The Iraqi Money Scandal, 40 Years On

gough loansSeven days before Gough Whitlam’s dismissal, the US Ambassador in Canberra told Whitlam that neither the CIA nor any other American government agencies secretly funded any political group or candidate in Australia, and the assurance was put into writing for the Department of Foreign Affairs. In Washington, the Assistant Secretary of State called on the Australian Deputy Head of Mission and repeated the claim.[1] Five days after the dismissal, Whitlam authorised an attempt to obtain and launder secret election funding from Iraq’s ruling Ba’ath Party for the ALP.

Recent evidence in declassified ASIO and Commonwealth Police files, and other accounts which have emerged since 1975, offer fresh perspectives on the excuses, cover-ups and agreed-upon fictions of the “Iraqi money affair”. Accounts of Whitlam’s breakfast meeting with the head of the Iraqi Intelligence Service and his companion, a relation of Saddam Hussein representing the Ba’ath Party, generally run on conventional lines with Whitlam being criticised for his behaviour then generously excused, as the event is made to appear a rather unimportant sideshow. At the same time, Rupert Murdoch, writing the biggest story in Australia’s political history, is pilloried for having unfairly used the event to attack Whitlam. This modern fairy tale has two parts—the lead-up to Whitlam’s encounter with the Iraqi thugs, and the events around the scandal becoming public knowledge.

Once upon a time, the Sunday after the dismissal, an ALP executive meeting was held in Sydney to discuss the unplanned-for election. Pro-Arab left-winger and Victorian Senate candidate Bill Hartley suggested to ALP National Secretary David Combe that campaign funds could be raised in the Middle East. Combe carried the proposal to Whitlam, who in the stress of the political disaster, approved the idea and suggested that well-known menswear retailer Reuben Scarf, the director of the non-profit Scarf Foundation, had proven Middle East contacts and would be a suitable go-between to act for the ALP.[2] Late that afternoon, before returning to Melbourne, Hartley contacted Henry Fischer, a co-director of the Foundation, and discussed the scheme with him. Fischer was interested and Hartley phoned the news to Combe. That night Whitlam and Combe visited Fischer at home. There were nuts and a bottle of German wine. Whitlam had a glass, Combe and Fischer finished the bottle—never mind that Fischer was a teetotaller.[3] No money was talked about, yet several days later Fischer flew to Baghdad to arrange the generous gift for the ALP. Two good-fairy Iraqi emissaries, secret police chief and torturer Farouk Abdulla Yehya and Saddam’s relative Ghafil Jassim Al-Tikriti, arrived and met Whitlam for breakfast and half a million dollars US was (Fischer in 1976)[4] or was not (Jenny Hocking in 2012)[5] handed over, and anyway Fischer stole the money (Fairfax Media in 2015).[6]

Two months later the money (or the promised second instalment) had failed to arrive and the ALP and its advertising agency, unable to pay the bills for money spent on the election campaign, faced a financial crisis. Unable to raise bridging finance by themselves, the conspirators were forced to share their secret with senior Party colleagues. Naturally it leaked. About the same time Henry Fischer initiated a meeting with Rupert Murdoch in London and revealed the details of the incredible story. Learning that good Laurie Oakes was about to break the story in the Melbourne Sun, based on revelations from Labor insiders, evil Murdoch seized the chance to embarrass Whitlam and wrote an astonishing front-page story, based on Fischer’s disclosures, for the Australian.[7] Then, travelling back to Australia, Fischer disappeared from a hotel in Singapore and, from an unknown location, issued a denial through his Sydney solicitors, putting forward an implausible and innocuous counter-tale which contradicted what he had told Murdoch but also what the ALP leaders had themselves already revealed. The politicians told variations on one story, Henry Fischer had told Murdoch another.

Murdoch, in March 1976, asserted that the reports in his papers, based on the Fischer account and his own investigations, were “completely substantiated”.[8] Whitlam sued for “defamation and injurious falsehood” in his original article, and the complaint was settled with a substantial payment by Murdoch.[9] The Attorney-General, Bob Ellicott, suggested in the Parliament that what Whitlam objected to was “the suggestion that he would vary Labor policy in the light of election donation”.[10] In 2007, two journalists from the Wall Street Journal asked Murdoch about the truth of what he had written: “Yeah. Absolutely true word for word … My source [Henry Fischer] disappeared when it came to court. But my secondary source [Bob Hawke] lied and later became prime minister, I won’t name any names. (Laughter).”[11]

This broadly conventional and untrustworthy telling of the story, sometimes with light variations, is obviously incomplete. Even simple accepted facts are wrong. For instance, Fischer is criticised for running to Murdoch with the story. In fact it was his employer, Reuben Scarf, who first attempted to make contact with Murdoch.[12] Basic questions about the arrangement between the ALP and Fischer are not raised. A fee must have been negotiated for acting for the ALP and certainly a commission would have been paid if the project was successful. Neither is mention ever made of who paid Fischer’s travel and accommodation expenses. Likewise, essential plans for how the money, if raised, was to be secretly deposited into Labor accounts are seldom fully explored. There is never any consideration of how quickly these details, if the story is accurate, must have been discussed and approved by all parties in order for Fischer to drop his other responsibilities and fly to Baghdad four days later or why he immediately left Australia with the Iraqis after they met Whitlam.

In the most recent retelling, the 2012 biography of Whitlam by Professor Jenny Hocking, the base story draws on accounts given in Laurie Oakes’s Crash Through or Crash: The Unmaking of a Prime Minister and Paul Kelly’s The Unmaking of Gough. Both books were published in May 1976. Both books hold material drawn from interviews with the Labor Party participants but there are other accounts and new elements of evidence which deserve to be considered. She ignores the other contemporary and essential book on the politics of the period, Alan Reid’s The Whitlam Venture, which was published in November 1976.[13]

ASIO files exist for Henry Fischer, Reuben Scarf and Bill Hartley. The file on David Combe was destroyed in September 1975, before the scandal, on the orders of ASIO Director-General Peter Barbour.[14] The declassified files for the three men, with the usual annoying redactions, are deposited in the National Archives of Australia. They indicate that the head of Iraq’s secret police and Saddam’s relation had flown into Australia, both under their own names, and until the first newspaper articles were published in late February, our internal security force had neither noticed, nor been warned of their presence by allied intelligence services.

The old story, a face-saving exercise, can be re-examined in the light of newer information. Doing so also brings forward a bizarre assertion of a possible Whitlam scandal which, though hidden in plain sight in the documentation, has never been publicly explored. Whitlam was clearly compromised by his contact with the Ba’ath Party and the Iraqi Intelligence Service, which at the time worked closely with the Russian Intelligence Service, and at least one of the other players in the affair was a KGB agent. If Gough Whitlam had not told the truth in 1975 then, when he arrived in Paris in 1983 as our Ambassador to UNESCO, he was a compromised figure susceptible to manipulation, or even blackmail, by Soviet Intelligence. Historians who are rather pleased by the anti-Americanism he displayed at the time may not be noticing something rather unpleasant hiding in the great man’s Parisian shadow.

The ALP National President, Bob Hawke, became involved when the conspirators were forced to involve other senior Party officials. In Blanche d’Alpuget’s 1982 biography he revealed that the money raising plan was in place even before the dismissal:

some weeks before the Government had been sacked Bill Hartley, who was a Senate candidate, had the idea that the ALP’s slender campaign funds could be pumped up with money from the Government of Iraq, for which he worked as a Press correspondent. He had a friend, Henry Fischer, who offered to go to Baghdad and raise the money—between a quarter and half a million dollars … in the confusion and fury that followed the sacking, Whitlam and Combe agreed with Hartley’s suggestion that he could tap funds from a special source.[15]

With this knowledge, disparate elements of evidence can be linked within a larger narrative. Diane Fischer, in her 1980 divorce agreement with Henry Fischer, was bound not to discuss her former husband’s involvement in the Iraqi affair “or of any events in which her husband was involved since the month of September, 1975, or concerning the receipt of her husband of any monies of whatsoever nature from the Iraqi Government or the Australian Labor Party”.[16] This makes no sense if the search for money only began after the dismissal, but makes perfect sense if the project was being planned at an earlier date—probably from the time Hartley was planning his future election campaign. Fischer had returned to Australia from overseas on September 21. This suggestion of a payment from the ALP could also refer to the never discussed topics of his expenses and commission.

Hawke suggested the means by which the funds raised were to be laundered: “the money could come to the ALP, Whitlam was told, via the Reuben Scarf Foundation”.[17] Thus Scarf and Fischer were used not only for their Middle East contacts but also for an alleged ability to launder the money for the ALP. When Henry Fischer talked to Murdoch he also suggested that this was the way the money was to be treated, but he made it seem that this not very original idea for deceit had come from the ex-Prime Minister:

Mr Fischer says that Mr Whitlam suggested Reuben Scarf and/or the Scarf family pay large sums into the ALP in Australia, taking equivalent amounts from Arab sources into their overseas accounts, thereby overcoming the ALP problem with foreign exchange controls as well as helping the Scarfs to have money beyond the eyes of the Australian Reserve Bank. Fischer says that when Scarf dodged any direct involvement Mr Whitlam said: “Use the diplomatic bags.”[18]

Fischer himself never explained exactly how the money was, or was to be processed—probably the former.

The major difference between the accounts given by the Labor participants and Fischer is that they maintained no money had been given, while he asserted that cash was received and that a second instalment had been promised. In conversation with Murdoch he also asserted that only part of the second Iraqi payment was for the ALP: “That ½ million. Supposed to be a part payment for the Cabinet [ALP] but mostly to go to the unions.”[19] The involvement of other seemingly minor characters in the affair who were associated with Hartley, and are present in the ASIO reports, changes quite markedly if it is possible they represent union and activist interests expecting money from Iraq.

Although the “Iraqi money affair” is seen as a post-Dismissal sideshow it may be part of a much larger endeavour: the story of the flow of Middle Eastern money to unions and pro-Arab, anti-Israel activists in Australia. The bungling ALP politicians may have temporarily turned off the flow of money into Australia and perhaps caused the closing down of a planned or operating mechanism constructed by Fischer and his associates to facilitate political corruption.

Reuben Scarf’s ASIO file begins in December 1973, when a security intercept revealed that he and two partners were involved in a merchant bank based in the New Hebrides. After Scarf’s employee Henry Fischer, already under observation, was seen visiting the Egyptian embassy in Canberra, ASIO copied a letter he wrote to the ambassador. Ostensibly an order to supply Egyptian cotton, the letter was from Scarf-Miller-Fischer Finance Holdings Ltd, merchant bankers. The bank had a post office box number in the New Hebrides, a Sydney CBD address, and a North Shore post office box and telephone number. The three men involved were Scarf, George F. Miller (the owner of the Music Hall in Neutral Bay) and Fischer, who described himself as a director.[20] Several weeks later Fischer again used SMF notepaper when he wrote to the same ambassador for his assistance in organising a visit by Scarf and himself to the Middle East. When they returned, Scarf accompanied Whitlam on a flight from Perth to Canberra and briefed the Prime Minister on the success of their commercial mission which he claimed as a Scarf Foundation initiative. The three directors of SMF (Scarf, Miller and Fischer) were also directors of the tax-exempt Scarf Foundation.

Over the next several years ASIO files hold other brief clues as to the continuing existence of SMF, but there is nothing in the documents, unless hidden under redacted elements of text, which indicate ASIO investigated this strange merchant bank or its possible connection with the Scarf Foundation. Whether the Australian Secret Intelligence Service (ASIS), our overseas security service, took an interest is unknowable.

Fischer and Scarf had been dealing profitably with Iraqi trading concerns since the beginning of 1974. At the beginning of 1975 the Iraqis made an attempt, through their Tokyo embassy, to gain information on Scarf and Fischer. They used an Australian citizen who they appeared to be cultivating for an intelligence role and who had no contact with their normal agents in this country.[21] When he suspected what was happening he contacted ASIO. Later in the year Hartley, who had seemingly ignored his friend Fischer’s active and well publicised political activity in the 1960s, wrote a letter to the PLO warning them of Fischer’s right-wing past.[22] About the same time, he was asked by the Iraqi government to report on the activities of Scarf, Miller and Fischer. This linking of the three men suggests SMF was of interest to the Iraqi government though that name was not mentioned.

Hartley sent his associate Gail Cotton from Melbourne to Sydney to investigate. She went to at least one campus and checked with her Arab acquaintances. An ASIO informer reported on her findings: “Cotton said this trio is not fully sincere and that they are using the Palestinian cause for their own personal benefit. She believes they are better than other supporters who say much but do not do anything.”[23] The assurance that they were smart businessmen rather than woolly idealists may have increased their standing in the practical eyes of the Arab revolutionaries. Later, despite his quite damning warnings against Fischer, Hartley provided his friend, before he journeyed to Baghdad for the ALP, with letters to Saddam Hussein and Iraqi Youth Minister Naeem Haddad. In case he needed to look elsewhere for cash Hartley also gave him a personal letter for Yasser Arafat. The ALP member had an interesting address book. The letters stated, according to Fischer, that he was on a “very delicate and important mission” for Whitlam.[24]

Looking at the affair through the perspective of the ALP leaders, commentators find it incredible that Whitlam, Combe and Hartley could deal with Henry Fischer, the holder of anti-Semitic right-wing views. Laurie Oakes is typical: “The involvement of Fischer with the Labor Party was to stagger people who were aware of his background.”[25] Richard Hall, in The Secret State, claims that before the 1974 election Fisher and Scarf had “made contact with the ALP at a fairly high level to make suggestions about Middle East policy and vaguely intimate the possibility of a donation. However the person approached on that occasion was warned about the past political record of Fischer and the contact was broken.”[26] Before and after that period Scarf and Fischer had high-level ALP contacts that they carefully cultivated.

In June 1973 Bill Hartley and Senator Lionel Murphy had been present at a lunch at Reuben Scarf’s house and then moved on to dinner at Fischer’s apartment with New South Wales ALP state parliamentarian George Petersen, and Justice Jim Staples.[27] In the lead-up to the 1974 election Scarf, with Henry Fischer present, had opened his Vaucluse home to entertain Bill Hartley and other ALP political figures including senators Murphy and Jim McClelland.[28] The senators were surely present to obtain a donation, and no doubt they received a generous one. About the same time the Egyptian ambassador in Canberra entertained ALP representatives planning to visit Egypt and the Middle East. Hartley was present, as was Reuben Scarf, who made a speech calling for “more co-operation between Australia and the Arab countries”.[29] Scarf later claimed the post-election visit by “a Labor delegation” had been organised by Fischer.[30] Before the 1975 election, Fischer said that Scarf had been contacted for a donation: “Jim McClelland called me the other day and put the hard word on me for some money. I have agreed to give.”[31] While it is conventional to wonder why Gough Whitlam had entrusted his reputation to a notorious right winger the opposite was actually true. He had put his trust in a Soviet spy.

ASIO became interested in Henry, or Henri, Fischer in the early 1960s when he received mail from British Nazi sources. He was known as an anti-Semite with strong right-wing views. As a young man from an educated middle-class French family he had moved to Switzerland to study cooking: this was probably to avoid being called up by the army to perform national service during the Algerian War. With family connections in the country he travelled to Australia and took up Australian nationality when he was twenty-one. Working as a cook on an Australian Antarctic expedition he was awarded a Polar Medal by the Queen. From 1965 until it closed in 1967 Fischer was involved with a right-wing magazine, Australian International News Review, to which Liberal backbencher Malcolm Fraser contributed an article, “Why We’re Fighting in Asia”. Gough Whitlam, then deputy leader of the ALP, unwittingly contributed the “Oddest political speech of last month” in September 1965: “By derivation civilised men are those who live in cities. Pagans are those who live in the country.”[32]

Despite his public reputation and their own observation ASIO had come to suspect that Fischer was a Soviet agent. A lapse of tradecraft by Fischer and his Soviet contact, a KGB agent operating out of the Canberra embassy, had been observed.[33] Their suspicions were correct. In 2014 files copied from KGB archives by defector Vasili Mitrokhin were made available to the public by Churchill College in the United Kingdom. After consulting them Fairfax Media revealed that Fischer had contacted the Soviet embassy in Canberra in 1970, made a secret visit to Moscow, was given the codename “Kirk”, and made a second visit in 1974.[34] The actual documents are not available for consultation in Australia and there are incidents in the ASIO files which suggest other contacts made with the Soviets. To add to the confusion there are also unsubstantiated claims that Fischer had reported to ASIS after overseas trips.[35] Before he left Australia for Baghdad, on behalf of the ALP, Fischer visited Canberra—possibly to arrange a visa for Iraq through the Egyptian embassy, surely to report to his Soviet contact. In 1994 Gough Whitlam suggested that Fischer had security links: “he would have been in touch with the CIA”.[36]

The heart of this affair is not Whitlam’s famous encounter with the Ba’ath Party emissaries. That, and surely recognised on both sides as such, was a formality. The real focus of interest is what happened on the two days before they met Whitlam. What did the Iraqi representatives ask for, and what were they promised, in return for the proposed donation? Or was it true, as Labor politicians said, and their claim was clearly stated in the first ground-breaking and writ-avoiding report by Laurie Oakes, that the money was to come “without strings”?[37] On Monday, the day they arrived, David Combe increased his advertising spending for the election campaign. Fischer told Murdoch that cash was not mentioned at the Wednesday breakfast meeting and nothing was negotiated: “Fischer said that that had all been done by Combe, who saw the Iraqis several times on the 8th, 9th and 10th of December.” Murdoch carried out his own checks and was confident that Combe had “certainly been seen a number of times” at the motel where the Iraqis were staying.[38] Were there negotiations on Tuesday and if so was Gough Whitlam, who was in Sydney that afternoon and evening, kept informed? Apart from Fischer and Murdoch’s claims, never publicised, there appear to be no other allegations that David Combe met privately with the Iraqis on Tuesday. He said he made two phone calls to Whitlam late Tuesday afternoon—making final arrangements for where and when the meeting would take place. The discussion of this, he said, did not come from his own contacts with the Iraqis but through telephone calls he received from Fischer.[39]

As for the money, Fischer, before he changed his story, said that US$500,000 was passed over at the meeting and that a second payment was promised but not given after Whitlam lost the election. David Combe told Paul Kelly that he believed the money, which he says was never received, was to have been handed over in Tokyo.[40] Diane Fischer claimed her husband had told her that he was given the money in Tokyo and banked it in Hong Kong.[41] At the time it was generally believed, at least in public, that the ALP received no money from Iraq. Modern views are divided between a belief that that no money changed hands, or that it was given and then stolen by Fischer. If it was stolen then it belonged to the ALP, who had a responsibility to report the theft to the police.

As everyone has an opinion on this, mine is that the money was given to the ALP. And that, after all these years, is also the belief of Rupert Murdoch: “there was a crisis, he’d [Whitlam] been promised, he was given cash, which they’d spent, and was promised that they’d get another quarter of a million and they spent that too”.[42]I find it completely unbelievable that Iraq would send the head of the Intelligence Service to deal with the matter without clinching the deal, the buying of a Western politician, seen at the time as a once and probably future prime minister.

Iraqi and Soviet intelligence services were closely linked and they were being offered a bargain they surely could not refuse. Even the seemingly simple-minded questions which Whitlam appears to have been asked at the meeting seem like basic steps in the recruitment of an agent of influence. The path to full-scale traitorhood begins with innocuous questions and payment, but leads into much more compromising territory. Whitlam’s defeat in the 1975 election delayed more serious consequences.

Whether money was handed over or not at the meeting is probably unknowable. In an affidavit presented to an American court during her divorce in 1980 Diane Fischer revealed that the meeting had been secretly taped by her husband and George F. Miller: “He was in the flat in December when he installed a tape recorder behind a bookcase to tape a conversation between Iraqi officials, my husband, and Mr Whitlam, the then [sic] Prime Minister.” When asked about the claim Miller, who was not under oath, replied, “It’s nonsense.”[43] Even with the tape recording, which might now be in any of the archives of several security agencies, the question might not be resolved. Everyone present was aware of the probability that what they said was being recorded, and Whitlam was far too cautious a lawyer to make any obviously damning statements, or count the money in public—if it was handed over.

After the breakfast meeting Fischer left Australia with the Iraqis. The three men flew first to Hong Kong on Wednesday and continued to Tokyo on Saturday. With two full days in the British colony the Iraqis spent longer time there than in Sydney. Whether the money came to Sydney in the diplomatic baggage of Yehya and went out the same way it seems clearer that it was with Fischer in Hong Kong. He was seen by his wife’s step-sister and her husband. He showed money he was holding, asked their advice about finding a local bank and introduced his Iraqi companions. [44] This unusual behaviour by the very private Fischer may have been an act of personal insurance, for he surely had no illusions about the dangerous men he was travelling with. It does not seem an unreasonable supposition that Iraqi cash, whether handed over in Sydney or Hong Kong, now went into a bank account, possibly SMF Finance Holdings. From then on it would have been untraceable.

A week later Fischer’s brother-in-law, an architect and director with a well-known Hong Kong company, sent him a formal agreement letter for a commission-based agency for “architectural, electrical and industrial planning” projects in Iraq. The agency was to run, in the first instance, for a period of three years. The formal proposal to Fischer was dated December 19 and signed and accepted by him on December 21.[45] This is not the action of a man who has just stolen half a million dollars from the picturesquely brutal Iraqi government.

David Combe was in touch with Fischer until February 17, 1976.[46] If a payment was made to Fischer in mid-December the Iraqis would have quickly known that it had not been received by the ALP. Bill Hartley had an Iraqi-paid-for telex machine and was in close contact with his employers. Fischer was in Iraq in late December 1975 and January 1976. This would have been suicide if he had just stolen half a million dollars from them. Likewise, Reuben Scarf travelled to Iraq in a fruitless attempt, according to Fischer, to obtain the second payment for the ALP. He would certainly not have visited the country if his employee had just robbed the brutal regime in power, and he remained on good terms with his Iraqi contacts after the scandal.

When the secret was spreading, as senior officials in the ALP were learning of the promised money and the financial problems of their party, Reuben Scarf, in Paris, made the first attempt to talk to Rupert Murdoch. When he failed to make contact, and was flying back to Australia, Fischer took over and eventually met the newspaper proprietor. Fischer is the only person connected with the scheme who alleged that money had been given to the ALP. Writers wishing to excuse Whitlam downplay the ethical questions involved by asserting that no money was received so little damage was really done to his reputation. It is also a ploy that would have covered Fischer. Scarf pleaded complete ignorance and escaped entirely. If he had claimed that no money was received Fischer would have appeared as a political innocent who had attempted to assist the ALP at a time of crisis. More likely the intense pressure that pushed Scarf and Fischer to contact Murdoch came from their certain knowledge that money had been involved and they were expecting to be exposed and made scapegoats by their untrustworthy political accomplices. Also, if the money had been stolen there was no reason at all for Fischer to speak to Murdoch.

The first time Murdoch and Fischer were in direct contact was by telephone: Murdoch in London, Fischer in New York. In a later statement Murdoch recalled the main points of what he had been told: “He [Fischer] said that Mr Whitlam had agreed to accept substantial sums of money for the election and that some [emphasis in original] of this money had not come through, thereby causing the present crisis.” Also, that “the Chief of Iraqi Intelligence together with a personal emissary of the dictator” had come to Australia and met Whitlam at Fischer’s home in Blues Point Tower “and that the Arabs had asked for top secret information on the Kissinger–Rubin and Kissinger–Assad talks, that Whitlam had arranged for them to receive this from a third party, a US citizen”.[47]

What Murdoch was told in that fifteen-minute phone call was so bizarre and specific that, while making his own efforts to confirm what he was being told, he contacted the Prime Minister, Malcolm Fraser. The astonishing claims prompted Fraser to issue instructions resulting in a query to ASIO: “Prime Minister has requested [Alan] Renouf [Department of Foreign Affairs] to report on allegations that copies of cables from Kissinger to Israeli Government have been sold in Australia to persons with Arab interests. Name of Reuben Scarf was mentioned.” It was also queried whether ASIO was aware of Iraqis or Iranians “with intelligence background” who had been in Australia in November or December 1975.[48] Whitlam’s name was not mentioned.

The follow-up discussions between Murdoch and Fischer were spread across seven days in London. Murdoch was wary as he dealt with his informant and he sought to verify what he could: “I was never convinced that Mr Fischer was telling me any more of the truth than I was able to check out.”[49] At the end Murdoch and his office staff summarised the conversations in a text set out like a “Statement” by Fischer. It exists as a rough draft with corrections in Fischer’s handwriting. Presumably meant to be retyped and signed, it was incomplete when Fischer left England for Australia and then disappeared from his hotel room in Singapore. It was never retyped or signed by Fischer and after it became public he issued a single-page version of events, through his Sydney solicitors, which contradicted everything he had told Rupert Murdoch, and also the accounts given by Hartley, Combe and Whitlam.[50]

The “Statement” circulated as a poor-quality photocopy throughout Parliament House in Canberra and was tabled in the Senate.[51] The pages are numbered 1 to 42, but pages 36 and 37 are missing. However, the files of the Commonwealth Police investigation, now in the Australian Archives, hold a complete text.[52] In an interview at the time Murdoch cryptically referred to “allegations which were infinitely more far-ranging than those published”.[53] Presumably this is part of what he was referring to. Whitlam is not mentioned in these pages. The censored text expands on an incident briefly touched on in the earlier part of the narration where Fischer claimed that at the breakfast meeting, after a bulky envelope had been passed over, the Iraqis questioned Whitlam about his knowledge of a “plot” linking Henry Kissinger and “reactionary cliques of the Arab world” against the Palestinians and socialist regimes in the Middle East. Whitlam’s reply was non-committal: “He then turned to Mr Combe and said: ‘Maybe you can put them in touch with our friend if it can be of any help to them.’” Fischer identifies “our friend” as Tito Howard, and claims that after separating from the Iraqi agents in Bangkok he had gone on to Kuwait to meet Howard. It is at this point that the pages are missing.

On those pages the narrative continues with Fischer telling how he met Howard in Kuwait and then went with him to Baghdad where he introduced him to Iraqi officials: “Mr Howard is a United States citizen aged approximately thirty-seven who lives in Damascus and Beirut but travels extensively and continuously throughout the world. Though he is officially known as a film producer making pro-Arab films”—more information is illegible because of the poor quality of the photocopied document.

The text notes that because of his political films he has had contact with “Australian left wing leaders and the Australian Union of Students”. The mention of students was followed by this observation: “Incidentally, Mr Jawad [a visiting Iraqi government official] who had that earlier experience in Australia, told me that he had personally given money to student leaders for their pro-left and pro-Arab activities.”

He then asserts that Howard offered the Iraqis “useful intelligence information which he had in his possession”. Specifically, Fischer claims that Howard offered documents to the Iraqis:

He said it would cost them plenty of money. A figure of one million dollars was mentioned and that he had with him secret documents proving the gist of all the Kissinger Arab talks about the Lebanese crisis and the Syria/Israeli settlement talks. The Iraqis’ own people had not been able to get this information fully but they were able to check out these documents to their satisfaction before paying over any money.[54]

Fischer claims that Howard is presently planning to return to Baghdad: “he also claims they have not paid him all the money they owed him. I was present at the first meetings between Howard and Haddad and other members of the leadership.”

On Monday February 23 Murdoch taped his conversation with Fischer; the two men spoke of Tito Howard and his contacts with the Iraqis and Whitlam:

Murdoch: “The thing about Tito Howard to me is the most serious thing you have said yet. In essence Whitlam took part in selling American secrets … He was a party to it. He said I cannot give you the secret but go and see so and so and he might be able to.”

Fischer: “That’s right. He is not giving them secrets but Tito Howard is. He has done a reference job.”

In the “Statement” Fischer has Whitlam telling Combe to “put them [the Iraqis] in touch with our friend [Tito Howard]”. In this conversation Fischer expanded on the events of the breakfast meeting by alleging that following this instruction David Combe had contacted Howard and told him to fly to Kuwait to meet Fischer. [55] At this time Fischer himself was travelling to Hong Kong, Tokyo, Bangkok and Kuwait with the Iraqi emissaries. While the Iraqis flew home from Kuwait, Fischer stopped there to meet Howard before they went on together to Baghdad for meetings with government officials at which Howard attempted to sell his secrets.

The next afternoon Fischer brought Howard to meet Murdoch. As they waited for their appointment Fischer was worried that he was catching a cold, and Howard complained of not sleeping well. Unknown to Murdoch at the time, Fischer was wearing a hidden tape recorder supplied by a News of the World employee. The taping was not good quality and there are a number of breaks in the transcript made by Murdoch’s office. After the introductions and opening remarks Fischer appears to be prompting his friend to talk about the Kissinger documents, but Howard strikes out in other directions:

Fischer: “You mentioned to me that you actually gave him [Whitlam] some pretty interesting information that he needed.”

Howard: “Not only information, some other things as well.”

It is possible that Howard is present to see how much his “friend” has revealed to the newspaper proprietor about his illegal activities, and also to make an effort to sell film of a quite separate affair concerning an attack by the Israelis on a US naval vessel. Regarding Australia, Howard claims that he “raised a considerable sum of money for him and the Labour [sic] Party and 15% of what I raised was to be mine as well”. As well as this Tito Howard is quite clear that he has film of Whitlam “accepting money”. The film is temporarily unavailable, he says, but he attempts to negotiate a sale of film that is never delivered. Murdoch does not mention the supposed trade in US documents and gives the impression of encouraging Howard to talk by agreeing to consider high-figure payments for supposed film of Whitlam accepting money.

Murdoch: “It’s a brief case. No question that it’s money?”

Howard: “No question.”

It all seems a fantasy mixed with elements of reality. Howard claimed to have spent four days in Australia and specifically refers to being here on Sunday, December 1 and Monday, December 2, 1975. Whitlam attended public campaign functions in Sydney (on the Sunday) and Melbourne (Monday). On the Monday Fischer was in Melbourne and attended an official ALP function at which he introduced Whitlam to a visiting Iraqi official. If Howard was also present this may be the basis for his claim to have film of Whitlam accepting money from an Arab in public. The talk of raising money for Whitlam and being promised a commission may be based on his own knowledge of Fischer’s activities.

The next day Fischer and Murdoch met again. Part of this conversation is referred to in the Fischer “Statement”. Fischer did not bring up the garbled plots Howard had introduced but cut to the probable centre of the confusing remarks:

It is interesting to note that at the meeting yesterday in London with Mr Murdoch and I, he claimed that the non payment of the second 500,000 dollars was due to his influence because he also felt cheated on some other arrangement with Mr Whitlam.[56]

This odd reference does not make sense without knowledge of the censored pages in the document.

In Fischer’s ASIO file is a photocopied filing card for Tito DeNagy Howard, date-stamped March 17, 1976, which simply notes: “Reputed to deal in the sale of U.S. official cables concerning Israel.”[57] This aspect of Howard’s involvement in the scandal has been ignored by later writers. Given that Whitlam had been engaging in a public debate involving the CIA around the time of the dismissal he may well have been interested in a secret US document if it had been offered to him for verification and purchase—just as Fischer alleged Howard had done with his Iraqi contacts.

Strangely, as close or far from the truth that this speculation may be there is one other element that may belong in this tale, a forgotten piece of political history preserved in Clyde Cameron’s political diaries.

On January 15, 1976, Cameron noticed newspaper reports of a break-in at John Curtin House, the national headquarters of the ALP, and the theft of “Party political” papers belonging to Whitlam. Further reports appeared with David Combe claiming the break-in had happened between December 23 and January 5. The police, it was claimed, were only notified after staff established what had been taken.It all seemed very mysterious to Cameron. One report had a staff member finding “the doors of the Party’s offices unlocked, although the entrance to the building was locked”. The first account, he noted, had claimed “the doors had been forced”. He was intrigued by the vagueness, as if Whitlam’s staff would not have known exactly what was missing. The files had been moved to this secure location from Whitlam’s Parliament House office after the election, “And yet, after more than a fortnight, we are asked to believe that no one is able to tell the police the nature of the allegedly stolen documents.”[58] Perhaps the stolen Whitlam documents were stolen Kissinger documents, which had been recovered by their owners who had ensured that by making sure their presence in John Curtin House was noticed they were leaving an obscure but quite clear message for Whitlam. The logic in this fantasy construction is that if Whitlam was in possession of documents given him by Howard, and these were retrieved by their owners, his probable refusal to continue his “other arrangement” with Howard would account for the hostility Fischer had suggested, and which Howard displayed in Murdoch’s office.

A further odd element in this already strange story occurred sixteen months later when the seemingly forgotten incident dramatically resurfaced when Bob Hawke accused ASIO of the break-in and the theft of documents, and the Canberra police of taking part in a “cover-up”. ASIO was silent. The police responded that although a break-in had been reported “nothing had been reported stolen”. The Deputy Commissioner of Police released a statement saying that “police found no evidence of forced entry into the premises and to this date nothing has been reported stolen”.[59]

The ever-mystified Clyde Cameron talked it over with a fellow Labor politician after an ALP executive meeting:

Mick Young told me he had asked Hawke why he held his press conference alleging that the CIA [sic] had broken into the ALP headquarters in Canberra following the 1975 election. Hawke told Young that David Combe had asked him to hold the conference and make the allegations.[60]

To accuse ASIO of stealing documents that were never reported stolen does seem unusual, even by the standards of a political party who perhaps had half a million dollars stolen from them, and never reported the theft. If this quite elegant little version was academic Aboriginal history, or the history of colonial Tasmania, the points between the dots would be inked into our history books but since it concerns a Labor idol, normal scepticism is advised.

At the time the scandal became public Tito Howard’s name came into the story when he was connected with Fischer’s disappearance in Singapore. When tracked down by journalists he gave a bizarre account of what had happened. Also, while admitting that he had been in Baghdad with Fischer, he stated that the reason for their visit was to sell “35,000 tons of frozen chickens to the Iraqis”.[61] Newspaper interest in him and his fabulous career appears to have died in late March when he was reported occupying a cell in Tuscaloosa County Jail. He had been arrested on nine forgery charges—matters to do with an allegedly stolen MasterCard.[62]

After the scandal Whitlam kept his job as leader of the opposition though he and Combe and Hartley were severely reprimanded. The ALP National Executive made a face-saving claim that no money had been received, none of the three had personally profited, and “none of the three persons directly talked on this matter [the money] with the two Iraqis”.[63] Intending to make a profit from the affair, Bill Hartley revealed plans in June 1976 to apply for a grant to write a book about the affair “using the tools of social science”. Asked how Whitlam would appear in the Labor family saga Hartley said he “would come out quite well”.[64] A few weeks later an imperious summons came from the Iraqi embassy in Japan ordering him to report for a high-level meeting in Tokyo. It would have made a fine chapter in his book. Although the gathering clashed with an ALP Executive meeting in Canberra the calls were insistent and he flew to Tokyo, his expenses paid by the Iraqi government. A representative of the Australian saw him arriving at Tokyo airport and noted that he “was met by a car carrying diplomatic number plates”.[65] At the end of the month, the financial report of the New South Wales branch of the ALP showed a surplus of $247,770, at a time when the federal party was $350,000 in debt after the election. The National Times commented: “The irony of the situation is that while the Federal party was engaging Mr Henry Fischer to secure funds from the Arabs there was a spare quarter of a million dollars sitting in the NSW coffers but never used.”[66] Or had someone made helpful political donations but not realised that the federal and New South Wales branches operated separate accounts?

David Combe had some ASIO difficulties in the early 1980s.[67]

Whitlam, after the election and in the years that followed, may have been of little interest to Iraqi Intelligence or the KGB. Fischer was a Soviet agent, and Bill Hartley was in the pay of the Iraqi government. Whitlam seemed a spent force. Whatever really happened in the Iraqi money affair was known to the KGB, and possibly one or two other security forces. When he stepped onto the international stage at UNESCO it was time, if they did hold secrets from 1975, for their investment to pay off. With a man like Whitlam it would have been crude to attempt overt blackmail although he simply could not have survived another public loss of face with fresh revelations from the revived money scandal. Perhaps also by then Henry Fischer had had some interesting talks with American intelligence, or Israeli, or French, or British, or Australian.

Of the three men involved in SMF, Reuben Scarf, who always denied involvement and disowned Fischer, was made a Member of the Order of Australia for community service and philanthropy by the Hawke government in 1985. He died in 1993. George F. Miller, never seriously mentioned in relation to the affair, died in 1989. Henry Fischer reappeared in America and was involved in more, and equally complicated, personal scandals. His present location is unknown. The registration for SMF Finance Holdings Ltd ended in 1981 when it was struck off by the Vanuatu Financial Services Commission.[68]

Perhaps there are further chapters in this history—not only the real story of the ALP’s Iraqi money scandal, but also the scope of financial support from Iraq to its Australian friends over the years. Much of the story may be in the Ba’ath Party archives taken after the fall of Baghdad or the memories of Farouk Abdulla Yehya, captured on September 25, 2003—present location or fate unknown.[69]

[1] John Blaxland, The Protest Years, The Official History of ASIO, 1963 – 1975 (Crows Nest, 2015), p. 447

[2] Full name: The Frank and Mahid Scarf Memorial Foundation

[3] Credited to a personal interview with David Combe in March 1976, Paul Kelly, The Unmaking of Gough (revised edition St. Leonards, 1994) p. 397

[4] See the Murdoch account of conversations with Fischer in Iraqi Loan (Commonwealth Police Reports), NAA: 1426, 168

[5] “From this point on the promised funds, a gift of $350 000 from the ruling Ba’ath Socialist Party, were always on their way but never actually arrived”: Jenny Hocking, Gough Whitlam His Time, The Biography, Volume II (Carlton, 2012), p. 364

[6] “Fischer, then in financial difficulty, subsequently stole $US500,000 (more than $2.8 million in today’s value) that the Iraqis transferred to a Hong Kong bank with the intention that the businessman would launder it to help pay off Labor’s campaign debts”: Philip Dorling, “Rupert Murdoch’s secret dealings with KGB agent still suppressed”, Sydney Morning Herald, 16 March 2015

[7] The Australian, 25 February 1976; The Sun, 25 February 1976

[8] George Munster, A Paper Prince (Ringwood, 1987 [1985]), p.114 citing Peter Michelmore, “Rupert Murdoch talks about the facts in the Iraki affair”, The Australian, 5 March 1976

[9] Jenny Hocking, Gough Whitlam His Time, The Biography, Volume II (Carlton, 2012), pp. 374 – 375

[10] Iraqi Loan (Commonwealth Police reports, correspondence), NAA: M1426, 165, p. 29

[11] Steve Stickle and Martin Peers, “Murdoch’s Role as Proprietor”, On the Record: http://online.wsj.com/public/article/SB118115049815626635.html

[12] Iraqi Loan [Commonwealth Police Reports], NAA: M1426, 168

[13] Alan Reid correctly points out that Scarf, not Fischer, made the first attempt to contact Murdoch. Alan Reid, The Whitlam Venture (Melbourne, 1976), p. 451

[14] A new file was soon commenced when conversations with Soviet officials were intercepted. See Secret Minute Paper in ASIO file on Combe, Harvey David Mathew, Volume 1: NAA:A6119, 4178

[15] Blanche d’Alpuget, Robert J. Hawke: A Biography (East Melbourne, 1982), p. 294

[16] Brian Toohey, Marian Wilkinson, The Book of Leaks (North Ryde, 1987), p. 78. Much of the book text on the Iraqi Money Affair was published earlier in Brian Toohey, “Where the Missing Half-Million Went: the Iraqi breakfast affair re-surfaces”, National Times, 2 – 13 September 1980

[17] Blanche d’Alpuget, Robert J. Hawke: A Biography (East Melbourne, 1982), p. 294

[18] Iraqi Loan [Commonwealth Police Reports], NAA: M1426, 168

[19] Iraqi Loan [Commonwealth Police Reports], NAA: M1426, 168 doc P, p5

[20] ASIO File on Scarf, Reuben Francis (aka Skaff Rubin), NAA: A6119, 4194

[21] ASIO file on Fischer, Henry John Louis (aka Henri Jean), Volume 3, NAA: A6119, 4200

[22] Letter from Hartley to Abed Qader Daher, 9 July 1975 in Peter Bowers, “View From Inside the Funds Affair”, Sydney Morning Herald, 25 March 1976

[23] ASIO file on Fischer, Henry John Louis (aka Henri Jean), Volume 3, NAA: A6119, 4200

[24] Peter Bowers, “View From Inside the Funds Affair”, Sydney Morning Herald, 25 March 1976, and Fischer’s “Statement”, p. 11

[25] Laurie Oakes, Crash Through or Crash: The unmaking of a Prime Minister (Richmond, 1976) p. 273

[26] Richard Hall, The Secret State: Australia’s Spy Industry (Stanmore, 1978), p. 136

[27] Clyde Cameron, The Cameron Diaries (North Sydney, 1990), p. 55

[28] ASIO File on Scarf, Reuben Francis (aka Skaff Rubin), NAA: A6119, 4194, pp. 34, 49

[29] ASIO File on Scarf, Reuben Francis (aka Skaff Rubin), NAA: A6119, 4194, p. 35

[30] Clyde Cameron, The Cameron Diaries (North Sydney, 1990), p. 70

[31] Fischer “Statement”, p. 9

[32] Australian International News Review, Fraser – 17 July 1965; Whitlam – 11 September 1965

[33] ASIO file on Fischer, Henry John Louis (aka Henri Jean), Miscellaneous papers, Volume 2, NAA: A6119, 3589

[34] Philip Dorling, “Australian violinist recruited to work as Soviet spy”, Sydney Morning Herald, 12 August 2014. While Mitrokhin confirms ASIO’s suspicions there are also possibilities, based on material in their released files, that he my have travelled to the USSR on other occasions. Philip Dorling, “Australian violinist recruited to work as Soviet spy”, Sydney Morning Herald, 12 August 2014

[35] The National Times, 1-6 March 1976, p. 3

[36] David Greason, “Whatever Happened to Henri Fischer’s Stolen ALP Funds?”, Australia/Israel Review, 15 – 28 June 1994

[37] Laurie Oakes, “Whitlam Sensation”, The Sun, 25 February 1976

[38] Rupert Murdoch, “Notes from conversations with Fischer over five days” in Iraqi Loan (Commonwealth Police Reports), NAA: 1426, 168 p. 5

[39] David Combe interview with Paul Kelly, March 1976, Paul Kelly, The Unmaking of Gough (revised edition St. Leonards, 1994) p. 402

[40] Paul Kelly, The Unmaking of Gough (revised edition St. Leonards, 1994) p. 403

[41] Brian Toohey, Marian Wilkinson, The Book of Leaks (North Ryde, 1987), p. 76

[42] Steve Stickle and Martin Peers, “Murdoch’s Role as Proprietor”, On the Record: http://online.wsj.com/public/article/SB118115049815626635.html

[43] Brian Toohey, Marian Wilkinson, The Book of Leaks (North Ryde, 1987), p. 78

[44] Brian Toohey, Marian Wilkinson, The Book of Leaks (North Ryde, 1987), p. 76

[45] Sinclair statement, Iraqi Loan (Commonwealth Police Reports), NAA: 1426, 168 pp. 13 – 14

[46] Paul Kelly, The Unmaking of Gough (revised edition St. Leonards, 1994) pp. 408 – 409

[47] Iraqi Loan (Commonwealth Police Reports), NAA: 1426, 168 Murdoch doc A

[48] ASIO File on Scarf, Reuben Francis (aka Skaff Rubin), NAA: A6119, 4194, p. 175

[49] Interview with Rupert Murdoch in The Australian, 5 March 1976

[50] The single page, undated, unsigned retraction is in Iraqi Loan (Commonwealth Police Reports), NAA: 1426, 168

[51] Fischer “Statement” tabled in Commonwealth Senate, 28 April 1976

[52] Iraqi Loan (Commonwealth Police Reports), NAA: M1426, 168

[53] “Rupert Murdoch talks about the facts in the Iraki affair”, The Australian, 5 March 1976

[54] The photocopied text is very poor quality and some words are partly obscured.

[55] “Text of Conversation between Mr K.R. Murdoch and Mr Henry Fischer, Monday, 23.2.75” in Iraqi Loan (Commonwealth Police Reports), NAA: M1426, 168

[56] Iraqi Loan (Commonwealth Police Reports), NAA: M1426, 168

[57] ASIO file on Fischer, Henry John Louis (aka Henri Jean), Volume 3, NAA:A6119, 4200 p. 64

[58] Clyde Cameron, The Cameron Diaries (North Sydney, 1990), PP. 7 – 9

[59] The Canberra Times, 6 May 1977

[60] Clyde Cameron, The Cameron Diaries (North Sydney, 1990), p. 529

[61] “The adventures of Rupert and two good friends”, Sunday Times, 14 March 1976 in ASIO file on Fischer, Henry John Louis (aka Henri Jean), Volume 3, NAA: A6119, 4200

[62] The Tuscaloosa News, 25 March 1976; The Canberra Times, 29 March 1976

[63] Text of the National Executive resolution in Sydney Morning Herald, 8 March 1976

[64] “Hartley move on loans affair”, Sydney Morning Herald, 9 June 1976 in ASIO file on Fischer, Henry John Louis (aka Henri Jean), Volume 3, NAA: A6119, 4200

[65] “Hartley in Tokyo”, The Australian, 18 June 1976 in ASIO file on Hartley, William Henry, Volume 9, NAA: 46119, 420

[66] “Funds to spare”, National Times, 28 June 1976 in ASIO file on Fischer, Henry John Louis (aka Henri Jean), Volume 3, NAA: A6119, 4200

[67] For interesting versions of the “Combe Affair” see: Mena Blesing, Was Your Dad a Russian Spy? (Crows Nest, 1986); David Marr, The Ivanov Trail (Melbourne, 1984)

[68] Vanuatu Financial Services Commission: 1709, 3124, S.M.F. Finance Holdings Limited, 24.03.81

[69] Reply by Secretary of State for Foreign and Commonwealth Affairs with table of former Iraqi government members detained by Coalition and Iraqi government. Written answers to questions, House of Commons, 2 March 2009, Hansard: www.publications.parliament.uk

2 thoughts on “The Iraqi Money Scandal, 40 Years On

  • acarroll says:

    Michael, thanks for refreshing our memories on this sordid affair.

    One question, with this line:

    “make an effort to sell film of a quite separate affair concerning a supposed attack by the Israelis on a US naval vessel”

    Do you know if this is in reference to the actual Israeli attack on the USS Liberty (a signals intelligence ship) that killed something like 30 odd US service men?

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