Fed Orders Foreign Bank to Give Up U.S. Institution
The Federal Reserve Board on Monday ordered a major international bank that once was convicted of money-laundering to divest itself of secret control over Washington’s largest bank.
The order includes an agreement by the Bank of Credit & Commerce International, or BCCI, that it will cease all operations in the United States.
Besides its hidden control over First American Bank of Washington, which is headed by former Defense Secretary Clark Clifford, Luxembourg-based BCCI has maintained agencies in Los Angeles and New York to take foreign deposits and make loans.
The order to which the bank consented requires it to submit a divestiture plan to the Fed within 60 days. The order will have no effect on criminal investigations into how it acquired controlling interest in First American and whether Clifford knew about it.
Clifford and Robert A. Altman, his law partner who is under investigation as president of the Washington bank, have said they had no knowledge that four Arabs who acquired controlling shares in First American nine years ago may have been fronting for BCCI. They said BCCI has exercised no control over First American.
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.
Federal Reserve spokesman Joe Coyne said that the consent order is unusually stringent.
“Although we’ve had some pretty strong orders in the past, I don’t recall that we’ve ever kicked anybody out of the country before,” Coyne said.
In a statement last week, Clifford and Altman said that “if the Federal Reserve has been misled or been misinformed in any respect regarding stock ownership . . . First American has been equally misled.”
Their statement acknowledged that some investigators believe the Middle East investors borrowed funds for their stock purchases from BCCI and that, because some loans have gone unpaid, BCCI holds the stock as collateral--and thus has control of First American.
In fact, New York Dist. Atty. Robert M. Morgenthau, who has been conducting a criminal inquiry for two years into BCCI’s operations in Manhattan, said Monday that the Fed’s order confirmed evidence he first uncovered months ago.
He said that his grand jury investigation will continue. Other sources made the same statement about a more recent inquiry by the Justice Department.
Clifford, 84, is one of the nation’s most prominent lawyers and statesmen. He was a top adviser to President Harry S. Truman and later was defense secretary under President Lyndon B. Johnson.
However, the reputation of BCCI, which has $19 billion in assets and 350 branches in 68 countries, has not been so spotless. It pleaded guilty last year to laundering cocaine profits for drug traffickers and once handled millions of dollars for ex-Panamanian dictator Manuel A. Noriega.
Subsequent to BCCI’s guilty plea, which came in a criminal case in Tampa, the government of Abu Dhabi, headed by Sheik Zayed ibn Sultan Nuhayan, acquired control of the bank last year from Agha Hasan Abedi. Abedi is a Pakistani financier who founded the bank in 1972.
Technically, the Fed’s order requires BCCI to divest itself of any stock of Credit & Commerce American Holdings, or CCAH, a Netherlands Antilles firm that is the holding company for First American Bankshares.
In a statement Monday, BCCI said that an internal audit last year “revealed certain outstanding loans to individual CCAH shareholders, some of which were secured by their CCAH stock,” and that “former bank management responsible for these loans resigned” as part of an overhaul of the bank’s operations. “The loans were promptly disclosed to the Bank of England and the Federal Reserve Board,” BCCI said.
