It was the bank that knew how to get around foreign-exchange rules and falsify letters of credit in support of smuggling.
Among its alleged services:
- In Panama, according to a little-known racketeering suit that the country brought against B.C.C.I., the bank systematically helped Noriega loot the national treasury.
- B.C.C.I. allowed the leader to open secret offshore accounts under the names of the Panamanian National Guard, the Panamanian Defense Forces and the Panamanian Treasury, to transfer national funds into those accounts and then to tap the funds himself.
- In Iraq, B.C.C.I. became one of the principal conduits for money that Saddam Hussein skimmed from national oil revenues during the 1980s. According to investigator Jules Kroll, who is tracking Saddam’s fortune, B.C.C.I. helped the dictator move and hide money all over the world.
- In Guatemala the collapse of B.C.C.I. has triggered a government probe into a $30 million loan that the bank extended to the country in 1988-89.
- Government officials told TIME they suspect that some of the money may have gone to pay bribes to stifle a four-year-old investigation of a major B.C.C.I. client, coffee smuggler and arms merchant Munther Bilbeisi.
- “If the $30 million was given to corrupt public officials and that can be proved, then the loan should be wiped out or reduced,” says Fernando Arevalo Reina of the Guatemalan Attorney General’s office. (Bilbeisi has denied any wrongdoing.)
As B.C.C.I.’s influence grew, a corrupt core of middle management evolved, described by bank employees as “100 entrepreneurs,” usually branch officers in foreign countries who were free to pursue their own agendas.
One such was Amjad Awan, the B.C.C.I. officer who was convicted in Florida for the money-laundering services he provided for Noriega. As long as these remote managers kept on gathering deposits, they were given wide latitude to do as they pleased, which increasingly meant serving a core clientele of what investigators estimate to be some 3,500 corrupt business people around the world.
The more B.C.C.I. became a conduit for such money, the more deposit gathering became the bank’s chief goal.
At annual meetings, founder Abedi would harangue his employees for days on the importance of luring deposits. That was probably because billions of dollars were vanishing. At the highest levels, B.C.C.I. officials whisked deposits into secret accounts in the Cayman Islands. These accounts constituted a hidden bank within B.C.C.I., known only to founder Abedi and a few others.
From those accounts, B.C.C.I. would lend massive amounts to curry favor with governments – as in its $1 billion loan to Nigeria – or to buy secret control of companies.
U.S. regulators discovered recently that such loans had enabled B.C.C.I. to buy clandestine control in three American banks:
- First American Bankshares in Washington
- National Bank of Georgia (later purchased by First American)
- Independence Bank of Encino, Calif.
The latter two were bought officially by Abedi’s front man, Ghaith Pharaon, the putative Saudi tycoon who received an ) estimated $500 million in B.C.C.I. loans in the 1970s and ’80s.
Those loans were secured only by shares of stock in the companies Pharaon purchased, which meant that they were never to be repaid.
What Abedi got in return for such loans was de facto ownership of three American banks, since he held their shares as collateral for the unrepayable loans. More important, this “nominee” shareholder arrangement meant that B.C.C.I. itself remained invisible to U.S. banking regulators.
Following its discovery earlier this year that B.C.C.I. owned both First American and Independence Bank, the Federal Reserve ordered it to sell them off.
B.C.C.I.’s deposits also disappeared through the black network, which used the money to pay bribes and conduct its weapons and currency deals. According to a former officer, B.C.C.I. bought virtual control of customs officials in ports and air terminals around the world. In the U.S. millions of dollars flowed through B.C.C.I.’s Washington office, allegedly destined to pay off U.S. officials.
The bribes and intelligence connections may offer an explanation for the startling regulatory inaction.
The Justice Department has hindered an investigation by Massachusetts Senator John Kerry, whose Subcommittee on Terrorism, Narcotics and International Operations was the first to probe B.C.C.I.’s illegal operations.
According to Kerry, the Justice Department has refused to provide documents and has blocked a deposition by a key witness, citing interference with its own investigation of B.C.C.I.
To date, however, the Justice Department investigation in Washington has issued only one subpoena.
“We have had a lot of difficulty getting any answers at all out of Justice,” says Kerry.
“We’ve been shuffled back and forth so many times between bureaus, trying to find somebody who was accountable. These things are very serious. What’s shocking is that more energy hasn’t been expended. Somebody consciously or negligently took their eyes off the ball in this investigation.”
According to Jack Blum, Kerry’s chief investigator in 1988-89, the lack of cooperation was so pervasive and so successful in frustrating his efforts to investigate B.C.C.I. that he now says he believes it was part of a deliberate strategy.
Says Blum:
“There’s no question in my mind that it’s a calculated effort inside the Federal Government to limit the investigation. The only issue is whether it’s a result of high-level corruption or if it’s designed to hide illegal government activities.”
The Justice Department denies any reluctance to investigate.
Said spokesman Dan Eramian:
“We believe there has been good cooperation between law-enforcement (agencies) in this investigation. We’re often accused of dragging our feet, and part of that we believe is partisan in nature.”
Yet the evidence of a cover-up is mounting:
In one of the most mysterious events in the case, B.C.C.I. bank records from Panama City relating to Noriega “disappeared” in transit to Washington while under guard by the Drug Enforcement Administration.
After an internal investigation, the DEA said it had no idea what had happened to the documents.
Lloyd’s of London, which is enmeshed in a racketeering lawsuit against B.C.C.I., has fruitlessly made offers to provide evidence of bribery and kickbacks and has made “repeated pleas” to U.S. Attorneys in Miami and New Orleans to seize B.C.C.I. records.
Lloyd’s accuses B.C.C.I. of taking part in smuggling operations and falsifying shipping documents. The insurance underwriters offered the results of their voluminous research into the bank’s illegal activities. The Justice Department attorneys ignored the offers, Lloyd’s says.
The U.S. Attorney General has assigned only a handful of FBI agents to its Washington grand jury investigation of B.C.C.I.’s relationship to First American Bankshares. The department’s main probe of B.C.C.I. itself is being handled by a sole Assistant U.S. Attorney in Tampa, who has recently been assigned another major case.
Similar understaffing is evident in a Miami grand jury probe of the relationship between B.C.C.I. and the CenTrust savings and loan, whose failure is estimated to cost taxpayers $2 billion.
This may help account for the fact that a 16-month investigation has yielded no indictments.
Just as perplexing is why the Bank of England and other authorities took so long to intervene.
Britain’s main financial regulator waited more than a year after seeing a Price Waterhouse audit that raised serious questions about B.C.C.I.’s viability before seizing its 25 branches in Britain.
One explanation:
the Bank of England was conducting extended negotiations with Abu Dhabi authorities, apparently hoping that B.C.C.I.’s current owner, Sheik Zayed bin Sultan al-Nahayan, would shore up the bank.
But more suspicious experts raise questions about B.C.C.I.’s links to Western intelligence agencies.
Leaders in Parliament have expressed outrage at the regulatory failure, which among other things has endangered deposits from as many as 45 municipalities and four utilities.
As authorities sift through B.C.C.I. subsidiaries around the world, they are trying to cope with potentially massive losses of depositors’ money. The Pakistani press spoke of “panic withdrawals,” and one paper added that “smugglers and drug barons” were desperately trying to rescue their offshore accounts.
Chronological History of Events Involving BCCI
