DOWNSIDE LEGACY AT TWO DEGREES OF PRESIDENT CLINTON
SECTION: THE STORY OF A CRIMINAL ENTERPRISE
SUBSECTION: CDFI and BCCI
COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND (CDFI)
South Shore Bank in Chicago in the 80's caught the eye of the Clintons for their lending to run-down neighborhoods. Jan Piercy, Hillary's roommate from Wellesley College, joined Shorebank as a top executive in 1984. The Clintons and Shorebank established the Southern Development Bankcorp in Arkadelphia in 1986. Hillary Clinton and Mack McLarty were on the board. It was formed with an investment from Winthrop Rockefeller Foundation, the Arkansas teachers pension fund, and a state corporation established by Governor Clinton. The bank and its subsidiaries used the Rose Law Firm. After Bill Clinton was elected president, the 1994 Riegle Community Development and Regulatory Improvement Act created something called the Community Development Financial Institutions Fund (CDFI), which was to be run by Treasury and which was to give $37 million to community development banks and nonprofit groups.
Shorebank got $4.5 million, the largest, Southern Development got $2 million, two other institutions related to Shorebank -- Kentucky's Louisville Development Bankcorp got $2.3 million and Douglass Bancorporation of Kansas City, Kansas -- got $1.9 million. The four institutions got about one-third of all the money. In routine investigation it was noted that these four institution's evaluation forms were uniquely undated and were all handled by Steve Rohde personally and the applications were all prepared by Shorebank. An Ernst & Young examiner wrote, a senior CDFI official "instructed reviewers to emphasize positive information for those being 'passed' and to emphasize negative information for those 'failing.'"
BANK OF CREDIT AND COMMERCE INTERNATIONAL (BCCI)
Pakistani banker Agha Hasan Abedi founded BCCI in 1972, it was incorporated in Luxembourg and expanded rapidly. By the early 1980s BCCI had become the preferred bank for such customers as the CIA, Colombian drugs cartels, arms smugglers and various third world dictators. By the mid-eighties, there was gathering evidence of financial irregularities, corruption and criminal involvement - an investigation ensued.
In December 1992, shortly after Clinton was elected, the Committee on Foreign Relations - US Senate produced a report that pointed out specific problems in the investigation and gave 20 specific areas which needed additional investigation (summarized below) The disposition of these issues is unknown. All that has come to the attention of this list is one settlement for $5 million in February of 1998.
Financial General, a Washington D.C.based bank with headquarters a block from the White House had been acquired in April 1977 by an investor group lead by William Middendorf II, who was Secretary of the Navy under Nixon and Ford. One member of the investor group was Jackson Stephens (Little Rock, controlling interest in Worthen National Bank and Stephens Inc, associated with Riadys and Clinton)
In November 1977, Stephens introduced BCCI-founder Abedi to Bert Lance, Carter's Director of the Office of Management and Budget. Financial General had sold to Lance controlling interest in the National Bank of Georgia in 1975. Abedi introduced Lance to Ghaith Pharaon who proceeded to acquire the stock of Lance's National Bank of Georgia, a deal consummated on January 5, 1978, a day after Lance's $3.4 million loan from the First National Bank of Chicago was repaid by BCCI London.
Lance and Stephens helped BCCI take over Financial General. A Financial General lawsuit "Bert Lance, Bank of Credit & Commerce International, Agha Hasan Abedi, Eugene J. Metzger, Jackson Stephens, Stephens Inc., Systematics Inc. and John Does numbers 1 through 25." Systematics was represented by C.J. Giroir, Webster Hubbell, and Hillary Rodham Clinton of the Rose Law Firm of Little Rock.
Also involved in the takeover were Clark Clifford (the former Defense Secretary under Johnson and lawyer for BCCI), Robert Altman (attorney for Bert Lance and Clifford's partner), and Kamal Adham (the former head of Saudi Arabian intelligence who was King Faisal's most trusted advisor, and whose half-sister Iffat was King Faisal's favorite wife).
In a lawsuit filed March 18, 1978, the Securities and Exchange Commission charged Lance with violations of federal security laws, and BCCI's application to purchase Financial General Bankshares was denied. Abedi then formed Credit and Commerce American Holdings (CCAH), Netherlands Antilles. On October 19, 1978, CCAH filed for approval with the Federal Reserve to purchase Financial General. This application was dismissed on February 16, 1979, but a new application was submitted later. The Federal Reserve finally approved the purchase on April 19, 1982, and BCCI renamed the bank "First American" three months later. Clark Clifford was made chairman and Robert Altman president. The head of Bank Supervision at the Federal Reserve when BCCI's purchase was approved was Jack Ryan, who later became head of the Resolution Trust Corporation, in which role he denied Rep. Leach's requests for documents related to Madison Guaranty, the Whitewater thrift.
BCCI founder Abedi donated 500 million rupees for the creation of Pakistan's Gulam Ishaq Research Institute for nuclear development. "Kamal Adham, who was the CIA's principal liason for the entire Middle East from the mid-1960's through 1979, was the lead frontman for BCCI in its takeover of First American, was an important nominee shareholder in BCCI, and remains one of the key players in the entire BCCI affair" (Senator John Kerry and Senator Hank Brown, The BCCI Affair: a Report to the Committee on Foreign Relations, United States Senate, December 1992).
Stephens and his Worthen National Bank invested in Harken Energy, a Texas company in which George Bush, Jr., was a board member. "The money Stephens invested came through the Swiss BCCI subsidiary"
In 1987 First American bought the National Bank of Georgia, formerly acquired from Bert Lance by Pharaon.
From the American Spectator 8/94 James Ring Adams
"The public has an overwhelming interest in knowing what business networks have claims on a president and his family. In this context, Hillary's windfall in the futures market is chilling. . Hillary must still feel grateful to James Blair and Tyson Foods, Inc., who allegedly steered her to her trades; and to Refco and its president Thomas Dittmer, which brokered them..And the Clintons' futures trading may have made them further beholden to the Stephens bond empire of Arkansas--and entangled them indirectly but significantly with the Pakistani financiers who brought us BCCI.
. Hillary's trading came to light in mid-March after Lloyd Cutler took over as White House counsel.
In line with his new policy of "openness," the White House admitted to New York Times investigators that she had plunged $1,000 in the notoriously choppy futures market in October 1978, when her husband had emerged as the clear front-runner in his first race for governor. James Blair, general counsel for Tyson Foods, Inc., was her guide to the market. By the time she closed her accounts in May 1980, she had cleared $99,540, which allowed the strapped couple to put up a down payment on their house and buy tax-exempt municipal bonds..
The First Couple had reason to be embarrassed. Hillary had worked through the Springdale, Arkansas, office of Refco, a fast-growing Chicago-based commodities broker. Its Arkansas outpost catered primarily to Tyson Foods, the nation's largest poultry firm, whose operations give the small Ozark town a pungent, penetrating odor. Hillary's personal broker was a professional poker player and 13-year veteran of Tyson Foods named Robert L. "Red" Bone, who had already compiled a substantial record of exchange rules infractions. Just a month before he went to work for Hillary, he had completed a one-year partial suspension on charges of plotting to manipulate the egg-futures market on the Chicago Mercantile Exchange. (He later received a second, more serious suspension for violating the first one.)
More significantly, at the end of Hillary's first year of trading, the Chicago Merc itself suspended Bone for three years for "allocating" trades--letting favored customers take the winning trades and dumping the losers on the rest. The action cited "serious and repeated violations of record-keeping functions, order-entry procedures, margin requirements and hedge procedures." Hillary's account wasn't specifically at issue, but it fit the pattern: her return on her first day of trading--more than $5,000 on $1,000 down--would have been mathematically impossible if Exchange rules were strictly followed.
On October 15, 1979, Hillary's own investment adviser, Tyson counsel Blair, filed a suit charging Red Bone, Refco, and its president Thomas Dittmer with systematically taking their customers to the cleaners.. The Merc and the Board of Trade now run two of the best funded political action committees in the country. In 1993, the Merc's Commodity Futures Political Fund disbursed nearly $200,000, making it the eighth most generous finance, insurance, and real estate PAC..
During the 1970s, the Merc invented futures trading in foreign currencies and stock indices and metamorphosed from the bane of Midwest farmers into a major player in global finance. Credit for the growth goes to Leo Melamed, a World War II refugee first elected Merc chairman in 1969 and a dominant power ever since.. Refco, then and now, meant Thomas Dittmer, one of the boldest traders on the Merc. Dittmer pulled off a number of coups in the early 1980s, including a panic in soybean prices and a near corner on coffee, but his most memorable success was the boom in cattle futures that enriched Hillary.
Dittmer used his windfall to make Refco a global player in metal refining, financial futures, and money management. In 1981, he joined the elite club of thirty-seven dealers who buy Treasury securities for the Federal Reserve.
The connection with Refco entangled the Clintons, however remotely, in another segment of the web of influence-buying that was then being spun across the world by the Bank of Credit and Commerce International. By itself, this tie might not amount to much, but it takes on added interest from the complex relations between the Clintons and the Stephens family of Little Rock, financiers and Arkansas king-makers with their own BCCI entanglement. The role of Jackson Stephens as financial backer of Governor Clinton has already been widely reported, as has his service to the BCCI's penetration of the American financial market (see TAS, November 1992). But almost nothing has been said about the equally fascinating appearance of Refco in the affairs of the world's most corrupt bank. Refco and Stephens also maintained business ties, but it's an open question whether these involved the BCCI. It's also an open question whether Bill Clinton's brush with this world is influencing the federal government's efforts, or lack of effort, at getting to the bottom of the BCCI scandal.
It can definitely be said, however, that Refco's international operations have attracted the interest of the untanglers of BCCI's affairs. BCCI is not only the world's largest single bank fraud, but also the most ubiquitous. It was founded in the Persian Gulf in 1972 by a Pakistani visionary named Agha Hasan Abedi, who inspired a cult-like devotion from his officers, primarily Urdu-speaking Pakistanis; he also steadfastly ignored economic reality, and wound up losing more than $10 billion. Increasingly desperate to cover his losses, he opened his doors to the world's vast underground economy, and BCCI became the central bank for terrorists, spies, arms dealers, and drug lords from Burma to Colombia. At the same time, his agents tried to buy their way into every political elite they encountered--including the Arkansas establishment that was watching the rise of the Clintons. In November 1977, Abedi met in Little Rock with Jimmy Carter's confidant Bert Lance and investment banker Jackson Stephens, a power above and beyond Bill Clinton. Out of this meeting came Abedi's celebrated takeover of an interstate banking chain based in Washington, D.C., patriotically renamed First American Bankshares and put in the hands of super-insider Clark Clifford. Coincidentally or not, Dittmer and Refco picked up a new client in the aftermath.
The far-sighted Abedi had cultivated Sheikh Zayed well before the mid-seventies boom in oil prices, taking the avid falconer on lavish bustard hunts in the wilds of Pakistan. (Abedi's agents also catered to the less wholesome tastes of the portly Crown Prince Khalifa.) Zayed became the primary financial backer of the BCCI and still owns its remains. When Abedi decided to buy the Washington, D.C. bank that Jack Stephens was peddling, he advanced one of Sheikh Zayed's minor sons as a stockholder, with Darwaish acting as the boy's agent..The deal apparently whetted Darwaish's appetite for American investments. Around October 1979, he and several assistants set up a Panamanian shell corporation to trade in the American commodities markets. They worked through a Swiss brokerage and placed their orders with Refco. Through November, they transferred more than $100 million of Sheikh Zayed's money to America, primarily through BCCI headquarters in London.
But the biggest loser with Refco was BCCI itself. From 1983 to 1985, the bank speculated recklessly in the futures market on U.S. Treasury bonds. The futures were a bet on the direction of interest rates and required split-second timing; one incredulous auditor found that BCCI was buying contracts and leaving them in desk drawers. Estimates of the losses reach $860 million.BCCI investigators are currently puzzling over another series of transactions involving Akbar. In addition to his role at the treasury department, he ran the bank's Grand Cayman branch..These murky global currents, apparently so remote from the Clintons, are looking more important in retrospect. Every new revelation suggests a deeper pattern of relationships than anyone had previously expected. The repeated appearance of the BCCI and its assorted fronts suggests that even now we underestimate Abedi's ambitions for penetrating the American economy. Through Capcom and Refco, his agents had become players in the Chicago Merc, which was then on its own way to becoming a major factor in global finance. Through its connections with major figures in the cable industry, Capcom and BCCI were apparently establishing a beachhead in American broadcasting. (The hand of the BCCI has been suspected in a minority investment these businessmen made in Ted Turner's Cable News Network.).
At the time, however, Bill and Hillary very likely had almost no inkling about their benefactors' extensive connections. Everyone concerned is now trying to minimize their importance. The closest Clinton link to BCCI, Jackson Stephens, maintains that he was an entirely unwitting tool and only for a short time. BCCI prosecutors will agree that Stephens probably never met Darwaish or any other of the nominee shareholders in the takeover that created First American Bankshares. As the stockbroker who arranged to buy these shares, he acted for the account of a dissident faction of the bank's board (which included himself) in an attempt to oust its management.Yet the interconnections continue to multiply. Stephens Inc., the family brokerage considered one of the largest outside Wall Street, maintained links with Refco throughout the 1980s. In 1980, it cleared futures contracts through Conti Commodities, the international futures trader for Continental Grain Company; Conti was subsequently purchased by Refco. In 1981, Stephens Inc. opened an account with Refco itself, a relation renewed several times in the 1980s. When Hillary was trading with Refco, she also opened a commodities account at Stephens Inc. Yet the Stephens name has not otherwise figured in press accounts..
Beyond these questions is the very urgent matter of the BCCI investigations. At this writing, the U.S. Justice Department and Manhattan District Attorney Robert Morgenthau are debating how to handle the biggest BCCI figure yet to come to justice in the U.S. (Abedi himself, now an invalid in Pakistan, was recently convicted in absentia in an Abu Dhabi court and sentenced to eight years. But no one expects that the Pakistani government will deliver him to the justice of Sheikh Zayed.) In a deal in May, Abu Dhabi turned over Swaleh Naqvi, Abedi's number two man, to American custody. Since then he has been in the hands of the federal government, which is negotiating a plea bargain, while D.A. Morgenthau's more aggressive investigators make no secret of their frustration at his lack of cooperation. Does the Clinton administration really have the heart to press Naqvi for all of the BCCI's secrets? The saga of Capcom and Refco suggests that the embarrassment could start in its own back yard.."
From William Rempel and Douglas Frantz Los Angeles Times 9/30/91 "The Bank of Credit & Commerce International handled millions of dollars in illegal arms transactions for Palestinian terrorist Abu Nidal in an effort to persuade its wealthy Mideast backers that the bank was staunchly pro-Arab, according to a former high-ranking bank official. British weapons secretly destined for the terrorist's arsenal -- some of them for resale to Iraq and elsewhere -- were financed through BCCI offices here and shipped under export documents that bank officials knew to be phony, records and interviews disclosed. "During the Iran-Iraq War, the bank wanted to show to the Arab world that we supported Iraq, and we did that through support of Abu Nidal for several years," said Ghassan Qassem, a 17-year BCCI officer who served as Abu Nidal's personal banker and became a spy inside the bank for Western intelligence agencies. The bank was a vehicle for transmitting money to Abu Nidal from wealthy Arabs who supported his work as a matter of political conviction and from individuals and governments that contributed funds as a form of protection against terrorist attacks aimed at them."
From BBC Summary Al-Hayat 8/20/98 "'Al-Hayat'has learnt that the Egyptian security authorities have arrested Sabri al-Banna (Abu Nidal). The security sources, however, have refused to reveal details of the arrest, in what can be considered to be the second most important operation after the arrest of Carlos. It is worth mentioning that Banna is the leader of the first group to break away from the PLO, that he has been expelled from Syria and from Iraq, and that he is suffering from health problems. 'Al-Hayat'asked Muhammad Subayh, Palestine National Council secretary and Palestinian envoy to the Arab League, about the arrest. He denied any knowledge of it and said that Sabri al-Banna is wanted by the Palestinian [National] Authority on charges of murdering several PLO leaders. Subayh said that Banna has been in hiding for over a year... "
From BBC Summary Al-Hayat 8/21/98 "The Egyptian official news agency MENA circulated late on the night before last a statement by an Egyptian source denying reports by the German news agency that Cairo had arrested Sabri al-Banna (Abu Nidal), leader of Fatah - The Revolutionary Council. President Yasir Arafat who yesterday met President Husni Mubarak in Cairo also denied any knowledge of the arrest. 'Al- Hayat'had published reports of his arrest based on a statement by sources who said that the man is very ill. An official in the Abu Nidal group in Beirut refused to make any comments on the report published by 'Al- Hayat' yesterday. He said: " We have no official comment on the report. If any such comment is issued we will pass it on to you." However, the Israeli newspaper 'Yediot Aharonot' said, citing " private sources" , yesterday that Abu Nidal's arrest took place some days ago. Meanwhile, 'Al-Hayat' has learnt from informed sources that Abu Nidal' s state of health is deteriorating, and it is said likely that he has contracted a chronic brain disease. The sources said that his condition is critical and that he is undergoing treatment. "
From Agence France Presse 8/23/98 "The Fatah Revolutionary Council on Sunday denied press reports its founder Abu Nidal had been arrested in Egypt and was in hospital dying of cancer. "Reports that our brother Abu Nidal has been arrested and that he is seriously ill are completely baseless," the group said in a statement. "These stories are being spread by intelligence services hostile to the Palestinian cause and are an attempt to divide our ranks and help the capitulating leadership" of Palestinian Authority President Yasser Arafat, it said. "
Stephens and Riady
From the American Spectator James Ring Adams 10/92 "Mike McAlary, the New York Post's specialist on organized crime, scored a genuine scoop last February: "Clinton and BCCI candidate's money man linked to scandal bank," the headline ran. It involved large-scale Arab influence on American politicians of both parties. It came directly from a sterling source, the office of Manhattan District Attorney Robert Morgenthau, a distinguished Democrat. But no major paper followed up on the story. The Wall Street Journal even dismissed it in an article on the Post's savaging of Clinton in the raucous New York primary. . Although this web seems devoted both to personal enrichment and political influence, it would be paranoid to call it a criminal conspiracy. Its main figures are known as upright patriots. Yet their friends, and friends of their friends, share a startling propensity for financial scandal. Some have received substantial prison sentences, and these were just for domestic misdeeds. The foreign involvements stretch from Abu Dhabi and Jeddah to Hong Kong and Jakarta, and deal extensively with the notorious Bank of Credit and Commerce International (BCCI), the central bank of global corruption. Whatever one makes of this mix of respectability and rogue banking, Bill Clinton now offers it another avenue to political power..
The apparent proof that Washington is protecting a somewhat sinister crew of political fundraisers has generated disgust with both parties and all incumbents. The phenomenon of H. Ross Perot had less to do with the virtues of Perot than with the failings of everyone else. It's ironic that Bill Clinton stands to reap the ultimate benefit from this disillusionment, for his campaign has been deeply indebted to a figure who stands as close to this permanent network as anyone still active in American finance, and who has acted as an agent for BCCI and its Saudi backers from that bank's first encroachments in America. Although Jackson Stephens has escaped the network's criminal entanglements, he clearly deserves the scrutiny the press has so far failed to provide..The district attorney's leak about Clinton was almost certainly prompted by a New York Times series on the candidates' campaign finances.
Without appreciating the significance of the news, Jeff Gerth reported that Clinton had received about $100,000 in contributions from associates of the Little Rock financier Jackson Stephens and a $2 million line of credit from the Worthen Bank of Little Rock, which Stephens substantially controlled. Stephens's name rings a loud gong with anyone who has investigated the career of BCCI in the United States. He was one of the crucial figures in opening American banking to Agha Hasan Abedi, the mystical Pakistani founder of BCCI. Stephens's bank and his personal lawyer, the former employer of Hillary Clinton, were separately involved in the local versions of two of the largest financial scandals of the 1980s. Yet Stephens was always considered either an innocent bystander or a victim. In all his dealings, his personal prestige has remained unchallenged.. The relations between the Stephenses and Clinton give a sharp insight into Arkansas politics, but they become truly notable because of Mr. Jack's other business ties, especially with T. Bertram Lance..
The election of Jimmy Carter redirected this group's energies from regional banking to global finance. Jack Stephens found himself dealing with banks from Pakistan to Indonesia. The immediate cause was Bert Lance's need to divest his stock in the National Bank of Georgia. Lance had become the director of the Office of Management and Budget as Carter's first cabinet appointment, and during his confirmation he promised to sell his NBG stock by the end of 1977. But he had borrowed heavily to buy it, and a sale at market price would have wiped him out.
While Lance ran into a hot, humid summer of trouble over his other bank deals, Stephens tried to broker an NBG sale at favorable terms. The bidders included a business friend of the Butchers, an Indonesian banker, and a Saudi businessman named Ghaith Pharaon, indicted last year as a front man for the BCCI. Through the fall of 1977, and Lance's own fall from his position at OMB (he resigned in September under pressure from the Senate), Stephens negotiated directly with BCCI's founder and maximum leader Agha Hasan Abedi..
Abedi's agents quickly snapped up the available stock from Stephens's faction and in mid-December commissioned Stephens to buy more on the open market. The BCCI officer running the show in Washington was a Pakistani named Abdus Sami; by the end of January 1978 he reported to Abedi that he had hired a prominent Washington attorney to help with takeover suits and filings with the regulators. The lawyer was Clark Clifford. (Clifford and his young partner Robert Altman had represented Lance during his Senate troubles. Lance takes credit for introducing Clifford to BCCI.) .Then the deal blew up in everyone's face. ..
Although Stephens escaped from the BCCI snare, he continued his foreign entanglements. The sale of Bert Lance's National Bank of Georgia left the Little Rock broker with an unusual partner, a very rich Indonesian banker named Mochtar Riady. Ethnically Chinese but well connected to the highest levels of Indonesian politics, Riady started his career in a Jakarta bicycle shop and built up a financial empire called the Lippo Group. He entered the bidding for Lance's bank in 1977 through the intercession of an international broker named Robert B. Anderson, who had been secretary of the Treasury under President Eisenhower. (Anderson died in disgrace a few years ago after pleading guilty to federal charges of tax evasion and money laundering.) But Stephens offered Riady an even better deal. The two first joined hands in a Hong Kong brokerage. Then in 1984, Riady gave his backing to Mr. Jack's most ambitious venture, an attempt to turn a chain of home-town Arkansas banks into a world-class financial player. In a busy first quarter of 1984, Stephens and Riady pumped capital into a statewide chain called First Arkansas Bankcorp, merged with another group of banks owned by C. Joseph Giroir, Jr., and renamed it Worthen Banking Corporation. (Remember Joe Giroir's name. As chairman of the Rose Law Firm in Little Rock, he gave Hillary Clinton the job she still holds. Thanks to him, the University of Arkansas law professor became a big-time corporate lawyer.)
Riady sent his son James to Little Rock as president of the national bank subsidiary Worthen Bank and Trust and started to buy out Joe Giroir's shares. The Arkansas bankers talked of exporting rice to Asia and predicted that their two-billion-dollar bank would quickly grow to ten billion. Then another disaster struck..As regulators caught on to the sophisticated fraud, they discovered that -- lo and behold -- the same thing was happening at Jack Stephens's Worthen Bank and Trust. A government-securities trading company from Livingston, New Jersey, called Bevill, Bresler & Schulman went bankrupt on Easter Sunday, a month after the ESM collapse and the Home State crisis, leaving Worthen with $52 million in uncollectible loans. (Remarkably, at one point Bevill, Bresler and ESM had overlapping personnel.) Once again, however, Jack Stephens persuaded the government that he was an innocent party. Worthen collected $20 million in insurance on the loss, barely averting insolvency. But the federal regulators went through its books with heightened diligence. By the end of the summer, the comptroller of the currency had cited Worthen Banking Corp. for making "excessive loans at preferential terms" to companies controlled by the Stephens brothers and Mochtar Riady. This practice, charged the comptroller, amounted to a violation of federal law. ..
A Worthen spokesman says the bank parted ways with the Riadys several years later, so that Little Rock had no role in the latest regathering of loose ends. When BCCI was closed around the world last year, setting off riots at its Hong Kong branch, a buyer stepped forward, offering a highly favorable deal for the Bank of Credit and Commerce Hong Kong Ltd.. The would-be rescuer was Mochtar Riady's Lippo Group.. "
Wall Street Journal 9/29/98 "... We know that the world's largest bank fraud can go almost unnoticed, except to Manhattan District Attorney Robert Morgenthau. We refer, in case you've forgotten, to the Bank of Credit & Commerce International, which was back in the news in two jurisdictions last week. In Washington, Clark Clifford and Robert Altman agreed to give up $18.5 million in claims on stock and legal fees connected with First American Bankshares, the BCCI front they once headed in the nation's capital. In Luxembourg, BCCI auditors Price Waterhouse and Ernst & Young agreed to a payment of $125 million to the defunct bank's customers; the creditors will now recover more than half their money--more than quadruple the best estimates at the time BCCI went under. These people, many of them Pakistani nationals in Britain, will be mighty glad that Mr. Morgenthau pursued the case when the Bank of England, the Justice Department and various others ducked. Yet for all the smoke Mr. Morgenthau uncovered we have only glimmers of the fire that led to it all. There are still unresolved questions about the political patronage that has helped shield BCCI principals from a full reckoning, and in particular about how a crooked Pakistani-Arab bank got control of the largest bank in Washington, D.C. In this respect, the Altman-Clifford settlement is particularly striking. At issue has always been whether the two knew that BCCI was the real owner of First American, of which they were, respectively, president and chairman.."
Wall Street Journal 9/29/98 Yet the essential mystery remains. Doubtless that's just the way many would like to leave it, because the names that pop up read like some kind of Who's Who. There is, to begin with, a large Arkansas connection, since Little Rock investment giant Stephens Inc. assembled the bloc of First American stock for the BCCI front men. Assisting in these transactions was the now-famous Rose Law Firm, then headed by Joseph Giroir, more lately a representative of the Riady family of Indonesia and participant in the notorious September 13, 1995, Oval Office meeting at which John Huang was dispatched to his fund-raising tasks. Rose Attorney Hillary Rodham represented a Stephens subsidiary, the Systematics bank-data processing firm, in a related lawsuit. James Riady made his first appearance in Little Rock about the time these transactions took place, with his family ending up with a piece of the Stephens-dominated Worthen Bank. Another player was Bert Lance, Jimmy Carter's disgraced head of Office of Management and Budget, who apparently hoped to head First American himself. All of these people deny that they knew anything crooked was taking place, just a group of smart, well-connected Friends of Bill stunningly ignorant about the people they were doing business with. Yet since the mystery has never been cleared up, you can't blame those of us who followed it from remembering names as they turn up in today's news. Nicholas Katzenbach, for instance; the former Attorney General surfaced last week with two of Mr. Clinton's serial White House counsels, defending the President against impeachment in a New York Times op-ed. We remember that Mr. Katzenbach replaced Mr. Clifford when the latter resigned from First American in 1991. Ditto for John E. "Jack" Ryan, who ended up as head of the Resolution Trust Company and denied Rep. Jim Leach's request for documents relating to Madison Guaranty Trust, the Whitewater S&L. We remember that it was under Mr. Ryan's watch as head of bank supervision at the Fed that BCCI won approval to buy First American.."Click Here for the full Senate report on BCCI
The American Spectator 12/96 James Ring Adams "...The Indo-money affair is cut from the same cloth as the scandal of the Bank of Credit and Commerce International, which earlier this decade led to the bank fraud indictment of former Defense Secretary and presidential adviser Clark Clifford. (The federal and New York State case against Clifford was later dropped because of his advanced age and the acquittal of his associate Robert Altman on similar charges.) The BCCI was trying to buy hidden control of American banks to build its global empire and also to wield influence for its Arab patrons. The Riadys and their allies had in addition the motive of sheer survival. They have been investing in Bill Clinton for twelve years, and one can understand why they would disregard American campaign law in the effort to preserve their stake. Where things get shocking was in the arrogant response of the White House and the Democratic National Committee when the scandal erupted. In quantity and quality the Indo-money case dwarfs any influence-peddling scandal in memory, even for those who recall the worst of the Nixon years. When the slumbering press awoke to the story (about a year after TAS put it on our cover), it discovered that the Riadys had managed to place a former senior employee of their Lippo Group inside the Clinton administration, with extraordinary access both to the Oval Office and to Asian contributors. But John Huang, with his $4 million in DNC fund-raising and fifty visits to the White House, was a relatively small player in a network that included the richest men of South Asia. Even the Riadys were only one of several conduits in a political penetration that may have shaped human rights and trade policy and even diplomatic relations with a number of countries along the Pacific Rim, including the most sensitive one of all, the People's Republic of China...."
James Ring Adams 10/92 The American Spectator "…. Even after the sharp contraction of Worthen Bank's ambitions, Jack Stephens and Stephens Inc. kept their foreign deals going. The one now gaining most notoriety put together Saudi money men, elements of the BCCI network, and George W. Bush, eldest son of the President. The deal, first reported by David Twersky of the Forward and then covered in some depth by the Wall Street Journal, provided financing for the Harken Energy Corp. of Houston. Eyebrows were raised when this small and untried company landed a "potentially lucrative" offshore drilling contract with the Persian Gulf princedom of Bahrain. Many saw it as no coincidence that George W. Bush, often called George, Jr., sat on the board of Harken with a consulting contract worth as much as $120,000 a year. But the fascinating details came in the financial history that put George Jr. in this position.
In the late 1970s, George Jr. tried to emulate his father's business success in the Oil Patch by setting up a series of drilling partnerships. Called Arbusto '78, Arbusto '79, and so forth, they attracted capital from, among others, a Houston aircraft broker and financial manager named James Bath, who according to a former associate had acted as liaison between Saudi businessmen and the Central Intelligence Agency in 1976, the year in which George Bush, the elder, served as director of central intelligence. Bath's associate also disclosed in the course of a bitter legal fight that Bath managed millions of dollars of Houston investments for Sheik Khalid bin Mahfouz, the most important commercial banker in Saudi Arabia and for a time one of the largest shareholders in BCCI. Manhattan District Attorney Robert Morgenthau indicted Sheik bin Mahfouz this July for a "scheme to defraud" in connection with his investments in BCCI. George W. Bush has given conflicting statements about Bath's investment in Arbusto, finally admitting to the Wall Street Journal that he was aware that Bath represented Saudi investors.
The Arbusto partnerships were busts as money-makers, but the investors managed to recoup their stakes through several stock swaps that wound up giving them shares in Harken Energy. But Harken itself needed help, and George Jr. gave it a boost in finding new financing through Stephens Inc. George Jr. attended a meeting in Little Rock between Harken officials and Jackson Stephens that produced an unusual rescue plan. Mr. Jack obtained a $25 million cash infusion for Harken from Union Bank of Switzerland, which rarely invested in small American companies. ……"