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THE BCCI AFFAIR |
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Carlson, who served as a Naval officer in the Pacific during World War II, joined the U.S. foreign service and was detailed to South Africa, before moving to the Bank of America, where he spent twenty years. While working for BOA, Carlson was stationed in Teheran in the 1960's and in Beirut in the early 1970's. Carlson ultimately became head of the bank's operations throughout the Middle East and East Africa. During that time, he came into close contact with Abedi, advising Abedi on the formation of BCCI in 1972, prior to BCCI's incorporation in Luxembourg. In turn, Abedi had introduced Carlson to Irvani, one of the most successful industrialists in Iran, who hired him to be manager of the Melli group. During this period Carlson started his own company, the "North West Investment Company", which was created in order "to help expedite shipments through Europe to companies in Iran." (52) North West invested $120,000 into Safeer Company during its first year, and one year later, liquidated this investment in Safeer, selling its shares to an entity, "Brockton Leather Company," which in turn sold them to Richard Helms for one dollar.(53) Corporate records obtained from Switzerland in May, 1992 show that North West is still listed as in operation, and that Carlson is listed as Vice-President of the Company and as a resident of Teheran, although Carlson lives in Snellville, Georgia. Northwest corporate records also show that Dr. Marco Jagmetti, the lawyer for Northwest, is a director of Rothschild Continuation Holdings, a holding company run by BCCI director Dr. Alfred Hartmann.(54) Although it has not been able to determine if they are related companies, the Subcommittee has uncovered documents indicating that BCCI shareholder Kamal Adham was President of a Panamanian holding company called "North West International".(55) After the Iranian revolution, Carlson fled Iran and went to work for Richard Helms in Safeer, on transactions financed by Irvani. Then, after Ghaith Pharoan purchased National Bank of Georgia from Bert Lance on behalf of BCCI, Agha Hasan Abedi personally selected Carlson as the new head of National Bank of Georgia.(56) A memorandum prepared by BCCI lawyers following a meeting with Carlson in November, 1990 describes how Irvani by early 1978 became a front-man for BCCI in its takeover of First American, at the very time Irvani was financing Helms' international consulting firm. The memorandum described Carlson as telling BCCI the following: In the mid-1970's, and arising out of the relationship which had grown from Agha Hasan Abedi's involvement with Irvani over Iran Arab Bank, Agha Hasan Abedi had invited Rahim Irvani to take a 5% stake in [First American]. Carlson said that Agha Hasan Abedi wished the consortium holding the shares to have a broad background including those from Iran. Carlson said the material produced at trial purported to indicate that Rahim Irvani had applied to Credit & Commerce Americas for a loan in order to purchase the share stake... The investment had not proceeded because firstly, Rahim Irvani had never been keen to make the investment at all, but had been persuaded that he could do so on the basis of the loan to be made to him [by Abedi and BCCI.](57) When Irvani agreed to act as a front-man, Richard Helms drafted legal language to protect Irvani against possible liability for the use of his name as a shareholder by Abedi, BCCI, and the Clifford law firm. A telex from Helms to Irvani, dated October 20, 1978, describes Helms' assistance to Irvani as follows: Roy Carlson asked on October 19 that I have an independent attorney review the seven documents he sent me by telex. . . you are not running undue risks. Carlson also told me that you wanted a draft of a simple agreement which would hold you harmless in these arrangements. The text of this agreement is as follows: LETTER AGREEMENT. For value received, the undersigned jointly and severally agree to indemnify you from any liability, loss, or damage, including reasonable attorneys' fees, arising out of or caused by your granting, as shareholder or a director, a power of attorney to any partner of Clifford, Glass, McIlwain and Finney, a Washington D.C. law firm, to act in your name with respect to the transaction involving Financial General Bankshares of Washington, D.C.(58) The telex ended with the sign-off, "With Warmest Regards, HELMS." With this suggestion, Helms was assisting Irvani in acting as a front-man for BCCI, who would not be at risk for the use of his name by the BCCI group represented by Clark Clifford and Robert Altman. Helms was assisting Irvani in his acting as a BCCI front-man in the takeover being handled by Clifford just one year after Clifford had assisted Helms in his negotiations with the Justice Department on his perjury indictment. Irvani's role in the takeover was acknowledged recently by his son, Bahman Irvani, who told the Atlanta Constitution that his father "lent his name to the 1978 takeover bid at the request of BCCI founder Agha Hasan Abedi."(59) Despite the existence of the October, 1978 telex from him to Irvani regarding how to structure the hold-harmless agreement for Irvani to the Clifford firm in the original FGB takeover, Helms has recently denied that he was involved in the transaction, terming the allegation "totally untrue . . . absolute nonsense."(60) Irvani's role in BCCI's initial attempt to acquire Financial General ended with the Iranian revolution in January 1979, as he became an unnecessary nominee. Over the following decade, Irvani, Carlson, and Helms continued to interact with one another and with BCCI. Helms provided introductions for Irvani to then U.S. Ambassador to Germany Walter J. Stoessel, Jr in January, 1979, and through former Senator Albert Gore Senior, contacted Senator Bumpers' office for assisting on locating rice dealers for Irvani. Helms and Irvani also continued to refer business to one another.(61) During the 1980's, Helms continued to introduce Irvani to prominent Americans, writing Vice President Bush on Irvani's behalf in October 29, 1987, forwarding an October 16, 1991 letter from Irvani to Bush, and forwarding letters of congratulations from Irvani to President-elect Bush and Secretary of State James Baker on November 28, 1988. None of the actual letters from Irvani to George Bush discussed in the Helms-Irvani correspondence have been located. But the cover letter from Irvani to Helms on the October 16, 1987 letter, refers to Irvani's desire to provide Vice President Bush with advice on his presidential campaign.(62) Helms took other steps on Irvani's behalf, including introducing Irvani's son Ali to Ambassador Paul Nitze, arms control advisor to President Reagan, and writing to U.S. Ambassador to Egypt Frank Wisner on Irvani's behalf on May 22, 1989. Helms introduced Irvani's son, Ali, to former CIA station chief for Saudi Arabia Raymond Close -- who had previously worked for Irvani's successor as BCCI's lead front-man in the First American takeover, Kamal Adham -- on July 11, 1989.(63) Throughout this period, BCCI financed Irvani investments in the United Kingdom and in the United States, which in 1989 amounted to $38 million in a single transaction to buy a New York office building, 140 East 58th Street. Other BCCI documents show numerous loans, typically of millions of dollars at a time, to the Irvani family, as well as indications that the Irvanis also received substantial loans from the National Bank of Georgia, both while that bank was owned by BCCI through Ghaith Pharoan, and after Pharoan was replaced as a nominal owner by First American. BCCI and William Casey and His Network On February 23, 1992, NBC News broadcast the allegation that former Director of Central Intelligence William Casey met secretly for three years with Abedi, that such meetings took place every few months at the Madison Hotel in Washington, D.C., and that they discussed matters relating to U.S. arms deals to Iran and the arming of Afghani rebels. Prior to the broadcast, NBC contacted the CIA and was advised of the following by the CIA: "An extensive search of CIA files and cable traffic revealed no evidence that CIA was involved in or had any knowledge of any use of BCCI for the sale of arms to Iran or the diversion of funds for the Nicaraguan contras, in connection with the Iran-contra affair."(64) Previously, Kerr had testified before the Subcommittee on October 25, 1991 that: allegations that the Agency had any direct or indirect relationship with Abedi or recruited him for CIA activities are absolutely baseless.(65) According to the CIA in February, 1992, the CIA found "no records or evidence whatsoever to indicate that former Director Casey or the Agency had any sort of relationship with Abedi."(66) Balanced against these flat denials are statements to the contrary by one BCCI official in a position to know to U.S. officials. The BCCI official explicitly described meetings between Casey and Abedi at the Madison Hotel in the mid-1980's, identified one other person who had personal knowledge of the meetings, and provided an account which one U.S. official deemed credible.(67) In addition, there are statements by BCCI officer Abdur Sakhia and Bert Lance that each had noticed in 1985 a change in Abedi's attitudes towards the United States, which they attributed to his developing a relationship with the CIA. Sakhia testified that in 1984, he was told by Abedi, or one of his associates in London that Abedi was uncomfortable about travelling in the United States because he feared he was on a CIA watch list, but that as of a year later, Abedi's attitude had changed completely, giving Sakhia an impressions that "a deal had been struck somewhere."(68) Lance provided a more detailed account, describing a meeting with Abedi at a symposium on conflict resolution at Emory University sponsored by President Carter in October 1983: What [Abedi] said was . . . from the precise moment that Ronald Reagan was sworn in as President of the United States, I have been on the CIA Watch List. And my every movement, my every act, whatever I do, personally as well as through BCCI, is noted, watched, observed, under surveillance of the Central Intelligence Agency. . . I said: Well, why, Mr. Abedi? . . . And he said something that was very interesting, Mr. Chairman. He said: You have to understand that I fall into the category of being a Third World liberal . . .(69) According to Lance, Abedi's attitude and concern about the CIA suddenly changed significantly in 1984. Where he had been concerned about making visits to the United States, and about expanding his operations in the United States, he now felt confident, leading Lance to conclude that Abedi had received "an assurance" that the U.S. government would no longer impede his activities. Lance, acknowledging he had no hard evidence for his assertion, nevertheless concluded that the CIA had made an effort "to coopt Mr. Abedi and BCCI, and in effect, turn them into the bank of the CIA."(70) Neither Lance nor Sakhia had been exposed to the other's testimony at the time of making these statements, or had ever met one another. One possible explanation of the contradictory accounts is that Casey undertook actions in the foreign policy or intelligence sphere while director of the CIA outside its record keeping and operations. The CIA's legal department has described such activity by Casey, including any role he had in the Iran/Contra affair, as being undertaken in his position as an advisor to the President, rather than in his position as Director of Central Intelligence.(71) In such cases, Casey would have taken actions which were outside the record keeping of the CIA, undocumented, fully deniable, and effectively irretrievable. Iranian Arms Deals and Dealers Regardless of whether Abedi and CIA director Casey concluded a deal under which BCCI would provide off-the-books assistant to any unofficial or "off-the-books" operation of Casey, BCCI was incontestably used by key Iran/Contra figures to finance arms shipments to Iran in connection with the secret Reagan Administration initiative. CIA records, as well as Kerr's testimony, state the CIA did not know this. However, the record is clear that a number of BCCI officials knew of the U.S. government arms sales to Iran at the time. Ironically, BCCI knew of this Reagan Administration initiative at a time when the Iranian arms sales remained secret not only from the U.S. public but the Congress, and at a time when the CIA knew that BCCI was a criminal enterprise. BCCI was also involved in a number of other Iranian arms sales after the fall of the Shah, some of which appear not to have been completed, and others of which appear not to have involved the United States. In still other cases involving BCCI's use for arms sales to Iran, it is simply not possible to determine the extent of involvement by U.S. officials. BCCI was used from the late 1970's in London by Iranian arms brokers who became the central figures in the "October Surprise" allegations of secret negotiations with Iran involving Casey and Iranians over the fate of U.S. hostages. It was also used by Iranian arms dealers in Britain who never completed arms sales with Iran. Most important, it was extensively used by Adnan Khashoggi and Manucher Ghorbanifar in arms deals that were directly on behalf of the United States. 1984-1986: Adnan Khashoggi and Manucher Ghorbanifar Both Saudi businessman Adnan Khashoggi and Iranian arms merchant Manucher Ghorbanifar were central agents of the United States in selling arms to Iran in the Iran/Contra affair. According to the official chronologies of the Iran/Contra committees, Khashoggi acted as the middleman for five Iranian arms deals for the United States, financing a number of them through BCCI; and Ghorbanifar was the individual who conceptualized the arms-for-hostage negotiations, and provided the initial channel to the "Iranian moderates" with whom the Reagan Administration negotiated prior to delivering shipments of U.S. TOW missiles and HAWKs to Iran in 1985 and 1986. Khashoggi was served as the "banker" for arms shipments as the undercover scheme developed in 1985 and 1986. Khashoggi himself said he advanced $1 million in August 1985 to "get the deal going." According to his own and other published accounts, he provided some $30 million in loans altogether, depositing money in a Swiss bank account controlled by Lake Resources, the company run by former White House aide Oliver North, who played the pivotal role in the operation involving the arms sales and diversion of funds to Nicaraguan Contra rebels. Both Khashoggi and Ghorbanifar banked at BCCI's offices in Monte Carlo, and for both, BCCI's services were essential as a means of providing short-term credit for sales of arms from the U.S. through Israel to Iran. Khashoggi's use of BCCI for the Iranian arms sales was first described, in passing, in an Iran/Contra committee deposition on June 8, 1987, describing the movement of $10 million from Credit Swisse which would to through BCCI four times to produce $40 million of sales "and therefore, additional profit." In the same deposition, the witness, Khashoggi business manager Emanuel Floor, described Ghorbanifar as stating, "these are my associates," and writing down the name, "BCCI." Floor described BCCI as acting not merely as Ghorbanifar and Khashoggi's bank for the purpose of these transactions, but as an actual partner in the Iranian arms deals.(72) As described in detailed Subcommittee testimony by BCCI Paris manager Nazir Chinoy on March 18, 1992, Khashoggi came to Paris to meet with Chinoy in early 1986 to discuss continuing transactions he had until then been conducting through BCCI's Monte Carlo branch. According to Chinoy, the meeting was set up when Chinoy wished to learn more about the reasons for the sudden increase in assets and activity of the Monte Carlo branch of BCCI, which was under his jurisdiction as chief manager for the French region of the bank. He learned from Manir Karim, the branch manager for Monte Carlo that most of the new assets and activity were the result of a very successful relationship that had been developed with Saudi arms dealer Adnan Khashoggi. Khashoggi had two to three "very active" deposit accounts at Monte Carlo, according to Chinoy, and kept very large balances there, paying "his crew" through travellers checks at the rate of $100,000 to $150,000 each month. Chinoy decided to learn more, and met with Khashoggi and Karim in BCCI's office in Paris: I met Khashoggi in a small room at the bank. He told me he had a deal, he was to be a supplier, buy American arms through Israel and supply them to the Iranians. What he wanted was a four-day credit.(73) Khashoggi told Chinoy he was working directly for the U.S. government and the CIA, and needed BCCI because none of the parties involved in the Iran/Contra affair trusted one another: The Israelis wanted their money for the arms whereas the Iranians would only pay when the arms physically would reach them. The Americans wanted their money as soon as they gave their arms to the Israelis and Khashoggi did not have the money himself at the time. Khashoggi wanted a revolving $5 million credit, and the charges he was prepared to pay were generous -- 2% front end fees per transaction. For $2 million you would get $40,000 per transaction. Then you would get interest at 1 1/2 % over LIBOR for the actual number of days the overdraft loan or line of credit was operating. This was juicy.(74) In meeting Khashoggi, Chinoy learned for the first time that BCCI had been providing these services for Khashoggi for a number of months through the Monte Carlo office of BCCI, without the knowledge of the Paris office, which was responsible for the Monte Carlo office. Karim explained that there had been at least five transactions as of early 1986, that had never been detected by other BCCI offices and which had never received formal approval in writing by BCCI's headquarters in London. This was done by exploiting BCCI's "float," through BCCI's officer taking a check on a Thursday or Friday from Khashoggi and holding it over the weekend, while giving Khashoggi credit for the check immediately. Khashoggi in return would use the money and make the payments to the Israelis. The arms would be delivered over the weekend and by Monday or Tuesday Khashoggi would have the check from a Swiss bank, normally Credit Suisse, where the North/Secord "Enterprise" maintained its accounts. Credit Suisse would give Khashoggi a "Demand draft," which BCCI would then cash for its credit on the transaction on a Tuesday or Wednesday after Khashoggi had his funds from the Iranians.(75) According to Chinoy, the five or more transactions had involved eight to ten million dollars in all. Chinoy recognized that the activity was profitable, but he was uncomfortable about BCCI being involved in a transaction that secretly involved the U.S., Israel and Iran in arms deals, and that had not been and would not be approved in writing by BCCI's London office. Chinoy said that he told Khashoggi he could not continue the deals, that they would have to stop them. In the weeks that followed, Chinoy noticed that profits at the Monte Carlo branch fell, indicating to him that his subordinate had obeyed Chinoy's order. But he then learned that the arms deals started up again anyway, and that Khashoggi and Karim completed two to three more transactions out of Monte Carlo totalling $15 million to $17 million dollars.(76) In the same period, Chinoy learned from Karim that Iranian arms sales Manucher Ghorbanifar also maintained a regular deposit account at BCCI Monte Carlo, in amounts ranging from $2 million to $2.5 million, typically kept in short-term certificates of deposit. Chinoy suggested to Karim that BCCI sever its relation with Ghorbanifar and was told: We should let the account be. He is in very good books with French intelligence, with the American government, he is helping everybody and he has good accounts in Switzerland and I hope we will get more money from him.(77) According to Chinoy, BCCI officers understood that Ghorbanifar had helped the French government obtain the release of hostages held in Beirut, and that accordingly, BCCI would strengthen its status in France by handling Ghorbanifar's business. Further confirmation for Chinoy's account came from BCCI's senior office in the United States, Abdur Sakhia, who testified that in the mid-1987, he was contacted by FBI agents investigating the Iran/Contra affair who needed to obtain records from BCCI Monte Carlo, which was the "missing link" in their documentary chain involving the U.S. and Credit Suisse. According to Sakhia, the FBI told him that a BCCI branch manager in Monte Carlo had been paid $100,000, "presumably by the U.S. government," and deposited that check in Switzerland in his own account. They asked Sakhia to obtain BCCI's records concerning the transaction from Europe. Sakhia contacted his superiors in London and they discussed whether or not BCCI should provide the information to the FBI despite the fact that to do so would violate French secrecy laws. The official at BCCI-London, Ameer Siddiki, agreed with Sakhia that if BCCI's involvement in Iran/Contra became known, it would focus dangerous attention on the bank's other activities. BCCI London informed Sakhia that if the United States government agreed to prevent BCCI's involvement from becoming public, BCCI would violate French law and provide the records to the United States. The FBI agreed to this arrangement, and the records regarding the Iranian transactions were provided by BCCI to the FBI.(78) Following this agreement, Sakhia remained concerned about the fact that the BCCI official involved, Manir Karim, had accepted a $100,000 bribe to handle the transactions, and deposited them in a non-BCCI institution, and yet had not been disciplined by BCCI. Based on this and related information, Sakhia concluded that the handling of the arms sales by BCCI "was all being orchestrated from London and London was aware of what was happening."(79) According to the Iran/Contra deposition of Albert Hakim, banker for the North/Secord Enterprise, Khashoggi made deposits in the North/Secord accounts from BCCI in the amount of $2.5 million on February 7, 1986; $2.5 million on February 10, 1986; and two checks of $5 million each on February 18, 1986. Still additional deposits were made from BCCI by Khashoggi for $5 million on May 18, 1986. Provocatively, Hakim referred to additional transactions amounting to millions more involving an entity referred to simply as "IC" of the Grand Caymans, reminiscent of BCCI's own Grand Caymans affiliate "ICIC." (80) Three payments to BCCI from the North/Secord accounts, including Lake Resources, the account used to finance arms to the contras, are shown in the ledger books maintained by Hakim on behalf of the enterprise, amounting to $10 million only.(81) In addition, the Hakim ledgers show five wire transfers amounting to $346,000 to First American Bank, which may merely indicate that Secord, North, or the fourth partner of the enterprise, former CIA agent Thomas Clines, may have had an account there. Evidence for the involvement of BCCI headquarters in London and Abedi in the Iran/Contra arms transactions is contained in documents between BCCI Grand Caymans and BCCI London in March 1986 involving a $10 million arms transaction -- the exact amount referred to by Emanuel Floor as having been intended for movement through BCCI by Khashoggi and Ghorbanifar, and tracking the February 18, 1986 payments referred to by Hakim. The documents, which refer to the use of a front company "in formation" to handle the transaction, are in the nature of preliminary discussions regarding whether BCCI would handle the transaction. But they contain a critical fact: they demonstrate the involvement of BCCI-London in transactions involving BCCI Monte Carlo and BCCI Grand Caymans. From Chinoy's point of view, the meaning of the documents is that when he expressed concern about the Khashoggi transaction, London simply went around him. From Sakhia's, the documents showed that Abedi had approved the BCCI project from the beginning. (82) Ironically, Clark Clifford had his own long-standing ties to Khashoggi. In 1981, Khashoggi took $250,000 from Northrop intended for Saudi Arabian Air Force General Hashim M. Hashim. Four years later, Northrop released documents accusing Khashoggi of demanding the bribe for the general, and then converting it to his own use, Khashoggi retained Clifford to represent him in the subsequent federal grand jury investigation of the matter. Significantly, both Kamal Adham and Faisal al Fulaij, BCCI's front-men for the 1981 takeover, were investigated as well as Khashoggi for taking money from Northrop and Lockheed in connection with U.S. arms sales to Saudi Arabia.(83) Perhaps as a matter of coincidence, the business formed by Secord in May, 1983 immediately upon his retirement from the U.S. government in partnership with Hakim, Stanford Technology Trading Group International of Vienna, Virginia, used a BCCI shareholder as its local agent in Saudi Arabia for contracts to provide security services in the Middle East. The person who Secord hired to help him acquire Saudi government contracts was Abdullah Said Bugshan and his brothers. Together, the Bugshan brothers owned about one half of one percent of BCCI during the period they reprsented Secord and Hakim in Saudi Arabia. While representing Secord, they had also deposits in BCCI ranging from $13 million to $21 milllion in BCCI and had outstanding loans of about $6 million from BCCI.(84) Other Iranian Arms Dealers and BCCI Ben Banerjee A recurring question about the Iran/Contra scandal is the issue of whether there may have been earlier arms sales to Iran, prior to the period covered by the Iran/Contra Congressional committees. On September 29, 1987, Die Welt, a German newspaper, reported that in 1984, Iran's ambassador authorized the purchase of 20,000 U.S.-made TOW missiles after talks between U.S. Lt. Col. Oliver North and Iranian officials in Hamburg. According to Die Welt, the deal fell through and the weapons were never delivered after an Iranian contact disappeared with the letter of credit. According to Die Welt, Iran's ambassador to West Germany, Mohammad Djavad Salari, signed a letter authorizing the purchase of the anti-tank weapons worth $264 million, and North, then a member of the U.S. National Security Council, took part in one negotiating session on Nov. 20, 1984. The newspaper said the purchase authorization came after talks in a Hamburg hotel between Iranians and two British-based arms dealers, Michael J. Aspin, owner of the weapons dealership Delta Investments and Indian-born millionaire weapons dealer Ben Banerjee, chief of the British company BR and W. Industries.(85) Both Banerjee and North denied the allegation. Documents obtained by the Subcommittee, filed in a British criminal case later brought against Aspin for fraud in connection with the attempted sale of the American TOW missiles to Iran in 1984, and a second attempted sale in 1985, include a "pro-forma invoice," dated November 21, 1985, for the supply and delivery of 1250 units of BCM 71A TOW MISSILES, manufactured in the USA, "all brand new in manufacturers original packing," from B.R. & W. Industries, Ltd., signed by Ben Banerjee, U.S., denominated "lift trucks" for the purpose of bank and customs documentation, and handled by BCCI in London. The invoice was accompanied by telexes and letters on BCCI stationary of a nature and type ordinarily used by BCCI, showing BCCI providing counter guarantees and letters of credit for a transaction involving the "lift trucks" in November and December, 1985, involving the Iranian government and its bank, Bank Melli, and channeled through the Arabian Gate General Trading Co. of Dubai, United Arab Emirates.(86) In staff interviews, BCCI Paris manager Chinoy confirmed that Banerjee banked with BCCI in London and was involved in "large dealings with Iran."(87) During the Aspin trial, Leslie Aspin, Michael Aspin's brother, testified that the TOW missile sale was a legitimate sale authorized by the United States government as part of a 1984 -1985 effort to ransom CIA agent William Buckley, with the weapons to be transferred from Portugal to Iran. In a sworn statement of May 1, 1987, Aspin attested that he and Oliver North opened three joint accounts in BCCI Paris into which North deposited $5 million on November 15, 1984, and listed the account numbers and signature cards of the three accounts, one of which was maintained for an entity called "Devon Island," allegedly, under the signature of North and Bannerjee, and the other two accounts, which were numbered accounts, maintained under the signatures of Aspin, Bannerjee and Ghorbanifar.(88) The Subcommittee has confirmed the existence of accounts in London involving Banerjee and in Monte Carlo involving Ghorbanifar, but has not received access to BCCI's accounts in Paris to determine whether or not the accounts referred to by Aspin existed. North has denied having maintained such an account. However, BCCI Paris manager Chinoy did learn of an account in the name "Devon Island" when he received a telephone call in 1988 from a London office of BCCI asking about it, and was advised by his assistant that the account existed but had not been used.(89) Both Banerjee and Aspin are dead. The Subcommittee is continuing to seek Banerjee and Aspin's records from BCCI's liquidators in hopes of determining whether the arms sales to Iran in which they were participated had the backing of or involvement of any U.S. official. 1980: BCCI and October Surprise: Cyrus Hashemi The late Cyrus Hashemi, an Iranian expatriate living in London, is a key figure in the "October Surprise" allegations charging that William Casey and other members of President Reagan's election team in 1980 engaged in negotiations with Iran, whereby Iran would delay the return of U.S. hostages held in Iran until after the November, 1980 election, in return for the U.S. providing Iran with needed arms for its war against Iraq. According to these allegations, which are substantially based on states made by Hashemi's brother Jamshid, who was based in Paris in this period, Cyrus Hashemi was to have acted as the middle-man in these secret negotiations between Casey and Iran. Later, Hashemi was indicted by the U.S. Attorney for the Southern District of New York for weapons dealings with Iran in a case that was ultimately thrown out of court as a result of complications arising out of the Iran/Contra affair.(90) Without reaching any judgments concerning these allegations, records obtained by the Subcommittee demonstrate that BCCI was one of the principal banks used by Cyrus Hashemi in the United Kingdom.(91) Bruce Rappaport, Alfred Hartmann, and BCCI Bruce Rappaport, an Israeli-born Swiss businessman who was investigated in 1987 by Independent Counsel Robert McKay for certain activities he engaged in on behalf of former CIA director Casey, had several connections to important participants in the BCCI affair. For example, he placed one of BCCI's key "rent-a-faces," Alfred Hartmann, who headed BCCI's secretly-held Swiss affiliate, Banque de Commerce et Placements, on the board of directors of his Intermaritime Bank of Geneva and New York; developed a relationship with BCCI's original contact in the U.S., Bert Lance, in the mid-1980's, and purchased an Antiguan melon-farm from Israeli arms dealers who were significant customers of BCCI in Miami.(92) Rappaport's links to BCCI are significant chiefly because of his relationship to Casey, a frequent golfing partner. For example, Rappaport threw a party in Washington in the summer of 1985 for Casey to demonstrate high-level support for a project to build a pipeline to ship oil from Iraq through Jordan. Rappaport was also the person who allegedly controlled accounts which received $10 million for the contras provided the North-Secord operation by the Sultan of Brunei, at the request of Elliot Abrams. The Iran/Contra Committees were told by Swiss authorities that the $10 million had disappeared, and was found to have "mistakenly" gone to an unwitting Swiss businessman, who then returned the money after the Iran/Contra affair was discovered. Press accounts, which Rappaport has denied, contend that the businessman was Rappaport. If Rappaport did indeed receive the funds, the placement of the $10 million with him would not likely have been in error, given his close relationship with Casey.(93) Oman While reviewing the complex relationships between BCCI and the Bank of Oman, which was affiliated with BCCI, the Subcommittee came across several linkages suggesting ties between the Sultanate of Oman, key figures in Saudi intelligence and U.S. persons with connections to the intelligence community. As a 1985 article in the New York Times noted, Western intelligence has been a major influence in this tiny, but strategically placed, Gulf State, adjacent to the United Arab Emirates headed by Sheik Zayed. Although BCCI is not mentioned in the article, there is a substantial amount of evidence which demonstrates that both BCCI and the CIA has played a major role in the foreign policy and economic affairs of that country. The article discusses a Pasadena corporation, Tetra Tech, operated by a former CIA agent, which "helps manage several key Omani government agencies."(94) It is clear that several companies and government agencies in Oman had multimillion dollar loans from BCCI. BCCI's loan book, dated March 3, 1991, for example, shows: Oman Aviation Service had an $8 million loan; Oman Building and Contracting Co. had over $11 million; Oman Flour Mills Co. had a $13 million loan; Oman Development Bank had $13 million; Oman Investment and Finance Company had a $10 million loan; Oman Building and contracting Services had a $16 million loan; and Sultanate of Oman had $14 million in loans. These are, of course, only the companies or government agencies which are clearly identifiable as having an Oman connection: there are undoubtedly other companies which the Subcommittee has been unable to identify.(95) Besides the entities listed above, BCCI may have been moving money through the National Bank of Oman to fund the war in Afghanistan. British journalists have written: "BCCI's role in assisting the U.S. to fund the Mujaheddin guerrillas fighting the Soviet occupation is drawing increasing attention. The bank's role began to surface in the mid-1980's when stories appeared in the New York Times showing how American security operatives used Oman as a staging post for Arab funds. This was confirmed in the Wall Street Journal of 23 October 1991 which quotes a member of the late General Zia's cabinet as saying 'It was Arab money that was pouring through BCCI.' The Bank which carried the money on from Oman to Pakistan and into Afghanistan was National Bank of Oman, where BCCI owned 29%."(96) The National Bank of Oman and its CEO, Case Zawawi, also did business with Bruce Rappaport. Jerry Townsend, the President of Colonial Shipping in Atlanta, told the Subcommittee that his former employer, Bruce Rappaport, had business relations in Oman with Case Zawawi at the National Bank of Oman. Townsend, who claims to have worked as a soviet analyst with the CIA, was employed by Rappaport between 1981 and 1990. Townsend recalled that Rappaport flew Zubin Mehta and the London Philharmonic to Oman on one occasion to entertain the Sultan and other members of the royal family. More importantly, according to Townsend, Rappaport and Zawawi had numerous "contracts with the Saudis." The consolidated loan report for BCCI of March 3, 1991 shows a loan authorization of almost $11 million to the Zawawi group with an outstanding balance of nearly $8 million.(97) Conclusions Key questions about the relationship between U.S. intelligence and BCCI cannot be answered at this time, and may never be answered, without the ability for investigators to review BCCI records and interview BCCI witnesses held by the government of Abu Dhabi. Other questions could be answered from documents available in the United Kingdom, and subpoenaed by the Committee, but for the decision by the British judge on an application of BCCI's liquidators not to permit the Committee to receive them without the written "permission" of the depositors involved, such as Abu Nidal, and the deceased Ben Banerjee and Cyrus Hashemi. Still other BCCI documents in the United Kingdom have been segregated and sealed by British intelligence (MI-5), and withheld from dissemination to anyone.(98) Finally, other relevant information in the possession of the CIA concerning certain important figures in BCCI's history remains classified, and hence outside the scope of this report. Summaries of some of this classified material have been provided to staff in a classified form that cannot be referred to. However, even there, the underlying material upon which these summaries were based, has been withheld, and therefore any additional relevant information the underlying material may contain can only be a matter of speculation. However, even by its own account of its activities, the CIA made two significant mistakes in its handling of BCCI. First, the CIA failed to provide the critical information it had gathered to the correct users of the information -- the Federal Reserve and the Justice Department. Kerr testified that he was "not sure it was a bad decision," a judgment challenged immediately during the hearing by Senator Hank Brown, who noted: My training was that somebody's supposed to take responsibility. . . . And when a decision is made that is a bad decision, you identify who made it. . . You may feel a failure to get information about a criminal activity to the Federal Reserve is not [a bad judgment], I have a different view of it.(99) Second, even when the CIA knew that BCCI was as an institution a fundamentally corrupt criminal enterprise, it used both BCCI and First American, BCCI's secretly held U.S. subsidiary, for CIA operations. In the latter case, some First American officials actually knew of this use.(100) While the reporting concerning BCCI by the CIA was in some respects impressive -- especially in its assembling of the essentials of BCCI's criminality, its secret purchase of First American by 1985, and its extensive involvement in money laundering -- there were also remarkable gaps in the CIA's reported knowledge about BCCI. According to Kerr, the CIA did not have any information regarding the involvement of Kamal Adham -- its chief intelligence liaison in the Arab Middle East during the 1960's and 1970's -- in BCCI, or that of his successor, Abdul Raouf Khalil, or of Iran/Contra arms dealer Adnan Khashoggi.(101) Those statements have since been reiterated to the Subcommittee by the CIA in April 1992, following a further review of CIA records, with the caveat by the CIA that CIA record keeping is not consolidated, and that it remains possible that information which exists has not been retrievable. The professed lack of knowledge by the CIA about the activities of its foreign intelligence liaisons and operatives who were BCCI's major shareholders and customers is perplexing and disturbing. The relationships between the CIA and Adham and Khalil were, according to public accounts, among the most important intelligence relationships the United States has had in Saudi Arabia over a quarter of a century. Similarly, Khashoggi and Ghorbanifar performed a central role for the U.S. government in connection with the Iran/Contra affair in operations that involved the direct participation of CIA personnel. The CIA's professions of total ignorance about their respective roles in BCCI are out of character with the Agency's detailed knowledge of many critical aspects of the bank's operations, structure, personnel, and history. If one accepts these statements at face value, it is hard not to conclude that the CIA's ignorance on these matters constituted a significant intelligence failure on the part of the CIA. Given the CIA's responsibilities to protect the U.S. against covert action by foreign powers, it would be especially disturbing if the United States does not, as a general matter, know anything whatsoever -- as the CIA has testified here -- of very substantial financial activities within the United States of chief foreign intelligence liaisons such as Adham and Khalil. The errors made by the CIA in connection with its handling of BCCI were complicated by its handling of this Congressional investigation. Initial information that was provided by the CIA was untrue; later information that was provided was incomplete; and the Agency resisted providing a "full" account about its knowledge of BCCI until almost a year after the initial requests for the information. These experiences suggest caution in concluding that the information provided to date is full and complete. Caution is especially warranted given the CIA's recurrent statements that its record keeping has not been consolidated, and that it is possible that records pertaining to BCCI, or its shareholders, could have been missed in its search. The lack of recollection by the chief intelligence officer of the Treasury, Douglas Mulholland, and by a then-senior official of the Office of the Comptroller of the Currency, Robert Bench, of the CIA having told them about BCCI's secret ownership of First American, is troubling. According to the CIA's records, Mulholland recognized at the time that the information was important, and sought more information. The original memoranda are written in a fashion that makes it unlikely that any recipient would have not have noted BCCI's secret ownership of Washington's largest bank holding company, and have remembered it later. Accordingly, the testimony of both Bench and Mulholland raises questions about their candor. ______________ Notes: 1. S. Hrg. 102-350 Pt. 3, pp. 569-570. 2. Id. 3. S. Hrg. 102-350, p. 794. 4. . Hrg. 102-350 pt.3, pp.569-570 5. Letter, Webster to Kerry, S. Hrg. 102-350, Pt. 3, p. 607. 6. Communication between Subcommittee staff and Virgil Mattingly, Federal Reserve, July 31, 1991. 7. Testimony of Richard Kerr, Acting Director of Central Intelligence, S. Hrg. 1012-350 Pt. 3 p. 573. 8. Briefings, Subcommittee staff, by CIA office of general counsel and deputy director of operations, March-April, 1991. 9. Kerr testimony, closed session, Subcommittee, October 31, 1991. 10. Testimony of Virgil Mattingly, Senate Banking Subcommittee on Consumer and Regulatory Affairs, S. Hrg. 102-379 p. 141. 11. Staff interview, Virgil Mattingly, Federal Reserve, June, 1991, and review of Federal Reserve documents. 12. Testimony of Virgil Mattingly and William Taylor, Senate Banking Subcommittee on Consumer and Regulatory Affairs, S. Hrg. 102-379 pp. 141-143. 13. Senate Banking Committee Testimony, March, 1991. 14. Testimony of Kerr, S. Hrg. 102-350, Pt. 3 p. 573. 15. Id. 16. Id. 17. Id. 18. Id. at 590-591. 19. Id., testimony of Altman, S. Hrg. 102-350, Pt. 3, p. 259. 268. 20. Testimony of Kerr, id. at 374. 21. Testimony of Kerr, S. Hrg. 102-350, Pt. 3, p. 573. 22. See February 18, 1992 testimony of Douglas P. Mulholland before Subcommittee. 23. CIA summary, declassified on April 9, 1992, based on Subcommittee review of internal Agency cable traffic on BCCI and CIA's interaction with Treasury, S Hrg. 102-350 Pt. 4, pp. 360-363. 24. Mulholland Testimony, S. Hrg. 102-350 Pt. 4, pp. 6-7. 25. Staff interviews with Mulholland, February 14, 1991. 26. Mulholland Testimony, id. at 8. 27. Id at 32-33. 28. Mulholland Testimony, S. Hrg. 102-350, Pt. 4 p. 9. 29. Id. p. 28. 30. Testimony Bench, S. Hrg. 102-350 Pt. 4 pp. 36-37. 31. Staff interview, Bench, February 14, 1992. 32. Interview, Bench, March 13, 1991. 33. Staff interview with secretary to Donald Regan, May 5, 1992. 34. Kerr, id, at 573; Mazur, S Hrg. 102-350, Pt. 3, p. 673. 35. Minutes of Evidence Taken Before House of Commons Treasury and Civil Service Committee, Banking Supervision and BCCI, February 5, 1992, Sec. 252. 36. BBC, excerpts, Radio Peace and Progress in Arabic, July 1, 1981, S. Hrg. 102-350, Pt. 3 p. 291. 37. Woodward, Veil, Simon & Schuster, New York, 1987 p. 352. 38. See Jeff Gerth, New York Times December 6, 1981, "Former Intelligence Aides Profiting From Old Ties," S. Hrg. 102-350 Pt. 3 pp. 293-299. 39. Id. 40. Id. 41. Statements of Adham to U.S. law enforcement officials, March, 1992. 42. Testimony of Lance, S. hrg. 102-350 p. 22. 43. Harris and Berry, "Arab Investors to Manage Funds; Arabs Want Lance to Direct Investments," Washington Post, December 18, 1977, A1. 44. Statements of Adham, id. 45. Affidavit of Clark M. Clifford, February 7, 1992, S. Hrg. 102-350 Pt. 4 p.710. 46. Transcript, Federal Reserve Board hearing, April 23, 1981, p. 65. 47. Testimony of Rahman, S. Hrg. 102-350, Pt. 1, p. 501. 48. Staff interview, U.S. investigator, April, 1992. 49. S. Hrg. 102-350 Pt. 4 pp. 310-316. 50. National Law Journal, December 22, 1980; UPI, December 13, 1980. 51. Washington Post, March 1, 1981, G1. 52. Staff interview by telephone with Roy Carlson, July 16, 1991. 53. Safeer Company, Second Annual Meeting, minutes, November 23, 1979, S. Hrg. 102-350, Pt. 4, p. 255. 54. Swiss corporate register, Zurich, p.155. 55. documents filed by Kamal Adham with the Federal Reserve, 1989 FRY-6: Principal Shareholder data, p.3. 56. BCCI documents, including telex to Frank Van Court from Swaleh Naqvi, 11/12/79, "seen by Agha Saheb," curriculum vitae of Irvani, Alwand Investment Company. 57. Confidential and Privileged Attendance Note, November 19, 1990, BCCI Attorney memcom of meeting with Roy Carlson, Exhibit D in G&H Montage case, id.; S Hrg. 102-350 Pt. 4 pp. 286-298. 58. Plaintiff's exhibit, Helms 9, G&H Montage, id., reprinted S. Hrg. 102-350 Pt. 4 p. 237. 59. Peter Mantias, "BCCI: Case reveals former CIA chief's ties to bank," Atlanta Constitution, February 15, 1992, A1. 60. Atlanta Constitution, "Ex-CIA chief Helms denies helping BCCI," February 18, 1992, S Hrg. 102-350 Pt. 4 p. 236. 61. Letter, Stoessel to Helms, January 26, 1979; Letter, Rahim Irvani to Helms, March 21, 1984, S. Hrg. 102-350 Pt. 4 pp. 270-277. 62. Letters on file in G.M.H. Montage case, id.; S. Hrg. 102-350 Pt. 4, pp. 259-260, 265, 272-273, 275. 63. Id.. S Hrg. 102-350 Pt. 4 p. 266. 64. NBC Memo, February 21, 1992. 65. Testimony of Kerr, S. Hrg. 102-350, Pt. 3 p. 573. 66. NBC Memo, id; communications of CIA DDO to Subcommittee staff, April 9, 1992. 67. Staff interview, federal investigator. 68. Testimony of Sakhia, S. Hrg. 102-350, Pt. 2, p. 527. 69. Testimony of Lance, S. Hrg. 102-350, p. 39. 70. Id at 40-41. 71. Staff briefing, CIA legal department staff, February, 1992. 72. Deposition of Emanuel Floor, Congressional Iran/Contra Committees, June 8, 1987, pp. 31-34, reprinted S. Hrg. 102-350 PT 2. pp. 539-540. 73. Chinoy, Staff interview, March 9-16, 1992. 74. Id. 75. Id. 76. Testimony of Chinoy, March 18, 1992, staff interviews, March 9-16, 1992. 77. Chinoy staff interview, March 9-16, 1992. 78. Testimony of Sakhia, S. Hrg. 102-350, Pt. 2, pp. 529-531. 79. Id. 80. Hakim Deposition, April 20, 1987, Vol 13, Iran/Contra Depositions, pp. 16-17. 81. Iran-Contra Affair, Appendix A: Volume 2, Source Documents S. Rept. No. 100-216, pp. 255-256. 82. Chinoy, staff interviews, March 9-16, 1992; Sakhia testimony, S. Hrg. 102-350, Pt. 2, pp. 530-531. 83. The New York Times, p. 56, September 3, 1975. 84. BCCI Holdings (Luxembourg), Statement of Shareholders, Giving Percentage of Shareholders, Deposits and Liabilities Including Contingent Liabilities of Each Shareholder, 1985-1987, Subcommittee document, Iran/Contra Appendix A, Volume 2, Source Documents, S. Rept. No. 100-216, p. 200. 85. See Associated Press, September 27, 1987. 86. S. Hrg. 102-350 Pt. 3 p. 618-628. 87. Staff interview, Chinoy, March 9-16, 1992. 88. Affidavit of John J. Loftus, Esq., September 12, 1991. 89. Staff interviews, Chinoy, March 9-16, 1992. 90. See generally October Surprise, Gary Sick, ________________, New York (1991). 91. FBI teletype, October 8, 1980, New York to Director, Attn Criminal Investigative Division, Terrorism Section, re Cyrus Hashemi. 92. See e.g. testimony of Lance, S. Hrg. 102-350, Pt. 3, p. 43-44. 93. See e.g. Legal Times, July 31, 1989, "I'm Not Rappaport." 94. New York Times, Jeff Gerth, 3/28/85 p. 5 95. BCCI Consolidated loan book, March 3, 1991. 96. Bankrupt, the BCCI Fraud, Kohan and Whittington p. 220 97. BCCI consolidated loan report. March 3, 1991 98. Communications, firm of Nussbaum and Wald, legal representatives to BCCI liquidators, Touche Ross, June, 1992. 99. S. Hrg. 102-350 Pt. 3 pp. 592-593. 100. Testimony of Altman, S. Hrg. 102-350 Pt. 3 p. 259. 101. Id. at 574. |