TIME: Almanac 1993/TIME Almanac 1993.iso/time/062491/0624202.000

Text File | 1992-08-28 | 6.4 KB | 132 lines

                                                                                BUSINESS, Page 40

BANKING

A Trail of Coffee and Cash


The dubious deals of a Jordanian bean merchant illuminate the
workings of the corrupt B.C.C.I. empire

By JONATHAN BEATY and S.C. GWYNNE/WASHINGTON


    When times were golden for Florida coffee importer
Munther Ismael Bilbeisi, he would tell friends his business was
so important that the Bank of Credit & Commerce International
set up a special branch in Boca Raton just to handle his
accounts and those of a few other high rollers. His boast was
not unfounded. During the 1980s his Coffee Inc. sold millions
of pounds of Central American beans to American buyers. A
Mercedes, a Porsche and a Rolls-Royce sat in the driveway of the
expatriate Jordanian's $1.8 million home.

    Today Bilbeisi's relationship with the shadowy $30 billion
bank is no longer a source of pride but a vivid page from a
worldwide scandal that began with B.C.C.I.'s indictment in 1988
for money laundering. Investigators now view B.C.C.I. as the
largest criminal corporate enterprise in modern history, a
secret banking network that served drug smugglers, tax evaders,
arms dealers and rapacious tyrants, including Panama's Manuel
Noriega. Four grand juries are probing the bank, while
investigators from the New York district attorney's office,
Congress and the Department of Justice are grappling with
mountains of seized records. Most prominent among those
embroiled in the scandal is former Defense Secretary Clark
Clifford. He is chairman of the largest bank in Washington,
which was secretly owned by B.C.C.I.

    A grand jury is investigating Bilbeisi, and last month a
Florida court issued a warrant for his arrest on income tax
evasion charges. The eroding fortunes of Bilbeisi and the bank
are not coincidental: he was precisely the kind of customer
B.C.C.I. sought in its quest to build a global empire. Bilbeisi,
who claimed friendship with Jordan's King Hussein, presented a
respectable front.

    Bilbeisi is also an arms dealer who has peddled used
Jordanian and new East European weaponry to South Africa and
Latin America under dubious terms. The $35 million worth of
coffee he sold to American companies was contraband smuggled
into the U.S. Financing for those deals, including letters of
credit and falsified documents, is the sort of business no
legitimate bank would touch, so Bilbeisi needed B.C.C.I. He was
happy to kick back cash to his bankers for such services,
including the laundering of his gains.

    His mistake was to cross swords with Lloyd's of London.
When coffee prices plunged in 1986, leaving him exposed, he
handed the insurers $6 million in claims for the alleged theft
of a Song dynasty vase and commercial losses on an undocumented
coffee shipment. Underwriters refused to pay, so Bilbeisi sued
them for punitive damages, prompting Lloyd's to launch a deeper
investigation. Result: last December Lloyd's filed a civil
racketeering suit against Bilbeisi and B.C.C.I., charging the
two with a long list of illegal acts, including coffee
smuggling, arms dealing, customs violations, money laundering
and paying bribes and kickbacks. That suit was followed by the
grand jury investigation into charges by the IRS that Bilbeisi
cheated on his taxes as well.

    Bilbeisi's smuggling scheme, undetected by U.S.
authorities, began with bribes to coffee growers in Guatemala,
Honduras and El Salvador to obtain beans not subject to tariff
agreements. The coffee, available at bargain rates, was
ostensibly for domestic consumption or export to nontariff
nations. To move the contraband through Central America,
Bilbeisi's agents, financed by B.C.C.I. letters of credit, paid
bribes to truckers, checkpoint officials and port officials. The
coffee was marked for delivery to Jordan or Syria but was routed
through Miami or New Orleans, where it was secretly off-loaded.
Former U.S. shipping agents who testified before the Florida
grand jury told TIME they accepted $4.5 million in bribes from
Bilbeisi for providing phony cargo manifests to fool U.S.
customs officials. The shipping agents say they were able to
dodge U.S. taxes because B.C.C.I. created false loans and
transfers, then deposited the bribes in secret accounts in
London.

    The Bilbeisi scheme reaches into corporate America as
well. The grand jury is investigating Arthur Berman, who was
president of Chase & Sanborn in 1981-84 and Chock Full o' Nuts
in 1984-85. The Lloyd's lawsuit contends that the executive,
knowing the coffee was smuggled, accepted "substantial
commissions" from Bilbeisi and Coffee Inc. to facilitate sales
to Chase & Sanborn and Chock Full o' Nuts. Bilbeisi's company
ledgers show $160,000 in cash and checks paid to Berman. In a
1988 deposition, Berman denied the payments were illegal
commissions, insisting they were merely loans that he used to
support "a young lady" and pay gambling debts.

    Lloyd's investigators have also probed Bilbeisi's role as
an arms broker. In one transaction Bilbeisi proposed the sale
of U.S.-built Jordanian fighter jets and helicopters to
Guatemala. According to documents from a Bilbeisi company, three
helicopters were delivered at hugely inflated prices, and part
of the proceeds was kicked back to high-ranking Guatemalan
officers and the brother of former President Vinicio Cerezo.
B.C.C.I. financed the deal for a $400,000 commission. Guatemala
has brought criminal charges against Bilbeisi, and is seeking
his extradition from Jordan.

    Meanwhile B.C.C.I.'s far-flung empire is imploding.
According to investigators, as much as $10 billion is missing
from the company's books. Sheik Zayed bin Sultan al-Nahayan, the
ruler of Abu Dhabi, has pumped in $1 billion to keep the bank
afloat since taking it over last year and has dismissed hundreds
of the Pakistani bankers who ran B.C.C.I. in its heyday. Abu
Dhabi, the Bank of England and the Federal Reserve are
struggling to come up with a workable restructuring plan that
will satisfy regulators amid continuing disclosures of illicit
banking activity.

    B.C.C.I.'s banking practice throughout the world was to
co-opt government officials and influential businessmen with
bribes, contributions and stakes in lucrative but dubious deals.
Agents now sifting through B.C.C.I. records are learning that
America was no exception.