Bahrain

Bahrain is an island state in the Persian Gulf. It was one of the markets in which the Bank of Credit and Commerce International (BCCI) grew fastest in its first years, its ruling family was among the Gulf families presented to the outside world as the bank's owners, and BCCI's offices there carried loans to the Saudi businessman Ghaith R. Pharaon and to the Saigol family that auditors later found to be in default or misrepresented.¹²³

The Federation Talks

In 1968, after Britain announced its withdrawal from the Gulf, Sheikh Zayed of Abu Dhabi and Sheikh Rashid of Dubai called for a federation that would include the seven Trucial States and also Qatar and Bahrain; the rulers of the nine states held a constitutional conference in Dubai from February 25 to 27, 1968. The federation formally established on December 2, 1971, as the United Arab Emirates was formed by six of the Trucial States, with the seventh joining the following year; Bahrain was not among them.⁴⁵

BCCI

"Fueled in part by infusions of petrodollar deposits from Gulf State rulers during the hey-day of the OPEC years," the Senate report of John Kerry and Hank Brown stated, "BCCI's early growth was exponential, especially in the United Arab Emirates, the Sultanate of Oman, Yemen, and Bahrain." It gave the bank's growth over its first five years:¹

A 1977 record of BCCI's shareholders from Bank of America files showed, in the report's words, that "the Pakistanis actually owned BCCI at a time when to the outside world, the bank was ostensibly owned by oil-rich Middle Eastern Arabs, including the ruling families of Bahrain, Sharjah, Dubai, Saudi Arabia, and Iran, as well as that of Abu Dhabi."¹

Nazir Chinoy, manager of BCCI in Paris, told the Senate that the "profits" Pharaon made on his interest in CenTrust of Miami, a transaction financed through BCCI Paris, "were transferred to BCCI's offices in Bahrain as a means of reducing Pharaon's defaults to BCCI there, and demonstrating to auditors that Pharaon's loans from BCCI were being serviced."² In its audit reports of 1990, Price Waterhouse found no evidence that the Saigol family, which owed BCCI 44 million dollars, was repaying loans or interest, and reported: "Representations previously given about the beneficial ownership of companies to which new loans were extended in Bahrain in 1989 have been false. The loans have been given, in part, to repay delinquent loans in other locations."³

Ambassador Hostler

Charles W. Hostler, United States ambassador to Bahrain at the time of the Senate inquiry, had met the Lebanese businessman Mohammed Hammoud in Beirut in the 1960s as a young Air Force officer, when Hammoud's wife taught him Arabic; he later managed Douglas Aircraft's office in Lebanon from 1965 to 1967 and worked for McDonnell Douglas. Hammoud, a front man for BCCI, bought the shares in First American held by Clark Clifford and Robert Altman. Hostler managed Hammoud's real estate investments in the United States, and told the subcommittee he had advised Hammoud on three properties: "vacant land" in Sherman, Connecticut, an "old building" in Boston and a "tear-down" in New York City.⁶