Marina Investor Tied to BCCI, Audit Shows : Banks: Saudi billionaire Ibrahim is linked to questionable loans of $130 million.


The billionaire Saudi Arabian businessman who secretly bought a major stake in a large group of properties in Marina del Rey two years ago has been linked by auditors to $130 million in questionable loans from the now-shuttered Bank of Credit and Commerce International.

The huge multinational bank was seized this month by banking authorities worldwide after an audit by the Price Waterhouse accounting firm found evidence of “massive and widespread fraud” potentially running into the billions of dollars.

An earlier Price Waterhouse audit of BCCI, prepared in March, 1990, identified numerous loans for which no documentation could be found. The audit listed the Saudi family headed by Abdul Aziz al Ibrahim among the major holders of these loans, according to a former congressional investigator.

Ibrahim, 43, is the leader of a group of investors that in 1989 bought a 49.9% interest in the marina properties--three hotels, two apartment complexes, offices, shops, restaurants and more than 1,100 boat slips, all of which operate on long-term leases with Los Angeles County on publicly owned land. The investment group is now locked in a bitter fight with its Los Angeles partner, developer Abraham M. Lurie, for control of the marina leases.


The Ibrahims’ representative in Los Angeles, Abdul Aziz Yahya, confirmed that the family has done business with BCCI but flatly denied having any improper loans with the bank.

Yahya said that accountants for the Ibrahims were conducting their own inquiry to determine what balances they had in accounts at BCCI.

“I have a belief . . . that we are victims as much as the others,” Yahya said. “We want to get to the bottom of this situation. . . . We would very much like to get this cleared up.”

Washington attorney and former U.S. Senate investigator Jack Blum, who has an extensive knowledge of BCCI and is familiar with the 1990 audit, said it shows the Ibrahim family had deposits of about $150 million in BCCI and loans of $130 million to $132 million at the end of 1989. The auditors described the Ibrahims as having significant loans and deposits with BCCI for a number of years, Blum said in an interview this week.

“We don’t have any outstanding loans with BCCI, definitely not with the magnitude of $132 (million),’ said Yahya, president of Newfield Enterprises International, which oversees the Ibrahims’ real estate investments in the United States.

BCCI was seized July 5 in a coordinated move by banking authorities in Britain, Luxembourg, Switzerland, France, Spain, the Cayman Islands and the United States. Regulators say it appears to be the largest bank fraud scandal in history. The bank drew international headlines in January, 1990, when it pleaded guilty to charges in Tampa, Fla., of laundering cocaine profits for Colombia’s Medellin cartel and paid a fine of about $15 million. Five bank employees were also convicted in the case.

Since then, the bank has been linked in published reports to secret, and in many cases apparently illegal, financial dealings involving Manuel Noriega, Ferdinand Marcos, Saddam Hussein, Arab terrorist groups and various intelligence agencies, including the CIA. When it was closed, the $20-billion bank operated in about 70 countries. In the United States, according to the Federal Reserve, BCCI secretly controlled Washington’s biggest bank, First American Bank, and the San Fernando Valley’s Independence Bank of Encino.

The contents of the latest Price Waterhouse report--the audit that actually led to the shutdown of BCCI--remain a closely guarded secret by Bank of England regulators. The 1990 report, however, provides a look at some of the bank’s extensive troubles.

The Ibrahim family was one of at least nine individuals, families or investment groups, mostly from Persian Gulf oil nations, identified in the 1990 audit as having more than $100 million each in questionable loans on BCCI’s books, the Wall Street Journal reported two weeks ago.

But auditors were unable to independently confirm the loan balances. Blum said the auditors could find “no loan agreement, no notes signed, no liens against property.” He said there was “a complete failure of anybody to document anything. Nobody kept any paper.”

The Ibrahims’ involvement with BCCI, even if it is shown to be innocent, poses potential trouble for them in Los Angeles. The association with the bank is likely to become a hot political issue if they manage to wrest control of the marina leases from Lurie--a significant possibility because Lurie is experiencing extensive financial problems that appear to make it difficult for him to buy out the Ibrahim-led group. If that happens, the Los Angeles County Board of Supervisors would be required to vote on whether to accept the Ibrahim group as majority marina leaseholders.

The entire marina is owned by Los Angeles County and businesses there operate on long-term, (generally 60-year) leases that can be bought and sold much like conventional real estate.

When the Ibrahim group made its original investment in Lurie’s properties in August, 1989, it purchased the 49.9% stake in the properties for $21.8 million. The transaction was structured through a dozen shell companies stretching from Luxembourg to the Cayman Islands to California to conceal the identity of the investors. Lurie, a longtime marina developer, retained a 50.1% interest in the leases.

County officials never learned who the investors were. The Board of Supervisors approved the deal after being assured by the investors’ Chicago attorney that the members of the group were legitimate foreign businessmen who “wish to remain anonymous to avoid . . . criminal elements that tend to gravitate to and feed upon the prominent and well-to-do.”

After a two-month investigation, The Times identified Ibrahim, a brother-in-law of Saudi King Fahd, as the lead investor. The marina properties were added to his extensive portfolio of U.S. real estate, which includes several Ritz-Carlton hotels.

Ibrahim representatives subsequently disclosed that Abdul Aziz al Ibrahim and his brother, Majid, control 93% of the stock in the Luxembourg company that made the Marina del Rey investment.

From the outset, however, Lurie and the Ibrahims had major disagreements on key issues ranging from development plans to payment of bank loans.

A deal to sell Lurie’s remaining interest to the Saudis was announced last fall in which the Saudis would pay Lurie $15.3 million and assume about $130 million in mortgages on the marina properties. The deal collapsed this spring, however, and the Saudis filed suit to dissolve their partnership with Lurie, accusing him of engaging in fraud.

Faced with mounting legal and financial problems, Lurie last month sought federal bankruptcy protection. And this month, on the eve of a threatened foreclosure against one of their marina hotels, the partnership of Lurie and the Saudis also filed for bankruptcy.

Lurie contends that the Saudis forced the partnership into bankruptcy so they could buy the leases at “fire-sale prices.” If the Saudis do buy the leases, the fight appears destined to once again land in the laps of the supervisors, who must approve any change in majority control of the marina leases.

In sharp contrast to two years ago, Ted Reed, director of the county Department of Beaches and Harbors, which administers the marina, said that if the Saudis emerge from the bankruptcy proceedings in control of the marina properties, the county “will demand as much of a full disclosure as possible.”

County officials will “certainly look to the reputation” of the investors and require a “much more precise financial statement,” Reed said.

County officials demanded detailed information about the identity of the Saudi investors, their character and financial background last fall when the planned sale of Lurie’s remaining interest in the marina was announced.

Reed said this week that the county has not received much of the background information that was requested.

The Price Waterhouse audit done last year raises questions but provides few answers about the Ibrahims’ loans from BCCI. The report said the loans to the Ibrahims were ostensibly advanced against deposits in BCCI, but without any formal lien against those deposits. Blum said auditors also were perplexed about why the interest rate for both the deposits and the loans was the same.

It is entirely conceivable, Blum said, that some of the loans that the auditors found on BCCI’s books did not really exist. He noted that “a loan is an asset” and could be invented by the bank to conceal losses. “No doubt that some of these loans were just pure fiction to cover holes in the balance sheet,” he said.

Yahya, the Ibrahims’ Century City spokesman, said the Saudis were among the victims in the bank fraud.

“We had done business as depositors with that bank and other banks as well,” Yahya said. “At no time had we borrowed any money from BCCI without the bank doing what they are supposed to do--which is basically a loan should be well collateralized.”

A Chronology: Saudi Investors and Marina del Rey

Marina del Rey sits on public land -- it is owned and administered by the Los Angeles County government. Businesses there operate under long-term leases (generally 60 years) that can be bought and sold much like conventional real estate.

AUGUST, 1989: The marina’s largest developer, Abraham M. Lurie, sells a 49.9% stake in his marina holdings to unidentified foreign investors for $21.8 million. The complex deal is structured through a dozen shell corporations stretching from Luxembourg to the Cayman Islands to California to conceal the identity of the investors. Los Angeles County supervisors approve the sale without learning--or even asking--who the investors are. The deal involves about 20% of the property in Marina del Rey--three hotels, two apartment complexes, offices, shops, restaurants and more than 1,100 boat slips.

NOVEMBER, 1989: After a two-month investigation, The Times identifies the lead investor as billionaire Saudi Arabian businessman Abdul Aziz al Ibrahim, a brother-in-law of Saudi King Fahd. The marina investment is the latest in a series of secret U.S. real estate acquisitions by Ibrahim and his partners. Their portfolio includes Ritz-Carlton hotels in New York, Washington and Houston, an unfinished hotel in Aspen, Colo., a hotel-office complex near Chicago’s O’Hare International Airport, some undeveloped prime property in the hills above Bel-Air, largely undeveloped land near Disney World in Florida and a hotel opposite the Mayo Clinic in Rochester, Minn.

OCTOBER, 1990: Lurie agrees to sell his remaining 50.1% interest in the marina to the Saudi investors for $15.3 million, with the Saudis also agreeing to assume more than $130 million in debts on the properties. This time, Los Angeles County demands to know the identity of the investors and their background. But the deal collapses and a bitter battle for control of the marina holdings ensues.

MARCH, 1991: The Saudis file suit in Los Angeles Superior Court seeking to dissolve their marina partnership and accusing Lurie of engaging in “fraud and abuse.” Two banks file default notices against the partnership for failure to make payments on $75 million in loans.

JUNE, 1991: Lurie, faced with mounting legal problems involving his Saudi partners, his ex-wife and his former real estate brokers, files for bankruptcy in a bid to protect his personal assets. A Superior Court judge appoints a receiver to oversee the marina holdings.

JULY 10, 1991: The day before a scheduled bank foreclosure against one of their marina hotels, the Lurie/Saudi partnership seeks protection under Chapter 11 of the federal bankruptcy code.

The Lurie/Ibrahim Holdings 1. Marine Plaza Hotel site 2. Marina International Hotel 3. Doubletree/Marina Beach Hotel 4. Marina del Rey Hotel 5. Admiralty Apartments 6. Islander Marina Apartments 7. Fisherman’s Village 8. Pier 44 9. Marina West 10. Marina Beach Shopping Center