Clifford quits post at bank tied to BCCI First American's board reportedly wanted him out

August 14, 1991|By Neil A. Lewis | Neil A. Lewis,New York Times News Service

WASHINGTON -- Clark M. Clifford, a towering figure at the intersection of law and politics in the capital for nearly half a century, resigned yesterday as the chairman of Washington's largest bank holding company, apparently under pressure from federal regulators and the board of the bank he led for nine years.

Federal regulators and investigators have said that First American Bankshares Inc., which operates 45 branches in Maryland, was secretly controlled by Bank of Credit and Commerce International, a loosely regulated international banking concern that was seized last month after auditors reported that the bank had a complex past that included bribery, money-laundering and bank fraud.

Mr. Clifford's law partner and protege, Robert A. Altman, who was president of First American Corp., also resigned yesterday. The corporation was a holding company within First American's intricate structure.

Banking officials said that the Federal Reserve Board and Charles McC. Mathias, the former Republican senator from Maryland who is on First American's board, helped force the resignations in the latest chapter in the BCCI saga and the dizzying decline of Mr. Clifford and Mr. Altman from their highly lucrative bank posts.

"The Fed wanted them out," one official said, "and Senator Mathias played the leading role."

Mr. Mathias, who had taken a leading role in managing the bank earlier this year when the BCCI connection was first discovered by the Fed, declined through a spokesman to discuss the specifics of how the two were forced out.

The resignations also crystallize how much Mr. Clifford's long relationship with First American and BCCI had tarnished his once-illustrious reputation in the twilight of his career as a lawyer, lobbyist, secretary of defense, adviser to Democratic presidents and an unchallenged symbol of rectitude in ZTC Washington.

Mr. Clifford, 84, represented the Arab-owned, Pakistani-run BCCI when it first tried to acquire U.S. banks in the late 1970s.

The crux of Mr. Clifford's and Mr. Altman's problems is that law enforcement officials are investigating whether the two lawyers knew of BCCI's secret ownership of First American, which was purchased in 1982 by a group of Middle East investors with BCCI money. If Mr. Clifford and Mr. Altman were aware that BCCI controlled First American and lied to regulators about it, they could be charged with fraud.

Both men have maintained that they knew nothing of BCCI's control of the bank and have insisted that it was they who ran First American.

Neither man has been formally accused of any wrongdoing.

Last month, the Federal Reserve moved to fine BCCI a record $200 million for "secret arrangements" that allowed the foreign bank to acquire First American but were in violation of agreements with the Fed that barred BCCI from having any ownership interest in First American. Those commitments were made by Mr. Clifford.

Frank Mankiewicz, the bank's public relations counsel, disputed the assertion that the resignations of Mr. Clifford and Mr. Altman had been forced. Rather, he said, they had chosen on their own to resign for the good of the company.

For now, First American said that Nicholas deB. Katzenbach, a former U.S. attorney general and former general counsel of International Business Machines Corp., would serve as First American's chairman.

His job is to attempt to extricate First American from BCCI and eventually to sell the bank to new owners.

But those tasks will be complicated by the fact that BCCI's shares in First American have been seized by foreign bank regulators and are tied up in court proceedings in London and New York.

Mr. Mathias said that the legal issues might take a long time to resolve and that a trust would allow the bank to continue operations until that occurred.

An order freezing BCCI's assets in the United States, including the First American holding, was extended Friday by Federal Bankruptcy Judge James Garrity in New York. It would prevent the movement of any First American shares.

But Harvey Miller, a bankruptcy lawyer representing a claim against BCCI, said that if the Fed asked Judge Garrity to revise his order to permit such a transaction, it would likely be granted.

The Fed, the district attorney in New York and a federal grand jury in Washington are investigating whether Mr. Clifford and Mr. Altman knowingly misled regulators with their repeated assurances over the years that BCCI would not be involved with First American.

In his statement of resignation, Mr. Clifford said that First American "has been operated honestly and without control from BCCI."

He added that he and Mr. Altman had resigned because the publicity about BCCI and First American could have an adverse impact on the bank.

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