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The Riyadh Connection
Behind the Clifford headlines lurks the real news about B.C.C.I.: growing evidence that the bank provided secret services for Saudis and U.S. intelligence agents
By JONATHAN BEATY AND S.C. GWYNNE
Aug. 10, 1992
The scene that captured the news last week was of stately superlawyer Clark Clifford, that icon of Washington power brokering for five decades, clutching his fedora and lowering his well-worn face in a Manhattan courtroom. There he and his younger partner Robert Altman faced charges that they took millions in bribes to act as front men for the notorious Bank of Credit & Commerce International. But even more significant may be a legal move related to the grand jury indictments of last week: Saudi Sheik Kamal Adham, the longtime head of Saudi Arabian intelligence and one of the most powerful men in the Middle East, entered a guilty plea to charges that he conspired to help B.C.C.I. secretly purchase control of First American, the bank that Clifford and Altman headed. Adham, a key director of both B.C.C.I. and First American, agreed to pay a $105 million fine and to cooperate in the widening probe.
Adham is just the latest of several Saudis with intimate ties to the royal family who have been dragged into the B.C.C.I. investigations. Also indicted by Manhattan District Attorney Robert Morgenthau was Ghaith Pharaon, the most flamboyant of the Saudis, who bought the National Bank of Georgia from Bert Lance, President Carter's onetime budget chief, and later sold it to First American. Last month Morgenthau moved against Sheik Khalid bin Mahfouz, who headed the largest commercial bank in Saudi Arabia. Still another enormously rich Saudi remains under investigation: Abdul Raouf Khalil, a shareholder in both B.C.C.I. and First American. The barrage of charges against these prominent Saudis poses a sticky problem for the Bush Administration, one that threatens to uncover an embarrassing pattern of legal and illegal intelligence operations as well as arms and money transactions involving Arab states, Israel and the U.S.

Morgenthau has also been taking a tough line with another U.S. ally in the region, Sheik Zayed bin Sultan al-Nahayan, ruler of Abu Dhabi and President of the United Arab Emirates. "Abu Dhabi has been promising cooperation for a year, but we've gotten nothing out of them," the district attorney said last week. His frustration is understandable: Zayed, now the owner of the tattered remains of B.C.C.I. founder Agha Hasan Abedi's erstwhile $20 billion banking empire, has placed 18 of the bank's top officials -- all of them potential witnesses who could help explain the workings of the criminal operations -- under house arrest in Abu Dhabi while he sits on most of the bank's records.

In testimony last week before a subcommittee chaired by Senator John Kerry, a convicted former B.C.C.I. employee fingered Zayed as one of the phony stockholders in B.C.C.I.'s purchase of First American. The witness, Akbar Bilgrami, testified that he had personally read the loan agreements by which B.C.C.I. lent the money to Zayed to buy First American shares. If true, this means that Zayed violated the same banking laws that Adham and Mahfouz are charged with breaking.

According to an American expert with close ties to Riyadh, Saudi King Fahd is "apoplectic" about the aggressive American probe. The Arabs, says this source, "are appalled and prefer to believe the B.C.C.I. investigation is a Zionist plot." Though the New York indictments differ little from ones handed down by the U.S. Justice Department, it has been New York's Morgenthau who has set the agenda. The Saudis claim that his father, former Treasury Secretary Henry Morgenthau, was instrumental in persuading President Harry Truman to recognize the new state of Israel. (The theory is shaky: ironically, it was a young Clark Clifford who, as Truman's political counselor, did most to win recognition for Israel.)

But the royal fury in Saudi Arabia is fed by more than just Arab-Jewish enmity and the Saudis' abhorrence of publicity. B.C.C.I. flourished because it could provide cover for deals between nominal enemies, especially in the arms trade. The demand for these services was particularly keen in the Middle East, especially when Israel and Arab states were involved. When American arms destined for Iran and Iraq passed through Israel, for example, B.C.C.I. was frequently the broker and financier. One such transfer involved Iraq's acquisition of Silkworm missiles from China in the mid-1980s. Fahd, worried that Iran was winning its war with Iraq, sought missiles for Saddam Hussein's regime, but was rebuffed by the U.S. and France. B.C.C.I. stepped in and brokered a deal with China as a supplier of the rockets and Israel as a provider of the high-technology guidance systems.

When oil profits ebbed in the early '80s, Abedi and the bank turned increasingly to weapons dealing, drug-money laundering and capital flight to keep operations afloat. The bank also became enmeshed in intelligence operations with several nations, including the U.S., which effectively shielded Abedi from unwelcome scrutiny as he perfected bribery and extortion as business tools. B.C.C.I. thereafter grew faster than ever.

There was, for example, the highly sensitive question of B.C.C.I.'s direct involvement in the secret arms-for-hostages deals in Iran during the 1980s, in which it acted as a broker and financier of weapons sales. Ollie North maintained three accounts at the B.C.C.I. Paris branch, and B.C.C.I. was used to transfer money to the contras.

B.C.C.I. was similarly entwined in another key U.S. intelligence operation of the 1980s: the supply of arms and money to the Afghan rebels. While such ! clandestine support was legally condoned, B.C.C.I. officials have told reporters that CIA Director William Casey, in a series of 1984 meetings in Washington with Abedi, struck a deal that included off-the-books operations never reported to the U.S. Congress.

B.C.C.I.'s connections to American intelligence operations resulted in a paralysis of enforcement. In January 1985, for example, long before U.S. Customs agents stumbled across B.C.C.I. in Florida, the CIA hand-delivered a secret report, described within the CIA as "dynamite," to Ronald Reagan's Treasury Secretary Donald Regan. According to CIA testimony before the Kerry committee, the report stated that B.C.C.I. secretly owned First American. Regan's intelligence aide sent back word that they already knew about B.C.C.I. and were not interested in learning more.

In the current probe of Saudi Abdul Raouf Khalil, investigators have complained that when Khalil was first sought by Federal Reserve examiners, the State Department claimed that he either didn't exist or couldn't be found. Knowing that Khalil was a high Saudi intelligence offical and the current liaison to the CIA the investigators advised the Riyadh embassy to "look for him down the hall in the CIA station chief's office." Khalil was quickly located and served with a subpoena.

There is evidence that the Reagan Administration knew early on about B.C.C.I.'s criminal activities. Dr. Norman Bailey, a former member of the staff of the National Security Council, has told TIME that in 1982, the NSC began receiving a stream of intelligence reports detailing the bank's arms trafficking, drug involvement, support of terrorists and role in the transfer of U.S. technological secrets to countries such as Pakistan and the Soviet Union.

Bush has insisted that he did not know Kamal Adham, who was running Saudi intelligence at the same time Bush was CIA director. The question was raised last year when the White House was embarrassed by the revelation that Adham had hired chief of staff John Sununu's ex-aide Edward Rogers for a $600,000 fee. A senior intelligence officer stationed in Saudi Arabia during those years told TIME last week that Bush's denial is not credible. "It's flat impossible," he says.

If he cooperates as promised, Adham will prove an interesting witness in the deepening B.C.C.I. probe. But that which is interesting to American prosecutors is setting teeth on edge in Saudi Arabia, and elsewhere.

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