TIME: Almanac 1993/TIME Almanac 1993.iso/time/082691/0826201.000

Text File | 1992-08-28 | 3.7 KB | 83 lines

                                                                                BUSINESS, Page 40

SCANDALS

The Fall of the Patriarch


Embroiled in the B.C.C.I. furor, Clark Clifford grudgingly gives
up the helm of Washington's largest bank


    "There is no function of any kind on the part of B.C.C.I. I
know of no present relationship. I know of no planned future
relationship."

    -- Clark Clifford, 1981


    Those words must have long haunted the former Defense
Secretary, but never more so than when he resigned under
pressure last week as chairman of First American Bankshares,
Washington's largest bank holding company. A decade ago
regulators, relying on Clifford, permitted a group of Middle
Eastern investors to acquire First American. Those purchasers,
however, turned out to be alleged fronts for the notorious Bank
of Credit & Commerce International, the criminal enterprise that
collapsed in July with an estimated $10 billion in losses. First
American's secret ownership demonstrated B.C.C.I.'s knack for
infiltrating power elites even as it served as a cash conduit
for terrorists, gunrunners and drug thugs.

    The departure of Clifford, a venerated Democratic Party
elder, and bank president Robert Altman, who also resigned, came
after intense prodding by the Federal Reserve Board. The
regulators have been seeking to restore public confidence in
First American (assets: $11 billion), which has been plagued by
troubled real estate loans in the Washington area. Last spring
the Fed tapped former Republican Senator Charles Mathias of
Maryland to head a committee of directors to oversee First
American. While Clifford, 84, and law partner Altman, 44,
retained their titles, investigators told TIME that the Mathias
group gradually took over their duties. "It started to get
nasty," said a federal investigator close to the power struggle.

    By then the Federal Reserve, which last month fined
B.C.C.I. $200 million for secretly acquiring First American and
two other U.S. banking companies, had decided that Clifford and
Altman had to go. To shore up the bank, regulators picked former
Attorney General Nicholas Katzenbach to succeed his longtime
friend Clifford as chairman.

    Clifford and Altman still face a daunting battery of
probes. Grand juries in Washington and New York City are
studying how much both men knew about B.C.C.I.'s secret
ownership of First American. Manhattan District Attorney Robert
Morgenthau is investigating a 1988 deal in which Clifford and
Altman reaped a combined $10 million profit after buying stock
in a B.C.C.I. affiliate. The two had borrowed $18 million from
B.C.C.I. to acquire the stock, which they held for less than two
years. TIME's sources say investigators are probing whether the
$10 million profit was a payoff for First American's 1987
purchase of the National Bank of Georgia for some $200 million
from B.C.C.I. front man Ghaith Pharaon. That deal bailed out
Pharaon and effectively transferred the $200 million from First
American to B.C.C.I. Clifford and Altman deny that they carried
out the deal under B.C.C.I.'s orders.

    Prosecutors are examining other ways in which First
American and B.C.C.I. might have been intertwined. Officers at
the First American Bank of New York, a subsidiary of the
Washington company, funneled financing for international deals
to B.C.C.I., a customer has told TIME. He recalled how "the
B.C.C.I. guys suddenly appeared" after several meetings at the
New York bank. "When I asked the First American vice president
what was going on, he looked at me and said that these guys were
running the show."

    -- By John Greenwald. Reported by S.C. Gwynne/Washington