Mathias reportedly pressed Clifford, Altman to resign at First American

August 19, 1991|By Gilbert A. Lewthwaite | Gilbert A. Lewthwaite,Washington Bureau of The Sun

WASHINGTON -- Former Maryland Sen. Charles McC. Mathias Jr. played a central role in pressing for the resignation of the two top executives of First American Bankshares, the D.C.-based banking company owned by scandal-ridden Bank of Credit and Commerce International, according to an executive involved in handling the crisis for First American.

Former Defense Secretary and Democratic Party luminary Clark M. Clifford and his law partner, Robert A. Altman, resigned as chairman and president, respectively, of First American last week. They face a congressional grilling next month over First American's alleged illegal ownership by BCCI.

As early as June, Mr. Mathias, a director of First American since 1987, was urging the two men to consider stepping down to protect the bank from the scandal engulfing BCCI, according to the executive. One of the technical difficulties was that they both sat on the boards of the three holding companies that controlled First American Bankshares, and action by each board would have been needed to end their control.

Eventually, it took the added pressure of the Federal Reserve Board and Sheik Zayed bin Sultan al-Nahyan of Abu Dhabi, the majority stockholder in BCCI, to persuade them to leave, according to the well-placed official.

The sheik, who reportedly holds 77 percent of BCCI stock, threatened to call an extraordinary meeting of shareholders to elect new directors of Credit and Commerce American Holdings, the top holding company through which BCCI allegedly gained illicit control of First American. Mr. Clifford and Mr. Altman were on the CCAH board.

"It would have had the practical effect of evicting Mr. Clifford and all those down the line," said the executive, who spoke on condition of anonymity.

Mr. Clifford's and Mr. Altman's grip on power at the bank had already been severely shaken by the revelation in May that both had borrowed millions in 1986 and 1987 from BCCI to invest in First American's holding company, said the source. This shocked both board members and staff of First American.

The two top executives were the only major figures at First Americanwith any high-profile connection to BCCI, and they rapidly emerged as the Washington focus of the scandal. Before becoming executives of First American, both acted as attorneys for BCCI.

They have consistently denied any knowledge of its alleged purchase of a controlling interest in First American through Middle Eastern front men who invested in CCAH for BCCI.

As the global BCCI scandal broke, Mr. Mathias was asked by the Federal Reserve board to head the effort to protect the Washington-based bank from the fallout of being connected to the scandal's alleged perpetrators.

First American was also under pressure from the Senate subcommittee on international operations, a grand jury and Manhattan District Attorney Robert Morgenthau, who issued indictments earlier this month against BCCI and its main officers, to produce documents and records.

But Mr. Clifford and Mr. Altman, advised by their lawyers, were giving priority to their own efforts to cope with the allegations against them, the First American source said, and the bank was accused of being reluctant to provide evidence to the regulatory authorities.

It was also becoming clear that the publicity they were attracting could undermine First American, which was in good financial order but suffering -- like other banks -- from the real estate recession.

"It was going to bring down a lot of unfavorable publicity on the bank, whether they were culpable or not," said the official. "It was not a question of guilt or innocence, but association."

Mr. Mathias asked the Federal Reserve for its dossier on BCCI's connection with First American, the official said. While in London, in June, he also called on the Bank of England, which led the legal crackdown on BCCI.

Earlier, on March 4, the Fed had given BCCI 60 days to sell its controlling interest in First American, exercised through CCAH.

Former Federal Reserve Chairman Paul Volcker was asked to act as trustee for the sale of the bank to new owners. According to one official privy to the proposal, Mr. Volcker was "reluctant," and the trusteeship was not closed on despite "several mutations" of the plan before BCCI was seized by the Bank of England on July 5.

"Had he agreed, I don't think we would be in the position we are now," said the official.

On Tuesday, Nicholas deB. Katzenbach, a former Johnson administration attorney general, agreed to act as chairman of First American following Mr. Clifford's departure. Mr. Mathias was among those who selected him.

Mr. Katzenbach's role will be to steer First American through this crisis and eventually to seek new owners for the bank, which has branches in Washington and Maryland, Virginia and several other states.

Mr. Mathias refused to discuss his role in the drama.

"It is a classic case of the more you find out, the more you need to know," he said.

He told The Sun that the capitalization of First American was "reasonably good" and that deposits at the end of June 1991 were higher than in June 1990. There had been "some erosion" of deposits recently because of the "storm of publicity surrounding the bank," but he added: "There has been no run [of withdrawals]."

He said the Fed's order to BCCI to sell its 60 percent share of the First American holding company CCAH was complicated by a decision in the British courts to give Sheik Zayed four months to reorganize BCCI.

The sheik's control of BCCI gives him ownership of 42 percent of First American. The sheik also owns 28 percent of First American directly. If he manages to reorganize BCCI, he could contest the Federal Reserve Board's order to sell it.

Said Mr. Mathias: "It's a valuable franchise. A Maryland, Virginia, D.C. banking franchise is valuable."

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