BCCI Kerry-Brown Senate Report

"The BCCI Affair: A Report to the Committee on Foreign Relations, United States Senate" (Senate Print 102-140) was a December 1992 report co-authored by Senators John Kerry (D-Massachusetts) and Hank Brown (R-Colorado) on the investigation by the Senate Foreign Relations Subcommittee on Terrorism, Narcotics, and International Operations, the Kerry Committee, into the Bank of Credit and Commerce International (BCCI). It documented the bank's fraud, money laundering, bribery and secret acquisition of American banks, its relationships with intelligence agencies including the CIA, and the conduct of the regulators and prosecutors who dealt with it.¹²

Investigation Origins

The subcommittee's inquiry began in February 1988, during a hearing on the drug trafficking and money laundering of General Manuel Noriega, at which BCCI was identified as facilitating his crimes. In March 1988 the Foreign Relations Committee authorized subpoenas to BCCI and to the bank officers who handled Noriega's assets, but their service was delayed at the request of the Justice Department and the Customs Service so as not to interfere with Operation C-Chase, the undercover sting in Tampa. The subcommittee deposed Amjad Awan, BCCI's manager for Latin America and Noriega's banker, shortly before his arrest in the sting in October 1988, and a second former BCCI officer afterward.²

In the spring of 1989 Kerry authorized the subcommittee's departing counsel, Jack Blum, to give what he had developed to the Justice Department; when, in Blum's view, the department failed to follow up, he took it to the Manhattan District Attorney, Robert Morgenthau, whose investigation was "based in substantial part on the leads provided him by Blum and the Subcommittee." Kerry's personal staff continued the inquiry through 1989 and 1990. In January 1990 Kerry criticized the Tampa plea agreement and its 14 million dollar forfeiture as insufficient, and the subcommittee published a report on drug money laundering that raised BCCI's alleged secret ownership of First American. After the Bank of England closed BCCI on July 5, 1991, the investigation resumed with Brown as ranking member; its staff, the report recorded, amounted to "two attorneys, with no budget for travel."²

Structure

The report was published in chapters: an executive summary; an introduction; "The Origin and Early Years of BCCI"; "BCCI's Criminality"; "BCCI's Relationship with Foreign Governments, Central Banks, and International Organizations"; two chapters on BCCI in the United States, covering the takeovers of Financial General Bankshares and the National Bank of Georgia and their consolidation; two on law enforcement, "The Justice Department and the US Customs Service" and "District Attorney of New York"; "BCCI and Its Accountants"; "BCCI, The CIA and Foreign Intelligence"; "The Regulators"; "Clark Clifford and Robert Altman"; "Abu Dhabi: BCCI's Founding and Majority Stockholders"; "Mohammed Hammoud: BCCI's Flexible Frontman"; "BCCI And Georgia Politicians"; "BCCI's Lawyers and Lobbyists"; "Hill and Knowlton and BCCI's PR Campaign"; "Ed Rogers and Kamal Adham"; "BCCI and Kissinger Associates"; "Capcom: A Case Study of Money Laundering"; "Legislative and Policy Recommendations"; and an appendix of matters for further investigation.³

Principal Findings

The executive summary set out sixteen findings. It concluded that BCCI "constituted international financial crime on a massive and global scale," its "unique criminal structure," which it called "an elaborate corporate spider-web" with Agha Hasan Abedi and Swaleh Naqvi "in the middle," having been conceived "for the specific purpose of evading regulation or control by governments." It listed BCCI's crimes as including fraud involving billions of dollars, money laundering in Europe, Africa, Asia and the Americas, bribery, "support of terrorism, arms trafficking, and the sale of nuclear technologies," management of prostitution, tax evasion, smuggling, illegal immigration, and "illicit purchases of banks and real estate." It found that BCCI "systematically bribed world leaders and political figures" in most of the 73 countries in which it operated, and named more than thirty countries where its relationships ranged "from the questionable, to the improper, to the fully corrupt."¹

Money laundering: BCCI provided specialized services for laundering drug proceeds, including those of Medellín traffickers in Colombia, using shell corporations, secrecy havens, front men and nominees, and back-to-back documentation among its own entities.¹⁴ Its former American regional manager, Abdur Sakhia, testified that when BCCI bought a bank in Colombia in 1983, "we knew that all the dollar deposits we would be getting would be drug money."⁵

Arms dealing and terrorist financing: BCCI provided financial services to arms dealers and to the Abu Nidal organization, whose accounts at its Sloane Street branch in London were reported to British and American intelligence by the branch manager, Ghassan Qassem.⁵

Noriega accounts: BCCI managed some 23 million dollars of Noriega's money from its London branches and helped him move it out of reach after his indictments, laundering part of it through its commodities affiliate Capcom.⁵⁶

First American: BCCI secretly acquired First American, the Washington bank holding company, through nominee shareholders led by Kamal Adham, with Clark Clifford and Robert Altman as its chairman and president and as BCCI's lawyers. The report found that Clifford and Altman "participated in improprieties with BCCI in the United States."¹⁷

Iraq: the report's appendix recorded that BCCI "also made loans to Iraq, although of a substantially smaller nature" than those of the Banca Nazionale del Lavoro, and listed the relationship among matters whose further investigation "could produce further understanding of Saddam Hussein's international network for acquiring weapons."⁸

DOJ Obstruction Finding

The report found that "the Justice Department mishandled its investigation and prosecution of BCCI." Customs officials had told Commissioner William von Raab by March 1988 that several BCCI officers were indictable under the racketeering statute, and Tampa prosecutors planned in April and May 1988 to indict BCCI as an institution, but in the fall of 1988 the department did not approve a RICO prosecution, "for reasons that were never explained to the Customs agents." The report found that after a recorded conversation in which Awan described BCCI's secret ownership of First American, prosecutors made "no effort to broaden the case against BCCI," with no attempt to interview Clifford or Altman. The January 1990 plea agreement, negotiated with BCCI's lawyers, the former federal prosecutors Lawrence Wechsler and E. Lawrence Barcella Jr., was decided by the United States Attorney in Tampa, Robert Genzman; the report found that it "kept BCCI alive," discouraged BCCI's officers from telling what they knew, and was followed by the department's ceasing to investigate BCCI entirely.¹⁴

The report contrasted the department with Morgenthau's office, which obtained the Price Waterhouse audits despite resistance from BCCI's lawyers and accountants, the Bank of England, the British Serious Fraud Office and the Justice Department. It stated that the Justice Department's prosecutors "regarded Blum as a 'wacko'" while "the New York District Attorney's office took it seriously, investigated it, and proved it out," and concluded that Morgenthau "not only broke the case on BCCI, but indirectly brought about BCCI's global closure": "the pressure from a single, local prosecutor's office that would not relent when it found evidence of global criminality, proved sufficient to shut down a $23 billion criminal bank operating in some 73 countries."¹⁹

CIA Connections

The report's chapter on intelligence recorded that the CIA first developed information on BCCI in 1979, learned in the early 1980s that it was involved in money laundering, targeted it for intelligence collection from the mid-1980s, and ran "a larger and more comprehensive operation as of 1986, which continued through 1990," producing several hundred reports on the bank. Acting Director Richard J. Kerr testified on October 25, 1991, that the CIA had also used BCCI for intelligence-gathering, which he "characterized... as limited and routine, and undertaken without the knowledge of any person at BCCI"; a Senate Intelligence Committee audit, the subcommittee was told, confirmed that testimony, though the CIA did not allow the subcommittee to read it. Kerr acknowledged that the CIA "had made extensive use of First American for a variety of purposes." He testified that the agency had not been involved with any BCCI "black network," had no knowledge of any use of BCCI for arms sales to Iran or the diversion of funds to the Contras, had no relationship with Agha Hasan Abedi, and had never placed Abedi on a watch list.¹⁰

The report identified two CIA mistakes on the agency's own account: it "failed to provide the critical information it had gathered to the correct users of the information," the Federal Reserve and the Justice Department, and it used both BCCI and First American for its operations "even when the CIA knew that BCCI was as an institution a fundamentally corrupt criminal enterprise." Kerr said he was "not sure it was a bad decision," and Brown replied: "My training was that somebody's supposed to take responsibility... I have a different view of it."¹⁰

The report recorded without adopting them two further claims. On February 23, 1992, NBC News broadcast an allegation that the former Director of Central Intelligence, William J. Casey, had met Abedi secretly every few months for three years at the Madison Hotel in Washington to discuss arms deals with Iran and the arming of the Afghan rebels; the CIA told NBC that a search of its files had found no such evidence. On Afghanistan, the report stated only that BCCI "may have been moving money through the National Bank of Oman to fund the war in Afghanistan," quoting unnamed British journalists who cited a member of the cabinet of General Zia ul-Haq, reported in The Wall Street Journal of October 23, 1991, as saying "It was Arab money that was pouring through BCCI"; BCCI owned 29 percent of the National Bank of Oman. The report found that BCCI was "incontestably used by key Iran/Contra figures to finance arms," including Adnan Khashoggi and Manucher Ghorbanifar, regardless of whether Casey and Abedi concluded any "off-the-books" operation.¹⁰ It concluded that "key questions about the relationship between U.S. intelligence and BCCI cannot be answered at this time, and may never be answered," because Abu Dhabi held BCCI's records and witnesses, a British judge had barred the subcommittee from documents without the permission of depositors such as Abu Nidal, and other documents had been "segregated and sealed by British intelligence (MI-5)."¹⁰

Regulators and Accountants

The report found that the Federal Reserve would not have approved the 1981 takeover of Financial General Bankshares "but for the false statements made to it," and that the Bank of England's regulation of BCCI "was wholly inadequate" and that it withheld information about BCCI's frauds "for fifteen months" before the closure; it called the Bank's tentative agreement to restructure BCCI as three banks "extraordinarily poor judgment" and its decision to let BCCI move its records to Abu Dhabi "a costly, and likely irretrievable, error."¹¹¹ It found that BCCI's auditors, Price Waterhouse, "failed to protect BCCI's innocent depositors and creditors from the consequences of poor practices at the bank of which the auditors were aware for years," and recorded that the Bank of England allowed the Federal Reserve to give Congress Price Waterhouse's final report, the Sandstorm Report, only in censored form.¹⁵

Reception

Presenting the British inquiry into the Bank of England's supervision of BCCI, the Bingham Report, to the House of Commons on October 22, 1992, the Chancellor of the Exchequer, Norman Lamont, said: "I do not accept the findings of Senator Kerry's report. He did not have access to the documents to which Lord Justice Bingham had access and he did not take evidence from the Bank of England. I believe that some wild and incorrect allegations were made in that report."¹²