U.S. Probes Payments at Seized Bank : * Scandal: $1 million in secret deposits went into the personal account of the former chairman of Independence Bank of Encino. Investigators suspect that the money represented kickbacks from BCCI.

Federal authorities disclosed Thursday that they are investigating $1 million in secret cash transfers from the Bank of Credit & Commerce International to the personal account of a former chairman of Independence Bank of Encino.

John W. Stone, director of supervision for the Federal Deposit Insurance Corp., told a Senate subcommittee that investigators suspect that the money was kickbacks for loan approvals paid to Kemal Shoaib, who served as Independence’s chairman after BCCI acquired hidden control of the bank in 1985.

“From 1986 through 1988, there are unexplained deposits directly from BCCI to the personal account of Mr. Shoaib totaling almost $1 million from unspecified sources through a Swiss bank,” Stone said.

Shoaib could not be reached for comment. A woman who answered the telephone at his London residence said he was in Pakistan and unavailable. Shoaib, who had been an executive with BCCI before taking over at Independence Bank, left the California bank in 1988.

Regulatory officials, who seized Independence Bank in January, now estimate total losses at the bank will reach at least $130 million to $140 million. They revealed the figure in providing the first detailed explanation of why Independence failed.

Stone said FDIC examiners found an extraordinary 44% of the bank’s loans were classified as troubled when it was taken over, including questionable loans to real estate developers. He said some findings have been referred to federal prosecutors in Los Angeles for criminal investigation.

“In the end, Independence Bank’s ultimate failure was a result of a weak board of directors, self-serving and poor-quality senior management, which allowed Independence Bank to veer out of control, and the downturn in Southern California’s real estate,” Stone told a subcommittee of the Senate Foreign Relations Committee.

He said only a small portion of the bank’s overall losses appear to be related to transactions with BCCI or known affiliates of the rogue international bank.

Stone and J. Virgil Mattingly Jr., general counsel of the Federal Reserve Board, said most of the losses at Independence are expected to be covered out of more than $500 million surrendered by BCCI earlier this year as a result of BCCI’s guilty plea to racketeering charges.

Others affiliated with the defunct international bank may not be so lucky. BCCI was shut down by regulators worldwide last July 5 after evidence surfaced that a series of long-running schemes had created losses of up to $15 billion.

Brian Smouha, the bank’s court-appointed liquidator in London, testified that creditors stand to recover 10 cents on the dollar or less. He said the figure could go up to 40 cents if a settlement is reached with the government of Abu Dhabi.

The rulers and government of the Persian Gulf sheikdom were BCCI’s majority stockholders when it was seized. They have offered $1.7 billion to settle its debts in exchange for an agreement by creditors not to pursue suits against Abu Dhabi.

In rare public testimony, a senior Abu Dhabi official told the subcommittee on Terrorism, Narcotics and International Operations that his country and its rulers lost $3 billion in BCCI.

‘The majority shareholders are the single biggest victims of the fraud and probably its only intended victim,” said Ahmed al Sayegh, an Abu Dhabi official who testified in his traditional Arab headdress and flowing white robe.

About 30 former top BCCI officials are under house arrest in Abu Dhabi. Earlier in the hearing, Mattingly complained that the Federal Reserve and Justice Department have not been allowed to interview the bankers.

In response to questioning by Sen. John F. Kerry (D-Mass.), the subcommittee chairman, Sayegh said negotiations are nearly completed that will allow U.S. authorities to interview the ex-bankers.

Kerry’s three-year probe of BCCI is winding down, and Thursday’s hearing struck a recurring theme when the former U.S. attorney in Miami criticized the Justice Department’s handling of the BCCI investigation.