By Jeremy Kuzmarov
November 15, 2023 Covert Action Magazine
British Prime Minister Harold Wilson, Queen Elizabeth and U.S. President Gerald Ford Sanctioned an Operation to Bring Left-Leaning Prime Minister Gough Whitlam Down by Having an Arms Company and Bank Run by CIA Assets Trick His Deputy Prime Minister into Accepting an Illegal Loan
Danny Casolaro was a maverick investigative reporter who was on the verge of exposing a corrupt cabal of CIA officers involved in money laundering and drug trafficking before he was murdered in his hotel room in Martinsburg, West Virginia, on August 10, 1991.
Casolaro stated cryptically before his death: “I am meeting with a source and I will bring back the head of the Octopus.”
The first chapter in Casolaro’s book exposing the Octopus intended to spotlight a joint CIA-British MI6 sting operation in 1975 that brought down the democratically elected Australian government led by Gough Whitlam of the Labor Party.
Deputy Prime Minister and Treasurer Jim Cairns was set up and made to look like he had accepted a $4 billion loan from Saudi Arabia in violation of the Australian constitution. He was forced to resign amidst public pressure, with Whitlam being dismissed soon after.
Declassified CIA documents later revealed that evidence in the scandal was fabricated. An Australian intelligence officer reported in a confidential 1976 intelligence bulletin that “some of the documents which helped discredit the Labor government in the last year in office were forgeries planted by the CIA.”
Rupert Murdoch, future owner of Fox News, publicized the scandal in newspapers that he owned in Australia and even personally wrote articles implicating Cairns that were designed to raise moral outcry about the alleged corruption and misgovernment under Whitlam’s leadership.
The CIA and MI6 were against Whitlam because his left-leaning government planned to close a U.S. spy facility at Pine Gap near Alice Springs, Australia, that was used to spy on Australian government communications and assisted in drug-trafficking operations from the Golden Triangle.
Whitlam and the Australian Labor Party had also been against U.S. carpet bombing of Vietnam, pulling out Australian troops from the war, and were threatening to nationalize subsidiaries of U.S. corporations. Additionally, they sought a peaceful settlement to the Indonesian conflict with East Timor following the end of Portuguese colonial rule, while the Ford administration supported Indonesian army aggression and CIA-trained Indonesian death squads.
The sting operation, known as the Arab loans scandal, was carried out by enticing Cairns into accepting a $4 billion loan at 2.5% interest to finance needed economic development projects. Cairns’ signature was typewritten on key documents allegedly proving his acceptance of the loan, though he never actually gave his signature.
Under the Australian constitution, any loan has to be approved through the Australian loan council. After the manufactured scandal broke out, Whitlam was dismissed by Governor-General John Kerr—who received funding from CIA fronts and was referred to by the CIA as “our man Kerr.”
Malcolm Fraser of the Liberal Party, which had received financing from the CIA through the CIA’s Nugan Hand Bank, was appointed as caretaker Prime Minister and won election the next year.
Fraser and his successors maintained the Pine Gap facility and acquiesced to U.S. policy in East Timor while supporting a more conservative economic policy than Whitlam’s government that was more amenable to U.S. corporations.
Unlocking the Mystery
Peter Osborne is a teacher and former science adviser to the Australian government who, after 25 years of research, has helped unlock the full story behind the coup.
The matter is personal for Osborne because his encryption business venture, established with the Australian government and United Nations, was destroyed by CIA Operation StillPoint and a bogus prince appearing in Australia announcing a $1.3 billion donation to the venture, because it had an encryption key that the National Security Agency (NSA)—which operated at Pine Gap—could not infiltrate.
Osborne carried out extensive research in primary documents and interviewed some key historical figures, including Michael Riconosciuto, a CIA computer expert with inside knowledge of the Octopus that Casolaro was investigating.
Riconosciuto told him that the joint CIA-MI6 sting operation to bring down Whitlam was coordinated by Sir William Denis Kendall, a one-time member of the British Parliament, with fascist sympathies who owned an arms company, and Frank Carlucci, a CIA Deputy Director involved in the plots against Patrice Lumumba in Congo in the early 1960s and U.S. Defense Secretary in the late 1980s.
Riconosciuto was friendly with Kendall and witnessed him speak on the phone with Harold Wilson and Queen Elizabeth, who gave Kendall permission to carry out the operation designed to destroy the Whitlam government.
MI6 agents Sir Harry Gilham (aka Double Deuce) and Eric Sear Cowls played key roles in the Arab loans scandal along with Mafia-linked CIA agents Robert Booth Nichols and Michael Hand.
A shadowy figure implicated in the Iran-Contra scandal who helped Philippines’ dictator Ferdinand Marcos steal $1 billion in gold, Nichols owned the Baron of Beef steak and guest house in the Dandenong Mountain Range near Victoria in Australia that served as a CIA safe house. Nichols also helped produce Steven Seagal’s 1992 movie Under Siege in which he made a cameo appearance as Colonel Sarnac.
Hand was a Special Forces veteran who set up the Nugan Hand bank in Australia that was used as a money-laundering front for CIA black operations, including the Arab loans scandal that brought down Whitlam.
Nichols helped to court Cairns, whom he knew well because he had taken refuge at his steak and guest house in 1969 after he had been attacked by some CIA-linked union thugs in his home because of his opposition to the Vietnam War.
CIA operative Ted Shackley, CIA Director William Colby and Secretary of State Henry Kissinger helped support and green-light the Arab loans scandal. According to Osborne, Colby, who became legal counsel to Nugan Hand Bank, met directly with Prince Saud bin Fahd Al Saud who set up the loan and reported back to Kissinger.
As part of the operation, Gilham met with Cairns and his son Phillip in Paris, along with Michael Stephens, a British liaison to the U.S. Air Force who worked for Rolls Royce, to cajole Cairns into accepting the loan and provided Cairns with fictitious documents.
Gilham was later struck and killed with an ice pick by Robert Booth Nichols who then took up residence in the apartment on Half Moon Street in the Mayfair section of London where the coup plot was hatched.
FBI investigation records confirm that Robert Booth Nichols had used the same address of 5 Half Moon Street, Mayfair, London, and 8 Sanford Street, St. Lucia, Queensland, Australia, as his registered places of residence on his “Permit Application to Carry a Concealed Weapon.”
Osborne’s research uncovered that the $4 billion loan coming from Saudi Arabia was cleared through Commerce International Corporation of New York, an arms-dealing company controlled by the CIA and Mafia.
The founder and chairman of Commerce International, Sotiris “Sonny” Fassoulis, was an OSS and CIA operative with Mafia links, whose company sold 90 millimeter cannons and armored vehicles to the U.S. Army during the Korean War.
A combat pilot during World War II who served with Claire Chennault’s legendary Flying Tigers and spent two years in prison in the early 1960s for selling counterfeit bonds, Fassoulis helped Chiang Kai-shek to relocate to Formosa (Taiwan) in 1949 after losing China’s civil war and was later appointed to a prestigious Far East Advisory Committee by Presidents Reagan, George H.W. Bush and George W. Bush.
Letters that were fraudulently signed by Cairns in the loans scandal were traced back to a small office in New York’s Chinatown and had the name listed of a “mystery man” associated with the company named Anthony Fensore.
Other names associated with Commerce International and the fraudulent $4 billion Arab loan had known links to drug trafficking and money laundering through the Nugan Hand Bank.
Thomas Ho-lung Yu, a Hong Kong arms dealer who had been part of the Flying Tigers with Fassoulis and was assistant comptroller of the CIA-run Civil Air Transport (CAT-AKA Air America/Air Opium), was a key middleman in brokering the loan who worked with Commerce International.
Marion Smoak, a State Department official and Republican Party powerbroker in South Carolina who golfed with President Gerald Ford, was another consultant on the fraudulent deal.
Key Role of Old CIA China Hand and Bay of Pigs Paymaster
The final approval for the loan was authorized by Mercantile Bank and Trust Company Ltd. of the Bahamas, whose legal counsel was Paul Helliwell, an old CIA China hand and the CIA’s liaison with organized crime who had set up offshore banks for the CIA for money-laundering purposes.
After the triumph of the Communist revolution in 1949, Helliwell had helped coordinate arms supplies to Chinese Guomindang generals in Burma and Taiwan who were plotting sabotage operations inside Communist China. (The CAT planes flew back with opium that helped finance the black operation).
Later, Helliwell helped set up the Nugan Hand Bank, along with the American Bankers Insurance Company based in Galveston, Texas, a cover for businessmen who cooperated with the CIA, and created an international holding company in the Cayman Islands that owned the Learjet used by Barry Seal for drug-running activities to the Nicaraguan Contras out of Mena, Arkansas.
That it was Helliwell’s bank putting up the credit for the fraudulent loan is significant in linking the CIA-Mafia complex or Octopus to the plot to bring down the Whitlam government, which succeeded in removing a key thorn in the CIA’s side.
Michael Hand was connected to the loans affair in that he worked for a company, Ocean Shores of Australia, specializing in the sale of land development lots that was represented by Helliwell and Mercantile Bank President Robert E. Cordes who signed the official letter of credit for the fraudulent $4 billion loan to Cairns.
Cordes’s affiliation with Mercantile Bank was only confirmed in April 2023 after a mysterious 50-year delay of the official liquidation report for the bank, whose auditors, Price Waterhouse & Co. (Bahamas and Caymans) were the same auditors of Nugan Hand Bank and the Bank of Credit and Commerce International (BCCI), another of the CIA’s money-laundering banks.
The owner of Mercantile Bank and Trust—which had branches in Nassau and the Cayman Islands—was Major General George Hamden Olmsted, an American military officer and insurance executive who served with the Office of Strategic Services (OSS), U.S. Navy Intelligence, and allied intelligence services during World War II.
According to an audit by Price Waterhouse, Mercantile had transferred about $2 million in assets and liabilities in 1972 to Castle Bank & Trust of Nassau, Bahamas, which Helliwell founded through a Panamanian shell company through his Miami-based law firm in 1962.
Castle Bank was investigated by the IRS under “Operation Tradewinds” and “Project Haven” for its involvement in drug-trafficking and tax evasion schemes. In 1980, Castle Bank was revealed to be a CIA account for the Helliwell law firm. In addition to Helliwell supposedly being one of the paymasters for the Bay of Pigs invasion of Cuba in 1961, Castle had been one of the CIA’s financing channels for operations in Latin America and against Cuba between 1964 and 1975 which included CIA operatives located on Andros Island, Bahamas.
The implication regarding the Arab loans scandal is that it is the same political operatives and financiers behind other deadly clandestine operations in the Cold War who were behind this one.
Following the Money
According to Osborne, Danny Casolaro was intending to travel to Australia before his death, to expose that “the Octopus” was behind the corrupt practices of BCCI and Nugan Hand Bank, along with the plot to bring down the Whitlam Government.
Osborne’s investigation “follows the money” and uncovers the complex web of common CIA banks, attorneys, accountants and interlocking corporate directorships to reveal the same “Octopus” that Casolaro was exposing before his death in Martinsburg on August 10, 1991.
Today, nearly a half century later, the political implications behind the Arab loans scandal and impunity of the perpetrators for their crimes remains profound.
Whitlam’s removal sent a signal to all subsequent Australian leaders that they must toe the U.S. line or else face a similar fate.
Australia consequently has evolved into what journalist John Pilger termed a “vassal state bar none” whose “politics, intelligence agencies, military and much of its media are [almost completely] integrated into Washington’s sphere of dominance and war plans.”
This has been seen most recently with the new trilateral security pact (AUKUS) with the U.S. and UK that is part of a strategy of threatened aggression against China, which could lead to the outbreak of World War III.
The cancer of corruption that surrounded “the Octopus” in Whitlam and Casolaro’s time has all the while spread even more malignantly in the U.S. with an aging Joe Biden now in the White House.
Biden played a key role in the 1980s in blocking investigation into “the Octopuses” operations as a member of the Senate Select Committee on Intelligence, and has used his playboy son Hunter to procure corrupt business deals in support of U.S. imperial ventures.
The only silver lining is that the public is increasingly attuned to the corruption prevalent in Washington and criminal machinations of the “deep state.”
This brings hope that, while Casolaro’s book was never written, his goal of exposing and jailing corrupt government officials associated with the Octopus and its successors may yet be fulfilled.
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