In the entire BCCI affair, perhaps no entity is more
mysterious and yet more central to BCCI's collapse and
criminality than Capcom, a London and Chicago based commodities
futures firm which operated between 1984 and 1988. Capcom is
vital to understanding BCCI because BCCI's top management and
most important Saudi shareholders were involved with the firm.
Moreover, Capcom moved huge amounts of money -- billions of
dollars -- which passed through the future's markets in a largely
Capcom was created by the former head of BCCI's Treasury
Department, Ziauddin Ali Akbar, who capitalized it with funds
from BCCI and BCCI customers. The company was staffed,
primarily, by former BCCI bankers, many of whom had worked with
Akbar in Oman and few of whom had any experience in the
commodities markets. The major investors in the company were
almost exclusively Saudi and were largely controlled by Sheik AR
Khalil, the chief of Saudi intelligence. Additionally, the
company employed many of the same practices as BCCI, especially
the use of nominees and front companies to disguise ownership and
the movement of money. Four Americans, Larry Romrell, Robert
Magness, Kerry Fox and Robert Powell -- none of whom had any
experience or expertise in the commodities markets -- played
important and varied roles as frontmen.
While the Subcommittee has been able to piece together the
history of Capcom and can point to many unusual and even criminal
acts committed by the firm, it still has not been able to
determine satisfactorily the reason Capcom was created and the
purposes it served for the various parties connected to the BCCI
scandal. It appears from the available evidence that Akbar,
BCCI, and the Saudis all may have pursued different goals through
-- misappropriation of BCCI assets for personal enrichment.
-- laundering billions of dollars from the Middle East to
the US and other parts of the world.
-- siphoning off assets from BCCI to create a safe haven for
them outside of the official BCCI empire.
By early 1985, BCCI was on the verge of financial collapse
as the result of losses in the commodities markets executed by
the head of the bank's Treasury Department, Mr. Z.A. Akbar.(1)
Akbar, a young Pakistani and protege of Swaleh Naqvi, the bank's
Chief Executive Officer, had been plucked from his job at
National Bank of Oman in 1981 to manage BCCI's investments from
its headquarters in London. Despite the fact that Akbar had no
apparent experience in the commodities, foreign exchange or
securities markets, by 1984 he was managing over $5.5 billion at
As Akbar invested heavily in the futures' markets, losses at BCCI treasury began to mount. According to Masihur Rahman, BCCI's former chief financial officer, Akbar made highly unusual investments based on unsound assumptions:
He [Akbar] was taking positions on silver and 20 year
bonds, suggesting that 20 year bonds would be 7% or
6.8%, and things like that,, which anybody who
understands treasury knows how deeply discounted it
would be if you project that sort of thing for 20
years. And he was taking those sorts of positions for
As the losses increased to staggering levels, Akbar created a maze of artificial accounting. According to a 1991 Price Waterhouse report, Akbar split the department's functions into normal Treasury activities and 'Number Two' account activities" . . . outside the scope of external audit . . . in the name of private clients but for [BCCI]. . ."(4) The report explained that the "Number Two" accounts derived from :
"misappropriation of external funds deposited under
trust with [BCCI] to be managed on behalf of a few
prominent people who are also shareholders of Holdings,
and maintaining a pool of funds in the private named
accounts of A. R. Khalil which were used freely by Z.
Akbar to fund adjustments. . ."(5)
In other words, Akbar inflated BCCI Treasury profits through
the use of unrecorded deposits in the accounts of important BCCI
"customers", such as Khalil.
By 1985, Akbar's treasury department had accumulated losses
approaching $1 billion, leading to a near collapse of the
bank.(6) Akbar and, presumably Naqvi, recognized that the off-balance sheet accounting in the "Number Two" accounts could no
longer adequately hide the massive losses. Accordingly, "out-of-book" or unrecorded deposits were moved "out-of-bank" to a new
financial entity -- Capcom Financial Services, Ltd.
At Capcom, Akbar and Naqvi reasoned, the phony BCCI accounts
could be further disguised and placed beyond the reach of bank
auditors. In short, Capcom afforded BCCI a wider scope of
options for the manipulation of accounts, the continuation of
frauds and, perhaps, a last ditch attempt at fiscal recovery.
On April 26, 1984 Akbar registered an obscure company named
Hourcharm, Ltd, at his home address in London. On May 22, 1984,
Hourcharm was renamed Capital Commodity Dealers, Ltd., and then
in July, Capcom Financial Services. Capcom was funded with a
capital of 1 million which during the first year was augmented
to 10,00,000 pounds and then increased to 25,000,000 pounds
Capcom commenced trading in London on September 17, 1984.
According to the June 22, 1991 Price Waterhouse Report to the
Bank of England, "Capcom ... rapidly became one of the most
significant of the brokers used by Treasury [BCCI]."(7) Indeed,
within the first year customer accounts bulged to over
100,000,000 (approximately $160,000,000), inordinately large
sums for a fledgling commodities brokerage company.(8) According
to Masihur Rahman, "Capcom was given an official credit line" by
A 1991 documentary on BCCI, produced in London, featured
Jehangir Masud, a former employee of the Abu Dhabi Investment
Authority, and Shahid Suleri, a former BCCI employee, commenting
on the connections between Capcom and BCCI. Masud claimed, "the
[BCCI] Treasury put huge volumes of business through generating
large brokerage fees for Capcom." Suleri recounted that Capcom
allocated profits to their own account, losses to BCCI, using
BCCI funds as margin deposits.(10) In testimony to the
Subcommittee, Rahman concurred, noting that "many of the
transactions that the bank was doing [were] being routed through
Capcom, who obviously was scaling out the differentials ....and
passing on the heavy losses and things to the bank."(11)
Capcom operated as a broker in the London and Chicago
commodities markets. Commodities markets should be distinguished
from the stock markets, which are more or less "cash markets"
designed for "direct investment." As author Martin Mayer has
explained, "you own what you buy and your success is a function
of the success of the company in which you have purchased
shares."(12) According to Mayer, futures markets, in contrast to
cash markets, do not offer the investor the "commodity that
underlies the activity." Mayer has written that futures
"trade contracts to purchase or sell that commodity on
a future date. The contract is inescapable. Those who
purchase must stand ready to receive the commodity at a
specified delivery point at this price on a specified
date (or to buy an offsetting obligation from someone
who has a contract to deliver to that point on that
date, thus permitting the "clearing corporation" that
serves the exchange to extinguish both contracts.)
Those who sell futures contracts must stand ready to
deliver the commodity to the delivery point for this
price on the specified date (or buy in someone else's
contract to accept delivery.) As a result future's
markets are not situations where everyone can win.(13)
The commodities markets in the U.K. and the U.S. are not restricted, regulated or supervised as stringently as the banking industry or the securities markets.(14)
Moreover, the commodities
markets can sustain almost limitless volume, a necessary
prerequisite for crime on the scale of that contemplated by BCCI
since fraudulent transactions may be hidden in a multitude of
legitimate ones. In a letter to the directors, the Chairman of
Capcom, Larry Romrell, reported that 165 million in trading
during the first four months of operation, and profits of
883,393. That trend continued until 1988 leading Akbar to boast
to agent Mazur: "We have contracted 165,000 contracts totalling
$53 billion with Drexel Burnham," and later, "we have done over
$90 billion total in 1988."(15)
While the number of contracts and dollar volume seems
unbelievable, a commodities company can artificially create
massive volume by many small or no-risk trading methods. Indeed,
the volume generated by Capcom helped it to generate
respectability and acceptance with reputable banks and
brokers.(16) For example, listed under "Auditors and Advisers" in
Capcom's 1987 Annual Report were the following major
international banks: Manufacturers Hanover Trust Company, London,
National Westminster Bank Plc, Manufacturers Hanover Trust
Company, New York, Deutsche Westminster Bank, A.G., and National
Westminster Bank, plc. Elsewhere, Capcom noted its ties to Dean
Witter Reynolds, American Express Bank, Refco, Prudential Bache
Trading Corp., and Sumitomo Trust and Banking, Ltd.(17) Like
BCCI, Capcom attempted to buy legitimacy to assist its rapid
Capcom's expansion took it to the United States where it
opened Capcom Futures in late 1984.(18) Mohammed Saghir, born in
the same town in India as Abedi, and a former cohort of Akbar's
at the National Bank of Oman, was brought in to run the Chicago
operations. The American Board of Directors mirrored that of
London with Larry Romrell serving as the Chairman.
In testimony before the Subcommittee, Wendy Gramm, the
Chairperson of the Commodities Futures Trading Association (CFTC)
described the relationship between Capcom US and Capcom UK:
Capcom UK and Capcom US were intertwined. Both
companies had common directors and shareholders. Capcom
UK owned 82% of Capcom US from May 1985 until June 30,
In July, 1985 the BCCI accounts were ostensibly withdrawn
from Capcom, apparently on the advice of the firm's auditors who
counseled that the bank should not be engaged in the kind of
speculation intrinsic to the commodities markets.(19) With all
visible BCCI accounts closed, Chairman Larry Romrell observed in
Capcom's annual report: "The cessation of BCCI business
obviously had an impact upon our volume."(20)
However, according to the 1991 Price Waterhouse report, at
the same time that BCCI withdrew from Capcom an amount of $68
million was paid by BCCI Treasury to Brenchase, Ltd, a subsidiary
of Capcom, controlled by Akbar, raising the question of whether
or not BCCI had really withdrawn from the firm.(21) Moreover, the
Price Waterhouse report notes that, "...despite an apparent
cessation of trading links with Capcom ...two payments of $50
million were made to Capcom in March, 1986 out of external funds
for which no liability for repayment was recorded."(22) These and
other comparable payments clearly suggest that Naqvi and Akbar
continued to use Capcom to shield BCCI funds and perhaps to move
Moreover, as late as 1989 the client list for Capcom
Futures, the US subsidiary of London-based Capcom Financial
Services, consists of several apparent BCCI accounts in the names
of BCCI employees controlled by Z.A. Akbar.
It is not clear why Naqvi and Akbar chose to maintain the
public facade of a split between Capcom and BCCI. One possible
explanation is that Naqvi and Akbar profited from BCCI losses
both at BCCI treasury and later at Capcom. When Senator Kerry
asked Mr. Rahman if Mr. Naqvi had profited from the BCCI losses,
the former BCCI manager responded, "since only two, three people
are involved ...somebody has profited a lot."(23)
In 1986, after the discovery of BCCI losses on cotton
trading, Akbar left the BCCI Treasury to join Capcom. According
to Masihur Rahman, Akbar "was released" from BCCI, taking "his
company car and other benefits."(24)
Upon moving to Capcom, Akbar formed Financial Advisory
Services (FAS), an introducing broker, or marketing arm for
Capcom. FAS was owned by Akbar's Panamanian-registered,
Liechtenstein operated nominee company, ZASK Trading and
Akbar did not immediately become a Director of Capcom,
sitting instead in the FAS offices which adjoined Capcom. Akbar
explained to Mazur his reasons for not joining Capcom's Board of
when I left the bank, BCCI people, they said 'Mr. Akbar,
for, for at least a couple of years you don't go and sit in
the office...it doesn't look nice that you leave the
bank...and establish your own company'... they said 'please
But it was Akbar, nevertheless, who directed operations at
Capcom. With the freedom of singular control over a vast pool of
BCCI's "out-of-book", "Number Two" Treasury funds deposited at
Capcom, Akbar manipulated to enrich himself. The Subcommittee
has concluded that with Akbar at the helm, Capcom engaged in
blackmail, bogus loans, "bucket shop" trading, use of nominee
frontmen, artificial mirror-image trades, co-mingling of funds,
money-laundering, theft, skimming of accounts, and kickbacks to
For example, Akbar arranged for kickbacks to Peniel
Investments, a Liechtenstein-based, Panamanian-registered company
that he owned. This arrangement, and others, specified
commissions that he paid to himself of between $5.00 and $12.00
per contract on business he had introduced to Capcom, specifying
"BCCI Overseas" as a qualifying account. In the months during
which BCCI lost $430 million at Capcom, Akbar paid himself a
total kickback of 4,671,579.86 (approximately $7,000,000).(26)
It is not clear whether Naqvi and anyone else at BCCI knew about
or participated in these kickback schemes.
There is evidence that Capcom engaged in money laundering
for a variety of clients both in the United States and in London.
For example, some 50 transactions were identified in the
Futures, Inc. accounts with insufficient or no supporting
documentation regarding the source or disposition of funds.
These transactions totalled more than $125,000,000.(27)
In testimony to the Subcommittee, Customs agent Robert Mazur
testified how Akbar used "mirror-image" trading to launder huge
sums of money. Mirror image trading involves buying contracts
for one account while selling an equal number from another
account. Since both accounts are controlled by the same
individual any profit or loss is effectively netted. According
to Mazur, Akbar explained that because these "mirror image"
transactions can be lost among many millions of dollars worth of
legitimate transactions "it would take forever for anyone to ever
Using mirror-image trading, Akbar bilked the BCCI Treasury
accounts and laundered money for one of Capcom's most notorious
clients, General Manuel Antonio Noriega.(29) Although complex,
the series of transactions involving Noriega, BCCI and Capcom
provide an illustration of textbook money laundering.
From 1982 through 1986 Noriega opened accounts with BCCI
for the "placement of secret funds of the [Panama] National Guard
-- money which Noriega was using for his personal use and that of
his family."(30) Despite the fact that the accounts were "no
correspondence" accounts in countries with strict bank secrecy
laws, Noriega was not completely free from risk in his use of the
public funds because the accounts were opened in his name and
with his signature.(31)
As of 1986, Noriega had placed approximately $23 million in BCCI accounts in Luxembourg and London. In July of that year, BCCI and Noriega began to shuffle these funds. On 26 July 1986, two Noriega accounts containing $8.1 million and $3 million were transferred from BCCI, Luxembourg, to the account of the Banco Nacionale de Panama at the Union Bank of Switzerland in Zurich(32) in the name of a company called [sic] "Finlay International."(33)
On this same day, other Noriega accounts at BCCI totalling
$11.8 million were transferred into the accounts of Banco
Nacionale de Panama at Deutsche Sudamerikanische Bank in Hamburg,
Germany, also in the name of [sic] "Finlay International."(34)
Thus, in a complicated set of transactions, the entire sum of
Noriega's BCCI accounts was transferred to banks other than BCCI,
held in accounts not opened by Noriega, and held in the name of
an entity other than Noriega.
The transfers became even more convoluted over the next two
years. On 8 September 1988, the entire $23 million was
transferred to the Banco Nacionale de Panama account at the
Middle Eastern Bank in London in the name of [sic] "Findlays."(35)
This transfer served to consolidate the funds in a single
account. Despite the fact that the funds were nominally held in
the account of the Banco Nacionale de Panama, the accounts
themselves had been opened by Noriega (who personally signed the
account opening documents) and remained in his control.(36)
On 13 September 1988, the Chief of the Private and
Investment Banking Division of the Nacionale Banco de Panama
instructed Middle East Bank to transfer the money from its
account to the account of [sic] "Finleys International Ltd."(37)
This transfer thus served to remove Banco Nacionale de Panama
from the transaction altogether.
From 15 September 1988 through 19 September 1988, Finley instructed Middle East Bank to disburse almost the entire balance which had been amassed in Finley's account. The letters from Finley were signed by Capcom's President, Z.A. Akbar.(38) Three of these payments totalling $20.5 million were made to Capcom and credited to the GESS and GOOD Capcom customer accounts.(39)
Another $2.6 million was paid to a coded account at the Trade
Development Bank in Geneva, Switzerland.
The transfers between Finley and Capcom effectively
laundered the funds originally deposited in BCCI by Noriega. The
transactions constituted "mirror image" trading; in effect, the
same person -- Akbar -- stood on both sides of the transaction.
Akbar was the managing director of Capcom and almost certainly
possessed the controlling interest in the majority of the
company's shares.(40) He also was the chairman and director of
Finley. Moreover, he possessed a Power of Attorney for the GESS
account and his brother was a director of the company behind the
In the entire set of transfers between Capcom, Finley, and
the Capcom Accounts, the funds were under Akbar's control and
subject to his direction. In order to disguise the transactions,
Akbar continually sought to inject other parties into the
scenario and to portray the transfers as legitimate business
transactions between non-identical parties.(42) However, the
documents indicate that Akbar moved funds from a bank account
under his control to a company of which he was the managing
director and then into Capcom customer accounts under his
control.(43) What appeared to be transactions between different
entities were merely transfers of funds between nominally
different accounts under the control of the same individual.
Akbar used Capcom and its accounts to conceal the source of the
funds and "transform" them into facially legitimate business
capital, brokerage fees, and bank account deposits.
Capcom may also have laundered money in the so-called
"Lebanese connection" case. According to the Peat, Marwick
report, on February 10th, 1988, Capcom received a telex from
Ahmed Tawfik giving instructions to make a payment of $150,000 to
Shakarchi Trading. Shakarchi trading was a Zurich-based currency
trading firm, principally involved in gold bullion trading.
Reportedly, a number of wealthy Egyptians had accounts with the
firm which was owned by Mohammed Shakarchi.
In February, 1989 Shakarchi was linked by U.S. and Swiss
investigators to two Lebanese brothers, Jean and Barkev
Magharian, who admitted that some of the two billion swiss francs
they channeled into Swiss banks and trading houses between 1985
and 1988 derived from drug transactions. The Magharian brothers
told investigators that $36 million the couriers brought to them
in Switzerland from Los Angeles came from cocaine profits.
The case gained notoriety when Swiss Minister of Justice was
forced to resign in January 1989 after admitting that she told
her husband, who worked for Shakarchi, that the firm was about to
be implicated in Switzerland's biggest financial scandal.
Yet another suspicious relationship maintained by Capcom
was with a German trading company, Ambros Holdings.
Approximately 44% of the Capcom U.S. client base consisted of
West German individual and corporate accounts controlled by a
handful of Western German companies such as "A and G management",
SFS GmbH management" and "Ralf Ltd." For example, Metzler SFS
controlled 37 of the accounts, or 39% of the total. The most
important of the German clients was Ambros holdings which
accounted for 50% to 70% of Capcom Future's gross commissions
and revenues in the period September/October 1988. According to
Capcom's records, the ledger balance was $40 million.
Ambros was a Panama registered company with offices in both
Germany and Liechtenstein. The company's President and Secretary
was Richard Sax, who traded for Ambros through Capcom Futures,
and elsewhere in Chicago, under the alias of Richard Wagner.
Ambros declared bankruptcy in Germany in 1991. German
prosecutors have been investigating the collapse of the firm
which may have lost as much DM 500m in the commodity futures
markets. According to press reports, German investigators
believe that Ambros operated as a giant Ponzi scheme.(44)
The June, 1991 Price Waterhouse Report noted the overlap of shareholders between BCCI and Capcom: "[Capcom's]...initial shareholders were dominated by major shareholders of [BCCI]."(45) A.R. Khalil, Minister of Communications for Saudi Arabia and Deputy Chief of Intelligence -- and a major BCCI shareholder -- was the dominant shareholder and director of Capcom from its foundation until its termination. Besides Khalil, the "Saudi Group", included, Kamal Adham, Khalil's former boss and the lead investor in the FGB takeover; J.J. Uddin, who acted as a substitute for Khalil; El Sayed E. El Jawhary, an associate of Adham and Khalil; and Robert E. Powell, an American with long-standing ties to Adham and Khalil.
Although little is known about Mr. Khalil, the Subcommittee
has learned that in 1976 he became Director General of Ministry
of Communications of Saudi Arabia . The Subcommittee has also
obtained a brief description of Khalil's background which he
provided to officials of the Federal Reserve on April 23, 1981 in
connection with the proposed acquisition of Financial General
My career has been devoted to business and I presently
hold interests in real estate, mechanical and
electrical maintenance projects, and commodities. In
addition, I have been involved in some business
ventures with American and British manufacturers for
the installation of electronic and computer equipment
in Saudi Arabia.(46)
In a document entitled "A Brief Resume of the Company and
Its Directors, Capital Commodities Dealers, Ltd.", Khalil is
identified as a prominent Saudi Businessman, involved in real
estate and construction, mainly in Saudi Arabia, U.A.E. and Oman.
He is also listed as the owner or director of the following
companies: Arabian Electronic Project Establishment, Global
Chemical and Maintenance Systems (where Robert E. Powell was
CEO), and Rockwell International, USA (where Kerry Fox worked).
The resume estimated Khalil's net worth to be "US $300,000,000."
It is noteworthy that during the same years that the Chief
of Saudi Intelligence, Kamal Adham, is entering the American
banking industry through the purchase of First American, his
successor in Saudi intelligence, Mr. Khalil, is quietly
purchasing three houses in the United States with the assistance
of Americans Kerry Fox and Larry Romrell -- key players in
The investor relationships in Capcom represent the
culmination of a long relationship between members of Saudi
intelligence and important figures in the US communications
industry. The record establishes the relationship between Khalil
and the Americans, Romrell, Magness, and Fox had its genesis in
the communications industry prior to the creation of Capcom.(47)
First, Kerry Fox had a long relationship with Khalil through his
work in the electronics business for Martin Marietta and Rockwell
International with the Saudi government dating five to ten years
prior to the creation of Capcom.
Second, Romrell and Magness proposed numerous ventures in
communications to BCCI and Khalil in the three years prior to the
formation of Capcom, 1982-1985. The proposals included the
installation of state-of-the-art electronics and communications
in the Saudi military command center. In October, 1982 Romrell
expressed interest to Akbar in "working with the bank [BCCI] and
managing any interests they may have in our area."
Larry Romrell has told the Subcommittee that he met Khalil
in 1981. The timing of the meeting appears to have been just
subsequent to Khalil's appearance at the Federal Reserve in
Washington D.C. in connection with the takeover of Financial
After entering into a real estate venture with Khalil,
Romrell moved quickly to solidify his relationship with Akbar,
BCCI and Khalil. The Subcommittee has compiled a log of business
proposals by Romrell for BCCI. (see Appendix I) Mr. Romrell
explained the various propositions in a response to written
questions from the Subcommittee:
Mr. Akbar had indicated to me that his clients or BCCI
-- I always had difficulty distinguishing between Mr.
Akbar's actions on behalf of his Mid-East investment
client and his actions on behalf of BCCi -- might be
interested in investing in the United States,
principally in "bricks and mortar" office buildings. I
suggested some possible investments to Mr. Akbar. I
never sought or received any compensation from BCCI or
Mr. Akbar for managing properties or anything else.(49)
While there is insufficient evidence to determine whether or
not any of these proposals were consummated between the parties,
the heavy traffic of proposals in 1983 to 1985 raises many
serious questions about Romrell's and Magness' involvement with
BCCI. Moreover, documents suggest that during this period BCCI
credit was an important vehicle for Mr. Romrell and Mr. Magness
in their personal affairs.
Documents provided to the Subcommittee also indicate that BCCI may have been a shareholder in TCI, the largest cable company in the United States.(50) All TCI shareholders were issued WTCI stock when the latter was spun-off from TCI as a separate company. The WTCI stock was then listed independently and was publicly traded on its own. In a letter to Akbar, Romrell wrote:
"I am enclosing an Information Statement which has just
become available this morning covering the distribution
to the TCI shareholders of all the outstanding shares
of WTCI...the stock will be distributed by today by
mail along with the enclosed Information Statement to
all TCI shareholders...there is a possibility that the
WTCI stock price will sell for a price upwards from
$8.00. I still intend to buy for our accounts at the
best possible price somewhere between $2 to $4.50. If
you have any comments or require any additional
information, please give me a call."(51)
Six months later, Romrell wrote Akbar about an apparent
"I understand the WTCI stock will officially start
trading at opening of business tomorrow, March 20. I
want to confirm my understanding that I have
established pursuant to my conversation with you a
$100,000 credit line with which to purchase stock and,
in addition, that you have authorized me to purchase
stock in your behalf up to a $100,000 limit. The
combined credit line would then be $200,000, except
that I would reduce my credit line within 30 days from
$100,000 to $85,000. If this is not your understanding
or does not meet with your approval, please contact me
Romrell has told the Subcommittee that, in fact, there was
no agreement and no combined credit line. He acknowledged that
the wording of the letter "did not sound good".(53)
Perhaps the most provocative document suggests that Romrell
was seeking a $200 million credit line from BCCI for TCI:
"...the TCI finance group that they are interested in
obtaining a loan facility...I asked Bob Magness...he asked
me to determine whether there would be any interest ion the
part of BCCI...I believe the credit facility that TCI is
looking for is around $200,000,000...as a separate matter,
WTCI will soon be looking for approximately $50,000,000 to
construct a new microwave route...there may be an
opportunity to put this deal together with BCCI if you are
According to TCI's lawyers, the company has never had any
relationship of any kind with BCCI:
[There is] no evidence that the TCI or the Related companies
had any business dealings with Capcom, BCCI, or any
currently identified related entity or person... (55)
During the period that Romrell is passing on WTCI
information to Akbar, he is also contemplating an investment in
Capcom: "Magness and I have discussed your proposal to invest in
a U.S. brokerage firm in Chicago or New York and to participate
in the ownership and operation to the mutual benefit of BCCI and
ourselves."(56) To entice the participation of Romrell and
Magness in Capcom, Akbar represented to the Americans that the
firm would earn a minimum of $4 million per year, and potentially
as much as $10 to $15 million.(57)
Despite the fact that neither of them had any experience or
expertise in the futures markets, Magness and Romrell agreed to
become directors on May 27, 1984.(58) They also decided to make a
financial investment in the firm. Magness, in a notarized
statement dated May 12, 1992, explained to the Subcommittee:
"...I agreed to buy a 1 percent interest for
"I was not offered anything for my investment beyond
the [above stated 1 percent] interest in Capcom. Nor
was I offered anything as an inducement to become a
member of Capcom's board of directors."(60)
However, Magness and Romrell also purchased a stake in Capcom with funds provided by BCCI. In a "Note for file" written November 9, 1984, Romrell scribbled:
"Bob and I" funded our share capital and loan stock as follows: "We agreed to fund $14,744(61)
$75,000 each from BCCI London...Balance of current
amount due was funded from our Credit Lines at BCCI,
The Subcommittee has obtained documents which appear to show
that, in fact there were other loans beyond those provided by
BCCI. Magness and Romrell executed no-risk loans to purchase
Capcom stock in a September 17, 1984 agreement with a Panamanian
company secretly owned by Akbar, managed in Liechtenstein by a
Dr. Franz Pucher. The company was named "Peniel Investments,
Inc."(63) Akbar provided Romrell and Magness with subordinated
Loan Stock in the amounts of 330,000 (approximately $450,000)
for Romrell and 69,300 (approximately $90,000) for Magness.(64)
A very unusual aspect of the loans is that they were self-liquidating: funds paid into Romrell's and Magness' loan accounts
from profits in their "managed investment" accounts would be used
to pay down the loan principal. (65) In other words, these loans
resembled the standard issue BCCI no-risk loans provided to those
who acted as nominees for the bank.
Another set of documents dating some months later shows additional loans to Magness and Romrell from Paten Holdings, Inc., a different Panamanian company, operated out of Geneva by Mme. Cecile Ringenberg, and again, secretly owned by Akbar. (66)
Romrell has told the Subcommittee that "at the time I understood
Paten Holdings to be a Swiss bank."(67)
On May 23, 1985, the Capcom directors used Paten Holdings to
increase the capital base in Capcom from L10,000,000 to
L25,000,000. By increasing the capital base of the firm,
Romrell's and Magness' overall holdings were also increased.
Romrell, who had placed only $15,000 of his own money into the
firm, found himself with holdings valued in excess of $2
The Loan Agreement, dated June 17, 1985, between Paten
Holdings, Inc. and Romrell and Magness provides both men with
169,500 (approx. $250,000). The terms require payment no later
than June 17, 1987. The collateral for the loans was the shares
secured by an attached memorandum of deposit and dividends and
interest were to be retained in order to reduce the outstanding
balance of the loans. As Romrell explained: "...with regard to
Paten Holdings, Inc...we had originally planned to reduce that
loan with dividends from Capcom."(69)
Indeed two years later, in July 1987, Romrell proposed a 30
percent dividend in a letter to Khalil, Adham, and Jawhary.(70)
However, upset from the events surrounding the CBOT
investigation, the Saudi Group refused to allow the dividends.
In order to accommodate the Americans, Akbar arranged for Romrell
and Magness to enter into replacement loan agreements with Paten
Holdings, Inc. The new loans were for an increased amount,
221,157.93 (approx. $330,000) and were secured by the Capcom
The year-end 1987 audit of Capcom in London by Arthur
Anderson raised the issue of disclosure of the Paten and Peniel
"All transactions with related or associated parties
have, where material and appropriate for the
presentation of a true and fair view...There are no
agreements whereby the directors could receive benefit
from dealing transactions either directly or indirectly
through agency agreements...In respect of the agency
agreements between Capcom Financial Services, Ltd and
the following companies: a) Peniel Investments, Ltd,
and b) Paten Holdings, Inc. ...In addition, we confirm
that the agreements were entered into at arms length
and that no director or shareholder has an interest in
either agent company. The company and its subsidiaries
have at no time during the period entered into any
arrangement, transaction or agreement to provide credit
facilities (including loans, quasi-loans, credit
transactions, mutually beneficial arrangements or
guarantees or security for liabilities for any
directors, shadow directors, officers or their
connected persons (except as permitted by the Companies
Act 1985 and as disclosed in the accounts.)(72)
The Paten and Peniel loan documents show this statement by
the auditors to be completely false. Either the auditors
colluded with Capcom management, or more likely, they were misled
as to Paten and Peniel by the management of Capcom.
Ultimately, Romrell tried to sever his connection to Paten.
According to Cecile Ringenberg, an emergency meeting was called
in London by Sheik Khalil. At that meeting, control of Paten
passed from Romrell to Akbar. Romrell has indicated to the
Subcommittee that he has never met Cecile Ringenberg, although a
xerox of her calling card was provided by him to the
The Subcommittee has uncovered documents which show that
Romrell and Magness clearly understood that they were acting as
nominees on behalf of Capcom. In a 1987 letter to Khalil,
"it was my understanding that the majority
shareholders were not willing to sign these guarantees
...As far as I personally am concerned, except for my
paid-up stock and notes, I have acted as nominee for
one or more of the original shareholders."(74)
Five days later, Romrell reiterated this point in another
"...It was my understanding at that time the majority
shareholders representing yourself, Sheikh Kamal, and
Mr. Jawhary...but it was the only one [plan] we could
see that would retain the original shareholders through
voting trusts and nominees and meet the needs of the
Chicago Board of Trade. It was understood by the
reorganized shareholders that they were nominees for
the original shareholders. Thus, the actual beneficial
ownership did not change."(75)
The reason for using American nominees by Capcom was clearly stated by Akbar in his taped conversation with undercover U.S. Customs agent Robert Mazur: "...it's better if we use some other people as our nominees, instead of showing [Capcom] as BCC subsidiary"(76) This is the identical strategy to that pursued by BCCI in its acquisition of First American Bank in Washington D.C.
Robert Powell, a California businessman with interests in
the Middle East, was also a director of Capcom, and, he claims,
unbeknownst to him, a nominee for the company. Powell, like so
many others involved in the BCCI affair, claims to feel
"deceived, duped, humiliated ...etc...etc."(77)
Powell has a background in infrastructure and aircraft
maintenance for the U.S. military, having provided "contract
services to the United States Air Force, Military Airlift
command, for the operation and maintenance of United States Air
Force facilities located at Wake-Island, Mid Pacific."(78)
Despite his close relationship to the U.S. military during the
Vietnam War, Powell claims to have no background in, or
affiliation with, military intelligence. Rather, he told
Subcommittee staff that he simply follows the military "where
According to Powell, in 1968 he was contacted by an
assistant to Sheik Kamal Adham named Mamoud Arabe who met with
him in Washington D.C. and subsequently set up meetings for him
with Adham, then chief of Saudi Intelligence, and A.R. Khalil,
the Deputy Chief of Saudi Intelligence, in New York. According
to Powell, he believed that Adham and Khalil were simply
"advisor(s)" to the King of Saudi Arabia and that during their
meeting they only discussed "differences between Democratic and
Residential candidates [with] a little bit of talk about the
company and the services we offer."(79) Nevertheless, at some
point thereafter, Powell settled in Saudi Arabia where he became
the managing director for Global Chemical and Maintenance
Systems, a company owned by A.R. Khalil. When Global Chemical
opened an office in Oman in 1976 Powell met Z.A. Akbar who was
then working at the National Bank of Oman, which was partially
owned by BCCI. The next year Powell established a banking
relationship for Global Chemical with BCCI, and while he lists
BCCI as Global's bank in its annual report, he claims under oath
that "no Global entity or myself borrowed any money from
Powell became involved with Capcom in 1984 at the suggestion
of Akbar.(81) According to Powell he invested 80,000 Pounds
Sterling in Capcom, money which was financed, although as of June
21, 1992, Powell was uncertain the nature or source of the
financing.(82) Powell told the Subcommittee that he believed his
initial investment represented the extent of his holdings. In
July, 1992, however, prompted by questions from the Subcommittee,
Powell contacted Capcom in London which advised him that by July
1985 he had accumulated 3,500,000 shares of stock -- 15% of the
firm's holdings. Most of that stock was transferred from his
account in 1987 but as of July 1992 he still owned 250,000 shares
of stock. According to Powell, "When or how I became the owner
of a 250,000 shares is not explained by the record nor do I have
any knowledge about the activities that created this apparent
paper increase." Powell wrote the Subcommittee "[I]t is obvious
that the company can do anything it pleases with its shares
without informing the affected parties. Is not hindsight
Powell's account of Akbar's deception and of his relationship with BCCI, however, require further investigation. By his own admission, Powell met with Akbar "once or twice a year" in London to review Capcom and his stock holdings.(84) Moreover, he acknowledges having met Abedi on at least one occasion and Naqvi on at least a half dozen occasions.(85) These meetings with BCCI's top management strike the Subcommittee as strange given Powell's claim that he had such a limited relationship with BCCI as an institution.
As mentioned earlier, the genesis of Capcom's links to the U.S. lies in the relationship between Kerry Fox and A.R. Khalil. Fox had been Vice-President and General Manager of communications and electronics at Martin Marietta and President of two of Rockwell International's major divisions when he met A.R. Khalil while doing business with the Saudi government.(86)
Correspondence between Fox and Khalil suggests that they
maintained a close relationship: "A.R. Khalil was and is a good
friend of mine."(87) According to Fox, "I had known Sheikh Khalil
for several years prior to that through business relationships
with the Saudi government...(prior to 1982.)"(88) Moreover, Fox
and Khalil owned neighboring homes in Texas and in Florida.(89)
During the early 1980's Fox went to work for U.S. Telephone
Communications, which by 1982, had experienced "phenomenal growth
and revenues of $90 million annually." In 1985 Fox founded his
own company in the telecommunications industry -- American
Telecommunications Inc. He also invested in a number of real
estate projects with his partner, Larry E. Romrell.(90)
In an affidavit, Fox described his relationship with Akbar
who "at that time... was personally handling many of Sheikh
Khalil's world-wide financial transactions."(91) According to
Fox, "I worked closely with Mr. Akbar both as managing director
of the Capital Fund, but more importantly for me when he served
as a Director of American Telecommunications Corporation."(92)
Fox described Akbar's role with ATC: "I worked closely with him
by telephone to assist our company through some very difficult
start-up and financial problems. Mr. Akbar provided badly needed
financial resources to the company, first as equity and later as
debt, which was instrumental to the company's survival."(93)
Indeed, Capcom and related entities purchased in excess of
350,000 shares of ATC stock, over 100,000 ATC warrants and loaned
the company hundreds of thousands of dollars. In the affidavit,
Fox defended Akbar as: "absolutely honest, trustworthy, and very
honorable. He is a man of the highest integrity, having a strict
code of high morals and business ethics."(94)
After Akbar was indicted for money laundering by the US
Attorney's office in Tampa Florida, he resigned from the board of
ATC. Akbar was replaced by Larry Romrell on the board, even
though Romrell told the Subcommittee that "by the late 1980's he
and Fox had a personal falling-out."(95)
This background raises questions about Fox, who along with
Romrell acted on behalf of Khalil in 1981 and 1982 to purchase
three residences in the U.S. and manage them. The Subcommittee
has learned that the three properties located in New Smyrna
Beach, Florida; Dallas, Texas; and Vail, Colorado were each
financed by BCCI and managed by Akbar.(96) Second, while Fox and
Romrell "used the houses from time to time", the property deals
may have been used to financially benefit the two Americans who
at the time were salaried employees. (97)
The Subcommittee invited Fox to testify on these matters at
its July 30, 1992 hearing, but Fox, though his attorneys, invoked
his fifth amendment privilege not to incriminate himself.(98)
Kerry Fox, although not a director of Capcom, was a director
of The Capital Fund, an open-ended public investment fund
launched by Capcom. The stated purpose of the FUND was
investment in stocks, bonds, metals, options, and commodities.
Control of the FUND resided in the "Manager", Capital Management
Services, which had its operating base in Muttra, Oman. The
original Directors were Paten Holdings and Zask Trading and
Investment, Ltd, Akbar's secretly held Panamanian companies
operated out of Liechtenstein. These entities were replaced as
directors by Kerry Fox in October, 1985, indicating that Akbar
had complete confidence in his ability to control Fox.(99)
By January 1, 1986 the initial L10,000,000 share capital had
been fully subscribed, making it appear that the general public
had invested in the Capital Fund.(100) In fact, however, Akbar
controlled almost everything behind the FUND, including Zask
Investment, Paten Holdings, his brother and Dr. Franz Pucher, the
Liechtenstein lawyer. Akbar secretly contributed $8,145,000 (81
percent) of the $10,000,000 deposited in the FUND with the
remaining 19 percent coming from BCCI/Capcom insiders, including
Kamal Adham and Mr. E. El Jawhary.
The first year of investments by the Capital Fund resulted
in an impressive profit, $2,278,708, and, in fact, the FUND
produced profits in every other year until its termination in
1988. However, Ian Watt of Peat Marwick McLintock, characterized
the profits as "artificial" and explained that through "matched"
and "back to back" transactions, money from at least 17 accounts
was transferred into Fund, totalling an estimated $3,334,480.(101)
Watt concluded that the FUND played a significant role in
Capcom's operations: "In all, save a number of insignificant
cases, the client account in which profit was created was
The Capital Fund continued to increase and prosper until
Akbar's indictment for drug money-laundering on October 10, 1988.
After the indictments, Kerry Fox met A.J. Puri in December, 1988
at the Dallas-Ft. Worth airport and was advised that the Capital
Fund would be wound up.(103) However, it was not until September
18, 1990 that Capital Management Services ceased trading and was
In early 1987 the Chicago Board of Trade (CBOT) clearing
corporation imposed a requirement that the owner of 5% or more of
a clearing member guarantee the house obligations of such member.
Accordingly, in June, 1987 the ownership of Capcom UK in Capcom
US was reduced from 82% to 4%. The individuals who purchased
Capcom UK shares in Capcom-U.S. did so with a loan from Capcom
UK. One month later, in July 1987, Capcom US loaned Capcom UK
nearly $3 million. That loan was never serviced and the
Subcommittee has concluded that Capcom was involved in nothing
more than a shell game to restructure its US operations.
At the same time that the restructuring was taking place, an
investigation of Capcom had been undertaken by the CBOT to
determine the identities of the individuals and entities which
had an ownership interest in Capcom. In response to the
investigation, A.R. Khalil wrote to Capcom's chairman, Larry
Romrell, demanding that all the directors be fully advised of the
true owners of Zask Investment and Trading, Akbar's company,
which had surreptitiously increased its ownership in various
Capcom entities. Ironically, Khalil ask that Romrell keep "my
advisor, Mr. Z. Akbar, fully informed."
The issue was resolved when the secretly held Akbar-controlled interests in Capcom declined and the Saudi Group re-established its majority position using relatives and associates
of Adham and Khalil on the Boards to escape the disclosure
requirements of the US regulators. For instance, Mr. Wadia Sayed
Khalil acquired a 39 percent ownership, and Mr. Robert E. Powell
a 1 percent ownership, which combined with others in the "Saudi
Group" totals 52 percent.(105)
In its investigation of Capcom the CBOT also disclosed that
Capcom had engaged in numerous serious violations. Stephen Early,
General Counsel to the CBOT testified before the Subcommittee:
[O]ne of the violations was that Capcom London was acting as a principal rather than an agent in transactions entered into on behalf of its customers. Now in essence, what that means, if I can put it in simplest terms, is that Capcom London was selling to its customers out of its inventory of positions of contracts traded at the board of trade....It is illegal in the United States...What we require is that the customer gets is the trade that was transacted in the public auction on the floor of the exchange and nothing else.(106)
Early concluded that "a trading practice such as this ...may be a
means to further cloud what you have already encountered as the
disarray of records, which is typical of Capcom and BCCI."
Capcom settled with the CBOT and agreed to "cease and desist"
from further violations and to pay a $124,000 fine.(107)
Early also testified that at the time "[W]e had no direct
evidence of money laundering on behalf of Capcom."(108) However,
during the same period, undercover Customs agent Robert Mazur was
learning from BCCI insiders that Capcom was, in fact, being used
to launder money. Mazur's undercover tapes formed the basis for
the October, 1988 indictment of the trading firm.
In the summer of 1988, just months before the indictment in
Tampa, Akbar contacted the Special Counsel to the Foreign
Relations Committee, Jack Blum, and during a luncheon meeting in
New York, claimed that he could lay out in detail the criminality
of BCCI. Akbar boasts were real: according to the 1991 Price
Waterhouse Report, "...Akbar took certain documents with him when
he left [BCCI]. In 1988 he used this information to blackmail
[BCCI], which paid $32 million to prevent him disclosing the true
nature of the activities of Treasury..."(109) Akbar may have been
using his meeting Blum to threaten BCCI. In testimony to the
Subcommittee, Blum characterized his meeting with Akbar as "a $30
The alleged bribes from BCCI to Akbar were paid into the
TWOY account at Capcom. According to the Ian Watt audit, "TWOY
and TWOY2 are both controlled by Akbar's brother, Mr. R. Akbar.
The beneficial owners are not known..."(111) But Watt notes,
"Akbar possessed a power of attorney over both TWOY accounts."(112)
In a secretly taped conversation Akbar explained to agent
Bob Mazur the use of coded accounts to disguise ownership. Akbar
used the example of TWOY, which he described as his account, and
explained that "TWOY" was a translation, presumably from his
native language, of the word "who":
"But if somebody asks, who's that person. Number two,
it means who? For my account and Tawoy. It is called
Tawoye. Tawoy. My account is Tawoye. Tawoye means
who. No one asks who's Tawoye. We are not supposed
The auditors noted the booking of a $31 million loss in the
TWOY account in March 1987 from Standard and Poors Index futures
trades.(114) In short, Akbar may have used the Twoy account to
launder money that he had extorted from BCCI.
Capcom Financial Services, Ltd., the British parent company of the Chicago-based Capcom Futures, Inc., was indicted by a grand jury in Tampa, Florida on October 10, 1988.(115) S.Z.A. Akbar and BCCI were also named in the indictment.
The indictment charged that Capcom had participated in a
conspiracy to launder money and to violate federal narcotics
laws.(116) The indictment specifically charged that Capcom had
used its bank and customer accounts to launder drug money for the
Medellin cartel and other Latin American sources.(117)
Just as BCCI mounted a full scale public relations assault
following the October 1988 indictment, so it appears did those
with ties to Capcom contemplate a similar campaign. In his
January office diary, Romrell noted "talked to Magness about CNN
report and Capcom... waiting to know the source of the
misinformation."(118) TCI, which Magness is chairman of, owns 20%
of CNN. During the same period, Romrell also scribbled in his
diary "Ramsey Clark/Lyndon Johnson/ Atty Gen is talking to
people in Wash D.C. ... Drug charges may be lifted against
But the charges were not dropped and, in fact, a second,
superseding indictment against BCCI was issued in 1989.(120) This
second indictment added 14 additional defendants but it neither
deleted Akbar or Capcom as defendants nor did it alter the legal
claims made against them.(121)
Akbar was arrested in the UK where he had also been
indicted. He was found guilty and sentenced to 18 months in
prison. After his release, he fled to Paris where he was again
arrested. Akbar is currently awaiting extradition to the United
States. While Capcom Financial Services, Ltd., the UK parent,
has been indicted, Capcom Futures, the U.S. subsidiary, has never
The day after Akbar and Capcom were indicted in the U.S. for
drug money-laundering, a memorandum was written by Romrell and
John Parry, which revealed that Romrell had working knowledge of
some of the "sensitive" accounts at Capcom, and that a joint
agreement existed between Romrell and Capcom to make investments:
"On Tuesday 11th October 1986 it was decided by mutual agreement between John Parry and Larry Romrell that it would be in the best interests of the company to liquidate the open positions in the account GESS (General Securities). This decision was taken in light of the sensitive nature of the account pertaining at the time...
"It was decided to close the account slowly over a matter of days, if necessary, so as to preclude any market comment concerning unnatural activity at Capcom.
For all of the above reasons it was also decided to
liquidate any open positions in the accounts of Little and
Following the announcements in October 1988 of the Florida
indictments of Capcom UK for money laundering and drug
trafficking, the futures markets activities of Capcom US,
according to CFTC Chairperson Gramm, "became of great concern" to
Indeed, the CFTC and the Chicago Mercantile Exchange
commenced an inquiry into Capcom. According to Chairperson
We were also interested in examining the Capcom US
records to identify potential evidence that might
suggest money laundering. Although money laundering is
not a violation of the Commodity Exchange Act, the
commission staff wanted to be sure all relevant
information was available to the authorities who could
best use it.(124)
On August 15, 1989, the CME Clearing House Finance
Subcommittee reviewed the staff report of the activities of
Capcom Futures from January, 1986 through May, 1989 and concluded
that there was a reasonable basis to charge Capcom U.S. with the
following violations: "Act of bad faith" (commingling customer
funds with house funds); Permitting the Misuse of facilities;
Detrimental Act; Uncommercial conduct; Accepting new trades when
account undermargined; Transfers of positions with no change in
ownership; notification of reduction in capital in excess of 20%;
and non-compliance with financial requirements.
The CME found that trading at Capcom was often done on the
basis of oral instructions received from customers which were
then confirmed in writing. In some instances, according to the
CME, "the files showed no confirmations." Moreover, the CME's
internal investigation found that:
There were several transfers of funds from unaffiliated
Capcom-U.S. customer accounts into the Ixora account,
an account owned and controlled by Z.A. Akbar.
According to the CME, no written authorizations were
obtained prior to the transfer of the funds.
According to the CME, Akbar, the owner of the Ixora account,
told the firm "he intended to use the account for trading and the
firm anticipated significant trading volume."(125) The Ixora
account actively traded from December, 1986 until May, 1987.
From November, 1987 through October, 1988, there were twelve
receipts into the account totaling $9.84 million and twenty-five
disbursements totaling $9.82 million. CFTC Chairperson Gramm
testified that IXORA was also "involved in a complicated $2
million transaction involving Finley International, Ltd. and
Capcom UK."(126) Finley, as noted earlier, was the account used to
launder General Noriega's money.
Certain of the trades in the Ixora account were clearly
BCCI-related. For instance, a confirmation letter, dated April
27, 1987 is addressed to Mustafa Kamal c/o Bande Hasan. Mr.
Hasan was an employee of BCCI in Miami. Moreover, CFTC
Chairperson Gramm told the Subcommittee that:
Information developed in our inquiry with respect to
the Ixora account at Capcom US, however, indicated that
certain disbursements were made to persons apparently
unrelated to the purported account owners, including
Akbar Bilgrami, who may be the same Akbar Bilgrami
identified as the Director of Latin American Overseas
by the October 1988 indictment.(127)
The Subcommittee has obtained documents which show that
Romrell is the individual named on the IXORA account at First
National Bank of Chicago. Moreover, Ixora account statements and
bank statements were sent to him at his Western
Telecommunications offices. CFTC Chairperson Gramm testified to
the Subcommittee that "In February of 1988 S.Z.A. Akbar
instructed that a cash disbursement of $100,000 be made the IXORA
account ... to Mr. Romrell's account." (128) Concerning the IXORA
account, Romrell told the Subcommittee:
[I] learned from the Subcommittee that Ixora also
had an account at Capcom, but I have no knowledge of
Ixora was a Cayman Islands corporation that was
owned by Mr. Akbar. Mr. Akbar asked me to find the
name of a Cayman Islands lawyer to handle this
matter....To my knowledge, Ixora never conducted any
According to Chairperson Gramm, investigators were unable to
learn anything more about the IXORA account because "Mr. Saghir
exercised his fifth amendment rights with respect to all
questions concerning this account when his investigative
testimony was taken by the CFTC.(130)
The CME also found that there were multiple transfers of funds between Mohammed Zaheer, the brother of Capcom Futures' President, M. Saghir and two unaffiliated customer accounts.
On October 29 1987 there were six receipts in the Zaheer account
totaling $4.84 million and the next day there were two
disbursements totaling $4.80 million. The CME noted that "from
the period December 31, 1986 through May 31, 1989, the ledger
balance of the account was usually less than $150,000." These
transfers are particularly suspect because an investigative firm
retained by the CME discovered that Mr. Zaheer worked in a
service station in Karachi, Pakistan and his position at this
service station is described as "not very high."(131)
After reviewing the Saghir/Zaheer transactions, Gerald Beyer, Vice President for the CME, told the Subcommittee that "On a person level, when I was involved in this investigation, I was certain that it involved drug money and laundering of money.
But there was no way we could prove that. We discussed that in
our committee; we discussed that among ourselves."(132)
Despite suspicions about highly unusual transactions, CFTC
Chairperson Wendy Gramm told the Subcommittee:
In terms of finding trading violations or Commodity
Exchange Act violations that perhaps could support
money laundering, we did not find any discernible
pattern...[N]o one has ben able to --at least other law
enforcement officials have not been able to find money
laundering in Capcom US, to our knowledge, as of
Money laundering, as Chairperson Gramm testified, is not
even a violation of the Commodities Futures Trading Act.
Incredibly, it appears that the CFTC and the self-regulatory
organizations have never even made a criminal referral for
possible money laundering:
Senator Kerry. [H]ave you ever specifically referred,
or have any of the exchanges ever made a criminal
referral for money laundering?
Dr. Gramm. We have raised concerns.
Senator Kerry. Have you made a criminal referral for money laundering?
Dr. Gramm. No. Not-- not specifically in that regard...
Chairperson Gramm told the Subcommittee that the results of
the inquiry by the CFTC "contributed to the removal of Capcom US
from US financial markets."(134) According to Gramm:
The Chicago Mercantile Exchange, CME, immediately
restricted the trading activities of Akbar and
subsequently made specific findings in October of 1989
that Capcom US had violated CME rules, including
accepting new trades in an undermargined account and
improperly transferring positions between accounts.
Capcom US paid a fine of $500,000 and agreed to
withdraw as a CME clearing member.
Early in 1989 the Chicago Board of Trade, the only US
exchange for which Capcom UK was a member, suspended
Capcom UK indefinitely and Capcom UK was subsequently
expelled on August 24, 1989. Also, on June 30, 1989
they allowed Capcom US to withdraw from CBOT
membership. In accepting the Capcom UK settlement, the
Board of Trade had reason to believe that Capcom UK had
entered into reckless and unbusinesslike dealings, was
unable to demonstrate capital compliance, and engaged
in fraud and dishonorable conduct in its dealings with
the exchanges, among other things.
In October of 1990 the NFA, the National Futures
Association, found Capcom US to have violated NFA rules
by making misrepresentations to a customer and making
unauthorized trades, failing to collect proper margin
from a customer, and failing to supervise employees and
agents. As a consequence NFA ordered Capcom US to
relinquish its FCM registration and NFA membership and
never to reapply, and to dissolve its corporate status
at the earliest possible date.
Ms. Gramm also stated that "all of the information developed
by the commission [including that developed by the
exchanges]....was made available to the prosecutors in charge of
the criminal case pending in Tampa."
While Capcom UK was indicted in the US, it has never been
tried and has successfully avoided service of process. More
amazingly, Capcom UK continues to operate in London to this day.
In fact, it has developed new European clients. While ZA Akbar
is in jail in France, his legal defense bills, in excess of
$100,000 a year are being picked up by Capcom. Moreover, Akbar's
brother and Mrs. Puri, until recently, served on the board of
Turmoil in the Persian Gulf after the fall of the Shah of
Iran in 1979 left a vacuum in the CIA's capability to gather
information. The huge CIA operation in Iran was lost, including
its most important listening stations to monitor the Soviet Union
and China. With Iran and Iraq locked in a land war, options
remaining were limited to several friendly nations: Saudi
Arabia, U.A.E., Oman, and Kuwait. With the revolutionary changes
in technology that spawned the modern communications industry in
the 1980's came the need for the proper U.S. agencies to employ
it, and, conversely, for our allies to gain access to it.
It was in this climate that majority shareholders in BCCI
approached U.S. executives in the communications industry to
serve on the board of Capcom. The Americans, Larry Romrell,
Robert Magness, both of Telecommunications Inc., and Kerry Fox of
American Telecommunications Company, had no knowledge or
background in commodities trading, and evidently were never
involved in the management of the firm.
The evidence of the role of Saudi Intelligence officials,
Adham and Khalil, who are the principle liaisons with the CIA
over two decades, owning and controlling Capcom, is disturbing to
the Subcommittee for two reasons. First, the Subcommittee is
concerned by the possibility of a foreign intelligence service
promoting a policy agenda in the U.S. Secondly, the close
relationship of Saudi Intelligence to the CIA leads to the
question of whether or not the CIA was aware of Saudi activities
in the U.S.. The CIA has unequivocally told the Subcommittee
that it did not use and has no knowledge of Capcom, and that it
was unaware of the investments in Capcom by Sheik Adham and Sheik
Unfortunately, it will be increasingly difficult to
ascertain the purposes for which Capcom was used. In a December,
1990 letter, it was noted that Mrs. Puri, wife of A.J. Puri, was
handling the "final details" of the Capital Fund wind-up.
Although the meaning of final details is ambiguous, the London
Independent reported in August, 1991 that "more than 100 boxes of
files and other papers belonging to BCCI-linked Capcom Financial
Services...were destroyed on the orders of a senior Capcom
official...The request to destroy the documents was made by
Sushma Puri...Ms. Puri is also co-director along with Capcom's
founder, S.Z.A. Akbar, of Futures Advisory Services."(135)
Documents do still exist in the United States. Andrea
Cocoran of the CFTC told the Subcommittee that the CFTC has all
the records. Chairperson Gramm added that "We do have an
investigation that continues regarding Capcom US."(136)
While it is encouraging to learn that the CFTC is continuing
to investigate Capcom, four years have lapsed since Capcom was
originally indicted. Counsel for Larry Romrell, the Chairman of
Capcom, told the Subcommittee in the spring of 1992 that his
client had not been interviewed nor had his records been
subpoenaed by any law enforcement agency: the Subcommittee was
the first government entity to show interest in Mr. Romrell's
role in the entire Capcom affair. Clearly, in the United States,
a much greater investigative effort needs to be devoted to
Capcom. It is hard to understand why British regulators -- in
light of the Peat Marwick report -- have allowed Capcom UK to
continue operations. Subcommittee staff have been advised that
Lord Justice Bingham has looked into the irregularities
surrounding Capcom in the United Kingdom. His findings regarding
Capcom's activities in the UK will, it is hoped, expose more of
the facts concerning its extensive activities in the UK than the
US investigations have been able to uncover.
In terms of the broader lessons of Capcom, regulation of the
futures markets need to be greatly strengthened. Even a cursory
background check on Akbar would have revealed that he had managed
the Treasury accounts at BCCI which lost $400 million in the
futures markets in the early eighties. Moreover, regulators who
appeared before the Subcommittee testified on the one hand that
annual audits of Capcom US turned up nothing irregular, but that
Capcom's books and records were a mess. That such a
contradiction was allowed to continue for four years indicates
that the CFTC needs to critically review the effectiveness of the
various exchange audits. Finally, money laundering should be made
a crime under the Commodities Futures Trading Act.
1. Installation of a subscription T.V. service in Saudi Arabia:
"...I would rather work with you and Mr. Khalil on this
venture."(137) (Khalil was the Minister of Communications in
2. "...Mr. Khalil, the Saudi Sheikh...I will go over the
material with him and I feel confident he will be
3. Advice on how to proceed on TCI's bid to the Saudi Arabian
government for cable television distribution system located
at the Royal Saudi Air Defense Command School, Jeddah.(139)
4. Advice on proposal to TCI to install a cable system for the
Ministry of Defense and Aviation Army Air Defense
5. $90,000,000 investment in a hospital in Houston, Northwest
Medical Center. Proposal that Magness and Romrell take 25
percent, BCCI 50 percent, doctors 25 percent.(141)
6. $22,000,000 joint purchase of Stouffers Inn, Denver.(142)
7. BCCI loan proposed for $2,600,000 for a related investor
group to purchase 30 percent in cattle feedlots owned partly
by Magness and Romrell.(143)
8. Purchase proposal of Winterwood Townhomes, Steamboat
Springs, using BCCI loan of $2,500,000 arranged by
9. Proposal of an investment of $3,100,000 in Marina Del Rey,
10. $300,000 credit line from BCCI for operation of Amigo Farms.
(April 18, 1984)(146)
11. $50,000 credit line for Romrell and Magness from BCCI. (June
12. Beehive International building in Salt Lake City, Utah;
Corporate Secretary and General Counsel is Romrell's
brother; "with his inside information we could make a good
13. Oil and gas investment in Windsor Reservoir.(148)
14. "$6 million of credit on real estate to a friend of Romrell.(149)
15. "Duds 'n Suds" share offering purchase proposal before
public issue proposed by Romrell to Akbar.(150)
16. Proposal for BCCI to be a partner in a land deal in Phoenix
with Mr. Noel Cullison, who Romrell had arranged to borrow
$525,000 from Capcom.(151)
17. $2,635,899 balance in loan credit from BCCI to
18. "I scheduled a meeting with Mr. Shoaib and Mr. Nazarian with
myself and Mr. Magness."(153)
19. "Also, I am enclosing another letter from Tony Coelho. Tony
Coelho would be the third most important man in the U.S.
Government, with the President and the Speaker of the House
being first and second most important."(154)
The following transactions are an indication of the dimension of
the relationship between the BCCI group and Capcom and related
individuals, transactions which occurred in Capcom, and other
financial details which have been found on documents produced to
the Subcommittee. In some instances, this information resolves
and explains questions regarding Capcom, but in others it raises
The itemization of these transactions is presented here only as a
log to put on public record in some consolidated order the
evidence of financial events which relate to Capcom.
A. ATC / FOX / Akbar et al.
Akbar and entities which be controlled issued credit
and purchased equity in American Telecommunications,
Inc (ATC). The Chairman and CEO of ATC is Mr. Kerry
Fox. Mr. Larry E. Romrell is a Director of ATC. Mr.
Fox was a Director of Capital Fund, a Capcom public
investment fund which was the recipient of large
amounts of moneys skimmed or laundered by Capcom, as
described later in this report.
The following transactions occurred between Mr. Kerry
Fox, ATC, Akbar, Capcom, Financial Advisory Services,
1. 150,000 shares of ATC purchased by Zask Investments and Trading, owned by Akbar, operated out of Liechtenstein.
2. 30,000 shares purchased as in 1 above.
3. 177,102 shares purchased by Financial Advisory Services (FAS), owned and controlled by Akbar, linked to Capcom as an "introducing agent".
April 20, 1988.
4. $100,000 borrowed by ATC from Zask, June 1, 1989.
5. 50,000 warrants of ATC stock purchased by FAS.
6. 50,000 warrants of ATC stock purchased by Zask.
7. 25,000 warrants of ATC stock (not purchased) owned by Akbar.
8. June 11, 1991 letter from Fox to Akbar offers ATC warrants to Capital Fund, referring to the February 12, 1987 and August 5, 1988 grants of warrants.
9. September 30, 1988 letter from Fox to Akbar solicited Akbar's support in arranging receivables financing in the amount of $1.5 million.
10. $100,000 loaned to ATC June 15, 1988 by Akbar. Fox refers to ATC making losses and asks Akbar to consider making another $100,000 credit.
11. Request from Fox to Akbar May 3, 1988, stating
that Fox had "nowhere else to turn" and was in a
"near term but critical cash flow problem"
(emphasis added), for "another" immediate loan of
$250,000 and longer term $2-3,000,000 financing
NOTE: Akbar was a Director of ATC to November 4, 1988, when he resigned subsequent to his and Capcom's October 10, 1988 indictments for drug money-laundering. Some of the above transactions occurred after the indictment and conviction of Akbar.
B. BCCI / Fox, Romrell / Khalil / Adham
Fox and Romrell acted as a front for A.R. Khalil for
the purchase of three real estate assets in the U.S.,
as described later in this report. Akbar was the BCCI
officer who arranged the financing.
1. $530,000 loan from BCCI to Fox/Romrell for construction of "Potato Patch" house, Vail, Colorado.
2. $908,625 loan from BCCI as of February 7, 1983, apparently for Vail Associates apartments.(155)
3. $2,000,000 loan BCCI to Dr. Charles Howard, Houston for sale of "Potato Patch" house by Romrell/Fox, who arranged loan and received part of proceeds.
4. November 8, 1982 letter from BCCI, Cayman to Fox/Romrell confirming loans outstanding:
$754,619 (Potato Patch, Vail)
$532,003 (collateral: 1st mortgage on Khalil's Vail house)
5. Payments of $15,000, $34,995, and $20,000 were paid by Khalil to Fox/Romrell in March, April 1981, apparently to find costs of a real estate construction project.
6. Fox/Romrell had an account at BCCI, Cayman, #03002241, which had a balance of $388,486.33 on December 1, 1981.
7. $2,635,899 balance in loan accounts at BCCI for Magness, Romrell properties (Amigo Farms).(156)
8. $2,000,000 loan request by Romrell from BCCI,
Cayman for IXORA Investments, Ltd, a company owned
by Akbar cited by the CME in 1987 for 53 irregular
transactions which imply money-laundering,
although the Audit Report stated "We cannot
speculate on the reasons, known only to them."
The CME required total financial disclosures
against the threat of expulsion, which caused
ownership and directorship changes in 1987/88.
The transfers into the account came from A.
Bilgrami, the BCCI officer convicted of drug
money-laundering and presently serving prison
sentence in Florida.
$1,950,000 was dispersed from the IXORA account at Capcom U.S. to Capcom U.K. on September 23, 1988.
A letter of January 1990 from First Chicago
indicates that IXORA is an account owned by Akbar
c/o Romrell, who had apparently acted for the
company IXORA for many years.
9. A British accountant investigating for the Serious
Fraud Office, London, noted:
"...a series of transfers made out of and back to
the Winterwood Associates [Romrell/Magness]
funding around year end 1985. Two amounts of
$1,000,000 were credited to this account from Bank
America Int'l, N.Y. prior to Dec. 31, 1985.
Subsequently, on 2 Jan. 1986, one amount of
$1,000,000 was transferred to 1st Interstate Bank
favoring Larry Romrell and another of $1,018,750
transferred to Account No. 01024628 of Mr. A.R.
Khalil with BCCI. Ziauddin Akbar and K. Muneer
were involved in authorizing both transfers." "The
01024628 account has been identified from our
investigation into treasury operations as a London
treasury pool account."
This suggests that the Winterwood Associates
account of Romrell/Magness and/or Romrell may have
been connected to the "routing of funds" by BCCI.
10. Kamal Adham, majority shareholder of Capcom, was
responsible for estimated losses at BCCI of $199
million as of December 29, 1990.(157)
11. A "Note for File 11.9.84" indicates that BCCI
loaned Magness and Romrell $75,000 each to buy
shares in Capcom.
C. Capital Fund (Capcom) / Kerry Fox
This was a public investment fund organized by
Akbar/Capcom with Kerry Fox as Director. It was the
recipient of funds from skimming and money-laundering.
1. October 14, 1985 share capital of $900,000 was authorized and by January 1, 1986, $10,000,000 was fully subscribed by investors.(158)
2. Akbar controlled entities, Notan Trading and Investment, Zask Investments and Trading, Pate Holdings, Riziaudden Akbar contributed $8,145,000 of the $10,000,000 to capital fund, thereby benefiting of 80 percent of the funds skimmed or laundered into Capital Fund.
3. October 31, 1988 Special Audit identified $2,900,000 of funds artificially "processed" between certain accounts of which Capital Fund was the recipient.
4. $734,158 was skimmed into Capital Fund from 16
customer accounts by "internal matching."(159)
D. Capcom Financial Information
1. Audit as at October 31, 1988 for Capcom: 1988
showed Brokerage Commission Income 7,156,692 and
loss on ordinary activities 8,514,936. Stock
ownership at this date by Directors was as
a. Romrell: 250,000 shares, down from 2,750,000 shares in 1987
b. A.R. Khalil: 8,250,000 shares (1/3 of outstanding)
c. A.K. Puri: 3,620,000 shares
d. B. Magness: 250,000 shares
e. S.Z.A. Akbar: 6,000,000 shares
2. February 3, 1988 Khalil "sold" 8,250,000 shares to
Akbar for 8,250,000. However, 4,000,000 cash
was debited to a Capcom account which did not have
sufficient funds and the balance of 4,250,000 was
offset of "other obligations." The transaction
appears to be only a camouflage of Khalil's
interest to circumvent disclosure requirements
imposed by regulatory authorities in late 1987.(160)
3. October 31, 1988 Special Audit revealed a total of
$3,600,000 of artificially processed transactions
between accounts at Capcom.
4. October 31, 1988 Special Audit detailed
11,518,360 provision against "doubtful customer
5. Auditors noted an unexplained deposit in Capcom of
8.6 million by an Egyptian Dr. Attia with no
trading having taken place.
6. $53,000,000 schedule of "profits" for the ARKY
account at Capcom found in Akbar's desk.
Presumably this is the account of A.R. Khalil.
These "profits were made from October, 1984 to
September, 1985, the period in which BCCI lost
$430 million at Capcom. This is the clearest
evidence that the shareholders of Capcom and/or
Akbar stole funds from BCCI through artificial
7. $525,000 loan to Mr. Noel Cullison for a real
estate development in Phoenix, arranged and
managed by Romrell.(162)
8. Romrell borrowed $400,000 from Mideast Finances,
Ltd., P.O. Box 211, Port Vila, Vanuatu for the
purchase of his shares in Capcom Futures, Chicago.
the credit was strictly limited to the value of
his Capcom Futures shares, with no other
liability. The document is dated September 30,
1988, but is not signed, leaving open the issue of
whether this was the actual form of financing for
his share purchase.
9. Magness entered into the same financing
arrangement with Mideast Finances, Ltd, Vanuatu as
in (8) above, dated September 30, 1988. The
document in file is not a signed copy either.
10. A Resolution of the Board October 3, 1988
Authorized Share Capital Increase of Capcom
Financial Services, Ltd, London to 100,000,000
(approximately $150,000,000). The intent
evidenced by this document evidences the large
scope of business contemplated by Capcom. Such a
capitalization would have placed it among the
largest brokerage houses in the world within three
years from start-up.
11. May 11, 1989 letter from Parry to Romrell
requiring confirmation of the debt of Romrell
($400,000) and Magness ($100,000) to Capcom
Financial Services, Ltd, requesting repayment and
confirmation that Capcom Futures, Inc shares are
the security for this indebtedness.
This document suggests that the financing of
Romrell's and Magness' shares was not done through
Mideast Finances Ltd, Vanuatu, or that Capcom
Financial Services, Ltd owns Mideast Finances, Ltd
and assigned the debt.
It should be noted that in the Capcom group was a
company called Capcom Bankers, Ltd, Suite 11,
Melitco House, Rue Pastenn, port Vila, Vanuatu.
12. August 14, 1986 letter from Akbar, Capcom
Financial Services to Romrell, Western
Telecommunications states that Romrell's balances
on July 18, 1986 at Capcom were as follows:
Investment Account $48,670 CR
Loan Account 53,250 DR
The loan account had been paid down with profits
from the Investment Account leading to a new
balance as follows:
Investment Account $14,260 CR
Loan Account 30,000 DR
This implies that the Capcom share financing was
"self-liquidating" from internal Capcom
transactions, so that Romrell would finally own
the shares without paying for them.
13. It is reported that BCCI lost $430,000,000 in the
Capcom affair.(163) This allegedly occurred from
September, 1984 to July, 1985.
14. An internal Capcom account GESS (General
Securities Corp) loaned FAS (Financial Advisory
Services, Ltd, owned by Akbar) 1,627,812.03 to
purchase its office building at 107 Grays Inn
Road, London on September 1, 1986.
The repayment of the loan does not connect to its
funding, having come from the following. Sources:
Sheikh Nooruddin, Middle East Bank, with funds
which should have gone to GESS, instead going to
GOOD (195,000), TWOY (350,000), GESS (1,209),
15. A snapshot of internal account management at
Capcom is provided by an audit review revealing
Finley International (presumably the company
through which Noriega's money passed) sent
$1,000,000 on September 16, 1988 and $10,000,000
on September 19, 1988. Akbar's explanation to the
auditors was that "funds were to cover losses made
by GESS when covering GOOD's position in silver in
16. The audit report stated that Predelict Investments, Ltd, owned by the Nigerian National Petroleum Corporation, loaned Capcom $10,000,000 from its Capcom Sub-account 134-170-054/52/200, with a two percent fee paid to Predelict, as noted on a letter October 4, 1988. The funds were returned to Predelict 12/10/88.
17. "The owner of the GOOD account is El Rayan, an
Islamic Investment company based in Cairo...one of
the largest in Egypt in import/export and real
estate and funds management...Egyptian authorities
closed El Rayan in November 1988." It was
described as "Capcom's biggest account" and may
have "lost" up to $90,000,000.(164)
It should be noted that the code used on all
telexes from Romrell to A.R. Khalil at the Kamal
Adham office in Jeddah is "GOOD".
18. A total of $47,500,000 in nine separate transfers
was paid to Capcom from Credit and Finance Corp,
Cayman; BCCI Overseas, Cayman; Bank of New York.
These transactions relate to Blackmail, Akbar, $32
million as discussed later.(165)
19. $150,000 payment February 10, 1988 through Capcom
from Ahmed Tawfick to Shakarchi Trading, A.G., the
Zürich-based company recently identified in a $1
billion money-laundering scandal in
20. $68,000,000 was paid from Treasury at BCCI to
Brenchase, Ltd, a wholly owned Capcom subsidiary,
on June 25, 1985, "for an unknown purpose."(167)
21. "Two payments of $50,000,000 were made to Capcom
in March, 1986 out of external funds [BCCI
Treasury] for which no liability for repayment was
22. Capcom Financial Services, Ltd loaned $10,000,000
originally to Capcom Futures, Inc, Chicago, then
replaced that loan with a $12,500,000 loan.(169)
23. Romrell had a series of payments to and from Capcom in London around July 1, 1987 for his personal account at Capcom: $25,000, $148,000, $22,000, $50,000.
1. According to Akbar Bilgrami, the losses at BCCI were accumulating long before Akbar assumed his responsibilities at BCCI's Treasury. According to Bilgrami, the "hole" in BCCI dated from the mid-seventies and increased until the early 1980's when the accountants began to suspect that BCCI was in financial difficulty. BCCI's Treasury losses were nothing more than a convenient means for explaining the actual financial condition of the bank.
2. Tape 150N, 9/2/88, 11:20 a.m., London, from U.S. v. BCCI, et al in Tampa.
3. S. Hrg. 102-305, Pt.1, p.513.
4. Price Waterhouse, 1991 Report, Section 4, Treasury, p.16.
5. Id at 17.
6. Price Waterhouse, 1991 Report, p.2.
7. Id. p.21.
8. By October 3, 1988, a Resolution of the Board of Directors authorized an increase in share capital to 100,000,000, a staggering amount, raising the question as to how the firm planned to grow so quickly.
9. S. Hrg. 102-350, Pt. 1, p.513.
10. Bandung Productions, transcript, "The Fraud of the Century", September 11, 1991, pp. 53-59.
11. S. Hrg. 102-350, Pt. 1, p.513.
12. Markets, by Martin Mayer, Norton Publishing, 1988, p.xxi.
13. Id. p. xxiv.
14. According to the Chairperson of the Commodities Futures Trading Commission, Wendy Gramm, the futures markets operate on the same principle of "know your customer" as banks. According to Gramm:
The futures broker, the futures commission
merchant, does have responsibilities with
regard to its customer accounts, including
knowing its customers. The self-regulatory
organizations have an obligation to ensure
that they are meeting those responsibilities,
and also do audits concerning brokers'
activities with regard to their customers.
see Gramm testimony, S. Hrg. 102-350, Pt. 6, p.647.
15. Price Waterhouse Report, June 22, 1991, p.21, Reprinted in S. Hrg. 102-350, Pt.5.
16. According to the Chairperson of the Commodities Futures Trading Commission, Wendy Gramm, Capcom US "was a relatively small, smaller than average company, with not many customer accounts and unremarkable in its trading." see Gramm testimony, S. Hrg. 102 -350, Pt.6, p. 647.
17. Capcom 1987 Annual Report. In testimony before the Subcommittee, Andrea Cocoran, Director of Planning and Supervision at the CFTC, confirmed that Capcom UK realized a net loss on futures trading of $76,206,064 to Refco. see testimony, Andrea Cocoran, S. Hrg. Pt.6, p.651.
18. In her testimony to the Subcommittee on July 30, 1992, Wendy Gramm, the Chairperson of the Commodities Futures Exchange Commission (CFTC), noted that "we found that certain principals of Capcom US, specifically S.Z.A. Akbar, Sushma Puri, and Mohammed Saghir, had previously worked at BCCI. S. Hrg. Pt. 6, p.7.
19. Price Waterhouse Report, June 22, 1991, p.21, emphasis added
21. Price Waterhouse Report, July 22, 1991, p.20. Reprinted in S. Hrg. Pt. 5.
22. Id. p.21
23. S. Hrg. 102-350, Pt. 1, p.513.
24. Id. p. 513.
25. Mazur tapes 150N, 9/20/88, 11:20 p.m., p.73, line 22-23, p.74, line 15
26. Handwritten Consolidated Profit and Loss Statement, Capcom, October 31, 1985.
27. February 17, 1989 Audit, Coopers and Lybrand Investigation of Capcom, p. 2.
28. Wall Street Journal, Peter Truell, 11/22/91, p.A1.
29. According to the 1991 Price Waterhouse report, "the adjustments in 1985 occurred in the period 25-28 June when amounts totalling $191 million were drawn down in the names of Khalil [and others]" and were paid to "Z.A.Akbar ($142 million) to adjust various Treasury pool accounts." Price Waterhouse Report, June 22, 1991, p.30.
30. For example, the account was to be in his name; accounts were opened in the name of his wife; BCCI Visa cards were issued to him, his wife and their children, and the bills were paid from the BCCI accounts.
31. Account Opening Forms, dated 24 August 1982. Correspondence was to be sent to Amjad Awan, BCCI Branch Manager in Panama.
32. 158626 July 1988 Letter from Subhan Siddiqui to BCCI Luxembourg.
33. Throughout the course of these events, "Finley International Ltd." is alternatively spelled "Findlays," "Finlay," "Finley International Co.," or "Finleys International Ltd." The account numbers and transfer letters of the various banks leave no doubt that all the names refer to Finley International Ltd., a Capcom customer. Finley International Ltd. is a company registered in Liberia whose only two officers are S. Z. Akbar and G. R. Khan. Akbar served as its chairman and treasurer.
34. 26 July 1988 Letter from Noriega to the manager of BCCI Luxembourg.
35. 8 September 1988 Letter from Eva de Teran of Banco Nacionale de Panama to Middle East Bank (to the attention of Amanullah Khan).
36. Complaint, Republic of Panama v. BCCI Holdings, et al., Case No. 90-2913-CIV-RYSKAMP (D.C. Fla.), dated 18 January 1991, at 6.
37. 13 September 1988 Letter from Eva de Teran of Banco Nacionale de Panama to Middle East Bank (to the attention of Amanullah Khan).
38. Akbar claimed that the $23 million received by Finley were remitted by a real estate investor named Al Fathi Tawfik who died in 1988. Akbar denied that any connection existed between the Finley deposits and Noriega. Ian Glendinning Watt, a Chartered Accountant of Peat, Marwick appointed to investigate Capcom's trading, found Akbar's explanations on this and every other matter to be "unsatisfactory," Affidavit of Ian Glendinning Watt dated 20 January 1989, at 44, "deficien[t]," id. at 45, "most curious," "illogical," and "not capable of corroboration." Id. at 46.
39. Among various papers in Mr. Akbar's desk at the time of
his arrest was a schedule indicating that an account with the
code name ARKY [presumed to be A.R. Khalil] earned profits of $53
million between October 1984 and September 1985." "The owner of
account GOOD is El Rayan, an Islamic Investment Company based in
Cairo...Egyptian authorities closed El Rayan in November,s 1988."
"...it may have lost $90,000,000." The closing of El Rayan was
the month following Akbar's indictment for drug money-laundering,
October 19, 1988. Numerous fax transmissions from Romrell to
Khalil at the "Kamal Adham Office" in Jeddah are inscribed "Code:
40. Watt Affidavit, p 18. Reprinted in S. Hrg. 102-350, Pt. 6.
41. The company behind the GESS account is General Securities, registered in Panama. Watt Affidavit at 20.
42. See, e.g., Watt Affidavit, at 38, 40, and 42.
43. The Finley account at Middle East Bank. See 13 September 1988 Letter from Akbar and Khan (on Finley letterhead) to Middle East Bank. Akbar admitted that he controlled the GESS account, see Watt Affidavit at 20, denied having any control over the GOOD account, id. at 38, and offered no explanation for the $2.5 million transfer to the Red Roses Account at the Trade Development Bank in Zurich. Id. at 42.
44. Staff Review of Capcom client list, provided by the Commodities Futures Exchange Commission. The Subcommittee would like to thank the staff of the Commodities Futures Exchange Commission which has provided important assistance to the Subcommittee.
45. The Price Waterhouse Report stated that Adham's exposure of losses at BCCI as of December 29, 1990, was $249,000,000; estimated losses were $199,000,000. Price Waterhouse Report, June 22, 1991, p.6
46. Transcript, Federal Reserve Board Hearing, April 23, 1981, p.65.
47. Khalil also had known Powell for several years prior to the creation of Capcom, although Powell was not connected, as far as the Subcommittee knows, to any communications business.
48. Letter, Romrell to Akbar, November 17, 1981.
49. Answers of Larry Romrell to questions from Subcommittee, July 3, 1992, questions 28.
50. "89225 1 BCCLNA G.
Attn. Mr. Akbar
At the TCI Stockholders meeting this morning it was
announced there would be a one for one stock split of
TCI stock, effective date 6/24/83.
Larry Romrell. (Telex, 6/9/83)
51. Letter, Romrell to Akbar, April 2, 1984, WTCI letterhead
Further in the same letter:Magness and I are most anxious to
visit with you with regard to the business opportunity we
discussed in Chicago or New York." The opportunity referred to in
the letter appears to be the founding of Capcom.
52. Letter, March 19, 1984, draft of Telex to Akbar.
53. staff interview with Romrell, 6/16/92. In his written response, provided under oath, Romrell stated: "In 1984 following the spin-off of WTCI, the stock might become available on the market. I contacted Mr. Akbar to inquire whether BCCI would lend money with which I could purchase shares. In that conversation, I understood that Mr. Akbar agreed to establish a line of credit for me, and that he was also interested in purchasing stock. There was no discussion of any joint line of credit, or even of how Mr, Akbar might finance his purchase. The March 19, 1984 reflects that understanding. However, I never received a response from Mr. Akbar. I never received the line of credit mentioned, I never put Akbar in touch with my broker, and, to my knowledge, Mr. Akbar never invested in TCI or WTCI." Affidavit, Larry Romrell, July 3, 1992, answer 40.
54. Letter, November 14, 1984, Romrell to Akbar at BCCI, London.
55. Letter, Betram Perkel, Law Offices of Jerome Kern, February 11, 1992. p.2, Reprinted in S. Hrg. 102-350. Pt.6.
56. Letter, February 27, 1984
57. Undated note on Western TCI note paper, styled Romrell.
Akbar's representation, as recorded by Romrell, is further evidence that from the beginning Akbar contemplated a BCCI link since there could not possibly be any other means for earning such commissions in a start-up company.
58. Telex, May 27, 1984.
59. Magness Affidavit, 5/19/92, p.3.
60. Id, p.3.
61. While Magness was already a wealthy man, this must be
considered a significant investment on the part of Romrell who
was at that time a salaried employee making $38,000.00.
62. Note for file, 11.9.84, hand-written.
63. Letter, February 6, 1985, Romrell to Mr. Ajay Puri, Capcom, London.
64. Letter, November 7, 1984, Larry Romrell to Mr. Ajay Puri, Capital Commodities Dealers, Ltd, London, attached.
65. Letter, November 7, 1984, Larry Romrell to Mr. Ajay Puri, Capital Commodities Dealers, Ltd, London.
66. Letter and loan documents attached, June 11, 1985, Letter from Romrell to Mr. Ajay Puri, Capcom.
67. Written responses from Larry Romrell, July 3, 1992, answer 53.
68. Staff interview with Larry Romrell, June 5, 1992.
69. Letter, August 22, 1986, Romrell to Akbar.
70. Letter, Romrell to Khalil, Adham, July 27, 1987.
71. The loan documents specified: "(a) that the total liability of the borrower in the repayment of the loan and all its accrued interests is strictly limited to the value of his shares in Capcom Financial Services, Ltd..." Paten loan agreement ("old and new loans"), signed, Romrell, June 30 1987.
72. Signed Larry Romrell et al, letter March 28, 1988, Capcom to Arthur Anderson, London, emphasis added.
73. Written responses from Larry Romrell, July 3, 1992, answer 58.
74. Letter, July 20, 1987, L.E. Romrell to Sheik Abdul Raouf H. Khalil, Sheik Kamal Adham, Mr. El Ghary, emphasis added.
75. Letter, July 25, 1987, L.E. Romrell to Sheikh Abdul Raouf H. Khalil, H.E. Sheikh Kamal Adham, El Sayed E. El Jawhary.
76. Mazur tape 150N, 9/20/88, p.9, line 1.
77. Affidavit, Robert E. Powell, July 8, 1992, p.5. Reprinted in S. Hrg. 102-350, Pt. 6.
78. Letter, Harry H. Schneider, Department of the Air Force, "To Whom it may Concern," January 3, 1977.
79. Affidavit, Robert E. Powell, July 8, 1992, p. 1. Reprinted in S. Hrg. 102-350, Pt. 6.
80. Affidavit, Robert E. Powell, August 2, 1992, p.1. Reprinted in S. Hrg. 102-350, Pt.6.
81. Affidavit, Robert E. Powell, June 21, 1992, answer to question 17. Reprinted in S. Hrg. 102 -350, Pt. 6.
82. Id., answer to question 19.
83. Affidavit, Robert E. Powell, August 2, 1992, p.2. Reprinted in S. Hrg. 102- 350, Pt. 6.
84. Affidavit, Robert E. Powell, June 21, 1992 answer to question 23. Reprinted in S. Hrg. 102- 350., Pt.6.
85. Id. answer to question 24.
86. Fox has acknowledged to the Subcommittee that he maintained a top secret clearance during this period because he worked with sophisticated electronics components in Saudi Arabia for Martin Marietta and Rockwell International.
Romrell told the Subcommittee that Fox once worked for
ARAMCO -- the middle east oil concern. Staff interview with
Romrell, June 5, 1992.
87. Letter, Fox to Jamil Khan, BCCI Overseas, Cayman Islands, April 22, 1987.
88. Statement of Witness, Kerry Fox, September 19, 1990
89. Interview with Larry Romrell, June 5, 1992.
90. Letter, June 28, 1982, Fox to Richard Bowman and Statement of Witness, September 19, 1990.
93. Id, p.2.
94. Statement of Witness, Kerry Fox, September 19, 1990.
95. Staff interview with Larry Romrell, June 5, 1992.
96. Documents show that "the Lake House", Rockwall, Texas, was purchased "with or through BCCI...Khalil bought the house in 1981, but immediately conveyed the property to BCCI in full satisfaction of debt to Khalil Investment and Trading Co., Panama. Letter, Fox to Khan, August 23, 1989.
97. Letter, Fox to Akbar, February 2, 1982. In 1984, Romrell's annual salary was approximately $38,000.00. Staff interview with Larry Romrell, June 5, 1992.
98. Letter, Lynn H. Cole, lawyer for Kerry Fox, to David McKean, July 27, 1992.
99. Letter from S. Walker and Co., October 4, 1985.
The "Advisor" to the Fund was Futures Advisory Services, an Akbar controlled company. The Administrator for the Fund was Cayhaven Corporate Services, Cayman Islands. The broker for the Fund was Capcom, London. Letter attached to Capital Fund prospectus, October 11, 1985. he main U.S. bank for the FUND was Bank of America International, New York. Authorized share capital in October, 1985 was $900,000. Account 2-04-19489 / BOA, Cayman Islands.
100. Letter, Puri to Fox, December 4, 1985.
101. Watt Affidavit, p.25. Reprinted in S. Hrg. 102- 350, Pt.6.
103. Note to File, Fox, December, 1988.
104. Fox affidavit, September 18, 1990.
105. Resolution of Board of Directors of Capcom Financial Services, Ltd, July 30, 1987; letter, December 22, 1987, Saghir to Romrell.
106. S. Hrg. 102-350, Pt.6, p.15.
109. Price Waterhouse Report, June 22, 1991, p.18.
110. S. Hrg. 102- 305, Pt. 1, p.30.
111. Peat Marwick McLintock Audit of Capcom for CBOT, May 4, 1989, p.21(b).
112. Id p. 21(b).
113. Mazur tape, 150N, 9/20/88, 11:20 a.m., p.57, lines 6-18.
114. Peat Marwick McLintock audit for CBOT, May 4, 1989.
115. Capcom Futures Inc. was not named in the original indictment. See 11/23/88 letter from Robert E. Powis of Interpass, Ltd., to Gerald E. Beyer of the Chicago Mercantile Exchange. Nor was it named in the second superseding indictment. See Second Superseding Indictment, United States District Court, Middle District of Florida, case no. 88-330-Cr-T-13(B).
116. Specifically, the indictment charged that the defendants had violated the following provisions of the United States Code: 21 U.S.C. s.846, the Attempt and Conspiracy section of the Drug Abuse Prevention Act; 18 U.S.C. s.371, the general provision regarding criminal conspiracy, and 18 U.S.C. s.1956, regarding the laundering of monetary instruments.
117. See, e.g., the Affidavit of Ian Glendinning Watt, dated 01/20/89, at 1.
118. Romrell office diary. To January 18, 1889. p. 6.
120. See Second Superseding Indictment, dated _______, United States District Court, Middle District of Florida, case no. 88-330-Cr-T-13(B).
121. See "Superseding Indictment Still Names Capcom Financial Services," Securities Week, 05/15/89, at 6.
122. Memorandum, 11 October 1988, signed by L. Romrell and J.C.F. Parry.
123. S. Hrg. 102-350, Pt.6, p.7.
124. S. Hrg. 102-350, Pt.6,p.8.
125. CFTC Chairperson Wendy Gramm did not indicate who the owner of the account was, but rather testified that "S.Z.A. Akbar had a power of attorney to direct trading in this account." S. Hrg. 102-350, Pt. 6, p.11.
126. S. Hrg. 102-350, Pt.6, p.12.
128. S. Hrg. 1-2-350. Pt.6, p.11.
129. Affidavit, Larry Romrell, July 3, 1992. Answer to question 61.
130. S. Hrg. 102-350, Pt. 6, p12.
131. In response to questions from the CME staff, Capcom
characterized Mr. Zaheer as "a self-employed auto dealer with a
dealership in Karachi, Pakistan."
132. S. Hrg. 102-350, Pt.6, p.658.
133. S. Hrg. 102-350, Pt.6, p.647.
134. S. Hrg. 102-350. Pt.6, p.7.
135. Independent, 18.8.91, p.6.
136. S. Hrg. 102-350, Pt.6, p.660.
137. Letter, Romrell to Akbar, October 27, 1982.
138. Letter, Mr. J. Barnathan, ABC, N.Y., April 29, 1982.
139. Letter, Romrell to Akbar, January 6, 1983.
140. Telex, Romrell to Akbar, December 17, 1982
141. Telex, Romrell to Akbar.
142. Letter, Romrell to Akbar, March 30, 1983.
143. Memo, Bob Saffel, August 17, 1983.
144. Letter, Romrell to Akbar, December 16, 1983.
145. Romrell to Puri, January 5, 1984.
146. Letter, Romrell to Akbar, [Personal guarantees given by Magness, Romrell to BCCI], April 18, 1984.
147. Letter, June 8, 1984, Romrell to Akbar.
148. Letter, Romrell to Akbar, December 18, 1984.
149. Letter, June 4, 1985, Romrell to Akbar.
150. Letter, January 17, 1986, Romrell to Akbar.
151. Letter, January 17, 1986, Romrell to Akbar.
152. Letter, July 7, 1987.
153. Letter, April 13, 1988, Romrell to Akbar, while at FAS, Ltd, after he left BCCI indicating continued interaction.
154. Letter, July 27, 1987, Romrell to Puri, emphasis added.
155. Letter, February 10, 1983 from Romrell to Fox.
156. Letter, July 7, 1987, Romrell to Ehrlich
157. Price Waterhouse Report, June 22, 1991
158. ' 1712Letter, December 4, 1985, Puri to Fox.
159. Watt Affidavit, p.25.
160. Arthur Anderson Special Audit Prepared for Counsel of Association of Futures Brokers and Dealers, Ltd, London, 5/10/89, p.22.
161. Watt Affidavit, p.22.
162. Letter, January 17, 1986, Romrell to Akbar.
163. September 11, 1991, "The Fraud of the Century", Bandung Productions, 53-79 highgate Road, London.
164. Peat Marwick McLintock audit of Capcom for CBOT, May 4, 1989, p.22(c).
165. Peat Marwick McLintock audit of Capcom for CBOT, May 4, 1989.
166. WATT Affidavit, supporting documents, Exhibit 20 (iii).
167. Price Waterhouse Report, June 22, 1991, p.20.
168. Price Waterhouse Report, June 22, 1991, p.21.
169. April 16, 1987, Joint Unanimous Resolution of Capcom
Futures, Inc, Board of Directors.