NEW YORK -- The Bank of Credit and Commerce International and two of its founders have been indicted for fraud, falsifying records and grand larceny in what Manhattan District Attorney Robert Morgenthau termed "the largest bank fraud in world financial history."
On another front in Washington yesterday, the Federal Reserve Board imposed a record $200 million fine on BCCI and sought to bar the founders and seven others from any involvement with U.S. banks in the future.
The indictment, the biggest U.S. law enforcement action to date in the unfolding global banking scandal that could cost depositors more than $5 billion, represented just the tip of the investigative iceberg in Morgenthau's 2 1/2 -year probe.
"This is maybe 20 percent to 25 percent of what will result from this investigation," Morgenthau said.
Morgenthau said the grand jury was also investigating BCCI's alleged secret control of First American Bankshares of Washington, and whether former U.S. Secretary of Defense Clark M. Clifford and his partner, Robert A. Altman, "knowingly and intentionally" filed false documents camouflaging BCCI's interest.
The wide-ranging indictment named BCCI, several affiliated companies, and BCCI's two key leaders during the alleged 19-year conspiracy: former BCCI president Agha Hasan Abedi, 68, of Pakistan; and former BCCI second-in-command Swaleh Naqvi, 57, of Abu Dhabi in the United Arab Emirates. Morgenthau is seeking to extradite both men.
Among other things, the indictment charged BCCI with money-laundering, paying "bribes and kickbacks" of about $3 million to the two top officers of the Central Reserve Bank of Peru in exchange for deposits to BCCI, and stealing more than $30 million from American Express Bank Limited.
BCCI, which has operations in about 70 countries, was shut down July 5 by banking regulators in seven countries, including the United States, Britain and France.
The Fed said its enforcement action stemmed from "evidence of secret arrangements" that allowed BCCI to gain control of First American, the National Bank of Georgia in Atlanta and CenTrust Savings Bank in Miami.