CLARK CLIFFORD AND ROBERT ALTMAN
For twelve years, from BCCI's initial attempts to acquire FGB/First American in January, 1978, until their forced resignation in August, 1991 from their positions as the top officials of First American, former Secretary of Defense Clark Clifford and his law partner, Robert Altman, were the central figures in BCCI's acquisitions and management of U.S. banks.
During that time, they met with and represented BCCI's top management, major shareholders, major borrowers, and every figure of consequence who participated in BCCI's frauds in the United States. Their roles included:
** Representing Bert Lance in his sale of National Bank of Georgia (NBG) to BCCI nominee Ghaith Pharaon in 1977 and 1978.
** Representing Lance, BCCI, and all of the Arab shareholders in the Financial General Bankshares (FGB) takeover and all related litigation from late 1977 through late 1990.
** Representing Commerce and Credit American Holdings (CCAH), the new entity created to buy FGB, and several levels of holding companies below CCAH, from 1978 through late 1990.
** Acting as chairman and president, respectively, and directors of First American, from 1981 through August 1991.
** Negotiating First American's purchase of National Bank of Georgia from Pharaon and BCCI in 1985 and 1986.
** Handling legal matters for First American, and selecting First American's other counsel from 1978 through late 1990.
** Representing BCCI before state and federal regulators from 1978 through late 1990.
** Representing BCCI before Congress from 1988 through 1990.
** Purchasing shares of First American and borrowing funds from BCCI for their shares of First American from 1986 through 1989.
** Coordinating the legal defense of BCCI and of all of its officers charged in the Tampa case, including handling the selection of attorneys for all of the individual BCCI officers, following BCCI's October, 1988 indictment.
Clifford and Altman have testified that they were throughout this period deceived as to BCCI's ownership of and control of First American and other BCCI entities in the United States, and ignorant of the bank's wrongdoing in any material respect. In Clifford's words:
In all these years, we didn't encounter a single suspicious circumstance. . . Were we deceived? Apparently, we were deceived.(1) (emphasis added)
We have not violated any law. We have not been guilty of any impropriety. . . if all that we read about, this poisonous, constant stream of misconduct, if that is a true statement of what this bank did, then we have been grossly deceived.(2)
As Altman testified:
The allegations that relate to misconduct on our part, I want the record to be clear, that we deny them totally and completely.(3)
In contrast, numerous BCCI officers who appeared before the Subcommittee testified that Mr. Clifford and Mr. Altman must have known that BCCI owned First American. Abdur Sakhia, for instance, testified:
[I]n any management discussions . . . on our future in the United States, we would think of three entities -- BCCI, National Bank of Georgia and First American -- in the same breath. Who would be going where, who would work in which entity, what area of entity will be handled by which entity, allocation of businesses, markets, geographic territories, all took place as if this was one entity. . . [I]t is very hard to believe, very, very hard to believe, almost impossible to believe. . . that Clifford and Altman did not know [about BCCI's ownership of First American].(4)
Similar statements were made in public testimony and in staff interviews by BCCI officials Amjad Awan, Akbar Bilgrami, and Nazir Chinoy concerning Clifford and Altman's role in BCCI and First American.
While it is clear that no one, with the possible exception of BCCI's top two officials, Abedi and Naqvi, knew of all the criminal conduct at the highest levels of the bank's operations, numerous people at BCCI and associated with it did know of BCCI's ownership of First American, its use of nominees for acquisitions generally, its lending to First American's purported shareholders, and its strategy for expansion in the United States.
The Subcommittee received with care the detailed proffer of information and testimony provided by Clifford and Altman, and struggled to reconcile their statements with the other information provided to the investigation. Reaching judgments regarding the nature and extent of Clifford and Altman's intentions is impeded by the lack of witnesses to a number of key meetings over the course of a decade regarding BCCI and First American in which only Clifford, Altman, and BCCI's top two officials, Abedi and Naqvi, were permitted to participate. Few memoranda exist as to the substance of any of these meetings, and it was the practice of Abedi, Naqvi, Clifford and Altman to exclude all others from these meetings who might otherwise give witness as to what was discussed and decided.
Nevertheless, based on a review of all of the documents and testimony before the Subcommittee, the account provided by Clifford and Altman to the Subcommittee is not consistent with the facts. Regrettably, as the chapter below details, in case after case, explanations provided by Clifford and Altman concerning their conduct are contradicted not merely by sworn testimony of other witnesses, but by contemporaneous documents which set forth facts that are at odds with their testimony. The totality of the information concerning Clifford and Altman leads to the conclusion that regardless of whether they too were deceived by BCCI in some respects, both men participated in some of BCCI's deceptions in the United States. Testimony of mid-level BCCI officials, contemporaneous documents created by others, and the legal documents and correspondence involving Clifford and Altman directly, together lead to the conclusion that Clifford and Altman:
** Assisted BCCI in purchasing a U.S. bank, Financial General Bankshares, with the participation of nominees, and understood BCCI's central involvement in directing and controlling the transaction.
** Made business decisions regarding acquisitions for First American that were motivated by BCCI's goals, rather than by the business needs of First American itself.
** Represented as their own to regulators decisions that had been made by Abedi and BCCI on fundamental matters concerning First American, including the purchase by First American of the National Bank of Georgia and First American's decision to purchase branches in New York City. While these decisions were ratified by First American's board of directors, they were decisions made initially by BCCI and communicated to Clifford and Altman, who in turn secured ratification of them, as necessary, by First American's boards.
** Concealed their own financing of shares of First American by BCCI from First American's other directors and from U.S. regulators.
** Withheld from regulators critical information that they possessed to secret BCCI's ownership of First American.
** Deceived regulators and the Congress concerning their own knowledge of and personal involvement in BCCI's illegalities in the United States.(5)
Clifford, Altman and Bert Lance each testified that their mutual involvement with BCCI began in the fall of 1977, in connection with Lance's decision to participate in a hostile takeover of Financial General Bankshares (FGB) in Washington, and the participation of a group of Middle Eastern investors, advised by BCCI.
But their accounts diverge as to how Clifford and Altman came to know BCCI and Abedi, and when Clifford and Altman began to participate with Lance and Abedi in planning BCCI's strategy for acquiring U.S. banks.
By Clifford and Altman's account, they knew nothing of BCCI and were introduced to the bank by Lance in December, 1977 and did not represent BCCI until mid-February, 1978 in connection with litigation with SEC and FGB's management. By Lance's account, Clifford's involvement with the case began two months earlier, soon after Lance met with Abedi in New York and discussed with Abedi BCCI's need to enter the U.S. market.
In Lance's account:
I went to see Mr. Clifford, who had represented me since Labor Day weekend of 1977, and I said: Mr. Clifford, I have made the acquaintance of Mr. Abedi. His bank is BCCI. He has some interest in talking to me about future relationships, whether that is in regard to being merely a consultant or being actively involved in one of his operations somewhere
. . . it is absolutely imperative and incumbent upon me to make sure that we know what kind of people that I am getting involved with . . . I asked Mr. Clifford, because of his knowledge and expertise . . . to do his due diligence on my behalf, as my attorney . . . Every instance o[r] report that I either got or from what Mr. Clifford told me came back that Mr. Abedi was a man of integrity and character.(6)
Based on the assurances he had received from Clifford, Lance went to London, met with Abedi again in late October, and began discussing the possibility of a takeover of FGB with Abedi and BCCI.(7)
In contrast, Clifford testified that the first he learned of BCCI was when Lance, as a "former client," brought Abedi to meet them in December, 1977 on "merely a social visit."(8) By Clifford's account:
One of the main subjects we discussed in that brief social meeting was the aid that he had for his bank, of providing the Third World with banking services which they had not ever had before . . . I found him to be pleasant and a man of importance. Thereafter, I'd hear from time to time that the little reports would sift in that Mr. Abedi and BCCI were in the process of acquiring stock in a company called Financial General Bank Shares. That's a bank holding company, centered in Washington. I had not heard of them before.(9)
In fact, in the period that Clifford testified he was merely hearing "little reports" sifting in "from time to time," Clifford and Altman were already representing Lance in connection with his attempt to sell the National Bank of Georgia to Ghaith Pharaon in a transaction fully negotiated by and handled by Abedi, ostensibly on Pharaon's behalf. This representation had begun no later than early December, 1977. As Lance testified, the negotiations concerning National Bank of Georgia with Abedi had taken place between Thanksgiving and Christmas, and were in that period turned over by Lance to his attorneys:
They [Mr. Clifford and Mr. Altman] were very aware of what I was trying to do and were very helpful to me in trying to do that. . . After discussions with Mr. Abedi about the National Bank of Georgia, I turned over these negotiations to Bob Altman to deal with Pharaon's attorney, a gentleman by the name of Frank Van Court, who is a member of the Vincent and Elkins law firm in Houston.(10)
Thus, Lance refers to an ongoing representation of him by Clifford and Altman, stemming out of Congressional testimony a month earlier, while Clifford describes Lance as a "former client." Lance places Clifford's involvement with him with BCCI in October, prior to discussions about the structuring of the FGB takeover, while Clifford places his first contact in late December. Lance places Clifford's representation of him on the BCCI-related acquisitions by December, while Clifford places the representation in mid-February. In each case, the difference between the testimony is that Lance places Clifford as a participant in the critical decisions that BCCI made in late 1977, while Clifford places himself at a distance from these decisions. Clifford's desire not to have been involved is understandable, because the manner in which Lance and the Middle Eastern investors chose to conduct their takeover bid for Financial General Bankshares would prove, within three months, to have been illegal by a federal judge.
A mid-December, 1977 article in The Washington Post provides irrefutable evidence of Clifford and Altman's involvement in negotiations by Lance at that time regarding investments by "Middle Eastern financial interests . . . into banks and other U.S. investments" in a deal in which the "matchmaker" was described as Abedi, head of BCCI. The article states that the Middle Eastern investors represented by Abedi want Lance "to set up a holding company to direct their capital into banks and other U.S. investments," and quotes Altman as confirming that negotiations between Lance and Abedi had taken place concerning the bank transactions:
"There are a lot of people who are trying to guess what's going on," said the attorney, Robert A. Altman, but he added that few are privy to the details. "The terms are still being negotiated. We hope to have a statement shortly."(11)
In the same article, Altman is described as announcing Lance's intention to sell his shares in the National Bank of Georgia as of early December, 1977 to an unnamed purchaser for $20 a share -- the exact amount paid in early January, 1978 to Lance by Ghaith Pharaon on behalf of himself and BCCI.(12) Thus, Altman and Clifford were already representing Lance in his negotiations over sales of his bank to Pharaon at the beginning of December, 1977; and in connection with the establishment of a bank holding company, obviously referring to the structure to be used by BCCI to acquire Financial General Bankshares, by mid-December, 1977; the period in which Clifford testified he had been privy only to "a social visit" from Abedi concerning other matters, and during which Clifford by his account did not represent Lance, described by Clifford as "a former client," at all.
As of January, 1978, Clifford and Altman were simultaneously representing Lance in his discussions with BCCI about the possible takeover of Financial General Bankshares; meeting with Abedi and other BCCI officials concerning that takeover; representing Lance in negotiations with Abedi and BCCI officials concerning the purchase of National Bank of Georgia by Ghaith Pharaon; and preparing to handle representation of the Arab shareholders who were ostensibly using BCCI as an "investment advisor" for the Financial General Bankshares transaction.
These roles were not being undertaken casually, or in a routine fashion, but in the context of what was about to become a high-stakes, highly-publicized hostile takeover of a major metropolitan Washington bank. The takeover bid was agreed to by Lance and BCCI in late November, 1977 and begun in December with purchases of Financial General Bankshares shares on the open market. It was structured so that each shareholder participating in the bid with BCCI would purchase an amount of shares just below the 5% that would trigger the requirement of SEC disclosure -- a strategy demonstrating some sophistication about and knowledge of U.S. regulations. The strategy, an obvious violation of SEC law if discovered, was dictated by the group's need to acquire an adequate block of shares in the FGB stock to challenge the controlling management of FGB, the Middendorf group, which already owned about 20 percent of the target bank.
This initial strategy created an underlying problem for Lance, BCCI, the Arab group, and its attorneys which was never corrected. If Lance, BCCI, the Arab investors, or their attorneys admitted the truth -- that they had been acting as a group from the beginning, purchasing blocks of FGB shares just under disclosure requirements to avoid premature disclosure and a more aggressive defense against the takeover by FGB's current management -- they would be admitting to possibly criminal violation of U.S. securities laws. Yet in denying this truth, they committed themselves to what was at the time a significant distortion of the truth, and a distortion which grew ever complicated over time.
Thus, an original, untrue proposition -- that the BCCI group was not a group at all, but a collection of Arab individuals who happened to use BCCI as a joint investment advisor, and who happened individually to independently become interested on the same week in the same U.S. bank -- was one which Clifford and Altman wound up maintaining from February, 1978 onwards, from the time the SEC filed suit against the Arab investors, Lance, and BCCI, charging that they had acted as a group, and had intentionally violated U.S. security disclosure laws by failing to disclose their intent to gain control over FGB. The representations made by Clifford and Altman concerning BCCI's role regarding First American in the years that followed were consistent with this original lie, and therefore inconsistent with the truth.
In their prepared testimony before the Senate, Clifford and Altman described the thrust of the SEC suit and their state of knowledge upon entering the case:
BCCI served as the banker and investment adviser to a number of wealthy Middle Eastern rulers and businessmen. Without our involvement or advice, four of these investors had purchased stock in an American holding company called Financial General Bankshares ("FGB"), the predecessor to First American, without filing certain disclosures with the Securities and Exchange Commission ("SEC").(13)
In their joint written statement to the Subcommittee, Clifford and Altman testified explicitly that they were not involved in the structuring of the original takeover attempt, the selection of the investors, or any other aspect of the transaction:
Without our involvement or advice, four of these [Middle Eastern] investors had purchased stock in an American bank holding company called Financial General Bankshares . . . without filing disclosures with the Securities and Exchange Commission ("SEC"). The SEC investigated these transactions, and the management of FGB, concerned that these purchases foreshadowed a possible corporate takeover effort, filed suit against the Arab investors, BCCI, Mr. Abedi, and others. We were retained to represent Bert Lance, Agha Hasan Abedi, BCCI, Sheikh Mohammed bin Zaied al Nayhan, Sheikh Sultan bin Zaied al Nahyan, Faisal al Fulaij, and Abudullah Darwaish.(14)
This account is contradicted by a January 30, 1978 memorandum found in BCCI files in Abu Dhabi by the Federal Reserve, and previously held in BCCI files in Karachi, Pakistan, from Abdus Sami, a BCCI official, to BCCI chairman Abedi. In this memorandum, Sami advises Abedi that Clifford personally approved the details of the plans for the takeover, and describes BCCI's intention to circumvent SEC disclosure by keeping purchases of the shares to just under 5 percent for each shareholder.
In the memorandum, Sami advised Abedi that in order "to keep ownership to below 5 percent we have to distribute the ownership to 4 persons of substance." Sami noted that "we have already given the names of Sheik Kamal Adham and Mr. Fulaij. We want two other names immediately." In the memorandum Sami also told Abedi that Lance had suggested the retention of Clifford as chief counsel "in view of the possibility of this [takeover] contest and also for presentation of the holding company application to Fed[eral Reserve]." According to Sami, "[I] met Clark Clifford and explained to him our strategy and goal. He was happy to know the details and has blessed the acquisition."(15) [emphasis added]
The memorandum clearly states that Clifford was involved in the FGB takeover from the beginning -- before two of the original four shareholders had even been chosen, before a takeover contest had actually begun, before an application was made to any regulator, before the SEC knew of any activity that might prompt its interest. The memorandum, found by the Federal Reserve in BCCI's files, is a contemporaneous representation of the understanding of the BCCI official most directly involved at the time in meetings with Lance and Clifford concerning the purchase of FGB. Accordingly, its clear import has to be given considerable weight.
The chronology in the memorandum is supported by the legal bills sent by Clifford and Altman to BCCI, and provided to the Subcommittee in the spring of 1992 by BCCI's liquidators. In their written statement to the Subcommittee, Clifford and Altman testified that they did not provide advice to BCCI, or its Arab investors, until the litigation involving the SEC and the Middendorf group, which began in mid-February 1978. But the bills from Clifford's law firm to BCCI, provided to the Subcommittee in May, 1992, demonstrate that they actually represented BCCI and the Arabs in January, 1978, just as Sami had specified, and contrary to Clifford and Altman's testimony.
Neither Clifford or Altman were experienced in either banking law, or in takeover litigation. Accordingly, Baldwin Tuttle, a former Federal Reserve attorney, was retained to handle banking regulatory issues, and the law firm of Wachtell, Lipton, Rosen & Katz in New York was retained to advise on the takeover itself.
In the months that followed, numerous filings were made with banking regulators by Tuttle, the Wachtell firm, and Clifford and Altman on the behalf of the Arab investors, BCCI, and Lance concerning the nature and extent of BCCI's involvement in the transaction.
For example, the original application to the Federal Reserve of October 19, 1978, made by CCAH and the original Middle Eastern shareholders and signed by Altman, stated:
The proposed individual investors in CCAH have substantial funds and it is contemplated that the funds to be used by each of them to purchase the equity interest in CCAH will be provided from their personal funds and possibly from personal borrowings from one or more financial institutions (which would be unaffiliated with BCCI or any of its affiliates), except that at least an aggregate of $50 million will be provided from personal funds and not more than an aggregate of $20 million will be borrowed. Such investors intend that if personal borrowings are made, Financial General Shares purchased pursuant to the Offer will not serve as collateral for such borrowings. (emphasis added)(16)
A November 24, 1978 letter from Altman to the Federal Reserve Bank of Richmond reiterated the commitment that:
neither BCCI nor any other organization related to BCCI contemplates owning any equity interest in CCAH.(17)
On January 12, 1979, Altman again told the Federal Reserve by letter that the shareholders would not borrow from BCCI or its affiliates. In October, 1980, when CCAH resubmitted an application to the Federal Reserve signed by Altman, Altman reiterated that BCCI had no role in the transaction:
BCCI owns no shares of FGB, CCAH, or CCAI, either directly or indirectly, nor will it if the application is approved. Neither is it a lender, nor will it be, with respect to the acquisition by any of the Investors of either FGB, CCAI, or CCAH shares . . . All of the Investors in CCAH have substantial funds and the funds to be used by each of them to purchase their equity interest in CCAH will be provided from their personal funds . . . . No principal of Applicant will retain any personal indebtedness in connection with this transaction.(18)
As described in the chapter on BCCI's activities in the United States, ultimately the decision came down to a public hearing at the Federal Reserve on April 23, 1981 in which Clifford and Altman, along with Mr. Adham and Mr. Fulaij, made an appeal to regulators to allow the acquisition to move forward. As Clifford told regulators at the hearing when he was asked about BCCI's involvement in the acquisition, BCCI's role would be:
None. There is no function of any kind on the part of BCCI . . . I know of no present relationship. I know of no planned future relationship that exists.(19)
In their prepared testimony before the Senate, Clifford and Altman testified that they made full disclosure to the regulators at that meeting concerning the contemplated relationship between BCCI and the Middle Eastern investors who bought shares in CCAH. Clifford and Altman testified that the regulators "were advised that certain of First American investors were also shareholders in BCCI; that the investors used BCCI as their commercial and investment bank; that BCCI had provided and would continue to provide "advisory and other services to the shareholders with respect to their CCAH investments; and that BCCI served as a communications link with the investors."(20)
As discussed earlier, Robert Mannion, the Associate General Counsel for the Federal Reserve, who conducted the public hearing on the FGB takeover, broached the issue of the relationship between the Middle Eastern investors and BCCI on numerous occasions, but ultimately accepted the assurances of Clifford, Altman and the Middle East investors themselves that BCCI would neither own nor control Financial General Bankshares.
Part of the problem is that the permissible relationship between BCCI and First American was never explicitly set out by anyone at the Federal Reserve, beyond the original requirement that BCCI could not act as a lender to the shareholders for the original purchase of FGB, and was limited to acting as an "investment advisor," and conduit for information. The principal official regulatory discussion of the degree to which BCCI and FGB could interact was set forth in a letter to the Federal Reserve from the Deputy Comptroller General, Mr. William Muckenfuss, in a letter to the Chairman of the Federal Reserve Board, which became part of the record upon which the Federal Reserve's approval of the CCAH application was granted. The Comptroller's office signed off on the takeover of Financial General Bankshares, stipulating certain conditions:
It has now been represented to us that BCCI will have no involvement with the management, and other affairs of Financial General, nor will BCCI be involved in the financing arrangements, if any are required, regarding this proposal. This commitment is critical, both now, and in the future, since a relationship with another financial institution would be a significant factor in appraising this application. This is especially important in light of overlapping ownership, which will exist between Credit and Commerce Holdings, Credit and Commerce Investment, and BCCI. Moreover, any enhanced, direct or indirect affiliation or relationship between BCCI and Financial General, would take on even greater significance in light of the fact that BCCI is not subject to regulation and supervision on a consolidated basis, by a single bank supervisory authority."(21)
Testifying before the Subcommittee, Clifford acknowledged that he interpreted the Muckenfuss letter to have signified a definite agreement in three areas: "one, BCCI would not acquire any stock in First American at the time of the tender offer; two, that they would not, in any way, finance the purchase of the stock in First American; and three that they would have no control over the operation of First American."(22)
Clifford's interpretation of the obligation differs from the plain text of the Muckenfuss letter and OCC's requirements. OCC stated that its approval was condition on BCCI not being involved with management. For that concept, Clifford unilaterally substituted the word "control," a substantially less stringent standard than that which the OCC actually required.
Concerning the first point, no documents have been found by the Subcommittee which definitively prove Clifford and Altman knew BCCI had acquired stock in First American prior to the conclusion of the FGB acquisition. But the Sami memorandum contains material suggesting that precisely such an arrangement had been approved by Clifford in the early days of the FGB takeover, and other documents provide circumstantial documentation of Clifford's knowledge about the proposed Middle Eastern shareholders in FGB not being at risk.
An October, 1978 telex from former CIA Director Richard Helms to Mohammed Rahim Irvani, one of the original investors, shows Helms advising another BCCI front-man on language designed to hold him harmless for acting as a front-man for BCCI. The language of the telex states that by agreement, Irvani would be not be liable for any liability caused by granting a power of attorney to Clifford and his firm in connection with the FGB takeover, and suggests that this language be sent to the Clifford firm.(23) Irvani was then listed, within days of the telex, in an application filed with the Federal Reserve by Altman on behalf of CCAH, listed as one of its intended principal shareholders, along with representatives of the Abu Dhabi royal family, and Faisal al Fulaij -- another nominee for BCCI.(24)
What was unusual about this agreement provided to Irvani by Helms at the time of Irvani's application to the Federal Reserve as a shareholder of CCAH is not the power of attorney given to Clifford and Altman -- they would hold a power of attorney for all of the Middle Eastern investors -- but rather the indemnification, which essentially states that Clifford and Altman have the power to act in Irvani's name without liability attaching to Irvani -- meaning that someone else, presumably BCCI, would be indemnifying Irvani against any possible liability as a result of the use of his name. As a result, Irvani would not be at risk for any actions he participated in during the takeover, and therefore would be understood to be a nominee by anyone knowing of the indemnification.
On point two, William Taylor, the head of Banking Supervision for the Federal Reserve, and Gerald Corrigan of the New York Federal Reserve, gave credence to Clifford's interpretation in testimony before the House Banking Committee. Corrigan stated that "there was no prohibition of borrowing from First American even when the stock of First American was placed as collateral." According to Altman, the only prohibition on pledge of stock was for the initial takeover. Nevertheless, Taylor's and Corrigan's testimony is at odds with the specific language of the Muckenfuss letter relating to "financial arrangements .... both now and in the future." Moreover, whenever Clifford and Altman clearly knew of such borrowing by First American shareholders from BCCI against collateral, such as in connection with their own such borrowings, various rights offerings, and First American's purchase of National Bank of Georgia, they took steps to hide this information from the regulators.
On point three, Clifford and Altman have remained adamant that BCCI never exercised any control over First American. On this point, however, there is substantial evidence to the contrary.
In testimony to the House Banking Committee, Clifford stated that "Before accepting the offer to serve [as Chairman of First American] however, a fundamental agreement was made with the shareholders on the issue of authority," that he [Clifford] would run the bank. (25) Counsel for Clifford acknowledged, however, that "the specific agreement... was an oral agreement" and that there was nothing in writing to support their client's assertion.(26) Clifford characterized his involvement in the operations of the bank as "no ivory tower experience for us." He explained that "This was a hands-on occupation. I took it as my first obligation."(27)
However, BCCI in fact participated in the selection of First American's top management from the outset of Clifford and Altman's tenure. As detailed in the Federal Reserve's summary of charges, Abedi, BCCI's CEO, interviewed a series of candidates for the new chief executive officer of First American, including former Citibank president William I. Spencer, Daniel J. Callahan, James Drumwright, and Robert Stevens, the last of whom ultimately became First American's CEO and president. While Spencer turned down the job offer after meeting with Abedi following an introductory meeting with Clifford, Callahan was informed by Clifford that he would not be offered the position of CEO of First American because Callahan had requested "exclusive administrative, operational and executive control" of the bank.(28)
Clifford's involvement with Abedi in this process -- which begin within days of the April 23, 1981 hearing before the Federal Reserve -- is evidence of his understanding at the time that BCCI would have a substantial say in the most important decisions affecting First American's future, beginning with the selection of a CEO. Contrary to the assurances provided the Federal Reserve by Clifford and Altman, no CEO would be chosen who would require full autonomy in decisions regarding the bank.
In prepared testimony before the Senate Foreign Relations Committee, Clifford and Altman stated that "The evidence is conclusive that the two companies [BCCI and First American] had different -- and incompatible--operating policies and procedures, strategic concepts, bank support functions, staffing and administrative programs, customer bases and controls and systems." Clifford cited as proof that BCCI did not control First American the testimony before the House Banking Committee of Robert P. Black, the Chairman of the Richmond Federal Reserve.
who said, that in a review of First American's activities in 1991, "we have found no evidence of influence or control."(29)
In practice, BCCI's involvement in day-to-day affairs of some of First American's members banks was either very limited, or non-existent, and in others, such as First American Virginia, the institution under the jurisdiction of the Richmond Federal Reserve, limited to a few transactions. But in other parts of First American, including First American Georgia and First American D.C., BCCI clearly influenced both important banking investment decisions and other transactions. In connection with First American New York, BCCI controlled most of the critical decisions by First American, including the hiring of management, the size, location and choice of office space, and the business strategy. More importantly, when it came to fundamental issues of First American's acquisition and sales strategy, BCCI's needs over the course of a decade repeatedly dictated First American's decision making, rather than independent business judgments by the U.S. officials of First American.
In their written testimony to the Subcommittee, Clifford and Altman made the following presentation concerning the issues related to BCCI's involvement with decisions concerning First American New York:
BCCI has not in any way controlled First American Bank of New York ("FABNY"), much less the First American organization. These events now being questioned cannot be viewed in isolation, and are related to unique circumstances in New York during the 1982-1983 time period. . . In connection with the 1981-1982 regulatory proceedings to acquire two New York banks owned by FGB, an application was submitted to the New York State Banking Board. Due to strong opposition, the investors agreed to divest the New York City bank following the tender offer. The Middle Eastern investors, in effect, were forced to create a new bank in New York City -- an unforeseen development.
As a result, an entire management group to operate the New York bank had to be identified and hired. Mr. Abedi, as investment advisor to the shareholders, was consulted about bankers whom he might know or recommend for employment by the new First American Bank of New York. This assistance was particularly welcome as FABNY was to have an international banking capability, and Mr. Abedi's background was devoted to international banking. At no time, however, did Mr. Abedi make decisions concerning the selection, hiring, or dismissal of officers. Final authority -- as made clear by Board minutes -- rested with Mr. Clifford and the FABNY board.(30)
However, in testimony before the Subcommittee, Altman acknowledged that the circumstances pertaining to BCCI's involvement in the establishment of a New York office for First American had lead to BCCI being unusually involved in some of the start-up functions of First American there.
When the acquisition was completed in the spring of 1982 we were then in a very awkward and, to some extent, unhappy posture. We were under an obligation to sell the New York City bank. And we were under a need to set up a new bank and really set it up from scratch. We had nothing in the city. We had no staff. We had no location. We had no resources. It put us, as I say, in a difficult position.
Now throughout the takeover litigation and during the regulatory proceedings, we essentially had two contacts in New York. One was the law firm of Wachtell, Lipton, Rosen & Katz that was co-counsel with us and represented the shareholders during these proceedings. And the other was BCCI, which had a representative office and was acting as the investment advisor. . . And so we went to the people we knew at Wachtell, Lipton and we asked the attorneys did they know of space in the city. And they did. And they recommended space. And we went to BCCI's representative office in New York, which was then headed by this man, Elley. And he also attempted to assist us by telling us of brokers or space that he was aware of. And, indeed, this was something that I worked on personally.
But I was not in New York City and when I would go up there and I was to get back messages or information, I would usually ask people to send it either to BCCI in New York or to the New York lawyers. They acted, in effect, as a local contact for us.
And so BCCI was trying to be helpful to us. Now this did not seem particularly out of the ordinary.(31)
Thus by Altman's account, BCCI, like Wachtell, Lipton, was acting a local contact and assistant to help First American establish its presence. Unfortunately, the account does not square with other information obtained by the Subcommittee concerning the circumstances which lead to the opening of the New York office of First American, nor does it provide any business justification for First American having made the decision to open a New York office in the first place.
To begin with, there was no obvious business justification for First American to purchase two branches in New York City from Banker's Trust, where banks like Citibank, Chase Manhattan, and Chemical Bank collectively had many hundreds of branches. Indeed, a decade later, George Davis, Clifford's successor as CEO of First American, would conclude that the New York operation of First American had lost money for years and remained in 1992 a drain on the resources of First American overall.(32) By contrast, Abedi and BCCI had made acquisition of a bank in New York his priority since 1975, while First American had not done any preparation in insure its ability to do business there. Again, in Altman's words:
We had nothing in the city. We had no staff. We had no location. We had no resources.(33)
The obvious question was why First American, under the circumstances, would as among the earliest actions of Clifford and Altman at the head of First American, go ahead with expanding First American's operations through purchasing New York branches under such difficult conditions. The answer, as numerous BCCI memoranda suggest, was that Abedi and BCCI needed the branch to act as an outpost in the U.S. for BCCI's international operations, and that Clifford and Altman were essentially acting as covers for BCCI's acquisition there, that had been previously blocked by New York bank regulators when BCCI sought to go in directly.
For example, a memorandum dated July 25, 1983, from BCCI employee Aijaz Afridi to BCCI Number 2 Swaleh Naqvi, with copies to BCCI officials Kemal Shoaib and K.K. Elley, described BCCI's plan for First American New York in terms that suggest it would operate independently from the other First American banks. According to this BCCI official, while operating independently, First American New York would be subsidized by the other First American banks, using their assets as sources of funds and their clients as sources for "their entire international business," with First American New York becoming "their Central Treasury."(34)
The BCCI memorandum discusses such issues as how to achieve growth and profitability for First American New York, how to project its image domestically and internationally, how to introduce the bank to Third World countries, new products and services, and related issues. Under "basic assumptions," Afridi noted:
Management style and Philosophy will be on the pattern of BCC -- No interference from the Holding Co. and free hand to the Management.(35)
The record also shows that BCCI's involvement in directing the establishment of this office was pervasive. For example, as both BCCI officials and BCCI documents show, it was BCCI, not First American, that determined how much office space First American would lease in New York. As Sakhia testified:
The decision of hiring, decision for acquisition of space . . . the New York office of First American was identified by BCC officers and approved by Mr. Abedi. He made the decision to rent that space.(36)
The space that was rented by First American was 350 Park Avenue, close to the offices already established by BCCI in New York at 320 Park Avenue. According to the Federal Reserve, and contrary to Altman's sworn testimony, it was BCCI, not Wachtell, Lipton, that directed the choice of a location, and when Clifford and Altman objected to the cost of the location, they were overruled by Abedi.(37)
Over the ensuing decade, the space would prove grossly excessive for the actual needs of First American, and its costs would become a significant drain on First American's resources. A letter dated December 13, 1982 from Elley to Swaleh Naqvi, Abedi's number two at BCCI, on BCC New York stationery, documents the nature of the relationship between BCCI and First American in New York. In the letter, Elley brings Naqvi up to date with a meeting he has had with Altman concerning the First American Bank in New York, and covering the subletting of space at 350 Park Avenue, renovation of the space, selection of board directors, recruitment of key staff, selection of auditors and attorneys, and coordination with the holding company and the shareholders -- all matters being handled for First American by Elley as a BCCI employee and reported to Naqvi, the BCCI senior executive at a time when Clifford and Altman were ostensibly in control of First American.(38)
BCCI also handled the purchase of new branch offices in New York for First American. In March 1983, while Elley was still employed by BCCI as head of its New York representative office, he began discussions with Bankers Trust officials regarding the purchase of branches of their bank for First American. Six weeks later, when First American submitted bids for the branches, BCCI officials -- not First American officials -- handled the negotiations.(39)
For instance, in an October 14, 1982 letter to Swaleh Naqvi, Khusro Karamat Elley, an employee of BCCI in New York, wrote concerning "the subletting of space, ... selection of board of directors, recruitment of key staff, selection of auditors, selection of lawyers, compensation package, including fringe benefits, projections for first year's operations, coordination with holding company and shareholders." (40)
Another letter written by Mr. Elley to Mr. Naqvi concerns the Board of Directors of First American Bank in New York and Mr. Elley's recommendation of Mr. Richard Paget to the board. In response to a question regarding the Paget recommendation, Altman testified only that:
We had a very unusual situation that developed in New York. And you were focusing on a period nearly 10 years ago, very limited in time.(41)
Clifford and Altman's written testimony referred to a single candidate for First American New York recommended to them by Abedi.(42) In fact, as specified below, BCCI had direct involvement in, and apparent control over, numerous key personnel decisions in First American New York beginning in early 1982 and continuing through at least early 1986.
For example, in October, 1982, Abedi had contacted Joseph Feghali, the president of another bank with whom BCCI had a correspondent banking relationship, interviewed him in Los Angeles, and offered Feghali the position of president and CEO of First American New York. In subsequent meetings, Abedi and his number two at BCCI, Naqvi, offered Feghali a seven-year contract with First American, including benefits and salary for Feghali, before Feghali had communicated with either Clifford or Altman. Only after these decisions had been made did Feghali meet with Altman. At that point, Altman and Feghali met to discuss First American New York operations with Elley, and continued further negotiations over the terms of a draft employment contract Altman provided Feghali, who ultimately turned down the offer from BCCI and from Altman for medical reasons.(43) Later, this scenario was repeated in 1983 in connection with BCCI first interviewing and then recommending to Clifford and Altman the hiring of Bruno Richter as CEO and president of First American New York, a position he accepted in July 1983.(44)
Following Richter's hiring by Clifford and Altman, he in turn sought to hire other bank officials for First American New York who were required to interview not only with Altman, but with Abedi and Naqvi in London. Later, when Clifford and Altman became unhappy with Richter, his firing was discussed at length with Abedi by Clifford and Altman. His replacement, William Duncan, was selected as First American New York's new president and CEO only after interviewing with Abedi in London.(45)
Ultimately, two BCCI officers, Elley and Afridi, were transferred by BCCI's New York agency to First American New York. Naqvi discussed the issue with Altman and then offered Elley a position at First American New York as senior Vice President. After leaving BCCI for First American, both officers continued to receive BCCI benefits including reimbursements from BCCI for gas, electric and telephone bills, as well as concessionary mortgage rates from BCCI.(46)
The minutes of a BCCI U.S. marketing meeting held in 1985 describe the participation of these two former BCCI officials during their tenure at First American in meetings aimed at strengthening BCCI's control of the U.S. bank. As the memorandum stated:
"Mr. Afridi opened the meeting and emphasized that the purpose of the meeting was to coordinate the efforts of different locations of BCCI and other institutions [emphasis added] so that the President's desire to have a totality of approach is achieved. It is a great challenge that the group faces in the present and future U.S. operations."(47)
Afridi was a former employee of BCCI who at the time was working for First American of New York and, according to the memorandum, "requested the members to work together to overwhelm the U.S. market. Historically, we have not made a calculated approach to the U.S. market." When Senator Kerry asked Mr. Altman to comment on the memorandum, Mr. Altman, who did not attend the meeting, said, "I can't explain what this does mean.....I can't comment on the propriety of what the participants were doing, but I think it is troubling."(48)
When asked by Senator Kerry if Mr. Elley and Mr. Afridi, whom Mr. Altman had hired from BCCI, were working behind his back on the joint marketing plan, Altman replied. "That is correct."(49) However, Abdur Sakhia, the head General manager for U.S. operations, testified that Altman talked to him personally "about [joint BCCI-First American] marketing."(50)
The handling of First American's capitalization by BCCI and by Clifford and Altman raise further substantial questions about their independence of BCCI's control in handling First American's most important financial transactions -- its capitalization. BCCI's direct involvement with Clifford and Altman in connection with financing for First American began almost immediately after the Federal Reserve approved the CCAH application, and continued throughout the 1980's.
As the Federal Reserve found in its summary of charges, on about May 13, 1982, BCCI or ICIC Overseas made a payment to one of First American's holding companies, CCAI, of $2.5 million to permit it to pay interest on a loan from BAII, followed by a second payment of $2.3 million on about July 13, 1982 from BCCI or ICIC Overseas for the same purpose. According to the Federal Reserve, these payments violated the commitment made by Clifford and Altman and CCAH that no more than $50 million in debt would be incurred by CCAH and its subsidiaries for the acquisition of FGB, because they represented an addition $4.8 million in debt to BCCI or ICIC Overseas by CCAH. The Federal Reserve additionally found that they violated the commitment made that BCCI would not fund the CCAH acquisition of FGB, a commitment violated through the payment of the interest.(51)
Two weeks after the second payment, CCAH's outside auditors, Ernst & Whinney, who at the time were also auditing BCCI's Luxembourg holding company, wrote to BCCI and to Altman concerning the $4.8 million in new funds, and describing the new funds as a capital contribution by a new investor. In effect, the auditors were viewing the payment by BCCI to be a capital contribution by BCCI entitling it to own shares in First American. In response, BCCI told the CCAH manager in the Netherland Antilles and the auditors on September 20, 1982 that the funds should be treated as a short-term subordinated loan from the shareholders of CCAH, making it a loan from BCCI to all of CCAH's shareholders. Six months later, Altman wrote the CCAH manager in the Netherlands Antilles that only one CCAH shareholder had lent the money -- Kamal Adham -- despite knowing that BCCI itself had lent the money and was now using Adham as a pass through or nominee. Later, after BCCI officials in London complained about how much the loan was costing BCCI, Altman directed CCAH to prepay the loan 19 months prior to its maturity, replacing it with a new loan at a higher interest rate, costing CCAH $152,0000 over the remaining term of the loan.(52)
In August, 1982, BCCI provided $30 million to First American through its holding company, CCAH, to purchase the remaining common and Class A shares of Financial General, making FGB a wholly-owned subsidiary of CCAH by eliminating any shareholders from Financial General who were not controlled by BCCI. As the Federal Reserve found:
At the time CCAH received and used the funds, no decision had been made as to the method by which they would be reflected on the books of the company. The board of directors had not authorized the issuance or sale of additional shares of the company, and no decision had been made as to whom, if anyone, new shares would be issued.(53)
In effect, the $30 million capital contribution gave BCCI a direct stake in First American less than one year after the Federal Reserve had approved its application on the understanding that BCCI would not be involved. Alternatively, the $30 million could be characterized as a BCCI loan to First American, also prohibited by the Federal Reserve. It took BCCI over four months to decide how to structure the contribution. Its conclusion was to direct its resident agent in the Netherlands to direct Altman to treat the $30 million as capital contributions from three existing Middle Eastern shareholders and from a fourth new shareholder, Sheikh Khalifa Bin Zayed al Nahyan. The resident agent provided Altman with back-dated resolutions authorizing this handling of the funds, which Altman duly had signed by CCAH's directors.(54)
In 1983, when CCAH raised $75 million in additional capital through a "rights offering," BCCI again paid the funds to First American, advancing the purchase price for the shares, despite the fact that responsibility for payment of the funds had not yet been allocated among the various shareholders in accordance with their acceptances, or waivers, of the shares due them in the rights offering. According to the Federal Reserve's summary of charges:
Altman was aware of BCCI's payment, and was concerned that the funds had not yet been allocated among the various shareholders . . .(55)
Later in 1983, when BCCI failed to provide an additional $25 million requested by CCAH, BCCI provided CCAH with a $20 million credit line, stating that CCAH had requested the loan. These funds were paid by BCCI to First American, with documentation created later attributing the lending to Kamal Adham, a key front-man for BCCI in the CCAH stock purchases. Tellingly, although BCCI treated Adham as the lender of the funds, Altman and another partner at Clifford & Warnke dealt exclusively with BCCI concerning the terms and repayment of the loan, despite Altman's frequent contacts with Adham on other matters pertaining to First American. Later, another Clifford & Warnke attorney drafted loan documents memorializing Adham's involvement in the matter, back dated two and a half months, and signed by Altman, which were provided to BCCI for Adham's signature.(56)
In future years, Clifford & Warnke lawyers communicated with BCCI a number of times concerning the "Adham" loan, and described the loan in two instances as one "arranged by you [BCCI] in our favor."(57) Despite BCCI's handling of every aspect of the loan, including the original disbursement to First American, Altman in filings with the Federal Reserve described it as a "loan from Investor." In 1991, when Altman gave sworn testimony to the Federal Reserve, he represented that the loan was made to CCAH by Adham.(58)
Perhaps the clearest example of Clifford and Altman undertaking an action, ostensibly on behalf of First American, but directed by BCCI, was First American's decision to purchase the National Bank of Georgia in 1986 from Ghaith Pharaon. Clifford and Altman have testified that they "learned that the owner of NBG, Ghaith Pharaon, was in financial difficulty and might be willing to sell his bank."(59) Clifford and Altman describe the acquisition of the National Bank of Georgia by First American in 1986 as a "reflection of First American's consistent corporate strategy of expansion since 1982," suggesting that it was mere coincidence that First American purchased a bank already owned by another member of the BCCI family, Pharaon, and which they understood to have adopted BCCI's hexagonal logo and banking practices.(60)
As the Office of the Comptroller of the Currency had suspected in early 1978, BCCI in fact owned 50 percent of National Bank of Georgia (NBG) from the moment of its ostensible sale to Ghaith Pharaon in May of that year, with Pharaon acting as BCCI's nominee for those shares to avoid the hostility regulators had already demonstrated towards any direct acquisition by BCCI. If any of Pharaon's creditors attached NBG's assets, the ensuing civil litigation could threaten to reveal this secret interest, with the result that BCCI be destroyed. Accordingly, BCCI decided to consolidate its U.S. holdings through the sale of NBG to First American, as specified in some detail in the chapter on BCCI's later activities in the U.S. Thus, while BCCI's business need to bring about this purchase is clear, First American's was not, especially given the actual underlying problems at NBG, which had begun when the bank had been under the control of Bert Lance and accelerated as a consequence of BCCI's management of NBG while Pharaon held the bank.
On January 1, 1985, Pharaon executed a secret "Memorandum of Deposit" with BCCI which provided that all of the outstanding shares of NBG Financial would be deposited with BCCI as collateral for loans to Pharaon and his companies, and giving BCCI "or its nominees" the right to vote the shares. As a result, as of that date, BCCI had effective control over the 50% of the shares of NBG which had been BCCI's from the beginning.(61)
By November 1985, with Pharaon's financial difficulties intensifying, BCCI's auditors, Price Waterhouse, began to express concern to BCCI about its exposure to Pharaon and calling on the bank to reduce this exposure. In fact, a portion of this exposure was related to Pharaon's holding of NBG on BCCI's behalf.
Accordingly, BCCI and Pharaon agreed to liquidate Pharaon's 50% interest in NBG, and sell his holdings of NBG stock held by Pharaon Holdings Limited back to NBG Financial, now controlled by BCCI. At this point, BCCI had direct and total secret control of all of the outstanding shares of National Bank of Georgia, and had demonstrated to Price Waterhouse its ability to force "loans" to major borrowers like Pharaon to be "repaid." But these financial manipulations did not solve the other serious problem created by Pharaon's deteriorating financial condition -- the possibility that creditors might seek to attach the shares of NBG Financial -- still officially "owned" by Pharaon. The result would not merely put BCCI's ownership of NBG at risk, but could set in motion the destruction of BCCI's entire empire in the United States and possibly globally.(62)
In London, Abedi looked at the NBG situation and determined that the simplest solution to the Pharaon problem was to merge National Bank of Georgia into First American, and thereby take Pharaon out of the picture. In the terms of the Federal Reserve charges, "in December 1986, BCCI caused CCAH to agree to purchase the shares of NBG [Financial] from Pharaon for $220 million."(63)
Significantly, while the transaction did not close until August 19, 1987, First American provided $80 million at the end of December, 1986 as an option on the purchase, securing those $80 million worth of shares and leaving Pharaon "holding" only a remainder of $140 million worth of the bank -- shares already held by BCCI as security for defaulted loans. Thus, any outsider who tried to attach Pharaon's shares in NBG would find that as creditors, they were now in back of First American and BCCI, making such an attachment of little legal value and thereby protecting the shares. From the point of view of First American, however, this secret arrangement had a significant problem. BCCI's security interest in NBG preceded that of First American. If something went wrong, First American might not be able to recover its $80 million.
Within BCCI at the time, it was generally understood that the sale of NBG from "Pharaon" to "First American" was principally a consolidation of BCCI entities within the United States. As Abdur Sakhia testified, First American had been planning to expand its operations to Florida in the mid-1980's, and had never discussed a move into Georgia, until 1985. In late 1985, he became aware that Pharaon's financial situation had become shaky, and at Abedi's request arranged for a meeting to take place in Miami in November of 1985 involving Abedi, Naqvi, Clifford, Altman, and two officials from National Bank of Georgia -- Carlson and Jamil. No one else was permitted to attend the meeting. After it ended, Abedi came out and told Sakhia and other BCCI officials that National Bank of Georgia would be merged with First American.(64) Abdur Sakhia remembers organizing the meeting. According to Sakhia, it was at this meeting that the decision was made to merge National bank of Georgia and First American. According to Sakhia, afterwards he met with Abedi, who talked of "merger and not buy and sell."(65)
Later, in preparation for BCCI's possible purchase of a bank in Florida, Sakhia was provided with a model file of the Independence Bank transaction, which showed Pharaon's role as a nominee, which was to be the model for the purchase of the Eagle Bank by BCCI. Sakhia then met with Naqvi in Luxembourg, and discussed BCCI's planned purchase of Eagle, with Faisal al Fulaij to act as the nominee instead of Pharaon. Altman was present during the conversation, and thus participated in a meeting in which the use of nominees by BCCI to purchase banks in the U.S. was discussed.(66) Altman's knowledge of this practice by BCCI and by Pharaon in connection with Independence would obviously have been important in the NBG transaction, causing him as a lawyer to have asked many questions concerning the relationship between BCCI and Pharaon. No document provided the Subcommittee shows Altman having ever expressed concern about the possibility that Pharaon was a nominee. The obvious explanation is that he did not do so because it was a fact Altman already knew, and because Altman himself had become a party to the arrangements involving BCCI and Pharaon.
After the Miami meeting, Sakhia wrote Abedi in London in February 1986 regarding BCCI's "Future Plans in the United States." In the memorandum, Sakhia referenced his discussions with Altman concerning the planned purchases by BCCI of banks in Florida. In a paragraph concerning the National Bank of Georgia, Sakhia suggested that in view of "the forthcoming restructuring of the bank in Georgia, it may be useful to merge their Miami operation with BCC Overseas, Miami, as this will offer additional dollar deposit and correspondent banking relationship to BCCI Overseas."(67)
In their written testimony before the Senate, Clifford and Altman denied that the acquisition of NBG by First American was directed by BCCI, stating instead that the acquisition:
was a reflection of First American's consistent corporate strategy of expansion since 1982 . . . in December 1986, based solely on its judgment of First American's best interests, the CCAH Board approved the proposed acquisition of NBG. BCCI did not influence these deliberations, nor did it control the Company's decision to acquire NBG. First American, not BCCI, initiated the NBG acquisition.
The price paid by First American was reasonable and determined free of control by BCCI.(68)
As Altman told journalists in 1986 who wondered at the coincidence of Clifford and Altman buying the bank once held by Lance and whose sale by Lance to Pharaon they had participated in:
It was clearly an arms-length business deal, that is to suggest we didn't get any special consideration in terms of price. . . It's a logical move for us in terms of our market expansion.(69)
In answers to written questions from the Subcommittee, Altman denied attending any meetings regarding the NBG purchase by First American in Miami, as described by Sakhia. However, Roy P.M. Carlson, the former President of NBG, has told Subcommittee staff that he, Mr. Clifford and Altman all met together at the Grand Bay Hotel in Miami in February 1986 to discuss the price for NBG.
Unfortunately, the statements made by Clifford and Altman to the Committee regarding the National Bank of Georgia transaction cannot be reconciled with the documentary and testimonial accounts of the other parties involved.
On July 29, 1992, the Federal Reserve issued a lengthy summary of charges against Clifford and Altman in connection with their roles in BCCI and First American, including 350 paragraphs setting forth their roles in connection with alleged violations of various federal regulatory provisions. Of those 350 paragraphs, 78 paragraphs were devoted to Clifford and Altman's handling of the purchase of NBG by First American, and they define in detail the factual basis for concluding that the purchase was occasioned not by the independent needs of First American, or an independent business judgment by Clifford and Altman, but by BCCI. The following account summarizes the Federal Reserve evidence and findings.
The Federal Reserve found that in 1977, Pharaon became the nominal owner of National Bank of Georgia in a transaction negotiated and bankrolled by BCCI, and in which BCCI had a secret 50 percent interest from the beginning. While nominally owned by Pharaon, NBG employed several BCCI officials, NBG personnel regularly attended BCCI conferences at BCCI's expense, NBG adopted BCCI's management style and hexagonal logo, and revised its business orientation from a retail bank to an international bank.(70)
In February 1983, Altman joined National Bank of Georgia officials at a BCCI-sponsored conference in New York, whose purpose was to integrate NBG into BCCI's corporate culture. Following a presentation by BCCI officials, an executive vice president of NBG, William Batastini, "gave public remarks at which he expressed his happiness at being part of the BCCI family," in Altman's presence. Batastini then repeated these remarks at a later annual conference of BCCI in Athens in March 1983, again in Altman's presence.(71)
By January 1, 1985, BCCI, in the course of restructuring Pharaon's loan portfolio with BCCI, acquired control of all NBG shares. In November, Pharaon's financial problems -- including a possible default on a $200 million loan that had been syndicated to a number of banks -- became public -- with the result that the prospect of liens on Pharaon's property by creditors became a significant threat. Moreover, the news caused Price Waterhouse, BCCI's auditor, to express concerns about BCCI's exposure to Pharaon, and to urge that BCCI call in loans to reduce its exposure. As the Federal Reserve found:
Because BCCI secretly owned and controlled NBG and its shares, an attachment of those assets by Pharaon's creditors threatened BCCI with a substantial financial loss. . . BCCI thus had an incentive to cause NBG to be sold to another BCCI nominee, one that would not be subject to levying creditors.(72)
Accordingly, BCCI began to plan the sale of NBG to CCAH and First American. In September 1985, Altman met with NBG's president, Roy Carlson, who had been placed at NBG by Abedi, who had known Carlson through Carlson's work at the Bank of America when Bank of America owned a stake in BCCI, and two other NBG officials. At the time, Georgia law prohibited the acquisition of a Georgia bank of a bank holding company, such as CCAH, which had substantial assets outside the south. The following month, Altman asked First American's Treasurer, A. Vincent Scoffone, to conduct a preliminary evaluation of NBG to determine a purchase price for NBG. Scoffone estimated that NBG's book value was approximately $80 million, and that based on recent bank sales prices of Georgia banks, a realistic price for NBG would range from $120 million to $180 million. At the time, Scoffone warned that "no review has been performed on the quality of the asset base. Such a review is mandatory before any real meaningful analysis can be made regarding the tangible net worth of NBG."(73)
According to testimony from Sakhia, and the summary of charges of the Federal Reserve, in November, 1985, Clifford and Altman attended a conference of BCCI managers in Miami, including Abedi, Naqvi, Sakhia, and two NBG officers, Carlson and former BCCI official Tariq Jamil. Following a conference with the managers, Clifford and Altman met separately with Abedi, Naqvi, Elley, Jamil and Carlson, during which Abedi decided and announced that NBG would be sold to CCAH, that Jamil would be transferred from NBG back to BCCI's headquarters in London, and that Elley would be transferred from First American New York to NBG to replace Jamil. Some time later, Altman told Sakhia he was not pleased with Abedi's decision to purchase NBG and that he would not have purchased the bank of his own free will.(74)
In February 1986, in connection with an evaluation of Pharaon's holdings, an independent valuation of NBG was conducted by the firm of Keefe, Bruyette & Woods, which determined that NBG was worth between $130 million and $144 million, and a copy of this report was provided to the firm of Clifford & Warnke. In May, 1986, First American's Treasurer, Scoffone, conducted a second analysis of NBG's value, without having been told by Clifford of Altman of the Keefe, Bruyette & Woods valuation. In a memorandum to Altman dated May 7, 1986, Scoffone concluded that based on the median purchase price for banks within the past year, its value was $152 million. Arguing that "NBG may be a unique situation because of its location in Atlanta, Georgia," Scoffone said that "a premium over the median purchase price may be appropriate," and on that basis concluded that a fair price for NBG would be $211 million if one assigned a higher multiple times book price for the shares than banks in the Georgia region had been sold for during the past year. He also acknowledged that at such a price:
this transaction would be highly beneficial to the present owner of NBG. The bank would be sold at a significant premium over both the national and local median sales prices.(75)
Contrary to normal banking practice on a purchase of this magnitude, Clifford and Altman did not retain an independent investment banker to assist in valuing the shares, as they had previously done in the purchase of branches for First American in New York from Banker's Trust in 1983, and would do again in 1990 when they were considering the sale of First American overall. Instead, First American relied on Scoffone's evaluation, and Altman became the sole representative of First American in negotiations over the acquisition and the structuring of the transaction. Significantly, in doing so, Altman did not deal with Pharaon, but with Abedi, Naqvi, and other BCCI officials.(76)
On May 8, 1986, Altman wrote Naqvi, enclosing Scoffone's evaluation, and expressing his hope that the purchase price would be in the range of $160 million to $175 million, as "we are nearing the point at which this purchase is too expensive."(77) A week later, meeting in London with Batastini at BCCI's London headquarters, Altman and Batastini agreed to a purchase price of $205 million, of which $80 million would be paid up front for an option to purchase, and $125 million upon consummation of the transaction. Under the agreement, First American (CCAH) would pay Pharaon the $80 million immediately, and against the $80 million would receive a security interest in NBG's shares -- thus protecting them from other Pharaon creditors. At the same time, BCCI and Altman discussed the fact that BCCI would simultaneously have lending to Pharaon for the remainder of the $205 million, leaving NBG's shares entirely pledged and protected from creditors. Altman then discussed this situation further with other attorneys for First American, who noted the following:
The proposed structure may focus unwelcome attention on the relationship between CCAH [First American's holding company] and BCCI and raise questions as to whether BCCI has acquired control of NBG. . . . A bigger problem [then certain other regulatory issues raised by the structure], however, arising from BCCI's involvement in the transaction is that it might focus closer attention on the relationship between CCAH and BCCI. An argument could be made perhaps that CCAH and BCCI are acting together and/or as principal and agent.(78)
Altman then sent a copy of this memorandum to Naqvi, and Clifford sent a second copy to Abedi in London, with a note from Clifford dated June 17, 1986 warning Abedi that the memorandum would "give you some idea of the difficulties and complexities facing us." Later in June, when CCAH and First American filed drafts of the option agreement with the Federal Reserve under which CCAH would acquire the National Bank of Georgia, the documents did not refer to the pledge of NBG shares to BCCI that was simultaneous with the pledge of NBG shares to First American, or to the fact that BCCI would acting as an "escrow agent" and would hold the funds paid to Pharaon by First American until the completion of the transaction.(79)
By August, Baldwin Tuttle at Milbank, Tweed, the regulatory attorney involved in handling the First American-NBG transaction, became sufficiently concerned about the structuring of it that he wrote to warn him that there five separate legal problems for First American arising out of it. First, the payment of the $80 million option placed CCAH/First American at risk; second, under the structure of the deal, First American did not have the right until the acquisition was completed to exercise any control of management of NBG, leaving it vulnerable should the current management not do their job; third, there was no provision in the agreement for negotiation of the price if the value of NBG declined prior to the option's exercise; fourth, legal opinions were necessary to determine "the validity of Pharaon's ownership of NBG;" and finally, there was no guarantee CCAH/First American would recover its $80 million if it chose not to exercise its option.(80)
These issues arose in part because Tuttle had previously been advised that BCCI would also have a security interest in NBG shares, raising the question of whether BCCI's interest in the shares, or First American's interest in the shares, would be satisfied first in the event something went wrong.
In response to this letter, Altman demanded that Tuttle appear at Altman's office, and during a "brief and hostile meeting," handed Tuttle both the original and the only other copy of his letter and warned Tuttle that if he ever wrote such a letter again, Tuttle would no longer represent CCAH/First American.(81)
While there are many conclusions one might draw on the basis of this incident, one notable element is Tuttle's recognition that there reasons to doubt "the validity of Pharaon's ownership of NBG." The only possible reason to doubt his ownership under the circumstances was the issue of whether BCCI was the actual owner already. Altman's response to Tuttle offers a convincing example of Altman's determination that no inquiries be made regarding this issue. It is evidence that Altman's failure to advise the Federal Reserve of BCCI's involvement in the transaction was wilful and intentional, rather than accidental, as reflected in the charges brought against Altman by the Federal Reserve in connection with this incident.
On September 4, 1986, Altman provided Naqvi at BCCI with draft documents relating to the option and loan transaction for his review, and identifying BCCI as pledge agent for First American's option payment and BCCI's loan. In a cover letter to Naqvi, Altman wrote that the agreements assumed that there was no debt secured by the NBG shares "except as may be later authorized with respect to the BCCI loan to Dr. Pharaon." As the Federal Reserve found, Altman was already aware of the Pharaon debt to BCCI secured by the NBG shares.(82)
The significance of the September 4, 1986 letter from Altman is that it identifies how Altman chose to respond to the problems posed by revealing the fact that BCCI already had a security interest in National Bank of Georgia shares that might impair the value of First American's security interest in them and raise questions about the $80 million option. Altman's response was, in effect, to join BCCI in a subterfuge -- that BCCI would not lend the money to Pharaon or gain security from Pharaon until First American's debt was secured -- when in fact, both Altman and Naqvi knew this was untrue.
On October 23, 1986, Pharaon and BCCI executed various agreements to effectuate the planned acquisition of National Bank of Georgia, which included a loan agreement between Pharaon and BCCI whereby BCCI would lend Pharaon $140 million at the time that CCAH/First American acquired its option to purchase NBG, secured by another pledge of NBG shares to BCCI. Altman did not sign these documents on behalf of CCAH, however, because, as the Federal Reserve found, he "became concerned that the documents as then drafted in connection with the NBG option would reveal to the Board BCCI's extensive participation in the transaction."(83) According to the Federal Reserve, Altman then went to London, where he met with a BCCI officer, Imran Iman, and a BCCI lawyer, to discuss the transaction. A memorandum written by the BCCI lawyer memorializing the meeting stated the following:
Mr. Altman stated that because the Federal Remere will see the Pledge Agreement they will see the references to the Loan Agreement and BCCI SA and will therefore want to see the Loan Agreement. By seeing all the documents, they would most likely arrive at an adverse conclusion.
Altman suggested that a better way to have structured the agreements would have been for the Option and Pledge Agreements to have been executed and then perhaps 60 days later, a Loan Agreement signed an addendum [sic] made to the Pledge Agreement to make BCCI a party to the Pledge Agreement. . .
[The BCCI attorney] would contact [C&W Partner] of Mr. Altman's office and appraise [sic] him of the above. [C&W Partner] would prepare the fresh Pledge Agreement on the above facts. . . Mr. Altman would discuss the above with Mr. Naqvi and if he is agreeable, Dr. Pharaon would be approached.(84)
Following the meetings with Altman, the documents were redrawn to separate the integrated transaction into two transactions in order to mislead the Federal Reserve. As a British lawyer for BCCI wrote in a memorandum:
[t]he reason for having two Pledge Agreements is that Mr. R. Altman feels that in the previous Pledge Agreement, the references to "Loan Agreement" would have given the Federal Reserve cause to see the "Loan Agreement" and possibly decide that an "integrated transaction" was being entered into. Whereas now, with the two Pledge agreements, the Federal Reserve will only see the Option Pledge, which contains no reference to the "Loan Agreement."(85)
A later memorandum by the BCCI lawyer to Naqvi, conveying the substance of meetings between him and Altman in Washington D.C. between December 18 and December 20, describes Altman advising that the documents pertaining to BCCI be signed after "a reasonable period will have elapsed" in order to prevent the Federal Reserve from concluding that the transactions involving BCCI were integrated with the First American purchase of NBG.(86)
The result of the signing of these documents is that NBG stock was simultaneously pledged to BCCI and to CCAH/First American, without it being clear which claim was subordinated. On December 18, 1986, Altman wrote BCCI to advise BCCI that CCAH consented to BCCI holding a security interest in Pharaon's stock in NBG up to a level of $140 million, in a letter that did not specify whose claim to Pharaon's pledged shares would come first.(87) In order to protect First American's interest, a subordination agreement was created on behalf of CCAH, which was executed by Altman the same day, December 18, 1986. BCCI did not, however, execute the agreement, leaving it of no effect. When First American lawyer Tuttle brought this to Altman's attention, Altman ordered the $80 million to be disbursed to Pharaon regardless, placing CCAH/First American at risk. Later, Altman lied about the situation to the Federal Reserve, denying that he was responsible for seeing to it that BCCI executed the subordination agreement.(88)
In the spring of 1987, months after paying the $80 million option to Pharaon, First American began its due diligence review of NBG to determine what First American had acquired. In the course of the due diligence, First American found numerous problems at NBG, including NBG having paid the expenses of its officials to meet with BCCI officials in London; NBG paying for hotel expenses for the crew of Abedi's private plane; NBG paying to fly Abedi to the opening of President Carter's Presidential library; NBG paying the salary of a former NBG employee for 15 months after he went back to work for BCCI; and paying a fee of $475,000 to BCCI in connection with the CCAH purchase. The due diligence also showed extraordinary expenses over NBG's assumption of a lease from Pharaon's business, Interedec, which would cost NBG another $25 million to $30 million over the 15 years life of the lease. Finally, it showed that NBG was at or near the bottom of its peer group on a wide variety of measures of financial performance, including its return on assets, return on equity, margin on earning assets, and percentage of non-performing loans. Any of these items would have justified First American demanding a reduction of the price paid for NBG, or its right to withdraw from the transaction. First American did neither.(89)
On April 22, 1987, CCAH/First American filed an application with the Federal Reserve to acquire NBG, which made no mention of BCCI's involvement in the transaction or of Clifford & Warnke's simultaneous representation of both CCAH and BCCI in the transaction. The application stated that Pharaon had control of 100 percent of NBG's shares, and did not disclose the existence of Pharaon's pledge of the NBG shares, and other documents giving BCCI the power to vote NBG's shares. When the Federal Reserve asked the source of funds for the purchase, at Altman's direction, CCAH's regulatory counsel, Tuttle, advised the Federal Reserve that the funds had been raised through a rights offering paid for in cash, with less than 5 percent of the equity capital involving borrowings by shareholders secured by a pledge of shares. In fact, at that very time, Altman and Clifford had themselves borrowed from BCCI about 10 percent of the equity capital in the rights offering, against shares in First American which they pledged to BCCI, in direct contravention of the representation they were making to the Federal Reserve.(90)
Finally, on July 24, 1987, Clifford and Altman sent all shareholders of First American an offering memorandum relating to a proposed share issuance to raise $115 million in new capital for CCAH to complete the purchase of NBG. This memorandum represented the first time that Clifford and Altman had asked the shareholders for their approval of the transaction they had commenced in September 1985 at BCCI's direction. It was, as the Federal Reserve found, materially incomplete about BCCI's involvement in the transaction. Moreover, its omission of any notice to the shareholder's of Clifford and Altman's own financial interest in the transaction, breached Clifford and Altman's fiduciary duties to the CCAH/First American shareholders.(91)
Final evidence of the fact that the NBG transaction was not in the interest of First American, is contained in the Federal Reserve's last finding concerning the transaction:
The acquisition of [NBG] created a serious drain on the financial health of First American . . . In 1992, First American transferred NBG to one of its subsidiaries at a fair market value of only $90 million -- $130 million less than it had paid for the bank only five years earlier. In addition, First American paid approximately $12 million to get out of the obligations of the master lease [on the Interedec property it assumed from Pharaon].(92)
The decision by BCCI, Clifford and Altman, to have First American buy National Bank of Georgia had ultimately cost First American over $140 million.
Part of the difficulty in unravelling the decision-making process relating to BCCI, First American, and the National Bank of Georgia, and Clifford and Altman's role in this process, is that Clifford and Altman simultaneously represented all parties in the transactions over a period of 12 years spanning each permutation of purchase and sale of each of the organizations involved.
The ambiguity about their multiple roles may have been convenient for Clifford and Altman in some circumstances, such as during attendance at BCCI's international conferences. But the ambiguity also created an overwhelming, ongoing conflict of interest between their obligations to First American's board of directors, officers and employees on the one hand, and BCCI on the other. This was especially true because in the United States, within both BCCI and First American, it was often perceived that there was an ongoing struggle for control of First American's destiny, between two competing organizations, one Pakistani, pertaining to BCCI, and the other American, and controlled by Clifford and Altman.
Nazir Chinoy, head of BCCI's Paris branch, learned of the struggle over First American New York at a BCCI annual conference in Luxembourg in 1985, from Afridi himself, who confessed over a glass of wine that he was increasingly unhappy at First American New York.
Afridi felt that Altman was not permitting him to run First American on BCCI lines and yet he was answerable to Mr. Abedi for profits. He said Altman was interfering in the management and that he had reported to Naqvi on many an occasion about Altman interfering with his management, or trying to change the management structure or style.(93)
As Chinoy described it, from his point of view as a BCCI official operating outside the U.S., there was not so much a separation between First American and BCCI as two different types of management, one Pakistani and one American.
I saw rivals competing for power -- Afridi wanting to be the top man, and Altman wanting to be the top man.(94)
The conflict of interest between First American's needs and BCCI's needs was made explicit to Clifford and Altman in a memorandum from an official of First American New York to them written in early 1987, concerning the termination of a First American employee in New York. Enclosed with the memorandum provided to Clifford and Altman was a letter from a First American employee that stated that the association between BCCI and First American was threatening to destroy First American as a bank:
Your basic error has been BCCI. This association is "on the street" and as soon as this becomes known (with BCCI reputation) decent accounts fly. . . . Either FAB must take over and become First American Bank and buy out BCCI shares, or let them have it. But have two factions running FAB, Eastern and Western, and until you decide just whom and what you are, FAB is doomed to extinction.(95)
There is no record that Clifford or Altman undertook any response to this letter, which contradicts Clifford's testimony that there was never a "suspicion" about BCCI's involvement in First American during the period he ran First American.
Another area of difficulty in assessing Clifford and Altman's knowledge of the relationship between First American and BCCI is that Clifford and Altman have maintained that BCCI acted as an investment advisor to the shareholders. In testimony before the Senate, Clifford testified, "we treat Mr. Abedi, we treat Mr. Naqvi, as the representatives of our investors."(96) In other words, not only did Clifford and Altman wear many hats, but they have maintained that Abedi and BCCI also played various roles, ranging from client to investment advisor to "communications link" for the middle eastern investors.
Sakhia, however, challenged Clifford and Altman's characterization of Abedi as a communications link for the Middle Eastern investors. Sakhia testified:
I fail to understand . . . that it was difficult to communicate with the Middle Eastern investors. . . . They were not Bedouins in the desert. . . . These were intelligent people who owned banks and businesses. The Abu Dhabi investment Authority has several billion dollars invested in this country, and if they can manage those businesses they did not need a channel via Mr. Abedi to First American. They could have done it directly.(97)
Clifford and Altman did begin to communicate directly with First American's shareholders in 1989, after the New York grand jury had begun and both BCCI and Clifford and Altman understood that the key issue would be whether the shareholders were nominees for BCCI. Thus, in October 1989, Altman, instead of his past practice in routing communications with shareholders through BCCI, wrote Adham and other shareholders directly to seek their position regarding the possible sale of the bank.
Perhaps the most controversial aspect of Clifford and Altman's relationship with BCCI was their purchase of CCAH shares with loans provided by BCCI, a transaction that not discovered by First American officials until the summer of 1990 and not disclosed to the Federal Reserve until the spring of 1991.
The transaction was controversial for a number of reasons. First, from the beginning, regulators had stated their understanding that BCCI would not be lending funds to BCCI shareholders which would be secured by CCAH shares. Second, when regulators asked Clifford and Altman whether they had been such lending now in the past, Altman's responses did not acknowledge the existence of the loans. Third, the loans had never been disclosed to First American's board of director or other offices. Fourth, the terms of the loans were very unusual in that they were non-recourse, and BCCI could not proceed against Clifford and Altman if they failed to repay them. Moreover, as specified below, there were secret side agreements between Clifford and Altman and BCCI which is essence guaranteed that BCCI would handle the sales of the stock for Clifford and Altman at a price agreed to among the three of them.
In their written testimony to the Subcommittee, Clifford and Altman provided a detailed explanation of how they came to purchase the stock, and how BCCI came to finance the purchase:
The amount paid us by the Company was relatively modest. Mr Clifford, as Chairman, requested, and was paid, $50,000 a year -- a modest amount compared to the substantial annual compensation paid to the top officials of major banks. Mr. Altman . . . received no payments other than the usual director's fees. . . Nor were we given the valuable perquisites that are normally provided senior officers of large corporations. We received no financial bonuses, incentive compensation, or profit sharing. . .
If First American prospered under our leadership, we hoped to have the opportunity to invest in stock and thereby participate with the shareholders in the economic benefits we were creating. In effect, we chose to take our financial rewards as managers by making an investment in stock. . . In 1985, in the light of 4 years of sustained economic growth experienced by First American under our control, we discussed with Sheikh Adham the possibility of acquiring stock in the Company. We also discussed it with Mr. Abedi, as the advisor to the shareholders. We learned the shareholders favored our investment in the company . . .
We had learned that certain of the shares [to be offered in a rights offering] might remain unsubscribed, and that we could purchase such shares at the same price -- book value -- as was paid by the other shareholders.
We determined to acquire shares on this basis, and, after considering alternatives, sought to finance this investment through bank loans, if possible. . .
The first institution we approached for financing was Banque Arabe et Internatinale d'Investissement ("BAII") in Paris, the consortium bank that acted as the lead lender in the syndicate that had lent $50 million in connection with the acquisition of FGB in 1982. . . When problems arose in the negotiation of terms by our counsel, efforts commenced to explore with BCCI financing for the contemplated stock purchase. BCCI, too, was familiar with the [First American/CCAH] stock being offered as collateral and the market for the shares. . .(98)
Thus, by this account, both the share purchase and the lending were intended as compensation by CCAH's grateful shareholders to Clifford and Altman for the superior job they had done in strengthening First American over the first five years of their management. As Clifford testified, "we got to a point where we knew we were over the hump. And I thought the time had come for Mr. Altman and me to participate in the results of this very determined effort that we had made, that was proving to be so successful."(99) Clifford testified that "I wanted to own some stock in my own company."(100)
With the loans that they secured from BCCI, Clifford and Altman purchased stock in CCAH in 1986. In testimony to the Senate, Altman said that he and Clifford participated in a "rights" offering which was confined to the 14 shareholders of CCAH, paying "book price" for the stock, which was $2,216.000.(101)
The account suggests that both the share purchases by Clifford and Altman, and the lending from BCCI were normal arms-length business transaction, such as other banks might contemplate to reward officers and directors. Moreover, it explicitly separates the decision by CCAH shareholders to compensate Clifford and Altman through permitting them to purchase shares in the bank from the decision by BCCI to lend them funds for the purchases. In fact, the two activities were integrated from the beginning, with BCCI committing from the start to arrange no-risk financing for Clifford and Altman as part of the transaction.
Evidence for the integration of the lending by BCCI to Clifford and Altman with the decision by Clifford and Altman to purchase shares, and the intention that the purchase be risk free, is set forth in some detail by the Federal Reserve in its findings against Clifford and Altman.
As the Federal Reserve detailed, prior to coming up with the "rights offering" approach, with lending done against the shares by BCCI, BCCI and Clifford and Altman considered a number of different alternatives by which they would acquire a risk-free interest in First American.
For example, in early drafts of the arrangement, CCAH itself agreed to issue shares to Clifford and Altman, with one draft including a commitment requiring Kamal Adham, with BCCI as a back-up, to repurchase Clifford and Altman's shares at any time at their discretion. Significantly, the requirement that Adham repurchase their shares was never discussed with him, demonstrating the degree to which Clifford and Altman, as well as BCCI, regarding him as no more than a nominee for BCCI.(102)
Ultimately, Clifford, Altman, and BCCI instead decided to provide them shares through a rights offering in which another BCCI nominee, Masriq, would "waive" its rights to shares in order to make them available to Clifford and Altman, at book value or $2216, one day after Masriq had purchased other CCAH shares at the price of $4044.20 a share -- a transaction that would be economically inconceivable if Masriq were a real party at interest rather than a nominee.(103)
In their written and oral testimony, Clifford and Altman never specified exactly what had gone wrong to prevent BAII [the French bank which they had originally contacted for the loans] from agreeing to lend funds to them for their stock, instead suggesting merely that unspecified difficulties with BAII had lead them to open negotiations over loans with BCCI.
In fact, BAII was considering the possibility of issuing such a loan solely on the basis that BCCI would simultaneously provide BAII with a guarantee of the loan -- making BAII effectively acting as a pass through to cover BCCI's involvement, just as it had done in connection in lending money at the outset of the FGB purchase. But Clifford and Altman insisted on the lending being on a non-recourse basis.
Clifford testified that the non-recourse aspect of the loan -- which prevented BCCI from suing him personally if he failed to repay the loan, or interest on the loan -- had been recommended to him by New York counsel who felt his advanced age required such an arrangement.(104) Despite Altman's relative youth -- he was under 40 years old at the time -- Altman's loan was on the same terms. Altman testified that the concern in his case stemmed from "the [lack of] liquidity of the investment."(105) Regardless of Clifford and Altman's actual reason for insisting that they not be at risk for the borrowing necessary to finance their purchases of CCAH shares, BAII refused to provide the lending, even with a backup guarantee from BCCI, on a non-recourse basis, viewing such lending in this circumstance to be inadequately secured. Thus, even with protection from BCCI, and with a BCCI director on its board, BAII viewed the transaction as sufficiently unusual to pull out.(106)
As Clifford testified, ultimately BCCI provided a $15 million loan on a 100% non-recourse basis for 18 months at the London Interbank Rate, which ordinarily runs below the Prime rate. When pressed by Senator Brown as to whether or not First American had ever loaned money to any individual on such favorable terms, Clifford replied, "I do not know."(107) In staff interviews, Virgil Mattingly, General Counsel for the Federal Reserve, has confirmed that First American has never made loans on such favorable terms.
The loans were due on January 1, 1988. The loans, however, were not paid off at that time. Altman explained that
"they [the loans] were not actually in default because we had gone to the lender [BCCI] . . . and asked if they would refinance the loan or roll it over. The lender [BCCI] indicated a willingness to do that, but before the documents were prepared for a second loan, we started the process of disposition of the shares."(108)
Once BCCI lent the money to Clifford and Altman for the loans, it immediately agreed to providing further protection to them to make certain they would never be at risk from their stock purchases, and in fact, committing to help them sell their shares "at such prices as BCCI and [Clifford or Altman] shall mutually determine."(109)
These unusual terms were set forth not in the loan agreements between BCCI and Clifford and Altman, but in a side agreement they executed, which recited the following terms on the loans:
notwithstanding any provision of the Note or Pledge Agreement (or any other document relating to the loan by the undersigned to BCCI) to the contrary, it is understood and agreed that the undersigned shall not be obligated personally to repay to BCCI the loan principal or any interest accrued thereon[, and that] BCCI shall be limited solely to the undersigned's interest in the CCAH shares and any proceeds thereof to repay the loan and interest thereon . . . BCCI shall arrange for the sale of said CCAH shares to . . . interested buyers in such manner, amount, and at such prices as BCCI and [Clifford or Altman] shall mutually determine.(110)
Clifford and Altman did not disclose the unique terms of its arrangements with BCCI to anyone, but actively sought to conceal it. In their written testimony to the Subcommittee, they suggest they provided full disclosure in the following terms:
As noted earlier, our investment in CCAH stock was known to and encouraged by the shareholders. In addition, our intended purchase of stock was duly disclosed to and authorized by the Board of CCAH, the parent company of First American. In advance of the 1986 rights offering, Mr. Clifford personally informed Managing Directors Symington and Quesada that we intended to acquire stock in the corporation . . . We also disclosed the acquisition of this stock to the Federal Reserve Board.(111)
In fact, First American itself was never told by Clifford or Altman of their borrowings from BCCI in connection with their purchase of CCAH shares, until the issue arose as First American began to respond to questions arising out of an audit of BCCI-First American wire transactions in the summer of 1990.
As the Federal Reserve found, Clifford and Altman failed to disclose a number of material facts to Symington and Quesada about their stock purchases, including that they were financing their purchases by means of non-recourse, preferential-rate loans from BCCI and that BCCI had agreed to arrange for the subsequent repurchase of their shares at a price to be agreed upon by Clifford, Altman and BCCI later.(112)
First American only learned of the existence of the Clifford and Altman loans, although not all of their unusual terms, when First American officials were conducting a review of BCCI wire transfers to First American accounts in response to matters arising out of the New York criminal investigation into the BCCI-First American relationship. In that review, they discovered millions of dollars in wire transfers from BCCI to Clifford and Altman's accounts, and asked them what these transfers pertained to.
A letter from Clifford and Altman to First American senior vice president James E. Lewis, dated August 1, 1990, details their handling of this inquiry from their own officers at First American. Clifford and Altman replied as follows:
This memorandum is written to provide you with background concerning certain wire transfers in 1988 you have identified between the Bank of Credit and Commerce International (Overseas) lt., and or personal accounts at First American Bank, N.A. . . .
You are informed that in connection with the 1986 Rights Offering to the shareholders of Credit and Commerce American Holdings, N.V., the parent holding company of First American, to raise additional capital for the Company, all of the new rights shares were not subscribed by the shareholders. We determined to acquire a small amount of CCAH shares which were thus available. In this regard, we explored financing of the purchase with possible lenders, including BCCI.
Satisfactory loans with BCCI (Overseas) Ltd. were negotiated by each of us and the purchase of the CCAH shares at the offering price was effected. (Mr. Clifford invested approximately twice as much as Mr. Altman.) . . .
In early 1988 we were interested in selling some of our CCAH stock and upon making inquiries in this regard, learned that a Middle East businessman wished to acquire shares of CCAH. As a result, we each sold him, for cash, a portion of or shares. BCCI serviced that transaction and wired to our respective accounts at First American the sale proceeds. From those proceeds we decided to pay off all outstanding indebtedness to BCCI (including interest) and, accordingly, we arranged to wire monies from or First American accounts to BCCI for that purpose.
We understand this information will be maintained on a confidential and privileged basis.(113)
Notable in this account is what Clifford and Altman did not tell First American on August 1, 1990: that BCCI had held a security interest in their First American shares, in contravention of the understanding of regulators that BCCI would not lend for the purpose of purchases of such shares; that BCCI's lending was made on a non-recourse basis, in which BCCI could recover only Clifford and Altman's interest in First American, rather than against them directly; that BCCI, not Clifford and Altman, had located the "Middle East businessman" who purchased their shares; or that from the beginning, Clifford and Altman had arranged with BCCI for guaranteed buy-backs of their stock to insure them against any possible loss.
Significantly, Clifford and Altman also failed to disclose the existence of these arrangements to their partners at Clifford & Warnke, who under normal partnership rules would have been entitled to a share of Clifford and Altman's profits from the compensation being provided them for their work at First American.
In June 1987, Clifford and Altman met with Abedi and Naqvi in London, and insisted on paying interest on their respective loans from BCCI, despite the fact that the side letters they agreed executed relieved them of any obligation to do so. Two months later, they participated in a second rights offering for CCAH stock. They again paid for the shares with non-recourse loans from BCCI, against which they pledged their shares of CCAH. They again executed side-letters relieving them of any risk on the transaction and insuring that they would be permitted to sell the stock at a price to be determined by BCCI, Clifford and Altman. At this point, Clifford held 5446 shares of CCAH, Altman 2722 shares. All were pledged to BCCI. Nowhere was BCCI's security interest in these shares recorded, including in the Netherland Antilles, where CCAH was incorporated, and where it was legally required.(114)
In early 1988, several events took place which could have given rise to Clifford and Altman's decision to sell enough of their shares in CCAH to eliminate the BCCI lending to them. First, on February 9, 1988, Abedi suffered a heart attack and stroke. The same day, in hearings before the Subcommittee, former Panamanian consul Jose Blandon disclosed that BCCI was handling drug money for General Noriega. In turn, Blandon's testimony prompted the issuance in March of a subpoena by the Foreign Relations Committee to BCCI for Noriega records.
In this very period, Clifford wrote a letter, dated February 8, 1988, to Naqvi, to ask Naqvi to arrange a sale of some or all of Clifford and Altman's stock. Significantly, the Federal Reserve concluded that the letter was not written on February 8, 1988 by Clifford, as dated, but "some time thereafter" and was backdated to make it look as if it were written prior to February 9, the date of the Abedi heart attack and the Blandon testimony.(115)
In March, 1988 the shares of CCAH stock owned by Clifford and Altman were sold for $6,800 per share. Although the stock had been purchased at book value, it was sold at market-value, which essentially meant whatever someone was willing to pay for it. Altman testified to the Subcommittee that "the distinction between a purchase at book value and a subsequent sale of the shares... was not a practice that was unique to Mr. Clifford and me and this transaction."(116) Mr. Mohammed Hammoud, a CCAH shareholder and the purchaser of the shares, was apparently willing to pay $6,800.00 per share -- the highest price ever paid for CCAH stock - which afforded Clifford and Altman a combined gross profit of $9.5 million. Clifford explained the high price by noting that "there were no rights offerings in 1988," the year Mr. Hammoud purchased the stock of Altman and Clifford. (117)
In fact, the price of the stock was set not by Hammoud, and not even by BCCI, but by Clifford and Altman, who told Naqvi the amount of net profit they wanted on the sale, after all taxes had been paid. As the Federal Reserve found:
In late February or early March 1988, Altman met in London with Naqvi. Naqvi called Imam and directed him to speak with Altman concerning the sale of Clifford's and Altman's shares. Altman stated that he wanted a net profit on his shares of $1.5 million, and that Clifford wanted a net profit on his shares of $3 million. These profits were to be after payment of all taxes and repayment of all loans from BCCI. Altman also stated that he and Clifford each wanted to retain a portion of their CCAH shares. Naqvi agreed to this and instructed Imam to work out the details with Altman.
In consultation with Altman, Imam calculated the sale price that would be necessary to achieve Clifford's and Altman's goals of paying off their loan balances including all interest paid, covering all capital gains taxes to be imposed in the transaction, and retaining a profit of $3 million and $l.5 million respectively. . . . Imam, in consultation with Altman, calculated that a purchase price of 2.69 times book, or $6,800 per share, would be needed to achieve Altman's objectives. In concluding their conversation, Altman instructed Imam not to disclose their conversation to anyone other than Naqvi.(118)
Following the working out of the details of this arrangement, BCCI "found" Mohammed Hammoud, described by BCCI chief financial officer Masihur Rahman as a "front man" for BCCI, to "purchase" Clifford and Altman's shares in First American, for the highest price ever paid for CCAH stock -- $6800 per share -- and with loans from BCCI, secured by the CCAH stock.(119)
Altman has testified that he had never met Mr. Hammoud.(120) However, a power of attorney maintained in BCCI records shows that Hammoud granted Altman a power of attorney allowing Altman to undertake any transaction on behalf of Hammoud he wished in connection with the purchase or sale of CCAH shares. Thus, the power of attorney granted to Altman by Hammoud would have permitted Altman to have effectuated the sale of his shares to Hammoud whenever he chose, any whatever price he chose.
Altman, however, testified that he did not know that he had a power of attorney from Hammoud, stating "to the best of my recollection, I have never seen that document before."(121)
The Federal Reserve concluded that Altman lied to them in his sworn testimony to them concerning the sale of the CCAH stock to Hammoud. According to the Federal Reserve:
On February 12, 1991, in sworn testimony to the Board of Governors, Altman falsely stated that he did not know how the purchase price of $6800 per share was fixed, and that he did not discuss the matter with Imam.(122)
Senator Brown accurately summed up the transaction when he stated, "the substance . . . was that [Clifford and Altman] got title to the stock without putting up a single penny of [their] own money, and suffered no loss if the stock dropped in price . . ."(123)
Remarkably, when Clifford and Altman decided in 1989 to finance purchases of shares in CCAH from their own funds, BCCI automatically advanced loans for those funds regardless, reversing the charges only after BCCI was informed that Clifford and Altman had decided to pay for the additional First American shares themselves.(124)
The Federal Reserve showed renewed interest in the issue of whether BCCI might secretly control First American after the indictment of BCCI in Tampa for drug money laundering in October, 1988 renewed simmering allegations that BCCI was in fact a rogue bank. At the time, CCAH had an application before the Federal Reserve to retain control of a Florida bank, the Bank of Escambia, N.A., of Pensacola, which it purchased as part of its purchase of the National Bank of Georgia.
On January 23, 1989, Altman met with a Federal Reserve examiner who questioned him concerning the nature and extent of the First American-BCCI relationship. Altman told the examiner he did not know about any understandings or financial arrangements that might exist between any CCAH shareholder and BCCI, failing to mention his own and Clifford's past such understandings and arrangements, as well as pledges of other shareholders' shares to BCCI of which he had learned.(125)
Following the meeting with Altman, the Federal Reserve decided to approve the application to retain Bank of Escambia, advising Altman in its transmittal letter that it was specifically relying on the representations made by CCAH regarding its relationship with BCCI and its commitment that "BCCI is not involved in the operations" of CCAH or First American.(126)
On December 13, 1989, William Rybeck, the Senior Deputy for Banking Supervision at the Federal Reserve wrote to Altman requesting "information on any loans, original or subsequent to the investors." Altman replied that he had no "access to information regarding any financial arrangements that might exist" between any CCAH shareholder and BCCI. "Based on our consultations with the resident management director for [CCAH] in the Netherlands Antilles, we can only confirm that no pledge or security interest has ever been recorded on the Company's share register by any lender."(127)
This response by Altman to the Federal Reserve was exceptionally misleading. First, Altman knew not only of his own and Clifford's loans from BCCI, but had arranged specifically that the loans not be recorded in the Netherlands Antilles, and had made similar arrangements for other CCAH shares pledged to BCCI. Thus, his confirmation that no pledge or security interest has been recorded was knowingly misleading, and provided to the Federal Reserve for the obvious purpose of convincing the Federal Reserve that no such loans had ever been made, when Altman knew this to be a lie.
On February 5, 1990, Altman followed up this initial misleading answer with a second letter to the Federal Reserve, this one characterized as one he had "just received" from Naqvi at BCCI concerning BCCI's loans to CCAH shareholders. The letter stated that the acquisition of Financial General "was not financed in any respect by BCCI," and was drafted to create the false impression that none of the loans that BCCI may have made to CCAH shareholders were made for the purpose of purchasing shares in CCAH/First American. This misleading letter, which Altman presented to the Federal Reserve as if it originated from BCCI, had actually been drafted by either Altman, or one of his partners at Clifford & Warnke, and transmitted to BCCI and Naqvi for Naqvi's signature.(128)
Altman explained his actions regarding these letters as a consequence of the Federal Reserve's supposed lack of interest in the issue of BCCI lending for CCAH shares that had not been part of the original FGB takeover in 1981:
Mr. Ryback, in December, had submitted to me a letter that is broadly worded . . . When I received the letter I spoke to Mr. Ryback and indeed, I spoke to him more than once. . . Mr. Ryback explained to me what it is that he was seeking by way of information. I might note that the first paragraph of Mr. Ryback's letter I believe is the matter relating to the tender offer. Then he goes on his second paragraph and deals with the subject of any loans made then or subsequently. . .
I pursued it, other attorneys pursued and we pursued it aggressively. We received information back that we thought at the time was credible. In this time period, the issue of lending arrangements arose, and the matter came up about what BCCI's practices were . . . We did not necessarily think that the lending was impermissible . . . It was not impermissible to borrow, even borrowing secured by the stock. But we gave the Federal Reserve the information we had obtained.(129)
Altman said that he understood that what the Federal Reserve wanted to know was first, whether BCCI had lent money for the original FGB takeover, and second, whether BCCI currently had lending which secured BCCI shares. Altman testified that the one kind of information that Ryback did not want was information about past BCCI lending which no longer existed -- such as the lending made to Clifford and Altman, and it was on that basis that Altman failed to provide him with this information:
Mr. Ryback was not interested in certain kinds of information, even though his original letter would seem to call for it. . . I had also indicated to him that to comply literally with this letter, I am told, would be burdensome, to get every loan ever made to any investor by BCCI. And that is why he focused his inquiry as the specific information that he needed for his purposes.(130)
Mr. Rybeck, however, told Senator Kerry that he had no memory of ever altering his original request.(131)
Ultimately, the Federal Reserve learned of the BCCI loans to Clifford and Altman only from its own investigation, when it discovered the relevant documents in BCCI files held in Abu Dhabi, and interviewed Imam, who participated in meetings, telephone calls, and written communications with Altman in connection with the loans.
What is evident from this history is that Altman systematically took steps to hide the truth about his and Clifford's loans from BCCI from the Federal Reserve, artfully answering questions in such a manner as to mislead the Federal Reserve and prevent the Federal Reserve from discovering their own secret loans. In the latter stages of this cover-up, Altman actually created letters purporting to be from BCCI that were created at Clifford & Warnke for the purpose of hiding Clifford and Altman's borrowings.
On July 6, 1990, Robert Altman wrote a memorandum to the file describing a meeting between him, Swaleh Naqvi, and another of BCCI's lawyers from another U.S. firm named Kim Gagne, on that day in London. Both in what it did say, and even more importantly in what it did not say, the memorandum demonstrated Altman's personal recognition of the potential problems for him relating to BCCI having lent him money for the purchase of his First American stock.
The memorandum, written at a time when the Abu Dhabi interests had just begun to assert their control of BCCI's business and legal strategy, focused on conflict of interest issues involving BCCI, Clifford and Altman, and provided a detailed review by Altman of the supposed nature of the First American/BCCI relationship in the following terms:
I said that I had wanted to inform him [Naqvi] personally why Clifford & Warnke could not provide legal advice to BCCI in connection with the investigation being conducted by the District Attorney in New York State. As he knew, our firm did not do criminal work, and the primary representation of BCCI would be by other lawyers in any event. However, we were general counsel to First American and an issue had arisen about BCCI's relationship with First American. While we did not now know of any actual conflict of interest between BCCI and First American, we were concerned about the appearance of a conflict as well as any potential conflict. . . . Mr. Iqbal [the new head of BCCI, replacing Naqvi at the request of Abu Dhabi] said he did not know much about the First American issue in New York as his focus was solely on BCCI's operations. Mr. Iqbal mentioned that BCCI had loans to some of First American shareholders, but that alone constituted his understanding of BCCI's relationship with First American. He accepted, however, my comments regarding any appearance of conflict.
Mr. Naqvi also accepted the views I presented. However, he seemed frustrated and stated that these allegations about the BCCI/First American relationship were "pure rubbish." Mr. Naqvi said that BCCI had "no interest whatsoever" in First American, except for a financial interest in some loans made to some of the First American shareholders (through general lines of credit). CCAH stock had, at some point, apparently been given as security. Mr. Naqvi said that some years ago BCCI had briefly considered a merger with Fist American, among its various corporate restructuring strategies, but that this had never been pursued, and was merely one of the historical planning models. Mr. Naqvi said he believed the false allegations about BCCI/First American were being spread by disaffected former BCCI employees who felt bitter toward the Bank.(132)
The subject matter of this memorandum is the BCCI relationship to First American, whether BCCI had any interest in First American, and the possible implications of loans BCCI might have made to First American shareholders. At the time Altman wrote this memorandum, both Altman and Naqvi knew well that Clifford and Altman had themselves had previously had such loans, and that loans from BCCI to First American shareholders was a key issue on which the New York District Attorney was seeking information. BCCI's secret loans to Clifford and Altman, secured by First American/CCAH stock, would obviously be material to such an inquiry, and of themselves raise substantial "conflict-of-interest" questions concerning Clifford and Altman. Any competent attorney would recognize this, and be compelled to explore the issue with a client in any genuine conversation about the issue of conflict. Yet nowhere in the memorandum does Altman discuss this issue with Naqvi, as certainly would have happened if such a discussion were authentically exploring the conflict issue.
The omission of any mention of Altman's own loans from BCCI for First American stock during the lengthy discussions of the conflict issues is striking, and extremely unlikely if the conversation and memorandum were intended to reflect an honest analysis and appraisal of the situation.
Clifford told the Subcommittee that "most of the services were rendered to the operating holding company, First American Bankshares," which "started out at a lower figure when the bank was not so large, and as the bank expanded then the cost of legal services expanded." Clifford indicated that his law firm received "maybe $1 million a year" in legal fees from First American.(133)
Clifford testified that the fees charged BCCI "were nothing like those charged First American, because there wasn't nearly that much work to do."
In fact, Clifford & Warnke billed First American and its related entities a total of about $11 million over about an eight year period, averaging about $1.35 million per year; and BCCI a total of about $6 million over twelve years, or about $500,000 per year, for a total of $17 million in all.
In addition, the law firm of Clifford & Warnke was the lead firm for the defense of the BCCI officers indicted in Tampa in 1988. According to the House Banking Committee, BCCI paid some $45 million in legal fees which were disbursed by Altman. In testimony before the Senate, however, Mr. Altman disputed that figure and indicated that "the amount of money ... paid in this general effort was half that -- approximately $20 million," which Altman testified was used for a variety of purposes including international audits and the implementation of new procedures to guard against money laundering. (134) Clifford testified that "not one penny of that effort came to us."(135) A summary of these disbursements, provided to the Subcommittee on March 2, 1992 by Clifford and Altman's attorneys, specifies a total of $18,975,224.47 paid by BCCI in attorney fees for the Tampa criminal defense, and another $2,817,011.66 for miscellaneous expenses, ranging from computer services and court reporters to private investigators and expert witnesses in connection with the case.
In testimony before the Senate, Clifford and Altman explicitly denied having done anything to delay, impede, or frustrate the efforts of the Senate to obtain the full story about BCCI, and BCCI's relationship to First American. As Altman testified:
There have been suggestions made by certain witnesses that we were engaged [in] influence peddling and the like, in order to protect BCCI. Those are totally untrue. There are suggestions that we condoned obstructions of this committee's efforts or investigations of BCCI. Those are totally untrue, and the record should reflect that that is our view, and as I said, we can detail it.(136)
Unfortunately, while repeatedly advising the Subcommittee of their intention to cooperate fully with its inquiries, Clifford and Altman, like BCCI itself, in fact failed to provide documents that had been subpoenaed by the Committee. In addition, according to allegations from a variety of sources, including other attorneys for BCCI and BCCI officials, they undertook a variety of efforts to delay or impede the Subcommittee investigation.
These efforts included:
** Altman allegedly instructing BCCI officer Amjad Awan to mark bank documents "attorney work product" in August 1988 in an attempt to exempt them from subpoena, despite the fact that the documents were bank records maintained in the ordinary course of business that had not been created by attorneys.
** Failing to insure that all BCCI documents specified in the Foreign Relations Committee subpoena in July 1988 were provided to the Subcommittee, and failing to instruct BCCI or First American employees to review BCCI records maintained at First American in response to the subpoena.
** Failing to insure that BCCI officials in Florida did not destroy or alter documents subpoenaed by the Committee in August and September, 1988.
** Altman telling Subcommittee staff on May 14, 1990 that BCCI had no outstanding loans to shareholders of CCAH, when one week earlier, he had told the Federal Reserve that he had heard reports of such lending in amounts ranging from $400 million to over $1 billion.(137)
** Allegedly attempting to use "political chits" to delay hearings of the Subcommittee in the summer of 1990.
Indeed, according to BCCI banker Amjad Awan, at the very time in the summer of 1988 that Clifford and Altman had advised the Subcommittee that they and BCCI would cooperate fully with the Subcommittee, they were simultaneously advising their clients that they intended to play "hardball" with the Subcommittee.(138)
Clifford and Altman have denied intentionally undertaking any of these activities, for example, explaining the failure to provide documents as inadvertent, and based on inadequate document review done by BCCI officials; and denying the "political chit" charge outright. Moreover, the Subcommittee investigation cannot fully answer all the questions raised about Clifford and Altman's response to the inquiries by the Subcommittee. For example, regarding the case in which BCCI officials destroyed and altered documents in response to the Committee subpoena in 1988, it is not clear from the record before the Subcommittee whether Clifford or Altman knew of these activities.
However, there is no question that documents subpoenaed by the Foreign Relations Committee concerning General Noriega, and existing in the United States, were never reviewed by Clifford and Altman as BCCI's attorneys, let alone provided to the Committee in response to a lawful subpoena. And, after Clifford and Altman were no longer representing BCCI, responses by them to document requests were delayed repeatedly, and some of the answers that were ultimately provided proved to be incompatible with the documentary evidence.
In March, 1988, following testimony before the Subcommittee by Jose Blandon and other witnesses in February concerning the use of BCCI by General Noriega and members of Noriega's business groups, the Foreign Relations Committee authorized subpoenas to BCCI for Noriega's records. At the time the Committee acted, Clifford and Altman had already begun their own internal investigation at BCCI of the relationship between BCCI and Noriega.
Documents provided to the Subcommittee on May 20, 1992 by Clifford and Altman, following BCCI's waiver of the attorney-client privilege, describe a witness interview with Amjad Awan, Noriega's personal banker at BCCI, conducted by an unspecified lawyer at Clifford & Warnke on February 23, 1988 -- two weeks following Blandon's disclosures. At the time, Awan was based in Miami, having been BCCI country manager in Panama from 1981 through 1984, and an officer at BCCI's Washington, D.C. representative office in 1984 and 1985. As the Clifford & Warnke attorney described the situation:
BCCI's New York office believes that BCCI may receive a subpoena, perhaps from Congress, to testify about BCCI's role vis-a-vis General Noriega . . . there was always an undercurrent that alot [sic] of the money in Panama may be drug money, but BCCI felt it was dealing with lawful activity in dealing with the foreign exchange dealers . . . Mr. Awan knows of no specific instances of drug money passing through BCCI. It is possible some was laundered drug money . . . General Noriega's business with BCCI was limited to the $200,000 to $300,000 he deposited for VISA cards, etc. But Mr. Awan became a personal friend of General Noriega. They became very close after Mr. Awan left Panama in 1984. General Noriega asked Mr. Awan to make hotel reservations, and to book limousine and airline tickets. Mr. Awan would often use his own credit cards to perform these services because the BCCI office in Washington in [sic] only a representative office. . . Mr. Awan meet [sic] General Noriega in New York on one occasion and asked Mr. Awan to give him $100,000 in cash.(139)
Thus, months before the service of a subpoena to BCCI regarding Noriega and Awan, Clifford and Altman had interviewed Awan regarding his relationship with Noriega, been informed of at least one cash payment by BCCI to Noriega in the U.S., and learned of Awan's handling of Noriega finances while at the Washington representative branch office of BCCI.
In the meantime, on June 1, 1988, Clifford wrote a memorandum to Altman concerning information he had received from BCCI's number two official, Swaleh Naqvi, in London, concerning an article in the New York Times that referred to BCCI's alleged involved in money laundering operations in Panama, in a leak arising out of the Customs "C-Chase" sting operation. According to the Clifford memorandum to Altman:
On Wednesday, June 1, at 11:00 am I had a phone call from Mr. Naqvi in London. He had placed the call to you, but in your absence then spoke to me. I explained to Mr. Naqvi that the reason you were away was that you were in California following up on information regarding the possible purchase of a bank.
His call had to do with the BCCI bank in Panama. There had been brought to his attention an article in the New York Times of Wednesday, May 25, that referred to the Panamanian office of BCCI. The report involved missing documents from the bank's records and stated that the authorities have linked BCCI in Panama to money-laundering operations.
Mr. Naqvi says that there are two individuals who operate the bank in Panama and he has told them to come to Washington to see us. . . . He stated that the men would remain here as long as we required their presence. After we have talked to the men we are to report to Mr. Naqvi. The matter is of such importance to him that he may, after our conversation, decide to come to the United States.(140)
Thus, by the time of the issuance of the Committee subpoena on July 27, 1988 and subsequent service August 1, 1988, Clifford and Altman were aware in some detail of both Noriega's involvement with BCCI and serious allegations concerning BCCI's involvement with drug money laundering generally.
After the Committee subpoena was served, in his initial contact with the Subcommittee on behalf of BCCI, Clark Clifford wrote Senator Kerry to advise him of BCCI's intention to cooperate fully with the investigation. Soon thereafter, Clifford contacted Senator Claiborne Pell, chairman of the full Committee, to request a one-month delay in producing documents pursuant to the subpoena. Senator Pell referred that request to Kerry staffer Dick McCall, extending production to September 11, 1988.
In the meantime, Clifford and Altman met with Jack Blum and Kathleen Smith of the Subcommittee staff to discuss the subpoenas. A memorandum to the file from Altman dated August 10, 1988, describes the meeting in the following terms:
During the course of our discussions which lasted about an hour and 20 minutes, Jack Blum described in detail the information collected during the investigation and public hearings by the Subcommittee . . . From its sources, the Subcommittee has been led to believe that BCCI, through its banking locations in Panama, Colombia and in Miami, Florida, has had a major involvement in the management of assets for General Manuel Antonio Noriega, the current head of the Panamanian government; Michael Harari, reputed to be a close aide of Noriega's, an arms dealer, and formerly an Israeli secret service agent; and various other individuals from Panama and Colombia with major involvements in international drug trafficking. The Subcommittee staff has also been led to believe that BCCI, through its banking locations in Colombia and Panama, has been significantly involved in the laundering of large amounts of cash obtained from the sale of illicit drugs in the United States. . .
(1) The staff has amassed extensive information on BCCI. It is their understanding that General Noriega was instrumental in helping BCCI secure a banking charter in Panama. Information on BCCI has been provided by third parties, including government officials and other banks, as well as current and former employees of BCCI.
(2) We advised the Committee that we would soon be going to Miami to begin to assemble facts and related documents and, if need be thereafter, to Colombia and Panama. We expressed concern over the breadth of the subpoena. . .
(3) Altman told them that it was the intention of BCCI's senior management to be cooperative and helpful. He stated that management was unaware of any impropriety of the bank or its employees.
(4) In response to the staff's inquiry, Altman described BCCI's relationship with First American and explained Clifford's and Altman's long-standing representation of the Bank. Altman also expressed our complete confidence in BCCI's management. He stated that criticism that had been levelled at the Bank over the years had proved, upon careful investigation, to be groundless and without merit. . .
Mr. Clifford, in particular, and the firm generally have enjoyed an excellent relationship with the Committee over the years.(141)
Awan was in London at the time the subpoena was served for a regularly scheduled marketing meeting, and was told about the subpoena by Naqvi, who told him the lawyers would work things out.(142) Following Awan's return to the United States, Awan participated in a series of interviews with Altman and two other lawyers from Clifford & Warnke in Miami in mid-August, 1988. Six other BCCI officials were also interviewed by Altman in the same period. In the memoranda prepared by Clifford & Warnke attorneys concerning these interviews, the BCCI officials made numerous untrue statements to the lawyers conducting the interviews, ranging form claims that they did not knowingly launder drug money, to a contention that "BCCI has no professional relationship with General Noriega," but merely had previously "maintain[ed] depository accounts for General Noriega in London and issued credit cards."(143)
On August 17, 1988, Altman and other Clifford & Warnke lawyers met again with BCCI officers in Miami and discussed the Senate subpoenas follows:
Mr. Altman commented on the existence of the Noriega account in London, but stated that the subpoenas requested documents in the possession of [BCCI] Overseas. . . . They were all transactions of S.A. The wire transfers of Panama to London had no names or account numbers. . . there could be unfortunate implications for the bank if we were to produce documents with respect to General Noriega's London account. Those records may be protected by English or other foreign law, an issue we will check. If those documents are produced, BCCI personnel in Panama could be at risk . . .
Mr. Altman suggested that we seek to produce documents in the first week of September. By then, we would have to formulate a position with respect to Mr. Awan.(144)
During the interviews, Awan stated that General Noriega had in fact banked with BCCI, that Awan had handled various transactions on behalf of Noriega while based in Washington, and that Noriega had a maximum deposit relationship with BCCI of $22 million. This final statement was, of course, entirely inconsistent with Awan's representation to Clifford & Warnke the previous February that Noriega's business with BCCI was limited to $200,000 to $300,000.(145) Moreover, Awan told Altman that he "did not think that General Noriega would be above taking bribes from those involved in the drug industry. (146)
It is clear from the documents provided to the Subcommittee that Mr. Altman was concerned about providing too much information to the Subcommittee. As Sanders notes in his memorandum:
Mr. Altman stated that the bank had a potential political exposure as a result of the receipt of substantial dollar deposits from General Noriega. Additionally, there is the concern with respect to money laundering, although the bank does not believe any laundering occurred knowingly. . . As to money laundering, we could explain it may have occurred. We could explain that we took some few millions dollars from unknown sources and that, in addition, we dealt with money changers. We could state, however, that it was the policy of the bank not to deal with drug money and, in any case, the amount of cash we received was insignificant compared to other banks.(147)
Following his meetings with Altman in Miami, Awan returned to London, to review the Noriega financial records and meet with Naqvi. While in London, he again met with Altman, who questioned Awan concerning the nature and extent of BCCI's relationship with Noriega. According to Awan's sworn testimony before the Committee, and staff interviews in connection with that testimony, while in London in late August, Altman told Awan to retrieve documents pertaining to Noriega in response to the Subpoena. Awan retrieved the documents, which included a number of originals and some copies, and showed them to Altman. All of the documents were BCCI financial records, and none of them contained any material prepared by attorneys. Nevertheless, when Altman returned the documents to Awan, he told Awan to mark them as "attorney work product." Awan, who did not understand what the phrase meant, marked the documents, "attorney word product," with the markings appearing on each folder in which they were contained.(148) Awan later recollected that Altman had also told him that regardless of what he might tell the Senate, he intended to play "hardball" in response to the subpoena.(149)
By contrast, Altman testified that there was "no intention to mislead this committee," and "there has been no effort to derail this process."(150)
Altman then met with Naqvi to discuss the Senate subpoena further. Following that meeting, Awan was told by Naqvi not to return to the United States, and that he would be transferred immediately to Paris as a means of avoiding the subpoena.(151) Awan protested, noting that his family and possessions were in Miami and that prior to the subpoena he had no plans to leave the United States. Naqvi agreed that Awan could return briefly to the U.S. to make arrangements to move, but urged him to leave as rapidly as possible. Awan returned to the United States and, believing after his meeting with Naqvi that he could not trust Altman to represent his interests, began communicating directly with Blum without the knowledge of Altman, and decided to resign from BCCI and retain a separate attorney.(152)
Significantly, chronologies of meetings, originally created as privileged and confidential attorney work product pertaining to the Congressional subpoena, and ultimately provided to the Subcommittee on May 20, 1992 by Altman's attorneys, do not show any meeting involving Altman and Awan in London in August, 1988, despite Awan's detailed testimony concerning his meeting with Altman in late August.
These chronologies show Altman's meetings with Awan only in February 23, 1988 in Washington and in mid-August with Awan in Miami, and omit any reference to Altman having Awan in London, or even to Altman having met with Naqvi in London in this period. Given Awan's detailed and explicit statement about meeting Altman in London at the time the subpoena was issued, and Altman having told him in London to mark Noriega documents "attorney work product," the omission of any reference to the London meetings in the Clifford & Warnke internal chronologies and documents is suggestive of Altman's intent.
Following his meeting with Altman and his meeting with Naqvi in August, Awan told Blum that BCCI had sought to transfer him out of the country and to prevent the service of the subpoena, and that this took place immediately following a meeting between his superiors and Altman. Blum arranged to serve Awan without providing further notice to BCCI, or Clifford or Altman, and service was made in early September, 1988.
Soon after the service of the subpoena on Awan, on September 9, 1988, Awan told an undercover Customs agent, Robert Musella, in a conversation secretly recorded by the government, that the Foreign Relations Committee "had a vendetta" against BCCI, and that lawyers for BCCI in Washington advised the bank to immediately transfer Awan out of Miami to Paris to avoid being served with the subpoena:
Last Friday, I was told that, ah, our lawyers, Mr. Altman was there, and he suggested to the bank that I should be immediately transferred from the U.S. to Paris. . . So they duly transferred me Friday to Paris.(153)
Later, Awan would explain to investigators that he was not personally present at any meetings with Altman regarding his transfer, but that the circumstances had lead him to believe that the BCCI decision had been made on the advise of Altman.(154)
On the very day Awan was telling Musella about BCCI's decision to move him to Paris in an effort to circumvent the Senate subpoena, September 9, 1988, Altman and his colleague at Clifford & Warnke, Robert Sanders, met with Blum to discuss the subpoenas issued by the Committee to BCCI. Altman told Blum that BCCI "does not do business" with drug dealers, did not have large depository relationships in Colombia and Panama, and that BCCI "had been approached for several occasions and offered lucrative commissions to accept large cash deposits, but the bank always refused." As detailed in the Clifford & Warnke memorandum of the meeting, Blum then asked Altman concerning the relationship between BCCI and Noriega:
Altman stated that BCCI previously maintained a deposit account for the Panamanian government which General Noriega, as head of the government, could control. BCCI may not disclose information about this account for two reasons. First, such disclosure would be unlawful under Panamanian bank secrecy law. Second, if this information were produced, the employees and business operations of BCCI would be vulnerable.
Mr. Blum wanted to know how much money was in this account and in what country the account was maintained. Mr. Altman stated that this information was not available. Mr. Altman advised that the only one way the bank might be able to disclose information was with the permission of the Panamanian government.
Mr. Blum inquired when the money in this account was withdrawn. Mr. Altman said the account was closed sometime this past summer.
Mr. Blum asked about Mr. Awan's present location. Mr. Altman stated that he was traveling in the United States for a few days, but may be transferred soon to BCCI's office in Paris. . . .
Mr. Blum asked whether BCCI ever made any loans to General Noriega. Mr. Altman stated that if there were any loans, they were minor in nature. Again bank secrecy laws foreclosed disclosure. . . .
Mr. Altman then stated in closing that he wanted to convey to Mr. Blum a serious concern. Mr. Altman noted that the banking business is built on trust and confidence. Accordingly, Mr. Clifford and he were concerned that BCCI's reputation would be unfairly damaged as a result of publicity about the investigation, even though all allegations would be disproved. In this regard we were concerned about any rumors or leaks that could flow from the investigation and might, incorrectly and inequitably, tarnish BCCI's investigation.(155)
On September 14, 1988, Clifford and Altman met with Foreign Relations Committee special counsel Blum to discuss document request and production, and reiterated previous commitments to cooperate with the Senate. Shortly thereafter, in Miami, BCCI officials, under instruction from BCCI management, began altering and destroying documents specified in the subpoena.(156) On September 19, 1988, Clifford and Altman made BCCI's first production of the subpoenaed documents, with a second production on September 21, 1988, accompanied by representations from BCCI, through Clifford and Altman, that no other documents pertaining to the subpoena existed.
After retaining separate counsel from BCCI and ceasing being represented by Clifford and Altman, Awan began to take the position that he would be at less risk if he did not object to the production of documents, and cooperated with the Subcommittee, a position that contradicted Clifford & Warnke's position that if Awan provided information, his life would be risk. Awan's tentative decision to cooperate with the Subcommittee, communicated on September 22, 1988 to lawyers at Clifford & Warnke, caused "distress" to the Clifford & Warnke lawyers handling the matter, as set forth in a September 22, 1988 memorandum from John Kovin, a partner at Clifford & Warnke, to Altman and another partner:
A literal reading of John Grabow's telephone message is somewhat distressing. If it means that no objections of any nature will be interposed to the production of documents in response to Amjad Awan's subpoena -- including any concerns that Mr. Awan may have about his personal safety -- it may cause us to alter the stance that we have adopted with the Committee staff up to this point.(157)
A second memorandum to the file from Kovin describes a meeting five days later in which the Clifford & Warnke attorneys are clearly trying to convince Awan's lawyers to maintain a collective strategy of keeping documents from the Committee. The September 27, 1988 memorandum, marked "privileged and confidential," from Kovin states:
In response to specific questions by Mr. Grabow [Awan's attorney], I responded that we had not provided any copies of Mr. Awan's expense or compensation records for retention by the Committee, nor had we provided any copies of "Noriega documents". With respect to the latter category, we do not intend at the present time supplying any such documents."(158)
In a memorandum three days later, Kovin wrote that "Awan turned over the so-called Noriega documents", and "Awan noted to Grabow but not to Blum that certain of his travel records --supplied to this firm -- from the period when he was stationed in Miami had not been produced."(159) Thus, Clifford & Warnke knew as of September 30, 1988 that documents responsive to the subpoena existed and had not been provided to the Senate. Kovin's recommendation as to how to proceed regarding those documents was not to conduct a search for them in order that they be provided the Senate, as was legally and ethically required of BCCI's attorneys, given the service of the Senate subpoena, but instead to "check on this [the missing documents] in the event it later became the subject of additional questions."(emphasis added)(160)
During September and October, Blum deposed Awan and a second BCCI witness, as the Subcommittee completed its two year investigation of drug trafficking in Central America and prepared its final report. When Blum's appointment at the Foreign Relations Committee lapsed in March, 1989, BCCI officials were told that Clifford and Altman had taken care the Foreign Relations Committee, and that the investigation was over.(161)
On July 7, 1989, after a June 15, 1989 broadcast by NBC on BCCI's involvement with General Noriega, describing BCCI documents concerning Noriega, Senator Kerry wrote Clifford noting that NBC apparently had obtained documents which had been subpoenaed by the Foreign Relations Committee and never provided.
Four days later, Clifford wrote Senator Kerry to state: "I am in receipt of your letter dated July 7, 1989," and noted that "we shall continue to try to be responsive to the needs of the Subcommittee."(162)
A meeting was set up for July 17, 1989, between Kerry staff and lawyers for BCCI to discuss the Subcommittee on Narcotics and Terrorism request for documents relating to bank accounts which General Noriega and the government of Panama held at BCCI branches in London, England. At the meeting, Altman and Raymond Banoun, a criminal defense attorney representing BCCI, advised the Subcommittee that no documents responsive to Subpoena were in the United States and that all documents were in London, had been reviewed, and did not refer to documents in the United States. The next day, Subcommittee staff wrote BCCI's attorneys to request the immediate provision of the documents to the Subcommittee to the extent that any such document had ever been in the United States, prompting a reply letter from BCCI's attorneys reaffirming BCCI's offer to assist the Subcommittee in obtaining the documents. The documents from London were ultimately provided to the Subcommittee in late November, 1989, and were found to refer to dozens of transactions involving BCCI records maintained at First American, which passed through First American, or which involved BCCI's representative office in Washington.
After reviewing these documents, Kerry staff noted that they referred to numerous documents at First American and BCCI Washington which should have been produced by BCCI to the Senate in the fall of 1988. On May 14, 1989, staff met with Altman, Banoun and Larry Wechsler, another BCCI lawyer, and the lawyers produced 775 pages of new documents concerning Noriega.
At this meeting, the attorneys stated that they relied on Awan's statements and conducted no independent searches for documents in 1988 in response to the Committee subpoena. Altman, who had previously told staff that he had reviewed all of Noriega's documents in London and that none of them referred to transaction in the United States, now suggested that his initial review had been casual at best, and that he had simply not noticed any such transactions.(163)
In the meeting, BCCI's lawyers agreed to produce all Noriega and Awan records held at First American by BCCI. Thus, a substantial number of documents which should have been provided to the Committee by Clifford and Altman in response to the subpoena to BCCI by the Foreign Relations Committee were in fact not provided. Indeed, no search at BCCI's accounts at First American had ever been conducted by First American in response to the subpoena to BCCI. The documents ultimately provided showed that, regarding Noriega's banking at least, BCCI and First American had a close working relationship, and that Noriega's funds had passed through First American, focusing further staff attention on the relationship between the two institutions.
During the meeting, in response to a request from the Subcommittee to provide information on loans from BCCI to its shareholders and the shareholders of related entities, including ICIC and CCAH, Altman advised Jonathan Winer of Kerry's staff that none of the shareholders of CCAH currently had loans from BCCI.(164) One week earlier, Altman had told the Federal Reserve precisely the opposite -- that Altman had "heard reports of loans by BCCI to certain shareholders [of CCAH] in amounts ranging from $400 million to over $1 billion."(165) Altman thus made a misleading statement to Senate staff regarding BCCI's outstanding lending to CCAH. Altman of course made no reference to his own past borrowings from BCCI.
By the summer of 1990, as the Subcommittee persisted in its efforts to learn more about BCCI's relationship to First American, the Subcommittee scheduled hearings intended to focus attention on the relationship between the two institutions. In response, according to two confidential memoranda prepared by a BCCI lawyer at the firm of Holland & Knight in Florida, based on conversations with Philip Manuel, a private investigator hired by BCCI in connection with its criminal defense, Altman and Banoun sought to call in "political markers" in an effort to stop the Subcommittee inquiry. As specified in the second of the two memoranda:
The Source [Manuel] stated that Altman and Banoun are opposing the subpoenas and doing everything within their power to call in "political markers." Consequently, it may be that Altman and Banoun will succeed in quashing their subpoenas or having them withdrawn; and not end up testifying before the Kerry Committee.(166)
Altman testified that he had "no idea what the author is talking about when he talks about calling in political markers," noting that he had never even asked for a delay of the hearing in writing.(167) In fact, staff was informed by Banoun, on behalf of BCCI, that attempts by the Subcommittee to question him or Altman would interfere with BCCI's attorney-client privilege, an assertion reiterated by former Senator John Culver, who as part of BCCI's team of lobbyists, contacted the Kerry office to urge a postponement of the planned hearing. After Altman, Banoun, and BCCI refused to appear at any hearing, and the Justice Department alleged that any hearing by the Subcommittee could interfere with its interests, the hearing was postponed, due to the refusal of each of the requested witnesses to agree to testify.
Thus, in contrast to the full cooperation promised by Clifford and Altman to the Subcommittee in the course of its investigation, BCCI's lawyer team, including Clifford and Altman, collectively failed to meet basic obligations to the Senate to insure that subpoenaed documents be produced; sought to convince BCCI officer Awan to tell the Senate that production of documents would threaten his life, at a time when Awan no longer wished to make this assertion; failed to search for documents known to be required by the subpoena and not produced; failed to search other categories of BCCI documents held at the First American Bank; asserted legal obstacles to cooperation on numerous occasions; and declined to provide witnesses at scheduled hearings. These findings represent the bare minimum of their failure to provide the promised cooperation.
On July 29, 1992, in coordination with criminal cases brought by the Justice Department and the New York District Attorney, the Federal Reserve issued its summary of charges against Clifford and Altman, specifying its findings of violations of law and regulations, and proposing to bar them from banking for life.
In its summary of charges, the Federal Reserve charged Clifford with four counts of violations of law and regulation, and Altman with seven counts of such violations.
The first count charges Clifford and Altman with having violated the Bank Holding Company Act by participating in BCCI's acquisition of control of CCAH/First American in violation of that law. Included in that count are numerous factual allegations concerning false statements and concealment of information by Altman.
The second count charges Clifford and Altman with having violated the Federal Reserve's order regarding the FGB takeover through violating the commitments made that BCCI would have no role in the management of or lending to First American, and related issues.
The third count charges Altman with having violated the Bank Holding Company Act by participating in BCCI's acquisition and retention of control of the National Bank of Georgia in violation of that act.
The fourth count charges Clifford and Altman with having breached their fiduciary duties to CCAH, First American, and CCAH shareholders by failing to disclose their personal financial arrangements with BCCI regarding their own shares of CCAH.
The fifth count charges Clifford and Altman with having engaged in unsafe and unsound banking practices and breaches of fiduciary duty in connection with premature paying off BCCI loans to CCAH which cost CCAH money.
The sixth count charges Altman with having violated the law by making a number of false statements to the Federal Reserve.
The seventh count charges Altman with having violated the bank Control Act in connection with the purchase of CCAH shares by Masriq, an entity controlled by Saudi banker Khalid bin Mahfouz, against whom the Federal Reserve has issued separate charges, treated elsewhere in this report.
The findings of the Federal Reserve remain subject at this time to a hearing to give Clifford and Altman the opportunity to rebut the Federal Reserve's case prior to the Federal Reserve reaching a final determination on these findings.
1. House Committee on Banking, Finance, and Urban Affairs, September 11, 1991, Serial No. 102-69, p. 36.
2. S. Hrg. 102-350 Pt 3, p. 63.
3. S. Hrg. 102-350 Pt. 3, p. 286.
4. S. Hrg. 102-350 Pt 2 p. 505, 518.
5. These findings should not be viewed to correspond to any conclusions that might be reached in connection with the matters at issue in criminal and civil litigation concerning Clifford and Altman in the U.S. District Court for the District of Colombia, and in New York County in the case brought by District Attorney Morgenthau. These findings have been reached on the basis of a record which may include material not admissible in any of those proceedings, and reflects judgments made in the course of Congressional fact-finding, whose rules and procedures do not correspond to those rules and procedures applicable to other proceedings.
6. Lance, S. Hrg. 102-350 Pt. 3 p. 6.
7. Id pp. 7-8.
8. Clifford, S. Hrg. 102-350 Pt. 2 pp. 58-59.
9. Id p. 59.
10. S. Hrg. 102-350 Pt. 3, pp. 11-12.
11. Art Harris and John F. Berry, Washington Post, December 18, 1977, A1.
13. S. Hrg. 102 Pt. 3 p. 70.
15. Sami memo to Abedi 1/30/78, S. Hrg. 102-350 Pt 3, pp. 26-27.
16. October 19, 1978 Application, CCAH to Federal Reserve; see Summary of Charges, Board of Governors of the Federal Reserve, No, 92-080-E-I1, In the matter of Clark M. Clifford and Robert A. Altman, July 29, 1992, Paragraph 33.
17. Summary of Charges, Federal Reserve, Id.
18. Id, paragraph 33(e).
19. Id, p. 33(i).
20. S. Hrg. 102-350, Pt. 3, p.75.
21. S. Hrg. 102-350 Pt. 3 p. 328-330.
22. Clifford, S. Hrg. 102-350 Pt. 3 p. 93.
23. Confidential and Privileged Attendance Note, November 19, 1990, BCCI Attorney memcom of meeting with Roy Carlson, Exhibit D in G and H Montage case.
24. See e.g. Summary of Charges, Board of Governors of the Federal Reserve System, In the matter of Clark M. Clifford, No. 92-080-E-11, July 29, 1992, paragraph 26.
25. Clifford and Altman written testimony before the House Committee on Banking, Finance and Urban Affairs, September 11, 1991, Serial No. 102-69, Pt. 1, p. 21.
26. Letter from Rauh and Bennett to Kerry, October 11, 1991.
27. S. Hrg. 102-350 Pt 3, p. 63.
28. Summary of charges, Federal Reserve, id, paragraphs 51-53.
29. Id p. 64.
30. S. Hrg. 102-350 Pt. 3 p. 77.
31. Altman, S. Hrg. 102-350 Pt. 3 p. 235.
32. Staff interview, Davis, May, 1992.
33. Altman testimony, S. Hrg. 102-350 Pt. 3 pp. 234-235.
34. Board of Governors Federal Reserve System Exhibit AD 134, Afridi to Naqvi, July 25, 1983.
36. Sakhia testimony, S Hrg. 102-350 Pt. 2 p. 513.
37. Summary of charges, Federal Reserve, In Re Clifford, 92-080-E-I1, July 29, 1991 Paragraph 75.
38. S. Hrg. 102-350 Pt. 3 p. 332.
39. Summary of charges, Federal Reserve, In the Matter of BCCI Holdings, 91-043, July 29, 1991, Paragraphs 176-178.
40. p.236. letter from Elley to Naqvi, October 14, 1982
41. S. Hrg. 102-350 Pt. 3 p. 238.
42. S. Hrg. 102-350 Pt. 3 p. 77.
43. Summary of charges, Federal Reserve, In the matter of Clifford, id, Paragraphs 80-86.
44. Id, Paragraph 92.
45. Id, paragraphs 92-103.
46. Summary of charges, Federal Reserve, Clifford, id, Paragraphs 87-91, see also personnel files, BCCI New York, Elley and Afridi, records reviewed by Subcommittee staff.
47. p. 241
49. p. 242
50. S. Hrg. 102-350 Pt. 2, Sakhia testimony, October 22, 1991, p. 518.
51. Summary of charges, Federal Reserve, Clifford, id. Paragraph 59.
52. Summary of charges, Federal Reserve, Clifford, id., Paragraphs 60-65.
53. Id, paragraph 68.
54. Id, paragraphs 69-72.
55. Summary of charges, Federal Reserve, Clifford, id, paragraph 110.
56. Summary of charges, Federal Reserve, Clifford, id, Paragraphs 111-115.
57. Id paragraphs 116-117.
58. Id, paragraph 123.
60. S. Hrg. 102-350 Pt 3, p. 78.
61. Id. Paragraph 184.
62. Id, paragraphs 184-187.
63. Summary of charges, Federal Reserve, In the Matter of BCCI, 91-043, July 29, 1991, Paragraph 188.
64. Sakhia testimony, S. Hrg. 102-350 Pt. 2 p. 604.
65. S. Hrg. 102-350, Pt. 2, testimony of Abdur Sakhia, October 22, 1992, p. 605.
1019S. Hrg. 102-350 Pt. 2, pp. 521, 606.
67. Sakhia letter to Abedi, Future Plans in the United States, February 10, 1986, S. Hrg. 102-350, Pt. 2 p. 595.
68. Written statement, Clifford and Altman, S. Hrg. 102-350 Pt. 3 p. 78.
70. Summary of Charges, Federal Reserve, Clifford, 92-080-E-I1, July 29, 1992, Paragraphs 128-129.
71. Id, Paragraph 130.
72. Id, paragraph 134.
73. Id, paragraphs 135-136.
74. Id, Paragraphs 137-138.
1028Summary of charges, Federal Reserve, Clifford, id, paragraphs 141-152; see also S. Hrg. 102-350 Pt 3. pp 394-400.
76. Id, Paragraphs 153-154.
77. See document reprinted S. Hrg. 102-350 Pt. 3 pp. 402-403.
78. Id, paragraph 162; see also memorandum "Option to Acquire National Bank of Georgia reprinted in House Committee on Banking, Finance, and Urban Affairs, September 11, 1991, Serial No. 102-69, Pt. 1, pp. 309-311.
79. Summary of charges, Federal Reserve, Clifford, id, paragraphs 163-166.
80. Id, paragraph 170.
82. Id, paragraph 171.
83. Id, paragraph 177.
84. Summary of charges, Federal Reserve, Clifford, id, paragraphs 177-178.
85. Id, paragraph 180.
86. Id, paragraph 183.
87. S. Hrg. 102-350 Pt 4 p. 494.
88. Id, paragraphs 187-188.
89. Id, paragraphs 195-202.
90. Id, paragraphs 205-206.
91. Id, paragraphs 207-212.
92. Id, paragraphs 215.
93. Staff interview, Chinoy, March 9, 1992.
95. Summary of charges, Federal Reserve, Clifford, id, Paragraph 104.
96. S. Hrg. 102-350 Pt 3, p. 245.
97. Sakhia, S. Hrg. 102-350 Pt. 2 p. 597.
98. S. Hrg. 102-350 Pt. 3 pp. 80-81.
99. S. Hrg. 102-350, Pt. 3, p. 62.
100. S. Hrg. 102-350 Pt. 3, p. 97.
101. S. Hrg. 102-350 Pt. 3, p. 103. Clifford explained that "book...is based ...upon the excess of assets over liabilities of that particular company, as of a particular time."
102. Summary of charges, Federal Reserve, Clifford, id, Paragraph 249.
103. Id, paragraph 251.
104. S. Hrg. 102-350, Pt. 3, p. 98.
105. S. Hrg. 102-350 Pt. 3, p.101.
106. Summary of charges, Federal Reserve, Clifford, id, paragraphs 253-254.
107. p. 100
108. S. Hrg. 102-350 Pt. 3, p. 103.
109. Summary of charges, Federal Reserve, Clifford, id, Paragraph 257.
110. Id, paragraph 257.
111. S. Hrg. 102-350 Pt. 3 pp. 80-81.
112. Summary of charges, Federal Reserve, Clifford, Id, Paragraph 258.
113. Clifford & Warnke Memorandum to James E. Lewis from Clifford and Altman, reprinted House Serial No. 102-69, Pt. 1, pp. 760-761.
114. Summary of charges, Federal Reserve, Clifford, id, Paragraphs 264-267.
115. Summary of charges, Federal Reserve, Clifford, id, Paragraph 268.
118. Summary of charges, Federal Reserve, Clifford, id, Paragraphs 269-270.
119. Id, paragraph 271-272.
122. Summary of charges, Federal Reserve, Clifford, id, Paragraph 275.
123. S. Hrg. 102-350 Pt. 3, p. 202.
124. Federal Reserve summary of charges, In re Clifford, id, Paragraph 290.
125. Summary of charges, Federal Reserve, Clifford, id, Paragraph 299.
126. Id, paragraph 300.
127. Id, paragraph 303.
128. Summary of charges, Federal Reserve, Clifford, id, Paragraph 305.
129. S. Hrg. 102-350 Pt. 3 pp. 206-207.
130. S. Hrg. 102-350 Pt 3 p. 207.
131. Kerry-Rybeck communication, October 22, 1991.
132. Altman Memorandum to the File, Clifford and Warnke, July 6, 1990, reprinted in S. Hrg. 102-350 Pt. 5.
133. S. Hrg. 102-350 Pt. 3, p. 266.
134. S. Hrg. 102-350 Pt. 3, p. 269.
135. S. Hrg. 102-350 Pt. 3, p. 270.
136. S. Hrg. 102-350 Pt. 3 p. 286.
137. Compare S. Hrg. 102-350 Pt. 3 p. 449 Memorandum to the File Re: Meeting with Federal Reserve Staff, May 8, 1992; and Memorandum to BCCI Noriega/Senate File From Raymond Banoun, regarding Altman meeting with Kerry Subcommittee staff, May 18, 1990.
138. Staff interview, Amjad Awan, July 20, 1992.
139. Interview with Amjad Awan at Clifford & Warnke on February 23, 1988, reprinted in S. Hrg. 102-350 Pt. 5.
140. Clifford memorandum to Altman, June 1, 1988, reprinted in S. Hrg. 102-350 Pt. 5.
141. Id, Memorandum to the File, Robert A. Altman, August 11, 1988.
142. Awan statements, Staff interview, July 20, 1992.
143. Memorandum to File, Robert C. Sanders, BCCI/Panama, August 29, 1988.
144. Sanders Memorandum to File, August 29, 1988, Re: BCCI/Panama.
146. Id. p. 12
147. Id. p. 22
148. Staff interviews, Awan, July, 1992, and Awan Subcommittee testimony, July 29, 1992, S. Hrg. 102-350 Pt. 6.
150. S. Hrg. 102-350 Pt. 3 pp. 279-280.
153. Awan, Staff Interview, July 20, 1992.
154. Staff interview, Awan, July 27, 1992.
155. Notes of Meeting With Jack A. Blum, Clifford and Warnke, September 9, 1988, reprinted S. Hrg. 102-350 Pt. 5.
156. Staff interview, Akbar Bilgrami, July 13-14, 1992.
157. Privileged and confidential Memorandum to Mssrs. Altman and Sanders Re: BCCI Congressional Matter, September 22, 1988, reprinted in S. Hrg. 102-350 Pt. 5.
158. Kovin, Memorandum to the File, September 27, 1988, p. 1.
159. Kovin, Memorandum to the file, September 30, 1988, p. 2, reprinted in S. Hrg. 102-350 Pt. 5.
161. Staff interview, Sakhia, October, 1991.
162. Clifford-Kerry correspondence.
163. Winer memcom, May, 1989.
164. See e.g. Memo to BCCI Noriega/Senate File, Raymond Banoun, Re: Meeting with Kerry Subcommittee Staff, May 18, 1990.
165. S. Hrg. 102-350 Pt. 3 p. 449.
166. S. Hrg. 102-350 Pt. 3 p. 538.
167. S. Hrg. 102-350 Pt. 3 p. 278.
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