The BCCI Affair
A Report to the Committee on Foreign Relations
United States Senate
Senator John Kerry and Senator Hank Brown
102d Congress 2d Session Senate Print 102-140
[For the entire, lengthy report written by Senators John Kerry and Hank Brown, see either
THE BCCI AFFAIR
1. BCCI CONSTITUTED INTERNATIONAL FINANCIAL CRIME ON A MASSIVE AND
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.
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.
These 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 quid-pro-quo.
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
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.
In 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 it.
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.
4. THE JUSTICE DEPARTMENT MISHANDLED ITS INVESTIGATION AND
PROSECUTION OF BCCI, AND ITS RELATIONSHIPS WITH OTHER GOVERNMENT AGENCIES
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 additional information.
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
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,
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
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 practice.
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 firm.
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.
By 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.
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 United States.
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 in fraud.
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 USE IT.
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.
By 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
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.
In 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.
In 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.
In 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.
As 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 time.
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
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
In 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 and
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
In 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
In 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.
In 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.
In 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
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,
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 STATES.
Regardless of whether Clifford and Altman were deceived by BCCI in some
respects, both men participated in some BCCI's deceptions in the United
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
In 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 York City.
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
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
In 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 auditors.
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 bank.
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 wrongdoing.
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
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
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
At 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
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, improper.
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 United States.
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 1980's.
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
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 DHABI.
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 to provide.
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
SUMMARY OF LEGISLATIVE RECOMMENDATIONS
- THE SUBCOMMITTEE RECOMMENDS THAT THE UNITED STATES DEVELOP A MORE
AGGRESSIVE AND COORDINATED APPROACH TO INTERNATIONAL FINANCIAL CRIME, AND
TO MOVE FURTHER AGAINST FOREIGN PRIVACY AND CONFIDENTIAL LAWS THAT PROTECT
- THE SUBCOMMITTEE RECOMMENDS THAT THE JUSTICE DEPARTMENT RECONSIDER THE
POLICIES AND PRACTICES THAT LED TO ITS INEFFECTIVENESS IN INVESTIGATING AND
PROSECUTING BCCI, AND IMPAIRED ITS ABILITY TO COOPERATE WITH OTHER
INVESTIGATIONS OF BCCI BEING CONDUCTED BY THE FEDERAL RESERVE, NEW YORK
DISTRICT ATTORNEY, AND THE SENATE.
- THE SUBCOMMITTEE RECOMMENDS THAT THE CENTRAL INTELLIGENCE AGENCY AND
STATE DEPARTMENT UPGRADE THE TRACKING OF FOREIGN FINANCIAL INSTITUTIONS AND
ACTIVITIES, AND THE DISSEMINATION OF INFORMATION CONCERNING SUCH
- THE SUBCOMMITTEE RECOMMENDS THAT THE CONGRESS CONSIDER WHETHER
ADDITIONAL OVERSIGHT MECHANISMS ARE NECESSARY TO ENSURE THE CIA'S
ACCOUNTABILITY ON THE PROVISION OF INFORMATION.
- THE SUBCOMMITTEE RECOMMENDS THAT FEDERAL AGENCIES IMPOSE NEW
REQUIREMENTS ON FOREIGN AUDITORS TO PROTECT U.S. INTERESTS IN ANY CASE IN
WHICH ANY SUCH AGENCY IS RELYING ON AN AUDIT CERTIFIED BY A FOREIGN
AUDITOR. AT MINIMUM, THIS SHOULD REQUIRE FOREIGN AUDITORS WHOSE
CERTIFICATIONS ARE USED BY INSTITUTIONS DOING BUSINESS IN THE U.S. AGREE TO
SUBMIT THEMSELVES TO U.S. LAWS.
- THE SUBCOMMITTEE RECOMMENDS THAT THE PRESIDENT AND THE SECRETARY OF
STATE ADVISE THE GOVERNMENT OF ABU DHABI THAT ITS WITHHOLDING OF DOCUMENTS
AND WITNESSES PERTAINING TO BCCI FROM U.S. FEDERAL LAW ENFORCEMENT
INVESTIGATORS, THE FEDERAL RESERVE, THE NEW YORK DISTRICT ATTORNEY AND THE
CONGRESS THREATENS VITAL U.S. INTERESTS AND WILL NOT BE TOLERATED.
- FURTHER ATTENTION NEEDS TO BE GIVEN TO THE PROBLEM OF THE REVOLVING
DOOR IN WASHINGTON, AND THE IMPACT ON THE REGULATORY PROCESS AND ON LAW
ENFORCEMENT OF POLITICAL INFLUENCE IN WASHINGTON. THE SUBCOMMITTEE
RECOMMENDS THE CONSIDERATION OF LEGISLATING A FEDERAL STATUTORY CODE OF
CONDUCT FOR ATTORNEYS WHO PRACTICE BEFORE FEDERAL AGENCIES.
- THE SELF-REGULATION OF THE U.S COMMODITIES MARKETS BY THE COMMODITIES
FUTURES TRADING COMMISSION, THE CHICAGO BOARD OF TRADE, AND THE CHICAGO
MERCANTILE EXCHANGE IS INADEQUATE TO PROTECT THOSE MARKETS AGAINST MONEY
LAUNDERING INVOLVING TRADES FROM ABROAD. THE SUBCOMMITTEE RECOMMENDS THAT
THE EXCHANGES MAKE MONEY LAUNDERING ILLEGAL, AND DEMAND THAT THIS
REQUIREMENT BE ACCEPTED BY FOREIGN COMMODITIES EXCHANGES WITH WHOM THEY DO
BUSINESS, AS A CONDITION OF ACCESS TO US EXCHANGES.
- THE SUBCOMMITTEE RECOMMENDS THAT FURTHER STEPS BE TAKEN TO INSURE
ADEQUATE ACCOUNTABILITY OF FOREIGN FINANCIAL INSTITUTIONS DOING BUSINESS IN
THE UNITED STATES, INCLUDING REQUIRING FOREIGN BANKS FORM SEPARATELY
CAPITALIZED HOLDING COMPANIES IN THE UNITED STATES AS A CONDITION OF
LICENSE AND THE CONSIDERATION BY THE FEDERAL RESERVE OF ESTABLISHMENT A
MINIMUM STANDARD FOR CONSOLIDATED REGULATION THAT EXCLUDES BANK REGULATORY
- THE SUBCOMMITTEE RECOMMENDS THAT FOREIGN INVESTORS WHO PURCHASE
SUBSTANTIAL SHARES OF U.S. BUSINESSES BE REQUIRED TO APPEAR PERSONALLY IN
THE UNITED STATES AS INSURANCE THAT THE FOREIGN INVESTOR IS NOT ACTING AS A
NOMINEE FOR SOMEONE ELSE.
- TURF WARS CONTINUE TO SEVERELY DAMAGE THE ABILITY OF LAW-ENFORCEMENT
AGENCIES IN THE UNITED STATES TO DO THEIR JOB. THE SUBCOMMITTEE RECOMMENDS
THE ESTABLISHMENT OF A COMMITTEE OF LAW ENFORCEMENT OFFICIALS WHOSE JOB IT
IS TO CONDUCT OVERSIGHT OF, PREVENT, AND RESPOND TO FAILURES OF COOPERATION
IN LAW ENFORCEMENT.
- THE SUBCOMMITTEE RECOMMENDS THAT A STATUTORY MECHANISM FOR THE RECEIPT
BY CONGRESS OF FOREIGN FINANCIAL INFORMATION BE ESTABLISHED.