Underbelly 4 Read online

  His name was Superintendent Peter Halloran, and he was in charge of witness protection for the Victoria Police. The call was short and grim.

  ‘He said: “You have to get out of the house immediately. You have been compromised”,’ a disillusioned Stephens was to recall later.

  Stephens wasn’t happy, but he didn’t argue. He knew Halloran was not the type to over-react. The policeman with more than twenty five years practical experience never took a backward step and was not prone to exaggeration. If he judged that being ‘compromised’ was a matter of life and death, then Stephens accepted it.

  That didn’t mean he had to like it. He put the handpiece back in the cradle, composed himself, and woke his wife, their two sons and visiting mother-in-law, packed a few possessions and ordered a cab to take them to the railway station.

  And he did something that had become second nature to him over the previous five years when talking to his family.

  He lied.

  This time he told them they needed to leave the country for a few days because their permanent resident status had finally come through and they could now re-enter Britain as immigrants rather than visitors.

  On the train to London the rest of the family chatted, happy that their future appeared to be finally secure. But Stephens was quiet, still thinking of Halloran’s call and what it really meant.

  Not that he needed to dwell on it. He knew all too well that he was the most important witness in the prosecution case against Australia’s biggest amphetamines manufacturer – John William Samuel Higgs. The brutal truth was that he had been moved to the other side of the world to keep him alive long enough to testify.

  The case that had taken eight years to build would live or die on the sworn evidence of Stephens, a man who stumbled into the investigation and was later manipulated into giving evidence against a drug cartel that had corrupt police on its payroll.

  Now, in one of the biggest security breaches in policing, the electronically-protected drug squad office in St Kilda Road had been burgled in what was clearly an inside job. It was an appalling scandal of the sort that erodes the foundations of legitimate police work in a democratic society, and yet it happened just as blatantly as it might have in a South American cocaine republic.

  The thieves ignored thousands of pages and hundreds of files stacked neatly on twenty-four shelves in three grey bookcases in the locked evidence room. There was no attempt to disguise what they wanted: the blue binders that contained more than one hundred statements that Stephens had made on the activities of Higgs.

  The thieves also grabbed receipts and bills that gave away the secret witness’s not-so-secret address in Britain.

  Higgs and the police knew that if Stephens was neutralised – as either a credible witness, or even a living one – the prosecution case would collapse.

  The security breach, discovered in January, 1997, was not the first and would not be the last time that Stephens was to feel like a foot soldier whose generals were all too ready to sacrifice him as an unfortunate casualty in the war against drugs.

  Over time he began to fear his enemies less and realise many of his problems were being generated by those who were supposed to protect him.

  He was at risk of being killed by friendly fire.

  BACK home in Melbourne, Stephens had been a surefooted businessman who could make money and lose it just as quickly. A smart, savvy man with an eye for a dollar, he would latch on to an opportunity only to become bored and let his work drift.

  During these lapses his social life revolved around playing cards, often all night, and in 1989 he was declared bankrupt after a long, lean run. But he was a great salesman and whenever he was in financial trouble he would return to his core business of selling cars to make quick bucks. By the early 1990s he had climbed back to making business deals outside the car industry and buying and selling produce on an international scale.

  Through an old card-playing mate he was introduced to a man who wanted business advice. Enter John Higgs, a middle-aged man with a past. The two first met at the Britannia Hotel in North Melbourne in June, 1992.

  ‘He was involved in a fish shop in Geelong and wanted to get an export licence to sell fish,’ Stephens was to recall of that first meeting with the man who seemed part motorcycle gangster, part millionaire. Higgs was also exploring the viability of exporting stock feed to Asia and, apparently, making several overseas trips to set up the business.

  The two were to meet many times in the following twelve months. It was the typical transition from social to business to friendship that Stephens had developed with others throughout his adult life. But, being gregarious by nature, he had friends on both sides of the law.

  One of them was Ian Tolson, who had been a policeman for twenty-five years, with more than ten of those spent investigating organised crime for the Bureau of Criminal Intelligence and the National Crime Authority.

  As soon as Stephens told Tolson of his new business contact the detective saw the opportunity of tapping into a drug network that up until then had always stayed one step in front of the law – often with inside help. Tolson was a recognised expert in cultivating informers and, believing the businessman with a wide network of associates could be of value, registered Stephens as an intelligence source.

  He was given a codename … E2/92.

  The understanding was that Tolson would use Stephens to gather any information that came his way. It would be a long way from hard evidence but it could be useful. It certainly couldn’t hurt. But he warned Stephens not to get out of his depth because Higgs was a heavy gangster – a man with a reputation for being able to make enemies disappear.

  Stephens fronted Higgs about his past and the former bikie freely admitted his prior convictions for drug dealing but said he was now interested in making money legitimately. Then, in a meeting in early 1993 in Stephens’ office, Higgs spotted some paperwork on the desk over a fertiliser deal with the chemical giant ICI.

  It was enough to spark a new level of interest by Higgs in his new pal. The drug dealer had fallen out with his chemical supplier in Sydney, ‘Kiwi’ Joe Moran, over a failed amphetamines cook and needed a new contact. Stephens looked promising.

  Within weeks an associate of Higgs arrived at the office and asked Stephens if he could provide bulk chemicals. It didn’t need an industrial chemist to tell Stephens he was being asked to become a partner in the amphetamines business.

  He went to Tolson, who was about to leave the police force to set up his own travel agency. The soon-to-be retired policeman put him in touch with Wayne Strawhorn of the drug squad – an investigator with a long term interest in Higgs’ activities.

  On 18 June, 1993, the three men met in a North Melbourne coffee shop. Strawhorn told Stephens he was interested in the activities of Higgs and would be grateful for any information. It was all low key. Nothing was written down and Stephens agreed to chat with the detective if he found out anything interesting.

  As a card player, Stephens should have known that Strawhorn was playing his hand close to the chest. The truth was that Higgs was the biggest amphetamines dealer in the country and, significantly, had proved to be untouchable for years.

  He had been targeted by the National Crime Authority, Australian Federal Police and the drug squad since 1984 and nine separate operations into allegations from massive drug dealing to murder had all failed. It was a pattern that screamed one thing to a knowledgeable observer … and that was: Higgs had inside help, the best police money could buy. This was dangerous ground indeed for an informer, but the man they called E2-92 probably wasn’t to realise that until later.

  The drug squad started yet another probe into Higgs and his vast network in July, 1991, but it too appeared to be going nowhere. Only eleven days before Strawhorn met Stephens for the first time the drug squad, Detective Chief Inspector John McKoy, wrote in a confidential report, ‘a concerted effort has been made to obtain a reliable informer against Higgs by targeting his know
n associates. To date detectives are no closer to charging him with drug matters.’

  Then E2/92 dropped in their lap.

  ‘He was a Godsend for us,’ Tolson said later.

  ‘He had an amazing network and was able to provide information that was useful to ASIO, Federal Police, Customs and the DEA in America. I still scratch my head and wonder why he did it.’

  But, according to someone who knew the new recruit best – Stephens’ wife, Julie – it was typical of him to agree to gather information. Not because of any noble anti-drugs sentiment, but because he was always looking for a new distraction or interest. ‘I don’t believe he had an altruistic motive. I believe he was attracted to the thrill of police work,’ was her blunt summary, much later.

  Years later, Stephens still doesn’t know why he agreed to be involved. He shrugs his shoulders, smiles and says: ‘It just happened, who knows why?’

  Higgs was a leviathan in the drug world. When street dealers deal in grams and major traffickers move kilos, John Higgs talked of tonnes. In 1992 police were told his syndicate had successfully completed a $48 million amphetamines cook.

  A career criminal with prior convictions for theft, assault, carnal knowledge, manslaughter, assaulting police and possessing cannabis, he was looking to monopolise the speed market. He would become the Bill Gates of amphetamines.

  The one-time member of the Black Uhlans motorcycle gang bragged that he had taken amphetamine production out of the hands of bikies and turned it into an industry. Like the international diamond cartels, he even held back hundreds of kilos of ‘product’ to ensure the market was not flooded and the price remained stable.

  He was relentless in his pursuit of base chemicals, stockpiling them for his ‘cook’, Brian Alexander Wilson, a failed New Zealand industrial chemist student who could produce top-class speed on demand.

  Higgs moved truckloads of chemicals without problems, provided two hovercrafts for a syndicate planning to smuggle cannabis from Papua New Guinea into the Northern Territory and, like many big crooks, was involved in race fixing as a means of laundering black money as race ‘winnings’.

  When police finally moved on Higgs they seized $371,000 in cash, $415,000 in counterfeit US currency, properties, cars, guns and eight tonnes of chemicals capable of producing amphetamines then valued at more than $200 million.

  Police were told that at one stage he had $18 million invested in Queensland real estate and was able to lose $600,000 in a failed rock concert without blinking. Police found that $1,733,439 went through his hands between 1982 and 1993, not that this was a big proportion of his actual turnover. At one stage he owned an ocean-going trawler in Eden, NSW, a fish processing plant in Geelong and a retail outlet.

  He also owned a string of trotters and an excavation business and used a former town planner with corrupt contacts to organise building permits. One of his companies won a lucrative contract to remove soil from the Crown Casino complex.

  He also had a horse feed and supplement business with connections in Malaysia and Singapore.

  ‘Higgsy wanted to control whatever he did. He wanted to make a billion dollars worth of speed. Why did he want chemicals that could have made $580 million worth of amphetamines? He wanted to corner the market. He had been king for so long people always came to him,’ Stephens said of him.

  STEPHENS was to talk to Strawhorn virtually every day for three and a half years. Along the way, he became the single most important intelligence gathering resource for Australian law enforcement.

  Operation Phalanx was to last eight years, result in 600 intelligence reports, sixteen separate task forces, the arrest of 135 people and destruction of the country’s most sophisticated drug syndicate.

  A police undercover operation rarely goes to plan. The targets are usually cunning, disposed to violence and often erratic. Usually, the inside man is a policeman who has completed the covert operators course. They are volunteers who at least know exactly what they are dealing with.

  The police department maintains it has an obligation to the detective above the operation and will cancel investigations that get too risky.

  Stephens, not being a police officer, was allowed to take unbelievable risks in unbelievable circumstances. In many ways he survived because he didn’t know what he was doing. He didn’t show fear because he didn’t comprehend all the dangers.

  At most meetings he wore a tape to gather evidence, even though discovery could mean death. Once, for instance, he was to meet convicted murderer Eris Censori in Brunswick. ‘I got out of the car and for some reason I went back and ripped the tape out,’ he recalled later. Censori met him with the words: ‘Someone’s been lagging.’

  He took Stephens to a Brunswick park and stripped him to his underwear. He found nothing and Stephens went home alive yet again.

  The agent was given a new mini-tape recorder to gather evidence. Detectives assured him it was ‘state of the art’ and ‘foolproof.’ He went to a meeting with some drug leaders with renewed confidence. As he sat there he caught his own reflection in a window and could clearly see the red light from the recorder blinking under his shirt. Horrified, he slipped his left hand under his shoulder to hide the light that would have given him away.

  In Operation Phalanx the undercover was an amateur and the investigation just evolved. Decisions were made on the run and Stephens had to rely on his ability to think on his feet to keep from being exposed. As long as he kept Higgs onside, the others would follow.

  Higgs surrounded himself with family and mates he had known for years. He was confident they would not betray him. But he needed Stephens or, more importantly, Stephens’ contacts in the chemical industry.

  Even as his associates were being arrested Higgs didn’t want to believe the leak was his chemical supplier. He needed his new mate and was blind to the mounting circumstantial evidence that Stephens was a double agent.

  Police supplied their inside man with tonnes of chemicals he provided to Higgs – utes, cars and trucks full of the stuff. Higgs could not afford to believe his golden goose was a police canary.

  For the last year and a half I wanted to stop. I had had enough, but the thing had taken on a life of its own. I don’t even think the police knew where it would end,’ he was to recall.

  The near misses, mostly due to police carelessness, were terrifying. Once he was supposed to have driven to South Australia to pick up barrels of chemicals to deliver in Ballarat. He met his police contacts near the drop-off point. They were waiting with a Holden utility complete with the drums on the back.

  They borrowed it from a local dealership and there was three kilometres on the speedo. If they had seen that I would have been in trouble so I smashed it with a coke bottle.’

  He said the rumour started to go around the syndicate that he was a police informer. One crook, Les Burr, claimed he found a police bug behind the radio of a car provided by Stephens.

  ‘He was having coffee in Ringwood when they (the police) knocked off his car to fit the bug but when they drove back there was no parks so they dumped it about two miles away.

  Les came out and reported the car stolen and the police said it was parked up around the corner and he must have forgotten where he had parked it.

  Stephens said that when police learned the bug had been spotted they grabbed Burr in the country.

  They took him around the corner and he thought he was going to be flogged. Then they let him go, so he went back to the car – and there was a screwdriver on the floor and the bug was gone.’

  Burr told Higgs the police were on to them but, amazingly enough, the ‘King’ refused to listen. ‘Burr was a nutcase. He was paranoid and always thought the army was after him so no-one believed him.’

  Stephens at times was on a high as he gathered evidence. Too high, sometimes. ‘I remember sitting in Brunswick at the back of the old water works. I was with Higgsy’s son (Craig, who was later murdered) and two other guys. We took delivery of thousands of packe
ts of Sudafed (which can be used to produce amphetamines) and we had to unpack them and peel them from the packets. We were in a disused shed and the police had video cameras across the road. Sharon (Senior Detective Sharon Stone) said we needed some light and I said, “No worries. I’ll burn the packets.”

  ‘Well, they were made of wax, weren’t they, and when I put a match to them the whole joint nearly went up. You could see it from Sydney.’

  He said two brothers under investigation through Operation Phalanx found a bugging device and drove to the Australian Federal Police headquarters and gave them the device. ‘They thought the Feds were working on them.’

  At one stage Higgs was sitting in Stephens’ office when Strawhorn rang for an update. ‘I said I couldn’t talk but he said he needed to know what was happening. I said to Higgs “John, this is the bloke from the chemical company – talk to him. So they had a chat”.’ Strawhorn managed to pass himself off as the insider.

  As the investigation reached a climax and many of the main players were being arrested, Stephens became convinced he was about to be exposed. Just as he was arranging to join the witness protection program and fly out of Australia Higgs rang, demanding a meeting. Would this be the final, fatal confrontation?

  ‘I had to go. We met in a coffee lounge in Carlton. But he just wanted to introduce me to a guy who wanted to import pineapples from Thailand.’ To the end he was looking for new deals, unaware that his career was over.

  Stephens was in the drug squad signing statements less than forty-eight hours before fleeing overseas when his mobile telephone rang. It was Eris Censori wanting to meet him.

  ‘I told him I was tied up but I had to go in case he went to my house and saw the furniture was gone. I got Strawnie to grab his gun and we met him in Punt Road.

  ‘All he wanted was directions to get to Lakes Entrance. I got the Melways from Wayne and told him how to get there. It was all getting unbelievable.’

  It was to get worse.

  WHEN Stephens first got involved with the drug squad he understood he was going to be in the background providing the odd tip. But, slowly, he was drawn in from a bit player to be the star of the show.