textfiles-politics/pythonCode/personTestingOutput/bcci-1.xml

<xml><p>Article 1577 of misc.activism.progressive:
From: dave@ratmandu.corp.sgi.com (dave "who can do? ratmandu!" ratcliffe)
Newsgroups: misc.activism.progressive
Subject: will <ent type='ORG'>BCCI</ent> happen again? bank on it. (part 1 of 2)
<info type="Message-ID"> 1991Nov23.064309.14321@pencil.cs.missouri.edu</info>
Date: 23 Nov 91 06:43:09 GMT
Sender: rich@pencil.cs.missouri.edu (<ent type='PERSON'>Rich Winkel</ent>)
Followup-To: alt.activism.d
Organization: <ent type='ORG'>PAC</ent>H
Lines: 586
Approved: map@pencil.cs.missouri.edu </p>

<p> The following is part one of a two-part series on <ent type='ORG'>BCCI</ent>
that recently appeared in "In These Times".
Reprinted with permission of "In These Times." </p>

<p> During <ent type='EVENT'>World War</ent> II <ent type='GPE'>the United</ent> States had emerged as the globe's
dominant economic and military power. In 1944, the <ent type='ORG'>Bretton Woods</ent>
agreement established a system of fixed exchange rates based on
the dollar ....
By 1971, however, U.S. corporations had lost their competitive
edge to <ent type='GPE'>Japan</ent> and the U.S. military had wasted hundreds of
billions of dollars in <ent type='GPE'>Vietnam</ent>. Nixon's decision to devalue the
dollar and effectively end the <ent type='ORG'>Bretton Woods</ent> agreement on fixed
exchange rates simply recognized the inevitable--<ent type='GPE'>the United</ent> States
no longer ruled the world ....
By the start of the '90s, <ent type='ORG'>BCCI</ent> and other banks that operated out
of the offshore financial havens played key roles in the new
economic order dominated by multinational corporations. As the
United States learned when it was forced to end fixed exchange
rates, the new global economic system was too powerful for any one
government to control. For <ent type='ORG'>BCCI</ent>, as well as for international
criminal elements, this was a dream come true. </p>

<p> from the October 23-29, 1991 issue of "IN THESE TIMES":
----------------------------------------------------------------------
<ent type='ORG'>BCCI</ent> THE BIG PICTURE
A system out of control, not just one bank
By <ent type='PERSON'>George</ent> <ent type='PERSON'>Winslow</ent> </p>

<p> This is the first story in a two-part "In These Times" investigation
into the broader economic implication of the <ent type='ORG'>BCCI</ent> affair. </p>

<p> IN THE EARLY '80S, PAKISTANI <ent type='PERSON'>IMMIGRANT AZIZ Rehman</ent> was overjoyed
to find a job in one of the world's fastest growing banks, the
<ent type='ORG'>Bank</ent> of Credit and <ent type='ORG'>Commerce International</ent> (<ent type='ORG'>BCCI</ent>). The pay was
good and the perks were even better. His employer gave him a
lavish expense account to entertain foreign diplomats--and he got
to meet people like <ent type='PERSON'>Jeb Bush</ent>, the U.S. vice president's son.
But <ent type='PERSON'>Rehman</ent> soon discovered that international finance had a less
glamorous side. Often, he had to lug heavy suitcases filled with
cash through the sweltering <ent type='GPE'>Miami</ent> heat. During the day, he
worried about being robbed; at night, he wondered about the
bank's strange way of doing business. <ent type='ORG'>Bank</ent> executives told <ent type='PERSON'>Rehman</ent>
the bags of cash were from a <ent type='ORG'>BCCI</ent> branch in the <ent type='GPE'>Bahamas</ent>. But
<ent type='PERSON'>Rehman</ent> knew they were lying. The branch office didn't exist.
Years later, it s clear that <ent type='ORG'>BCCI</ent> has misplaced a lot more than
a bank office. On July 5 1991, bank regulators from several
nations shut down <ent type='ORG'>BCCI</ent>, charging that top executives had lost or
stolen as much as $15 billion worth of deposits.
Since then, the <ent type='ORG'>BCCI</ent> affair has exploded into the biggest
financial scandal of the '90s. A barrage of press reports have
detailed BCCI's involvement with drug dealers, <ent type='ORG'>CIA</ent> operators,
corrupt dictators and sleazy arms dealers. Even <ent type='ORG'>CIA</ent> officials
have been quoted as calling <ent type='ORG'>BCCI</ent> "<ent type='ORG'>the Bank</ent> of Crooks and Criminals
International."
Unfortunately, the mainstream media has largely ignored a much
bigger scandal--a revolution in the global economy that has
produced many banks just like <ent type='ORG'>BCCI</ent>. This revolution has caused a
terrifying cycle of poverty, drug addiction and financial fraud
around the world. Like the toxic waste given off by a chemical
factory, <ent type='ORG'>BCCI</ent> is simply a noxious byproduct of a global economy
based on profits and high finance, not human needs. </p>

<p> <ent type='ORG'>HUMBLE BEGINNINGS</ent>: The economic context of the <ent type='ORG'>BCCI</ent> scandal
begins with socialism and ends with the creation of a kind of
capitalist utopia.
In 1972, BCCI's founder, <ent type='PERSON'>Agha Hasan</ent> Abedi, was under house
arrest in <ent type='GPE'>Pakistan</ent>. A socialist government had nationalized
Abedi's United <ent type='ORG'>Bank</ent> and was investigating allegations of fraud at
the institution. But as police guarded his house, Abedi was
already meeting with some of his powerful friends, plotting the
creation of a new bank, <ent type='ORG'>BCCI</ent>.
This bank, Abedi liked to say, would be the world's first
"genuinely global bank." <ent type='ORG'>Bank</ent> of <ent type='GPE'>America</ent>--then the world's
largest bank--was trying to expand its international division.
The huge U.S. bank was the first investor to jump on board. <ent type='ORG'>Bank</ent>
of <ent type='GPE'>America</ent> put up only $2.5 million to acquire a 25 percent stake
in <ent type='ORG'>BCCI</ent>, but its involvement helped Abedi get investment capital
from powerful Third-World leaders and financiers. One early
investor was <ent type='PERSON'>Sheik Zayed Bin Sultan</ent> al-Nahyan, ruler of oil-rich
Abu Dhabi. Other major investors would eventually include <ent type='PERSON'>Kamal</ent>
Adham, former chief of Saudi Arabia's intelligence service; the
<ent type='PERSON'>bin Mahfouz</ent> family, which also controls Saudi Arabia's largest
bank; and other rulers from <ent type='GPE'>the United</ent> Arab Emirates.
<ent type='ORG'>BCCI</ent> went into operation with only $10 million in capital, but
Abedi's timing was perfect. Over the next 18 years, <ent type='ORG'>BCCI</ent> would
grow by leaps and bounds. By no coincidence, so would the
international financial system. In 1970, only about $60 billion
moved through the international financial system each day. Today
more than $2 trillion worth of stocks bonds and currencies cross
national borders--a 3200 percent increase. <ent type='ORG'>BCCI</ent> took full
advantage of this growth. By early 1990, it had grown into a $21
billion bank with 425 branches in over 75 countries that served
1.2 million customers. </p>

<p> UNCLE SAM'S FALL: A dramatic period of political and economic
disorder produced the global economic revolution that allowed <ent type='ORG'>BCCI</ent>
to thrive. One year before <ent type='ORG'>BCCI</ent> was founded, President Richard
<ent type='PERSON'>Nixon</ent> announced that <ent type='GPE'>the United</ent> States would devalue the dollar,
effectively ending the <ent type='NORP'>American</ent> government's control over the
international financial system.
During <ent type='EVENT'>World War</ent> II <ent type='GPE'>the United</ent> States had emerged as the globe's
dominant economic and military power. In 1944, the <ent type='ORG'>Bretton Woods</ent>
agreement established a system of fixed exchange rates based on
the dollar. By making the dollar the equivalent of gold in world
trade, U.S. economic policies became the world's economic
policies. <ent type='GPE'>Washington</ent> could print dollars to finance the Marshall
Plan in Europe and other programs designed to open up markets to
<ent type='NORP'>American</ent> corporations. And it could mint money to build up
America's military establishment--which, in turn, protected U.S.
investments in other countries. It was a "free world based on the
dollar and backed by the atomic bomb," according to <ent type='PERSON'>Richard Barnet</ent>
and <ent type='PERSON'>Ronald Muller</ent>, authors of "The Global Reach: <ent type='ORG'>The Power</ent> of
Multinational Corporations."
By 1971, however, U.S. corporations had lost their competitive
edge to <ent type='GPE'>Japan</ent> and the U.S. military had wasted hundreds of
billions of dollars in <ent type='GPE'>Vietnam</ent>. Nixon's decision to devalue the
dollar and effectively end the <ent type='ORG'>Bretton Woods</ent> agreement on fixed
exchange rates simply recognized the inevitable--<ent type='GPE'>the United</ent> States
no longer ruled the world. </p>

<p> A NEW KING: Assuming the U.S. government's throne, huge
multinational corporations had become the world's new imperial
power. <ent type='NORP'>American</ent> foreign investments jumped from $29.1 billion in
1955 to $120 billion in 1970 and $373 billion in 1989. Foreign
investments by every country in the world grew nearly tenfold from
$112.3 billion in 1967 to $1023 billion in 1987.
U.S. banks also expanded their international operations to
provide financial services to their blue-chip clients. In 1965,
only 20 U.S. banks with 112 branches had set up shop overseas. By
1988, 132 <ent type='NORP'>American</ent> banks had 849 foreign branches, holding a total
of more than $275 billion in assets.
<ent type='ORG'>BCCI</ent> was quick to establish a relationship with many of the U.S.
banks that had expanded overseas in the '70s. A confidential
internal <ent type='ORG'>BCCI</ent> study, obtained by "In These Times," illustrates
just how many U.S. banks had close financial relationships with
<ent type='ORG'>BCCI</ent>. The 1985 study notes that for all of 1984, <ent type='ORG'>BCCI</ent> transferred
foreign currencies worth $37.5 billion through <ent type='NORP'>American</ent> banks.
Most of these foreign currency transfers, $19 billion, involved
five major <ent type='NORP'>American</ent> banks: <ent type='ORG'>Bank</ent> of <ent type='GPE'>America</ent>, <ent type='ORG'>Security Pacific</ent>,
<ent type='NORP'>American</ent> Express <ent type='ORG'>Bank</ent> Ltd., <ent type='ORG'>the Bank</ent> of <ent type='GPE'>New York</ent> and First
Chicago.
The <ent type='ORG'>BCCI</ent> study also shows that on an average working day in
1984, <ent type='ORG'>BCCI</ent> conducted 1434 transactions involving $2.7 billion
with the five banks. Most of those transactions (700 in all,
worth $1.7 billion) involved <ent type='ORG'>Bank</ent> of <ent type='GPE'>America</ent>--even though <ent type='ORG'>Bank</ent> of
<ent type='GPE'>America</ent> had sold its stake in <ent type='ORG'>BCCI</ent> in 1980. </p>

<p> CAPITALIST <ent type='ORG'>UTOPIAS</ent>: The rapid growth of the global economy also
produced dramatic changes in the very structure of the
international economic system. Massive military expenditures from
<ent type='GPE'>Vietnam</ent>--along with increased imports--caused billions of dollars
to flow out of <ent type='GPE'>the United</ent> States. In the '60s, banks began
loaning these dollars--called "Eurodollars" because they were
often held in European banks--to corporations, thus creating the
world's first unregulated, international financial market. In
1963, only about $148 million worth of bonds or loans were issued
in the Eurodollar market. By 1988 over $721 billion worth of
securities and loans were made in the market.
Most Eurodollar trading occurs in what are known as offshore
havens. Typically these havens--located in places like <ent type='GPE'>Panama</ent>,
<ent type='GPE'>Hong Kong</ent> and the <ent type='GPE'>Bahamas</ent>--operate as a kind of capitalist utopia
for transnational corporations. Strict bank-secrecy laws protect
depositors from the prying eyes of tax collectors or foreign
investigators. Lax local regulations allow foreign banks to carry
on many activities--such as selling stocks and bonds--that may be
illegal or tightly regulated in their home countries. More
importantly, taxes are virtually non-existent.
Today, offshore havens manage over $5 trillion worth of assets-
-nearly the size of the U.S. gross national product for 1990. But
before the rise of the Eurodollar market, many of these havens
didn't exist or played only a minor role in international finance.
The <ent type='GPE'>Cayman Islands</ent>, for example, didn't set up shop as an offshore
center until the mid-'60s. But by 1990, the <ent type='NORP'>Caribbean</ent> nation was
home to over 500 banks from all over the world--including 46 of
the 50 largest--holding over $250 billion in assets.
<ent type='ORG'>BCCI</ent> was one of the banks that most profited from the rise of
offshore finance. It capitalized by setting up its headquarters
in <ent type='GPE'>Luxembourg</ent>, an offshore haven, and by establishing subsidiaries
in dozens of other havens. By 1990, for example, its Cayman
Islands subsidiary held over $7.5 billion worth of assets.
By the start of the '90s, <ent type='ORG'>BCCI</ent> and other banks that operated out
of the offshore financial havens played key roles in the new
economic order dominated by multinational corporations. As the
United States learned when it was forced to end fixed exchange
rates, the new global economic system was too powerful for any one
government to control. For <ent type='ORG'>BCCI</ent>, as well as for international
criminal elements, this was a dream come true. </p>

<p> PEEKABOO FINANCE: From the start, <ent type='ORG'>BCCI</ent> understood the beauty of
offshore finance. Operating out of regulation-free havens, <ent type='ORG'>BCCI</ent>
was able to embark on what international investigators have called
"the most complex deception in banking history." To hide the fact
that <ent type='ORG'>BCCI</ent> "may never have been profitable in its entire history,"
BCCI's auditors say that top executives used the offshore system
to set up "a massive and complex web of fictitious transactions."
Over a 15-year period, <ent type='ORG'>BCCI</ent> shuffled nearly $15 billion through
over 750 accounts. For example, after losing an astonishing $849
million speculating in U.S. <ent type='ORG'>Treasury</ent> bonds between 1979 and 1986,
<ent type='ORG'>BCCI</ent> executives simply parked the losses in its <ent type='GPE'>Cayman Islands</ent>
subsidiary, where bank regulators wouldn't find them. Then it
illegally shuffled new deposits through various havens to make it
look as if hundreds of millions of dollars worth of loans to <ent type='ORG'>BCCI</ent>
executives and large shareholders were being repaid. In fact,
they weren't. As Rep. <ent type='PERSON'>Charles Schumer</ent> (D-NY) recently stated,
"<ent type='ORG'>BCCI</ent> fell between the international cracks."
These cracks are beginning to look more and more like canyons.
Law-enforcement experts say that offshore banks provide essential
financial services for many of the world's most profitable crimes,
including the drug business (in which $300 billion is laundered
worldwide each year, according to the State Department), tax fraud
(which, according to <ent type='ORG'>the Internal Revenue Service</ent>, totals $100
billion a year in <ent type='GPE'>the United</ent> States alone) and securities fraud
(which adds up to $10 billion annually in <ent type='GPE'>the United</ent> States,
according to a recent private study). Offshore banking also aids
the <ent type='ORG'>Mafia</ent> (which launders over $70 billion annually, according to
the <ent type='ORG'>FBI</ent>) and black-market arms traffickers. (Offshore bank
accounts were used in the <ent type='GPE'>Iran</ent>-contra affair, illegal arms sales
to <ent type='GPE'>Iraq</ent> and several recent illegal sales of technology used to
make nuclear bombs.) Furthermore, Sen. <ent type='PERSON'>John Kerry</ent> (D-MA)
contends that "billions" looted from U.S. savings-and-loans ended
up in secret offshore accounts. Such accounts were also used by
the perpetrators of <ent type='EVENT'>Watergate</ent>, as well as the recent scandals at
<ent type='ORG'>the Department</ent> of Housing and Urban Development and at the
<ent type='ORG'>Pentagon</ent>.
As a full-service bank, <ent type='ORG'>BCCI</ent> diversified into almost all of
these criminal activities. But before exploring its role as a
"<ent type='ORG'>Bank</ent> of Crooks and Criminals International," it's worth
remembering that some of BCCI's largest crimes were quite legal--
at least in the context of the lawless offshore financial system. </p>

<p> A FREE LUNCH: Consider, for example, taxes. While Aziz <ent type='PERSON'>Rehman</ent>
was carrying large bags of cash around <ent type='GPE'>Miami</ent> for <ent type='ORG'>BCCI</ent>, he noticed
that many of the bank's clients weren't interested in drugs or
arms or weird <ent type='ORG'>CIA</ent> plots. They simply wanted to avoid taxes. In
one case--uncovered by the U.S. Senate Subcommittee on Terrorism,
Narcotics and International Operations, which is headed by Sen.
<ent type='PERSON'>Kerry</ent>--Modern Health Care had <ent type='ORG'>BCCI</ent> wire $20 million into an
account in the <ent type='NORP'>Caribbean</ent>.
"They got interest over there, and they never showed that
interest into <ent type='GPE'>the United</ent> States [for tax purposes]," <ent type='PERSON'>Rehman</ent>
remembers. "That's why people deposit outside <ent type='GPE'>the United</ent> States.
But <ent type='ORG'>BCCI</ent> is by no means the only bank that has been involved in
tax fraud. Using offshore havens to avoid the <ent type='ORG'>IRS</ent> has become
standard operating procedure for many financial institutions. In
the mid-'70s, for example, while <ent type='GPE'>New York City</ent> was going broke and
drastically cutting social services, city officials charged that
<ent type='ORG'>Citibank</ent> had used offshore havens to avoid over $30 million in
taxes. In this case, <ent type='ORG'>Citibank</ent> created a series of fictitious
transactions that made it look as if its subsidiaries in <ent type='GPE'>America</ent>
and Europe were losing money. Then, the profits were recorded in
subsidiaries located in offshore havens. (A Reagan appointee to
<ent type='ORG'>the Securities and Exchange Commission</ent> eventually dropped charges
against the bank, explaining that he did "not subscribe to the
theory that a company that violates tax and exchange-control
regulations is a bad corporation.")
Foreign corporations have also used the offshore system to avoid
paying U.S. taxes. For example, the <ent type='ORG'>IRS</ent> claims that foreign
multinational corporations operating in <ent type='GPE'>the United</ent> States avoided
between $13 billion and $30 billion worth of U.S. taxes in the
'80s.
The issue of tax fraud in the <ent type='ORG'>BCCI</ent> scandal has been virtually
ignored by the mainstream media, but it has had a horrifying
effect on the quality of life in <ent type='GPE'>America</ent>. Over time, the ability
of banks like <ent type='ORG'>BCCI</ent> to help corporations avoid taxes, has left a
big hole in local, state and federal budgets.
In 1950, when offshore finance and multinational production
didn't play a very important role in the world's economy, U.S.
corporations paid 26 percent of all state, local and federal
taxes. But by 1990, their share had dropped to only 8 percent.
Of course, offshore banking wasn't the only reason for this
decline--but it certainly helped. If U.S. corporations still paid
26 percent of all taxes, they would have paid an extra $329
billion in 1990 alone. This number is worth remembering when
people talk about <ent type='ORG'>BCCI</ent> as simply a case of bank fraud, far removed
from problems like poverty, bad schools or potholes. </p>

<p> ------------------------------------------------------------------
'<ent type='ORG'>Bank</ent> of Crooks and Criminals International' had
links to U.S. intelligence and <ent type='ORG'>Third World</ent> tyrants
| It's no wonder <ent type='ORG'>the Bank</ent> of Credit and Commerce
International (<ent type='ORG'>BCCI</ent>) is enmeshed in one of the
biggest financial scandals of the 20th century. A
list of BCCI's shareholders reads like a who's who of
corrupt Third-World elites. Most of them have a long
history of involvement in major arms deals or
corporate bribery scams. In addition, several key
<ent type='ORG'>BCCI</ent> insiders have extensive ties to <ent type='NORP'>Western</ent>
intelligence agencies.
These same figures helped loot the bank, receiving
hundreds of millions of dollars worth of loans that
were never repaid.
One major shareholder and a front man for BCCI's
illegal purchases of various <ent type='NORP'>American</ent> banks--
including First <ent type='NORP'>American</ent> <ent type='ORG'>Bank</ent>shares in <ent type='GPE'>Washington</ent>,
D.C.--was Sheikh <ent type='PERSON'>Kamal Adham</ent>, the brother-in-law of
the late Saudi King <ent type='PERSON'>Faisal</ent>. During the '60s and
'70s, <ent type='PERSON'>Kamal</ent> ran the Saudi equivalent of the <ent type='ORG'>FBI</ent> and
<ent type='ORG'>CIA</ent>. And like many members of the Saudi ruling
family, he often demanded commissions (a polite way
of saying bribe) from multinational corporations
operating around the <ent type='LOC'>mideast</ent>.
In the '50s and '60s, <ent type='PERSON'>Kamal</ent> accepted kickbacks from
the <ent type='GPE'>Japan</ent>ese in return for cheap oil. He also took
commissions for arms deals set up for <ent type='PERSON'>Northrup</ent> and
two other U.S. arms dealers. In the '70s, according
to the "<ent type='ORG'>Wall Street Journal</ent>," he was paid "many
millions of dollars in commission" by <ent type='ORG'>Boeing</ent> to
persuade the <ent type='NORP'>Egyptians</ent> to buy its planes.
Besides his extensive ties to the U.S. arms
industry, <ent type='PERSON'>Kamal</ent> maintained close ties to <ent type='NORP'>Western</ent>
intelligence agencies. In 1977, the "<ent type='GPE'>Washington</ent>
Post" described <ent type='PERSON'>Kamal</ent> as the CIA's "<ent type='PERSON'>liason</ent> man" in
the region and noted that <ent type='PERSON'>Kamal</ent> had hired former <ent type='ORG'>CIA</ent>
station chief <ent type='PERSON'>Raymond Close</ent> as an adviser. In the
late '60s, <ent type='PERSON'>Kamal</ent> acted as the CIA's intermediary to
funnel payments to <ent type='PERSON'>Anwar Sadat</ent> while <ent type='PERSON'>Sadat</ent> was vice
president of <ent type='GPE'>Egypt</ent>. According to <ent type='PERSON'>Larry Gurwin</ent>'s 1990
article in the business magazine "Regardie's," <ent type='PERSON'>Kamal</ent>
channeled hundreds of millions of dollars to <ent type='GPE'>Egypt</ent>
after <ent type='PERSON'>Sadat</ent> took power. These funds convinced <ent type='PERSON'>Sadat</ent>
to expel <ent type='NORP'>Soviet</ent> military advisers in 1973 and to
establish a closer relationship with <ent type='GPE'>the United</ent>
States.
In Kamal's years as the head of Saudi intelligence,
he was responsible for a number of human rights
abuses, including torture and executions of political
opponents. Internal <ent type='ORG'>BCCI</ent> documents show that <ent type='PERSON'>Kamal</ent>
received over $313 million in loans from <ent type='ORG'>BCCI</ent>, most
of which have not been repaid.
Other one-time <ent type='ORG'>BCCI</ent> shareholders with close
connections to the <ent type='ORG'>CIA</ent> and the <ent type='NORP'>Western</ent> arms industry
include Iran's now-ousted ruling family. <ent type='PERSON'>Shah</ent>
Mohammed Reza Pahlevi, whose family held stock in
<ent type='ORG'>BCCI</ent> as late as 1978, was installed in power in 1953
by a <ent type='ORG'>CIA</ent>-backed coup against <ent type='PERSON'>Mohammed Mossadeq</ent>, who
had nationalized <ent type='NORP'>American</ent> oil companies. In the
'70s, before he was overthrown, the <ent type='PERSON'>Shah</ent> purchased
billions of dollars worth of arms from <ent type='NORP'>American</ent>
companies.
<ent type='GPE'>Kuwaiti</ent> businessman <ent type='PERSON'>Faisal</ent> Saud al Fulajj was a
small <ent type='ORG'>BCCI</ent> shareholder. According to the "Wall
Street Journal," he accepted over $300000 in bribes
from <ent type='ORG'>Boeing</ent> while he was head of <ent type='ORG'>the Kuwait Airlines</ent>.
Fulajj was also one of seven men who received $47
million in bribes to illegally act as a frontman for
BCCI's illegal and secret purchases of various
<ent type='NORP'>American</ent> banks, including First <ent type='NORP'>American</ent>.
<ent type='PERSON'>Mohammed Irvani</ent> was another frontman with ties to
<ent type='NORP'>Western</ent> intelligence. He set up a consulting firm
with former <ent type='ORG'>CIA</ent> director <ent type='PERSON'>Richard Helms</ent> in 1977.
<ent type='PERSON'>Ali Mohammed Shorafa</ent> was a small <ent type='ORG'>BCCI</ent> shareholder
and yet another frontman in the First <ent type='NORP'>American</ent>
affair. According to columnist <ent type='PERSON'>Jack Anderson</ent> and
"Regardie's" magazine, <ent type='PERSON'>Shorafa</ent> financed a company
that received an exclusive contract to ship U.S. arms
to <ent type='GPE'>Egypt</ent> right after the Camp David accords.
Internal <ent type='ORG'>BCCI</ent> documents show that <ent type='ORG'>BCCI</ent> gave Fulajj at
least $113 million in loans and <ent type='PERSON'>Shorafa</ent> $123 million
in loans.
<ent type='PERSON'>Agha Hasan</ent> Abedi, BCCI's founder, kept close ties
to <ent type='GPE'>Pakistan</ent>i military and intelligence officials.
Abedi hired a number of bank officials with links to
the <ent type='GPE'>Pakistan</ent>i military or intelligence services. The
"Financial Times" of <ent type='GPE'>London</ent> has reported that the <ent type='ORG'>CIA</ent>
used <ent type='ORG'>BCCI</ent> to funnel payments to the <ent type='GPE'>Pakistan</ent>i
military. Recently, the "<ent type='ORG'>Wall Street Journal</ent>
reported that one top <ent type='GPE'>Pakistan</ent>i official who refused
to extradite Abedi to <ent type='GPE'>the United</ent> States to face
charges of fraud and larceny, "had received (from
<ent type='ORG'>BCCI</ent>) a monthly stipend, free travel, a home loan and
an expensive automobile."
Abedi was so close to <ent type='GPE'>Pakistan</ent>i Dictator <ent type='PERSON'>Zia</ent> al-Haq, that <ent type='PERSON'>Zia</ent> rushed to Abedi's bedside when the
banker had a heart attack. Zia's term in office
produced massive human rights violations and
continual allegations that top Kaistani officials
were involved in the lucrative heroin trade. <ent type='PERSON'>Zia</ent>
overthrew the democratically elected government of
<ent type='PERSON'>Zulfikav Ali Bhutto</ent> and executed <ent type='ORG'>Bhutto</ent>.
The U.S. government rewarded Zia's support for the
<ent type='NORP'>Afghan</ent> rebels with $2.1 billion worth of U.S. Agency
for <ent type='ORG'>International Development</ent> grants and hundreds of
millions of dollars in military aid.
The <ent type='PERSON'>bin Mahfouz</ent> family--which owns Saudi Arabia's
largest bank--sold its 20 percent stake in <ent type='ORG'>BCCI</ent> in
1990. The family also has a long history of
corruption and financial fraud. In the late '70s,
for example, the family teamed up with the Hunt
brothers, infamous <ent type='GPE'>Texas</ent> oil barons, in an illegal
attempt to manipulate the price of silver by
cornering the world silver market. The operation
nearly touched off a worldwide financial panic before
it was halted by U.S. regulators. More recently, the
<ent type='PERSON'>bin Mahfouz</ent> family used <ent type='ORG'>BCCI</ent> as a private piggy bank,
receiving over $176 million in unsecured loans from
the bank.
Sheikh <ent type='PERSON'>Zayed bin Sultan</ent> al-Nahyan, the ruler of Abu
Dhabi and head of <ent type='GPE'>the United</ent> Arab Emirates us BCCI's
largest shareholder. He rose to power in 1966 when
the <ent type='NORP'>British</ent> encouraged him to overthrow his brother,
Sheikh <ent type='ORG'>Shakbut</ent>, who provoked widespread unrest by
refusing to spend his oil revenues on various
development schemes. (<ent type='ORG'>Shakbut</ent> once justified his
policies by saying the oil companies needed the money
more than the citizens of his country did.)
<ent type='PERSON'>Sheik Zayed</ent> proved to be the more enlightened
ruler, spending billions to establish a social
welfare state for the citizens of Abu Dhabi. But he
still treats Abu Dhabi's oil revenues (about $1
billion a month) as personal income, using it to
build lavish mansions around the world. As a staunch
U.S. ally, he has spent billions on U.S. and European
arms. President <ent type='PERSON'>Bush</ent> recently asked <ent type='ORG'>Congress</ent> to
approve another $648 million U.S. arms deal as a
reward for <ent type='PERSON'>Sheik Zayed</ent>'s staunch support for the U.S.
during the <ent type='GPE'>Iraq</ent> war.
------------------------------------------------------------------ </p>

<p> <ent type='ORG'>LOOTING</ent> THE THIRD WORLD: During the '80s, <ent type='NORP'>American</ent>s weren't the
only ones faced with cuts in social services and declining
standards of living. Between 1980 and 1985, average incomes in
Latin <ent type='GPE'>America</ent> fell by 9 percent. Some heavily indebted countries
like <ent type='GPE'>Argentina</ent> (where incomes dropped 17.7 percent) and <ent type='GPE'>Bolivia</ent>
(down 29.4 percent) fared even worse.
But, as the average Latin <ent type='NORP'>American</ent> suffered, wealthy elites used
banks like <ent type='ORG'>BCCI</ent> to take hundreds of billions of dollars out of
their homelands. <ent type='ORG'>Court</ent> documents and Senate hearings show that
Panama's <ent type='PERSON'>Manuel Noriega</ent>, Iraq's <ent type='PERSON'>Saddam Hussein</ent>, the <ent type='GPE'>Philippines</ent>'
Ferdinand Marcos, Haiti's Jean-Claude Duvalier and other dictators
used <ent type='ORG'>BCCI</ent> to steal billions of dollars from native countries. The
<ent type='ORG'>BCCI</ent> affair illustrates how large multinational corporations have
established close financial and political ties with corrupt
Third-World elites, who used <ent type='NORP'>Western</ent> arms sales, political
repression and the <ent type='ORG'>CIA</ent> to maintain their power (see accompanying
story in box).
But in going after the capital-flight business, <ent type='ORG'>BCCI</ent> wasn't
doing anything out of the ordinary. Estimates of how much money
has been moved out of Third-World countries vary, but all of them
are alarming. <ent type='ORG'>Morgan Guarantee Trust</ent>, a U.S. financial
institution, estimates that local elites transferred over $200
billion out of the Third-World into the <ent type='NORP'>Western</ent> financial system
between 1975 and 1985. Other researchers have produced estimates
as high as $660 billion--equal to about half of all outstanding
Third-World debts. <ent type='ORG'>Morgan Guarantee</ent> notes that the ten most-heavily indebted Latin <ent type='NORP'>American</ent> countries borrowed $375 billion
between 1975 and 1985. During that time, an amount equal to about
half of that borrowed money was siphoned out of these countries by
capital flight. <ent type='GPE'>Venezuela</ent>, for example borrowed $36 billion, but
had $41 billion leave the country. </p>

<p> BCCI'S PALS IN HIGH PLACES: Such huge debts have left many
Third-World countries dependent on the International Monetary
Fund, the World <ent type='ORG'>Bank</ent>, the U.S. government and various other
international development bodies. But these bodies have promoted
Third-World development strategies that stress foreign
investment--thus increasing the power of multinational
corporations. <ent type='ORG'>BCCI</ent> was one of the primary beneficiaries of such
policies.
The <ent type='ORG'>IMF</ent>, the World <ent type='ORG'>Bank</ent> and the U.S. government have supported a
number of projects to establish offshore havens. BCCI's most
notorious money-laundering operation occurred in <ent type='GPE'>Panama</ent>, where one
<ent type='ORG'>BCCI</ent> official says he acted as <ent type='PERSON'>Manuel Noriega</ent>'s "personal banker."
This, of course, wouldn't have been possible if a U.S. Agency for
<ent type='ORG'>International Development</ent> official hadn't helped <ent type='GPE'>Panama</ent> set up an
offshore haven in 1970.
<ent type='ORG'>BCCI</ent> also had large operations in virtually every <ent type='NORP'>Caribbean</ent>
offshore haven--and it established close ties to many <ent type='NORP'>Caribbean</ent>
governments. Internal <ent type='ORG'>BCCI</ent> documents show that the bank received
large deposits from virtually every central bank in the <ent type='NORP'>Caribbean</ent>
and from the <ent type='NORP'>Caribbean</ent> Development <ent type='ORG'>Bank</ent> (<ent type='ORG'>CDB</ent>), a regional lending
institution that is heavily funded by <ent type='GPE'>the United</ent> States. The <ent type='ORG'>CDB</ent>
has provided many loans to <ent type='NORP'>Caribbean</ent> countries who wanted to set
up tax-free industrial havens for multinational corporations.
But ties between <ent type='ORG'>BCCI</ent> and development agencies went far beyond
general policy discussions and the creation of offshore havens.
The "<ent type='ORG'>Wall Street Journal</ent>" noted recently that "[t]he U.S.
government was one of BCCI's biggest customers in <ent type='GPE'>Cameroon</ent>, with
$10 million in U.S. Agency for <ent type='ORG'>International Development</ent> accounts.
That is equal to about 5 percent of <ent type='ORG'>BCCI</ent> Cameroon's published
assets."
More importantly, "In These Times" has learned that the <ent type='ORG'>IMF</ent>
contacted officials at central banks in <ent type='GPE'>Brazil</ent>, <ent type='GPE'>Argentina</ent> and
<ent type='GPE'>Uruguay</ent> about BCCI's expansion into Latin <ent type='GPE'>America</ent>. The <ent type='ORG'>IMF</ent> also
gave <ent type='ORG'>BCCI</ent> advice on how the bank could expand its operations in
<ent type='GPE'>Bolivia</ent>, <ent type='GPE'>Chile</ent>, <ent type='GPE'>Peru</ent>, <ent type='GPE'>Colombia</ent>, <ent type='GPE'>Ecuador</ent>, <ent type='GPE'>Mexico</ent> and <ent type='GPE'>Venezuela</ent>.
The <ent type='ORG'>IMF</ent> further suggested that <ent type='ORG'>BCCI</ent> might get deposits from
central banks in Latin <ent type='GPE'>America</ent> if it established correspondent
bank relationships with these banks. (Correspondent banks provide
various financial services for each other, such as taking deposits
and wire transfers.) After it followed that advice, <ent type='ORG'>BCCI</ent>
eventually established banking relationships with central banks in
at least 30 countries around the world. Because of BCCI's
financial troubles, many of these banks may lose a large share of
the money they deposited with <ent type='ORG'>BCCI</ent>. One former World <ent type='ORG'>Bank</ent> and <ent type='ORG'>IMF</ent>
official has already been indicted by <ent type='GPE'>Peru</ent>vian officials for his
role in having Peru's central bank reserves deposited at <ent type='ORG'>BCCI</ent>.
<ent type='ORG'>BCCI</ent> put together other deals that involved the World <ent type='ORG'>Bank</ent> and
the <ent type='ORG'>IMF</ent>. According to "Time" magazine, <ent type='ORG'>BCCI</ent> intervened in a
dispute between the <ent type='ORG'>IMF</ent> and <ent type='GPE'>Jamaica</ent> over the country's inability
to pay its mounting debts. <ent type='ORG'>BCCI</ent> brokered a deal with the <ent type='ORG'>IMF</ent> in
which <ent type='ORG'>BCCI</ent> agreed to provide a new $48 million loan to <ent type='GPE'>Jamaica</ent>.
Soon thereafter, Jamaica's central bank agreed to make large
deposits with <ent type='ORG'>BCCI</ent>.
One <ent type='ORG'>BCCI</ent> employee, <ent type='PERSON'>Amjad Awan</ent>, also told <ent type='PERSON'>Kerry</ent> subcommittee
investigators that the World <ent type='ORG'>Bank</ent> suggested <ent type='ORG'>BCCI</ent> provide a loan to
<ent type='GPE'>Bolivia</ent>. After <ent type='ORG'>BCCI</ent> provided the loan, which was guaranteed by
the World <ent type='ORG'>Bank</ent>, Bolivia's central bank began depositing money in
<ent type='ORG'>BCCI</ent>. </p>

<p> IN THE RED: Ironically, as the <ent type='ORG'>IMF</ent> and the World <ent type='ORG'>Bank</ent> were using
<ent type='ORG'>BCCI</ent> to help solve the debt crisis in several countries, <ent type='ORG'>BCCI</ent> was
engaging in a number of illegal transactions that actually
increased the debt various Third-World countries were paying.
<ent type='PERSON'>Jack Blum</ent>, a former counsel for the <ent type='PERSON'>Kerry</ent> subcommittee, claims
that <ent type='ORG'>BCCI</ent> became very active in "the business of brokering Third-World debt." Many of these debts, which were in arrears, were
nearly worthless or were being sold by banks for about 20 cents on
the dollar to outside investors. <ent type='PERSON'>Blum</ent> says that these investors
would contact <ent type='ORG'>BCCI</ent>, which would intervene with a Third-World
government. Under a scheme promoted by the <ent type='ORG'>IMF</ent>, the World <ent type='ORG'>Bank</ent>
and <ent type='GPE'>the United</ent> States, many governments would agree to pay back
all of the debt (not just the 20 percent that the investor had
paid for it), if the debt-purchaser would invest the money in the
debtor country or use the money to buy a company the country's
government was trying to sell.
But according to <ent type='PERSON'>Blum</ent>, many investors made huge profits while
investing very little in Third-World nations. An example of such
a transaction can be found in <ent type='GPE'>Argentina</ent>. In the late '80s, <ent type='ORG'>BCCI</ent>
bought <ent type='NORP'>Argentinian</ent> debt for an unknown discount, then had the
<ent type='NORP'>Argentinian</ent> government redeem it at full value. It's unclear how
much <ent type='ORG'>BCCI</ent> paid for the <ent type='NORP'>Argentinian</ent> debt, which currently sells for
79 cents on the dollar. Assuming <ent type='ORG'>BCCI</ent> bought the debt at the
current rate (which is a very conservative guess), the bank would
have paid only $30 million for $38 million of debt, producing a
quick $8 million profit.
To hold up the bank's end of the deal, <ent type='ORG'>BCCI</ent> frontman Ghaith
Pharoan then agreed to invest $38 million in a hotel and farm in
<ent type='GPE'>Argentina</ent>. But according to the "<ent type='GPE'>New York</ent> Times," Pharoan only
invested about $10 million. Assuming, conservatively, <ent type='ORG'>BCCI</ent> made
an $8 million windfall on the deal, the bank, in effect, purchased
a $10 million hotel for $2 million. <ent type='GPE'>Argentina</ent>, on the other hand,
spent $38 million to redeem its debt and received only $2 million
in new investment money.
<ent type='PERSON'>Jack Blum</ent> laid out BCCI's illegal Third-World debt operations in
an August 1991 testimony before the <ent type='PERSON'>Kerry</ent> committee. The debt
scam, <ent type='PERSON'>Blum</ent> pointed out, "is a very major business. I think it
runs to billions of dollars."
Yet, like many of the other multibillion-dollar economic scams
covered by this article, Blum's testimony attracted virtually no
press attention. Once again, the mainstream media's lack of
interest in larger economic issues led it to ignore a scandal that
has impoverished many Third-World countries.
<ent type='ORG'>BCCI</ent> is not the first scandal of its kind. In the early '80s,
the Vatican bank scandal produced widespread calls for a tougher
system of international bank regulations. But nothing was done.
As prosecutors sift through the wreakage of the <ent type='ORG'>BCCI</ent> affair,
banks like <ent type='ORG'>BCCI</ent> continue to use offshore havens to help
multinational corporations avoid taxes, and to aid corrupt Third-World leaders in looting their countries. The international
financial system still operates outside the control of any real
government authority. <ent type='ORG'>BCCI</ent> will happen again. </p>

<p> <ent type='PERSON'>George</ent> <ent type='PERSON'>Winslow</ent> is a <ent type='GPE'>New York City</ent> freelance writer who regularly
covers white-collar crime and international finance. </p>

<p> In Part II, "In These Times" shows how larger economic issues shed
new light on BCCI's more notorious operations--the bank's ties to
the <ent type='ORG'>CIA</ent>, drug dealers, sleazy S&amp;Ls, and influence peddlers. </p>

<p> --
daveus rattus </p>

<p> yer friendly neighborhood ratman </p>

<p> KOYAANISQATSI </p>

<p> ko.yan.nis.qatsi (from <ent type='EVENT'>the Hopi Language</ent>) n. 1. crazy life. 2. life
in turmoil. 3. life out of balance. 4. life disintegrating.
5. a state of life that calls for another way of living. </p>

<p> Article 1633 of misc.activism.progressive:
From: dave@ratmandu.corp.sgi.com (dave "who can do? ratmandu!" ratcliffe)
Newsgroups: misc.activism.progressive
Subject: will <ent type='ORG'>BCCI</ent> happen again? bank on it. (part 2 of 2)
<info type="Message-ID"> 1991Dec5.000939.15744@pencil.cs.missouri.edu</info>
Date: 5 Dec 91 00:09:39 GMT
Sender: rich@pencil.cs.missouri.edu (<ent type='PERSON'>Rich Winkel</ent>)
Followup-To: alt.activism.d
Organization: <ent type='ORG'>PAC</ent>H
Lines: 613
Approved: map@pencil.cs.missouri.edu </p>

<p> The following is part two of a two-part series on <ent type='ORG'>BCCI</ent>.
Reprinted with permission of "In These Times." </p>

<p> Meanwhile, the Reagan and <ent type='PERSON'>Bush</ent> administrations actively
obstructed a congressional investigation of the scandal. A Senate
subcommittee chaired by Sen. <ent type='PERSON'>John Kerry</ent> (D-MA) has been
investigating <ent type='ORG'>BCCI</ent> for several years. From the start, the
subcommittee encountered resistance from the administration. For
example, the Justice Department ordered key witnesses not to
cooperate with <ent type='PERSON'>Kerry</ent>. The department also refused to produce
documents subpoenaed by the subcommittee.
But these machinations are only part of a much larger political
scandal--the growing political power of financial institutions
over every aspect of the <ent type='NORP'>American</ent> political system. Over the past
decade, securities firms, major banks, insurance companies and
other financial institutions have given more money to <ent type='ORG'>Congress</ent>
than any other industry. </p>

<p> from the October 30-November 5, 1991 issue of "IN THESE TIMES":
----------------------------------------------------------------------
<ent type='ORG'>BCCI</ent> THE BIG PICTURE
New capitalism: bank fraud, drug trade, espionage
By <ent type='PERSON'>George</ent> <ent type='PERSON'>Winslow</ent> </p>

<p> In its October 23 issue, "In These Times" began a two-part
series on the broader economic and social issues of the <ent type='ORG'>BCCI</ent>
affair. Author <ent type='PERSON'>George</ent> <ent type='PERSON'>Winslow</ent> argued that the real scandal
was not a lone wayward bank, but a world financial system
out of control. <ent type='PERSON'>Winslow</ent> examined how, during the past two
decades, multinational corporations rose to global economic
dominance. He then documented the way in which operations
like <ent type='ORG'>BCCI</ent> use "offshore havens" to do these corporations
banking.
Such havens--located in places like <ent type='GPE'>Panama</ent>, <ent type='GPE'>Hong Kong</ent> and
the <ent type='GPE'>Bahamas</ent>--free corporations from the taxes, oversight and
laws of their home countries. They also help Third-World
leaders loot their own nations, thus increasing those
countries debts and putting further strain on the shaky U.S.
economy. No matter what happens in the ongoing <ent type='ORG'>BCCI</ent>
investigation, <ent type='PERSON'>Winslow</ent> concluded, the offshore financial
system that spawned the bank still operates outside of the
control of any real government authority. "<ent type='ORG'>BCCI</ent> will happen
again," he wrote.
In the following story, <ent type='PERSON'>Winslow</ent> examines how larger economic
issues shed new light on BCCI's more notorious operations--
the bank's ties to the <ent type='ORG'>CIA</ent>, drug dealers, sleazy S&amp;Ls and
influence peddlers. </p>

<p> EVEN IN <ent type='GPE'>MIAMI</ent>, WHERE EXCESS HAS BECOME a fine art, <ent type='PERSON'>David Paul</ent>, the
chairman of CenTrust <ent type='ORG'>Savings</ent> <ent type='ORG'>Bank</ent>, stood out from the pack. <ent type='PERSON'>Paul</ent>,
who raised lots of money for top <ent type='ORG'>Democratic Party</ent> politicians,
used bank funds to buy a $13 million Rubens that he hung in his
opulent estate and insisted that his $7 million yacht be built
with 14 carat gold nails.
But by the late '80s, <ent type='PERSON'>Paul</ent> was in trouble. CenTrust, like many
other S&amp;Ls, had suffered huge losses by speculating in securities
and junk bonds. For years he had hidden the losses with
accounting tricks that were legalized by <ent type='ORG'>Congress</ent> and the Reagan
administration. But, as the public began howling about fraud in
the S&amp;L industry, bank regulators ordered <ent type='PERSON'>Paul</ent> to make the losses
public, a move that threatened to ruin his bank.
To buy time, <ent type='PERSON'>Paul</ent> used his political clout to arrange meetings
with top regulators in the Reagan administration. At the
meetings, <ent type='PERSON'>Paul</ent> introduced <ent type='ORG'>Ghaith Pharaon</ent>, a wealthy Saudi
financier who had already bought 25 percent of CenTrust. <ent type='PERSON'>Paul</ent>
implied that <ent type='NORP'>Pharaon</ent> and his wealthy Saudi friends planned to save
the bank.
Impressed with this display of wealth, regulators let CenTrust
stay in business. CenTrust lost more money and <ent type='PERSON'>Paul</ent> kept throwing
lavish parties--at one $122000 affair he flew six famous chefs
first class from <ent type='GPE'>the United</ent> States to <ent type='GPE'>France</ent>. When bank
regulators finally shut down CenTrust in 1990, taxpayers got stuck
with a bill for $2 billion.
The CenTrust fiasco took place in <ent type='GPE'>Florida</ent> and <ent type='GPE'>Washington</ent>--half-way around the world from Abu Dhabi, where a number of <ent type='ORG'>Bank</ent> of
Credit and <ent type='ORG'>Commerce International</ent> (<ent type='ORG'>BCCI</ent>) executives are now under
house arrest. But the CenTrust affair illustrates how the sun
never sets on the new world of bank fraud. <ent type='ORG'>Ghaith Pharaon</ent>--the
wealthy Saudi financier who was supposed to save CenTrust--was
simply one of the front men that <ent type='ORG'>BCCI</ent> used to secretly buy and
loot at least four <ent type='NORP'>American</ent> banks. </p>

<p> THE PRICE WE PAY: The "<ent type='GPE'>New York</ent> Times" recently assured its
readers that many of BCCI's crimes would have little effect on
<ent type='NORP'>American</ent>s. "[The] money laundering and other corruption at <ent type='ORG'>BCCI</ent>
occurred largely overseas. ... The criminals and most, if not
all, of the victims of BCCI's scams were foreigners," the "Times"
wrote.
But that is not at all the case--and in this article, "In These
Times" will examine how and why. Many of BCCI's alleged crimes,
such as its involvement in the S&amp;L scandal, were conceived in the
United States--and most of the bank's foreign criminal activity
would not have been possible without the complicity of <ent type='NORP'>American</ent>
business and government.
Today, it would be hard to find an <ent type='NORP'>American</ent> who hasn't been
victimized by <ent type='ORG'>BCCI</ent>. Taxpayers have spent billions of dollars, and
may have to spend billions more, to bail out banks looted by <ent type='ORG'>BCCI</ent>
and its clients. Financial services provided by <ent type='ORG'>BCCI</ent> and other
banks helped international drug traffickers bring tens of billions
of dollars worth of illegal narcotics into <ent type='GPE'>the United</ent> States.
Arms transactions financed or administered by <ent type='ORG'>BCCI</ent> accelerated a
<ent type='LOC'>Mideast</ent>ern arms race that helped trigger the U.S.-<ent type='GPE'>Iraq</ent>i war. And
<ent type='ORG'>BCCI</ent> was not the only major financial institution to profit from
bank fraud, arms deals and drug smuggling. These problems--and
the financial system that nourishes them--will continue. </p>

<p> <ent type='ORG'>SEC</ent>RET INVASION: Only five years after being founded in the Third
World, <ent type='ORG'>BCCI</ent> began its invasion of <ent type='GPE'>America</ent>. In 1977, several of
BCCI's largest shareholders launched a hostile bid for the largest
bank in <ent type='GPE'>Washington</ent>, D.C., Financial General <ent type='ORG'>Bank</ent>shares (now called
First <ent type='NORP'>American</ent> <ent type='ORG'>Bank</ent>shares). There were problems from the start.
A number of the investors were simply <ent type='ORG'>BCCI</ent> front men, many of them
with long histories of involvement in corporate bribery scandals.
A <ent type='ORG'>Securities and Exchange Commission</ent> (<ent type='ORG'>SEC</ent>) investigation into the
deal uncovered a wide range of illegal securities transactions.
Normally these violations would have disqualified potential
investors from handling billions of dollars in federally insured
deposits. But BCCI's high-powered legal team, headed by Clark
Clifford--a former secretary of defense and adviser to four
presidents--convinced <ent type='ORG'>the Federal Reserve Board</ent> to approve the
deal on the condition that <ent type='ORG'>BCCI</ent> would not control the bank. It
was a condition <ent type='ORG'>BCCI</ent> ignored from the start. Over the next
decade, <ent type='ORG'>BCCI</ent> also used <ent type='ORG'>Ghaith Pharaon</ent> as a frontman to secretly
acquire a minority stake in CenTrust, as well as controlling
interests in the National <ent type='ORG'>Bank</ent> of Georgia and the Independence
<ent type='ORG'>Bank</ent> of Encino, <ent type='GPE'>Calif</ent>. As with its secret purchase of First
<ent type='NORP'>American</ent> <ent type='ORG'>Bank</ent>shares, <ent type='ORG'>BCCI</ent> shifted money through a bewildering
array of offshore havens to convince regulators that the banks
were being bought by wealthy <ent type='NORP'>Arabs</ent> with lots of cash. In fact,
the real owner was <ent type='ORG'>BCCI</ent>.
Then, <ent type='ORG'>BCCI</ent> used the same system of offshore finance to loot the
banks. For example, soon after <ent type='ORG'>BCCI</ent> lost over $849 million
speculating in U.S. <ent type='ORG'>Treasury</ent> bonds, <ent type='ORG'>BCCI</ent> executives had First
<ent type='NORP'>American</ent> <ent type='ORG'>Bank</ent>shares (<ent type='ORG'>FAB</ent>) pay $220 million for <ent type='ORG'>Ghaith Pharaon</ent>'s
shares in National Georgia <ent type='ORG'>Bank</ent>. According to the "Wall Street
Journal," <ent type='ORG'>FAB</ent> paid between $20 million to $60 million more than
any other bank was willing to pay. The deal had the effect of
transferring $220 million from a very solvent bank, <ent type='ORG'>FAB</ent>, to
<ent type='NORP'>Pharaon</ent> and <ent type='ORG'>BCCI</ent> at a time when the latter two were in deep
financial trouble.
Today, the effects of BCCI's involvement are plain. <ent type='ORG'>FAB</ent>, once a
solvent, well-capitalized commercial bank, is in dire financial
straits. Recently regulators gave <ent type='ORG'>FAB</ent>, which lost $182 million in
1990, a rating of "four." Five means the banks is broke and
should be shut down: one is an excellent rating. The $11 billion
bank, which now has $469 million worth of bad loans, could easily
cost U.S. taxpayers billions of dollars if it collapses. </p>

<p> NEW RULES: More importantly, the <ent type='ORG'>FAB</ent> fiasco illustrates how the
new world of international finance has affected the <ent type='NORP'>American</ent>
banking industry. The increasingly unregulated international
financial system of the '70s and <ent type='NORP'>American</ent> financial system as
well.
This deregulation dramatically changed the structure of <ent type='NORP'>American</ent>
finance (see "In These Times," Oct. 2). For the first time since
the <ent type='EVENT'>Depression</ent>, banks were allowed to expand their operations into
the insurance and securities markets. <ent type='ORG'>Savings</ent>-and-loan
associations were permitted to make speculative investments in the
commercial real-estate market--a practice that ruined many S&amp;Ls.
Large corporations, which had once raised most of their short-term
debt from commercial banks, now turned to foreign banks and Wall
Street firms. Securities firms such as <ent type='ORG'>Merrill Lynch</ent> offered
certificates of deposit--encroaching on a traditional market of
banks--and channeled tens of billions of dollars into shady S&amp;Ls.
Finance companies--especially subsidiaries of large auto makers--
stepped onto another traditional turf of the banking industry the
auto-loan market. <ent type='ORG'>Sears</ent> and other retailers. which were once
content to sell power tools and lawn chairs, began peddling credit
cards and stocks.
These changes not only increased competition among financial
institutions, but also reduced profits and led to increasingly
speculative investments. <ent type='ORG'>Deregulation</ent> led to a decade of
financial fraud and mismanagement. Like <ent type='ORG'>BCCI</ent>, some S&amp;L owners
used secret bank accounts in offshore havens to hide their
ownership or to embezzle millions of dollars.
Federal authorities made it easier for investors to buy banks,
allowing many shady financiers to move into the industry. Many of
these financiers, such as <ent type='PERSON'>Charles Keating</ent> and <ent type='PERSON'>David Paul</ent>, set up
elaborate business and political ties with BCCI's clients,
advisers and shareholders. These ties show that <ent type='ORG'>BCCI</ent> was not
simply a foreign problem--and that the S&amp;L scandal goes far beyond
U.S. borders. In the '80s, high-flying institutions like <ent type='ORG'>BCCI</ent> and
CenTrust became magnets for con artists of all kinds. </p>

<p> <ent type='ORG'>BCCI</ent> AND THE S&amp;L SCANDAL: For example, <ent type='PERSON'>Charles Keating</ent> and his
thrift, <ent type='ORG'>Lincoln</ent> <ent type='ORG'>Savings</ent> and Loan, invested millions of dollars in
Trendinvest, an offshore company that speculated in foreign
currencies. According to the "<ent type='ORG'>Wall Street Journal</ent>," <ent type='ORG'>Lincoln</ent>
suffered "large losses" from trades made at Trendinvest and
"lawyers representing investors ... defrauded by Mr. <ent type='PERSON'>Keating</ent> . .
. accuse him of shifting money overseas through such mechanisms as
foreign exchange losses."
A <ent type='ORG'>BCCI</ent> executive, <ent type='PERSON'>Alfred Hartmann</ent>, served on Trendinvest's board
of directors and advised <ent type='PERSON'>Keating</ent> on the foreign-exchange
transactions. In 1989, <ent type='ORG'>Lincoln</ent> <ent type='ORG'>Savings</ent> and Loan filed for
bankruptcy--a move that cost taxpayers over $2.5 billion.
Another notorious S&amp;L con artist is <ent type='PERSON'>Herman Beebe</ent>. <ent type='ORG'>Beebe</ent> had a
history of bank fraud as well as alleged business ties to the
<ent type='ORG'>Mafia</ent>--which would normally have prevented him from buying a bank.
But in the '80s world of deregulated banking, <ent type='ORG'>Beebe</ent> was able to
secretly buy and loot at least 100 S&amp;Ls.
Beebe's exploits are documented in the book, "Inside Job: The
Looting of America's <ent type='ORG'>Savings</ent> and Loans," by <ent type='PERSON'>Stephen Pizzo</ent>, Mary
Fricker and <ent type='PERSON'>Paul</ent> Muolo. According to the authors, one of Beebe's
closest business associates, <ent type='PERSON'>Ben Barnes</ent>, set up partnership with
John Connally, the former governor of <ent type='GPE'>Texas</ent>. The partnership
borrowed money from at least 17 S&amp;Ls. But the partnership failed
to pay back many of the loans, due to the real-estate crash.
Connally, a one-time US. treasury secretary, was forced into
bankruptcy.
In the late '70s, Connally owned a <ent type='GPE'>Texas</ent> bank with <ent type='ORG'>BCCI</ent> front
man <ent type='NORP'>Pharaon</ent>, according to <ent type='PERSON'>Stephen Fay</ent>'s book, "Beyond Greed: The
Hunt Family's Bold Attempt to Corner the Silver Market." Connally
introduced the <ent type='PERSON'>bin Mafouze</ent> family, BCCI's second-largest
shareholder, to the Hunt brothers, the infamous oil barons who
lost their $10 billion fortune trying to illegally manipulate the
world's silver market. The <ent type='PERSON'>bin Mafouze</ent> family and <ent type='NORP'>Pharaon</ent>
invested in the Hunt scam and suffered huge losses.
Through <ent type='NORP'>Pharaon</ent> and CenTrust, the <ent type='ORG'>BCCI</ent> connection also leads
back to the biggest con artists of the S&amp;L scandal--<ent type='PERSON'>Michael Milken</ent>
and his firm, <ent type='ORG'>Drexel Burnham Lambert</ent>. The Federal Deposit
Insurance Corporation (<ent type='ORG'>FDIC</ent>) has charged that <ent type='ORG'>Milken</ent>, <ent type='ORG'>Drexel</ent>,
CenTrust's <ent type='PERSON'>Paul</ent> and <ent type='ORG'>BCCI</ent> rigged a sale of $150 million worth of
junk bonds to make it appear as if CenTrust had raised more
capital than it actually had.
More importantly, a $6.8 billion suit filed by the <ent type='ORG'>FDIC</ent> alleges
that <ent type='ORG'>Milken</ent>, <ent type='ORG'>Drexel</ent>, <ent type='PERSON'>Keating</ent> and <ent type='PERSON'>Paul</ent> set up a network of junk-bond buyers at CenTrust and other S&amp;Ls who "wilfully, deliberately
and systematically plundered certain S&amp;Ls." This network used
"illegal and manipulative secretive trading activities" to trade
bonds back and forth to each other, creating "an illusion of an
efficient, growing and liquid market for junk bonds."
In other words, the <ent type='ORG'>FDIC</ent> believes that the network created a
bogus market for junk bonds that artificially inflated the prices
for these bonds. When the market finally collapsed, many S&amp;Ls
such as CenTrust, went broke, costing taxpayers at least $6
billion. </p>

<p> HOOKED ON DRUG MONEY: Financial crime, however, wasn't the only
toxic byproduct of global financial deregulation. The authors of
"Inside Job" have noted that organized crime groups produced tens
of billions of dollars worth of revenue each year. These criminal
organizations needed financial institutions to launder their
profits: "Thrift deregulation fulfilled ... those needs nicely.
... Not only had the rules been drastically eased, but the cops
[thrift examiners] were no longer much of a threat, their ranks
having been gutted after state and federal deregulation."
Financial pressures also forced many banks to turn a blind eye
toward money laundering. Faced with declining profits, bad
Third-World debts and increased competition, banks needed new
deposits and customers.
Handling drug money had been illegal in <ent type='GPE'>the United</ent> States since
<ent type='ORG'>the Bank</ent> Secrecy Act of 1970. But, in practice, the rewards often
exceeded the penalties. Between 1970 and 1985, only two thrifts
were fined for money laundering. And a federal crackdown on money
laundering in the mid-'80s produced only $21 million worth of
fines against 44 banks--a small portion of the $50 billion to $100
billion worth of drug money laundered through <ent type='NORP'>American</ent> banks each
year. <ent type='ORG'>BCCI</ent> was one of the banks that capitalized on this booming
industry. Like many other financially troubled institutions,
drug-cartel deposits helped <ent type='ORG'>BCCI</ent> hide its losses and keep growing.
Naturally, <ent type='ORG'>BCCI</ent> executives worked very hard to keep their
customers happy.
<ent type='GPE'>Panama</ent>nian dictator <ent type='PERSON'>Manuel Noriega</ent>, for example, received
millions of dollars in kickbacks from the <ent type='GPE'>Medellin</ent> drug cartel.
When <ent type='PERSON'>Noriega</ent> set up a $25 million account with <ent type='ORG'>BCCI</ent>, bank
executives issued him credit cards for his wife and mistress.
They booked him into posh <ent type='GPE'>New York City</ent> hotels and they took him
on shopping sprees at the city's largest department stores where
<ent type='PERSON'>Noriega</ent> ran up as much as $100000 worth of credit-card bills.
<ent type='PERSON'>Noriega</ent> is believed to have laundered at least $90 million through
<ent type='ORG'>BCCI</ent>.
In other cases, <ent type='ORG'>BCCI</ent> actually helped drug dealers set up
sophisticated laundering systems. For example, when a U.S.
undercover agent, <ent type='PERSON'>Robert Musella</ent>, began depositing money from the
<ent type='GPE'>Medellin</ent> cartel at <ent type='ORG'>BCCI</ent>, the bank sent <ent type='ORG'>Musella</ent> to Europe for a
kind of seminar in laundering. Then, <ent type='ORG'>BCCI</ent> set up a <ent type='NORP'>Byzantine</ent>
system of offshore corporations and banks that <ent type='ORG'>Musella</ent> used to
launder $16 million in drug money.
Here, BCCI's skill at manipulating the deregulated U.S. banking
industry played a key role. At least some of the drug money that
<ent type='ORG'>Musella</ent> was laundering for the <ent type='GPE'>Medellin</ent> cartel made its way
through First <ent type='NORP'>American</ent> and other banks secretly controlled by
<ent type='ORG'>BCCI</ent>, according to House <ent type='ORG'>Bank</ent>ing Committee investigators.
<ent type='ORG'>BCCI</ent> taught <ent type='ORG'>Musella</ent> so much about the secret world of money
laundering that government investigators were able to indict 85
people and launch investigations into the activities of 41 major
banks, including <ent type='ORG'>Bank</ent> of <ent type='GPE'>America</ent>. <ent type='ORG'>BCCI</ent> eventually paid a $15
million fine, only a small part of the profits it made from
laundering over $1 billion worth of drug money for the <ent type='GPE'>Medellin</ent>
cartel in the '80s.
But while the mainstream media has focused on <ent type='ORG'>BCCI</ent> as a full-service bank for drug dealers, media reports have paid very little
attention to money laundering by other major banks. For example,
<ent type='ORG'>Bank</ent> of <ent type='GPE'>America</ent> was hit with a $4.75 million fine for money
laundering in 1986. It was the largest money-laundering fine
until the <ent type='ORG'>BCCI</ent> case. Yet two years later, the financially
troubled <ent type='ORG'>Bank</ent> of <ent type='GPE'>America</ent> was still laundering money.
In 1989, U.S. investigators cracked an operation that used
jewelry stores, <ent type='ORG'>BCCI</ent> and many other banks to launder over $12
billion in cocaine profits for the <ent type='GPE'>Medellin</ent> cartel. Major banks
that accepted cash deposits from the drug-money-laundering
organization included <ent type='ORG'>Bank</ent> of <ent type='GPE'>America</ent> ($32 million), Republic
National <ent type='ORG'>Bank</ent> ($185 million), <ent type='NORP'>American</ent> Express <ent type='ORG'>Bank</ent> ($11 million),
<ent type='ORG'>Citibank</ent> ($63 million), and <ent type='ORG'>Extebank</ent> ($138 million). (<ent type='ORG'>BCCI</ent>, which
received a $13 million wire transfer from <ent type='ORG'>the Bank</ent> of <ent type='GPE'>New York</ent>,
was a relatively minor player in this scheme.) </p>

<p> DRUGS, GUNS AND <ent type='ORG'>IDEOLOGY</ent>: BCCI's money-laundering activities also
have a political context that has been largely ignored by the
mainstream media. Over the last decade, the Reagan and <ent type='PERSON'>Bush</ent>
administrations have attempted to portray the war against drugs as
a <ent type='EVENT'>Cold War</ent> crusade. By attacking "narco-terrorists," Reagan
attempted to link Latin <ent type='NORP'>American</ent> revolutionaries and Latin
<ent type='NORP'>American</ent> drug traffickers--thus justifying, for example, U.S.
military intervention in <ent type='GPE'>Nicaragua</ent>. Likewise, <ent type='PERSON'>Bush</ent> recently sent
military advisers to <ent type='GPE'>Peru</ent> to fight left-wing guerrillas involved
in the drug trade.
But, in fact, billionaires who run the drug cartels are hardly
left-wing rebels. They are a lot like most wealthy Third-World
elites who use terror and illegal arms deals to maintain their
power.
In 1989, for example, <ent type='GPE'>Colombia</ent>n officials raided the farm of
<ent type='PERSON'>Gonzalo Rodriquez Gacha</ent>, one of the founders and a top leader of
the <ent type='GPE'>Medellin</ent> drug cartel. Here they found hundreds of assault
rifles that had been imported from <ent type='ORG'>the Israel Military Industries</ent>,
the state-owned arms manufacturers.
They also found a bizarre home video. It showed members of the
cartel at a paramilitary training camp attacking a mock village
and firing their guns into homes. The men were screaming
"<ent type='NORP'>Communist</ent> guerrillas, we want to drink your blood"--hardly a
slogan that <ent type='NORP'>Marxist</ent> revolutionaries would use.
The weapons, <ent type='GPE'>Colombia</ent>n officials soon discovered, had been used
to assassinate a number of union leaders attempting to organize
workers at large farms owned by the cartel. The paramilitary
camp--backed by the <ent type='GPE'>Colombia</ent>n military and financed by the
cartel--trained <ent type='GPE'>Colombia</ent>n death squads. The camp had been set up
by <ent type='NORP'>Israeli</ent> arms dealers and former military officers.
One officer, Lt. Col. <ent type='PERSON'>Amatzia Shuali</ent> had trained military
officers in <ent type='GPE'>Guatemala</ent> and <ent type='GPE'>Nicaragua</ent>n Contra rebels in <ent type='GPE'>Honduras</ent>.
At the camp, members of the cartel learned how to make bombs that
had been used to blow up a <ent type='GPE'>Colombia</ent>n airliner with 117 passengers.
This horrifying affair has been virtually ignored by the
<ent type='NORP'>American</ent> media and it has not been covered in any of the articles
on <ent type='ORG'>BCCI</ent>. Yet "In These Times" has learned that U.S. government
investigators are probing allegations that <ent type='ORG'>BCCI</ent> had ties to
several of the people who set up the camps. <ent type='ORG'>BCCI</ent> had a large
number of branches in <ent type='GPE'>Colombia</ent> that were used by the cartels, and
<ent type='PERSON'>druglord Gacha</ent> was a <ent type='ORG'>BCCI</ent> customer.
More importantly, the case illustrates how <ent type='EVENT'>Cold War</ent> politics
have corrupted the war on drugs. In <ent type='GPE'>Colombia</ent>, this policy had
disastrous effects. After the discovery of one cocaine lab, U.S.
officials claimed the drug trade was being run by the guerrillas.
The charge was later proven false. In fact, the <ent type='GPE'>Colombia</ent>n
military was aligned with the drug dealers. One of the front
companies used to set up the death-squad camps was actually owned
by the <ent type='GPE'>Colombia</ent>n minister of defense. As a result, millions of
dollars in U.S. aid, earmarked for the war on drugs, was actually
going to fight the guerrillas. </p>

<p> OFFSHORE A-BOMB INDUSTRY: Guns for the drug cartels represented
only a small part of BCCI's arms supermarket. <ent type='ORG'>BCCI</ent> was involved
in the sale of guns to the <ent type='NORP'>Contras</ent> and the <ent type='ORG'>CIA</ent>-backed <ent type='NORP'>Afghan</ent>
rebels. Gun dealers hired by <ent type='ORG'>the National Security Council</ent>'s
<ent type='PERSON'>Oliver</ent> <ent type='PERSON'>North</ent> used the bank to illegally sell tow missiles to <ent type='GPE'>Iran</ent>
during the <ent type='GPE'>Iran</ent>-contra affair. And the banks provided financial
services for Silkworm missiles sold to Saudi Arabia, Scud-B
missiles bought by <ent type='GPE'>Syria</ent>, weapons purchased by the <ent type='PERSON'>Abu Nidal</ent>
terrorist group, <ent type='ORG'>Mirage Jets</ent> acquired by India and helicopters
sold to <ent type='GPE'>Guatemala</ent>.
Some of the most terrifying deals apparently involved atomic
bombs. Sen. <ent type='PERSON'>Alan Cranston</ent> (D-CA), has alleged that <ent type='ORG'>BCCI</ent> was
involved in programs by <ent type='GPE'>Argentina</ent>, <ent type='GPE'>Libya</ent>, <ent type='GPE'>Pakistan</ent> and <ent type='GPE'>Iraq</ent> to
build atomic bombs. In addition, former Senate investigator Jack
<ent type='PERSON'>Blum</ent> says that <ent type='PERSON'>Munther Bilbeisi</ent>, an arms dealer "whose brother was
a [<ent type='ORG'>BCCI</ent>] branch bank manager" and a "major" <ent type='ORG'>BCCI</ent> customer, was
involved "in an effort to sell enriched uranium from <ent type='GPE'>South Africa</ent>
to <ent type='LOC'>the Middle East</ent>."
In each case, arms dealers obtained export licenses under the
pretext of shipping arms to a given country. But the arms would
never arrive at their official destination. Instead using a
system of dummy corporations and secret bank accounts at
unregulated offshore havens, the dealers were able to illegally
ship the materials to their real destination.
So far, the "<ent type='GPE'>Washington</ent> Post" has been the only major paper to
explain that the "global banking system ... makes it relatively
easy to finance cross-borders smuggling of sensitive nuclear
technology." This is partly because "international banks ...
are under no obligation to check whether the materials being
transported are legal." </p>

<p> <ent type='ORG'>BCCI</ent> AND THE <ent type='ORG'>CIA</ent>: More importantly, very few media reports have
put BCCI's arms sales in a larger context of <ent type='NORP'>American</ent> foreign
policy and covert operations.
The congressional <ent type='GPE'>Iran</ent>-Contra committee noted that then-<ent type='ORG'>CIA</ent>
director <ent type='PERSON'>William</ent> Casey "wanted to establish an offshore entity
capable of conducting operations in furtherance of U.S. foreign
policy that was 'stand-alone'--financially independent of
appropriated funds, and, in turn, congressional oversight."
Like the transnational corporations that created the offshore
financial world to avoid government control, the <ent type='ORG'>CIA</ent> was able to
use <ent type='ORG'>BCCI</ent> and the offshore financial system to set up its own
unregulated, private, foreign-policy apparatus. In this way, it
could ignore <ent type='ORG'>Congress</ent>, which had outlawed aid to <ent type='ORG'>the White House</ent>-backed <ent type='ORG'>Nicarguan Contra</ent> rebels, and public opinion, which was
opposed to U.S. military intervention in the region.
Countries that agreed to cooperate with this "secret
government"--including <ent type='GPE'>Panama</ent>, <ent type='GPE'>Israel</ent>, Saudi Arabia and other <ent type='LOC'>Gulf</ent>
states--received billions in U.S. aid and arms during the '80s.
Arms dealers and banks like <ent type='ORG'>BCCI</ent> profited from the deals by
charging huge fees and by receiving official protection for some
of their illegal operations, such as drug smuggling.
BCCI's history, structure and expertise made it a perfect
vehicle for the secret government's covert operations. Set up as
an offshore bank, <ent type='ORG'>BCCI</ent> operated out of unregulated financial
havens where covert operations could be easily hidden. Like many
other corrupt Third-World elites, BCCI's shareholders also had a
long history of ties to <ent type='NORP'>Western</ent> arms dealers and intelligence
agencies.
Panama's <ent type='PERSON'>Manuel Noriega</ent> was an important figure in the secret
scheme to illegally fund the <ent type='NORP'>Contras</ent>. <ent type='PERSON'>Jose Blandon</ent>, a former
<ent type='PERSON'>Noriega</ent> aide, claims that the <ent type='ORG'>CIA</ent> advised <ent type='PERSON'>Noriega</ent> to use <ent type='ORG'>BCCI</ent> as
his bank. Various published sources say that the <ent type='ORG'>CIA</ent> was
depositing as much as $200000 a year in Noriega's account at
<ent type='ORG'>BCCI</ent>. <ent type='PERSON'>Noriega</ent>, in turn, helped <ent type='PERSON'>Oliver</ent> <ent type='PERSON'>North</ent> set up dummy
corporations and secret bank accounts that were used to finance
the <ent type='NORP'>Contras</ent>.
<ent type='GPE'>Israel</ent> also played a key role. <ent type='GPE'>Israel</ent> shipped <ent type='PERSON'>Noriega</ent> more than
$500 million worth of arms during the '80s, supplied the <ent type='NORP'>Contras</ent>
with guns and helped sell weapons to <ent type='GPE'>Iran</ent> in the <ent type='GPE'>Iran</ent>-Contra
affair. <ent type='ORG'>BCCI</ent> is known to have worked with <ent type='NORP'>Israeli</ent> officials on
several arms deals during this period. The bank also provided
financing for a number of arms shipments to <ent type='GPE'>Iran</ent> in the <ent type='GPE'>Iran</ent>-Contra affair. Another country that acted as a <ent type='ORG'>CIA</ent> proxy in
<ent type='GPE'>Iran</ent>-Contra was Saudi Arabia, which gave the <ent type='NORP'>Contras</ent> at least $22
million.
The Saudis also provided <ent type='ORG'>CIA</ent>-supported rebels fighting the
<ent type='NORP'>Soviet</ent>-backed <ent type='NORP'>Afghan</ent> government with about half of their funds.
BCCI's longstanding ties to Pakistan's military and to the Saudi
royal family made the bank a logical choice to funnel <ent type='ORG'>CIA</ent> aid in
<ent type='NORP'>Afghan</ent>istan. Recently, Pakistan's finance minister, <ent type='PERSON'>Sartaj Aziz</ent>,
told the "Financial Times" that <ent type='ORG'>BCCI</ent> was used by the <ent type='ORG'>CIA</ent> to direct
arms and money to the <ent type='NORP'>Afghan</ent>istan rebels. The official also said
that U.S. intelligence agencies had set up a slush fund for
<ent type='GPE'>Pakistan</ent>i military leaders who helped the <ent type='NORP'>Afghan</ent> resistance.
During the same interview, the finance minister claimed drug
traffickers in the region had used <ent type='ORG'>BCCI</ent> to launder profits from
sales of heroin. Furthermore, it's clear that the <ent type='NORP'>Afghan</ent> rebels
sold drugs to buy arms. ("We i must grow and sell opium to fight
our holy war," a rebel commander once told the "<ent type='GPE'>New York</ent> Times.")
And the <ent type='ORG'>CIA</ent> may have been involved. "In These Times" has learned
that government investigators are probing allegations that one <ent type='ORG'>CIA</ent>
official supervised the <ent type='ORG'>BCCI</ent>-financed shipment of drugs and arms
through <ent type='GPE'>Pakistan</ent>. </p>

<p> BANKING ON WAR: But getting rid of <ent type='ORG'>BCCI</ent> won't hinder those
government officials who, like <ent type='PERSON'>William</ent> Casey and <ent type='PERSON'>Oliver</ent> <ent type='PERSON'>North</ent>, are
determined to undermine <ent type='NORP'>American</ent> democracy. It's important to
remember that the <ent type='ORG'>CIA</ent> has used banks like <ent type='ORG'>BCCI</ent> for decades.
During the '60s, '70s and '80s, for example, the <ent type='ORG'>CIA</ent> laundered
money for coups and covert operations through the Castle <ent type='ORG'>Bank</ent> in
the <ent type='GPE'>Bahamas</ent>, <ent type='ORG'>the World Finance Corporation</ent> in <ent type='GPE'>Florida</ent> and the
Nugan Hand <ent type='ORG'>Bank</ent> of Australia. Like <ent type='ORG'>BCCI</ent>, these banks had ties to
organized crime figures, drug dealers and spies. Like <ent type='ORG'>BCCI</ent>, they
all had links to <ent type='NORP'>American</ent> banking and S&amp;L scandals. And like
<ent type='ORG'>BCCI</ent>, fraud and speculative investments by top executives forced
all three banks out of business.
More recently, the <ent type='ORG'>CIA</ent> had ties with 22 failed thrifts that
loaned money to people involved in "gun running, drug smuggling,
money laundering and covert aid to the <ent type='GPE'>Nicaragua</ent>n <ent type='NORP'>Contras</ent>,"
according to the "<ent type='ORG'>Houston Post</ent>."
Over time, the booming <ent type='ORG'>CIA</ent>-backed arms trade has produced big
profits for arms dealers and banks like <ent type='ORG'>BCCI</ent>. But these black-market sales have also touched off a terrifying arms race in the
<ent type='ORG'>Third World</ent>.
Consider, for example, the role that <ent type='ORG'>BCCI</ent> and many other banks
played in a secret operation to build up <ent type='PERSON'>Saddam Hussein</ent>'s military
might. Last summer, a joint investigation by ABC's "Nightline"
and the "Financial Times" concluded that "<ent type='PERSON'>Robert Gates</ent> was deeply
involved as deputy director of the <ent type='ORG'>CIA</ent> in a major covert operation
that funneled weapons and technology to <ent type='GPE'>Iraq</ent>. ... The CIA's
covert shipments put into <ent type='PERSON'>Saddam Hussein</ent>'s hand some of the most
dangerous battlefield weapons in the world."
To carry out these shipments, <ent type='ORG'>Gates</ent>--now the <ent type='ORG'>CIA</ent> director-designate--allegedly met with <ent type='PERSON'>Carlos Cardoen</ent>, the head of
<ent type='PERSON'>Industrias Cardoen</ent>. This <ent type='GPE'>Chile</ent>an company, which was the largest
private supplier of weapons to <ent type='GPE'>Iraq</ent>, shipped more than $500
million worth of weapons to <ent type='GPE'>Iraq</ent> in the '80s (see "In These
Times," April 17 and Oct. 9).
<ent type='PERSON'>Industrias Cardoen</ent> is licensed to build and ship high-tech
artillery guns created by arms dealer <ent type='PERSON'>Gerald Bull</ent> and ArmsCor, an
arms manufacturer owned by the <ent type='GPE'>South Africa</ent>n government.
In 1990, <ent type='PERSON'>Gerald Bull</ent> was assassinated, allegedly by <ent type='NORP'>Israeli</ent>
agents because he was working with <ent type='PERSON'>Saddam Hussein</ent> to build a
"supergun" capable of firing nuclear and chemical weapons. <ent type='ORG'>Bull</ent>,
an expert on advanced artillery, had a long history of illegal
arms sales. In the late '70s, a congressional staff report found
that <ent type='ORG'>Bull</ent> had conspired with <ent type='ORG'>CIA</ent> agents to break the U.S. arms
embargo against <ent type='GPE'>South Africa</ent> by shipping technology that allowed
ArmsCor to develop sophisticated artillery guns.
In 1990, the <ent type='ORG'>Inter Press</ent> news service reported that over 200 of
these guns had been sold by <ent type='PERSON'>Cardoen</ent> and ArmsCor to <ent type='GPE'>Iraq</ent>. At least
50 to 70 had been sold to <ent type='GPE'>the United</ent> Arab Emirates, which is
headed by BCCI's largest shareholder.
<ent type='ORG'>BCCI</ent> enters this affair in two ways. In August, Britain's
"Independent" newspaper alleged that <ent type='ORG'>BCCI</ent> had helped Bull's
company, <ent type='ORG'>Space Research</ent>, smuggle propellant for Hussein's supergun
from <ent type='GPE'>Belgium</ent> to <ent type='GPE'>Iraq</ent>. The story, largely ignored in <ent type='GPE'>the United</ent>
States, also reported that "a former deputy prime minister [Andre
Cools] of <ent type='GPE'>Belgium</ent> was killed days after being given <ent type='ORG'>BCCI</ent> bank
statements alleging bribes were paid to beat the arms embargo" to
<ent type='GPE'>Iraq</ent>.
<ent type='ORG'>BCCI</ent> also loaned at least $72 million to the <ent type='GPE'>Atlanta</ent> branch of
<ent type='ORG'>the Banca Nazionale del Lavoro</ent> (<ent type='ORG'>BNL</ent>)--Italy's largest bank. This
<ent type='ORG'>BNL</ent> branch loaned <ent type='GPE'>Iraq</ent> over $4 billion between 1985 and 1989 and
provided financial services that allowed <ent type='PERSON'>Hussein</ent> to illegally buy
hundreds of millions of dollars worth of arms and military
supplies. The <ent type='ORG'>BNL</ent> branch didn't have enough money to take on such
large loans, so it illegally financed them by borrowing money from
banks like <ent type='ORG'>BCCI</ent>. The House <ent type='ORG'>Bank</ent>ing Committee says that Bull's
<ent type='ORG'>Space Research</ent> Corporation was one of the companies that received
illegal financing from <ent type='ORG'>BNL</ent> for Iraq's weapons program.
Such deals helped keep <ent type='PERSON'>Hussein</ent> in power and dramatically
increased the political tensions throughout the <ent type='LOC'>Mideast</ent>.
Confident that the arms would keep flowing, <ent type='PERSON'>Hussein</ent> invaded <ent type='GPE'>Iran</ent>
in 1980 and <ent type='GPE'>Kuwait</ent> a decade later--conflicts that cost more than a
million lives.
But in providing financial services to <ent type='PERSON'>Saddam Hussein</ent>, <ent type='ORG'>BCCI</ent> was
not alone. In the <ent type='ORG'>BNL</ent> affair, for example, <ent type='ORG'>Bank</ent> of <ent type='GPE'>America</ent>
transferred $72 million between <ent type='ORG'>BCCI</ent> and <ent type='ORG'>BNL</ent>. J.P. <ent type='ORG'>Morgan</ent>, a
major <ent type='GPE'>New York</ent> bank, acted as a clearing agent for <ent type='ORG'>BNL</ent> in the
loans to <ent type='GPE'>Iraq</ent>. And many large European corporations provided the
technology and weapons. </p>

<p> A WHITEWASH? Fraud at <ent type='ORG'>BCCI</ent> burst into the headlines when bank
regulators around the world shut down the bank this past July.
But like the S&amp;L scandal--which wasn't discovered by the
mainstream media until hundreds of billions of dollars had been
lost--warning bells at <ent type='ORG'>BCCI</ent> had been going off for well over a
decade. As early as the late '70s, <ent type='NORP'>British</ent> and <ent type='NORP'>American</ent>
regulators were so worried about the bank's operations that they
denied <ent type='ORG'>BCCI</ent> key regulatory licenses to expand its operations. Yet
<ent type='ORG'>BCCI</ent> marched on, illegally buying <ent type='NORP'>American</ent> banks and stealing
deposits to cover its huge losses.
Meanwhile, the Reagan and <ent type='PERSON'>Bush</ent> administrations actively
obstructed a congressional investigation of the scandal. A Senate
subcommittee chaired by Sen. <ent type='PERSON'>John Kerry</ent> (D-MA) has been
investigating <ent type='ORG'>BCCI</ent> for several years. From the start, the
subcommittee encountered resistance from the administration. For
example, the Justice Department ordered key witnesses not to
cooperate with <ent type='PERSON'>Kerry</ent>. The department also refused to produce
documents subpoenaed by the subcommittee.
But these machinations are only part of a much larger political
scandal--the growing political power of financial institutions
over every aspect of the <ent type='NORP'>American</ent> political system. Over the past
decade, securities firms, major banks, insurance companies and
other financial institutions have given more money to <ent type='ORG'>Congress</ent>
than any other industry.
For example, <ent type='ORG'>the Center for Responsive Politics</ent> estimates that
in the 1988 election, political action committees (<ent type='ORG'>PAC</ent>s) for the
finance, insurance and real-estate industries gave over $27
million to congressional candidates. That's about 26 percent of
all business <ent type='ORG'>PAC</ent> contributions. <ent type='ORG'>Common Cause</ent> estimates that
between 1983 and 1988, the S&amp;L industry gave $11.6 million to
<ent type='ORG'>Congress</ent> and party committees.
Despite a decade of financial scandals, this well-oiled lobbying
machine has defeated every major attempt to enact tough new U.S.
regulations over the financial system.
In BCCI's case, the result has been a better cover-up than
anything <ent type='PERSON'>Oliver</ent> <ent type='PERSON'>North</ent> ever concocted. Washington's inaction has
allowed <ent type='ORG'>BCCI</ent> to continue exploiting an obsolete U.S. regulatory
system that was set up in the
Some reforms may yet come out of the <ent type='ORG'>BCCI</ent> scandal--but <ent type='ORG'>Congress</ent>
and <ent type='ORG'>the White House</ent> show little interest in fundamental change.
In fact, the mood in <ent type='GPE'>Washington</ent> is for more deregulation, not
less. Sometime this year or next year, <ent type='ORG'>Congress</ent> is likely to pass
<ent type='ORG'>White House</ent>-sanctioned legislation that will further deregulate
the banking and financial industry (see "In These Times," Oct. 2).
This legislation, which gives banks new freedom to buy insurance
companies and set up shop on Wall Street, is designed to help
<ent type='NORP'>American</ent> banks compete in the international financial system. But
by reducing government control, the legislation would simply give
multinational corporations more power over the world's economy.
Bringing these corporations under control won't be easy.
<ent type='ORG'>Congress</ent> could pass laws putting banks out of business if they
launder criminal money, and it could impose tough economic
sanctions on offshore havens that refuse to cooperate with U.S.
regulations and investigations.
But tough U.S. laws might simply convince financial institutions
to move their operations overseas, putting many <ent type='NORP'>American</ent>s out of
work and making it harder to finance this country's chronic
government deficits. It took a group of regulators from five
major capitalist companies to shut down <ent type='ORG'>BCCI</ent> this past summer. It
will take many countries, acting together, to bring the system
that created <ent type='ORG'>BCCI</ent> under control. Given the current political
climate, that is unlikely. </p>

<p> <ent type='PERSON'>George</ent> <ent type='PERSON'>Winslow</ent> is a <ent type='GPE'>New York City</ent> freelance writer who regularly
covers white-collar crime and international finance. </p>

<p> --
daveus rattus </p>

<p> yer friendly neighborhood ratman </p>

<p> KOYAANISQATSI </p>

<p> ko.yan.nis.qatsi (from <ent type='EVENT'>the Hopi Language</ent>) n. 1. crazy life. 2. life
in turmoil. 3. life out of balance. 4. life disintegrating.
5. a state of life that calls for another way of living. </p>

<p> </p></xml>