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It was easy to miss the latest bombshell in the BCCI scandal. Last week everyone focused on the Senate subcommittee hearings, where Price Waterhouse--recently lionized for uncovering massive fraud at the Bank of Credit and Commerce International--was pummeled by BCCI's former chief financial officer, who accused the accounting firm of ignoring trading losses that led to the bank's demise. But a far darker story emerged from the fine print of documents filed with the subcommittee. According to these exhibits, five rulers of the United Arab Emirates used their connections to BCCI to get sizable loans from the bank, some, apparently, paying no interest or principal--at least through last year.
Among those named is Sheik Zaid bin Sultan al-Nahyan, ruler of Abu Dhabi and now majority owner of BCCI. Until last week the sheik looked like a financial Saladin for injecting $1 billion into BCCI in the year before it closed. But on April 6, 1990, Price Waterhouse letter to BCCI directors and Fed documents paint a different picture:they allege that Sheik Zaid-along with six relatives and Abu Dhabi investment authorities--were carrying $371.8 million in personal overdrafts and loans from BCCI, largely offsetting their investment in the bank, and $17.5 million in loans from ICIC Holdings, a BCCI's CEO and a representative of Abu Dhabi shareholders on the board: "There haven't been any of the rulers or shareholders that were interest-free."
The BCCI buck didn't stop there. Price Waterhouse documents allege that Sheik Rashid bin Said al-Maktum, the late ruler of Dubai, and his family held loans of $124.6 million. Contests a Dubai government official, "Nobody from the ruler's family has [borrowed] from BCCI." Price Waterhouse and Fed documents allege loans made to Sheik Hamad bin Mohammed al-Sharqi, ruler of Fujairah, totaling $186 million, and to Sheik Humaid bin Rashid al-Nuaimi, ruler of Ajman, totaling $86 million, were more than twice the value of their First American Bankshares stock, which had been pledged as collateral. Both sheiks have denied they borrowed the money. Says a senior Fujairah official, "I have no idea about this." In perhaps the eeriest case of lending, Price Waterhouse reports that the government of Sharjah allegedly borrowed $192 million from BCCI to build a power plant; as of spring 1990, the auditing firm says, $60 million in interest payments or principal had either disappeared or was uncollectible. "The money has not disappeared," insists a senior Sharjah official, adding that negotiations to reschedule the loan payments were inconclusive.
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Where did such a princely sum--nearly $1 billion in questionable loans--come from? Part of it, probably, from the Cayman Islands, where ICIC Holdings had been set up to hold 30 percent of BCCI's stock for employees. But in the mid-1980's, according to the documents, the bank within a bank secretly began receiving unrecorded deposits totaling $600 million and siphoned off huge amounts to BCCI shareholders and others. Why did Price Waterhouse--which had been auditing the Cayman Islands entity for at least a half dozen years--not sound off about the scam until the Spring of 1990? The firm contends BCCI continually refused to let it examine the accounts or contact any of the principals. Price Waterhouse accepted all numbers on blind faith. "Obviously a fraud was being conducted which provides a false picture," says a London spokesman, "but we were determined to answer all questions to the best of our ability." Obviously, that best wasn't nearly good enough.
Everyday seems to bring new revelations about the bank's nefarious doings. Last week NEWSWEEK correspondents learned that:
BCCI founder Agha Hasan Abedi prefers handshake deals to paper contracts. The only two machines that work in his office, goes the joke in Pakistan, are his phone and his shredder.
Most of some 40 million in BCCI loans to the Guatemalan government is unaccounted for. The central bank says the money bought oil and other things. But Attorney General Acisclo Valladares says it went to pay off officials to protect a coffee-smuggling scheme.
BCCI front-man Ghaith Pharaon bought a piece of Miami's CenTrust Savings Bank and agreed to sell the S&L half of an insurer he owned. The deal later fell through, but it wasn't reported to the SEC.
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