Uncle Sam's complicity exposed as BCCI scandal unravels BCCI

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SOCIALIST ACTION NOVEMBER 1991 7 Founded by Pakistanis and Arabs in 1972, BCCI grew in 19 years into a multi-national giant with 350 branches in 70 countries. The United States was not one of those countries—officially, that is. Federal law and Wall Street's opposition bar these "upstart" Arabs and Pakistanis from owning American banks.

However, as an "offshore" bank with a branch in the Cayman Islands and agencies in Florida, BCCI could still do a lot of business in this country. Much of it concerned the laundry business—not clothes, but money. Suitcases full of dirty drug money, collected from all over the United States, could be moved through BCCI international channels and emerge as clean, untraceable bank deposits.

In 1988, the Internal Revenue Service (IRS), Customs Service, and the U.S. Attorney's office in Florida convicted six BCCI officials on laundering charges. In probing further into BCCI affairs, investigators found incriminating evidence that they rushed to their superiors in Washington.

They discovered that BCCI secretly controlled First American Bank in Washington, D.C.; a small bank in Encino, Calif.; and the First National Bank of Georgia. But the response to this news in Washington was a big yawn.

Since 1983, various federal agencies had beard rumors of malfeasance by BCCI officials, but no investigation was launched. An IRS investigator who wanted to pursue the accusations was told to lay off.

The money-laundering charge was settled by a plea bargain—a fine, but no jail time for anyone. This left the local BCCI connections intact. When Florida authorities sought to close down their operations in that state, a Justice Dept. official told them to leave BCCI alone.

In December 1988, an IRS official in Florida made a phone call to Federal Reserve officials reporting various BCCI scams and frauds. The officials took no action because "reports must be in written form."

Now that BCCI has collapsed, congressional committees are asking questions. Why was the administration shielding this "Bank of Crooks and Criminals?" How could the managers of First American Bank not be aware over a span of nine years that BCCI controlled their bank?

LINES They admitted before the committee that they spoke to BCCI officials almost daily.

Adherence to two principles contributed to the phenomenal growth of BCCI. Offer financial services for almost any illegal operation a government or individual will pay for, and buy the services of strategic people wherever the bank operates.

But strategic people do not come cheap. Clark Clifford and his law partner, Robert Altman, made $IO million dealing in their bank's stock with money borrowed from BCCI. They made more millions from fees for legal work for BCCI.

For less money, BCCI hired the best lobbyists in Washington. With their skills honed by service to the S&L crooks, these influence-peddlers could halt any hostile moves against BCCI.

A more subtle means of gaining friends in high places was through hefty contributions to worthy charities. They gave $8.8 million to foundations headed by ex-President Jimmy Carter. This may have been a ploy to ease the way to the National Bank of Georgia, owned by Carter's associate, Bert Lance.

Money alone would not have preserved the coverup for nine years if the White House had not supported it. Who could believe that the Federal Reserve-the banks' watch dog-did not know what BCCI was doing right on their doorstep?

The BCCI was too useful to the CIA, FBI, and other conspiratorial bodies to be put out of business. Perhaps laundering drug money in Florida was a no-no, and had to be stopped. But the scams and frauds that robbed thousands of little people overseas bothered no one in Washington.

The $23 billion in funds scattered about the world so freely was deposited in BCCI banks by small-business people and peasants in India, Africa and Latin America, and by Asian immigrants in Europe. They were proud to put their money in "their own" Third World bank.

These deposits were not invested in productive enterprises. Loans were made to shady characters who had no prospect of paying them back. Good money followed bad. The Bokal shipping company borrowed at least $250 million in chunks of $70 to $80 million. The latter loans were made to pay accrued interest, which amounted in 1988 to $395 million. Something had to give.

Because BCCI was worldwide, with no real center of command, it was possible to hide losses through "creative financing." The Wall Street Journal reports, "BCCI did not have an infinite supply of capital. It had to start inventing some. ... This was a full time occupation which involved the manufacture of documentation... concealment of funds flow, etc."

Meanwhile, other loans were made to influential friends of the bank. Auditors traced $2 billion in loans to sheikhs and others, with no record of repayment. An investigator spoke of "one cover up heaped upon another-of losses breeding frauds which in turn bred new frauds."

Authorities in London were aware of much of this, but they did nothing as the situation deteriorated. As in Washington, prominent Britons on the BCCI payroll blocked investigations. Suddenly, on July 5, 1991, the Bank of England, which regulates banks, shut down the London BCCI.

This wiped out the savings and current accounts of thousands of minority people in Britain. The effect was so devastating on minority businessmen that a British court delayed the execution of the order for four months.

Sheikh Zayed, Sultan of Abu Dhabi and one of the world's wealthiest men, is nominal owner of BCCI. He complains the British gave him no opportunity to recapitalize the bank with his millions. He sees the hand of British imperialism that does not want any Third World Bank to grow to the point where it could challenge Western financial institutions. It is doubtful that even the Sheikh's millions would be enough to make BCCI solvent. This "Bank of Crooks and Criminals" became less a bank and more an international conspiracy.

Spreading money around may have hooked individuals, but never bought acceptance by the banking fraternity. BCCI was "that Arab bank " to be used only when there was some dirty deal to be pulled off or big profit to be made."

Crooks and criminals ran BCCI, but American and British crooks and criminals in high places conspired with them. The losers are the millions of Third World people who have lost their money and their hope.

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