Khalid bin Mahfouz

Khalid Salim bin Mahfouz was born December 26, 1949, in Jeddah, Saudi Arabia. His father, Salem bin Mahfouz, was a Yemeni-born money-changer who founded the National Commercial Bank (NCB), the first and largest private bank in Saudi Arabia. Khalid succeeded his father in management of NCB and by the 1990s personally held a 75% stake in the institution, with his wife Naela Kaaki holding the remaining 25%. In 1999, following the collapse of BCCI, the Saudi government purchased a controlling 50% stake in NCB for at least $1 billion, partly used to retire Khalid's personal debts, after which the Mahfouz family retained a 34% stake but Khalid surrendered all management positions. Khalid bin Mahfouz died August 16, 2009, in Jeddah.¹

BCCI Ownership and Fraud

Bin Mahfouz personally owned approximately 20% of BCCI. Between 1986 and 1988, according to the 1992 Manhattan grand jury indictment, he invested more than $700 million in BCCI and separately invested $140 million in Credit and Commerce American Holdings, the vehicle that secretly owned First American Bank in Washington, D.C., before selling both sets of shares. The fraud: at least $300 million of the payments Mahfouz received for those shares came from BCCI's own funds, recorded on BCCI's books as fictitious loans and falsely confirmed to auditors as performing assets. As a result, BCCI's auditors and regulators were deceived into believing Mahfouz remained a major shareholder through at least April 1990, lending the institution a false appearance of solvency.¹²

Indictment and Settlement

On July 1, 1992, Manhattan District Attorney Robert Morgenthau presented a New York state grand jury indictment naming bin Mahfouz and his associate Haroon Kahlon on charges of defrauding BCCI depositors and investors of $300 million and abetting a conspiracy by top BCCI officers to conceal the bank's true ownership and financial condition from regulators. Bin Mahfouz resigned as NCB chairman on or around July 8, 1992, to contest the charges. The Federal Reserve simultaneously moved against NCB's New York branch on grounds that Mahfouz had misled American regulators.²

On December 23, 1993, bin Mahfouz agreed to pay $225 million to resolve all federal and New York state charges. The distribution was: $35 million to the U.S. Treasury, $1 million to New York State, $1 million to New York City, and $188 million to the BCCI settlement fund, bringing total BCCI-related recoveries to approximately $880 million. In exchange, Morgenthau's office and the Federal Reserve Board dropped all civil and criminal charges. Bin Mahfouz admitted no criminal guilt.²

PROMIS Connection

A document dated May 14, 1985, on Department of Justice letterhead and signed by William Bradford Reynolds, Assistant Attorney General for the Civil Rights Division, set out a covert plan to distribute espionage-modified PROMIS software in the Middle East. The letter states: "As agreed, Messrs. Manucher Ghorbanifar, Adnan Khashoggi, and Richard Armitage will broker the transaction of the PROMISE software to Sheik Khalid bin Mahfouz for resale and general distribution as gifts in his region." The letter specified that the software must be "equipped with the special retrieval unit" and that "no paper work, customs, or delay" was to accompany the transfer, with all payments to be routed through accounts at Credit Suisse and National Commercial Bank. Reynolds authenticated the letter in 2005 interviews with INSLAW investigators, stating he had signed it at the request of personnel in Deputy Attorney General Lowell Jensen's office while Edwin Meese was recused from all PROMIS-related matters.³⁴

The document placed bin Mahfouz alongside Ghorbanifar and Khashoggi, both of whom were simultaneously central to the arms-for-hostages pipeline that became the Iran-Contra Affair, in a network brokering intelligence-modified software to the Middle East.

The 1986 Share Agreement

The Kerry-Brown Senate Report described bin Mahfouz as "head of the National Commercial Bank of Saudi Arabia and the most powerful banker in the Middle East," and wrote that the "forced sale" BCCI later considered for First American was "first considered, and attempted, by BCCI, in 1986 in connection with the purchases of BCCI and CCAH stock" by him. He had bought the shares "under a complex agreement that would permit him to purchase both banks, or to hold his interests temporarily with BCCI guaranteeing to buy them back at no risk to bin Mahfouz." According to the report, "After auditors for National Commercial Bank raised questions about bin Mahfouz's actions regarding BCCI, the transactions were fully unwound by 1989, leaving the First American problem for BCCI unsolved."⁵

In September 1990 Price Waterhouse learned that BCCI "had concealed further lending of over $500 million to its major customs by 'parking' that lending with a Middle Eastern bank, namely, the National Commercial Bank of Saudi Arabia controlled by Khalid bin Mahfouz." The practice had continued after the removal of Swaleh Naqvi, "with the knowledge and approval of the Board representative of the controlling shareholders," the government of Abu Dhabi.⁶

Houston

In June 1992 the Houston Chronicle reported that the Financial Crimes Enforcement Network and the FBI were reviewing accusations that the Houston businessman James R. Bath had guided Saudi money into Houston, and that Bath had said in a sworn deposition that he was "the sole director of Skyway Aircraft Leasing Ltd., a company that a court document shows is owned by Khaled bin Mahfouz." The newspaper reported that in 1990 Bath bought the Express Auto Park garage at Houston's Hobby Airport for 8.4 million dollars, "which included a $1.4 million loan provided by Mahfouz, according to transaction documents," and that after Sheikh Salem M. Binladen, for whom Bath had bought Houston Gulf Airport in 1977, died in 1988, "his interests in the airport were taken over by Mahfouz, according to court documents." Bath had invested 50,000 dollars in the Arbusto '79 and Arbusto '80 oil partnerships of George W. Bush.⁷

The journalist Lucy Komisar wrote in 2007 that in 1976, when George H.W. Bush headed the CIA, the agency sold some of the planes of its proprietary airline Air America to Skyway, "a company owned by Bath and Bin Mahfouz." She also described bin Mahfouz as the "chief banker" of the Saudi investor Abdullah Taha Bakhsh, who held about 11 percent of Harken Energy, the oil company of which George W. Bush was a director.⁸