$37 million fine levied against figure in BCCI scandal

September 18, 1991|By New York Times News Service

WASHINGTON -- The Federal Reserve yesterday announced a $37 million civil fine against Saudi businessman Ghaith R. Pharaon for concealing the Bank of Credit and Commerce International's acquisition of the Independence Bank in Encino, Calif., in 1985.

The bank regulators also moved in federal court in New York to freeze Mr. Pharaon's assets amid indications he was selling off his U.S. holdings.

Judge Peter K. Leisure of the U.S. District Court for the Southern District of New York issued a temporary restraining order yesterday preventing any transfer of Mr. Pharaon's assets until a court hearing next week.

Yesterday's actions add no new actors to the scandal. Mr. Pharaon has been cited, by the Federal Reserve and a Manhattan grand jury, as a front for and co-conspirator with BCCI in the United States.

He is one of a number of Saudis with close ties to the royal family who have invested in American banks and businesses.

But the holdings of the Harvard-educated Mr. Pharaon have been more visible than most, ranging from an 1,875-acre estate in southern Georgia near Savannah that once belonged to Henry Ford, to some Hyatt hotels overseas and Ramada hotels in the United States, small insurance companies and a maker of star-shaped fasteners.

Mr. Pharaon also acquired a Georgia bank from Bert Lance, the former budget adviser to President Jimmy Carter. The Federal Reserve, by using new tools that Congress gave regulators last year in passing crime legislation, hopes to get its hands on some of Mr. Pharaon's assets before they are moved offshore.

Mr. Pharaon could not be located. His lawyer, Richard Lawler, did not return phone messages left with his Manhattan office.

It is not clear whether the Federal Reserve will be able to collect the fine. It would look first to Mr. Pharaon's holdings in the United States. But the Federal Reserve says Mr. Pharaon has dissipated some of his assets in the country since he learned of the Federal Reserve's interest in his activities.

For example, in June, days after the Federal Reserve tried to serve him with a subpoena, Mr. Pharaon sold an 80 percent interest in an American company, DLF Finance Inc., for more than $1 million, according to an affidavit filed in New York court by Thomas C. Baxter Jr., a lawyer with the Federal Reserve Bank of New York.

Mr. Baxter also told the court about the imminent sale of Mr. Pharaon's stake in a Georgia insurance company, American Southern Insurance Co., for $33 million.

The extent of Mr. Pharaon's holdings and debts are not known. But, according to documents made public yesterday, the Fed believes that Mr. Pharaon may face a liquidity crisis as a result of other asset freezes related to the international banking scandal.

Mr. Pharaon's involvement with BCCI, the Luxembourg-based bank that was seized in July by regulators, was complex. The various criminal, regulatory and legislative investigations into the bank have brought out some of those ties.

In July, the Fed levied a $200 million fine against the bank and sought to permanently bar the Saudi businessman, as well as several former BCCI officials, from any further role in American banks. The Fed said Mr. Pharaon was involved in BCCI's attempts to conceal illegal holdings during the 1980s in the National Bank of Georgia and Centrust Savings, a Miami savings and loan.

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