Time - Man of the Year/Time_Man_of_the_Year_Compact_Publishing_3YX-Disc-1_Compact_Publishing_1993.iso/moy/081092/08109931.000

Text File | 1993-04-08 | 9KB | 182 lines

                                                                                SCANDALS, Page 40

The Riyadh Connection


Behind the Clifford headlines lurks the real news about B.C.C.I.:
growing evidence that the bank provided secret services for
Saudis and U.S. intelligence agents

By JONATHAN BEATY and S.C. GWYNNE


    The scene that captured the news last week was of stately
superlawyer Clark Clifford, that icon of Washington power
brokering for five decades, clutching his fedora and lowering
his well-worn face in a Manhattan courtroom. There he and his
younger partner Robert Altman faced charges that they took
millions in bribes to act as front men for the notorious Bank
of Credit & Commerce International. But even more significant
may be a legal move related to the grand jury indictments of
last week: Saudi Sheik Kamal Adham, the longtime head of Saudi
Arabian intelligence and one of the most powerful men in the
Middle East, entered a guilty plea to charges that he conspired
to help B.C.C.I. secretly purchase control of First American,
the bank that Clifford and Altman headed. Adham, a key director
of both B.C.C.I. and First American, agreed to pay a $105
million fine and to cooperate in the widening probe.

    Adham is just the latest of several Saudis with intimate
ties to the royal family who have been dragged into the
B.C.C.I. investigations. Also indicted by Manhattan District
Attorney Robert Morgenthau was Ghaith Pharaon, the most
flamboyant of the Saudis, who bought the National Bank of
Georgia from Bert Lance, President Carter's onetime budget
chief, and later sold it to First American. Last month
Morgenthau moved against Sheik Khalid bin Mahfouz, who headed
the largest commercial bank in Saudi Arabia. Still another
enormously rich Saudi remains under investigation: Abdul Raouf
Khalil, a shareholder in both B.C.C.I. and First American. The
barrage of charges against these prominent Saudis poses a sticky
problem for the Bush Administration, one that threatens to
uncover an embarrassing pattern of legal and illegal
intelligence operations as well as arms and money transactions
involving Arab states, Israel and the U.S.

    Morgenthau has also been taking a tough line with another
U.S. ally in the region, Sheik Zayed bin Sultan al-Nahayan,
ruler of Abu Dhabi and President of the United Arab Emirates.
"Abu Dhabi has been promising cooperation for a year, but we've
gotten nothing out of them," the district attorney said last
week. His frustration is understandable: Zayed, now the owner
of the tattered remains of B.C.C.I. founder Agha Hasan Abedi's
erstwhile $20 billion banking empire, has placed 18 of the
bank's top officials -- all of them potential witnesses who
could help explain the workings of the criminal operations --
under house arrest in Abu Dhabi while he sits on most of the
bank's records.

    In testimony last week before a subcommittee chaired by
Senator John Kerry, a convicted former B.C.C.I. employee
fingered Zayed as one of the phony stockholders in B.C.C.I.'s
purchase of First American. The witness, Akbar Bilgrami,
testified that he had personally read the loan agreements by
which B.C.C.I. lent the money to Zayed to buy First American
shares. If true, this means that Zayed violated the same banking
laws that Adham and Mahfouz are charged with breaking.

    According to an American expert with close ties to Riyadh,
Saudi King Fahd is "apoplectic" about the aggressive American
probe. The Arabs, says this source, "are appalled and prefer to
believe the B.C.C.I. investigation is a Zionist plot." Though
the New York indictments differ little from ones handed down by
the U.S. Justice Department, it has been New York's Morgenthau
who has set the agenda. The Saudis claim that his father,
former Treasury Secretary Henry Morgenthau, was instrumental in
persuading President Harry Truman to recognize the new state of
Israel. (The theory is shaky: ironically, it was a young Clark
Clifford who, as Truman's political counselor, did most to win
recognition for Israel.)

    But the royal fury in Saudi Arabia is fed by more than
just Arab-Jewish enmity and the Saudis' abhorrence of
publicity. B.C.C.I. flourished because it could provide cover
for deals between nominal enemies, especially in the arms trade.
The demand for these services was particularly keen in the
Middle East, especially when Israel and Arab states were
involved. When American arms destined for Iran and Iraq passed
through Israel, for example, B.C.C.I. was frequently the broker
and financier. One such transfer involved Iraq's acquisition of
Silkworm missiles from China in the mid-1980s. Fahd, worried
that Iran was winning its war with Iraq, sought missiles for
Saddam Hussein's regime, but was rebuffed by the U.S. and
France. B.C.C.I. stepped in and brokered a deal with China as
a supplier of the rockets and Israel as a provider of the
high-technology guidance systems.

    When oil profits ebbed in the early '80s, Abedi and the
bank turned increasingly to weapons dealing, drug-money
laundering and capital flight to keep operations afloat. The
bank also became enmeshed in intelligence operations with
several nations, including the U.S., which effectively shielded
Abedi from unwelcome scrutiny as he perfected bribery and
extortion as business tools. B.C.C.I. thereafter grew faster
than ever.

    There was, for example, the highly sensitive question of
B.C.C.I.'s direct involvement in the secret arms-for-hostages
deals in Iran during the 1980s, in which it acted as a broker
and financier of weapons sales. Ollie North maintained three
accounts at the B.C.C.I. Paris branch, and B.C.C.I. was used to
transfer money to the contras.

    B.C.C.I. was similarly entwined in another key U.S.
intelligence operation of the 1980s: the supply of arms and
money to the Afghan rebels. While such clandestine support was
legally condoned, B.C.C.I. officials have told reporters that
CIA Director William Casey, in a series of 1984 meetings in
Washington with Abedi, struck a deal that included off-the-books
operations never reported to the U.S. Congress.

    B.C.C.I.'s connections to American intelligence operations
resulted in a paralysis of enforcement. In January 1985, for
example, long before U.S. Customs agents stumbled across
B.C.C.I. in Florida, the CIA hand-delivered a secret report,
described within the CIA as "dynamite," to Ronald Reagan's
Treasury Secretary Donald Regan. According to CIA testimony
before the Kerry committee, the report stated that B.C.C.I.
secretly owned First American. Regan's intelligence aide sent
back word that they already knew about B.C.C.I. and were not
interested in learning more.

    In the current probe of Saudi Abdul Raouf Khalil,
investigators have complained that when Khalil was first sought
by Federal Reserve examiners, the State Department claimed that
he either didn't exist or couldn't be found. Knowing that Khalil
was a high Saudi intelligence offical and the current liaison
to the CIA the investigators advised the Riyadh embassy to "look
for him down the hall in the CIA station chief's office."
Khalil was quickly located and served with a subpoena.

    There is evidence that the Reagan Administration knew
early on about B.C.C.I.'s criminal activities. Dr. Norman
Bailey, a former member of the staff of the National Security
Council, has told TIME that in 1982, the NSC began receiving a
stream of intelligence reports detailing the bank's arms
trafficking, drug involvement, support of terrorists and role
in the transfer of U.S. technological secrets to countries such
as Pakistan and the Soviet Union.

    Bush has insisted that he did not know Kamal Adham, who
was running Saudi intelligence at the same time Bush was CIA
director. The question was raised last year when the White House
was embarrassed by the revelation that Adham had hired chief of
staff John Sununu's ex-aide Edward Rogers for a $600,000 fee.
A senior intelligence officer stationed in Saudi Arabia during
those years told TIME last week that Bush's denial is not
credible. "It's flat impossible," he says.

    If he cooperates as promised, Adham will prove an
interesting witness in the deepening B.C.C.I. probe. But that
which is interesting to American prosecutors is setting teeth
on edge in Saudi Arabia, and elsewhere.