215c-8a04-11e5-90de-f44762bf9896.html

Tapscott: how to save democratic capitalism with a basic income

Tapscott: There is a very real risk that capitalism can be replaced

EurActiv.com by Jorge Valero

http://www.euractiv.com/sections/innovation-industry/tapscott-there-very-real-risk-capitalism-can-be-replaced-319428

"It is ridiculous to call Uber a sharing economy company," argues Don Tapscott.  [Don Tapscott]

 

Don Tapscott, whose books have been used by Barack Obama, gave a TED-type inspirational speech to senior members of the in-house think tanks of the EU institutions on Thursday (12 November). In his view, either we share wealth, or it will be the end of capitalism.
Don Tapscott is a Canadian business executive, author, and consultant. He is widely regarded as one of the world's most influential thinkers on innovation, media, and the economic and the social impact of technology.

Tapcott spoke to EurActiv's Jorge Valero

It seems as though the impact of the digital revolution has been more significant on the private sector than on the public sphere. Why?

That is a true statement. The private sector has market forces better accelerating change. And entrepreneurship is at the source of innovation. But governments by law are typically not startups. The Treaty of Westfalia was a long time ago, and nation states have been around for a while. But in the private sector, anybody with a good idea can create a business.
On the other hand, there have been some changes in both the architecture of governments — how we orchestrate capability to create services and public value. The big change is 'open data'. This is not about transparency at all, but about governments giving up access that enables companies and civil society organizations to self-organise to use those assets to create public value. When it comes to democracy itself, we have done almost nothing. And that is very disappointing to me, reflecting on the last 30 years.

In the private sector, we are witnessing the rise of the so-called 'Internet of Things', 'Industry 4.0', etc… What is the corollary in the public sector?

We could have changes to 'government' and changes to 'governance'. Governments could become more like networks. The model of government today is “I am a government. I collect tax revenues from citizens and corporations. I have people inside my boundaries that create services and laws, and deliver those back to citizens. We hope you enjoy them and reelect us". The new model is: “I am a government. I do all of that, but I also create a platform upon which other parts of society can self-organise to create public value."

Some public goods, like security, are quite sensitive. Which sectors could be dealt by these networks?

Everything. Let’s take healthcare. In Spain, every baby should get a website, being half a health record and half a social network for health. Clinicians provide the data (for) your personal web portal. And you have full transparency into your own record. Then you start taking responsibility for your own health. Because you not only have information and knowledge. You also have the ability to collaborate with others.
This already exits with web platforms like patientslikeme, where 25% of all people in the US that have ALS are collaborating in this platform. This is different from the industrial model of health, which is "I am a doctor and I deliver healthcare to you, and you only get it when you are in the system." That is why it costs so much. Why could we not move to a collaborative model of health?

Speaking of collaborative models, you have stressed that platforms such as Uber are not so revolutionary. Instead, the real change-maker is the technology behind Bitcoin', the so-called blockchain. Why is that?

There is no sharing in Uber. It is a 45 billion dollar corporation that aggregates services. It is ridiculous to call it a sharing economy company. The first generation of the internet enabled us to communicate information only. The second generation, based on blockchain technology, enables us to communicate value and money in a peer-to-peer way. So you don’t need a bank, a government, a powerful social network or a credit card company in the middle. This creates an extraordinary opportunity and really a turning point in human history: the dream of a more peer-to-peer collaborative economy, where everyone gets to share the wealth they create.

But this digital age also has a dark side, like the destruction of jobs or privacy concerns, for example. You have proposed a new social contract to address these issues. What should be included in this new pact?

If we have wealth creation, but we don’t have prosperity, then we need to do two things. We need to redistribute wealth, and we need to find new ways of distributing wealth in the first place. Therefore, new distributive models of wealth creation, where many more people get to participate in the creation of companies, and more people like musicians that create value get to keep the value, to share the value they create, rather that all going to tiny institutions.
If we have growing economies but we don’t have commensurate job growth, then we need to start thinking about the work we do. And possibly, for economies growing enough to support it, to think about proposals like a guaranteed annual income. This is not socialism. This is businesses, governments and civil society coming together to come up with a new compact on how to save democratic capitalism. Because if we don’t find ways to make democratic capitalism work then it will be replaced by other systems. And some of the alternatives are not desirable, as they can take us backwards in history.

Is there a risk that capitalism could be substituted?

It is a very real risk. We have a crisis of legitimacy of our democratic institutions. Youth voting is declining everywhere. And young people are starting to look for alternative ways to bring about changes in society. It is important that we take the necessary steps to make sure that democratic capitalism can work, or it will be replaced.

In Europe, we have a refugee crisis unfolding on top of an ongoing economic crisis, while this digital revolution is taking place. Is there a risk that more autocratic governments will emerge from this?

Of course. There is a huge risk. When you have a disparity between peoples’ expectations and reality, you get problems. Right now there is a huge and growing disparity. People expect prosperity and to have a good life. If that is not possible, then things start to come apart. You have polarisation of political views, you have social unrest, and eventually you get big problems, like insurrection, calamities, violence and even revolution. Or strong governments and dictators, and the military coming to power to try to bring order. We don’t need that. We can avoid that, but it requires everyone to work quickly now.

Is the so-called 'Old-Europe' well-equipped to take governments and governance to the next improved stage?

There is good news and bad news. The bad news is that Europe has a whole series of deeply entrenched institutions, and traditional, very hierarchical and in some cases bureaucratic governments at all levels.
The good news is that Europe also is civilised and it has many processes for discussion and debate and consensus. That makes Europe quite different from other countries, including the US, where right now there is a complete bipolarisation of the political spectrum, where you just have a battle, not a real discussion. 

Friday, November 06, 2015

by

Common Dreams

50 Ways to Leave the Euro: Greece and the Global Crisis 

http://commondreams.org/views/2015/11/06/50-ways-leave-euro-greece-and-global-crisis

by

Thomas H. Greco, Jr.

A sticker reads "No" on the palm of a protester during a demonstration calling for a 'No' vote in the upcoming referendum in Athens on Jul 3, 2015. (Photo: AFP/Aris Messinis)

The problem is all inside your head, I told the Greeks
The answer is easy, you need only stop the leaks
The power is yours to claim the freedom that you seek
There must be fifty ways to leave the Euro
          (Apologies to Simon and Garfunkel)

Following the resounding “NO” vote by the Greek people on the bailout conditions in the July referendum, the negotiations between the Greek government and “the institutions” resumed with the expectation that a better deal for Greece would ensue. The outcome was quite the contrary. Greek negotiators ended up agreeing to a bailout deal that was far more onerous than the one the voters had rejected. Why?

The harsh reality is that the Greek government is insolvent. Having been lured into the debt-trap and the shared euro currency by western oligarchs using a combination of measures, including outright fraud, Greece was forced to accept the onerous conditions attached to the first two bailouts. Now it has been bludgeoned into accepting a third. The weapon of choice is the euro currency itself which is being wielded by the European Central Bank (ECB). By throttling the flow of euro currency into the country, the ECB last summer created near chaos in the Greek economy. This, and the threat of even more severe punishment in the future, was enough to bring the Greek government to heel.

With sovereign debt up around 180% of GDP, there is no way that the Greek government will ever be able to grow its way out of the current mess. The draconian measures demanded by the creditor institutions will just make it worse. Even the IMF has acknowledged (with apparent reluctance) that some debt relief is necessary for the Greek economy to recover. The new agreement forces the Greek government to yield even more sovereignty and to open its economy and its people more fully to exploitation by corporate interests and transnational banking institutions.

While the Greek government may be insolvent, the nation of Greece is not poor, at least not yet. But many of the conditions being imposed on the Greek government and the Greek economy will change all that. These include the demands for privatization of public assets, as well as the debt repayments and increasing tax burdens that are doing great harm to family-run businesses and mid-level enterprise that form the backbone of the Greek economy.

The fact is that Greece is blessed with many riches and the vultures from the west would dearly love get their hands on all of them. All the negotiations, past and present, have been about pressuring the Greek government to help them do it. Investigative reporter Greg Palast, with Michael Nevradakis, in a recent article spotlighted a fundamental root of the current problem saying that, “… the euro itself ..is the virus responsible for Greece’s economic ills,” and “The imposition of the euro had one true goal: To end the European welfare state.” So it isn’t Greece alone that has been a target. Palast and Nevradakis continue, pointing out that, “Each Eurozone nation, unable to control neither the value of its own currency, nor its own budget, nor its own fiscal policy, could only compete for business by slashing regulations and taxes.”

But the roots of the problem go even deeper than the euro currency. The present eurozone crisis is but one current example of the elite agenda that was kicked into high gear during the Reagan-Thatcher era of the 1980s and became codified in the “Washington Consensus.” Using international trade agreements and institutions like the International Monetary Fund (IMF) and World Bank as their instruments, “the powers of financial capitalism” have been able to easily invade one country after another with toxic loans, enabling them to wield increasing power as they loot the commons and convert all manner of publicly owned assets to private corporate profit centers. Professor Carroll Quigley, mentor to former U.S. President Bill Clinton, revealed almost 50 years ago that “…the powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. ”

Fortunately, in the wake of the 2008 financial meltdown, money and banking are at long last again becoming common topics for political debate. People are waking up to the fact that those who control money control economics, politics, and virtually everything else. Yet we have all been duped into allowing the money power to be turned over to unelected and often unknown persons. The result has been the subversion of democratic government, increasing disparities in incomes and wealth, and economic hardship and impoverishment of the masses.

Greece is now the pivot point of a struggle that has been ongoing for a long time. People around the world must now decide whether we will create a “new world order” based on democratic government by and for the people, or allow ourselves to be herded into a neo-feudal society dominated by the few at the top of the international banking and corporate pyramid.

In the wake of his re-election victory on September 20, Greek Prime Minister Alexis Tsipras continues to argue that Greece's economy cannot recover from its deep depression unless the burden of servicing its debt is eased. As things stand at this moment, it seems the best the Greek government can do is to negotiate a stretching out its debt repayment schedule. That may buy a bit more time, but will not be enough to cure the “disease.”

Despite all the fear mongering and predictions about the dire consequences that might result from Greece’s exit from the eurozone (Grexit), the choice is clear for the Greek government, either it will continue to surrender its people and its economy to be raped and plundered, or it will declare its independence, withdraw from the eurozone, and do what needs to be done to rebuild its economy on its own terms. How might that be done?

Now that we recognize what the elite agenda is and the true nature of the political currencies that are being used to beat governments and peoples into submission, it is clear that we must find ways to (1) disencumber ourselves of obligations that have been fraudulently imposed on us, (2) reduce our dependence on systems and structures that cheat and disempower us, and (3) build functional alternatives that serve the common good. Here are the steps that will eventually need to be taken by Greece and others that find themselves in a similar predicament.

Debt triage

With regard to its debts, the government needs to find respite and relief. As in a corporate bankruptcy, all debts must be frozen with no further accrual of interest until its finances can be restructured, then, decisions must be made about which obligations will be honored and which will be repudiated. Government obligations should be divided into three categories.

1. Obligations to pension funds, municipalities, schools, employees, and contractors. These must be fully honored.

2. Obligations to banks that have loaned money that they have created “out of thin air,” and obligations to supra-bank entities like the IMF, World Bank, ECB, etc. These should be repudiated as illegitimate, immoral, and even illegal.

3. Legitimate obligations to non-bank corporations and certain other entities should be honored but the period of repayment should be stretched out with annual repayments being capped at a reasonable percentage of total output (GDP) so as not to impose undue hardship on the people.
Create domestic liquidity

The fundamental need of any developed economy is for a means of payment (liquidity) to facilitate exchange of real goods and services. As described above, the ECB cannot be relied upon to provide an adequate supply of euro currency, nor is the euro a “friendly” instrument for enabling domestic trade. The government therefore will need to find ways of providing “home grown liquidity” (payment media) for the domestic economy. It can do this by issuing its own national currency that could circulate alongside the euro, but that must be done in ways that are non-inflationary and maintain parity with the euro. Any currency issued by the government therefore must not be forced to circulate by making it a general legal tender. Only the government should be required to accept its own currencies as payment of taxes and other dues. Everyone else should be free to refuse it or discount it. However, when issued in proper proportion to its anticipated revenues, government issued currencies will be acceptable in the marketplace.

Tax Anticipation Warrants

Tax revenues provide a solid foundation for the issuance of a government currency. There is plenty of historical precedent for Tax Anticipation Warrants or notes, and many contemporary writers have put forth proposals of that kind for Greece. But there are limits to everything, and if this Greek currency is to be both interest-free and inflation-free, the government must, along with balancing its budget, limit the amount of warrants it issues to some reasonable amount in relation to its annual revenues. They also must not be favored with legal tender status beyond the government’s own promise to receive it back, at face value, in payment for taxes and dues. But, tax anticipation notes will not provide enough liquidity for the economy to thrive as it should. So what else needs to happen?

Reemployment notes

There is also precedent for “development loans” to be made by government agencies to support domestic business and industry and thus get the wheels of commerce turning again and put unemployed people back to work. The government should therefore establish a national Development Bank to allocate, especially to small and medium sized domestic businesses, what might be called Reemployment notes (or credits). These should be interest-free and repayable within a relatively short period of time, say one or two years, but they should be issued in a steady stream to maintain liquidity at an optimal level. These loans should go first to businesses that have a ready supply of goods and services which can immediately be sold. As the Reemployment notes are used to pay employees and suppliers, they begin to circulate throughout the domestic economy enabling numerous transactions to occur prior to their repayment. By the simultaneous injection of currency and goods into the market, inflation and currency debasement will be avoided.

Private Currencies and Credit Clearing Exchanges

A further step should be to encourage and support the emergence of non-governmental payment media. Private and community currencies have a long history and they have again been popping up around the world over the past 25 years. Most of these have had very little impact but if properly done, such currencies have enormous potential. Private currencies that are spent into circulation by trusted producers of desired goods and services can provide “home grown liquidity” that is interest-free. By monetizing the value of goods and services that are already in the market and waiting to be bought, private currencies can also be inflation-free. Like tax anticipation warrants, these, too have the power to put people back to work and connect unmet needs with available supplies. Railway notes that were issued during the 19th century are one example of how valued services can be monetized to provide a sound circulating medium of exchange.

The same results can also be achieved by organizing Mutual Credit Clearing associations to enable reciprocity amongst businesses that exchange goods and services. The 80 year old Swiss WIR cooperative business circle is a good example of the successful application of the clearing process, as are the scores of commercial trade exchanges (sometimes called “barter exchanges”) that have for the past several decades been operating successfully all over the world. One such successful exchange that I recently visited, called Sardex, has for the past five years been providing domestic liquidity on the island of Sardinia through the credit clearing services it provides for its 3000 business members.

Meanwhile, at the grassroots level, systems like LETS, and the Greek version called TEM, are struggling to find the proper procedures needed to achieve effective scope and scale of operation. They, too, have enormous potential benefits, especially if ways can be found to harmonize their structures and operations with those of the commercial trade exchanges.

Solidarity loans

We are all together in this battle for freedom, sovereignty, and a humane world order. People everywhere need to stand in solidarity with the people on the front lines, and right now the front lines are in Greece. It has been suggested that supporters might help cash-starved small businesses operating in places like Greece by making small euro loans to them through Crowdsourcing or Crowdsourcing campaigns. Such a program might help some businesses to hang on a bit longer, but liquidity added to the Greek economy in this way would only provide a small amount of short-term relief because the euro currency will quickly be drained away from the domestic economy as payments are made on external debts, or to pay for imports, or as people hoard physical cash. However, there is a way that euro loans can provide longer term liquidity that will not leak out of the country or be hoarded.
The euros or other political currencies that are loaned (dollars, pounds, pesos, etc.) need to first be sanitized and domesticated by converting them into a parallel domestic currency that must be used only within the Greek economy.

How does it work?

Crowdfunders or peer to peer lenders can provide euros or other political currencies to an NGO that would act as trustee that would then make loans to selected businesses in the form of Solidarity Notes (SOL). Each SOL note would be 100% backed by euro or other currency deposits like Swiss francs, or better yet, by real assets that will hold their value despite bank failures, deposit confiscation, or debasement of political currencies by the monetary authorities.

SOL currency could then be used by the selected businesses to pay their employees and suppliers who would, in turn, use them to make purchases from shops or other providers of desired goods and services. SOL currency will change hands many times prior to repayment of the loans, circulating throughout the Greek economy, in parallel with euro currency, for the duration of the loan, which might be two or three years, or even longer. As the business borrowers earn back the SOL, they will repay their loans at maturity. The NGO will then return to the original lenders the political currency that they provided as backing for the SOL. Whatever income is derived from the political currency investments can be used to cover the costs incurred by NGO in administering the program, and any residual income might be paid out as dividends to the people who provided the capital.

The key to success of this program is to provide the SOL loans to established businesses that have desired goods and services that are already available and waiting for buyers. The goods and services could be food, medicines, clothing, housewares, building supplies, energy, and any other necessities, plus essential services. In each case SOL provides the payment media needed to connect available supplies with unmet needs.
In summary, this is the process:

• Supporters provide an NGO with deposits of euros, dollars, pounds, or other political currency which the NGO invests in various financial and real assets (similar to retirement funds).
• Using those assets as backing, the NGO then issues a private currency, called SOL, by making interest-free, short-term loans to qualified domestic producers and sellers of essential consumer goods and services
• This to enables the reemployment of idle workers and the sale of excess capacity,
• while at the same time satisfying basic needs, without inflation.
• SOL loans are then repaid to the NGO and that amount of SOL is extinguished.
• The assets that backed that amount of SOL are liquidated and deposits are returned to the original donors.
• The process is continuous as new deposits enable new SOL loans to be made.

Although we have been speaking about issuing domestic currencies in the form of printed notes, they might also be issued in digital form as account balances that are accessed by means of credit or debit cards or transferred using the newer mobile phone technologies. Each of these forms of manifestation has its own particular advantages and disadvantages, so the choice must be tailored to the local situation.

This approach to sanitizing and domesticating can also be applied to improve the performance of the many community currencies that are sold into circulation, such as Bristol and Brixton Pounds in the UK, Toronto and Salt Sprig Island Dollars in Canada, and Berkshares in the US.

Besides the actions outlined above, the Greek government must also take bold action to correct the internal errors and imbalances that have plagued it for a long time. Corruption, cronyism, tax evasion, and over-regulation of small business are but a few of the problems that need to be addressed. And finally, the Greek people must embrace the spirit of solidarity and cooperation if they are to reclaim their dignity, survive as a nation, and maintain the quality of life that so many visitors flock to Greece to experience. If all that can be achieved, then Greece, the historical “cradle of democracy” can blaze a trail for others to follow toward a new convivial world order of peace, freedom, and a dignified life for all.

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License

Thomas H. Greco, Jr. is an educator, consultant, and author who is widely regarded as a leading authority on moneyless exchange systems, community currencies, and financial innovation. His most recent book is, The End of Money and the Future of Civilization (Chelsea Green, 2009, Floris Books (UK), 2010). His main website is http://beyondmoney.net/.

ProPublica

In Plain Sight

11.10.15        1:00 AM ET

FOUND After 35 Years: CIA’s Fugitive Banker

http://www.thedailybeast.com/articles/2015/11/10/found-after-35-years-cia-s-fugitive-banker.html

How Michael Jon Hand, who founded an Australian bank with ties to American military and intelligence officials that defrauded depositors and investors, was tracked to Idaho.

By Raymond Bonner, Special to ProPublica

It was one of the greatest disappearing acts of modern times.
Amid a swirl of allegations and rumors that the Nugan Hand Bank was involved in arms smuggling, drug-running, and covert operations for the CIA, the institution’s American founder vanished from Australia. Thirty-five years later, that man, Michael Jon Hand, was tracked to a small town in Idaho where he has been living under the name of Michael Jon Fuller.

Hand was found by an Australian writer, Peter Butt, whose just-released book, Merchants of Menace, discloses Hand’s whereabouts after decades of mystery.
If finding Hand, now 73, solves one mystery, it raises another. How could he have lived in the United States so long without being detected? He changed his name only slightly, from Hand to Fuller, and did not get a new Social Security number, according to Butt.

Hand’s company, G.M.I. Manufacturing, is registered with the Idaho secretary of state. The company “now manufactures tactical weapons for US Special Forces, special operations groups and hunters,’’ Butt writes. Has Hand/Fuller been brazen, foolish, or, as Butt asks, does he belong “to a protected species, most likely of the intelligence kind?”

Two years after fleeing Australia, in 1982, when the CIA was involved in a covert operation to overthrow the left-wing Sandinista government in Nicaragua, Hand was working as a military adviser in the region where the anti-Sandinista “contras” were based, according to an Australian intelligence document, which was declassified earlier this year.

The FBI did not immediately respond to a request for comment. The CIA has previously denied it had any links to Hand.

Hand had been a Green Beret in Vietnam and a CIA operative in Laos before moving to Australia, where he and Frank Nugan, a wealthy playboy, established the Nugan Hand Bank in 1973, with $80. Hand fled Australia seven years later, after Nugan was found dead inside his Mercedes-Benz, his left hand holding the barrel of a .30-caliber rifle a few inches from his head, his right hand near the trigger.

During an inquest into Nugan’s death, Hand testified that the bank was insolvent, owing investors large and small some $50 million. The inquest ruled Nugan’s death a suicide, a finding many Australians found dubious.

With depositors and law enforcement authorities in pursuit, Hand, with assistance from a former CIA officer, secured a forged Australian passport, donned a false mustache and beard, and fled Australia in June of 1980. He flew to Fiji, then on to Canada, from which he could cross into the United States without a visa.

The Sydney Morning Herald first reported on Butt’s findings on Monday. In a segment that aired Sunday night, Australia’s 60 Minutes filmed Hand/Fuller emerging from a pharmacy at a shopping mall in Idaho Falls. He has a full beard and neck brace, and was wearing sunglasses and a blue checked shirt. He refused to answer any questions or speak at all when confronted by 60 Minutes reporter Ross Coulthart.

Suspicions about the bank’s links to the CIA arose almost immediately after Nugan was found dead. His wallet contained the business card of William E. Colby, who had been director of the CIA from 1973 to 1976.

Hand told colleagues that it was his ambition that the bank “become a banker for the CIA.”

Colby was forced to resign when it was reported that the agency had been engaged in illegal spying on American citizens. He became a legal adviser to Nugan Hand, and on the back of his business card were handwritten dates when someone, presumably Colby, would be in Hong Kong and Singapore.

As reporters began digging into Nugan Hand, they found that Colby wasn’t the only individual with an intelligence or military background involved with the bank.

“Nugan Hand had enough generals, admirals, and spooks to run a small war,” Jonathan Kwitny, an investigative reporter at The Wall Street Journal, wrote in the definitive book about the bank, The Crimes of Patriots: A True Tale of Dope, Dirty Money, and the CIA.

The president was a retired Navy admiral; the head of the Manila branch, a retired Air Force general; the head of the Washington office, a retired Army general; another retired Army general ran the office in Hawaii.

 

In a review of Kwitny’s book in The New York Times, Howard Blum asks: “Why were so many honorable men working for such a blatantly corrupt organization?”

Several former CIA operatives also had links to the bank of one kind or another, including Frank Terpil and Edwin Wilson, who were indicted for selling explosives to Libyan dictator Muammar Gadhafi. (Terpil fled to Cuba, where he still lives. Wilson, who was convicted and sentenced to prison, died in 2012.)

In Australia, the collapse of Nugan Hand was the subject of several high-level investigations in the 1980s. They found, generally, that the bank was engaged in money laundering, tax evasion, and violation of Australian banking laws. One investigation found links between Hand and the CIA, while another did not. At the time, Australian investigators complained about the lack of help from the FBI.

Hand, who was raised in the Bronx, studied forestry for a year before enlisting in the Army in 1963. He was sent to Vietnam, where he was awarded a Purple Heart, Silver Star, and the Distinguished Service Cross, the second-highest combat medal. At some point, he became a contractor operative for the CIA and did work for Air America, the agency’s front airline, according to one of the Australian investigations.

He visited Sydney on “R&R”—“rest and recuperation,” the once-yearly out for American soldiers in Vietnam—and eventually emigrated. He hung out at the Bourbon and Beefsteak Bar, in King’s Cross, then and now Sydney’s seedy vice district, where he met Frank Nugan. They began selling real estate, primarily to American servicemen in Southeast Asia, then trading in silver bullion, before opening the bank.

Nugan wrote the bank a check for $980,000, then covered it by writing a bank check to himself for the same amount. “Through this elementary accounting fraud, Nugan could claim that the company’s paid-up capital was a million dollars,” Alfred W. McCoy writes in The Politics of Heroin: CIA Complicity in the Global Drug Trade.

From those humble and corrupt beginnings grew a global goliath that attracted investors with promises of 16 percent interest on deposits, in off-shore accounts. By 1979, Nugan Hand had 13 branches around the world, and many of its depositors were drug traffickers, according to Australian investigators.

Hand told colleagues that it was his ambition that the bank “become a banker for the CIA,” according to the findings of one of the Australian investigations.

Efforts to reach Hand were unsuccessful.

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