Lobbyists’ Role Cited in Failure to Probe BCCI

The Ronald Reagan Administration, under heavy pressure from high-powered Washington lobbyists hired by the Bank of Credit & Commerce International, repeatedly ignored evidence that the Abu Dhabi-owned bank was operating illegally in the United States, a congressional committee was told Thursday.

Former U.S. Customs Commissioner William von Raab and former Senate investigator Jack Blum, in testimony before a Senate Foreign Relations subcommittee, outlined a list of developments during the 1980s that they said provided the government with evidence of misconduct by BCCI.

In each case, they said, the government failed to pursue the evidence aggressively.

Von Raab blamed the influence of lobbyists and public relations firms hired by BCCI for discouraging the government from conducting a full investigation of the bank.

“There wasn’t a single influence-peddler who wasn’t being used to work this case,” he said. “If you were to get the BCCI Rolodex for its influence peddlers, you would have the blue-chip list.”

Von Raab, now a private attorney, mentioned the names of four influential Washingtonians--three Democrats and one Republican--that he said he believes were instrumental in helping to squelch any investigation of BCCI.

They are Clark M. Clifford, adviser to several Democratic presidents and chairman of BCCI-controlled First American Bank in Washington; Robert Altman, Clifford’s protege and First American president; Robert Gray, Republican public relations consultant, and Frank Mankewicz, one-time press secretary to Robert F. Kennedy and now a business partner of Gray.

Many other law firms and consultants also were employed by BCCI.

Clifford and Altman are under investigation by federal authorities for their roles in the secret BCCI ownership of First American.

Mankewicz denied the allegations on behalf of himself and Gray, describing Von Raab’s testimony as “incredibly irresponsible and totally false.” He said that neither he nor any other member of their public relations firm, Hill & Knowlton, contacted anyone in the executive branch or the Congress on behalf of BCCI.

At the same time, Blum, now a private attorney, suggested that both Republicans and Democrats in government failed to pursue the BCCI case until recently because they believed that members of their own parties might be responsible for ignoring early warnings of a scandal.

“This scandal is an embarrassment to everybody who had anything to do with it,” he said. “There is culpability all around. I think there is an overall distaste for getting into it.”

Even at the Senate hearing, there was a strong political undercurrent as Republicans tried to lay blame on Clifford and Altman, and Democrats aimed their criticism at the administrations of Presidents Bush and Reagan. That caused Sen. Jesse Helms (R-N.C.) to observe: “It’s not just on one side, it’s on both sides.”

BCCI was seized early last month by regulators in 32 countries after they received evidence that bank officers had engaged in a massive scheme of fraud and the granting of bad loans, many of them to Middle Eastern investors in the bank. Losses are believed to total $10 billion.

Reagan Administration officials apparently received their first evidence of illegal activity by BCCI when the CIA prepared an intelligence report in 1986 that is said to have outlined the bank’s involvement in illegal activities around the globe.

But Fed officials have said they never were shown the CIA document, which alleged that BCCI had illegally obtained control of First American. Likewise, Von Raab said he never received a copy of the CIA document until two years later, even though sources said it was distributed to other law enforcement officials as well as the Justice, Treasury and State departments.

Two years later, federal prosecutors in Tampa indicted several BCCI employees on charges of laundering drug money. Although the case produced evidence of other illegal BCCI activities, Von Raab said, the Justice Department did not pursue the probe.

Instead, the Justice Department negotiated a plea bargain with the defendants in which the government pledged that it would not bring charges against the bank itself for the offenses uncovered in that case. Both Blum and Von Raab were critical of the plea bargain.

At the same time, Blum, who had by then concluded a Senate investigation that touched on BCCI, said he provided federal prosecutors in Florida with detailed depositions from two former bank employees, who described a broad range of illegal activities by the bank. He said the prosecutors did nothing with the evidence.

Von Raab suggested that U.S. prosecutors in Florida were more interested in using the evidence gained in the Tampa money-laundering case to indict then-Panamanian dictator Manuel A. Noriega. He said that law enforcement officials in the Reagan Administration were “blinded” by the political pressure they were receiving to build a case against Noriega.

Despite all the evidence that government officials had obtained about BCCI, the Federal Reserve Board--the agency with primary authority over such matters--said it was never informed of any such allegations. William Taylor, who is in charge of the Fed’s current BCCI inquiry, testified at the hearing that Fed officials have searched their records and found no evidence that they were contacted by the CIA, Treasury or the Justice and State departments.

According to Taylor, the Fed did not receive any hint of illegality by BCCI until it received a telephone call on Dec. 27, 1988, from a Customs Service officer, who alleged that BCCI secretly owned three American banks. He said an investigation of that tip by the Fed found “no corroborating evidence.”

It was not until early 1991 that the Fed began a serious investigation of BCCI. This occurred shortly after the Fed was informed by New York Dist. Atty. Robert Morganthau that none of the more than $1 billion in BCCI loans to the Arab owners of First American had ever been repaid. This evidence confirmed suspicions that BCCI was the actual owner.

Staff writers Karen Tumulty and Ronald J. Ostrow contributed to this story.