Dirty Money

When the Bank of Credit and Commerce International was closed down on 5 July 1991, a million people throughout the world lost their deposits. Many of the losers were from the Third World; small businessmen who had struggled to make a living in countries other than their own, and who had been impressed by BCCI’s multilingual staff and its often-trumpeted concern for the starving millions.

No previous bank collapse has caused so much distress. Many of the Shocked depositors believed for a short while that their tragedy was the result of an act of God, or at least of some financial misfortune, such as a Stock Exchange crash, which could not have been foreseen. But as the months dragged on without a penny compensation, and as the articles and books and reports started to be published, the astonishing truth emerged. The BCCI scandal had nothing to do with misfortune. It was the result of systematic fraud, conducted by what the New York District Attorney called ‘a corrupt and criminal organisation’ over a period of nearly twenty years.

The mastermind behind the fraud was Agha Hassan Abedi. Abedi had what is known inside banks as charisma and outside banks as a nice line in drivel. He ‘inspired’ his staff to work hard by writing them homilies about God and loyalty. ‘It is in the medium of giving,’ he wrote, ‘that life flows into life, and God’s divinity in all its embracing fullness, shines and rains softly, smoothly and blissfully on His Creation.’ That sort of thing impressed the entrepreneurs who made their names in the Eighties. Anita Roddick, for instance, whose Body Shop is one of the few such enterprises which has not yet gone bust, proudly quoted a slice of Abedi gibberish in her modest account of her magnificent achievements. Abedi’s blarney was always aimed upwards, at the great minds and hearts of world society, and for that reason was consistently successful.

His insights were few, but he made the most of them. First among them was the understanding that there was an awful lot of money floating around in the Gulf sheikhdoms. From his native Pakistan, Abedi made a bee-line for Abu Dhabi, the richest of those states, and wove his ridiculous spell round the billionaire Sheikh Zayed and the millionaire families who formed his court. In exchange for the millions necessary to start the bank which was his life’s dream, Abedi could provide anything those families wanted. Senator Kerry’s report reveals:

The prostitution handled by BCCI was carried over from practices originally instituted by Abedi at the United Bank, when, working with a woman, Begum Ashgari Rahim, he cemented his relationship with the Al-Nahyan family of Abu Dhabi through providing them with Pakistani prostitutes ... She first won the favours or attention of the ruling family by arranging to get virgin women from the villages from ages 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 appropriate to their intended roles as short-term sexual companions for the sheikhs ... There was substantial competition among clothiers and jewellers for her business.

This sort of thing worked wonders, and before long the Abu Dhabi sheikhs were putting up the money for the new bank. But Abedi was not satisfied with a nice little earner in the Middle East. He wanted to win to his divine mission the most important people in the Western world. The basic principle which drove him on was that important people make the important decisions, and even the most important people have their price. The price for Bert Lance, a close friend of President Carter, and briefly a member of Carter’s Administration, was obvious. Poor Bert had got into trouble with his own bank at home in Georgia and owed about three million dollars. Abedi lent him the three million. It was never repaid of course, but the two men were firm friends for life. Another much more distinguished convert was Clark Clifford, the beautifully-spoken lawyer who had been a friend of the Kennedys and Defence Secretary to Lyndon Johnson. When Abedi first met him Clifford was looking for a cause – especially if it had a few million dollars attached to it. Adams and Frantz describe in detail one deal in which Clifford and his partner Robert Altman, well-known in Washington social circles since he was married to Wonderwoman, bought and sold shares through BCCI and ended up with $9.8m in their pockets. Kerry reveals that Clifford’s and Altman’s firm was paid some $45m in legal fees by BCCI. That sort of money persuaded Clifford to help BCCI to take over the biggest bank in Washington, through a number of not so subtle devices, despite being told by US Government regulators that they could do no such thing.

Then there was President Carter himself. After being beaten in the 1980 Election by Ronald Reagan, Carter had an understandable yearning to be taken seriously, and Abedi took him very seriously indeed. The holy banker flew round and round the world with the exPresident so that both men could declare their shared faith in the importance of Third World development – and conduct a bit of business on the side. When the Carter Centre opened in Atlanta ‘to study Third World issues’ Abedi lobbed in a vital half-million dollars. Senator Kerry concludes: ‘President Carter became closely associated for a decade with a bank that constituted organised crime. This out-come was not in the interests of the United States.’ Another Third World enthusiast from Georgia was Andy Young, Carter’s former Ambassador at the UN. Mr Young, too, was swept off his feet by Agha Hassan Abedi, and during his two terms as Mayor of Atlanta took a consultancy fee of $50,000 a year from BCCI. During that time he travelled widely on BCCI jets, as did so many other important people especially from the Third World itself. In South Korea, in Nigeria, in Jamaica (which impoverished island was at one time almost entirely owned and controlled by BCCI), in Brazil (the Brazilian Ambassador to the United States became one of BCCI’s most important employees, especially when he teamed up with the enormously influential Kissinger Associates), in Peru, where at one stage BCCI managed to ‘hide’ all the government funds in another country after slipping the requisite $3m into the pockets of state bank officials, in Argentina, in Paraguay, in China, India and the Far Last top people of every kind flocked to Mr Abedi, captivated by his charisma, his reforming zeal – and his largesse.

Like that other charismatic zealot, Robert Maxwell, Abedi made a special fuss of prosecutors, attorneys general and ministers of justice. So successful was he in this sphere that very few law offices bothered even to investigate the source of BCCI’s funds. Much of this, it now turns out, was more likely than not to have been ‘dirty money’ from the sale of cocaine or, far more deadly, of armaments. Two of Abedi’s favourite dictators in this field were Manuel Noriega, the drug-smuggling President of Panama whose airline tickets on one BCCI-sponsored spree down the West Coast of the United States cost $30,000; and Saddam Hussein, who managed not to pay back a loan of $12m on the grounds that he had a ‘special relationship’ with BCCI, in that it did not require him to make any special repayments.

All this generosity to important people had a purpose. It was to secure government funds for BCCI which would give a solid appearance to the bank’s balance sheet and cut down the likelihood of investigation. Above all else, Abedi detested investigation – and not just because of all the money-laundering, drug-smuggling and arms traffic in which his bank was involved. The pillar on which he built his bank was the well-tried fraud known in the US after a former rogue called Ponzi. Simply put, Ponzi – and Abedi – borrowed money from one bank to pay back a loan from another. The device works perfectly well until someone rumbles it. That someone has to be paid off. Then others find out and they have to be paid off too. Suddenly, there are people all over the world being paid off in huge dollops of cash which the bank doesn’t have – and the whole rotten edifice collapses.

British readers will be tut-tutting by now, remarking perhaps what nasty things can go on in what Margaret Thatcher’s well-bred Minister of State, Alan Clark, tastefully described as Bongo Bongo Land. They should read this, from Kochan and Whittington’s little book: ‘BCCI made hay out of the London connection. Arabs from the newly-enriched Gulf States came to the UK to enjoy the casinos, buy property, educate their children, shop and race their horses, and they banked in droves at the BCCI branches in their favoured prosperous locations – Marble Arch, Kensington, Mayfair and so on. Between 1973 and 1977, the number of BCCI branches in the United Kingdom grew from four to 45.’

In fact, the centre of BCCI was good old Britain where everything is, to coin a phrase, safe as the Bank of England. Here was Abedi’s favourite home, in leafy Harrow, his favourite place of business, his favourite famous friend, solid, dependable former prime minister James Callaghan, who developed for the cranky banker what he called ‘a warm personal regard’ – and his favourite regulator, the Bank of England. Abedi used to complain to his progressive friends that the Bank of England would never let BCCI into its ‘club’, but in truth he was delighted with the co-operative attitude of the Bank.

These two books about BCCI are rapidly-constructed and competent narratives by journalists (Adams and Frantz from the United States, Kochan and Whittington from Britain). Adams and Frantz give a thriller-like account of the ‘sting’ with which the US Customs first brought BCCI officials to the Florida courts. But neither book can deal with the question which should most disturb British readers: why and how did a corrupt bank which was regulated by the Bank of England get away with it for so long? That question is dealt with directly by these two government reports. The Kerry Report, which is as yet unavailable in Britain, is a magnificent document: a huge, toughly-written indictment not just of the corruption and filth in BCCI but of the breathtaking complacency of the authorities on both sides of the Atlantic.

Senator Kerry believes (though Senator Brown does not always agree) that his investigation was deliberately and continually impeded by the Bush Administration. The close proximity of Bush to Irangate and now to Iraqgate makes that seem very likely. For British readers, however, the Senator’s report is at its most powerful when it deals with the Bank of England. These are Kerry’s (very striking) conclusions: 1. The Bank had ‘deep concerns’ about BCCI from the late Seventies but ‘sought to avoid having to conduct the regulatory oversight’ necessary. 2. In 1988 and 1989, the Bank ‘learned of BCCI’s involvement in the financing of terrorism and in drug money laundering’ but ‘declined to exercise the broader supervision which it had the ability to exercise’. 3. In the spring of 1990, the Bank knew of substantial loan losses and had evidence of fraud. The response was ‘not to close BCCI down but to prop it up’. 4. In April 1990, the Bank ‘relied on British secrecy and confidentiality laws to reduce the risk of BCCI’s collapse. As a result innocent depositors and creditors who did business with BCCI after that date were denied vital information that could have protected them against losses.’ 5. The Bank’s decision in 1990 to permit BCCI to move its headquarters and records out of London ‘had profound negative consequences all over the world. Essential witnesses and documents were handed over to Abu Dhabi, which has not given them up to investigators.’ This was a ‘costly and likely irretrievable error on the part of the Bank of England’. Two further nails were hammered into what ought to be the Bank’s coffin. First, the decision to close BCCI in July 1991 had nothing to do with the Bank’s own judgment. The Bank of England was pushed into it by the US authorities, who, later that month, unleashed a huge fraud indictment against BCCI which is still in progress. Second, from April 1990, ‘the Bank of England had ... inadvertently become partner to a cover-up of BCCI’s criminality’.

It is hard to imagine a more savage indictment of any authority, let alone one which purports to safeguard banking practices in the banking centre of the world. Kerry cannot contain his indignation, not so much at the dithering and incompetence of the Bank, though they were staggering, but at the secrecy laws and fetish for confidentiality which allowed the BCCI scandal to be covered up. He has overwhelming proof that arms traffickers and terrorists used BCCI, and that intelligence agencies on both sides of the Atlantic co-operated with the bank, sometimes to track down the wrong-doers, sometimes to collude with them. He reveals that the first people allowed into the BCCI London headquarters after the closure was announced were officers from MI5 who swiftly ‘sealed’ a large quantity of documents which have never been made available to the Kerry inquiry. He notes that British judges, sitting in secret, have intervened to resist the disclosure to his inquiry of documents and bank accounts which would shed a great deal of light on the success of BCCI in Britain, and the share in that success of intelligence spooks and armaments bandits.

Very little attention was paid in the British media when the Kerry Report was published at the end of September. Price Waterhouse, BCCI’s auditors, who also get a terrible drubbing from the report, put out a baleful statement to the effect that they had not given evidence to Kerry (though Robert Bench, a partner in Price Waterhouse US, was a principal witness). When a report on the same subject by Lord Justice Bingham was published in October, editors and ministers seized it eagerly, searched it for any direct indictment of the Bank such as Kerry had delivered but found nothing so forthright. Because Bingham did not call for anyone to resign or be disciplined, they concluded, everything and everyone could stay in place. Bingham’s report is written in a quite different style from Kerry’s. It shows no shock or outrage, as though bank frauds of this magnitude are really things which gentlemen ought to take in their stride. Well-bred British judges naturally shy away from the stridency of bumptious senators from Massachusetts. Was not Lord Justice Bingham, after all, at public school with one of the Price Waterhouse partners, Tim Hoult, who gave evidence to him?

The Bingham Report, moreover, has large holes in it caused by the secrecy and confidentiality which Kerry denounces. A glorious example is Section F, headed ‘The Intelligence Agencies’. The section starts: ‘For security reasons, the involvement of the intelligence agencies is described in a separate appendix, Appendix Eight.’ Feverishly, the reader searches for Appendix Eight. It is not there! Back then to Section F. After the reference to Appendix Eight, there is a demure asterisk corresponding to another asterisk at the bottom of the page. Published there, for all to see, are three words: ‘not being published’. Not being published! Why? The allegation is that terrorists and arms traffickers used British banks to conduct their illegal trade – and that the intelligence services were involved. In the United States, elected senators were allowed to pursue that allegation, find it partly proved and publish their findings. In Britain, such disclosure, in an inquiry set up by an elected Parliament, is out of the question. But wait. Anyone who concludes that the Bingham Report is a straight cover-up for the Bank is making a big mistake.

Despite its moderate tone and its reluctance to condemn out loud, the report is a long catalogue of carelessness on the part of the Bank, the auditors and the other agencies responsible. Again and again, Bingham produces evidence of reports to the Bank of strange goings-on at BCCI, all of which were cynically ignored. Bingham reports that he finds the Bank’s reaction ‘hard to understand’; that he is ‘puzzled’; that he ‘cannot accept’ the official explanation. Perhaps the summit of his laid-back approach is reached, appropriately enough, in an addendum when he discusses what the Bank told the Treasury about BCCI : ‘When, on 4 April 1990, BCCI was described as “in many ways remarkably successful”, the Treasury could scarcely have deduced that a loss of $49m for 1988 was going to be followed by one of $498m for 1989. When on 5 April 1991, the Bank was reported to be happy about the financial position of BCCI, the Treasury could scarcely have appreciated that the Bank was technically insolvent. This picture of BCCI which the Bank gave the Treasury during this period was in my opinion misleading, both in what was said and more particularly in what was not.’ The Bank, in short, was lying. It was lying directly to cover up the real state of affairs at BCCI. But Bingham’s very next sentence is: ‘The Bank had no intention to mislead.’ This is so preposterous that for a time I took it as an editing mistake where the word ‘no’ had been wrongly inserted. Obviously the Bank intended to mislead. That was its policy – to keep things quiet in the hope they could be sorted out in secret. The whole thrust of the Bingham Report is to provide the facts to incriminate the Bank and then to flounce away from incrimination.

Enormous relief swept over the British Government when they read Bingham. The Chancellor of the Exchequer, Norman Lamont, who was educated at Cambridge and trained at Rothschild’s, told the House of Commons he had every faith in Robin Leigh-Pemberton, Governor of the Bank of England, a personal friend of the prime minister who appointed him, Margaret Thatcher. When the House of Commons debated the Bingham Report on 6 November, Lamont didn’t even bother to speak. His place was taken by his Economic Secretary, Anthony Nelson, who was educated at Cambridge and trained at Rothschild’s. Nelson made a speech of monumental complacency to the effect that there was always a rotten apple in the barrel and the Government was resolutely determined to leave no stone unturned or avenue unexplored to ensure that nothing of the kind ever happened again.

As is plain from the Kerry Report (which only one MP who spoke, Peter Hain, appeared to have read), BCCI was not just a rotten apple in the barrel. The barrel has been stinking for at least half a century. In the Sixties we had the Bank of Sark affair (£100m stolen) and Bernie Cornfeld, who with Robert Vesco, swiped hundreds of millions of dollars from investors in a ‘mutual fund’ modestly called the Fund of Funds. Cornfeld pioneered the dual use of the offshore trust and the Luxembourg bank which Abedi made into an art form. In the Seventies and Eighties the banking world was shaken by the gigantic fraud set up by Roberto Calvi and Michele Sindona of the Banco Ambrosiano and the Franklin Bank. Like Abedi, Calvi and Sindona felt they were on the side of God – and had not a little help in their endeavours from the Vatican. Abedi’s techniques were also used, almost to the letter, by Michael Hand in the intricate drug and money-laundering operation at the Australian Nugan Hand Bank. Perhaps the best example comes once again from dear safe old Britain. When the Johnson Matthey Bank went bust in 1985, the Bank of England was so terrified of the consequences that it quickly formed a ‘lifeboat’ – i.e. had a whip-round among the clearing banks to bail out the depositors. Then a committee was set up to leave no stone unturned or avenue unexplored to ensure that nothing of the kind would ever happen again. It was called the ‘Leigh-Pemberton Committee’ after the Governor of the Bank of England – the man who presided over the BCCI disaster, which followed almost immediately.

The problem is not that a few crooks escaped the net. It is that the net itself welcomes, encourages and bank-rolls the crooks. The free-enterprise fanaticism which has swept the intellectual and political world in the last twelve years – free enterprise policed by free entrepreneurs – was followed, inevitably, by the most untrammelled corruption; and the loving way in which Abedi and his crooks were cosseted and caressed by famous banks, famous politicians and famous lawyers shows just how firmly-rooted that corruption is.