For twelve years, from BCCI's initial attempts to acquire
FGB/First American in January, 1978, until their forced
resignation in August, 1991 from their positions as the top
officials of First American, former Secretary of Defense Clark
Clifford and his law partner, Robert Altman, were the central
figures in BCCI's acquisitions and management of U.S. banks.
During that time, they met with and represented BCCI's top
management, major shareholders, major borrowers, and every figure
of consequence who participated in BCCI's frauds in the United
States. Their roles included:
** Representing Bert Lance in his sale of National Bank of
Georgia (NBG) to BCCI nominee Ghaith Pharaon in 1977 and 1978.
** Representing Lance, BCCI, and all of the Arab
shareholders in the Financial General Bankshares (FGB) takeover
and all related litigation from late 1977 through late 1990.
** Representing Commerce and Credit American Holdings
(CCAH), the new entity created to buy FGB, and several levels of
holding companies below CCAH, from 1978 through late 1990.
** Acting as chairman and president, respectively, and
directors of First American, from 1981 through August 1991.
** Negotiating First American's purchase of National Bank of
Georgia from Pharaon and BCCI in 1985 and 1986.
** Handling legal matters for First American, and selecting
First American's other counsel from 1978 through late 1990.
** Representing BCCI before state and federal regulators
from 1978 through late 1990.
** Representing BCCI before Congress from 1988 through 1990.
** Purchasing shares of First American and borrowing funds
from BCCI for their shares of First American from 1986 through
** Coordinating the legal defense of BCCI and of all of its
officers charged in the Tampa case, including handling the
selection of attorneys for all of the individual BCCI officers,
following BCCI's October, 1988 indictment.
Clifford and Altman have testified that they were throughout
this period deceived as to BCCI's ownership of and control of
First American and other BCCI entities in the United States, and
ignorant of the bank's wrongdoing in any material respect. In
In all these years, we didn't encounter a single suspicious
circumstance. . . Were we deceived? Apparently, we were
deceived.(1) (emphasis added)
We have not violated any law. We have not been guilty of any impropriety. . . if all that we read about, this poisonous, constant stream of misconduct, if that is a true statement of what this bank did, then we have been grossly deceived.(2)
As Altman testified:
The allegations that relate to misconduct on our part, I
want the record to be clear, that we deny them totally and
In contrast, numerous BCCI officers who appeared before the
Subcommittee testified that Mr. Clifford and Mr. Altman must have
known that BCCI owned First American. Abdur Sakhia, for
[I]n any management discussions . . . on our future in
the United States, we would think of three entities --
BCCI, National Bank of Georgia and First American -- in
the same breath. Who would be going where, who would
work in which entity, what area of entity will be
handled by which entity, allocation of businesses,
markets, geographic territories, all took place as if
this was one entity. . . [I]t is very hard to believe,
very, very hard to believe, almost impossible to
believe. . . that Clifford and Altman did not know
[about BCCI's ownership of First American].(4)
Similar statements were made in public testimony and in
staff interviews by BCCI officials Amjad Awan, Akbar Bilgrami,
and Nazir Chinoy concerning Clifford and Altman's role in BCCI
and First American.
While it is clear that no one, with the possible exception
of BCCI's top two officials, Abedi and Naqvi, knew of all the
criminal conduct at the highest levels of the bank's operations,
numerous people at BCCI and associated with it did know of BCCI's
ownership of First American, its use of nominees for acquisitions
generally, its lending to First American's purported
shareholders, and its strategy for expansion in the United
The Subcommittee received with care the detailed proffer of
information and testimony provided by Clifford and Altman, and
struggled to reconcile their statements with the other
information provided to the investigation. Reaching judgments
regarding the nature and extent of Clifford and Altman's
intentions is impeded by the lack of witnesses to a number of key
meetings over the course of a decade regarding BCCI and First
American in which only Clifford, Altman, and BCCI's top two
officials, Abedi and Naqvi, were permitted to participate. Few
memoranda exist as to the substance of any of these meetings, and
it was the practice of Abedi, Naqvi, Clifford and Altman to
exclude all others from these meetings who might otherwise give
witness as to what was discussed and decided.
Nevertheless, based on a review of all of the documents and
testimony before the Subcommittee, the account provided by
Clifford and Altman to the Subcommittee is not consistent with
the facts. Regrettably, as the chapter below details, in case
after case, explanations provided by Clifford and Altman
concerning their conduct are contradicted not merely by sworn
testimony of other witnesses, but by contemporaneous documents
which set forth facts that are at odds with their testimony. The
totality of the information concerning Clifford and Altman leads
to the conclusion that regardless of whether they too were
deceived by BCCI in some respects, both men participated in some
of BCCI's deceptions in the United States. Testimony of mid-level
BCCI officials, contemporaneous documents created by others, and
the legal documents and correspondence involving Clifford and
Altman directly, together lead to the conclusion that Clifford
** Assisted BCCI in purchasing a U.S. bank, Financial
General Bankshares, with the participation of nominees, and
understood BCCI's central involvement in directing and
controlling the transaction.
** Made business decisions regarding acquisitions for First
American that were motivated by BCCI's goals, rather than by the
business needs of First American itself.
** Represented as their own to regulators decisions that had
been made by Abedi and BCCI on fundamental matters concerning
First American, including the purchase by First American of the
National Bank of Georgia and First American's decision to
purchase branches in New York City. While these decisions were
ratified by First American's board of directors, they were
decisions made initially by BCCI and communicated to Clifford and
Altman, who in turn secured ratification of them, as necessary,
by First American's boards.
** Concealed their own financing of shares of First American
by BCCI from First American's other directors and from U.S.
** Withheld from regulators critical information that they
possessed to secret BCCI's ownership of First American.
** Deceived regulators and the Congress concerning their own knowledge of and personal involvement in BCCI's illegalities in the United States.(5)
Clifford, Altman and Bert Lance each testified that their
mutual involvement with BCCI began in the fall of 1977, in
connection with Lance's decision to participate in a hostile
takeover of Financial General Bankshares (FGB) in Washington, and
the participation of a group of Middle Eastern investors, advised
But their accounts diverge as to how Clifford and Altman
came to know BCCI and Abedi, and when Clifford and Altman began
to participate with Lance and Abedi in planning BCCI's strategy
for acquiring U.S. banks.
By Clifford and Altman's account, they knew nothing of BCCI
and were introduced to the bank by Lance in December, 1977 and
did not represent BCCI until mid-February, 1978 in connection
with litigation with SEC and FGB's management. By Lance's
account, Clifford's involvement with the case began two months
earlier, soon after Lance met with Abedi in New York and
discussed with Abedi BCCI's need to enter the U.S. market.
In Lance's account:
I went to see Mr. Clifford, who had represented me since Labor Day weekend of 1977, and I said: Mr. Clifford, I have made the acquaintance of Mr. Abedi. His bank is BCCI. He has some interest in talking to me about future relationships, whether that is in regard to being merely a consultant or being actively involved in one of his operations somewhere
. . . it is absolutely imperative and incumbent upon me to
make sure that we know what kind of people that I am getting
involved with . . . I asked Mr. Clifford, because of his
knowledge and expertise . . . to do his due diligence on my
behalf, as my attorney . . . Every instance o[r] report that
I either got or from what Mr. Clifford told me came back
that Mr. Abedi was a man of integrity and character.(6)
Based on the assurances he had received from Clifford, Lance
went to London, met with Abedi again in late October, and began
discussing the possibility of a takeover of FGB with Abedi and
In contrast, Clifford testified that the first he learned of
BCCI was when Lance, as a "former client," brought Abedi to meet
them in December, 1977 on "merely a social visit."(8) By
One of the main subjects we discussed in that brief social
meeting was the aid that he had for his bank, of providing
the Third World with banking services which they had not
ever had before . . . I found him to be pleasant and a man
of importance. Thereafter, I'd hear from time to time that
the little reports would sift in that Mr. Abedi and BCCI
were in the process of acquiring stock in a company called
Financial General Bank Shares. That's a bank holding
company, centered in Washington. I had not heard of them
In fact, in the period that Clifford testified he was merely
hearing "little reports" sifting in "from time to time," Clifford
and Altman were already representing Lance in connection with his
attempt to sell the National Bank of Georgia to Ghaith Pharaon in
a transaction fully negotiated by and handled by Abedi,
ostensibly on Pharaon's behalf. This representation had begun no
later than early December, 1977. As Lance testified, the
negotiations concerning National Bank of Georgia with Abedi had
taken place between Thanksgiving and Christmas, and were in that
period turned over by Lance to his attorneys:
They [Mr. Clifford and Mr. Altman] were very aware of what I
was trying to do and were very helpful to me in trying to do
that. . . After discussions with Mr. Abedi about the
National Bank of Georgia, I turned over these negotiations
to Bob Altman to deal with Pharaon's attorney, a gentleman
by the name of Frank Van Court, who is a member of the
Vincent and Elkins law firm in Houston.(10)
Thus, Lance refers to an ongoing representation of him by
Clifford and Altman, stemming out of Congressional testimony a
month earlier, while Clifford describes Lance as a "former
client." Lance places Clifford's involvement with him with BCCI
in October, prior to discussions about the structuring of the FGB
takeover, while Clifford places his first contact in late
December. Lance places Clifford's representation of him on the
BCCI-related acquisitions by December, while Clifford places the
representation in mid-February. In each case, the difference
between the testimony is that Lance places Clifford as a
participant in the critical decisions that BCCI made in late
1977, while Clifford places himself at a distance from these
decisions. Clifford's desire not to have been involved is
understandable, because the manner in which Lance and the Middle
Eastern investors chose to conduct their takeover bid for
Financial General Bankshares would prove, within three months, to
have been illegal by a federal judge.
A mid-December, 1977 article in The Washington Post provides
irrefutable evidence of Clifford and Altman's involvement in
negotiations by Lance at that time regarding investments by
"Middle Eastern financial interests . . . into banks and other
U.S. investments" in a deal in which the "matchmaker" was
described as Abedi, head of BCCI. The article states that the
Middle Eastern investors represented by Abedi want Lance "to set
up a holding company to direct their capital into banks and other
U.S. investments," and quotes Altman as confirming that
negotiations between Lance and Abedi had taken place concerning
the bank transactions:
"There are a lot of people who are trying to guess what's
going on," said the attorney, Robert A. Altman, but he added
that few are privy to the details. "The terms are still
being negotiated. We hope to have a statement shortly."(11)
In the same article, Altman is described as announcing
Lance's intention to sell his shares in the National Bank of
Georgia as of early December, 1977 to an unnamed purchaser for
$20 a share -- the exact amount paid in early January, 1978 to
Lance by Ghaith Pharaon on behalf of himself and BCCI.(12) Thus,
Altman and Clifford were already representing Lance in his
negotiations over sales of his bank to Pharaon at the beginning
of December, 1977; and in connection with the establishment of a
bank holding company, obviously referring to the structure to be
used by BCCI to acquire Financial General Bankshares, by mid-December, 1977; the period in which Clifford testified he had
been privy only to "a social visit" from Abedi concerning other
matters, and during which Clifford by his account did not
represent Lance, described by Clifford as "a former client," at
As of January, 1978, Clifford and Altman were simultaneously
representing Lance in his discussions with BCCI about the
possible takeover of Financial General Bankshares; meeting with
Abedi and other BCCI officials concerning that takeover;
representing Lance in negotiations with Abedi and BCCI officials
concerning the purchase of National Bank of Georgia by Ghaith
Pharaon; and preparing to handle representation of the Arab
shareholders who were ostensibly using BCCI as an "investment
advisor" for the Financial General Bankshares transaction.
These roles were not being undertaken casually, or in a
routine fashion, but in the context of what was about to become a
high-stakes, highly-publicized hostile takeover of a major
metropolitan Washington bank. The takeover bid was agreed to by
Lance and BCCI in late November, 1977 and begun in December with
purchases of Financial General Bankshares shares on the open
market. It was structured so that each shareholder participating
in the bid with BCCI would purchase an amount of shares just
below the 5% that would trigger the requirement of SEC disclosure
-- a strategy demonstrating some sophistication about and
knowledge of U.S. regulations. The strategy, an obvious violation
of SEC law if discovered, was dictated by the group's need to
acquire an adequate block of shares in the FGB stock to challenge
the controlling management of FGB, the Middendorf group, which
already owned about 20 percent of the target bank.
This initial strategy created an underlying problem for
Lance, BCCI, the Arab group, and its attorneys which was never
corrected. If Lance, BCCI, the Arab investors, or their attorneys
admitted the truth -- that they had been acting as a group from
the beginning, purchasing blocks of FGB shares just under
disclosure requirements to avoid premature disclosure and a more
aggressive defense against the takeover by FGB's current
management -- they would be admitting to possibly criminal
violation of U.S. securities laws. Yet in denying this truth,
they committed themselves to what was at the time a significant
distortion of the truth, and a distortion which grew ever
complicated over time.
Thus, an original, untrue proposition -- that the BCCI group
was not a group at all, but a collection of Arab individuals who
happened to use BCCI as a joint investment advisor, and who
happened individually to independently become interested on the
same week in the same U.S. bank -- was one which Clifford and
Altman wound up maintaining from February, 1978 onwards, from the
time the SEC filed suit against the Arab investors, Lance, and
BCCI, charging that they had acted as a group, and had
intentionally violated U.S. security disclosure laws by failing
to disclose their intent to gain control over FGB. The
representations made by Clifford and Altman concerning BCCI's
role regarding First American in the years that followed were
consistent with this original lie, and therefore inconsistent
with the truth.
In their prepared testimony before the Senate, Clifford and
Altman described the thrust of the SEC suit and their state of
knowledge upon entering the case:
BCCI served as the banker and investment adviser to a
number of wealthy Middle Eastern rulers and
businessmen. Without our involvement or advice, four
of these investors had purchased stock in an American
holding company called Financial General Bankshares
("FGB"), the predecessor to First American, without
filing certain disclosures with the Securities and
Exchange Commission ("SEC").(13)
In their joint written statement to the Subcommittee,
Clifford and Altman testified explicitly that they were not
involved in the structuring of the original takeover attempt, the
selection of the investors, or any other aspect of the
Without our involvement or advice, four of these [Middle
Eastern] investors had purchased stock in an American bank
holding company called Financial General Bankshares . . .
without filing disclosures with the Securities and Exchange
Commission ("SEC"). The SEC investigated these transactions,
and the management of FGB, concerned that these purchases
foreshadowed a possible corporate takeover effort, filed
suit against the Arab investors, BCCI, Mr. Abedi, and
others. We were retained to represent Bert Lance, Agha Hasan
Abedi, BCCI, Sheikh Mohammed bin Zaied al Nayhan, Sheikh
Sultan bin Zaied al Nahyan, Faisal al Fulaij, and Abudullah
This account is contradicted by a January 30, 1978
memorandum found in BCCI files in Abu Dhabi by the Federal
Reserve, and previously held in BCCI files in Karachi, Pakistan,
from Abdus Sami, a BCCI official, to BCCI chairman Abedi. In this
memorandum, Sami advises Abedi that Clifford personally approved
the details of the plans for the takeover, and describes BCCI's
intention to circumvent SEC disclosure by keeping purchases of
the shares to just under 5 percent for each shareholder.
In the memorandum, Sami advised Abedi that in order "to keep
ownership to below 5 percent we have to distribute the ownership
to 4 persons of substance." Sami noted that "we have already
given the names of Sheik Kamal Adham and Mr. Fulaij. We want two
other names immediately." In the memorandum Sami also told Abedi
that Lance had suggested the retention of Clifford as chief
counsel "in view of the possibility of this [takeover] contest
and also for presentation of the holding company application to
Fed[eral Reserve]." According to Sami, "[I] met Clark Clifford
and explained to him our strategy and goal. He was happy to know
the details and has blessed the acquisition."(15) [emphasis added]
The memorandum clearly states that Clifford was involved in the FGB takeover from the beginning -- before two of the original four shareholders had even been chosen, before a takeover contest had actually begun, before an application was made to any regulator, before the SEC knew of any activity that might prompt its interest. The memorandum, found by the Federal Reserve in BCCI's files, is a contemporaneous representation of the understanding of the BCCI official most directly involved at the time in meetings with Lance and Clifford concerning the purchase of FGB. Accordingly, its clear import has to be given considerable weight.
The chronology in the memorandum is supported by the legal bills sent by Clifford and Altman to BCCI, and provided to the Subcommittee in the spring of 1992 by BCCI's liquidators. In their written statement to the Subcommittee, Clifford and Altman testified that they did not provide advice to BCCI, or its Arab investors, until the litigation involving the SEC and the Middendorf group, which began in mid-February 1978. But the bills from Clifford's law firm to BCCI, provided to the Subcommittee in May, 1992, demonstrate that they actually represented BCCI and the Arabs in January, 1978, just as Sami had specified, and contrary to Clifford and Altman's testimony.
Neither Clifford or Altman were experienced in either
banking law, or in takeover litigation. Accordingly, Baldwin
Tuttle, a former Federal Reserve attorney, was retained to handle
banking regulatory issues, and the law firm of Wachtell, Lipton,
Rosen & Katz in New York was retained to advise on the takeover
In the months that followed, numerous filings were made with
banking regulators by Tuttle, the Wachtell firm, and Clifford and
Altman on the behalf of the Arab investors, BCCI, and Lance
concerning the nature and extent of BCCI's involvement in the
For example, the original application to the Federal Reserve
of October 19, 1978, made by CCAH and the original Middle Eastern
shareholders and signed by Altman, stated:
The proposed individual investors in CCAH have substantial funds and it is contemplated that the funds to be used by each of them to purchase the equity interest in CCAH will be provided from their personal funds and possibly from personal borrowings from one or more financial institutions (which would be unaffiliated with BCCI or any of its affiliates), except that at least an aggregate of $50 million will be provided from personal funds and not more than an aggregate of $20 million will be borrowed. Such investors intend that if personal borrowings are made, Financial General Shares purchased pursuant to the Offer will not serve as collateral for such borrowings. (emphasis added)(16)
A November 24, 1978 letter from Altman to the Federal
Reserve Bank of Richmond reiterated the commitment that:
neither BCCI nor any other organization related to BCCI
contemplates owning any equity interest in CCAH.(17)
On January 12, 1979, Altman again told the Federal Reserve
by letter that the shareholders would not borrow from BCCI or its
affiliates. In October, 1980, when CCAH resubmitted an
application to the Federal Reserve signed by Altman, Altman
reiterated that BCCI had no role in the transaction:
BCCI owns no shares of FGB, CCAH, or CCAI, either directly
or indirectly, nor will it if the application is approved.
Neither is it a lender, nor will it be, with respect to the
acquisition by any of the Investors of either FGB, CCAI, or
CCAH shares . . . All of the Investors in CCAH have
substantial funds and the funds to be used by each of them
to purchase their equity interest in CCAH will be provided
from their personal funds . . . . No principal of Applicant
will retain any personal indebtedness in connection with
As described in the chapter on BCCI's activities in the
United States, ultimately the decision came down to a public
hearing at the Federal Reserve on April 23, 1981 in which
Clifford and Altman, along with Mr. Adham and Mr. Fulaij, made an
appeal to regulators to allow the acquisition to move forward. As
Clifford told regulators at the hearing when he was asked about
BCCI's involvement in the acquisition, BCCI's role would be:
None. There is no function of any kind on the part of BCCI
. . . I know of no present relationship. I know of no
planned future relationship that exists.(19)
In their prepared testimony before the Senate, Clifford and
Altman testified that they made full disclosure to the regulators
at that meeting concerning the contemplated relationship between
BCCI and the Middle Eastern investors who bought shares in CCAH.
Clifford and Altman testified that the regulators "were advised
that certain of First American investors were also shareholders
in BCCI; that the investors used BCCI as their commercial and
investment bank; that BCCI had provided and would continue to
provide "advisory and other services to the shareholders with
respect to their CCAH investments; and that BCCI served as a
communications link with the investors."(20)
As discussed earlier, Robert Mannion, the Associate General
Counsel for the Federal Reserve, who conducted the public hearing
on the FGB takeover, broached the issue of the relationship
between the Middle Eastern investors and BCCI on numerous
occasions, but ultimately accepted the assurances of Clifford,
Altman and the Middle East investors themselves that BCCI would
neither own nor control Financial General Bankshares.
Part of the problem is that the permissible relationship
between BCCI and First American was never explicitly set out by
anyone at the Federal Reserve, beyond the original requirement
that BCCI could not act as a lender to the shareholders for the
original purchase of FGB, and was limited to acting as an
"investment advisor," and conduit for information. The principal
official regulatory discussion of the degree to which BCCI and
FGB could interact was set forth in a letter to the Federal
Reserve from the Deputy Comptroller General, Mr. William
Muckenfuss, in a letter to the Chairman of the Federal Reserve
Board, which became part of the record upon which the Federal
Reserve's approval of the CCAH application was granted. The
Comptroller's office signed off on the takeover of Financial
General Bankshares, stipulating certain conditions:
It has now been represented to us that BCCI will have
no involvement with the management, and other affairs
of Financial General, nor will BCCI be involved in the
financing arrangements, if any are required, regarding
this proposal. This commitment is critical, both now,
and in the future, since a relationship with another
financial institution would be a significant factor in
appraising this application. This is especially
important in light of overlapping ownership, which will
exist between Credit and Commerce Holdings, Credit and
Commerce Investment, and BCCI. Moreover, any enhanced,
direct or indirect affiliation or relationship between
BCCI and Financial General, would take on even greater
significance in light of the fact that BCCI is not
subject to regulation and supervision on a consolidated
basis, by a single bank supervisory authority."(21)
Testifying before the Subcommittee, Clifford acknowledged
that he interpreted the Muckenfuss letter to have signified a
definite agreement in three areas: "one, BCCI would not acquire
any stock in First American at the time of the tender offer; two,
that they would not, in any way, finance the purchase of the
stock in First American; and three that they would have no
control over the operation of First American."(22)
Clifford's interpretation of the obligation differs from the
plain text of the Muckenfuss letter and OCC's requirements. OCC
stated that its approval was condition on BCCI not being involved
with management. For that concept, Clifford unilaterally
substituted the word "control," a substantially less stringent
standard than that which the OCC actually required.
Concerning the first point, no documents have been found by
the Subcommittee which definitively prove Clifford and Altman
knew BCCI had acquired stock in First American prior to the
conclusion of the FGB acquisition. But the Sami memorandum
contains material suggesting that precisely such an arrangement
had been approved by Clifford in the early days of the FGB
takeover, and other documents provide circumstantial
documentation of Clifford's knowledge about the proposed Middle
Eastern shareholders in FGB not being at risk.
An October, 1978 telex from former CIA Director Richard
Helms to Mohammed Rahim Irvani, one of the original investors,
shows Helms advising another BCCI front-man on language designed
to hold him harmless for acting as a front-man for BCCI. The
language of the telex states that by agreement, Irvani would be
not be liable for any liability caused by granting a power of
attorney to Clifford and his firm in connection with the FGB
takeover, and suggests that this language be sent to the Clifford
firm.(23) Irvani was then listed, within days of the telex, in an
application filed with the Federal Reserve by Altman on behalf of
CCAH, listed as one of its intended principal shareholders, along
with representatives of the Abu Dhabi royal family, and Faisal al
Fulaij -- another nominee for BCCI.(24)
What was unusual about this agreement provided to Irvani by
Helms at the time of Irvani's application to the Federal Reserve
as a shareholder of CCAH is not the power of attorney given to
Clifford and Altman -- they would hold a power of attorney for
all of the Middle Eastern investors -- but rather the
indemnification, which essentially states that Clifford and
Altman have the power to act in Irvani's name without liability
attaching to Irvani -- meaning that someone else, presumably
BCCI, would be indemnifying Irvani against any possible liability
as a result of the use of his name. As a result, Irvani would not
be at risk for any actions he participated in during the
takeover, and therefore would be understood to be a nominee by
anyone knowing of the indemnification.
On point two, William Taylor, the head of Banking
Supervision for the Federal Reserve, and Gerald Corrigan of the
New York Federal Reserve, gave credence to Clifford's
interpretation in testimony before the House Banking Committee.
Corrigan stated that "there was no prohibition of borrowing from
First American even when the stock of First American was placed
as collateral." According to Altman, the only prohibition on
pledge of stock was for the initial takeover. Nevertheless,
Taylor's and Corrigan's testimony is at odds with the specific
language of the Muckenfuss letter relating to "financial
arrangements .... both now and in the future." Moreover, whenever
Clifford and Altman clearly knew of such borrowing by First
American shareholders from BCCI against collateral, such as in
connection with their own such borrowings, various rights
offerings, and First American's purchase of National Bank of
Georgia, they took steps to hide this information from the
On point three, Clifford and Altman have remained adamant
that BCCI never exercised any control over First American. On
this point, however, there is substantial evidence to the
In testimony to the House Banking Committee, Clifford stated
that "Before accepting the offer to serve [as Chairman of First
American] however, a fundamental agreement was made with the
shareholders on the issue of authority," that he [Clifford] would
run the bank. (25) Counsel for Clifford acknowledged, however,
that "the specific agreement... was an oral agreement" and that
there was nothing in writing to support their client's
assertion.(26) Clifford characterized his involvement in the
operations of the bank as "no ivory tower experience for us." He
explained that "This was a hands-on occupation. I took it as my
However, BCCI in fact participated in the selection of First
American's top management from the outset of Clifford and
Altman's tenure. As detailed in the Federal Reserve's summary of
charges, Abedi, BCCI's CEO, interviewed a series of candidates
for the new chief executive officer of First American, including
former Citibank president William I. Spencer, Daniel J. Callahan,
James Drumwright, and Robert Stevens, the last of whom ultimately
became First American's CEO and president. While Spencer turned
down the job offer after meeting with Abedi following an
introductory meeting with Clifford, Callahan was informed by
Clifford that he would not be offered the position of CEO of
First American because Callahan had requested "exclusive
administrative, operational and executive control" of the bank.(28)
Clifford's involvement with Abedi in this process -- which
begin within days of the April 23, 1981 hearing before the
Federal Reserve -- is evidence of his understanding at the time
that BCCI would have a substantial say in the most important
decisions affecting First American's future, beginning with the
selection of a CEO. Contrary to the assurances provided the
Federal Reserve by Clifford and Altman, no CEO would be chosen
who would require full autonomy in decisions regarding the bank.
In prepared testimony before the Senate Foreign Relations Committee, Clifford and Altman stated that "The evidence is conclusive that the two companies [BCCI and First American] had different -- and incompatible--operating policies and procedures, strategic concepts, bank support functions, staffing and administrative programs, customer bases and controls and systems." Clifford cited as proof that BCCI did not control First American the testimony before the House Banking Committee of Robert P. Black, the Chairman of the Richmond Federal Reserve.
who said, that in a review of First American's activities in
1991, "we have found no evidence of influence or control."(29)
In practice, BCCI's involvement in day-to-day affairs of
some of First American's members banks was either very limited,
or non-existent, and in others, such as First American Virginia,
the institution under the jurisdiction of the Richmond Federal
Reserve, limited to a few transactions. But in other parts of
First American, including First American Georgia and First
American D.C., BCCI clearly influenced both important banking
investment decisions and other transactions. In connection with
First American New York, BCCI controlled most of the critical
decisions by First American, including the hiring of management,
the size, location and choice of office space, and the business
strategy. More importantly, when it came to fundamental issues of
First American's acquisition and sales strategy, BCCI's needs
over the course of a decade repeatedly dictated First American's
decision making, rather than independent business judgments by
the U.S. officials of First American.
In their written testimony to the Subcommittee, Clifford and
Altman made the following presentation concerning the issues
related to BCCI's involvement with decisions concerning First
American New York:
BCCI has not in any way controlled First American Bank of
New York ("FABNY"), much less the First American
organization. These events now being questioned cannot be
viewed in isolation, and are related to unique circumstances
in New York during the 1982-1983 time period. . . In
connection with the 1981-1982 regulatory proceedings to
acquire two New York banks owned by FGB, an application was
submitted to the New York State Banking Board. Due to strong
opposition, the investors agreed to divest the New York City
bank following the tender offer. The Middle Eastern
investors, in effect, were forced to create a new bank in
New York City -- an unforeseen development.
As a result, an entire management group to operate the
New York bank had to be identified and hired. Mr. Abedi, as
investment advisor to the shareholders, was consulted about
bankers whom he might know or recommend for employment by
the new First American Bank of New York. This assistance was
particularly welcome as FABNY was to have an international
banking capability, and Mr. Abedi's background was devoted
to international banking. At no time, however, did Mr. Abedi
make decisions concerning the selection, hiring, or
dismissal of officers. Final authority -- as made clear by
Board minutes -- rested with Mr. Clifford and the FABNY
However, in testimony before the Subcommittee, Altman
acknowledged that the circumstances pertaining to BCCI's
involvement in the establishment of a New York office for First
American had lead to BCCI being unusually involved in some of the
start-up functions of First American there.
When the acquisition was completed in the spring of 1982 we
were then in a very awkward and, to some extent, unhappy
posture. We were under an obligation to sell the New York
City bank. And we were under a need to set up a new bank and
really set it up from scratch. We had nothing in the city.
We had no staff. We had no location. We had no resources. It
put us, as I say, in a difficult position.
Now throughout the takeover litigation and during the
regulatory proceedings, we essentially had two contacts in
New York. One was the law firm of Wachtell, Lipton, Rosen &
Katz that was co-counsel with us and represented the
shareholders during these proceedings. And the other was
BCCI, which had a representative office and was acting as
the investment advisor. . . And so we went to the people we
knew at Wachtell, Lipton and we asked the attorneys did they
know of space in the city. And they did. And they
recommended space. And we went to BCCI's representative
office in New York, which was then headed by this man,
Elley. And he also attempted to assist us by telling us of
brokers or space that he was aware of. And, indeed, this was
something that I worked on personally.
But I was not in New York City and when I would go up there
and I was to get back messages or information, I would
usually ask people to send it either to BCCI in New York or
to the New York lawyers. They acted, in effect, as a local
contact for us.
And so BCCI was trying to be helpful to us. Now this did not
seem particularly out of the ordinary.(31)
Thus by Altman's account, BCCI, like Wachtell, Lipton, was
acting a local contact and assistant to help First American
establish its presence. Unfortunately, the account does not
square with other information obtained by the Subcommittee
concerning the circumstances which lead to the opening of the New
York office of First American, nor does it provide any business
justification for First American having made the decision to open
a New York office in the first place.
To begin with, there was no obvious business justification
for First American to purchase two branches in New York City from
Banker's Trust, where banks like Citibank, Chase Manhattan, and
Chemical Bank collectively had many hundreds of branches. Indeed,
a decade later, George Davis, Clifford's successor as CEO of
First American, would conclude that the New York operation of
First American had lost money for years and remained in 1992 a
drain on the resources of First American overall.(32) By contrast,
Abedi and BCCI had made acquisition of a bank in New York his
priority since 1975, while First American had not done any
preparation in insure its ability to do business there. Again, in
We had nothing in the city. We had no staff. We had no
location. We had no resources.(33)
The obvious question was why First American, under the
circumstances, would as among the earliest actions of Clifford
and Altman at the head of First American, go ahead with expanding
First American's operations through purchasing New York branches
under such difficult conditions. The answer, as numerous BCCI
memoranda suggest, was that Abedi and BCCI needed the branch to
act as an outpost in the U.S. for BCCI's international
operations, and that Clifford and Altman were essentially acting
as covers for BCCI's acquisition there, that had been previously
blocked by New York bank regulators when BCCI sought to go in
For example, a memorandum dated July 25, 1983, from BCCI
employee Aijaz Afridi to BCCI Number 2 Swaleh Naqvi, with copies
to BCCI officials Kemal Shoaib and K.K. Elley, described BCCI's
plan for First American New York in terms that suggest it would
operate independently from the other First American banks.
According to this BCCI official, while operating independently,
First American New York would be subsidized by the other First
American banks, using their assets as sources of funds and their
clients as sources for "their entire international business,"
with First American New York becoming "their Central Treasury."(34)
The BCCI memorandum discusses such issues as how to achieve
growth and profitability for First American New York, how to
project its image domestically and internationally, how to
introduce the bank to Third World countries, new products and
services, and related issues. Under "basic assumptions," Afridi
Management style and Philosophy will be on the pattern of
BCC -- No interference from the Holding Co. and free hand to
The record also shows that BCCI's involvement in directing
the establishment of this office was pervasive. For example, as
both BCCI officials and BCCI documents show, it was BCCI, not
First American, that determined how much office space First
American would lease in New York. As Sakhia testified:
The decision of hiring, decision for acquisition of space
. . . the New York office of First American was identified
by BCC officers and approved by Mr. Abedi. He made the
decision to rent that space.(36)
The space that was rented by First American was 350 Park
Avenue, close to the offices already established by BCCI in New
York at 320 Park Avenue. According to the Federal Reserve, and
contrary to Altman's sworn testimony, it was BCCI, not Wachtell,
Lipton, that directed the choice of a location, and when Clifford
and Altman objected to the cost of the location, they were
overruled by Abedi.(37)
Over the ensuing decade, the space would prove grossly
excessive for the actual needs of First American, and its costs
would become a significant drain on First American's resources. A
letter dated December 13, 1982 from Elley to Swaleh Naqvi,
Abedi's number two at BCCI, on BCC New York stationery, documents
the nature of the relationship between BCCI and First American in
New York. In the letter, Elley brings Naqvi up to date with a
meeting he has had with Altman concerning the First American Bank
in New York, and covering the subletting of space at 350 Park
Avenue, renovation of the space, selection of board directors,
recruitment of key staff, selection of auditors and attorneys,
and coordination with the holding company and the shareholders --
all matters being handled for First American by Elley as a BCCI
employee and reported to Naqvi, the BCCI senior executive at a
time when Clifford and Altman were ostensibly in control of First
BCCI also handled the purchase of new branch offices in New
York for First American. In March 1983, while Elley was still
employed by BCCI as head of its New York representative office,
he began discussions with Bankers Trust officials regarding the
purchase of branches of their bank for First American. Six weeks
later, when First American submitted bids for the branches, BCCI
officials -- not First American officials -- handled the
For instance, in an October 14, 1982 letter to Swaleh Naqvi,
Khusro Karamat Elley, an employee of BCCI in New York, wrote
concerning "the subletting of space, ... selection of board of
directors, recruitment of key staff, selection of auditors,
selection of lawyers, compensation package, including fringe
benefits, projections for first year's operations, coordination
with holding company and shareholders." (40)
Another letter written by Mr. Elley to Mr. Naqvi concerns
the Board of Directors of First American Bank in New York and Mr.
Elley's recommendation of Mr. Richard Paget to the board. In
response to a question regarding the Paget recommendation, Altman
testified only that:
We had a very unusual situation that developed in New York.
And you were focusing on a period nearly 10 years ago, very
limited in time.(41)
Clifford and Altman's written testimony referred to a single
candidate for First American New York recommended to them by
Abedi.(42) In fact, as specified below, BCCI had direct
involvement in, and apparent control over, numerous key personnel
decisions in First American New York beginning in early 1982 and
continuing through at least early 1986.
For example, in October, 1982, Abedi had contacted Joseph
Feghali, the president of another bank with whom BCCI had a
correspondent banking relationship, interviewed him in Los
Angeles, and offered Feghali the position of president and CEO of
First American New York. In subsequent meetings, Abedi and his
number two at BCCI, Naqvi, offered Feghali a seven-year contract
with First American, including benefits and salary for Feghali,
before Feghali had communicated with either Clifford or Altman.
Only after these decisions had been made did Feghali meet with
Altman. At that point, Altman and Feghali met to discuss First
American New York operations with Elley, and continued further
negotiations over the terms of a draft employment contract Altman
provided Feghali, who ultimately turned down the offer from BCCI
and from Altman for medical reasons.(43) Later, this scenario was
repeated in 1983 in connection with BCCI first interviewing and
then recommending to Clifford and Altman the hiring of Bruno
Richter as CEO and president of First American New York, a
position he accepted in July 1983.(44)
Following Richter's hiring by Clifford and Altman, he in
turn sought to hire other bank officials for First American New
York who were required to interview not only with Altman, but
with Abedi and Naqvi in London. Later, when Clifford and Altman
became unhappy with Richter, his firing was discussed at length
with Abedi by Clifford and Altman. His replacement, William
Duncan, was selected as First American New York's new president
and CEO only after interviewing with Abedi in London.(45)
Ultimately, two BCCI officers, Elley and Afridi, were
transferred by BCCI's New York agency to First American New York.
Naqvi discussed the issue with Altman and then offered Elley a
position at First American New York as senior Vice President.
After leaving BCCI for First American, both officers continued to
receive BCCI benefits including reimbursements from BCCI for gas,
electric and telephone bills, as well as concessionary mortgage
rates from BCCI.(46)
The minutes of a BCCI U.S. marketing meeting held in 1985
describe the participation of these two former BCCI officials
during their tenure at First American in meetings aimed at
strengthening BCCI's control of the U.S. bank. As the memorandum
"Mr. Afridi opened the meeting and emphasized that the
purpose of the meeting was to coordinate the efforts of
different locations of BCCI and other institutions
[emphasis added] so that the President's desire to have
a totality of approach is achieved. It is a great
challenge that the group faces in the present and
future U.S. operations."(47)
Afridi was a former employee of BCCI who at the time was
working for First American of New York and, according to the
memorandum, "requested the members to work together to overwhelm
the U.S. market. Historically, we have not made a calculated
approach to the U.S. market." When Senator Kerry asked Mr.
Altman to comment on the memorandum, Mr. Altman, who did not
attend the meeting, said, "I can't explain what this does
mean.....I can't comment on the propriety of what the
participants were doing, but I think it is troubling."(48)
When asked by Senator Kerry if Mr. Elley and Mr. Afridi,
whom Mr. Altman had hired from BCCI, were working behind his back
on the joint marketing plan, Altman replied. "That is
correct."(49) However, Abdur Sakhia, the head General manager for
U.S. operations, testified that Altman talked to him personally
"about [joint BCCI-First American] marketing."(50)
The handling of First American's capitalization by BCCI and
by Clifford and Altman raise further substantial questions about
their independence of BCCI's control in handling First American's
most important financial transactions -- its capitalization.
BCCI's direct involvement with Clifford and Altman in connection
with financing for First American began almost immediately after
the Federal Reserve approved the CCAH application, and continued
throughout the 1980's.
As the Federal Reserve found in its summary of charges, on
about May 13, 1982, BCCI or ICIC Overseas made a payment to one
of First American's holding companies, CCAI, of $2.5 million to
permit it to pay interest on a loan from BAII, followed by a
second payment of $2.3 million on about July 13, 1982 from BCCI
or ICIC Overseas for the same purpose. According to the Federal
Reserve, these payments violated the commitment made by Clifford
and Altman and CCAH that no more than $50 million in debt would
be incurred by CCAH and its subsidiaries for the acquisition of
FGB, because they represented an addition $4.8 million in debt to
BCCI or ICIC Overseas by CCAH. The Federal Reserve additionally
found that they violated the commitment made that BCCI would not
fund the CCAH acquisition of FGB, a commitment violated through
the payment of the interest.(51)
Two weeks after the second payment, CCAH's outside
auditors, Ernst & Whinney, who at the time were also auditing
BCCI's Luxembourg holding company, wrote to BCCI and to Altman
concerning the $4.8 million in new funds, and describing the new
funds as a capital contribution by a new investor. In effect, the
auditors were viewing the payment by BCCI to be a capital
contribution by BCCI entitling it to own shares in First
American. In response, BCCI told the CCAH manager in the
Netherland Antilles and the auditors on September 20, 1982 that
the funds should be treated as a short-term subordinated loan
from the shareholders of CCAH, making it a loan from BCCI to all
of CCAH's shareholders. Six months later, Altman wrote the CCAH
manager in the Netherlands Antilles that only one CCAH
shareholder had lent the money -- Kamal Adham -- despite knowing
that BCCI itself had lent the money and was now using Adham as a
pass through or nominee. Later, after BCCI officials in London
complained about how much the loan was costing BCCI, Altman
directed CCAH to prepay the loan 19 months prior to its maturity,
replacing it with a new loan at a higher interest rate, costing
CCAH $152,0000 over the remaining term of the loan.(52)
In August, 1982, BCCI provided $30 million to First American
through its holding company, CCAH, to purchase the remaining
common and Class A shares of Financial General, making FGB a
wholly-owned subsidiary of CCAH by eliminating any shareholders
from Financial General who were not controlled by BCCI. As the
Federal Reserve found:
At the time CCAH received and used the funds, no decision
had been made as to the method by which they would be
reflected on the books of the company. The board of
directors had not authorized the issuance or sale of
additional shares of the company, and no decision had been
made as to whom, if anyone, new shares would be issued.(53)
In effect, the $30 million capital contribution gave BCCI a
direct stake in First American less than one year after the
Federal Reserve had approved its application on the understanding
that BCCI would not be involved. Alternatively, the $30 million
could be characterized as a BCCI loan to First American, also
prohibited by the Federal Reserve. It took BCCI over four months
to decide how to structure the contribution. Its conclusion was
to direct its resident agent in the Netherlands to direct Altman
to treat the $30 million as capital contributions from three
existing Middle Eastern shareholders and from a fourth new
shareholder, Sheikh Khalifa Bin Zayed al Nahyan. The resident
agent provided Altman with back-dated resolutions authorizing
this handling of the funds, which Altman duly had signed by
In 1983, when CCAH raised $75 million in additional capital
through a "rights offering," BCCI again paid the funds to First
American, advancing the purchase price for the shares, despite
the fact that responsibility for payment of the funds had not yet
been allocated among the various shareholders in accordance with
their acceptances, or waivers, of the shares due them in the
rights offering. According to the Federal Reserve's summary of
Altman was aware of BCCI's payment, and was concerned that
the funds had not yet been allocated among the various
shareholders . . .(55)
Later in 1983, when BCCI failed to provide an additional $25
million requested by CCAH, BCCI provided CCAH with a $20 million
credit line, stating that CCAH had requested the loan. These
funds were paid by BCCI to First American, with documentation
created later attributing the lending to Kamal Adham, a key
front-man for BCCI in the CCAH stock purchases. Tellingly,
although BCCI treated Adham as the lender of the funds, Altman
and another partner at Clifford & Warnke dealt exclusively with
BCCI concerning the terms and repayment of the loan, despite
Altman's frequent contacts with Adham on other matters pertaining
to First American. Later, another Clifford & Warnke attorney
drafted loan documents memorializing Adham's involvement in the
matter, back dated two and a half months, and signed by Altman,
which were provided to BCCI for Adham's signature.(56)
In future years, Clifford & Warnke lawyers communicated with
BCCI a number of times concerning the "Adham" loan, and described
the loan in two instances as one "arranged by you [BCCI] in our
favor."(57) Despite BCCI's handling of every aspect of the loan,
including the original disbursement to First American, Altman in
filings with the Federal Reserve described it as a "loan from
Investor." In 1991, when Altman gave sworn testimony to the
Federal Reserve, he represented that the loan was made to CCAH by
Perhaps the clearest example of Clifford and Altman
undertaking an action, ostensibly on behalf of First American,
but directed by BCCI, was First American's decision to purchase
the National Bank of Georgia in 1986 from Ghaith Pharaon.
Clifford and Altman have testified that they "learned that the
owner of NBG, Ghaith Pharaon, was in financial difficulty and
might be willing to sell his bank."(59) Clifford and Altman
describe the acquisition of the National Bank of Georgia by First
American in 1986 as a "reflection of First American's consistent
corporate strategy of expansion since 1982," suggesting that it
was mere coincidence that First American purchased a bank already
owned by another member of the BCCI family, Pharaon, and which
they understood to have adopted BCCI's hexagonal logo and banking
As the Office of the Comptroller of the Currency had
suspected in early 1978, BCCI in fact owned 50 percent of
National Bank of Georgia (NBG) from the moment of its ostensible
sale to Ghaith Pharaon in May of that year, with Pharaon acting
as BCCI's nominee for those shares to avoid the hostility
regulators had already demonstrated towards any direct
acquisition by BCCI. If any of Pharaon's creditors attached
NBG's assets, the ensuing civil litigation could threaten to
reveal this secret interest, with the result that BCCI be
destroyed. Accordingly, BCCI decided to consolidate its U.S.
holdings through the sale of NBG to First American, as specified
in some detail in the chapter on BCCI's later activities in the
U.S. Thus, while BCCI's business need to bring about this
purchase is clear, First American's was not, especially given the
actual underlying problems at NBG, which had begun when the bank
had been under the control of Bert Lance and accelerated as a
consequence of BCCI's management of NBG while Pharaon held the
On January 1, 1985, Pharaon executed a secret "Memorandum of
Deposit" with BCCI which provided that all of the outstanding
shares of NBG Financial would be deposited with BCCI as
collateral for loans to Pharaon and his companies, and giving
BCCI "or its nominees" the right to vote the shares. As a result,
as of that date, BCCI had effective control over the 50% of the
shares of NBG which had been BCCI's from the beginning.(61)
By November 1985, with Pharaon's financial difficulties
intensifying, BCCI's auditors, Price Waterhouse, began to express
concern to BCCI about its exposure to Pharaon and calling on the
bank to reduce this exposure. In fact, a portion of this exposure
was related to Pharaon's holding of NBG on BCCI's behalf.
Accordingly, BCCI and Pharaon agreed to liquidate Pharaon's
50% interest in NBG, and sell his holdings of NBG stock held by
Pharaon Holdings Limited back to NBG Financial, now controlled by
BCCI. At this point, BCCI had direct and total secret control of
all of the outstanding shares of National Bank of Georgia, and
had demonstrated to Price Waterhouse its ability to force "loans"
to major borrowers like Pharaon to be "repaid." But these
financial manipulations did not solve the other serious problem
created by Pharaon's deteriorating financial condition -- the
possibility that creditors might seek to attach the shares of NBG
Financial -- still officially "owned" by Pharaon. The result
would not merely put BCCI's ownership of NBG at risk, but could
set in motion the destruction of BCCI's entire empire in the
United States and possibly globally.(62)
In London, Abedi looked at the NBG situation and determined
that the simplest solution to the Pharaon problem was to merge
National Bank of Georgia into First American, and thereby take
Pharaon out of the picture. In the terms of the Federal Reserve
charges, "in December 1986, BCCI caused CCAH to agree to purchase
the shares of NBG [Financial] from Pharaon for $220 million."(63)
Significantly, while the transaction did not close until
August 19, 1987, First American provided $80 million at the end
of December, 1986 as an option on the purchase, securing those
$80 million worth of shares and leaving Pharaon "holding" only a
remainder of $140 million worth of the bank -- shares already
held by BCCI as security for defaulted loans. Thus, any outsider
who tried to attach Pharaon's shares in NBG would find that as
creditors, they were now in back of First American and BCCI,
making such an attachment of little legal value and thereby
protecting the shares. From the point of view of First American,
however, this secret arrangement had a significant problem.
BCCI's security interest in NBG preceded that of First American.
If something went wrong, First American might not be able to
recover its $80 million.
Within BCCI at the time, it was generally understood that
the sale of NBG from "Pharaon" to "First American" was
principally a consolidation of BCCI entities within the United
States. As Abdur Sakhia testified, First American had been
planning to expand its operations to Florida in the mid-1980's,
and had never discussed a move into Georgia, until 1985. In late
1985, he became aware that Pharaon's financial situation had
become shaky, and at Abedi's request arranged for a meeting to
take place in Miami in November of 1985 involving Abedi, Naqvi,
Clifford, Altman, and two officials from National Bank of Georgia
-- Carlson and Jamil. No one else was permitted to attend the
meeting. After it ended, Abedi came out and told Sakhia and other
BCCI officials that National Bank of Georgia would be merged with
First American.(64) Abdur Sakhia remembers organizing the
meeting. According to Sakhia, it was at this meeting that the
decision was made to merge National bank of Georgia and First
American. According to Sakhia, afterwards he met with Abedi, who
talked of "merger and not buy and sell."(65)
Later, in preparation for BCCI's possible purchase of a bank
in Florida, Sakhia was provided with a model file of the
Independence Bank transaction, which showed Pharaon's role as a
nominee, which was to be the model for the purchase of the Eagle
Bank by BCCI. Sakhia then met with Naqvi in Luxembourg, and
discussed BCCI's planned purchase of Eagle, with Faisal al Fulaij
to act as the nominee instead of Pharaon. Altman was present
during the conversation, and thus participated in a meeting in
which the use of nominees by BCCI to purchase banks in the U.S.
was discussed.(66) Altman's knowledge of this practice by BCCI and
by Pharaon in connection with Independence would obviously have
been important in the NBG transaction, causing him as a lawyer to
have asked many questions concerning the relationship between
BCCI and Pharaon. No document provided the Subcommittee shows
Altman having ever expressed concern about the possibility that
Pharaon was a nominee. The obvious explanation is that he did not
do so because it was a fact Altman already knew, and because
Altman himself had become a party to the arrangements involving
BCCI and Pharaon.
After the Miami meeting, Sakhia wrote Abedi in London in
February 1986 regarding BCCI's "Future Plans in the United
States." In the memorandum, Sakhia referenced his discussions
with Altman concerning the planned purchases by BCCI of banks in
Florida. In a paragraph concerning the National Bank of Georgia,
Sakhia suggested that in view of "the forthcoming restructuring
of the bank in Georgia, it may be useful to merge their Miami
operation with BCC Overseas, Miami, as this will offer additional
dollar deposit and correspondent banking relationship to BCCI
In their written testimony before the Senate, Clifford and
Altman denied that the acquisition of NBG by First American was
directed by BCCI, stating instead that the acquisition:
was a reflection of First American's consistent corporate
strategy of expansion since 1982 . . . in December 1986,
based solely on its judgment of First American's best
interests, the CCAH Board approved the proposed acquisition
of NBG. BCCI did not influence these deliberations, nor did
it control the Company's decision to acquire NBG. First
American, not BCCI, initiated the NBG acquisition.
The price paid by First American was reasonable and
determined free of control by BCCI.(68)
As Altman told journalists in 1986 who wondered at the coincidence of Clifford and Altman buying the bank once held by Lance and whose sale by Lance to Pharaon they had participated in:
It was clearly an arms-length business deal, that is to
suggest we didn't get any special consideration in terms of
price. . . It's a logical move for us in terms of our market
In answers to written questions from the Subcommittee,
Altman denied attending any meetings regarding the NBG purchase
by First American in Miami, as described by Sakhia. However, Roy
P.M. Carlson, the former President of NBG, has told Subcommittee
staff that he, Mr. Clifford and Altman all met together at the
Grand Bay Hotel in Miami in February 1986 to discuss the price
Unfortunately, the statements made by Clifford and Altman to
the Committee regarding the National Bank of Georgia transaction
cannot be reconciled with the documentary and testimonial
accounts of the other parties involved.
On July 29, 1992, the Federal Reserve issued a lengthy
summary of charges against Clifford and Altman in connection with
their roles in BCCI and First American, including 350 paragraphs
setting forth their roles in connection with alleged violations
of various federal regulatory provisions. Of those 350
paragraphs, 78 paragraphs were devoted to Clifford and Altman's
handling of the purchase of NBG by First American, and they
define in detail the factual basis for concluding that the
purchase was occasioned not by the independent needs of First
American, or an independent business judgment by Clifford and
Altman, but by BCCI. The following account summarizes the Federal
Reserve evidence and findings.
The Federal Reserve found that in 1977, Pharaon became the
nominal owner of National Bank of Georgia in a transaction
negotiated and bankrolled by BCCI, and in which BCCI had a secret
50 percent interest from the beginning. While nominally owned by
Pharaon, NBG employed several BCCI officials, NBG personnel
regularly attended BCCI conferences at BCCI's expense, NBG
adopted BCCI's management style and hexagonal logo, and revised
its business orientation from a retail bank to an international
In February 1983, Altman joined National Bank of Georgia
officials at a BCCI-sponsored conference in New York, whose
purpose was to integrate NBG into BCCI's corporate culture.
Following a presentation by BCCI officials, an executive vice
president of NBG, William Batastini, "gave public remarks at
which he expressed his happiness at being part of the BCCI
family," in Altman's presence. Batastini then repeated these
remarks at a later annual conference of BCCI in Athens in March
1983, again in Altman's presence.(71)
By January 1, 1985, BCCI, in the course of restructuring
Pharaon's loan portfolio with BCCI, acquired control of all NBG
shares. In November, Pharaon's financial problems -- including a
possible default on a $200 million loan that had been syndicated
to a number of banks -- became public -- with the result that the
prospect of liens on Pharaon's property by creditors became a
significant threat. Moreover, the news caused Price Waterhouse,
BCCI's auditor, to express concerns about BCCI's exposure to
Pharaon, and to urge that BCCI call in loans to reduce its
exposure. As the Federal Reserve found:
Because BCCI secretly owned and controlled NBG and its
shares, an attachment of those assets by Pharaon's creditors
threatened BCCI with a substantial financial loss. . . BCCI
thus had an incentive to cause NBG to be sold to another
BCCI nominee, one that would not be subject to levying
Accordingly, BCCI began to plan the sale of NBG to CCAH and
First American. In September 1985, Altman met with NBG's
president, Roy Carlson, who had been placed at NBG by Abedi, who
had known Carlson through Carlson's work at the Bank of America
when Bank of America owned a stake in BCCI, and two other NBG
officials. At the time, Georgia law prohibited the acquisition of
a Georgia bank of a bank holding company, such as CCAH, which had
substantial assets outside the south. The following month, Altman
asked First American's Treasurer, A. Vincent Scoffone, to conduct
a preliminary evaluation of NBG to determine a purchase price for
NBG. Scoffone estimated that NBG's book value was approximately
$80 million, and that based on recent bank sales prices of
Georgia banks, a realistic price for NBG would range from $120
million to $180 million. At the time, Scoffone warned that "no
review has been performed on the quality of the asset base. Such
a review is mandatory before any real meaningful analysis can be
made regarding the tangible net worth of NBG."(73)
According to testimony from Sakhia, and the summary of charges of the Federal Reserve, in November, 1985, Clifford and Altman attended a conference of BCCI managers in Miami, including Abedi, Naqvi, Sakhia, and two NBG officers, Carlson and former BCCI official Tariq Jamil. Following a conference with the managers, Clifford and Altman met separately with Abedi, Naqvi, Elley, Jamil and Carlson, during which Abedi decided and announced that NBG would be sold to CCAH, that Jamil would be transferred from NBG back to BCCI's headquarters in London, and that Elley would be transferred from First American New York to NBG to replace Jamil. Some time later, Altman told Sakhia he was not pleased with Abedi's decision to purchase NBG and that he would not have purchased the bank of his own free will.(74)
In February 1986, in connection with an evaluation of
Pharaon's holdings, an independent valuation of NBG was conducted
by the firm of Keefe, Bruyette & Woods, which determined that NBG
was worth between $130 million and $144 million, and a copy of
this report was provided to the firm of Clifford & Warnke. In
May, 1986, First American's Treasurer, Scoffone, conducted a
second analysis of NBG's value, without having been told by
Clifford of Altman of the Keefe, Bruyette & Woods valuation. In a
memorandum to Altman dated May 7, 1986, Scoffone concluded that
based on the median purchase price for banks within the past
year, its value was $152 million. Arguing that "NBG may be a
unique situation because of its location in Atlanta, Georgia,"
Scoffone said that "a premium over the median purchase price may
be appropriate," and on that basis concluded that a fair price
for NBG would be $211 million if one assigned a higher multiple
times book price for the shares than banks in the Georgia region
had been sold for during the past year. He also acknowledged that
at such a price:
this transaction would be highly beneficial to the present
owner of NBG. The bank would be sold at a significant
premium over both the national and local median sales
Contrary to normal banking practice on a purchase of this
magnitude, Clifford and Altman did not retain an independent
investment banker to assist in valuing the shares, as they had
previously done in the purchase of branches for First American in
New York from Banker's Trust in 1983, and would do again in 1990
when they were considering the sale of First American overall.
Instead, First American relied on Scoffone's evaluation, and
Altman became the sole representative of First American in
negotiations over the acquisition and the structuring of the
transaction. Significantly, in doing so, Altman did not deal with
Pharaon, but with Abedi, Naqvi, and other BCCI officials.(76)
On May 8, 1986, Altman wrote Naqvi, enclosing Scoffone's
evaluation, and expressing his hope that the purchase price would
be in the range of $160 million to $175 million, as "we are
nearing the point at which this purchase is too expensive."(77) A
week later, meeting in London with Batastini at BCCI's London
headquarters, Altman and Batastini agreed to a purchase price of
$205 million, of which $80 million would be paid up front for an
option to purchase, and $125 million upon consummation of the
transaction. Under the agreement, First American (CCAH) would pay
Pharaon the $80 million immediately, and against the $80 million
would receive a security interest in NBG's shares -- thus
protecting them from other Pharaon creditors. At the same time,
BCCI and Altman discussed the fact that BCCI would simultaneously
have lending to Pharaon for the remainder of the $205 million,
leaving NBG's shares entirely pledged and protected from
creditors. Altman then discussed this situation further with
other attorneys for First American, who noted the following:
The proposed structure may focus unwelcome attention on the
relationship between CCAH [First American's holding company]
and BCCI and raise questions as to whether BCCI has acquired
control of NBG. . . . A bigger problem [then certain other
regulatory issues raised by the structure], however, arising
from BCCI's involvement in the transaction is that it might
focus closer attention on the relationship between CCAH and
BCCI. An argument could be made perhaps that CCAH and BCCI
are acting together and/or as principal and agent.(78)
Altman then sent a copy of this memorandum to Naqvi, and
Clifford sent a second copy to Abedi in London, with a note from
Clifford dated June 17, 1986 warning Abedi that the memorandum
would "give you some idea of the difficulties and complexities
facing us." Later in June, when CCAH and First American filed
drafts of the option agreement with the Federal Reserve under
which CCAH would acquire the National Bank of Georgia, the
documents did not refer to the pledge of NBG shares to BCCI that
was simultaneous with the pledge of NBG shares to First American,
or to the fact that BCCI would acting as an "escrow agent" and
would hold the funds paid to Pharaon by First American until the
completion of the transaction.(79)
By August, Baldwin Tuttle at Milbank, Tweed, the regulatory attorney involved in handling the First American-NBG transaction, became sufficiently concerned about the structuring of it that he wrote to warn him that there five separate legal problems for First American arising out of it. First, the payment of the $80 million option placed CCAH/First American at risk; second, under the structure of the deal, First American did not have the right until the acquisition was completed to exercise any control of management of NBG, leaving it vulnerable should the current management not do their job; third, there was no provision in the agreement for negotiation of the price if the value of NBG declined prior to the option's exercise; fourth, legal opinions were necessary to determine "the validity of Pharaon's ownership of NBG;" and finally, there was no guarantee CCAH/First American would recover its $80 million if it chose not to exercise its option.(80)
These issues arose in part because Tuttle had
previously been advised that BCCI would also have a security
interest in NBG shares, raising the question of whether BCCI's
interest in the shares, or First American's interest in the
shares, would be satisfied first in the event something went
In response to this letter, Altman demanded that Tuttle
appear at Altman's office, and during a "brief and hostile
meeting," handed Tuttle both the original and the only other copy
of his letter and warned Tuttle that if he ever wrote such a
letter again, Tuttle would no longer represent CCAH/First
While there are many conclusions one might draw on the basis
of this incident, one notable element is Tuttle's recognition
that there reasons to doubt "the validity of Pharaon's ownership
of NBG." The only possible reason to doubt his ownership under
the circumstances was the issue of whether BCCI was the actual
owner already. Altman's response to Tuttle offers a convincing
example of Altman's determination that no inquiries be made
regarding this issue. It is evidence that Altman's failure to
advise the Federal Reserve of BCCI's involvement in the
transaction was wilful and intentional, rather than accidental,
as reflected in the charges brought against Altman by the Federal
Reserve in connection with this incident.
On September 4, 1986, Altman provided Naqvi at BCCI with
draft documents relating to the option and loan transaction for
his review, and identifying BCCI as pledge agent for First
American's option payment and BCCI's loan. In a cover letter to
Naqvi, Altman wrote that the agreements assumed that there was no
debt secured by the NBG shares "except as may be later authorized
with respect to the BCCI loan to Dr. Pharaon." As the Federal
Reserve found, Altman was already aware of the Pharaon debt to
BCCI secured by the NBG shares.(82)
The significance of the September 4, 1986 letter from Altman
is that it identifies how Altman chose to respond to the problems
posed by revealing the fact that BCCI already had a security
interest in National Bank of Georgia shares that might impair the
value of First American's security interest in them and raise
questions about the $80 million option. Altman's response was, in
effect, to join BCCI in a subterfuge -- that BCCI would not lend
the money to Pharaon or gain security from Pharaon until First
American's debt was secured -- when in fact, both Altman and
Naqvi knew this was untrue.
On October 23, 1986, Pharaon and BCCI executed various
agreements to effectuate the planned acquisition of National Bank
of Georgia, which included a loan agreement between Pharaon and
BCCI whereby BCCI would lend Pharaon $140 million at the time
that CCAH/First American acquired its option to purchase NBG,
secured by another pledge of NBG shares to BCCI. Altman did not
sign these documents on behalf of CCAH, however, because, as the
Federal Reserve found, he "became concerned that the documents as
then drafted in connection with the NBG option would reveal to
the Board BCCI's extensive participation in the transaction."(83)
According to the Federal Reserve, Altman then went to London,
where he met with a BCCI officer, Imran Iman, and a BCCI lawyer,
to discuss the transaction. A memorandum written by the BCCI
lawyer memorializing the meeting stated the following:
Mr. Altman stated that because the Federal Remere will see
the Pledge Agreement they will see the references to the
Loan Agreement and BCCI SA and will therefore want to see
the Loan Agreement. By seeing all the documents, they would
most likely arrive at an adverse conclusion.
Altman suggested that a better way to have structured the
agreements would have been for the Option and Pledge
Agreements to have been executed and then perhaps 60 days
later, a Loan Agreement signed an addendum [sic] made to the
Pledge Agreement to make BCCI a party to the Pledge
Agreement. . .
[The BCCI attorney] would contact [C&W Partner] of Mr.
Altman's office and appraise [sic] him of the above. [C&W
Partner] would prepare the fresh Pledge Agreement on the
above facts. . . Mr. Altman would discuss the above with Mr.
Naqvi and if he is agreeable, Dr. Pharaon would be
Following the meetings with Altman, the documents were
redrawn to separate the integrated transaction into two
transactions in order to mislead the Federal Reserve. As a
British lawyer for BCCI wrote in a memorandum:
[t]he reason for having two Pledge Agreements is that Mr. R.
Altman feels that in the previous Pledge Agreement, the
references to "Loan Agreement" would have given the Federal
Reserve cause to see the "Loan Agreement" and possibly
decide that an "integrated transaction" was being entered
into. Whereas now, with the two Pledge agreements, the
Federal Reserve will only see the Option Pledge, which
contains no reference to the "Loan Agreement."(85)
A later memorandum by the BCCI lawyer to Naqvi, conveying
the substance of meetings between him and Altman in Washington
D.C. between December 18 and December 20, describes Altman
advising that the documents pertaining to BCCI be signed after "a
reasonable period will have elapsed" in order to prevent the
Federal Reserve from concluding that the transactions involving
BCCI were integrated with the First American purchase of NBG.(86)
The result of the signing of these documents is that NBG
stock was simultaneously pledged to BCCI and to CCAH/First
American, without it being clear which claim was subordinated. On
December 18, 1986, Altman wrote BCCI to advise BCCI that CCAH
consented to BCCI holding a security interest in Pharaon's stock
in NBG up to a level of $140 million, in a letter that did not
specify whose claim to Pharaon's pledged shares would come
first.(87) In order to protect First American's interest, a
subordination agreement was created on behalf of CCAH, which was
executed by Altman the same day, December 18, 1986. BCCI did
not, however, execute the agreement, leaving it of no effect.
When First American lawyer Tuttle brought this to Altman's
attention, Altman ordered the $80 million to be disbursed to
Pharaon regardless, placing CCAH/First American at risk. Later,
Altman lied about the situation to the Federal Reserve, denying
that he was responsible for seeing to it that BCCI executed the
In the spring of 1987, months after paying the $80 million
option to Pharaon, First American began its due diligence review
of NBG to determine what First American had acquired. In the
course of the due diligence, First American found numerous
problems at NBG, including NBG having paid the expenses of its
officials to meet with BCCI officials in London; NBG paying for
hotel expenses for the crew of Abedi's private plane; NBG paying
to fly Abedi to the opening of President Carter's Presidential
library; NBG paying the salary of a former NBG employee for 15
months after he went back to work for BCCI; and paying a fee of
$475,000 to BCCI in connection with the CCAH purchase. The due
diligence also showed extraordinary expenses over NBG's
assumption of a lease from Pharaon's business, Interedec, which
would cost NBG another $25 million to $30 million over the 15
years life of the lease. Finally, it showed that NBG was at or
near the bottom of its peer group on a wide variety of measures
of financial performance, including its return on assets, return
on equity, margin on earning assets, and percentage of non-performing loans. Any of these items would have justified First
American demanding a reduction of the price paid for NBG, or its
right to withdraw from the transaction. First American did
On April 22, 1987, CCAH/First American filed an application
with the Federal Reserve to acquire NBG, which made no mention of
BCCI's involvement in the transaction or of Clifford & Warnke's
simultaneous representation of both CCAH and BCCI in the
transaction. The application stated that Pharaon had control of
100 percent of NBG's shares, and did not disclose the existence
of Pharaon's pledge of the NBG shares, and other documents giving
BCCI the power to vote NBG's shares. When the Federal Reserve
asked the source of funds for the purchase, at Altman's
direction, CCAH's regulatory counsel, Tuttle, advised the Federal
Reserve that the funds had been raised through a rights offering
paid for in cash, with less than 5 percent of the equity capital
involving borrowings by shareholders secured by a pledge of
shares. In fact, at that very time, Altman and Clifford had
themselves borrowed from BCCI about 10 percent of the equity
capital in the rights offering, against shares in First American
which they pledged to BCCI, in direct contravention of the
representation they were making to the Federal Reserve.(90)
Finally, on July 24, 1987, Clifford and Altman sent all
shareholders of First American an offering memorandum relating to
a proposed share issuance to raise $115 million in new capital
for CCAH to complete the purchase of NBG. This memorandum
represented the first time that Clifford and Altman had asked the
shareholders for their approval of the transaction they had
commenced in September 1985 at BCCI's direction. It was, as the
Federal Reserve found, materially incomplete about BCCI's
involvement in the transaction. Moreover, its omission of any
notice to the shareholder's of Clifford and Altman's own
financial interest in the transaction, breached Clifford and
Altman's fiduciary duties to the CCAH/First American
Final evidence of the fact that the NBG transaction was not
in the interest of First American, is contained in the Federal
Reserve's last finding concerning the transaction:
The acquisition of [NBG] created a serious drain on the financial health of First American . . . In 1992, First American transferred NBG to one of its subsidiaries at a fair market value of only $90 million -- $130 million less than it had paid for the bank only five years earlier. In addition, First American paid approximately $12 million to get out of the obligations of the master lease [on the Interedec property it assumed from Pharaon].(92)
The decision by BCCI, Clifford and Altman, to have First
American buy National Bank of Georgia had ultimately cost First
American over $140 million.
Part of the difficulty in unravelling the decision-making
process relating to BCCI, First American, and the National Bank
of Georgia, and Clifford and Altman's role in this process, is
that Clifford and Altman simultaneously represented all parties
in the transactions over a period of 12 years spanning each
permutation of purchase and sale of each of the organizations
The ambiguity about their multiple roles may have been
convenient for Clifford and Altman in some circumstances, such as
during attendance at BCCI's international conferences. But the
ambiguity also created an overwhelming, ongoing conflict of
interest between their obligations to First American's board of
directors, officers and employees on the one hand, and BCCI on
the other. This was especially true because in the United States,
within both BCCI and First American, it was often perceived that
there was an ongoing struggle for control of First American's
destiny, between two competing organizations, one Pakistani,
pertaining to BCCI, and the other American, and controlled by
Clifford and Altman.
Nazir Chinoy, head of BCCI's Paris branch, learned of the
struggle over First American New York at a BCCI annual conference
in Luxembourg in 1985, from Afridi himself, who confessed over a
glass of wine that he was increasingly unhappy at First American
Afridi felt that Altman was not permitting him to run First
American on BCCI lines and yet he was answerable to Mr.
Abedi for profits. He said Altman was interfering in the
management and that he had reported to Naqvi on many an
occasion about Altman interfering with his management, or
trying to change the management structure or style.(93)
As Chinoy described it, from his point of view as a BCCI
official operating outside the U.S., there was not so much a
separation between First American and BCCI as two different types
of management, one Pakistani and one American.
I saw rivals competing for power -- Afridi wanting to be the
top man, and Altman wanting to be the top man.(94)
The conflict of interest between First American's needs and
BCCI's needs was made explicit to Clifford and Altman in a
memorandum from an official of First American New York to them
written in early 1987, concerning the termination of a First
American employee in New York. Enclosed with the memorandum
provided to Clifford and Altman was a letter from a First
American employee that stated that the association between BCCI
and First American was threatening to destroy First American as a
Your basic error has been BCCI. This association is "on the
street" and as soon as this becomes known (with BCCI
reputation) decent accounts fly. . . . Either FAB must take
over and become First American Bank and buy out BCCI shares,
or let them have it. But have two factions running FAB,
Eastern and Western, and until you decide just whom and what
you are, FAB is doomed to extinction.(95)
There is no record that Clifford or Altman undertook any response to this letter, which contradicts Clifford's testimony that there was never a "suspicion" about BCCI's involvement in First American during the period he ran First American.
Another area of difficulty in assessing Clifford and
Altman's knowledge of the relationship between First American and
BCCI is that Clifford and Altman have maintained that BCCI acted
as an investment advisor to the shareholders. In testimony
before the Senate, Clifford testified, "we treat Mr. Abedi, we
treat Mr. Naqvi, as the representatives of our investors."(96) In
other words, not only did Clifford and Altman wear many hats, but
they have maintained that Abedi and BCCI also played various
roles, ranging from client to investment advisor to
"communications link" for the middle eastern investors.
Sakhia, however, challenged Clifford and Altman's
characterization of Abedi as a communications link for the Middle
Eastern investors. Sakhia testified:
I fail to understand . . . that it was difficult to
communicate with the Middle Eastern investors. . . .
They were not Bedouins in the desert. . . . These were
intelligent people who owned banks and businesses. The
Abu Dhabi investment Authority has several billion
dollars invested in this country, and if they can
manage those businesses they did not need a channel via
Mr. Abedi to First American. They could have done it
Clifford and Altman did begin to communicate directly with
First American's shareholders in 1989, after the New York grand
jury had begun and both BCCI and Clifford and Altman understood
that the key issue would be whether the shareholders were
nominees for BCCI. Thus, in October 1989, Altman, instead of his
past practice in routing communications with shareholders through
BCCI, wrote Adham and other shareholders directly to seek their
position regarding the possible sale of the bank.
Perhaps the most controversial aspect of Clifford and
Altman's relationship with BCCI was their purchase of CCAH shares
with loans provided by BCCI, a transaction that not discovered by
First American officials until the summer of 1990 and not
disclosed to the Federal Reserve until the spring of 1991.
The transaction was controversial for a number of reasons.
First, from the beginning, regulators had stated their
understanding that BCCI would not be lending funds to BCCI
shareholders which would be secured by CCAH shares. Second, when
regulators asked Clifford and Altman whether they had been such
lending now in the past, Altman's responses did not acknowledge
the existence of the loans. Third, the loans had never been
disclosed to First American's board of director or other offices.
Fourth, the terms of the loans were very unusual in that they
were non-recourse, and BCCI could not proceed against Clifford
and Altman if they failed to repay them. Moreover, as specified
below, there were secret side agreements between Clifford and
Altman and BCCI which is essence guaranteed that BCCI would
handle the sales of the stock for Clifford and Altman at a price
agreed to among the three of them.
In their written testimony to the Subcommittee, Clifford and
Altman provided a detailed explanation of how they came to
purchase the stock, and how BCCI came to finance the purchase:
The amount paid us by the Company was relatively
modest. Mr Clifford, as Chairman, requested, and was paid,
$50,000 a year -- a modest amount compared to the
substantial annual compensation paid to the top officials of
major banks. Mr. Altman . . . received no payments other
than the usual director's fees. . . Nor were we given the
valuable perquisites that are normally provided senior
officers of large corporations. We received no financial
bonuses, incentive compensation, or profit sharing. . .
If First American prospered under our leadership, we
hoped to have the opportunity to invest in stock and thereby
participate with the shareholders in the economic benefits
we were creating. In effect, we chose to take our financial
rewards as managers by making an investment in stock. . . In
1985, in the light of 4 years of sustained economic growth
experienced by First American under our control, we
discussed with Sheikh Adham the possibility of acquiring
stock in the Company. We also discussed it with Mr. Abedi,
as the advisor to the shareholders. We learned the
shareholders favored our investment in the company . . .
We had learned that certain of the shares [to be
offered in a rights offering] might remain unsubscribed, and
that we could purchase such shares at the same price -- book
value -- as was paid by the other shareholders.
We determined to acquire shares on this basis, and,
after considering alternatives, sought to finance this
investment through bank loans, if possible. . .
The first institution we approached for financing was
Banque Arabe et Internatinale d'Investissement ("BAII") in
Paris, the consortium bank that acted as the lead lender in
the syndicate that had lent $50 million in connection with
the acquisition of FGB in 1982. . . When problems arose in
the negotiation of terms by our counsel, efforts commenced
to explore with BCCI financing for the contemplated stock
purchase. BCCI, too, was familiar with the [First
American/CCAH] stock being offered as collateral and the
market for the shares. . .(98)
Thus, by this account, both the share purchase and the
lending were intended as compensation by CCAH's grateful
shareholders to Clifford and Altman for the superior job they had
done in strengthening First American over the first five years of
their management. As Clifford testified, "we got to a point where
we knew we were over the hump. And I thought the time had come
for Mr. Altman and me to participate in the results of this very
determined effort that we had made, that was proving to be so
successful."(99) Clifford testified that "I wanted to own some
stock in my own company."(100)
With the loans that they secured from BCCI, Clifford and
Altman purchased stock in CCAH in 1986. In testimony to the
Senate, Altman said that he and Clifford participated in a
"rights" offering which was confined to the 14 shareholders of
CCAH, paying "book price" for the stock, which was $2,216.000.(101)
The account suggests that both the share purchases by
Clifford and Altman, and the lending from BCCI were normal arms-length business transaction, such as other banks might
contemplate to reward officers and directors. Moreover, it
explicitly separates the decision by CCAH shareholders to
compensate Clifford and Altman through permitting them to
purchase shares in the bank from the decision by BCCI to lend
them funds for the purchases. In fact, the two activities were
integrated from the beginning, with BCCI committing from the
start to arrange no-risk financing for Clifford and Altman as
part of the transaction.
Evidence for the integration of the lending by BCCI to
Clifford and Altman with the decision by Clifford and Altman to
purchase shares, and the intention that the purchase be risk
free, is set forth in some detail by the Federal Reserve in its
findings against Clifford and Altman.
As the Federal Reserve detailed, prior to coming up with the
"rights offering" approach, with lending done against the shares
by BCCI, BCCI and Clifford and Altman considered a number of
different alternatives by which they would acquire a risk-free
interest in First American.
For example, in early drafts of the arrangement, CCAH itself
agreed to issue shares to Clifford and Altman, with one draft
including a commitment requiring Kamal Adham, with BCCI as a
back-up, to repurchase Clifford and Altman's shares at any time
at their discretion. Significantly, the requirement that Adham
repurchase their shares was never discussed with him,
demonstrating the degree to which Clifford and Altman, as well as
BCCI, regarding him as no more than a nominee for BCCI.(102)
Ultimately, Clifford, Altman, and BCCI instead decided to
provide them shares through a rights offering in which another
BCCI nominee, Masriq, would "waive" its rights to shares in order
to make them available to Clifford and Altman, at book value or
$2216, one day after Masriq had purchased other CCAH shares at
the price of $4044.20 a share -- a transaction that would be
economically inconceivable if Masriq were a real party at
interest rather than a nominee.(103)
In their written and oral testimony, Clifford and Altman
never specified exactly what had gone wrong to prevent BAII [the
French bank which they had originally contacted for the loans]
from agreeing to lend funds to them for their stock, instead
suggesting merely that unspecified difficulties with BAII had
lead them to open negotiations over loans with BCCI.
In fact, BAII was considering the possibility of issuing
such a loan solely on the basis that BCCI would simultaneously
provide BAII with a guarantee of the loan -- making BAII
effectively acting as a pass through to cover BCCI's involvement,
just as it had done in connection in lending money at the outset
of the FGB purchase. But Clifford and Altman insisted on the
lending being on a non-recourse basis.
Clifford testified that the non-recourse aspect of the loan
-- which prevented BCCI from suing him personally if he failed to
repay the loan, or interest on the loan -- had been recommended
to him by New York counsel who felt his advanced age required
such an arrangement.(104) Despite Altman's relative youth -- he
was under 40 years old at the time -- Altman's loan was on the
same terms. Altman testified that the concern in his case stemmed
from "the [lack of] liquidity of the investment."(105) Regardless
of Clifford and Altman's actual reason for insisting that they
not be at risk for the borrowing necessary to finance their
purchases of CCAH shares, BAII refused to provide the lending,
even with a backup guarantee from BCCI, on a non-recourse basis,
viewing such lending in this circumstance to be inadequately
secured. Thus, even with protection from BCCI, and with a BCCI
director on its board, BAII viewed the transaction as
sufficiently unusual to pull out.(106)
As Clifford testified, ultimately BCCI provided a $15
million loan on a 100% non-recourse basis for 18 months at the
London Interbank Rate, which ordinarily runs below the Prime
rate. When pressed by Senator Brown as to whether or not First
American had ever loaned money to any individual on such
favorable terms, Clifford replied, "I do not know."(107) In staff
interviews, Virgil Mattingly, General Counsel for the Federal
Reserve, has confirmed that First American has never made loans
on such favorable terms.
The loans were due on January 1, 1988. The loans, however,
were not paid off at that time. Altman explained that
"they [the loans] were not actually in default because
we had gone to the lender [BCCI] . . . and asked if
they would refinance the loan or roll it over. The
lender [BCCI] indicated a willingness to do that, but
before the documents were prepared for a second loan,
we started the process of disposition of the
Once BCCI lent the money to Clifford and Altman for the
loans, it immediately agreed to providing further protection to
them to make certain they would never be at risk from their stock
purchases, and in fact, committing to help them sell their shares
"at such prices as BCCI and [Clifford or Altman] shall mutually
These unusual terms were set forth not in the loan
agreements between BCCI and Clifford and Altman, but in a side
agreement they executed, which recited the following terms on the
notwithstanding any provision of the Note or Pledge
Agreement (or any other document relating to the loan by the
undersigned to BCCI) to the contrary, it is understood and
agreed that the undersigned shall not be obligated
personally to repay to BCCI the loan principal or any
interest accrued thereon[, and that] BCCI shall be limited
solely to the undersigned's interest in the CCAH shares and
any proceeds thereof to repay the loan and interest thereon
. . . BCCI shall arrange for the sale of said CCAH shares to
. . . interested buyers in such manner, amount, and at such
prices as BCCI and [Clifford or Altman] shall mutually
Clifford and Altman did not disclose the unique terms of its
arrangements with BCCI to anyone, but actively sought to conceal
it. In their written testimony to the Subcommittee, they suggest
they provided full disclosure in the following terms:
As noted earlier, our investment in CCAH stock was
known to and encouraged by the shareholders. In addition,
our intended purchase of stock was duly disclosed to and
authorized by the Board of CCAH, the parent company of First
American. In advance of the 1986 rights offering, Mr.
Clifford personally informed Managing Directors Symington
and Quesada that we intended to acquire stock in the
corporation . . . We also disclosed the acquisition of this
stock to the Federal Reserve Board.(111)
In fact, First American itself was never told by Clifford or
Altman of their borrowings from BCCI in connection with their
purchase of CCAH shares, until the issue arose as First American
began to respond to questions arising out of an audit of BCCI-First American wire transactions in the summer of 1990.
As the Federal Reserve found, Clifford and Altman failed to
disclose a number of material facts to Symington and Quesada
about their stock purchases, including that they were financing
their purchases by means of non-recourse, preferential-rate loans
from BCCI and that BCCI had agreed to arrange for the subsequent
repurchase of their shares at a price to be agreed upon by
Clifford, Altman and BCCI later.(112)
First American only learned of the existence of the Clifford
and Altman loans, although not all of their unusual terms, when
First American officials were conducting a review of BCCI wire
transfers to First American accounts in response to matters
arising out of the New York criminal investigation into the BCCI-First American relationship. In that review, they discovered
millions of dollars in wire transfers from BCCI to Clifford and
Altman's accounts, and asked them what these transfers pertained
A letter from Clifford and Altman to First American senior
vice president James E. Lewis, dated August 1, 1990, details
their handling of this inquiry from their own officers at First
American. Clifford and Altman replied as follows:
This memorandum is written to provide you with
background concerning certain wire transfers in 1988 you
have identified between the Bank of Credit and Commerce
International (Overseas) lt., and or personal accounts at
First American Bank, N.A. . . .
You are informed that in connection with the 1986 Rights
Offering to the shareholders of Credit and Commerce American
Holdings, N.V., the parent holding company of First
American, to raise additional capital for the Company, all
of the new rights shares were not subscribed by the
shareholders. We determined to acquire a small amount of
CCAH shares which were thus available. In this regard, we
explored financing of the purchase with possible lenders,
Satisfactory loans with BCCI (Overseas) Ltd. were
negotiated by each of us and the purchase of the CCAH shares
at the offering price was effected. (Mr. Clifford invested
approximately twice as much as Mr. Altman.) . . .
In early 1988 we were interested in selling some of our
CCAH stock and upon making inquiries in this regard, learned
that a Middle East businessman wished to acquire shares of
CCAH. As a result, we each sold him, for cash, a portion of
or shares. BCCI serviced that transaction and wired to our
respective accounts at First American the sale proceeds.
From those proceeds we decided to pay off all outstanding
indebtedness to BCCI (including interest) and, accordingly,
we arranged to wire monies from or First American accounts
to BCCI for that purpose.
We understand this information will be maintained on a
confidential and privileged basis.(113)
Notable in this account is what Clifford and Altman did not
tell First American on August 1, 1990: that BCCI had held a
security interest in their First American shares, in
contravention of the understanding of regulators that BCCI would
not lend for the purpose of purchases of such shares; that BCCI's
lending was made on a non-recourse basis, in which BCCI could
recover only Clifford and Altman's interest in First American,
rather than against them directly; that BCCI, not Clifford and
Altman, had located the "Middle East businessman" who purchased
their shares; or that from the beginning, Clifford and Altman had
arranged with BCCI for guaranteed buy-backs of their stock to
insure them against any possible loss.
Significantly, Clifford and Altman also failed to disclose
the existence of these arrangements to their partners at Clifford
& Warnke, who under normal partnership rules would have been
entitled to a share of Clifford and Altman's profits from the
compensation being provided them for their work at First
In June 1987, Clifford and Altman met with Abedi and Naqvi
in London, and insisted on paying interest on their respective
loans from BCCI, despite the fact that the side letters they
agreed executed relieved them of any obligation to do so. Two
months later, they participated in a second rights offering for
CCAH stock. They again paid for the shares with non-recourse
loans from BCCI, against which they pledged their shares of CCAH.
They again executed side-letters relieving them of any risk on
the transaction and insuring that they would be permitted to sell
the stock at a price to be determined by BCCI, Clifford and
Altman. At this point, Clifford held 5446 shares of CCAH, Altman
2722 shares. All were pledged to BCCI. Nowhere was BCCI's
security interest in these shares recorded, including in the
Netherland Antilles, where CCAH was incorporated, and where it
was legally required.(114)
In early 1988, several events took place which could have
given rise to Clifford and Altman's decision to sell enough of
their shares in CCAH to eliminate the BCCI lending to them.
First, on February 9, 1988, Abedi suffered a heart attack and
stroke. The same day, in hearings before the Subcommittee, former
Panamanian consul Jose Blandon disclosed that BCCI was handling
drug money for General Noriega. In turn, Blandon's testimony
prompted the issuance in March of a subpoena by the Foreign
Relations Committee to BCCI for Noriega records.
In this very period, Clifford wrote a letter, dated February
8, 1988, to Naqvi, to ask Naqvi to arrange a sale of some or all
of Clifford and Altman's stock. Significantly, the Federal
Reserve concluded that the letter was not written on February 8,
1988 by Clifford, as dated, but "some time thereafter" and was
backdated to make it look as if it were written prior to February
9, the date of the Abedi heart attack and the Blandon
In March, 1988 the shares of CCAH stock owned by Clifford
and Altman were sold for $6,800 per share. Although the stock
had been purchased at book value, it was sold at market-value,
which essentially meant whatever someone was willing to pay for
it. Altman testified to the Subcommittee that "the distinction
between a purchase at book value and a subsequent sale of the
shares... was not a practice that was unique to Mr. Clifford and
me and this transaction."(116) Mr. Mohammed Hammoud, a CCAH
shareholder and the purchaser of the shares, was apparently
willing to pay $6,800.00 per share -- the highest price ever paid
for CCAH stock - which afforded Clifford and Altman a combined
gross profit of $9.5 million. Clifford explained the high price
by noting that "there were no rights offerings in 1988," the year
Mr. Hammoud purchased the stock of Altman and Clifford. (117)
In fact, the price of the stock was set not by Hammoud, and
not even by BCCI, but by Clifford and Altman, who told Naqvi the
amount of net profit they wanted on the sale, after all taxes had
been paid. As the Federal Reserve found:
In late February or early March 1988, Altman met in
London with Naqvi. Naqvi called Imam and directed him to
speak with Altman concerning the sale of Clifford's and
Altman's shares. Altman stated that he wanted a net profit
on his shares of $1.5 million, and that Clifford wanted a
net profit on his shares of $3 million. These profits were
to be after payment of all taxes and repayment of all loans
from BCCI. Altman also stated that he and Clifford each
wanted to retain a portion of their CCAH shares. Naqvi
agreed to this and instructed Imam to work out the details
In consultation with Altman, Imam calculated the sale
price that would be necessary to achieve Clifford's and
Altman's goals of paying off their loan balances including
all interest paid, covering all capital gains taxes to be
imposed in the transaction, and retaining a profit of $3
million and $l.5 million respectively. . . . Imam, in
consultation with Altman, calculated that a purchase price
of 2.69 times book, or $6,800 per share, would be needed to
achieve Altman's objectives. In concluding their
conversation, Altman instructed Imam not to disclose their
conversation to anyone other than Naqvi.(118)
Following the working out of the details of this
arrangement, BCCI "found" Mohammed Hammoud, described by BCCI
chief financial officer Masihur Rahman as a "front man" for BCCI,
to "purchase" Clifford and Altman's shares in First American, for
the highest price ever paid for CCAH stock -- $6800 per share --
and with loans from BCCI, secured by the CCAH stock.(119)
Altman has testified that he had never met Mr. Hammoud.(120)
However, a power of attorney maintained in BCCI records shows
that Hammoud granted Altman a power of attorney allowing Altman
to undertake any transaction on behalf of Hammoud he wished in
connection with the purchase or sale of CCAH shares. Thus, the
power of attorney granted to Altman by Hammoud would have
permitted Altman to have effectuated the sale of his shares to
Hammoud whenever he chose, any whatever price he chose.
Altman, however, testified that he did not know that he had
a power of attorney from Hammoud, stating "to the best of my
recollection, I have never seen that document before."(121)
The Federal Reserve concluded that Altman lied to them in
his sworn testimony to them concerning the sale of the CCAH stock
to Hammoud. According to the Federal Reserve:
On February 12, 1991, in sworn testimony to the Board
of Governors, Altman falsely stated that he did not know how
the purchase price of $6800 per share was fixed, and that he
did not discuss the matter with Imam.(122)
Senator Brown accurately summed up the transaction when he
stated, "the substance . . . was that [Clifford and Altman] got
title to the stock without putting up a single penny of [their]
own money, and suffered no loss if the stock dropped in price
. . ."(123)
Remarkably, when Clifford and Altman decided in 1989 to
finance purchases of shares in CCAH from their own funds, BCCI
automatically advanced loans for those funds regardless,
reversing the charges only after BCCI was informed that Clifford
and Altman had decided to pay for the additional First American
The Federal Reserve showed renewed interest in the issue of
whether BCCI might secretly control First American after the
indictment of BCCI in Tampa for drug money laundering in October,
1988 renewed simmering allegations that BCCI was in fact a rogue
bank. At the time, CCAH had an application before the Federal
Reserve to retain control of a Florida bank, the Bank of
Escambia, N.A., of Pensacola, which it purchased as part of its
purchase of the National Bank of Georgia.
On January 23, 1989, Altman met with a Federal Reserve
examiner who questioned him concerning the nature and extent of
the First American-BCCI relationship. Altman told the examiner he
did not know about any understandings or financial arrangements
that might exist between any CCAH shareholder and BCCI, failing
to mention his own and Clifford's past such understandings and
arrangements, as well as pledges of other shareholders' shares to
BCCI of which he had learned.(125)
Following the meeting with Altman, the Federal Reserve
decided to approve the application to retain Bank of Escambia,
advising Altman in its transmittal letter that it was
specifically relying on the representations made by CCAH
regarding its relationship with BCCI and its commitment that
"BCCI is not involved in the operations" of CCAH or First
On December 13, 1989, William Rybeck, the Senior Deputy for
Banking Supervision at the Federal Reserve wrote to Altman
requesting "information on any loans, original or subsequent to
the investors." Altman replied that he had no "access to
information regarding any financial arrangements that might
exist" between any CCAH shareholder and BCCI. "Based on our
consultations with the resident management director for [CCAH] in
the Netherlands Antilles, we can only confirm that no pledge or
security interest has ever been recorded on the Company's share
register by any lender."(127)
This response by Altman to the Federal Reserve was
exceptionally misleading. First, Altman knew not only of his own
and Clifford's loans from BCCI, but had arranged specifically
that the loans not be recorded in the Netherlands Antilles, and
had made similar arrangements for other CCAH shares pledged to
BCCI. Thus, his confirmation that no pledge or security interest
has been recorded was knowingly misleading, and provided to the
Federal Reserve for the obvious purpose of convincing the Federal
Reserve that no such loans had ever been made, when Altman knew
this to be a lie.
On February 5, 1990, Altman followed up this initial
misleading answer with a second letter to the Federal Reserve,
this one characterized as one he had "just received" from Naqvi
at BCCI concerning BCCI's loans to CCAH shareholders. The letter
stated that the acquisition of Financial General "was not
financed in any respect by BCCI," and was drafted to create the
false impression that none of the loans that BCCI may have made
to CCAH shareholders were made for the purpose of purchasing
shares in CCAH/First American. This misleading letter, which
Altman presented to the Federal Reserve as if it originated from
BCCI, had actually been drafted by either Altman, or one of his
partners at Clifford & Warnke, and transmitted to BCCI and Naqvi
for Naqvi's signature.(128)
Altman explained his actions regarding these letters as a
consequence of the Federal Reserve's supposed lack of interest in
the issue of BCCI lending for CCAH shares that had not been part
of the original FGB takeover in 1981:
Mr. Ryback, in December, had submitted to me a letter that is broadly worded . . . When I received the letter I spoke to Mr. Ryback and indeed, I spoke to him more than once. . . Mr. Ryback explained to me what it is that he was seeking by way of information. I might note that the first paragraph of Mr. Ryback's letter I believe is the matter relating to the tender offer. Then he goes on his second paragraph and deals with the subject of any loans made then or subsequently. . .
I pursued it, other attorneys pursued and we pursued it
aggressively. We received information back that we thought
at the time was credible. In this time period, the issue of
lending arrangements arose, and the matter came up about
what BCCI's practices were . . . We did not necessarily
think that the lending was impermissible . . . It was not
impermissible to borrow, even borrowing secured by the
stock. But we gave the Federal Reserve the information we
Altman said that he understood that what the Federal Reserve
wanted to know was first, whether BCCI had lent money for the
original FGB takeover, and second, whether BCCI currently had
lending which secured BCCI shares. Altman testified that the one
kind of information that Ryback did not want was information
about past BCCI lending which no longer existed -- such as the
lending made to Clifford and Altman, and it was on that basis
that Altman failed to provide him with this information:
Mr. Ryback was not interested in certain kinds of
information, even though his original letter would seem to
call for it. . . I had also indicated to him that to comply
literally with this letter, I am told, would be burdensome,
to get every loan ever made to any investor by BCCI. And
that is why he focused his inquiry as the specific
information that he needed for his purposes.(130)
Mr. Rybeck, however, told Senator Kerry that he had no
memory of ever altering his original request.(131)
Ultimately, the Federal Reserve learned of the BCCI loans to
Clifford and Altman only from its own investigation, when it
discovered the relevant documents in BCCI files held in Abu
Dhabi, and interviewed Imam, who participated in meetings,
telephone calls, and written communications with Altman in
connection with the loans.
What is evident from this history is that Altman
systematically took steps to hide the truth about his and
Clifford's loans from BCCI from the Federal Reserve, artfully
answering questions in such a manner as to mislead the Federal
Reserve and prevent the Federal Reserve from discovering their
own secret loans. In the latter stages of this cover-up, Altman
actually created letters purporting to be from BCCI that were
created at Clifford & Warnke for the purpose of hiding Clifford
and Altman's borrowings.
On July 6, 1990, Robert Altman wrote a memorandum to the
file describing a meeting between him, Swaleh Naqvi, and another
of BCCI's lawyers from another U.S. firm named Kim Gagne, on that
day in London. Both in what it did say, and even more importantly
in what it did not say, the memorandum demonstrated Altman's
personal recognition of the potential problems for him relating
to BCCI having lent him money for the purchase of his First
The memorandum, written at a time when the Abu Dhabi
interests had just begun to assert their control of BCCI's
business and legal strategy, focused on conflict of interest
issues involving BCCI, Clifford and Altman, and provided a
detailed review by Altman of the supposed nature of the First
American/BCCI relationship in the following terms:
I said that I had wanted to inform him [Naqvi] personally
why Clifford & Warnke could not provide legal advice to BCCI
in connection with the investigation being conducted by the
District Attorney in New York State. As he knew, our firm
did not do criminal work, and the primary representation of
BCCI would be by other lawyers in any event. However, we
were general counsel to First American and an issue had
arisen about BCCI's relationship with First American. While
we did not now know of any actual conflict of interest
between BCCI and First American, we were concerned about the
appearance of a conflict as well as any potential conflict.
. . . Mr. Iqbal [the new head of BCCI, replacing Naqvi at
the request of Abu Dhabi] said he did not know much about
the First American issue in New York as his focus was solely
on BCCI's operations. Mr. Iqbal mentioned that BCCI had
loans to some of First American shareholders, but that alone
constituted his understanding of BCCI's relationship with
First American. He accepted, however, my comments regarding
any appearance of conflict.
Mr. Naqvi also accepted the views I presented. However,
he seemed frustrated and stated that these allegations about
the BCCI/First American relationship were "pure rubbish."
Mr. Naqvi said that BCCI had "no interest whatsoever" in
First American, except for a financial interest in some
loans made to some of the First American shareholders
(through general lines of credit). CCAH stock had, at some
point, apparently been given as security. Mr. Naqvi said
that some years ago BCCI had briefly considered a merger
with Fist American, among its various corporate
restructuring strategies, but that this had never been
pursued, and was merely one of the historical planning
models. Mr. Naqvi said he believed the false allegations
about BCCI/First American were being spread by disaffected
former BCCI employees who felt bitter toward the Bank.(132)
The subject matter of this memorandum is the BCCI
relationship to First American, whether BCCI had any interest in
First American, and the possible implications of loans BCCI might
have made to First American shareholders. At the time Altman
wrote this memorandum, both Altman and Naqvi knew well that
Clifford and Altman had themselves had previously had such loans,
and that loans from BCCI to First American shareholders was a
key issue on which the New York District Attorney was seeking
information. BCCI's secret loans to Clifford and Altman, secured
by First American/CCAH stock, would obviously be material to such
an inquiry, and of themselves raise substantial "conflict-of-interest" questions concerning Clifford and Altman. Any competent
attorney would recognize this, and be compelled to explore the
issue with a client in any genuine conversation about the issue
of conflict. Yet nowhere in the memorandum does Altman discuss
this issue with Naqvi, as certainly would have happened if such a
discussion were authentically exploring the conflict issue.
The omission of any mention of Altman's own loans from BCCI
for First American stock during the lengthy discussions of the
conflict issues is striking, and extremely unlikely if the
conversation and memorandum were intended to reflect an honest
analysis and appraisal of the situation.
Clifford told the Subcommittee that "most of the services were rendered to the operating holding company, First American Bankshares," which "started out at a lower figure when the bank was not so large, and as the bank expanded then the cost of legal services expanded." Clifford indicated that his law firm received "maybe $1 million a year" in legal fees from First American.(133)
Clifford testified that the fees charged BCCI "were nothing like
those charged First American, because there wasn't nearly that
much work to do."
In fact, Clifford & Warnke billed First American and its
related entities a total of about $11 million over about an eight
year period, averaging about $1.35 million per year; and BCCI a
total of about $6 million over twelve years, or about $500,000
per year, for a total of $17 million in all.
In addition, the law firm of Clifford & Warnke was the lead
firm for the defense of the BCCI officers indicted in Tampa in
1988. According to the House Banking Committee, BCCI paid some
$45 million in legal fees which were disbursed by Altman. In
testimony before the Senate, however, Mr. Altman disputed that
figure and indicated that "the amount of money ... paid in this
general effort was half that -- approximately $20 million," which
Altman testified was used for a variety of purposes including
international audits and the implementation of new procedures to
guard against money laundering. (134) Clifford testified that "not
one penny of that effort came to us."(135) A summary of these
disbursements, provided to the Subcommittee on March 2, 1992 by
Clifford and Altman's attorneys, specifies a total of
$18,975,224.47 paid by BCCI in attorney fees for the Tampa
criminal defense, and another $2,817,011.66 for miscellaneous
expenses, ranging from computer services and court reporters to
private investigators and expert witnesses in connection with the
In testimony before the Senate, Clifford and Altman
explicitly denied having done anything to delay, impede, or
frustrate the efforts of the Senate to obtain the full story
about BCCI, and BCCI's relationship to First American. As Altman
There have been suggestions made by certain witnesses that
we were engaged [in] influence peddling and the like, in
order to protect BCCI. Those are totally untrue. There are
suggestions that we condoned obstructions of this
committee's efforts or investigations of BCCI. Those are
totally untrue, and the record should reflect that that is
our view, and as I said, we can detail it.(136)
Unfortunately, while repeatedly advising the Subcommittee of
their intention to cooperate fully with its inquiries, Clifford
and Altman, like BCCI itself, in fact failed to provide documents
that had been subpoenaed by the Committee. In addition, according
to allegations from a variety of sources, including other
attorneys for BCCI and BCCI officials, they undertook a variety
of efforts to delay or impede the Subcommittee investigation.
These efforts included:
** Altman allegedly instructing BCCI officer Amjad Awan to
mark bank documents "attorney work product" in August 1988 in an
attempt to exempt them from subpoena, despite the fact that the
documents were bank records maintained in the ordinary course of
business that had not been created by attorneys.
** Failing to insure that all BCCI documents specified in
the Foreign Relations Committee subpoena in July 1988 were
provided to the Subcommittee, and failing to instruct BCCI or
First American employees to review BCCI records maintained at
First American in response to the subpoena.
** Failing to insure that BCCI officials in Florida did not
destroy or alter documents subpoenaed by the Committee in August
and September, 1988.
** Altman telling Subcommittee staff on May 14, 1990 that
BCCI had no outstanding loans to shareholders of CCAH, when one
week earlier, he had told the Federal Reserve that he had heard
reports of such lending in amounts ranging from $400 million to
over $1 billion.(137)
** Allegedly attempting to use "political chits" to delay
hearings of the Subcommittee in the summer of 1990.
Indeed, according to BCCI banker Amjad Awan, at the very time in the summer of 1988 that Clifford and Altman had advised the Subcommittee that they and BCCI would cooperate fully with the Subcommittee, they were simultaneously advising their clients that they intended to play "hardball" with the Subcommittee.(138)
Clifford and Altman have denied intentionally undertaking
any of these activities, for example, explaining the failure to
provide documents as inadvertent, and based on inadequate
document review done by BCCI officials; and denying the
"political chit" charge outright. Moreover, the Subcommittee
investigation cannot fully answer all the questions raised about
Clifford and Altman's response to the inquiries by the
Subcommittee. For example, regarding the case in which BCCI
officials destroyed and altered documents in response to the
Committee subpoena in 1988, it is not clear from the record
before the Subcommittee whether Clifford or Altman knew of these
However, there is no question that documents subpoenaed by
the Foreign Relations Committee concerning General Noriega, and
existing in the United States, were never reviewed by Clifford
and Altman as BCCI's attorneys, let alone provided to the
Committee in response to a lawful subpoena. And, after Clifford
and Altman were no longer representing BCCI, responses by them to
document requests were delayed repeatedly, and some of the
answers that were ultimately provided proved to be incompatible
with the documentary evidence.
In March, 1988, following testimony before the Subcommittee
by Jose Blandon and other witnesses in February concerning the
use of BCCI by General Noriega and members of Noriega's business
groups, the Foreign Relations Committee authorized subpoenas to
BCCI for Noriega's records. At the time the Committee acted,
Clifford and Altman had already begun their own internal
investigation at BCCI of the relationship between BCCI and
Documents provided to the Subcommittee on May 20, 1992 by
Clifford and Altman, following BCCI's waiver of the attorney-client privilege, describe a witness interview with Amjad Awan,
Noriega's personal banker at BCCI, conducted by an unspecified
lawyer at Clifford & Warnke on February 23, 1988 -- two weeks
following Blandon's disclosures. At the time, Awan was based in
Miami, having been BCCI country manager in Panama from 1981
through 1984, and an officer at BCCI's Washington, D.C.
representative office in 1984 and 1985. As the Clifford & Warnke
attorney described the situation:
BCCI's New York office believes that BCCI may receive a
subpoena, perhaps from Congress, to testify about BCCI's
role vis-a-vis General Noriega . . . there was always an
undercurrent that alot [sic] of the money in Panama may be
drug money, but BCCI felt it was dealing with lawful
activity in dealing with the foreign exchange dealers . . .
Mr. Awan knows of no specific instances of drug money
passing through BCCI. It is possible some was laundered drug
money . . . General Noriega's business with BCCI was limited
to the $200,000 to $300,000 he deposited for VISA cards,
etc. But Mr. Awan became a personal friend of General
Noriega. They became very close after Mr. Awan left Panama
in 1984. General Noriega asked Mr. Awan to make hotel
reservations, and to book limousine and airline tickets. Mr.
Awan would often use his own credit cards to perform these
services because the BCCI office in Washington in [sic] only
a representative office. . . Mr. Awan meet [sic] General
Noriega in New York on one occasion and asked Mr. Awan to
give him $100,000 in cash.(139)
Thus, months before the service of a subpoena to BCCI
regarding Noriega and Awan, Clifford and Altman had interviewed
Awan regarding his relationship with Noriega, been informed of at
least one cash payment by BCCI to Noriega in the U.S., and
learned of Awan's handling of Noriega finances while at the
Washington representative branch office of BCCI.
In the meantime, on June 1, 1988, Clifford wrote a
memorandum to Altman concerning information he had received from
BCCI's number two official, Swaleh Naqvi, in London, concerning
an article in the New York Times that referred to BCCI's alleged
involved in money laundering operations in Panama, in a leak
arising out of the Customs "C-Chase" sting operation. According
to the Clifford memorandum to Altman:
On Wednesday, June 1, at 11:00 am I had a phone call
from Mr. Naqvi in London. He had placed the call to you, but
in your absence then spoke to me. I explained to Mr. Naqvi
that the reason you were away was that you were in
California following up on information regarding the
possible purchase of a bank.
His call had to do with the BCCI bank in Panama. There
had been brought to his attention an article in the New York
Times of Wednesday, May 25, that referred to the Panamanian
office of BCCI. The report involved missing documents from
the bank's records and stated that the authorities have
linked BCCI in Panama to money-laundering operations.
Mr. Naqvi says that there are two individuals who
operate the bank in Panama and he has told them to come to
Washington to see us. . . . He stated that the men would
remain here as long as we required their presence. After we
have talked to the men we are to report to Mr. Naqvi. The
matter is of such importance to him that he may, after our
conversation, decide to come to the United States.(140)
Thus, by the time of the issuance of the Committee subpoena
on July 27, 1988 and subsequent service August 1, 1988, Clifford
and Altman were aware in some detail of both Noriega's
involvement with BCCI and serious allegations concerning BCCI's
involvement with drug money laundering generally.
After the Committee subpoena was served, in his initial
contact with the Subcommittee on behalf of BCCI, Clark Clifford
wrote Senator Kerry to advise him of BCCI's intention to
cooperate fully with the investigation. Soon thereafter, Clifford
contacted Senator Claiborne Pell, chairman of the full Committee,
to request a one-month delay in producing documents pursuant to
the subpoena. Senator Pell referred that request to Kerry staffer
Dick McCall, extending production to September 11, 1988.
In the meantime, Clifford and Altman met with Jack Blum and
Kathleen Smith of the Subcommittee staff to discuss the
subpoenas. A memorandum to the file from Altman dated August 10,
1988, describes the meeting in the following terms:
During the course of our discussions which lasted about
an hour and 20 minutes, Jack Blum described in detail the
information collected during the investigation and public
hearings by the Subcommittee . . . From its sources, the
Subcommittee has been led to believe that BCCI, through its
banking locations in Panama, Colombia and in Miami, Florida,
has had a major involvement in the management of assets for
General Manuel Antonio Noriega, the current head of the
Panamanian government; Michael Harari, reputed to be a close
aide of Noriega's, an arms dealer, and formerly an Israeli
secret service agent; and various other individuals from
Panama and Colombia with major involvements in international
drug trafficking. The Subcommittee staff has also been led
to believe that BCCI, through its banking locations in
Colombia and Panama, has been significantly involved in the
laundering of large amounts of cash obtained from the sale
of illicit drugs in the United States. . .
(1) The staff has amassed extensive information on
BCCI. It is their understanding that General Noriega was
instrumental in helping BCCI secure a banking charter in
Panama. Information on BCCI has been provided by third
parties, including government officials and other banks, as
well as current and former employees of BCCI.
(2) We advised the Committee that we would soon be
going to Miami to begin to assemble facts and related
documents and, if need be thereafter, to Colombia and
Panama. We expressed concern over the breadth of the
subpoena. . .
(3) Altman told them that it was the intention of
BCCI's senior management to be cooperative and helpful. He
stated that management was unaware of any impropriety of the
bank or its employees.
(4) In response to the staff's inquiry, Altman
described BCCI's relationship with First American and
explained Clifford's and Altman's long-standing
representation of the Bank. Altman also expressed our
complete confidence in BCCI's management. He stated that
criticism that had been levelled at the Bank over the years
had proved, upon careful investigation, to be groundless and
without merit. . .
Mr. Clifford, in particular, and the firm generally
have enjoyed an excellent relationship with the Committee
over the years.(141)
Awan was in London at the time the subpoena was served for a
regularly scheduled marketing meeting, and was told about the
subpoena by Naqvi, who told him the lawyers would work things
out.(142) Following Awan's return to the United States, Awan
participated in a series of interviews with Altman and two other
lawyers from Clifford & Warnke in Miami in mid-August, 1988. Six
other BCCI officials were also interviewed by Altman in the same
period. In the memoranda prepared by Clifford & Warnke attorneys
concerning these interviews, the BCCI officials made numerous
untrue statements to the lawyers conducting the interviews,
ranging form claims that they did not knowingly launder drug
money, to a contention that "BCCI has no professional
relationship with General Noriega," but merely had previously
"maintain[ed] depository accounts for General Noriega in London
and issued credit cards."(143)
On August 17, 1988, Altman and other Clifford & Warnke
lawyers met again with BCCI officers in Miami and discussed the
Senate subpoenas follows:
Mr. Altman commented on the existence of the Noriega
account in London, but stated that the subpoenas requested
documents in the possession of [BCCI] Overseas. . . . They
were all transactions of S.A. The wire transfers of Panama
to London had no names or account numbers. . . there could
be unfortunate implications for the bank if we were to
produce documents with respect to General Noriega's London
account. Those records may be protected by English or other
foreign law, an issue we will check. If those documents are
produced, BCCI personnel in Panama could be at risk . . .
Mr. Altman suggested that we seek to produce documents
in the first week of September. By then, we would have to
formulate a position with respect to Mr. Awan.(144)
During the interviews, Awan stated that General Noriega had
in fact banked with BCCI, that Awan had handled various
transactions on behalf of Noriega while based in Washington, and
that Noriega had a maximum deposit relationship with BCCI of $22
million. This final statement was, of course, entirely
inconsistent with Awan's representation to Clifford & Warnke the
previous February that Noriega's business with BCCI was limited
to $200,000 to $300,000.(145) Moreover, Awan told Altman that he
"did not think that General Noriega would be above taking bribes
from those involved in the drug industry. (146)
It is clear from the documents provided to the Subcommittee
that Mr. Altman was concerned about providing too much
information to the Subcommittee. As Sanders notes in his
Mr. Altman stated that the bank had a potential
political exposure as a result of the receipt of substantial
dollar deposits from General Noriega. Additionally, there is
the concern with respect to money laundering, although the
bank does not believe any laundering occurred knowingly. . .
As to money laundering, we could explain it may have
occurred. We could explain that we took some few millions
dollars from unknown sources and that, in addition, we dealt
with money changers. We could state, however, that it was
the policy of the bank not to deal with drug money and, in
any case, the amount of cash we received was insignificant
compared to other banks.(147)
Following his meetings with Altman in Miami, Awan returned
to London, to review the Noriega financial records and meet with
Naqvi. While in London, he again met with Altman, who questioned
Awan concerning the nature and extent of BCCI's relationship with
Noriega. According to Awan's sworn testimony before the
Committee, and staff interviews in connection with that
testimony, while in London in late August, Altman told Awan to
retrieve documents pertaining to Noriega in response to the
Subpoena. Awan retrieved the documents, which included a number
of originals and some copies, and showed them to Altman. All of
the documents were BCCI financial records, and none of them
contained any material prepared by attorneys. Nevertheless, when
Altman returned the documents to Awan, he told Awan to mark them
as "attorney work product." Awan, who did not understand what the
phrase meant, marked the documents, "attorney word product," with
the markings appearing on each folder in which they were
contained.(148) Awan later recollected that Altman had also told
him that regardless of what he might tell the Senate, he intended
to play "hardball" in response to the subpoena.(149)
By contrast, Altman testified that there was "no intention
to mislead this committee," and "there has been no effort to
derail this process."(150)
Altman then met with Naqvi to discuss the Senate subpoena
further. Following that meeting, Awan was told by Naqvi not to
return to the United States, and that he would be transferred
immediately to Paris as a means of avoiding the subpoena.(151) Awan
protested, noting that his family and possessions were in Miami
and that prior to the subpoena he had no plans to leave the
United States. Naqvi agreed that Awan could return briefly to the
U.S. to make arrangements to move, but urged him to leave as
rapidly as possible. Awan returned to the United States and,
believing after his meeting with Naqvi that he could not trust
Altman to represent his interests, began communicating directly
with Blum without the knowledge of Altman, and decided to resign
from BCCI and retain a separate attorney.(152)
Significantly, chronologies of meetings, originally created
as privileged and confidential attorney work product pertaining
to the Congressional subpoena, and ultimately provided to the
Subcommittee on May 20, 1992 by Altman's attorneys, do not show
any meeting involving Altman and Awan in London in August, 1988,
despite Awan's detailed testimony concerning his meeting with
Altman in late August.
These chronologies show Altman's meetings with Awan only in
February 23, 1988 in Washington and in mid-August with Awan in
Miami, and omit any reference to Altman having Awan in London, or
even to Altman having met with Naqvi in London in this period.
Given Awan's detailed and explicit statement about meeting Altman
in London at the time the subpoena was issued, and Altman having
told him in London to mark Noriega documents "attorney work
product," the omission of any reference to the London meetings in
the Clifford & Warnke internal chronologies and documents is
suggestive of Altman's intent.
Following his meeting with Altman and his meeting with Naqvi
in August, Awan told Blum that BCCI had sought to transfer him
out of the country and to prevent the service of the subpoena,
and that this took place immediately following a meeting between
his superiors and Altman. Blum arranged to serve Awan without
providing further notice to BCCI, or Clifford or Altman, and
service was made in early September, 1988.
Soon after the service of the subpoena on Awan, on September
9, 1988, Awan told an undercover Customs agent, Robert Musella,
in a conversation secretly recorded by the government, that the
Foreign Relations Committee "had a vendetta" against BCCI, and
that lawyers for BCCI in Washington advised the bank to
immediately transfer Awan out of Miami to Paris to avoid being
served with the subpoena:
Last Friday, I was told that, ah, our lawyers, Mr. Altman
was there, and he suggested to the bank that I should be
immediately transferred from the U.S. to Paris. . . So they
duly transferred me Friday to Paris.(153)
Later, Awan would explain to investigators that he was not
personally present at any meetings with Altman regarding his
transfer, but that the circumstances had lead him to believe that
the BCCI decision had been made on the advise of Altman.(154)
On the very day Awan was telling Musella about BCCI's
decision to move him to Paris in an effort to circumvent the
Senate subpoena, September 9, 1988, Altman and his colleague at
Clifford & Warnke, Robert Sanders, met with Blum to discuss the
subpoenas issued by the Committee to BCCI. Altman told Blum that
BCCI "does not do business" with drug dealers, did not have large
depository relationships in Colombia and Panama, and that BCCI
"had been approached for several occasions and offered lucrative
commissions to accept large cash deposits, but the bank always
refused." As detailed in the Clifford & Warnke memorandum of the
meeting, Blum then asked Altman concerning the relationship
between BCCI and Noriega:
Altman stated that BCCI previously maintained a deposit
account for the Panamanian government which General Noriega,
as head of the government, could control. BCCI may not
disclose information about this account for two reasons.
First, such disclosure would be unlawful under Panamanian
bank secrecy law. Second, if this information were produced,
the employees and business operations of BCCI would be
Mr. Blum wanted to know how much money was in this
account and in what country the account was maintained. Mr.
Altman stated that this information was not available. Mr.
Altman advised that the only one way the bank might be able
to disclose information was with the permission of the
Mr. Blum inquired when the money in this account was
withdrawn. Mr. Altman said the account was closed sometime
this past summer.
Mr. Blum asked about Mr. Awan's present location. Mr.
Altman stated that he was traveling in the United States for
a few days, but may be transferred soon to BCCI's office in
Paris. . . .
Mr. Blum asked whether BCCI ever made any loans to
General Noriega. Mr. Altman stated that if there were any
loans, they were minor in nature. Again bank secrecy laws
foreclosed disclosure. . . .
Mr. Altman then stated in closing that he wanted to
convey to Mr. Blum a serious concern. Mr. Altman noted that
the banking business is built on trust and confidence.
Accordingly, Mr. Clifford and he were concerned that BCCI's
reputation would be unfairly damaged as a result of
publicity about the investigation, even though all
allegations would be disproved. In this regard we were
concerned about any rumors or leaks that could flow from the
investigation and might, incorrectly and inequitably,
tarnish BCCI's investigation.(155)
On September 14, 1988, Clifford and Altman met with Foreign
Relations Committee special counsel Blum to discuss document
request and production, and reiterated previous commitments to
cooperate with the Senate. Shortly thereafter, in Miami, BCCI
officials, under instruction from BCCI management, began altering
and destroying documents specified in the subpoena.(156) On
September 19, 1988, Clifford and Altman made BCCI's first
production of the subpoenaed documents, with a second production
on September 21, 1988, accompanied by representations from BCCI,
through Clifford and Altman, that no other documents pertaining
to the subpoena existed.
After retaining separate counsel from BCCI and ceasing being
represented by Clifford and Altman, Awan began to take the
position that he would be at less risk if he did not object to
the production of documents, and cooperated with the
Subcommittee, a position that contradicted Clifford & Warnke's
position that if Awan provided information, his life would be
risk. Awan's tentative decision to cooperate with the
Subcommittee, communicated on September 22, 1988 to lawyers at
Clifford & Warnke, caused "distress" to the Clifford & Warnke
lawyers handling the matter, as set forth in a September 22, 1988
memorandum from John Kovin, a partner at Clifford & Warnke, to
Altman and another partner:
A literal reading of John Grabow's telephone message is somewhat distressing. If it means that no objections of any nature will be interposed to the production of documents in response to Amjad Awan's subpoena -- including any concerns that Mr. Awan may have about his personal safety -- it may cause us to alter the stance that we have adopted with the Committee staff up to this point.(157)
A second memorandum to the file from Kovin describes a
meeting five days later in which the Clifford & Warnke attorneys
are clearly trying to convince Awan's lawyers to maintain a
collective strategy of keeping documents from the Committee. The
September 27, 1988 memorandum, marked "privileged and
confidential," from Kovin states:
In response to specific questions by Mr. Grabow [Awan's
attorney], I responded that we had not provided any copies
of Mr. Awan's expense or compensation records for retention
by the Committee, nor had we provided any copies of "Noriega
documents". With respect to the latter category, we do not
intend at the present time supplying any such documents."(158)
In a memorandum three days later, Kovin wrote that "Awan
turned over the so-called Noriega documents", and "Awan noted to
Grabow but not to Blum that certain of his travel records --supplied to this firm -- from the period when he was stationed in
Miami had not been produced."(159) Thus, Clifford & Warnke knew as
of September 30, 1988 that documents responsive to the subpoena
existed and had not been provided to the Senate. Kovin's
recommendation as to how to proceed regarding those documents was
not to conduct a search for them in order that they be provided
the Senate, as was legally and ethically required of BCCI's
attorneys, given the service of the Senate subpoena, but instead
to "check on this [the missing documents] in the event it later
became the subject of additional questions."(emphasis added)(160)
During September and October, Blum deposed Awan and a second
BCCI witness, as the Subcommittee completed its two year
investigation of drug trafficking in Central America and prepared
its final report. When Blum's appointment at the Foreign
Relations Committee lapsed in March, 1989, BCCI officials were
told that Clifford and Altman had taken care the Foreign
Relations Committee, and that the investigation was over.(161)
On July 7, 1989, after a June 15, 1989 broadcast by NBC on BCCI's involvement with General Noriega, describing BCCI documents concerning Noriega, Senator Kerry wrote Clifford noting that NBC apparently had obtained documents which had been subpoenaed by the Foreign Relations Committee and never provided.
Four days later, Clifford wrote Senator Kerry to state: "I am in
receipt of your letter dated July 7, 1989," and noted that "we
shall continue to try to be responsive to the needs of the
A meeting was set up for July 17, 1989, between Kerry staff
and lawyers for BCCI to discuss the Subcommittee on Narcotics and
Terrorism request for documents relating to bank accounts which
General Noriega and the government of Panama held at BCCI
branches in London, England. At the meeting, Altman and Raymond
Banoun, a criminal defense attorney representing BCCI, advised
the Subcommittee that no documents responsive to Subpoena were in
the United States and that all documents were in London, had been
reviewed, and did not refer to documents in the United States.
The next day, Subcommittee staff wrote BCCI's attorneys to
request the immediate provision of the documents to the
Subcommittee to the extent that any such document had ever been
in the United States, prompting a reply letter from BCCI's
attorneys reaffirming BCCI's offer to assist the Subcommittee in
obtaining the documents. The documents from London were
ultimately provided to the Subcommittee in late November, 1989,
and were found to refer to dozens of transactions involving BCCI
records maintained at First American, which passed through First
American, or which involved BCCI's representative office in
After reviewing these documents, Kerry staff noted that they
referred to numerous documents at First American and BCCI
Washington which should have been produced by BCCI to the Senate
in the fall of 1988. On May 14, 1989, staff met with Altman,
Banoun and Larry Wechsler, another BCCI lawyer, and the lawyers
produced 775 pages of new documents concerning Noriega.
At this meeting, the attorneys stated that they relied on
Awan's statements and conducted no independent searches for
documents in 1988 in response to the Committee subpoena. Altman,
who had previously told staff that he had reviewed all of
Noriega's documents in London and that none of them referred to
transaction in the United States, now suggested that his initial
review had been casual at best, and that he had simply not
noticed any such transactions.(163)
In the meeting, BCCI's lawyers agreed to produce all Noriega
and Awan records held at First American by BCCI. Thus, a
substantial number of documents which should have been provided
to the Committee by Clifford and Altman in response to the
subpoena to BCCI by the Foreign Relations Committee were in fact
not provided. Indeed, no search at BCCI's accounts at First
American had ever been conducted by First American in response to
the subpoena to BCCI. The documents ultimately provided showed
that, regarding Noriega's banking at least, BCCI and First
American had a close working relationship, and that Noriega's
funds had passed through First American, focusing further staff
attention on the relationship between the two institutions.
During the meeting, in response to a request from the
Subcommittee to provide information on loans from BCCI to its
shareholders and the shareholders of related entities, including
ICIC and CCAH, Altman advised Jonathan Winer of Kerry's staff
that none of the shareholders of CCAH currently had loans from
BCCI.(164) One week earlier, Altman had told the Federal Reserve
precisely the opposite -- that Altman had "heard reports of loans
by BCCI to certain shareholders [of CCAH] in amounts ranging from
$400 million to over $1 billion."(165) Altman thus made a
misleading statement to Senate staff regarding BCCI's outstanding
lending to CCAH. Altman of course made no reference to his own
past borrowings from BCCI.
By the summer of 1990, as the Subcommittee persisted in its
efforts to learn more about BCCI's relationship to First
American, the Subcommittee scheduled hearings intended to focus
attention on the relationship between the two institutions. In
response, according to two confidential memoranda prepared by a
BCCI lawyer at the firm of Holland & Knight in Florida, based on
conversations with Philip Manuel, a private investigator hired by
BCCI in connection with its criminal defense, Altman and Banoun
sought to call in "political markers" in an effort to stop the
Subcommittee inquiry. As specified in the second of the two
The Source [Manuel] stated that Altman and Banoun are
opposing the subpoenas and doing everything within their
power to call in "political markers." Consequently, it may
be that Altman and Banoun will succeed in quashing their
subpoenas or having them withdrawn; and not end up
testifying before the Kerry Committee.(166)
Altman testified that he had "no idea what the author is
talking about when he talks about calling in political markers,"
noting that he had never even asked for a delay of the hearing in
writing.(167) In fact, staff was informed by Banoun, on behalf of
BCCI, that attempts by the Subcommittee to question him or Altman
would interfere with BCCI's attorney-client privilege, an
assertion reiterated by former Senator John Culver, who as part
of BCCI's team of lobbyists, contacted the Kerry office to urge a
postponement of the planned hearing. After Altman, Banoun, and
BCCI refused to appear at any hearing, and the Justice Department
alleged that any hearing by the Subcommittee could interfere with
its interests, the hearing was postponed, due to the refusal of
each of the requested witnesses to agree to testify.
Thus, in contrast to the full cooperation promised by Clifford and Altman to the Subcommittee in the course of its investigation, BCCI's lawyer team, including Clifford and Altman, collectively failed to meet basic obligations to the Senate to insure that subpoenaed documents be produced; sought to convince BCCI officer Awan to tell the Senate that production of documents would threaten his life, at a time when Awan no longer wished to make this assertion; failed to search for documents known to be required by the subpoena and not produced; failed to search other categories of BCCI documents held at the First American Bank; asserted legal obstacles to cooperation on numerous occasions; and declined to provide witnesses at scheduled hearings. These findings represent the bare minimum of their failure to provide the promised cooperation.
On July 29, 1992, in coordination with criminal cases
brought by the Justice Department and the New York District
Attorney, the Federal Reserve issued its summary of charges
against Clifford and Altman, specifying its findings of
violations of law and regulations, and proposing to bar them from
banking for life.
In its summary of charges, the Federal Reserve charged
Clifford with four counts of violations of law and regulation,
and Altman with seven counts of such violations.
The first count charges Clifford and Altman with having
violated the Bank Holding Company Act by participating in BCCI's
acquisition of control of CCAH/First American in violation of
that law. Included in that count are numerous factual allegations
concerning false statements and concealment of information by
The second count charges Clifford and Altman with having
violated the Federal Reserve's order regarding the FGB takeover
through violating the commitments made that BCCI would have no
role in the management of or lending to First American, and
The third count charges Altman with having violated the Bank
Holding Company Act by participating in BCCI's acquisition and
retention of control of the National Bank of Georgia in violation
of that act.
The fourth count charges Clifford and Altman with having
breached their fiduciary duties to CCAH, First American, and CCAH
shareholders by failing to disclose their personal financial
arrangements with BCCI regarding their own shares of CCAH.
The fifth count charges Clifford and Altman with having
engaged in unsafe and unsound banking practices and breaches of
fiduciary duty in connection with premature paying off BCCI loans
to CCAH which cost CCAH money.
The sixth count charges Altman with having violated the law
by making a number of false statements to the Federal Reserve.
The seventh count charges Altman with having violated the
bank Control Act in connection with the purchase of CCAH shares
by Masriq, an entity controlled by Saudi banker Khalid bin
Mahfouz, against whom the Federal Reserve has issued separate
charges, treated elsewhere in this report.
The findings of the Federal Reserve remain subject at this time to a hearing to give Clifford and Altman the opportunity to rebut the Federal Reserve's case prior to the Federal Reserve reaching a final determination on these findings.
1. House Committee on Banking, Finance, and Urban Affairs, September 11, 1991, Serial No. 102-69, p. 36.
2. S. Hrg. 102-350 Pt 3, p. 63.
3. S. Hrg. 102-350 Pt. 3, p. 286.
4. S. Hrg. 102-350 Pt 2 p. 505, 518.
5. These findings should not be viewed to correspond to any
conclusions that might be reached in connection with the matters
at issue in criminal and civil litigation concerning Clifford and
Altman in the U.S. District Court for the District of Colombia,
and in New York County in the case brought by District Attorney
Morgenthau. These findings have been reached on the basis of a
record which may include material not admissible in any of those
proceedings, and reflects judgments made in the course of
Congressional fact-finding, whose rules and procedures do not
correspond to those rules and procedures applicable to other
6. Lance, S. Hrg. 102-350 Pt. 3 p. 6.
7. Id pp. 7-8.
8. Clifford, S. Hrg. 102-350 Pt. 2 pp. 58-59.
9. Id p. 59.
10. S. Hrg. 102-350 Pt. 3, pp. 11-12.
11. Art Harris and John F. Berry, Washington Post, December 18, 1977, A1.
13. S. Hrg. 102 Pt. 3 p. 70.
15. Sami memo to Abedi 1/30/78, S. Hrg. 102-350 Pt 3, pp. 26-27.
16. October 19, 1978 Application, CCAH to Federal Reserve; see Summary of Charges, Board of Governors of the Federal Reserve, No, 92-080-E-I1, In the matter of Clark M. Clifford and Robert A. Altman, July 29, 1992, Paragraph 33.
17. Summary of Charges, Federal Reserve, Id.
18. Id, paragraph 33(e).
19. Id, p. 33(i).
20. S. Hrg. 102-350, Pt. 3, p.75.
21. S. Hrg. 102-350 Pt. 3 p. 328-330.
22. Clifford, S. Hrg. 102-350 Pt. 3 p. 93.
23. Confidential and Privileged Attendance Note, November 19, 1990, BCCI Attorney memcom of meeting with Roy Carlson, Exhibit D in G and H Montage case.
24. See e.g. Summary of Charges, Board of Governors of the Federal Reserve System, In the matter of Clark M. Clifford, No. 92-080-E-11, July 29, 1992, paragraph 26.
25. Clifford and Altman written testimony before the House Committee on Banking, Finance and Urban Affairs, September 11, 1991, Serial No. 102-69, Pt. 1, p. 21.
26. Letter from Rauh and Bennett to Kerry, October 11, 1991.
27. S. Hrg. 102-350 Pt 3, p. 63.
28. Summary of charges, Federal Reserve, id, paragraphs 51-53.
29. Id p. 64.
30. S. Hrg. 102-350 Pt. 3 p. 77.
31. Altman, S. Hrg. 102-350 Pt. 3 p. 235.
32. Staff interview, Davis, May, 1992.
33. Altman testimony, S. Hrg. 102-350 Pt. 3 pp. 234-235.
34. Board of Governors Federal Reserve System Exhibit AD 134, Afridi to Naqvi, July 25, 1983.
36. Sakhia testimony, S Hrg. 102-350 Pt. 2 p. 513.
37. Summary of charges, Federal Reserve, In Re Clifford, 92-080-E-I1, July 29, 1991 Paragraph 75.
38. S. Hrg. 102-350 Pt. 3 p. 332.
39. Summary of charges, Federal Reserve, In the Matter of BCCI Holdings, 91-043, July 29, 1991, Paragraphs 176-178.
40. p.236. letter from Elley to Naqvi, October 14, 1982
41. S. Hrg. 102-350 Pt. 3 p. 238.
42. S. Hrg. 102-350 Pt. 3 p. 77.
43. Summary of charges, Federal Reserve, In the matter of Clifford, id, Paragraphs 80-86.
44. Id, Paragraph 92.
45. Id, paragraphs 92-103.
46. Summary of charges, Federal Reserve, Clifford, id, Paragraphs 87-91, see also personnel files, BCCI New York, Elley and Afridi, records reviewed by Subcommittee staff.
47. p. 241
49. p. 242
50. S. Hrg. 102-350 Pt. 2, Sakhia testimony, October 22, 1991, p. 518.
51. Summary of charges, Federal Reserve, Clifford, id. Paragraph 59.
52. Summary of charges, Federal Reserve, Clifford, id., Paragraphs 60-65.
53. Id, paragraph 68.
54. Id, paragraphs 69-72.
55. Summary of charges, Federal Reserve, Clifford, id, paragraph 110.
56. Summary of charges, Federal Reserve, Clifford, id, Paragraphs 111-115.
57. Id paragraphs 116-117.
58. Id, paragraph 123.
60. S. Hrg. 102-350 Pt 3, p. 78.
61. Id. Paragraph 184.
62. Id, paragraphs 184-187.
63. Summary of charges, Federal Reserve, In the Matter of BCCI, 91-043, July 29, 1991, Paragraph 188.
64. Sakhia testimony, S. Hrg. 102-350 Pt. 2 p. 604.
65. S. Hrg. 102-350, Pt. 2, testimony of Abdur Sakhia, October 22, 1992, p. 605.
1019S. Hrg. 102-350 Pt. 2, pp. 521, 606.
67. Sakhia letter to Abedi, Future Plans in the United States, February 10, 1986, S. Hrg. 102-350, Pt. 2 p. 595.
68. Written statement, Clifford and Altman, S. Hrg. 102-350 Pt. 3 p. 78.
70. Summary of Charges, Federal Reserve, Clifford, 92-080-E-I1, July 29, 1992, Paragraphs 128-129.
71. Id, Paragraph 130.
72. Id, paragraph 134.
73. Id, paragraphs 135-136.
74. Id, Paragraphs 137-138.
1028Summary of charges, Federal Reserve, Clifford, id, paragraphs 141-152; see also S. Hrg. 102-350 Pt 3. pp 394-400.
76. Id, Paragraphs 153-154.
77. See document reprinted S. Hrg. 102-350 Pt. 3 pp. 402-403.
78. Id, paragraph 162; see also memorandum "Option to Acquire National Bank of Georgia reprinted in House Committee on Banking, Finance, and Urban Affairs, September 11, 1991, Serial No. 102-69, Pt. 1, pp. 309-311.
79. Summary of charges, Federal Reserve, Clifford, id, paragraphs 163-166.
80. Id, paragraph 170.
82. Id, paragraph 171.
83. Id, paragraph 177.
84. Summary of charges, Federal Reserve, Clifford, id, paragraphs 177-178.
85. Id, paragraph 180.
86. Id, paragraph 183.
87. S. Hrg. 102-350 Pt 4 p. 494.
88. Id, paragraphs 187-188.
89. Id, paragraphs 195-202.
90. Id, paragraphs 205-206.
91. Id, paragraphs 207-212.
92. Id, paragraphs 215.
93. Staff interview, Chinoy, March 9, 1992.
95. Summary of charges, Federal Reserve, Clifford, id, Paragraph 104.
96. S. Hrg. 102-350 Pt 3, p. 245.
97. Sakhia, S. Hrg. 102-350 Pt. 2 p. 597.
98. S. Hrg. 102-350 Pt. 3 pp. 80-81.
99. S. Hrg. 102-350, Pt. 3, p. 62.
100. S. Hrg. 102-350 Pt. 3, p. 97.
101. S. Hrg. 102-350 Pt. 3, p. 103. Clifford explained that "book...is based ...upon the excess of assets over liabilities of that particular company, as of a particular time."
102. Summary of charges, Federal Reserve, Clifford, id, Paragraph 249.
103. Id, paragraph 251.
104. S. Hrg. 102-350, Pt. 3, p. 98.
105. S. Hrg. 102-350 Pt. 3, p.101.
106. Summary of charges, Federal Reserve, Clifford, id, paragraphs 253-254.
107. p. 100
108. S. Hrg. 102-350 Pt. 3, p. 103.
109. Summary of charges, Federal Reserve, Clifford, id, Paragraph 257.
110. Id, paragraph 257.
111. S. Hrg. 102-350 Pt. 3 pp. 80-81.
112. Summary of charges, Federal Reserve, Clifford, Id, Paragraph 258.
113. Clifford & Warnke Memorandum to James E. Lewis from Clifford and Altman, reprinted House Serial No. 102-69, Pt. 1, pp. 760-761.
114. Summary of charges, Federal Reserve, Clifford, id, Paragraphs 264-267.
115. Summary of charges, Federal Reserve, Clifford, id, Paragraph 268.
118. Summary of charges, Federal Reserve, Clifford, id, Paragraphs 269-270.
119. Id, paragraph 271-272.
122. Summary of charges, Federal Reserve, Clifford, id, Paragraph 275.
123. S. Hrg. 102-350 Pt. 3, p. 202.
124. Federal Reserve summary of charges, In re Clifford, id, Paragraph 290.
125. Summary of charges, Federal Reserve, Clifford, id, Paragraph 299.
126. Id, paragraph 300.
127. Id, paragraph 303.
128. Summary of charges, Federal Reserve, Clifford, id, Paragraph 305.
129. S. Hrg. 102-350 Pt. 3 pp. 206-207.
130. S. Hrg. 102-350 Pt 3 p. 207.
131. Kerry-Rybeck communication, October 22, 1991.
132. Altman Memorandum to the File, Clifford and Warnke, July 6, 1990, reprinted in S. Hrg. 102-350 Pt. 5.
133. S. Hrg. 102-350 Pt. 3, p. 266.
134. S. Hrg. 102-350 Pt. 3, p. 269.
135. S. Hrg. 102-350 Pt. 3, p. 270.
136. S. Hrg. 102-350 Pt. 3 p. 286.
137. Compare S. Hrg. 102-350 Pt. 3 p. 449 Memorandum to the File Re: Meeting with Federal Reserve Staff, May 8, 1992; and Memorandum to BCCI Noriega/Senate File From Raymond Banoun, regarding Altman meeting with Kerry Subcommittee staff, May 18, 1990.
138. Staff interview, Amjad Awan, July 20, 1992.
139. Interview with Amjad Awan at Clifford & Warnke on February 23, 1988, reprinted in S. Hrg. 102-350 Pt. 5.
140. Clifford memorandum to Altman, June 1, 1988, reprinted in S. Hrg. 102-350 Pt. 5.
141. Id, Memorandum to the File, Robert A. Altman, August 11, 1988.
142. Awan statements, Staff interview, July 20, 1992.
143. Memorandum to File, Robert C. Sanders, BCCI/Panama, August 29, 1988.
144. Sanders Memorandum to File, August 29, 1988, Re: BCCI/Panama.
146. Id. p. 12
147. Id. p. 22
148. Staff interviews, Awan, July, 1992, and Awan Subcommittee testimony, July 29, 1992, S. Hrg. 102-350 Pt. 6.
150. S. Hrg. 102-350 Pt. 3 pp. 279-280.
153. Awan, Staff Interview, July 20, 1992.
154. Staff interview, Awan, July 27, 1992.
155. Notes of Meeting With Jack A. Blum, Clifford and Warnke, September 9, 1988, reprinted S. Hrg. 102-350 Pt. 5.
156. Staff interview, Akbar Bilgrami, July 13-14, 1992.
157. Privileged and confidential Memorandum to Mssrs. Altman and Sanders Re: BCCI Congressional Matter, September 22, 1988, reprinted in S. Hrg. 102-350 Pt. 5.
158. Kovin, Memorandum to the File, September 27, 1988, p. 1.
159. Kovin, Memorandum to the file, September 30, 1988, p. 2, reprinted in S. Hrg. 102-350 Pt. 5.
161. Staff interview, Sakhia, October, 1991.
162. Clifford-Kerry correspondence.
163. Winer memcom, May, 1989.
164. See e.g. Memo to BCCI Noriega/Senate File, Raymond Banoun, Re: Meeting with Kerry Subcommittee Staff, May 18, 1990.
165. S. Hrg. 102-350 Pt. 3 p. 449.
166. S. Hrg. 102-350 Pt. 3 p. 538.
167. S. Hrg. 102-350 Pt. 3 p. 278.