Ever since coming to office, Whitlam's apparent challenging of the future of US facilities at Pine Gap, his condemnation of the American bombing of North Vietnam and his perceived soft stance on Eastern bloc issues was reported to have rankled American officials deeply. Whitlam was known to have a deep antipathy to the widely alleged US involvement in destabilising left-wing governments, and their apparent involvement in the overthrow of the elected Salvador Allende government in Chile in September 1973 was a case in point.

Whitlam was so unhappy with the closeness of ASIO's ties with its US partners that he gave instructions to Barbour to sever them. But Barbour felt this would be harmful to the nation, causing damage to critical intelligence links with the United States. Barbour decided, therefore, to maintain informal contacts with the United States government. His striking stance revealed a surprising level of courage and inner strength – something detractors accused him of lacking.

The US intelligence community had been uneasy about the Whitlam government since its election in December 1972 and had expressed concern about the incoming government's policies. Indeed Nixon and Kissinger's national security study of mid-1974 was instigated as a result of these concerns, yet did not trigger any attempt at underhanded interference in Australia's political process. By early 1975, however, US concerns had become more intense.

While much of the following story is about the US intelligence community and the Australian government, it needs to be told in some detail because of false allegations that ASIO was working in response to US intelligence direction and not on behalf of the Australian government, and that US intelligence was implicated in the dismissal of the Whitlam government.

With the resignation of Barbour [in September, 1975], Whitlam was eager for change within Australia's intelligence and security agencies. Whitlam had lost faith in his intelligence chiefs and was eager to review their organisations methodically and rigorously. In the meantime, Whitlam took further steps that unsettled ASIO officers.

On October 22, ASIO was asked to provide a list to the Department of the Prime Minister and Cabinet of all CIA officers in Australia over the previous 10 years. The reply from ASIO did not include Richard Stallings, thought by Whitlam and [journalist Brian] Toohey to be a former CIA officer, who apparently contacted Toohey with allegations of CIA activities in Australia in the 1960s.

Without seeking official confirmation Whitlam declared that Stallings was a CIA operative and that he had been in charge of establishing the Pine Gap installation in the 1960s – a facility managed, on the Australian side, through the Department of Defence, not by ASIO. This may have in part explained Stallings not being known to ASIO. Stallings happened to have rented a house for a short while in 1967 from then minister for the interior and National Country Party leader Doug Anthony. Whitlam played on this, accusing the CIA of having made politically motivated financial contributions. Whitlam provided no evidence to substantiate his accusations. In the meantime, stories about CIA links and conspiracy theories abounded, with more than 16 articles on the topic appearing in the week leading up to Kerr's dismissal of the Whitlam government on November 11.

On November 4 the US ambassador approached Whitlam and categorically denied that the CIA had passed funds to any organisation or candidate for political office in Australia, nor, he claimed, had any other US government agency done so.

Strong public denials that the CIA had taken any part in Australian politics were sent out from the director of the CIA, William Colby, as well. Still, Whitlam repeated the allegation that he knew of two instances in which CIA money had been used to influence domestic Australian politics.

Records maintained by ASIO's senior liaison officer in Washington reveal that he was called to see the East Asia Division chief, Theodore "Ted" Shackley, on November 8 and given a message to pass to ASIO's interim Director-General, Frank Mahony​. The senior liaison officer recounted to ASIO the essence of Shackley's remarks in a cable. In it he relayed Shackley's concerns that with several people publicised "it is not possible for the Americans to continue to deal with the matter on a no comment basis". He further reported they were "perplexed at the point as to what all this means". Did this signify some change in the bi-lateral intelligence security related fields? They could not see how this dialogue with continued reference to them could "do other than blow the lid off those installations in Australia where the persons concerned have been working and which are vital to both of our services and countries particularly the installation at Alice Springs".

The senior liaison officer reported that the Americans now felt it necessary "to speak also directly to ASIO because of the complexity of the problem". They wanted to know if Headquarters ASIO had been contacted or involved. They could "understand a statement made in political debate but constant further unravelling worries them". They asked: "Is there a change in the Prime Minister's attitude in Australian policy in this field?"

A key point the senior liaison officer flagged in his cable was that in his view this message should be seen "as an official demarche on a service to service link". He went on to say: "It is a frank explanation of a problem seeking counsel on that problem." He advised that the Americans felt that everything possible had been done on a diplomatic basis and "now on an intelligence liaison link they feel that if this problem cannot be solved they do not see how our mutually beneficial relationships are going to continue". He went on to say the Americans felt "grave concerns as to where this type of public discussion may lead". The Director-General "should be assured" that they "do not lightly adopt this attitude". It would not be long before it was leaked to the press.

This cable or demarche relaying the message from Shackley​ was received at Headquarters ASIO on November 9 and a copy was sent to the Secretary of the Department of Defence, Sir Arthur Tange. A copy of the message also was passed by Mahony to Whitlam at Tullamarine Airport on the afternoon of November 10. (The content of the Shackley cable was later confirmed in Parliament in 1977 by Whitlam who, as Opposition Leader, read it into Hansard. He declared, "in plain terms that cable revealed that the CIA had deceived the Australian government and was still seeking to continue its deception".)

On November 10, Mahony wrote a response to the senior liaison officer in Washington that seemed to avoid directly addressing Shackley's immediate concerns. Whitlam personally approved the cable and directed that the texts of his "relevant public statements be conveyed to Washington". The letter states: "The Director-General draws attention to the Prime Minister's reply on 16 April 1973 to the assurances sought by Mr Schlesinger namely that no changes are intended with regard to protecting US information and any clearance procedure and that service to service information has been and will be protected."

Whitlam's cable reached Washington on November 11 and was passed to Shackley, who stated that in view of that message and in the light of the Prime Minister's remarks on the television interview on November 6, he was "consequently assured that no policy change vis-a-vis intelligence relationships had taken place". This is a highly contentious view that needs to be examined in the context of the following observations. What actually transpired during this period is riddled with controversy, and journalists have taken positions that simply do not correlate with the official records reviewed by the author or of the views of those involved.

Journalists Brian Toohey, John Pilger​ and William Pinwill​ have claimed that Tange ensured that his Chief Defence Scientist, John Farrands, briefed the Governor-General by telephone on the "security crisis" over the weekend of November 8-9 and that the dismissal was a result of this information. But years later, interviewed by the press, Farrands, Tange and Kerr categorically denied the assertion. Kerr remained adamant, saying, "I did it myself. I sacked Whitlam. Nobody else did. Nobody else inspired me to do it, nobody else asked me to do it". Tange similarly dismissed the conspiracy theorists as "false and defamatory".

After the dismissal of the Whitlam government, the former opposition leader, Malcolm Fraser, became leader of a caretaker government in the period before the general election due to be held on December 13.

Fraser went on to win the election by a large margin, a result that removed the uncertainty hanging over the US intelligence community's relationship with ASIO, as subsequent events would demonstrate.

In January 1976, the senior liaison officer in Washington had another meeting with Shackley, which the officer described as "primarily of a social nature only". There, Shackley declared, "I hope they don't think we're as bad as we appear to be". The senior liaison officer reported that "Although this was said lightly, I gained the impression that it was meant almost apologetically", and that the Americans really wanted to be assured that the incident had not damaged relations with ASIO. The officer noted they were "very concerned about the publicity involving Pine Gap because it was 'getting too close to the truth'."

According to one assessment, the Shackley cable was probably the most serious note passed to Australian authorities in the history of bilateral relations between Australia and the United States – a virtual ultimatum to Mahony as Director-General of ASIO to do something. Tange was less worried, later describing this as a telex "fired off by a ham-fisted American intelligence official extravagantly predicting serious consequences for Australia's relations which could follow the Prime Minister's disclosures".

Journalist Brian Toohey later reckoned that in light of wavering Liberal Party determination in mid-November to continue blocking supply in the Senate, "the only serious purpose served by the commotion created by the CIA was to help Kerr make the decision that suddenly reversed the tide that was running Whitlam's way". Also weighing on their minds, he argued, was "that the agreement allowing Pine Gap to operate in Australia fell due for renewal on December 10, 1975". Whitlam later declared, however, that he saw this as a non-issue, as he had earlier made it clear that the government intended the facility to continue being operated jointly in accordance with the agreement.

The demarche was taken by public commentators to be "a sort of prima facie evidence of US interference in the Whitlam government". Some claimed the US approach to ASIO for information on events in Australia was "an understanding that ASIO had obligations of loyalty to [them] before its obligations to the Australian government". There is no indication to that effect in the ASIO records. Indeed, on the face of it, the cable outlined policy options and consequences that were understandable under the circumstances from the point of view of US policy makers seeking to protect US intelligence interests. The cable relayed a message that was explicit and disconcerting, but not underhanded.

Reflecting on the rumours of US destabilisation of Whitlam and the aspersions cast upon Kerr, Fraser later maintained that the stories were "crap, total crap". Similarly, Whitlam later observed "It is not a fact, however, that Kerr needed any encouragement from the CIA".

A meeting arranged between Whitlam as Opposition Leader in July 1977 and President Jimmy Carter's Deputy Secretary of State, Warren Christopher, has been cited as possible evidence of the conspiracy theorists being correct. At that meeting, Christopher is reported to have relayed a message from Carter including a remark that "the US administration would never again interfere in the domestic political processes of Australia". Christopher's remarks are perfectly understandable in the context of the Shackley demarche – which Whitlam made a point of reading into the official records of Parliament in 1977.

In 1982, the Wall Street Journal accused the CIA of having used the Nugan Hand Bank, which had collapsed amid controversy in 1980, as a funding mechanism for covert action and narcotics trafficking, and as a conduit for funds to assist in overthrowing the Whitlam government. The report claimed that ASIO was implicated. American intelligence officials met with the Counsel to the US President's Intelligence Oversight Board in August 1982, and strenuously denied the allegations.

During the period the Whitlam government was in power, an American contractor and cipher clerk with the American aerospace corporation TRW, Christopher Boyce, reportedly operated a sensitive and classified telex machine on a CIA network in the United States. Boyce later gained notoriety and fame in the news and in the movie The Falcon and the Snowman for his apparent role in selling secrets to the Soviet Union – a move he claims to have taken out of disgust over how the US government was deceiving Australia and undermining the Whitlam government, which he said it perceived as a threat.

Boyce claimed there were "references to your Governor-General" by the CIA officers who worked with Boyce, describing Sir John Kerr as "our man Kerr". Boyce's assertions have not been corroborated, and his other allegations consistently maintained a position sympathetic to the Soviet Union and highly critical of the United States. Boyce's actions, demonstrably motivated by financial gain, cannot be taken as proof that the CIA was acting in the manner he claims.

The CIA's apparent involvement in Australia clearly generated enormous controversy. Justice Hope recognised this and made his own inquiries to determine the veracity of many of the claims. In 1976 his top-secret special supplement to the Fourth Report on the Royal Commission on Intelligence and Security was released for very limited distribution. In it he wrote that ASIO had no evidence of undeclared activity in Australia by the Americans against Australian targets.

Much of what Hope had written in the special supplement remains closed to public access. Perhaps the earlier release of his findings may have helped mitigate or dispel some of the conspiracy theories that would reverberate in the months and years after the dismissal of the Whitlam government.

This chapter presents as clear a picture of what actually transpired as possible from the ASIO records. That picture, while troubling, is not nearly as controversial as some of the deepest conspiracy theorists would like to believe.

This is an edited extract from The Protest Years 1963-1975, The Official History of ASIO (Volume II) by John Blaxland. Allen & Unwin. $49.99