The Strange Saga of

“The Bank of Crooks and Criminals International”


Sightings from The Catbird Seat

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From The Outlaw Bank , by Jonathan Beaty & S.C. Gwynne:


“Mr. Bond, power is sovereignty. Clausewitz’s first principle was to have a secure base. From there proceeds freedom of action. Together, that is sovereignty. I have secured these things and much besides. . . . These things can only be secured in privacy. You talk of kings and presidents. How much power do they possess? As much as their people will allow them . . . And how do I possess that power, that sovereignty? Through privacy. Through the fact that nobody knows. Through the fact that I have to account to no one.”

– Ian Fleming, Dr. No

Dr. No, the island monarch with thin, cruel lips and immost designs on the fate of the Western world, would have been fascinated by the scandal that blossomed around the Bank of Credit and Commerce International (BCCI) in the summer of 1991. It was a conspiratorialist’s conspiracy, a plot so byzantine, so thoroughly corrupt, so exquisitely private, reaching so deeply into the political and intelligence establishments of so many countries, that it seemed to have its only precedent in the more hallucinogenic fiction of Ian Fleming, Kurt Vonnegut, or Thomas Pynchon.

As tales of its global predations were spattered across headlines all over the world, its apparent influence reached almost absurd proportions. This was a bank that had taken the popular notion of a “global electronic village” and made a mockery of it, a bank that was at once everywhere and nowhere, whose dirtiest secrets were hidden deep in the impossible tangles of its offshore networks.

BCCI suddenly bloomed as sort of supermetaphor for the 1980s, the decade that celebrated the likes of Robert Maxwell, Ivan Boesky, and Michael Milken and unleashed upon the United States a horde of freebooters in the banking and thrift business. But nothing in the history of financial scandals even approaches the $20-billion-plus heist at BCCI, which sixty-two countries shuttered forever in July 1991 in a paroxysm of regulatory vengeance. No single scandal had ever involved such vast amounts of money.

Superlatives were quickly exhausted. BCCI was the largest criminal corporate enterprise ever, the biggest Ponzi scheme, the most pervasive money-laundering operation in history, the only bank – so far as anyone knows – that ran a brisk sideline business in both conventional and nuclear weapons, gold, drugs, turnkey mercenary armies, intelligence and counterintelligence, shipping, and commodities from cement in the Middle East to Honduran coffee to Vietnamese beans.

Though it was fundamentally a financial fraud, BCCI itself was not a bank in any conventional sense. Or, more precisely, banking was only a part of the global organism, the ingeniously constructed platform from which its other lines of business were launched….

This “bank” possessed its very own diplomatic corps, intelligence network, and private army, its own shipping and commodities trading companies. And BCCI itself was so thoroughly enmeshed in the official affairs of Pakistan that it was often impossible to separate the two.

BCCI was bigger even than that: It was the unsettling next-stage evolution of the multinational corporation, the one the theorists had been predicting for years but which never seemed to be able to shed its sovereign boundaries. (General Motors and Mitsubishi are both good examples of this – huge companies with holdings and operations all over the world that nonetheless persist in being fundamentally American and Japanese entities.) In taking that step, BCCI became truly stateless and very nearly invisible to the authorities in each country where it did business.

The BCCI scandal shows what sort of frightening mischief can be made in a world where trillions of electronic dollars routinely wash in and out of international financial markets.

Nor was BCCI a conspiracy. In much of what it did, BCCI reflected the way the world works. The organization was designed to mimic the way the world’s largest corporations and banks move and hide their money. It was no accident that BCCI was incorporated in Luxembourg, one of the least regulated nations on earth and a favorite haven of the money men at the Fortune 500. It was no accident that it ran its wildest manipulation through what amounted to a branch in the Cayman Islands – a place long favored by major banks to hold offshore money away from the ken of the IRS and banking authorities.

BCCI had mastered these black arts so well that it became the bank of choice for the intelligence agencies of the Western hemisphere, who found its deeply secretive methods more and more useful. BCCI was necessary to them; it was part of the way they worked, too. It was those alliances, along with bribery on a grand scale, that allowed the criminal bank to flourish for two decades with effective immunity from the law.

This is the story of how the wealthy and corrupt in Latin America managed to steal virtually every dollar lent to their countries by Western banks, creating the debt crisis of the 1980s; how heads of state such as Ferdinand Marcos, Saddam Hussein, Manuel Noriega, and others skimmed billions from their national treasuries and hid them in Swiss and Caymanian accounts forever free from snooping regulators; how Pakistan and Iraq got materials for nuclear weaponry and how Libya built poison-gas plants.

BCCI is also the story of how governments manage to put together arms deals with supposedly hostile governments, as in the case of Israel’s clandestine trades with Arab states, or the United States’ supplying weapons to both Iraq and Iran in violation of its own laws.

BCCI is a paradigm of how our national borders have been rendered porous, despite the best attempts of law enforcement; it is about terrorism and how terrorism is financed; it is about how drugs enter the United States and Europe and how the drug lords disguise and conceal their ill-gotten gains.

The BCCI scandal affords a rare and representative glimpse at the trillion-dollar-plus underground market of secret money that moves at will in and out of these reasons, no authorities anywhere were in a hurry to shut down BCCI: The bank was as useful to governments as it was to crooks, and indeed, governments became active participants in the fraud.

In the United States, BCCI became the subject of a massive and decade-long cover-up. For the investigators and the reporters who finally cracked it, the most difficult task of all was breaking down the formidable walls erected by their own law enforcement agencies.

Penetrating the cover-up became the key that finally unlocked the BCCI scandal….

– Truth or Consequences, New Mexico, January 1, 1993

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Few investigative reporters will relinquish control of their notes and research as a story progresses, but in this case things were out of hand. The BCCI scandal was not one neat financial story waiting to be packaged: Here were dozens of complex stories, each spiraling off in a different direction….

Most of Beaty’s sources were paranoid about telephone taps, and while he doubted that his system would foil a government-installed tap, his most anxious sources could take comfort in the illusion of electronic sophistication. Were his lines being tapped? Beaty didn’t know – the strange echos and clicks on his calls might well have been lousy telephone service – but he did think it significant that his law enforcement sources didn’t want to talk over his phone.

“When an FBI agent wants you to call from a pay phone, what do you think?” he asked Gwynne plaintively.

By mid-summer there were two good reasons to worry about the security of phone lines. In late July and early August two reporters who had been working on the BCCI story were killed. The first was a reporter for the Financial Times named Anson Ng, who was found dead in his apartment in Guatemala City, Guatemala. The story was recounted by Senator Alan Cranston before the Kerry subcommittee:

“First, according to people who talked by phone with Ng in the days before his death, the British journalist mentioned that he was working on a quote, big story, unquote, related to BCCI and Guatemala. Second, although officials in Guatemala have sought to characterize Ng’s assassination as the work of common criminals, the murder seems to be the work of professional hit men. . . . Apparently a silencer was used in the killing, which was done by a single bullet wound to the head. . . . I am told that Ng’s head was wrapped in a towel and his body left in the bathroom, something consistent with efforts to keep the murder secret for a period of time. According to those closest to Ng, a set of documents were stolen from his desk.”

Less than two weeks later a similar story hit much closer to home. On August 10, a Washington, D.C., freelance writer named Danny Casolaro, who had also been working on BCCI as part of a larger story, was found dead in a Martinsburg, West Virginia, motel room. He was discovered in a bathtub surrounded by a pool of blood.

Though it was immediately ruled a suicide, there were enough unanswered questions that the press jumped all over the story. He had supposedly killed himself by slashing his wrists – except that the cuts had been phenomenally deep, all the way through the tendons. There was also evidence that someone else had been in the room with him.

“It looked like someone tried to wipe up the blood on the floor and slid the towels under the sink,” one of the motel’s housekeepers said in a magazine interview.

“It looked like someone threw the towels on the floor and tried to wipe the blood with their foot, but they didn’t get the blood, they just smeared it on the floor.”….

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From The Laundrymen , by Jeffrey Robinson:

Banco Ambrosiano was the greatest banking collapse in Europe since the end of World War II. It was shortly to be followed by the greatest banking collapse in the history of banking….

In 1988, the Justice Department launched Operation C-Chase, the letter C standing for currency. Posing as drug dealers, undercover agents put out the bait that they had loads of currency to launder. And BCCI fell for it….

A costly and complicated five-year operation– involving agents from Customs, the IRS, the DEA, and the FBI– C-Chase produced more than twelve hundred conversations and nearly four hundred hours of clandestinely recorded videotape. By assisting drug dealers to wash $34 million, the Justice Department was able to indict, and in 1990 to convict, several BCCI bankers and dozens of other individuals.

In one blow, the Americans had unknowingly pulled the bottom out from under a gargantuan house of cards….

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From The Outlaw Bank, by Jonathan Beaty & S.C. Gwynne:

BCCI is more than just a criminal bank. From interviews with sources close to BCCI, Time has pieced together a portrait of a clandestine division of the bank called the Black Network, which functions as a global intelligence operation and a mafia-like enforcement squad.

Operating out of the bank’s offices in Karachi, Pakistan, the 1,500-employee Black Network has used sophisticated spy equipment and techniques, along with bribery, extortion, kidnapping and even, by some accounts, murder.

The Black Network … stops at almost nothing to further the bank’s aims the world over….

The strange and still murky ties between BCCI and the intelligence agencies of several countries are so pervasive that even the White House has become entangled. As Time reported earlier this month, the National Security Council has used BCCI to funnel money for the Iran-Contra deals, and the CIA maintained accounts in BCCI for covert operations.

Moreover, investigators have told Time that the Defense Intelligence Agency has maintained a slush-fund account with BCCI, apparently to pay for clandestine activities….

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The man spoke quickly and in a near whisper, looking around and past the reporter’s shoulder as he talked.

“You’re onto something and you’re correct about there being no separation between [Agha Hasan] Abedi and Pakistan’s intelligence agency, the ISI [Inter-Services Intelligence]. A number of Pakistan’s generals have been on Abedi’s private payroll for years. You might not be aware of it, but several people in the State Department have resigned over the years in protest to the extent of our tilt to Pakistan. We gave them unauthorized satellite and communications technology as well as authorized sophisticated technology like the F-16 fighter plane program, and your friend Abedi and BCCI were in the middle of all of it.

“I don’t know how your Navstar documents got to the Soviets. But if the Pakistanis obtained Synthetic aperture Radar, as your source says, somebody stole it from us. We gave them the Landsat processing equipment you talked about, but that was more or less aboveboard. They could see everything India was doing. Why do you think India built up such a massive army?”

Beaty decided he was on a roll and tossed out one of the big questions he was holding.

“I haven’t told this to anybody in Washington yet, but one of our sources said that a couple of years ago BCCI had three Columbine Heads and they were selling them to Iraq. I got the impression this was one of our biggest secrets, but I can’t even find out what a Columbine Head is. Apparently even the name is classified top secret. Do you know?”

The man pursed his lips and appeared pained. When he spoke he looked away from the reporter and talked from the side of his mouth, “It might be the trigger for the fuel-air bomb. I think we better end this conversation.”

He stood up. “Why don’t you finish your cappuccino before you leave? If you need to talk to me again, ask the same friend who suggested I talk to you. Don’t try to call me at home. My phone has been tapped before.”

The deputy under secretary picked up his hat and disappeared into the crowd.

Beaty took out a notebook and wrote down everything before he lost the exact wording.

Sweet Jesus, the fuel-air bomb? No wonder nobody wanted to talk. Iraq’s bombardment of Israel during the Gulf War – with Scud missiles financed by BCCI had created panic because it was feared Saddam possessed the fuel-air bomb and that he might be able to deliver some of them with the Scud rockets.

It was called the poor man’s hydrogen bomb, and it worked by exploding a large cloud of vaporized gasoline. The resulting explosion rivaled atomic blasts. It was almost primitive technology, but it took an extremely sophisticated triggering system to ignite the gas cloud.

Sweet Jesus.

Beaty headed for a phone to try to find Gwynne, who was in South Caroline interviewing a former partner of Ghaith Pharaon. They couldn’t abandon the mainstream BCCI story, but Beaty was beginning to feel like Alice in Wonderland again.

BCCI was news, but Beaty was beginning to feel like Alice in Wonderland again. BCCI was news, but he could count on his fingers the number of people in the media and law enforcement who weren’t narrowly focused on whether Clark Clifford and Robert Altman knew they were working for BCCI.

Why wasn’t more of the truth about BCCI coming out? It dawned on him that more information about Abedi’s secret empire was being held at the highest reaches of the American government than anywhere else.

Gwynne had checked out of his hotel, so Beaty left a message for him with the bureau switchboard. They had to catch a plane to the Caribbean tomorrow. They were going to meet the Pakistani on neutral ground.

The Pakistani was the source who had told them about the Columbine Heads….


It was a Friday afternoon in Washington, and Beaty and Blum were having a late lunch on the veranda of Duke Zeibert’s restaurant…. The technology-transfer lawyer, the one who helped them identify the Navstar photos liberated from the Kremlin safe, had joined them. The sound and fury of the BCCI scandal had passed, and Clark Clifford’s trial lay in the future.

They were talking about what it all had meant when Beaty looked up in surprise. Condor, whom he had not seen for weeks, nodded to the group, pulled up a chair, and sat down.

“Jonathan, I have an answer to the question you asked,” he said.

“The technology for the Colombine Heads got out of the country when it was leaked to the Israelis in 1983. The man who accomplished it was James Guerin, the original manufacturer of the mechanism: Guerin was a Hardy Boy, one of Casey’s private agents.”

All three listeners were nonplussed. Both Blum and the lawyer had helped Beaty in his search to discover what the Columbine Heads were, and they knew what Condor was talking about: critical components of the fuel-air bomb. And while Beaty had never heard of him, both lawyers knew who James Guerin was.

“But how could anyone get secret hardware like that out of the country?” Beaty asked.

“He didn’t,” Condor said very quietly. “He took the plans out of the country, and they built a new manufacturing plant in South America. Apparently Casey wanted to give the fuel-air bomb to the Israelis; they had besieged the Carter administration for the technology but had been turned down flat. Things were different under Reagan, but Casey knew he would never get approval for the transfer from Congress. So he had Guerin give it to them.

There was a long silence.

“But if that was 1983 or 1984, how did BCCI acquire three heads in 1989 to sell to Saddam Hussein?” Beaty finally ventured.

“I don’t know. I can only assume that BCCI had something to do with the original plans to build a plant out of the country. There is some indication Pakistan received the technology too.”

Then Condor stood up. “That’s all, Kid. You’ve pulled me into this too deeply and now I’m out of it. Don’t come to me with any more questions; you’re on your own.”

He walked out without another word.

Beaty had a plane to catch, but he tarried long enough for Blum and the other lawyer to give him Guerin’s background: A self-made millionaire and defense contractor, [James] Guerin founded International Signal Controls in Lancaster, Pennsylvania, which manufactured exotic fusing devises and other highly secret technology.

He had business associates such as onetime Secretary of State Alexander Haig, and when ISC merged with Ferranti, the British arms and electronics firm, Admiral Bobby Inman, the former deputy director of the CIA, joined the Ferranti-ISC board of directors. Presumably to keep an eye on American secrets.

The Ferranti declared bankruptcy and sued Guerin for claiming to have hundreds of millions of dollars’ worth of pending contracts that had never materialized. The nonperforming contracts turned out to be military deals with Pakistan and Abu Dhabi, and it was Guerin’s contention that they had come unraveled after General Zia was killed in 1988.

“He was just recently tried for fraud in the United States,” Blum explained. “Inman told the court Guerin had once been very helpful to the agency, but it did him no good. He was convicted of fraud, money laundering, and exporting arms to South Africa, and he’s headed for prison. I think there were allegations that he also sold cluster bombs to Iraq.

That may have had something to do with Banco Nazionale del Lavaro in Atlantathat’s the BNL branch that loaned Saddam $600 million. I told you you should be looking into that.”

Beaty nodded. The emerging BNL scandal was part of an embarrassment being dubbed “Irangate,” and the Bush administration was being accused of dragging its feet in the investigation of the bank.

The Justice Department and the CIA accused each other of failing to act on intelligence information that the BNL was funneling money including U.S. agriculture loans converted to militarily useful goods instead of grain – to build up Saddam Hussein’s war machine.

A lot of that money rolled through BCCI on its way to the Middle East….

Beaty called Gwynne a few days later. “Sam, we’ve got to get moving. I’ve got a jailhouse interview lined up with Christopher Dragoul, the former manager of BNL’s branch in Atlanta. He claims the United States knew all about the loans to Iraq. And we need to go interview a guy named James Guerin who’s also in a federal slammer,” Beaty added quickly.

“I don’t know if what Condor told me about him is true, but we’ve got to go ask Guerin himself.”

“Wait until you hear what I’ve found out so far.”…

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For more, GO TO > > > The Secret Nests


From The Outlaw Bank: BCCI, by Jonathan Beaty & S.C. Gwynne:


Perhaps the most disturbing aspect of the BCCI affair in the United States was the failure of U.S. government and federal law enforcement to move against the outlaw bank. Instead of swift retribution, what took place over more than a decade was a cover-up of major, alarming proportions, often orchestrated from the very highest levels of government. When the Justice Department finally moved decisively against BCCI in late 1991, it did so reluctantly, with both Robert Morgenthau and the national press corps breathing down its neck.

The government knew a great deal about BCCI’s criminality and knew it from a wide variety of sources. Though the public did not hear about its transgressions until later, BCCI had long been graven into the annals of U.S. law enforcement, intelligence, national security, and diplomacy. Authentic, unambiguous information about the bank’s money laundering, weapons dealing, nuclear proliferation, terrorist accounts, and other crimes had reached the State Department, the Justice Department, the Treasury, the CIA, and even the White House’s National Security Council years before. The detail of information was exceptional, the failure to follow up on it baffling.

U.S. officialdom had known for years just exactly how bad the bank was, and even that it secretly owned First American Bank…

What finally busted the logjam was not the government but the prodigious buildup of information on BCCI from sources outside federal law enforcement: from Morgentahau, from Blum, from Kerry’s maverick subcommittee, from current and former BCCI employees around the world, from sources in the intelligence and weapons communities….

One of the first of the high-level close encounters with BCCI took place in 1984. That year Senator Paula Hawkins of Florida traveled to Pakistan with a congressional delegation to visit General Zia. To the surprise of her compatriots, she brought up an unpleasant subject in her brief conversation with Pakistan’s military dictator. She told him that she was concerned about a Pakistani bank that was laundering money out of the Cayman Islands.

This was a critical time in the new U.S.-Pakistan alliance; billions of U.S. dollars were flowing into the country, and the last thing Zia wanted was to hear complaints from a U.S. senator about Pakistani skulduggery. After her departure, Zia ordered an investigation, which found that there were, in fact, no Pakistani banks in the Cayman Islands. His staff communicated this back to Hawkins’s office in Washington. (Of course, BCCI was not a Pakistani bank.) According to Abdur Sakhia, Zia immediately caled Abedi, “blew his top, and said, ‘Look, you are spoiling our relationship with the U.S.'” Abedi called Sakhia, then the top-ranking BCCI officer in the United States, and ordered him to Washington to placate Paula Hawkins….

It seems likely that Hawkins heard about BCCI’s money-laundering circus in the Cayman Islands from the CIA, though why she should have remains a mystery. According to Richard Kerr, the CIA first began producing and disseminating reports on BCCI’s involvement in 1984. The net result was that the State Department silenced Hawkins, reassured Zia, and appeased Abedi. And the Justice Department and the Drug Enforcement Administration had been part of the arrangement. Sakhia heard nothing more about the “problem.”

Still more disturbing was a report produced by the CIA in 1985. The CIA knew about some of BCCI’s criminal activities as early as 1979. In 1983 the agency started distributing information to other government agencies, most prominently Treasury, Customs, Justice, the FBI, Commerce, the Drug Enforcement Administration, the National Security Agency, the Defense Intelligence Agency, the Federal Reserve Board, the State Department, and the Department of Energy (the last suggesting, among other things, that BCCI’s role in nuclear weapons proliferation had been the subject of some of the studies.) In 1984, for example, four years before the Tampa indictments of the bank, the CIA was describing BCCI’s money-laundering activities in detail to the Treasury Department.

By 1985 the agency had learned so much that it flatly told both the Department of the Treasury and the Department of Commerce that BCCI secretly owned Clark Clifford’s First American Bank. Treasury then informed the Office of the Comptroller of the Currency. Six years before the scandal broke, the nation’s top financial enforcement officials – with the exception of the Fed – knew BCCI’s deepest and darkest American secret, yet did nothing about it.

Even more intriguing than the report itself, however, was how that information traveled from the agency to Treasury, and what became of it. In January 1985 a CIA agent arrived at the 1500 Pennsylvania Avenue of Douglas Mulholland, the intelligence liaison at the Treasury Department, with an unusual document. All CIA documents destined for Treasury officials, including Secretary Donald Regan, passed through Mulholland, who had been chosen by William Casey personally to be the CIA’s main link with Treasury. That the doucument was hand-carried by a CIA agent was strange enough. Stranger still, the document Mulholland saw was printed on plain paper – there was no CIA letterhead, no evidence of its source. Mulholland said in Senate testimony that in all his years working in the intelligence community he had never seen an agency report delivered in such a format, which suggested that this was very hot stuff.

The subject was BCCI….

The CIA memo landed with explosive force on the doorstep of Donald Regan and the U.S. Treasury. It precipitated an immediate response from both Mulholland and Bench, who sent the agent scurrying back to find more information. What happen next would become the trademark U.S. government response to BCCI in the years to come.

Suddenly, and for no apparent reason, Treasury lost all interest in BCCI….

Something had happened over at Treasury to change everyone’s mind about the “dynamite” information that had come into their possession four months before…. Someone had, in the intervening months, gotten to Regan and Mulholland, and the message had been unambiguous: Back off….

The Mulholland memo was merely one of several hundred reports on the bank’s activities generated between 1979 and 1991 by the agency’s directorate of operations, which had even written far longer and more comprehensive reports where “information about the organization was tied into larger discussions of terrorism and counter-narcotics.” In 1986 the CIA told the State Department in detail about BCCI’s link with the terrorist organization of Abu Nidal in the form of multiple acounts at BCCI’s financing of illegal international weapons sales. Other reports told the FBI about BCCI’s role in drug smuggling.

In short, every governmental agency that had anything to do with the crimes BCCI had committed had been told about the bank in some manner.

After its involvement in the Paula Hawkins episode, the Justice Department continued to have contacts with BCCI. These were apparently independent of the frequent reports it was receiving from the CIA. In 1987 Abdur Sakhia was contacted by FBI agents who were following the trail of a weapons sale. This particular transaction was an integral part of the covert arms-for-hostages gambit in Iran that would become the centerpiece of the Iran-Contra scandal. The dealer was Adnan Khashoggi.

The FBI said that to finance the deal, Khashoggi had received a large loan from BCCI’s Monte Cdarlo office, for which he had paid a $100,000 bribe to a BCCI officer. The FBI said it wanted to see records from BCCI Monte Carlo. In exchange for that, it promised to keep BCCi out of the press. Sakhia said he had “cooperated” with the FBI in the case, which never did surface in news coverage of the Iran-Contra affair.

Thus as early as 1987 the investigative arm of the Justice Department knew in detail about BCCI’s involvement with a weapons dealer and knew that BCCI had played a key role in Iran-Contra.

That same year the FBI, the U.S. attorney in Miami, and the Internal Revenue Service received a full-scale criminal refferal from the Federal Reserve, whose May 1987 examination of BCCI’s Miami office identified large-scale money laundering. As with the increasingly desperate attempts by James Dougherty, the Miami attorney for Lloyd’s of London, to get the attention of law enforcement, there was no response from Justice. Indeed, even though the C-Chase investigation was in full cry by this time, Customs knew nothing about BCCI until an undercover agent stumbled into it in casual conversation.

In 1988 the Fed made yet another criminal referral to Justice, this time about BCCI’s New York office. Again, Justice did not follow up, even though, like so much of the other information Justice officials received and disregarded, this would have broadened the scope of the Tampa prosecution considerably.

Even the ballyhooed Tampa investigation was deeply compromised. From the earliest days of the Tampa prove, the actions of Justice officials were counterintuitive, counterlogical, and comprehensible only as either a massive, orchestrated attempt to bottle up damaging information or as one of the late Twentieth Century’s great pieces of law enforcement bungling.

Among thousands of other incriminating documents, investigators in Tampa were in possession of the tapes from the Ali Mirza debriefing conducted by Jack Blum in early 1989. Mirza had described BCCI’s secret control of three American banks, bribes paid to politicians, and systematic attempts to fix a congressional investigation. And yet the same words that later prompted Time magazine to launch a no-holds-barred investigation of BCCI brought no response from Justice in Tampa….

The Tampa investigation had been proclaimed as the greatest single takedown of drug smugglers and money launderers in history. Ninety people were arrested, among them eleven officers of BCCI. C-Chase netted not only the likes of Gerardo “Don Chepe” Moncada, one of the kingpins of the Medellin cartel, but scores of smaller smugglers who ran the infrastructure that facilitated shipment, sale, and payment for Colombian drugs sold in the United States. And of course the feds had gotten the bank alleged to be the biggest drug-money launderer in the world: BCCI.

That is the way it looked to the public, anyway, when the sting took place in October 1988, carefully timed to coincide with a speech by Vice President (and presidential candidate) George Bush on the war against drugs. And that is the way it looked in 1990 when BCCI pleaded guilty and five of its executives went to jail.

But that was not how it looked to insiders. Among other oddities in the case, the BCCI officers were never treated as ordinary defendants, either by office of the Justice Deparment in Florida, or by the bank itself, which insisted that these people represented an isolated instance of criminality in an other wise pure and wholesome banking operation. As low-ranking offenders, one might have expected them to be thrown into a jail with other common criminals, as were the various Colombian operators who were arrested in the sting.

But this was not the case. By arrangement between the Department of Justice and BCCI’s lawyers, the defendants were moved to comfortable condominiums in Tampa, paid for by the bank. By further arrangement, they were guarded in their seclusion by off-duty Tampa police officers.

In their comfortable house arrest, all of their needs were provided for. Not only that, but Swaleh Naqvi, who was supposed to be furious that these men had sullied the bank’s good name, instructed Clark Clifford and Robert Altman to hire one of the largest armadas of law firms and lawyers ever assembled to defend a handful of low-level crooks. They assembled fifty lawyers from twenty law firms to defend both the bank and the accused individuals. By the time of the trial in 1990, Clifford and Altman had doled out over $20 million in legal fees, paid for by a bank that had no capital at all and was rapidly hemorrhaging cash….

It is incomprehensible, prima facie, that not a single defendant in the money-laundering case against BCCI sought to plea-bargain, nor did the high-priced attorneys make an obvious or all-out effort to convince them to do so…. Had the defendants turned state’s evidence, undoubtedly they would have received greatly reduced sentences. As it was, five Pakistani bankers from BCCI Tampa received sentences from three to twenty years in federal prison. For the two who got twenty years, their lives were destroyed. From the wailing that went up in the Tampa federal courtroom from the families of those convicted, and the screams in Urdu in the corridors, it was clear that none of them had bargained for this.

Yet that is what they got, and that is precisely what BCCI, working through its attorneys, wanted them to get. Naqvi’s goal was to separate corporate BCCI from the defendants, to create the appearance that the criminality was sharply confined to one the bank’s branches…. What [Naqvi] really wanted was to trade the convictions of five minor employees for the freedom of the larger entity. He got what he wanted.

He also wanted and needed something else: a legal deal that avoided a sweeping indictment that could have allowed the Justice Department to seize the bank’s assets. This indictment, under the RICO statute, never happened, thanks in part to a massive lobbying campaign, orchestrated by Robert Altman, which employed some of the best legal talent in the United States and was targeted directly at Justice.

To offer one example of the sort of muscle that was brought to bear, BCCI’s attorneys met several times in Washington with the Justice Department’s head of Crime and Racketeering to persuade Justice not to bring the RICO. These were not ordinary lawyers. The lobbying campaign in Washington was led by a firm, subcontracted from Altman, called Laxalt Washington Perito and Dubuc. (“Laxalt” is the former Republican senator from Nevada, Paul Laxalt.)

The point men were former Justice Department officials E. Lawrence Barcella and Paul Perito. Barcella had made a national name as the spy-chasing U.S. attorney who caught and convicted rouge CIA agent Ed Wilson. Perito was also a former chief counsel and staff director for the House Select Committee on Crime….

Altman had made a point to hire former Justice Department officials to defend the bank in Florida and in Washington. He hired John Hume, who had spent most of his career as a top government prosecutor in Washington, to defend former BCCI officer Amjad Awan. And he hired Peter Romatowski, another big-name former Justice prosecutor from New York, to defend former BCCI Paris manager Nazir Chinoy.

Circulating aggressively through Washington on behalf of BCCI were yet another former federal prosecutor, Larry Wechsler, top Washington lawyer Ray Banoun, former Senator John Culver, and Hill & Knowlton executive Frank Mankiewicz, a longtime Washington insider who had run George McGovern’s presidential campaign.

Large, politically powerful law firms like Holland & Knight in Miami and Morrison and Foerster in San Francisco were enlisted and paid handsomely for similar efforts to squelch criticism and allow the bank to stay open.

Though BCCI had retained a high-powered legal team to look after its interests in Washington, two of its most active lobbyists were Senator Orrin Hatch (R-Utah) and his aide Michael Pillsbury. Both made important approaches to Washington officials as part of BCCI’s attempt to remove itself from further scrutiny following its plea of guilty to the charges in Tampa.

In late 1989 Pillsbury and prominent BCCI shareholder Mohammed Hammoud visited Swaleh Naqvi in London to offer Hatch’s help. This was an unusual team. Pillsbury was the former deputy under secretary for defense credited with initiating the effort to obtain Stinger missiles for the Afghan Mujahedin. Hammoud was a longtime acquaintance of Hatch who had purchased Clifford’s and Altman’s stock in the Naqvi-engineered deal that brought the two men millions in profits.

After the plea bargain was announced, Pillsbury was able to arrange a meeting between Hatch and BCCI lawyer Ray Banoun, during which, Banoun told The New York Times, Hatch called a Justice Department official to lobby on behalf of BCCI. The result of Hatch’s contact with BCCI’s lawyers was a speech drafted by Barcella, Wechsler, and Altman and delivered by Orrin Hatch on February 22, 1990, on the Senate floor. It was a ringing denunciation of Kerry and others who had criticized the Justice Department and the plea agreement.

Soon thereafter, Hatch received a warm letter from Swaleh Naqvi, who through Altman had simultaneously recruited Holland & Knight in Miami, who cited Hatch’s speech to pressure Florida banking authorities into allowing the bank to stay open. Two weeks after the speech Hatch called Naqvi again, this time to encourage him to make a $10 million loan to Hatch’s friend and business partner Monzer Hourani, a Lebanese immigrant from Houston, Texas….

~ ~ ~

In spite of the specificity of the case against the Justice Department, the State Dapartment and the CIA, it would be unfair to single them out as the only U.S. governmental agencies that knew much and did little.

The Drug Enforcement Administration not only sat in on the Sakhia meeting but had 125 cases in its files mostly linking BCCI with undercover storefront money-laundering operations….

The report also argues that the most shocking failure to follow up occurred at the Internal Revenue Service.

“Most startling is the IRS refusal to begin an undercover investigation of BCCI despite persistent requests by Criminal Investigation Division personnel,” said the report. According to Schumer, the IRS had identified fifteen major matters involving BCCI between 1984 and 1991, including:

>> In 1986 India gave the IRS documents showing a multimillion-dollar laundering scheme involving BCCI in a number of countries. No follow-up.

>> In 1987 the IRS received a criminal referral from the Fed regarding cash transactions and irregular activities in BCCI Miami and Atlanta accounts. No follow-up.

>> In 1988 the IRS brough a major money-laundering case against defendant Jerry Lee Harvey. Sixty million dollars were laundered, much of it through BCCI Panama and BCCI Cayman Islands. No follow-up.

>> In 1989, in Oklahoma City, the IRS indicted and convicted a heroin dealer who had laundered $1 million through BCCI in New York and Hong Kong. No follow-up.

>> In 1989 the IRS office in Dallas requested and was refused permission to expand its investigation to Miami afer a large undercover operation had fingered it as a key link in money-laundering activities….

In December 1991, fully three years after the conclusion of C-Chase, the Justice Department finally used the sweeping RICO powers at its disposal, issuing a “superseding indictment” against the bank. That same day BCCI pleaded guilty and agreed to forfeit $550 million in U.S. assets – everything the authorities could get their hands on….

$ $ $

From The Progressive Review, 10/11/00, by Sam Smith:



THE GREATEST FINANCIAL scandal in historythe BCCI affair — left American participants virtually untouched. The media covered the scandal poorly even though, according to one investigative journalist, up to a hundred Washington politicians and lawyers might have been criminally liable.

As a result — much like Clinton and the Dixie Mafia — Americans have but the vaguest notion of what happened. In fact, the two stories overlap. And like many contemporary sagas of corruption, the two stories reached deep into both the major parties. In fact, if George W. Bush is elected, we will be entering our fifth consecutive presidential administration (two Democratic and three Republican) with direct ties to leading figures in the biggest financial scandal of all time.

This time line suggests some of the interplay of individuals and parties:


National Bank of Georgia president Bert Lance, whom former Georgia Governor Jimmy Carter described as being like a brother and was Carter’s chosen but defeated successor, meets with Jackson Stephens, a Naval Academy classmate of Carter. Stephens Inc. arranges public offering of NBG stock. Stephens would later be described by the New York Post as the man who was to “Clinton what Bert Lance was to candidate Jimmy Carter.”


Both Stephens and Lance help Carter in his race for the White House. Carter uses the NBG corporate plane without disclosing it. Campaign is later fined.

Two Indonesian billionaires come to Arkansas. Mochtar Riady and Liem Sioe Liong are close to Suharto. Riady is looking for an American bank to buy. Riady’s agent is Jackson Stephens.


Lance comes to Washington as director of the Office of Management and Budget. He quickly comes under investigation for his past financial dealings and in September resigns. His lawyer is Clark Clifford, later embroiled in the BCCI case.


Hillary Clinton, the Arkansas governor’s wife, is getting considerable business from Stephens Inc.

George W. Bush begins operations of his oil firm, Arbusto Energy. He assembles several dozen investors in a limited partnership including Dorothy Bush (a friend of BCCI figure Robert Altman), Lewis Lehrman, William Draper, and James Bath, a Houston aircraft broker who bought several planes from Air America, a CIA front. Bath’s firm appears to be owned by Saudi investors. He also was a part-owner of a Houston’s Main Bank, along with a couple of BCCI figures.

Stephens brokers the arrival of BCCI to this country, and steers BCCI’s founder, Hassan Abedi to Bert Lance.

Stephens Inc tries to sell Riady stock in the National Bank of Georgia. The Washington Post quotes a US banker suggesting that Riady is working for Suharto, who is trying to butter up Carter: “They think of this country like a ‘regime’ similar to their own and they just don’t realize that such a ploy wouldn’t work.” There’s no deal. Lance’s bank will eventually be taken over by a BCCI front man — Ghaith Pharaon. Pharaon later sells his bank to First American. Pharaon will be fined $37 million by the Federal Reserve Board and become a fugitive.

Abedi moves to secretly take over First American Bankshares — later the subject of the only BCCI-connected scandal to be prosecuted in the US.


Mochtar Riady and Stephens Inc set up Stephens Finance Ltd. In Hong Kong.

Lance is indicted on charges of violating federal banking laws. Clifford’s partner, Robert Altman, represents Lance who eventually achieves a hung jury.

During this same period, Stephens is, according to Peter Truell and Larry Gurwin in “False Profits,” playing “a crucial role in BCCI’s penetration of the US market.”


Mochtar Riady buys a stake in the Worthen holding company whose assets include the Stephens-controlled Worthen Bank. Price: $16 million. Other Worthen co-owners will eventually include BCCI investor Abdullah Taha Bakhish. Deal handled by C. Joseph Giroir II. Giroir is the Rose law firm chair who hired Hillary Clinton. Giroir will continue to be a deal-maker for the Riadys.


Arkansas state pension funds — deposited in Worthen by Governor Bill Clinton — suddenly lose 15% of their value because of the failure of high risk, short-term investments and the brokerage firm that bought them. The $52 million loss is covered by a Worthen check written by Jack Stephens in the middle of the night, an insurance policy, and the subsequent purchase over the next few months of 40% of the bank by Mochtar Riady. Clinton and Worthen escape a major scandal. Mochtar’s son James Riady comes back to Arkansas to manage Worthen as president.

Worthen is investigated by the Office of the Comptroller of the Currency for improper loans to companies owned by the Riadys and Stephenses.


George W. Bush and partners receive more than $2 million of Harken Energy stock in exchange for a failing oil well operation, which has lost $400,000 in the prior six months. After Bush joins Harken, the largest stock position and a seat on its board is acquired by Harvard Management Company. The Harken board gives Bush $600,000 worth of the company’s publicly traded stock, plus a seat on the board plus a consultancy that pays him up to $120,000 a year. When Harken runs short of cash it hooks up with Jackson Stephens, who arranges a $25 million stock purchase by Union Bank of Switzerland. Sheik Abdullah Bakhsh, who joins the board as a part of the deal, is connected to BCCI.


Stephens’ wife Mary Ann runs George Bush’s campaign in Arkansas. He is a member of Team 100 — individuals who have given $100,000 to the Republican party.

A few days before the supposedly surprise arrest of five BCCI officials, some of the world’s most powerful drug dealers quietly withdraw millions of dollars from the bank. Some government investigators believe the dealers were tipped off by sources within the Reagan administration.


Bahrain officials suddenly break off offshore drilling negotiations with Amoco and decide to deal with Harken Energy, George W. Bush’s firm. Harken has had a series of failed ventures and no cash, so the Bass brothers are brought in to finance Harken’s efforts at a cost of $50 million. Harken’s investment banker is the same firm that helped in BCCI’s acquisition of First American. Among the other BCCI-connected figures that help the deal: Bahrain’s prime minister.


Bush’s attorney general, Richard Thornberg, is warned about BCCI but does nothing.


Stephens Inc gives $100,000 to a Bush dinner committee.

With Stephens, Mochtar Riady buys BCCI’s former Hong Kong subsidiary from its liquidators.

A former top aide to White House Chief of Staff John Sununu goes to work for a prominent figure in the BCCI scandal less than a month after leaving the Bush administration. Edward Rogers Jr. signs a $600,000 contract to give legal advice to Sheik Kamal Adham, an ex-Saudi intelligence officer who is being investigated for his role in BCCI’s takeover of First American Bankshares.

The Miami acting US Attorney is reportedly rebuffed by the Justice Department in his efforts to indict BCCI and some of its principal officers on tax fraud charges. Justice Department later denies this occurred.


Ronald Reagan is introduced at the GOP convention by former senator Paul Laxalt, whose law firm represented BCCI in a drug money case. The chair of the convention, Craig Fuller, has been the number two official of Hill & Knowlton which was involved in the BCCI-First American case. Bush’s campaign press representatives has done PR for a Saudi sheik accused of involvement in the BCCI affair, earning $200,000 in fees in just two months.

Employees of Stephens Inc. give more money to the Clinton campaign than those of any other firm except Goldman, Sachs and the NY law firm of Wilke, Farr & Gallagher.

Stephens’ Worthen Bank gives Clinton a $3.5 million line of credit allowing the cash-strapped candidate to finish the primaries. Little Rock Worldwide Travel provides Clinton with $1 million in deferred billing for his campaign trips. Without the Worthen and Worldwide largess, it is unlikely that the cash-strapped candidate could have survived through the later primaries.


Webster Hubbell, a former Rose law firm partner — although not known for skill in Asian trade matters — goes to work for a Lippo Group affiliate after being forced out of the Clinton administration and before going to jail. Hubbell represented both Worthen and James Riady during the 1980s.


With the settlement of civil fraud charges against Clark Clifford and Robert Altman, the puny and often diverted investigation into the American branch of the BCCI scandal effectively comes to an end. Under the deal, the pair will have to surrender $5 million in stock in First American Bankshares, which had been illegally controlled by BCCI.

They will, however, get to keep $10-15 million in proceeds obtained during their tenure as First American attorneys.

~ ~ ~

The BCCI scandal cheated depositors out of over $10 billion worldwide.

Many of these were lower income people now being paid off at 15 and 25 cents on the dollar for damage done by a illegal operation willingly used not only by hundreds of drug dealers and other criminals from various countries, but by the intelligence services of five nations (including the CIA) and at least one government, Pakistan, seeking to finance its nuclear weapons development.

Things always moved a little too smoothly in the BCCI investigation, leaving scores of unanswered questions and, so far as can be determined, hardly anyone to blame. One exception, Swaleh Naqvi, BCCI’s number two man, was given a mild sentence — over the objections of Manhattan District Attorney Robert Morgenthau. He later told prosecutors that he had never explained to Altman and Clifford who really owned First American.

Naqvi’s plea bargain with Justice appeared to have been what the Wall Street Journal called “sweetheart justice.”

Said the Journal: When drugs and money laundering arrive, political corruption cannot be far behind. If we had an explanation of how BCCI got away with its illegal purchase of First American, we could afford to dismiss such ambiguous connections as lawyer-client relationships. But we have no such answer, and are left to speculate why, in the Naqvi plea-bargain, the Justice Department does not seem to be pressing for one.”

The American media has studiously downplayed the story to the end. The New York Times, for example, put the Altman-Clifford settlement on its business page.

But while the story has disappeared not all the characters connected to this saga have.

One, for example, is still president and another is ahead in the polls….


From Forbidden Truth : U.S. Taliban Secret Oil Diplomacy and the Failed Hunt for Bin Laden

By Jean-Charles Brisard & Guillaume Dasqauié




Khalid bin Mahfouz is not your typical banker. He’s not flashy or audacious. At seventy-three, he prefers to keep a low profile. A diabetic for years, he remains impassive behind his thick glasses and moustache, as if distrustful of anything outside his own world….

Khalid bin Mahfouz was a key figure in the Bank of Credit and Commerce International, or BCCI, affair. Between 1986 and 1990, he was a top executive there, holding the position of operational director. His family held a 20 percent share in the bank at the time. He was charged in the United States in 1992 with tax fraud in the bank’s collapse.

In 1995, held jointly liable in the BCCI’s collapse, he agreed to a $245 million settlement to pay the bank’s creditors, allowing them to indemnify a portion of the bank’s clients. The specific charges against the bank were embezzlement and violation of American, Luxembourg, and British banking laws.

After dominating the financial news throughout the 1990s, the BCCI is now at the center of the financial network put in place by Osama bin Laden’s main supporters….

~ ~ ~

On July 2, 1991, regulators in the United States, Great Britain, France, and Spain – as well as administrative authorities in Switzerland and Luxembourg – decided to liquidate the bank, and the ruling took effect July 5.

On July 29, the New York district attorney charged the bank’s main managers with fraud. The BCCI was fined $200 million….

~ ~ ~

The U.S. Senate report on the BCCI described Khalid bin Mahfouz as “the most powerful banker in the Middle East.” In reality, he is much more than that. At the crossroads of business affairs and militant Islam, he embodies all of the kingdom’s contradictions in regard to Islamic fundamentalism.

Khalid bin Mahfouz’s problems began in 1992 with the BCCI scandal, in which he was accused of having precipitated the collapse. At the same time, the Senate report on the BCCI revealed documents implicating the National Commercial Bank in the delivery of arms between Israel and Iran in the 1980s. The operation was financed by the Saudis in the framework of an agreement to liberate American hostages in Beirut.

In view of these accusations, Khalid bin Mahfouz was forced to step down as CEO on the NCB in 1992. His brother Mohammed took over for him in the interim until his return in 1996, after he agreed to a settlement to pay back BCCI creditors.

His decline continued in 1999, with the American investigations into the U.S. embassy attacks in Africa one year earlier. American authorities discovered suspicious transfers of “tens of millions of dollars” made after April 1999 from the NCB to charity organizations associated with Osama bin Laden, some of which were controlled by Khalid bin Mahfouz’s own family….

Normally hesitant to cooperate with American authorities, Saudi Arabia was faced with a moral dilemma, as well as a major attack on its own interests, because the bank was also “its bank.” The kingdom finally ordered an audit the same year in order to verify the allegations.

The audit uncovered massive transfers made to charity organizations with ties to Osama bin Laden, some of which were controlled by members of the bin Mahfouz family. Shortly thereafter, Saudi authorities placed Khalid bin Mahfouz under house arrest in a hospital in Taif. According to our information, he is still there as of mid-2002.

With Saudi interests at stake, the kingdom needed to safeguard what it could, and to have more control in the bank’s management. Starting in July 1999, the Saudi regime decided to dilute the bin Mahfouz holdings by purchasing a major share of their investment and placing it in the Public Investment Fund (40 percent) and the General Organization for Social Insurance (10 percent). At the same time, Abdullah Salim Bahamdan, who had long served as CEO, became the bank’s new president.

Furthermore the Saudis had to handle the bin Mahfouzes carefully, since they knew the family had close ties with Osama bin Laden. As former CIA director James Woolsey confirmed, in addition to the financial support given by the bin Mahfouzes, there are also family ties between them.

Khalid bin Mahfouz’s own sister is married to Osama bin Laden….

~ ~ ~

The bin Mahfouz financial and charity network is one of the most active in facilitating Osama bin Laden’s activities. We are now discovering the many ramifications and connections between this empire and the Al Qaeda organization.

The two worlds have come in contact many times over the years. While it is sometimes difficult to prove direct financial support, there is, however, enough interconnection between economic structures and Islamic entities to suggest their collusion….

~ ~ ~

The bin Mahfouz galaxy is not only made up of dubious investments, but its creator gives a new dimension to business relations. He was able to establish such relations in the past, notably with the United States.

A Pakistani bank in which he is the main shareholder is a good example: Prime Commercial Bank is run by Sami Bubarak Baarma, a Saudi Arabian citizen, born in 1955; Saced Chaudhry; and Abdul Rahman bin Khalid bin Mahfouz, son of Khalid Mahfouz.

Sami Murarak Baarma is an executive of SNCB Securities Limited in London, another bin Mahfouz financial subsidiary. For the NCB, he manages a financial network called Middle East Capital Group (MECG), based in Lebanon. One MECG’s directors is Henry Sarkissian, who runs several companies in the Binladin Group. Sami Mubarak Baarma is also in charge of the Saudi National Commercial Bank’s international division. As a result of his influence in Pakistan, he became a member of the Carlyle Group’s advisory committee.

The Carlyle Group’s leading investors include many figures from former U.S. president George H.W. Bush’s entourage, as well as that of President George W. Bush. Its board of directors includes important figures from the Bush team: James A. Baker III, former secretary of state under the first President Bush; Frank C. Carlucci, former secretary of defense under Ronald Reagan; Richard G. Darman, former director of the Office of Management and Budget under George H.W. Bush between 1989 and 1993; and John Sununu, former White House chief of staff under George Bush.

In addition, Saudi Prince Al-Waleed bin Talal, nephew of King Fahd, owns an indeterminate stake in the group. Even George W. Bush was a member of the board of directors of one of the Carlyle Group’s subsidiaries, Caterair, between 1990 and 1994.

In 1987 an obscure Saudi financier named Adbullah Taha Bakhsh invested in Harken, a Texas oil company of which George W. Bush was a director from 1986 to 1993.

The deal consisted of recapitalizing the company, which was going through difficult times. This Saudi investor is none other than the partner of Khalid bin Mahfouz and Ghaith Pharaon. And so Taha Bakhsh became an 11.5 percent shareholder in Harken Energy Corp.

His representatives within Harken Energy is not unknown either. Talat Othman, is a member alongside Frank Carlucci of one of America’s most prestigious “think tanks,” the Middle East Policy Council as well as being a leading Arab-American supporter of the Republican party.

These investors know each other well. They’ve been sitting on the same boards for more than ten years, alongside Salem bin Laden, the brother of Osama bin Laden who died in a plane crash in Texas in 1988.

It is therefore not surprising to find James R. Bath on the list of shareholders in two other companies controlled by George W. BushArbusto ’79 Ltd. and Arbusto ’80 Ltd.

In the late 1970s, James R. Bath, a wealthy Texas entrepreneur, invested $50,000 in these companies to get them off the ground. At the time, he was the U.S. business representative for Salem bin Laden according to the terms of a 1976 trust agreement. It came out later, in 1993, in an official U.S. document, that he was also the legal representative of Khalid bin Mahfous.

The two entities founded by George W. Bush were later merged with Harken Energy; all traces of these transactions have disappeared.

Khalid bin Mahfouz was very active in Texas at the time. During a deposition before the Financial Crimes Enforcement Network (FinCEN), James R. Bath claimed to own Skyway Aircraft Leasing Ltd. which in fact belonged to Khalid bin Mahfouz.

In 1990, Mahfouz procured a loan of $1.4 million for James R. Bath, allowing him to buy a stake in the Houston Airport. Following Salem bin Laden’s death in 1988, Khalid bin Mahuouz took back this holding.

But the bin Mahfouz empire also shares common interests with American oil companies, specifically concerning Central Asia in the area around the Caspian Sea, which is coveted by these companies.

In the last few yeard, Khalid bin Mahfouz’s Nimir Petroleum signed exploration and drilling agreements in the major Gulf States, Central Asia, from Oman to Kazakhstan, and even in Venezuela.

In 1994, Nimir Petroleum agreed to partner with the Saudi group Delta Oil Company, which had been trying for years to get a contract in order to build a gas and oil pipeline between Turkmenistan and Pakistan – via Afghanistan. The main partner in the $5 billion project was none other than the American corporate giant Unocal Corp. Negotiations with the Taliban had come to a deadlock, and the Delta Oil-Unocal consortium was undoubtedly counting on Khalid bin Mahfouz’s support in the undertaking.

Besides, Khalid bin Mahfouz was not the only Saudi businessman to take a strong interest in Central Asia’s oil at the time. Starting in 1991, Dallah Albarakka, a group controlled by Saleh Abdullah Kamel, was also getting involved in the exploitation of several sites in Kazakhatan and Uzbekistan.

~ ~ ~

In the world of the BCCI, there is another facet of the BCCI that is little known. It involves investments made by the bank’s main protagonists in the luxury goods industry, through a financial group in the Gulf controlled by Khalid bin Mahfouz’s cicle.

In 1982, a group of investors from the Middle East created a financial company with the goal of building a diversified portfolio, with assets estimated today at more than $5 billion. The group concentrated on reputable and financially stable investments in the areas of publishing, distribution, watch-making, and luxury goods.

The company, Investcorp, is located in Manama, the capital of Bahrain, and was founded by the region’s most elite oilmen and financiers: Nemir Kirdar, an Iraqi businessman and former manager of Chase Manhattan Bank in the Persian Gulf; Ahmed Ali Kanoo, who died in 1997; Ahmed Zaki Yamani, former oil minister of Saudi Arabia; and Abdul Rathman Salim Al Ateeqi, former oil minister of Kuwait.

Investcorp Investment Holdings Corp., is registered in the Cayman Islands, and its main subsidiary overseeing international activities, Investcorp SA, is registered in Luxembourg.

Inspired by the movement toward autonomy and the financial emancipation of the Persian Gulf after the first oil crisis – especially in view of large Western financial institutions – Investcorp was established on similar principles to those that led to the creation of the BCCI in 1972. Though the two entities are not in the same industries – the BCCI is a banking institution, while Investcorp is meant to be an investment company – they were both created with the joint support of the Emirate authorities, Saudi investors, and Western banks (Bank of America in the case of the BCCI, and Chase Manhattan in the case of Investcorp).

In addition, their holding companies were located in the same offshore centers (the Cayman Islands and Luxembourg).

The two entities also have common shareholders. In addition to its two main executives (Abdul rahman Salim Al areequ, chairman, and Nemir Kirdar, president and CEO) as well as representatives from the government of the United Arab Emirates, Investcorp also has an executive committee made up of eighteen of the group’s main shareholders, many of whom were shareholders in the BCCI.

At least four of these members represent the interests of, or are closely involved with, Saudi businessmen who played a major role in the BCCI affair. They are Abdullah Taha Bakhsh, Mohammed Abdullah al Zamil, Bakr Mohammed bin Laden, and Omar Al Aggad.

Between 1976 and 1982, Abdullah Taha Bakhsh – an investor in Harkin Energy, recall – was the representative for the bin Laden family in the United States. He also represents Khalid bin Mahfouz’s financial interests in the Middle East. What’s more, several sources emphasize the fact that he represents the interests of Khalid Salim bin Mahfouz on the board of directors of Investcorp.

In fact, bin Mahfouz holds a 25 percent stake in Investcorp, thanks to Bakhah’s services….

Investcorp’s investments have not always been judicious, and the company is caught in several litigations, notably in the United States, Great Britain, and France for fraud and breaking accounting laws.

The context of Investcorp’s creation, as we explained, is similar to that of the BCCI in the early 1980s, especially in the discovery of fraudulent practices….

For more, GO TO > > > Aloha, Harken Energy ; Investigating Investcorp


May 24, 1996

Stock offering by Saks
a boon to Bishop Estate

Its holdings gain more than $24 million in value
on the first day of trading

By Rick Daysog, Honolulu Star-Bulletin

Bishop Estate’s investment in Saks Fifth Avenue increased by more than $24 million in a single day.

The charitable trust owns 4.1 percent of the upscale department store chain’s parent, Saks Holdings Inc., whose shares soared with the successful launch of its initial public offering Wednesday.

The stock, priced late Tuesday at $25 per share, closed Wednesday at $34.621/2 on the New York Stock Exchange, a 38.5 percent increase.

That gave Bishop Estate a paper profit of $24.1 million for the 2.5 million Saks shares it owns. Saks’ stock closed on Thursday at $32.50 a share but regained 50 cents on Friday to close at $33.

The estate stressed that it has not realized any gains because it has not sold any of its stock.

“We’re very pleased with the results there,” said Kekoa Paulsen, spokesman for the estate. “(But) bottom line, it’s a paper gain.”

Paulsen said the estate is positive about Saks’ future and its current management, noting that the investment in Saks is for the long-term. Bishop Estate purchased its stake in Saks Holdings back in March 1993 from Bahrain-based Investcorp S.A. for about $50 million.

Bishop Estate, the state’s largest private landowner, lists about $1 billion in assets but critics have said that figure may be as high as $10 billion.

Founded in 1867, Saks Fifth Avenue was privately held and operated as a division of Gimbel Bros. Inc. until it was purchased by British giant BAT Industries Plc in 1973. In 1990, BAT sold Saks to Investcorp for $1.6 billion.

The retailer currently owns 45 Saks Fifth Avenue department stores, 19 Off 5th outlet stores and the Folio catalog.

In Hawaii, Saks operates an off-price outlet at the Waikele Center and has expressed an interest in opening a department store in central Honolulu.

In Wednesday’s public offering, Investcorp sold 16 million shares in Saks, or about a quarter of the retailer’s equity. Saks said it would use the proceeds to pay down debt, which it listed as nearly $976 million.

An offering prospectus said that Bishop Estate’s 4.1 percent stake represents the fifth largest block of the company’s stock. Investcorp is the largest with 17.3 percent of the Saks’ equity, followed by SIPCO Ltd., a Cayman Island-based investor, with 17.28 percent.

Honolulu Star-Bulletin Business

~ ~ ~

For more, GO TO > > > Investigating Investcorp


From the American Spectator, by James Ring Adams

August, 1994

“The public has an overwhelming interest in knowing what business networks have claims on a president and his family. In this context, Hillary’s windfall in the futures market is chilling. . .

Hillary must still feel grateful to James Blair and Tyson Foods, Inc., who allegedly steered her to her trades; and to Refco and its president Thomas Dittmer, which brokered them …

And the Clintons’ futures trading may have made them further beholden to the Stephens bond empire of Arkansas–and entangled them indirectly but significantly with the Pakistani financiers who brought us BCCI.

Hillary’s trading came to light in mid-March after Lloyd Cutler took over as White House counsel.

In line with his new policy of “openness,” the White House admitted to New York Times investigators that she had plunged $1,000 in the notoriously choppy futures market in October 1978, when her husband had emerged as the clear front-runner in his first race for governor. James Blair, general counsel for Tyson Foods, Inc., was her guide to the market.

By the time she closed her accounts in May 1980, she had cleared $99,540, which allowed the strapped couple to put up a down payment on their house and buy tax-exempt municipal bonds..

The First Couple had reason to be embarrassed. Hillary had worked through the Springdale, Arkansas, office of Refco, a fast-growing Chicago-based commodities broker. Its Arkansas outpost catered primarily to Tyson Foods, the nation’s largest poultry firm, whose operations give the small Ozark town a pungent, penetrating odor.

Hillary’s personal broker was a professional poker player and 13-year veteran of Tyson Foods named Robert L. “Red” Bone, who had already compiled a substantial record of exchange rules infractions. Just a month before he went to work for Hillary, he had completed a one-year partial suspension on charges of plotting to manipulate the egg-futures market on the Chicago Mercantile Exchange. (He later received a second, more serious suspension for violating the first one.)

More significantly, at the end of Hillary’s first year of trading, the Chicago Merc itself suspended Bone for three years for “allocating” trades–letting favored customers take the winning trades and dumping the losers on the rest. The action cited “serious and repeated violations of record-keeping functions, order-entry procedures, margin requirements and hedge procedures.”

Hillary’s account wasn’t specifically at issue, but it fit the pattern: her return on her first day of trading–more than $5,000 on $1,000 down–would have been mathematically impossible if Exchange rules were strictly followed.

On October 15, 1979, Hillary’s own investment adviser, Tyson counsel Blair, filed a suit charging Red Bone, Refco, and its president Thomas Dittmer with systematically taking their customers to the cleaners.. The Merc and the Board of Trade now run two of the best funded political action committees in the country. In 1993, the Merc’s Commodity Futures Political Fund disbursed nearly $200,000, making it the eighth most generous finance, insurance, and real estate PAC. . . .

During the 1970s, the Merc invented futures trading in foreign currencies and stock indices and metamorphosed from the bane of Midwest farmers into a major player in global finance. Credit for the growth goes to Leo Melamed, a World War II refugee first elected Merc chairman in 1969 and a dominant power ever since.. Refco, then and now, meant Thomas Dittmer, one of the boldest traders on the Merc.

Dittmer pulled off a number of coups in the early 1980s, including a panic in soybean prices and a near corner on coffee, but his most memorable success was the boom in cattle futures that enriched Hillary.

Dittmer used his windfall to make Refco a global player in metal refining, financial futures, and money management. In 1981, he joined the elite club of thirty-seven dealers who buy Treasury securities for the Federal Reserve.

The connection with Refco entangled the Clintons, however remotely, in another segment of the web of influence-buying that was then being spun across the world by the Bank of Credit and Commerce International. By itself, this tie might not amount to much, but it takes on added interest from the complex relations between the Clintons and the Stephens family of Little Rock, financiers and Arkansas king-makers with their own BCCI entanglement.

The role of Jackson Stephens as financial backer of Governor Clinton has already been widely reported, as has his service to the BCCI’s penetration of the American financial market (see TAS, November 1992). But almost nothing has been said about the equally fascinating appearance of Refco in the affairs of the world’s most corrupt bank.

Refco and Stephens also maintained business ties, but it’s an open question whether these involved the BCCI. It’s also an open question whether Bill Clinton’s brush with this world is influencing the federal government’s efforts, or lack of effort, at getting to the bottom of the BCCI scandal.

It can definitely be said, however, that Refco’s international operations have attracted the interest of the untanglers of BCCI’s affairs. BCCI is not only the world’s largest single bank fraud, but also the most ubiquitous. It was founded in the Persian Gulf in 1972 by a Pakistani visionary named Agha Hasan Abedi, who inspired a cult-like devotion from his officers, primarily Urdu-speaking Pakistanis; he also steadfastly ignored economic reality, and wound up losing more than $10 billion.

Increasingly desperate to cover his losses, he opened his doors to the world’s vast underground economy, and BCCI became the central bank for terrorists, spies, arms dealers, and drug lords from Burma to Colombia.

At the same time, his agents tried to buy their way into every political elite they encountered–including the Arkansas establishment that was watching the rise of the Clintons.

In November 1977, Abedi met in Little Rock with Jimmy Carter’s confidant Bert Lance and investment banker Jackson Stephens, a power above and beyond Bill Clinton. Out of this meeting came Abedi’s celebrated takeover of an interstate banking chain based in Washington, D.C., patriotically renamed First American Bankshares and put in the hands of super-insider Clark Clifford. Coincidentally or not, Dittmer and Refco picked up a new client in the aftermath.

The far-sighted Abedi had cultivated Sheikh Zayed well before the mid-seventies boom in oil prices, taking the avid falconer on lavish bustard hunts in the wilds of Pakistan. (Abedi’s agents also catered to the less wholesome tastes of the portly Crown Prince Khalifa.) Zayed became the primary financial backer of the BCCI and still owns its remains. When Abedi decided to buy the Washington, D.C. bank that Jack Stephens was peddling, he advanced one of Sheikh Zayed’s minor sons as a stockholder, with Darwaish acting as the boy’s agent.

The deal apparently whetted Darwaish’s appetite for American investments. Around October 1979, he and several assistants set up a Panamanian shell corporation to trade in the American commodities markets. They worked through a Swiss brokerage and placed their orders with Refco. Through November, they transferred more than $100 million of Sheikh Zayed’s money to America, primarily through BCCI headquarters in London.

But the biggest loser with Refco was BCCI itself.

From 1983 to 1985, the bank speculated recklessly in the futures market on U.S. Treasury bonds. The futures were a bet on the direction of interest rates and required split-second timing; one incredulous auditor found that BCCI was buying contracts and leaving them in desk drawers. Estimates of the losses reach $860 million.

BCCI investigators are currently puzzling over another series of transactions involving Akbar. In addition to his role at the treasury department, he ran the bank’s Grand Cayman branch..These murky global currents, apparently so remote from the Clintons, are looking more important in retrospect. Every new revelation suggests a deeper pattern of relationships than anyone had previously expected.

The repeated appearance of the BCCI and its assorted fronts suggests that even now we underestimate Abedi’s ambitions for penetrating the American economy. Through Capcom and Refco, his agents had become players in the Chicago Merc, which was then on its own way to becoming a major factor in global finance. Through its connections with major figures in the cable industry, Capcom and BCCI were apparently establishing a beachhead in American broadcasting. (The hand of the BCCI has been suspected in a minority investment these businessmen made in Ted Turner’s Cable News Network.).

At the time, however, Bill and Hillary very likely had almost no inkling about their benefactors’ extensive connections. Everyone concerned is now trying to minimize their importance. The closest Clinton link to BCCI, Jackson Stephens, maintains that he was an entirely unwitting tool and only for a short time. BCCI prosecutors will agree that Stephens probably never met Darwaish or any other of the nominee shareholders in the takeover that created First American Bankshares. As the stockbroker who arranged to buy these shares, he acted for the account of a dissident faction of the bank’s board (which included himself) in an attempt to oust its management.

Yet the interconnections continue to multiply. Stephens Inc., the family brokerage considered one of the largest outside Wall Street, maintained links with Refco throughout the 1980s. In 1980, it cleared futures contracts through Conti Commodities, the international futures trader for Continental Grain Company; Conti was subsequently purchased by Refco. In 1981, Stephens Inc. opened an account with Refco itself, a relation renewed several times in the 1980s. When Hillary was trading with Refco, she also opened a commodities account at Stephens Inc. Yet the Stephens name has not otherwise figured in press accounts.

Beyond these questions is the very urgent matter of the BCCI investigations. At this writing, the U.S. Justice Department and Manhattan District Attorney Robert Morgenthau are debating how to handle the biggest BCCI figure yet to come to justice in the U.S. (Abedi himself, now an invalid in Pakistan, was recently convicted in absentia in an Abu Dhabi court and sentenced to eight years. But no one expects that the Pakistani government will deliver him to the justice of Sheikh Zayed.)

In a deal in May, Abu Dhabi turned over Swaleh Naqvi, Abedi’s number two man, to American custody. Since then he has been in the hands of the federal government, which is negotiating a plea bargain, while D.A. Morgenthau’s more aggressive investigators make no secret of their frustration at his lack of cooperation. Does the Clinton administration really have the heart to press Naqvi for all of the BCCI’s secrets? The saga of Capcom and Refco suggests that the embarrassment could start in its own back yard..”

Abu Nidal

From William Rempel and Douglas Frantz Los Angeles Times 9/30/91:

“The Bank of Credit & Commerce International handled millions of dollars in illegal arms transactions for Palestinian terrorist Abu Nidal in an effort to persuade its wealthy Mideast backers that the bank was staunchly pro-Arab, according to a former high-ranking bank official. British weapons secretly destined for the terrorist’s arsenal — some of them for resale to Iraq and elsewhere — were financed through BCCI offices here and shipped under export documents that bank officials knew to be phony, records and interviews disclosed.

“During the Iran-Iraq War, the bank wanted to show to the Arab world that we supported Iraq, and we did that through support of Abu Nidal for several years,” said Ghassan Qassem, a 17-year BCCI officer who served as Abu Nidal’s personal banker and became a spy inside the bank for Western intelligence agencies. The bank was a vehicle for transmitting money to Abu Nidal from wealthy Arabs who supported his work as a matter of political conviction and from individuals and governments that contributed funds as a form of protection against terrorist attacks aimed at them.”

From BBC Summary Al-Hayat 8/20/98: “‘Al-Hayat’ has learnt that the Egyptian security authorities have arrested Sabri al-Banna (Abu Nidal). The security sources, however, have refused to reveal details of the arrest, in what can be considered to be the second most important operation after the arrest of Carlos.

It is worth mentioning that Banna is the leader of the first group to break away from the PLO, that he has been expelled from Syria and from Iraq, and that he is suffering from health problems. ‘Al-Hayat’ asked Muhammad Subayh, Palestine National Council secretary and Palestinian envoy to the Arab League, about the arrest. He denied any knowledge of it and said that Sabri al-Banna is wanted by the Palestinian [National] Authority on charges of murdering several PLO leaders. Subayh said that Banna has been in hiding for over a year… ”

From BBC Summary Al-Hayat 8/21/98: “The Egyptian official news agency MENA circulated late on the night before last a statement by an Egyptian source denying reports by the German news agency that Cairo had arrested Sabri al-Banna (Abu Nidal), leader of Fatah – The Revolutionary Council.

President Yasir Arafat who yesterday met President Husni Mubarak in Cairo also denied any knowledge of the arrest. ‘Al- Hayat’had published reports of his arrest based on a statement by sources who said that the man is very ill. An official in the Abu Nidal group in Beirut refused to make any comments on the report published by ‘Al- Hayat’ yesterday. He said: ” We have no official comment on the report. If any such comment is issued we will pass it on to you.”

However, the Israeli newspaper ‘Yediot Aharonot’ said, citing ” private sources” , yesterday that Abu Nidal’s arrest took place some days ago. Meanwhile, ‘Al-Hayat’ has learnt from informed sources that Abu Nidal’ s state of health is deteriorating, and it is said likely that he has contracted a chronic brain disease. The sources said that his condition is critical and that he is undergoing treatment. ” . . .

From Agence France Presse 8/23/98: “The Fatah Revolutionary Council on Sunday denied press reports its founder Abu Nidal had been arrested in Egypt and was in hospital dying of cancer. “Reports that our brother Abu Nidal has been arrested and that he is seriously ill are completely baseless,” the group said in a statement.

“These stories are being spread by intelligence services hostile to the Palestinian cause and are an attempt to divide our ranks and help the capitulating leadership” of Palestinian Authority President Yasser Arafat, it said. “


From The Outlaw Bank: BCCI, by Jonathan Deaty & S.C. Gwynne:

Kamal Adham was one of the true inside power players of the Middle East, a shrewd, jovial man who had for decades straddled the worlds of Middle Eastern business and politics.. He was the half brother of Iffat, the favorite wife of King Faisal, who ruled Saudi Arabia from 1964 until his death in 1975. . . .

Like so many other enterprising Arabs in the 1960s and 1970s, when oil revenues were booming and foreign companies were lining up to sell their products, Adham had used his connection to commercial advantage. The way most commoners in the Middle East got rich off the oil boom was through a simple system know as “agency” arrangements.

In order to sell a product or service in Saudi Arabia, you had to know someone in the royal family, which authorized all expenditures. If you did not know a princeling or a royal cousin, then you hired an “agent” who provided you access for a “commission.” Though this commission often looks very much like a “bribe” … it was nonetheless the way business was done, and few were better at it than Kamal Adham.

The list of his agency deals was long and illustrious. . . .

By the mid-1960s Adham’s influence was such that he simultaneously came to represent three defense firms and was being ardently courted by a fourth. Said Northrop representative Kermit Roosevelt, “Adham already has a piece of the Lighting deal, the Mirage deal, and the Lockheed deal and is trying to complete the square by an arrangement with Northrup.”

He also came to be the principal broker for weapons purchased by Saudi Arabia on behalf of Egypt.

But perhaps his richest contract was with Boeing Company , which paid him millions of dollars in commissions to help it sell passenger jetliners to the fledgling Saudi airlines. . . .

That and other similar transactions had led to a three-year investigation of Boeing’s commission payments by the U.S. Securities and Exchange Commission, whose goal in part was to figure out exactly who Boeing was using to accomplish these sleights of hand.

Curiously, in the words of a 1976 Wall Street Journal article, Boeing’s efforts to suppress those names, particularly Adham’s, “has been accomplished with significant help from the State Department, which entered a court fight between the SEC and Boeing to argue that disclosure of Boeing’s ‘highly placed’ consultants abroad could harm U.S. foreign policy interests.

How could the mere disclosure of Adham’s name affect U.S. foreign policy? In two ways.

First, Adham was the head of the Saudi internal security service – arguably the most important agency of the government, since it protected the royal family – and the General Intelligence Directorate of Saudi Arabia. In that role he was the principal liaison between the CIA and European intelligence agencies, and he even had an agency code name: Tumbleweed. In geopolitical terms, Adham was the five-hundred-pound gorilla of Saudi intelligence, an outfit know and feared for its merciless hunts for dissidents and brutal methods of repression. . . .

But the second and more important foreign policy concern was that Adham was the kingdom’s key link to Egyptian President Anwar Sadat in the years leading to the Camp David accords in 1979 – the years following the 1973 war, when the Saudi-Egypt axis acquired key strategic importance. . . .

~ ~ ~

Banking licenses were no longer an insurmountable problem for Abedi. . . .

By early fall 1978 Abedi opened bank branches in Lahore and Islamabad, and his choice of the young Nazir Chinoy, from the Bank of America’s Lahore branch, to head them and to “devise marketing strategies to enhance the business of the bank in Pakistan” illustrates another link in the shadow alliances he was forging in America.

Abedi orchestrated a similar cross-fertilization move by directing Pharaon to fire the incumbent CEO of the National Bank of Georgia and replace him with Roy Carlson, the former head of Bank of America’s Middle East operations.

(Carlson had other valuable connections: After twenty years with Bank of America he had gone to work for one of Abedi’s Iranian associates, Rahim Irvani, and Irvani’s American partner, Richard Helms, the former director of the CIA and U.S. ambassador to Iran.) . . .

Abedi already knew that he and the Bank of America were going to have to part company publicly. Under U.S. banking regulations his international bank couldn’t take control of Financial General, a multi-state bank holding company, while having another U.S. bank holding company as a major investor. There were other reasons on both sides for the coming public divorce of Abedi and Bank of America, but neither envisioned actually parting company: They would live together without being married.

Five of Bank of America’s senior officers were either on BCCI’s board of directors or helped to manage Abedi’s bank. For the nest decade the two banks would move billions of dollars a week through each other’s international offices, and the Bank of America would be an invaluable, if hidden, ally, since it would continue to accept BCCI’s letter-of-credit business after virtually no other Western bank would touch it. Indeed, it could be argued that Bank of America became the single most important financial institution helping BCCI stay afloat.

In the United States alone, Bank of America transferred more than $1 billion a day for BCCI until the moment of BCCI’s global seizure in July 1991.

And BofA was a key player in Abedi’s deposit-gathering scheme. According to Yakoob Wadalawallah, a former officer in BCCI’s Los Angeles office, Abedi exhorted his remote branches to pay high premiums for deposits, as much as 1 percent over the going market rate. But that, of course, put the branches in the position of paying more for their deposits than they were earning from them. Abedi’s solution was to have officers like Wadalawallah place those deposits in BCCI accounts at Bank of America, where BCCI would compensate the branch for the high rate that it was paying its own client.

Thus Bank of America acted as a sort of global vacuum cleaner, sucking up many BCCI branch deposits and thereby providing the fuel Abedi needed to keep his Ponzi scheme alive.

Meanwhile, a great deal of money was also routed through Bank of America’s Pakistan branches, perhaps one reason BofA hired a son of General Zia in 1978. A shareholder’s lawsuit against BofA alleges that Zia’s son was employed by BCCI, “even though he was completely unqualified for the position,” as a way of helping “BCCI bribe important Pakistani officials.” . . .

The favors granted to Abedi were not a one-way affair. What was good for Pakistan was also good for Abedi. He was building up a remarkable latticework of favors done and favors owed, while adeptly disseminating the benefits coming back his way. . . .

Abedi established the protocol department in 1975, while United Bank was still in business, to look after the needs of his wealthy clients who came from the Middle East to visit Pakistan. When BCCI opened its doors in Karachi in 1978, the protocol department was in place with a staff of more than one hundred and a $1.5 million budget. . . .

Ahmed built and looked after the Pakistan palaces and homes of royal families. He hired gardeners, cooks, and servants, and acted as tour guide and factotum to major depositors who came to hunt or to party. The protocol department kept more than one hundred limousines at the disposal of important guests.

Just as Ahmed hired hundreds of helpers to beat the bushes in advance of falconing expeditions, the protocol department was also responsible for sweeping the countryside in search of another kind of prey: very young girls for the entertainment of the sheikhs and Middle Eastern businessmen. . . .

The protocol department continued to grow: By 1988 it employed nearly five hundred people and was prepared to supply benefits more exotic that the “young beauties from Lahore” Sami Masri mentioned in telling Beaty about the gifts dispensed to Senator John Tower.

According to Masri, the protocol officers directed by Sani Ahmed were also responsible for moving money to pay for illicit operations and for luring businessmen, military officers, and politicians into Abedi’s web of intrigue through a combination of favors, money, blackmail, and intimidation.

BCCI officers showed up at the most unusual, high-level places: They were there for Henry Kissinger’s first secret mission to China; they accompanied Jimmy Carter on visits to both Pakistan and China.

Abedi had money to spare to underwrite the protocol department: In 1981 Ghulam Ishaq Khan granted BCCI a special tax-free status allowing Abedi to avoid tens of millions of dollars in taxes and to pour his huge Pakistan profits into one of his front companies and into Pakistan’s atomic bomb project.

When Abedi formed the BCCI Foundation in Pakistan in 1981, he named Khan chairman and announced that 85 to 90 percent of all the bank’s profits would be donated to charity, a claim that greatly enhanced his reputation as a philanthropist. . . .

Most of the millions that flowed through the foundation went to two uses: first, to investments – patently noncharitable – in a company called Attock Cement, owned by Abedi’s associate and U.S. front man Ghaith Pharaon. The second beneficiary was something called the Ghulam Ishaq Khan Institute of Engineering Sciences and Technology. In 1983, for example, the foundation’s investments in Attock were five times the amount donated to its fifty charitable causes, which included Jimmy Carter’s Global 2000.

And in 1987 the foundations single largest donation, $10 million, went to the Khan Institute. According to its brochures, the Ghulam Ishaq Khan Institute trains young scientists and engineers. The reality is a little more ominous . . .

The director of the institute is Dr. Abdul Qadeer Khan, the man most closely linked with Pakistan’s efforts to develop nuclear weapons. Khan, a German-trained metallurgist, once worked as a classified enrichment plant in the Netherlands, where he gained access to key plans. So important is he to the Pakistani national interest that even his whereabouts are considered a national secret.

Another foundation branch is the New and Emerging Sciences and Technology (NEST) Institute, chaired by Pakistan’s leading nuclear physicist and the father of its nuclear program, I.H. Usmani. . . .

Through the foundations it funded and controlled, BCCI was carrying out a key element of Pakistani national policy: shopping the world for nuclear technology and material. Bhutto himself had acknowledged the motives behind an attempt in the mid-1970s to purchase a French plutonium extraction plant.

“All we needed,” he wrote, “was the nuclear reprocessing plant.”. . .

For more, GO TO > > > The Nuclear Nests


From The Outlaw Bank: BCCI, by Jonathan Beaty & S.C. Gwynne:

BCCI is a paradigm of the way much of the world works, and nowhere was this more true than in its activities in the Cayman Islands.

Long before it was shuttered in July 1991, BCCI had come to be the world’s leading underground bank, performing services and making its money off the underground economies from Pennsylvania to the Pacific Rim.

There are several definitions of “underground,” but they reduce mainly to those parts of the economy that, in response to regulation, taxation, or law enforcement, have managed to remain invisible to the authorities. This can include everything from money running through offshore banks and cash payments to construction crews to cash from illegal drug transactions.

Everyone has by now heard of or read about the black market economies of the former Soviet Union and Eastern bloc. But even the most advanced First World economics are bursting with black money.

In the United States, that model of responsibility and active government enforcement, the size of the underground economy is estimated to be $350 billion to $500 billion a year, equivalent to more than 10 percent of the U.S. gross national product (and $100 billion or more in lost revenue for the government).

Economists at the World Bank and the International Monetary Fund estimate that a similar 10 percent of the Western European economy and 70 percent to 80 percent of the economies of the former Soviet Union and Eastern Europe are “black.”

In the developing world the black numbers are also remarkable: Peru, 60 percent; India, 50 percent; Tiawan, 40 percent.

Most of this money is completely untrackable. . . .

Once the money moved into Cayman accounts, of course, the islands’ secrecy laws prevented anyone from looking at it. If there was concern, BCCI could give the client a numbered account, as the Swiss have done for years. . . .


From The Wall Street Journal:

September 29, 1998

We know that the world’s largest bank fraud can go almost unnoticed, except to Manhattan District Attorney Robert Morgenthau. We refer, in case you’ve forgotten, to the Bank of Credit & Commerce International, which was back in the news in two jurisdictions last week.

In Washington, Clark Clifford and Robert Altman agreed to give up $18.5 million in claims on stock and legal fees connected with First American Bankshares, the BCCI front they once headed in the nation’s capital.

In Luxembourg, BCCI auditors Price Waterhouse and Ernst & Young agreed to a payment of $125 million to the defunct bank’s customers; the creditors will now recover more than half their money–more than quadruple the best estimates at the time BCCI went under.

These people, many of them Pakistani nationals in Britain, will be mighty glad that Mr. Morgenthau pursued the case when the Bank of England, the Justice Department and various others ducked.

Yet for all the smoke Mr. Morgenthau uncovered we have only glimmers of the fire that led to it all.

There are still unresolved questions about the political patronage that has helped shield BCCI principals from a full reckoning, and in particular about how a crooked Pakistani-Arab bank got control of the largest bank in Washington, D.C.

In this respect, the Altman-Clifford settlement is particularly striking. At issue has always been whether the two knew that BCCI was the real owner of First American, of which they were, respectively, president and chairman. . . .

Yet the essential mystery remains.

Doubtless that’s just the way many would like to leave it, because the names that pop up read like some kind of Who’s Who.

There is, to begin with, a large Arkansas connection, since Little Rock investment giant Stephens Inc. assembled the bloc of First American stock for the BCCI front men.

Assisting in these transactions was the now-famous Rose Law Firm, then headed by Joseph Giroir, more lately a representative of the Riady family of Indonesia and participant in the notorious September 13, 1995, Oval Office meeting at which John Huang was dispatched to his fund-raising tasks.

Rose Attorney Hillary Rodham represented a Stephens subsidiary, the Systematics bank-data processing firm, in a related lawsuit.

James Riady made his first appearance in Little Rock about the time these transactions took place, with his family ending up with a piece of the Stephens-dominated Worthen Bank.

Another player was Bert Lance, Jimmy Carter’s disgraced head of Office of Management and Budget, who apparently hoped to head First American himself.

All of these people deny that they knew anything crooked was taking place, just a group of smart, well-connected Friends of Bill stunningly ignorant about the people they were doing business with.

Yet since the mystery has never been cleared up, you can’t blame those of us who followed it from remembering names as they turn up in today’s news.

Nicholas Katzenbach, for instance; the former Attorney General surfaced last week with two of Mr. Clinton’s serial White House counsels, defending the President against impeachment in a New York Times op-ed. We remember that Mr. Katzenbach replaced Mr. Clifford when the latter resigned from First American in 1991.

Ditto for John E. “Jack” Ryan, who ended up as head of the Resolution Trust Company and denied Rep. Jim Leach’s request for documents relating to Madison Guaranty Trust, the Whitewater S&L.

We remember that it was under Mr. Ryan’s watch as head of bank supervision at the Fed that BCCI won approval to buy First American

$ $ $

From The American Spectator, 12/96, by James Ring Adams:

The Indo-money affair is cut from the same cloth as the scandal of the Bank of Credit and Commerce International, which earlier this decade led to the bank fraud indictment of former Defense Secretary and presidential adviser Clark Clifford. (The federal and New York State case against Clifford was later dropped because of his advanced age and the acquittal of his associate Robert Altman on similar charges.)

The BCCI was trying to buy hidden control of American banks to build its global empire and also to wield influence for its Arab patrons. The Riadys and their allies had in addition the motive of sheer survival. They have been investing in Bill Clinton for twelve years, and one can understand why they would disregard American campaign law in the effort to preserve their stake.

Where things get shocking was in the arrogant response of the White House and the Democratic National Committee when the scandal erupted.

In quantity and quality the Indo-money case dwarfs any influence-peddling scandal in memory, even for those who recall the worst of the Nixon years. When the slumbering press awoke to the story (about a year after TAS put it on our cover), it discovered that the Riadys had managed to place a former senior employee of their Lippo Group inside the Clinton administration, with extraordinary access both to the Oval Office and to Asian contributors.

But John Huang, with his $4 million in DNC fund-raising and fifty visits to the White House, was a relatively small player in a network that included the richest men of South Asia. Even the Riadys were only one of several conduits in a political penetration that may have shaped human rights and trade policy and even diplomatic relations with a number of countries along the Pacific Rim, including the most sensitive one of all, the People’s Republic of China. . . .

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From The American Spectator, 10/92, by James Ring Adams 10/92:

…. Even after the sharp contraction of Worthen Bank’s ambitions, Jack Stephens and Stephens Inc. kept their foreign deals going. The one now gaining most notoriety put together Saudi money men, elements of the BCCI network, and George W. Bush, eldest son of the President. The deal, first reported by David Twersky of the Forward and then covered in some depth by the Wall Street Journal, provided financing for the Harken Energy Corp. of Houston.

Eyebrows were raised when this small and untried company landed a “potentially lucrative” offshore drilling contract with the Persian Gulf princedom of Bahrain. Many saw it as no coincidence that George W. Bush, often called George, Jr., sat on the board of Harken with a consulting contract worth as much as $120,000 a year. But the fascinating details came in the financial history that put George Jr. in this position.

In the late 1970s, George Jr. tried to emulate his father’s business success in the Oil Patch by setting up a series of drilling partnerships. Called Arbusto ’78, Arbusto ’79, and so forth, they attracted capital from, among others, a Houston aircraft broker and financial manager named James Bath, who according to a former associate had acted as liaison between Saudi businessmen and the Central Intelligence Agency in 1976, the year in which George Bush, the elder, served as director of central intelligence.

Bath’s associate also disclosed in the course of a bitter legal fight that Bath managed millions of dollars of Houston investments for Sheik Khalid bin Mahfouz, the most important commercial banker in Saudi Arabia and for a time one of the largest shareholders in BCCI.

Manhattan District Attorney Robert Morgenthau indicted Sheik bin Mahfouz this July for a “scheme to defraud” in connection with his investments in BCCI. George W. Bush has given conflicting statements about Bath’s investment in Arbusto, finally admitting to the Wall Street Journal that he was aware that Bath represented Saudi investors.

The Arbusto partnerships were busts as money-makers, but the investors managed to recoup their stakes through several stock swaps that wound up giving them shares in Harken Energy. But Harken itself needed help, and George Jr. gave it a boost in finding new financing through Stephens Inc.

George Jr. attended a meeting in Little Rock between Harken officials and Jackson Stephens that produced an unusual rescue plan. Mr. Jack obtained a $25 million cash infusion for Harken from Union Bank of Switzerland, which rarely invested in small American companies. . .

$ $ $

From, by Ron Bell (9/11/92)

Charles Keating and the S&L Crisis

Charles Keating, the godfather of the S&L scandal, now sits behind bars, perhaps for the rest of his life. He has been assessed fines exceeding 3.6 billion dollars in just one civil action. Federal prosecution has not yet begun. Yet after several books and tens of thousands of column inches of newsprint, the major features of the Keating story remain, until now, untold.

For example, General John Singlaub and the CIA’s Latin American military campaigns, Carl Lindner’s purchase of UNITED BRANDS and the U.S. Honduran aid program, extensive BCCI transactions, PRUDENTIAL INSURANCE, and Keating’s attempt to get a strangle hold on the water supply of Arizona are key essential features of Keating’s story that have not had national exposure.

An army of federal regulators, prosecutors, attorneys and judges have combed the affairs of Charles Keating. So why haven’t the major features of his operations come to light? Having a brother who was vice president of ASSOCIATED PRESS helped keep items off the wire service.

The ownership of Phoenix’s two city newspapers helped even more. The ARIZONA REPUBLIC and the PHOENIX GAZETTE are owned by the Dan Quayle family.

The Vice President’s involvement in the affairs of CIA Latin American programs provided plenty of incentive for Phoenix newspapers to keep the Keating affair as quiet as possible. And Carl Lindner, a much bigger fish than Charles Keating in these affairs, holds the largest stock interest in KTSP TV, the CBS television affiliate in Phoenix.

Keating is a man who has done favors for many powerful individuals including Presidents Ford, Reagan and Bush.

Steven Pizzo, author of INSIDE JOB, one of the best books on S&L looting, supplied Barbara Honegger, author of OCTOBER SURPRISE, a Defense Intelligence Agency telex indicating that the alleged OCTOBER SURPRISE airplane for William Casey’s and Heinrich Rupp’s Paris trip was arranged by Kenneth Qualls, formerly the chief pilot of Charlie Keating’s AMERICAN CONTINENTAL CORPORATION.

This and other high level CIA favors may suggest even more sinister reasons why the major features of the Keating story never made it to print….

Savings and Loans were originally chartered to provide home mortgage loans. When Ronald Reagan deregulated the industry, high rollers were free to attempt more ambitious projects with the federally insured deposits.

No one was more ambitious than Charlie Keating and no one lost more of the tax payer’s money.

To date taxpayers have been assessed $500 BILLION for the S&L looting$2 1/2 BILLION for Charlie’s sins alone.

After providing less than a dozen home loans, Keating set out to build THE PHOENICIAN, a $300 million luxury resort hotel financed 55% by his newly acquired S&L, LINCOLN SAVINGS, and 45% by the King and Queen of Kuwait.

In November of 1989, six months after Keating’s parent company AMERICAN CONTINENTAL finally hit the skids, the Feds took over the PHOENICIAN RESORT in a surprise 1:00 AM raid. . . .

If the Feds had done even the most elemental examination of the business affairs of Charles Keating, this is what they would certainly have found: On November 26, 1980, just two weeks after the election of Ronald Reagan and George Bush, Keating purchased the property located at 2735 East Camelback Road for his AMERICAN CONTINENTAL CORPORATION Headquarters.

For this he paid $3,083,000 to the MICHAEL J. PELOQUIN DEVELOPMENT CORPORATION.

During the period from 1980 to 1984, Maricopa county court records show that sixty civil suits were filed against Peloquin. And Michael J. Peloquin has a famous father, Robert Peloquin, who has an even more questionable past.

After serving on Robert Kennedy’s Strike Force On Organized Crime, Robert Peloquin and half the other attorneys there, distinguished themselves by going directly to work for the major organized crime figures they were investigating.

Peloquin Sr. set up the private spy company, INTERTEL, reportedly for the king pin of American organized crime, Meyer Lansky.

After Lansky had failed to introduce legalized gambling into Atlantic City, INTERTEL was formed to “police the gambling industry” to make gambling acceptable to the state of New Jersey. It is a matter of record that Robert Peloquin ran the PARADISE ISLAND CASINO in the Bahamas for Lansky. This is interesting since Keating had his mansion base also in the Bahamas.

It was INTERTEL that was responsible for the security of Howard Hughes the last two questionable years of his life. Nixon’s Domestic Affairs Advisor, Charles Colson once stated that it was difficult to tell “where the HUGHES CORPORATION ended and the CIA began”.

The parent company of INTERTEL is RESORTS INTERNATIONAL whose original name was MARY CARTER PAINT COMPANY.

MARY CARTER PAINT was reported in a significant May 20, 1976 article by Howard Kohn in ROLLING STONE to have been founded by Allen Dulles, the Director of CIA under Presidents Eisenhower and Kennedy.

In the book, THE COMPANY THAT BOUGHT THE BOARDWALK, INTERTEL was described as a merger of former FBI, CIA, Customs, Bureau of Tobacco and Firearms, IRS and other federal agents with organized crime. This book describes in some detail how Robert Peloquin headed the first Justice Department STRIKE FORCE ON ORGANIZED CRIME, then retired to go directly to work for those Justice was investigating.

Michael J. Peloquin purchased what would soon become the AMERICAN CONTINENTAL headquarters property April 2, 1979, from James E. Patrick II and Herman Chanen for $550,000. The sale to Keating represented a bump of $2.5 million in only 8 months!

What is more, Patrick II and Chanen are not stupid when it comes to real estate. Patrick II is the son of James Patrick, who at this time was President of VALLEY NATIONAL BANK, Arizona’s largest bank. Herman Chanen owns the largest construction company in Phoenix and at sale time was Chairman of the State Board of Regents which oversees all state universities.

These men represented the very pinnacle of the Phoenix business establishment. Soon after the Keating deal, James Patrick Sr. retired to become president of ROYAL PETROLEUM in Kuwait, a country closely connected to Charlie’s business affairs.

September 19, 1985, Keating received a $5 million loan on this property from PRUDENTIAL INSURANCE COMPANY, a bump of another $2 million. This was a one payment note that was due in total October 1, 1990. The note was secured with nothing more that the property which had been purchased for $3,083,000. When Keating filed Chapter 11 in April of 1989 this $5 million was added to the rest of the money that just evaporated.

Why were these big business interests coming forward to set Charlie up in business?

PRUDENTIAL is a big player in this.

Not only was George Bush’s father, Prescott Bush, on the board of Directors of PRUDENTIAL but Ronald Reagan was one of the largest stockholders.

It was PRUDENTIAL that owned the land upon which Herman Chanin built the lavish shopping center, BILTMORE FASHION SQUARE, which is located just across the street from Keating’s headquarters. . . .

For more, GO TO > > > Prudential: A Nest on Shaky Ground ; The Secret Nests ; Vultures in The Meadows

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From Multinational Monitor, 12/94:


The 10 Worst Corporations of 1994

Who examines the examiners? . . .

PRICE WATERHOUSE faces approximately $12.5 billion in legal claims from the Deloitte & Touche liquidators of the collapsed Bank of Credit and Commerce International over Price’s audit of the bank….

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From The Outlaw Bank: BCCI, by Jonathan Beaty & S.C. Gwynne:


Although BCCI described itself to American regulators as an international bank owned by rich, successful Arabs, its founder, the mysterious agha Hasan Abedi, was a Pakistani, and it was run largely by Pakistanis. The reporters, gearing up for the next story, were intrigued with Mirza’s contention that the government of Pakistan had pressured the United States to limit prosecution of BCCI. Mirza’s version of the bank’s creation, if true, indicated that the bank had criminal leanings from the start. He had told investigators that while Abedi was indeed a clever banker, he also benefited from the backing of a Pakistani named Fazle Haq, who was – Mirza said – heavily engaged in narcotics trafficking and moving the heroin money through the bank….

“Haq had become more powerful,” Mirza had said, “after the arrival of the Khomeini regime in Iran. Although the shah had beheaded drug smugglers, Khomeini bested him in this regard and went after drug traffickers with a vengeance. The result of this increased pressure was that drugs which had been smuggled from Afghanistan through Iran were now coming through Pakistan, which only resulted in further enriching Haq’s power.”

Haq was connected with several “elite” Pakistani families and had many allies in the Pakistan government and military supporting his activities, Mirza had said, and “the funds that were generated by the narcotics trafficking were put into the bank.”…

Even more intriguing were implications that the U.S. government was well aware of BCCI’s connections to the heroin trade. In a second meeting with the unidentified intelligence man, on March 20, 1989, Mizra told the agent he had just met in New York with Mr. “Happy” Minwallah, one of former Prime Minister Benzair Bhutto’s closest advisers.

“Minwallah had told source at their meeting that on January 5, 1989, Ambassador Oakley [U.S. Ambassador to Pakistan Robert Oakley] requested a secret meeting with Bhutto. The only other person at the meeting was Minwallah. Oakley told Bhutto that he was aware that BCCI was heavily engaged in various kinds of criminal activity and was the subject of investigation….

Oakley informed Bhutto that this information had been brought to Pakistan from Washington by the number-two man of either the CIA or FBI…

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It was John Moscow who had called his attention to the fact that BCCI had just laid off nearly one thousand employees in London…. Moscow had theorized that among all those unhappy former employees there must be a senior officer who might want to talk….

Moscow muttered the names of three potential candidates…. Beaty added a name of his own and sent the list off to Adam Zagorin with a plea for help. Zagorin had tracked down the jackpot of them all. Until last year, Mr. M. – Masihur Rahman – had been BCCI’s chief financial officer….

After landing in London, Beaty checked into the historic Brown’s Hotel and was still unpacking when Zagorin arrived….

“Rahman is very nervous about this,” Zagorin said, “but he’s agreed to meet us here at the hotel tomorrow at 4:00 p.m. I’ve had to promise him that we won’t reveal that he’s talked to us and that we won’t publish anything without his permission. He’s afraid the bank will harm his family….”

The courtship with Rahman was delicate and lasted over five hours. Rahman excused himself from time to time to call his wife. “It is a signal, you see. If I do not call her, she will know something has happened to me. She is very distraught and worried about the children. We have had many threats.”

It was an extraordinary tale: Rahman, born in Calcutta, the son of a chief justice of the supreme court, had been brought into United Bank by Abedi and Swaleh Naqvi in 1966, and moved with them when Abedi created BCCI. He had brought with him the original handwritten ledgers of the bank’s first year of operation in Abu Dhabi. … He told the entire history of the bank….

Gradually, a story emerged that no one – beyond the inner circle of BCCI management – had heard before. After BCCI pleaded guilty to money laundering in January 1990, Price Waterhouse, whose audits had given the bank a clean bill of health for years, suddenly took another look. “It discovered problems everywhere” in a worldwide audit in March of that year. This was such a disaster that Rahman was placed in charge of an internal audit committee that was to verify the Price Waterhouse figures.

Although the management team put the best possible face on it, its findings showed matters were even worse than the outside auditors had portrayed. The books were in shambles. Hundreds of millions of dollars had been loaned or transferred from one account to another without paperwork; hundreds of millions more had simply disappeared….

The more Rahman talked, the more Beaty and Zagorin realized the awesome scope of the fraud within BCCI. The soft-spoken Pakistani described what he called a secret bank within the bank – International Credit and Investment Company Holdings (ICIC) in the Cayman Islands – into which perhaps billions of dollars in deposits were improperly diverted before they disappeared altogether. He said that even though he was the chief financial officer, knowledge of that secret conduit was kept from him and he did not discover it until the internal audit.

He was incensed that BCCI’s employee benefit fund, designed by Abedi to provide retirement income and profits to the fourteen thousand people who worked for the bank – especially the senior officers – had also disappeared down that black hole in the Cayman Islands to cover hundreds of millions in unexplained losses….

It was nearly midnight when Beaty told Rahman that, as much as the magazine would like to help, this was all to incredible to be put into print. “Who would believe the auditors would certify the bank’s accounts if it was this bad?”

“I can show you,” Rahman insisted. “I have copies of all the audits in the trunk of my car outside!”…

Rahman opened the trunk and removed an armload of folders and papers, and the three men climbed into the car. Beaty began flipping rapidly through pages … Gwynne would never believe this, he thought. He would never believe these audit reports. There were scores, hundreds, thousands of loans in staggering sums for which there had been no repayment for years. The Gokal Brothers shipping company held $404 million in loans against $62 million in collateral, and, in the dry language of accountancy, the examiners cast doubt on the value of that collateral. Ghaith Pharaon and his brother, Wabel, had outstanding loans totaling $288 million, yet, the auditors noted, “There are no loan agreements, promissory notes, or correspondence with the customers.”

And Rahman was right about the auditors. One Price Waterhouse review of the bank’s Cayman Island holdings – the black hole – dated October 18, 1985, certified BCCII’s books without qualification even though it included the following statement in its certification:

“Customer deposits consist of confidential accounts which are not conducted as open accounts requiring periodic dispatch of statements. Furthermore, because of company policy we have not been able to confirm any deposit balances directly with customers, and therefore it is not possible for our examination of such accounts to extend beyond the amounts recorded.”

Beaty thought he was beyond surprise. “Good grief, they certified the books without confirmation or checking of any kind! That’s not possible.”

He turned to the banker. “Mr. Rahman, you need more than Time magazine’s help. You were the financial officer, and the dishonest people you say are now running the bank are going to blame you for much of this when it comes out.”

Rahman nodded sadly.

“The only person I can think of who can give you the kind of protection yhou need is Robert Morgenthau, the district attorney of New York. He’s an honest man, and you simply must talk to him. Take the audits to him. You need a powerful protector.”

Beaty and Zagorin spent another half hour in earnest conversation with Rahman, and he tentatively agreed to take the audit reports to New York. He had nowhere else to turn; by his own account, the Bank of England was working to bury the BCCI scandal before more of it became public. His own lawyers, he believed, had sold him out. They were urging him not to go public with information about the bank….


The document that brought down everything had a curious lineage indeed, coming as it did from the very same prestigious company that had whitewashed BCCI’s accounts for years. One of the cornerstones of the fraud was Price Waterhouse. As one of the world’s largest accounting firms, it wielded enormous influence, and a clean, or “unqualified,” audit from the company meant easy access to credit and capital; it meant the regulators kept their long noses out of your files’ it gave depositors confidence. In short, an unqualified Price Waterhouse audit neatly purveyed all a bank needed to survive and prosper. Until the October audit that Bill Ryback traveled to London to see, all audits of BCCI had presented a bank that, while growing very quickly, was otherwise unblemished.

That was, of course, patently false. Anyone who looked critically at the bank’s accounts would have known immediately that something was wrong. Just how far BCCi had veered from prudent banking practices was glaringly obvious as far back as 1978. That year the Office of the Comptroller of the Currency (OCC), the largest U.S. regulator of banks, had run its own audit on BCCI, part of a larger audit of Bank of America, which then held 30 percent of BCCI’s shares.

The conclusions of the audit – which, along with all the other early warning signs of BCCI’s condition, was made to disappear by the U.S. government – were stark enough: The bank’s explosive growth had created strains on management; the bank had no lending limits, often had no documentation at all supporting its loans, and was whizzing money around the world from affiliate to affiliate and leaving no paper trail. Money was disappearing in “unsecured borrowings” into the International Credit and Investment Company Holdings (ICIC) in the Cayman Islands.

Worse than that, the bank’s portfolio of bad loans was expanding at an unsettling rate: Bad or questionable loans constituted three and one half times BCCI’s capital. One client alone – the Gokal shipping family from Pakistan – had $185 million in loans, or 290 percent of the bank’s capital funds….

That year the bank got a nice, clean bill of health from its two auditors: Ernst & Young, which handled the main European books, and Price Waterhouse, which looked after the Cayman Islands. This use of two firms to account for one company was highly unusual, but this was Abedi’s way of ensuring that no one save himself and Swaleh Naqvi would ever view the sprawling entity in its entirety.

This arrangement, however, did not last, and in 1986 Ernst & Young resigned the account, believing correctly that it could not conduct a true audit without access to the growing number of accounts in the Cayman Islands.

That left Price Waterhouse as BCCI’s sole auditor, and it was Price Waterhouse in the critical years 1987, 1988, and 1989 that delivered unqualified audits of a bank with no capital, a bank whose accounts had become so devious, so grossly manipulated, that even the auditors themselves would later admit that the bank’s financial history could never be reconstructed.

Yet Price Waterhouse did know that things were amiss, and they knew certainly as early as 1985, if not earlier. That was the year they gave BCCI an “unqualified opinion” while noting that the bank had inadequate loan loss reserves, had no lending limits to individuals, kept little or no current financial information on any of its clients, and made loans without collateral….

Though the reason for Price Waterhouse’s behavior is still the subject of violent controversy, documentary evidence would later suggest one possible answer: Among its many attempts to curry favor, BCCI made $597,000 in loans to Price Waterhouse from its Barbados office.

In spite of this egregious track record, in early 1991 the Bank of England hired Price Waterhouse to run an “independent” audit of BCCI. As though to expiate for past sins, PW actually did an independent audit, one that revealed what the accounting firm itself called “one of the most complex deceptions in banking history.”…

After what insiders estimate was eight full years of rendering bogus accounts, Price Waterhouse had finally delivered something akin to a real version of the bank, as surreal as it may have looked to the outside world.

Still missing were “accountings” of BCCI’s other businesses, including weapons, drugs, mercenary armies, and a variety of commodities. Though immensely profitable and funded directly with depositors’ money, these would never turn up on any audit…

For more, GO TO > > > What Price Waterhouse ?

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For even more of the Worst of the Worst, GO TO > > >


















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Last updated on December 11, 2006 by The Catbird