At 11:13 a.m. on Wednesday, July 29, 1992, Manhattan District Attorney Robert M. Morgenthau walked through the back door of his office, followed by several staff members and representatives of the U.S. Justice Department and the Federal Reserve, to face a waiting crowd.
The slim, white-haired D.A. read in a quiet, halting voice from his prepared text: “A New York County grand jury has returned two indictments, charging six individuals, including Clark M. Clifford and Robert A. Altman, for criminal conduct arising out of the operation of the Bank of Credit and Commerce International-BCCI.” This bank, Morgenthau said, was “a criminal enterprise”. that had “bribed central bankers, government officials, and others worldwide to gain power and money.” Among those bribed, the indictment alleged, were Clifford and Altman; the grand jury accused them of receiving tens of millions of dollars from the corrupt bank for their part in its illegal schemes.
These were shocking charges. Clark Clifford had been one of the most powerful and admired men in the nation’s capital since the 1940s. An elder statesman of the Democratic party, he had advised every Democratic president from Harry Truman to Jimmy Carter and had served as Lyndon Johnson’s secretary of defense. After of cultivating a reputation as a man of integrity, Clifford now faced charges that carried a maximum penalty of eight years in prison and $80 million in fines. Altman, his forty-five-year-old protege, could be sentenced to twenty years’ imprisonment and $80 million in fines.
In addition to the indictments, Morgenthau outlined a plea bargain his office had negotiated with Kamal Adham, the former intelligence chief of Saudi Arabia and an adviser to that country’s King Fahd. Adham admitted to helping BCCI in its crimes in the United States and agreed to pay a $105 million fine. He also pledged complete cooperation with the Manhattan district attorney and other U.S. authorities, raising the possibility that someone from the bank’s inner circle would testify against Clifford, Altman, and other defendants.
The indictment of Clifford dealt with only one aspect of the BCCI affair-its secret, illegal takeover of the Washington-based First American Bank. But by the summer of 1992 the scandal had become a vast and complicated scandal embracing a multitude of individuals and institutions around the world. Before it was shut down, BCCI had operated in seventy-three countries and had been a major force in such financial centers as New York, London, Geneva, Paris, and Hong Kong and in the capitals of the Persian Gulf, where many of BCCI’s sponsors lived.
BCCI had outwardly seemed like a normal financial institution, with attractively designed branch offices, its own traveler’s check business, and a reputation for financing international trade. But behind this convincing facade, BCCI was a criminal enterprise that catered to some of the most notorious villains of the late twentieth century, including Saddam Hussein, the bloodthirsty ruler of Iraq; leaders of the Medellin drug cartel, which controls the bulk of the world’s cocaine trade; Khun Sa, the warlord who dominates heroin trafficking in Asia’s Golden Triangle; Abu Nidal, the head of one of the world’s leading terrorist organizations; and Manuel Antonio Noriega, the drug-dealing former dictator of Panama. BCCI not only assisted others in committing crimes, the institution was itself a fraud. The men who ran the bank collected billions of dollars in deposits and then systematically looted it. BCCI insiders had also plundered other financial institutions-in Europe, the Middle East, and the United States.
This criminal rampage lasted for nearly two decades. Rarely was BCCI hindered by bank regulators, law enforcement authorities, or politicians, in part because it had bought off many of the people who should have been policing it. Its political reach was awesome: the BCCI network was connected to some of the most powerful people in the world, including Middle Eastern potentates, Asian strongmen, and political leaders in Europe and the United States. The bank and its allies even had personal and financial ties to people in the inner circles of President George Bush and the man who was aiming to unseat him, Governor Bill Clinton of Arkansas.
(The same man, in one instance-Jackson Stephens, an Arkansas investment banker who played a crucial role in BCCI’s penetration of the U.S. market by collecting First American stock. Stephens’s wife at that time, Mary Anne, ran Bush’s 1988 campaign in Arkansas. And in May 1991, his brokerage firm, Stephens Inc., kicked in $100,000 to a Bush dinner committee. But Bill Clinton also received substantial financial backing over the years from Stephens, who in addition has given substantial legal work to the Little Rock law firm in which Hillary Clinton is a partner.)
BCCI’s ability to operate with impunity for so long may also have had something to do with its connections to the murky world of intelligence (box, page 49). It had generated tremendous goodwill at the CIA by assisting in a series of sensitive covert operations. BCCI’s relationship with U.S. intelligence was so close that questions have been raised about whether the CIA was one of the original sponsors of BCCI-and even one of the beneficiaries of its larceny.
The political and intelligence dimensions of the affair make it far more than a financial scandal. Some pundits have labeled it an “international Watergate.” Others have called it “the mother of all scandals.” It is a tale of intrigue and political corruption on a worldwide scale with an amazing cast of characters. The most remarkable of all is the founder and guiding force of BCCI, Pakistani financier Agha Hasan Abedi. It was his vision, charisma, and hunger for power that propelled BCCI and inspired the almost religious devotion of his staff. Alberto Calvo, who helped to establish BCCI’s network of offices in Latin America, describes Abedi as “intelligent, brilliant, lucid and shady; prophetic; angel and devil; generous to the point of absurdity; a megalomaniac; a manipulator.”
The central question asked of Clifford and Altman was the one that had dogged Richard Nixon during Watergate: What did they know and when did they know it? What, specifically, did they know about BCCI’s relationship with First American? When did they learn that BCCI owned the U.S. banking institution?
BCCI was not only forbidden to own stock in First American, it was also barred from exercising “controlling influence” over it. This meant, in essence, that First American had to be managed as a wholly autonomous institution. Nevertheless, journalists and congressional investigators turned up an extraordinary number of instances in which BCCI was involved in First American’s affairs. Examples included the involvement of BCCI officials in the launching of First American Bank of New York (FABNY), the purchase by First American of Bankers Trust branches, schemes for the joint marketing of services, and even the hiring of executives. When confronted with each example, Clifford and Altman would typically reply in one of two ways: (1) it was done behind their backs or (2) it didn’t make the final decisions.
But the credibility of Clifford and Altman was seriously damaged by a series of dubious statements to regulators, journalists, and congressional investigators. Clifford, for example, provided several conflicting accounts of who had asked him to run First American, which resulted in the following question from the Republican senator Jesse Helms. “Mr. Clifford,” he asked, “I would like to clear up a question about who exactly asked you to take over the chairmanship of First American. In your testimony before the House Banking Committee and in press interviews, you stated that Mr. Abedi and Mr. Adham asked you to take the position. In your written responses to questions submitted by the House Banking Committee, you stated that you were asked by Mr. Adham. Finally, in your written statement before the House Banking Committee, you stated that the investors asked you to take the post. For the purposes of clarification, just who did ask you to take the post?”
A similarly sensitive issue for Clifford and Altman is that they were in constant communication with BCCI over the years and yet had little contact with the Arab investors who ostensibly owned the bank. Their response is that BCCI acted as an investment adviser and communications link to the Arabs. The problem with this answer is that they have provided several, often conflicting, descriptions of BCCI’s role. To cite just a few of many examples:
In November 1978, Altman said in a letter to the Federal Reserve Bank of Richmond that BCCI had advised three of the initial investors in First American: Kamal Adham, Faisal Saud al-Fulaij, and Abdullah Darwaish. He said that people related to BCCI would probably advise the investors in the future.
In October 1988, Altman told The Washington Post that Abedi (not BCCI) advises the investors.
In Clifford and Altman’s prepared statement to Sen. John Kerry’s Foreign Relations subcommittee on narcotics, terrorism and international operations-and in their testimony-Abedi the adviser vanishes. “BCCI,” says the statement, “performed the same communications function with respect to all the shareholders, including Sheikh Zaied [Zayed] and others.” In oral testimony, Altman said, “It was understood by the regulatory authorities at the time, not that Mr. Abedi was the adviser to the shareholders, not that Mr. Abedi was the communications link, but that BCCI performed and would continue to perform those functions.”
However it is expressed, this alleged “advisory” role is a critical part of Clifford and Altman’s defense. The reason they met so often with BCCI officials and provided information about First American is that First American’s shareholders wanted them to do so. In view of this, the Kerry Committee asked lawyers for Clifford and Altman to supply “all documents that reflect statements by the investors as to their desire that you keep BCCI informed of the financial progress of First American.” There is apparently no such documentation. On October 11, 1991, the committee received this reply: “Messrs. Clifford and Altman were not instructed to do so in writing.”
The very notion that Clifford and Altman had to use BCCI to communicate with First Americans stockholders has been ridiculed by one former BCCI official, Abdur Sakhia. “They were not Bedouins in the desert who were being communicated with,” Sakhia has said. “These were intelligent people who owned banks and businesses.”
Although Clifford and Altman insisted that the case against them was based on flimsy evidence, the reality was that investigators for the Manhattan district attorney, the Justice Department, and the Federal Reserve had obtained a great deal of damaging information about the two lawyers. Some of it was laid out in the indictments and in a Federal Reserve order of July 29, 1992. But there was also other information that had not been released publicly, including statements from dozens of witnesses who were familiar with the relationship between BCCI and First American.
One such witness was Riaz Saleem Aslam, a former financial adviser to Sheikh Zayed bin Sultan al-Nahyan, the aging ruler of the Arab emirate of Abu Dhabi and among the most important of BCCI’s patrons. Aslam, with direct personal knowledge of the takeover, accused Zayed and assorted BCCI officials of wrongdoing in the takeover, and was jailed for several years in Abu Dhabi for allegedly defrauding Zayed.
Dildar Rizvi, a former senior BCCI officer, is believed to have corroborated Aslam’s statements in September 1992. In interviews in Pakistan with investigators from the Justice Department and from Morgenthau’s office, he gave an account of the takeover that closely agreed with that of Aslam, according to people close to the investigation.
Aslam also alleged that Clifford and Altman were accomplices and that their complicity dated back to late 1977, just weeks after the BCCI attempt to take over First American began.
In fact, Aslam believed that the Washington lawyers had urged Zayed to keep him in prison because they were fearful of what he could say about their conduct. He noted that they had been BCCI’s principal U.S. lawyers until October 1990 (when Zayed replaced them with Patton, Boggs & Blow). During that period, according to Aslam’s attorney, BCCI’s lawyers wrote “memos to Zayed’s Department of Personal Affairs to press for his continued incarceration.” The same month the Clifford firm was dropped, Aslam was freed.
Zayed played an integral role in the founding of BCCI, according to a statement Aslam claimed to have written in 1983. When the institution was established, “Zayed was probably the largest single shareholder and also provided a large subordinated loan to augment the small capital of the bank.” Much of BCCI’s capital, however, was “internally created” by coopting bank loans and deposits and with fraudulent accounting entries. The sheikh supported BCCI “by placing long-term deposits with it” that were “far in excess of what a normal investor would have considered prudent.”
The sheikh was intimately involved in Abedi’s attempt to acquire Financial General (as First American was then called), according to Aslam. It was understood at the outset that Abedi would control the banking company. One of Zayed’s motives, Aslam said, was to increase his political power in the United States. “Mr. Abedi never concealed his intent to control FGB as the effective arm of BCCI,” he wrote, “which Abedi said would benefit the Ruler both through ownership of BCCI and direct ownership of a Washington D.C. bank, especially if this could result in a mutually profitable relation with a close confidant of the President of the United States”-a reference to Jimmy Carter’s friend Bert Lance.
Abedi and his associates lied to regulators about the identity of the investors, and Zayed went along with the deception, according to Aslam. The initial stock purchases in late 1977 and early 1978 had ostensibly been made by Kamal Adham, Faisal Saud al-Fulaij, and two of Zayed’s sons, Sheikh Sultan and Sheikh Mohammed. (Mohammed, a minor, supposedly acted through Aslam’s boss, Abdullah Darwaish, the chairman of the ruler’s Department of Personal Affairs.) In reality, Aslam said, the stock was accumulated by Abedi and placed in the names of the four investors. The real owners were Zayed and BCCI.
(In his statements, Aslam spells the name of Zayed’s adviser as “Darwish” and the name of Abedi’s deputy, Swaleh Naqvi, as “Naqvi.” First American is generally referred to by its old name, Financial General Bankshares, which is sometimes abbreviated as FGB or FGL. The “L” is for Limited, probably because Limited is used in corporate names in Aslam’s native Pakistan.)
The collection of the stock had been handled clumsily. “Lance had clearly inspired Abedi to act impulsively,” Aslam stated, “without proper allowance” for U.S. securities laws. This was a reference to the requirement that anyone who buys 5 percent of a public company’s stock should file a disclosure statement with the Securities and Exchange Commission; Abedi quickly exceeded that limit and failed to make any filings.
Realizing his legally perilous position, Abedi retained Clifford’s law firm. According to Aslam, this was done in December 1977-not, as Clifford has maintained, the following February, when the investment group was sued by the banking company.
Aslam’s recollection jibes with new findings by Senator Kerry’s investigators. They discovered an invoice sent to Abedi by Clifford’s firm which covers work done in January 1978. Moreover, a telex from BCCI employee Abdus Sami states that Sami had retained Clifford in connection with the takeover. Financial General’s lawsuit was filed on February 17, more than two weeks after the telex was sent.
By late January 1978, BCCI controlled about 17 percent of the stock, more than three times the disclosure threshold. It became imperative to disguise BCCI’s control of the stock-and its violation of securities law-by parceling out the shares to four nominees.
Evidence of BCCI’s efforts to round up front men is contained in documents unearthed by U.S. government investigators. For example, on January 30, 1978, BCCI’s Abdus Sami, in his telex to Abedi, urgently requested “two other names immediately” in addition to the two he already had, Adham and Fulaij. Abedi quickly came up with Zayed’s sons Sultan and Mohammed. In a written statement dated 1991, Aslam said, “The shares which were ultimately represented as purchased by the two sons through BCCI had been allocated to them as nominees for Sheikh Zayed, who purchased them with his own knowledge, his own funds, and designated his sons as nominees to keep secret his ownership.”
Clifford and Altman were accomplices in BCCI’s scheme to conceal the true ownership of the stock, according to Aslam. In his words, they helped Abedi “rectify the mistakes and guide the acquisition in conformance to U.S. regulation.” With their guidance, “a reorganized, although false, edifice of ownership of shares in FGB was created.” In statements to the SEC and Financial General, noted Aslam, the owners were “referred to as the ‘Arab investors.’” Disclosure statements filed with the SEC stated that Mohammed and Sultan acquired close to 5 percent of Financial General on January 26, 1978. This, of course, was four days before Sami asked Abedi to supply two more names. Either Sami’s telex is wrong or the SEC filings are false.
After Financial General sued the four Arab “stockholders” (along with Abedi and his associates), Darwaish had to go to Washington to be deposed by lawyers for the banking company. He was extremely anxious about the deposition, according to Aslam, and talked nervously about “the big guns” he would have to face. Clifford and Altman did more than simply prepare him for the deposition, according to Aslam; they coached him on what to say.
In his 1983 statement, Aslam described one alleged coaching session which, he said, took place in London in an apartment near Hyde Park. “I recollect a meeting in the summer of 1978 held at Darwish’s (rented) penthouse at the Quadrangle Apartments in London. The following were present-A.H. Abedi, S.H. Naqui, Clark Clifford, R. Altman, B.T. Lance, Abdullah Darwish, and R. Aslam.” The purpose of the meeting “was to discuss strategy and bring Darwish up to date,” Aslam wrote. “In practical terms Clifford and Altman coached Darwish extensively prior to his testimony, including times when I was present.”
There was additional coaching in Washington the week before the deposition, according to Aslam. As a result, almost all of Darwaish’s “testimony in the FGB actions was a reflection of what Clifford and Altman wanted it to be rather than what had occurred in Darwish’s knowledge,” Aslam said.
Clifford, Altman, and Sheikh Zayed have denied any wrongdoing in connection with the takeover of First American. The Washington lawyers say they were duped by BCCI. The ruler of Abu Dhabi claims he was a victim of the bank. Nevertheless, it is impossible to dismiss Aslam’s allegations out of hand. Although he is clearly an interested party-having been jailed for several years by Zayed-he was a witness to the takeover, and his story is consistent with what is now known about it; much of it can also be corroborated with documents and statements by other witnesses. Aslam could be a powerful witness against Clifford, Altman, and other suspects in the BCCI affair.
One mystery in the BCCI affair that may never be solved is where the money went. Some of BCCI’s losses have been explained, but billions of dollars are still unaccounted for. Are there large caches of loot in secret bank accounts controlled by Abedi and his close associates? Did a large portion of the missing money go to some of the political figures who helped the bank?
There is strong evidence that money was diverted to accounts controlled by Saudi and Abu Dhabi sheikhs. A New York grand jury has already accused Khalid Bin Mahfouz, Saudi Arabia’s leading banker and an important BCCI insider, of stealing as much as $300 million from the bank. Documents from BCCI and Capcom, its now-failed commodities-trading affiliate, show that more than $200 million went to accounts in the names of Saudi intelligence boss Adham and Abdul-Raouf Khalil, a senior aide to Adham who remained in the Saudi agency after Adham’s departure.
The senior Saudis behind BCCI played important roles in aiding the CIA. The war in Afghanistan, for example, was an extraordinary ten year partnership between the Pakistani military, its intelligence agency (the ISI), the Saudi Intelligence Agency, and the CIA. Working with the ISI, Prince Turki bin Faisal, Adham’s successor as Saudi intelligence chief (and a BCCI shareholder), distributed more than $1 billion in cash to Afghan guerrillas during the late 1980s. Saudi middleman Adnan Khashoggi, with BCCI’s help, provided a critical link in at least four of the six Iran-contra transactions between August 1985 and October 1986. Albert Hakim, who acted as Oliver North’s banker for Iran-contra dealings, also referred to other arms-trafficking deals totaling millions of dollars that involved a party he simply called “IC” of Grand Cayman. These deals, congressional investigators speculate, could well have involved ICIC, BCCI’s Grand Cayman affiliate.
The Saudi establishment was stunned by the Bin Mahfouz indictment; its intensive lobbying of the State Department had been to no avail. Morgenthau’s office refused to kowtow to foreign policy considerations, in any case. King Fahd called Ambassador Charles W. Freeman, Jr., to voice his shock and sadness at the news. The king even asked if the U.S. government would make a public statement vouching for the safety and stability of the Saudi banking system. Ambassador Freeman had to demur politely and explain that the law-or at least a maverick prosecutor’s office in New York-had to take its course.
The Fed had also come under tremendous pressure from the Saudi authorities, who had sought to settle the issue of Bin Mahfouz’s involvement with BCCI quietly. The Saudi Arabian Monetary Agency (SAMA), the kingdom’s central banking authority, wanted desperately to keep the name of King Fahd’s banker out of the press. “They are concerned what implications it will have for the Saudi banking system as a whole,” a senior Bush administration official told a reporter shortly after the New York indictment.
Abedi also benefited, according to former associates. A former BCCI official with ties to Pakistani intelligence says that information on Abedi’s hidden wealth has been given to British investigators by Bashir Choudhury, a BCCI officer in Naqvi’s special duties department who is now in Pakistan. Choudhury, according to this source, said that Abedi had salted away several hundred million dollars in Liechtenstein.
The BCCI deception lasted for nearly two decades. Not until 1988 were serious efforts made to peel off Abedi’s mask and reveal the true nature of the man and his bank. Even then, three more years would pass before the criminal organization known as the Bank of Credit and Commerce International was put out of business.
BCCI’s crime wave lasted as long as it did because of an appalling breakdown in the systems of control that are supposed to protect the public. With few exceptions, board members, auditors, bank regulators, and law enforcement agencies behaved with extraordinary blindness, lethargy, naivete, and timidity. In several cases, watchdogs were not fools but knaves: in exchange for money, favors, jobs, and other forms of largesse, they looked the other way.
The day after the indictments of Clifford and Altman were announced, Senator Kerry’s committee held a hearing on BCCI in which corruption was a recurrent theme. After the hearing, Kerry returned to his office and talked with a visitor about the importance of political influence in the BCCI affair. Four years earlier, he said, Clifford came to his office and vouched for BCCI. “Clifford sat right on that sofa and said, ‘BCCI’s a good bank.’ He said, ‘We’re anxious to be cooperative, we’ve never done anything wrong.’” Kerry also touched on the pernicious influence of campaign contributions. “The amount of money that floats around this city is grotesque,” he said. When asked if anyone could be relied on to protect the public, he said, “Only good people-the Robert Morgenthaus-people who see their duty and do it.”
