The Other Bank Scandal
SEGAL, HARVEY H.
The Other Bank Scandal The Outlaw Bank: A Wild Ride into the Secret Heart of BCCI By Jonathan Beaty and S. C. Gwynne Random House. 399 pp. $25.00. Reviewed by Harvey H. Segal Author,...
...It was the first in the country to computerize its records and introduce the notion of "customer service...
...He persuaded a leading textile manufacturer to invest $2 million in the first native Pakistani bank...
...BCCI was shaped by two forces: a vision of Third World grandeur, and the gyrating fortunes of oil-producing countries in the Persian Gulf...
...From its inception...
...Late in July 1992—after Kamal Adham, former chief of Saudi Arabian intelligence and a shareholder of both BCCI and First American, pleaded guilty and agreed to cooperate with prosecutors—the grand jury struck two more blows...
...Its offices were closed and its assets were seized...
...Gwynne, Time's BCCI investigative team, provide a complex answer in this lucid and compelling book...
...Second, the grand jury indicted Washington superlawyers Clark M. Clifford and Robert A. Altman, respectively First American's chairman and president, for masterminding their bank's takeover by BCCI and receiving millions of dollars for participating in the scheme...
...Once the petrodollars dried up, BCC1 turned to rich veins of new deposits and fees: money laundering for the Latin American drug trade, arms trafficking and, according to some, financing terrorist groups...
...Abedi, now protected in Pakistan, will probably never stand trial...
...Abedi, the visionary, came from a well-connected, Urdu-speaking, Shiite Muslim family in North-Central India...
...The Sheikh was awash in oil revenues, but as a simple man of the desert he was wary of banks...
...Shortly thereafter Blum left the subcommittee, but before returning to private practice he took the damning testimony of BCCI insiders—evidence whose very existence the Justice Department denied—first to Robert Morgenthau and later to Jonathan Beaty...
...In 1967 he arrived in a single-engine plane for his maiden meeting with Zayed bin Sultan al-Nahayan, head of Abu Dhabi's ruling family and future President of the United Arab Emirates...
...Perhaps the certitude of a noble cause emboldens confidence men...
...The timing of the launch couldn't have been better...
...Since opec's 1973 embargo led to nearly quadrupled oil prices, the Gulf states were literally deluged with huge dollar surpluses they wanted "recycled"—lent out or invested by banks and other financial intermediaries...
...Department of Justice with its legions of lawyers, hordes of investigators, and superior access to the police of other countries...
...A turning point came in the autumn of 1988 when U.S...
...He responded by organizing the offshore BCCI...
...financial institutions: First American Bank, the largest in the Washington, D.C...
...Finally, if you like theater and happen to be in New York, look in on Judge John K.A...
...market...
...Amid all this Abedi pursued his burning ambition to become a major force in the U.S...
...But the Federal Reserve, if its protests can be believed, never got the word...
...BCCI, it said, had been a criminal enterprise since 1972, bribing central bankers and other government officials in a number of countries...
...arms to Afghan rebels—infuriated Senator John F. Kerry (D.-Mass...
...The Federal Reserve Board weighed in, fining BCCI $200 million for illegally taking control of three U.S...
...Thus the prosecution by the Manhattan DA's office and the eventual media exposure...
...The silver-tongued Clifford gulled the Federal Reserve Board's regulators into accepting that there were no links between BCCI and those Middle Easterners, even though Abedi openly served as their investment adviser...
...Reviewed by Harvey H. Segal Author, "Corporate Makeover" The Bank of Credit and Commerce International (BCCI) gained instant notoriety on July 5, 1991, when government regulators in 69 countries—Pakistan was the notable exception—declared it insolvent...
...Garbed in a $ 1,500 double-breasted suit and flanked by his aging parents and handsome wife, TV "Wonder Woman" Lynda Carter, Altman, for all his controlled cool, lookslikeaman who could face 20 years in prison and an $80 million fine...
...Undaunted, Abedi started to doctor the books...
...Padlocking was a prelude to prosecution...
...Beaty and Gwynne's Outlaw Bank is the best of a growing number of books on the Bank of Credit and Commerce International, but it is not without flaws...
...whose Foreign Relations Subcommittee investigated BCCI for many months under the direction of its gifted counselor, Jack Blum...
...It's a prospect, to paraphrase Samuel Johnson, that concentrates the mind...
...The Bush Administration's blatant coverup—motivated, it would seem, by a desire to hide CIA and other government ties to the bank and repay Abedi for his help in funneling U.S...
...Jonathan Beaty and S.C...
...It charged Abedi, Naqvi and others with "enterprise corruption" under New York's version of Rico, the Federal Racketeer Influenced and Corrupt Organizations Act...
...Moreover, they are thin on the bank's links to American politicians in both parties and to people in the news media...
...Customs agents arrested five BCCI employees on moneylaundering and narcotics charges in Tampa...
...Later that month a New York County grand jury, impaneled by Manhattan District Attorney Robert M. Morgenthau, indicted Agha Hasan Abedi, BCCI's Pakistani founder, and Swaleh Naqvi, then its operating head, for fraud, bribery, grand larceny, and money laundering...
...The hapless, Urdu-speaking grunts were sentenced to prison, but thanks to furious lobbying by Clifford and Altman and the work of an army of lawyers, the bank itself was let off with a ridiculously small fine of $14 million...
...BCCI grew at a spectacular rate in the 1970s, but its fortunes hinged critically on the two requirements for petrodollar surpluses: high inflation in the West, enabling opec to boost or at least maintain its oil prices, and a continuing slow pace of Gulf imports...
...A million BCCI customers, many of them poor expatriate workers from Pakistan and the Near East, lost all or most of their savings...
...For a fuller account of those concerns, along with the sorry failure of the Bank of England to regulate BCCI's operations there, see False Profits: The Inside Story of BCCI, the World's Most Corrupt Financial Empire by Peter Truell and Larry Gurwin...
...Although BCCI's holdings swelled into the billions of dollars, vast sums were soon lost through currency speculation and loans to insiders, especially to the Gokal family of Pakistani shippers...
...In the process he gave new meaning to the term "service...
...he had already spurned several Western overtures...
...Clifford and his protege, Altman, plotted the strategy that enabled a group of "Middle East investors" to acquire Financial General Bankshares in 1982, later renamed First American Bank...
...The defaulted loans were secretly transferred to the ledgers of a dummy corporation in the Cayman Islands, and the bank's balance sheet was bolstered by fictitious infusions of capital...
...area, National Bank of Georgia, and Miami's bankrupt Centrust Savings, the biggest S&L in the Southeast...
...Upon graduating from Lucknow University in the mid 1940s, he got a clerkship through his father at the Muslim-owned Habib Bank of Bombay, an institution that in 1947 joined the massive migration to the newly-formed state of Pakistan...
...By the late 1950s Abedi, having quickly scaled Habib's corporate hierarchy, was ready to strikeout on his own...
...Despite the intense media coverage the scandal received, only Time magazine raised a crucial question: Why did the initiative for prosecuting BCCI come from Morgenthau, rather than the U.S...
...By adopting the Woodward-Bernstein formula of sharing personal experiences with the reader—there is a running account of Beaty's troubles with a defector from BCCI's Mafia-like "Black Network," who may or may not be a killer —they add color at the expense of substance...
...Bradley's courtroom—on the 13th floor of 111 Centre Street in lower Manhattan—where John Moscow, son of the New York Times political correspondent Warren Moscow, is prosecuting the case against Robert Altman...
...Zayed put up $1.9 million of capital and the California-based Bank of America, bent upon being a player in the Gulf, invested another $625,000 in return for a 30 per cent stake plus a seat on the board...
...And in an act of supreme chutzpah, a ranking member of the criminal division at the Justice Department wrote to the Florida comptroller urging that BCCI's license not be revoked...
...Credits were extended to trusted cronies who purchased shares of BCCI stock that the bank held as collateral...
...Early in 1972, populist President Zulfikar Ali Bhutto nationalized Pakistan's banks and for a while placed Abedi under house arrest...
...Bernard Cornfeld—who founded Investors Overseas Services in the 1960s, a highly lucrative and egregiously crooked international mutual fund sales operation—was a sybaritic Socialist who believed that he could end the Cold War through youth mobilization...
...A breakthrough came at last in 1978 when Ghaith Pharaon, a high-living front man for Abedi, took control of the National Bank of Georgia in collaboration with Bert Lance, Jimmy Carter's close friend and former budget director...
...United Bank Limited was innovative...
...In 1986 the CI A circulated a report to the Treasury, State and Commerce Departments that said BCCI had controlled First American since 1982...
...It lent generously, sometimes unprofitably, to struggling farmers and small businessmen—a policy that Abedi would constantly point to, if not pursue, as a putative benefactor of the world's poor...
...Abedi was not the original socially conscious larcenist on the financial scene...
...To realize his vision of a multinational Third World bank, Abedi looked beyond Karachi...
...As it happened, inflation and oil prices dropped precipitously in the early '80s, a time when the Gulf states were imprudently increasing spending on armaments and other unproductive foreign goods...
...Besides helping the Sheikh and his extended family acquire estates in Pakistan, for example, he catered to their every need, procuring not only peregrine falcons but adolescent boys and girls...
...That deal led to intimate ties with Carter and Clark Clifford, who had successfully defended Lance against charges of bank fraud...
...Charles Keating, now in prison for his role in the Lincoln S&L collapse, was an early soldier in the culture war, a highly vocal enemy of pornography...
...The charismatic Abedi broke down Zayed's resistance, and through him won the trust —as well as the deposits—of numerous Arab magnates...
Vol. 76 • June 1993 • No. 8
