THE BCCI AFFAIR
BCCI's unique criminal structure -- an elaborate corporate spider-web with BCCI's founder, Agha Hasan Abedi and his assistant, Swaleh Naqvi, in the middle -- was an essential component of its spectacular growth, and a guarantee of its eventual collapse. The structure was conceived by Abedi and managed by Naqvi for the specific purpose of evading regulation or control by governments. It functioned to frustrate the full understanding of BCCI's operations by anyone.
Unlike any ordinary bank, BCCI was from its earliest days made up of multiplying layers of entities, related to one another through an impenetrable series of holding companies, affiliates, subsidiaries, banks-within-banks, insider dealings and nominee relationships. By fracturing corporate structure, record keeping, regulatory review, and audits, the complex BCCI family of entities created by Abedi was able to evade ordinary legal restrictions on the movement of capital and goods as a matter of daily practice and routine. In creating BCCI as a vehicle fundamentally free of government control, Abedi developed in BCCI an ideal mechanism for facilitating illicit activity by others, including such activity by officials of many of the governments whose laws BCCI was breaking.
As one BCCI officer later recalled, Abedi had a saying that expressed his view about law:
The only laws that are permanent are the laws of nature. Everything else is flexible. We can always work in and around the laws. The laws change.(1)
BCCI would not change to accommodate human laws. On the occasions that such laws actually interfered with BCCI's business, BCCI would, as necessary, change the laws to accommodate BCCI -- or ignore them entirely.
Significantly, at the same time that BCCI created its elaborate corporate structure for the purpose of deceiving and defrauding those outside BCCI, within BCCI, BCCI's various entities were largely disregarded, and treated interchangably. As BCCI's liquidators concluded one year after the bank's closure in a report to the bank's creditors committee, "in a number of respects, the BCCI Group appears to have conducted its affairs as a single entity, witout clearly identifying which company or entity within the BCCI Group was responsible for any particular transaction."(2)
As a result, the records of BCCI's criminal activity constitute an accounting and legal nightmare, and a full record of what actually took place is unlikely to be reconstructed. BCCI's multiplicity of locations, layered corporate structure, front-companies, front-men, its willingness from the top down to falsify information, and its pervasive disregard for the national laws of each country it operated in, combined to create a culture of criminality within the bank so massive as to defy investigation.
BCCI records in the United States are fragmentary and incomplete. To the extent that they are organized at all, that organization is in chronological order document by document, rather than according to any subject matter, customer account, or transaction. Though fragmentary, these records are also voluminous, amounting to at least 9,000 boxes in New York and Miami alone, and several million pages. Foreign BCCI document repositories of BCCI, especially in the United Kingdom, the Grand Caymans, and Abu Dhabi, are even larger, with access for U.S. investigators limited by foreign bank confidentiality, privacy laws, and the willingness of the foreign jurisdictions to cooperate.
One year following the closure of BCCI, federal investigators in the U.S. were still in the process of microfilming BCCI documents from Miami, and liquidators for BCCI in the United Kingdon had indexed 1600 boxes containing approximately 2.4 million separate BCCI documents -- approximately 2.5 percent of the total of BCCI's documents in the United Kingdom.(3)
Adding to the inherent problem of investigating the largest case of organized crime in history, spanning over some 72 nations, has been the destruction of documents at BCCI and its affiliates by shredding and arson; document backdating and falsification; the removal of most key documents from London to Abu Dhabi in 1990; the refusal of authorities in the United Kingdom and in the Grand Caymans to share information with Congress and other U.S. investigators as a consequence of their interpretation of local bank confidentiality and privacy laws; the inability to question Abedi due to his stroke, the inability to question BCCI's other key officials due to their incarceration and segregation in Abu Dhabi by Abu Dhabi officialdom since July 5, 1991, and BCCI's haphazard method of record-keeping.
Regardless of what might be shown in the missing material, the remainder is more than adequate to document BCCI's criminality, including fraud by BCCI and BCCI customers involving billions of dollars; money laundering in Europe, Africa, Asia, and the America; BCCI's bribery of officials in most of those locations; its support of terrorism, arms trafficking, and the sale of nuclear technologies; its management of prostitution; its commission and facilitation of income tax evasion, smuggling, and illegal immigration; its illicit purchases of banks and real estate; and a panoply of financial crimes limited only by the imagination of its officers and customers.
Among BCCI's principal mechanisms for committing crimes were shell corporations, bank confidentiality and secrecy havens, layering of corporate structure, front-men and nominees, back-to-back financial documentation among BCCI controlled entities, kick-backs and bribes, intimidation of witnesses, and retention of well-placed insiders to discourage governmental action.
As Robert Mueller III, the Assistant Attorney General at the Justice Department now in charge of the BCCI investigation, testified in October, 1991:
BCCI was not an ordinary bank. It was set up deliberately to avoid centralized regulatory review, and operated extensively in bank secrecy jurisdictions. Its affairs are extraordinarily complex. Its offers were sophisticated international bankers whose apparent objective was to keep their affairs secret, to commit fraud on a massive scale, and to avoid detection.(4)
In the words of former Senate investigator Jack Blum:
The problem that we are all having in dealing with this bank is that . . . it had 3,000 criminal customers and every one of those 3,000 criminal customers is a page 1 story. So if you pick up an one of [BCCI's] accounts you could find financing from nuclear weapons, gun running, narcotics dealing, and you will find all manner and means of crime around the world in the records of this bank.(5)
However daunting the task of explicating the full extent of BCCI's criminality, it is essential to recognize that at core, BCCI was not a bank which made an adequate return on investment through lending out depositors funds like other banks, but a "Ponzi scheme," which used new depositors funds to pay current expenses and to repay earlier depositors, creating a pyramid of mounting obligations that ultimately and inevitably would bring about BCCI's collapse.
As Blum testified:
"The people I talked to at the bank would say, this was a bank that was very strange, because it needed deposits all the time, and if you're running a Ponzi scheme you need more and more cash in to support the whole system of fraud that you've generated. What it meant was that BCCI people would go out and bribe central bank officials and high government officials to get them to deposit their country's foreign exchange at BCCI, and in exchange for whatever amount of money, suddenly the foreign exchange reserves of a country would be put there and put to use."(6)
From the beginning, BCCI President Abedi conceived of BCCI as a machine with two driving mechanisms -- asset growth and faith. The latter was essential to prevent a day of reckoning when depositors and creditors alike would cause a run on the bank. The former was necessary to sustain the latter through bad times. Together, they worked to sustain the illusion that BCCI was solvent, when in fact, it is unlikely BCCI was ever solvent.
On December 18, 1991, in an agreement with the Justice Department and New York District Attorney, BCCI's liquidators pled guilty to having engaged in a criminal conspiracy through financial fraud, and thereby constituting a Racketeering Influenced and Corrupt Organization (RICO), whose entire assets, legitimate and illegitimate, were subject to confiscation by the government. Specific crimes admitted to by BCCI's liquidators in the agreement included:
** Seeking deposits
of drug proceeds and laundering drug money
Thus, the criminality at BCCI was not, as has sometimes been suggested, a side-effect of the bank's enormous growth during the 1970's, an unintended consequence of overly rapid expansion, but inherent in the bank's philosophy of asset expansion from the beginning, and pervasive to its closure.
While U.S. law
enforcement was not able to legally establish BCCI as organized crime
until December, 1991, the scope of BCCI's criminality had been clear to
both prosecutors and BCCI's defense team at least a year earlier. As
BCCI's own private investigators, hired by the bank after its indictment
in Tampa for money laundering in October, 1988, told BCCI officials in
As an officer of BCCI Canada wrote to law enforcement just three days after the closure of BCCI worldwide, even those inside BCCI were often appalled by its practices.
We have read with a sense of relief that finally somebody had the guts to investigate into the affairs in the Bank . . . BCCI s.a., BCCI Overseas and BCC Canada have been for years conducting false accounting practices, concealment of losses (more so to avoid displeasing the Arab Owners) and making irregular loans.(9)
The letter went on to describe the knowledge of principal officers of BCCI, including its chief executive officer in the Americas, knowledge of money laundering, drug trafficking, loans created in "bogus" names, and advances of funds to non-existent companies in London, Luxembourg, Cyprus, Malta, the Channel Islands, and other locations. The writer begged investigators prosecute "the big crooks in London and Abu Dhabi."(10)
BCCI Paris branch manager Nazir Chinoy would later admit to investigators that essentially all of BCCI's activity in France was the result of the customer or the bank or both violating somebody's laws.
All the money we got [at BCCI-France] in some way we were breaking the law. If you taking it with a kickback, you are breaking foreign exchange, all Africans who brought their money got commissions which meant kick-backs. Back to back LCs to misrepresent financial deals, taking out less money in a third world country and keeping a share, kickbacks, exchanges, laundering, in some way you are breaking the law in each case. The law breaking was pretty systematic.(11)
Scope, Types and Techniques of Fraud
BCCI's financial empire was built on the fiction that it was heavily capitalized by oil-rich Arab leaders, when the reality was that most of them -- and according to some credible information, all of them -- were acting as nominees, providing either their names to BCCI, or their names plus their funds in the form of deposits to BCCI to get a guaranteed no-risk return, rather than as actual investors at risk.
As a result, BCCI never had a substantial capital base, and was forced from the beginning to use deposits to meet operating expenses rather than to properly invest them in legitimate loans or other financing. Not having the actual capital base, BCCI simply pretended it was there, and enlisted the reputations of its shareholders to assist it in so pretending, in order to lure others to deposit their funds with BCCI. As BCCI officers have told the Subcommittee, BCCI in effect had to create retained capital out of operating profits through juggling its books because of the lack of real capitalization. Because of the lack of real profits as well, the supposed profits had to in turn be manufactured through juggling the books pertaining to deposits. These deposits, in turn, could only receive a good return on investment through taking the funds from new deposits, requiring BCCI to grow at a frenzied pace in order to avoid collapse.
As Manhattan prosecutor Robert Morgenthau described in his indictment against BCCI of July 29, 1991, to whose first six counts BCCI's liquidators plead guilty as part of the December, 1991 plea agreement,
[BCCI's] scheme was premised on the fact that banks rely on credit. The essence of the scheme was to convince depositors and other banking and financial institutions, by means of false pretenses, representations, and promises that the BCC Group was a safe financial repository and institution for funds, and thereby defendants acted to persuade depositors and banking and other financial institutions to provide the BCC Group banks with deposits and credit.(12)
The New York District Attorney found that among the major actions taken by BCCI to carry out its fraud were:
** Employing the ruling families of a number of Middle Eastern states as nominees for BCCI, who pretended to be at risk in BCCI but who were in fact guaranteed to be held harmless by BCCI for any actual losses.
** Using bank secrecy havens including Luxembourg and the Cayman Islands to avoid regulation on a consolidated basis by any single regulator of BCCI, and thereby to permit BCCI to transfer assets and liabilities from bank to bank as needed to conceal BCCI's true economic status.
** Paying bribes and kickbacks to agents of other banking and financial institutions, thereby avoiding the scrutiny of regulators. (13)
The Sandstorm Report
An insider's account of BCCI's fraud created by BCCI's own auditors, Price Waterhouse, and provided to the Bank of England dated June 22, 1991, the "Sandstorm Report," was the final evidence that lead to the shutdown of BCCI globally on July 5, 1991. That draft report, based on a review of banking records from several countries and interviews carried out through the spring of 1991, found evidence of "widespread fraud and manipulation," at BCCI, reflecting "the general scale and complexity of the deceptions which have undoubtedly taken place over many years."(14) This information was developed when Price Waterhouse investigated some $600 million of BCCI deposits not recorded in BCCI's books. Other major losses related to BCCI accounts in related entities, including ICIC in the Grand Caymans, sometimes know as BCCI's "bank-within-a-bank," the Bank de Commerce et Placements, a BCCI subsidiary in Switzerland, the Kuwaiti Investment Finance Company (KIFCO), a secret BCCI subsidiary ostensibly owned by a BCCI nominee.
The Sandstorm report has been provided to the Subcommittee solely in a heavily censured form by the Federal Reserve at the insistence of the Bank of England, which forbid the Federal Reserve from providing a clean copy of the report to the Congress on the ostensible ground that to do so would violate British bank secrecy and confidentiality laws. However, even with the hundreds of items and almost every identifiable name in the report censured, it is clear that the Sandstorm report outlines criminality on a vast scale.
Among the specific types of BCCI fraud described by Price Waterhouse in Sandstorm were account manipulation of non-performing loans, fictitious profits and concealed losses, fictitious loans set up in connection with repurchases of shares, misappropriation of deposits, fictitious transactions and charges, unrecorded deposit liabilities, nominee arrangements to create false capitalization, unorthodox and apparently illegal repurchasing arrangements for shareholders, the "parking" of loans to avoid recognition of losses, shoddy lending, bad investments, off-book transactions, false confirmations of transactions, misrepresentations with respect to beneficial ownership of shares, fictitious customer loans, falsified audit confirmations, and the drafting of fraudulent agreements.(15)
The Sandstorm report -- prepared by Price Waterhouse for the benefit of BCCI's final group of managers, brought in for the purpose of finding a way to help BCCI survive as a wholly-owned subsidiary of Abu Dhabi -- describes BCCI's fraud, rather kindly, as originating in BCCI's sense of vulnerability in case of any losses because of its lack of any lender of last resort and the hostile attitude of the international banking community. According to Price Waterhouse, to compensate for this weakness, BCCI's management, including Abedi and Naqvi, believed it was essential to declare profitability every year regardless of the true financial condition of BCCI. Accordingly, Abedi and Naqvi provided guaranteed rates of return to principal Middle Eastern shareholders of BCCI, and then falsified and manipulated accounts and records as necessary in order to pay those returns, while still showing profits. (16)
When BCCI actually lost money due to poor lending practices, rather than accept provisions for the losses, it simply disguised them, through what Price Waterhouse described as "a very complicated series of manipulations of loan and deposit accounts, treasury activities and purchases of its own shares." (17)
Price Waterhouse found significant account manipulation at BCCI beginning as early as 1976.(18) These account manipulations were, according to BCCI officials interviewed by the Subcommittee, carried out in order to make BCCI appear to be a far more profitable institution than it really was, and thus provide a sufficient capital base to justify its level of lending and provide "security" for its deposits.
As BCCI's losses grew, so did its manipulation of accounts and its frauds, as well as its use of affiliated and related entities such as ICIC in the Grand Caymans, the Banque de Commerce et Placements in Geneva, the National Bank of Oman, and the Kuwaiti Investment Finance Corporation (KIFCO).
The bank has a history of poor lending where it now appears that a significant amount of account manipulation has gone on. This has included the utilization of funds routed through Fork [ICIC], including funds managed by Fork Investments [ICIC Investments]; the use of fictitious lionize drawn down in the names of third parties; and the use of unrecorded deposits, in an attempt to avoid the need to make provisions. This routing of funds has been carried out on a very significant scale, involving a number of related companies, including the Fork Holdings Group [ICIC Holdings Group], LOANS, NBO, and KIFCO, and third party banks such that it is now difficult for anyone to ascertain the true nature of external exposures recorded in the names of certain major customers.
It now appears that over the period from 1977 to 1985, the Treasury operations of Sandstorm made significant losses. These losses were concealed and at the same time significant profits were manufactured. The precise amount of such loans/fictitious profits cannot now be established but may well have been of the order of $600-$700 million before funding costs, or approaching $1 billion if funding costs are added.
These losses were originally funded through unorthodox means at the behest of Abedi. . .(19)
The underlying situation at BCCI, already bad, worsened dramatically in 1985 as a result of $500 million in losses "incurred" by BCCI in commodity trading undertaken through Capcom, BCCI's commodity trading affiliate, managed for BCCI by S.M. Akbar. According to Massihur Rahman, who was BCCI's chief financial officer at the time, this was equivalent to BCCI's entire capital, and threatened to wipe out the bank.(20)
Price Waterhouse concluded:
In 1986 . . . it was discovered that significant losses had been incurred in option trading. When Akbar resigned, he left a record of his activities with [redacted by Bank of England] who brought under his own control the amounts which had been financed by unorthodox means. [Redacted by Bank of England] set up a small central team under [redacted by Bank of England] to review the record left by [redacted by Bank of England] to verify the representations made by Akbar and maintain contact with the customers. We understand that whilst [redacted by Bank of England] attempted to establish some control by [illegible] customers deposits, largely by using funds from Fork [ICIC], he could not bring himself to make full disclosure, which would almost certainly have brought the bank down.
Instead as a result of continued pressure for profits and loan servicing he continued to use unrecorded deposits, certain external funds (with Fork Holdings [ICIC Holdings] and companies controlled but not legally owned, by it) and funds were drawndown on bogus loan accounts in the name of prominent Middle East investors. These funds were applied to adjust other balances in order to avoid making provision for bad loans and to conceal the past Treasury losses, in an enormous and complex web of fictitious transactions in what is probably one of the most complex deceptions in banking history.
These losses now form a major part of the current deficit in the bank which has been rectified by the financial support arrangements providing by the Government of Abu Dhabi.(21)
Manager's Ledgers and Numbered Accounts
Among BCCI's unusual practices was the use of "managers ledgers" in addition to numbered accounts to manipulate accounts through back-to-back transactions that were essentially untraceable.
BCCI insiders advised the Subcommittee in early 1991 that these accounts often were designated solely as "ML" with a number following it, and often no one other than the BCCI officer responsible for the account would have any idea who, if anyone, owned it. In some cases, even the BCCI officer in charge of the account would be unable to identify its owner.
Price Waterhouse described this practice in BCCI Grand Caymans as early as April 1986, stating that "we have no particular objection to [using numbered accounts]," but "we found that in most instances none of the officers of the Grand Cayman office were able to correctly identify either the name of the borrower or the credit officer responsible for monitoring the account at other locations."(22) At the time, Price Waterhouse suggested that BCCI should improve its management of such accounts to prevent such occurrences, but when the bank failed to do so, Price Waterhouse took no additional action other than adding an asterisk (*) to this notation in later audit reports, indicating that the recommendation had been made to BCCI more than once.
Later, Price Waterhouse noted how financial transactions from BCCI to its secretly held Swiss subsidiary, LOANS, were marked "PAY WITHOUT MENTIONING OUR NAME," with the result that the recipients of the funds from LOANS were unable to determine from whom or where the money had come.(23)
Price Waterhouse's findings were later affirmed by its successor accountants, Touche Ross, who handled the liquidation of BCCI. A year after becoming liquidator, Touche Ross noted that the true picture of BCCI's activities was distorted by such practices as "loan parking," "artificial fund transfers," the provision of multiple loans to a customer, each secured by the same property, and many similar improper practices.(24)
BCCI Concealment of Treasury Losses
In 1985, after rumors of BCCI's losses in options trading reached bank regulators, Luxembourg bank regulators asked BCCI to provide an audited review of its central treasury activities. BCCI selected Price Waterhouse Cayman to perform the work, which determined in early 1986 that significant losses had been incurred and not recorded. According to Price Waterhouse, it concluded then that the losses and lack of record keeping were due to "incompetence."(25) However, in the 1991 Sandstorm Report, Price Waterhouse found that "with the benefit of hindsight, it appears more sinister in that it now seems to have been a deliberate way to fictitiously inflate income."(26)
BCCI officials have confirmed that the account provided Price Waterhouse in 1986 was designed to conceal the long-term nature of BCCI's inflation of its books.(27)
Ziauddin Akbar, the Treasury official held responsible for the massive losses in 1986 and fired by BCCI at the time following their discovery, told two BCCI officials in the U.S. in 1988 that Akbar had been a "scapegoat," used by BCCI's management to deceive the auditors when the auditors had accidently caught on to long-term manipulations by BCCI of its financial condition.
Ziauddin Akbarr told these officials that BCCI had been inflating its assets from the mid-1970's in order to make the make look profitable when it was not. When Price Waterhouse discovered this activity in 1986, BCCI's top officials worked out a scheme with Akbar under which he would accept responsibility, and pretend that the losses had just happened in the previous year due to unwise commodity speculations by BCCI. In that way, the losses would be viewed by outsiders as an unforunate one-time occurence, and with the sacrifice of Akbar, BCCI could continue.(28)
In its 1991 review, Price Waterhouse found that among the specific techniques used by BCCI to hide its losses were:
** misappropriation of deposits without depositors knowledge to provide funds to adjust non-performing and bogus loan accounts, and Treasury losses.
** misappropriation of external funds deposited under trust with Sandstorm [BCCI] and Fork [ICIC] to be managed on behalf of a few prominent people who are also shareholders of [BCCI] Holdings.
** the creation of loans with no commercial substance in the names of people without their knowledge.
** selling certificates of deposit placed with the Central Treasury without informing the depositors, and using the proceeds to fund adjustments.
** routing funds through [ICIC], LOANS, KIFCO, SDCC and other affiliates and third parties to make adjustments prior to accounting reference dates and audit confirmation dates, which were often reversed at a later date.(29)
ICIC -- The Bank Within A Bank
From the early days of BCCI, the various legal entities known collectively as ICIC, functioned officially as a BCCI pension fund for BCCI officers, and unofficially as BCCI's principal "bank within a bank."
The flexibility of ICIC to carry out many different schemes for Abedi is indicated by the number of different entities Abedi created using the identical ICIC abbreviation, including International Credit and Investment Company Overseas, Ltd.; International Credit and Investment Co., Ltd.; International Credit and Commerce (Overseas) Ltd.; ICIC Holdings of Grand Cayman; ICIC Apex Holdings; ICIC Overseas, Cayman; ICIC Foundation; the ICIC Staff Benefit Fund; the ICIC Staff Benefit Trust; ICIC Business Promotions; ICIC Business and Promotions; and others.
As BCCI liquidators in the Grand Caymans found, ICIC was not really a bank at all, but a post-office box location to "book" transactions that were initiated, organized, and approved in other parts of BCCI. In essence, ICIC was a "conduit" or mechanism for BCCI's fraud.(30)
Some of the bewildering number of purposes and uses of the different ICICs included:
ICIC Apex Holding Limited. Incorporated on October 2, 1987 as the ultimate holding company for the ICIC Group, equivalent to a charitable trust, with the beneficiaries designated as "mankind at large."
ICIC Holdings. Incorporated on April 6, 1976 as the holding company for the ICIC Group, created as the holding company for ICIC Overseas. ICIC Holdings "invested" in ICIC (Overseas) and loaned money to ICIC Foundation and the ICIC Staff Benefit Fund.
ICIC (Overseas) Limited. Incorporated on April 6, 1976 as an offshore bank to facilitate the purchase and sale of BCCI shares and to provide private banking services for BCCI shareholders and customers. (ICIC Overseas also advanced funds to nominees to allow them to purchase interests in the three other BCCI affiliates -- Attock Oil, Credit and Commerce Insurance, and the Saudi Development Company.)
ICIC Foundation Cayman. A charitable foundation wholly owned by the ICIC Foundation in the United Kingdom, established by a gift of BCCI shares owned by ICIC Holdings. The assets of the Foundation were shares in BCCI, and the assets of the UK Foundation were one-third of the shares of LOANS, the secretly-owned Swiss affiliate of BCCI.
ICIC Staff Benefit Fund. A Cayman entity wholly owned by the ICIC Staff Benefit Trust for the benefit of BCCI Employees, established by a gift of BCCI shares from ICIC Holdings. This entity held another one-third of the shares of LOANS.(31)
Usually, correspondence and transactions involving any of these ICIC entities would refer merely to ICIC, leaving it to top BCCI management to determine which of the entities, if any, would get "credit" or be "debited" for the particular transaction.
No one within BCCI other than Abedi, Naqvi, and small circle of younger assistants, had an overall picture of ICIC. To early Pakistani recruits to BCCI, such as Massihur Rahman, ICIC was described as a "parallel organization" to BCCI which would "hold shares of the bank for the founder group," in essence, a holding company controlling the stock of the BCCI holding companies.(32) ICIC was also, from the beginning, a mechanism to disguise and misrepresent the ownership of BCCI. As needed, ICIC took on additional characteristics: bank, foundation, and finance company. But its most usual purpose was to act as a vehicle for BCCI's inflation of assets and concealment of losses, acting as a mechanism for at least $1 billion of circular transactions to inflate BCCI's books.
The first detailed audit of ICIC conducted by Price Waterhouse took place in 1991, with its draft conclusions provided to BCCI's board of directors on June 17, 1991, in a report classified by Price Waterhouse as "strictly private and confidential." The Price Waterhouse report provides cautions that its findings were based on records which were missing, falsified, or incomplete. But the picture drawn in the report again details fraud on a massive scale.
The Price Waterhouse audit found that BCCI effectively controlled ICIC, and that most ICIC transactions were initiated at the instructions of senior BCCI management: Swaleh Naqvi, the number two man at BCCI, and two of his assistants, Mr. Hafeez and Mr. Imam. ICIC's uses included:
** Financing BCCI shares and capitalization, through the use of nominees, buy-back arrangements, and guaranteed minimum returns on investments.
** Routing funds in a manner to disguise their true nature and effect on BCCI.
** Providing guarantees, through commitments signed by BCCI management on ICIC letterhead, for various nominee arrangements for shareholders of companies secretly controlled by BCCI, such as First American through its holding company, CCAH.
** Lending to BCCI shareholders and customers.
** Paying BCCI expenses.
** Handling the management of customer funds controlled by BCCI chairman Abedi through powers of attorney.
** BCCI buying its own shares through nominees through ICIC.
** Processing financial transactions that were "unrecorded" at BCCI and which therefore remain untraceable.(33)
In all, ICIC made $290 million in loans, of which all but perhaps $25 million is apparently lost. About $93.5 million of those loans were used to purchase shares of BCCI itself; another $100 million in loans went to nominees for BCCI, or for "routing" transactions aimed at disguising BCCI's financial status; another $20 million went to an ICIC subsidiary, ICAC, and effectively disappeared in ICAC's insolvency. Another $62 million in lending went to "secure" interests in other entities by BCCI "shareholders," including people who were clearly serving as nominees.
ICIC lending included millions to major front-men for BCCI including Ghaith and Wabel Pharoan, Faisal al Fulaij, Prince Turki, and Mohammed Hammoud. The role at BCCI of Hammoud, who purchased the shares of Clark Clifford and Robert Altman in First American in 1988 with funds lent him by BCCI, is illustrated by the fact than when his BCCI loans become delinquent, they were simply transferred from BCCI to ICIC.(34)
Examples of ICIC being used by BCCI to handle nominee relations include:
** Wabel Pharoan writing ICIC on December 4, 1984 to confirm that all transactions in BCCI shares in his name were undertaken as a nominee.
** Faisal al Fulaij writing ICIC on February 16, 1985 to confirm that ICIC was entitled to all profits, and was required to bear all losses, on the CCAH (First American Bank) shares in his name which were being managed by ICIC.
** BCCI officer H.M. Kazmi writing Saudi Sheikh Kamal Adham on August 2, 1987 to confirm that Adham was not liable for any loans recorded in his name on the books of ICIC, including Adham's loans secured by his shares of CCAH for the First American Bank and Attock Oil.(35)
ICIC also offered unorthodox services, including guarantees against loss, to prominent Middle Eastern political figures, including the rulers of several Gulf states. For example, BCCI #2, Swaleh Naqvi, sent confirmation letters in February 1990 from ICIC Holdings to the Rulers of Ajman and Fujairah advising them that loans to them from BCCI would be paid off through proceeds from the disposal of their shares in CCAH, owner of the First American bank. In the event that their shares did not cover losses, Naqvi confirmed that these Rulers would not be required by ICIC or BCCI to pay them. It is notable that at the time Naqvi made this commitment, CCAH and the First American Banks had not been offered for sale to anyone.(36)
From the time of BCCI's indictment on drug money laundering charges in Tampa, Florida in October, 1988, there was little doubt to anyone looking at the facts that BCCI had been used to launder drug money.
The Customs agents working on the "C-Chase" case against BCCI, moved millions of dollars in U.S. currency, representing the proceeds of cocaine sales through BCCI Panama, BCCI Luxembourg, and LOANS Switzerland as a result of the knowing participation of several BCCI officials.(37)
As Robert Mazur, the Customs agent in Tampa who selected BCCI as the target of the Customs money laundering sting testified, BCCI bank executives volunteered methods to enhance and improve his techniques for money laundering, and shortly before the sting ended the operation, offered to introduce Mazur to other potential "cash" customers for money laundering services from Bogota, Colombia.(38)
Attorneys for BCCI and the bank itself contended that the Tampa case represented an accident involving a small number of bank officers. Indeed, when BCCI itself pled guilty to money laundering in January, 1990, the bank continued to take the position that this guilty plea only constituted an admission that a few of its employees had engaged in the activity, and that its guilty plea was based solely on a theory of corporate responsibility, "respondeat superior." As BCCI's attorneys argued to federal prosecutors and Senate staff prior to the bank's January 1990 plea agreement, it was inevitable that a bank operating in so many countries would be used by drug traffickers. This was partially true, as the Deputy Assistant Secretary of State for International Narcotics Matters acknowledged:
Setting aside those instances where BCCI managers knowingly promoted money laundering, BCCI seemed attracted to traffickers for the same reasons that other banks have been found attractive. First, traffickers seek international banks that are sophisticated in wire transfers, that have branches in those parts of the world where they operate, and which permit quick retrieval of funds. Second, traffickers seek banks in those countries where national banking laws afford maximum secrecy to depositors, permit nominee accounts, and do not provide for close monitoring of cross border transactions of currency movements.(39)
Given BCCI's size and dispersion, money laundering at BCCI would have been inevitable under any circumstances. Given BCCI's never ending quest for assets and its management's attitude towards laws, it was ubiquitous. As Akbar Bilgrami explained, Abedi was constantly telling BCCI employees that the only thing that mattered was the generation of assets. When Bilgrami was in Colombia in the mid-1980's, a period when Colombia had already developed the reputation as the center for cocaine smuggling and drug money, Abedi told him that he needed to increase BCCI's activity in Colombia to $1 billion in local currency in deposits, and $1 billion in U.S. denominated deposits -- funds which obviously could only be generated, directly or indirectly, from the drug trade.(40)
BCCI's December, 1991 plea agreement with U.S. law enforcement outlines the systematic nature of the money laundering as follows:
40. The BCCI Defendants and their affiliates . . . would and did formulate and implement a corporate strategy for increasing BCCI's deposits by encouraging placements of funds from the proceeds of drug sales, in conscious disregard of the currency regulations, tax laws, and anti-drug laws of the United States, and of other nations;
41. In furtherance of the BCCI Group's corporate strategy to pursue deposits in disregard of United States and foreign law, the BCCI Defendants . . . would knowingly offer a full range of services to drug importers, suppliers and money launderers;
42. Co-conspirators would and did conduct . . . financial transactions with narcotics drug proceeds including the wire transfer of said proceeds from places in the United States to and through other places outside the United States, with the intent to conceal and disguise the nature, location, source and ownership of these drug proceeds.(41)
The criminal information entered into by the liquidators outlined how BCCI laundered money, detailing its use of certificates of deposits held at foreign branches to offset cash deposits made in the U.S.; its technique of crediting "counter-balancing loan proceeds" to foreign corporate bank accounts designated by drug traffickers; and BCCI's use of false names, codes, and counter-surveillance techniques against law enforcement, among other money-laundering techniques.
Knowledge of the bank's money laundering activity was not limited to a few high-level officials at the bank, as former BCCI chief financial officer Massihur Rahman contended.(42) As Abdur Sakhia, formerly BCCI's chief officer in the United States testified, it been obvious within BCCI as of 1983 that the bank had adopted a conscious policy of soliciting drug funds when it decided to purchase a bank in Colombia. It was obvious to Sakhia and other BCCI officers then that BCCI's motivation for obtaining the Colombia bank was its recognition that enormous amounts of U.S. currency were being generated as a result of narcotics trafficking, and that Colombia could become an extremely profitable operation for BCCI.
According to Sakhia,
We knew that the money that we would be getting in Colombia would be drug money. We knew that all the dollar deposits we would be getting would be drug money.(43)
Sakhia contended that his own attempts to discourage BCCI's entry into the Colombian market resulted in his being denied the position of becoming regional manager for BCCI throughout the Americas, in retaliation for his unwillingness to go along with BCCI's plan:
If I had agreed to the purchase of the Colombia bank I would have been head of the Latin American region total but I opposed the purchase of the Colombian bank. I opposed it for two reasons. I didn't want that size of acquisition. We wouldn't know who the 500 people of staff we were taking over well enough. We were getting branches in lawless areas like Cartegena, Cali and Medellin. There were armed guards every time I went from Bogota to the hotel in Colombia. I made an effort to get controls on our accounts in Miami because of concerns about drug money. I was opposed by London and by Amir and Saleem Saddiqi, who was also head of audit and compliance and simultaneously head of growth and profit.(44)
While Sakhia provided key information to U.S. investigators about wrong-doing at BCCI, other BCCI officers remaining at the institution scoffed at his professions of innocence in the banks criminality.(45) Similarly, Massihur Rahman, who likewise provided vital information to this and other investigations, professed to have been excluded from all wrongdoing at the bank. But other BCCI insiders contended that Rahman assisted BCCI's inner circle in deception, if inadvertently, through noting deficiencies in BCCI's books and warning other officials of the risks if they were not corrected. As one BCCI official told investigators in the spring of 1992:
Massihur Rahman was head of finance and he was a member of the Central Management Committee. He was never part of the inner clique of the top four or five and yet he had a very significant position because all of the balance sheets were reviewed by him. He packaged the balance sheets. He is a very intelligent man. If there were any shortcomings here or there, he came up with the ideas of how to make it look good. As a professional, he dressed them up when he saw deficiencies. He was a technocrat, he understood what the international world wants, whereas a lot of the others did not meet outsiders at all. From their point of view what was good enough for Pakistan or India was good enough. Massihur Rahman had a higher standard. He told them what they had to come up with and Naqvi produced the proper figures in response.(46)
The degree of BCCI-U.S.'s reliance on money laundering as a principal business was demonstrated by what happened when BCCI put into place a "compliance program" as part of its January 1990 plea agreement resolving the Tampa money laundering case: business dropped noticeably, especially referrals from other BCCI locations, because neither BCCI nor its customers wanted to provide details about the customers' businesses.(47)
BCCI's clients for money laundering included Panamanian General Manuel Noriega, for whom it managed some $23 million of criminal proceeds out of its London branches; Pablo Escobar, of the Medellin cartel; Rodriguez Gacha, of the Medellin cartel; and several members of the Ochoa family.(48)
Bribery was a key component of BCCI's strategy for asset growth worldwide, from the earliest days of the bank. In some case, the recipients of funding from BCCI may not have considered the payments to be "bribes," but simply a mechanism by which BCCI obtained what it wanted from an official, and in return the official helped BCCI, such as BCCI's payments to two of the Gulf emirs in return for the use of their names as nominees for the purchase of First American. In other cases, the bribes were naked and direct quid pro quos, such as BCCI's payments to Central Bank officials in return for Central Bank deposits in countries like Peru. In other cases, BCCI made campaign contributions to politicians, such as it did with General Zia in Pakistan and Carlos Andres Perez in Venezuela. In still other cases, BCCI's payments came in the guise of charitable contributions, and provided BCCI with an entree to generate deposits from others, as in the case of President Jimmy Carter. Among the Americans who BCCI provided with financial assistance in addition to Carter, were U.S. Ambassador to the United Nations Andrew Young, Bert Lance, and Jesse Jackson. Abroad, important figures with extensive contact with BCCI included former British Prime Minister James Callahan, then United Nations Secretary General Javier Perez de Cueller, Jamaican prime minister Edward Seaga, Antiguan prime minister Lester Byrd; a large number of African heads of state; and many Third World central bank officials.
The courting of important governmental and political figures was a task ordinarily undertaken directly by Abedi, usually with considerable secrecy. Typically, a local BCCI official would make contact with a key national political figure, who would then be passed on to Abedi. Abedi would then assess that official's needs and try to put together a transaction suitable to the official's status and needs. (49)
In some cases, Abedi would not make a "bribe" per say, but would instead use BCCI's resources to build goodwill, which he in turn would then make use of to generate assets elsewhere. This was Abedi's approach, for example, with President Jimmy Carter, who received millions of dollars in BCCI funding for charitable activities, and then travelled with Abedi to developing nations, providing Abedi with entry to their leaders and, often, the assets of their central banks.(50)
Abedi used a similar approach with Jesse Jackson and Andrew Young, both of whom had business expenses paid for by BCCI, and either solicited business for BCCI in return, or offered to do so. (51)
When it came to General Noriega, bribes were unnecessary, as BCCI provided the far more important service of laundering $23 million of his money and keeping it safe from other governments and his eventual successors in Panama by insuring its disappearance following his indictments. But to demonstrate BCCI's hospitality, the bank still made sure that it provided Noriega with an expensive gift -- a $25,000 persian carpet, hand delivered with Abedi's regards to Noriega by Alauddin Sheikh.(52)
In other cases, however, BCCI would make direct payments to key officials, sometimes in suitcases filled with cash. As BCCI officer Abdur Sakhia stated in interviews with Subcommittee staff:
Abedi's philosophy was to appeal to every sector. President Carter's main thing was charity, so he gave Carter charity. [Pakistani President] Zia's brother in law needed a job, he got a job. [Bangldeshi President] Ashraf's mistress needed a job, she got a job. Admission of your son to a top college, he would arrange it somehow.(53)
According to Sakhia,
There was a world wide list of people who were in the payoff of BCCI. It was my understanding this included the family of Indira Ghandi, Ashad of Bangladesh, and General Zia. In Africa, most of the leaders of Africa in Zambia, Zimbabwe, Mugabe, and others, were all understood to have received money.(54)
According to both Sakhia and BCCI's Paris manager, Nazir Chinoy, BCCI official Alauddin Sheikh would sometimes take cash to people at Abedi's request.(55) Both officials stated that they understood that Nigerian central bankers were paid off in cash by Mr. Sheikh at a World Bank meeting in Seoul, Korea.(56)
Chinoy said that such payments were typically made in great secrecy, but that it was obvious to him and others at BCCI what was going on. He described one such apparent payment by Abedi to President Mugabe in Zimbabwe.
I accompanied Mr. Abedi and Mr. Sheikh to the opening of a joint venture with Zimbabwe. I believe that to get permission to open that venture, money was paid to President Mugabe and to Nkomo. The basis I am making this statement was that when I went there with Mr. Sheikh, I was acting as Mr. Abedi's personal assistant or secretary. Mr. Sheikh went off on his own to see Nkomo who was the chief opposition at that time, and then he went off to see President Mugabe, and when they talked they wanted me out of the room. A number of us were there for the opening. But only Sheikh and Abedi left in the room with these two political figures. Otherwise I was accompanying him and acting with him. Sheikh carried a bag with him. At the time I had a suspicion that you don't get permission as a foreign bank so easily without a payment. Without favors, it wouldn't be so easy to get a bank that fast, especially given the opposition of the British banks who were already established there. And I can think of no other reason for the exclusion of everyone but Sheikh and Abedi.(57)
The New York District Attorney's indictment of BCCI alleged that in 1986 and 1987, BCCI president Abedi and number two official, Swaleh Naqvi, opened a bank account in a Swiss bank in Panama to "transmit bribes and kickbacks in the amount of a percentage of the deposits maintained by the Central Reserve Bank of Peru to the two senior officers of that bank," in a total amount of $3 million, in return for Peru maintaining large central bank deposits in BCCI.(58) These bribes were paid following a meeting involving BCCI officials and Peruvian president Alan Garcia. According to BCCI official Akbar Bilgrami, the purpose of the meeting was to make sure that President Garcia would not undercut the decision by the Central Bank and that if the payments were made to the Central Bankers, BCCI would indeed receive the Peruvian deposits in return. Upon returning from Peru, Shafi told Bilgrami that Garcia had given his blessing to the transaction.(59)
Chinoy contended that BCCI was simply efficiently exploiting the prevailing business practices in many of the countries in which it operated, suggesting that in Nigeria and many other African countries it was not possible to do business without buying presents, giving kickbacks, or making bribes to officials.
Commission means kick-back. The government approves a $300 million contract. A multinational corporation agrees with the government which has helped him, 10 percent gets kicked back. A company is established abroad or they nominate a cousin or someone who is paid 3 percent. It is known as a commission but it is actually a kickback. It is the only way to do business.(60)
Support of Terrorism and Arms Trafficking
BCCI's support of terrorism and arms trafficking developed out of several factors. First, as a principal financial institution for a number of Gulf sheikhdoms, with branches all over the world, it was a logical choice for terrorist organizations, who received payment at BCCI-London and other branches directly from Gulf-state patrons, and then transferred those funds wherever they wished without apparent scrutiny. Secondly, BCCI's flexibility regarding the falsification of documentation was helpful for such activities. Finally, to the extent that pragmatic considerations were not sufficient of themselves to recommend BCCI, the bank's pan-third world and pro-Islam ideology would have recommended it to Arab terrorist groups.
Arms trafficking involving BCCI included the financing of Pakistan's procurement of nuclear weapons through BCCI Canada, as documented in the Parvez case, involving a Pakistani who attempted to procure nuclear related materials financed by BCCI through the United States. (61)
In a November 22, 1991 letter to the Subcommittee, the CIA stated that "the Agency did have some reporting [as of 1987] on BCCI being used by third world regimes to acquire weapons and transfer technology," but was unwilling to elaborate on the nature of this activity in public.(62)
In early August, 1991, the Committee was provided with documents from the Latin American and Caribbean Region Office (LACRO) of BCCI, describing the offer for sale by the Argentine air force of 22 Mirage aircraft for $110 million. (63) The planned sale was to have been made to Iraq, as part of Saddam Hussein's massive military buildup prior to the Gulf war. BCCI was acting as the broker for the transaction, which was to take place in August or September of 1989, but not completed as a result of a dispute within the Argentine military itself.(64) Arms sales involving BCCI from Latin America to the Middle East remain, as of April 1992, under active investigation by U.S. law enforcement.(65)
In the United Kingdom, a key window on BCCI's support of terrorism was an informant named Ghassan Qassem, the former manager of the Sloan Street branch of BCCI in London. Qassem had been given the accounts of Palestinian terrorist Abu Nidal at BCCI, and then proceeded, while at BCCI, to provide detailed information on the accounts to British and American intelligence, apparently as a paid informant, according to press accounts based on interviews with Qassem.(66)
As of 1986, the information obtained about Abu Nidal's use of BCCI was sufficiently detailed as to justify dissemination within the U.S. intelligence community.(67)
In July, 1987, as a result of the information provided by Qassem, a State Department report concerning Abu Nidal and Qassem, declassified in 1991 at the request of the Subcommittee, describes Abu Nidal's use of BCCI.
The ANO commercial network comprises several businesses created over the past seven years with the long-term goal of establishing legitimate trading enterprises in various countries, gaining experience in commercial trade, and making a profit for the group. . . The general manager of the commercial network and the principal agent in gray-arms transactions is Samir Hasan Najm al-Din (Samir Najmeddin). He has directed many of ANO's commercial activities, both licit and illicit, from his offices in the INTRACO building in Warsaw, Poland.. . . He has maintained a general account at a major West European Bank [BCCI in London] from which he transfers money to individual company accounts at local banks. He maintains joint control of each company's ban accounts, along with the company manager, and he is responsible for forwarding all major contracts to Sabri al-Banna for final approval.(68)
Following dissemination of this material by the U.S., the U.S. coordinated efforts to shut down the financing of the activities exposed in its targeting of Abu Nidal through BCCI-London, with some success.(69)
Other terrorist groups continued to make use of BCCI, including one "state sponsor of terrorism," and the Qassar brothers, Manzur and Ghassan, who have been associated with terrorism, arms trafficking, and narcotics trafficking in connection with the Government of Syria, and with the provision of East Bloc arms to the Nicaraguan contras in a transaction with the North/Secord enterprise paid for with funds from the secret U.S. arms sales to Iran.(70)
Training of Cartel Death Squads
In April 1989, a network of Israeli arms traffickers, operating out of Miami, made a shipment of 500 Israeli manufactured machine guns through the Caribbean island of Antigua for the use of members of the Medellin cartel. Later, one of these weapons was used in the assassination of Colombian presidential candidate Luis Carlos Galan, and several other of the weapons were found in the possession of cartel kingpin Jose Gonzalo Rodriguez Gacha after his death in a gunfight with Colombian drug agents.
The principals in the arms trafficking included Yair Klein, who had previously been identified in Colombian drug enforcement documents as involved in training paramilitary squads for the cocaine cartel in Medellin; Pinchas Shahar, an Israeli intelligence operative, and Maurice Sarfati, an Israeli "businessman" operating out of Miami and Paris.
The scandal broke after a broadcast by NBC News on August 21, 1989 about Klein's activities, and a Colombian judge charged Klein with having engaged in criminal conspiracy in training the private armies for the cartel. In the months that followed, the scandal extended to Antigua as well, an island with no substantial military force and no need for the 500 machine guns its foreign minister ordered from Israeli military industries.
Subsequent investigations of the affair, including one by the Government of Antigua conducted by a Washington attorney, Lawrence Barcella, left many questions unanswered. However, it became clear that the Antigua project had been outgrowth of the establishment of a "melon farm" by Sarfati in Antigua in 1983, financed by the United States government through a $2 million loan from the Overseas Private Investment Corporation (OPIC), in part on the basis of financial references for the principals provided OPIC by BCCI.
Before providing the $2 million to Mr. Sarfati for his melon farm, OPIC requested financial references. Sarfati provided references from his principal bank, BCCI Miami. In a letter from its Miami office, BCCI advised OPIC on June 14, 1983 that Sarfati, "who is one of our valued customers" had a number of major accounts with BCCI.(71)
Ultimately, OPIC lost its entire investment in the melon farm and concluded that it had been defrauded by Sarfati. After filing suit against Sarfati, OPIC sold its remaining interest in the melon farm, at a loss of 50 cent on the dollar, to an Israeli businessman, Bruce Rappaport, and an entity owned by him called the Swiss American Bank. Rappaport, a confidante of former CIA director William Casey, was in this period also in frequent contact with BCCI's original U.S. contact, Bert Lance. Coincidentally, one of BCCI's principal board members, Alfred Hartmann, who was also chairman of BCCI's secretly-owned Swiss affiliate BCP, also sat on the board of another of Rappaport's banks.(72)
In 1990, when the Subcommittee sought records pertaining to Mr. Sarfati from BCCI, it was advised by lawyers for BCCI that the Sarfati accounts at BCCI were "missing." Additional investigative work later located most of the accounts pertaining to one of Sarfati's partners in the Antigua venture, Haim Polani, but the accounts of Sarfati and his businesses remained lost. BCCI Latin American and Caribbean Region (LACRO) documents now maintained at the Federal Reserve in Miami document millions in BCCI loans to various Sarfati businesses.
BCCI and BNL
BCCI was also involved with the Banco Nationale del Lavoro (BNL), Italy's biggest bank, whose Atlanta office was involved in a scheme to provide as much as $4 billion in fraudulent loans to facilitate illegal arms sales for the government of Iraq. In March 1991, three officials from BNL were indicted.
Although much about the relationship between the two banks remains unclear, BCCI documents in the United States show that BCCI loaned short-term -- often overnight -- its substantial U.S. surpluses to BNL in Atlanta, with transactions amounting to billions a year. While such lending from a bank with a surplus to another bank that could use the assets would be normal, what was not normal about the transaction was BCCI taking funds from its overseas branches for overnight use by BNL.
BCCI and BNL shared a key figure in common, Alfred Hartmann, who was on the board of directors of both banks and the head of BCCI's secretly controlled Swiss affiliate, Banque de Commerce et Placements (BCP).
Ironically, when BCCI was closed, its Swiss affiliate was almost immediately sold to a Turkish banking group, Cukorova, whose subsidiary, EndTrade, was BNL's partner in the illegal arms sales from the U.S. to Iraq, and part of the federal investigation into BNL.
BCCI's involvement in prostitution arose out of its creation of its special protocol department in Pakistan to service the personal requirements of the Al-Nahyan family of Abu Dhabi, and on an as-needed basis, other BCCI VIPs, including the families of other Middle Eastern rulers.
Several BCCI officers described the protocol department's handling of prostitution to Senate investigators in private, and two -- Abdur Sakhia and Nazir Chinoy -- confirmed their general knowledge of the practice in testimony.
The prostitution handled by BCCI was carried over from practices originally instituted by Abedi at the United Bank, when working with a woman, Begum Asghari Rahim, he cemented his relationship with the Al-Nahyan family through providing them with Pakistani prostitutes.
Among BCCI bank officials in Pakistan, Begum Rahim was reputed to have in United Bank first won the favors or attention of the royal family by arranging to get virgin women from the villages from the ages of 16 to 20. Rahim would make payments to their families, take the teenaged girls into the cities, and there taught them how to dress and how to act, including the correct mannerisms. The women would be then brought to the Abu Dhabi princes. For years, Rahim would take 50-60 of these girls at a time to large department stores in Lahore and Karachi to get them outfitted for clothes. Given the size of Rahim's retinue and her spending habits -- $100,000 at a time was not unusual when she was engaged in outfitting her charges -- her activities became notorious in the Pakistani community generally, and there was substantial competition among clothiers and jewelers for her business.(73)
According to one U.S. investigator with substantial knowledge of BCCI's activities, some BCCI officials have acknowledged that some of the females provided some members of the Al-Nahyan family were young girls who had not yet reached puberty, and in certain cases, were physically injured by the experience. The official said that former BCCI officials had told him that BCCI also provided males to homosexual VIPs.(74)
Intimidation of Witnesses
After his experience with the nationalization of the United Bank in Pakistan, Abedi never forgot the ability of governments to destroy his creations. Bribery and prostitution were two techniques to discourage government inquiry. Intimidation of potential witnesses and whistle blowers was another.
Throughout investigations of BCCI, would-be BCCI whistle blowers have expressed fears for their lives, including Noriega's BCCI banker, Amjad Awan, who told Senate investigator Jack Blum that he would be killed if the details of the limited information he gave the Senate about BCCI were revealed; a second former BCCI official who was a source of Blum; and the two BCCI officials who ultimately testified before the Senate in 1991: Massihur Rahman and Abdur Sakhia.
Both Rahman and Sakhia left BCCI in 1990, together with a few others from the bank in the period when Abu Dhabi was taking active control of BCCI and forcing out those of the original Pakistani group who lacked close ties to the Al-Nahyan family.
These departures came at an especially vulnerable time for BCCI, and the threats to them should they break the code of silence left nothing to the imagination.
In the testimony of Abdur Sakhia, formerly the BCCI official in charge of Latin America and the Caribbean,
When I left the bank in April 1990, we left as a group, about 12 of us, Each one was told you go quietly, if you make any noise, they are going to fix you. I got the word from Naqvi's secretary that if I made any noise, Altman's firm will get me involved in a drug case.(75)
In the account of Massihur Rahman,
I left. Since then, my family and I have been hounded. All sorts of direct and indirect threats have been used, to the extent that Scotland Yard got to know about it and the Guildford police got to know about it . . . and they had special security put around our house and special equipment put in the house for direct access to the police station, and my wife and children were suffering greatly . . . they were being terrorized by these situations and my wife was having to put the children under the bed every night for fear of some physical violence or some gunshots.(76)
It had long been part of BCCI internal lore that erring Pakistani officers in Pakistan could wind up having an accident if they talked about BCCI when they left. In the United Kingdom, another senior BCCI executive, John Hilbery, had told Rahman that there had been a gunshot through his window shortly after he left the bank. As a result, Hilbery decided he would not go to court against BCCI to assert any claims against his former employer, but would simply quietly withdraw.(77)
During the Tampa money laundering case against BCCI, information was received through government sources about potential plans to try to affect the government's case by kidnapping witnesses.(78)
Moreover, in that same case, BCCI retained private investigators to investigate the Customs agents who had brought the case against BCCI, with the investigators ultimately destroying the business of a key informant who assisted in the prosecution of the case. As chief undercover Customs agent Robert Mazur testified:
BCCI, had in fact, retained another investigative firm for the sole purpose of investigating me, and the IRS agent who is the affined to the BCCI searches. That was something that not only happened to me, but also happened to many other people who tried to work on behalf of the Government, and in particular, a citizen who showed tremendous courage to allow the Government to use his business in part as their cover, who later became a victim of malicious statements that were made by the investigators that led later to his financial ruin, and its a shame that that type of thing occurred, but it did.(79)
None of the BCCI officers interviewed by the Senate claimed to have knowledge of a "black network" of intelligence operatives, arms dealers, drug traffickers, burglars, or assassins employed by BCCI, as described in a Time magazine cover-story on BCCI on August 15, 1991. They declared, to a person, that they did not believe such a network existed at the bank. However, several suggested that if the black network were recharacterized as a team of officials carrying out Abedi's most secret missions, then it could exist on a somewhat smaller scale than that characterized by Time, operating out of either BCCI's Pakistani protocol department or its Pakistani BCCI Foundation.
1. Staff interview, Abdur Sakhia, October 7, 1991.
2. Touche Ross, Bank of Credit and Commerce International (SA) in Liquidation, Report on the Activities Undertaken in Luxembourg and the UK Covering the Liquidation Period Up to April 15, 1992.
3. Touche Ross, Report on the Activities Undertaken in Luxembourg and the UK Covering the Liquidation Period Up to April 15, 1992.
4. S. Hrg. 102-350, Pt. 3 pp. 790-791.
5. Blum, S. Hrg. 102-350, Pt. 1, p. 61.
6. Blum, S. Hrg. 102-350, Pt. 1, p. 37
7. Superseding Information, U.S. v. BCCI, Crim. No. 91-0655, U.S. District Court for the District of Colombia, December 19, 1991.
8. Report of Internal Investigation to BCCI, Philip Manuel Resources Group, November 1990, S. Hrg. 102-350, Pt. 2, pp. 387-388.
9. Letter to Whom It May Concern, July 8, 1991 on BCC Canada letterhead.
11. Staff interview, Chinoy, March 9-16, 1992.
12. People v. BCCI, Supreme Court of the State of New York, County of New York, July 29, 1991.
14. Price Waterhouse, Draft Report on Sandstorm SA Under S. 41 of the Savings Act of 1987.
15. Price Waterhouse, Draft Report on Sandstorm SA Under S. 41 of the Savings Act of 1987.
16. Id at 1.
17. Id at 1.
18. Id at 1.
19. Id at 2
20. Testimony of Rahman, S. Hrg. 102-350, Pt. 1, p. 502.
21. Id at 2.
22. Price Waterhouse report to BCCI, Internal Control Report, April 28, 1986, p. 3.
23. Price Waterhouse, Draft Report on Sandstorm SA Under S. 41 of the Savings Act of 1987, p. l3.
24. Touche Ross, Report on the Activities Undertaken in Luxembourg and the UK Covering the Liquidation Period Up to 15 April 1992.
25. Id at 17.
27. Staff interviews, Akbar Bilgrami and Amjad Awan, July, 1992.
28. Staff interviews, Akbar Bilgrami, July 13-14, 1992; Amjad Awan, July 20-21, 1992.
30. Report of Grand Caymans Liquidators to Grand Caymans Court, August 30, 1991, Deloitte Ross Tohmatsu, International Credit and I nvestment Company (Overseas) Ltd.
31. Price Waterhouse, Report to the Director on ICIC Group, June 17, 1991, Sec. 1.
32. Testimony of Rahman, S. Hr. 102-350, Pt. 1, p. 517.
33. Price Waterhouse, Report to the Director on ICIC Group, June 17, 1991, Sec. 1.
37. S. Hrg. 102-350, Pt. 3, p. 737.
38. Testimony of Robert Mazur, S. Hrg. 102-350, Pt. 3, p. 682.
39. Testimony of Grant Smith, Deputy Assistant Secretary of State, S. Hrg. 102-350, Pt. 3, p. 579.
40. Staff interviews, Akbar Bilgrami, July 13-14, 1992.
41. Superseding Information, U.S. v. BCCI, Crim. No. 91-0655, U.S. District Court for the District of Colombia, December 19, 1991.
42. Testimony of Rahman, S.Hrg. 102-350, Pt. 1, p. __.
43. Interview, Abdur Sakhia, October 7, 1991
44. Sakhia, id.
45. Staff interviews with various BCCI officers, October 1991 and July 1992, including Akbar Bilgrami, who worked with Sakhia in Miami in the mid-1980's.
46. Staff interview, BCCI officer, March, 1992. In defense of Sakhia and Rahman, it is notable that neither is the subject of investigation by law enforcement in connection with BCCI's activities, and neither have sought immunity from prosecution, demonstrating substantial limits on their culpability. Both voluntarily provided critically important information about BCCI to U.S. investigators, including the Senate.
47. Price Waterhouse, Interim Report on Results and Operations to BCCI Holdings, September 30, 1989, S. Hrg. 102-350, Pt. 1, p. 279.
48. BCCI Records and customer lists, LACRO, Federal Reserve, Miami.
49. Staff interviews with Abdur Sakhia, October 7, 1991; Nazir Chinoy, March 9-16, 1991; Confidential BCCI informant, March, 1990.
50. See e.g. AP, July 15, 1991.
51. Staff interview, Nazir Chinoy, March 9-16, 1991; BCCI documents, Andrew Young trip to Nicaragua.
52. Chinoy, id.
53. Staff interview, Abdur Sakhia, October 7, 1991.
54. Staff interview, Abdur Sakhia, October 7, 1991.
55. Staff interviews with Sakhia, id., and with Chinoy, March 9-16, 1991.
57. Staff interview, Chinoy, March 9-16, 1992.
58. People v. BCCI, Supreme Court of the State of New York, County of New York, July 29, 1991.
59. Staff interview, Akbar Bilgrami, July 13-14, 1992.
60. Staff interview, Chinoy, id.
61. Testimony of Alan Kreczo, Deputy Legal Adviser, Department of State, S. Hrg. 102-350, Pt. 3, p. 599.
62. S. Hrg. 102-350 Pt. 3 p. 601.
63. BCCI LACRO documents in S. Hrg. 102-350 Pt. 1 pp. 126-162.
65. Internal Customs source, April, 1992.
66. See e.g. Financial Times, November 13, 1991, p. 6.
67. Testimony of Laurence Pope, Associate Coordinator for Counter-Terrorism, Department of State, S. Hrg. 102-350, Pt. 3, p 580.
68. Abu Nidal's Terror Network, U.S. Department of State, S. Hrg. 102-350, Pt. 3, pp. 640-641.
69. Testimony of Pope, id, at 581.
70. See Testimony of Pope, id., at 581; staff interviews.
71. Loan Application to the Overseas Private Investment Corporation, submitted by Roydan (Antigua) Limited.
72. OPIC Documents provided to Subcommittee, July, 1990; Testimony of Bert Lance, S.Hrg. 102-350, Pt.3 pp. 44-46.
73. Staff interview, Nazir Chinoy, March 9-16, 1991; see also account of Sakhia, October 7, 1991; practice described by other anonymous BCCI officers to Senate staff.
74. Staff interviews, U.S. investigator, February, 1992.
75. Sakhia interview, October 13, 1991
76. Testimony of Rahman, S. Hrg. 102-350 Pt. 1 p. 256.
78. Testimony of Robert Mazur, S. Hrg. 102-350, Pt. 3, p 692.
79. Id at 692.