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77 KiB
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Article 1577 of misc.activism.progressive:
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From: dave@ratmandu.corp.sgi.com (dave "who can do? ratmandu!" ratcliffe)
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Newsgroups: misc.activism.progressive
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Subject: will BCCI happen again? bank on it. (part 1 of 2)
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<info type="Message-ID"> 1991Nov23.064309.14321@pencil.cs.missouri.edu</info>
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Date: 23 Nov 91 06:43:09 GMT
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Sender: rich@pencil.cs.missouri.edu (Rich Winkel)
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Followup-To: alt.activism.d
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Organization: PACH
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Lines: 586
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Approved: map@pencil.cs.missouri.edu
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The following is part one of a two-part series on BCCI
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that recently appeared in "In These Times".
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Reprinted with permission of "In These Times."
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During World War II the United States had emerged as the globe's
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dominant economic and military power. In 1944, the Bretton Woods
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agreement established a system of fixed exchange rates based on
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the dollar ....
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By 1971, however, U.S. corporations had lost their competitive
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edge to Japan and the U.S. military had wasted hundreds of
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billions of dollars in Vietnam. Nixon's decision to devalue the
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dollar and effectively end the Bretton Woods agreement on fixed
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exchange rates simply recognized the inevitable--the United States
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no longer ruled the world ....
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By the start of the '90s, BCCI and other banks that operated out
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of the offshore financial havens played key roles in the new
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economic order dominated by multinational corporations. As the
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United States learned when it was forced to end fixed exchange
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rates, the new global economic system was too powerful for any one
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government to control. For BCCI, as well as for international
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criminal elements, this was a dream come true.
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from the October 23-29, 1991 issue of "IN THESE TIMES":
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----------------------------------------------------------------------
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BCCI THE BIG PICTURE
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A system out of control, not just one bank
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By George Winslow
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This is the first story in a two-part "In These Times" investigation
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into the broader economic implication of the BCCI affair.
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IN THE EARLY `80S, PAKISTANI IMMIGRANT AZIZ Rehman was overjoyed
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to find a job in one of the world's fastest growing banks, the
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Bank of Credit and Commerce International (BCCI). The pay was
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good and the perks were even better. His employer gave him a
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lavish expense account to entertain foreign diplomats--and he got
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to meet people like Jeb Bush, the U.S. vice president's son.
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But Rehman soon discovered that international finance had a less
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glamorous side. Often, he had to lug heavy suitcases filled with
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cash through the sweltering Miami heat. During the day, he
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worried about being robbed; at night, he wondered about the
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bank's strange way of doing business. Bank executives told Rehman
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the bags of cash were from a BCCI branch in the Bahamas. But
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Rehman knew they were lying. The branch office didn't exist.
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Years later, it s clear that BCCI has misplaced a lot more than
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a bank office. On July 5 1991, bank regulators from several
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nations shut down BCCI, charging that top executives had lost or
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stolen as much as $15 billion worth of deposits.
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Since then, the BCCI affair has exploded into the biggest
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financial scandal of the `90s. A barrage of press reports have
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detailed BCCI's involvement with drug dealers, CIA operators,
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corrupt dictators and sleazy arms dealers. Even CIA officials
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have been quoted as calling BCCI "the Bank of Crooks and Criminals
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International."
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Unfortunately, the mainstream media has largely ignored a much
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bigger scandal--a revolution in the global economy that has
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produced many banks just like BCCI. This revolution has caused a
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terrifying cycle of poverty, drug addiction and financial fraud
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around the world. Like the toxic waste given off by a chemical
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factory, BCCI is simply a noxious byproduct of a global economy
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based on profits and high finance, not human needs.
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HUMBLE BEGINNINGS: The economic context of the BCCI scandal
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begins with socialism and ends with the creation of a kind of
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capitalist utopia.
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In 1972, BCCI's founder, Agha Hasan Abedi, was under house
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arrest in Pakistan. A socialist government had nationalized
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Abedi's United Bank and was investigating allegations of fraud at
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the institution. But as police guarded his house, Abedi was
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already meeting with some of his powerful friends, plotting the
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creation of a new bank, BCCI.
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This bank, Abedi liked to say, would be the world's first
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"genuinely global bank." Bank of America--then the world's
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largest bank--was trying to expand its international division.
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The huge U.S. bank was the first investor to jump on board. Bank
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of America put up only $2.5 million to acquire a 25 percent stake
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in BCCI, but its involvement helped Abedi get investment capital
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from powerful Third-World leaders and financiers. One early
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investor was Sheik Zayed Bin Sultan al-Nahyan, ruler of oil-rich
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Abu Dhabi. Other major investors would eventually include Kamal
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Adham, former chief of Saudi Arabia's intelligence service; the
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bin Mahfouz family, which also controls Saudi Arabia's largest
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bank; and other rulers from the United Arab Emirates.
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BCCI went into operation with only $10 million in capital, but
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Abedi's timing was perfect. Over the next 18 years, BCCI would
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grow by leaps and bounds. By no coincidence, so would the
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international financial system. In 1970, only about $60 billion
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moved through the international financial system each day. Today
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more than $2 trillion worth of stocks bonds and currencies cross
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national borders--a 3,200 percent increase. BCCI took full
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advantage of this growth. By early 1990, it had grown into a $21
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billion bank with 425 branches in over 75 countries that served
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1.2 million customers.
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UNCLE SAM'S FALL: A dramatic period of political and economic
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disorder produced the global economic revolution that allowed BCCI
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to thrive. One year before BCCI was founded, President Richard
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Nixon announced that the United States would devalue the dollar,
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effectively ending the American government's control over the
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international financial system.
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During World War II the United States had emerged as the globe's
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dominant economic and military power. In 1944, the Bretton Woods
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||
agreement established a system of fixed exchange rates based on
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||
the dollar. By making the dollar the equivalent of gold in world
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trade, U.S. economic policies became the world's economic
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policies. Washington could print dollars to finance the Marshall
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Plan in Europe and other programs designed to open up markets to
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American corporations. And it could mint money to build up
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America's military establishment--which, in turn, protected U.S.
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investments in other countries. It was a "free world based on the
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dollar and backed by the atomic bomb," according to Richard Barnet
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and Ronald Muller, authors of "The Global Reach: The Power of
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Multinational Corporations."
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By 1971, however, U.S. corporations had lost their competitive
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edge to Japan and the U.S. military had wasted hundreds of
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||
billions of dollars in Vietnam. Nixon's decision to devalue the
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dollar and effectively end the Bretton Woods agreement on fixed
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exchange rates simply recognized the inevitable--the United States
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no longer ruled the world.
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A NEW KING: Assuming the U.S. government's throne, huge
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multinational corporations had become the world's new imperial
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power. American foreign investments jumped from $29.1 billion in
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1955 to $120 billion in 1970 and $373 billion in 1989. Foreign
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investments by every country in the world grew nearly tenfold from
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$112.3 billion in 1967 to $1,023 billion in 1987.
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U.S. banks also expanded their international operations to
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provide financial services to their blue-chip clients. In 1965,
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only 20 U.S. banks with 112 branches had set up shop overseas. By
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1988, 132 American banks had 849 foreign branches, holding a total
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of more than $275 billion in assets.
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BCCI was quick to establish a relationship with many of the U.S.
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banks that had expanded overseas in the '70s. A confidential
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internal BCCI study, obtained by "In These Times," illustrates
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just how many U.S. banks had close financial relationships with
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BCCI. The 1985 study notes that for all of 1984, BCCI transferred
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foreign currencies worth $37.5 billion through American banks.
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Most of these foreign currency transfers, $19 billion, involved
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five major American banks: Bank of America, Security Pacific,
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American Express Bank Ltd., the Bank of New York and First
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Chicago.
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The BCCI study also shows that on an average working day in
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1984, BCCI conducted 1,434 transactions involving $2.7 billion
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with the five banks. Most of those transactions (700 in all,
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worth $1.7 billion) involved Bank of America--even though Bank of
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America had sold its stake in BCCI in 1980.
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CAPITALIST UTOPIAS: The rapid growth of the global economy also
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produced dramatic changes in the very structure of the
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international economic system. Massive military expenditures from
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Vietnam--along with increased imports--caused billions of dollars
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to flow out of the United States. In the '60s, banks began
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loaning these dollars--called "Eurodollars" because they were
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often held in European banks--to corporations, thus creating the
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world's first unregulated, international financial market. In
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1963, only about $148 million worth of bonds or loans were issued
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in the Eurodollar market. By 1988 over $721 billion worth of
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securities and loans were made in the market.
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Most Eurodollar trading occurs in what are known as offshore
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havens. Typically these havens--located in places like Panama,
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Hong Kong and the Bahamas--operate as a kind of capitalist utopia
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for transnational corporations. Strict bank-secrecy laws protect
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depositors from the prying eyes of tax collectors or foreign
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investigators. Lax local regulations allow foreign banks to carry
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on many activities--such as selling stocks and bonds--that may be
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illegal or tightly regulated in their home countries. More
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importantly, taxes are virtually non-existent.
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Today, offshore havens manage over $5 trillion worth of assets-
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-nearly the size of the U.S. gross national product for 1990. But
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before the rise of the Eurodollar market, many of these havens
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didn't exist or played only a minor role in international finance.
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The Cayman Islands, for example, didn't set up shop as an offshore
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center until the mid-'60s. But by 1990, the Caribbean nation was
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home to over 500 banks from all over the world--including 46 of
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the 50 largest--holding over $250 billion in assets.
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BCCI was one of the banks that most profited from the rise of
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offshore finance. It capitalized by setting up its headquarters
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in Luxembourg, an offshore haven, and by establishing subsidiaries
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in dozens of other havens. By 1990, for example, its Cayman
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Islands subsidiary held over $7.5 billion worth of assets.
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By the start of the '90s, BCCI 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 BCCI, as well as for international
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criminal elements, this was a dream come true.
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PEEKABOO FINANCE: From the start, BCCI understood the beauty of
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offshore finance. Operating out of regulation-free havens, BCCI
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was able to embark on what international investigators have called
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"the most complex deception in banking history." To hide the fact
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that BCCI "may never have been profitable in its entire history,"
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BCCI's auditors say that top executives used the offshore system
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to set up "a massive and complex web of fictitious transactions."
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Over a 15-year period, BCCI shuffled nearly $15 billion through
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over 750 accounts. For example, after losing an astonishing $849
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million speculating in U.S. Treasury bonds between 1979 and 1986,
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BCCI executives simply parked the losses in its Cayman Islands
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subsidiary, where bank regulators wouldn't find them. Then it
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illegally shuffled new deposits through various havens to make it
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look as if hundreds of millions of dollars worth of loans to BCCI
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executives and large shareholders were being repaid. In fact,
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they weren't. As Rep. Charles Schumer (D-NY) recently stated,
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"BCCI fell between the international cracks."
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These cracks are beginning to look more and more like canyons.
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Law-enforcement experts say that offshore banks provide essential
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financial services for many of the world's most profitable crimes,
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including the drug business (in which $300 billion is laundered
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worldwide each year, according to the State Department), tax fraud
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(which, according to the Internal Revenue Service, totals $100
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billion a year in the United States alone) and securities fraud
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(which adds up to $10 billion annually in the United States,
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according to a recent private study). Offshore banking also aids
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the Mafia (which launders over $70 billion annually, according to
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the FBI) and black-market arms traffickers. (Offshore bank
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accounts were used in the Iran-contra affair, illegal arms sales
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to Iraq and several recent illegal sales of technology used to
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make nuclear bombs.) Furthermore, Sen. John Kerry (D-MA)
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contends that "billions" looted from U.S. savings-and-loans ended
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up in secret offshore accounts. Such accounts were also used by
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the perpetrators of Watergate, as well as the recent scandals at
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the Department of Housing and Urban Development and at the
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Pentagon.
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As a full-service bank, BCCI diversified into almost all of
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these criminal activities. But before exploring its role as a
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"Bank of Crooks and Criminals International," it's worth
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remembering that some of BCCI's largest crimes were quite legal--
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at least in the context of the lawless offshore financial system.
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A FREE LUNCH: Consider, for example, taxes. While Aziz Rehman
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was carrying large bags of cash around Miami for BCCI, he noticed
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that many of the bank's clients weren't interested in drugs or
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arms or weird CIA plots. They simply wanted to avoid taxes. In
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one case--uncovered by the U.S. Senate Subcommittee on Terrorism,
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Narcotics and International Operations, which is headed by Sen.
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Kerry--Modern Health Care had BCCI wire $20 million into an
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account in the Caribbean.
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"They got interest over there, and they never showed that
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interest into the United States [for tax purposes]," Rehman
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remembers. "That's why people deposit outside the United States.
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But BCCI is by no means the only bank that has been involved in
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tax fraud. Using offshore havens to avoid the IRS has become
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standard operating procedure for many financial institutions. In
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the mid-'70s, for example, while New York City was going broke and
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drastically cutting social services, city officials charged that
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Citibank had used offshore havens to avoid over $30 million in
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taxes. In this case, Citibank created a series of fictitious
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transactions that made it look as if its subsidiaries in America
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and Europe were losing money. Then, the profits were recorded in
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subsidiaries located in offshore havens. (A Reagan appointee to
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the Securities and Exchange Commission eventually dropped charges
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against the bank, explaining that he did "not subscribe to the
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theory that a company that violates tax and exchange-control
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regulations is a bad corporation.")
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Foreign corporations have also used the offshore system to avoid
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paying U.S. taxes. For example, the IRS claims that foreign
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multinational corporations operating in the United States avoided
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between $13 billion and $30 billion worth of U.S. taxes in the
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'80s.
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The issue of tax fraud in the BCCI scandal has been virtually
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ignored by the mainstream media, but it has had a horrifying
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effect on the quality of life in America. Over time, the ability
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of banks like BCCI to help corporations avoid taxes, has left a
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big hole in local, state and federal budgets.
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In 1950, when offshore finance and multinational production
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didn't play a very important role in the world's economy, U.S.
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corporations paid 26 percent of all state, local and federal
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taxes. But by 1990, their share had dropped to only 8 percent.
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Of course, offshore banking wasn't the only reason for this
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decline--but it certainly helped. If U.S. corporations still paid
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26 percent of all taxes, they would have paid an extra $329
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billion in 1990 alone. This number is worth remembering when
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people talk about BCCI as simply a case of bank fraud, far removed
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from problems like poverty, bad schools or potholes.
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------------------------------------------------------------------
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| `Bank of Crooks and Criminals International' had |
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| links to U.S. intelligence and Third World tyrants |
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| |
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| It's no wonder the Bank of Credit and Commerce |
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| International (BCCI) is enmeshed in one of the |
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| biggest financial scandals of the 20th century. A |
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| list of BCCI's shareholders reads like a who's who of |
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| corrupt Third-World elites. Most of them have a long |
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| history of involvement in major arms deals or |
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| corporate bribery scams. In addition, several key |
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| BCCI insiders have extensive ties to Western |
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| intelligence agencies. |
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| These same figures helped loot the bank, receiving |
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| hundreds of millions of dollars worth of loans that |
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| were never repaid. |
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| One major shareholder and a front man for BCCI's |
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| illegal purchases of various American banks-- |
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| including First American Bankshares in Washington, |
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| D.C.--was Sheikh Kamal Adham, the brother-in-law of |
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| the late Saudi King Faisal. During the `60s and |
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| `70s, Kamal ran the Saudi equivalent of the FBI and |
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| CIA. And like many members of the Saudi ruling |
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| family, he often demanded commissions (a polite way |
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| of saying bribe) from multinational corporations |
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| operating around the mideast. |
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| In the `50s and `60s, Kamal accepted kickbacks from |
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| the Japanese in return for cheap oil. He also took |
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| commissions for arms deals set up for Northrup and |
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| two other U.S. arms dealers. In the '70s, according |
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| to the "Wall Street Journal," he was paid "many |
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| millions of dollars in commission" by Boeing to |
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| persuade the Egyptians to buy its planes. |
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||
| Besides his extensive ties to the U.S. arms |
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| industry, Kamal maintained close ties to Western |
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| intelligence agencies. In 1977, the "Washington |
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||
| Post" described Kamal as the CIA's "liason man" in |
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| the region and noted that Kamal had hired former CIA |
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||
| station chief Raymond Close as an adviser. In the |
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||
| late `60s, Kamal acted as the CIA's intermediary to |
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||
| funnel payments to Anwar Sadat while Sadat was vice |
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| president of Egypt. According to Larry Gurwin's 1990 |
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||
| article in the business magazine "Regardie's," Kamal |
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| channeled hundreds of millions of dollars to Egypt |
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| after Sadat took power. These funds convinced Sadat |
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| to expel Soviet military advisers in 1973 and to |
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| establish a closer relationship with the United |
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| States. |
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||
| In Kamal's years as the head of Saudi intelligence, |
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| he was responsible for a number of human rights |
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| abuses, including torture and executions of political |
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||
| opponents. Internal BCCI documents show that Kamal |
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| received over $313 million in loans from BCCI, most |
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| of which have not been repaid. |
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| Other one-time BCCI shareholders with close |
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| connections to the CIA and the Western arms industry |
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| include Iran's now-ousted ruling family. Shah |
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| Mohammed Reza Pahlevi, whose family held stock in |
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| BCCI as late as 1978, was installed in power in 1953 |
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| by a CIA-backed coup against Mohammed Mossadeq, who |
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| had nationalized American oil companies. In the |
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| `70s, before he was overthrown, the Shah purchased |
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| billions of dollars worth of arms from American |
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| companies. |
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||
| Kuwaiti businessman Faisal Saud al Fulajj was a |
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| small BCCI shareholder. According to the "Wall |
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| Street Journal," he accepted over $300,000 in bribes |
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||
| from Boeing while he was head of the Kuwait Airlines. |
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||
| Fulajj was also one of seven men who received $47 |
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||
| million in bribes to illegally act as a frontman for |
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||
| BCCI's illegal and secret purchases of various |
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||
| American banks, including First American. |
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||
| Mohammed Irvani was another frontman with ties to |
|
||
| Western intelligence. He set up a consulting firm |
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||
| with former CIA director Richard Helms in 1977. |
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||
| Ali Mohammed Shorafa was a small BCCI shareholder |
|
||
| and yet another frontman in the First American |
|
||
| affair. According to columnist Jack Anderson and |
|
||
| "Regardie's" magazine, Shorafa financed a company |
|
||
| that received an exclusive contract to ship U.S. arms |
|
||
| to Egypt right after the Camp David accords. |
|
||
| Internal BCCI documents show that BCCI gave Fulajj at |
|
||
| least $113 million in loans and Shorafa $123 million |
|
||
| in loans. |
|
||
| Agha Hasan Abedi, BCCI's founder, kept close ties |
|
||
| to Pakistani military and intelligence officials. |
|
||
| Abedi hired a number of bank officials with links to |
|
||
| the Pakistani military or intelligence services. The |
|
||
| "Financial Times" of London has reported that the CIA |
|
||
| used BCCI to funnel payments to the Pakistani |
|
||
| military. Recently, the "Wall Street Journal |
|
||
| reported that one top Pakistani official who refused |
|
||
| to extradite Abedi to the United States to face |
|
||
| charges of fraud and larceny, "had received (from |
|
||
| BCCI) a monthly stipend, free travel, a home loan and |
|
||
| an expensive automobile." |
|
||
| Abedi was so close to Pakistani Dictator Zia al- |
|
||
| Haq, that Zia 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. Zia |
|
||
| overthrew the democratically elected government of |
|
||
| Zulfikav Ali Bhutto and executed Bhutto. |
|
||
| The U.S. government rewarded Zia's support for the |
|
||
| Afghan rebels with $2.1 billion worth of U.S. Agency |
|
||
| for International Development grants and hundreds of |
|
||
| millions of dollars in military aid. |
|
||
| The bin Mahfouz family--which owns Saudi Arabia's |
|
||
| largest bank--sold its 20 percent stake in BCCI 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 Texas 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 |
|
||
| bin Mahfouz family used BCCI as a private piggy bank, |
|
||
| receiving over $176 million in unsecured loans from |
|
||
| the bank. |
|
||
| Sheikh Zayed bin Sultan al-Nahyan, the ruler of Abu |
|
||
| Dhabi and head of the United Arab Emirates us BCCI's |
|
||
| largest shareholder. He rose to power in 1966 when |
|
||
| the British encouraged him to overthrow his brother, |
|
||
| Sheikh Shakbut, who provoked widespread unrest by |
|
||
| refusing to spend his oil revenues on various |
|
||
| development schemes. (Shakbut once justified his |
|
||
| policies by saying the oil companies needed the money |
|
||
| more than the citizens of his country did.) |
|
||
| Sheik Zayed 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 Bush recently asked Congress to |
|
||
| approve another $648 million U.S. arms deal as a |
|
||
| reward for Sheik Zayed's staunch support for the U.S. |
|
||
| during the Iraq war. |
|
||
------------------------------------------------------------------
|
||
|
||
|
||
LOOTING THE THIRD WORLD: During the '80s, Americans weren't the
|
||
only ones faced with cuts in social services and declining
|
||
standards of living. Between 1980 and 1985, average incomes in
|
||
Latin America fell by 9 percent. Some heavily indebted countries
|
||
like Argentina (where incomes dropped 17.7 percent) and Bolivia
|
||
(down 29.4 percent) fared even worse.
|
||
But, as the average Latin American suffered, wealthy elites used
|
||
banks like BCCI to take hundreds of billions of dollars out of
|
||
their homelands. Court documents and Senate hearings show that
|
||
Panama's Manuel Noriega, Iraq's Saddam Hussein, the Philippines'
|
||
Ferdinand Marcos, Haiti's Jean-Claude Duvalier and other dictators
|
||
used BCCI to steal billions of dollars from native countries. The
|
||
BCCI affair illustrates how large multinational corporations have
|
||
established close financial and political ties with corrupt
|
||
Third-World elites, who used Western arms sales, political
|
||
repression and the CIA to maintain their power (see accompanying
|
||
story in box).
|
||
But in going after the capital-flight business, BCCI 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. Morgan Guarantee Trust, a U.S. financial
|
||
institution, estimates that local elites transferred over $200
|
||
billion out of the Third-World into the Western 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. Morgan Guarantee notes that the ten most-
|
||
heavily indebted Latin American 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. Venezuela, for example borrowed $36 billion, but
|
||
had $41 billion leave the country.
|
||
|
||
BCCI'S PALS IN HIGH PLACES: Such huge debts have left many
|
||
Third-World countries dependent on the International Monetary
|
||
Fund, the World Bank, 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. BCCI was one of the primary beneficiaries of such
|
||
policies.
|
||
The IMF, the World Bank and the U.S. government have supported a
|
||
number of projects to establish offshore havens. BCCI's most
|
||
notorious money-laundering operation occurred in Panama, where one
|
||
BCCI official says he acted as Manuel Noriega's "personal banker."
|
||
This, of course, wouldn't have been possible if a U.S. Agency for
|
||
International Development official hadn't helped Panama set up an
|
||
offshore haven in 1970.
|
||
BCCI also had large operations in virtually every Caribbean
|
||
offshore haven--and it established close ties to many Caribbean
|
||
governments. Internal BCCI documents show that the bank received
|
||
large deposits from virtually every central bank in the Caribbean
|
||
and from the Caribbean Development Bank (CDB), a regional lending
|
||
institution that is heavily funded by the United States. The CDB
|
||
has provided many loans to Caribbean countries who wanted to set
|
||
up tax-free industrial havens for multinational corporations.
|
||
But ties between BCCI and development agencies went far beyond
|
||
general policy discussions and the creation of offshore havens.
|
||
The "Wall Street Journal" noted recently that "[t]he U.S.
|
||
government was one of BCCI's biggest customers in Cameroon, with
|
||
$10 million in U.S. Agency for International Development accounts.
|
||
That is equal to about 5 percent of BCCI Cameroon's published
|
||
assets."
|
||
More importantly, "In These Times" has learned that the IMF
|
||
contacted officials at central banks in Brazil, Argentina and
|
||
Uruguay about BCCI's expansion into Latin America. The IMF also
|
||
gave BCCI advice on how the bank could expand its operations in
|
||
Bolivia, Chile, Peru, Colombia, Ecuador, Mexico and Venezuela.
|
||
The IMF further suggested that BCCI might get deposits from
|
||
central banks in Latin America 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, BCCI
|
||
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 BCCI. One former World Bank and IMF
|
||
official has already been indicted by Peruvian officials for his
|
||
role in having Peru's central bank reserves deposited at BCCI.
|
||
BCCI put together other deals that involved the World Bank and
|
||
the IMF. According to "Time" magazine, BCCI intervened in a
|
||
dispute between the IMF and Jamaica over the country's inability
|
||
to pay its mounting debts. BCCI brokered a deal with the-lMF in
|
||
which BCCI agreed to provide a new $48 million loan to Jamaica.
|
||
Soon thereafter, Jamaica's central bank agreed to make large
|
||
deposits with BCCI.
|
||
One BCCI employee, Amjad Awan, also told Kerry subcommittee
|
||
investigators that the World Bank suggested BCCI provide a loan to
|
||
Bolivia. After BCCI provided the loan, which was guaranteed by
|
||
the World Bank, Bolivia's central bank began depositing money in
|
||
BCCI.
|
||
|
||
IN THE RED: Ironically, as the IMF and the World Bank were using
|
||
BCCI to help solve the debt crisis in several countries, BCCI was
|
||
engaging in a number of illegal transactions that actually
|
||
increased the debt various Third-World countries were paying.
|
||
Jack Blum, a former counsel for the Kerry subcommittee, claims
|
||
that BCCI 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. Blum says that these investors
|
||
would contact BCCI, which would intervene with a Third-World
|
||
government. Under a scheme promoted by the IMF, the World Bank
|
||
and the United 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 Blum, many investors made huge profits while
|
||
investing very little in Third-World nations. An example of such
|
||
a transaction can be found in Argentina. In the late '80s, BCCI
|
||
bought Argentinian debt for an unknown discount, then had the
|
||
Argentinian government redeem it at full value. It's unclear how
|
||
much BCCI paid for the Argentinian debt, which currently sells for
|
||
79 cents on the dollar. Assuming BCCI 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, BCCI frontman Ghaith
|
||
Pharoan then agreed to invest $38 million in a hotel and farm in
|
||
Argentina. But according to the "New York Times," Pharoan only
|
||
invested about $10 million. Assuming, conservatively, BCCI made
|
||
an $8 million windfall on the deal, the bank, in effect, purchased
|
||
a $10 million hotel for $2 million. Argentina, on the other hand,
|
||
spent $38 million to redeem its debt and received only $2 million
|
||
in new investment money.
|
||
Jack Blum laid out BCCI's illegal Third-World debt operations in
|
||
an August 1991 testimony before the Kerry committee. The debt
|
||
scam, Blum 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.
|
||
BCCI 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 BCCI affair,
|
||
banks like BCCI 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. BCCI will happen again.
|
||
|
||
|
||
George Winslow is a New York City freelance writer who regularly
|
||
covers white-collar crime and international finance.
|
||
|
||
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 CIA, drug dealers, sleazy S&Ls, and influence peddlers.
|
||
|
||
--
|
||
daveus rattus
|
||
|
||
yer friendly neighborhood ratman
|
||
|
||
KOYAANISQATSI
|
||
|
||
ko.yan.nis.qatsi (from the Hopi Language) 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.
|
||
|
||
Article 1633 of misc.activism.progressive:
|
||
From: dave@ratmandu.corp.sgi.com (dave "who can do? ratmandu!" ratcliffe)
|
||
Newsgroups: misc.activism.progressive
|
||
Subject: will BCCI 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 (Rich Winkel)
|
||
Followup-To: alt.activism.d
|
||
Organization: PACH
|
||
Lines: 613
|
||
Approved: map@pencil.cs.missouri.edu
|
||
|
||
|
||
The following is part two of a two-part series on BCCI.
|
||
Reprinted with permission of "In These Times."
|
||
|
||
Meanwhile, the Reagan and Bush administrations actively
|
||
obstructed a congressional investigation of the scandal. A Senate
|
||
subcommittee chaired by Sen. John Kerry (D-MA) has been
|
||
investigating BCCI 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 Kerry. 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 American political system. Over the past
|
||
decade, securities firms, major banks, insurance companies and
|
||
other financial institutions have given more money to Congress
|
||
than any other industry.
|
||
|
||
from the October 30-November 5, 1991 issue of "IN THESE TIMES":
|
||
----------------------------------------------------------------------
|
||
BCCI THE BIG PICTURE
|
||
New capitalism: bank fraud, drug trade, espionage
|
||
By George Winslow
|
||
|
||
In its October 23 issue, "In These Times" began a two-part
|
||
series on the broader economic and social issues of the BCCI
|
||
affair. Author George Winslow argued that the real scandal
|
||
was not a lone wayward bank, but a world financial system
|
||
out of control. Winslow examined how, during the past two
|
||
decades, multinational corporations rose to global economic
|
||
dominance. He then documented the way in which operations
|
||
like BCCI use "offshore havens" to do these corporations
|
||
banking.
|
||
Such havens--located in places like Panama, Hong Kong and
|
||
the Bahamas--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 BCCI
|
||
investigation, Winslow concluded, the offshore financial
|
||
system that spawned the bank still operates outside of the
|
||
control of any real government authority. "BCCI will happen
|
||
again," he wrote.
|
||
In the following story, Winslow examines how larger economic
|
||
issues shed new light on BCCI's more notorious operations--
|
||
the bank's ties to the CIA, drug dealers, sleazy S&Ls and
|
||
influence peddlers.
|
||
|
||
|
||
|
||
EVEN IN MIAMI, WHERE EXCESS HAS BECOME a fine art, David Paul, the
|
||
chairman of CenTrust Savings Bank, stood out from the pack. Paul,
|
||
who raised lots of money for top Democratic Party 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, Paul was in trouble. CenTrust, like many
|
||
other S&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 Congress and the Reagan
|
||
administration. But, as the public began howling about fraud in
|
||
the S&L industry, bank regulators ordered Paul to make the losses
|
||
public, a move that threatened to ruin his bank.
|
||
To buy time, Paul used his political clout to arrange meetings
|
||
with top regulators in the Reagan administration. At the
|
||
meetings, Paul introduced Ghaith Pharaon, a wealthy Saudi
|
||
financier who had already bought 25 percent of CenTrust. Paul
|
||
implied that Pharaon 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 Paul kept throwing
|
||
lavish parties--at one $122,000 affair he flew six famous chefs
|
||
first class from the United States to France. When bank
|
||
regulators finally shut down CenTrust in 1990, taxpayers got stuck
|
||
with a bill for $2 billion.
|
||
The CenTrust fiasco took place in Florida and Washington--half-
|
||
way around the world from Abu Dhabi, where a number of Bank of
|
||
Credit and Commerce International (BCCI) executives are now under
|
||
house arrest. But the CenTrust affair illustrates how the sun
|
||
never sets on the new world of bank fraud. Ghaith Pharaon--the
|
||
wealthy Saudi financier who was supposed to save CenTrust--was
|
||
simply one of the front men that BCCI used to secretly buy and
|
||
loot at least four American banks.
|
||
|
||
THE PRICE WE PAY: The "New York Times" recently assured its
|
||
readers that many of BCCI's crimes would have little effect on
|
||
Americans. "[The] money laundering and other corruption at BCCI
|
||
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&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 American
|
||
business and government.
|
||
Today, it would be hard to find an American who hasn't been
|
||
victimized by BCCI. Taxpayers have spent billions of dollars, and
|
||
may have to spend billions more, to bail out banks looted by BCCI
|
||
and its clients. Financial services provided by BCCI and other
|
||
banks helped international drug traffickers bring tens of billions
|
||
of dollars worth of illegal narcotics into the United States.
|
||
Arms transactions financed or administered by BCCI accelerated a
|
||
Mideastern arms race that helped trigger the U.S.-Iraqi war. And
|
||
BCCI 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.
|
||
|
||
SECRET INVASION: Only five years after being founded in the Third
|
||
World, BCCI began its invasion of America. In 1977, several of
|
||
BCCI's largest shareholders launched a hostile bid for the largest
|
||
bank in Washington, D.C., Financial General Bankshares (now called
|
||
First American Bankshares). There were problems from the start.
|
||
A number of the investors were simply BCCI front men, many of them
|
||
with long histories of involvement in corporate bribery scandals.
|
||
A Securities and Exchange Commission (SEC) 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 the Federal Reserve Board to approve the
|
||
deal on the condition that BCCI would not control the bank. It
|
||
was a condition BCCI ignored from the start. Over the next
|
||
decade, BCCI also used Ghaith Pharaon as a frontman to secretly
|
||
acquire a minority stake in CenTrust, as well as controlling
|
||
interests in the National Bank of Georgia and the Independence
|
||
Bank of Encino, Calif. As with its secret purchase of First
|
||
American Bankshares, BCCI shifted money through a bewildering
|
||
array of offshore havens to convince regulators that the banks
|
||
were being bought by wealthy Arabs with lots of cash. In fact,
|
||
the real owner was BCCI.
|
||
Then, BCCI used the same system of offshore finance to loot the
|
||
banks. For example, soon after BCCI lost over $849 million
|
||
speculating in U.S. Treasury bonds, BCCI executives had First
|
||
American Bankshares (FAB) pay $220 million for Ghaith Pharaon's
|
||
shares in National Georgia Bank. According to the "Wall Street
|
||
Journal," FAB 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, FAB, to
|
||
Pharaon and BCCI at a time when the latter two were in deep
|
||
financial trouble.
|
||
Today, the effects of BCCI's involvement are plain. FAB, once a
|
||
solvent, well-capitalized commercial bank, is in dire financial
|
||
straits. Recently regulators gave FAB, 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.
|
||
|
||
NEW RULES: More importantly, the FAB fiasco illustrates how the
|
||
new world of international finance has affected the American
|
||
banking industry. The increasingly unregulated international
|
||
financial system of the '70s and American financial system as
|
||
well.
|
||
This deregulation dramatically changed the structure of American
|
||
finance (see "In These Times," Oct. 2). For the first time since
|
||
the Depression, banks were allowed to expand their operations into
|
||
the insurance and securities markets. Savings-and-loan
|
||
associations were permitted to make speculative investments in the
|
||
commercial real-estate market--a practice that ruined many S&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 Merrill Lynch offered
|
||
certificates of deposit--encroaching on a traditional market of
|
||
banks--and channeled tens of billions of dollars into shady S&Ls.
|
||
Finance companies--especially subsidiaries of large auto makers--
|
||
stepped onto another traditional turf of the banking industry the
|
||
auto-loan market. Sears 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. Deregulation led to a decade of
|
||
financial fraud and mismanagement. Like BCCI, some S&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 Charles Keating and David Paul, set up
|
||
elaborate business and political ties with BCCI's clients,
|
||
advisers and shareholders. These ties show that BCCI was not
|
||
simply a foreign problem--and that the S&L scandal goes far beyond
|
||
U.S. borders. In the '80s, high-flying institutions like BCCI and
|
||
CenTrust became magnets for con artists of all kinds.
|
||
|
||
BCCI AND THE S&L SCANDAL: For example, Charles Keating and his
|
||
thrift, Lincoln Savings and Loan, invested millions of dollars in
|
||
Trendinvest, an offshore company that speculated in foreign
|
||
currencies. According to the "Wall Street Journal," Lincoln
|
||
suffered "large losses" from trades made at Trendinvest and
|
||
"lawyers representing investors ... defrauded by Mr. Keating . .
|
||
. accuse him of shifting money overseas through such mechanisms as
|
||
foreign exchange losses."
|
||
A BCCI executive, Alfred Hartmann, served on Trendinvest's board
|
||
of directors and advised Keating on the foreign-exchange
|
||
transactions. In 1989, Lincoln Savings and Loan filed for
|
||
bankruptcy--a move that cost taxpayers over $2.5 billion.
|
||
Another notorious S&L con artist is Herman Beebe. Beebe had a
|
||
history of bank fraud as well as alleged business ties to the
|
||
Mafia--which would normally have prevented him from buying a bank.
|
||
But in the '80s world of deregulated banking, Beebe was able to
|
||
secretly buy and loot at least 100 S&Ls.
|
||
Beebe's exploits are documented in the book, "Inside Job: The
|
||
Looting of America's Savings and Loans," by Stephen Pizzo, Mary
|
||
Fricker and Paul Muolo. According to the authors, one of Beebe's
|
||
closest business associates, Ben Barnes, set up partnership with
|
||
John Connally, the former governor of Texas. The partnership
|
||
borrowed money from at least 17 S&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 Texas bank with BCCI front
|
||
man Pharaon, according to Stephen Fay's book, "Beyond Greed: The
|
||
Hunt Family's Bold Attempt to Corner the Silver Market." Connally
|
||
introduced the bin Mafouze 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 bin Mafouze family and Pharaon
|
||
invested in the Hunt scam and suffered huge losses.
|
||
Through Pharaon and CenTrust, the BCCI connection also leads
|
||
back to the biggest con artists of the S&L scandal--Michael Milken
|
||
and his firm, Drexel Burnham Lambert. The Federal Deposit
|
||
Insurance Corporation (FDIC) has charged that Milken, Drexel,
|
||
CenTrust's Paul and BCCI 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 FDIC alleges
|
||
that Milken, Drexel, Keating and Paul set up a network of junk-
|
||
bond buyers at CenTrust and other S&Ls who "wilfully, deliberately
|
||
and systematically plundered certain S&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 FDIC 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&Ls
|
||
such as CenTrust, went broke, costing taxpayers at least $6
|
||
billion.
|
||
|
||
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 the United States since
|
||
the Bank 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 American banks each
|
||
year. BCCI was one of the banks that capitalized on this booming
|
||
industry. Like many other financially troubled institutions,
|
||
drug-cartel deposits helped BCCI hide its losses and keep growing.
|
||
Naturally, BCCI executives worked very hard to keep their
|
||
customers happy.
|
||
Panamanian dictator Manuel Noriega, for example, received
|
||
millions of dollars in kickbacks from the Medellin drug cartel.
|
||
When Noriega set up a $25 million account with BCCI, bank
|
||
executives issued him credit cards for his wife and mistress.
|
||
They booked him into posh New York City hotels and they took him
|
||
on shopping sprees at the city's largest department stores where
|
||
Noriega ran up as much as $100,000 worth of credit-card bills.
|
||
Noriega is believed to have laundered at least $90 million through
|
||
BCCI.
|
||
In other cases, BCCI actually helped drug dealers set up
|
||
sophisticated laundering systems. For example, when a U.S.
|
||
undercover agent, Robert Musella, began depositing money from the
|
||
Medellin cartel at BCCI, the bank sent Musella to Europe for a
|
||
kind of seminar in laundering. Then, BCCI set up a Byzantine
|
||
system of offshore corporations and banks that Musella 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
|
||
Musella was laundering for the Medellin cartel made its way
|
||
through First American and other banks secretly controlled by
|
||
BCCI, according to House Banking Committee investigators.
|
||
BCCI taught Musella 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 Bank of America. BCCI 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 Medellin
|
||
cartel in the '80s.
|
||
But while the mainstream media has focused on BCCI as a full-
|
||
service bank for drug dealers, media reports have paid very little
|
||
attention to money laundering by other major banks. For example,
|
||
Bank of America was hit with a $4.75 million fine for money
|
||
laundering in 1986. It was the largest money-laundering fine
|
||
until the BCCI case. Yet two years later, the financially
|
||
troubled Bank of America was still laundering money.
|
||
In 1989, U.S. investigators cracked an operation that used
|
||
jewelry stores, BCCI and many other banks to launder over $12
|
||
billion in cocaine profits for the Medellin cartel. Major banks
|
||
that accepted cash deposits from the drug-money-laundering
|
||
organization included Bank of America ($32 million), Republic
|
||
National Bank ($185 million), American Express Bank ($11 million),
|
||
Citibank ($63 million), and Extebank ($138 million). (BCCI, which
|
||
received a $13 million wire transfer from the Bank of New York,
|
||
was a relatively minor player in this scheme.)
|
||
|
||
DRUGS, GUNS AND IDEOLOGY: 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 Bush
|
||
administrations have attempted to portray the war against drugs as
|
||
a Cold War crusade. By attacking "narco-terrorists," Reagan
|
||
attempted to link Latin American revolutionaries and Latin
|
||
American drug traffickers--thus justifying, for example, U.S.
|
||
military intervention in Nicaragua. Likewise, Bush recently sent
|
||
military advisers to Peru 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, Colombian officials raided the farm of
|
||
Gonzalo Rodriquez Gacha, one of the founders and a top leader of
|
||
the Medellin drug cartel. Here they found hundreds of assault
|
||
rifles that had been imported from the Israel Military Industries,
|
||
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
|
||
"Communist guerrillas, we want to drink your blood"--hardly a
|
||
slogan that Marxist revolutionaries would use.
|
||
The weapons, Colombian 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 Colombian military and financed by the
|
||
cartel--trained Colombian death squads. The camp had been set up
|
||
by Israeli arms dealers and former military officers.
|
||
One officer, Lt. Col. Amatzia Shuali had trained military
|
||
officers in Guatemala and Nicaraguan Contra rebels in Honduras.
|
||
At the camp, members of the cartel learned how to make bombs that
|
||
had been used to blow up a Colombian airliner with 117 passengers.
|
||
This horrifying affair has been virtually ignored by the
|
||
American media and it has not been covered in any of the articles
|
||
on BCCI. Yet "In These Times" has learned that U.S. government
|
||
investigators are probing allegations that BCCI had ties to
|
||
several of the people who set up the camps. BCCI had a large
|
||
number of branches in Colombia that were used by the cartels, and
|
||
druglord Gacha was a BCCI customer.
|
||
More importantly, the case illustrates how Cold War politics
|
||
have corrupted the war on drugs. In Colombia, 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 Colombian
|
||
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 Colombian 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.
|
||
|
||
OFFSHORE A-BOMB INDUSTRY: Guns for the drug cartels represented
|
||
only a small part of BCCI's arms supermarket. BCCI was involved
|
||
in the sale of guns to the Contras and the CIA-backed Afghan
|
||
rebels. Gun dealers hired by the National Security Council's
|
||
Oliver North used the bank to illegally sell tow missiles to Iran
|
||
during the Iran-contra affair. And the banks provided financial
|
||
services for Silkworm missiles sold to Saudi Arabia, Scud-B
|
||
missiles bought by Syria, weapons purchased by the Abu Nidal
|
||
terrorist group, Mirage Jets acquired by India and helicopters
|
||
sold to Guatemala.
|
||
Some of the most terrifying deals apparently involved atomic
|
||
bombs. Sen. Alan Cranston (D-CA), has alleged that BCCI was
|
||
involved in programs by Argentina, Libya, Pakistan and Iraq to
|
||
build atomic bombs. In addition, former Senate investigator Jack
|
||
Blum says that Munther Bilbeisi, an arms dealer "whose brother was
|
||
a [BCCI] branch bank manager" and a "major" BCCI customer, was
|
||
involved "in an effort to sell enriched uranium from South Africa
|
||
to the Middle East."
|
||
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 "Washington 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."
|
||
|
||
BCCI AND THE CIA: More importantly, very few media reports have
|
||
put BCCI's arms sales in a larger context of American foreign
|
||
policy and covert operations.
|
||
The congressional Iran-Contra committee noted that then-CIA
|
||
director William 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 CIA was able to
|
||
use BCCI and the offshore financial system to set up its own
|
||
unregulated, private, foreign-policy apparatus. In this way, it
|
||
could ignore Congress, which had outlawed aid to the White House-
|
||
backed Nicarguan Contra 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 Panama, Israel, Saudi Arabia and other Gulf
|
||
states--received billions in U.S. aid and arms during the '80s.
|
||
Arms dealers and banks like BCCI 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, BCCI 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 Western arms dealers and intelligence
|
||
agencies.
|
||
Panama's Manuel Noriega was an important figure in the secret
|
||
scheme to illegally fund the Contras. Jose Blandon, a former
|
||
Noriega aide, claims that the CIA advised Noriega to use BCCI as
|
||
his bank. Various published sources say that the CIA was
|
||
depositing as much as $200,000 a year in Noriega's account at
|
||
BCCI. Noriega, in turn, helped Oliver North set up dummy
|
||
corporations and secret bank accounts that were used to finance
|
||
the Contras.
|
||
Israel also played a key role. Israel shipped Noriega more than
|
||
$500 million worth of arms during the '80s, supplied the Contras
|
||
with guns and helped sell weapons to Iran in the Iran-Contra
|
||
affair. BCCI is known to have worked with Israeli officials on
|
||
several arms deals during this period. The bank also provided
|
||
financing for a number of arms shipments to Iran in the Iran-
|
||
Contra affair. Another country that acted as a CIA proxy in
|
||
Iran-Contra was Saudi Arabia, which gave the Contras at least $22
|
||
million.
|
||
The Saudis also provided CIA-supported rebels fighting the
|
||
Soviet-backed Afghan 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 CIA aid in
|
||
Afghanistan. Recently, Pakistan's finance minister, Sartaj Aziz,
|
||
told the "Financial Times" that BCCI was used by the CIA to direct
|
||
arms and money to the Afghanistan rebels. The official also said
|
||
that U.S. intelligence agencies had set up a slush fund for
|
||
Pakistani military leaders who helped the Afghan resistance.
|
||
During the same interview, the finance minister claimed drug
|
||
traffickers in the region had used BCCI to launder profits from
|
||
sales of heroin. Furthermore, it's clear that the Afghan rebels
|
||
sold drugs to buy arms. ("We i must grow and sell opium to fight
|
||
our holy war," a rebel commander once told the "New York Times.")
|
||
And the CIA may have been involved. "In These Times" has learned
|
||
that government investigators are probing allegations that one CIA
|
||
official supervised the BCCI-financed shipment of drugs and arms
|
||
through Pakistan.
|
||
|
||
BANKING ON WAR: But getting rid of BCCI won't hinder those
|
||
government officials who, like William Casey and Oliver North, are
|
||
determined to undermine American democracy. It's important to
|
||
remember that the CIA has used banks like BCCI for decades.
|
||
During the '60s, '70s and '80s, for example, the CIA laundered
|
||
money for coups and covert operations through the Castle Bank in
|
||
the Bahamas, the World Finance Corporation in Florida and the
|
||
Nugan Hand Bank of Australia. Like BCCI, these banks had ties to
|
||
organized crime figures, drug dealers and spies. Like BCCI, they
|
||
all had links to American banking and S&L scandals. And like
|
||
BCCI, fraud and speculative investments by top executives forced
|
||
all three banks out of business.
|
||
More recently, the CIA had ties with 22 failed thrifts that
|
||
loaned money to people involved in "gun running, drug smuggling,
|
||
money laundering and covert aid to the Nicaraguan Contras,"
|
||
according to the "Houston Post."
|
||
Over time, the booming CIA-backed arms trade has produced big
|
||
profits for arms dealers and banks like BCCI. But these black-
|
||
market sales have also touched off a terrifying arms race in the
|
||
Third World.
|
||
Consider, for example, the role that BCCI and many other banks
|
||
played in a secret operation to build up Saddam Hussein's military
|
||
might. Last summer, a joint investigation by ABC's "Nightline"
|
||
and the "Financial Times" concluded that "Robert Gates was deeply
|
||
involved as deputy director of the CIA in a major covert operation
|
||
that funneled weapons and technology to Iraq. ... The CIA's
|
||
covert shipments put into Saddam Hussein's hand some of the most
|
||
dangerous battlefield weapons in the world."
|
||
To carry out these shipments, Gates--now the CIA director-
|
||
designate--allegedly met with Carlos Cardoen, the head of
|
||
Industrias Cardoen. This Chilean company, which was the largest
|
||
private supplier of weapons to Iraq, shipped more than $500
|
||
million worth of weapons to Iraq in the '80s (see "In These
|
||
Times," April 17 and Oct. 9).
|
||
Industrias Cardoen is licensed to build and ship high-tech
|
||
artillery guns created by arms dealer Gerald Bull and ArmsCor, an
|
||
arms manufacturer owned by the South African government.
|
||
In 1990, Gerald Bull was assassinated, allegedly by Israeli
|
||
agents because he was working with Saddam Hussein to build a
|
||
"supergun" capable of firing nuclear and chemical weapons. Bull,
|
||
an expert on advanced artillery, had a long history of illegal
|
||
arms sales. In the late '70s, a congressional staff report found
|
||
that Bull had conspired with CIA agents to break the U.S. arms
|
||
embargo against South Africa by shipping technology that allowed
|
||
ArmsCor to develop sophisticated artillery guns.
|
||
In 1990, the Inter Press news service reported that over 200 of
|
||
these guns had been sold by Cardoen and ArmsCor to Iraq. At least
|
||
50 to 70 had been sold to the United Arab Emirates, which is
|
||
headed by BCCI's largest shareholder.
|
||
BCCI enters this affair in two ways. In August, Britain's
|
||
"Independent" newspaper alleged that BCCI had helped Bull's
|
||
company, Space Research, smuggle propellant for Hussein's supergun
|
||
from Belgium to Iraq. The story, largely ignored in the United
|
||
States, also reported that "a former deputy prime minister [Andre
|
||
Cools] of Belgium was killed days after being given BCCI bank
|
||
statements alleging bribes were paid to beat the arms embargo" to
|
||
Iraq.
|
||
BCCI also loaned at least $72 million to the Atlanta branch of
|
||
the Banca Nazionale del Lavoro (BNL)--Italy's largest bank. This
|
||
BNL branch loaned Iraq over $4 billion between 1985 and 1989 and
|
||
provided financial services that allowed Hussein to illegally buy
|
||
hundreds of millions of dollars worth of arms and military
|
||
supplies. The BNL branch didn't have enough money to take on such
|
||
large loans, so it illegally financed them by borrowing money from
|
||
banks like BCCI. The House Banking Committee says that Bull's
|
||
Space Research Corporation was one of the companies that received
|
||
illegal financing from BNL for Iraq's weapons program.
|
||
Such deals helped keep Hussein in power and dramatically
|
||
increased the political tensions throughout the Mideast.
|
||
Confident that the arms would keep flowing, Hussein invaded Iran
|
||
in 1980 and Kuwait a decade later--conflicts that cost more than a
|
||
million lives.
|
||
But in providing financial services to Saddam Hussein, BCCI was
|
||
not alone. In the BNL affair, for example, Bank of America
|
||
transferred $72 million between BCCI and BNL. J.P. Morgan, a
|
||
major New York bank, acted as a clearing agent for BNL in the
|
||
loans to Iraq. And many large European corporations provided the
|
||
technology and weapons.
|
||
|
||
A WHITEWASH? Fraud at BCCI burst into the headlines when bank
|
||
regulators around the world shut down the bank this past July.
|
||
But like the S&L scandal--which wasn't discovered by the
|
||
mainstream media until hundreds of billions of dollars had been
|
||
lost--warning bells at BCCI had been going off for well over a
|
||
decade. As early as the late '70s, British and American
|
||
regulators were so worried about the bank's operations that they
|
||
denied BCCI key regulatory licenses to expand its operations. Yet
|
||
BCCI marched on, illegally buying American banks and stealing
|
||
deposits to cover its huge losses.
|
||
Meanwhile, the Reagan and Bush administrations actively
|
||
obstructed a congressional investigation of the scandal. A Senate
|
||
subcommittee chaired by Sen. John Kerry (D-MA) has been
|
||
investigating BCCI 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 Kerry. 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 American political system. Over the past
|
||
decade, securities firms, major banks, insurance companies and
|
||
other financial institutions have given more money to Congress
|
||
than any other industry.
|
||
For example, the Center for Responsive Politics estimates that
|
||
in the 1988 election, political action committees (PACs) for the
|
||
finance, insurance and real-estate industries gave over $27
|
||
million to congressional candidates. That's about 26 percent of
|
||
all business PAC contributions. Common Cause estimates that
|
||
between 1983 and 1988, the S&L industry gave $11.6 million to
|
||
Congress 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 Oliver North ever concocted. Washington's inaction has
|
||
allowed BCCI to continue exploiting an obsolete U.S. regulatory
|
||
system that was set up in the
|
||
Some reforms may yet come out of the BCCI scandal--but Congress
|
||
and the White House show little interest in fundamental change.
|
||
In fact, the mood in Washington is for more deregulation, not
|
||
less. Sometime this year or next year, Congress is likely to pass
|
||
White House-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
|
||
American 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.
|
||
Congress 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
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to move their operations overseas, putting many Americans out of
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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 BCCI this past summer. It
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||
will take many countries, acting together, to bring the system
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||
that created BCCI under control. Given the current political
|
||
climate, that is unlikely.
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||
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||
George Winslow is a New York City freelance writer who regularly
|
||
covers white-collar crime and international finance.
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||
|
||
--
|
||
daveus rattus
|
||
|
||
yer friendly neighborhood ratman
|
||
|
||
KOYAANISQATSI
|
||
|
||
ko.yan.nis.qatsi (from the Hopi Language) 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.
|
||
|
||
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