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The Case That Kerry Cracked
By Lucy Komisar, AlterNet
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Four books were written about BCCI in the early 1990s:
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As an investigator for Senator Frank Church’s subcommittee on multinational corporations, Blum had exposed the Lockheed bribes and ITT’s attempts to destabilize the government of Salvador Allende in Chile.
“The Foreign Relations Committee was looking at the relationship between drug trafficking and arms dealing and the way we run foreign policy,” says Blum. “’Did we ignore all the stuff going on to support the war in Nicaragua?’ We got into the issue of money laundering.” Blum said he “stumbled across Lee Ritch,” who told the panel, “I used to launder my money in the Cayman Islands. The U.S. wised up, and the bankers told me to shift to Panama. In Panama, I’m told the only guy to talk to is Noriega. He sends me to BCCI.”
Blum says, “We go poking around. I found a guy who had worked for BCCI. I met him in Miami. He said, ‘That’s their major line of work. They’re a bunch of criminals.’ He goes on to say that in addition to handling drug money, they were managing Noriega’s personal finances and that the bankers who did that lived in Miami.” Noriega even carried a BCCI Visa credit card.
So Blum subpoenaed that information. He said, “There is a subplot between us and the federal government and prosecutors. We find out about coming arrests for money laundering [in an ongoing Tampa drug trafficking investigation], but the feds want to make only a limited case in Tampa; they don’t want to investigate other ramifications. Their story is they had their case and didn’t want it messed up with extraneous stuff. The notion the other stuff was extraneous boggles the mind.”
Blum began poking deeper and came across the CIA standing in the shadows. He found that during the 1980s, the CIA had prepared hundreds of reports that discussed BCCI’s criminal connections — drug trafficking, money laundering — and its control of Washington's First American Bank, part of an illegal plot to get into the U.S. banking system. He also found that this was accomplished with the help of major U.S. figures, including former Treasury Secretary Bert Lance, former Defense Secretary Clark Clifford, former U.S. Sen. Stuart Symington, ex-federal bank regulators, and former and current local, state and federal legislators.
The CIA provided its reports to Treasury Secretary Donald Regan but not to the prosecutors in Tampa. The Treasury and Customs departments also sat on evidence. Kerry tried to get the Bush Justice Department to expand the Tampa investigation or to turn its information over to the FBI or other agencies. It refused.
Blum told me, “We started with laundering drug money, but then pursued it much further and got in testimony a pretty good layout of the criminal nature of the bank. Having done that, we wrote a report and said the matter needs further investigation. But the Justice Department doesn’t pick up on any of the clues. I talked to them. I got a leading figure in the bank to turn evidence to the government, which didn’t want to listen. I taped him for three days with undercover agents in a hotel room in Miami; the government didn’t transcribe the tapes.”
The chief Customs undercover agent who handled the drug sting against BCCI was so disgusted, he quit. The Justice Department ordered key witnesses not to cooperate with Kerry, and it refused to produce documents subpoenaed by his subcommittee. The CIA also stonewalled or lied to the Kerry investigators.
As a junior senator, Kerry was further hampered because his subcommittee mandate was limited to looking into terrorism and drugs. But even that investigation was bothering too many important people, so Clayborne Pell, a Democratic senator, shut it down.
Then the Justice Department closed the Tampa case with a plea bargain that let BCCI off the hook. Kerry was furious. He thought the crooked bank should be shut down. He said the deal kept the bank alive and discouraged bank officials from telling the U.S. what they knew about BCCI's larger criminality, including its ownership of First American and other U.S. banks. However, the bank relied on its friends. Sen. Orrin Hatch (R-Utah) defended the plea bargain on the Senate floor, and then asked the bank to lend $10 million to a friend.
Following the plea agreement, the Justice Department stopped investigating BCCI for about 18 months. It even lobbied state regulators to keep BCCI open — after being urged to do that by former Justice Department personnel working for BCCI.
Kerry tried in 1990 and 1991 to get an investigation by the Senate Banking Committee, chaired by Democrat Donald Riegle. But Riegle and four of the other members of his committee had gotten money from Charles Keating, head of Lincoln Savings and Loan, who was later convicted of fraud, and they weren’t interested in drawing attention to crooked banks.
Finally, Kerry got permission to run a one-day subcommittee hearing in May 1991. Then he started holding public hearings through the banking committee, which wouldn’t staff them; he had to use his own people. “Riegle considered himself a gentlemen, because he let Kerry do that,” says Blum. “Riegle is probably the most misnamed U.S. senator.”
The bank’s friends prevented more Kerry hearings, says Blum. “They got it out of Foreign Relations,” he recalled. “We later learned that BCCI, between September 1988 and July 1991 when the bank closed, spent $26 million on lawyers and lobbyists trying to keep themselves in business. They hired people on both sides to shut [the investigations] down.”
But, Blum adds, “They didn’t stop me from going to the New York County DA’s office with Kerry’s blessing to assure a prosecution would ensue.” Blum went to see New York District Attorney Robert Morgenthau and told him about the Justice Department’s refusal to investigate BCCI's involvement in drug money laundering and other crimes. The Justice Department and the Federal Reserve, run by Paul Volcker, refused to aid the DA’s investigation.
However, Morgenthau got a grand jury indictment of BCCI in July 1991. It said the bank and its founders had defrauded depositors, falsified bank records to hide illegal money laundering, committed millions of dollars in larcenies and paid off public officials. It charged that BCCI had been a criminal enterprise since 1972 and had paid millions of dollars in bribes to central bankers or other financial officials in a dozen developing countries. Morgenthau named Ghaith Pharaon as a front man for BCCI who had gotten a secret loan from the bank to invest in three U.S. banks.
The New York Fed — not Washington — also took action. It coordinated an action on the fourth of July weekend 1991 to shut BCCI down. And, finally, the DA’s investigation forced Washington to act, though it kept the case as limited as possible. Soon after, Assistant Attorney General Robert S. Mueller III (now head of the FBI) oversaw the indictment by a federal grand jury of Democratic influence-peddler and former Johnson Defense Secretary Clark Clifford and his protégé Robert Altman — the top officials of First American Bank — for misleading the Federal Reserve Board about BCCI's secret control of the bank and obstructing the Fed's inquiries into BCCI.
Altman got off after convincing the jurors that he — an executive worth multi-millions of dollars in pay and stock benefits — didn’t know who the bank’s true owners were. Clifford evaded trial because of the Pinochet defense: his health.
In September, the Justice Department came up with an indictment of top BCCI officials which focused only on drug-money laundering, not on fraud against the bank’s depositors. It ignored leads, witnesses and evidence that would have revealed the bank’s large scale frauds — and exposed CIA and Reagan-Bush use of the bank.
“When I first looked at it, I thought there’s something nefarious or embarrassing — what is it? Their own incompetence? Worse? You never know the answer,” says Blum. “There was the Fed, which looked stupider than hell, the Office of the Comptroller who were stupid beyond comprehension. The then head of CIA said, yes, the CIA had used the bank. Everything you touched about that bank led to somebody ugly. Margaret Thatcher’s husband and maybe son, the prime minister of Canada, a 'who’s who of politics and the worlds of skullduggery.”
In July 1992, a New York County grand jury indicted Khalid Bin Mahfouz and an aide for defrauding BCCI and its depositors of as much as $300 million. But Bin Mahfouz was in Saudi Arabia, out of reach, and in the end Morgenthau settled for a fine. The Fed fined Bin Mahfouz $170 million. The Justice Department didn’t go after Bin Mahfouz at all.
The Kerry Committee report issued in 1992 was damning. It said that the White House knew about BCCI’s criminal activities, that the U.S. intelligence agencies used it for secret banking and that BCCI routinely paid off American public officials. Among the Kerry Report’s major findings:
- Federal prosecutors handling the Tampa drug money laundering indictment of BCCI did not use the information they collected to focus on — or report to federal agencies — BCCI’s other crimes, including its secret, illegal ownership of First American Bank.
- The Justice, Treasury and Customs departments failed to support or aid investigators and prosecutors.
- Following lobbying by former Justice officials working for BCCI, the U.S. attorney in Tampa accepted a plea agreement that kept BCCI alive and discouraged bank officials from revealing other crimes.
- CIA chief Casey and the agency knew, by early 1985, a lot about what BCCI was up to and didn’t inform the Justice Department or the Federal Reserve.
- “After the CIA knew that BCCI was, as an institution, a fundamentally corrupt criminal enterprise, it continued to use both BCCI and First American, BCCI's secretly held U.S. subsidiary, for CIA operations.”
- The Federal Reserve approved the first hidden BCCI takeover despite evidence the bank was behind it because it was swayed by influence-peddlers such as Clifford and because the CIA and Treasury failed to raise warnings about what they knew.
There’s a lot about BCCI that outsiders will never know. Once the investigations started, there were seven fires in the fireproof London warehouses where BCCI stored records. In one of them, four firemen were killed.
Experience That Counts
During this presidential campaign, Kerry has talked a lot about his service in Vietnam, but he doesn’t take credit now for exposing BCCI, perhaps because he thinks it’s too complicated for the American public to understand the scandal. Yet, more than physical courage, what the U.S. needs is guts and smarts and the resolution and courage to fight scourges that range from terrorism to international crime to corporate corruption and tax evasion.
So, what if John Kerry the investigator gets elected President? He would be not only the nation’s president but also a bold crime investigator and prosecutor who knows how to — and is willing to — overcome obstacles, whether they be international criminals or U.S. power brokers, to “follow the money” and bring about justice.
Jack Blum, who is not involved in the Kerry campaign, says: “There has never been a guy who has run for president who has, hands-on, known the kinds of substantive things he knows about the world of international crime, about banking and international bank regulation and finance, about the interconnectedness of the world finance system and how various intelligence agencies play into it. He is uniquely qualified.”
Kerry’s experience fighting the Washington establishment over BCCI also gave him a profound education in the workings of the insider Washington power and corruption that support corporate and organized crime and weaken the country’s ability to counter terrorism. He showed that he has what it takes to stand up to the big-money special interests that don’t want the system to change.
Lucy Komisar, a New York-based journalist, is writing a book on the offshore bank & corporate secrecy system and international money laundering.