The Strange Saga of
BCCI
"The Bank of Crooks and Criminals International"
Sightings from The Catbird Seat
~ o ~
From The Outlaw Bank , by Jonathan Beaty & S.C. Gwynne:
THE DEVIL'S PAYMASTER
"Mr. Bond, power is sovereignty. Clausewitz's first principle was to have a secure base. From there proceeds freedom of action. Together, that is sovereignty. I have secured these things and much besides. . . . These things can only be secured in privacy. You talk of kings and presidents. How much power do they possess? As much as their people will allow them . . . And how do I possess that power, that sovereignty? Through privacy. Through the fact that nobody knows. Through the fact that I have to account to no one."
- Ian Fleming, Dr. No
Dr. No, the island monarch with thin, cruel lips and immost designs on the fate of the Western world, would have been fascinated by the scandal that blossomed around the Bank of Credit and Commerce International (BCCI) in the summer of 1991. It was a conspiratorialist's conspiracy, a plot so byzantine, so thoroughly corrupt, so exquisitely private, reaching so deeply into the political and intelligence establishments of so many countries, that it seemed to have its only precedent in the more hallucinogenic fiction of Ian Fleming, Kurt Vonnegut, or Thomas Pynchon.
As tales of its global predations were spattered across headlines all over the world, its apparent influence reached almost absurd proportions. This was a bank that had taken the popular notion of a "global electronic village" and made a mockery of it, a bank that was at once everywhere and nowhere, whose dirtiest secrets were hidden deep in the impossible tangles of its offshore networks.
BCCI suddenly bloomed as sort of supermetaphor for the 1980s, the decade that celebrated the likes of Robert Maxwell, Ivan Boesky, and Michael Milken and unleashed upon the United States a horde of freebooters in the banking and thrift business. But nothing in the history of financial scandals even approaches the $20-billion-plus heist at BCCI, which sixty-two countries shuttered forever in July 1991 in a paroxysm of regulatory vengeance. No single scandal had ever involved such vast amounts of money.
Superlatives were quickly exhausted. BCCI was the largest criminal corporate enterprise ever, the biggest Ponzi scheme, the most pervasive money-laundering operation in history, the only bank - so far as anyone knows - that ran a brisk sideline business in both conventional and nuclear weapons, gold, drugs, turnkey mercenary armies, intelligence and counterintelligence, shipping, and commodities from cement in the Middle East to Honduran coffee to Vietnamese beans.
Though it was fundamentally a financial fraud, BCCI itself was not a bank in any conventional sense. Or, more precisely, banking was only a part of the global organism, the ingeniously constructed platform from which its other lines of business were launched....
This "bank" possessed its very own diplomatic corps, intelligence network, and private army, its own shipping and commodities trading companies. And BCCI itself was so thoroughly enmeshed in the official affairs of Pakistan that it was often impossible to separate the two.
BCCI was bigger even than that: It was the unsettling next-stage evolution of the multinational corporation, the one the theorists had been predicting for years but which never seemed to be able to shed its sovereign boundaries. (General Motors and Mitsubishi are both good examples of this - huge companies with holdings and operations all over the world that nonetheless persist in being fundamentally American and Japanese entities.) In taking that step, BCCI became truly stateless and very nearly invisible to the authorities in each country where it did business.
The BCCI scandal shows what sort of frightening mischief can be made in a world where trillions of electronic dollars routinely wash in and out of international financial markets.
Nor was BCCI a conspiracy. In much of what it did, BCCI reflected the way the world works. The organization was designed to mimic the way the world's largest corporations and banks move and hide their money. It was no accident that BCCI was incorporated in Luxembourg, one of the least regulated nations on earth and a favorite haven of the money men at the Fortune 500. It was no accident that it ran its wildest manipulation through what amounted to a branch in the Cayman Islands - a place long favored by major banks to hold offshore money away from the ken of the IRS and banking authorities.
BCCI had mastered these black arts so well that it became the bank of choice for the intelligence agencies of the Western hemisphere, who found its deeply secretive methods more and more useful. BCCI was necessary to them; it was part of the way they worked, too. It was those alliances, along with bribery on a grand scale, that allowed the criminal bank to flourish for two decades with effective immunity from the law.
This is the story of how the wealthy and corrupt in Latin America managed to steal virtually every dollar lent to their countries by Western banks, creating the debt crisis of the 1980s; how heads of state such as Ferdinand Marcos, Saddam Hussein, Manuel Noriega, and others skimmed billions from their national treasuries and hid them in Swiss and Caymanian accounts forever free from snooping regulators; how Pakistan and Iraq got materials for nuclear weaponry and how Libya built poison-gas plants.
BCCI is also the story of how governments manage to put together arms deals with supposedly hostile governments, as in the case of Israel's clandestine trades with Arab states, or the United States' supplying weapons to both Iraq and Iran in violation of its own laws.
BCCI is a paradigm of how our national borders have been rendered porous, despite the best attempts of law enforcement; it is about terrorism and how terrorism is financed; it is about how drugs enter the United States and Europe and how the drug lords disguise and conceal their ill-gotten gains.
The BCCI scandal affords a rare and representative glimpse at the trillion-dollar-plus underground market of secret money that moves at will in and out of these reasons, no authorities anywhere were in a hurry to shut down BCCI: The bank was as useful to governments as it was to crooks, and indeed, governments became active participants in the fraud.
In the United States, BCCI became the subject of a massive and decade-long cover-up. For the investigators and the reporters who finally cracked it, the most difficult task of all was breaking down the formidable walls erected by their own law enforcement agencies.
Penetrating the cover-up became the key that finally unlocked the BCCI scandal....
- Truth or Consequences, New Mexico, January 1, 1993
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Few investigative reporters will relinquish control of their notes and research as a story progresses, but in this case things were out of hand. The BCCI scandal was not one neat financial story waiting to be packaged: Here were dozens of complex stories, each spiraling off in a different direction....
Most of Beaty's sources were paranoid about telephone taps, and while he doubted that his system would foil a government-installed tap, his most anxious sources could take comfort in the illusion of electronic sophistication. Were his lines being tapped? Beaty didn't know - the strange echos and clicks on his calls might well have been lousy telephone service - but he did think it significant that his law enforcement sources didn't want to talk over his phone.
"When an FBI agent wants you to call from a pay phone, what do you think?" he asked Gwynne plaintively.
By mid-summer there were two good reasons to worry about the security of phone lines. In late July and early August two reporters who had been working on the BCCI story were killed. The first was a reporter for the Financial Times named Anson Ng, who was found dead in his apartment in Guatemala City, Guatemala. The story was recounted by Senator Alan Cranston before the Kerry subcommittee:
"First, according to people who talked by phone with Ng in the days before his death, the British journalist mentioned that he was working on a quote, big story, unquote, related to BCCI and Guatemala. Second, although officials in Guatemala have sought to characterize Ng's assassination as the work of common criminals, the murder seems to be the work of professional hit men.... Apparently a silencer was used in the killing, which was done by a single bullet wound to the head.... I am told that Ng's head was wrapped in a towel and his body left in the bathroom, something consistent with efforts to keep the murder secret for a period of time. According to those closest to Ng, a set of documents were stolen from his desk."
Less than two weeks later a similar story hit much closer to home. On August 10, a Washington, D.C., freelance writer named Danny Casolaro, who had also been working on BCCI as part of a larger story, was found dead in a Martinsburg, West Virginia, motel room. He was discovered in a bathtub surrounded by a pool of blood.
Though it was immediately ruled a suicide, there were enough unanswered questions that the press jumped all over the story. He had supposedly killed himself by slashing his wrists - except that the cuts had been phenomenally deep, all the way through the tendons. There was also evidence that someone else had been in the room with him.
"It looked like someone tried to wipe up the blood on the floor and slid the towels under the sink," one of the motel's housekeepers said in a magazine interview.
"It looked like someone threw the towels on the floor and tried to wipe the blood with their foot, but they didn't get the blood, they just smeared it on the floor."....
$ $ $
From The Laundrymen , by Jeffrey Robinson:
Banco Ambrosiano was the greatest banking collapse in Europe since the end of World War II. It was shortly to be followed by the greatest banking collapse in the history of banking....
In 1988, the Justice Department launched Operation C-Chase, the letter C standing for currency. Posing as drug dealers, undercover agents put out the bait that they had loads of currency to launder. And BCCI fell for it....
A costly and complicated five-year operation-- involving agents from Customs, the IRS, the DEA, and the FBI-- C-Chase produced more than twelve hundred conversations and nearly four hundred hours of clandestinely recorded videotape. By assisting drug dealers to wash $34 million, the Justice Department was able to indict, and in 1990 to convict, several BCCI bankers and dozens of other individuals.
In one blow, the Americans had unknowingly pulled the bottom out from under a gargantuan house of cards....
From AMERICAN DYNASTY - Aristocracy, Fortune, and the Deceit in the House of Bush, by Kevin Phillips:
INDIANA BUSH AND THE AXIS OF EVIL
As president, Bush senior gloried in the Gulf War and the 1989 invasion of Panama, both cast as strikes for democracy–even if the dictators attacked were former friends.
Over a decade...his web of covert international relationships prompted charges of his participating in and covering up in three actual or alleged illegalities: the Republican Party’s “October Surprise” negotiations with Iran in 1980, supposedly undertaken to ensure that no hostages taken in Iran would be released before the election; the Iran-Contra scandal; and “Iraqgate,” secretly arming Iraq from 1984 to 1990 before hurriedly changing course after Saddam Hussein took Kuwait.
Two catchphrases recur in the family resume: “arms deals” and “clandestine operations.”
A third recurring association would be “cover-up.”
George W. Bush was a willing recipient of the inheritance–witness the CIA and BCCI ties of some who finance him, from Arbusto to Harken Energy a decade later. For example, James Bath, who invested fifty thousand dollars in the 1979 and 1989 Arbusto partnerships, probably do so as U.S. business representative for rich Saudi investors Salem bin Laden and Khalid bin Mahfouz (Osama bin Laden’s brother-in-law). Both men were involved with the Bank of Credit and Commerce International, the rogue bank and occasional CIA front known for financing arms deals – indeed, bin Mahfouz owned 20 percent of its stock.
Bath, who made his fortune investing for the two Saudis, was a colorful Texan – and then some. According to former Houston Post reporter Pete Brewton, Bath was “an asset of the CIA, reportedly recruited by George Bush himself” in 1976 to keep the Agency up to date on Saudi activities.
A decade later, Harken Energy, the company willing to handsomely buy out George W.’s crumbling oil and gas business, had its own CIA connections. Chairman Alan Quasha was the son of a Philippine lawyer connected to the Nugan Hand Bank, a notorious Australian bank closely linked to the CIA.
Equally to the point, 17.6 percent of Harken’s stock was owned by Abdullah Bakhsh, another Saudi magnate reported by some to be representing Khalid bin Mahfouz.
A U.S. Senate subcommittee investigating BCCI in 1992 reported on how the bank bought friendship and favors from politicians around the world; details of the investigation were published in two books: False Profits: The Inside Story of BCCI, the World’s Most Corrupt Financial Empire, by Peter Truell, and The Outlaw Bank: A Wild Ride into the Secret Heart of BCCI, by Jonathan Beaty and S.C. Gwynne. According to the latter, the story of the Bush involvement in the BCCI scandal involved the “trails that branched, crossed one another or came to unexpected dead ends.”...
As we have seen, Jeb Bush began his business career in Miami collaborating with Cubans tied to the CIA or to kindred intelligence agencies in pre-Castro Cuba. He socialized with Adbur Sakhia, BCCI’s Miami branch manager and later its top U.S. Official. Jeb Bush’s partners and early associates included a number of Cuban emigres with CIA, Nicaraguan ‘contra, or Batista-era Cuban intelligence connections.
To say that armaments, clandestine operations, and money-laundering banks recur in the history of the Walker-Bush family is no exaggeration at all. No other presidents have been so caught up in this kind of foreign policy. And the Bushes’ preoccupations are not clear until you consider the whole dynasty. It is the dynastic aspect that truly reveals the pattern – the clandestine behavior over multiple generations....
From The Outlaw Bank, by Jonathan Beaty & S.C. Gwynne:
BCCI is more than just a criminal bank. From interviews with sources close to BCCI, Time has pieced together a portrait of a clandestine division of the bank called the Black Network, which functions as a global intelligence operation and a mafia-like enforcement squad.
Operating out of the bank's offices in Karachi, Pakistan, the 1,500-employee Black Network has used sophisticated spy equipment and techniques, along with bribery, extortion, kidnapping and even, by some accounts, murder.
The Black Network ... stops at almost nothing to further the bank's aims the world over....
The strange and still murky ties between BCCI and the intelligence agencies of several countries are so pervasive that even the White House has become entangled. As Time reported earlier this month, the National Security Council has used BCCI to funnel money for the Iran-Contra deals, and the CIA maintained accounts in BCCI for covert operations.
Moreover, investigators have told Time that the Defense Intelligence Agency has maintained a slush-fund account with BCCI, apparently to pay for clandestine activities....
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The man spoke quickly and in a near whisper, looking around and past the reporter's shoulder as he talked.
"You're onto something and you're correct about there being no separation between [Agha Hasan] Abedi and Pakistan's intelligence agency, the ISI [Inter-Services Intelligence]. A number of Pakistan's generals have been on Abedi's private payroll for years. You might not be aware of it, but several people in the State Department have resigned over the years in protest to the extent of our tilt to Pakistan. We gave them unauthorized satellite and communications technology as well as authorized sophisticated technology like the F-16 fighter plane program, and your friend Abedi and BCCI were in the middle of all of it.
"I don't know how your Navstar documents got to the Soviets. But if the Pakistanis obtained Synthetic aperture Radar, as your source says, somebody stole it from us. We gave them the Landsat processing equipment you talked about, but that was more or less aboveboard. They could see everything India was doing. Why do you think India built up such a massive army?"
Beaty decided he was on a roll and tossed out one of the big questions he was holding.
"I haven't told this to anybody in Washington yet, but one of our sources said that a couple of years ago BCCI had three Columbine Heads and they were selling them to Iraq. I got the impression this was one of our biggest secrets, but I can't even find out what a Columbine Head is. Apparently even the name is classified top secret. Do you know?"
The man pursed his lips and appeared pained. When he spoke he looked away from the reporter and talked from the side of his mouth, "It might be the trigger for the fuel-air bomb. I think we better end this conversation."
He stood up. "Why don't you finish your cappuccino before you leave? If you need to talk to me again, ask the same friend who suggested I talk to you. Don't try to call me at home. My phone has been tapped before."
The deputy under secretary picked up his hat and disappeared into the crowd.
Beaty took out a notebook and wrote down everything before he lost the exact wording.
Sweet Jesus, the fuel-air bomb? No wonder nobody wanted to talk. Iraq's bombardment of Israel during the Gulf War - with Scud missiles financed by BCCI - had created panic because it was feared Saddam possessed the fuel-air bomb and that he might be able to deliver some of them with the Scud rockets.
It was called the poor man's hydrogen bomb, and it worked by exploding a large cloud of vaporized gasoline. The resulting explosion rivaled atomic blasts. It was almost primitive technology, but it took an extremely sophisticated triggering system to ignite the gas cloud.
Sweet Jesus.
Beaty headed for a phone to try to find Gwynne, who was in South Caroline interviewing a former partner of Ghaith Pharaon. They couldn't abandon the mainstream BCCI story, but Beaty was beginning to feel like Alice in Wonderland again.
BCCI was news, but Beaty was beginning to feel like Alice in Wonderland again. BCCI was news, but he could count on his fingers the number of people in the media and law enforcement who weren't narrowly focused on whether Clark Clifford and Robert Altman knew they were working for BCCI.
Why wasn't more of the truth about BCCI coming out? It dawned on him that more information about Abedi's secret empire was being held at the highest reaches of the American government than anywhere else.
Gwynne had checked out of his hotel, so Beaty left a message for him with the bureau switchboard. They had to catch a plane to the Caribbean tomorrow. They were going to meet the Pakistani on neutral ground.
The Pakistani was the source who had told them about the Columbine Heads....
EPILOGUE
It was a Friday afternoon in Washington, and Beaty and Blum were having a late lunch on the veranda of Duke Zeibert's restaurant.... The technology-transfer lawyer, the one who helped them identify the Navstar photos liberated from the Kremlin safe, had joined them. The sound and fury of the BCCI scandal had passed, and Clark Clifford's trial lay in the future.
They were talking about what it all had meant when Beaty looked up in surprise. Condor, whom he had not seen for weeks, nodded to the group, pulled up a chair, and sat down.
"Jonathan, I have an answer to the question you asked," he said.
"The technology for the Colombine Heads got out of the country when it was leaked to the Israelis in 1983. The man who accomplished it was James Guerin, the original manufacturer of the mechanism: Guerin was a Hardy Boy, one of Casey's private agents."
All three listeners were nonplussed. Both Blum and the lawyer had helped Beaty in his search to discover what the Columbine Heads were, and they knew what Condor was talking about: critical components of the fuel-air bomb. And while Beaty had never heard of him, both lawyers knew who James Guerin was.
"But how could anyone get secret hardware like that out of the country?" Beaty asked.
"He didn't," Condor said very quietly. "He took the plans out of the country, and they built a new manufacturing plant in South America. Apparently Casey wanted to give the fuel-air bomb to the Israelis; they had besieged the Carter administration for the technology but had been turned down flat. Things were different under Reagan, but Casey knew he would never get approval for the transfer from Congress. So he had Guerin give it to them."
There was a long silence.
"But if that was 1983 or 1984, how did BCCI acquire three heads in 1989 to sell to Saddam Hussein?" Beaty finally ventured.
"I don't know. I can only assume that BCCI had something to do with the original plans to build a plant out of the country. There is some indication Pakistan received the technology too."
Then Condor stood up. "That's all, Kid. You've pulled me into this too deeply and now I'm out of it. Don't come to me with any more questions; you're on your own."
He walked out without another word.
Beaty had a plane to catch, but he tarried long enough for Blum and the other lawyer to give him Guerin's background: A self-made millionaire and defense contractor, [James] Guerin founded International Signal Controls in Lancaster, Pennsylvania, which manufactured exotic fusing devises and other highly secret technology.
He had business associates such as onetime Secretary of State Alexander Haig, and when ISC merged with Ferranti, the British arms and electronics firm, Admiral Bobby Inman, the former deputy director of the CIA, joined the Ferranti-ISC board of directors. Presumably to keep an eye on American secrets.
The Ferranti declared bankruptcy and sued Guerin for claiming to have hundreds of millions of dollars' worth of pending contracts that had never materialized. The nonperforming contracts turned out to be military deals with Pakistan and Abu Dhabi, and it was Guerin's contention that they had come unraveled after General Zia was killed in 1988.
"He was just recently tried for fraud in the United States," Blum explained. "Inman told the court Guerin had once been very helpful to the agency, but it did him no good. He was convicted of fraud, money laundering, and exporting arms to South Africa, and he's headed for prison. I think there were allegations that he also sold cluster bombs to Iraq.
That may have had something to do with Banco Nazionale del Lavaro in Atlanta - that's the BNL branch that loaned Saddam $600 million. I told you you should be looking into that."
Beaty nodded. The emerging BNL scandal was part of an embarrassment being dubbed "Irangate," and the Bush administration was being accused of dragging its feet in the investigation of the bank.
The Justice Department and the CIA accused each other of failing to act on intelligence information that the BNL was funneling money - including U.S. agriculture loans converted to militarily useful goods instead of grain - to build up Saddam Hussein's war machine.
A lot of that money rolled through BCCI on its way to the Middle East....
Beaty called Gwynne a few days later. "Sam, we've got to get moving. I've got a jailhouse interview lined up with Christopher Dragoul, the former manager of BNL's branch in Atlanta. He claims the United States knew all about the loans to Iraq. And we need to go interview a guy named James Guerin who's also in a federal slammer," Beaty added quickly.
"I don't know if what Condor told me about him is true, but we've got to go ask Guerin himself."
"Wait until you hear what I've found out so far."...
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From The Outlaw Bank: BCCI, by Jonathan Beaty & S.C. Gwynne:
THE BIG SLEEP
Perhaps the most disturbing aspect of the BCCI affair in the United States was the failure of U.S. government and federal law enforcement to move against the outlaw bank. Instead of swift retribution, what took place over more than a decade was a cover-up of major, alarming proportions, often orchestrated from the very highest levels of government. When the Justice Department finally moved decisively against BCCI in late 1991, it did so reluctantly, with both Robert Morgenthau and the national press corps breathing down its neck.
The government knew a great deal about BCCI's criminality and knew it from a wide variety of sources. Though the public did not hear about its transgressions until later, BCCI had long been graven into the annals of U.S. law enforcement, intelligence, national security, and diplomacy. Authentic, unambiguous information about the bank's money laundering, weapons dealing, nuclear proliferation, terrorist accounts, and other crimes had reached the State Department, the Justice Department, the Treasury, the CIA, and even the White House's National Security Council years before. The detail of information was exceptional, the failure to follow up on it baffling.
U.S. officialdom had known for years just exactly how bad the bank was, and even that it secretly owned First American Bank...
What finally busted the logjam was not the government but the prodigious buildup of information on BCCI from sources outside federal law enforcement: from Morgentahau, from Blum, from Kerry's maverick subcommittee, from current and former BCCI employees around the world, from sources in the intelligence and weapons communities....
One of the first of the high-level close encounters with BCCI took place in 1984. That year Senator Paula Hawkins of Florida traveled to Pakistan with a congressional delegation to visit General Zia. To the surprise of her compatriots, she brought up an unpleasant subject in her brief conversation with Pakistan's military dictator. She told him that she was concerned about a Pakistani bank that was laundering money out of the Cayman Islands.
This was a critical time in the new U.S.-Pakistan alliance; billions of U.S. dollars were flowing into the country, and the last thing Zia wanted was to hear complaints from a U.S. senator about Pakistani skulduggery. After her departure, Zia ordered an investigation, which found that there were, in fact, no Pakistani banks in the Cayman Islands. His staff communicated this back to Hawkins's office in Washington. (Of course, BCCI was not a Pakistani bank.) According to Abdur Sakhia, Zia immediately caled Abedi, "blew his top, and said, 'Look, you are spoiling our relationship with the U.S.'" Abedi called Sakhia, then the top-ranking BCCI officer in the United States, and ordered him to Washington to placate Paula Hawkins....
It seems likely that Hawkins heard about BCCI's money-laundering circus in the Cayman Islands from the CIA, though why she should have remains a mystery. According to Richard Kerr, the CIA first began producing and disseminating reports on BCCI's involvement in 1984. The net result was that the State Department silenced Hawkins, reassured Zia, and appeased Abedi. And the Justice Department and the Drug Enforcement Administration had been part of the arrangement. Sakhia heard nothing more about the "problem."
Still more disturbing was a report produced by the CIA in 1985. The CIA knew about some of BCCI's criminal activities as early as 1979. In 1983 the agency started distributing information to other government agencies, most prominently Treasury, Customs, Justice, the FBI, Commerce, the Drug Enforcement Administration, the National Security Agency, the Defense Intelligence Agency, the Federal Reserve Board, the State Department, and the Department of Energy (the last suggesting, among other things, that BCCI's role in nuclear weapons proliferation had been the subject of some of the studies.) In 1984, for example, four years before the Tampa indictments of the bank, the CIA was describing BCCI's money-laundering activities in detail to the Treasury Department.
By 1985 the agency had learned so much that it flatly told both the Department of the Treasury and the Department of Commerce that BCCI secretly owned Clark Clifford's First American Bank. Treasury then informed the Office of the Comptroller of the Currency. Six years before the scandal broke, the nation's top financial enforcement officials - with the exception of the Fed - knew BCCI's deepest and darkest American secret, yet did nothing about it.
Even more intriguing than the report itself, however, was how that information traveled from the agency to Treasury, and what became of it. In January 1985 a CIA agent arrived at the 1500 Pennsylvania Avenue of Douglas Mulholland, the intelligence liaison at the Treasury Department, with an unusual document. All CIA documents destined for Treasury officials, including Secretary Donald Regan, passed through Mulholland, who had been chosen by William Casey personally to be the CIA's main link with Treasury. That the doucument was hand-carried by a CIA agent was strange enough. Stranger still, the document Mulholland saw was printed on plain paper - there was no CIA letterhead, no evidence of its source. Mulholland said in Senate testimony that in all his years working in the intelligence community he had never seen an agency report delivered in such a format, which suggested that this was very hot stuff.
The subject was BCCI....
The CIA memo landed with explosive force on the doorstep of Donald Regan and the U.S. Treasury. It precipitated an immediate response from both Mulholland and Bench, who sent the agent scurrying back to find more information. What happen next would become the trademark U.S. government response to BCCI in the years to come.
Suddenly, and for no apparent reason, Treasury lost all interest in BCCI....
Something had happened over at Treasury to change everyone's mind about the "dynamite" information that had come into their possession four months before.... Someone had, in the intervening months, gotten to Regan and Mulholland, and the message had been unambiguous: Back off....
The Mulholland memo was merely one of several hundred reports on the bank's activities generated between 1979 and 1991 by the agency's directorate of operations, which had even written far longer and more comprehensive reports where "information about the organization was tied into larger discussions of terrorism and counter-narcotics." In 1986 the CIA told the State Department in detail about BCCI's link with the terrorist organization of Abu Nidal in the form of multiple accounts at BCCI's financing of illegal international weapons sales. Other reports told the FBI about BCCI's role in drug smuggling.
In short, every governmental agency that had anything to do with the crimes BCCI had committed had been told about the bank in some manner.
After its involvement in the Paula Hawkins episode, the Justice Department continued to have contacts with BCCI. These were apparently independent of the frequent reports it was receiving from the CIA. In 1987 Abdur Sakhia was contacted by FBI agents who were following the trail of a weapons sale. This particular transaction was an integral part of the covert arms-for-hostages gambit in Iran that would become the centerpiece of the Iran-Contra scandal. The dealer was Adnan Khashoggi.
The FBI said that to finance the deal, Khashoggi had received a large loan from BCCI's Monte Cdarlo office, for which he had paid a $100,000 bribe to a BCCI officer. The FBI said it wanted to see records from BCCI Monte Carlo. In exchange for that, it promised to keep BCCi out of the press. Sakhia said he had "cooperated" with the FBI in the case, which never did surface in news coverage of the Iran-Contra affair.
Thus as early as 1987 the investigative arm of the Justice Department knew in detail about BCCI's involvement with a weapons dealer and knew that BCCI had played a key role in Iran-Contra.
That same year the FBI, the U.S. attorney in Miami, and the Internal Revenue Service received a full-scale criminal refferal from the Federal Reserve, whose May 1987 examination of BCCI's Miami office identified large-scale money laundering. As with the increasingly desperate attempts by James Dougherty, the Miami attorney for Lloyd's of London, to get the attention of law enforcement, there was no response from Justice. Indeed, even though the C-Chase investigation was in full cry by this time, Customs knew nothing about BCCI until an undercover agent stumbled into it in casual conversation.
In 1988 the Fed made yet another criminal referral to Justice, this time about BCCI's New York office. Again, Justice did not follow up, even though, like so much of the other information Justice officials received and disregarded, this would have broadened the scope of the Tampa prosecution considerably.
Even the ballyhooed Tampa investigation was deeply compromised. From the earliest days of the Tampa prove, the actions of Justice officials were counterintuitive, counterlogical, and comprehensible only as either a massive, orchestrated attempt to bottle up damaging information or as one of the late Twentieth Century's great pieces of law enforcement bungling.
Among thousands of other incriminating documents, investigators in Tampa were in possession of the tapes from the Ali Mirza debriefing conducted by Jack Blum in early 1989. Mirza had described BCCI's secret control of three American banks, bribes paid to politicians, and systematic attempts to fix a congressional investigation. And yet the same words that later prompted Time magazine to launch a no-holds-barred investigation of BCCI brought no response from Justice in Tampa....
The Tampa investigation had been proclaimed as the greatest single takedown of drug smugglers and money launderers in history. Ninety people were arrested, among them eleven officers of BCCI. C-Chase netted not only the likes of Gerardo "Don Chepe" Moncada, one of the kingpins of the Medellin cartel, but scores of smaller smugglers who ran the infrastructure that facilitated shipment, sale, and payment for Colombian drugs sold in the United States. And of course the feds had gotten the bank alleged to be the biggest drug-money launderer in the world: BCCI.
That is the way it looked to the public, anyway, when the sting took place in October 1988, carefully timed to coincide with a speech by Vice President (and presidential candidate) George Bush on the war against drugs. And that is the way it looked in 1990 when BCCI pleaded guilty and five of its executives went to jail.
But that was not how it looked to insiders. Among other oddities in the case, the BCCI officers were never treated as ordinary defendants, either by office of the Justice Deparment in Florida, or by the bank itself, which insisted that these people represented an isolated instance of criminality in an other wise pure and wholesome banking operation. As low-ranking offenders, one might have expected them to be thrown into a jail with other common criminals, as were the various Colombian operators who were arrested in the sting.
But this was not the case. By arrangement between the Department of Justice and BCCI's lawyers, the defendants were moved to comfortable condominiums in Tampa, paid for by the bank. By further arrangement, they were guarded in their seclusion by off-duty Tampa police officers.
In their comfortable house arrest, all of their needs were provided for. Not only that, but Swaleh Naqvi, who was supposed to be furious that these men had sullied the bank's good name, instructed Clark Clifford and Robert Altman to hire one of the largest armadas of law firms and lawyers ever assembled to defend a handful of low-level crooks. They assembled fifty lawyers from twenty law firms to defend both the bank and the accused individuals. By the time of the trial in 1990, Clifford and Altman had doled out over $20 million in legal fees, paid for by a bank that had no capital at all and was rapidly hemorrhaging cash....
It is incomprehensible, prima facie, that not a single defendant in the money-laundering case against BCCI sought to plea-bargain, nor did the high-priced attorneys make an obvious or all-out effort to convince them to do so.... Had the defendants turned state's evidence, undoubtedly they would have received greatly reduced sentences. As it was, five Pakistani bankers from BCCI Tampa received sentences from three to twenty years in federal prison. For the two who got twenty years, their lives were destroyed. From the wailing that went up in the Tampa federal courtroom from the families of those convicted, and the screams in Urdu in the corridors, it was clear that none of them had bargained for this.
Yet that is what they got, and that is precisely what BCCI, working through its attorneys, wanted them to get. Naqvi's goal was to separate corporate BCCI from the defendants, to create the appearance that the criminality was sharply confined to one the bank's branches.... What [Naqvi] really wanted was to trade the convictions of five minor employees for the freedom of the larger entity. He got what he wanted.
He also wanted and needed something else: a legal deal that avoided a sweeping indictment that could have allowed the Justice Department to seize the bank's assets. This indictment, under the RICO statute, never happened, thanks in part to a massive lobbying campaign, orchestrated by Robert Altman, which employed some of the best legal talent in the United States and was targeted directly at Justice.
To offer one example of the sort of muscle that was brought to bear, BCCI's attorneys met several times in Washington with the Justice Department's head of Crime and Racketeering to persuade Justice not to bring the RICO. These were not ordinary lawyers. The lobbying campaign in Washington was led by a firm, subcontracted from Altman, called Laxalt Washington Perito and Dubuc. ("Laxalt" is the former Republican senator from Nevada, Paul Laxalt.)
The point men were former Justice Department officials E. Lawrence Barcella and Paul Perito. Barcella had made a national name as the spy-chasing U.S. attorney who caught and convicted rouge CIA agent Ed Wilson. Perito was also a former chief counsel and staff director for the House Select Committee on Crime....
Altman had made a point to hire former Justice Department officials to defend the bank in Florida and in Washington. He hired John Hume, who had spent most of his career as a top government prosecutor in Washington, to defend former BCCI officer Amjad Awan. And he hired Peter Romatowski, another big-name former Justice prosecutor from New York, to defend former BCCI Paris manager Nazir Chinoy.
Circulating aggressively through Washington on behalf of BCCI were yet another former federal prosecutor, Larry Wechsler, top Washington lawyer Ray Banoun, former Senator John Culver, and Hill & Knowlton executive Frank Mankiewicz, a longtime Washington insider who had run George McGovern's presidential campaign.
Large, politically powerful law firms like Holland & Knight in Miami and Morrison and Foerster in San Francisco were enlisted and paid handsomely for similar efforts to squelch criticism and allow the bank to stay open.
Though BCCI had retained a high-powered legal team to look after its interests in Washington, two of its most active lobbyists were Senator Orrin Hatch (R-Utah) and his aide Michael Pillsbury. Both made important approaches to Washington officials as part of BCCI's attempt to remove itself from further scrutiny following its plea of guilty to the charges in Tampa.
In late 1989 Pillsbury and prominent BCCI shareholder Mohammed Hammoud visited Swaleh Naqvi in London to offer Hatch's help. This was an unusual team. Pillsbury was the former deputy under secretary for defense credited with initiating the effort to obtain Stinger missiles for the Afghan Mujahedin. Hammoud was a longtime acquaintance of Hatch who had purchased Clifford's and Altman's stock in the Naqvi-engineered deal that brought the two men millions in profits.
After the plea bargain was announced, Pillsbury was able to arrange a meeting between Hatch and BCCI lawyer Ray Banoun, during which, Banoun told The New York Times, Hatch called a Justice Department official to lobby on behalf of BCCI. The result of Hatch's contact with BCCI's lawyers was a speech drafted by Barcella, Wechsler, and Altman and delivered by Orrin Hatch on February 22, 1990, on the Senate floor. It was a ringing denunciation of Kerry and others who had criticized the Justice Department and the plea agreement.
Soon thereafter, Hatch received a warm letter from Swaleh Naqvi, who through Altman had simultaneously recruited Holland & Knight in Miami, who cited Hatch's speech to pressure Florida banking authorities into allowing the bank to stay open. Two weeks after the speech Hatch called Naqvi again, this time to encourage him to make a $10 million loan to Hatch's friend and business partner Monzer Hourani, a Lebanese immigrant from Houston, Texas....
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In spite of the specificity of the case against the Justice Department, the State Dapartment and the CIA, it would be unfair to single them out as the only U.S. governmental agencies that knew much and did little.
The Drug Enforcement Administration not only sat in on the Sakhia meeting but had 125 cases in its files mostly linking BCCI with undercover storefront money-laundering operations....
The report also argues that the most shocking failure to follow up occurred at the Internal Revenue Service.
"Most startling is the IRS refusal to begin an undercover investigation of BCCI despite persistent requests by Criminal Investigation Division personnel," said the report. According to Schumer, the IRS had identified fifteen major matters involving BCCI between 1984 and 1991, including:
>> In 1986 India gave the IRS documents showing a multimillion-dollar laundering scheme involving BCCI in a number of countries. No follow-up.
>> In 1987 the IRS received a criminal referral from the Fed regarding cash transactions and irregular activities in BCCI Miami and Atlanta accounts. No follow-up.
>> In 1988 the IRS brough a major money-laundering case against defendant Jerry Lee Harvey. Sixty million dollars were laundered, much of it through BCCI Panama and BCCI Cayman Islands. No follow-up.
>> In 1989, in Oklahoma City, the IRS indicted and convicted a heroin dealer who had laundered $1 million through BCCI in New York and Hong Kong. No follow-up.
>> In 1989 the IRS office in Dallas requested and was refused permission to expand its investigation to Miami afer a large undercover operation had fingered it as a key link in money-laundering activities....
In December 1991, fully three years after the conclusion of C-Chase, the Justice Department finally used the sweeping RICO powers at its disposal, issuing a "superseding indictment" against the bank. That same day BCCI pleaded guilty and agreed to forfeit $550 million in U.S. assets - everything the authorities could get their hands on....
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From The Progressive Review, 10/11/00, by Sam Smith:
THE BCCI AFFAIR
CARTER ... REAGAN ... BUSH ... CLINTON ... BUSH ... AND BCCI
THE GREATEST FINANCIAL scandal in history -- the BCCI affair -- left American participants virtually untouched. The media covered the scandal poorly even though, according to one investigative journalist, up to a hundred Washington politicians and lawyers might have been criminally liable.
As a result -- much like Clinton and the Dixie Mafia -- Americans have but the vaguest notion of what happened. In fact, the two stories overlap. And like many contemporary sagas of corruption, the two stories reached deep into both the major parties. In fact, if George W. Bush is elected, we will be entering our fifth consecutive presidential administration (two Democratic and three Republican) with direct ties to leading figures in the biggest financial scandal of all time.
This time line suggests some of the interplay of individuals and parties:
1975
National Bank of Georgia president Bert Lance, whom former Georgia Governor Jimmy Carter described as being like a brother and was Carter's chosen but defeated successor, meets with Jackson Stephens, a Naval Academy classmate of Carter. Stephens Inc. arranges public offering of NBG stock. Stephens would later be described by the New York Post as the man who was to "Clinton what Bert Lance was to candidate Jimmy Carter."
1976
Both Stephens and Lance help Carter in his race for the White House. Carter uses the NBG corporate plane without disclosing it. Campaign is later fined.