TIME: Almanac 1993/TIME Almanac 1993.iso/time/090291/0902200.000

Text File | 1992-08-28 | 15.3 KB | 309 lines

                                                                                BUSINESS, Page 56

SCANDALS

Not Just a Bank


You can get anything you want through B.C.C.I. -- guns, planes,
even nuclear-weapons technology

By JONATHAN BEATY and S.C. GWYNNE -- With reporting by Adam
Zagorin/Brussels


    "We were representing a joint venture and chasing a sale
of military equipment to the Belgian government. We had gone
pretty far down the line when suddenly B.C.C.I. showed up,
representing the Italians. I was staying at the Hilton in
Brussels, and I got a phone call from a B.C.C.I. guy asking me
to come down to the lobby. When I go down, there's a B.C.C.I.
guy, Pakistani, and next to him is this 220-lb. French guy named
Andre -- the kind of guy who stuffs people in car trunks. They
have business cards with a B.C.C.I. logo. So Andre says, `You're
getting out of this thing. This is our deal.' Then the other
B.C.C.I. guy says, `You're out, and go and tell your client
you're out.' They scared the hell out of me. B.C.C.I. had two
functions, as bagmen and as thugs. They pushed the competition
out."



    Bagmen, thugs, arms deals and B.C.C.I. Common ingredients,
it turns out, in the murky world of international arms sales,
where experiences like that of the American dealer quoted above
are common fare. While prosecutors and auditors from
governments and regulatory bodies continue their scramble to
unravel the role of the Bank of Credit & Commerce International
in the world's first truly global financial scandal, TIME has
learned that what looked like a bank was in fact a multipurpose,
multinational enterprise. In the past two decades, the
organization created by Pakistani financier Agha Hasan Abedi has
become, among other things, a powerful player in the netherworld
of international arms. Using the clandestine routes and
alliances originally created for money laundering, B.C.C.I. has
brokered, financed and, in some instances, initiated
transactions that have often upset the uneasy technomilitary
balance sought by the U.S. and other major powers engaging in
government-to-government sales.

    Many of the B.C.C.I.-brokered arms deals are perfectly
legal, involving shipments of conventional weapons -- rocket
launchers, tanks and even sophisticated jet fighters such as the
Mirage 2000. But many more are not. Moreover, government
sources, former B.C.C.I. bankers, and arms merchants doing
business through B.C.C.I. have described the bank's more
sinister role in providing nuclear-weapons technology for
Pakistan, Iran, Iraq and Libya -- nations widely believed to be
pursuing development of the so-called Islamic bomb to counter
the nuclear force they assume Israel possesses. According to
these sources, B.C.C.I. has also been busy providing Pakistan
and other customers throughout the Middle East with the capacity
to deliver such weapons.

    Though the discovery of irregularities led to the shutdown
of B.C.C.I.'s banking operations last July, Abedi's $20 billion
"bank" is in fact far more complex. It is a vast, stateless,
multinational corporation that deploys its own intelligence
agency, complete with a paramilitary wing and enforcement
units, known collectively as the "black network." It maintains
its own dip lomatic relations with foreign countries through
bank "protocol officers" who use seemingly limitless amounts of
cash to pursue Abedi's goals. B.C.C.I. trades massively and for
its own account in commodities ranging from grain, rice, cement
and coffee to timber, carpets and anchovies. It is a force to be
reckoned with in international oil markets and, through its
intertwined relationship with the Gokal brothers' shipping
interests, is a shipping conglomerate as well. Taken altogether,
B.C.C.I. commands virtual self-sufficiency as a purveyor of
goods around the world.

    Through its practiced use of false documentation, the
deployment of billions of dollars in unbooked letters of credit,
and clandestine arrangements with compliant government officials
in numerous countries, B.C.C.I. was ideally positioned for its
role as arms marketeer to the world, particularly the Middle
East. Though its tracks are often difficult to detect, TIME has
discovered B.C.C.I.'s fingerprints on a startling array of
transactions. Among them:

    -- The victorious allied march into Kuwait City in the
wake of Desert Storm was spearheaded by a contingent of
returning Kuwaitis. Few if any noticed, however, that the
Kuwaitis were riding atop Yugoslavian M-84 battle tanks --
upgraded versions of the Soviets' workhorse T-72 -- complete
with East European backup personnel. Sixty-four such tanks and
crews had been purchased, financed and supplied to the Desert
Storm coalition forces by B.C.C.I.

    -- An ongoing project in Abu Dhabi to develop a standoff
land-attack missile system for the emirate's fleet of Mirage
2000s is being financed by B.C.C.I.

    -- Recently B.C.C.I. brokered the sale of OF-40 Mark 2
main battle tanks -- also to Abu Dhabi -- from Italian arms
manufacturer Oto Melara. B.C.C.I. later obtained and financed
a dozen S-23 180-mm artillery guns from North Korea for Dubai.

    -- In the past three years B.C.C.I. has brokered and
financed the sale of Astros II battlefield multiple-rocket
launchers from Brazil to both Iran and Iraq. The enterprise has
also sold Chinese Silkworm missiles to both countries. A
spokesman for Avibras Industria, maker of the Astros rocket
system, concedes sales to Iraq but denies any sales to Iran or
any deals involving B.C.C.I. A spokesman also allows that the
company received "insignificant" financing from the Brazilian
B.C.C.I. bank that was used for "domestic purposes."

    -- B.C.C.I. arranged for the sale of Argentine TAM battle
tanks to Iran in 1989, arms sources report. Argentina's Defense
Ministry denies that any tanks were ever sold to Iran.

    -- B.C.C.I. supplied Iraq with French-made Roland
antiaircraft missile systems and with G-6 mobile artillery units
from South Africa.

    B.C.C.I. did more than finance or broker arms deals
between nations that couldn't risk exposure of politically
embarrassing relationships. Arms dealers from Europe and the
Middle East, as well as a high-level operative from B.C.C.I.'s
Karachi-based black network, have separately provided TIME with
nearly identical descriptions of some of B.C.C.I.'s elaborate
services for the sale of conventional weapons. "They could
handle everything," says one of those sources. "Brokering,
financing, letters of credit, false end-user certificates,
shopping, spare parts, training and even personnel. You could
order a bomb, a plane to deliver it and somebody to drop it."

    With that kind of muscle, B.C.C.I. was able to secure
substantial business from one of the world's pre-eminent makers
of military aircraft, Dassault Aviation, the French company that
produces the Mirage jet fighter. According to Arif Durrani, a
B.C.C.I.-financed Pakistani arms dealer now doing time in a U.S.
federal prison for illegally providing Hawk antiaircraft missile
parts to Iran during the Iran-contra era, one of the biggest
Mirage dealers in the world is a Pakistani multimillionaire
named Asaf Ali. "Just as Ghaith Pharaon fronts for B.C.C.I. to
purchase banks and businesses, Asaf is B.C.C.I.'s man in the
weapons business," says Durrani, who financed many of his
weapons deals through B.C.C.I. offices in London and New York
City. While Durrani has made a number of other claims that have
been contested by the Justice Department, another well-placed
source confirms that Asaf Ali is backed financially by B.C.C.I.
in his worldwide deals and that he brokers Mirages, including
some top-of-the-line Mirage 2000s that were sold to Iraq, Libya
and Abu Dhabi, among other countries.

    In a recent deal, Asaf, displaying the po litical
dexterity of a superpower, brokered the sale of 49 Mirage 2000s
to India and then, to maintain parity, provided Pakistan with
a similar number of new and used Mirages. To fill the Pakistani
order, investigators looking at the deal say, he rerouted nearly
two dozen Mirages, yet to be paid for, originally brokered
through B.C.C.I. to Peru. A political scandal enveloping
B.C.C.I. in Peru focuses in part on the financial transactions
in the on-again-off-again Mirage deal. But last week a Dassault
spokesman, Francois Prigent, briskly dismissed any
responsibility. "The shipment to Peru is the business of Peru;
what happens to planes after we make a delivery is up to them."
The firm also denied connections to B.C.C.I. ("Banks are chosen
by clients, not by us") and to Asaf Ali ("We don't know that
man").

    But arms merchants interviewed in several countries say
otherwise. "Asaf Ali has been an important Dassault agent for
years, and everyone knows that," says a French businessman who
has worked on arms deals in Pakistan.

    The arrest last month of a retired Pakistani general
brought into sharp focus B.C.C.I.'s role in selling nuclear
secrets. General Inam ul-Haq, who was arrested in Germany, has
been sought since 1987 by U.S. authorities in connection with
the purchase of nuclear weapons-grade steel for Pakistan's
bomb-development program. The Justice Department says that
B.C.C.I. was Inam's financier, and the U.S. is seeking his
extradition. The alarm has spread to other branches of the U.S.
government. In a recent letter to Attorney General Richard
Thornburgh, Senate Governmental Affairs Committee chairman John
Glenn, a Democrat from Ohio, expressed concern that "B.C.C.I.
has been providing financial services to agents of the Pakistani
government for the illicit purchase of nuclear weapon-related
commodities in the United States and in other nations." Glenn
urged Thornburgh to pursue "a full examination of such
activities."

    "B.C.C.I. is functioning as the owners' representative for
Pakistan's nuclear-bomb project," says an international
businessman who has worked through the bank to supply Pakistan's
nuclear-weapons and missile industry. "In the West, Abedi
presented one face, but in the Muslim world, he and his bankers
have always promoted themselves as a Third World, Muslim bank
that would eventually dominate global finances by using oil
dollars and Abedi's network of influence. And he whispered in
the ears of the sheiks and the generals that he would bring them
the Muslim bomb."

    While munitions-control experts in the U.S. have evidence
that B.C.C.I. played a role in the delivery of munitions-grade
nuclear hardware and technology to Iraq and Iran, it is the
Pakistanis who are the chief beneficiaries of Abedi's
multifarious services. "You can't draw a line separating the
bank's black operatives and Pakistan's intelligence services,"
says an international arms broker, who provided details of
recent B.C.C.I.-generated orders for nuclear-bomb supplies for
Pakistan. "And in Karachi his bankers are surprisingly
patriotic."

    Sources also point to China as a supplier of nuclear
hardware for Pakistan, as well as missile-delivery systems for
Pakistan, Syria, Iraq and Saudi Arabia, including a
B.C.C.I.-brokered sale of midrange ballistic missiles to the
Saudis in 1988. By way of explanation, they cite B.C.C.I.'s
close banking relations with China, where $400 million in assets
were frozen after the bank's offices were shut down in July.
Abedi's bank had been the first Western-style bank allowed to
operate on the communist mainland, in part because of Abedi's
early support of CITIC, the Chinese investment company that is
the doorway to China's military-industrial complex. China,
starved for hard currency, has thus far not signed the Nuclear
Nonproliferation Treaty or missile-technology-limitation
agreements.

    Arms dealers are not the only ones to describe a pact
between Abedi's bank and China's weapons industry: according to
State Department sources, China has also used B.C.C.I. as a
middleman in Silkworm missile sales to Iran, Iraq and Saudi
Arabia. The Silkworm missiles sold to Iraq and Saudi Arabia were
equipped with sophisticated Israeli-manufactured guidance
systems, the government sources say. Arms dealers who have done
business with B.C.C.I. say its officers attracted illegal deals
because the bank provided documentation and letters of credit
for arms being shipped, for example, as agricultural machinery,
and that it routinely handled arms moving out of Eastern Europe
and masked technology transfers from the West into Soviet bloc
countries. The East bloc trade was so lucrative that Abedi
traveled to Moscow in 1985 to promote more weapons deals and to
lobby for permission to open B.C.C.I. branch offices in the
Soviet Union. Former employees have told TIME that B.C.C.I.
associates found it easy to bribe arms-factory managers and
officials within the Soviet Union because of low pay, but that
perestroika had cut into B.C.C.I. profits there. Reason: some
government officials who favored the bank because of payoffs had
been removed from their positions.

    The very act of operating simultaneously as a bank and as
a broker gives B.C.C.I. an enormous advantage: it is instantly
able to fund virtually any deal it wants and empower any
middleman it chooses to pull such a deal off. The
B.C.C.I.-brokered sale of F-4 Phantom jet parts to Iran from the
U.S. offers a good illustration of the process. The deal starts
when B.C.C.I. learns from its sources in Iran that it wants to
buy spare parts. B.C.C.I. and its agents then research the
supplier market to obtain the price of the materiel. Because
U.S. restrictions on the sale of such equipment to Iran make
this particular deal illegal, B.C.C.I. next provides a falsified
end-user certificate saying the jet parts will be sold to
Israel. The bank then opens a letter of credit -- a form of
financing only a bank can do -- in favor of the seller or the
seller's agent and arranges to ship the parts. Because B.C.C.I.
is a large bank, it can afford to pay off the seller
immediately, then turn and collect a vastly larger sum from
Iran.

    In spite of the virtual global shutdown of B.C.C.I., the
bank remains intact in its traditional haven, Pakistan. Though
other press reports maintain that Abedi is physically frail and
often incoherent, TIME has interviewed several business
associates who say he remains a major figure in the
international weapons trade. He has held a press conference
within the past month, and is in the process of licensing a new
bank in Pakistan, called the Progressive Bank.

    In the meantime, B.C.C.I. is even now brokering an arms
deal to Abu Dhabi, involving the sale of 45 South African G-6
mobile artillery pieces. If B.C.C.I. can hold it together,
sources say, Abu Dhabi may buy as many as 55 more of the same
pieces.

    The Price Waterhouse audit that led to B.C.C.I.'s seizure
last July covered only its banking activities. It said nothing
about immensely profitable deals in other businesses, notably
weaponry. Nor could it account for profits it could not see. And
while the enterprise's known banking services are shut down
around the world, virtually the full cadre of B.C.C.I.'s black
network, arms traders and global operatives remain unindicted,
unaccused and at large. The best guess of many of the sources
TIME interviewed is that they will simply move on, perhaps under
the umbrella of Pakistan's newest bank.