U.S. regulators under fire in widening BCCI scandal INTERNATIONAL BANK SCANDAL Justice Dept. ignored warnings, Kerry says

August 04, 1991|By Gilbert A. Lewthwaite | Gilbert A. Lewthwaite,Washington Bureau of The Sun

WASHINGTON -- The world's biggest banking scandal has engulfed this nation's capital, throwing the integrity of high-profile individuals and federal institutions into question.

No hard evidence has yet been produced of any criminal cover-up within the Reagan or Bush administrations. But federal officials stand accused of ignoring repeated and serious allegations against the Bank of Credit and Commerce International since the early 1980s and of bowing to pressure from top-dollar Washington lobbyists.

To Sen. John Kerry, D-Mass., who has spearheaded Congress' effort to expose BCCI, three facts stand out:

*The shutdown of BCCI's global operations was initiated by the Bank of England -- not the Justice Department.

*The bank's operators were indicted by New York prosecutor Robert Morgenthau -- not the Justice Department.

*The bank has been assessed $200 million in civil penalties by the Federal Reserve Board -- not the Justice Department.

"There it is," said Mr. Kerry. "They [Justice Department officials] have made their statement. I don't need to say it. Their silence says it."

Justice Department officials defend themselves by pointing out that they launched the first criminal prosecution against the bank and its officers. That yielded convictions and jail sentences of up to 12 years against five BCCI executives in Florida last year, as well as $14 million in fines from BCCI in a plea bargain.

Still, the plea bargain has been criticized because it allowed BCCI to continue to operate in the United States. It also shielded the bank against prosecution arising from then-pending investigations.

Privately, prosecutors say that they needed to gain entry into the criminal enterprise. They weighed whether they should "immunize" or prosecute the officials. They decided that prosecution was the best route. They now hope to gain cooperation from the prisoners who were reassigned to BCCI's Florida operation from London, Paris and Latin America and who have extensive knowledge of the bank's international operations. They decided to let the bank continue so they could monitor its operations.

So was there a cover-up?

Mr. Kerry said: "It has to be a question on the table. Is it one of the highest, most active, questions? In my mind, no. But could there have been a cover-up? Yes, there could have been."

He is skeptical of allegations that illegal payoffs were made to officials, although Jack Blum, a veteran Senate investigator, said last week that he had heard of a payoff list being discovered during a Federal Reserve Board bank audit. The Fed has denied knowledge of any list.

BCCI has been exposed as the center of a multibillion-dollar worldwide financial scam involving drugs, espionage, terrorism, gun-running and even nuclear weapons proliferation. Its clientele could have filled a "Who's Who" of international notoriety: Saddam Hussein, Manuel Antonio Noriega, Ferdinand E. and Imelda Marcos, Col. Muammar el Kadafi, Jean-Claude "Baby Doc" Duvalier.

A series of congressional inquiries will try to answer these questions:

*Why was no action taken on a 1986 CIA report, which claimed that BCCI had secretly and illegally acquired First American Bankshares Inc. in Washington after being banned from U.S. bank ownership?

*Did the CIA, knowing the bank's criminal ownership, use the bank to funnel cash to its covert overseas operations, including illegal funding of the contras in Nicaragua?

*Why were the Justice Department, Treasury Department and the Federal Reserve Board slow to react to signs of the massive global fraud?

*Were U.S. officials involved in covering up the bank's activities, which included takeovers of banks in Georgia and California as well as the District of Columbia?

Senator Kerry said his committee would produce evidence to show that CIA funds were funneled through BCCI on their way to Afghanistan. That happened, he said, despite a 1986 CIA report, prepared for then-U.S. Customs Commissioner William von Raab, alleging BCCI's secret and illicit takeover of First American.

The committee also will investigate whether BCCI was used to channel then-Lt. Col. Oliver L. North's illegal slush fund to the contras, he said.

Mr. Kerry said: "A memorandum, which I have read, clearly shows that the CIA was aware this bank was notorious, had a bad reputation, was engaged in bad enterprises; and a red flag went up which was sufficient to say to me, 'Don't deal with these people. Investigate them.' "

He is trying to have the secret CIA report declassified. That report was prepared by Robert M. Gates, whose nomination to be director of the CIA is under intense scrutiny on Capitol Hill.

Mr. Kerry said that he knew of no connection between Mr. Gates and the CIA's use of BCCI. But there are indications that the CIA "steered" General Noriega, who was then Panama's de facto ruler and now faces narcotics charges in Florida, toward use of the bank. General Noriega is reported to have used BCCI to launder drug money.

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