Part 2 of 2
1989 Chicago Investigation
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 the CFTC.(123)
Indeed, the CFTC and the Chicago Mercantile Exchange commenced an inquiry into Capcom. According to Chairperson Gramm:
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 that account.
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 business whatsoever.(129)
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 now.(133)
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...
Capcom Today
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 Capcom.
Conclusion
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 Khalil.
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.
APPENDIX 1
Romrell Proposals To Akbar
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 Saudi Arabia.)
2. "...Mr. Khalil, the Saudi Sheikh...I will go over the material with him and I feel confident he will be interested..."(138)
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 Command.(140)
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 Romrell.(144)
9. Proposal of an investment of $3,100,000 in Marina Del Rey, California.(145)
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 5, 1984)
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 deal."(147)
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 Winterwood.(152)
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)
APPENDIX II
Money Flow From BCCI to Capcom and Related Individuals
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 questions.
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, and BCCI:
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 package.
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)
$108,742
$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 follows:
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 balances."
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 market transactions.(161)
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), totalling 1,754,000.
15. A snapshot of internal account management at Capcom is provided by an audit review revealing the following:
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 1987."
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 Switzerland.(166)
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 recorded."(168)
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.
_______________
Notes:
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
20. Id.
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: GOOD".
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.
TCI ENGL
6/9/83
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.
Best regards,
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.
91. Id.
92. Id.
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.
102. Id.
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.
107. Id.
108. Id.
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.
119. Id.
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.
127. Id.
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.