The most expensive battle in English legal history ended on
Wednesday when a £850m lawsuit brought by liquidators of
Bank of Credit and Commerce International (known by many as
the Bank of Crooks and Crime International) against the Bank
of England was withdrawn leaving a £100m legal bill in its
Lawyers for Deloitte, BCCI's liquidator, said the action was
being ended after one of the High Court's most senior judges
ruled that it was “no longer in the best interests of the
creditors for the litigation to continue”.
A US Senate Committee on
Foreign Relations investigation headed by Senator
John Kerry reported that: BCCI's unique criminal
structure -- an elaborate corporate spider-web with
BCCI's founder, Agha Hasan Abedi and his assistant,
Swaleh Naqvi, in the middle -- was an essential
component of its spectacular growth, and a guarantee
of its eventual collapse. The structure was
conceived by Abedi and managed by Naqvi for the
specific purpose of evading regulation or control by
governments. It functioned to frustrate the full
understanding of BCCI's operations by anyone.
Regardless of what might be shown in the missing
material, the remainder is more than adequate to
document BCCI's criminality, including fraud by BCCI
and BCCI customers involving billions of dollars;
money laundering in Europe, Africa, Asia, and the
America; BCCI's bribery of officials in most of
those locations; its support of terrorism, arms
trafficking, and the sale of nuclear technologies;
its management of prostitution; its commission and
facilitation of income tax evasion, smuggling, and
illegal immigration; its illicit purchases of banks
and real estate; and a panoply of financial crimes
limited only by the imagination of its officers and
customers. In the words of former Senate
investigator Jack Blum: The problem that we are all
having in dealing with this bank is that . . . it
had 3,000 criminal customers and every one of those
3,000 criminal customers is a page 1 story. So if
you pick up an one of [BCCI's] accounts you could
find financing from nuclear weapons, gun running,
narcotics dealing, and you will find all manner and
means of crime around the world in the records of
BCCI collapsed in 1991 owing £10bn. The misfeasance claim,
which was brought against the Bank of England in 1993, had
accused senior officials of acting in bad faith and with
deliberate disregard for depositors' interests over the
supervision of BCCI.
Wednesday's ruling, was made in private by the judge who
heads the Chancery Division and is understood to have
followed a decision two months ago by BCCI's English
creditors' committee that the costly litigation was no
longer in the interest of all creditors.
Mervyn King, the Bank of England governor who had refused to
consider settling the case, said: “There has never been a
shred of evidence to support these disgraceful allegations,
and the case has collapsed as we always expected it would.”
“The foolish determination to pursue a hopeless case for so
long has also led to a huge waste of creditors' and
taxpayers' money, and I hope everyone concerned will take a
close look at how and why such a very weak case took years
to come to an end,” he continued. The Bank, the governor
said, would be seeking “the largest possible compensation
for its costs”.
The Bank's legal bill is understood to exceed £70m, while
the liquidators' is put at about £38m. In the English legal
system, a loser pays a winner's costs, which means the bill
is likely to end up with the creditors, who range from local
authority funds to small stallholders. The Bank has made
clear that it would seek costs based on the highest possible
BCCI collapsed in 1991 when evidence of a massive fraud came
to light after a decade of rumours about its dubious
practices. At that stage, BCCI owed depositors and creditors
more than £10bn, making it the world's biggest banking
BCCI was founded by a Pakistani national and became known as
the Bank of Crooks and Crime International. At the time of
its collapse, it was owned by the ruler of Gulf emirate Abu
Dhabi and many in the Muslim world viewed it as a conspiracy
destroy an international symbol of the Islamic world.
The Bank of England was subsequently criticised in a 1992
report into the scandal by Lord Bingham then Lord Justice
Bingham who said it had not pursued “the truth about BCCI
with the rigour which BCCI's market reputation justified”.
The bank has statutory immunity against negligence claims
and the only option for the liquidators was a more ambitious
claim of “misfeasance in public office”. Under this, they
sought up to £850m in damages.
Wednesday, Deloitte said that the BCCI liquidators said a
further dividend payout to creditors, due in December, would
be unaffected by the collapse of the case. This will bring
the recovery to creditors of 81 per cent from 75 per cent at
present, or just under $6bn (£3.4bn) - more than fourteen
years after the collapse.
The largest case of organized crime in history
Report to the Committee on Foreign Relations of the United
States Senate in 1992, by Senator John Kerry and Senator
Hank Brown said that BCCI created its elaborate
corporate structure for the purpose of deceiving and
defrauding those outside BCCI, within BCCI, BCCI's various
entities were largely disregarded, and treated
interchangably. As BCCI's liquidators concluded one year
after the bank's closure in a report to the bank's creditors
committee, "in a number of respects, the BCCI Group appears
to have conducted its affairs as a single entity, witout
clearly identifying which company or entity within the BCCI
Group was responsible for any particular transaction."
BCCI CONSTITUTED INTERNATIONAL FINANCIAL CRIME ON A MASSIVE
AND GLOBAL SCALE.
BCCI's unique criminal structure -- an elaborate corporate
spider-web with BCCI's founder, Agha Hasan Abedi and his
assistant, Swaleh Naqvi, in the middle -- was an essential
component of its spectacular growth, and a guarantee of its
eventual collapse. The structure was conceived by Abedi and
managed by Naqvi for the specific purpose of evading
regulation or control by governments. It functioned to
frustrate the full understanding of BCCI's operations by
Unlike any ordinary bank, BCCI was from its earliest days
made up of multiplying layers of entities, related to one
another through an impenetrable series of holding companies,
affiliates, subsidiaries, banks-within-banks, insider
dealings and nominee relationships. By fracturing corporate
structure, record keeping, regulatory review, and audits,
the complex BCCI family of entities created by Abedi was
able to evade ordinary legal restrictions on the movement of
capital and goods as a matter of daily practice and routine.
In creating BCCI as a vehicle fundamentally free of
government control, Abedi developed in BCCI an ideal
mechanism for facilitating illicit activity by others,
including such activity by officials of many of the
governments whose laws BCCI was breaking.
BCCI's criminality included fraud by BCCI and BCCI customers
involving billions of dollars; money laundering in Europe,
Africa, Asia, and the Americas; BCCI's bribery of officials
in most of those locations; support of terrorism, arms
trafficking, and the sale of nuclear technologies;
management of prostitution; the commission and facilitation
of income tax evasion, smuggling, and illegal immigration;
illicit purchases of banks and real estate; and a panoply of
financial crimes limited only by the imagination of its
officers and customers.
Among BCCI's principal mechanisms for committing crimes were
its use of shell corporations and bank confidentiality and
secrecy havens; layering of its corporate structure; its use
of front-men and nominees, guarantees and buy-back
arrangements; back-to-back financial documentation among
BCCI controlled entities, kick-backs and bribes, the
intimidation of witnesses, and the retention of well-placed
insiders to discourage governmental action.
2. BCCI SYSTEMATICALLY BRIBED WORLD
LEADERS AND POLITICAL FIGURES THROUGHOUT THE WORLD.
BCCI's systematically relied on relationships with, and as
necessary, payments to, prominent political figures in most
of the 73 countries in which BCCI operated. BCCI records and
testimony from former BCCI officials together document
BCCI's systematic securing of Central Bank deposits of Third
World countries; its provision of favors to political
figures; and its reliance on those figures to provide BCCI
itself with favors in times of need.
relationships were systematically turned to BCCI's use to
generate cash needed to prop up its books. BCCI would obtain
an important figure's agreement to give BCCI deposits from a
country's Central Bank, exclusive handling of a country's
use of U.S. commodity credits, preferential treatment on the
processing of money coming in and out of the country where
monetary controls were in place, the right to own a bank,
secretly if necessary, in countries where foreign banks were
not legal, or other questionable means of securing assets or
profits. In return, BCCI would pay bribes to the figure, or
otherwise give him other things he wanted in a simple
The result was that BCCI had relationships that ranged from
the questionable, to the improper, to the fully corrupt with
officials from countries all over the world, including
Argentina, Bangladesh, Botswana, Brazil, Cameroon, China,
Colombia, the Congo, Ghana, Guatemala, the Ivory Coast,
India, Jamaica, Kuwait, Lebanon, Mauritius, Morocco,
Nigeria, Pakistan, Panama, Peru, Saudi Arabia, Senegal, Sri
Lanka, Sudan, Suriname, Tunisia, the United Arab Emirates,
the United States, Zambia, and Zimbabwe.
3. BCCI DEVELOPED A STRATEGY TO
INFILTRATE THE U.S. BANKING SYSTEM, WHICH IT SUCCESSFULLY
IMPLEMENTED, DESPITE REGULATORY BARRIERS THAT WERE DESIGNED
TO KEEP IT OUT.
1977, BCCI developed a plan to infiltrate the U.S. market
through secretly purchasing U.S. banks while opening branch
offices of BCCI throughout the U.S., and eventually merging
the institutions. BCCI had significant difficulties
implementing this strategy due to regulatory barriers in the
United States designed to insure accountability. Despite
these barriers, which delayed BCCI's entry, BCCI was
ultimately successful in acquiring four banks, operating in
seven states and the District of Colombia, with no
jurisdiction successfully preventing BCCI from infiltrating
The techniques used by BCCI in the United States had been
previously perfected by BCCI, and were used in BCCI's
acquisitions of banks in a number of Third World countries
and in Europe. These included purchasing banks through
nominees, and arranging to have its activities shielded by
prestigious lawyers, accountants, and public relations firms
on the one hand, and politically-well connected agents on
the other. These techniques were essential to BCCI's success
in the United States, because without them, BCCI would have
been stopped by regulators from gaining an interest in any
U.S. bank. As it was, regulatory suspicion towards BCCI
required the bank to deceive regulators in collusion with
nominees including the heads of state of several foreign
emirates, key political and intelligence figures from the
Middle East, and entities controlled by the most important
bank and banker in the Middle East.
Equally important to BCCI's successful secret acquisitions
of U.S. banks in the face of regulatory suspicion was its
aggressive use of a series of prominent Americans, beginning
with Bert Lance, and continuing with former Defense
Secretary Clark Clifford, former U.S. Senator Stuart
Symington, well-connected former federal bank regulators,
and former and current local, state and federal legislators.
Wittingly or not, these individuals provided essential
assistance to BCCI through lending their names and their
reputations to BCCI at critical moments. Thus, it was not
merely BCCI's deceptions that permitted it to infiltrate the
United States and its banking system. Also essential were
BCCI's use of political influence peddling and the revolving
door in Washington.
THE JUSTICE DEPARTMENT MISHANDLED ITS INVESTIGATION AND
PROSECUTION OF BCCI, AND ITS RELATIONSHIPS WITH OTHER
GOVERNMENT AGENCIES CONCERNING BCCI.
Federal prosecutors in Tampa handling the 1988 drug money
laundering indictment of BCCI failed to recognize the
importance of information they received concerning BCCI's
other crimes, including its apparent secret ownership of
First American. As a result, they failed adequately to
investigate these allegations themselves, or to refer this
portion of the case to the FBI and other agencies at the
Justice Department who could have properly investigated the
The Justice Department, along with the U.S. Customs Service
and Treasury Departments, failed to provide adequate support
and assistance to investigators and prosecutors working on
the case against BCCI in 1988 and 1989, contributing to
conditions that ultimately caused the chief undercover agent
who handled the sting against BCCI to quit Customs entirely.
The January 1990 plea agreement between BCCI and the U.S.
Attorney in Tampa kept BCCI alive, and had the effect of
discouraging BCCI's officials from telling the U.S. what
they knew about BCCI's larger criminality, including its
ownership of First American and other U.S. banks.
The Justice Department essentially stopped investigating
BCCI following the plea agreement, until press accounts,
Federal Reserve action, and the New York District Attorney's
investigation in New York forced them into action in
Justice Department personnel in Washington lobbied state
regulators to keep BCCI open after the January 1990 plea
agreement, following lobbying of them by former Justice
Department personnel now representing BCCI.
Relations between main Justice in Washington and the U.S.
Attorney for Miami, Dexter Lehtinen, broke down on
BCCI-related prosecutions, and key actions on BCCI-related
cases in Miami were, as a result, delayed for months during
Justice Department personnel in Washington, Miami, and Tampa
actively obstructed and impeded Congressional attempts to
investigate BCCI in 1990, and this practice continued to
some extent until William P. Barr became Attorney General in
late October, 1991.
Justice Department personnel in Washington, Miami and Tampa
obstructed and impeded attempts by New York District
Attorney Robert Morgenthau to obtain critical information
concerning BCCI in 1989, 1990, and 1991, and in one case, a
federal prosecutor lied to Morgenthau's office concerning
the existence of such material. Important failures of
cooperation continued to take place until William P. Barr
became Attorney General in late October, 1991.
Cooperation by the Justice Department with the Federal
Reserve was very limited until after BCCI's global closure
on July 5, 1991.
Some public statements by the Justice Department concerning
its handling of matters pertaining to BCCI were more
cleverly crafted than true.
5. NEW YORK DISTRICT ATTORNEY
MORGENTHAU NOT ONLY BROKE THE CASE ON BCCI, BUT INDIRECTLY
BROUGHT ABOUT BCCI'S GLOBAL CLOSURE.
Acting on information provided him by the Subcommittee, New
York District Attorney Robert Morgenthau began an
investigation in 1989 of BCCI which materially contributed
to the chain of events that resulted in BCCI's closure.
Questions asked by the District Attorney intensified the
review of BCCI's activities by its auditors, Price
Waterhouse, in England, and gave life to a moribund Federal
Reserve investigation of BCCI's secret ownership of First
The District Attorney's criminal investigation was critical
to stopping an intended reorganization of BCCI worked out
through an agreement among the Bank of England, the
government of Abu Dhabi, BCCI's auditors, Price Waterhouse,
and BCCI itself, in which the nature and extent of BCCI's
criminality would be suppressed, while Abu Dhabi would
commit its financial resources to keep the bank going during
a restructuring. By the late spring of 1991, the key
obstacle to a successful restructuring of BCCI bankrolled up
Abu Dhabi was the possibility that the District Attorney of
New York would indict. Such an indictment would have
inevitably caused a swift and thoroughly justified an
international run on BCCI by depositors all over the world.
Instead, it was a substantial factor in the decision of the
Bank of England to take the information it had received from
Price Waterhouse and rely on it to close BCCI.
6. BCCI'S ACCOUNTANTS FAILED TO
PROTECT BCCI'S INNOCENT DEPOSITORS AND CREDITORS FROM THE
CONSEQUENCES OF POOR PRACTICES AT THE BANK OF WHICH THE
AUDITORS WERE AWARE FOR YEARS.
BCCI's decision to divide its operations between two
auditors, neither of whom had the right to audit all BCCI
operations, was a significant mechanism by which BCCI was
able to hide its frauds during its early years. For more
than a decade, neither of BCCI's auditors objected to this
BCCI provided loans and financial benefits to some of its
auditors, whose acceptance of these benefits creates an
appearance of impropriety, based on the possibility that
such benefits could in theory affect the independent
judgment of the auditors involved. These benefits included
loans to two Price Waterhouse partnerships in the Caribbean.
In addition, there are serious questions concerning the
acceptance of payments and possibly housing from BCCI or its
affiliates by Price Waterhouse partners in the Grand
Caymans, and possible acceptance of sexual favors provided
by BCCI officials to certain persons affiliated with the
Regardless of BCCI's attempts to hide its frauds from its
outside auditors, there were numerous warning bells visible
to the auditors from the early years of the bank's
activities, and BCCI's auditors could have and should have
done more to respond to them.
the end of 1987, given Price Waterhouse (UK)'s knowledge
about the inadequacies of BCCI's records, it had ample
reason to recognize that there could be no adequate basis
for certifying that it had examined BCCI's books and records
and that its picture of those records were indeed a "true
and fair view" of BCCI's financial state of affairs.
The certifications by BCCI's auditors that its picture of
BCCI's books were "true and fair" from December 31, 1987
forward, had the consequence of assisting BCCI in misleading
depositors, regulators, investigators, and other financial
institutions as to BCCI's true financial condition.
Prior to 1990, Price Waterhouse (UK) knew of gross
irregularities in BCCI's handling of loans to CCAH/First
American and was told of violations of U.S. banking laws by
BCCI and its borrowers in connection with CCAH/First
American, and failed to advise the partners of its U.S.
affiliate or any U.S. regulator.
There is no evidence that Price Waterhouse (UK) has to this
day notified Price Waterhouse (US) of the extent of the
problems it found at BCCI, or of BCCI's secret ownership of
CCAH/First American. Given the lack of information provided
Price Waterhouse (US) by its United Kingdom affiliate, the
U.S. firm performed its auditing of BCCI's U.S. branches in
a manner that was professional and diligent, albeit
unilluminating concerning BCCI's true activities in the
Price Waterhouse's certification of BCCI's books and records
in April, 1990 was explicitly conditioned by Price
Waterhouse (UK) on the proposition that Abu Dhabi would bail
BCCI out of its financial losses, and that the Bank of
England, Abu Dhabi and BCCI would work with the auditors to
restructure the bank and avoid its collapse. Price
Waterhouse would not have made the certification but for the
assurances it received from the Bank of England that its
continued certification of BCCI's books was appropriate, and
indeed, necessary for the bank's survival.
The April 1990 agreement among Price Waterhouse (UK), Abu
Dhabi, BCCI, and the Bank of England described above,
resulted in Price Waterhouse (UK) certifying the financial
picture presented in its audit of BCCI as "true and fair,"
with a single footnote material to the huge losses still to
be dealt with, failed adequately to describe their serious
nature. As a consequence, the certification was materially
misleading to anyone who relied on it ignorant of the facts
then mutually known to BCCI, Abu Dhabi, Price Waterhouse and
the Bank of England.
The decision by Abu Dhabi, Price Waterhouse (UK), BCCI and
the Bank of England to reorganize BCCI over the duration of
1990 and 1991, rather than to advise the public of what they
knew, caused substantial injury to innocent depositors and
customers of BCCI who continued to do business with an
institution which each of the above parties knew had engaged
From at least April, 1990 through November, 1990, the
Government of Abu Dhabi had knowledge of BCCI's criminality
and frauds which it apparently withheld from BCCI's outside
auditors, contributing to the delay in the ultimate closure
of the bank, and causing further injury to the bank's
innocent depositors and customers.
7. THE CIA DEVELOPED IMPORTANT INFORMATION ON BCCI,
AND INADVERTENTLY FAILED TO PROVIDE IT TO THOSE WHO COULD
THE CIA AND FORMER CIA OFFICIALS HAD A
FAR WIDER RANGE OF CONTACTS AND LINKS TO BCCI AND BCCI
SHAREHOLDERS, OFFICERS, AND CUSTOMERS, THAN HAS BEEN
ACKNOWLEDGED BY THE CIA.
early 1985, the CIA knew more about BCCI's goals and
intentions concerning the U.S. banking system than anyone
else in government, and provided that information to the
U.S. Treasury and the Office of the Comptroller of the
Currency, neither of whom had the responsibility for
regulating the First American Bank that BCCI had taken over.
The CIA failed to provide the critical information it had
gathered to the correct users of the information -- the
Federal Reserve and the Justice Department.
After the CIA knew that BCCI was as an institution a
fundamentally corrupt criminal enterprise, it continued to
use both BCCI and First American, BCCI's secretly held U.S.
subsidiary, for CIA operations.
While the reporting concerning BCCI by the CIA was in some
respects impressive -- especially in its assembling of the
essentials of BCCI's criminality, its secret purchase of
First American by 1985, and its extensive involvement in
money laundering -- there were also remarkable gaps in the
CIA's reported knowledge about BCCI.
Former CIA officials, including former CIA director Richard
Helms and the late William Casey; former and current foreign
intelligence officials, including Kamal Adham and Abdul
Raouf Khalil; and principal foreign agents of the U.S., such
as Adnan Khashoggi and Manucher Ghorbanifar, float in and
out of BCCI at critical times in its history, and
participate simultaneously in the making of key episodes in
U.S. foreign policy, ranging from the Camp David peace talks
to the arming of Iran as part of the Iran/Contra affair. Yet
the CIA has continued to maintain that it has no information
regarding any involvement of these people, raising questions
about the quality of intelligence the CIA is receiving
generally, or its candor with the Subcommittee. The CIA's
professions of total ignorance about their respective roles
in BCCI are out of character with the Agency's early
knowledge of many critical aspects of the bank's operations,
structure, personnel, and history.
The errors made by the CIA in connection with its handling
of BCCI were complicated by its handling of this
Congressional investigation. Initial information that was
provided by the CIA was untrue; later information that was
provided was incomplete; and the Agency resisted providing a
"full" account about its knowledge of BCCI until almost a
year after the initial requests for the information. These
experiences suggest caution in concluding that the
information provided to date is full and complete. The
relationships among former CIA personnel and BCCI front men
and nominees, including Kamal Adham, Abdul Khalil, and
Mohammed Irvani, requires further investigation.
8. THE FLAWED DECISIONS MADE BY
REGULATORS IN THE US WHICH ALLOWED BCCI TO SECRETLY ACQUIRE
US BANKS WERE CAUSED IN PART BY GAPS IN THE REGULATORY
PROCESS AND IN PART BY BCCI'S USE OF WELL-CONNECTED LAWYERS
TO HELP THEM THROUGH THE PROCESS.
When the Federal Reserve approved the take over of Financial
General Bankshares by CCAH in 1981, it had substantial
circumstantial evidence before it to suggest that BCCI was
behind the bank's purchase. The Federal Reserve chose not to
act on that evidence because of the specific representations
that were made to it by CCAH's shareholders and lawyers,
that BCCI was neither financing nor directing the take over.
These representations were untrue and the Federal Reserve
would not have approved the CCAH application but for the
false statements made to it.
approving the CCAH application, the Federal Reserve relied
upon representations from the Central Intelligence Agency,
State Department, and other U.S. agencies that they had no
objections to or concerns about the Middle Eastern
shareholders who were purporting to purchase shares in the
bank. The Federal Reserve also relied upon the reputation
for integrity of BCCI's lawyers, especially that of former
Secretary of Defense Clark Clifford and former Federal
Reserve counsel Baldwin Tuttle. Assurances provided the
Federal Reserve by the CIA and State Department, and by both
attorneys, had a material impact on the Federal Reserve's
willingness to approve the CCAH application despite its
concerns about BCCI's possible involvement.
1981, the Office of the Comptroller of the Currency had
additional information, from reports concerning BCCI's role
in the Bank of America and the National Bank of Georgia,
concerning BCCI's possible use of nominee arrangements and
alter egos to purchase banks on its behalf in the United
States, which it failed to pass on to the Federal Reserve.
This failure was inadvertent, not intentional.
approving the CCAH application, the Federal Reserve
permitted BCCI and its attorneys to carve out a seeming
loophole in the commitment that BCCI not be involved in
financing or controlling CCAH's activities. This loophole
permitted BCCI to act as an investment advisor and
information conduit to CCAH's shareholders. The Federal
Reserve's decision to accept this arrangement allowed BCCI
and its attorneys and agents to use these permitted
activities as a cover for the true nature of BCCI's
ownership of CCAH and the First American Banks.
After approving the CCAH application in 1981, the Federal
Reserve received few indicators about BCCI's possible
improper involvement in CCAH/First American. However, at
several critical junctures, especially the purchase by First
American of the National Bank of Georgia from Ghaith Pharaon
in 1986, there were obvious warnings signs that could have
been investigated and which were not, until late 1990.
a foreign bank whose branches were chartered by state
banking authorities, BCCI largely escaped the Federal
Reserve's scrutiny regarding its criminal activities in the
United States unrelated to its interest in CCAH/First
American. This gap in regulatory oversight has since been
closed by the passage of the Foreign Bank Supervision
Enhancement Act of 1991.
The U.S. Treasury Department failed to provide the Federal
Reserve with information it received concerning BCCI's
ownership of First American in 1985 and 1986 from the CIA.
However, IRS agents did provide important information to the
Federal Reserve on this issue in early 1989, which the
Federal Reserve failed adequately to investigate at the
The FDIC approved Ghaith Pharaon's purchase of the
Independence Bank in 1985 knowing him to be a shareholder of
BCCI and knowing that he was placing a senior BCCI officer
in charge of the bank, and failed to confer with the Federal
Reserve or the OCC regarding their previous experiences with
Pharaon and BCCI.
Once the Federal Reserve commenced a formal investigation of
BCCI and First American on January 3, 1991, its
investigation of BCCI and First American was aggressive and
diligent. Its decisions to force BCCI out of the United
States and to divest itself of First American were prompt.
The charges it brought against the parties involved with
BCCI in violating federal banking standards were fully
justified by the record. Its investigations have over the
past year contributed substantially to public understanding
to date of what took place.
Even after the
Federal Reserve understood the nature and scope of BCCI's
frauds, it did not seek to have BCCI closed globally. This
position was in some measure the consequence of the Federal
Reserve's need to secure the cooperation of BCCI's majority
shareholders, the government and royal family of Abu Dhabi,
in providing some $190 million to prop up First American
Bank and prevent an embarrassing collapse. However, Federal
Reserve investigators did actively work in the spring of
1991 to have BCCI's top management removed.
investigating BCCI, the Federal Reserve's efforts were
hampered by examples of lack of cooperation by foreign
governments, including most significantly the Serious Fraud
Office in the United Kingdom and, since the closure of BCCI
on July 5, 1991, the government of Abu Dhabi.
U.S. regulatory handling of the U.S. banks secretly owned by
BCCI was hampered by lack of coordination among the
regulators, which included the Federal Reserve, the FDIC,
and the OCC, highlighting the need for further integration
of these separate banking regulatory agencies on supervision
9. THE BANK OF ENGLAND'S REGULATION OF
BCCI WAS WHOLLY INADEQUATE TO PROTECT BCCI'S DEPOSITORS AND
CREDITORS, AND THE BANK OF ENGLAND WITHHELD INFORMATION
ABOUT BCCI'S FRAUDS FROM PUBLIC KNOWLEDGE FOR FIFTEEN MONTHS
BEFORE CLOSING THE BANK.
The Bank of England had deep concerns about BCCI from the
late 1970s on, and undertook several steps to slow BCCI's
expansion in the United Kingdom.
1988 and 1989, the Bank of England learned of BCCI's
involvement in the financing of terrorism and in drug money
laundering, and undertook additional, but limited
supervision of BCCI in response to receiving this
the spring of 1990, Price Waterhouse advised the Bank of
England that there were substantial loan losses at BCCI,
numerous poor banking practices, and evidence of fraud,
which together had created a massive hole in BCCI's books.
The Bank of England's response to the information was not to
close BCCI down, but to find ways to prop up BCCI and
prevent its collapse. This meant, among other things,
keeping secret the very serious nature of BCCI's problems
from its creditors and one million depositors.
April, 1990, the Bank of England reached an agreement with
BCCI, Abu Dhabi, and Price Waterhouse to keep BCCI from
collapsing. Under the agreement, Abu Dhabi agreed to
guarantee BCCI's losses and Price Waterhouse agreed to
certify BCCI's books. As a consequence, innocent depositors
and creditors who did business with BCCI following that date
were deceived into believing that BCCI's financial problems
were not as serious as each of these parties already knew
them to be.
From April, 1990, the Bank of England relied on British bank
secrecy and confidentiality laws to reduce the risk of
BCCI's collapse if word of its improprieties leaked out. As
a consequence, innocent depositors and creditors who did
business with BCCI following that date were denied vital
information, in the possession of the regulators, auditors,
officers, and shareholders of BCCI, that could have
protected them against their losses.
order to prevent risk to its restructuring plan for BCCI and
a possible run on BCCI, the Bank of England withheld
important information from the Federal Reserve in the spring
of 1990 about the size and scope of BCCI's lending on
CCAH/First American shares, despite the Federal Reserve's
requests for such information. This action by the Bank of
England delayed the opening of a full investigation by the
Federal Reserve for approximately eight months.
Despite its knowledge of some of BCCI's past frauds, and its
own understanding that consolidation into a single entity is
essential for regulating a bank, in late 1990 and early 1991
the Bank of England tentatively agreed with BCCI and its Abu
Dhabi owners to permit BCCI to restructure as three
"separate" institutions, based in London, Abu Dhabi and Hong
Kong. This tentative decision demonstrated extraordinarily
poor judgment on the part of the Bank of England. This
decision was reversed abruptly when the Bank of England
suddenly decided to close BCCI instead in late June, 1991.
The decision by the Bank of England in April 1990 to permit
BCCI to move its headquarters, officers, and records out of
British jurisdiction to Abu Dhabi has had profound negative
consequences for investigations of BCCI around the world. As
a result of this decision, essential records and witnesses
regarding what took place were removed from the control of
the British government, and placed under the control of the
government of Abu Dhabi, which has to date withheld them
from criminal investigators in the U.S. and U.K. This
decision constituted a costly, and likely irretrievable,
error on the part of the Bank of England.
10. CLARK CLIFFORD AND ROBERT ALTMAN
PARTICIPATED IN IMPROPRIETIES WITH BCCI IN THE UNITED
Regardless of whether Clifford and Altman were deceived by
BCCI in some respects, both men participated in some BCCI's
deceptions in the United States.
Beginning in late 1977, Clifford and Altman assisted BCCI in
purchasing a U.S. bank, Financial General Bankshares, with
the participation of nominees, and understood BCCI's central
involvement in directing and controlling the transaction.
the years that followed, they made business decisions
regarding acquisitions for First American that were
motivated by BCCI's goals, rather than by the business needs
of First American itself; and represented as their own to
regulators decisions that had been made by Abedi and BCCI on
fundamental matters concerning First American, including the
purchase by First American of the National Bank of Georgia
and First American's decision to purchase branches in New
Clifford and Altman concealed their own financing of shares
of First American by BCCI from First American's other
directors and from U.S. regulators, withheld critical
information that they possessed from regulators in an effort
to keep the truth about BCCI's ownership of First American
secret, and deceived regulators and the Congress concerning
their own knowledge of and personal involvement in BCCI's
illegalities in the United States.
11. ABU DHABI'S INVOLVEMENT IN BCCI'S
AFFAIRS WAS FAR MORE CENTRAL THAN IT HAS ACKNOWLEDGED,
INVOLVING IN SOME CASES NOMINEE RELATIONS AND NO-RISK
TRANSACTIONS THAT ABU DHABI IS TODAY COVERING-UP THROUGH
HIDING WITNESSES AND DOCUMENTS FROM U.S. INVESTIGATORS.
Members of Abu Dhabi's ruling family appear to have
contributed no more than $500,000 to BCCI's capitalization
prior to April 1990, despite being the record owner of
almost one-quarter of the bank's total shares. An unknown
but substantial percentage of the shares acquired by Abu
Dhabi overall in BCCI appear to have been acquired on a
risk-free basis -- either with guaranteed rates of return,
buy-back arrangements, or both.
The interest held in BCCI by the Abu Dhabi ruling family,
like the interests held by the rulers of the three other
gulf sheikdoms in the United Arab Emirates who owned shares
of BCCI, materially aided and abetted Abedi and BCCI in
projecting the illusion that BCCI was backed by, and
capitalized by, Abu Dhabi's wealth. Investments made in BCCI
by the Abu Dhabi Investment Authority appear to have been
genuine, although possibly guaranteed by BCCI with buy-back
or other no-risk arrangements.
Shares in Financial General Bankshares held by members of
the Abu Dhabi royal family in late 1977 and early 1978
appear to have been nominee arrangements, adopted by Abu
Dhabi as a convenience to BCCI and Abedi, under arrangements
in which Abu Dhabi was to be without risk, and BCCI was to
guarantee the purchase through a commitment to buy-back the
stock at an agreed upon price.
Abu Dhabi's representative to BCCI's board of directors,
Ghanim al Mazrui, received unorthodox financial benefits
from BCCI in no-risk stock deals which may have compromised
his ability to exercise independent judgment concerning
BCCI's actions; confirmed at least one fraudulent
transaction involving Abu Dhabi; and engaged in other
improprieties pertaining to BCCI; but remains today in place
at the apex of Abu Dhabi's committee designated to respond
to BCCI's collapse.
April, 1990, Abu Dhabi was told in detail about BCCI's fraud
by top BCCI officials, and failed to advise BCCI's external
auditors of what it had learned. Between April, 1990 and
November, 1990, Abu Dhabi and BCCI together kept some
information concerning BCCI's frauds hidden from the
From April, 1990 through July 5, 1991, Abu Dhabi tried to
save BCCI through a massive restructuring. As part of the
restructuring process, Abu Dhabi agreed to take
responsibility for BCCI's losses, Price Waterhouse agreed to
certify BCCI's books for another year, and Abu Dhabi, Price
Waterhouse, the Bank of England, and BCCI agreed to keep all
information concerning BCCI's frauds and other problems
secret from BCCI's one million depositors, as well as from
U.S. regulators and law enforcement, to prevent a run on the
After the Federal Reserve was advised by the New York
District Attorney of possible nominee arrangements involving
BCCI and First American, Abu Dhabi, in an apparent effort to
gain the Federal Reserve's acquiescence in BCCI's proposed
restructuring, provided limited cooperation to the Federal
Reserve, including access to selected documents. The
cooperation did not extend to permitting the Federal Reserve
open access to all BCCI documents, or substantive
communication with key BCCI officials held in Abu Dhabi,
such as BCCI's former president, Swaleh Naqvi. That access
ended with the closure of BCCI July 5, 1991.
From November, 1990 through the present, Abu Dhabi has
failed to provide documents and witnesses to U.S. law
enforcement authorities and to the Congress, despite
repeated commitments to do so. Instead, it has actively
prevented U.S. investigators from having access to vital
information necessary to investigate BCCI's global
The proposed agreement between Abu Dhabi and BCCI's
liquidators to settle their claims against one another
contains provisions which could have the consequence of
permitting Abu Dhabi to cover up any wrongdoing it may have
had in connection with BCCI.
There is some evidence that the Sheikh Zayed may have had a
political agenda in agreeing to the involvement of members
of the Abu Dhabi royal family and its investment authority
in purchasing shares of Financial General Bankshares, then
of CCAH/First American. This evidence is offset, in part, by
testimony that Abu Dhabi share purchases in the U.S. bank
were done at Abedi's request and did not represent an actual
investment by Abu Dhabi until much later.
12. BCCI MADE EXTENSIVE USE OF THE
REVOLVING DOOR AND POLITICAL INFLUENCE PEDDLING IN THE
UNITED STATES TO ACCOMPLISH ITS GOALS.
BCCI's political connections in Washington had a material
impact on its ability to accomplish its goals in the United
States. In hiring lawyers, lobbyists and public relations
firms in the United States to help it deal with its problems
vis a vis the government, BCCI pursued a strategy that it
had practiced successfully around the world: the hiring of
former government officials.
BCCI's and its shareholders' cadre of professional help in
Washington D.C. included, at various times, a former
Secretary of Defense (Clark Clifford), former Senators and
Congressmen (John Culver, Mike Barnes), former federal
prosecutors (Larry Wechsler, Raymond Banoun, and Larry
Barcella, a former State Department Official (William
Rogers), a former White House aide (Ed Rogers), a current
Presidential campaign deputy director (James Lake), and
former Federal Reserve Attorneys (Baldwin Tuttle, Jerry
Hawke, and Michael Bradfield). In addition, BCCI solicited
the help of Henry Kissinger, who chose not to do business
with BCCI but made a referral of BCCI to his own lawyers.
several key points in BCCI's activities in the U.S., the
political influence and personal contacts of those it hired
had an impact in helping BCCI accomplish its goals,
including in connection with the 1981 CCAH acquisition of
FGB and the handling and aftermath of BCCI's plea agreement
in Tampa in 1990.
The political connections of BCCI's U.S. lawyers and
lobbyists were critical to impeding Congressional and law
enforcement investigations from 1988 through 1991, through a
variety of techniques that included impugning the motives
and integrity of investigators and journalists, withholding
subpoenaed documents, and lobbying on capital hill to
protect BCCI's reputation and discourage efforts to close
the bank down in the United States.
13. BCCI'S PUBLIC RELATIONS FIRM
SMEARED PEOPLE WHO WERE TELLING THE TRUTH AS PART OF ITS
WORK FOR BCCI.
When Hill and Knowlton accepted BCCI's account in October,
1988, its partners knew of BCCI's reputation as a "sleazy"
bank, but took the account anyway. In 1988 and 1989, Hill
and Knowlton assisted BCCI with an aggressive public
relations campaign designed to demonstrate that BCCI was not
a criminal enterprise, and to put the best face possible on
the Tampa drug money laundering indictments. In so doing, it
disseminated materials unjustifiably and unfairly
discrediting persons and publications who were telling the
truth about BCCI's criminality.
Important information provided by Hill and Knowlton to
Capitol Hill and provided by First American to regulators
concerning the relationship between BCCI and First American
in April, 1990 was false. The misleading material
represented the position of BCCI, First American, Clifford
and Altman concerning the relationship, and was contrary to
the truth known by BCCI, Clifford and Altman.
Hill and Knowlton's representation of BCCI was within the
norms and standards of the public relations industry, but
raises larger questions as to the relationship of those
norms and standards to the public interest.
14. BCCI ACTIVELY SOLICITED THE FRIENDSHIPS OF MAJOR
U.S. POLITICAL FIGURES, AND MADE PAYMENTS TO THESE POLITICAL
FIGURES, WHICH IN SOME CASES MAY HAVE BEEN IMPROPER.
Beginning with Bert Lance in 1977, whose debts BCCI paid off
with a $3.5 million loan, BCCI, BCCI nominees, and top
officials of BCCI systematically developed friendships and
relationships with important U.S political figures. While
those which are publicly known include former president
Jimmy Carter, Jesse Jackson, and Andrew Young, the
Subcommittee has received information suggesting that BCCI's
network extended to other U.S. political figures. The
payments made by BCCI to Andrew Young while he was a public
official were at best unusual, and by all appearances,
15. BCCI'S COMMODITIES AFFILIATE,
CAPCOM, ENGAGED IN BILLIONS OF DOLLARS OF LARGELY ANONYMOUS
TRADING IN THE US WHICH INCLUDED A VERY SUBSTANTIAL LEVEL OF
MONEY LAUNDERING, WHILE CAPCOM SIMULTANEOUSLY DEVELOPED
SIGNIFICANT TIES TO IMPORTANT U.S. TELECOMMUNICATIONS
INDUSTRY EXECUTIVES AND FOREIGN INTELLIGENCE FIGURES.
BCCI's commodities affiliate, Capcom, based in Chicago,
London and Cairo, was principally staffed by former BCCI
bankers, capitalized by BCCI and BCCI customers, and owned
by BCCI, BCCI shareholders, and front-men. Capcom employed
many of the same practices as BCCI, especially the use of
nominees and front companies to disguise ownership and the
movement of money. Four U.S. citizens -- none of whom had
any experience or expertise in the commodities markets --
played important and varied roles as Capcom front men in the
While investigation information concerning Capcom is
incomplete, its activities appear to have included
misappropriation of BCCI assets; the laundering of billions
of dollars from the Middle East to the US and other parts of
the world; and the siphoning of assets from BCCI to create a
safe haven for them outside of the official BCCI empire.
Capcom's majority shareholders, Kamal Adham and A.R. Khalil,
were both former senior Saudi government officials and
successively acted as Saudi Arabia's principal liaisons to
the Central Intelligence Agency during the 1970's and
Its U.S. front men included Robert Magness, the CEO of the
largest U.S. cable telecommunications company, TCI; a
vice-President of TCI, Larry Romrell; and two other
Americans, Kerry Fox and Robert Powell, with long-standing
business interests in the Middle East. Magness, Romrell and
Fox received loans from BCCI for real estate ventures in the
U.S., and Magness and Romrell discussed numerous business
ventures between BCCI and TCI, some of which involved the
possible purchase of U.S. telecommunications stock and
substantial lending by BCCI.
Commodities regulators with the responsibility for
investigating Capcom showed little interest in conducting a
thorough investigation of its activities, and in 1989
allowed Capcom to avoid such an investigation through
agreeing to cease doing business in the United States.
The Subcommittee could not determine whether BCCI, Capcom,
or their shareholders or agents actually acquired equity
interests in the U.S. cable industry and believes further
investigation of matters pertaining to Capcom is essential.
16. INVESTIGATIONS OF BCCI TO DATE
REMAIN INCOMPLETE, AND MANY LEADS CANNOT BE FOLLOWED UP, AS
THE RESULT OF DOCUMENTS BEING WITHHELD FROM US INVESTIGATORS
BY THE BRITISH GOVERNMENT, AND DOCUMENTS AND WITNESSES BEING
WITHHELD FROM US INVESTIGATORS BY THE GOVERNMENT OF ABU
Many of the specific criminal transactions engaged in by
BCCI's customers remain hidden from investigation as the
result of bank secrecy laws in many jurisdictions, British
national security laws, and the holding of key witnesses and
documents by the Government of Abu Dhabi. Documents
pertaining to BCCI's use to finance terrorism, to assist the
builders of a Pakistani nuclear bomb, to finance Iranian
arms deals, and related matters have been sealed in the
United Kingdom by British intelligence and remain
unavailable to U.S. investigators. Many other basic matters
pertaining to BCCI's criminality, including any list that
may exist of BCCI's political payoffs and bribes, remain
sequestered in Abu Dhabi and unavailable to U.S.
Many investigative leads remain to be explored, but cannot
be answered with devoting substantial additional sources
that to date no agency of government has been in a position
Unanswered questions include, but are not limited to, the
relationship between BCCI and the Banco Nazionale del Lavoro;
the alleged relationship between the late CIA director
William Casey and BCCI; the extent of BCCI's involvement in
Pakistan's nuclear program; BCCI's manipulation of
commodities and securities markets in Europe and Canada;
BCCI's activities in India, including its relationship with
the business empire of the Hinduja family; BCCI's
relationships with convicted Iraqi arms dealer Sarkis
Sarkenalian, Syrian drug trafficker, terrorist, and arms
trafficker Monzer Al-Kassar, and other major arms dealers;
the use of BCCI by central figures in the alleged "October
Surprise," BCCI's activities with the Central Bank of Syria
and with the Foreign Trade Mission of the Soviet Union in
London; its involvement with foreign intelligence agencies;
the financial dealingst of BCCI directors with Charles
Keating and several Keating affiliates and front-companies,
including the possibility that BCCI related entities may
have laundered funds for Keating to move them outside the
United States; BCCI's financing of commodities and other
business dealings of international criminal financier Marc
Rich; the nature, extent and meaning of the ownership of
other major U.S. financial institutions by Middle Eastern
political figures; the nature, extent, and meaning of real
estate and financial investments in the United States by
major shareholders of BCCI; the sale of BCCI affiliate
Banque de Commerce et Placement in Geneva, to the Cukorova
Group of Turkey, which owned an entity involved in the BNL
Iraqi arms sales, among others.
The withholding of
documents and witnesses from U.S. investigators by the
Government of Abu Dhabi threatens vital U.S. foreign policy,
anti-narcotics and money laundering, and law enforcement
interests, and should not be tolerated.