David L. Paul

David L. Paul was a real estate developer and owner of CenTrust Savings Bank of Miami.¹

Business and Financial Activities

Paul put CenTrust on a significant growth curve using brokered deposits, which he funneled into high-risk real estate loans, junk bonds, and offbeat investments.² He built a gleaming postmodernist skyscraper for CenTrust, which cost $180 million and featured marble, gold-plated bathroom fixtures, and a $13 million Peter Paul Rubens painting.³ He also spent $7 million on a ninety-five-foot yacht with a marble fireplace.⁴

Paul, along with Ghaith R. Pharaon and Agha Hasan Abedi, engineered a sham purchase of CenTrust debentures. Pharaon, acting as a front for BCCI, bought $24,668,750 of CenTrust's bonds in 1987. Paul secretly repurchased these bonds less than a year later, and Pharaon received a commission.⁵ This transaction allowed CenTrust to satisfy regulators and remain open for an additional year, costing U.S. taxpayers an estimated $2 billion when it was finally closed.⁶

Political Connections and Legal Issues

Paul had extensive political contacts, giving $300,000 to Democratic politicians and raising more.⁷ He was appointed financial chairman of the Democratic Senatorial Campaign Committee in 1987 by Senator John Kerry.⁸ His personal calendar showed frequent meetings with numerous senators and other key political figures.⁹

In 1992, Paul and Pharaon were indicted together by the Department of Justice in Miami for the bond-swap conspiracy.¹⁰ His business practices and connections were scrutinized during the BCCI scandal, highlighting the intertwined nature of finance and politics.

Pharaon and the Debentures

When Ghaith R. Pharaon disclosed on August 12, 1987, that he held 16.9 percent of CenTrust's common stock, Paul told journalists the next day that Pharaon was "one of my very close personal friends. He is probably one of the three of four closest personal friends Mrs. Paul and I have." The Kerry-Brown Senate Report described the arrangement by which Pharaon would sell CenTrust subordinated debentures, a BCCI branch would buy 25 million dollars of them "to deceive other investors as to their market value," and CenTrust would buy back any debentures BCCI had bought.¹¹

Indictment and Conviction

On February 28, 1992, a federal grand jury in Miami returned a 22-count indictment against Paul, Pharaon and CenTrust's former executive vice president William Christopher Berry. It charged that Paul had conspired with a BCCI insider to arrange a phony securities purchase: BCCI bought about 27.7 million dollars of CenTrust debentures on May 24, 1988, and two months later a Connecticut real estate subsidiary of CenTrust bought them back at par for 25 million dollars though their market value had fallen to about 24.7 million, and Pharaon kept the 331,500 dollar difference. It also charged Paul and Berry with structuring a June 1988 securities deal with Lincoln Savings to conceal from regulators that the transactions were linked. CenTrust had collapsed on February 2, 1990, at a cost to the federal government of 1.7 billion dollars.¹²

After a trial in 1993 Paul was convicted on 68 of 69 counts concerning the diversion of 3.2 million dollars of CenTrust money to his own use, most of it for work on his mansion on La Gorce Island in Miami Beach. On February 10, 1994, he pleaded guilty to the 29 remaining counts, which concerned dealings with Lincoln Savings, Michael Milken's Drexel Burnham Lambert and BCCI. "This... represents the first conviction of a U.S. banker growing out of the worldwide BCCI investigations in this country," said the prosecutor, Allan Sullivan. United Press International noted that he had assembled a 30 million dollar collection of Old Masters paintings in CenTrust's executive suite.¹³