ABU DHABI: BCCI'S FOUNDING AND MAJORITY SHAREHOLDERS
There was no relationship more central to BCCI's existence from its inception than that between BCCI and Sheikh Zayed and the ruling family of Abu Dhabi.
Abu Dhabi was present at BCCI's creation as one of two providers of BCCI's capital. It was BCCI's largest depositor, and its largest borrower, and for most of BCCI's existence, its largest shareholder. The relationship between the two entities was, as Price Waterhouse told the Bank of England days before BCCI's closure, "very close," with BCCI providing services to the ruling family of Abu Dhabi far beyond the ordinary relationship of a bank to either its shareholders or depositors.(1)
There are numerous examples of the centrality of the Abu Dhabi relationship to BCCI, and its unusual nature.
In 1972, when BCCI was created, Abu Dhabi shareholders purchased 20 percent of its stock with an investment of $500,000, and then generously agreed to have that interest drop to just over one percent of BCCI just three years later.
In January, 1978, when BCCI decided to enter the United States and purchase shares in Financial General Bankshares, and needed two additional names, the ruling family of Abu Dhabi supplied them.
In 1980 and 1981, when BCCI needed a purchaser for Bank of America's shares in BCCI, and had no one other than its bogus Grand Caymans bank-within-a-bank, ICIC, to buy them, Abu Dhabi stepped in once again to increase its interest in BCCI.
Throughout the 1970's and 1980's, the Abu Dhabi ruling family and the Abu Dhabi government placed billions of dollars in deposits at BCCI and its affiliates, such as ICIC, giving BCCI and its head, Agha Hasan Abedi, the right to manage those assets, and a power of attorney to act in the name of Sheikh Zayed.
In 1990, when accountants and regulators in the United Kingdom found fraud at BCCI, the Abu Dhabi ruling family and government stepped in again, agreeing to formally buy the bank, assert control, guarantee its losses, replace BCCI's head with the head of its own BCCI affiliate, the Bank of Credit and Commerce Emirates (BCCE), move BCCI's operations and records from London to Abu Dhabi, and work on a plan to find a way to save the bank despite its having acknowledged "mishandling" at least $2.2 billion of Abu Dhabi's money.
By July 5, 1991, when BCCI was closed globally, the Government of Abu Dhabi, its ruling family, and an investment company holding the assets of the ruling family, were the controlling, and official "majority" shareholders of BCCI -- owning 77 percent of the bank. But since the remaining 23 percent was actually held by nominees and by BCCI's alter-ego ICIC, Abu Dhabi was in fact BCCI's sole owner.
After July 5, 1991, it was in Abu Dhabi that most of BCCI's top officials remained, where they remain under the control of the Abu Dhabi government, under conditions said to be luxurious, which the Abu Dhabi government refuses to discuss. While there, they have remained incommunicado, and out of the reach of foreign investigators, unwilling, or unable, to tell the world what happened.
In short, there is no question that the relationship between Abu Dhabi and BCCI was central to both, and that no adequate understanding of BCCI is possible without an understanding of the Abu Dhabi relationship. Yet according to the testimony presented to the Subcommittee by Abu Dhabi, that relationship was one that boiled down to little more than victim (Abu Dhabi) and criminal (Abedi and BCCI). In essence, according to Abu Dhabi, BCCI abused Abu Dhabi's trust by stealing deposits and mismanaging a bank it owned, making Abu Dhabi by its own account BCCI's largest victim, losing what it describes as some $6 billion in all.
Thus, by Abu Dhabi's account, it never knew that most or all of BCCI's shareholders were front-men or nominees for BCCI, including the heads of state of several of the smaller sheikhdoms of the United Arab Emirates of which Sheikh Zayed is president, sheikhs who are generally understood to treat Sheikh Zayed with great deference. It never knew that such prominent shareholders as Kamal Adham and A.R. Khalil, two successive heads of Saudi intelligence, were also nominees for the bank, along with such well-known Middle Eastern financial figures as Faisal Fulaij of Kuwait and Ghaith Pharaon of Saudi Arabia. Unlike these other figures, who were part of BCCI's deceptions, and who by Abu Dhabi's account participated in BCCI's schemes to deceive Abu Dhabi, Abu Dhabi contends it was innocent of wrongdoing, and utterly duped.(2) To quote the testimony of Abu Dhabi's witness before the Subcommittee, Ahmed Al Sayegh:
We didn't know anything about the bank [BCCI] because of our passive role in the past [prior to taking control in April 1990].(3)
However, unlike any other shareholder, officer, attorney, agent or depositor of BCCI, Abu Dhabi has been in the position, since April, 1990, of having total control over BCCI's records. At least eighteen of its key officers, who have remained held incommunicado and under house arrest in Abu Dhabi since BCCI's collapse. During that period, Abu Dhabi has chosen not to make any of these witnesses available to U.S. law enforcement. While it did, temporarily, make some key documents available to the Federal Reserve concerning the involvement of non-Abu Dhabi figures in BCCI's wrongdoing prior to BCCI's closure, it has at all times prevented federal investigators from having free access to BCCI's records, and all access to those records has been ended since July 5, 1991.
Thus, Abu Dhabi has remained throughout the past fourteen months in the position of being able either to prove its assertions, or risk disproving them, through the simple act of granting access to the critical BCCI information it alone controls, in witnesses and documents. Yet it has chosen not to do so. In the process, Abu Dhabi has made, and broken, repeated commitments to provide both witnesses and documents to the Justice Department, the New York District Attorney, and the Senate, going as far back as November, 1990, and continuing to the present.
Given Abu Dhabi's suppression of critical information about its role in BCCI, its contention that it is innocent of all wrongdoing in connection with BCCI, would, on this basis alone, inevitably be viewed with some skepticism.
But despite Abu Dhabi's withholding of essential witnesses and documents, BCCI financial records obtained to date by investigators, together with testimony and statements from BCCI insiders, outline a picture of the relationship which suggests that Abu Dhabi officials were indeed knowing participants in substantial wrongdoing pertaining to BCCI's activities in the United States and elsewhere, that members of the Abu Dhabi ruling family participated in risk-free investments in BCCI banks, and that Abu Dhabi officials engaged, as of April, 1990 on some issues and on others much earlier, in a cover-up of fraudulent activity involving BCCI, which continues, in substantial part, to this day.
** Members of Abu Dhabi's ruling family appear to have contributed no more than $500,000 to BCCI's capitalization prior to April 1990, despite being the record owner of almost one-quarter of the bank's total shares, with a book value of over $750 million as of December 31, 1989. However, the Abu Dhabi Investment Authority, holder of a 10 percent interest in BCCI beginning in 1980, appears to have made some cash payments for its interest in BCCI, which had a book value of approximately $250 million as of December 31, 1989. An unknown but substantial percentage of the shares acquired by Abu Dhabi overall in BCCI appear to have been acquired on a risk-free basis -- either with guaranteed rates of return, buy-back arrangements, or both.
** The apparent interest held in BCCI by the Abu Dhabi ruling family, like the apparent interests held by the rulers of the three other gulf sheikdoms in the United Arab Emirates who owned shares of BCCI, materially aided and abetted Abedi and BCCI in projecting the illusion that BCCI was backed by, and capitalized by, Abu Dhabi's wealth. However, Abu Dhabi provided BCCI only the use of its name rather than substantial capital, until at least 1980-1981. At that time, "investments" made in BCCI by the Abu Dhabi Investment Authority to purchase shares of BCCI sold by the Bank of America to ICIC, appear to have involved actual payments from Abu Dhabi, according to some documents, on a no-risk, guaranteed return basis.
** Shares in Financial General Bankshares held by members of the Abu Dhabi ruling family in late 1977 and early 1978 appear to have been nominee arrangements, adopted by Abu Dhabi as a convenience to BCCI and Abedi, under arrangements in which Abu Dhabi was to be without risk, and BCCI was to guarantee the purchase through a commitment to buy-back the stock at an agreed upon price. Later, one of the two original members of the Abu Dhabi ruling family in fact sold back his shares to another BCCI front-man, Kamal Adham.
** Abu Dhabi's representative to BCCI's board of directors, Ghanim al Mazrui, received unorthodox financial benefits from BCCI in no-risk stock deals which may have compromised his ability to exercise independent judgment concerning BCCI's actions; confirmed at least one fraudulent transaction involving Abu Dhabi; and engaged in other improprieties pertaining to BCCI; but remains today in place at the apex of Abu Dhabi's committee designated to respond to BCCI's collapse.
** In April, 1990, Abu Dhabi was told in detail about BCCI's fraud by top BCCI officials, and failed to advise BCCI's external auditors of what it had learned. Between April, 1990 and November, 1990, Abu Dhabi and BCCI together kept some information concerning BCCI's frauds hidden from the auditors.
** From April, 1990 through July 5, 1991, Abu Dhabi tried to save BCCI through a massive restructuring. As part of the restructuring process, Abu Dhabi agreed to take responsibility for BCCI's losses, Price Waterhouse agreed to certify BCCI's books for another year, and Abu Dhabi, Price Waterhouse, the Bank of England, and BCCI agreed to keep all information concerning BCCI's frauds and other problems secret from BCCI's one million depositors, as well as from U.S. regulators and law enforcement, to prevent a run on the bank.
** After the Federal Reserve was advised by the New York District Attorney of possible nominee arrangements involving BCCI and First American, Abu Dhabi, in an apparent effort to gain the Federal Reserve's acquiescence in BCCI's proposed restructuring, provided limited cooperation to the Federal Reserve, including access to selected documents. The cooperation did not extend to permitting the Federal Reserve open access to all BCCI documents, or substantive communication with key BCCI officials held in Abu Dhabi, such as BCCI's former president, Swaleh Naqvi. Access was sufficient, however, to permit the Federal Reserve to identify critical documents regarding frauds involving non-Abu Dhabi shareholders and borrowers of BCCI and BCCI itself pertaining to CCAH/First American, the National Bank of Georgia and the Independence Bank. That access ended with the closure of BCCI July 5, 1991.
** From November, 1990 until September 21, 1992, Abu Dhabi failed to provide documents and witnesses to U.S. law enforcement authorities and to the Congress, despite repeated commitments to do so. Instead, it actively prevented U.S. investigators from having access to vital information necessary to investigate BCCI's global wrongdoing. As of September 21, 1992, Abu Dhabi began making certain documents available for review by U.S. law enforcement, in a move apparently timed to coincide with the publication of this report. No representation has been made by Abu Dhabi, or by U.S. law enforcement, as to the significance or completeness of the documents Abu Dhabi selected for law enforcement review at its Washington, D.C. Embassy. Moreover, none of the BCCI officials held in Abu Dhabi have yet to be made available for interview by U.S. law enforcement. At the time of writing of this report, none of the newly available documents had been made offered by Abu Dhabi for review by the Subcommittee.(4)
** The proposed agreement between Abu Dhabi and BCCI's liquidators to settle their claims against one another contains provisions which could have the consequence of permitting Abu Dhabi to cover up wrongdoing it may have had in connection with BCCI.
** Answers by Abu Dhabi's representative to key questions from the Subcommittee about Abu Dhabi's role in BCCI, were non-responsive, evasive, and misleading, although for the most part artfully crafted to avoid being literally untrue.
** There is some evidence that the Sheikh Zayed may have had a political agenda in agreeing to the involvement of members of the Abu Dhabi ruling family and its investment authority in purchasing shares of Financial General Bankshares, then of CCAH/First American. This evidence is offset, in part, by testimony that Abu Dhabi share purchases in the U.S. bank were done at Abedi's request and did not represent an actual investment by Abu Dhabi until much later.
The chapter on BCCI's early history describes in detail the early history of Abu Dhabi and BCCI, which is recapitulated in summary form here.
Abu Dhabi is the largest and wealthiest member of the United Arab Emirates, an oil-rich federation of sheikhdoms, formed in 1971, whose rulers own all the land and natural resources of their nations in fee simple absolute, with no distinctions being made among the wealth of the ruler, his family, and the nation itself. Sheikh Zayed of Abu Dhabi, installed in 1966 as head of the newly wealthy oil state through a British-led coup against his brother in 1966, soon after developed a relationship with Agha Hasan Abedi, head of the United Bank of Pakistan. Six years later, when Abedi decided to form BCCI, he did so after receiving the blessing of Sheikh Zayed, and a commitment of support. That support involved a tiny capital contribution to the bank by Abu Dhabi -- $500,000 -- and a huge placement of petrodollars.
As set forth in the chapter on BCCI's early history in some detail, the relationship between BCCI and Sheikh Zayed exceeded normal standards of bank/client relationships in a number of respects. BCCI was not merely a bank owned in part by Sheikh Zayed. Sheikh Zayed was not merely BCCI's largest depositor. BCCI for many years handled almost every financial matter of consequence for the Sheikh and his family, as well planning, managing, and carrying out trips abroad, and a wide range of services limited only by the desires of the Al Nayhan family itself.(5)
In his testimony of May 18, 1992, Abu Dhabi's representative Ahmed Al Sayegh suggested that Abedi's role in Abu Dhabi has been much overstated:
When Mr. Abedi was a respected banker and founder of BCCI, his role, therefore, was limited to his bank. . . . His role in the case, I guess, was limited to inducing potential investors in making commitments to his bank, whether buying shares or placing deposits. . . He was not a financial advisor [to Abu Dhabi or Sheikh Zayed].(6)
Other information obtained by the Subcommittee from many sources demonstrates that Al Sayegh's testimony on this point was untrue. In fact, for over twenty years, Abedi created and managed a network of foundations, corporations, and investment entities for Abu Dhabi's ruling family, of a complexity similar to the network he had created at BCCI itself. BCCI handled the financing arrangements for many of these entities, and managed a variety of Abu Dhabi's portfolio accounts in U.S. dollars.(7) As far back as 1969 and 1970, when Abedi was still head of the United Bank in Pakistan, Abedi established a cargo shipping company, the Hilal Group, operated by Associated Shipping Services, Limited, London, as an operational company for Abu Dhabi's Department of Private Affairs. Though primarily used to own cargo ships, the entity was also used for trading in equities, holding property investments, and other direct investments. One of the entities owned by Hilal Group, Progressive Investment, had Abedi on its board. Later, when BCCI established the Cromwell Hospital in London to provide a medical facility for the Abu Dhabi ruling family and other prominent Middle Easterners, Abedi arranged for the financing of the purchase for Abu Dhabi through a complex series of transactions involving BCCI and a shell corporation holding Sheikh Zayed's interests by which BCCI lent the funds for the hospital in pounds against dollar accounts of the Department of Private Affairs, with the result that the hospital investment did not appear on the books of the Department.(8)
Moreover, BCCI and Abu Dhabi also engaged in a series of joint ventures, managed by BCCI, throughout the 1980's. Typical of such ventures was the China-Arab bank, a joint venture of BCCI and the Abu Dhabi Investment Authority, established in China in 1985 coincident with BCCI's opening of offices in China, to use funds from Abu Dhabi to invest in China. BCCI accounting records show a number of other ventures involving BCCI and Abu Dhabi in China, as well as numerous financial relationships involving BCCI and Abu Dhabi interests throughout the 1980's.(9)
Contrary to Al Sayegh's testimony, Abedi had broad authority over the investments and finances of the ruling family until his stroke in 1989. As the present chairman of the Department of Private Affairs of Sheikh Zayed, Ghanim Al Mazrui testified in civil litigation in 1982, Abedi could even be viewed as an official of the Abu Dhabi government, because of his position on the Abu Dhabi committee responsible for overseeing Abu Dhabi's wealth.(10)
As Bert Lance observed, the relationship was exceedingly intimate:
Mr. Abedi . . . had, in effect, for lack of a better term, been kind and attentive to Sheikh Zayed when he was still wandering around in the desert and he had all his assets in his tent somewhere . . . I think this is important to you as you search for the truth, to understand that that relationship went back a long way -- and it went back before Sheikh Zayed became "the richest man in the world" at that point in time, with an income of some $4 billion or $5 billion, as the press reported; that there had been a relationship that had developed that Mr. Abedi had helped Sheikh Zayed when he had no real power or influence . . . Sheikh Zayed had absolute and total trust and coincidence in Mr. Abedi, that whatever Mr. Abedi said or suggested was something that Sheikh Zayed would look on with favor; that Mr. Abedi had, in effect, built the house where we were [meeting with Sheikh Zayed in his palace] outside of Lahore without any guidance or direction from Sheikh Zayed, and it was that sort of relationship. It was very, very unique.(11)
BCCI also provided members of the Abu Dhabi ruling family with personal services, ranging from Sheikh Zayed's own modest needs to the more elaborate requirements of his sons and members of his retinue. A history of BCCI's protocol department, and its relationship to Abu Dhabi, is set forth in the chapter on BCCI's early history.
Throughout the first critical decade of BCCI's eighteen year existence, as much as 50% of BCCI's overall assets were from Abu Dhabi and the Al Nayhan family, who were earning about $750 million a year in oil revenues in the early 1970's, an amount that rose to nearly $10 billion a year by the end of the decade. Until the formation of a separate affiliate, the Bank of Credit and Commerce Emirates (BCCE), BCCI functioned as the official bank for the Gulf emirates, and handled a substantial portion of Abu Dhabi's oil revenues. And yet from the beginning, there was an oddity about this central relationship: at no time while Abedi was in charge of BCCI did Abu Dhabi hold more than a small share of BCCI's recorded shares. Abu Dhabi appears not to have invested substantial funds in BCCI, but instead to have insisted on guaranteed rates of return for the use of its money. Thus, rather than being a major investor in BCCI, in the early years, Abu Dhabi only agreed to place extremely large sums of money as deposits at the bank, which BCCI used in lieu of capital.
As a result of the Abedi-Zayed agreement, Abedi now had essentially unlimited resources to create BCCI. He could now act simultaneously as manager of billions of Sheikh Zayed's personal wealth, as banker to the United Arab Emirates of which Sheikh Zayed was chief of state, and as chairman of a new bank that had guaranteed assets of hundreds of millions of dollars from its inception.(12)
Abedi thus relied on the Sheikh's resources to finance his rapid expansion, not through capital investment, but as a huge depositor. The result was BCCI's finances quickly became so intermingled with the finances of Abu Dhabi that it was difficult even for BCCI insiders to determine where one left off and the other began. Whether Abu Dhabi insiders, including Abu Dhabi's representative on BCCI's board of directors, Ghanim Al Mazrui, knew of this intermingling, remains an open question.
Although Abu Dhabi had a key interest in BCCI from its creation, in accord with Abu Dhabi's failure to provide the initial funds for capitalization, BCCI's early stock recordations did not show Abu Dhabi as the actual owner of the bank. A snapshot of BCCI shares from Bank of America files as of September 30, 1977 described BCCI's majority owner as ICIC, at 50.1 percent; its most important minority owner as Bank of America, at 30 percent; and its largest Arab owner as Majid Al-Futaim of Dubai in the United Arab Emirates at just 4 percent, with the members of the family of Abu Dhabi owning just 3.4 percent all told.(13)
According to Abu Dhabi itself, it actually had a 20 percent interest in BCCI in 1972, which then dropped to less than five percent some two years later, with Abu Dhabi remaining a "passive investor," without formal representation on BCCI's board until 1981.(14)
In response to the Subcommittee's request for information on the history of Abu Dhabi's ownership interest in BCCI, Abu Dhabi provided on May 13, 1992, a list of Abu Dhabi shareholding in BCCI Holdings (Luxembourg) S.A., one of BCCI's two flag-ship holding companies, which it described as "based on preliminary review of documents."
The shareholding list provided by Abu Dhabi does not begin until 1975, three years following BCCI's founding in 1972, and after, for reasons not fully explained, Abu Dhabi's declared ownership in BCCI shares had dramatically dropped. It shows an unusual pattern of ownership of BCCI shares by the Al Nayhan family and the Abu Dhabi Investment Authority (ADIA).
Overall, after beginning at 20 percent in 1972, the Al-Nayhan family's ownership of BCCI dropped to less than three percent in 1975, and then to just over one percent of BCCI in 1976, where its interest remained, with small increases until 1980. In 1980, the Al Nayhan family's holdings of BCCI sharply increased to over 8 percent, in 1981 increased sharply again to over 18 percent, and by 1984 had reached 27 percent, and by 1986, 33 percent, where it remained until 1990, when Abu Dhabi became -- officially -- a 77 percent owner of BCCI.(15)
What is unusual about this pattern is the drop from Abu Dhabi's holdings of 20 percent to less than 2 percent in three years, followed by an increase from 2 percent to 18 percent five years later. It is difficult to understand why any shareholder of a rapidly growing bank would be willing to sell off or dilute so much of its interest in the years in which the bank's value was rapidly increasing, and then buy back that interest at far greater cost following five years of growth.
Sheikh Zayed's own holdings of BCCI displayed a still stranger pattern. After owning 20 percent of BCCI in 1972, his personal ownership had dropped to 2.26 percent in 1975, dropped still further to less than one percent -- just .59 percent -- in 1976, and lower yet in 1977 to .47 percent of BCCI, before suddenly climbing in 1980 to 4.11 percent, when Sheikh Zayed purchased 80,000 shares in the bank. Sheikh Zayed then resold these same 80,000 shares the following year, reducing his ownership interest from the 4.11 percent back to .47 percent. In 1984, he purchased BCCI shares anew and his interest again climbed to over four percent, the vicinity in which his personal interest in BCCI remained to BCCI's closing.
Despite explicit requests to do so, Abu Dhabi failed to provide to the Subcommittee any explanation of the peregrinations of Abu Dhabi's ownership of BCCI stock, the price paid for the shares purchased, or the price received for the shares sold. Prior to the May 14 hearing, staff advised lawyers for Abu Dhabi that the purchase and sales prices of the stock and any funds provided by Abu Dhabi to BCCI as capital were critical issues requiring answers. Apart from the statement that Abu Dhabi paid $500,000 for its original interest in BCCI in 1972, Abu Dhabi provided no answer to these questions. To the extent that Abu Dhabi did not pay for such shares, there would be substantial questions as to whether it, like BCCI's other shareholders, was also a nominee for BCCI.
The patterns shown above, for the period up to April, 1990 are in some respects more consistent with a nominee relationship as with an ownership relationship, except for the 10 percent ownership of BCCI held from 1980 on the Abu Dhabi Investment Authority, which appears to be genuine. However, even that ownership interest in BCCI by Abu Dhabi cannot be viewed as conclusive in the absence of access to any buy-back arrangements from BCCI that might have existed.
For example, evidence for concluding that Sheikh Zayed's interests in BCCI could have been as a nominee for BCCI, or interchangeable with BCCI, is the purchase by him for an unknown price and sale for another unknown price, of 80,000 shares in BCCI, over one year. This is not a normal practice for share trades in a privately held bank by a party with a long-standing ownership interest in the bank. Similar transactions involving BCCI's manipulation of shares in CCAH/First American were definitively found by the Federal Reserve to have been either shams or nominee transactions.
On the other hand, Abu Dhabi did, from 1981 onwards, own ever increasing percentages of BCCI, principally through Sheikh Zayed's son, Sheikh Khalifa, and the Abu Dhabi Investment Authority, becoming the largest shareholders of the bank at some point in the 1980's. This suggests the possibility that Abu Dhabi actually owned the stock, regardless of guaranteed returns or buy-back arrangements to "eliminate" risk to Abu Dhabi.
Following the May 14, 1992 hearing in which Abu Dhabi's representative, Ahmed Al Sayegh, testified, the Subcommittee tried again to elucidate the truth about this issue.
It reiterated in questions to Al Sayegh the request that Abu Dhabi specify the capital actually paid in by the Abu Dhabi shareholders at the time of each stock purchase, including the date of each infusion of capital, and the amount paid in. Al Sayegh did not provide the answer to the question of how much Abu Dhabi paid each time for its shares of BCCI stock. Instead, he stated:
Many of the Majority Shareholders' share purchases were from third parties, rather than purchases of newly-issued stock, and other stock acquisitions came in the form of dividends. . . In any event, I am unaware of the details of amounts paid for shares in particular transactions.(16)
The Subcommittee has asked Abu Dhabi to provide a knowledgeable witness regarding such questions for over two years, beginning in July, 1990. In the spring of 1992, it requested that Abu Dhabi's representative on BCCI's board of directors, Ghanim Al Mazrui, appear to testify. Instead, Al Sayegh was selected. His written answers were provided to the Subcommittee five weeks after his testimony, through Abu Dhabi's Washington, D.C. lawyers at Patton, Boggs & Blow. Hence, Al Sayegh's statement that he is "unaware of the details" amounts to nothing less than a refusal by the government of Abu Dhabi to answer the questions asked: what the Abu Dhabi shareholders of BCCI actually paid for the fifteen separate purchases of BCCI stock listed by Abu Dhabi as having been made and what other shareholders paid for the shares of BCCI stock sold in that period by Sheikh Zayed, his son, Sheikh Khalifa bin Zayed, and the Abu Dhabi Investment Authority. Answers to those questions would be vital in demonstrating that Abu Dhabi was a legitimate, non-nominee shareholder for all of its shares. The fact that Abu Dhabi has refused to answer these questions suggests that the facts if revealed would not be helpful to Abu Dhabi's position that it was never a nominee for BCCI, and was always at risk.
Information contained in the Section 41 report of Price Waterhouse of June, 1991, provided to the Bank of England and obtained by the Subcommittee in an uncensored form only in late August, 1992, further suggests that the shares in BCCI held by the ruling family of Abu Dhabi were purchased according to BCCI's typical practices for nominees -- paid for by loans from BCCI itself, with buy-back agreements and guarantees to insure the purchaser against loss.
The Section 41 report states that the initial capitalization of BCCI was just $2.5 million, and that subsequent increases of capitalization, to $845 million as of December 31, 1990, had been carried out through the extensive use of nominee arrangements, financed directly by loans from BCCI and its bank-within-a-bank, ICIC Grand Caymans.
In the report, Price Waterhouse specifically found that members of the Ruling Family of Abu Dhabi acquired their shares on the basis of guaranteed rates of return and buy-back arrangements, with the result that they were not at risk for their ostensible "shareholdings" of BCCI.(17)
While the evidence is not conclusive, there is a significant possibility that BCCI simply loaned the ruling family the funds for its stock, or provided them gratis
A list of major loans to shareholders of BCCI prepared in connection with a BCCI audit for the year ending September 30, 1987, shows lending to the Ruler of Abu Dhabi as standing at $620,800,000 -- some $74 million more than the authorized "limit" for lending to Sheikh Zayed establish by BCCI's credit committee, and more than twice the amount lent to the next highest borrower, Ghaith Pharaon at $283,900,000. A second such list, dated July 31, 1991, shows loans to the Abu Dhabi group from BCCI totalling $371.8 million, with an additional $17.5 million in loans to Abu Dhabi from BCCI's affiliate, ICIC, for a total lending to Abu Dhabi of just under $390 million. After the Abu Dhabi group, BCCI's next highest level of lending to a shareholder was to its front-man, Kamal Adham, at $323.5 million. In either period, the size of the lending to Abu Dhabi was sufficiently substantial that it could have been applied to any number of purposes by either BCCI or Abu Dhabi, including the financing of a significant proportion of the holdings of members of the Abu Dhabi ruling family in BCCI itself and in CCAH/First American.(18)
A lengthy account of how Abu Dhabi became involved as shareholders in the purchase of Financial General Bankshares (FGB) is set forth in the chapter on BCCI's entry into the United States.
The key questions that have arisen regarding those facts are whether Sheikh Zayed had a political agenda in participating in BCCI's secret purchase of FGB; whether the Abu Dhabi shareholders were BCCI's nominees in connection with those purchases; whether the Abu Dhabi shareholders knew that BCCI was the real owner of FGB; and whether Abu Dhabi shareholders or representatives knowingly participated in false statements made to the Federal Reserve in connection with the purchase.
From the first public awareness of the FGB takeover, reported in early 1978, the issue of whether the Middle Eastern investors in FGB had a political agenda was of substantial concern to regulators. As Virginia's chief banking regulator, Sidney Bailey stated in the public hearing at the Federal Reserve concerning the takeover in the spring of 1981:
There can be little doubt that some incentives other than orthodox investment motives must have prompted this effort. . . One obvious plausible answer to this riddle lies in the unique position of Financial General in the market. No other single financial institution is situated in both the financial and government hubs of the United States.(19)
Bailey wondered whether that secret agenda was somehow related to political goals of the Middle Eastern group involved.
According to Bert Lance, BCCI's initial partner in its most important acquisitions in the United States, both Sheikh Zayed and Abedi indeed felt that BCCI could become a critical element in strengthening ties between the United States and their constituencies. As Lance described a meeting between him, Sheikh Zayed and Abedi in Islamabad, Pakistan in late 1977:
Abedi was concerned about the shifting tides towards the Soviets in Afghanistan, Iran, India and the Mideast. Both Abedi and Zayed each expressed their concerns about the Arab worlds lack of ties to the US. They wanted to do something about it.(20)
This point of view was reflected in a contemporaneous press account in the Washington Post on December 18, 1977. As the article stated:
An Atlanta source close to the negotiations says the Arabs see Lance as giving them access to the administration. Though a private citizen, Lance is a regular visitor at the White House and is the chairman of a $500-to-$1,000-a-plate fund-raiser for President Carter scheduled for January in Atlanta. "Under normal circumstances," says this source, "NBG would be the last bank anyone would be interested in. But the investors see this as an opportunity to do a favor for someone close to the President."(21)
In response to a written question from the Subcommittee chairman, Al Sayegh denied that any of the Abu Dhabi investments in CCAH/First American were related to a larger political agenda:
The suggestion that Sheikh Zayed purchased shares in Financial General Bankshares to acquire influence in the United States suggests improper motives on his part. Not only . . . did he never purchase FGB shares, but the suggestion of improper motive is vehemently denied. The shares that were purchased for Sheikh Sultan and Sheikh Mohammed were solely intended as a passive commercial investment, not to acquire influence in the United States.(22)
Lance, who was present during the period of the original FGB purchases, had no motive to lie on this particular matter. It is not clear who the Washington Post's source was. Al Sayegh, who was not present during any of the events material to this issue, might well not wish to admit any political agenda that existed on the part of the Sheikh. However, the overall evidence accumulated by the Subcommittee on this point is insufficient to be conclusive either way.
The Federal Reserve's judgments about the nominee role of the four Middle East investors in the FGB takeover were reached in large part on the basis of documents provided Federal Reserve investigators in the spring of 1991 by Abu Dhabi in Abu Dhabi.
These BCCI documents were in Abu Dhabi, because Abu Dhabi had insisted on moving them from London to Abu Dhabi in the spring of 1990 after being told of fraud at BCCI by BCCI's external auditors, Price Waterhouse, and agreeing to take over BCCI and to provide new funding for the bank to keep it from collapsing.
During their trip to Abu Dhabi in March, 1991, to review the BCCI documents that been moved there one year earlier by Abu Dhabi, the Federal Reserve investigators were not permitted open access to documents. Instead, they advised the Abu Dhabi government of the documents they wanted, and in return, were provided with access to certain files, which were brought by Abu Dhabi representatives to the Federal Reserve investigators' hotel rooms. As a consequence, the investigators recognized at the time that there was a very significant possibility that they were not being provided access to other important files, and that files pertaining to Abu Dhabi could have been hidden or destroyed.(23) The materials provided by Abu Dhabi to the Federal Reserve documented in detail the mechanisms by which Adham, Fulaij, Khalil, El Gohary, and others were used by BCCI as nominees. The materials provided did not include any documents concerning similar arrangements involving Abu Dhabi. Accordingly, the Federal Reserve's judgments about nominees did not reach the question of whether the Abu Dhabi shareholders had arrangements similar to that of the remaining Arabs involved in the 1978 and 1980 FGB takeover.
The Subcommittee has, however, interviewed and received additional statements in some detail, supplemented in more general terms by his sworn testimony, from a key BCCI official who handled the finances of the Sheikh of Abu Dhabi for BCCI in the relevant period, and who had frequent contact in the period 1977 through 1980 with Abdullah Darweish, the Abu Dhabi official handling the shares on behalf of one of Sheikh Zayed's sons during the takeover. This witness, Akbar Bilgrami, convicted of money laundering the Tampa case in 1989, handled personal finances for Sheikh Zayed's Private Department held at BCCI in the late 1970's, working closely with Abedi, Sheikh Zayed, and Darweish, and having numerous direct contacts with each of them in this period.
Bilgrami told the Subcommittee that while he and Darweish were in Marbella, Spain in late 1977 or early 1978, Darweish received a stack of legal papers from BCCI concerning the proposed FGB takeover and the role of the Abu Dhabi investors. Darweish asked Bilgrami to read and review these documents before he would sign them. Bilgrami read them carefully, and told Darweish that while many of the provisions were left in blank, the terms of the documents were for BCCI to provide loans, with buy-back agreements, to several members of the Abu Dhabi ruling family, in nominee arrangements. Bilgrami said the arrangements were complex and involved several interim entities between BCCI and the ruling family shareholders, but that the documents very clearly set forth a nominee relationship involving loans from BCCI for the purchase of shares in the U.S. bank. According to Bilgrami, Darweish told him this was "Abedi's operation," and that it was Darweish's understanding that Abu Dhabi participation in "Abedi's operation" had been cleared and that Darweish would sign the documents. At the time, Darweish advised Bilgrami that he was not happy about signing documents with blanks in them, but that he had little choice since the arrangements had already been made.(24)
Bilgrami concluded at the time that none of Abu Dhabi's funds were being invested in the U.S. and that Abu Dhabi's investors in FGB were all nominees, for several reasons. First, the documents described loans from BCCI to pay the Abu Dhabi investors for the share purchases. Second, the documents referred to "buy back" arrangements, which would give BCCI control over the shares, including the right to buy or sell them, and to set the price of any sale. Third, Bilgrami had had sufficient experience with the Abu Dhabi government to know that Darweish would not sign any document with blanks in it if Abu Dhabi itself was making an investment. Documentation for such investments were closely scrutinized by several levels of Abu Dhabi officials, and blanks would not have been permitted. Finally, Darweish made it clear to Bilgrami that the purchase of the U.S. bank was an "Abedi operation from beginning to end."(25)
According to Bilgrami, he made a copy of these documents for himself, in order to understand them better, and looked at them carefully at the time and at least one additional occasion to make sure he understood them. He said that he carried the documents with him whenever he was transferred to a new country by BCCI, and believed they remained among his papers at the time of his arrest in October 1988 in Tampa. However, it was his understanding from federal investigators that they had not been found among his seized papers.(26)
Bilgrami's account concerning Abu Dhabi having been nominees has been corroborated generally by another Pakistani who was also close to Darweish and involved in the circumstances pertaining to the FGB takeover in 1977 and 1978.(27) In addition, it is corroborated by the circumstances of Abu Dhabi's shareholders being selected by BCCI to participate in the FGB within days of the preparation of a memorandum by a BCCI employee, Abdus Sami. In the memorandum, dated January 30, 1978, Sami advised Abedi that the details of the FGB takeover had been agreed upon, but that BCCI needed to select two additional shareholders to supplement the two who had already agreed to participate. The memorandum implies that the two are to be nothing more than nominees:
We have already given the names of Sheikh Kamal Adham and Mr. Fulaig [sic]. We want two other names immediately.(28)
Within days, BCCI had the additional two names -- Darweish and Sheikh Zayed's son, Sheikh Sultan bin Zayed Al Nahyan.
According to Abu Dhabi, their participation was solicited by Abedi, and they understood them to be passive investments in a bank with high growth potential.(29) But if they were in fact investments, little if any investigation could have been done by the Abu Dhabi investors into the proposed investment between the time of the Sami memorandum and the time of their share purchases. And the language of the Sami memo -- which refers to names being given, rather than investments being sought -- suggest a nominee relationship instead, especially given the fact that the two names BCCI already had were indeed nominees for BCCI.
As Price Waterhouse told the Bank of England in its June 1991 Section 41 report:
We have . . . seen evidence to suggest . . . that the four investors [Kamal Adham, Faisal al Fulaij, Sheikh Sultan Bin Zayed and Abdullah Darweish on behalf of Sheikh Mohammed Bin Zayed] were used to keep individual ownership below 5% and to ensure that BCCI's name did not appear.(30)
Thus, documents reviewed by Price Waterhouse suggested that the two Abu Dhabi shareholders in the original FGB takeover were as much nominees as Adham and Fulaij.
According to information obtained from a Pakistani national familiar with the transaction, Sheikh Sultan's shares, and the shares held by Darweish on behalf of Sheikh Mohammed, were "allocated" by BCCI for the purpose of avoiding the SEC filing requirement that would have had to have been undertaken if the Abu Dhabi interests were combined together.
It is also significant that Bilgrami's description in staff interviews of the papers allegedly involving Abu Dhabi acting as a nominee for BCCI in 1977 and 1978 closely resembles the actual nominee arrangements BCCI reached with all of the other Arab shareholders -- documents that Bilgrami has never seen.
Abu Dhabi has vigorously denied that it was involved in any nominee arrangements with BCCI. However, given the fact that BCCI had nominee arrangements with the leaders of three other emirates in the United Arab Emirates, as well as with all of the other principal Arab "investors" involved with BCCI, the lack of involvement of Abu Dhabi in nominee arrangements would have been contrary to BCCI's practice. It is difficult to imagine that they would have chosen to be, alone among the Middle Eastern shareholders, including several others from the UAE, principals, rather than nominees, for Abedi and BCCI in the takeover of Financial General Bankshares. There is an additional plausible alternative: that the Abu Dhabi ruling family viewed BCCI already as an institution they owned and controlled, and therefore they did not distinguish between investments made by them personally and guaranteed by BCCI, or nominee arrangements under which they merely held stock for BCCI.
Accordingly, while the direct documentary evidence that would back up Bilgrami's assertions has not been made available by Abu Dhabi authorities, Bilgrami's account, supported by the other facts available to the Subcommittee, is credible. Either the Abu Dhabi shareholders were nominees for BCCI in the early days of the FGB takeover, or alternatively, they did not distinguish between their holdings of FGB and BCCI's.
From 1977 to December, 1981, Abdullah Darweish was chairman of the private department of Sheikh Zayed and the ruling family of Abu Dhabi, responsible for handling their investments and functioning as a liaison to Abedi and BCCI. According to the Abu Dhabi Attorney General, Darweish's responsibilities were "holding the administration and investment of all monies and assets of this department."(31) Darweish had essentially sole authority for these funds, and worked closely with BCCI on many of the investments. On December 8, 1981, Darweish was arrested in Abu Dhabi and charged with defrauding the ruling family, with his role as chief financial advisor replaced by Ghanim Al Mazrui as head of a committee.
At the time of his arrest, Darweish was still a shareholder in Financial General Bankshares in Washington, having purchased shares in FGB on behalf of Sheikh Mohammed, one of Sheikh Zayed's sons, in the capacity as his guardian. According to various BCCI officials who knew Darweish, there had been a power struggle in Abu Dhabi between Crown Prince Sheikh Khalifa, Sheikh Zayed's son, and Sheikh Zayed, in which Darweish had been caught, with the result that when a compromise was reached between father and son, Darweish was the sacrifice. But his arrest also set into a motion litigation involving others who had been financially injured as a consequence of the power shifts which took place over the incident involving a Panama corporation, registered in the name of Sheikh Zayed, Financiera Avenida. Financiera had been established to invest Sheikh Zayed's wealth, without BCCI's involvement. After Darweish's removal, everyone associated with Financiera lost out, with the investment funds moving to the control of Sheikh Khalifa's long-time aide, Al Mazrui, who replaced Darweish, and to BCCI. The ensuring litigation opened a window into the operations and investments of Sheikh Zayed, and BCCI.
Depositions and documents produced during the litigation in New York, Chicago, London, Switzerland and Abu Dhabi showed that Abedi had come, as of 1980, to supervise essentially all of the handling of Sheikh Zayed and Abu Dhabi's wealth -- through his service on the investment committee of the Department of Private Affairs that supervised the placement of the Sheikhs' wealth outside of BCCI; through his handling, for a period, of essentially all of the oil revenues dedicated by Sheikh Zayed to his private investments; and in his capacity as chairman of BCCI, through his control over Abu Dhabi's funds on deposit at BCCI.
As Abu Dhabi's representative, Ahmed Al Sayegh, testified, "in excess of $2 billion was entrusted to Abedi and Naqvi for investment by Their Highnesses Sheikh Zayed and Sheikh Khalifa under a power of attorney between 1980 and 1990."(32) Al Sayegh did not identify how much in excess of $2 billion was entrusted to BCCI, but given Abu Dhabi's testimony that it lost $6 billion in all in BCCI's collapse, the amount must have been considerable.
In the context of Darweish's fall in 1980, several things happened to intensify the relationship between BCCI and Abu Dhabi. Sheikh Zayed directed that all of his personal oil revenues be placed in BCCI. He directed his investment authority, ADIA, to acquire a 10 percent state in BCCI from ICIC, after ICIC as BCCI's alter ego agreed to buy-back those shares from its departing U.S. partner, Bank of America. And he placed the chairman of his private department, Al Mazrui, on BCCI's board of directors, where Al Mazrui ultimately became chairman of the board. To a remarkable degree, the fallout from the Darweish arrest was the merger of Abu Dhabi's interest, and that of BCCI. This coincidentally took place at the exact time of the Financial General Bankshares takeover in Washington.
As suggested above, for more than fifteen years, Ghanim Faris Al Mazrui has served Sheikh Zayed as a financial advisor and manager, having been secretary general of the Abu Dhabi Investment Authority (ADIA) from 1976 to the present, which handles the principal government investments of Abu Dhabi; chairman or acting chairman of the Private Department of Sheikh Zayed, which handles the principal personal investments of the ruler of Abu Dhabi, from 1982 to the present; and chairman of a "Shareholders Working Group," which Abu Dhabi describes as "an informal committee appointed to oversee and coordinate the Majority Shareholders' response to the closure of BCCI," since July, 1991, and continuing to the present.(33)
From 1981 on, Al Mazrui also served on the Board of Directors of BCCI itself, in his capacity as secretary general of ADIA, which held 10 percent of BCCI's shares.
Simultaneous with Al Mazrui's appointment to the Board of Directors of BCCI, was his appointment to the Board of Directors of two other banks in Hong Kong, ostensibly unrelated to BCCI, called the Hong Kong Deposit and Guaranty Bank and Tetra Finance, Inc. Both entities, on which he served with several other important Middle Eastern officials, including Yassin Hassan, Kamal Adham's original contact for the FGB takeover, collapsed just two years later, with a total loss of capital and depositor losses amounting to several hundred million dollars.(34) The collapse, however, did not appear have an impact on Al Mazrui's career, and he remained in place handling the ruling family's finances and entrusted with investing billions of Abu Dhabi's oil revenues as well, up to the time of BCCI's collapse a decade later.
Given his long service to both Abu Dhabi and his decade of hands-on experience with BCCI, substantial questions have arisen as to what Al Mazrui knew concerning BCCI's frauds, and when he knew about the frauds. In response to a question to Abu Dhabi from Senator Kerry concerning this issue, Abu Dhabi's designated witness, Ahmed Al Sayegh, stated that Al Mazrui first learned of BCCI's problems, and its involvement in false or deceitful accounting practices, in April, 1990, from Price Waterhouse, along with other members of BCCI's board of directors. According to Al Sayegh, in the same period, BCCI officers, whose names he failed to specify, met with Abu Dhabi officials, with names again not specified but which apparently included Al Mazrui:
in an effort to persuade the Government to make a substantial capital injection into the bank. BCCI's officers confirmed that the Bank was experiencing severe financial difficulties and disclosed the misuse of $2.2 billion of managed funds on behalf of the Ruling Family.(35)
Thus, Abu Dhabi's chief representative on BCCI's board, and Sheikh Zayed's trusted financial manager, Al Mazrui, had for the previous decade somehow failed to detect BCCI having misused, and apparently defrauded Abu Dhabi of, up to $2.2 billion, in addition to having presided over the failures of the two Hong Kong banks in 1983. Moreover, Al Mazrui himself had participated in improprieties and received no-risk financial pay-offs from BCCI.
As Price Waterhouse told the Bank of England, in June, 1991, neither Al Mazrui nor any other representative of Abu Dhabi had advised them that substantial funds of Abu Dhabi had been "mismanaged" by BCCI. The auditors could not determine what else Al Mazrui knew and when he knew it. But the auditors had determined that Al Mazrui himself had been involved in unusual financial practices with BCCI from 1986 on:
The extent to which the major shareholders and in particular their board representative H.E.G.F. Mazrui was aware of the matters discussed in this report [that is, BCCI's frauds] cannot be established. We are, however, informed that H.E.G.F. Mazrui and the government were briefed fully on all the problems in April, 1990, notwithstanding that they allowed the 1989 accounts to be finalised in discussions with ourselves and the Regulators without disclosing this information. In addition, up until discussion of our Report to the Directors and Regulators of 3 October 1990, H.E.G.F. Mazrui contended that the loans for collection by the shareholders which have now been proven to be totally fictitious, were recoverable.(36)
Price Waterhouse further advised the Bank of England that Al Mazrui had his own accounts at BCCI's bank-within-a-bank, ICIC, which showed that he received funds in 1986 and earlier from no-risk transactions involving BCCI shares in which he was guaranteed against possible loss. Price Waterhouse told the Bank of England that Al Mazrui confirmed that he benefitted from these transactions and informed the Abu Dhabi government of his involvement in them, ostensibly for the first time, in April 1990. Price Waterhouse told the Bank of England that Al Mazrui also confirmed a fictitious loan made to the Crown Prince of Abu Dhabi by BCCI, but claimed that he did not remember signing the false confirmation. Al Mazrui told Price Waterhouse that his signature must have been forged, a contention Price Waterhouse rejected.(37)
In summary, the Section 41 report by Price Waterhouse shows that Al Mazrui received substantial personal financial benefits from BCCI through no-risk stock trading; argued that BCCI loans which were really fictitious were recoverable; and personally confirmed a bogus BCCI loan to the Crown Prince of Abu Dhabi and then lied about it, before confessing all to Abu Dhabi authorities in April, 1990. Yet more than two years later, Al Mazrui remains in place as the head of Abu Dhabi's working group to deal with BCCI-related problems. Al Mazrui has neither been fired, nor resigned, from the positions of trust he has clearly violated.
Given these facts, Al Mazrui's continued role in handling Abu Dhabi's response to the collapse of BCCI, raises additional questions. One possible explanation is that Sheikh Zayed and the ruling family are remarkably tolerant of incompetence, deception, fraud, and the personal enrichment of top advisors. Alternative explanations are that Al Mazrui's improprieties had previously been sanctioned by higher-ups, or were consistent with ordinary practices in the Emirate.
On April 18, 1990, Price Waterhouse provided a devastating report on BCCI to the Bank of England which was simultaneously provided to BCCI's board of directors, including Abu Dhabi representative Al Mazrui. The report stated that a number of financial transactions at BCCI booked in its Grand Caymans affiliates and other offshore banks were "false and deceitful," and that it was impossible at the present time to determine just how far the fraud reached.
Price Waterhouse's report was prompted by its own critical need to solve a problem. It was no longer in a position to certify BCCI's books, unless someone provided financial guarantees to protect against loss. Either BCCI had to be closed down now, or the Bank of England itself had to give its assent to keeping it open in some new form as a means of avoiding losses to BCCI's million or more depositors. New management needed to be installed. New financing had to be found, and the holes in BCCI's books had to be plugged.
The obvious solution was to ask Sheikh Zayed and the government of Abu Dhabi to take over the bank. As Zayed and the Al Nayhan family who ruled Abu Dhabi had been major depositors of BCCI, and had long had billions in family finances handled by BCCI, they stood to lose as much as anyone if the bank collapsed. Accordingly, Abu Dhabi would have to be told the truth about BCCI's perilous condition, and asked to commit funds to keeping the bank solvent.
A series of urgent meetings were held in Abu Dhabi and Luxembourg, beginning in March, 1990, in which Naqvi confessed his errors and resigned from his position as CEO at BCCI. A new management team was brought in. Unfortunately, rather than constituting a strong group of banking professionals, the new team was headed by a long-time Abu Dhabi insider from BCCI itself, Zafar Iqbal, the former head of BCCI's branch in the United Arab Emirates, the Bank of Credit and Commerce Emirates, or BCCE, who had long had a close personal relationship with important members of the ruling family of Abu Dhabi arising out of his provision of intimate personal services for them in Pakistan and elsewhere. Within the bank, Iqbal was not considered to be an expert on much besides pleasing the Abu Dhabi ruling family. BCCI junior officers knew him as the man who had for years provided "singing and dancing girls" to the ruling family, and related personal services.(38) BCCI operations were moved, without objection from the Bank of England, to Abu Dhabi, along with all of BCCI's most important records. And assurances were given to Price Waterhouse that Abu Dhabi would make an open-ended financial commitment to bail out BCCI, enabling Price Waterhouse to sign off on its books. As Price Waterhouse stated to the chairman of the Abu Dhabi Finance Department on April 25, 1990:
Your representative, HE G Al Mazrui, has confirmed to use that you are fully aware of the nature and magnitude of the uncertainties and prepared to provide the necessary financial support in the event that losses arise from realisation of these loans.(39)
Price Waterhouse then duly certified BCCI's books, subject to a single caveat -- that the basis of the preparation of the certification was Abu Dhabi's intention to maintain BCCI's capital base while it reorganized and restructured.
By agreement, Price Waterhouse, Abu Dhabi, BCCI, and the Bank of England had in effect agreed upon a plan in which they would each keep the true state of affairs at BCCI secret in return for cooperation with one another in trying to restructure the bank to avoid a catastrophic multi-billion dollar collapse. Thus to some extent, from April 1990 forward, BCCI's British auditors, Abu Dhabi owners, and British regulators, had now become BCCI's partners, not in crime, but in cover-up. The goal was not to ignore BCCI's wrongdoing, but to correct it in order to keep the bank in operation, and therefore, to hide the truth from the public because the truth would force the bank to be closed.
If Abu Dhabi had honored the commitment made to Price Waterhouse and the Bank of England, when BCCI was closed globally, BCCI's innocent creditors and depositors would not have suffered a penny in losses, since Abu Dhabi had agreed to guarantee them as the price for the Price Waterhouse certification.
In April, 1990, Naqvi and the other chief officers who resigned with him from their positions in BCCI were placed under house arrest in Abu Dhabi, as Abu Dhabi took formal control of BCCI. Unfortunately, as it did so, it did not disclose to Price Waterhouse certain information that it now had about the extent of the fraud at BCCI, and it took positions that had the clear intention of seeking to sweep the true nature of BCCI's problems under the rug, and to avoid the disclosure to BCCI's regulators of what had really taken place. Essentially, Abu Dhabi was now seeking to make certain that the money it was spending on BCCI would suffice to keep secret many of the facts about the relationship between Abu Dhabi and BCCI, even, as necessary, from Price Waterhouse, the outside auditors for the bank it now owned.
In September, 1990, Price Waterhouse learned that BCCI had concealed further lending of over $500 million to its major customs by "parking" that lending with a Middle Eastern bank, namely, the National Commercial Bank of Saudi Arabia controlled by Khalid bin Mahfouz, the most powerful banker in the Middle East, who was later indicted in the United States in connection with his activities pertaining to BCCI and First American. Price Waterhouse also learned that since Naqvi's removal, the practice had continued, "with the knowledge and approval of the Board representative of the controlling shareholders" -- the government of Abu Dhabi. The auditors had begun to realize that Abu Dhabi officials were now colluding with BCCI in continuing fraudulent practices, and in hiding them from Price Waterhouse.(40)
Since March or April, 1990, Naqvi, who had personally handled in excess of $2 billion of Abu Dhabi's funds and was personally responsible for many of BCCI's frauds, had been living under house arrest in Abu Dhabi. Abu Dhabi had decided to retain Naqvi as a consultant to advise them on BCCI, and were giving him access to BCCI's documents. According to Price Waterhouse, Naqvi was maintaining some 6,000 files personally in Abu Dhabi, whose very existence had still never been disclosed to the auditors. For months, as Price Waterhouse continued its efforts to review BCCI's books, it had been lied to by BCCI and it was finding, by Abu Dhabi, kept in ignorance of the bank's most vital records, and only stumbled onto the fact of their existence in November, 1990.(41)
As Price Waterhouse described it, when they confronted Abu Dhabi with their concerns about Naqvi, and a request to review the files he controlled, they were told by Abu Dhabi authorities that the auditors could not have access to them, and that they would remain under the control of the discredited Naqvi:
Price Waterhouse's report to the directors of 3 October 1990 revealed that management may have colluded with some of BCCI's major customers to misstate or disguise the underlying purpose of significant transactions. Following this, the controlling shareholders of BCCI [Abu Dhabi], under pressure from Price Waterhouse, agreed to a full investigation of the problem accounts and to enforce the resignations of Abedi and Naqvi as directors.
An Investigative Committee comprising representatives from Price Waterhouse, E&W Middle East Firm (who were auditors of the Abu Dhabi Government interests), two firms of lawyers and the Abu Dhabi Government was established in November 1990 to supervisor the investigation into the problem accounts. Price Waterhouse were advised by senior BCCI management that Naqvi had been retained as an "advisor" to provide explanations to the Abu Dhabi Government and that they could not have access to files being used by him. Price Waterhouse made clear to the controlling shareholders that without access to Naqvi and the files he was using there could be no investigation.
Ultimately access was granted and we were shocked to find that Naqvi was holding around 6,000 files. After initial steps to secure the files, a preliminary review revealed that amongst them were details of transactions and agreements not previously disclosed to us despite management's prior assurances that they had provided all relevant information to Price Waterhouse.(42)
Abu Dhabi had placed Naqvi, a principal architect of BCCI's frauds, in charge of BCCI's most important and secret records without telling them. For the past eight months, Naqvi and Abu Dhabi had maintained exclusive control of those records, with essentially unlimited opportunities to destroy them or falsify them throughout that time. By the time Price Waterhouse finally obtained access to these records in November and December, 1990, it found massive fraud in the materials that still existed. But the auditors had no way of determining the extent to which those documents were already cleansed of any material damaging to the new owners of BCCI, along with any other material which Abu Dhabi or Naqvi wanted hidden forever.
During December, 1990, at the very time that the New York District Attorney had obtained some of the most critical of its earlier audit reports, Price Waterhouse completed its initial review of the formally hidden Naqvi files. In that review, Price Waterhouse found evidence of phony loans and hidden deposits amounting to hundreds of millions of dollars, nominee arrangements, hold harmless agreements relieving borrowers of any obligation to repay loans, and other, similarly criminal practices at the bank. Again, to Price Waterhouse's shock, Abu Dhabi had known of these practices since at least April, 1990, and never disclosed them to the auditors.(43)
The implications of these findings for BCCI's future were devastating. If there were in fact deposits that had been made to BCCI amounting to hundreds of millions that had never been recorded at the bank, how was anyone to ever determine what claims by BCCI depositors might be real, and what claims might be phony? Price Waterhouse decided that it dare not put this information in writing, and would confine itself to reporting it orally to the Bank of England, which it did in January 1991. In response, Abu Dhabi again agreed to make good any losses in connection with these unrecorded deposits.(44)
The key goal of Abu Dhabi from the time it took control of BCCI in April, 1990 was to find a way to save its interest in the bank. By the account of Al Sayegh and Abu Dhabi:
In April, 1990, senior management revealed that BCCI had suffered significant losses and Price Waterhouse for the first time identified certain transactions that had been "either false or deceitful." The Price Waterhouse report was sent to the Bank of England and was discussed at a meeting between the Bank of England, the Luxembourg Monetary Institute, Price Waterhouse, and BCCI management in April, 1990. With the full support of the Bank of England, the Ruling Family purchased some 15 million outstanding BCCI shares, and the Abu Dhabi Department of Finance (which previously had owned no BCCI shares) purchased another 15 million outstanding shares and subscribed for 10 million additional shares issued by BCCI. The share issuance was intended to cover the losses which had been identified and to restore the liquidity of the BCCI subsidiary banks. As a result of these steps, and the outlay of $1.2 billion, the Abu Dhabi investors now owned 77 percent of the stock of BCCI.(45)
Abu Dhabi immediately removed Naqvi from control of BCCI and replaced him with Zafar Iqbal, then head of the Abu Dhabi operation of BCCI, the Bank of Credit and Commerce Emirates, whose qualifications for the position have been discussed above. They decided to shrink the bank, and:
with the encouragement of the College of Regulators, a decision was made to move the headquarters of BCCI to Abu Dhabi form London, so that the Majority Shareholders could begin to monitor some of the activities of BCCI management.(46)
Planning began to find a way to restructure BCCI into a three-headed entity, with separate "independent" banks based in three locations, Abu Dhabi, Hong Kong and London, in a proposal that evidently had some support if not final approval from the Bank of England and the College of Regulators through the spring of 1991. As described in a legal analysis provided to the BCCI Creditors' Committee after BCCI's collapse by the firm of Norton Rose in London, this transaction would have involved the Government of Abu Dhabi committing "some US$4 billion . . . under financial support arrangements." These arrangements were signed between BCCI and Abu Dhabi on May 22, 1991. Under their terms, most of BCCI's problem loans were transferred at book value -- far in excess of their real value -- to new companies owned directly by the Government of Abu Dhabi. In return, Abu Dhabi gave BCCI SA promissory notes denominated in US dollars and UAE dirhams, equivalent in face value to $3.061 US, with additional guarantees totalling another $750 million for a group of remaining loans with some value.(47)
The three separate and independent banks to arise out of BCCI's ashes were to have control and management of the operations of the former BCCI banks divided into Europe and Canada, for the United Kingdom bank; the Middle East and Asian subcontinent, for the Abu Dhabi bank; and the Far East, for the Hong Kong bank. Under the plan, a substantial portion of the BCCI global network would have been wound up or sold off. The banking operations of BCCI would have been transferred from Luxembourg to Abu Dhabi by the end of 1991 and from Grand Caymans to Abu Dhabi by the end of 1992.(48)
Snags developed, however, as the restructuring proposal proceeded. The first was the New York District Attorney obtaining information in the late autumn of 1990 concerning the previous Price Waterhouse audit reports, including the April, 1990 reports, that triggered Abu Dhabi's takeover of BCCI.
In November, 1990, the New York District Attorney advised the Federal Reserve that a source stated that the reports showed that there had been massive lending -- amounting to $850 million or more -- by BCCI to First American's shareholders, none of which had ever been disclosed to the Federal Reserve.
The Federal Reserve, after some significant obstacles, was permitted by BCCI in December, 1990 to view those reports in London.
On December 21, 1990, Federal Reserve attorneys met with attorneys for Abu Dhabi and BCCI from the Washington law firm of Patton, Boggs and Blow. The Federal Reserve learned from Patton Boggs for the first time about the massive restructuring of BCCI planned by Abu Dhabi to respond to unspecified capital "deficiencies" at BCCI. Patton Boggs confirmed that what the Federal Reserve already knew from the Price Waterhouse audit reports -- that BCCI had lent large sums to CCAH's shareholders which were secured by CCAH's shares. Two weeks later, the Federal Reserve opened a formal investigation. Less than three weeks later, it concluded that criminal activity had been involved in the First American purchase, referred the matter to the Justice Department, sent a proposed cease and desist order to BCCI, and widened its investigation.(49)
Thus, during the spring of 1991, Abu Dhabi faced a new problem. At any time, the Federal Reserve could, if it so desired, make it impossible for the Bank of England to proceed with the restructuring. Accordingly, Abu Dhabi found itself in the position of having to cooperate with the Federal Reserve's investigation of BCCI and First American, and provide information which could simultaneously confirm some of BCCI's frauds, and thus increase the risk that bank which it was trying to save would not survive.
The compromise reached by Abu Dhabi was to permit Federal Reserve investigators to travel to Abu Dhabi and review BCCI documents, but only those documents pertaining to transactions involving U.S. banks, and only as selected by Abu Dhabi. The Federal Reserve investigators went to Abu Dhabi, told them what categories of documents they wanted, and Abu Dhabi officials then "located them" from its BCCI document files. When investigators sought to meet with Swaleh Naqvi, access to Naqvi was granted, but only after Naqvi was provided an attorney who protested that he could not allow the investigators to speak with Naqvi until the lawyer was more familiar with the case.(50) The result was that the Federal Reserve obtained substantial, but incomplete, information concerning BCCI's activities in the United States, and very little information of any kind concerning Abu Dhabi's role, or what took place at BCCI apart from its role in purchasing U.S. banks.
After the Federal Reserve, First American, and BCCI entered into consent decrees on March 4, 1991, Subcommittee staff contacted Abu Dhabi's U.S. attorneys at Patton, Boggs and Blow in an effort to understand the ramifications of the decrees and the proposed restructuring of BCCI. In the meeting, staff expressed their concerns about the fact that BCCI's former head, Swaleh Naqvi was still in place providing advice and assistance to BCCI; that BCCI's current head, Zafar Iqbal, was to remain in control of the banks throughout the restructuring and presumably afterwards; and that a structure was to emerge out of BCCI which failed to respond to what was even the one an obvious lesson of the BCCI affair -- dividing BCCI into more than one part was dangerous to the health of the international banking system. The attorneys at Patton, Boggs and Blow, who were at the time representing both Abu Dhabi and BCCI, acknowledged that they shared the concerns about Iqbal and Naqvi, and would pass the Subcommittee's concerns on to their clients. Staff questioned the attorneys as to whether the three independent banks could do business with one another, and what protection would be in place to prevent further fraud from taking place. In response, Middleton Martin, Abu Dhabi's principal lawyer at Patton, Boggs and Blow in Washington, suggested that Abu Dhabi was a "white hat" among whomever might be the "black hats," and was doing its best to solve BCCI's many problems.(51)
At the direction of the chairman of the Subcommittee, staff met with staff of the Federal Reserve to express Senator Kerry's concerns about the proposed restructuring, and the wisdom of permitting BCCI to be restructured in three parts. The Federal Reserve took the position with staff that the decision was the Bank of England's. The Federal Reserve's principal goals were to sever BCCI's relationship with First American and to find out the nature and decree to which U.S. banking laws had been violated by BCCI, its shareholders, and officers. However, Federal Reserve investigators were also disturbed by the continued participation of BCCI directors and officers in the future of the proposed three banks, and objected especially to the continued involved of Iqbal. By the late spring of 1991, both U.S. and U.K. regulators began to insist on the removal of Iqbal as the head of BCCI. Al Mazrui, who had worked closely with Iqbal for many years, resisted, temporarily paralyzing the restructuring plan that had previously been agreed to among the various regulators, Abu Dhabi and BCCI.(52)
While tentatively assenting to Abu Dhabi's proposal for restructuring BCCI, the Bank of England, in about March, 1991, also authorized a Section 41 report by the auditors, named for the provision in British banking laws by which regulators can commission an audit report of a bank by its outside auditors for the regulators. That report was initiated at least in part in response to new information developed by Price Waterhouse in December, 1990 or January 1991 about the broad extent of BCCI's frauds. The Section 41 report was completed in late June. The fraud outlined in that report resulted in the Bank of England deciding, within days, to abandon its previous support for a restructuring and to close the bank. Just two days before BCCI was closed, Abu Dhabi had provided the British and Luxembourg regulators with the latest -- and what proved to be the final -- draft restructuring plan for BCCI.(53)
Abu Dhabi representatives were outraged by the sudden closure of BCCI. They had not been expecting the action, had committed nearly $4 billion to keep BCCI open, and had been working closely with regulators in an effort to make the restructuring succeed. Moreover, in an effort to appease the Federal Reserve and prevent a collapse of First American, while also protecting against the loss of the value of its investment in First American, Abu Dhabi had also made a series of payments totalling about $190 million to keep First American from possible failure. The last of these payments was made only days before the final closure of BCCI, a closure which Abu Dhabi could reasonably conclude might well have been timed not to take place until the moment they had put up the final installment of cash to help prop up First American.(54)
In the wake of BCCI's collapse, any cooperation from Abu Dhabi to the Federal Reserve ceased.
Abu Dhabi's first step in response to the closure of BCCI was to set into motion legal proceedings in Abu Dhabi entitling it to seize the promissory notes it had issued to BCCI as part of the restructuring plan. As Norton Rose described it:
On Tuesday, July 16, 1991 the Government of Abu Dhabi filed Plaint No. 1560 with the Abu Dhabi Civil Court of First Insurance. . . The Court ordered such seizure and consequently that afternoon four court officers attended the head of BCCI Group . . . where they located the outstanding promissory notes and two guarantees, sealed them in yellow enveloped, and deposited them in a safe (which was marked red) at the Bank. The keys to the safe are apparently being kept in the Treasury of the Abu Dhabi Civil Court.(55)
Thus, Abu Dhabi insured that actual documents representing the additional financial obligations it entered into with BCCI -- ranging from $1.2 billion to $2.8 billion depending on how one valued the notes -- would be locked under seal and kept from BCCI's liquidators, who otherwise might be able to recover additional funds from Abu Dhabi on the basis of the notes, but now would be stymied through the notes' impoundment.(56)
Abu Dhabi spent the remainder of July, 1991 trying to avoid the liquidation of BCCI and to restart the restructuring plan. It applied to the courts in the UK and Luxembourg to adjourn the petition for liquidation to permit the consideration of the restructuring. But the effort was fruitless. Even if the courts did not ultimately reject it, within a few hours of its closure on July 5, 1991, BCCI had effectively been obliterated, leaving some 14,000 employees out of work, and some one million depositors out of luck. BCCI had lost billions of their money long ago. But it was BCCI's closure that forced the world to recognize the losses.
Shortly after BCCI's closure, liquidators were appointed by the District Court of Luxembourg, where BCCI was incorporated, to handle the winding up of BCCI and the recovery of the maximum possible amount of assets for distribution to innocent depositors and creditors of BCCI worldwide. The mandate of BCCI's liquidators was to recover funds, not necessarily to aid in investigations of BCCI. As chief liquidator Brian Smouha testified:
[O]ur responsibility is to use the resources in the liquidation estates to maximize recoveries to be made available to creditors and depositors. [A]s far as we are able consistent with that responsibility, we endeavor to cooperate with numerous investigative authorities in a number of countries.(57) [emphasis added]
Thus, to whatever extent investigative efforts might threaten to reduce the recovery of funds for BCCI's depositors, BCCI's liquidators have a responsibility under the terms of their appointment to sacrifice the investigation and uncovering the truth about what happened to the goal of maximizing funds to return to the creditors.
Following their appointment, the liquidators found two key situations they had to deal with in order to recover substantial assets for BCCI. The first was in the United States, which had more than $330 million in BCCI assets frozen unless an agreement could be reached with the Justice Department, New York District Attorney, and Federal Reserve. The second was with Abu Dhabi. Abu Dhabi had previously guaranteed BCCI's debts as of April, 1990. At the time of the liquidation of BCCI, it was BCCI's sole owner. Abu Dhabi has one of the world's deepest pockets as a result of its huge oil reservoirs, and its revenues from oil of $10 billion or more annually. There would be numerous possible theories for recovering funds from Abu Dhabi if its role were litigated by the liquidator. On the other hand, Abu Dhabi also held a number of cards were any such litigation to take place. First, it controlled BCCI's records. Second, it controlled key BCCI witnesses. Third, its wealth could easily be turned to time-consuming litigation, delaying any pay-out to innocents for a decade or more. As a result, the liquidator either had the choice of reaching an agreement with Abu Dhabi which met it interests, or of entering in a difficult, contentious, and drawn-out battle with Abu Dhabi with uncertain results.
The U.S. situation was, needless to say, far easier to resolve. The liquidators were to a remarkable degree able to integrate the goals of assisting investigators and helping depositors in the context of the plea agreements they reached in the United States on January 24, 1992. In those agreements, BCCI's liquidators entered pleas of guilty on behalf of BCCI to federal racketeering and similar New York state charges. The pleas promised full cooperation by the liquidators with U.S. law enforcement authorities and worked out a fair distribution of BCCI's assets in the United States that protected U.S. interests while facilitating the return of excess funds to BCCI's worldwide creditors. BCCI's liquidators also provided substantial assistance to the Subcommittee investigation, providing thousands of BCCI documents in the United States, waivers of the attorney-client and work-product privilege of BCCI's attorneys and investigators, and other important help.
But on the issue of BCCI and Abu Dhabi, the goals of investigating what happened, and the liquidators need to insure the maximum recovery, were not so easily aligned.
Abu Dhabi took a number of positions with the liquidators which together amounted to Abu Dhabi maintaining its ability to cover-up any information it wished the world not to know.
First, Abu Dhabi made it clear to the liquidators that they could not press for the return of BCCI's documents held in Abu Dhabi, despite the fact that under any ordinary standard of bankruptcy law outside the jurisdiction of Abu Dhabi, the liquidators have the right to control those documents, and the obligation to make them available to parties at interest in the liquidation.
Second, Abu Dhabi made it clear that the liquidators themselves would have only limited access to BCCI's documents in Abu Dhabi for the limited purpose of using them to try to litigate claims against non-Abu Dhabi borrowers from BCCI. As Smouha acknowledged:
[W]e have, after initially being denied access to those documents, since late summer  had access to the Central Credit Division and other Central Office documents in Abu Dhabi for loan recovery purposes. Many of the critical documents in Abu Dhabi were put under the control of a court appointed receiver in Abu Dhabi. The receiver has not permitted us to remove documents from Abu Dhabi.
With respect to witnesses, as you know, certain key ex-employees of BCCI are under arrest in Abu Dhabi. We have asked for access to certain of those persons. We have been advised that these persons are under control of [t]he public prosecutor in Abu Dhabi and that access must be obtained through that official.(58)
As of the writing of this report, that access had yet to be obtained by anyone outside the Abu Dhabi government.
Third, Abu Dhabi insisted that it alone would have the right to reach judgments about whom to sue on BCCI's behalf from among BCCI's lawyers, accountants, and top officers, and how to proceed against them, while permitting the liquidators to share in 50 percent of any returns on such claims, with the other 50 percent to be given to Abu Dhabi itself.(59) As Michael Crystal, an attorney for the liquidators, testified:
Under the proposed arrangements . . . these claims will be managed . . . by the Government of Abu Dhabi's lawyers under a cooperation arrangement under which we have a say in the case management.(60)
In fact, the literal language of the Contribution Agreement proposed leaves this decision entirely to Abu Dhabi's discretion, regardless of whom they may consult on "case management":
[T]he claims of Principal BCCI Companies against certain specified third parties are to be assigned to the Government of Abu Dhabi [and] will be pursued by them. [This applies to] the former auditors and certain former solicitors of the Principal BCCI Companies; certain named individuals who were formerly responsible for the management of the principal BCCI Companies.(61)
The right to make decisions about how and against whom to pursue claims is a basic right of any liquidator, and one of the most important responsibilities, as the issue of who is sued, how a case is managed, and whether or not to settle such claims goes to the heart of a liquidators' ability to maximize a recovery.
Here, the interest of Abu Dhabi and the liquidators could dramatically diverge. For example, Abu Dhabi might well be more interested in insuring the silence of BCCI's professional advisors, lawyers and accountants, than in the maximum recovery of assets from them. Accordingly, if the liquidators acquiesced in Abu Dhabi's insistence on having the sole right to make this decision, Abu Dhabi could choose to settle claims against those who know the most about Abu Dhabi's participation in BCCI's improprieties, in return for their silence. Contrary to the import of Crystal's testimony, if Abu Dhabi decided to settle its claims against BCCI officers like Swaleh Naqvi, against its auditors like Price Waterhouse, and against its attorneys, in return for their agreement to say nothing further about what they had learned concerning BCCI to anyone, including government investigators, the liquidators would be bound to accept the decision.
Finally, as would be normal in any such agreement, the liquidators would release Abu Dhabi from any claims that the liquidators, on behalf of BCCI, its depositors and creditors, would have against Abu Dhabi.
In return for these key concessions by the liquidators, Abu Dhabi agreed to provide $1.7 billion to the pool to be used to repay creditors and depositors. Given Abu Dhabi's contention that it was defrauded of $6 billion, and its professions of innocence, its claims would be treated equally with those of innocent creditors and depositors, with the result that half or more of the $1.7 billion contributed by Abu Dhabi would likely be returned to Abu Dhabi itself, going from one Abu Dhabi pocket to another, leaving depositors receiving no more than 30 cents on the dollar for their losses and according to some creditors' contentions, far less.
Given the difficult choice between accepting these unusual demands from Abu Dhabi in return for Abu Dhabi's $1,7 billion contribution or of litigating Abu Dhabi's liability, the liquidators accepted to Abu Dhabi's demands and initialed agreements with Abu Dhabi on February 20, 1992, incorporating the concessions described above, subject to approval by BCCI's creditors and depositors. These agreements, which also included detailed and reasonable provisions for the pooling of BCCI assets and other important technical issues pertaining to the liquidation, were then provided to the courts for ratification, ratified by the British court, and remain pending before the Luxembourg court.
The practical consequences of the agreements reached by the liquidators with Abu Dhabi have meant that the liquidators have essentially chosen not to contest Abu Dhabi's positions concerning its innocence in the affair; have decided not to investigate any wrongdoing by Abu Dhabi in connection with BCCI; have acquiesced in Abu Dhabi's sequestration of documents that legally belong to the liquidators and witnesses to whom the liquidators legally should have access; and have even placed Abu Dhabi in the position of being able to purchase the silence of the auditors and lawyers who handled BCCI's affairs.
The secrecy, if not necessarily the real reason for the secrecy, concerning the actual nature of Abu Dhabi's possibility liabilities to the creditors, has been acknowledged by the liquidators themselves. For example, the presentation made to BCCI's creditors and depositors by the liquidators in their March 16, 1992 report describing the proposed agreement with Abu Dhabi explicitly states under the title "Disadvantages" of the agreement, that:
The Liquidators are advised by their legal advisors that it would be inappropriate to provide a detailed assessment of claims against the Majority Shareholders, because to do so might be highly prejudicial to the interests of creditors were the Majority Shareholder Agreements not to become unconditional.(62)
This remarkable sentence contains the essence of the dilemma in the liquidator-Abu Dhabi deal. If the liquidators were to tell those whom BCCI injured what Abu Dhabi might have done and what its potential liability might be, either the creditors, Abu Dhabi, or both might withdraw from the agreement, with ten years of more of difficult litigation ensuing. Those being asked to sign off on the agreement, were being required to do with full warning by the liquidators that the liquidators were already suppressing information on Abu Dhabi's liability in order to obtain the agreement.
Equally important, the practical consequences of the agreements reached by the liquidators with Abu Dhabi have been that the liquidators are as a practical matter acquiescing in Abu Dhabi's frustration of U.S. law enforcement, regulatory, and Congressional investigations concerning its activities pertaining to BCCI. This is disputed by the liquidators. As Michael Crystal testified:
The commercial situation is not intended by the court appointed fiduciaries, nor does it, touch and concern the ongoing obligations of regulators to inquire into the past, to look into history, and to consider whether there has been criminal misconduct which needs to be prosecuted. There's nothing in the plea agreement which we think cuts across those two separate interests.
The plea agreement requires us to cooperate with regulators to ensure that crime is prosecuted and we have taken assiduously our duties to provide full cooperation to the relevant regulatory authorities under the plea agreement.
So far as the commercial arrangements are concerned . . . they will not prevent regulators in jurisdictions who have access to international treaties . . . from continuing to pursue criminals and bring them to justice in a variety of jurisdictions.
The arrangements with Abu Dhabi don't prevent that. They don't prohibit it.(63)
Crystal's testimony on this point was technically correct, but as a practical matter, misleading. In giving the power of the liquidators to reach independent judgments about how to pursue those most knowledgeable about BCCI's wrongdoing -- and the extent of wrongdoing by Abu Dhabi -- the agreements with Abu Dhabi initialed by the liquidators have already had, and will continue to have, a profound negative impact on ongoing criminal investigations in the United States pertaining to BCCI.
Moreover, there is, to say the least, a very large tension between the legal commitment the liquidators made to the Justice Department and the New York District Attorney to provide BCCI's full cooperation to the United States, and the legal commitment the liquidators have now made to Abu Dhabi. In time, that tension could imperil the ability of the liquidators to recover any assets from the United States. U.S. law enforcement would be fully entitled to declare that the commitments made to Abu Dhabi have precluded the cooperation with the United States required under the plea agreement entered into by the liquidators on BCCI's behalf. With the liquidators thus declared in breach of their commitments to the Justice Department, New York District Attorney, and Federal Reserve under the plea agreements, the latter institutions and the U.S. courts could be free to take the position that BCCI's U.S. assets had been forfeited by the liquidators in the process.
Beginning in the spring of 1991, the Subcommittee asked Abu Dhabi's and BCCI's lawyers at Patton Boggs and Blow that Abu Dhabi or BCCI provide knowledgeable witnesses to testify in public concerning the key issues pertaining to BCCI. These requests were ignored, or rejected, until the spring of 1992, when the Subcommittee advised Abu Dhabi's attorneys that they themselves could be subpoenaed to testify before the Subcommittee in their capacity as business agents for Abu Dhabi in the event that a knowledgeable Abu Dhabi witness was not produced. Recognizing that Abu Dhabi was continuing to refuse to produce the key BCCI officials, such as Swaleh Naqvi, the Subcommittee requested that Ghanim Al Mazrui be produced, or an equally knowledgeable associate.
A hearing date was set for May 14, 1992. Until a few days before the hearing, Abu Dhabi did not inform the Subcommittee of the identify of the witness who testify. Shortly before the hearing, he was identified as Ahmed Al Sayegh, a member of the steering committee, headed by Al Mazrui, responsible for handling Abu Dhabi's response to BCCI's closure, and a person with no knowledge of, or involvement in, Abu Dhabi's activities with BCCI over the previous two decades. That lack of knowledge was, unfortunately, reflected in a number of answers by Al Sayegh to important questions from the Subcommittee.
Al Sayegh was, for example, unaware that from at January 1978 through November 1990, Clark Clifford and Robert Altman represented Abu Dhabi, testifying that "I don't think they were ever our lawyers, Senator." In fact, Clifford and Altman made numerous filings with regulators on the behalf of various members of the Abu Dhabi ruling family, had extensive correspondence with representatives of Abu Dhabi, met with Abu Dhabi's representatives during the Financial General Bankshares takeover, and had signed powers of attorney, spanning more than a decade, for Sheikh Zayed personally, for the Abu Dhabi Investment Authority, for at least one of Sheikh Zayed's sons, and for Abdullah Darweish, guardian of another of Sheikh Zayed's sons.(64)
Al Sayegh was similarly unaware of who made the decision to install Zafar Iqbal as head of BCCI in April, 1990; of communications involving Bert Lance and Sheikh Zayed concerning the FGB takeover in 1978; of the structuring of the participation of Abu Dhabi ruling family members in the FGB takeover from 1978 through 1981; of the affairs of Sheikh Zayed's private department at any time; of whether or not Sheikh Zayed in any period placed all of Abu Dhabi's oil revenues in BCCI; of how much Abu Dhabi had invested in CCAH/First American. Al Sayegh further contended that Agha Hasan Abedi was never a financial advisor for Sheikh Zayed or the Abu Dhabi government.(65)
This lack of knowledge, coming in testimony ten months after BCCI's closure, reflected an obvious decision by Abu Dhabi not to send someone to testify before the Subcommittee who knew what had actually taken place between BCCI and Abu Dhabi over the previous twenty years.
Al Sayegh did, however, present Abu Dhabi's formal positions concerning its role in the BCCI affair, and its intentions of fully cooperating with the United States in investigating what happened. As he declared in his opening statement:
First, the majority shareholders had no involvement in the frauds perpetuated by BCCI which went on for some 18 years while they were passive minority shareholders.
The investment decisions they made during that time were based upon unqualified auditor's reports supplied by respected accounting firms and the knowledge that the bank was regulated in many countries. They were investors in a bank, not managers of a bank and relied on auditors and regulators to do their jobs.
Second, the majority shareholders are the single biggest victim of the fraud and probably its only intended victim . . .
[I]t must be understood that the majority shareholders do not control the prosecutions in the UAE, though they are doing everything in their power to assist in the ongoing investigation. . . We too enjoy a separation of powers which include an independent judicial system responsible for criminal proceedings. The separation of powers is respected and upheld at the highest levels of UAE government.
Third, and most importantly for our purposes here today, the Majority Shareholders have every intention of fully cooperating with competent United States authorities in pursuing their own investigations, subject only to any restrictions placed on the under UAE law and the needs of our domestic investigations. . .
[M]y appearance today renews the Majority Shareholders' commitment to cooperate with the investigative efforts of your subcommittee and other competent U.S. authorities to the extent that we are able to do so in a manner consistent with our own vital interests and the law of the United Arab Emirates.(66)
The key points made by Al Sayegh were that Abu Dhabi was innocent, victimized, and would fully cooperate with the United States on investigating and prosecuting BCCI -- to the extent permitted by the law of its country and to the extent permitted by its "vital interests."
By Al Sayegh's account, Abu Dhabi's decisions to invest in BCCI was based not on the personal relationship between Sheikh Zayed and Abedi described by everyone else familiar with what actually happened, but on Abu Dhabi's reliance on BCCI's regulators in Luxembourg, the UK and the Grand Caymans, and on Price Waterhouse and Ernst & Whinney, BCCI's accountants.
By Al Sayegh's account, the chief difficulties in making documents and witnesses available to the investigators of other countries is that the Abu Dhabi legal system does not permit it, as its legal system is based on a separation of powers that prevents the Executive Branch from exercising any influence over the judicial process. In support of this account, Abu Dhabi's attorneys provided the Subcommittee with extracts of various laws of the United Arab Emirates, most of which have no applicability whatsoever to matters in dispute, but which do contain several relevant passages:
WE ZAYED BIN SULTAN AL NAHYAN, the President of the United Arab Emirates, having examined the Provisional Constitution and in view of the proposal made by [various Abu Dhabi cabinets and councils] HAVE ISSUED THE FOLLOWING LAW: . . .
[J]udges shall be independent having no dominant control over them in the performance of their duties other than the provisions of the Islamic Doctrine, the laws in force and their conscience. No individual or authority may violate the independency of the judicial authorities or interfere in matters of justice. . .
The function of the public prosecution shall be exercised before the Federal Courts by an attorney general . . .
The appointment of the attorney general and the other members of the Public Prosecution to the grade of prosecutor shall be effected by a decree issued by the President of the State [Sheikh Zayed] following approval of the Cabinet upon the nomination of the Minister of Justice. . .
The Minister of Interior may detain an alien against whom a deportation order has been issued, for a period not exceeding two weeks. . .
Following his arrest, an accused may not be detained for more than forty-eight hours [unless there is an order by the prosecutor] to detain him provisionally pending interrogation for a period of seven days subject to renewal for further periods not exceeding fourteen days. [A judge may] extend the detention for a period not to exceed thirty days, subject to renewal . . .(67)
As Al Sayegh's prepared testimony, these final provisions were the basis for the ordering of the summary arrest of the BCCI officials suspected of being involved in the irregularities and fraudulent activities, and their detention since, as under the interpretation given the law, the phrase "subject to renewal" allows the judge to continue to hold the accused from month to month so long as the prosecution wishes, without any limit whatsoever, for years, decades, or life, if matters remain under investigation.(68) Indeed, Subcommittee staff have interviewed one knowledgeable Pakistani insider about BCCI and Abu Dhabi who spent years in prison in Abu Dhabi without trial, after being involved in a dispute with a member of the ruling family.
Similarly, Al Sayegh's prepared testimony described BCCI's bank records as under the "protective custody of the U.A.E. federal civil court," which has provided "access
to the Majority Shareholders," Abu Dhabi, to "gather evidence upon which the prosecution can proceed," while the U.A.E. prosecutor, appointed by Sheikh Zayed, "has ordered that the documents . . . remain confidential" for reasons not explained.(69)
Given the fact that Sheikh Zayed, according to his own attorneys in submissions with the Federal Reserve, owns all of Abu Dhabi's resources and land, and that the laws themselves are styled as decrees by Sheikh Zayed, in consultation with other bodies and officials who are appointed by Sheikh Zayed, not by popular vote at elections, the notion that the United Arab Emirates's justice system is somehow completely independent from the interests of the ruling family of Abu Dhabi stretches credulity.
Following the conclusion of Al Sayegh's opening statement, Senator Kerry asked him whether Abu Dhabi was now prepared to cooperate with the United States on investigating BCCI. Al Sayegh gave, in essence, a commitment to complete the process of negotiating cooperation agreements with the U.S. within weeks:
Senator Kerry. Can we understand now that Mr. Naqvi and Mr. Iqbal and others will be made available to both members of the committee staff and Justice Department personnel
Mr. Al Sayegh. Yes, Senator. We are in discussions now, ongoing discussions, with the Department of Justice on terms for an agreement to provide access to both individuals and documents . . . They started a few weeks ago, Senator. I am certain we could wrap them up quickly.(70)
These statements were widely reported in the press the following day. Contrary to Al Sayegh's assurances, as of the date of the writing of this report four months later, no access to documents or witnesses has been provided to either the Subcommittee or to federal law enforcement by Abu Dhabi.(71)
As noted above, Al Sayegh did not have the personal background and knowledge of the facts concerning Abu Dhabi's involvement with BCCI to answer a number of basic questions asked by the Subcommittee in his oral testimony. Moreover, the testimony came following some seven hours of testimony from other witnesses. Accordingly, Senator Kerry requested, and Al Sayegh agreed to provide, answers to a number of remaining questions in writing, which were sent to Abu Dhabi's lawyers on May 20, 1992, with answers received July 8, 1992.
In replying to the 65 additional questions from Senator Kerry, Al Sayegh expressed his unhappiness at the number, nature, and tone of the questions, contending that some "inquired into my own personal affairs and the personal affairs of the Majority Shareholders or their representatives that had no relation whatsoever to matters involving BCCI and CCAH" and that others "contained factual allegations that are baseless and seem designed to embarrass the Majority Shareholders and their representatives." Accordingly, Al Sayegh requested a meeting with Senator Kerry to take place before he answered the questions. Senator Kerry declined.
Senator Kerry's questions sought to clarify points left unclear during the hearing. Unfortunately, in a number of cases, Al Sayegh's answers did not provide the clarification sought.
For example, Question 6 asked whether the Abu Dhabi Investment Authority was claiming sovereign immunity from suit in the United States. In response Al Sayegh gave the uninformative answer that it "depends upon the context in which the issue arises and the relevant facts and circumstances."(72)
Question 7 asked whether the other majority shareholders of BCCI, including Sheikh Zayed and his sons, would be claiming sovereign immunity. The uninformative answer was "it depends on the context in which the issue arises."(73)
In answer to Question 11, which asked about the circumstances of a loan by the Abu Dhabi Investment Authority to finance the buy-back of BCCI shares by Sheik Khalid bin Mahfouz, who engaged in fraudulent transactions with BCCI, Al Sayegh answered, "I am not aware of the details of the loan. . . I know of no reason why ADIA would be required to disclose its loans to U.S. regulators."(74)
In answer to Question 13, which asked whether any of the Abu Dhabi shareholders placed or deposited assets in ICIC, and if so, for the dates, amounts and purchase of each such placement, Al Sayegh replied that "in excess of $2 billion" was entrusted by Sheikh Zayed and his son, Sheikh Khalifa between 1980 and 1990 which were temporarily deposited in ICIC before being invested. No details were provided, nor any suggestion of how much "in excess of $2 billion" might have been involved.
In answer to Question 14, which asked Al Sayegh to provide detailed information concerning an account maintained by Sheikh Zayed and the ruling family in ICIC, known as Account No. 20071, Al Sayegh replied that "I do not think it is appropriate to provide details of the personal, private affairs of His Highness Sheikh Zayed to the Subcommittee, nor am I privy to them. However, to assist the Subcommittee, I am able to say that funds deposited in Account No. 20071 at ICIC Overseas were Ruling Family funds, to be invested by Abedi and Naqvi pursuant to powers of attorney."(75)
In answer to Question 16, which asked whether any of the majority shareholders had ever taken loans from ICIC, Al Sayegh relied that "I am not aware of any loans by ICIC to the Majority Shareholders."(76) In fact, Price Waterhouse audits of ICIC available to the Majority Shareholders, and obtained by the Subcommittee for the first time in August 1992, demonstrate quite clearly that as of December 31, 1989, ICIC had lent $17.5 million to the Abu Dhabi group.(77)
In answer to Question 18, which asked Al Sayegh to describe the nature and extent of claims by Abu Dhabi against ICIC, Al Sayegh replied that the Ruling Family has "very substantial claims" against ICIC, but "the details of the Majority Shareholders' intentions regarding the claims are subject to legal privilege and cannot be disclosed."(78)
In answer to Question 28, which asked Al Sayegh to provide the Subcommittee with a break-down of the capital paid-in by Abu Dhabi shareholders to BCCI, Al Sayegh replied "I am unaware of the details of amounts paid for shares in particular transactions, except that I am aware that $1.2 billion was injected into BCCI in April 1990 in an effort to save the bank."(79)
In answer to Question 29, which asked Al Sayegh to provide a detailed breakdown of its losses as the biggest victim of BCCI's fraud, including the date, type, location and amount, Al Sayegh replied that the losses included misappropriated funds, equity investments in BCCI, amounts on deposit, and interest, ignoring the Subcommittee's request for any dates on the losses, where and how they occurred, and what amounts were involved in each case.(80)
In answer to Question 34, which asked Al Sayegh whether Al Mazrui, who remains chairman of the Shareholders Group in charge of handling Abu Dhabi's interests pertaining to BCCI, received financial benefits in connection with the purchase of BCCI shares, Al Sayegh replied, "I am not privy to the details of Mr. Mazrui's own private affairs."(81) In fact, Al Mazrui had confessed to receiving these benefits, according to Price Waterhouse's Section 41 report, to members of the Abu Dhabi ruling family in April, 1990.
In answer to Question 42, which asked Al Sayegh who had custody of the $1.2 to $2.8 billion in promissory notes to BCCI from Abu Dhabi, seized by Abu Dhabi authorities through court action after BCCI's closure, Al Sayegh replied, "The Majority Shareholders are not in a position to provide details or court papers on this matter because the matter is sub judice and because of the in camera nature of the proceedings."(82)
In answer to question 44, which asked Al Sayegh to specify the terms it requires to conclude a cooperation agreement with the Justice Department and the New York District Attorney, Al Sayegh replied, "I do not believe it to be appropriate to discuss the details of the cooperation program, other than to say that we believe that the U.S. authorities will be fully satisfied."(83)
In answer to question 48, which asked Al Sayegh to specify the conditions of confinement of BCCI's officers in Abu Dhabi (who are reportedly being held in an Officer's Club under comfortable conditions), Al Sayegh replied, "I do not believe the conditions under which these individuals are held in confinement is an appropriate issue for the Subcommittee to be concerned with."(84)
In answer to questions 58-61, concerning the function of the James Lake and his firm, Robinson Lake, retained by Sheikh Zayed and Abu Dhabi to handle public relations for Abu Dhabi pertaining to BCCI, Al Sayegh replied that questions about what they were doing for Abu Dhabi, how much they were being paid, and who they were communicating with, were not legitimate areas for the Subcommittee's inquiry. Al Sayegh said that he believed these basic questions about its purpose in hiring Lake were "intentionally calculated to embarrass Mr. Lake," and refused to tell the Subcommittee what he had been paid.(85)
A number of the answers to other questions were also less than illuminating.
In summary, these answers, taken together, themselves demonstrate how limited the level of scrutiny Abu Dhabi is willing to tolerate as a result of its involvement with BCCI. Basic questions concerning how much money it put into BCCI, how much money it deposited, loans it may have made in connection with BCCI share purchases and sales, improprieties involving its chief financial officer responsible for BCCI, the status of the BCCI officials held in Abu Dhabi, and even what Abu Dhabi wanted out of its negotiations on cooperation with the Justice Department and New York District Attorney, are central to understanding Abu Dhabi's role in BCCI. Instead, Al Sayegh, representing Abu Dhabi, has taken the position that these matters are, essentially, none of the Subcommittee's business. The answers provided by Al Sayegh highlight how much Abu Dhabi may have to hide.
The day after Al Sayegh testified before the Subcommittee, Senator Kerry's office received a sworn, unsolicited letter from a constituent, who described himself as a U.S. citizen with personal knowledge of Al Sayegh.
The constituent, a Massachusetts management consultant who had worked in Abu Dhabi, advised the Subcommittee "against uncritical acceptance of Mr. Al Sayegh's statements [because] he made false statements to me in my business dealings with him and I suffered substantial damage by accepting his word as truth."
The constituent, Dr. George B. Bricker, stated that his management consultant company, had entered into contracts with the Abu Dhabi National Oil Company (ADNOC) from 1982 to 1986, during which time Bricker and his staff performed various services for ADNOC.
In mid-1986, Bricker's company, Redirection, was assigned to diagnose organizational problems relating to the ADNOC Finance Directorate, whose newly appointed manager was Al Sayegh. Bricker stated that he worked closely with Al Sayegh's staff and met twice with Al Sayegh on the project, during which Al Sayegh told him that he was satisfied with the Redirection's and Bricker's performance. However, over a period of several weeks, Redirection stopped being paid by Abu Dhabi, causing Bricker to ask Al Sayegh if there was a problem.
According to Bricker, Al Sayegh said there was merely "an insignificant hiccup in the accounts payable procedure" and that Redirection's invoices would soon be paid in full. Bricker kept his staff on the job for months more, without anyone being paid by Abu Dhabi. Eventually, Bricker told the staff to leave Abu Dhabi, at which time Al Sayegh admitted to Bricker that payments to Redirection had been withheld at Al Sayegh's direction since the beginning of the project more than six months earlier, and would not be paid until Redirection performed additional services for new work which had never before been discussed or included in the contract.
Bricker eventually learned that his situation was related to an attempt by Al Sayegh, which was successful, to replace the previous management of ADNOC entirely, with younger managers of Al Sayegh's generation and background. As Bricker had been in place under the earlier management, Al Sayegh was using the technique of not paying Bricker and his company as a way of forcing Bricker out without firing him. As Bricker summarized, "Redirection performed no further projects for ADNOC. Redirection lost an estimated US$100,0000 because of Mr. Al Sayegh's all-too-plausible false statements. Clearly, Redirection had no legal recourse; the U.S. Embassy was no help."(86)
While it is not possible to resolve the merits of the business dispute involving Al Sayegh and the Massachusetts constituent who wrote Senator Kerry, the unsolicited sworn statements made by a U.S. citizen, Dr. Bricker, concerning Al Sayegh's alleged dishonesty in doing business with him, do raise questions about the credibility of Al Sayegh.
BCCI audit reports obtained since Al Sayegh's testimony show the company he was managing, ADNOC, as itself having very substantial deposits at BCCI. These deposits were not held, as one would expect of the Abu Dhabi National Oil Company, in Abu Dhabi, or even in the Middle East, but at the BCCI bank responsible for the greatest portion of BCCI's losses and fraud, BCCI-Grand Cayman, where they amounted to some $229,277,000 as of September 30, 1988.(87)
Finally, the Peat Marwick audit investigation of BCCI's commodities affiliate and partner in money-laundering, Capcom, make reference to apparently improper transactions involving Capcom in the United Arab Emirates and individuals referred to as the Al Sayegh brothers. The Subcommittee has not been able to determine whether the reference applies to the witness.(88)
Like BCCI itself, Abu Dhabi has made a practice of hiring in the United States as its attorneys and public relations assistants firms which are among the most politically well-connected in Washington, D.C.
From 1978 through 1990, Abu Dhabi's interests in Financial General Bankshares and in CCAH/First American were represented by former Defense Secretary Clark Clifford, Robert Altman, and the firm of Clifford & Warnke.
Through much of that period and continuing to the present, Abu Dhabi's other interests in the United States were represented by the Washington firm of Patton, Boggs & Blow. During that period, Patton Boggs has also "served as headquarters for a billion-dollar enterprise called Real Estate Operations, Inc., owned by Sheikh Zayed's Abu Dhabi government," as was described in a lengthy article on Patton Boggs' handling of Abu Dhabi's real estate investments that appeared in the Wall Street Journal May 20, 1992.
According to the Journal, Abu Dhabi's investments in the United States, much of which have been handled by Patton Boggs, total nearly $1 billion. The Journal article then described how these assets were held by Real Estate Operations, Inc., which in turn controlled 22 real estate investment companies, 10 partnerships, three shell corporations, and other entities, which in turn own millions of square feet of commercial and retail property across the United States.(89)
As a result of handling Abu Dhabi's business, Patton Boggs in addition to being attorneys for Abu Dhabi, became, in effect, their business agents, or investment managers in the United States, thus linking the firm to Abu Dhabi in a manner more intimate than a narrower, attorney-client relationship.
Ironically, at BCCI's request, Patton Boggs also handled legal work for a front-man of BCCI, Mohammed Hammoud, pertaining to a real estate investment he made in Virginia that was financed by BCCI, with a back-up letter of credit issued from BCCI's then secretly-held U.S. bank, First American.
Thus, especially for the period from November, 1990, when they became BCCI's principal lawyers in the United States, to July 5, 1991, when BCCI was closed, Patton Boggs inherited, to some extent, the problem of multiple hats previously applicable to Clifford and Altman. While Patton, Boggs partners had no role at the First American bank, apart from the interests of their clients, there was a potential conflict of interest present between the interests of Abu Dhabi as shareholders of BCCI, and the interests of BCCI's creditors and depositors. This conflict always existed, but was only highlighted after BCCI's closure, once the creditor and depositor interest became represented not by Patton Boggs, but by BCCI's liquidators.
At the same time, Abu Dhabi has since BCCI's closure retained a politically-connected public relations consultant, James Lake, and his firm of Robinson-Lake, to carry out public relations efforts on behalf of Abu Dhabi. Lake, who received $200,000 in payments from Abu Dhabi last fall in connection with this work, has simultaneously been performing -- as a volunteer, in an unpaid position -- the job of deputy manager to President Bush's re-election campaign, causing the chairman of the Subcommittee to state on March 18, 1992 that:
I do not believe that Mr. Lake should be sitting in on White House campaign strategy meetings while he is also providing strategy to Sheikh Zayed on how to deal with problems arising out of his ownership of BCCI.(90)
Senator Kerry suggested that Lake resign from representing Abu Dhabi, or from the President's campaign. In response, Lake said that there was no conflict, and he would continue to handle both matters. He also explicitly stated he would have no contact with anyone in the Executive Branch concerning Abu Dhabi matters.
SENATOR KERRY'S VIEW:
Senator Kerry continues to believe that Lake's dual representation represents a disturbing conflict of interest. In the view of the chairman of the Subcommittee, at a time when Abu Dhabi continues to refuse to prevent the Justice Department from obtaining access to documents and witnesses held in Abu Dhabi, Lake's dual role sends the wrong message to Abu Dhabi about how serious U.S. authorities are in investigating and prosecuting anyone who has committed crimes pertaining to BCCI in the United States.
1. Price Waterhouse Report Sec 41 to the Bank of England, June, 1991, Sec. 1.33.
2. See testimony of Al Sayegh, S. Hrg. 102-350 Pt. 5 p. 759.
3. S. Hrg. 102-350 Pt. 5 p. 762.
4. A key issue raised by the September 21, 1992 decision to provide access to some documents is whether the action represents real cooperation, or merely the appearance of cooperation as part of a public relations effort. On September 21, 1992, Robert M. Moregenthau, District Attorney of New York, wrote the Subcommittee stating the following: "I write at the request of Ronald S. Liebman, Esq. of Patton Boggs & Blow, counsel for certain individuals and entities in Abu Dhabi, including members of the Ruling Family. Mr. Liebman has advised me that photocopies of certain documents have been delivered to the Embassy of the United Arab Emirates in Washington, D.C. for inspection by members of the District Attorney's Office. Later today we will begin the process of reviewing these records, and will continue doing so until they have been fully reviewed. Mr. Liebman has further advised me that an Abu Dhabi court order authorizing this review was obtained yesterday. This review will not be deemed an admission or authorized representation by the Abu Dhabi parties. We will be free to use whatever leads are obtained to further our investigation." Abu Dhabi has provided no explanation of why these documents had been withheld from U.S. law enforcement prior to September 21, 1992. Abu Dhabi has also provided no explanation of why it has refused to permit law enforcement to copy these documents, or to review them outside the confines of the Embassy of the United Arab Emirates. Abu Dhabi has not provided the documents to the Subcommittee. Thus, it is impossible to determine which documents have been provided by Abu Dhabi, and which documents have continued to be withheld. It is also not possible to determine what information the BCCI officials held in Abu Dhabi could provide U.S. law enforcement if Abu Dhabi permitted U.S. officials access to them.
5. See generally detailed testimony regarding this issue of Nazir Chinoy, March 18, 1992; Akbar Bilgrami, July 30, 1992; and testimony of Abdur Sakhia October 22, 1991 and Masihur Rahman, August 8, 1991.
6. S. Hrg. 102-350 Pt. 5 p. 757.
7. Deposition of Abdullah Darweish, September 23, 1982, Financiera Avenida S.A. v. Refco, US District Court Northern District of Illinois No. 82-C-1272.
8. Staff interview, August, 1992, Pakistani national familiar with BCCI-Abu Dhabi relationship.
9. Price Waterhouse audit reports to BCCI board of directors, 1987-1989; miscellaneous BCCI loan and financial documents.
10. Deposition, Lasidi v. Financiera Avenida, New York Supreme Court County of New York, 1982.
11. S. Hrg. 102-350 Pt. 3 p. 22.
13. Exhibit I, OCC Report of Joseph Vaez to Robert Bench, February 15, 1978; an accounting of Abu Dhabi's interest in BCCI at this time provided to the Subcommittee on May 13, 1992 contradicts this figure, describing the Abu Dhabi holdings in 1977 as 1.28 percent of BCCI.
14. Prepared Statement of BCCI Majority Shareholders, S. Hrg. 102-350 Pt. 5 p. 747.
15. Shareholding in BCCI Holdings (Luxembourg) S.A., prepared by Abu Dhabi to Subcommittee, reprinted S. Hrg. 102-350 Pt. 5.
16. Answer of Al Sayegh to Question 28 posed by Subcommittee, reprinted in S. Hrg. 102-350 Pt. 5.
17. Price Waterhouse Section 41 Report to the Bank of England, June, 1991.
18. Price Waterhouse audit report documents, BCCI, Loans to Shareholders, Valuation of Shares BCCI Holdings & CCAH at November 30, 1987, and at December 31, 1989, obtained by Subcommittee.
19. Bailey, Federal Reserve Hearing, April 23, 1981, pp. 15-17.
20. Staff interview, Lance, October, 1991.
21. Washington Post, December 18, 1977, "Arab Investors Want Lance to Manage Funds."
22. Al Sayegh, answer to question 25 from Senator Kerry, July 8, 1992, reprinted in S. Hrg. 102-350 Pt. 5.
23. Interviews, Richard Small and Thomas Baxter, Federal Reserve, April-May, 1991; testimony of Virgil Mattingly, May 14, 1992, S. Hrg. 102-350 Pt. 5.
24. Staff interviews, Akbar Bilgrami, July 13-14, 1992; Bilgrami testimony, July 30, 1992, S. Hrg. 102-350, Pt. 6.
27. Staff interviews, former BCCI employee and Pakistani national, July, 1992.
28. Sami memorandum, January 30, 1978, id.
29. Al Sayegh, answers to question #19 from Senator Kerry, July 8, 1992, reprinted in S. Hrg. 102-350 Pt. 5.
30. Price Waterhouse Report Sec 41 to the Bank of England, June 1991.
31. Indictment, December 8, 1991, Attorney General of Abu Dhabi Sheikh Zayed v. Darweish.
32. Al Sayegh, sworn answer to Question 13 of Senator Kerry, July 8, 1992, reprinted in S. Hrg. 102-350 Pt. 5.
33. Al Sayegh, Answers to Question #33 of Senator Kerry, July 8, 1992, reprinted in S. Hrg. 102-350 Pt. 5.
34. Price Waterhouse Audit Reports, 1983, Hong Kong Deposit and Guaranty and Tetra Finance (HK).
35. Al Sayegh, Answer to Questions #31 and #35 from Senator Kerry, July 8, 1992, reprinted in S. Hrg. 102-350 Pt. 5.
36. Price Waterhouse Report Section 41 to the Bank of England, June 1991.
38. Staff interviews, Nazir Chinoy, Abdur Sakhia, Akbar Bilgrami, Massihur Rahman. In private, BCCI officials referred to Iqbal's chief role and principal skills to be as a procurer.
39. S. Hrg. 102-350 Pt. 1 p. 481.
40. Section 41 Report to the Bank of England, Price Waterhouse, June, 1991.
41. Memorandum submitted by Price Waterhouse in reply to Questions from the House of Commons Committee on Treasury and Civil Service, February 5, 1991.
42. Memorandum submitted by Price Waterhouse in reply to Questions from the House of Commons Committee on Treasury and Civil Service, February 5, 1991.
43. Memorandum submitted by Price Waterhouse in reply to Questions from the House of Commons Committee on Treasury and Civil Service, February 5, 1991.
44. Id. Price Waterhouse's findings of the Section 41 report are reviewed in some detail in the chapter concerning BCCI's criminality.
45. S. Hrg. 102-350 Pt 4 pp. 747-748.
47. Norton Rose Report to the members of the BCCI SA Creditors' Committee, May 1, 1992, pp. 3-5; reprinted in S. Hrg. 102-350 Pt. 5.
48. Norton Rose report, id p. 5.
49. S. Hrg. 102-379, testimony of Virgil Mattingly, May 23, 1991, pp. 114-121.
50. S. Hrg. 102-350 Pt. 5 p. 750, and staff interviews with Federal Reserve investigator Richard Small.
51. Winer memcom, March meeting with Patton, Boggs, and Blow.
52. Staff interview, August 26, 1992, Masihur Rahman, who was in daily contact with BCCI officials and U.S. and British regulators during the relevant period.
53. Norton Rose Report, id p. 6.
54. See testimony of Al-Sayegh, S. Hrg. 102-350 Pt. 5 pp. 760-763.
55. Norton Rose, id p. 54.
56. Norton Rose, id, pp 54-55.
57. S. Hrg. 102-350 Pt. 5 p. 325.
58. Smouha prepared testimony, S. Hrg. 102-350 Pt. 5 p. 330.
59. See Smouha's testimony, S. Hrg. 102-350 Pt 5 pp. 331-333.
60. S. Hrg. 102-350 Pt. 5 p. 335.
61. Appendix 3, Summary of the Proposed Agreements, Joint Liquidators Report, Bank of Credit and Commerce International, SA March 16, 1992, p. 16.
62. Joint Liquidators Report, March 17, 1992, id., reprinted in S. Hrg. 102-350 Pt. 5.
63. S. Hrg. 102-350 Pt. 5 p. 338.
64. S. Hrg. 102-350 Pt. 5 p. 766; documents regarding Clifford and Altman's representation of Abu Dhabi from 1978 through 1990, S. Hrg. 102-350 Pt. 4 pp. 424, 432, 437-439, 456-459.
65. Al-Sayegh testimony, S. Hrg. 102-350 Pt. 5 pp. 759-770.
66. S. Hrg. 102-350 Pt. 5 pp. 743-746.
67. Extracts, United Arab Emirates Federal No. 6 of 1973, Federal Law No. 10 of 1973, Federal Law No. 3 of 1983, reprinted in S. Hrg. 102-350 Pt. 5.
68. S. Hrg. 102-350 Pt. 5 p. 754.
69. S. Hrg. 102-350 Pt. 5 p. 754.
70. S. Hrg. 102-350 Pt. 5 pp. 756-757.
71. On September 21, 1992, Abu Dhabi began making selected documents available at its Washington embassy for viewing by the Federal Reserve and U.S. law enforcement, on the condition that no copies be made and that none of the information could be used as admissions in court. None of these documents have been made available to the Subcommittee and the value of this information, if any, cannot be evaluated.
72. Sworn statement, Ahmed Al-Sayegh, in response to question 6 of Senator Kerry, July 8, 1992, reprinted in S. Hrg. 102-350 Pt. 5.
73. Id, question 7.
74. Id., answer to Question 11.
75. Id, answer to Question 14.
76. Id, answer to question 16.
77. Valuation of Shares BCCI Holdings & CCAH at December 31, 1989 and Loans to Shareholders, Subcommittee document.
78. Sworn statement, Ahmed Al-Sayegh, in response to question 18 of Senator Kerry, July 8, 1992, reprinted in S. Hrg. 102-350 Pt. 5.
79. Id, answer to Question 28.
80. Id, response to question 29.
81. Id, answer to question 35.
82. Id, answer to question 42.
83. Id, answer to question 44.
84. Id, answer to question 48.
85. Id., answer to question 58-61.
86. Statement, Dr. George B. Bricker, to Office of Senator John Kerry, May 18, 1992, by Fax.
87. Price Waterhouse Report to the Audit Committee, BCCI Holdings (Luxembourg) SA, 10 November, 1988, Subcommittee document.
88. See S. Hrg. 102-350 Pt. 6, Peat Marwick Report.
89. "Abu Dhabi's Links With A Powerful Law Firm Present Problem For Democrats on BCCI Issue," Wall Street Journal, May 20, 1992, p. A-18.
90. S. Hrg. 102-350 t. 4 . 356.
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