BCCI to Plead Guilty, Forfeit $550 Million
The Bank of Credit & Commerce International agreed Thursday to plead guilty to sweeping new federal racketeering charges and to forfeit a record $550 million to help repay foreign depositors and shore up two struggling U.S. banks that it controlled through front men.
The forfeiture of all of BCCI’s frozen assets in the United States--double the previous record for a criminal forfeiture--will provide a combined total of up to $275 million for Independence Bank of Encino and First American Bankshares of Washington. The other $275 million will go into a fund for foreign victims of the bank’s collapse.
Atty. Gen. William P. Barr said the agreement also will provide law-enforcement authorities with wider access to internal BCCI records, providing a major boost to continuing investigations of individuals associated with the bank.
“This could take years off the time it would otherwise take to investigate and prosecute individual wrongdoers,” Barr said at a press conference announcing the new charges and the plea agreement.
The far-reaching settlement was approved Wednesday by a court in BCCI’s legal home of Luxembourg. It was the last step in an unprecedented cooperative effort by federal agencies, New York state prosecutors and court-appointed liquidators in three countries trying to salvage money from the wrecked bank.
The plea agreement in federal court here does not affect pending cases against individuals. Among them are federal racketeering charges filed last month against BCCI founder Agha Hasan Abedi, former bank President Swaleh Naqvi and Ghaith R. Pharaon, the Saudi Arabian tycoon who allegedly helped BCCI gain secret control of Independence Bank and National Bank of Georgia.
The most immediate beneficiary of the deal will be Independence Bank, which officials said will get $5 million in cash now and more later. Executives at the troubled institution have warned that it could fail by year’s end without an infusion of up to $50 million. Regulators hope to bolster the bank enough to make it attractive to a buyer.
The money for Independence and First American will come from BCCI deposits and other assets frozen when regulators here and in six other countries seized the bank last July 5. Officials said no determination has been made yet on how the $275 million will be divided between the two banks. If either bank fails, the money would be used to reimburse the Federal Deposit Insurance Corp.
BCCI has not been accused of looting Independence or First American, but both banks have suffered after negative publicity because of their involvement with BCCI. In addition, the Federal Reserve has said most of $220 million that First American paid to Pharaon for National Bank of Georgia in 1987 actually went to BCCI.
The plea deal was struck with the bank’s liquidators in Britain, the Cayman Islands and Luxembourg. Justice Department officials said the ruling family of Abu Dhabi, majority shareholders in the bank, were not consulted in the talks.
As part of the plea, the liquidators will receive about $275 million of BCCI’s U.S. assets, said George Terwilliger, the deputy attorney general who coordinated the settlement. The money will go into a worldwide fund to repay thousands of depositors and creditors believed to have lost as much as $15 billion when the bank was seized.
Terwilliger said the money will be paid to the victims’ fund only after the liquidators set up a screening mechanism to ensure that money is not paid to BCCI customers who were criminals, ranging from drug traffickers and arms smugglers to terrorists.
Sen. John Kerry (D-Mass.), who has clashed repeatedly with the Justice Department over the pace of its BCCI investigation, offered cautious praise for the agreement, particularly the plan to help Independence and First American.
“While the ultimate outcome of BCCI’s ownership of these banks remains to be seen, this agreement will definitely buy time for the regulators in their effort to keep these banks alive,” Kerry said.
Along with the Justice Department and banking regulators, New York Dist. Atty. Robert M. Morgenthau’s office participated in the plea negotiations. He brought fraud and larceny charges against the bank, Abedi and Naqvi last July. As part of the plea, Morgenthau’s office will be paid a $10-million fine from BCCI’s frozen assets.
“As we now know and this plea agreement documents, the bank was corrupt in all of its operations and was designed to loot and defraud around the globe,” Morgenthau said.
Indeed, the new federal charges unveiled Thursday are the broadest indictment yet of BCCI’s activities, depicting a rogue institution in which laws were brokenas a matter of corporate strategy to get new deposits.
As part of the racketeering conspiracy, the bank admitted that it sought deposits from drug proceeds, laundered drug money and helped customers evade taxes. It also admitted using front men to acquire control of Independence, First American and National Bank of Georgia and then creating false records to disguise their ownership and financial condition.
Justice Department officials said efforts are continuing to arrest Abedi, Naqvi and Pharaon, but they refused to provide details. Abedi is in Pakistan, where officials have said they will not extradite him. Naqvi is in custody in Abu Dhabi, which does not have an extradition treaty with the United States, and Pharaon’s location is unknown.