It was no secret in this land of crushing poverty and disease that the Bank of Credit & Commerce International and its dynamic chairman, Aga Hasan Abedi, had a special relationship with Bangladesh and its long-serving dictator, President Hussain Mohammed Ershad.
But few knew just how special.
When Ershad’s relatives needed jobs, for example, Abedi quietly hired them for high-paying senior management positions at key BCCI branches in Hong Kong, Britain and Canada.
When Abedi needed a diplomatic cover to bring BCCI into the lucrative banking market in the oil-rich sultanate of Brunei, Ershad dipped into his nation’s meager budget, hired one of BCCI’s most flamboyant bank managers to serve as Bangladesh’s first ambassador to Brunei and opened a new Bangladeshi embassy in the sultanate. It functioned more like a BCCI sales office than the foreign mission of a fellow Islamic nation.
And finally, when Ershad, in his last years in power, needed help in plundering his impoverished nation of what prosecutors now contend was hundreds of millions of dollars in kickbacks and commissions on foreign-aid projects, Abedi’s bank was there.
It was ready and willing to funnel the dictator’s ill-gotten wealth through its vast international network of bank branches into secret Ershad accounts in Europe, the Caribbean and the Far East, according to documents and the chief prosecutor who is pursuing the case against the now-jailed Ershad on more than 50 counts of corruption.
“They have plundered this country--both of them,” Bangladesh’s Atty. Gen. Aminul Haq lamented in a recent interview, in which he detailed for the first time how Ershad allegedly used BCCI to rake in kickbacks worth more than $1 billion--the equivalent of the entire annual budget of this nation of 100 million people.
“This bank, this BCCI, was a smuggler’s paradise,” the prosecutor said. “They were the bankers of all the smugglers and the corrupt people here. . . . Of course they helped ruin us.”
According to documents obtained by The Times and information from dozens of interviews with BCCI officers, government officials and private businessmen throughout South Asia, it was from behind Abedi’s self-styled veneer of charity and the boosting of the Third World--which the Pakistani marketing wizard used to promote himself and his bank as champions of the poor and oppressed in more than 70 nations worldwide--that BCCI did far more harm than good to Third World nations like Bangladesh.
Here, in a land that perpetually ranks among the poorest of the world’s poor, BCCI stretched the law to its limits to avoid paying desperately needed government taxes, to skirt national banking regulations and to remit as much profit as possible out of Bangladesh and into the bank’s international web of corporations and subsidiaries, which investigators now say BCCI’s top management raided to enrich themselves and their friends.
It was only through the nexus of two unrelated events--last year’s popular revolt that overthrew Ershad and last month’s closure of BCCI worldwide and its ensuing international scandal--that it is now possible to see the mosaic of exploitation, typical of the bank’s operations in impoverished countries like Bangladesh, a pattern that one former officer described as “a perverse, reverse Robin Hood.”
In the first decade that BCCI operated here, after opening the first of its four branches in Bangladesh, for example, the bank took as much as $12 million in profits from a country where the average resident subsists on an annual income of just over $100, according to documents and bank officers interviewed.
When Bangladesh’s central bank disallowed those remittances in the mid-1980s in an attempt to crack down on the capital flight and force the bank to provide surpluses for mounting bad loans, BCCI’s top management in London invented an intricate plan. It not only permitted the bank to shelter its profits from Bangladeshi taxation but to use those same tax-free profits to finance a new, corporately separate BCCI-owned bank.
First, BCCI created a Bangladeshi charitable trust, the BCC Foundation. It ostensibly was set up to finance scholarships for the needy, rural health care centers and school libraries across Bangladesh.
The foundation was financed entirely by donations from profits of BCCI’s Bangladesh operations; in turn, those operations were made virtually tax-free by virtue of the charitable donations.
But in reality, less than 10% of the donations have gone to charity. Like a similar foundation that BCCI created to avoid taxes in nearby Pakistan, the Bangladesh BCC Foundation earned far more in interest alone than it gave to worthy causes each year.
The foundation’s showcase program, a “Talent Assistance Scheme” to give needy college-age students interest-free loans, received just 400,000 taka (about $10,500) in donations last year, while the foundation made nearly 10 million taka in interest alone.
The foundation’s largest single donation was not to charity but indirectly to BCCI itself: a $1.5-million investment in a new bank called the Bank of Small Industries & Commerce or BASIC. Staffed almost entirely by BCCI officers under a “management contract,” the foundation’s investment in the new, for-profit bank was not only deemed legal by the Bangladeshi government, then-President Ershad and his financial advisers chose to invest in it themselves. They bought one-third ownership in the bank to provide more capital.
Former BCCI officers said Ershad personally helped engineer BASIC’s license to operate at a time when many other prospective banks were turned down. He also attended BASIC’s grand opening in 1987, signifying approval. Foundation officials attempting to justify the investment said the new bank must remit all profits back to the foundation. But they conceded that, so far, all such profits have gone into the bank’s expansion. The decision, they said, was made by the foundation’s board, which is virtually identical to the BCCI board.
In the end, the net effect of the foundation arrangement, according to several former BCCI officers and government officials, was to keep millions of dollars in taxes out of Bangladesh’s national treasury.
“In Bangladesh,” declared former BCCI manager Munwar Hussain Chowdhury, who served with the bank for more than a decade in Bangladesh and elsewhere in Asia, “the BCCI really took the country for a ride.”
It wasn’t just Ershad who personally benefited from BCCI’s largess during the years the bank won its many political boons here. Although three of the president’s in-laws were hired by BCCI during those years, that was only the beginning of a political employment program by the bank. It was so massive it often blurred the line between BCCI and the government.
During the two decades that BCCI expanded rapidly throughout the Third World, it was renowned for its ability to hire one or two key government ministers or their relatives to ensure goodwill from governments in power.
But in Bangladesh, BCCI hired no fewer than 15 such individuals. They were the sons and daughters of prime ministers, finance ministers, commerce ministers, foreign ministers, police chiefs, central bank governors and deputy governors.
“It got to the stage where, when you rose to a certain level of office here, your kids automatically went to work for BCCI,” said one prominent Bangladeshi businessman. “It was like joining the Foreign Legion.”
The most dramatic illustration of how the line between BCCI and the Bangladeshi government grew fainter and fainter until it all but disappeared was Ershad’s September, 1985, appointment of Iftekhar Karim as the first--and last--Bangladeshi ambassador to Brunei.
Karim, the son-in-law of Ershad’s then-foreign minister, was working as a top BCCI executive in Paris at the time. But Ershad, acting on Abedi’s personal request, not only signed Karim on as a Bangladeshi ambassador but also sent him to open the nation’s first embassy in Brunei. There, BCCI was desperately trying to open a branch that could benefit by the sultan’s estimated $25 billion in government deposits.
Ultimately, Karim failed in his efforts. After a flurry of critical newspaper accounts appeared describing the grand lifestyle of the ambassador of one of the world’s poorest countries--Karim was often seen driving his Rolls-Royce Excalibur around the sultanate and entertaining at lavish parties--Bangladesh closed its embassy. Karim returned to BCCI’s employ.
“Karim was a brilliant banker, but the market in Brunei was impossible to break in to--four British banks had a lock on it,” recalled former BCCI officer Chowdhury. “Of course, everyone knew Ershad was only doing it as a big favor for Mr. Abedi, but no one was safe to say it out loud in Bangladesh at the time.”
It is only now, eight months after Ershad was driven from power and two months after BCCI Bangladesh was shut down in a human disaster that has frozen the life savings of more than 15,000 Bangladeshis, that officials of the country’s new government are beginning to piece together such private meetings, which helped form the “special relationship” between Ershad and Abedi.
The new government of Prime Minister Khaleda Zia, which came to power in elections soon after Ershad was deposed and jailed, hired a New York financial investigative firm to trace and locate the massive kickbacks Ershad is believed to have taken on huge development projects.