Clifford Quits as Head of Bank Linked to BCCI : Finance: The Democratic elder statesman is under scrutiny by the Fed but is not accused of wrongdoing.

The widening scandal involving the Bank of Credit & Commerce International led Tuesday to the resignation of Clark M. Clifford, a former defense secretary and adviser to Democratic presidents, as chairman of a Washington banking firm that was secretly controlled by BCCI.

Robert A. Altman, a protege of Clifford, simultaneously resigned as president of the firm, First American Bankshares Inc. The holding company owns First American Bank, the largest bank in Washington, as well as sister banks in New York, Virginia, Maryland and Georgia.

Clifford and Altman have been under scrutiny by the Federal Reserve Board, the Justice Department and Manhattan Dist. Atty. Robert M. Morgenthau as part of an extensive investigation of alleged fraud and other abuses by BCCI.

The Federal Reserve Board has determined that BCCI secretly and illegally acquired a controlling interest in First American, acting through several Arab “front men” who had invested in the banking firm.

Clifford and Altman have denied any knowledge of BCCI’s direct links to the bank, and neither man has been charged with any wrongdoing. But their resignations were clearly a result of the spreading scandal, which attracted worldwide attention when regulators in many countries shut down BCCI operations last month.

First American reportedly has been losing business as a result of the BCCI affair, although top officers have denied it.

Clifford, 84, considered one of Washington’s elder statesmen, said in a statement that he was resigning as chairman of the holding company to protect “the interests of First American’s employees, customers and depositors.”

First American issued a separate statement attributing the voluntary departures to adverse publicity arising from the BCCI scandal. In recent weeks, Morgenthau has obtained indictments against BCCI and two former executives, and the Federal Reserve Board has sought to impose a $200-million fine on the banking empire.

“Mr. Clifford and Mr. Altman advised the board that they were taking this initiative in order to protect First American, which they have worked to build over nine years,” the company said.

Government sources said the resignations were in response to pressure from the Federal Reserve Board, which has documented BCCI’s ties to First American, as well as from some members of First American’s board of directors.

“The pressure has been on them for weeks,” one source said. “It’s been six weeks of twisted arms. But nothing was promised them in return for their resignations, like immunity from any possibility of future prosecution.”

Sources said that federal regulators have become increasingly concerned that the spreading scandal might make customers leery of dealing with First American banks.

BCCI’s links to First American have become a central focus of the Fed’s inquiry because it is a violation of federal law for a foreign institution to own an American bank without prior approval of the Federal Reserve Board.

A state grand jury in New York and a federal grand jury in Washington are investigating whether Clifford and Altman deliberately misled bank regulators about First American’s relationship with BCCI. The two moved into First American’s top executive positions in 1981 after assuring bank regulators that BCCI would have no ownership or control over their $11-billion bank holding company in Washington.

Clifford has told authorities that, if he was duped by BCCI’s executives, so were many banking authorities around the world. BCCI’s losses from bad loans, suspect payments and outright fraud have recently been estimated at $15 billion.

Clifford is known primarily in Washington as an adviser to every Democratic President since Harry S. Truman. Altman, 44, has been regarded as a rising star in Washington’s legal and financial community. He has also attracted attention as the husband of actress Lynda Carter, who starred as Wonder Woman in the television series.

Referring to First American, one federal regulator said that “everyone felt the removal of the two top executives was useful in order to protect the institution.” The concern about Clifford and Altman, he said, was “the contagion issue, guilt by association--depositors might falsely conclude that First American was unstable, which we do not believe it is.”

The regulator said investigators have found no evidence that BCCI’s ties to First American resulted in any fraudulent banking activity by the Washington-based firm or its officers. “We continue to find no abuse inside First American through BCCI,” he said.

A source familiar with events leading to the resignations said Clifford and Altman initially were reluctant to step aside, fearing that doing so would be interpreted as an acknowledgment of wrongdoing.

At the same time, the source said, the Federal Reserve Board “did not want to rush in and demand their resignations” for fear of creating a false impression that First American was unstable.

In addition, considering the nature of the evidence gathered to date, “it’s not at all clear that the Fed could have forced them to resign, if they had resisted,” he said.

In its statement, First American said Clifford would be replaced as chairman by former Atty. Gen. Nicholas D. Katzenbach, who served with Clifford in Lyndon B. Johnson’s Cabinet.

Katzenbach, a senior vice president and general counsel of International Business Machines Corp., “brings the kind of experience and integrity that you’d like to have in this role,” a federal regulator said.