September 2018


Laurie Matheson, our man in Moscow

By Thornton McCamish
Image of Laurie Matheson

Laurie Matheson in the Courier-Mail, July 20, 1983 © Fairfax Media

Was ‘Australia’s James Bond’ working for the KGB? Or ASIO? Or both?

For most of the reporters covering the Royal Commission on Australia’s Security and Intelligence Agencies, the afternoon of July 25, 1983 was their first chance to get a good look at Laurie Matheson. The Australian Security Intelligence Organisation’s key witness, an enigmatic figure whom newspapers had dubbed the “third man” in the Combe–Ivanov affair, did not pause to speak to the press. Journalists were left to note the upright bearing of the now notorious businessman, his magnificent overcoat, the inscrutable set of his fine, if severe, features, and the Praetorian Guard of legal advisers who ushered him into Canberra’s Hinkler Building to give his evidence.

Matheson was, in the words of one of those journalists, David Marr, “the uncertain sum of a few fascinating details”. An adept – some said brilliant – linguist, Matheson was a former navy diver who had gone into trade and made a fortune negotiating sales of Australian mutton, butter and wheat to the Soviet Union. Now the secretive “Kremlin-made millionaire” had become the key to Australia’s biggest spying scandal since the Petrov affair 30 years before.

In the early 1980s, the USSR was still the West’s existential enemy. Even faraway Canberra was caught up in the clandestine espionage battles of the Cold War. In late 1982, ASIO had identified Valery Ivanov, first secretary at the Soviet embassy, as a Russian spy; soon after, ASIO’s analysts also concluded that former ALP federal secretary David Combe, who at the time was working as a political consultant and in regular contact with Ivanov, was, if not a spy, then an “agent of influence” who, unwittingly or otherwise, was being groomed to advance Soviet interests in Australia.

How did ASIO know that Combe may have been having compromising dealings with Ivanov? Because Combe talked about Ivanov to Matheson, who had retained Combe, an enthusiastic proponent of closer cultural and trade ties to the USSR, to help him with some business problems in Moscow. And Matheson told ASIO.

After several months of hearings, the royal commission concluded that Ivanov was indeed an officer in the KGB, the Soviet secret intelligence agency. Combe had “allowed himself to be led into a position where his loyalty could become suspect”, but he certainly wasn’t a spy, nor an agent of influence. His reputation was nonetheless in tatters.

The royal commission final report volunteered no conclusions about Matheson. The businessman’s testimony had been given in closed sessions after his lawyers argued his life might be at risk if his ASIO links were made known. They became known anyway. Under parliamentary privilege, a Labor MP denounced Matheson as a “scaramouche and a nark … [who] is protected from any scrutiny of his rotten dealings and those things which he has told to his ASIO masters because of what is laughingly referred to as his ‘cover’”. It was widely assumed that the mysterious trade czar was an intelligence agent of some sort. But for whom? ASIO? Or maybe the Australian Secret Intelligence Service? Surely not Russia?

The Australian public never found out. Matheson maintained his silence. After his death from cancer in 1987, Matheson, who was repeatedly described to me by his old friends as a brilliant autodidact, and a remarkable and charismatic man, drifted into the dim recesses of national memory as the shifty mogul who shopped a mate to ASIO for reasons that have never been clear.

“Now that is an incredible story,” said a former Matheson associate almost before I had finished explaining why I was calling, 30 years later. “Matheson! … The Australian James Bond, I call him.”

If Matheson’s part in Australian history was hazy at the time of the Ivanov affair, it hasn’t become much clearer since. The Official History of ASIO: 1975–1989, for instance, covers the Ivanov affair at length, but makes only fleeting mention of ASIO’s crucial source as a “Russian-speaking, ex-Navy businessman who ran a Melbourne-based firm, Commercial Bureau of Australia”. When I contacted one of the history’s authors about this laconic account, he politely advised that he had nothing to add about Matheson, nor about the fact that, 50 years after he left the navy, Matheson’s service records are still partly classified on national security grounds. His ASIO file is an object that exercises a Holy Grail–like fascination for students of the Matheson legend, but anyone who has seen it risks prosecution merely by saying so, much less describing its contents.

Of course, the appearance of official secretiveness is catnip to connoisseurs of shoe-phone espionage and conspiracy theories. It’s all the evidence we need that Matheson must have been, as David Combe publicly claimed in 1984, “much, much more than a mere ASIO informant of long standing”.

In the absence of hard facts, Matheson’s story has only grown stranger. In the last years of his life he lived at Duneira, the historic mansion at Mount Macedon, 60 kilometres north-west of Melbourne. In 1992, five years after Matheson’s death, Duneira was sold to Stuart Stoneman; from 2002 the S.R. Stoneman Foundation regularly opened the estate for cultural events. Jacqueline Ogeil, who worked as director there until early this year, had long been fascinated by the legend of the house’s notorious former owner. In 2004, she told me, builders repairing Duneira’s roof found bugging wires hidden in the ceilings. It was the Matheson legend that drew many visitors to the tours she conducted of the house – or kept them away. Ogeil once invited a writer who’d covered the Ivanov affair to stay at Duneira during the Woodend literary festival; he emphatically refused. “He said there’s no way he was going to stay in the ‘devil’s lair’.”

There’s nothing spooky about the beautiful memorial sculpture that adorns Matheson’s final resting place at Macedon Cemetery. Carved from the finest Carrara marble, it’s a life-size figure of a naked, slim-waisted sleeping woman, her hip polished to a dull shine over the years by handsy passers-by. But it does seem odd that what must be one of the most sensuous and eye-catching funerary monuments in the country should commemorate an obsessively private man whose life is shrouded in myth and official secrecy. So does the fact that Matheson is not even buried beneath the sorrowing nymph. He’s buried in his other grave. Next one along.

That a man infamous for leading a hidden double life should have two graves seems too perfect, a superfluous extra joker in a pack already stacked with them. If Australian history reads as the most beautiful lies, in Mark Twain’s famous phrase, then Matheson’s legend – a “masterpiece of confabulation”, as David Marr described it to me – seems to have been unjustly neglected. Perhaps the man who created it has been too.

When he came to live in Mount Macedon in 1981, Matheson was a fine-looking man of 51 with a charming young family and a taste for luxury cars, including a burgundy Silver Shadow with personalised numberplates. No one had ever heard of him. “Except that he was enormously wealthy, no one knew anything at all about Laurie,” says Cliff Pannam QC, who lived nearby at the time.

Matheson made an immediate impact on the hermetic social world of the Mount, as one does when one comes out of nowhere and buys the grandest house in a small community. There’s a touch of Gatsby about the Matheson people remember from that period. He had a military background, gracious old-fashioned manners, and an immaculate wardrobe reputedly tailored by Gieves & Hawkes of London’s Savile Row, outfitters to debonair military gents since Lord Nelson’s day. Personable but watchful, Matheson was a generous host yet gratifyingly hard to get close to. “Laurie lived in a world of shadows,” says Philip Dunn QC, another neighbour. It was said that Matheson spoke a dozen languages and owned homes around the world. He regularly entertained rowdy groups of Russian businessmen at Duneira. People noticed.

They noticed the money, too. Matheson had staff. He had an art collection worth an estimated $2 million. Eric Walsh, who had been Prime Minister Gough Whitlam’s press secretary, and later worked as a lobbyist for Matheson, remembers his South Yarra residence as “a bloody great castle”. His family skied every January at Gstaad, staying in Yehudi Menuhin’s chalet. His wine cellar was an Aladdin’s cave of riches people still grow misty-eyed trying to describe. Visitors dropping by Duneira on a Saturday afternoon might be treated to a fine red collected from an old winemaking pal in Soviet Georgia, or to a vintage Fonseca port worth thousands. It wasn’t clear where the money was coming from, just that Laurie didn’t mind spending it, not least on his guests. “You have to understand,” says Pannam, “he was profligate in his generosity. He was always thrusting things on you. You know, ‘You must take this home with you’ – and it would be some rare bottle of Château Lafite or something.”

The young artist Peter Schipperheyn came to know the secretive tycoon several years before he sculpted the nymph for Matheson’s grave. Matheson was a patron, but much more too. To Schipperheyn, Matheson was a fascinating friend, an intriguing man of the world and “just one of the most remarkable people I’ve ever met”. He had no airs. He was passionately interested in art – in 1979 his company sponsored a touring exhibition of treasures from St Petersburg’s Hermitage museum – and fascinated by artists. “Laurie’s generosity and faith in an unproven young artist completely changed my life.”

Of course, lots of very rich people are in all other respects entirely uninteresting, but Matheson was no ordinary silvertail. “Every time I met him, something new emerged about his background,” Pannam says. How many just-add-water millionaires of the 1980s had worked in naval intelligence – and could quote Pushkin in the original Russian? It turned out that Matheson had also led the search for Prime Minister Harold Holt when he disappeared while swimming off Cheviot Beach near Portsea, Victoria, in 1967.

Over time, other tantalising glimpses of Matheson’s military past emerged. “He was an ‘attack diver’ in the Mekong Delta during the Vietnam War,” Pannam tells me. “Or so the story goes. He used to swim underwater, and as the enemy were approaching with limpet mines, breathing through bamboo sticks, he would cut their throats.” Brian Travers*, a diplomat who knew Matheson in Moscow in the mid 1970s, also has a distinct recollection of being told about “offensive operations in Haiphong harbour during the war. Limpet mines were mentioned, I believe.” Over the years, others have publicly claimed that Matheson’s Russian and specialist combat skills were sometimes put to use overseas by ASIS and even Britain’s MI6.

Still, if official secrecy accounts for part of the lurid speculation that came to surround him, Matheson’s own tendency to dissimulate might have something to do with it, too. “Laurie liked to play games,” Dunn told me. He’d tell one person he taught himself Russian when he was serving in Korea and wanted to be able to communicate if he was captured. He’d tell another he’d picked it up while serving on British Royal Navy submarines in the 1960s. Neither was exactly true, as it happens, but the stories were part of Matheson’s charm, especially after a couple of drinks. He once bragged that he controlled half of the world’s refrigerated shipping fleet. He knew Soviet leader Leonid Brezhnev, he said; in Moscow he was occasionally called on to supply – discreetly – hard-to-obtain American cigarettes and disposable razors to senior Kremlin figures.

What’s clear is that, with his carefully shaded background and affable evasions, Matheson was a perfect cipher for le Carré–style fantasies. Even if you didn’t believe the rumours about MI6, Matheson clearly had some unusual skills. He had a photographic memory, for instance, or so he told Peter Schipperheyn. “Very useful for learning languages, he said.” There were other things. He could hold his vodka in the heroic quantities demanded by Russian business protocol. He could repeat entire conversations almost word for word. Once, unprompted, he explained to an admiring colleague the best technique for evading pursuers in a chase situation.

And Matheson was an impressive specimen: strong, practical and capable. When bushfires threatened Duneira in early 1983 he was called to Mount Macedon from his St Kilda Road office. According to a newspaper report, he leapt into his Ferrari and hammered along the Calder Freeway at 230 kilometres an hour. With the help of his caretaker, he beat off embers with a wet hessian sack, saving the historic house from destruction. A newspaper photograph from that day shows him standing undefeated on his smouldering lawn, smudged with soot, gazing evenly at the camera like a man who’d dealt with plenty worse.

Plenty worse was coming. A few weeks later the Ash Wednesday fires devastated Mount Macedon. By sheer chance Duneira was spared, but Pannam’s home nearby was incinerated. “I lost everything. And Laurie said to me, ‘Look, you’ve got to get out of here. I’ve got a house in Greece, and you’ve got to take your wife and kids and go have a rest.’”

It was a magnanimous offer, typical of Laurie. Pannam gratefully accepted. With his young family he spent a couple of weeks at Matheson’s superb lighthouse at Galaxidi, on the Gulf of Corinth. Little expense had been spared in the renovation. The drinks bar, another guest remembers being told, was modelled on the main bar of the Hotel Grande Bretagne in Athens.

There was just one odd thing about the visit. Matheson wanted Pannam to do him a favour when he got to the house. “He said, ‘When you go there, go up to the main bedroom. There’s a wall of wardrobes, and up on the left-hand side, if you put your hand down the back you’ll find there a gun wrapped up in cloth. I want you to take it and go down to the taverna near the pier; I’ve made an arrangement that the woman there will let you have a Zodiac [inflatable boat]. And I want you to go out to the middle of the gulf, and I want you to throw the gun into the water.’”

When he got to Greece, Pannam played along and made a cursory search for the gun. He found it precisely where Matheson had said it would be. “It was a handgun, a Beretta. There were bullets too. And yes, at the end of the pier – there was the woman, and there was this Zodiac. So I went out and I dropped the gun in the water.”

Pannam seemed faintly incredulous even as he described the incident 35 years later. “I’ve got to tell you, this really happened. I had that gun in my own hands. I know! It’s extraordinary stuff.”

One thing journalists found in 1983 as they began to look into Matheson’s background was that the man who would end up with two graves also had two names. Born Lawrence Phelan on Anzac Day, 1930 in Bondi, Matheson grew up in Western Sydney. When he was eight his parents divorced and his mother placed him with the Burnside Presbyterian Orphan Homes, Parramatta. He lived there for five years, and then attended agricultural high schools in Richmond and Yanco. At 17, he joined the navy. Around this time he formally renounced the name Phelan, and took his mother’s maiden name. Officially, Matheson’s 20-year career in the navy is an uneventful tale of steady promotion. The Department of Veterans’ Affairs has him on active duty in a conflict zone only for a few weeks of the Vietnam War, but he almost certainly saw more action than that, in Vũng Tàu in Vietnam, and possibly in Korea too. At some point he began teaching himself Russian using Linguaphone tapes, but only became fluent during an intensive course he took in 1955 at the RAAF languages school at Point Cook outside Melbourne. The one hint of intelligence work in Matheson’s navy record is a year spent on special duties at the “Joint Intelligence Bureau Interrogation Centre” in Sydney in the late 1950s.

Then, in 1968 came a dramatic turnaround. Matheson left the navy and, after a year’s training in Canberra, was, with the backing of Deputy Prime Minister John McEwan, appointed deputy trade commissioner in Vienna, with responsibilities for the USSR. Matheson visited Moscow frequently to develop contacts and research trade prospects, and in 1972 he established a permanent trade commissioner post in the Soviet capital.

After his first marriage ended, he resigned and returned to Australia. A year later he was back in Moscow as the representative of the Melbourne trading house Heine Brothers. When that company gave up its Russian operations, Matheson took them over, opening his own business, Commercial Bureau (Australia) Pty Ltd, in early 1976.

Old Russia hands guessed it might take years for Commercial Bureau to win accreditation. It only took months. In early 1976 Matheson signed a $140 million contract for frozen mutton that may have earned him as much as $4 million in one go. Within a year, he had an exclusive licence that made Commercial Bureau the conduit for most Australian exports to the USSR. Even more profit was to be made from the shipping that Commercial Bureau subsidiaries chartered to land it all in Soviet ports. When Matheson began visiting Moscow in 1969, bilateral trade stood at a meagre $42 million; by 1979 the USSR was buying nearly $1 billion of Australian goods and services a year. This may have been the fruits of brilliant deal-making, murky patronage or plain luck; it was certainly an excellent business model. Australian farmers were selling more mutton, beef, grain and butter than they could ever have dreamed, largely thanks to one little-known ex-navy diver who employed 30 people in several offices around the world.

“Is it the case that you became very wealthy in a short period after the commencement of the company, you personally?” David Combe’s counsel asked Matheson at the royal commission.

Matheson: “In the sense that I am the owner of the company, that is true.”

In 1978 Commercial Bureau acquired a subsidiary to distribute Stolichnaya vodka in Australia. Actor Omar Sharif flew in for the glittering launch at the Windsor Hotel. Afterwards Matheson met young financial journalist Ian Reinecke at the bohemian Balzac restaurant in East Melbourne for a rare interview. Reinecke recorded Matheson’s final RAN rank as lieutenant commander; he noted that Matheson had headed the search for Holt and had been “a top Australian Navy expert on Soviet affairs”. Matheson complained that it was hard to “convince Australians that the USSR is interested in trade rather than politics”, and generally styled himself as a man of impressive connections. “Mr Matheson invites the description ‘eminence grise’ as if the phrase was invented for him,” Reinecke wrote.

“Chronic dissembler” is another phrase that comes to mind. Matheson seems to have been irresistibly drawn to misdirection, as though the simple truth, without embellishments or erasures, was always insufficient to his purpose, whatever that was. The story that Matheson had “led” the search for Holt in 1967 fell apart under gentle media probing: navy sources confirmed that 32 specialist divers had participated in the search, and Matheson wasn’t one of them. He certainly wasn’t in charge. And while he may have had a photographic memory, there is no evidence he had other languages apart from Russian, and enough Greek to get by. A claim that he was “close” to Tony Eggleton, a Liberal Party federal director, was later dismissed by Eggleton himself as “poetic licence”.

In the memories of many people I spoke to, Matheson gives off a thrilling, slightly volatile glow of charisma. Not in Reinecke’s. “He was obviously a pretty sophisticated operator, but he was trying a bit hard,” Reinecke told me. “Looking back, my one real impression of him was that there were elements of le Carré: you know, the careful recitation of his background, and his anxiety to position himself as a neutral player between the USSR and Australia.”

The mild businessman’s mug shot published with Reinecke’s story is certainly hard to reconcile with the phantom who had done jobs for MI6 and hunted enemy infiltrators in the rivers of South Vietnam.

But then the mild, nothing-to-hide businessman was another one of Matheson’s personas. By 1980 he had deputised most of his work in Moscow, and his ambitions in Australia had grown well beyond frozen mutton. He wanted to sell Soviet power plants to state governments. His consultants were lobbying to get approval for a giant Australian–Soviet coking coal co-venture in Queensland, and a scheme to launch a joint fishing fleet out of Tasmania. These were deals worth billions. Matheson would turn up to Canberra business dinners in a Lamborghini. He entertained the Soviet ambassador at a sheep-grazing property he’d bought in Wee Jasper. He decided he would like to join the Melbourne Club, and retained a consultant glad to help him work out how to get in. He also wanted a knighthood, in recognition of all he’d contributed to trade and the arts. He dispatched a consultant, Derek Amos, to talk to National Party officials in Canberra and see what could be done.

This arriviste grandee is unrecognisable to some who thought they knew him well. Pannam remembers being astounded when he heard that his friend had applied to join the Melbourne Club. “I can’t believe he even wanted to be a member,” Pannam says. “He was too solitary for that. He wasn’t a joiner. He was the opposite.”

Perhaps the most remarkable Matheson is the one hiding in plain sight in the national balance-of-trade figures of the 1970s. For a solitary former navy diver and intelligence officer, Matheson made an inspired trade negotiator. In the early days, making frequent trips from Vienna, he lived a “suitcase life” in grim Moscow hotel rooms under oppressive surveillance. But as time went on, with one visa extension after another, he doorknocked his way through byzantine trade and foreign affairs bureaucracies, gradually building up connections and contacts. It took patience, persistence and charm. Tony Kevin was a young diplomat when he met Matheson in the early 1970s. “Laurie was one of the most charismatic people I’ve ever had the fortune to meet,” he says. “He had this lovely natural way of connecting with Russian people at all levels. He really had a phenomenal ability to create trusting relationships, at a time and place where trust was in short supply.”

He needed it. Many of the trade bureaucrats Matheson dealt with at the State Committee of External Economic Relations were under the influence of the KGB, and some were KGB officers themselves. Matheson suspected his Moscow flat was bugged; he knew Russian intelligence officers secretly interviewed his local staff about their work. An Australian security official who worked in Moscow in the 1970s, Peter Gray*, says the city was “a very hostile environment” for someone like Matheson. “The Russians would have expected someone working out on his own like that to be an intelligence gatherer, and they would have known for sure about his naval background. If they have their suspicions and decide they want to target you, they set you up and you get booted.”

As the royal commission revealed, Matheson was occasionally briefing Australian security services on the things he saw in the USSR. This wasn’t necessarily unusual. Diplomats were regularly debriefed by Australian intelligence when they returned from the USSR, and ASIO was naturally interested in any information someone like Matheson could provide. But that only makes his highwire act in Moscow more remarkable. Matheson did everything he could to show there was nothing to hide. He deliberately eschewed embassy facilities, preferring telegrams and unsecure phones. He lived in the open.

A lot of foreigners found Moscow postings gloomy and oppressive, and kept to themselves; Matheson mixed with Russians. “Laurie was a patriot,” Gray told me. “But whoever he was talking to, he was direct, and sincere. He listened very carefully, and people could tell he was truly interested in them and was genuinely curious about Russia.” He loved the opera and ballet. He introduced younger colleagues to some of the city’s pleasures: the parks, sailing on nearby lakes, and the raffish riverboat nightclubs that more circumspect diplomats avoided as potential honey traps. “He helped me understand the place a lot more and meet a few people,” says Brian Travers, Matheson’s young diplomat friend. “He was good like that. There was a lot of drinking and a lot of parties, and long Sunday lunches in winter. He was very charming.”

This Matheson, the bridge-building Russophile and driven deal-maker, is still a complicated guy. He was not a team player. He was furious when he thought the Australian ambassador was leaking gossip about Matheson’s work to other Western diplomats in the early 1970s. Later, he didn’t bother hiding his contempt for what he saw as the sheltered, gossipy life of the Australian embassy, which he referred to as “the comic opera”. Not surprisingly, he managed to antagonise two successive ambassadors with this attitude; one forbade his staff from having anything to do with him.

Travers remembers Matheson being very stressed at one point in the mid 1970s. “Deals were going sour and he had become quite unpleasant, very much on edge, and drinking far too much.” When he drank, he could become abusive. At any time he could be plain mysterious. Travers recalls Matheson telling him, on one languid Sunday afternoon, that he was a communist. “Why was he telling me that? Was he acting as a provocateur? Was he working for ASIO, trying to squeeze out from people like me that we were fellow travellers?” Travers still has no idea.

“He was a consummate actor,” Tony Kevin says. “Laurie had a chameleon-like ability to fit into any surroundings. So he had the right personality to be a spy. But he also had the right personality to be a trade diplomat.

“I guess the conclusion is that there’s not much difference in the skill sets.”

Matheson’s link to Australian intelligence services was an unwelcome revelation for David Combe, of course – and for consultant Eric Walsh, who also became entangled in the royal commission thanks to information Matheson supplied to ASIO. (“He said to me on more than one occasion: ‘Mate, I swear to you I’ve got nothing to do with ASIO. Ask the attorney-general! Eric, I swear to you.’”) But the most telling fact to emerge from the publicity surrounding the affair was that Matheson’s business had been struggling since the early 1980s and was now in serious trouble. In Moscow, Commercial Bureau was bleeding funds in demurrage charges over a disputed mutton shipment; in other notable flops, the company had been unable to fill an ambitious butter contract, and had supplied a mix of old and new cheese for another order specifying new only. The Tasmanian fishing venture was mired in political difficulties. Most seriously, a senior employee, Bruce Fasham, had broken away to set up a rival company. Matheson thought Fasham was white-anting his prospects both in Moscow and Canberra, and their respective lawyers had been slugging it out in the Victorian courts.

The attempt to suppress information about Matheson’s business affairs at the royal commission only strengthened the impression that ASIO was protecting a key source. Careful analysis of Matheson’s censored testimony showed that he had resumed briefing ASIO in November 1982, around the time that Valery Ivanov was identified as a spy. Some wondered whether ASIO had used Matheson to set up Combe. Matheson wondered whether they’d used Combe to set him up. Still others noted that, despite the stale cheese fiasco, the Russians had thrown Commercial Bureau a lifeline with two timely meat contracts at the end of 1982. What exactly did the Soviets get in return for Matheson’s exclusive accreditation, apart from American cigarettes on the sly and a friendly voice in a hostile country? “I’m not trying to say that everything Russia does is beautiful,” Matheson said in a 1979 TV interview. “Obviously it is not … [But] I think they need our friendship and understanding, and I think we could use theirs.”

A volatile mix of secrecy and misinformation fed speculation everywhere, even in cabinet. Combe testified that when he saw Deputy Prime Minister Lionel Bowen at Parliament House in March 1983, Bowen told him he wouldn’t see Matheson, Combe’s client. Why? “Because he works for ASIO.” According to Special Minister of State Mick Young, Bowen was “enormously antagonistic to Mr Matheson” when the National and International Security Committee met in April to consider expelling Ivanov. Combe later wrote that Bowen grilled the director-general of ASIO about Matheson’s Russian links and naval intelligence background, even asking if ASIO was sure “Matheson wasn’t a KGB contact himself”.

Matheson refused to speak, even as he watched everything he’d done as a trade diplomat and businessman to civilise relations between Australia and Russia turn into a tabloid nightmare.

Peter Schipperheyn remembers sitting with Matheson in the garden at Duneira one afternoon when a helicopter arrived overhead, bristling with telephoto lenses. “A couple of times I asked him, ‘What’s all this about you being a spy?’ He’d just say, ‘It’s all bullshit. I just want to make money.’” But Matheson was conscious of being closely watched. “I was quite sure my phone was being tapped,” Schipperheyn says. “I’d hear these click-clicks when I spoke to him.” Consultant Derek Amos visited Matheson’s South Yarra home one day and noticed two men sitting in a large black car. When he came out later the car was still there, but parked in a different position. Amos drove to a payphone and called Matheson. “He just said, ‘Oh, thanks for letting me know.’ He never mentioned it again, and when I brought it up later, he just said, ‘That’s okay, don’t worry about that.’”

Matheson was not as sanguine as he seemed. His ASIO handlers found him increasingly agitated during their meetings. He had become obsessed with what he perceived as former associate Bruce Fasham’s treachery. And he felt abandoned by the government. The strain was showing. Cliff Pannam got a phone call late one night at Mount Macedon. “Laurie said, ‘You’ve got to come up here immediately.’ I said, ‘What’s up?’ He said, ‘I’ll tell you when you get here.’”

Pannam collected Phil Dunn on the way and drove to Duneira. Matheson was standing on the lawn outside. “He’s got night vision goggles on and he’s got a pistol in each hand and he’s going, ‘Those fucking Paks are here to kill me! Now, boys, we’ve got to be very careful because these bastards, they’re very good.’” No Pakistanis were found. It makes a curious picture, though: two nervous lawyers and one mutton magnate looking for Pakistani hit men in a labyrinth of moon shadows and rhododendrons. Dunn remembers that night, too. He told me he hadn’t mentioned it because he feared it would sound a bit …

“Unbelievable?” I suggested.

“I was going to say, florid.”

Matheson’s role in the Ivanov affair slowly drifted out of the papers. But his troubles weren’t over. In late 1983, police raided Commercial Bureau’s offices in Melbourne, seizing 20 boxes of documents. Faced with debt, tax trouble and a steady stream of salacious publicity, Matheson sold Commercial Bureau to Elders (IXL), who held a fire sale of old Russian stock – or “Matheson memorabilia”, as one newspaper called it – at an auction in Port Melbourne. Lots included Ural and Vostok motorcycles, Jupiter sidecars, a small passenger boat, and a corn loader. Bulked out by rubberneckers, the crowd was large and the bidding brisk.

For Matheson there would be no knighthood. He didn’t get into the Melbourne Club either. A rumour went around Mount Macedon that he’d been blackballed.

By June 1984 the Australian Federal Police was investigating Commercial Bureau’s tax affairs in earnest. Investigators set out on an international paperchase, visiting the offices of shipping companies associated with Commercial Bureau in New York, Hamburg, Singapore and Hong Kong. Ahead of them at every point were Matheson’s lawyers. For six weeks they hurried between filing cabinets in three continents, travelling first class the whole way. On the transatlantic leg they flew Concorde.

Nonetheless, in October 1985, Matheson appeared in court to face charges related to alleged tax fraud.

Then – abruptly – the case was suspended. An allegation had been made within the AFP that an investigator had fabricated incriminating evidence using seized Commercial Bureau letterheads and an AFP typewriter. He was charged with criminal fraud. The trial ran for one week in June 1986 in the ACT Supreme Court. A jury found him not guilty. The original tax charges against Matheson were also dropped.

No one was guilty of anything. Four years of trial by media and parliamentary privilege, a royal commission and four court cases had proven nothing against Matheson, exposed little about his commercial dealings, and revealed almost nothing about his past. At the heart of the babushka doll of the Matheson legend, it seemed, was only a man’s uncanny ability to make people see things that were never there.

Was it just a tragic personality flaw? Or was it the ingrained habit of someone who for 40 years had survived in a world where shadows provide vital cover? For whatever reason – patriotism, a code of honour, legal advice or fear – Matheson chose not to explain himself to history.

Phil Dunn told me he was once asked to do Matheson a favour. He too was enjoying Matheson’s hospitality at the house in Greece. “This would have been 1984. There was a metal box that Laurie wanted me to locate and then dispose of. He asked me not to open it. He just said, ‘I’d like you to punch some holes in it and throw it into the ocean.’” The box was hidden in a staircase. After much tapping and fiddling, Dunn eventually located a loose riser, and discovered a space behind. “And there it was, this little metal documents box with a handle.”

Dunn fetched a hammer and a chisel from the garden shed. Even though Matheson had asked him not to open it, he did anyway. He looked inside. Then he closed the box, punched some holes in the lid, and tossed it into the sea. It took a surprisingly long time to sink, he remembers. “When I told Laurie later, he just said ‘good’ and never mentioned it again.

“And you know what was in that box? Nothing. It was empty. I mean – what are you supposed to make of that? What does it mean?”

* Some names have been changed.

Thornton McCamish

Thornton McCamish is a Melbourne-based journalist and author. His most recent book is Our Man Elsewhere: In Search of Alan Moorehead.

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From the front page

Illustration by Jeff Fisher

Letter from Dunkley

As a byelection draws the nation’s focus to the scrappy suburb of the author’s childhood, a visit reveals the damage wrought by the housing crisis

Kim Williams seen through window with arms half-raised

The interesting Mr Williams

At a time when the ABC faces more pressure than ever before, is its new chair the right person for the job?

Andrew Tate in dark sunglasses flanked by two men, attending his trial in Bucharest, Romania, July 2023

The Tate race

Online misogyny touted by the likes of Andrew Tate (awaiting trial for human trafficking and rape) is radicalising Australian schoolboys

Exterior of the Department of Treasury, Canberra

Tax to grind

Tax reform should not be centred on what we want, but on who we want to be

In This Issue

Image of Leonard Bernstein

Leonard Bernstein: show tunes and symphonies

Centenary celebrations highlight the composer’s broad ambitions and appeal

Still from Leave No Trace

The hermitic world of Debra Granik’s ‘Leave No Trace’

The ‘Winter’s Bone’ director takes her exploration of family ties off the grid

Image of Low

Low’s ‘Double Negative’: studies in slow transformation

Twelve albums in, the Minnesota three-piece can still surprise in their unique way


Labor’s great big new tax plan

Bill Shorten wants to reframe how we tackle the budget

More in The Monthly Essays

Kim Williams seen through window with arms half-raised

The interesting Mr Williams

At a time when the ABC faces more pressure than ever before, is its new chair the right person for the job?

Rehearsal for the ABC TV show ‘Cooking with Wine’, March 13, 1956

Whose ABC?

Amid questions of relevance and culture war hostilities, the ABC’s charter clearly makes the case for a government-funded national broadcaster

Andrew Tate in dark sunglasses flanked by two men, attending his trial in Bucharest, Romania, July 2023

The Tate race

Online misogyny touted by the likes of Andrew Tate (awaiting trial for human trafficking and rape) is radicalising Australian schoolboys

Close-up of smiling Kathleen Folbigg after being acquitted at the New South Wales Court of Criminal Appeal, December 14, 2023

By her own words

How systemic misconceptions around women’s guilt led to a 20-year miscarriage of justice for Kathleen Folbigg

Online latest

Osamah Sami with members of his local mosque

In ‘House of Gods’, Sydney’s Muslim community gets to be complicated

Plus, Barnaby Joyce shines in ‘Nemesis’, Emma Seligman and Rachel Sennott deliver ‘Bottoms’, and Chloë Sevigny and Molly Ringwald step up for ‘Feud: Capote vs. The Swans’.

International Film Festival Rotterdam highlights

Films from Iran, Ukraine and Bundaberg were deserving winners at this year’s festival

Two women on a train smile and shake hands

‘Expats’ drills down on Hong Kong’s class divide

Plus, Netflix swallows Trent Dalton, Deborah Mailman remains in ‘Total Control’ and ‘Vanderpump Rules’ returns for another season

Image of a man playing music using electronics and the kora (West African harp)

Three overlooked albums of spiritual jazz from 2023

Recent releases by kora player John Haycock, trumpeter Matthew Halsall and 14-piece jazz ensemble Ancient Infinity Orchestra feel like a refuge from reality