A dirty offshore bank that the CIA used to run guns to Hussein, finance Osama bin Laden, move money in the illegal Iran-Contra operation and carry out other “agency” black ops. The Bushes also benefited privately; one of the bank’s largest Saudi investors helped bail out George W. Bush’s troubled oil investments.
BCCI was founded in 1972 by a Pakistani banker, Agha Hasan Abedi, with the support of Sheik Zayed bin Sultan al Nahyan, ruler of Abu Dhabi and head of the United Arab Emirates. Its corporate strategy was money laundering. It became the banker for drug and arms traffickers, corrupt officials, financial fraudsters, dictators and terrorists.
The CIA used BCCI Islamabad and other branches in Pakistan to funnel some of the $2 billion that Washington sent to Osama bin Laden’s Mujahadeen to help fight the Soviets in Afghanistan. It moved the cash the Pakistani military and government officials skimmed from U.S. aid to the Mujahadeen. It also moved money as required by the Saudi intelligence services.
The BCCI operation gave Osama bin Laden an education in offshore black finance, which he would put to use when he organized the jihad against the United States. He would move money through the Al-Taqwa Bank, operating in offshore Nassau and Switzerland with two Osama siblings as shareholders.
At the same time, BCCI helped Saddam Hussein, funneling millions of dollars to the Atlanta branch of the Italian government-owned Banca Nazionale del Lavoro (BNL), Baghdad’s U.S. banker, so that from 1985 to 1989 it could make $4 billion in secret loans to Iraq to help it buy arms.
U.S. congressman Henry Gonzalez held a hearing on BNL in 1992 during which he quoted from a confidential CIA document that said the agency had long been aware that the bank’s headquarters was involved in the U.S. branch’s Iraqi loans.
Kickbacks from 15 percent commissions on BNL-sponsored loans were channeled into bank accounts held for Iraqi leaders via BCCI offices in the Caymans as well as in offshore Luxembourg and Switzerland. BNL was a client of Kissinger Associates, and Henry Kissinger was on the bank’s international advisory board, along with Brent Scowcroft, who would become George Bush Sr.’s national security advisor. That connection makes the Bush administration’s surprise and indignation at “oil for food” payoffs in Iraq seem disingenuous.
Important Saudis were influential in the bank. Sheik Kamal Adham, brother-in-law of the late Saudi King Faisal, head of Saudi intelligence from 1963 to 1979, and the CIA’s liaison in the area, became one of BCCI’s largest shareholders. George Bush Sr. knew Adham from his time running the CIA in 1975.
Another investor was Prince Turki bin Faisal al-Saud, who succeeded Adham as Saudi intelligence chief. The family of Khalid Salem bin Mahfouz, owner of the National Commercial Bank, the largest bank in Saudi Arabia, banker to King Fahd and other members of the ruling family, bought 20 percent to 30 percent of the stock for nearly $1 billion. Bin Mahfouz was put on the board of directors.
The Arabs’ interest in the bank was more than financial. A classified CIA memo on BCCI in the mid-1980s said that “its principal shareholders are among the power elite of the Middle East, including the rulers of Dubai and the United Arab Emirates, and several influential Saudi Arabians. They are less interested in profitability than in promoting the Muslim cause.”
The Bushes’ private links to the bank passed to Bin Mahfouz through Texas businessman James R. Bath, who invested money in the United States on behalf of the Saudi. In 1976, when Bush was the head of the CIA, the agency sold some of the planes of Air America, a secret “proprietary” airline it used during the Vietnam War, to Skyway, a company owned by Bath and Bin Mahfouz. Bath then helped finance George W. Bush’s oil company, Arbusto Energy Inc., in 1979 and 1980.
When Harken Energy Corp., which had absorbed Arbusto (by then merged with Spectrum 7 Energy), got into financial trouble in 1987, Jackson Stephens of the powerful, politically connected Arkansas investment firm helped it secure $25 million in financing from the Union Bank of Switzerland. As part of that deal, a place on the board was given to Harken shareholder Sheik Abdullah Taha Bakhsh, whose chief banker was BCCI shareholder Bin Mahfouz.
Then, in 1988, George Bush Sr. was elected president. Harken benefited by getting some new investors, including Salem bin Laden, Osama bin Laden’s half brother, and Khalid bin Mahfouz. Osama bin Laden himself was busy elsewhere at the time — organizing al Qaeda.
The money BCCI stole before it was shut down in 1991 — somewhere between $9.5 billion and $15 billion — made its 20-year heist the biggest bank fraud in history. Most of it was never recovered. International banks’ complicity in the offshore secrecy system effectively covered up the money trail.
But in the years after the collapse of BCCI, Khalid bin Mahfouz was still flush with cash. In 1992, he established the Muwafaq (“blessed relief”) Foundation in the offshore Channel Islands. The U.S. Treasury Department called it “an al Qaeda front that receives funding from wealthy Saudi businessmen.”
When the BCCI scandal began to break in the late 1980s, the Sr. Bush administration did what it could to sit on it. The Justice Department went after the culprits — was virtually forced to — only after New York District Attorney Robert Morgenthau did. But evidence about BCCI’s broader links exist in numerous U.S. and international investigations. Now could be a good time to take another look at the BCCI-Osama-Saddam-Saudi-Bush connection.
The Above is from “The BCCI Game: Banking on America, Banking on Jihad” by investigative journalist Lucy Komisar in the book “A Game as Old as Empire,” published by Berrett-Koehler.
Below is from July 29, 1991 Time website titled ‘BCCI: The Dirtiest Bank of All‘
Nothing in the history of modern financial scandals rivals the unfolding saga of the Bank of Credit & Commerce International (B.C.C.I.), the $20 billion rogue empire that regulators in 62 countries shut down in July 1991 in a stunning global sweep. Never has a single scandal involved so much money, so many nations or so many prominent people.
Superlatives are quickly exhausted:
it is the largest corporate criminal enterprise ever, the biggest Ponzi scheme, the most pervasive money-laundering operation and financial supermarket ever created for the likes of Manuel Noriega, Ferdinand Marcos, Saddam Hussein and the Colombian drug barons.
B.C.C.I. even accomplished a Stealth-like invasion of the U.S. banking industry by secretly buying First American Bankshares, a Washington-based holding company with offices stretching from Florida to New York, whose chairman is former U.S. Defense Secretary Clark Clifford.
But B.C.C.I. is more than just a criminal bank.
From interviews with sources close to B.C.C.I., 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 primarily 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 – so named by its own members – stops at almost nothing to further the bank’s aims the world over.
The more conventional departments of B.C.C.I. handled such services as laundering money for the drug trade and helping dictators loot their national treasuries.
The black network, which is still functioning, operates a lucrative arms-trade business and transports drugs and gold. According to investigators and participants in those operations, it often works with Western and Middle Eastern intelligence agencies. The strange and still murky ties between B.C.C.I. 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 used B.C.C.I. to funnel money for the Iran-contra deals, and the CIA maintained accounts in B.C.C.I. for covert operations.
Moreover, investigators have told TIME that the Defense Intelligence Agency has maintained a slush-fund account with B.C.C.I., apparently to pay for clandestine activities.
But the CIA may have used B.C.C.I. as more than an undercover banker:
U.S. agents collaborated with the black network in several operations, according to a B.C.C.I. black-network “officer” who is now a secret U.S. government witness. Sources have told investigators that B.C.C.I. worked closely with Israel’s spy agencies and other Western intelligence groups as well, especially in arms deals.
The bank also maintained cozy relationships with international terrorists, say investigators who discovered suspected terrorist accounts for Libya, Syria and the Palestine Liberation Organization in B.C.C.I.’s London offices.
The bank’s intelligence connections and alleged bribery of public officials around the world point to an explanation for the most persistent mystery in the B.C.C.I. scandal:
why banking and law-enforcement authorities allowed the bank to spin out of control for so long.
In the U.S. investigators now say openly that the Justice Department has not only reined in its own probe of the bank but is also part of a concerted campaign to derail any full investigation.
Says Robert Morgenthau, the Manhattan district attorney, who first launched his investigations into B.C.C.I. two years ago:
“We have had no cooperation from the Justice Department since we first asked for records in March 1990. In fact they are impeding our investigation, and Justice Department representatives are asking witnesses not to cooperate with us.”
B.C.C.I. was started in 1972 with the putative mission of becoming the Muslim world’s first banking powerhouse.
Though it was incorporated in Luxembourg and headquartered in London, had more than 400 branches and subsidiaries around the world and was nominally owned by Arab shareholders from the gulf countries, B.C.C.I. was always a Pakistani bank, with its heart in Karachi.
Agha Hasan Abedi, the bank’s founder and leader until his ouster last year, is a Pakistani, as are most of the bank’s former middle managers. And it was in Pakistan that the bank’s most prodigiously corrupt division was spawned.
The Soviet invasion of Afghanistan in 1979 and the resulting strategic importance of neighboring Pakistan accelerated the growth of B.C.C.I.’s geopolitical power and its unbridled use of the black network. Because the U.S. wanted to supply the mujahedin rebels in Afghanistan with Stinger missiles and other military hardware, it needed the full cooperation of Pakistan, across whose border the weapons would be shipped.
By the mid-1980s, the CIA’s Islamabad operation was one of the largest U.S. intelligence stations in the world.
“If B.C.C.I. is such an embarrassment to the U.S. that forthright investigations are not being pursued, it has a lot to do with the blind eye the U.S. turned to the heroin trafficking in Pakistan,” says a U.S. intelligence officer.
The black network was a natural outgrowth of B.C.C.I.’s dubious and criminal associations.
The bank was in a unique position to operate an intelligence-gathering unit because it dealt with such figures as,
- Noriega
- Saddam
- Marcos
- Peruvian President Alan Garcia
- Daniel Ortega
- contra leader Adolfo Calero
- arms dealers like Adnan Khashoggi
Its original purpose was to pay bribes, intimidate authorities and quash investigations.
But according to a former operative, sometime in the early 1980s the black network began running its own drugs, weapons and currency deals.
“I was recruited by the black network in the early 1980s,” says an Arab- born employee who has ties to a ruling family in the Middle East and has told U.S. authorities of his role in running one of the black units.
“They came to me while I was in school in the U.S.; they spoke my language, knew all of my friends and gave me money. They told me they wanted me to join the organization, and described its wealth and political power, but at first they never said exactly what the organization did.”
This operative – call him Mustafa – underwent a year of training that began with education in psychology and the principles of leadership and proceeded into spycraft, with lessons in electronic surveillance, breaking and entering, and interrogation techniques.
“Then the nature of our advisers changed,” says Mustafa. “The pleasantness was gone, and we moved to Pakistan, where we trained with firearms.”
Mustafa’s first operational assignment took him to London.
“They gave us passports and identification, and we moved a shipment of (unidentified) goods. In England they had more I.D. waiting for us, because customs and immigration are strict, but when we moved many places, into India or China or Latin America, matters were taken care of, and we just slipped through borders. We would be met. It was always all arranged.”
A typical operation took place in April 1989, when a container ship from Colombia docked during the night at Karachi, Pakistan.
Black-unit operatives met the ship after paying $100,000 in bribes to Pakistani customs officials. The band unloaded large wooden crates from several containers.
“They were so heavy we had to use a crane rather than a forklift,” says a participant.
The crates were trucked to a “secure airport” and loaded aboard an unmarked 707 jet, where an American, believed by the black-unit members to be a CIA agent, supervised the frantic activity.
The plane then departed for Czechoslovakia, taking the place of a scheduled Pakistan International Airlines commercial flight that was aborted at the last minute by prearrangement.
The 707’s radar transponder was altered to beep out the code of a commercial airliner, which enabled the plane to overfly several countries without arousing suspicion.
“From Czechoslovakia the 707 flew to the U.S.,” said the informant, insisting that none of the black-unit workers had any knowledge of what was in the heavy wooden crates.
“It could have been gold. It could have been drugs. It could have been guns. We dealt in those commodities,” Mustafa told U.S. authorities.
Other informants with details about the black network have come forward as the banking disaster has unfolded.
“B.C.C.I. was a full-service bank,” says an international arms dealer who frequently worked with the clandestine bank units.
“They not only financed arms deals that one government or another wanted to keep secret, they shipped the goods in their own ships, insured them with their own agency and provided manpower and security. They worked with intelligence agencies from all the Western countries and did a lot of business with East bloc countries.”
In Lima, where a probe of B.C.C.I.’s stewardship of Peru’s central-bank funds is under way, local investigators are trying to trace what happened to money in an aborted B.C.C.I.-brokered deal to sell French-made Mirage jet fighters to the impoverished nation.
Sources in the clandestine arms trade say B.C.C.I. eventually sold the planes to Pakistan and India.
U.S. intelligence agencies were well aware of such activities.
“B.C.C.I. played an indispensable role in facilitating deals between Israel and some Middle Eastern countries,” says a former State Department official.
“And when you look at the Saudi support of the contras, ask yourself who the middleman was: there was no government-to-government connection between the Saudis and Nicaragua.”
As an equal-opportunity smuggler, the bank dealt in arms from many countries.
“It was B.C.C.I. that financed and brokered (Chinese) Silkworm missiles that went to Saudi Arabia,” the former official says, “and those were equipped with sophisticated Israeli guidance systems. When you couldn’t use direct government transfers or national banks, B.C.C.I. was there to hot- wire the connections between Saudi Arabia, China and Israel.”
The bank also helped transfer North Korean Scud-B missiles to Syria, a B.C.C.I. source told TIME.
Yet the bank’s arms business was benign compared with the black network’s other missions. Sources say B.C.C.I. officials, known as protocol officers, were responsible for providing a smorgasbord of services for customers and national officials: paying bribes to politicians, supplying “young beauties from Lahore,” moving drugs and expediting insider business deals.
When it came to recruiting and persuading, the black network usually got its way.
“We would put money in the accounts of people we wanted to seduce to work for us,” says Mustafa, “or we would use terror tactics,” including kidnapping and blackmail. “The Pakistanis were easy to terrorize; perhaps we might send someone his brother’s hand with the rings still on it.”
Adds Mustafa:
“We were after business cooperation or military or industrial secrets that we would use or broker, and we targeted generals, businessmen and politicians. In America it was easy: money almost always worked, and we sought out politicians known to be corruptible.”
The black network was the bank’s deepest secret, but rumors of its activities filtered through the bank’s managerial level with chilling effectiveness. Senior bankers voice fears that they will be financially ruined or physically maimed – even killed – if they are found talking about B.C.C.I.’s activities.
High-level bank officers know what happened to a Karachi-based protocol officer whom the black network suspected of unreliability last year.
“They found he had been trying to liquidate his assets and quietly sell his house,” says Mustafa. “So, first they killed his brother, and then they sent brigands to rape his wife. He fled to the U.S., where he is hiding.”
U.S. investigators confirm the account but have little hope he will volunteer any secrets if he is located.
Businessmen who pursued shady deals with B.C.C.I. are just as frightened.
“Look,” says an arms dealer, “these people work hand in hand with the drug cartels; they can have anybody killed. I personally know one fellow who got crossed up with B.C.C.I., and he is a cripple now. A bunch of thugs beat him nearly to death, and he knows who ordered it and why. He’s not about to talk.”
Currently the black units have focused their scrutiny and intimidation on investigators.
“Our own people have been staked out or followed, and we suspect tapped telephones,” says a New York law-enforcement officer.
The black unit’s mission eventually became the pursuit of power and influence for its own sake, but its primary purpose was to foster a global looting operation that bilked depositors of billions of dollars.
Price Waterhouse, the accounting firm whose audit triggered the worldwide seizure of B.C.C.I. assets earlier this month, says the disarray is so extreme that the firm cannot even put together a coherent financial statement. But investigators believe $10 billion or more is missing, fully half of B.C.C.I.’s worldwide assets.
How did it happen? B.C.C.I.’s corporate structure allowed the bank to operate virtually without regulation all over the world.
The bank’s organizational web consisted of dozens of shell companies, offshore banks, branches and subsidiaries in 70 countries. It was incomprehensible even to its own financial officers and auditors. The bank’s extensive use of unregulated Cayman Islands accounts enabled it to hide almost anything.
The bank’s complex organization and unique method of accounting – longhand in paper ledgers, written in Pakistan’s Urdu language – make it unlikely that most of the missing money will be traced. Nor is it likely that anyone will ever know just how much Abedi, who has incorporated a new bank, called the Progressive Bank, in Karachi, stole from the rest of the world.
B.C.C.I.’s downfall was inevitable because it was essentially a planetary Ponzi scheme, a rip-off technique pioneered by American flimflam man Charles Ponzi in 1920. B.C.C.I. gathered deposits, looted most of them, but kept enough new deposits flowing in so that there was always sufficient cash on hand to pay anyone who asked for his money.
During the years of its most explosive growth in the late 1970s and mid-1980s, B.C.C.I. became a magnet for drug money, capital-flight money, tax-evading money and money from corrupt government officials. B.C.C.I. quickly gained a reputation as a bank that could move money anywhere and hide it without a trace.
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