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THE BCCI AFFAIR

BCCI, THE CIA AND FOREIGN INTELLIGENCE

Introduction

The relationships involving BCCI, the CIA, and members of the United States and foreign intelligence communities have been among the most perplexing aspects of understanding the rise and fall of BCCI. The CIA's and BCCI's mutual environments of secrecy have been one obvious obstacle. For many months, the CIA resisted providing information to the Subcommittee about its involvement with and knowledge of BCCI. Moreover, key players who might explain these relationships are unavailable. Some, including former CIA director William Casey, and BCCI customers and Iranian arms dealers Ben Banerjee and Cyrus Hashemi, are dead. Others, including most of BCCI's key insiders, remain held incommunicado in Abu Dhabi. While promising in public hearings to provide full cooperation to the Subcommittee, to date the Abu Dhabi government has refused to make any BCCI officers available for interview by the Subcommittee. Former BCCI chairman Agha Hasan Abedi remains severely incapacitated due to a heart attack. Finally, some persons in a position to know portions of the truth have denied having any memory of events in which they participated and of documents which they reviewed.

A baseline for assessing the BCCI-CIA story is the CIA's official record of its use of BCCI and its targeting of the bank, as set forth in several hundred CIA records created from 1982 through 1992. That record was, by and large, accurately represented by CIA acting director Richard Kerr in public testimony on October 25, 1991, supplemented by more detailed, classified testimony on October 31, 1991. Unfortunately, that record also contains ostensible gaps in knowledge on the part of the CIA about the activities of key contacts in the Middle East for U.S. intelligence -- including BCCI shareholders Kamal Adham and Abdul Raouf Khalil, and BCCI customer and Iran/Contra arms merchant Adnan Khashoggi -- which strain belief.

Outside the documentary record provided to the Subcommittee by the CIA, there is additional material, consisting of BCCI documents, testimony from BCCI officials and insiders, and extrinsic, circumstantial and historic information describing other substantial contacts between BCCI and the intelligence community. These include contacts between BCCI and:

** former U.S. intelligence officials, including a former head of the CIA;

** former and current foreign intelligence officials; and

** individuals engaged in covert operations on behalf of the United States government, including in the Iran/Contra affair.

In addition, the Subcommittee has received allegations of meetings between former CIA director William Casey and BCCI's head, Agha Hasan Abedi.

CIA officials have told the Subcommittee that the CIA as an institution has rules requiring the creation of written records on every activity engaged in by the Agency, and on all significant information reported to the Agency. In the summer of 1991, the CIA engaged in what its officials described as a "dumb" or "brute force" review of its documents, essentially reviewing all possible files for information on BCCI, rather than relying on knowledgeable individuals to select such information. The review located a substantial amount of material generated by the CIA throughout the 1980's, which was produced in July and August, 1991 for CIA internal reviews, in September and October for the Congressional intelligence oversight committees, and beginning in March, 1992, to the Subcommittee.

Unfortunately, there remains a wide disparity between the CIA's official account of critical relationships between BCCI and persons associated with the CIA, and the information available from other sources, including BCCI's own records. One is left with the choice of accepting the official record, which requires an assessment that the other contacts between BCCI and U.S. intelligence figures and operations are coincidental, or of assuming that the full story of BCCI's relationship to the United States has been intentionally veiled by critical players on both sides of that relationship.

The Subcommittee Investigation and the CIA

The Subcommittee's contact with the CIA regarding BCCI began in March, 1991, when staff learned from a Subcommittee source that the CIA had prepared a report concerning BCCI's criminality which was made available to Customs in late 1988. Cleared staff contacted the CIA's congressional liaison office to request a copy of the document. The staff was told that no such document had ever existed. Perplexed, staff contacted its source to determine whether he was certain that the material had been provided. The source referred staff to former Customs Commissioner William Von Raab, who confirmed the existence of the document. Staff contacted the CIA a second time, and informed the agency that a senior Reagan administration official had viewed the document. Again, the Subcommittee was told that no documents concerning BCCI had ever been created by the CIA.(1)

Staff then met with Von Raab, who revealed that not only had the CIA provided him with a briefing paper regarding BCCI, but that he obtained it through the offices of then-CIA assistant director Robert Gates, who referred to BCCI as "the Bank of Crooks and Criminals." Von Raab also advised the Subcommittee that Customs agents handling the C-Chase investigation of BCCI had discovered in the course of their work several BCCI accounts that were actually accounts held by the CIA. Von Raab told Subcommittee staff that his agents were told to cease their investigation of those particular accounts.(2) However, in an interview with Subcommittee staff, AUSA Mark Jackowski denied that he had ever uncovered any CIA involvement with the bank and Assistant Attorney General Robert Mueller testified that "at no time ...has anyone from the CIA ... attempted to obstruct or interfere with the Department of Justice's investigation and prosecution of BCCI."(3)

On May 14, 1991, Senator Kerry wrote CIA Director Webster to again request the briefing paper on BCCI prepared by the CIA, as well as information on the CIA's own use of the bank. No reply was received in response to this letter from the CIA for over two months, during which BCCI was closed globally following its seizure in the United Kingdom by the Bank of England on July 5, 1991.

In the meantime, cleared staff requested a formal briefing from CIA staff concerning the CIA's knowledge of BCCI's activities. The CIA provided an oral briefing at its offices in June, 1991 at the "secret" level, consisting of very general information concerning BCCI's use by drug traffickers, material which was by then already largely a matter of public record. The briefer provided by the CIA to Congressional staff was unfamiliar with other basic information about BCCI, such as the names of BCCI's shareholders, including former Saudi intelligence chief Kamal Adham, the key figure in BCCI's secret takeover of First American, and the CIA's former principal contact in the Arab Middle East. Further, the briefer also appeared to be ignorant of the principal analytic documents concerning BCCI previously prepared by the CIA and disseminated to Executive Branch agencies, which contained this and other more important information about BCCI.(4)

On July 23, 1991, CIA director Webster replied to Senator Kerry's May 14 request by letter, admitting to the existence of two documents concerning BCCI, which were described as "extremely sensitive" and therefore restricted to being held by the Senate intelligence committee.(5) On reviewing these memoranda, Senator Kerry recognized that the earlier of the two documents, created in early 1986, contained startling information -- that the First American Bank in Washington was secretly owned by BCCI. The distribution list attached to the memorandum indicated that the CIA had communicated this information at the time to the Treasury Department. These was no indication that either Treasury or the CIA had ever advised the Federal Reserve, the primary regulator of First American, of this critical information.

Senator Kerry asked Judge Webster to declassify immediately the fact that the CIA had known as of 1986 that BCCI owned First American, and to begin the process of declassifying the entirety of both memoranda. On July 31, 1991, the CIA advised Senator Kerry that he could reveal the information concerning BCCI's secret ownership of First American, but no other information from the memos. The CIA had not yet acknowledged its own use of BCCI to the Subcommittee, or provided access to any other materials prepared by the CIA concerning BCCI.

When the single sentence from the 1986 memorandum was declassified, Senator Kerry supplied it immediately to the Federal Reserve, whose counsel expressed shock that the CIA, Treasury, State Department, and Office of the Comptroller of the Currency had possessed this information in 1986 and never provided it to the Federal Reserve.(6)

On August 2, 1991, with Congress in recess, acting CIA director Richard Kerr chose to provide the first public account of the CIA's involvement with BCCI at the National Press Club, to a group of high school students, who were not permitted to ask questions.

During the August recess, the Senate Select Committee on Intelligence began its audit of the CIA's relationship with BCCI, and requested that the CIA provide its auditors with all documents prepared by the CIA concerning BCCI. In the same period, the CIA began its own internal reviews of its handling of BCCI, including a management review, an intelligence review, and an "independent investigation" by the CIA's statutory Inspector General.(7) By the end of August, 1991, the CIA had determined that there were several hundred reports on BCCI by the CIA, of which perhaps four dozen contained substantial information regarding the bank.

Through early October, 1991, in response to further requests from Senator Kerry, the CIA continued to refuse to declassify any of the remainder of the information concerning BCCI on the ground that to do so might imperil sources and methods. The CIA also remained unwilling to permit staff outside the Intelligence Committees to review this material. As CIA legal staff later explained it, the CIA was unaccustomed to providing information pertaining to oversight issues to staff outside the Intelligence Committees, and felt uncomfortable with the questions being posed by the Subcommittee.(8)

Ultimately, Acting Director Richard Kerr agreed to testify before the Subcommittee concerning BCCI in public, after Senator Kerry advised the CIA that the nomination of CIA director Robert Gates would be delayed until the CIA provided such testimony.

On October 25, 1991, Acting Director Kerr testified in open session before the Subcommittee regarding the CIA-BCCI relationship, expressing from his opening statement his personal discomfort about providing information concerning intelligence matters in public:

As an intelligence officer for 30 years, I find myself a little reluctant in an open hearing to talk about intelligence, intelligence sources, and intelligence methods, and the information that we acquire through that process (emphasis added).

Despite Kerr's reluctance, the information contained in his testimony, summarized below, substantially advanced the Subcommittee's knowledge of the official record regarding the CIA's contacts with BCCI. For example, the Subcommittee learned for the first time that there were not two memoranda regarding BCCI prepared by the CIA, but hundreds which had been disseminated to other agencies. Kerr also disclosed that he had provided the Treasury Department with information about BCCI's secret ownership of First American in 1985, a year earlier than previously known, and implying the existence of a separate memorandum to Treasury not previously acknowledged.

Kerr refused to answer a number of questions in open session. In closed session the following week, Kerr acknowledged that several of the questions he refused to answer did not refer to classified information or concern national security. Instead, he had refused to discuss the information in open session because he felt uncomfortable discussing information in public that might embarrass the United States, or any U.S. agency or official.(9)

Initially, Kerr resisted providing the Senators serving on the Subcommittee the opportunity to review the documentary material pertaining to BCCI created by the CIA, suggesting instead that the CIA provide the Senators only general information characterizing the number of reports and the general substance, to "protect sources and methods." Following the closed session, during which Senator Kerry pressed again for the documents, it was agreed between the Subcommittee and the CIA that all the memoranda prepared by the CIA concerning BCCI would be sent to the Senate Intelligence Committee storage facility to permit review. Months later, that material had still not been provided.

Finally, on February 18, 1992, some eleven months after the Subcommittee had first sought information concerning BCCI from the CIA, Director Gates, after meeting with Senator Kerry, directed the CIA to permit staff to review additional records at the CIA pertaining to BCCI. Following this directive from Gates, the CIA for the first time made substantial information regarding its knowledge of BCCI available to the Subcommittee, although information on CIA operations using the bank remained unavailable, channeled solely to the Congressional intelligence committees.

The Subcommittee review culminated in the CIA agreeing to declassify certain material from the 1985 memorandum about BCCI, discussed below.

The Official Record

The CIA's first user request in connection with BCCI was from the Federal Reserve in 1981, which asked the CIA whether the CIA had any derogatory information concerning the Middle Eastern shareholders who were about to buy Financial General Bankshares (FGB), which later became First American Bankshares, through the holding company CCAH. The CIA, after reviewing its records, told the Federal Reserve that it had no derogatory information on the shareholders, who included Kamal Adham and Abdul Raouf Khalil, the past and then-current Saudi intelligence liaisons to the United States.(10)

The CIA did not tell the Federal Reserve that Adham and Khalil were foreign intelligence liaisons of the United States, nor did it advise the Federal Reserve that both Adham and a third FGB shareholder, Faisal al-Fulaij, had been the subject of a Securities and Exchange Commission probe in connection with violations of the Foreign Corrupt Practices Act by Boeing and Lockheed for arms sales to Saudi Arabia.(11)

There is conflicting evidence as to whether the Governors of the Federal Reserve were aware of the intelligence background of any of the CCAH shareholders. However, at the staff level at least the Federal Reserve did learn in 1981 of both the intelligence contacts of Adham and the SEC probe into his and Fulaij's alleged receipt of bribes.(12) Former Federal Reserve Chairman Paul Volcker, who signed the order approving the application of CCAH shareholders to take over Financial Bankshares, testified before the Senate Banking Committee in early 1991 that he "wasn't aware" of Mr. Adham's intelligence background, and that "he was sure that it might send an eyebrow or two up," and that "it might provoke further investigation."(13)

Because BCCI was not officially purchasing FGB, and a condition of the purchase was that BCCI not be involved in the transaction except as an investment advisor, the Federal Reserve did not ask the CIA about BCCI itself. If it had done so, it would likely have learned about BCCI's involvement in money laundering.

According to the contemporaneous CIA records retrieved during the search of Agency files during the summer of 1991, the CIA first developed information concerning BCCI, which it provided users in the U.S. government, in 1979. After learning in the early 1980's that BCCI was, as an institution, involved in money laundering activities, the CIA began by the mid-1980's to target BCCI as an institution for foreign intelligence collection. Initially, this collection operation was small. The CIA began a larger and more comprehensive operation as of 1986, which continued through 1990. This operation focused on the "people, the mechanisms, and the way that BCCI laundered narcotics money."(14)

In the course of targeting BCCI for laundering drug money, the CIA learned of BCCI's involvement in manipulating certain financial markets, in arms trafficking, and in supporting international terrorism, including handling the finances of Sabri Al-Bannah or Abu Nidal, and his terrorist organization.(15)

Between 1979 and 1991, the Directorate of Operations of the CIA produced several hundred reports containing intelligence concerning BCCI. BCCI was also discussed in a number of finished Directorate of Intelligence analytic studies, as part of larger discussions of terrorism and counter narcotics.(16) Among these reports was detailed reporting on the use of BCCI Panama by major narcotics traffickers. The Operations Directorate also prepared three special analytic reports, incorrectly characterized by Kerr as having been prepared by the CIA's Intelligence Directorate, one each in 1985, 1986, and 1989, discussed below in some detail.(17)

Kerr acknowledged that the CIA had also used BCCI for certain intelligence-gathering operations, and characterized the use as limited and routine, and undertaken without the knowledge of any person at BCCI. A Senate Intelligence Committee audit, conducted in the summer and fall of 1991, confirmed Kerr's testimony on that point, according to a briefing provided by the auditor to Subcommittee staff. The Subcommittee was not permitted by the CIA to read the actual report generated by Senate Intelligence Committee staff, and thus detailed review by the Subcommittee of that audit has not been possible.(18)

Kerr also acknowledged what the Subcommittee had learned in testimony just one day previously from former First American president Robert Altman, that the CIA had made extensive use of First American for a variety of purposes, including as a repository for "normal banking" and for savings accounts.(19)

The agency later informed Subcommittee staff that neither Clifford nor Altman had been made aware of the existence of the accounts prior to the summer of 1991.

According to Kerr, critical to understanding the contacts between the CIA and BCCI were a number of things the CIA did not do. Kerr testified that contrary to press reports, the CIA had not been involved with any BCCI black network of thugs and assassins, had not been involved with or had knowledge of any use of BCCI for the same of arms to Iran or the diversion of funds for the Nicaraguan Contras, had not violated any laws, had no relationship with BCCI's head, Agha Hasan Abedi, and had never placed Abedi on a watch list.(20)

The 1985, 1986 and 1989 Reports

The Operations directorate produced two finished analytic reports regarding BCCI, the first in early 1986, and the second in early 1989, as well as a special intelligence report in early 1985, which was the basis of the material provided to the Treasury and to OCC. Kerr testified that as of early 1985, the CIA had learned that BCCI had succeeded in gaining control of Financial General Bankshares in late 1981, which then was renamed First American, and told the Treasury and Office of the Comptroller of the Currency ("OCC"), about BCCI's secret purchase.(21) Kerr did not inform the Subcommittee that the original report containing this information was then lost, and has never since been located by the CIA.(22) Congressional Relations at the Agency did inform Subcommittee staff that the author of the 1985 could not be identified. However, in a subsequent meeting, the Associate Director of Operations informed Subcommittee staff that, indeed, the author had been identified and that he had been asked to reconstruct the memo to the extent possible.

The 1985 Report

There are a number of oddities pertaining to the early 1985 report by the CIA on BCCI.

The first oddity is the fact that original report is missing and has not been located by the CIA, which has instead, at the request of the Subcommittee, reconstructed the contents of the report by looking to the source information it was based upon, and relying on its normal procedures for analyzing and disseminating similar material.

The second unusual aspect of the report is that the CIA has records showing it to have been commissioned by the then-head of the International Division of the OCC, Robert Bench, who has denied under oath having ever sought the information.

A third oddity is that CIA records also show Douglas P. Mulholland, then the intelligence chief of the Treasury Department, as having also solicited the information. Yet like Bench, Mulholland denies having any recollection of having done so.

Fourth, the information contained in the report -- that BCCI owned First American -- was important and startling, and would have been so recognized by anyone in the position of Mulholland or Bench -- yet neither of them recollect that the report discussed this issue. First American was by then the largest bank holding company in the metropolitan Washington area, and BCCI's prohibition from ownership had received widespread attention in the Washington Post and the financial press.

Firth, no action was taken by Mulholland or Bench in response to this critical information to alert federal law enforcement or the Federal Reserve, the primary regulator. The CIA, having provided the information to Treasury and the OCC, believed it had no further obligation to disseminate the information, either.

In an effort to sort through these anomalies, the Subcommittee in the spring of 1992 reviewed the material provided by the CIA to Mulholland and Bench in 1985. During the course of that review, the CIA provided a complete record to the Subcommittee of all the raw information upon which the 1985 memo was based. The Subcommittee requested the declassification of material from the 1985 material concerning First American and the bribery of officials. The declassification was completed on April 9, 1991, and consisted of the following account, which excerpts the substance, and on critical factual issues, the actual language, of the original 1985 material:

The CIA's Summary

Background:

In the early 1980s, as part of the overall U.S. Government effort to stop international narcotics trafficking, the Agency began collecting strategic foreign intelligence on narco-dollar money laundering. A successful intelligence collection operation in the Caribbean developed operational leads to several major foreign banks, including BCCI, suspected of narcotics money laundering. Pursuing these leads, CIA initiated a mutually productive dialogue with international banking experts at the Office of the Comptroller of the Currency to determine how CIA could meet OCC's intelligence needs. In late 1984, Agency officers met with a senior official from OCC, who expressed interest in a broad range of international financial intelligence CIA could provide. One of several issues in which the OCC official expressed interest was the takeover efforts and suspicious activities of institutions such as BCCI, which he specifically cited for its spectacular growth and the mystery surrounding its activities. In a later meeting, a Treasury intelligence liaison official expressed the interest of that organization in BCCI because of a possible concern about the less than wholesome reputation of the bank.

Foreign Intelligence Collection:

In late 1984 and early 1985, the Agency collected some intelligence on BCCI and disseminated the information to the Treasury Department. The foreign intelligence provided to the Treasury dealt with several activities, including the following information.

The primary goal of BCCI senior management was growth in deposits at all branches internationally. The strategy being employed by BCCI to achieve rapid growth in assets and profits included manipulation of international financial markets and bribery, which was an approved policy encouraged by senior executives, including the general managers and President Abedi. The objectives of BCCI included developing both profits and political/economic leverage in the Near East, Africa, and Asia through the use of a tremendous volume of financial assets. BCCI expansion in the United States included the secret ownership of the Washington, D.C.-based bank holding company with which BCCI was affiliated. All of the shareholders in the Washington D.C.-based bank holding company were fronts for BCCI. BCCI loaned them the capital to make the purchase in return for their shares as collateral, which was regarded as a sensitive secret within BCCI management circles. If all of BCCI's assets in the U.S. were included in their balance sheet, the bank would be much higher in the worldwide ranking of the top one hundred financial institutions.

The Agency-Treasury Dialogue:

CIA provided this foreign intelligence to the Treasury intelligence community liaison representative in January 1985 [Douglas P. Mulholland], who reported to CIA that he carried it directly to the Secretary [Donald Regan] for his further disposition. The Treasury intelligence liaison officer also recommended only two persons in the Comptroller hierarchy see this material, which he described as "dynamite." The liaison officer praised this information, promised to keep the Agency fully informed of Treasury's reaction to it, and provided follow-up collection requirements to the Agency. These included a request for examples of BCCI management encouraging the use of bribery. The Treasury liaison officer also requested the name of the Washington, D.C.-based bank holding company owned by BCCI and the names of any other U.S.-based companies controlled by BCCI.

In April 1985, Agency officers had a curiously unsatisfactory discussion with the Treasury intelligence liaison representative concerning BCCI activities reported earlier by the Agency. The Treasury official explained that the position of the Treasury enforcement offices was that the BCCI activities reported by the Agency were not surprising and complemented the general picture Treasury had of BCCI. The Treasury officer stated that although his organization was interested in BCCI's activities to manipulate an international financial market and in the bank's buying into the U.S. along the lines of its acquisition of Financial General Bankshares [First American], Treasury was not concerned enough to levy further collection requirements on the Agency. The Treasury intelligence liaison officer said that money laundering remained the major focus of Treasury's enforcement side.(23)

What is notable about the information contained in the memorandum is that it was emphatic on BCCI's ownership of a Washington, D.C. based holding company, identified by Treasury as First American. The Treasury's senior intelligence official, Mulholland, initially considered the information to be "dynamite," but by April, after conferring with then Secretary of the Treasury Donald Regan, had concluded that Treasury saw no need for receiving further information about BCCI's ownership of First American, or its plans in the United States generally.

Mulholland's Testimony

On February 19, 1992, Douglas P. Mulholland, currently the Assistant Secretary of State for Intelligence and Research, testified about his contacts with the CIA concerning BCCI as the special assistant for national security to the Secretary of the Treasury from 1982 through 1987, when he was the CIA's chief liaison in the Treasury.

Mulholland, a career officer of the CIA, had been placed in Treasury by CIA chief William Casey, and left his job at Treasury on retirement from the CIA in 1987 to become a researcher for the Bush election campaign, before being appointed to his current position as head of intelligence at the State Department.

Mulholland described his contacts with the CIA concerning BCCI as follows:

I have a very limited memory of any specific documents, discussions, or events relating to BCCI, including any information that may have been introduced by the intelligence community during the mid-1980's.

Although I may well have discussed sensitive information on BCCI with senior department officials, including then-Secretary Donald Regan, that was not such an unusual experience as to ingrain such a discussion in my mind. . . With regard to BCCI, I recall only receiving one report during my time at the Treasury . . . The report was hand carried to me by a CIA officer who emphasized the sensitivity of the report.

I also recall this report because of its unusual format. The report lacked any heading or identifying numbers, and was typed on a plain piece of paper. One substantive aspect of the report struck me as particularly surprising, but because this information was produced and remains controlled by CIA, I am unable to discuss with you today any of the substance.(24)

In public testimony, Mulholland therefore declined to discuss the substance of the single aspect of the report which he found surprising. However, in interviews with Subcommittee staff prior to his testimony, Mulholland advised the Subcommittee that his memory concerned a matter in the CIA report which had nothing to do with BCCI's possible ownership of U.S. institutions, and that he had no personal memory that the issue was raised in the report.(25)

Mulholland emphasized throughout his testimony that his own memory regarding the BCCI report was very limited. He acknowledged that the CIA's documents reported him having provided the report Secretary Regan, but he stated he had no personal memory of having done so.(26) He estimated the frequency of his meetings with Secretary Regan regarding CIA reports as being anywhere from "zero to one hundred percent" of the time, and said he had not the "vaguest idea" of how often he had discussed such matters with the Secretary. He testified that the secondary source chronology the CIA concerning his activities was plausible, but that he could not say for certain whether it was correct, as he had no memory of having asked for any information, or having briefed anyone else on the information.(27)

Mulholland stated that even if he had recognized that the information contained in the report important, he would not have the right at the Treasury Department, let alone the responsibility, to take any action to disseminate the information further, since the CIA was the agency which created the information and controlled it.(28)

Mulholland acknowledged that he had never received a comparable report from the CIA about any other bank besides BCCI, and that the BCCI report was not "normal." He testified that there was no record maintained at the Treasury Department of the report having been logged in, and he could not give any reason for this omission.(29)

Mulholland said he had no memory of having commissioned such a report, despite the CIA's documentary record that he had done so, and hence, he was unable to provide the Subcommittee with any reason why any person at Treasury might have asked the CIA to develop information concerning BCCI in late 1984 and early 1985.

Bench's Testimony

Bench, like Mulholland, had only a very limited memory of the 1985 report. As he testified:

I do recall reviewing a classified piece of information that dealt with BCCI. . . it was somewhere in the middle of the '82 to '87 period. I feel comfortable about that. . . I recall receiving a document from the CIA that dealt with BCCI. To the best of my recollection it didn't deal with First American and it didn't deal with anything in the United States. There is an action step that I took within the office on that information . . . which was to look at this information in terms of LCD [Lesser Developed Country] debt.(30)

In staff interviews prior to this testimony, Bench emphasized that he had no memory whatsoever of having ever been advised that BCCI held interests in any financial institution in the United States, let alone First American.(31)

Bench also told staff that not only had he no memory of having commissioned a report on BCCI, but he would have been unlikely to have done so in any case, because of the OCC's need to work abroad without officials from other countries being concerned that it was doing so in conjunction with U.S. intelligence. Bench was therefore perplexed that the CIA had identified him as the requester, noting that to the extent he had an interaction concerning BCCI, it was the CIA asking him if he wanted information.(32)

Regan's Recollection

Following the declassification of the 1985 memorandum by the CIA, the Subcommittee contacted former Secretary of the Treasury Donald Regan to determine what memory he had regarding Mulholland having provided him with the 1985 memorandum. According to an aide to Regan, he initially believed he had not been shown the memorandum by Mulholland because he had left Treasury to take the position of chief of staff at the White House, and so advised a Wall Street Journal reporter who contacted him at home in August, 1991. Regan was then contacted by Mulholland in August or September, 1991, who advised Regan that Mulholland had reviewed records at the CIA showing that he did provide the memorandum to Regan, and that Mulholland had no personal recollection regarding the matter, either. According to Regan's aide, Regan still has no recollection of Mulholland ever providing information regarding BCCI to him.(33)

In reviewing the CIA documents and the testimony of Kerr, Mulholland and Bench, it appears that the CIA has accurately set forth the information regarding First American provided Mulholland, Regan and Bench in 1985, and that Mulholland, Bench and Reagan's memories that the CIA did not tell them about BCCI's secret control of First American are, at best, incorrect.

The 1986 and 1989 Reports

While the 1985 report received oddly limited distribution, the 1986 report, containing most of the key elements of the earlier report, including the fact that BCCI was owned by First American, was distributed more widely, to the Department of State, Defense Intelligence Agency, National Security Agency, National Security Council, Commerce Department, and to Treasury. Thus, every major CIA user that might be interested in the information received it, except for the two agencies which would have had a statutory responsibility to begin investigations in response -- the Federal Reserve and the Justice Department. However, Treasury logs again showed no actual receipt of the document, and there is no record of Treasury having passed the information to its agents in U.S. Customs, including those in Tampa whose investigation of BCCI lead to its indictment on money laundering charges in October, 1988.(34) The 1989 report, which provided detailed information concerning BCCI's criminality, was provided both Customs and the FBI, and reiterated the information, reported in the 1985 and 1986 memos, that First American was owned by BCCI. Even at this late date, the Federal Reserve was notified by no one of the existence of the report, or of any of the material in it.

Unofficial BCCI-CIA Links

The unofficial story of BCCI's links to U.S. intelligence is complicated by the inability of investigators to determine whether private persons affiliated with U.S. intelligence were undertaking actions such as selling U.S. arms to a foreign government outside ordinary channels on their own behalf, or ostensibly under sanction of a U.S. government agency, policy, or operation.

In the 1970's and 1980's, there have been cases of people with ties to U.S. intelligence engaging in operations on their own behalf which in fact had no ties to any approved U.S. government interest, such as former CIA officer Edwin Wilson's illegal arms sales to Idi Amin of Uganda and to Colonel Qaddafi of Libya. There have been other cases, such as retired General Richard Secord's arms sales to Iran and to the contras in the Iran/Contra affair, which are hard to distinguish from Wilson's case, except for the fact that the sales had actual secret approval and support from officials within the government, although they were not authorized by law under the Arms Export Control Act, and although Congress did not receive notifications required by law from the President.

In the case of BCCI, former CIA officials, including former CIA director Richard Helms and the late William Casey; former and current foreign intelligence officials, including Kamal Adham and Abdul Raouf Khalil; and principal foreign agents of the U.S., such as Adnan Khashoggi and Manucher Ghorbanifar, float in and out of BCCI at critical times in its history, and participate simultaneously in the making of key episodes in U.S. foreign policy, ranging from the Camp David peace talks to the arming of Iran as part of the Iran/Contra affair.

As early as the mid-1980's, sources in the United Kingdom were alleging that BCCI was providing services not only to the CIA, but to intelligence agencies of a number of countries, including the Soviet Union. For example, a November 5, 1986 letter to the Governor of the Bank of England, written anonymously, stated the following:

The BCCI is involved in helping people avoid Tax, illegal transfers of money, Hawala transfers, off the record deposits, conduit for drug and crime money and also as banker to intelligence agencies for most major agencies of the world.(35)

Did BCCI, its shareholders, or its officers, perform services for the United States government during any part of its existence? Were such services linked in any respect to BCCI's activities, such as its acquisition of First American? The unofficial record, explored below, raises these questions but cannot answer them definitively.

Kamal Adham: BCCI's Godfather of Middle East Intelligence

Kamal Adham, who was the CIA's principal liaison for the entire Middle East from the mid-1960's through 1979, was the lead front-man for BCCI in its takeover of First American, was an important nominee shareholder in BCCI, and remains one of the key players in the entire BCCI affair. On July 29, 1992, he reached a plea agreement with the District Attorney of New York, acknowledging that he had been a BCCI front-man in the United States, and agreeing to provide full cooperation with U.S. law enforcement in BCCI-related investigations and prosecutions.

Adham was at the time of BCCI's creation in 1972, the brother-in-law of King Faisal of Saudi Arabia, and the head of Saudi Intelligence, responsible for internal security and relations with external intelligence agencies. Press accounts concerning Adham from the late 1970's refer to him as the "godfather of Middle East intelligence," emphasize the closeness of his ties to the Central Intelligence Agency, and describe his having had responsibility for making payments, on behalf of the CIA, to Egyptian President Anwar Sadat when Sadat was merely Nasser's Vice President and having financial troubles.(36) As Bob Woodward described it:

Relations between the CIA and the Saudi intelligence service were generally good, going back to the days when the legendary and enormously wealthy Kamal Adham had been its head. In 1970, the Saudis had provided then Egyptian Vice President Sadat with a regular income. It was impossible to determine where Saudi interests in these arrangements ended and American CIA interests began.(37)

Adham's historic relationship with U.S. intelligence was indeed unusually close. While Adham was still in place as the CIA's liaison in 1977, the CIA's station chief for Saudi Arabia, Raymond H. Close, chose to go to work for Adham upon leaving the CIA, according to press reports at the time which Close has only denied since the BCCI scandal broke.(38) As Jeff Gerth of the New York Times reported in 1981:

In the case of Mr. Close, the one time station chief in Saudi Arabia, former Government officials say his actions, while in the CIA and since retirement, are often clouded in mystery. In the first place, some think Mr. Close may still be working for the CIA in some capacity, although he officially retired in 1977. They add that a further complicating factor is that some Saudis privately share the same perception.(39)

The Times account describes how Close had actually given approval to weapons sales from Saudi Arabia to Pakistan in the early 1970's, in contravention of the "official policy" enunciated by the American ambassador, and states that Close went into business with Kamal Adham upon leaving the CIA.(40)

Within months of going into business with Close, Kamal Adham became the "lead investor" for the CCAH group taking over First American, officially on his own behalf, but in fact, acting as a nominee for BCCI. On April 23, 1981, Adham personally appeared at the Federal Reserve's hearing on the First American takeover, to inform the Federal Reserve of his personal wealth and background, and his desire to be a passive investor. In that appearance, Adham neglected to tell the Federal Reserve of his background in Saudi Arabian intelligence, historic ties to the CIA, or that Adham had acted as the most important liaison between the United States and his long-time friend, Anwar Sadat, in helping negotiate the Camp David accords.(41)

As President Carter's former Director of the Office of Management and Budget, Bert Lance, testified,

There was an opportunity there for Kamal Adham to have done the kind of work he did with regard to Sadat's visit to Jerusalem and that sort of thing, and subsequently playing a role in regards to satisfying some of the Arab countries with regard to the action that Sadat had taken, both in going to Jerusalem and also in Camp David.(42)

The key role played by Adham in Camp David was apparently to encourage other Arab political figures not to repudiate Sadat for agreeing to peace with Israel. Although such attempts may have appeared unsuccessful in terms of public statements by Gulf rulers, it is clear that many of the Gulf rulers in private provided some support for Sadat, including then-Crown Prince and now King Faud of Saudi Arabia, who sought to strengthen ties with the United States as a means of defending the Saud family from a variety of possible instabilities.

The actual intent of BCCI and its Arab shareholders in participating with BCCI in the takeover of First American remains a matter of speculation. One article, appearing in the Washington Post on December 18, 1977, at the very beginning of the takeover efforts regarding First American and the National Bank of Georgia, described the intent of BCCI and the Arabs as gaining "access to the administration" through Lance.(43) The involvement of Gulf leaders in the takeover in Washington at the same time as the Camp David accords were put into place, would have been recognized within the Middle East at the time as an important symbolic gesture by each of them to strengthen ties with Israel's superpower sponsor, the United States. Their ownership of First American also would have providing a direct means to gain influence in the U.S. through the ownership of the bank.

To recapitulate: Adham was at the same time in business with a retired CIA station chief whose activities caused people in the U.S. and Saudi governments to question whether he was truly "retired," acting as an intermediary for the U.S. in negotiations regarding Camp David, and acting as a phony "lead shareholder" in a take-over of the largest bank in the nation's capital on behalf of BCCI. The simultaneity was thus either part of a larger political plan of Adham, BCCI, and people within the Carter Administration and the CIA, or merely a coincidence.

Questioned about the concurrence of these events, Adham has told U.S. investigators that they were unrelated, and thus, BCCI's purchase of First American was not a quid pro quo for Camp David. Instead, Adham has suggested that his involvement in these events, and BCCI's later involvement in financing the Presidential library, charities, and travel of President Jimmy Carter, for whom Camp David was the major achievement of his presidency, were in fact coincidence.(44)

Clark Clifford, in sworn interrogatories, stated that he, too, believed Adham's roles in Camp David and in the simultaneous takeover of Financial General were coincidence. Clifford stated that while Adham had told him of his friendship with Sadat, he had not advised Clifford of having any role in Camp David.(45)

A fuller account of Adham's role as a front-man for BCCI from its creation and in connection with the CCAH takeover is contained in the chapter on BCCI's nominees.

Abdul Raouf Khalil

Abdul Raouf Khalil, like Kamal Adham, was a BCCI shareholder and front man from its creation, and a key nominee in BCCI's secret takeover of First American. Like Adham, Khalil appeared at the Federal Reserve on April 23, 1981 to tell the Federal Reserve he intended to be a passive investor. Like Adham, Khalil failed to advise the Federal Reserve that he was, at the time of the Federal Reserve's hearing, a key figure in Saudi Arabian intelligence, and its liaison to the United States. Indeed, Khalil's description of his activities at the hearing were fundamentally misleading on this point, as they presented Khalil to be nothing more than a private Arab businessman, who as a friend of Adham, joined Adham to be passive investor of Middle Eastern money in the stable U.S. banking system. As Khalil told the Federal Reserve:

My career has been devoted to business and I presently hold interests in real estate, mechanical and electrical maintenance projects, and commodities. In addition, I have been involved in some business ventures with American and British manufacturers for the installation of electronic and computer equipment in Saudi Arabia.(46)

Khalil did not characterize the kind of electronics and computers he was installing in Saudi Arabia, or advise the Federal Reserve of the telling name of one of his businesses: the Saudi Security and Technical Services Company. In fact, the electronic and computer equipment which Khalil referred to included the electronic and computer equipment for the Government of Saudi Arabia, and for its intelligence operations.

Price Waterhouse audit reports suggest that Khalil had no written contact with BCCI from 1985 on. By the late 1980's, senior officials of BCCI knew of no way to contact Khalil, and in some cases, such as that of chief financial officer Massihur Rahman, even doubted his existence.(47) Yet throughout this period, BCCI used Khalil -- or his name -- extensively as a nominee in transactions in Latin American and the Caribbean, as well as in Europe, while Khalil continued to have ongoing contact with the CIA, which continued, according to law enforcement officials, until well after BCCI's closure on July 5, 1991. Moreover, Khalil simultaneously was a principal shareholder and director of Capcom, BCCI's commodities trading affiliate, throughout this period.

Khalil's continuing ties to the CIA are exemplified by the experience of U.S. regulators, who asked the State Department in 1991 to locate Khalil for service of legal documents, and were told that Khalil could not be located. After some months, the regulators determined that Khalil was frequently found in the offices of the CIA station chief in Saudi Arabia. Upon making this suggestion to the State Department, the regulators found that service of the legal documents on Khalil was quickly arranged.(48)

Former CIA Director Richard Helms and BCCI Front Man Mohammed Irvani

Adham and Khalil were not the only BCCI and CCAH shareholders with intelligence ties. Before Adham acted as the lead shareholder in the takeover of First American, another person acted as BCCI's chief front-man in an earlier, unsuccessful takeover attempt. That man, Mohammed Rahim Motaghi Irvani, was listed in the original SEC filing in the early, 1978 takeover attempt, as a 5 percent shareholder of CCAH. Irvani was at the time the principal partner of former CIA director Richard Helms in Helms' international consulting firm, Safeer, and the chief financier of that firm. During the time Irvani acted as BCCI's lead front-man in the original takeover, he received advice on how to be protected from any liability in that role by Helms. Thus, there were personal, legal, and financial links between Helms and Irvani at a critical time in the history of BCCI's acquisition of First American.

Irvani founded the Melli Industrial Group in Iran in 1949 to manufacture footwear and leather goods, and developed close ties to the government of the Shah of Iran. By the time of the first Financial General Bankshare's takeover in 1978, the Melli Industrial Group owned 23 operating companies, as well as joint ventures with foreign firms such as Goodyear and United Chemical. Irvani also owned the Alwand Industrial Co., which held interests in the Iran Arab Bank, and had a net worth estimated in financial documents of over $50 million personally and a financial empire whose corporate value was as much as $800 million.(49)

Irvani's friendship and financial support were critical to Helms in this period. Helms, a thirty-year veteran of the CIA and its predecessor, the OSS, was dismissed in February, 1973 from his position as CIA director by President Nixon and appointed Ambassador to Iran until 1977, where he met Irvani. When he returned to the U.S., Helms was indicted for lying before a Congressional committee concerning CIA activities in Chile. On October 31, 1977, Helms plead no contest to two charges, in return for a recommendation by the government that he not be sentenced to prison.

In arranging this plea agreement, Helms was represented by Washington defense attorney Edward Bennett Williams. But in addition to Williams' negotiations, Helms also called upon Clark Clifford for help. In the fall of 1977, Clifford visited a top Justice Department official to argue against an indictment of Helms, saying such charges could damage the U.S. intelligence community.(50)

Despite Clifford's successful intervention with Justice, as a result of the guilty plea, Helms was, in the words of the federal judge who presided over the case, "in disgrace and shame."(51) It was precisely at this time that Irvani provided a critical lifetime to Helms through financing the Safeer Company, named for the Iranian word for "Ambassador," as an international consulting firm whose initial business was mostly supplied by Irvani and Irvani's contacts.

According to Safeer Company corporate records and other documents on file in civil litigation in Atlanta in the case of G&H Montage, Gmbh v. Irvani, Superior Court of Gwinnett County, Georgia, 88-A-03571-6, 80 percent of Safeer was capitalized and owned by Irvani. Moreover, much of Safeer's early business activity was handled by Irvani's former chief U.S. assistant, Roy Carlson, who became Vice President of Safeer and had close ties to BCCI.

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