The CIA warned law enforcement officials as early as 1986 that the Bank of Credit & Commerce International secretly and illegally gained control of First American Bank in Washington, but the government failed to move against BCCI until earlier this year, according to information disclosed Wednesday.
The CIA's early warning came to light as Sen. John Kerry (D-Mass.) made public a small part of a five-page document that the agency provided in 1986 to other government officials, including law enforcement authorities. According to a U.S. official familiar with the document, it reported all intelligence information about BCCI available at that time.
The document appears to reinforce allegations--including some leveled by Kerry himself--that the Justice Department and other U.S. agencies ignored early evidence of widespread corruption at BCCI. It appears also to counter allegations that the CIA and then-Deputy Director Robert M. Gates, now an adviser to President Bush and his nominee to return to the agency as its director, participated in a cover-up.
BCCI, an international bank now owned largely by the royal family of Abu Dhabi, was seized by bank regulators in 32 countries earlier this month after disclosures that it had made numerous unrepaid loans to insiders. Its collapse is believed to be the biggest banking scandal in history, with losses estimated in the billions of dollars.
BCCI's ownership of First American is the subject of simultaneous investigations by the Justice Department and the Federal Reserve Board. Both agencies are looking into allegations that First American Chairman Clark M. Clifford, adviser to many Democratic presidents, helped to conceal the ownership of the bank from federal officials.
Investigators believed that BCCI's Arab and Pakistani owners used their secret control of First American to gain political influence and a financial foothold in the United States.
Kerry said there is no evidence on the record that any government officials who read the CIA's 1986 document about BCCI ever contacted the Federal Reserve Board, which had opposed efforts by BCCI to take over American banks.
"The questions raised by this memo are obvious and serious," said Kerry, chairman of a Senate Foreign Relations subcommittee that plans hearings today on the BCCI scandal.
"BCCI's secret ownership of First American was illegal," Kerry said. "Yet, despite the fact that a number of U.S. agencies were told about the secret ownership of First American by BCCI, apparently no one did anything about it. The question is why?"
Kerry did not identify the agencies that received the document in 1986, but a U.S. official who refused to be identified said that law enforcement agencies were among the original recipients. Kerry indicated that the CIA also gave the same document to law enforcement officials again before a 1990 plea-bargain agreement between the Justice Department and former BCCI employees charged in Florida with laundering illegal drug money.
According to Federal Reserve Board general counsel J. Virgil Mattingly Jr., his agency did not begin to investigate BCCI's alleged ownership of First American until after the money laundering case came to light in 1988. The Fed took its first step against BCCI last January, and recently called on the Justice Department to investigate the First American case.
Kerry only recently obtained access to the 1986 CIA memo, which former U.S. Customs Commissioner William von Raab has said he first obtained from Gates in 1988. Gates' role in distributing the memo originally fueled speculation that he tried to squelch the investigation of BCCI because the bank was used by the CIA to funnel money to Third World countries.
Although CIA officials have acknowledged that the agency did business with BCCI, they have staunchly denied that any of their BCCI-related activities were in any way illegal.
When Kerry asked recently for CIA permission to disclose part of the 1986 document, CIA Director of Congressional Affairs Stanley M. Moskowitz replied in a letter to the senator: " . . . You may disclose the fact that this portion of the report states that BCCI attempted unsuccessfully to acquire or gain control of (First American) in late 1981, but that BCCI achieved this goal six months later; the exact nature of this control is unclear."
In 1981, First American was acquired by a group of Middle Eastern investors who told U.S. officials that BCCI had no role in their enterprise, even though some of the purchasers were closely associated with BCCI founder Agha Hasan Abedi.
Clifford, as well as his law partner, Robert A. Altman, who served as president of First American, also insisted at the time that BCCI had no role in owning the bank.