Possible Illegal Ownership of D.C. Bank Probed : Finance: Institution headed by Clark Clifford may be controlled by Luxembourg depository that pleaded guilty to laundering drug money.

The Federal Reserve Board and the Department of Justice are investigating whether a large international bank has secretly and illegally held controlling ownership in Washington’s largest bank, headed by former Defense Secretary Clark M. Clifford.

The investigators are trying to determine whether a Luxembourg-based institution, known as the Bank of Credit and Commerce International, or BCCI, has secretly controlled Clifford’s First American Bank, with Clifford’s knowledge.

The BCCI, which has $20 billion in assets and 350 branches in 70 countries, was convicted last year of laundering massive cocaine profits. It once handled millions of dollars for ousted Panamanian strongman Manuel A. Noriega, who is facing trial on drug conspiracy charges.

Clifford, 84, is a onetime top adviser to President Harry S. Truman, was defense secretary under President Lyndon B. Johnson and is one of the nation’s most prominent lawyers and statesmen.

He and his law partner, Robert A. Altman, who also is under investigation as president of the Washington bank, say they had no knowledge that four wealthy Arab investors who acquired controlling shares in First American may have been fronting for BCCI.

Under Federal Reserve Board rules, U.S. banks must disclose fully--and obtain the Fed’s approval of--any acquisition that would give foreigners controlling ownership of their institutions.

Investigators are also checking allegations that BCCI--founded by a Pakistani businessman who is a friend of former President Jimmy Carter--secretly controlled the National Bank of Georgia in Atlanta and Independence Bank in Encino, Calif., also an apparent violation.

First American said in a statement Friday that BCCI has served as an “investment adviser” and “communications link” with it--roles that it said were “presented to bank regulators at the time First American was purchased” nine years ago.

Middle Eastern investors “advised the Federal Reserve they were not borrowing funds from BCCI to finance the 1982 tender offer for the company,” which originally was known as First General, the statement added.

However, the statement acknowledged that some investigators believe that those investors borrowed funds for their stock purchases from BCCI and that, because some loans have gone unpaid, BCCI holds the stock as collateral--and has control of First American.

“If the Federal Reserve has been misled or been misinformed in any respect regarding the stock ownership of First American . . . (then the bank) has been equally misled,” the statement said.

First American lost $139 million in 1990, its first red-ink year ever.

As the investigations have proceeded, some law enforcement officials have raised questions about why BCCI’s money-laundering activities were not thoroughly aired two years ago, when Justice Department prosecutors first received evidence of such offenses.

At that same time, the Customs Service, a branch of the Treasury Department, began looking into some transactions. And an investigator for the Senate Foreign Relations Committee also uncovered evidence of possible problems.

Clifford, long a Democratic Party stalwart who has served as BCCI’s Washington attorney, has dismissed allegations that he contacted prominent Democratic senators in an effort to cut off a congressional investigation.

He has also denied that he personally asked Treasury Secretary Nicholas F. Brady to curtail an investigation by the Customs Service.

Jack A. Blum, a former Senate investigator, has said that in 1989 he persuaded two former BCCI executives to provide inside information to a Justice Department prosecutor in Florida about BCCI’s allegedly illicit control of Washington’s largest bank.

But Blum said that, instead of serving as the basis for prosecution, the matter ended up with BCCI’s pleading guilty last year to a different charge--that of laundering millions of dollars of cocaine profits in the United States.

As part of the plea bargain in that case, the bank agreed to forfeit more than $15 million in assets.

But tape-recorded statements about BCCI’s alleged ownership of Clifford’s Washington bank never surfaced in court, and Mark Jackowsky, the federal prosecutor who took custody of this evidence, refused to tell a reporter what became of it.

The tape-recorded evidence was provided by Amjad Awan, who managed BCCI’s Panama office and was Noriega’s personal banker. The transcript of a September, 1988, conversation shows that Awan told an undercover agent:

“We own a bank in Washington. It’s called the First American Bank. There are six banks bought out by BCCI about eight years ago. BCCI was acting as adviser to them, but the truth of the matter is that the bank belongs to BCCI. Those guys are just nominee shareholders.”

Now, indirectly under pressure from the office of Robert M. Morgenthau, the Manhattan district attorney who began his own investigation of BCCI’s New York-area activities two years ago, the Justice Department’s criminal division is again investigating the case.

Federal Reserve Board officials, whom Morgenthau contacted months ago, have been looking into BCCI’s links with First American and have made a formal referral of evidence to the Justice Department. Justice Department officials refused to comment on the case.

A source close to the case said “there’s no question about it” that the inquiry started by Morgenthau--a former U.S. attorney in New York who specialized in banking investigations 20 years ago--had caused the Justice Department to rekindle its interest.

Morgenthau said in an interview that the grand jury in New York is focusing on “evidence that BCCI might have acted to control First American” and the possibility that “false and fraudulent financial statements may have been filed” with New York state banking officials.

The Federal Reserve Board is studying whether it should require BCCI to divest itself of any First American holdings it acquired without specific board approval. The Fed oversees bank holding companies like First American’s parent corporation, First American Bankshares Inc.

Clifford, Altman and others associated with First American have insisted that their conduct has been proper and above board.

Blum’s Senate investigating job was abolished in early 1989, shortly after he returned from a Florida trip in which he thought he had uncovered important evidence establishing that BCCI secretly owned First American.

In taped interviews with Blum, two former BCCI executives said that their bank had provided loans to the Arab investors who bought controlling shares of First American, and then the bank took back the shares as collateral for the loans.

Because the investors had put up no money of their own, and because BCCI held the stock, BCCI was the real owner of First American, the former BCCI executives said.

According to one investigator, the ex-BCCI officers alleged also that Clifford and Altman attended a BCCI management conference in Vienna at which charts were displayed that showed First American among BCCI’s holdings.

Clifford and Altman said Friday that that allegation is false.

One of the BCCI executives said also that Clifford and Altman boasted to bank colleagues in London that they had derailed the Senate investigation and gotten Blum fired.

Blum believes that lobbying and financial contributions by Clifford and his law partners may have cost him his job as chief counsel of the Senate Foreign Relations subcommittee on terrorism and narcotics, headed by Sen. John Kerry (D-Mass.).

Federal Election Commission records show that, about the time of Blum’s Florida trip, Clifford, Altman and two others in their firm gave $1,000 to Kerry’s campaign committee.

Three months later, Clifford donated another $1,000 to Kerry’s campaign and $1,000 to the campaign of Sen. Claiborne Pell (D-R.I.), chairman of the full Foreign Relations panel.

Aides to Kerry and Pell denied that campaign contributions had had any impact on the investigation and said they knew of no lobbying by Clifford or associates to halt the investigation.

Kerry aide Richard McCall said the probe had gone on for two years--twice as long as originally envisioned--and that Pell was uneasy with the notion that his usually sedate panel was sponsoring splashy hearings on drugs and money-laundering.

In any event, McCall added, Kerry continued pursuing BCCI records after Blum left and eventually persuaded Clifford to produce stacks of documents that had been previously withheld.