Bank of Credit and Commerce International
Encyclopedia
The Bank of Credit and Commerce International (BCCI) was a major international bank
founded in 1972 by Agha Hasan Abedi
, a Pakistan
i financier
. The Bank was registered in Luxembourg
with head offices in Karachi
and London
. Within a decade BCCI touched its peak. It operated in 78 countries, had over 400 branches, and had assets in excess of US$20 billion, making it the 7th largest private bank in the world by assets.
BCCI came under the scrutiny of numerous financial regulators and intelligence agencies in the 1980s due to concerns that it was poorly regulated. Subsequent investigations revealed that it was involved in massive money laundering
and other financial crimes
, and illegally gained controlling interest in a major American bank. BCCI became the focus of a massive regulatory battle in 1991 and on July 5 of that year customs and bank regulators in seven countries raided and locked down records of its branch offices.
Investigators in the U.S. and the UK revealed that BCCI had been "set up deliberately to avoid centralized regulatory review
, and operated extensively in bank secrecy jurisdictions. Its affairs were extraordinarily complex. Its officers were sophisticated international bankers whose apparent objective was to keep their affairs secret, to commit fraud on a massive scale, and to avoid detection."
The liquidators
, Deloitte & Touche, filed a lawsuit against Price Waterhouse and Ernst & Young
– the bank's auditors – which was settled for $175 million in 1998. A further lawsuit against the ruling Sheikh of Abu Dhabi
, a major shareholder, was launched in 1999 for approximately $400 million. BCCI creditors also instituted a $1 billion suit against the Bank of England
as a regulatory body. After a nine-year struggle, due to the Bank's statutory immunity, the case went to trial in January 2004. However, in November 2005, Deloitte persuaded creditor Abu Dhabi to drop its claims against the Bank of England, except for a claim for return of its deposits, in that Abu Dhabi owned 77% of the bank shares at closing, and was therefore also facing a major lawsuit. http://www.deloitte.com/view/en_CA/ca/services/financialadvisory/case-study/4e0d899a961fb110VgnVCM100000ba42f00aRCRD.htm To date liquidators have recovered about 75% of the creditors' lost money. A decade after its liquidation, its activities were still not completely understood.
, started the bank in 1972. Abedi, a prolific banker, had previously set up the United Bank of Pakistan in 1959. Preceding the nationalization of United Bank in 1974 he sought to create a new supranational banking entity. Abedi was succeeded by Swaleh Naqvi as the bank's chief who, in the aftermath following controversy over BCCI, was replaced by Zafar Iqbal Chaudhry in the late 1990s. BCCI was created with capital from Sheikh Zayed bin Sultan Al Nahyan, the ruler of Abu Dhabi
in the United Arab Emirates
and Bank of America
(25%).
BCCI expanded rapidly in the 1970s, pursuing long-term asset growth over profits, seeking high net-worth individuals and regular large deposits. The company itself divided into BCCI Holdings with the bank under that splitting into BCCI SA
(Luxembourg
) and BCCI Overseas (Grand Cayman
). BCCI also acquired parallel banks through acquisitions: buying the Banque de Commerce et Placements (BCP) of Geneva
in 1976, and creating KIFCO (Kuwait
International Finance Company), Credit & Finance Corporation Ltd, and a series of Cayman-based companies held together as ICIC (International Credit and Investment Company Overseas, International Credit and Commerce [Overseas], etc.). Overall, BCCI expanded from 19 branches in five countries in 1973 to 27 branches in 1974, to 108 branches in 1976, with assets growing from $200 million to $1.6 billion. This growth caused extensive underlying capital problems. The Guardian alleged that BCCI was using cash from deposits to fund operating expenses, rather than making investments. Investigative journalist and author Joseph J. Trento has argued that the bank's transformation was guided by the head of Saudi intelligence with a view to enabling it to finance covert intelligence operations at a time, in the aftermath of Watergate
, when the American intelligence agencies were defending themselves from investigations by domestic authorities.
BCCI entered the African markets in 1979, and Asia in the early 1980s. BCCI was among the first foreign banks awarded a license to operate in the Chinese Special Economic Zone
of Shenzhen
which bore testament to Agha Hasan Abedi's public relations skills, a feat that had yet to be achieved by the likes of Citicorp and JP Morgan. Some of China's largest state banks were depositors in BCCI's Shenzhen branch.
There was rigid compartmentalization; the 248 managers and general managers reported directly to Abedi and the CEO Swaleh Naqvi. It was structured in such a way that no single country had overall regulatory supervision over it so as not to hinder potential growth and expansion opportunities. Its two holding companies were based in Luxembourg and the Cayman Islands
—two jurisdictions where banking regulation was notoriously weak. It was also not regulated by a country that had a central bank
. On several occasions, the Office of the Comptroller of the Currency
told the Federal Reserve in no uncertain terms that BCCI must not be allowed to buy any American bank because it was poorly regulated.
By 1980, BCCI was reported to have assets of over $4 billion with over 150 branches in 46 countries. Bank of America was "bewildered" by BCCI and reduced its holding in 1980, and the company came to be held by a number of groups, with ICIC owning 70%. By 1989, ICIC's shareholding was reduced to 11% with Abu Dhabi groups holding almost 40%. However, large numbers of shares were held by BCCI nominees. It was very common for Middle Eastern elites to use nominees to hold their stock, as they did not want the public to know the details of their holdings.
In 1982, 15 Middle Eastern investors bought Financial General Bankshares, a large bank holding company headquartered in Washington, D.C.
All the investors were BCCI clients, but the Fed received assurances that BCCI would be in no way involved in the management of the company, which was renamed First American Bankshares. To alleviate regulators' concerns, Clark Clifford
, an adviser to five presidents, was named First American's chairman. Clifford headed a board composed of himself and several other distinguished American citizens, including former United States Senator
Stuart Symington
. In truth, BCCI had been involved in the purchase of FGB/First American from the beginning. Abedi had been approached about buying it as early as 1977, but by this time BCCI's reputation in the United States was so poor that it could not hope to buy an American bank on its own (as mentioned above, the OCC was adamantly opposed to BCCI being allowed to buy its way into the American banking industry). Rather, it used the First American investors as nominees. Moreover, Clifford's law firm was retained as general counsel, and also handled most of BCCI's American legal work. BCCI was also heavily involved in First American personnel matters. The relationship between the two was so close that rumors spread BCCI was the real owner of First American.
F. Lee Bailey and Florida state prosecutor Richard Gerstein were the directors of CenTrust Federal Savings Bank, a failed satellite of BCCI; this would eventually lead to Bailey's disbarment.
BCCI had an unusual annual auditing system: Price Waterhouse
were the accountants for BCCI Overseas, while Ernst & Young
audited BCCI and BCCI Holdings (London and Luxembourg). Other companies such as KIFCO and ICIC were audited by neither. In October 1985, the Bank of England and the Institut Monétaire Luxembourgeois (Luxembourg's bank regulator) ordered BCCI to change to a single accountant, alarmed at reported BCCI losses on the commodities and financial markets. Price Waterhouse became the sole accountants in 1987.
In 1990, a Price Waterhouse audit of BCCI revealed an unaccountable loss of hundreds of millions of dollars. The bank approached Sheikh Zayed bin Sultan Al Nahyan, who made good the loss in exchange for an increased shareholding of 78%. Much of BCCI's documentation was also then transferred to Abu Dhabi. The audit also revealed numerous irregularities. Most seriously, BCCI had made a staggering $1.48 billion worth of loans to its own shareholders, who used BCCI stock as collateral.
The audit also confirmed what many Americans who watched BCCI long suspected—that BCCI secretly (and illegally) owned First American. When the Fed cleared the group of Arab investors to buy First American, it did so on condition that they supplement their personal funds with money borrowed from banks with no connection to BCCI. Contrary to that agreement, several stockholders had borrowed heavily from BCCI. Even more seriously, they pledged their First American stock as collateral. When they didn't make interest payments, BCCI took control of the shares. It was later estimated that in this manner, BCCI had ended up with 60 percent or more of First American's stock.
Despite these problems, Price Waterhouse signed BCCI's 1989 annual report, largely due to Zayed's firm commitment to propping up the bank.
at 45 branches.
There was particular concern over BCCI's loan portfolio because of its roots in areas where modern banking was still an alien concept. For instance, a large number of its customers were devout Muslims who believed charging interest on loans—a major pillar of modern banking—was riba
, or usury. In many Third World countries, a person's financial standing didn't matter as much as his relationship with his banker. One particularly notable example is the Gokal family, a prominent family of shipping magnates. They had a relationship with Abedi dating back to his days at United Bank. Abedi personally handled their loans, with little regard for details such as loan documents or creditworthiness. At one point, BCCI's loans to the Gokal companies were equivalent to US$ 1.5 billion, three times the bank's capital. Longstanding banking practice dictates that a bank not lend more than 10 percent of its capital to a single customer.
, Manuel Noriega
, Hussain Mohammad Ershad and Samuel Doe
. Other account holders included the Medellin Cartel
and Abu Nidal
.
held numerous accounts at BCCI, according to William von Raab, former U.S. Commissioner of Customs. Oliver North
also used and held multiple accounts at BCCI. These bank accounts were used for a variety of illegal covert operations, including transfers of money and weapons related to the Iran-Contra scandal, according to Time Magazine. The CIA also worked with BCCI in arming and financing the Afghan mujahideen during the Afghan War against the Soviet Union
, using BCCI to launder proceeds from trafficking heroin grown in the Pakistan-Afghanistan borderlands, boosting the flow of narcotics to European and U.S. markets. http://www.globalresearch.ca/articles/CHO404A.html
The US intelligence agencies used BCCI to funnel drug money to Afghan Mujahideen in their fight against Soviet invasion and to insurgents such as Nicaraguan Contras.
In 1988, the bank was implicated for being the center of a major money-laundering scheme. After a six-month trial, BCCI, under immense pressure from US authorities, pleaded guilty in 1990, but only on the grounds of respondeat superior
. While federal regulators took no action, Florida regulators forced BCCI to pull out of the state.
and paid special attention to the promotion of the Urdu
language and literature through the Urdu Markaz located in London. BCCI also established the Infaq Foundation in Pakistan, which was instrumental in funding the establishment of some of the top universities of the region, such as BCCI FAST (Institute of Computer Sciences)and GIK (Institute of Science, Engineering, & Technology), in addition to regular support for many other educational institutions.
BCCI also established the Cromwell Hospital
(now owned by Bupa
) in London.
In addition to the above, BCCI helped revive hundreds of historical buildings and monuments throughout the developing world and contributed significantly to the arts, culture, sports, health, and education in many poor, Third World countries. A significant percentage of employee's salaries were regularly contributed through their consent to global charitable causes.
"We live each day in divinity, in the power and quality of divinity. It rains on us. We are enveloped by it. Divinity is the totality of the flux of energy. We are living all the time in the flux of energy which is loaded with God's qualities. We enhance the quality of our own existence by way of humility. When we live in humility, God's providence pours into us. It is the quality of our meaning that we receive God's divinity and providence.
The ecology of BCC is God's ecology. God showers his infinite benevolence on us because we have the humility to receive it. The light of providence is our guiding light and the power of providence goes deep into our souls. Know the meaning of the power and the light that providence is, when it gets into our soul and starts illuminating it. Divinity is stronger in silence than when we speak. Words cannot do justice to what we are trying to express. We are left in power and in humility".
showing that BCCI had engaged in "widespread fraud and manipulation" that made it difficult, if not impossible, to reconstruct BCCI's financial history.
The Sandstorm report, parts of which were leaked to The Sunday Times
, included details of how the Abu Nidal
terrorist group had manipulated details and through using fake identities had opened accounts at BCCI's Sloane Street
branch, near Harrods
in London
. Britain's internal security service, MI5
, had signed up two sources inside the branch to hand over copies of all documents relating to Abu Nidal's accounts. One source was the Syria
n-born branch manager, Ghassan Qassem, the second a young British employee.
The Abu Nidal link man for the BCCI accounts was a man based in Iraq named Samir Najmeddin or Najmedeen. Throughout the 80s, BCCI had set up millions of dollars worth of letters of credit for Najmeddin, largely for arms deals with Iraq. Qassem later swore in an affidavit
that Najmeddin was often accompanied by an American, whom Qassem subsequently identified as the financier Marc Rich
. Rich was later indicted in the U.S. for tax evasion
and racketeering in an apparently unrelated case and fled the country.
Qassem also told reporters that he had once escorted Abu Nidal, who was allegedly using the name Shakir Farhan, around town to buy a tie, without realizing who he was. This revelation led in 1991 to one of the London Evening Standard's best-known front-page headlines: "I Took Abu Nidal Shopping."
On July 5, 1991, regulators persuaded a court in Luxembourg to order BCCI liquidated on the grounds that it was hopelessly insolvent. According to the court order, BCCI had lost more than its entire capital and reserves the year before. At 1 pm London time that day (8 am in New York City
), regulators in five countries marched into BCCI's offices and shut them down. Around a million depositors were immediately affected by this action.
On July 7, 1991, Hong Kong
Office of the Commissioner of Banking (forerunner of the Hong Kong Monetary Authority
) ordered BCCI to shut down its business in Hong Kong on the grounds that BCCI had problem loans and the Sheikh of Abu Dhabi
, the major shareholder of BCCI, refused to provide funds to the Hong Kong BCCI. Hong Kong BCCI was liquidated on July 17, 1991.
In 2002, Denis Robert
and Ernest Backes, former number three of Clearstream
, described as a "bank of banks" which practices "financial clearing", discovered that BCCI had continued to maintain its activities after its official closure, with "microfiches" of Clearstream's illegal unpublished accounts.
A few weeks after the seizure, on July 29, Manhattan District Attorney
Robert Morgenthau announced that a Manhattan grand jury
had indicted BCCI, Abedi and Naqvi on twelve counts of fraud, money laundering and larceny. Morgenthau, who had been investigating BCCI for over two years, claimed jurisdiction because millions of dollars laundered by the bank flowed through Manhattan. Also, Morgenthau cited BCCI's secret ownership of First American, which operated a subsidiary in New York City. Morgenthau said that all of BCCI's deposits had been fraudulently collected because the bank misled depositors about its ownership structure and financial condition. He described BCCI as "the largest bank fraud
in world financial history."
On November 15, BCCI, Abedi and Naqvi were indicted on federal charges that it had illegally bought control of another American bank, Independence Bank of Los Angeles
, using Saudi businessman Ghaith Pharaon
as the puppet owner.
Just a month later, BCCI's liquidators (Deloitte, PWC) pleaded guilty to all criminal charges pending against the bank in the United States (both those lodged by the federal government and by Morgenthau), clearing the way for BCCI's formal liquidation that fall. BCCI paid $10 million in fines and forfeited all $550 million of its American assets—at the time, the largest single criminal forfeiture ever obtained by federal prosecutors. The money was used to repay losses to First American and Independence and to make restitution to BCCI's depositors. None of this was enough to rescue both banks, however; Independence was seized later in 1992, while First American was forced into a merger with First Union in 1993.
However, many of the major players in the scandal have never been brought to trial in American or UK courts. Abedi, for example, died in 1995. He was under indictment in the United States and UK for crimes related to BCCI, but Pakistani officials refused to give him up for extradition because they felt the charges were politically motivated. Even without this to consider, he'd been in poor health since suffering a stroke in the 1980s. Pharaon is still a fugitive as of 2011; at last report he was believed to be in Syria.
In 1992, United States Senators John Kerry
and Hank Brown
became the co-authors of a report on BCCI, which was delivered to the Committee on Foreign Relations. The BCCI scandal was one of a number of disasters that influenced thinking leading to the Public Interest Disclosure Act (PIDA) of 1998
. The report found that Clifford and his legal/business partner Robert A. Altman
had been closely involved with the bank from 1978, when they were introduced to BCCI by Bert Lance
, the former director of the Office of Management and Budget, to 1991. Earlier, Pharaon was revealed to have been the puppet owner of National Bank of Georgia, a bank formerly owned by Lance before being sold back to First American (it had previously been an FGB subsidiary before Lance bought it). Clifford and Altman testified that they had never observed any suspicious activity, and had themselves been deceived about BCCI's control of First American. However, the federal government and Morgenthau contended that the two men knew, or should have known, that BCCI controlled First American.
Morgenthau and the federal government brought indictments against Clifford and Altman, but did not pursue Clifford due to his age and deteriorating health (he died in 1998). Altman, however, was indicted and ultimately tried in New York. Although he was acquitted, Altman accepted a de facto lifetime ban from any role in the banking industry to settle a civil suit by the Fed.
The British government also set up an independent inquiry, chaired by Lord Justice Bingham
, in 1992. Its House of Commons Paper, Inquiry into the Supervision of the Bank of Credit and Commerce International, was published in October of that year. Following the report, the bank's liquidators launched the Three Rivers DC v Bank of England case, on behalf of thousands of BCCI creditors who are suing the Bank of England for its failure to properly oversee the bank. The BCCI creditors sought £850m in damages, claiming that the Bank of England was guilty of misfeasance in public office. The case collapsed in November 2005, with the Bank of England seeking to re-claim legal bills. The cost of the case to the creditors could be as high as £100m.
Legal cases involving BCCI
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
founded in 1972 by Agha Hasan Abedi
Agha Hasan Abedi
Agha Hasan Abedi also known as Agha Sahab was a banker and philanthropist who founded the Bank of Credit and Commerce International in 1972...
, a Pakistan
Pakistan
Pakistan , officially the Islamic Republic of Pakistan is a sovereign state in South Asia. It has a coastline along the Arabian Sea and the Gulf of Oman in the south and is bordered by Afghanistan and Iran in the west, India in the east and China in the far northeast. In the north, Tajikistan...
i financier
Financier
Financier is a term for a person who handles typically large sums of money, usually involving money lending, financing projects, large-scale investing, or large-scale money management. The term is French, and derives from finance or payment...
. The Bank was registered in Luxembourg
Luxembourg
Luxembourg , officially the Grand Duchy of Luxembourg , is a landlocked country in western Europe, bordered by Belgium, France, and Germany. It has two principal regions: the Oesling in the North as part of the Ardennes massif, and the Gutland in the south...
with head offices in Karachi
Karachi
Karachi is the largest city, main seaport and the main financial centre of Pakistan, as well as the capital of the province of Sindh. The city has an estimated population of 13 to 15 million, while the total metropolitan area has a population of over 18 million...
and London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
. Within a decade BCCI touched its peak. It operated in 78 countries, had over 400 branches, and had assets in excess of US$20 billion, making it the 7th largest private bank in the world by assets.
BCCI came under the scrutiny of numerous financial regulators and intelligence agencies in the 1980s due to concerns that it was poorly regulated. Subsequent investigations revealed that it was involved in massive money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
and other financial crimes
Financial crimes
Financial crimes are crime against property, involving the unlawful conversion of the ownership of property to one's own personal use and benefit...
, and illegally gained controlling interest in a major American bank. BCCI became the focus of a massive regulatory battle in 1991 and on July 5 of that year customs and bank regulators in seven countries raided and locked down records of its branch offices.
Investigators in the U.S. and the UK revealed that BCCI had been "set up deliberately to avoid centralized regulatory review
Financial regulation
Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system...
, and operated extensively in bank secrecy jurisdictions. Its affairs were extraordinarily complex. Its officers were sophisticated international bankers whose apparent objective was to keep their affairs secret, to commit fraud on a massive scale, and to avoid detection."
The liquidators
Liquidator (law)
In law, a liquidator is the officer appointed when a company goes into winding-up or liquidation who has responsibility for collecting in all of the assets of the company and settling all claims against the company before putting the company into dissolution....
, Deloitte & Touche, filed a lawsuit against Price Waterhouse and Ernst & Young
Ernst & Young
Ernst & Young is one of the largest professional services networks in the world and one of the "Big Four" accountancy firms, along with Deloitte, KPMG and PricewaterhouseCoopers ....
– the bank's auditors – which was settled for $175 million in 1998. A further lawsuit against the ruling Sheikh of Abu Dhabi
Abu Dhabi
Abu Dhabi , literally Father of Gazelle, is the capital and the second largest city of the United Arab Emirates in terms of population and the largest of the seven member emirates of the United Arab Emirates. Abu Dhabi lies on a T-shaped island jutting into the Persian Gulf from the central western...
, a major shareholder, was launched in 1999 for approximately $400 million. BCCI creditors also instituted a $1 billion suit against the Bank of England
Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...
as a regulatory body. After a nine-year struggle, due to the Bank's statutory immunity, the case went to trial in January 2004. However, in November 2005, Deloitte persuaded creditor Abu Dhabi to drop its claims against the Bank of England, except for a claim for return of its deposits, in that Abu Dhabi owned 77% of the bank shares at closing, and was therefore also facing a major lawsuit. http://www.deloitte.com/view/en_CA/ca/services/financialadvisory/case-study/4e0d899a961fb110VgnVCM100000ba42f00aRCRD.htm To date liquidators have recovered about 75% of the creditors' lost money. A decade after its liquidation, its activities were still not completely understood.
History
BCCI's founder, Agha Hasan AbediAgha Hasan Abedi
Agha Hasan Abedi also known as Agha Sahab was a banker and philanthropist who founded the Bank of Credit and Commerce International in 1972...
, started the bank in 1972. Abedi, a prolific banker, had previously set up the United Bank of Pakistan in 1959. Preceding the nationalization of United Bank in 1974 he sought to create a new supranational banking entity. Abedi was succeeded by Swaleh Naqvi as the bank's chief who, in the aftermath following controversy over BCCI, was replaced by Zafar Iqbal Chaudhry in the late 1990s. BCCI was created with capital from Sheikh Zayed bin Sultan Al Nahyan, the ruler of Abu Dhabi
Abu Dhabi
Abu Dhabi , literally Father of Gazelle, is the capital and the second largest city of the United Arab Emirates in terms of population and the largest of the seven member emirates of the United Arab Emirates. Abu Dhabi lies on a T-shaped island jutting into the Persian Gulf from the central western...
in the United Arab Emirates
United Arab Emirates
The United Arab Emirates, abbreviated as the UAE, or shortened to "the Emirates", is a state situated in the southeast of the Arabian Peninsula in Western Asia on the Persian Gulf, bordering Oman, and Saudi Arabia, and sharing sea borders with Iraq, Kuwait, Bahrain, Qatar, and Iran.The UAE is a...
and Bank of America
Bank of America
Bank of America Corporation, an American multinational banking and financial services corporation, is the second largest bank holding company in the United States by assets, and the fourth largest bank in the U.S. by market capitalization. The bank is headquartered in Charlotte, North Carolina...
(25%).
BCCI expanded rapidly in the 1970s, pursuing long-term asset growth over profits, seeking high net-worth individuals and regular large deposits. The company itself divided into BCCI Holdings with the bank under that splitting into BCCI SA
S.A. (corporation)
S.A. designates a particular type of corporation in various countries, mostly those employing the civil law. It originated in Spain during the 16th century. Depending on language, the abbreviation stands for various phrases meaning anonymous society, anonymous company, anonymous partnership, or...
(Luxembourg
Luxembourg
Luxembourg , officially the Grand Duchy of Luxembourg , is a landlocked country in western Europe, bordered by Belgium, France, and Germany. It has two principal regions: the Oesling in the North as part of the Ardennes massif, and the Gutland in the south...
) and BCCI Overseas (Grand Cayman
Grand Cayman
Grand Cayman is the largest of the three Cayman Islands and the location of the nation's capital, George Town. In relation to the other two Cayman Islands, it is approximately 75 miles southwest of Little Cayman and 90 miles southwest of Cayman Brac.-Geography:Grand Cayman encompasses 76% of...
). BCCI also acquired parallel banks through acquisitions: buying the Banque de Commerce et Placements (BCP) of Geneva
Geneva
Geneva In the national languages of Switzerland the city is known as Genf , Ginevra and Genevra is the second-most-populous city in Switzerland and is the most populous city of Romandie, the French-speaking part of Switzerland...
in 1976, and creating KIFCO (Kuwait
Kuwait
The State of Kuwait is a sovereign Arab state situated in the north-east of the Arabian Peninsula in Western Asia. It is bordered by Saudi Arabia to the south at Khafji, and Iraq to the north at Basra. It lies on the north-western shore of the Persian Gulf. The name Kuwait is derived from the...
International Finance Company), Credit & Finance Corporation Ltd, and a series of Cayman-based companies held together as ICIC (International Credit and Investment Company Overseas, International Credit and Commerce [Overseas], etc.). Overall, BCCI expanded from 19 branches in five countries in 1973 to 27 branches in 1974, to 108 branches in 1976, with assets growing from $200 million to $1.6 billion. This growth caused extensive underlying capital problems. The Guardian alleged that BCCI was using cash from deposits to fund operating expenses, rather than making investments. Investigative journalist and author Joseph J. Trento has argued that the bank's transformation was guided by the head of Saudi intelligence with a view to enabling it to finance covert intelligence operations at a time, in the aftermath of Watergate
Watergate scandal
The Watergate scandal was a political scandal during the 1970s in the United States resulting from the break-in of the Democratic National Committee headquarters at the Watergate office complex in Washington, D.C., and the Nixon administration's attempted cover-up of its involvement...
, when the American intelligence agencies were defending themselves from investigations by domestic authorities.
BCCI entered the African markets in 1979, and Asia in the early 1980s. BCCI was among the first foreign banks awarded a license to operate in the Chinese Special Economic Zone
Special Economic Zone
A Special Economic Zone is a geographical region that has economic and other laws that are more free-market-oriented than a country's typical or national laws...
of Shenzhen
Shenzhen
Shenzhen is a major city in the south of Southern China's Guangdong Province, situated immediately north of Hong Kong. The area became China's first—and one of the most successful—Special Economic Zones...
which bore testament to Agha Hasan Abedi's public relations skills, a feat that had yet to be achieved by the likes of Citicorp and JP Morgan. Some of China's largest state banks were depositors in BCCI's Shenzhen branch.
There was rigid compartmentalization; the 248 managers and general managers reported directly to Abedi and the CEO Swaleh Naqvi. It was structured in such a way that no single country had overall regulatory supervision over it so as not to hinder potential growth and expansion opportunities. Its two holding companies were based in Luxembourg and the Cayman Islands
Cayman Islands
The Cayman Islands is a British Overseas Territory and overseas territory of the European Union located in the western Caribbean Sea. The territory comprises the three islands of Grand Cayman, Cayman Brac, and Little Cayman, located south of Cuba and northwest of Jamaica...
—two jurisdictions where banking regulation was notoriously weak. It was also not regulated by a country that had a central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...
. On several occasions, the Office of the Comptroller of the Currency
Office of the Comptroller of the Currency
The Office of the Comptroller of the Currency is a US federal agency established by the National Currency Act of 1863 and serves to charter, regulate, and supervise all national banks and the federal branches and agencies of foreign banks in the United States...
told the Federal Reserve in no uncertain terms that BCCI must not be allowed to buy any American bank because it was poorly regulated.
By 1980, BCCI was reported to have assets of over $4 billion with over 150 branches in 46 countries. Bank of America was "bewildered" by BCCI and reduced its holding in 1980, and the company came to be held by a number of groups, with ICIC owning 70%. By 1989, ICIC's shareholding was reduced to 11% with Abu Dhabi groups holding almost 40%. However, large numbers of shares were held by BCCI nominees. It was very common for Middle Eastern elites to use nominees to hold their stock, as they did not want the public to know the details of their holdings.
In 1982, 15 Middle Eastern investors bought Financial General Bankshares, a large bank holding company headquartered in Washington, D.C.
Washington, D.C.
Washington, D.C., formally the District of Columbia and commonly referred to as Washington, "the District", or simply D.C., is the capital of the United States. On July 16, 1790, the United States Congress approved the creation of a permanent national capital as permitted by the U.S. Constitution....
All the investors were BCCI clients, but the Fed received assurances that BCCI would be in no way involved in the management of the company, which was renamed First American Bankshares. To alleviate regulators' concerns, Clark Clifford
Clark Clifford
Clark McAdams Clifford was an American lawyer who served United States Presidents Harry S. Truman, John F. Kennedy, Lyndon B. Johnson and Jimmy Carter, serving as United States Secretary of Defense for Johnson....
, an adviser to five presidents, was named First American's chairman. Clifford headed a board composed of himself and several other distinguished American citizens, including former United States Senator
United States Senate
The United States Senate is the upper house of the bicameral legislature of the United States, and together with the United States House of Representatives comprises the United States Congress. The composition and powers of the Senate are established in Article One of the U.S. Constitution. Each...
Stuart Symington
Stuart Symington
William Stuart Symington was a businessman and political figure from Missouri. He served as the first Secretary of the Air Force from 1947 to 1950 and was a Democratic United States Senator from Missouri from 1953 to 1976.-Education and business career:...
. In truth, BCCI had been involved in the purchase of FGB/First American from the beginning. Abedi had been approached about buying it as early as 1977, but by this time BCCI's reputation in the United States was so poor that it could not hope to buy an American bank on its own (as mentioned above, the OCC was adamantly opposed to BCCI being allowed to buy its way into the American banking industry). Rather, it used the First American investors as nominees. Moreover, Clifford's law firm was retained as general counsel, and also handled most of BCCI's American legal work. BCCI was also heavily involved in First American personnel matters. The relationship between the two was so close that rumors spread BCCI was the real owner of First American.
F. Lee Bailey and Florida state prosecutor Richard Gerstein were the directors of CenTrust Federal Savings Bank, a failed satellite of BCCI; this would eventually lead to Bailey's disbarment.
BCCI had an unusual annual auditing system: Price Waterhouse
PwC
PricewaterhouseCoopers is a global professional services firm headquartered in London, United Kingdom. It is the world's largest professional services firm measured by revenues and one of the "Big Four" accountancy firms....
were the accountants for BCCI Overseas, while Ernst & Young
Ernst & Young
Ernst & Young is one of the largest professional services networks in the world and one of the "Big Four" accountancy firms, along with Deloitte, KPMG and PricewaterhouseCoopers ....
audited BCCI and BCCI Holdings (London and Luxembourg). Other companies such as KIFCO and ICIC were audited by neither. In October 1985, the Bank of England and the Institut Monétaire Luxembourgeois (Luxembourg's bank regulator) ordered BCCI to change to a single accountant, alarmed at reported BCCI losses on the commodities and financial markets. Price Waterhouse became the sole accountants in 1987.
In 1990, a Price Waterhouse audit of BCCI revealed an unaccountable loss of hundreds of millions of dollars. The bank approached Sheikh Zayed bin Sultan Al Nahyan, who made good the loss in exchange for an increased shareholding of 78%. Much of BCCI's documentation was also then transferred to Abu Dhabi. The audit also revealed numerous irregularities. Most seriously, BCCI had made a staggering $1.48 billion worth of loans to its own shareholders, who used BCCI stock as collateral.
The audit also confirmed what many Americans who watched BCCI long suspected—that BCCI secretly (and illegally) owned First American. When the Fed cleared the group of Arab investors to buy First American, it did so on condition that they supplement their personal funds with money borrowed from banks with no connection to BCCI. Contrary to that agreement, several stockholders had borrowed heavily from BCCI. Even more seriously, they pledged their First American stock as collateral. When they didn't make interest payments, BCCI took control of the shares. It was later estimated that in this manner, BCCI had ended up with 60 percent or more of First American's stock.
Despite these problems, Price Waterhouse signed BCCI's 1989 annual report, largely due to Zayed's firm commitment to propping up the bank.
Lending practices
BCCI's rapid growth alarmed the financial community, as well as regulators. When a bank grows rapidly, it is lending more and more money each year. BCCI contended that its growth was fueled by the increasingly large number of deposits by oil-rich states who owned stock in the bank as well as by sovereign developing nations. However, this claim failed to mollify the regulators. For example, the Bank of England ordered BCCI to cap its branch network in the United KingdomUnited Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
at 45 branches.
There was particular concern over BCCI's loan portfolio because of its roots in areas where modern banking was still an alien concept. For instance, a large number of its customers were devout Muslims who believed charging interest on loans—a major pillar of modern banking—was riba
Riba
Riba means one of the senses of "usury" . Riba is forbidden in Islamic economic jurisprudence fiqh and considered as a major sin...
, or usury. In many Third World countries, a person's financial standing didn't matter as much as his relationship with his banker. One particularly notable example is the Gokal family, a prominent family of shipping magnates. They had a relationship with Abedi dating back to his days at United Bank. Abedi personally handled their loans, with little regard for details such as loan documents or creditworthiness. At one point, BCCI's loans to the Gokal companies were equivalent to US$ 1.5 billion, three times the bank's capital. Longstanding banking practice dictates that a bank not lend more than 10 percent of its capital to a single customer.
Funding to criminals and dictators
BCCI was not squeamish about dealing with disreputable clients. It frequently handled money for dictators such as Saddam HusseinSaddam Hussein
Saddam Hussein Abd al-Majid al-Tikriti was the fifth President of Iraq, serving in this capacity from 16 July 1979 until 9 April 2003...
, Manuel Noriega
Manuel Noriega
Manuel Antonio Noriega Moreno is a Panamanian politician and soldier. He was military dictator of Panama from 1983 to 1989.The 1989 invasion of Panama by the United States removed him from power; he was captured, detained as a prisoner of war, and flown to the United States. Noriega was tried on...
, Hussain Mohammad Ershad and Samuel Doe
Samuel Doe
Samuel Kanyon Doe was the 21st President of Liberia, serving from 1986 until his assassination in 1990. He had previously served as Chairman of the People's Redemption Council from 1980 to 1986. He was the first indigenous head of state in Liberian history.Doe was a part of a rural tribe in inland...
. Other account holders included the Medellin Cartel
Medellín Cartel
The Medellín Cartel was an organized network of "drug suppliers and smugglers" originating in the city of Medellín, Colombia. The drug cartel operated in Colombia, Bolivia, Peru, Central America, the United States, as well as Canada and Europe throughout the 1970s and 1980s. It was founded and...
and Abu Nidal
Abu Nidal
Abu Nidal , born Sabri Khalil al-Banna , was the founder of Fatah–The Revolutionary Council , a militant Palestinian group more commonly known as the Abu Nidal Organization...
.
CIA funding to the Afghan Mujahideen and the Contras
The U.S. Central Intelligence AgencyCentral Intelligence Agency
The Central Intelligence Agency is a civilian intelligence agency of the United States government. It is an executive agency and reports directly to the Director of National Intelligence, responsible for providing national security intelligence assessment to senior United States policymakers...
held numerous accounts at BCCI, according to William von Raab, former U.S. Commissioner of Customs. Oliver North
Oliver North
Oliver Laurence North is a retired U.S. Marine Corps officer, political commentator, host of War Stories with Oliver North on Fox News Channel, a military historian, and a New York Times best-selling author....
also used and held multiple accounts at BCCI. These bank accounts were used for a variety of illegal covert operations, including transfers of money and weapons related to the Iran-Contra scandal, according to Time Magazine. The CIA also worked with BCCI in arming and financing the Afghan mujahideen during the Afghan War against the Soviet Union
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
, using BCCI to launder proceeds from trafficking heroin grown in the Pakistan-Afghanistan borderlands, boosting the flow of narcotics to European and U.S. markets. http://www.globalresearch.ca/articles/CHO404A.html
The US intelligence agencies used BCCI to funnel drug money to Afghan Mujahideen in their fight against Soviet invasion and to insurgents such as Nicaraguan Contras.
After the decline of Soviet Union
BCCI’s demise began in 1986, when a US Customs undercover operation led by Special Agent Robert Mazur infiltrated the bank’s private client division and uncovered their active role soliciting deposits from drug traffickers and money launderers. The so-called C-Chase investigation began when it was apparent the Soviet Union was weakening and Washington lost interest in funding the mujahideen. This two year undercover operation concluded in 1988 with a fake wedding that was attended by BCCI officers and drug dealers from around the world who had established a personal friendship and working relationship with undercover agent Mazur. At the same time he was dealing undercover with BCCI executives, Mazur used his undercover operation to establish a relationship with the hierarchy of the Medellin Cartel as one of their sources for laundering drug proceeds.In 1988, the bank was implicated for being the center of a major money-laundering scheme. After a six-month trial, BCCI, under immense pressure from US authorities, pleaded guilty in 1990, but only on the grounds of respondeat superior
Respondeat superior
Respondeat superior is a legal doctrine which states that, in many circumstances, an employer is responsible for the actions of employees performed within the course of their employment...
. While federal regulators took no action, Florida regulators forced BCCI to pull out of the state.
Philanthropic contributions
The bank established the Third World Foundation in London, which published the widely circulated Third World QuarterlyThird World Quarterly
Third World Quarterly is a peer-reviewed academic journal published by Routledge. The journal was established in 1979. , the editor-in-chief is Shahid Qadir. It was published eight times per year until 2011, when publication increased to ten times per year...
and paid special attention to the promotion of the Urdu
Urdu
Urdu is a register of the Hindustani language that is identified with Muslims in South Asia. It belongs to the Indo-European family. Urdu is the national language and lingua franca of Pakistan. It is also widely spoken in some regions of India, where it is one of the 22 scheduled languages and an...
language and literature through the Urdu Markaz located in London. BCCI also established the Infaq Foundation in Pakistan, which was instrumental in funding the establishment of some of the top universities of the region, such as BCCI FAST (Institute of Computer Sciences)and GIK (Institute of Science, Engineering, & Technology), in addition to regular support for many other educational institutions.
BCCI also established the Cromwell Hospital
Cromwell Hospital
The Cromwell Hospital is a private sector hospital located in the South Kensington area of London. The hospital was founded on 29 April 1981. The Cromwell Hospital has at various times been owned by the Bank of Credit & Commerce International and the Abu Dhabi royal family.The footballer George...
(now owned by Bupa
Bupa
Bupa is a large British healthcare organisation, with bases on three continents and more than ten million customers in over 200 countries. It is a private healthcare company, in direct contrast to the UK's National Health Services, which are tax-funded healthcare systems and do not require private...
) in London.
In addition to the above, BCCI helped revive hundreds of historical buildings and monuments throughout the developing world and contributed significantly to the arts, culture, sports, health, and education in many poor, Third World countries. A significant percentage of employee's salaries were regularly contributed through their consent to global charitable causes.
Corporate culture
BCCI developed a strong corporate culture which it promoted consistently. In 1985 BCC's annual management conference was held on 2–3 March in Vienna. The closing remarks to the conference, entitled "God, providence, divinity, faith, BCC", are representative of BCC's corporate culture:"We live each day in divinity, in the power and quality of divinity. It rains on us. We are enveloped by it. Divinity is the totality of the flux of energy. We are living all the time in the flux of energy which is loaded with God's qualities. We enhance the quality of our own existence by way of humility. When we live in humility, God's providence pours into us. It is the quality of our meaning that we receive God's divinity and providence.
The ecology of BCC is God's ecology. God showers his infinite benevolence on us because we have the humility to receive it. The light of providence is our guiding light and the power of providence goes deep into our souls. Know the meaning of the power and the light that providence is, when it gets into our soul and starts illuminating it. Divinity is stronger in silence than when we speak. Words cannot do justice to what we are trying to express. We are left in power and in humility".
The Sandstorm report
In March 1991, the Bank of England asked Price Waterhouse to carry out an inquiry. On June 24, 1991, using the code name "Sandstorm" for BCCI, Price Waterhouse submitted the Sandstorm reportSandstorm report
The Sandstorm report was the name of the secret report submitted on June 22, 1991 by financial consultants Price Waterhouse to the Bank of England, showing that the Bank of Credit and Commerce International had engaged in widespread fraud, and that organizations regarded as terrorist groups had...
showing that BCCI had engaged in "widespread fraud and manipulation" that made it difficult, if not impossible, to reconstruct BCCI's financial history.
The Sandstorm report, parts of which were leaked to The Sunday Times
The Sunday Times (UK)
The Sunday Times is a Sunday broadsheet newspaper, distributed in the United Kingdom. The Sunday Times is published by Times Newspapers Ltd, a subsidiary of News International, which is in turn owned by News Corporation. Times Newspapers also owns The Times, but the two papers were founded...
, included details of how the Abu Nidal
Abu Nidal
Abu Nidal , born Sabri Khalil al-Banna , was the founder of Fatah–The Revolutionary Council , a militant Palestinian group more commonly known as the Abu Nidal Organization...
terrorist group had manipulated details and through using fake identities had opened accounts at BCCI's Sloane Street
Sloane Street
Sloane Street is a major London street which runs north to south, from Knightsbridge to Sloane Square, crossing Pont Street about half way along, entirely in The Royal Borough of Kensington and Chelsea. Sloane Street takes its name from Sir Hans Sloane, who purchased the surrounding area in 1712...
branch, near Harrods
Harrods
Harrods is an upmarket department store located in Brompton Road in Brompton, in the Royal Borough of Kensington and Chelsea, London. The Harrods brand also applies to other enterprises undertaken by the Harrods group of companies including Harrods Bank, Harrods Estates, Harrods Aviation and Air...
in London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
. Britain's internal security service, MI5
MI5
The Security Service, commonly known as MI5 , is the United Kingdom's internal counter-intelligence and security agency and is part of its core intelligence machinery alongside the Secret Intelligence Service focused on foreign threats, Government Communications Headquarters and the Defence...
, had signed up two sources inside the branch to hand over copies of all documents relating to Abu Nidal's accounts. One source was the Syria
Syria
Syria , officially the Syrian Arab Republic , is a country in Western Asia, bordering Lebanon and the Mediterranean Sea to the West, Turkey to the north, Iraq to the east, Jordan to the south, and Israel to the southwest....
n-born branch manager, Ghassan Qassem, the second a young British employee.
The Abu Nidal link man for the BCCI accounts was a man based in Iraq named Samir Najmeddin or Najmedeen. Throughout the 80s, BCCI had set up millions of dollars worth of letters of credit for Najmeddin, largely for arms deals with Iraq. Qassem later swore in an affidavit
Affidavit
An affidavit is a written sworn statement of fact voluntarily made by an affiant or deponent under an oath or affirmation administered by a person authorized to do so by law. Such statement is witnessed as to the authenticity of the affiant's signature by a taker of oaths, such as a notary public...
that Najmeddin was often accompanied by an American, whom Qassem subsequently identified as the financier Marc Rich
Marc Rich
Marc Rich is an international commodities trader and entrepreneur. He is best known for founding the commodities company Glencore. He was indicted in the United States on federal charges of illegally making oil deals with Iran during the late 1970s-early 1980s Iran hostage crisis and tax evasion...
. Rich was later indicted in the U.S. for tax evasion
Tax evasion
Tax evasion is the general term for efforts by individuals, corporations, trusts and other entities to evade taxes by illegal means. Tax evasion usually entails taxpayers deliberately misrepresenting or concealing the true state of their affairs to the tax authorities to reduce their tax liability,...
and racketeering in an apparently unrelated case and fled the country.
Qassem also told reporters that he had once escorted Abu Nidal, who was allegedly using the name Shakir Farhan, around town to buy a tie, without realizing who he was. This revelation led in 1991 to one of the London Evening Standard's best-known front-page headlines: "I Took Abu Nidal Shopping."
The forced closure of BCCI
BCCI was awaiting final approval for a restructuring plan in which it would have re-emerged as the "Oasis Bank". However, after the Sandstorm report, regulators concluded BCCI was so fraught with problems that it had to be seized. It had already been ordered to shut down its American operations in March for its illegal control of First American.On July 5, 1991, regulators persuaded a court in Luxembourg to order BCCI liquidated on the grounds that it was hopelessly insolvent. According to the court order, BCCI had lost more than its entire capital and reserves the year before. At 1 pm London time that day (8 am in New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
), regulators in five countries marched into BCCI's offices and shut them down. Around a million depositors were immediately affected by this action.
On July 7, 1991, Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
Office of the Commissioner of Banking (forerunner of the Hong Kong Monetary Authority
Hong Kong Monetary Authority
The Hong Kong Monetary Authority or HKMA is Hong Kong's central banking institution . It is a government authority founded on 1 April 1993 via the consolidation of "Office of the Exchange Fund" and the "Office of the Commissioner of Banking"...
) ordered BCCI to shut down its business in Hong Kong on the grounds that BCCI had problem loans and the Sheikh of Abu Dhabi
Abu Dhabi
Abu Dhabi , literally Father of Gazelle, is the capital and the second largest city of the United Arab Emirates in terms of population and the largest of the seven member emirates of the United Arab Emirates. Abu Dhabi lies on a T-shaped island jutting into the Persian Gulf from the central western...
, the major shareholder of BCCI, refused to provide funds to the Hong Kong BCCI. Hong Kong BCCI was liquidated on July 17, 1991.
In 2002, Denis Robert
Denis Robert
Denis Robert is a French freelance journalist and a writer. Robert formerly worked for Libération newspaper for 12 years....
and Ernest Backes, former number three of Clearstream
Clearstream
Clearstream Banking S.A. is the clearing and settlement division of Deutsche Börse, based in Luxembourg and Frankfurt. Clearstream was created in January 2000 through the merger of Cedel International and Deutsche Börse Clearing...
, described as a "bank of banks" which practices "financial clearing", discovered that BCCI had continued to maintain its activities after its official closure, with "microfiches" of Clearstream's illegal unpublished accounts.
A few weeks after the seizure, on July 29, Manhattan District Attorney
New York County District Attorney
The New York County District Attorney is the elected district attorney for New York County , New York. The office is responsible for the prosecution of violations of New York state laws....
Robert Morgenthau announced that a Manhattan grand jury
Grand jury
A grand jury is a type of jury that determines whether a criminal indictment will issue. Currently, only the United States retains grand juries, although some other common law jurisdictions formerly employed them, and most other jurisdictions employ some other type of preliminary hearing...
had indicted BCCI, Abedi and Naqvi on twelve counts of fraud, money laundering and larceny. Morgenthau, who had been investigating BCCI for over two years, claimed jurisdiction because millions of dollars laundered by the bank flowed through Manhattan. Also, Morgenthau cited BCCI's secret ownership of First American, which operated a subsidiary in New York City. Morgenthau said that all of BCCI's deposits had been fraudulently collected because the bank misled depositors about its ownership structure and financial condition. He described BCCI as "the largest bank fraud
Bank fraud
Bank fraud is the use of fraudulent means to obtain money, assets, or other property owned or held by a financial institution, or to obtain money from depositors by fraudulently representing to be a bank or financial institution. In many instances, bank fraud is a criminal offense...
in world financial history."
On November 15, BCCI, Abedi and Naqvi were indicted on federal charges that it had illegally bought control of another American bank, Independence Bank of Los Angeles
Los Ángeles
Los Ángeles is the capital of the province of Biobío, in the commune of the same name, in Region VIII , in the center-south of Chile. It is located between the Laja and Biobío rivers. The population is 123,445 inhabitants...
, using Saudi businessman Ghaith Pharaon
Ghaith Pharaon
Ghaith Rashad Pharaon, is a prominent Saudi businessman and financier.-Background:...
as the puppet owner.
Just a month later, BCCI's liquidators (Deloitte, PWC) pleaded guilty to all criminal charges pending against the bank in the United States (both those lodged by the federal government and by Morgenthau), clearing the way for BCCI's formal liquidation that fall. BCCI paid $10 million in fines and forfeited all $550 million of its American assets—at the time, the largest single criminal forfeiture ever obtained by federal prosecutors. The money was used to repay losses to First American and Independence and to make restitution to BCCI's depositors. None of this was enough to rescue both banks, however; Independence was seized later in 1992, while First American was forced into a merger with First Union in 1993.
However, many of the major players in the scandal have never been brought to trial in American or UK courts. Abedi, for example, died in 1995. He was under indictment in the United States and UK for crimes related to BCCI, but Pakistani officials refused to give him up for extradition because they felt the charges were politically motivated. Even without this to consider, he'd been in poor health since suffering a stroke in the 1980s. Pharaon is still a fugitive as of 2011; at last report he was believed to be in Syria.
In 1992, United States Senators John Kerry
John Kerry
John Forbes Kerry is the senior United States Senator from Massachusetts, the 10th most senior U.S. Senator and chairman of the Senate Foreign Relations Committee. He was the presidential nominee of the Democratic Party in the 2004 presidential election, but lost to former President George W...
and Hank Brown
Hank Brown
George Hanks "Hank" Brown is a former Republican politician and U.S. Senator from Colorado who served as president of the University of Colorado system from April 2005 - January 2008.-Education:...
became the co-authors of a report on BCCI, which was delivered to the Committee on Foreign Relations. The BCCI scandal was one of a number of disasters that influenced thinking leading to the Public Interest Disclosure Act (PIDA) of 1998
Public Interest Disclosure Act 1998
The Public Interest Disclosure Act 1998 is an Act of the Parliament of the United Kingdom that protects whistleblowers from detrimental treatment by their employer...
. The report found that Clifford and his legal/business partner Robert A. Altman
Robert A. Altman
Robert A. Altman is the current chairman and CEO of ZeniMax Media, parent company of Bethesda Softworks, LLC.-Career:Altman is a lawyer. He became part of the company BCCI. During his time there he was accused of helping the business buy an American bank and lying to US regulators about it. In...
had been closely involved with the bank from 1978, when they were introduced to BCCI by Bert Lance
Bert Lance
Thomas Bertram Lance is an American businessman, who was Director of the Office of Management and Budget under President Jimmy Carter. He is known mainly for his resignation from President Jimmy Carter's administration due to scandal in 1977.- Early Life :Lance was born in Gainesville, Georgia...
, the former director of the Office of Management and Budget, to 1991. Earlier, Pharaon was revealed to have been the puppet owner of National Bank of Georgia, a bank formerly owned by Lance before being sold back to First American (it had previously been an FGB subsidiary before Lance bought it). Clifford and Altman testified that they had never observed any suspicious activity, and had themselves been deceived about BCCI's control of First American. However, the federal government and Morgenthau contended that the two men knew, or should have known, that BCCI controlled First American.
Morgenthau and the federal government brought indictments against Clifford and Altman, but did not pursue Clifford due to his age and deteriorating health (he died in 1998). Altman, however, was indicted and ultimately tried in New York. Although he was acquitted, Altman accepted a de facto lifetime ban from any role in the banking industry to settle a civil suit by the Fed.
The British government also set up an independent inquiry, chaired by Lord Justice Bingham
Thomas Bingham, Baron Bingham of Cornhill
Thomas Henry Bingham, Baron Bingham of Cornhill, KG PC QC FBA , was a British judge and jurist. He served in the highest judicial offices of the United Kingdom as Master of the Rolls, Lord Chief Justice and as Senior Law Lord before his retirement, when he focused his work as a teacher and lecturer...
, in 1992. Its House of Commons Paper, Inquiry into the Supervision of the Bank of Credit and Commerce International, was published in October of that year. Following the report, the bank's liquidators launched the Three Rivers DC v Bank of England case, on behalf of thousands of BCCI creditors who are suing the Bank of England for its failure to properly oversee the bank. The BCCI creditors sought £850m in damages, claiming that the Bank of England was guilty of misfeasance in public office. The case collapsed in November 2005, with the Bank of England seeking to re-claim legal bills. The cost of the case to the creditors could be as high as £100m.
Former directors
- Khalid bin MahfouzKhalid bin MahfouzKhalid bin Mahfouz was a wealthy Saudi Arabian businessman residing in Ireland. He was accused of supporting al-Qaeda.As of 2002, he was believed to be confined in a hospital in Taif by Saudi authorities...
– non-executive director and personally owned a 20% stake in BCCI between 1986 and 1990. - Alfred Hartman
- Shaikh Mohammed Ishaq
- James R. BathJames R. BathJames Reynolds Bath is a former director of Bank of Credit and Commerce International , and also former part owner of Arbusto Energy with George W. Bush, with whom Bath served as a member of the Texas Air National Guard during the Vietnam War...
See also
- Kamal AdhamKamal AdhamKamal Adham was a former Director General of Saudi Arabia's Al Mukhabarat Al A'amah, General Intelligence Directorate. He was the younger half-brother of Princess Iffat Al-Thuniyyan Al Saud.-Childhood training:...
- Bert LanceBert LanceThomas Bertram Lance is an American businessman, who was Director of the Office of Management and Budget under President Jimmy Carter. He is known mainly for his resignation from President Jimmy Carter's administration due to scandal in 1977.- Early Life :Lance was born in Gainesville, Georgia...
- List of notable business failures
- Nugan Hand BankNugan Hand BankNugan Hand Bank was an Australian merchant bank thatcollapsed in 1980 in sensational circumstances amidst rumours of involvement by the Central Intelligence Agency and organized crime.-Founding:...
- The International (film)The International (film)The International is a 2009 thriller film directed by Tom Tykwer. The film follows an Interpol agent and an American attorney who investigate corruption within the IBBC, a fictional merchant bank based in Luxembourg. It serves organized crime and corrupt governments as a banker and as an arms...
- Ig Nobel Prize winners (2002) – Joint recipient of the 2002 Ig Nobel Prize in Economics, along with many other companies involved in accounting scandals, "for adapting the mathematical concept of imaginary numbers for use in the business world."
Legal cases involving BCCI
- Mahmud and Malik v Bank of Credit and Commerce International SA [1998] AC 20, where employees sued the bank for breach of mutual trust and confidence by carrying on unlawful activities and thereby tarnishing the employees' reputations.
External links
- BCCI (in liquidation) homepage
- BBC Summary of Case and Administrators lawsuit against Bank of England
- The BCCI Affair, Report to the Committee on Foreign Relations States Senate; held at FAS -(A Report to the Committee on Foreign Relations United States Senate by Senator John KerryJohn KerryJohn Forbes Kerry is the senior United States Senator from Massachusetts, the 10th most senior U.S. Senator and chairman of the Senate Foreign Relations Committee. He was the presidential nominee of the Democratic Party in the 2004 presidential election, but lost to former President George W...
and Senator Hank BrownHank BrownGeorge Hanks "Hank" Brown is a former Republican politician and U.S. Senator from Colorado who served as president of the University of Colorado system from April 2005 - January 2008.-Education:...
; December 1992; 102d Congress 2d Session Senate Print 102-140)- Profile: Bank of Credit and Commerce International (BCCI) www.cooperativeresearch.org