The Mystery of Nugan Hand Bank and the Murder of Donald Mackay

The murder of Donald Mackay and the mystery of the Nugan Hand bank are two of the enduring riddles of Australian history. But were these two mysteries related? While I was researching the history of the Australian drug trade, I discovered the two mysteries were closely intertwined. Although they both have a Griffith connection what linked them was a ‘Sydney Connection’.

The Sydney Connection was a drug smuggling route that connected the US market for heroin and marijuana to Asia via Australia. It was a transshipment route, organized by US special agents, the US mafia, and Sydney criminals, that came into existence during the Vietnam years, routing the US/Asia drug trade through Australia.

The pioneer of the SE Asia/Sydney/US drug route was a tall, handsome NSW Special Branch detective named John Wesley Egan who was twice recommended for bravery awards for his part in rescues at the Gap. His baby face graced the Sydney afternoon papers. They called him a hero.

Egan’s involvement in heroin smuggling began in 1966 after he joined the political police, the Special Branch, and came via a CIA contact who recruited Egan as a drug courier for an Asian drug army, the Hmong army of warlord Vang Pao, who were fighting a secret war in Laos as a proxy for the CIA against the communist Pathet Lao. Egan made the first trans-Pacific heroin run from Southeast Asia to New York via Sydney in 1966, carrying two kilos of heroin hidden in a specially made corset. Over the next months, Egan made regular flights to New York, taking periodic leave from his police job. Within four months he had exhausted all leave, and he resigned from the NSW police force and moved to New York.

From then on Egan hired other couriers to complete the chain — ‘clear skins’ like himself – usually NSW police officers on leave for the seven-day run. Egan used the ‘shotgun technique’, booking three or more couriers on the same flight, with a ‘supervisor’ riding along to make sure no one absconded. He kept 20 couriers in motion between Sydney and New York. Over a six-month period in 1966-1967, Egan and his gang smuggled $22 million worth of heroin into the USA, before a mistake by a courier led to Egan’s arrest.

Egan’s operation was huge, worth hundreds of million of dollars in today’s terms. This remarkable narcotics ring, composed of NSW police officers led by a Special Branch detective, became known as the ‘Corset Gang’. They were the first major group ever arrested in the United States for smuggling Asian heroin into the US, the pioneers of the Southeast Asia/Sydney/US route. Egan’s operation would leave the NSW police well infected with the germs of the Sydney Connection.

In 1975, a U.S. mobster named Danny Stein visited Sydney to organise the importation of drugs for the U.S. market. The idea, recycled from the Corset Gang, was to use Sydney as a transhipment point for drugs between the Golden Triangle and the U.S. west coast. Amongst the organised crime figures Danny Stein visited in Sydney was another ex-NSW detective called Murray Riley.

Murray Stewart Riley was an ex- detective who became one of the major
criminal entrepreneurs of Sydney. Like John Wesley Egan, Riley was another of the brightest stars of the NSW police, a sporting hero who won two gold rowing medals at consecutive Commonwealth Games at Auckland in 1950 and Vancouver in 1954, partnering future NSW Police Commissioner, Merv Wood. The pair won bronze in sculls at the 1956 Melbourne Olympic Games. Incredibly, Murray Riley became the ‘Mr Big’ of the Australian drug trade in 1976 and, in the same year, Merv Wood became NSW Police Commissioner!

In 1975, Murray Riley met Frank Nugan. In the years that followed, Murray Riley emerged as a major trans-Pacific drug smuggler, while Frank Nugan set up the Nugan Hand Bank, which financed Riley’s drug activities via his Nugan Hand account. The financial arm of this second Sydney Connection was the Nugan Hand Bank and the man at its centre was Frank Nugan.

Frank Nugan was born in Griffith and he and his elder brother Ken went to school with Donald Mackay. By 1977, Frank Nugan was the banker for the Australian drug trade. He lived in Vaucluse in a mansion with its own private beach and he was one of the richest men in Sydney.

It was said about Donald Mackay that he was murdered by the Mr Bigs of the Australian drug trade because he “knew too much” about their activities. Frank Nugan was one of these Mr Bigs.

Did Donald Mackay die because he discovered something that linked Frank Nugan to the drug trade?

What I uncovered was evidence that indicated that this was what happened.

It seems that in these years Australia was growing marijuana for the US market, and acres of cannabis were being farmed in the Riverina region and trucked to Sydney and shipped across the Pacific, entering the US through docks controlled by the San Francisco mafia.

Crime reporter Tony Reeves interviewed a TNT truck driver who told him that in the 1970s he regularly drove shipments down from the Nugan packing shed to the Flemington markets in Sydney. When he turned up at the Nugan packing shed, he would be given money and told to have a meal, and that his truck would be packed for him. He would come back to find the truck packed and the contents locked away behind a new padlock. The same scenario would play itself out at the Sydney markets; he would be given money, told to have a meal, and would come back to find the truck unloaded. Intrigued by this, he checked out the truck and found minute traces of marijuana. The truck driver estimated that his truck fully loaded would hold ten tones of cannabis.

In early 1977, as the newspapers began calling Griffith the ‘pot capital of Australia’, persistent rumours began circulating that the Nugan Group’s packing plant in Griffith was somehow involved. That year, an independent audit turned up secret accounts in the Nugan Group’s books in the names of local pot growers with cheques for hundreds of thousands of dollars made out to members of the Trimboli and Sergi families. Members of these families were heavily involved in Griffith’s marijuana trade, and family members were involved with a one acre plot of pot at Hanwood near Griffith in February 1974, with a thirty-one acre pot plantation at Coleambally in 1975. The secret accounts in their names suggest that some of the pot was being grown for Frank Nugan.

The gangster tactics that Frank Nugan used to hush up the affair provide further corroboration. When the auditors and independent directors of the Nugan Group tried to find out more, Frank Nugan responded by seeking to remove the auditors, and by ‘intimidating’ the opposition directors.

The intimidation was impressive.

The man Frank Nugan hired as his private investigator was Fred Krahe, an ex- NSW detective whose reputation as an underworld enforcer and hit man earned him the nickname of the ‘Killer Cop’. InThe Prince and The Premier, David Hickie called Krahe the “King of crooked police during the Askin era, he organised the abortion rackets, armed hold-ups, the framing of criminals and bribery payments among prostitutes and the police, and he maintained a reputation feared in the Sydney underworld”.

In July 1977, Frank Nugan possessed both the motive for the murder of Donald Mackay and the likely murder weapon, Fred Krahe. Although he was not the grower for Euston or Coleambally, Frank Nugan was the man who paid the growers. The second Sydney Connection, which he fronted, had access to the U.S. market; they were the only network in Australia which could move such a large quantity of pot. Together the two crops, Euston and Coleambally, would have produced about 90 tones of pot according to NSW police estimation, worth approximately $90 million in 1977 dollars or about $1,000,000,000  in 1998 terms.

In July 1977, two weeks before the murder, the crisis over the secret accounts
came to a head when the auditors refused to complete the Nugan Group accounts for the financial year. Donald Mackay became aware of this scandal in the last week of his life. According to Mackay’s solicitor and friend, Ian Salmon, Mackay talked about the affair with him. However, because Ken Nugan, the manager of the Nugan packing shed was an associate and fellow member of the Liberal Party, Mackay was reluctant to become involved.

Griffith locals believed that Donald Mackay was killed because he ‘knew too much’.

The affair of the Nugan Group’s secret accounts suggests that shortly after the secret accounts at the Nugan Group became a public scandal (when the auditors refused to complete the company’s books in the first weeks of July 1977), someone like the truck driver who contacted Tony Reeves, suspected that marijuana growing might be the explanation behind the secret accounts went to Donald Mackay with this information. But Fred Krahe or Frank Nugan learned of this.

Frank Nugan had many reasons to kill to prevent exposure, and in Fred Krahe he had the perfect assassin. Up until this point, Donald Mackay knew only the growers in their grass castles. Now he had a clue that led to the man with the mansion in Vaucluse. As many suspected, Mackay was murdered to protect the financiers and distributors, those higher up the chain of this enormous drug smuggling network. Frank Nugan was that man.

Dr John Jiggens.

“The Mystery of Nugan Hand Bank: The Murder of Don Mackay” (part 3 of 3),
StickyPoint Magazine Issue 04 (2008)
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