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Scandals Is That All There Is?
B.C.C.I. pleads guilty to criminal charges and forfeits $550 million, but individual culprits are still on the loose
By JONATHAN BEATY AND S.C. GWYNNE
Dec. 30, 1991
It was the ultimate package deal, a grand compromise designed to clean up one of the world's messiest piles of financial wreckage. Bank liquidators, acting on behalf of the moribund Bank of Credit & Commerce International, marched into a crowded Manhattan courtroom last Friday and settled, in one unexpected swoop, all U.S. criminal charges outstanding against B.C.C.I. as a corporation. The bank, which in the U.S. is now essentially just a hollow shell, pleaded guilty to federal and state charges of racketeering, fraud and money laundering. The liquidators agreed to surrender virtually every penny of B.C.C.I.'s assets in the U.S., a total of $550 million, which represents the largest criminal forfeiture in history.
The guilty plea, hammered out during four months of intense negotiations among banking authorities and prosecutors in Washington, London and Luxembourg, was designed in part to impose some order on the worldwide scramble to lay claims to B.C.C.I.'s remaining assets. So far, auditors have found only $1.5 billion in the coffers of a bank that once held $22 billion in deposits. "We felt we could duke it out for years, or we could accommodate each other. I think we found a fair arrangement," says George Terwilliger, the acting Deputy U.S. Attorney General.

Half of B.C.C.I.'s forfeiture has been allocated to a worldwide fund to compensate innocent depositors who lost their money when the bank collapsed. The remaining half has been reserved for a U.S. contingency fund to shore up financial institutions that B.C.C.I. secretly controlled. Washington regulators fear that the already depleted guarantee fund at the Federal Deposit Insurance Corporation could be endangered by banking problems at the Independence Bank in Encino, Calif., and at Washington's First American. Their concern was so acute that authorities immediately transferred $5 million of the forfeited money to the Encino bank to prevent its collapse.

But far more money is needed to compensate victims worldwide, so authorities are seeking a much bigger bailout. Their intended source: the ruler of Abu Dhabi, Sheik Zayed bin Sultan al-Nahayan, who is now the major shareholder in B.C.C.I. For months banking authorities and liquidators have tried to talk Zayed into donating billions of dollars to cushion the losses of depositors around the world so they might recoup 30% to 40% instead of the 10% now expected. B.C.C.I.'s agreement with the U.S. may pave the way for that bailout.

Zayed, who has already poured billions into the bank, shows signs of wanting to make the best of a bad situation by reviving portions of B.C.C.I. as a bank based in the Middle East. "What B.C.C.I. was all about is the infusion of Arab dollars into the U.S. and the political influence that goes with it," says a B.C.C.I. investigator. Just what Zayed might demand for pouring more billions into what's left of B.C.C.I. remains unspoken, but Abu Dhabi has made it clear in the past that it would prefer some sort of restructuring to outright liquidation.

While the bank is shut down in most countries, B.C.C.I. is still operating in Pakistan and Switzerland, as well as in Zambia and Zimbabwe. In other countries, individuals or entities with close ties to the old B.C.C.I. seem to be buying up the bank's branches. At the same time, several Middle Eastern banks are taking over the bank's role as a promoter of weapons deals, sources have told TIME.

B.C.C.I.'s corporate guilty plea will not slow down the pending indictments of individuals connected to the bank. The investigation has speeded up now that cooperation has improved between federal officials, led by U.S. Attorney General William Barr, and state prosecutors in New York, led by Manhattan district attorney Robert Morgenthau. For months Morgenthau's unprecedented worldwide probe had been running rings around the foot-dragging Justice investigation. Plenty remains to be uncovered. A grand jury in Manhattan is looking into the roles played in B.C.C.I.'s schemes by First American's ex- chairman, former Defense Secretary Clark Clifford, and his law partner, Robert Altman.

Political bribery is another ripe area of investigation. In Georgia last week Governor Zell Miller and house speaker Tom Murphy testified before a federal grand jury probing reports of payoffs to legislators for passing a law enabling First American to buy the National Bank of Georgia when both banks were controlled by B.C.C.I. A report of those alleged bribes originally came into the hands of the CIA in 1986, according to TIME sources.

Connections to B.C.C.I. are proving to be politically sticky. Last week the Bush Administration denied any knowledge of a business relationship between Charles Hostler, the U.S. envoy to Bahrain, and B.C.C.I. An NBC News report had linked Hostler, a major G.O.P contributor, to a Connecticut real estate development controlled by reputed B.C.C.I. front man Mohammed Hammoud. Hostler says he became involved in the Connecticut project because of friendship with Hammoud and did not profit from it, and denies ties to B.C.C.I. Hammoud's connections, however, seem clear. Internal B.C.C.I. documents examined by TIME show that the bank planned to move $5 million of Hammoud's loans -- including those related to the Connecticut project -- to "offshore" branches to avoid examination by regulators. Hammoud will not be able to clear matters up: the London-based businessman reportedly died in May 1990 under mysterious circumstances.

While the surprising guilty plea last week settled many issues, it may have been only a curtain raiser for new disclosures on how the corrupt bank really operated.

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