BCCI Founder’s Aides Tell Another Tale : Finance: Supporters of an ailing Agha Hasan Abedi blame scandal on a conspiracy from within.

In a small, red-roofed cottage in the heart of this South Asian financial mecca, just a few feet from the private office where, three decades ago, he had conceived and masterminded a $20-billion international banking empire, Agha Hasan Abedi has watched from a wheelchair as his life’s vision crumbled in scandal, intrigue and charges of unprecedented worldwide bank fraud in just a few weeks’ time.

He has said little about it, his brain damaged from heart attacks, his speech slurred from a stroke and his vocal cords badly damaged from surgery.

In fact, the man who once vowed to build the largest bank on the planet in less than a quarter of a century has read little or nothing about the collapse of his empire, a network of bank branches in 76 countries.

The man who built, bought, bargained and brokered the Bank of Credit & Commerce International--a name now more synonymous with vice than with vision--can no longer read even a simple balance sheet. He spends his days in front of a television set. He remembers only the old days, he tells his rare visitors in speech so slurred that it is incomprehensible to a stranger. As for the rest, his aides will explain everything.

Even as international investigators from the United States, Britain, France and even Luxembourg layer new allegations on BCCI--among them a criminal indictment handed up Monday in New York, accusing Abedi of masterminding what American prosecutors say may be the largest bank fraud in history--Abedi’s inner circle of handpicked lieutenants finally decided this weekend that they, at least, had heard enough. Seated in that same office where Abedi laid the foundations for the BCCI empire in the early 1970s, they said it was finally time to tell Abedi’s side of the story.

Although they denied any personal knowledge of direct links between BCCI and gunrunners, drug dealers, CIA operatives and nuclear-weapons component smugglers--allegations that have been made against BCCI’s Pakistani operations in several recent foreign press accounts--the three former senior executives of the bank told a story that was as replete with conspiracies and international intrigues as the allegations still emerging in the BCCI scandal.

Theirs was a version far different, far more specific than the popular view held throughout this increasingly anti-American Muslim nation.

Here, Abedi is revered as a Third World saint who has bailed out nations, bankrolled scores of charities, saved hundreds of lives, employed thousands of middle-class Pakistanis and put Pakistan itself on the map of international finance--only to be undone by what several Pakistani commentators have called a Western-Jewish conspiracy to destroy Pakistan and the Muslim world.

But the story told by Khalil Zobairi, one of Abedi’s first managerial hires after he started BCCI in 1972, and by Muzaffar Ali Bukhari, who served in BCCI’s top management for more than a decade, had little to do with the outside financial world.

Instead, they said it was a conspiracy from within that destroyed the Third World’s biggest banking empire--that and the inherent failings of the management style Abedi used to build his institution from a tiny bank with a Luxembourg address, no branches and just $2.5 million in capital into an international network with $20 billion in assets and 1 million depositors worldwide.

“In my opinion, the main reason for the fall of BCCI was because of the extraordinary trust of Mr. Abedi in lieutenants--senior lieutenants who were around him but were highly incompetent and corrupt,” said Zobairi, who along with others in Abedi’s remaining inner circle are now waiting for government approval to start yet another bank in Pakistan.

The basic plot, as told by Abedi’s inner circle: BCCI’s dynamism and health held out only as long as Abedi’s did. But, after two heart attacks, a stroke and a heart transplant left Abedi an invalid in his Karachi home in 1988, his top managers hijacked the bank from him, shielded him from deepening losses and wrongdoing until his retirement last year and, ultimately, led BCCI down the road to ruin. But just beneath that scripted veneer, even Abedi’s inner circle conceded that ultimately he created an institution tailor-made for corruption and abuse.

It was an empire with little or no central control or accountability, in which regional managers, who were encouraged to tiptoe on the outer edges of the law in their quest to grow and grow fast, occasionally crossed the lines of legality.

It was an institution in which Abedi instructed everyone to live beyond their means to build their own stature and confidence. He was obsessed with building personal, almost godfatherly relationships, ranging from the lowest-paid bank teller to the richest, most powerful leaders of institutions and nations around the globe, while constantly searching out new tax corners to cut and new national markets to control.

Interviews with businessmen, political leaders, lawyers, journalists and other prominent Pakistanis in Karachi, none of whom have direct ties to BCCI’s founder and some of whom rank among his few local detractors, confirmed much of the inner circle’s account of BCCI’s rise and fall.

“The fact is, Abedi’s only real fault was that he was not immortal,” said one prominent Pakistani familiar with Abedi and BCCI’s operations. “It was a one-man show. He built this network of relationships and obligations--a personal network of obligations that his successors knew nothing about . . . . The BCCI culture was all right if Abedi was immortal. But then he got sick. Abedi was the keystone of the arch. It had to collapse sooner or later. It was only a matter of time.”

For BCCI, the time came on June 6, when the Bank of England, armed with an audit report from Price Waterhouse that revealed billions of dollars in bad loans and potential fraud within the bank, ordered the entire BCCI network closed and its accounts frozen worldwide.

But for Abedi’s inner circle, and those who have met the Pakistani tycoon both before and after his debilitating illness, the bank’s ultimate fate was sealed on that day in early February in the Inter-Continental Hotel in the Pakistani city of Lahore, where Abedi was stricken with his first heart attack.

To truly understand the fall of BCCI, however, most observers here say one must first understand the rise of Abedi and his self-styled banking empire. Born in 1922 in the northern Indian city of Lucknow, he possessed a soft-spoken, homespun nobility that sprang from his roots.

Lucknow, which remains a part of India, was a center for high Islamic culture before the British divided the Indian subcontinent to create the new Islamic state of Pakistan in 1947. In earlier centuries, the city was home to the renowned kings of Avadh, princely rulers known for royalty, refined decadence and their tulekdars, noble lords characterized by their generosity and infatuation with power. “Abedi is really the epitome of that high Indian Muslim culture,” the prominent Pakistani said. “He was truly a consummate tulekdar, and you can see how his faults emerged from this.”

Abedi’s first job was in a Lucknow bank as a teller counting out money for well-heeled customers. When the subcontinent was partitioned along religious lines several years later, Abedi joined the millions of Indian Muslims migrating that year to Karachi, then a sleepy backwater port of just 350,000 people.

Soon afterward, Abedi started his first bank. He called it the United Bank Ltd., and, within just two decades, he built it into Pakistan’s largest. He recruited the best, most loyal managers he could find. And, using enticements from the sordid to the sublime, he laid the groundwork for his future empire by opening Pakistan’s doors to the soon-to-be-rich Middle East markets.

Karachi’s corporate magnates now recall with nostalgia how Abedi used the city’s first five-star hotel as a base to entertain his new Arab clients in the 1960s--Karachi’s heady years as a bustling sin city before Pakistan’s Muslim conservatives forced the government of then-Prime Minister Zulfikar Ali Bhutto to ban liquor nationwide and embark on a program of religious austerity in 1977.

It was in those early years with United Bank that Abedi’s top managers would supply harems and escorts for his new Arab customers to take on hunting trips in the Pakistani desert, where, in re-enactments of medieval Arab tradition, the sheiks would use falcons to hunt the country’s nearly extinct bird, the bustard. “This was the real beginning of Abedi’s empire,” said one prominent Karachi businessman. “As fundamentalist Muslims, the sheiks told Abedi that Islamic law prohibited them from earning interest on their accounts. So he paid out the interest in favors. And really, it wasn’t so different than the old court of Avadh, where courtiers and concubines abounded.”

But as early as 1972, Abedi was well aware of Bhutto’s plan to nationalize Pakistan’s banks as a symbol of his new socialism. So the young entrepreneur approached one of his many newly rich Arab friends, the emir of Abu Dhabi, as well as financiers from the Bank of America, which was then seeking a foothold in the Middle East.

Abedi quickly raised $2.5 million in starting capital. With it, he incorporated BCCI that year in Luxembourg, then a notorious tax haven. Abedi stayed on with United Bank until the nationalization order came, and, in January, 1974, he left to devote himself full time to building his new empire.

His vision, and his motto, were simple. “Mr. Abedi’s dream was that we should become the biggest bank of the world in 25 years,” recalled Bukhari, who left BCCI as South Asian manager last year when it was clear that Abedi had lost virtually all control over the bank. “He used to say that in our meetings and conferences. He used to look ahead--not two years, three years or five years, but 20 years or 25 years. And he used to ask questions: ‘Where do you see the bank after 50 years?’ And the planning was done accordingly.”

Abedi himself has confirmed a much-told story from BCCI’s early years, when he disagreed with a manager from the Bank of America, which pulled out of BCCI soon after it started. Abedi got up from the table, walked to the penthouse window, stared out and said: “The difference between you and me is, I’m standing 10 years in the future and looking back, and you’re sitting here looking forward.”

The fast-moving banker used a similar philosophy on his top managers: Think rich, act rich and you will be rich, and so will the bank. “In the beginning, everybody used to stay in five-star hotels,” Bukhari said. “Mr. Abedi said it doesn’t matter. He said: ‘You build up your stature.’ He believed that you must dress well, you must live well, you must mix in high society so that you gain confidence. . . . And he believed: ‘We pay you so well, there will be no further temptation for you to do anything for yourself. You dedicate all your time to the institution.’ ”

Abedi lived it by example. Jetting around the world in the bank’s private, customized Boeing 727, Abedi ingratiated himself with the world’s rich, its powerful and its famous. He used philanthropy as a double-bowled chalice, building personal friendships with leaders such as former President Jimmy Carter by donating to their favorite charities, while simultaneously creating massive tax writeoffs for his bank’s burgeoning profits.

From top to bottom, even within BCCI’s management structure, Abedi used the same technique to build human debts from lowly tellers to governors of national central banks. “Some people collect coins. Some people collect postage stamps. He used to collect people,” Bukhari said.

Bukhari noted of his boss: “He used to say: ‘Whenever you come across a good banker--he may be a governor of a central bank of a country or he may be a general manager of another bank--if he’s available, you take him.’ But we said: ‘Sir, there is no work for him.’ And he’d say: ‘He will generate his own work. . . . When we go to a developing country in, say, Africa, when we send him, he will say: ‘With our experience of 20 years or 30 years as governor of the central bank in Pakistan or someplace, I will organize your central bank.’ These people used to then bank with us. We would open our branches there. This is how we expanded.”

Bukhari then recounted numerous times when he was called by Pakistan’s finance minister or central bank governor, who pleaded for help to avert a national foreign-exchange crisis. Bukhari would call Abedi, who would instantly transfer $100 million or $200 million in bank funds into the Pakistani government account, charging full interest but never specifying a repayment schedule.

Bukhari explained that BCCI similarly gained footholds in many Third World nations where foreign banks were illegal by first helping them repay international debts in exchange for minority BCCI interest in their national banking system.

Such activities earned Abedi and his bank unprecedented laurels as shining lights for the Third World--an institution daring to go where no Western financial corporation would tread.

But as BCCI mushroomed in size, attracting increasing scrutiny from federal regulators in the United States--where BCCI and its shareholders had bought subsidiary banks and made little secret of their dealings with such prominent dictators as Panama’s Manuel A. Noriega--Abedi began to lose control of the many regional offices that functioned with increasing autonomy and impunity.

“Mr. Abedi is not that good a banker from that point of view--to manage currency and this and that, what all banks do,” Bukhari said. “So he said: ‘OK, decentralization as far as operations are concerned. . . .’ I don’t think Mr. Abedi ever went into the nitty-gritty of banking, as such.”

The first hint that such a philosophy was going wrong came in 1985, the year Bukhari and the other executives interviewed here were told that BCCI had posted a loss of $300 million. Bukhari said that when he and others asked what caused the loss, the current management of the bank told them that it was from “cutting corners.”

Abedi ordered new austerity measures within the bank that year and called for an across-the-board consolidation. But he did nothing to regain personal control over regional offices spinning further and further out of control. The problems in several of BCCI’s many autonomous regions began to mount.

Then, in February, 1988, under increasing personal pressure, Abedi was stricken with his first and second heart attacks in rapid succession. He underwent a heart transplant operation in March, but aides said that his condition deteriorated further after the indictment later that year of several BCCI employees in Florida, where the bank was charged, and pleaded guilty to, charges of laundering drug money--a plea that Abedi now says he never would have permitted had he actually been running the bank at the time. For Asian managers such as Zobairi, the Florida case was one in which a handful of BCCI managers had gone renegade, but one that reinforced the dangers inherent in Abedi’s management style.

It was after Abedi fell ill that Zobairi, Bukhari and other members of Abedi’s inner circle allege that his management team sold BCCI and Abedi’s vision to the ruler of Abu Dhabi, Sheik Zayed ibn Sultan al Nuhayan, and finally moved the bank’s home office to that Persian Gulf emirate last year. Zobairi explained how Abedi finally was eased out of BCCI officially last year, how Sheik Zayed purchased most of the bank’s shares on the recommendation of its current management the same year, how a junior bank executive with little experience but fierce loyalty to the sheik took over as BCCI chairman. Then Zobairi added: “What has happened, that’s the proof itself.”

“You just see the people who have gained,” added the senior ex-BCCI executive who asked not to be named. “They were all with Mr. Abedi for more than 20 years. . . . He trusted them. . . . And they are the ones who have profited most from the bank.”

But as Abedi sits in his wheelchair day after day on the modest quarter-acre Karachi compound he acquired decades ago, his inner circle insists that the 68-year-old visionary reaped few personal profits from his empire--an assertion well-documented by Abedi’s lifestyle in recent years. Aides estimate his entire assets at $5 million, which they have begun to liquidate to meet living expenses.

In the words of one prominent Karachi attorney who knows Abedi: “It never was money that Abedi was after. It was power--not in the crude sense, but access to people, influence. He very much enjoyed it. That was his poison.”

* BACKGROUND ON BCCI: A review of the names and events behind the banking scandal. World Report