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THE BCCI AFFAIR |
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The Request to Keep BCCI Open At the time of the plea agreement, BCCI's attorneys became aware of the possibility that BCCI's guilty plea on drug money laundering charges might well result in BCCI's closure by the various state banking regulatory agencies that had licensed it to do business in Florida, New York, and California. The BCCI lawyers pointed out to prosecutors that if BCCI were closed, it would be more difficult for BCCI to cooperate in making cases against other criminals. Accordingly, the attorneys asked the Tampa prosecutors to send a letter to the state regulators asking the regulators to keep the bank open. Within the U.S. Attorney's offices, there was some sentiment that Justice should recommend BCCI should be closed down entirely. Dexter Lehtinen told the Subcommittee that "Tampa [the US Attorney for the Middle District of Florida] wanted to know our position with respect to BCCI's license, and that BCCI's lawyer's wanted to know . . . my position." According to Lehtinen, he told "both groups that we were of the opinion that a license should be in jeopardy if we made a successful prosecution."(71) Despite US Attorney's Lehtinen's recommendation, US Attorney Genzman decided to adopt a neutral position regarding the revocation of the license. The Tampa prosecutors accordingly on January 31, 1990, wrote state regulators to advise them that the Tampa U.S. Attorney's office had no position whatsoever as to whether BCCI should be closed down, or stay open. BCCI's lawyers, principally former federal prosecutors Lawrence Wechsler, Lawrence Barcella, and Raymond Banoun, dissatisfied with this result, decided to talk to others in the Justice Department to bring about a different result. Two weeks later, they achieved their goal. Chuck Saphos, head of the narcotics section of the Criminal Division of Justice in Washington, D.C., agreed to write a letter to the state regulators urging them to keep BCCI open. In return, BCCI would be able to cooperate with Justice. BCCI's lawyers contacted the state regulators' office in Florida, and told the regulators that a letter would be coming from Washington, asking them to keep BCCI open. Soon afterwards, the letter did, in fact, arrive, signed by Saphos, stating that BCCI's cooperation was important to the Justice Department and that keeping it open would allow the Department to monitor BCCI's customer accounts: "We are, therefore, requesting that BCCI be permitted to operate in your jurisdiction, with the understanding that certain accounts may be maintained by the bank, at the request of the Department of Justice, which otherwise would be closed to avoid legal and regulatory violations."(72) In addition to the regulators, Saphos sent copies of his letters to the Federal Reserve, and to BCCI lawyers Banoun and Wechsler. The rationale for keeping the bank open was in fact, very weak. First, there were like to be few significant drug money launderers still using BCCI following its highly publicized indictment in October, 1988. Second, to the extent such accounts existed at the time of the indictment, BCCI's lawyers had systematically sought to shut down them or refer them over to law enforcement as part of its consent decree entered into with the Federal Reserve in early 1989 as a result of the indictment. Finally, the plea agreement, and promise to cooperate with the government, would be as public as the indictments had been. It would be hard to imagine that any drug money launderers could still be enticed to use BCCI under such conditions. Saphos' letter had adopted BCCI's position about the case, rather than recognizing the true facts at the time. In Florida, state regulators were baffled by the Saphos letter. They felt there was no logical reason to allow BCCI to continue to operate in Florida. The day after receiving the Saphos letter, Florida Comptroller Gerald Lewis wrote Saphos back in the following terms: Thank you for your letter of February 13, 1990, requesting that the Bank of Credit and Commerce International (Overseas) Limited ("BCCI") be permitted to continue operating in Florida as a state licensed foreign bank agency despite BCCI's guilty plea to money laundering charges . . . Because BCCI has pled guilty to felony charges, the ultimate decision of renewal becomes a difficult one. Your letter indicates that you may have information I should consider in resolving this matter. To this end, I invite you and any other appropriate Department of Justice officials to meet with me in Tallahassee on February 19, 1990.(73) Saphos, although chief of the narcotics section, had little previous involvement with any aspect of the BCCI investigation or prosecution. His position that BCCI should be kept open had evidently not been approved by the Attorney General, or by anyone else at Justice. Accordingly, Saphos was in no position to travel to Tallahassee to explain why BCCI should be kept open. He immediately wrote Lewis back to change his position: I must apologize if there was ambiguity in my letter of February 13, 1990, which led to a belief on your part that the Department of Justice wished to influence your decision on whether to permit BCCI to retain its license. The Department of Justice takes no position in that regard. The sole purpose of my letter was to indicate that, if you allow BCCI to continue in business, there may be occasions where the Department of Justice may request BCCI, pursuant to its obligations under the plea agreement, to make or continue a banking relationship with customers who are the subjects of criminal investigations. . . . I merely wanted to make certain that you and I were communicating concerning criminal investigations.(74) Thus Saphos who had only three days earlier stated "we are therefore requesting that BCCI be permitted to operate in your jurisdiction," was now forced to state on the record that this was not the position of the Department of Justice, and to mischaracterize the position he had clearly taken to help BCCI in his earlier letter. In testimony before the Subcommittee, Assistant Attorney General Mueller struggled to explain the circumstances surrounding the Saphos letters, admitting, "that first letter is ambiguous at best," and "I do not know what initiated it ..."(75) Greg Kehoe, US Attorney Genzman's First Assistant testified that when he first learned about Saphos' letter to the state regulators, he was upset.(76) As Kehoe testified, "[O]bviously the attorneys for BCCI were talking to Mr. Saphos" and "[they] tried to go behind my back." Yet Kehoe, who negotiated the plea agreement, seemed indifferent to the incident, testifying that in his view, "Saphos' efforts were with the best intentions of law enforcement involved," while acknowledging that, "nothing surprises me in the murky world of criminal law enforcement."(77) In testimony before the Subcommittee, US Attorney Genzman did little to clarify this bizarre chain of events. The US Attorney told the Subcommittee that "... in this case we told the Comptroller's office that we were taking no position" relative to the reissuing of BCCI's license to operate in Florida. The obvious explanation for what happened is that Saphos was personally lobbied by people he knew who had formerly been with the Justice Department and now represented BCCI on the outside, and agreed to do them a favor. There is no record of any other person within the Justice Department signing off on Saphos' letter, and it appears likely that he sent it without the letter having gone through any formal approval process. When his recommendation to keep BCCI open became an issue, he retreated from it. The Miami Investigation By the latter part of 1989 another investigation of BCCI had been launched, in the Southern District of Florida under the direction of US Attorney Dexter Lehtinen.(78) The Miami investigation centered on the theory that BCCI could be indicted for various tax frauds. It was Lehtinen's belief that this case would not be barred by double jeopardy, because it involved different facts from the Tampa case, and because the Miami office had refused to participate in the plea agreement with BCCI. Lehtinen testified that the investigation was "an important matter . . . a priority matter."(79) At the time Lehtinen was also investigating David Paul's dealings in Miami's largest Savings & Loan, CenTrust, which had a variety of ties to BCCI and in which BCCI held a secret interest of 25 percent through its nominee, Ghaith Pharaon. Lehtinen described to the Subcommittee the strategy behind his two-track investigation and the aggressiveness with which his assistants moved to make the case against the bank: "CenTrust was alleged to have had some relationships to BCCI, and so we had two teams which would issue what would you call BCCI subpoenas. One team would issue BCCI subpoenas on behalf of its CenTrust investigation, one would issue BCCI subpoenas on behalf of its BCCI investigation."(80) Lehtinen explained that the case was "records intensive," which made the subpoenas vitally important.(81) In late 1990 and early 1991, Lehtinen's office issued a series of subpoenas pursuant to the CenTrust and BCCI investigations. Many of the subpoenas were to BCCI in other countries for records and documents that had been moved from the Miami branch.(82) As Lehtinen described the subpoenas, "[they] never mentioned foreign countries."(83) The investigators in Miami, however, were frustrated when BCCI asserted the bank secrecy laws of foreign jurisdictions. Lehtinen's assistants then proposed to seek compulsion through the courts to have the records located abroad produced. Lehtinen told Senator Brown, "[O]ur circuit, the Eleventh circuit is very clear, those subpoenas will be enforced. Some other circuits are a little bit different, but our circuit is very aggressive."(84) Before proceeding, however, Lehtinen's office was first required to have authorization from the Justice Department's Office of International Affairs. However, according to Lehtinen, the response from the Justice Department was that they would not authorize enforcement of the subpoenas.(85) Lehtinen told the Subcommittee that he didn't "recall a specific reason for the refusal." Ultimately, with the assistance of Deputy Assistant Attorney General Mark Richard, the US Attorney's office in Miami did seek compulsion for enforcement to two of the subpoenas, one in the United Arab Emirates and one in Panama. When BCCI continued to refuse to comply with the two subpoenas, the bank was fined $50,000 a day, until seven days later, when it capitulated and supplied the records.(86) Lehtinen and his assistants continued to urge the Department of Justice to assist in the enforcement of the other subpoenas. By August, 1991, following the Morgenthau indictment, the Justice Department began a series of meetings in an effort to move more swiftly against BCCI. In one such meeting at Justice in Washington, Lehtinen again raised the issue of the failure to enforce his subpoenas in response to Assistant Attorney General Mueller's offer to provide assistance to any US Attorney office pursuing a case against BCCI. Despite Mueller's offer, no assistance was forthcoming and the subpoenas continued to languish, leaving Lehtinen perplexed: [E]xactly why the Department of Justice handles matters as they do is -- whatever factors they take into account are not particularly known to us in Miami in all circumstances. We in Miami wanted all of those steps taken that we proposed. They were not taken and we are just not able to say why.(87) Despite the problems with not having the subpoenas enforced, Lehtinen's office continued to pursue the investigation of BCCI for tax fraud. Lehtinen testified that in his meeting with Assistant Attorney General Mueller in early August, Mueller encouraged him to "work aggressively on it as much as possible."(88) By the third week in August, Lehtinen was ready to move forward with an indictment after having been notified by his assistants that "there was no problem with the on-site review by the Justice department's tax division. Then, suddenly, on August 22, Dennis Saylor, chief assistant to Assistant Attorney General Mueller, called Lehtinen and, according to the US Attorney, "indicated to me that I was directed not to return the indictment."(89) As Lehtinen testified: [I] asked who was requesting me not to return it, and he said [Acting] Attorney General William Barr. I asked why we weren't returning the indictment, if it was tax, tax was on-site and tax would talk to us. . . I asked, why we are being told this way not to indict, and he said he didn't know. . . (90) Lehtinen thought that it was strange that he would be receiving a telephone call from "non-tax" people telling not to proceed.(91) The next day Lehtinen received a letter from the Assistant Attorney General for the Tax Division Bruton, informing him that he should not move forward because his investigation of BCCI was not "an authorized" tax investigation. Lehtinen told the Subcommittee, "I don't know what they are talking about there...That is very odd."(92) Later in his testimony, Lehtinen added: Well, the statement that you are not doing an authorized Tax Division case is foolish. If it is not an authorized tax case that is because the Tax division -- I don't know what that means. I mean, you are doing a grand jury. The Tax Division knows it. You are urged for more than a month by DOJ to indict it. You coordinate with tax. You ask for a special review and then a day after you get a phone call saying the Attorney General says don't do it. The tax division tells you, oh, by the way, your grand jury isn't an authorized grand jury. In late July or early August, the head of the criminal division, Mr. Mueller, told us he -- he told Andreas Rivera directly that he would specifically make sure the Tax Division handled this case effectively and efficiently. So to say tax didn't know until August 19th doesn't make a lot of sense."(93) Moreover, Lehtinen had sent a letter to the Justice Department on May 13, 1991 in which he concluded that "the BCCI tax case is a case of the greatest national urgency."(94) Lehtinen was particularly concerned because the statute of limitations was set to run on one his counts. When he conveyed his concern, the reply from the tax division, according to Lehtinen was "Why don't you just claim that BCCI was out of the country," because the statute does not run if the target is out the country. Lehtinen testified that he dismissed this advice as "disingenuous and a real legal problem."(95) When pressed by Senator Brown on the ramifications of the Department's actions, Lehtinen testified "We believed that a decision to not go to the grand jury would mean a decision to drop the charge."(96) Lehtinen testified that he would have understood had the tax division criticized his case on evidentiary grounds, but, at the time, that did not appear to be the case. Instead the Miami US Attorney was given the somewhat ambiguous instructions that more work needed to be done on the case. According to Lehtinen, "[T]here was functionally speaking no additional work that could be done," pointing out that "if you [the Justice Department] want me to do additional work, you should have approved my grand jury subpoena."(97) Lehtinen became even more confused when one month later he was told by the Justice Department that he could not indict because of problems of double jeopardy arising out of the Tampa case. Senator Brown spoke for the Subcommittee when he characterized the unwillingness of the Justice Department to allow the Grand Jury to return indictments in the southern district as "very strange."(98) By early November, the concerns over evidence and double jeopardy previously expressed by the Justice Department had all but vanished. On November 6, 1991, Deputy Attorney General, George J. Terwilliger, wrote Lehtinen that he was "prepared to defer to your prosecutorial judgment on this matter..." When asked by Senator Kerry if the state of his evidence had changed from August, Lehtinen responded, "No, it was the same evidence."(99) Lehtinen implied to the that the reversal by the Department of Justice was the result of Congressional and media pressure: There had been significant, Time Magazine and New York Times articles, very critical of the Department. I know Congressman Schumer sent staffers to Miami and to various districts on behalf of the House Judiciary Subcommittee on Crime.(100) While it is difficult to sort out precisely what went wrong between the U.S. Attorney for Miami and main Justice in Washington, it is obvious from the above account that two important cases involving BCCI in Miami were frustrated, if not paralyzed, by inaction at main Justice in Washington during much of 1991. In part, that outcome may have been the result of continuing attempts by the Justice Department to defend the plea agreement in Tampa, and to steer any further activities pertaining to BCCI to the Tampa office. Additionally, the Justice Department may have been uncomfortable dealing with the possible preclusion of investigation or prosecution in Miami arising out of the double-jeopardy problems created by BCCI's plea in Tampa, problems that had to date not surfaced even in interviews with Congressional investigators. Jack Blum and the Justice Department In March of 1988, months before the takedown of Operation C-Chase in Tampa, the chief investigator for the Foreign Relations Committee, Jack Blum, contacted the Justice Department with startling information about BCCI. In the course of his investigation into narcotics trafficking in Panama, Blum had come into contact with "a very senior BCCI officer who was in the process of disengaging from the bank."(101) According to Blum, the BCCI banker provided him with a substantial amount of information about the bank's criminality. Blum proceeded to seek authorization from the Foreign Relations Committee to issue subpoenas to the bank, which were granted. Before issuing the subpoenas, however, Blum contacted the US attorney's office in Miami and Tampa, which asked him not to proceed. Blum told the Subcommittee: I talked to Joe Maigre, who was then the deputy in Tampa, who told me there was an undercover operation underway. . . the well-advanced Operation C-Chase. . . I was not told the nature of the operation. What I was told was that agent's lives were in danger, and that he -- and that he was followed-up by the Department of Justice in a formal way -- requested that we defer the issuance of a subpoena until we get a go-ahead.(102) Blum did defer issuance of the subpoenas until late July, 1988. At that time, he contacted Tampa, and asked if he had clearance for now issuing the subpoenas. He was told there was no objection. The four Committee on Foreign Relations subpoenas were then served on BCCI and its officers. Blum's next contact with the Department of Justice occurred in March 1989. The contact was precipitated after Blum received a telephone call from a former client who knew a highly placed BCCI officer who claimed that the Senate investigation "almost brought the house down and there was a full court press to make sure that it didn't get anywhere."(103) Blum had his friend convince the BCCI officer to talk to Blum. Blum then arranged to have Customs and IRS secretly "wire" a hotel room in Miami to secretly record their conversation. Blum debriefed the BCCI official over the course of the next three days. He testified that the BCCI official "laid out in exquisite detail the false capitalization of the bank, the question of straw men holding stock, the use of the bank to purchase First American, National Bank of Georgia, Independence Federal in Encino, CA..."(104) According to Blum, he then: "flew up to Tampa and met with a team that consisted of other Customs and IRS agents and two representatives of the U.S. attorney's office. The agents were quite excited. They seemed ready and eager to go forward. I had lengthy conversations with at least one of the assistants, Mark Jackowski. He was eager to go forward."(105) Two weeks later, after Blum had left the Subcommittee, he made arrangements with law enforcement to secretly tape the BCCI official who had originally provided him a great deal of information about the bank. Again, Blum secretly met the individual in a hotel room in Miami and debriefed him for several hours. And, again, Blum believed that the Justice Department would use the information in its investigation of the bank.(106) Following the taping, Blum had further contact with the Tampa investigators and prosecutors, providing further information over the course of a lengthy conference call. However, according to Blum, the Justice Department did not follow-up on the information: "I waited for something to happen and, and what happened was, I started getting calls from the two guys I took to Tampa who said they're [the Justice Department] is not following up. Then, I talked to the agents, and the agents said, well, we're very busy. . . No follow-up. And I began to worry that something was very wrong with this case. In -- I now believe it was late May, I decided that I would bring this matter to another jurisdiction, and that was New York... [I] talked to Bob Morgenthau and essentially told him what I knew. On the basis of the same evidence essentially, and he ultimately communicated with the same witnesses, he produced the indictment. . ."(107) Mark Jackowski, the principal assistant United States attorney in Tampa handling the prosecution of BCCI from 1988 through 1990, presents a very different version of events: The ex-BCCI official who had been portrayed by Blum as having direct, firsthand knowledge concerning various matters, either did not have such information, or was unwilling to admit it. The ex-official's information appeared to be primarily hearsay, gossip, rumor and innuendo. He was also unwilling to testify at any public proceeding. . . We were disappointed because Mr. Blum had led us to believe that the witness could provide firsthand information relative to the bank's involvement in money laundering and other matters.(108) Rather than tell Blum that the interviews had been failures, and that the U.S. Attorney's office would not make use of the witnesses he had proffered, Jackowski and the Tampa prosecutorial team issued a subpoena to the Federal Reserve for documents pertaining to the First American relationship, and then permitted the broader inquiry suggested by Blum to lapse. In justification of this failure to act, Jackowski, in sworn testimony, raised questions about Blum's credibility and even his honesty. Jackowski testified that he discounted what Blum told him about BCCI because Blum had made several wild accusations about the Subcommittee and asked for money for the information he was providing the Justice Department.(109) In staff interviews prior to his testimony, Jackowski claimed Blum had made even more outrageous statements -- that Senator Kerry had been paid one million dollars by BCCI, and that as a result Blum was fired from his job.(110) Jackowski contended that he did not believe these claims, any more than he believed the other information Blum had provided him, characterizing Blum as a "wacko." (111) Jackowski acknowledged that he failed to make any contemporaneous memorandum of the alleged conversations during which Blum supposedly made the statements cited by Jackowski, failed to investigate Blum's alleged wrongdoing, failed to investigate Kerry's alleged wrongdoing. failed to inform the Subcommittee of Blum's alleged remarks, and first raised the allegations 30 months later, in interviews with Congressional staff and at the public hearing, some five months after Blum had made his public criticisms of Justice. Blum took the same information that he had presented to Jackowski to the Manhattan District Attorney's office some weeks later after he had been told by his BCCI informants that Justice Department officials in Florida were not following up on the information. According to the Manhattan District Attorney's office, which provided the Subcommittee with a letter dated November 21, 1991: At no time did Mr. Blum ever seek or request money form this office for his assistance to us in the investigation of BCCI, nor did he receive any money from this office for his out-of-pocket expenses. At no time did Mr. Blum ever ask for or suggest that he wanted, employment with this office. At no time, during this office's dealings with Mr. Blum, did he ever accuse you, Senator Kerry, of misconduct.(112) It seems highly illogical and unlikely that Blum would make the kind of representations to Jackowski which Jackowski has asserted, and then, only weeks later, adopt an entirely different demeanor with the Manhattan District Attorney's Office. What is more likely is that Blum did complain about not being able to complete the investigation of BCCI that had begun to develop in his final months with the Subcommittee, and may have offered to assist the U.S. Attorney's office on the case if they wanted his help. It is notable that both of the witnesses who were taped with Blum by Justice, and who Jackowski viewed to have no useful information, were in fact placed before a grand jury by the New York District Attorney, to provide the testimony they had originally offered the Justice Department. That testimony became part of the record on which the grand jury then voted to indict BCCI on July 29, 1991. The Subcommittee finds Jackowski's testimony not merely unconvincing, but given the severity of the charges, malicious. The Subcommittee believes Jackowski's testimony may stem from a personal dislike of Blum, who has not only been critical of the Justice Department, but who garnered significant media attention for having broken open the case when Jackowski had labored long and hard for months as the principal Justice Department official dedicated to Operation C-Chase. Jackowski deserves significant credit for his work, but not for his testimony. Notably, in response to questions from Senator Brown, Jackowski acknowledged that the tape recordings made by the U.S. Attorney's office, involving Blum and his BCCI informant, focused on the issue of BCCI's use of nominees in the course of its secret take-over of U.S. banks. As Jackowski acknowledged: The tapes, sir, contained information with respect to First American, that is correct. They contained information relative to NBG, that is correct. They contained information relative to Independence. With respect to Independence, the first witness said that he had in fact gone to a law firm because he suspected that Independence Bank might be owned by BCCI through Ghaith Pharaon.(113) Because the witness did not have what Jackowski regarded as sufficient first hand information concerning these issues, Jackowski and the other Tampa prosecutors considered the information offered to be of little value, and shrugged off the witnesses Blum had believed to be so important. Cooperation with the District Attorney and the Federal Reserve Inexplicably, at times in the investigation the Justice Department has provided halting or reluctant cooperation with other law enforcement and regulatory bodies. In some instances the cooperation was non-existent, and in others, the Subcommittee has concluded that the Justice Department actually tried to frustrate or delay the provision of witnesses and documents to other law enforcement. In testimony before the Senate Banking Committee, the General Counsel of the Federal Reserve, Virgil Mattingly, described to Senator Kerry the cooperation that his office was receiving from law enforcement: Senator Kerry. What kind of cooperation is the Fed receiving from the New York District Attorney who is investigating both CCAI and CCAH? Mr. Mattingly. Superb. Senator Kerry. What kind of cooperation have you received from the Justice Department? Mr. Mattingly. We have cooperated fully with the Justice department. We have given them everything we have on this matter. Senator Kerry. What kind of cooperation are you receiving from them? Mr. Mattingly. We are actively working with them.(114) What Mattingly did not state in his public testimony is that over the past year, the Justice Department had actually been refusing to provide assistance to the Federal Reserve, and to some extent, had actually mislead the Federal Reserve about the existence of important information. On February 7, 1990, the Federal Reserve had sent investigators to Tampa to meet with federal prosecutors, who were at the time in the midst of the trial of five BCCI officers who had been indicted in the Tampa case. The prosecutors said that while rumors of the BCCI-CCAH relationship abounded, they had investigated them and found no evidence to substantiate them.(115) This position was then confirmed by IRS agents working with the Tampa prosecutors. The agents told the Federal Reserve that they wrote a report to the grand jury setting out the facts, which they would be glad to provide to the Federal Reserve, and that they had an informant who could also provide further information on the issue. Following the meeting, the Federal Reserve investigator was told by a Tampa prosecutor that the report contained no relevant information, and therefore would not be provided. The Federal Reserve persisted in requesting the report, and the Tampa prosecutor, for reasons not explained, continued to refuse to cooperate by providing it. In the meantime, the investigator tried repeatedly to talk to the informant, and was told by the informant's wife that the informant was out of the country.(116) Instead of cooperating with the Federal Reserve, the Tampa prosecutor had actually refused to provide requested information. At the time of Mattingly's testimony, the Federal Reserve had yet to be obtain the report it had been requesting from the Justice Department for 18 months. During that same hearing District Attorney Morgenthau spoke directly to some of the problems that his office was having in working with the Justice Department. The District Attorney stated, "We've had a number of meetings with senior people in the fraud section of the Justice Department, and I think that their position is that they would rather go it alone." (117) District Attorney Morgenthau also testified that he had sought documents from the US Attorney's office in Tampa and that those documents had not been provided. According to Morgenthau, "I wrote him a letter on March 8. I've never had a response to that letter. We were told that it had to be cleared by main Justice and a name was given to us. We called that lawyer three or four times on the phone, and he didn't answer his phone. I'm sure they are all very busy down there."(118) As the New York District Attorney's case continued to develop, the tapes that had been created by Blum became of significant concern to the office. Given their assessment of the importance of the information they had been provided by Blum's witnesses, the New York prosecutors wanted to be sure they had told Justice the same thing, and that the stories had not changed. Accordingly, District Attorney Morgenthau requested that the tapes made in March, 1989 of the Blum-BCCI official conversations be made available to his office. Initially, his assistants were advised by the U.S. Attorney for Tampa's office that no such tapes existed. Later, the U.S. Attorney acknowledged their existence, but refused to provide them to the Manhattan District Attorney on the ground that to do so would threaten to reveal a source -- the BCCI official who Blum had been taped with, with whom the Justice Department had had no contact since March 1989, and whose identity was already known to the Manhattan District Attorney. In another case, District Attorney Morgenthau requested that the Justice Department provide a witness to New York who had important information that New York needed. Senator Kerry. I have heard through the grapevine as we have been investigating this of an instance or instances in which the Justice Department has access to or custody of a witness with material information regarding this case, which your office would like to interview but they have refused to provide your office with access to such a witness. Is that accurate? Mr. Morgenthau. With this correction. They have said that he may be available in a year. Senator Kerry. In a year? Mr. Morgenthau. Yes. Not at this time. . . in a year. I don't want you to think that they have refused to let us see him.(119) Morgenthau went on to say that his office had offered to exchange information with the Justice Department, but that they had rejected the offer. The District Attorney told the Subcommittee that he had run many collaborative investigations in the past and that the actions of the Justice Department in the BCCI case represented the "exception, not the rule."(120) In response to Morgenthau's criticisms, US Attorney Genzman argued that "all sorts of problems crop up" in cooperative efforts and he specifically noted that "because of the differing systems of immunity, giving up information [to a county DA] might taint the Federal investigation."(121) There was a certain irony to Genzman's remarks given that at this point in time, the investigation of the Manhattan District Attorney's office was far in advance of his own. Indeed, the US Attorney's September 1991 indictment closely mirrored that of District Attorney Morgenthau, although it trailed the local prosecutor by nearly six weeks. The Investigation Begins Again In late 1990, upon receiving information from several sources, including lawyers for Abu Dhabi and BCCI, that BCCI might well own First American, the Federal Reserve made a criminal referral to the Justice Department. As a result, for the first time, a grand jury was sworn in to hear evidence concerning BCCI's secret ownership of First American on January 16, 1991. At that point, the New York District Attorney had been investigation these issues for about 18 months, and the Federal Reserve was in the initial stages of what would soon became a very significant investigatory effort to sort out who had participated in violating the Bank Holding Company Act and other banking statutes. After the collapse of the bank on July 6, 1991, and the impending indictments by the District Attorney in Manhattan, the Justice Department in Washington moved swiftly to broaden its investigation. According to Dexter Lehtinen: "[S]omewhat prior to the indictment, briefly, believing that he [Morgenthau] would indict, and thereafter, the Department's criminal division surveyed all of the United States Attorney's offices. Of course, they knew all about us because of our efforts to enforce the subpoenas, but [they] surveyed everyone with respect to what they were doing on any of these issues that Morgenthau had dealt with and what did they need?"(122) As Lehtinen put it, "There was substantially more interest after [Morgenthau's] indictment."(123) On September 5, 1991, the US Attorney in Tampa returned an indictment alleging racketeering and additional money laundering charges. And on November 15, 1991 the Department of Justice in Washington issued BCCI related indictments alleging racketeering and other offenses based on the secret acquisition and control of Independence Bank and the parking of securities in Centrust.(124) According to Assistant Attorney General Mueller, "It was only in May of this year [1991] that we received a referral from the Federal Reserve on this bank.....the Department has moved with remarkable speed given the complexity of the matters involved."(125) In testimony before the Subcommittee, Mueller described the importance which the Justice attached to the BCCI case after the worldwide collapse of the bank. He stated that: The Department is pursuing allegations of wrongdoing of BCCI and its employees. It is conducting investigations through a Washington based task force, and in a number of US Attorneys' offices. At present 37 Federal prosecutors, supported by dozens of agents and supervisory and support personnel, are conducting or supporting investigations nationwide....The Washington task force alone has interviewed dozens of witnesses and reviewed tens of thousands of pages of records. It is interviewing witnesses and securing evidence in locations such as Britain, France, Abu Dhabi, Pakistan, Egypt, the Cayman Islands, the Channel Islands, Argentina, Peru and other countries.(126) On July 29, 1992, the Justice Department, the District Attorney of New York, and the Federal Reserve each moved against BCCI's top officials, some of BCCI's nominees, and Clark Clifford and Robert Altman in a coordinated effort. Clearly, at least as of the time that Attorney General Barr was confirmed at Justice, many of the problems that had surfaced between the Justice Department and other law enforcement agencies had been worked through by the end of 1991, and a clear effort was being made to collaborate effectively on investigating and prosecuting BCCI. Justice and the CIA From early 1985 on, the CIA possessed and disseminate to other governmental agencies detailed and important information about BCCI's plans in the United States, and its secret ownership of First American. That information was made available initially to the Treasury and to the Comptroller of the Currency, neither of which passed the information on to anyone else. In 1986, a broader group of agencies received the same information. In neither case did the CIA's memoranda trickle down to the agents or prosecutors responsible for investigating and prosecuting BCCI, until after the takedown of Operation C-Chase, when information in a third memorandum from the CIA did reach Tampa Customs agents. Undercover Customs agent Mazur testified that during Operation C-Chase he never received any information from his superiors "about information the CIA might have."(127) According to Mazur, information from the CIA was brought to his attention "after the conclusion of the undercover operation." Assistant Attorney General Mueller told the Subcommittee that while the CIA may have known about BCCI's criminality and illegal ownership of First American dating as far back as 1985, "regrettably, the Justice Department was not on the CIA's dissemination list until 1990 and therefore the Department never received this 1986 report at the time it was disseminated." Mueller is correct that no component of DOJ ever received the 1986 report, but the May 1989 report, which contained many of the same facts, including BCCI's ownership of First American -- in some cases with more detail provided -- was provided to both the DEA and the FBI. As Assistant Attorney General Mueller testified: At no time, to my knowledge, has anyone from the CIA, or any agency, attempted to obstruct or interfere with the Department of Justice's investigation and prosecution of BCCI.(128) For the record, assistant US Attorney Mark Jackowski, who oversaw the undercover operation and prosecuted the case, has provided a variety of answers on this subject. When asked by a journalist whether he had uncovered any CIA involvement in BCCI or whether the agency had ever interfered with Operation C-Chase or the ensuing prosecution, Jackowski responded "no comment." When asked the same question by Subcommittee staff, Jackowski replied that "I read a lot of spy novels. Let's leave it at that." When asked by Senator Kerry in a public hearing, Jackowski, under oath, stated that he did not come into contact with the CIA. The Justice Department and the Senate Investigation Through much of the Subcommittee's four year investigation into BCCI, the Justice Department treated the Subcommittee's investigation with visible disdain, at times bordering on contempt. As Jackowski testified, the Tampa prosecutors viewed the principal Subcommittee investigator of BCCI in 1988 and 1989, Jack Blum, to be unreliable at best, someone who wished to trade his information for money, and who had produced little of real value for them. In interviews with Senate staff in the fall of 1991, Jackowski characterized Blum as a "wacko," who had done little more than provide him with "bullshit."(129) Accordingly, after initial interviews of his witnesses, Jackowski and his colleagues did nothing further with the information and leads he had provided. Following Blum's departure, other Senate staff efforts were treated equally cavalierly. In the fall of 1989, the Subcommittee sought to depose a Colombian money-launderer who was also cooperating with the Tampa prosecutors, and who had used BCCI in Panama. The Tampa prosector's office and the Justice Department, without prior notification to Subcommittee staff, began making telephone calls to other Senate offices, not involved in the investigation, in an effort to prevent the deposition. The Justice Department told these offices, and Subcommittee staff that even staff interviews with the witness would inevitably prejudice the federal prosecution of BCCI and of Manuel Noriega, and that the government could be forced to provide to the defendants any material the Colombian provided to the Subcommittee. Staff advised the Justice Department that the deposition would be held Committee confidential, and was in any case constitutionally protected against disclosure. However, because of the level of concern the Justice Department expressed, and the implicit threat by Justice that the Subcommittee would be blamed if something did go wrong with the Noriega prosecution in connection with the Colombian, the deposition was halted. As a result, the important information possessed by the witness concerning BCCI's criminal activity in Panama was never provided to the Subcommittee on the record. To make matters worse, the communications by Justice seeking to stop the deposition with other Senate offices not involved in the investigation resulted in a leak that the Colombian was cooperating with the government, imperiling his family and property in Colombia. As a result of this leak, generated through incautious actions by Justice, the Colombian refused to cooperate further with the Subcommittee. Ironically, the Colombian, far from being essential to the government's criminal cases against BCCI and Noriega, was never used by the government in either trial. During the spring of 1990, when the Subcommittee was seeking to obtain documents from BCCI directly, lawyers for BCCI took the position that they would gladly provide documents they were making available to the Justice Department from overseas if the Justice Department would in turn provide copies to BCCI's lawyers in the United States. In response, Justice attorneys advised the BCCI lawyers on May 25, 1990, that the Subcommittee staff should contact Justice directly for the documents involved, which came from Panama. Subcommittee staff contacted federal prosecutors in Tampa and Miami about the documents, who did not return telephone calls or reply to letters for many weeks. In early July, a prosecutor from Tampa advised the Subcommittee staff to ask main Justice in Washington for its position regarding the documents. Following repeated telephone calls, the Justice Department finally advised the Subcommittee in mid-July, 1990, that it could not provide the Subcommittee any documents whatsoever from any location whatsoever, other than the materials entered into the record in the BCCI trial in Tampa. The decision was made by Justice following a meeting between Subcommittee staff and Chuck Saphos, the head of Justice's narcotics section who had six months earlier written the state regulators to recommend that BCCI be kept open. In the meeting with the Subcommittee, Saphos took the position that any question the Subcommittee might ask about BCCI would inevitably prejudice ongoing matters at the Justice Department. Saphos told staff that there was no matter pertaining to BCCI that could be discussed without prejudicing the Noriega trial. Accordingly, the Justice Department could not consent to testify concerning any aspect of the BCCI case, nor would it provide any information concerning any aspect of the BCCI case apart from what was on the public record in the Tampa trial. Following the meeting between Subcommittee staff and Saphos, Deputy Assistant Attorney General Bruce Navarro advised Senator Kerry in a letter dated July 24, 1990: Your questions about the nature of BCCI's cooperation under the plea, BCCI's potential involvement in the handling of assets of Antonio Noriega and the possibility of further investigative efforts by the United States concern matters upon which the Department can not comment without jeopardizing any future prosecutions that might be undertaken. . . Many of the specific questions you have raised may be addressed by BCCI itself. The Department simply can not testify on matters which are under investigation or subject to pending litigation.(130) As is now made clear by the record, this was during a period in which law enforcement had taken an acknowledged "time-out" from its investigation. Even after the global closure of BCCI, the Justice Department continued to impede attempts by the Subcommittee to gather information concerning BCCI, and its own handling of the BCCI case. The Subcommittee had requested copies of Customs Service memoranda related to Operation C-Chase. As the Customs Service is an agency of the US Treasury -- not the Justice Department -- it would have been the Treasury's decision as to whether to release them. Treasury had no objection to their release. However, after conferring with Justice, Treasury explained to the Subcommittee that it would not release them without Justice's permission, and that permission had not been granted by Justice. The Subcommittee then asked Justice to explain its refusal to release the documents. The reason provided by the Department was that the memoranda contained information that would jeopardize ongoing investigations. After considerable wrangling, and after the Justice Department was advised that any additional delays in providing the documents could result in equal delays in a Senate vote on confirmation Acting Attorney General Barr in a permanent position, Subcommittee staff were allowed to review the memoranda in an unredacted form. When the documents had been produced, few revealed anything about ongoing investigations. Many referred to embarrassing criticisms by Customs agents of the handling of the BCCI investigation, including the lack of resources that had been devoted to Operation C-Chase, internal discussions concerning the advisability of bringing a RICO case and the advisability of pursuing a plea agreement with the bank. Prior to the warning concerning a delay in the Barr nomination, the Justice Department also refused to allow Senator Kerry to meet one-on-one with DEA agent Mazur, formerly the lead Customs agent in Operation C-Chase. The Department insisted that a member of the Justice Department be present in the interview, contending that any private interview between a Senator and a Department of Justice employee was precluded by "Attorney General Order 504-73," which charges the Assistant Attorney General for Legislative Affairs "with the responsibility of coordinating all Department of Justice activities relating to the Congress." The Assistant Attorney General for Legislative Affairs stated that a private meeting between a United States Senator investigating BCCI and the undercover agent who exposed the bank, without the presence of officials from Justice's legislative relations office, would prevent him with "fulfilling the responsibilities charged to him by the Attorney General."(131) As a result, despite numerous requests from Senator Kerry to meet with Mazur personally, the meeting did not place. Senator Kerry therefore decided to simply request Mazur to testify publicly, without any prior debriefing of what he might to say to either the Senator or the Senator's staff. Senator Kerry also decided to seek testimony from Mark Jackowski as the chief prosecutor in the Tampa case. On September 16, 1991, September 18, 1991, and October 16, 1991, in response to a series of requests from the Subcommittee, the Justice Department expressed its refusal to accede to Subcommittee requests for the testimony of Jackowski and Mazur before the Subcommittee concerning BCCI. At the time, neither of them were involved in further activities concerning BCCI. In the September 16, 1991, the Justice Department suggested that the Subcommittee's requests would not only compromise ongoing cases, but put Mazur's personal safety at risk: Department's policy on provision of Departmental representatives for Congressional hearings is that line attorneys and investigative personnel do not represent the Department in Congressional hearings . . . One effect of having Mr. Mazur testify in an open Congressional hearing on his role in the undercover operation which led to the successful prosecutions in the BCCI matter, even with safeguards such as attempting to disguise his identity, would increase the possibility of drug traffickers attempting to seek revenge by harming Mr. Mazur or his family.(132) Mazur's personal attorney advised staff that Mazur believed his identity could be protected through the mechanism of having him testify behind a screen with his voice altered, an approach that was ultimately adopted by the Subcommittee. Later, Mazur personally advised staff of the Subcommittee that he had no reason to believe his testimony before the Subcommittee, with those precautions, would create any risk to him or his family. The Justice Department also advised the Subcommittee that if Mazur testified, he could never be used again in an undercover assignment.(133) Later, after Mazur testified before the Subcommittee, he in fact returned to an undercover role, without incident. Finally, the Justice Department, reiterating a line that it had previously taken on several occasions with the Subcommittee, said that the Subcommittee's requests threatened to prejudice ongoing matters.(134) After attempting to resolve any legitimate problems the Justice Department might have, without success, the Subcommittee chairman advised the Justice Department on October 31, 1991, that if it continued in its refusal to provide these witnesses, the Subcommittee would seek the authorization of subpoenas to compel the Justice Department to produce them as witnesses. At this point, having delayed hearings concerning the Justice Department's handling of BCCI for months in 1991, and for more than a year since the Subcommittee's original request for its testimony in July, 1990, the Justice Department agreed to produce the witnesses in order to prevent the confrontation between the Senate and the Justice Department that would ensue should a subpoena be issued.(135) In summary, between March 1988 and October 1991, the Justice Department repeatedly requested delays or halts to action by the Subcommittee concerning BCCI, criticized Subcommittee staff and information concerning BCCI, refused to provide assistance to the Subcommittee concerning BCCI, and, on occasion, made misleading or false statements to the Subcommittee concerning the status of investigative efforts concerning BCCI. This pattern shifted substantially after Senator Kerry advised the Justice Department that its handling of the Subcommittee could impede the Barr nomination. While some differences of opinion concerning Congressional access to documents have taken place, following Attorney General Barr's confirmation, the Justice Department has generally demonstrated a dramatically improved responsiveness to Subcommittee inquiries and requests concerning matters relating to BCCI. Post-Script On August 26, 1992, some weeks after the date of the drafting of this chapter of the report, the Justice Department delivered to the Subcommittee chairman and ranking member a response to a request made to Justice by the Subcommittee one year earlier, on August 1, 1991, and reiterated on November 21, 1991, for a rebuttal by the Justice Department to any of the statements made by former Subcommittee investigator Jack Blum before the Subcommittee which the Justice Department considered incorrect.(136) The rebuttal provided on August 26, 1992 consisted of a thirteen page statement challenging the August 1, 1991 sworn testimony of former Customs Commissioner William von Raab, an eleven page statement challenging the August 1, 1991 sworn testimony of former Subcommittee investigator Blum, and a cover letter apologizing "for any inconvenience our delay in responding may have caused you." Nearly all of the statements contained in the rebuttals were previously made by Justice Department officials either in prepared statements or in sworn testimony before the Subcommittee on November 21, 1991 and May 18, 1992, and have been previously analyzed, incorporated, and referred to within the body of this chapter. As noted at the start of this section, editorial writers commenting on the Justice Department's handling of BCCI frequently described its response as "sluggish," an assessment which the Justice Department has termed unfair. The delay of over nine months by the Justice Department before providing the Subcommittee the requested response unfortunately provides some ironic further demonstration of the underlying problem. Given the lack of celerity of this response, and the repetitious character of its rebuttals, the Subcommittee, rather than attempt to incorporate these further statements at the last minute in the body of the section, includes them, without comment or further analysis, as appendices below. _______________ Notes: 1. See e.g. editorials, "Why So Slow on BCCI?", Washington Post, May 29, 1991, "What the U.S. Knew About BCCI," Washington Post September 9, 1991, "Greed, Influence and BCCI," The Washington Post, November 1, 1991; "Questions For Mr. Barr," Washington Post, November 12, 1991; "What Took So Long?," New York Times, August 3, 1991. 2. S. Hrg. 102-350 Pt. 3 p. 789. 3. Federal Law Enforcement's handling of Allegations Involving the Bank of Credit and Commerce International. Staff Report Issued On September 5, 1991 by the Committee on the Judiciary. September 1991., p.2. 4. Id. p.3. 5. Id. 6. Id. 7. Id. 8. Id. p.4. 9. S. Hrg. 102-350 Pt. 2. p. 524. 10. S. Hrg. 102-350, Pt. 3, p. 716. 11. Id. p. 671. 12. Id. p.672. 13. S. Hrg. 102-350, Pt. 3, p. 669. 14. Id. p. 672. 15. Id. p. 672 16. Id. p. 678. 17. Id. p. 681. 18. Id. p. 688. 19. Id. p. 689. 20. Id. p. 732. 21. Id. p. 683. 22. Transcript, federal wiretap of conversation between Robert Musella, undercover agent and Amjad Awan, September 9, 1988, 5:05 pm, Grand Bay Hotel, Miami, Florida. 23. S. Hrg. 102-350 Pt. 1 p. 52. 24. S Hrg. 102-379, Subcommittee on Consumer and Regulatory Affairs, Senate Committee on Banking, Housing and Urban Affairs, May 23, 1991, p. 231. 25. S. Hrg. 102-350 Pt. 3, p.731. 26. S. Hrg. 102-350 Pt. 3 p. 686. 27. Id. p. 687. 28. Id. 29. Id. p.721 30. S. Hrg. 102-350 Pt. 3 p. 721. 31. Customs Memorandum from Mazur to Group Supervisor, March 15, 1988. 32. Id. p.691. 33. Memorandum from Mazur to [redacted by Justice Department], April 11, 1989, Subject: Current Resource Needs of Operation C-Chase. 34. Id. p.691 35. S. Hrg. 102-350 Pt. 3 p. 753. 36. S. Hrg. 102-350 Pt. 3 p. 696. 37. Mazur Memorandum to [redacted by Justice Department] April 11, 1989, Subject: Current Resource Needs of Operation C-Chase. 38. Id. p. 701. 39. Id. p. 695. 40. S. Hrg. 102-350 p. 746. 41. S. Hrg. 102-350 Pt. 3 p. 723. 42. Id. p.717 43. Id. p.719. 44. Id. p. 736. 45. Id. p.697. 46. S. Hrg. 102-350 p. 773. 47. Id p. 697. 48. Id p. 698. 49. Id. p. 749. 50. Id. p. 792. 51. Id. p.750. 52. Id. p. 754. 53. S. Hrg. 102-350 Pt. 3 p. 752. 54. Id. p. 754. 55. S. Hrg. 102-350 Pt. 1 p. 279. 56. Staff interviews, Amjad Awan and Akbar Bilgrami, July 20-29, 1992. 57. Testimony of Deputy Assistant Attorney General Paul Maloney, S. Hrg. 102-379 pp. 222-223. 58. S Hrg 102-379. p. 233. 59. S. Hrg. 102-350. Pt. 3. pp. 718-719. 60. Id. p.694. 61. Staff interviews, Bilgrami and Awan, July 20-29, 1992. 62. Id. p.719. 63. Id. p. 718. 64. Staff interviews, Amjad Awan and Akbar Bilgrami, July 20-29, 1992. 65. Oral communication, June, 1992, U.S. government official. 66. Id. p. 720. 67. Id. p.782. 68. Lehtinen testimony, p.64. 69. Id. p. 13. 70. Id. 71. Id. p.16. 72. Id. p. 768. 73. Gerald Lewis to Charles S. Saphos, February 14, 1990. 74. Saphos letter to Lewis, February 16, 1990. 75. Id. p.799. 76. S. Hrg. 102-350 Pt. 3 p. 768. 77. Id. p.768. 78. S. Hrg. 102-350 Pt. 5, Lehtinen testimony, p. 11. 79. Id. p.19 80. Id. p. 15. 81. Id. 82. Lehtinen recalled in testimony that the countries included the United Kingdom, France, Holland, Luxembourg, Switzerland, panama, United Arab Emirates, and the Bahamas and Grand Cayman. Id. p. 23. 83. Id. p.23. 84. Id. p.39. 85. d. p.26. 86. Id. p. 28. 87. Id. p. 34. 88. Id. p.50. 89. Id. p.51. 90. Id. p.52. 91. Id. p.54. 92. Id. p.58. 93. Id. p. 63. 94. Id. p.70. 95. Id. p. 76. 96. Id. p. 82. 97. Id. p.80. 98. Id. p.77. 99. Id. p. 60. 100. Id. p. 61. 101. S. Hrg. 102-350, Pt. 1. p.27. 102. Id. p.27. 103. Id. p. 32. 104. Id. p.32. 105. Id. p.33. 106. Id. p.33. 107. Id. p. 33. Greg Kehoe, First Assistant US Attorney in Tampa testified that District Attorney Morgenthau's indictment was based on Price Waterhouse audit reports. However, District Attorney Morgenthau credits Blum with providing him the evidentiary foundation for beginning his investigation that led, months later, to New York's securing the audit reports. 108. Id. p.735. 109. Id. p. 735. 110. Winer memo to files, Jackowski interview, September 23, 1991. 111. Id. 112. Letter to Senator John Kerry, signed Michael Cherkasky, District Attorney of the County of New York, November 21, 1992, Id. p. 770. 113. S. Hrg. 102-350 Pt. 3 p. 759. 114. Id. p.137. In testimony later in the day, Robert Genzman explained that "With regard to cooperation with the Federal reserve, let me mention one problem... If we gave certain information to the federal Reserve, that information could become subject to the regulatory scheme under which the federal Reserve works." p. 235. 115. Chronology, House Banking Committee, BCCI Pt 1, id., p. 689. 116. Chronology, House Banking Committee, BCCI Pt. 1, id. pp. 689-690. 117. Id. p. 163. 118. Id. 119. S. Hrg. 102-379, pp. 166-167. 120. Id. 121. Id. p.235. 122. Lehtinen testimony, p. 29. 123. Id. p.30. 124. S. Hrg 102-350, Pt. 3, p. 787. 125. Id. p. 788. 126. Id. p, 788. 127. Id. p. 673. 128. S. Hrg. 102-350 Pt. 3, p. 789. 129. Memo to files, Winer, Re: Jackowski interview, September 23, 1991. 130. Letter, Navarro to Senator Kerry, July 24, 1990. 131. Letter to US Senators Hank Brown and John Kerry from Assistant Attorney General W. Lee Rawls, September 18, 1991. 132. Letter from Assistant Attorney General W. Lee Rawls to Senator Kerry and Senator Brown, September 16, 1991. 133. Id. 134. Id. 135. Letter, W. Lee Rawls, Assistant Attorney General, to Senators Kerry and Brown, November 4, 1991. 136. S. Hrg. 102-350 Pt. 4 p. 778. |