Senate Report Ties Failed Miami Bank to BCCI : Finance: The document cites transactions between CenTrust Savings Bank and Ghaith R. Pharaon, reportedly a major holder in Bank of Credit & Commerce.
An “interlocking relationship” existed between the failed CenTrust Savings Bank of Miami and the indicted Bank of Credit & Commerce International, a congressional report said Monday.
The links included a joint contribution to a philanthropic foundation run by former President Jimmy Carter and reimbursement by CenTrust of a BCCI official’s purchase of airline tickets to transport six French chefs to a dinner party.
The report on CenTrust’s failure was submitted by Sen. Orrin Hatch (R-Utah) to the Senate Judiciary subcommittee on antitrust, monopolies and business rights.
Hatch, a member of the panel, assigned a member of his personal staff to write the report, which recommends subcommittee hearings. The report found virtually no evidence of politicians pressuring federal regulators on behalf of CenTrust.
CenTrust failed in 1990 at a projected cost to taxpayers of $2 billion, the report noted. “It is a story of greed and mismanagement on the part of David L. Paul, the CenTrust chairman, who squandered the institution’s resources to support a lavish personal lifestyle.”
The report said there was “an interlocking relationship, which should be further investigated by the subcommittee, between CenTrust and the Bank of Credit & Commerce International,” the report said.
The link was through Saudi investor Ghaith R. Pharaon, a 28% shareholder in CenTrust “who reportedly owned, or has owned, substantial stock in BCCI,” the report said. Pharaon is also the owner of Independence Bank in Encino--a capacity in which the Federal Reserve has accused him of being a front for BCCI.
The report said that on July 27, 1988, Pharaon reimbursed CenTrust for half of a $100,000 contribution to the Carter Center, a philanthropic foundation run by the former president.
On Jan. 9, 1989, the report said, CenTrust reimbursed Pharaon $36,600 for airline tickets that Pharaon had purchased, to transport the six French chefs to a dinner party at Paul’s home.
And on Feb. 18, 1988, CenTrust wired Pharaon $13,920 for a contribution to the arts, the report said.
Pharaon met with regulators, the report said, to push for approval of a $200-million CenTrust sale of subordinated debentures in 1988.
“There was at least one meeting between Pharaon and (Federal Home Loan Bank Board) Chairman (M. Danny) Wall,” the report said.
The report said BCCI later participated in a “cosmetic transaction to make CenTrust’s books look better by buying $25 million of the debenture, which was not selling well. Two months later CenTrust bought back at par the $25 million in its debentures that BCCI had purchased.”
CenTrust bought back the debentures from other buyers at an average of only 62 cents on the dollar, according to the report.
A federal grand jury in Atlanta, meanwhile, reportedly is examining a 1987 bill whose passage by Georgia’s Legislature allowed First American Bankshares Inc.--a Washington-based holding company that authorities say was secretly controlled by BCCI--to buy National Bank of Georgia from Pharaon.