BUSINESS

INDECENT EXPOSURES

WASHINGTON IS EMBARRASSED BY NEW REVELATIONS OF SECRET BCCI CAMPAIGN CONTRIBUTIONS

MARCI McDONALD August 12 1991
BUSINESS

INDECENT EXPOSURES

WASHINGTON IS EMBARRASSED BY NEW REVELATIONS OF SECRET BCCI CAMPAIGN CONTRIBUTIONS

MARCI McDONALD August 12 1991

INDECENT EXPOSURES

BUSINESS

One of its branches is less than a block from the White House—and the television commercials for Washington’s First American Bank featured wholesome scenes of family reunions against a backdrop of fluttering U.S. flags. “We’re First American,” a voice intoned, “the bank for all Americans.” But that patriotic appeal may have been designed to mask the fact that for the past decade the city’s largest bank has been secretly owned by the same Pakistani and Persian Gulf investors who controlled the scandal-ridden Bank of Credit and Commerce International, indicted last week for what New York County district attorney Robert Morgenthau termed “the largest bank fraud in world financial history.”

Within hours of Morgenthau’s 12-count indictment—which named BCCl’s Pakistani founder, Agha Hasan Abedi—on criminal

WASHINGTON IS EMBARRASSED BY NEW REVELATIONS OF SECRET BCCI CAMPAIGN CONTRIBUTIONS

charges of fraud, bribery, money-laundering and grand larceny, Washington’s Federal Reserve levied a record $230-million civil fine against the Luxembourg-chartered bank for “purposefully concealing” its ownership of

First American and three other U.S. financial institutions. But as new information about BCCl’s criminal clientele and complex global web emerged, some of the reddest faces were in the U.S. capital. In a two-day hearing before the Senate subcommittee on terrorism, William von Raab, former U.S. commissioner of customs, claimed that BCCI had achieved its decade-long deception by hiring a half-dozen of the city’s top lawyers and lobbyists as “influence peddlers,” and by funnelling secret contributions to campaign coffers.

Those charges were particularly embarrassing for Massachusetts Senator John Kerry, the Democratic subcommittee chairman who in 1987 initiated an inquiry into BCCI and the money-laundering services it performed for former Panamanian dictator Manuel Noriega. Kerry said last week that he learned that BCCI had secretly bought an interest in Miami’s

now-defunct CenTrust Savings Bank, whose former chairman was businessman David Paul, Kerry’s co-chairman on the 1988 Democratic Senate Campaign Committee. Kerry told his subcommittee that he was “appalled” to discover the connection. CenTrust, which was seized by regulators last year, donated at least $377,000 in 1988 to federal political campaigns, including $35,000 to the Kerry-Paul committee. Added Kerry: “BCCI represents a new level of corruption of the political process.”

In Canada, the House of Commons finance committee will hold hearings later this month to investigate the bank’s Canadian operations. And in Britain, High Court Judge Sir Nicolas Browne-Wilkinson offered BCCl’s estimated 115,000 small depositors a temporary reprieve from the loss of their money. He ordered a delay in the liquidation of the bank’s British operations for four months to give BCCl’s new majority shareholder, Sheik Zayed bin Sultan al-Nahayan, the ruler of the Persian Gulf state of Abu Dhabi, time to devise a rescue plan.

That decision was a major setback for the Bank of England, whose governor, Robin Leigh-Pemberton, had expressed reservations about letting Abu Dhabi officials revive the bank, which is accused of a $23-billion global fraud. Two weeks ago, Leigh-Pemberton told a Commons committee that he believed that the fraud included some of the sheik’s own representatives in BCCI. As the tiny oil-rich emirate prepared to celebrate the 25th anniversary of Sheik Zayed’s ascension to the throne this

week, foreign newspapers carrying reports of the BCCI scandal were conspicuously absent from Abu Dhabi store racks.

In Pakistan, government officials vowed to defy Morgenthau’s extradition request against Abedi. The ailing 68-year-old founder and former chairman of BCCI was forced to resign last year after a damaging British audit report on the London-headquartered bank. Confined to a wheelchair in Karachi after suffering two heart attacks, Abedi denied the charges against him. “The truth will ultimately prevail,” he declared.

For Abedi, who once dreamed of building a vast Moslem global bank, the scandal was a stunning blow. Indeed, former Senate investigator Jack Blum testified before Kerry’s subcommittee that the banker was so close to late Pakistani president General Mohammed Zia ulHaq that the general once left a state dinner to rush to Abedi’s bedside as soon as he learned of his heart attack. Blum also said that many of Zia’s generals had used the bank to hide money that they stole from covert U.S. aid intended to arm the Afghan rebel movement, as well as to funnel their profits from rebel heroin sales.

But in Washington, the most politically damaging revelations concern BCCl’s success in establishing a clandestine U.S. operation despite efforts by regulators to keep the bank out of the country. In doing so, Abedi allegedly used a half-dozen wealthy Persian Gulf rulers and tycoons as his front men in what Morgenthau termed a “rent-a-sheik plan.” According to the Federal Reserve, BCCI offered the Arabs “sham loans” to buy shares in the holding companies of four U.S. financial institutions, beginning with First American Bankshares Inc. The bank effectively controlled the shares and never required the nominees to make payments on the loans.

Among the most controversial of those nominees was Kamal Adham, a former head of Saudi Arabian intelligence who had close ties to the CIA. Another was Saudi financier Ghaith Pharaon, who bought California’s Independence Bank, based in Encino, and the National Bank of Georgia, where his purchase rescued the financially hard-pressed Bert Lance, former president Jimmy Carter’s close friend, after Lance’s resignation in 1977 as the White House budget director amid allegations of scandal.

Last week, some critics said that those political connections helped explain why neither congressmen nor federal justice officials seemed eager to take action against BCCI. With the fallout sullying both Democrats and Republicans alike—indeed, von Raab claimed that Treasury Secretary Nicholas Brady had ordered his staff to keep BCCI information from him—Blum pointed out one of the difficulties in the staggeringly complex bank fraud. Declared Blum: “This scandal is an embarrassment to everybody who has anything to do with it. It’s the cesspool on the front lawn.” And, he might have added, a scandal whose odor is likely to haunt global politics for years to come.

MARCI McDONALD in Washington