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The CIA in Australia – Part 2

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                   Part 2 of a 6 part series
                Watching Brief, PRNS, October 1986

Ralph McGehee:  The Shackley Cable, which was a virtual ultimatum
to the head of ASIO to do something about the Whitlam government,
is a sort of prima facie evidence of CIA interference in the
Whitlam government.  This was on November 10.  On November 11,
Governor-General John Kerr dismissed the Whitlam government on a
parliamentary technicality.

Brian Toohey:  I know as a hard fact that Task Force 157 was
involved in covert activities against the Labor government.  That
much I have as a hard fact from an impeccable source here.

Jane Lanbrook:  That was former CIA agent Ralph McGehee and
journalist Brian Toohey talking on this program last week about CIA
actions against the Whitlam government.  The destabilisation
campaign was run by the top secret Task Force 157 under the cover
of the Nugan-Hand bank.  Welcome to the second part of Watching
Brief for this week.  I'm Jane Lanbrook and now in the second part
of our series, The CIA in Australia, Tony Douglas looks at the
effects of that destabilisation campaign, the so-called LOANS
AFFAIRS, the dismissal of the Whitlam government and the role of
former US ambassador Marshall Green.

Tony Douglas:  In early 1973 the United States appointed Marshall
Green as ambassador to Australia.  His appointment was a sign of US
uneasiness over the election of the Labor government.  By the time
of Green's departure, in September 1975, many in the Labor party
felt similarly unease over the role played by the master diplomat
in destabilising the Whitlam government.  One who saw the early
signs was Joan Coxsedge, now a Victorian Labor MP, who in 1973
formed the Committee for the Abolition of Political Police.

Joan Coxsedge:  Well, I think it's important for people to
understand that Green wasn't just any old ambassador.  First of
all, he was the first career diplomat that we had in this country
unlike the sort of calibre person we normally get who are rewarded
for kicking in money to the Republican or Democratic parties.  He
was a very very senior man indeed.  In fact, he was mentioned in
the Pentagon papers as being a high-level policy maker for America
in Southeast Asia and he had known CIA connections. So, quite
obviously, the alarm bells rang back in Washington with the
election of a Labor government.  They were worried about policies
that we had to close down the bases to exert more independence
generally on our economy and they wanted somebody to not only
monitor, I suggest, to lead a destabilisation of the elected
government.  God knows he had plenty of experience, he had been
involved in quite a few coups in Southeast Asia including the very
bloody one in Indonesia.

Tony Douglas:  Joan Coxsedge's suspicions about Green were shared
by Whitlam's Cabinet Minister Clyde Cameron who had many face to
face meetings with the American ambassador.

Clyde Cameron:  Marshall Green was for many many years a top CIA
operative who orchestrated the overthrow of the Sukarno government
which led to the installation of President Suharto.  He was
involved in the CIA intrigue in Vietnam and in the overthrow of the
government of Greece.  He's a very very skilled operative in the
art of destabilisation of governments that the United States
doesn't approve of.

Tony Douglas:  What was his method of operation?

Clyde Cameron:  Well, his method of operation was to make close
contact with the military of a particular country, those who own
and control the media, and to generally infiltrate the sections of
governments where policy or decision-making takes place.  And if he
is unsuccessful in giving the right decisions there, well, the next
step would always be to get the army to organise a coup.  That's
what happened in Indonesia, a phoney uprising was organised by the
CIA in order to give justification for the military coup that
followed.  And the same happened with the assassination of Deben in
South Korea. Where a ruler is unable to bring about the kind of
decisions that suits the CIA or where a ruler doesn't even try to
do so, then, the next step is to organise some pretence for
military action.  The same sort of thing happened in Chile in 1973.
And one of the first people he called on after visiting the Prime
Minister and having already put in his credentials to the Governor-
General was me.  And as he was walking through the door of my
office I saluted him in the normal way, `please to meet you your
excellency, take a seat,' and before he could take a seat I said
`what would you do if our government decided to nationalise the
Australian subsidiaries of the various American multinational
corporations?' and he'd been caught by surprise, he wasn't
accustomed to a minister asking that sort of question whilst he was
in the process of taking his seat, and he blurted out: `oh, we'll
move in'.  I said, `oh, move in? like bringing the marines in?.  He
said, `oh...' he looked a bit uncomfortable by now, although he's
a senior man he didn't expect being caught off guard, he was very
uncomfortable and he said, `oh, no, the days of sending the marines
has passed but there are plenty of other things we could do'.  I
said, `for example?'.  He said, `well, trade'. And I said, `do you
realise that if you stop trading with Australia you would be the
loser to the extent of 600 million dollars a year', that was the
balance of trade figures at that time. He said, `oh, well, there
are other things'.  And he didn't elaborate but, of course, there
are other things.

Tony Douglas:  In 1974 the conservative coalition blocked supply to
force an early election.  The move backfired and Whitlam was
comfortably re-elected.  The prospect was now a Whitlam government
until 1977 with prominent left-winger Jim Cairns elevated to the
positions of Treasurer and Deputy Prime Minister.  In that time the
lease of Pine Gap would come up for renewal and Minerals and Energy
Minister Rex Connor would have time to gain control over
Australia's vast and mostly foreign owned basic commodities.  It
was at this stage that two big players wandered on to the national
political stage, offering cheap loans to finance the plans for
buying back the farm.  It led to the media circus known as `The
Loans Affairs'.

Joan Coxsedge:  Well, this was the so-called `scandal' if you like
of 1975 and the scandal of the Loans Affairs filled countless pages
of newspapers day in, day out, week in, week out, the whole year,
and I think the Loans Affairs showed what a tremendous performance
the CIA could actually turn on when they really put their minds up
to it and it started off in February 1975 when copies of telexes
and other documents, some were genuine but some undoubtedly forged,
came flooding in from all over the world, you know, like on queue,
very highly orchestrated.  And Australians were asked to believe
that we were the victims of a monstrous conspiracy in that members
of our Parliament were about to sell off our country to the Arabs.
And, if you actually have a look at the facts, I think they are
worth going back to, and that is that the ruling circles in OPEC
countries had accumulated huge amounts of money following the great
leapt in oil prices in 1973 and they certainly invested thousands
of millions of dollars privately in the United States and elsewhere
and had made loans to British, French, Danish, Italian and Japanese
governments without raising a commotion at all.  An Executive
Council meeting of the Australian government met on the 13 of
December of 1974 and they authorised Rex Connor, who at that stage
(he's dead now) was the Minister for Minerals and Energy, to seek
loans of up to 4,000 million dollars to deal with, this is a direct
quote, `with exigencies arising out of the current situation and
international energy crisis and to strengthen Australia's external
financial position to provide immediate protection for Australia in
regard to supply of minerals and energy'.  This was a very
important concept for Australians to have.  But the authority
wasn't given to Treasury because they were known to be treacherous
and they were known to be very hostile to departmental heads of the
government and, although this decision was supposed to be secret,
it wasn't very long before offers to assist in that search came
from some very strange quarters: from a very odd gentleman called
T. Khemlani and he was supposed to be a financier from Pakistan.
He approached Rex Connor and eventually, and I think that Connor
was caught as fool, but he authorised Khemlani to run around all
the OPEC countries to seek out funds for the government.  Now as it
turned out, Khemlani was sent by a Hong Kong arms firm which had
very close associations with a crowd called Commerce International
and Commerce International is a very powerful Brussels-based
armaments outfits with documented links to the CIA.  And a short
time after that, we had a Melbourne businessman by the name of
George Harris.  He contacted our Federal Treasurer, Dr Jim Cairns,
with an offer of overseas loan money.  Now Harris' overseas
principles were none other than the New York office of Commerce
International and they were the same firm that were in Khemlani's
background.  So there is a whole lot of controversy surrounding the
negotiations between Cairns and Harris and you get different
accounts but I think the most worthwhile account is the one that
was taken from the statutory declaration made a lot later by a
Sydney businessman by the name of Leslie Nagi and that was tabled
by Jim Cairns in the Federal Parliament and Nagi was the senior
partner of Alco International in which he held a sixty percent
interest with George Harris, who joined on the 1st of March 1974
and he held a forty percent interest.  Now, according to Hansard,
Nagi received a call from an acquaintance insisting that Harris
should be present at the meeting with another intermediary in Dr
Cairns' office.  And at that time Harris was very prominent and
influential as a member of the Carlton football club and he was on
very friendly terms with many leading members of the establishment
such as Sir Robert Menzies, Sir John Banting who had been the
Australian High Commissioner in London in 1975 and who was a former
head of the Prime Minister's department and consultant to the
Office of National Assessments [ONA].  And we had Philip Lynch
coming in.  Philip Lynch, who died a number of years go, was a
Deputy Leader and Shadow Treasurer of the Federal anti-Labor
opposition.  But, as well as that, Harris also had a close
association with a number of very important people in the Victorian
Liberal government. And so, Harris first approached Cairns in a
letter dated 16th November 1974 and he sought approval for himself
and Nagi to negotiate overseas loans for state government
authorities.  Now Cairns was told by Treasury, `No', so Harris got
the funds down but at a later meeting in Cairns' office, and that
was on the 7th of March 1975, Harris produced a telex from a New
York company called Sunlight.  But Sunlight was offering 4,000
million dollars at a 7.2 percent interest with an outrageous 2.5
percent brokerage.  Now people today may think that's not very
high, but back in 1975, you know, 2.5 percentage brokerage for a
4,000 million dollars loan was considered utterly outrageous.  But
he also produced a letter showing that the money would be supplied
by Commerce International.  We keep coming back to Commerce
International.  Now Cairns flatly refused to agree to these terms.
And so Harris was left in and out of office to dictate a draft
letter to one of Dr Cairns' secretaries and, apparently, Harris
knew her very well.  So she came out of Dr Cairns office and handed
the signed letter to Harris who, according to Nagi, lost no time in
heading for the door.  Now the finished letter of authorisation was
addressed to Alco International and endorsed a 2.5 percent
commission, two conditions that Cairns had-- according to Nagi--
flatly rejected only a few minutes before.  So subsequently Cairns
gave Harris, whom he trusted implicitly, further letters of
authorisation and Harris and Nagi went overseas to raise the money
promised by Commerce International and, of course, you can imagine
that during these trips Harris made full use of his friendship with
Sir John Banting to show that these letters of authority were
absolutely genuine but, not surprisingly, the search for the loans
proved highly elusive.  One or two tentative offers were made but
they turned out to be totally false but one in particular appeared
to almost be complete and ironically the intermediary was none
other than the Narodni Bank of Moscow.  But after Rex Connor's
first authority to Khemlani expired in January 1975 with no
results, Connor was given a new authority on the 28th January 1975
to raise 2,000 million dollars.  Once again, nothing was
forthcoming from Khemlani so the second authority was rebuked on
the 20th May 1975.  Now, according to Nagi in his statement, he
formed the opinion that no low interest money had ever been
available.  That's a view that's shared by many other people.

Tony Douglas:  If the money for these loans was never there in the
first place who was T. Khemlani, the mysterious Pakistani
financier.  Co-author of ROOTED IN SECRECY Jerry Aaron looks at his
subsequent career.

Jerry Aaron:  We do know that in 1981 he was actually employed as
the Italian companies manager in Haiti which is run by the
government and in 1981 he was found guilty of trying to move timber
in stolen US dollars out of the US on behalf of the mafia and he
was given a life sentence for turning state evidence.  So, perhaps
he is available for further work now.  One of the interesting
features of this Khemlani affair is that just before Whitlam was
dismissed from office he got a letter from Hawaii which contained
a copy of the message which was allegedly sent to Fraser giving
details of the role Khemlani was playing there and which was being
paid for in order to destroy the Labor government.  And the message
contained instructions which should be decoded before transmission
by calling a certain number, which turned out to be the Hawaiian
headquarters of the CIA. 

Tony Douglas:  If the CIA set up the Whitlam government it got
great assistance from two quarters.  Firstly, the Labor ministers
themselves who used go-betweens like Harris and Khemlani neither of
whom had the necessary bona fides to conduct such negotiations and
both of whom were depending on the arms company Commerce
International to supply the money, a company with documented CIA
links.  However, they also received crucial assistance from the
Australian media who blew up the story.  Was this done, as Clyde
Cameron suggested, by Marshall Green cultivating three or four
media owners in Australia or has the CIA penetrated the media
itself?  That's the question I put to former CIA agent Ralph

Ralph McGehee:  Well, the first thing that the agency tries to
build or create is penetrations into the media of the world. They
had a worldwide organisation. And this was penetration of media
assets around the world and they called it "the world" because that
brings a name of an organ and here is an organ which you can play
any propaganda you want anywhere in the world. So, the fact that
the media took it up [in Australia] one can suspect heavy CIA

Tony Douglas:  When Green left Australia in September 1975 all the
pieces were in place.  The Loans Affairs had discredited the
government and given the Opposition leader Malcolm Fraser the
reprehensible circumstances he needed to block supply.  In
addition, the complexion of the Senate had been altered by dubious
constitutional devices to give the coalition parties the numbers to
force the government to the polls.  But what if the government
refused to go.  That pushed the Governor-General Sir John Kerr
right to the centre of the political stage.  Kerr had been
appointed Governor-General in 1974 by Whitlam himself.  The
appointment was strongly opposed by many in the Labor party
including the present Prime Minister Bob Hawke.

Jerry Aaron:  Well, John Kerr came from a working class background
and then he made his way through Law School.  At the end of World
War II we find him working in the Directorate of Research and Civil
Affairs and by this time he was a Lieutenant Colonel and he made
contact in this capacity with the intelligence agencies overseas on
behalf of Australia.  Then, when the war came to an end, Kerr
joined the ALP and represented the ALP legally but the sort of
flirting with the ALP didn't last very long.  He became
increasingly conservative and ultimately became a darling of the
establishment.  He was a very...I'm not allowed to say people are
right-wing judges because they are supposed to give impartial
judgement, but he was certainly the person responsible for jailing
Claire O'Shade and I suppose the sentence in this case was up to
him and this created the greatest post-war industrial upheaval in
Australia leading virtually to a general strike.

Joan Coxsedge:  Well, of course, he had connections with two well-
known CIA sponsor outfits.  One was the Australian Association for
Cultural Freedom.  Kerr was very disappointed actually because
although he had been a long-time member of the Australian
Association for Cultural Freedom he failed to make the presidency
of that organisation, but he did serve as the first president for
two terms of Law Asia from 1966 and that's another well-known CIA

Tony Douglas:  So how did Kerr behave from the days leading up to
the dismissal.  One man near the centre of the action was Whitlam
Cabinet Minister Clyde Cameron.

Clyde Cameron:  What I do know is that as Commander-in-Chief of the
Armed Forces Kerr had been in communication with chiefs of the
Armed Forces.  I know the Governor-General's office had been in
touch with the American embassy.  They contemplated the possibility
of a general strike in which there would be a revolt of the trade
union movement resulting in a complete shutdown of all power or gas
supplies or transport, all activity, even the waterworks, the
sewage, everything would have been cut off.  The country couldn't
have lasted any more than 24 hours. So, if was decided that the
army would be put on red alert so in the eventuality of that sort
of thing happening they would be able to move in.  And in the event
of the army finding that the whole matter had gone beyond their
control... because what could the army do? They couldn't man the
power stations and the water-works and the sewage plants and all
the transport facilities with the kind of army we've got.  And it
was then decided that they would call on the Americans to send in
the Pacific Fleet and would stand ready to take and bombard Sydney.

Tony Douglas:  For most Australians the dismissal is an
uncomfortable reminder of a turbulent period of Australian
politics.  If they reflect on the events of 1975 at all, the
scenario of an Australian Governor-General using the authority of
the English Crown to trigger a series of events that would lead to
the American Fleet bombing an Australian city to bring about the
downfall of a duly elected government is beyond belief.  Surely
these things only occur in banana republics.  Whether or not that
is the scenario of 1975 it's evident that the CIA was deeply
implicated and that leading conservative politicians knew in
advance of Kerr's actions.

Joan Coxsedge:  There is a very fascinating document that we
reproduced, because we thought that was so very interesting.  It
involves Andrew Peacock, now at that stage of course he was widely
tipped to succeed Malcolm Fraser as leader of the conservative
Liberal Party, which he did and subsequently lost.  In 1975 it
showed that during a parliamentary debate that was written up in
Hansard it was revealed that towards the end of September 1975,
almost two months before the coup toppled the Whitlam government,
during a visit to Bali Andrew Peacock disclosed amazing detailed
knowledge of the scenario that was to take place on the 11th of
November 1975.  One of the crucial things, as far as Peacock is
concerned, is that the conversation took place with Bahkin which is
the notorious Indonesian Secret Police.  Bahkin's report of the
meeting, the part that is most interesting to us is the bits on
Australian domestic policies and, according to Mr Peacock, he said
at that time the opposition parties were leading 20 percent in the
opinion polls over the Labor party and in order to win a general
election it was sufficient to have only 3 percent and the
opposition wanted to force an early general election and he
mentioned November 1975.  And he said that he also really wanted to
see this three-year terms fulfilled of the Labor government, he
didn't really want to force a general election by rejecting the
supply bill in the senate but he felt his party would be forced to
agree to bring on a general election because pressure was already
strong enough, because he said that 9 out of 11 members of the
Shadow Cabinet agreed with the bringing on of an election.  He
said, `there might be a bit of a problem with two Liberal senators
who would not follow the command of the party', which also proved
to be true, but he said if the supply bill can really be rejected
by the senate the following scenario would develop:  Prime Minister
Whitlam is not prepared to dissolve the Parliament and the senate,
which would be a double dissolution, and he would therefore
continue to govern without a budget and, as a result, he would not
be able to pay the wages, you know, public servants, and the
situation will become chaotic.  Another option was that Whitlam may
appeal against the senate to the High Court and that would mean a
constitutional battle would result.  And the third suggestion he
made was that Whitlam would not agree to a double dissolution or to
hold a general election and this, he said, the Governor-General Sir
John Kerr would be forced to ask Malcolm Fraser to form a Cabinet
but this Cabinet would not be able to get a mandate to govern
because Parliament is controlled by the Labor party and what can
happen is that Malcolm Fraser is appointed Prime Minister and a
minute later he asks the Governor-General to dissolve Parliament
and the senate following which a general election is to be held.
Now, as we know this was released by Bakhin in September 1975 and
the scenario proved to be remarkable accurate.

ANNOUNCER:  [People's shouts of `WE WANT GOUGH, WE WANT GOUGH, in
the background]  The Governor-General of Australia who by this
proclamation dissolves the Senate and the House of Representatives.
Given under my hands on the great seal of Australia on the 11th of
November 1975, by his excellency's command, Malcolm Fraser as Prime


Written by nuganhand

September 1, 2008 at 3:07 pm

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