CHAPTER 7. A KILLER ENTERPRISE
OUTLAW BANKS
We must learn to ‘feel’ that BCCI is this Power,” read a bizarre memo once circulated by the Bank of Commerce and Credit International, better known as BCCI. That “power” was a reference to the image printed in light tones behind the text – a print of Michelangelo’s famous Creation of Adam, the fresco painting that adorns the ceiling of the Sistine Chapel. It shows God, surrounded by angels and with his finger outstretched, reaching toward the first man, Adam, imbuing him with the gift of life. In continuing the reference to Michelangelo’s depiction of the divine spark, the memo stated that BCCI is “not merely a group of branches, a set of facts and figures. Since, BCCI is a power, a spirit, a Desire – it is all encompassing and enfolding – it relates itself to cosmic power and wisdom, which is the will of God.”1
Founded in 1972, BCCI certainly wielded considerable power in its day, though its power was hardly of a spiritual or benevolent variety. When it finally collapsed after a nearly two-decades run, thanks to forced closures brought about by regulators and law enforcement, so too did the “planetary Ponzi scheme” it had been running.2 At the time of its collapse in 1991, TIME ran a lengthy story describing the bank as the “dirtiest bank of them all.”3 The authors of that article, Jonathan Beaty and S. C. Gwynne, also wrote that Robert Morgenthau, Manhattan’s district attorney, had stated that he received no help from the Justice Department when he launched his own investigation into the bank.
Obfuscation and protection from the highest levels of power were defining characteristics of BCCI. The bank’s founder, Agha Hasan Abedi, who had a penchant for occult ramblings and mind games, surrounded himself with a bevy of politicians, community leaders, business giants, powerful criminals, and spooks.4 Prior to the formation of BCCI, Abedi, a Pakistani banker, had been an economic advisor to Sheikh Zayed bin Sultan Al Nahyan. Sheikh Zayed had been the driving force behind the formation of the United Arab Emirates and was the union’s first leader. According to one person close to Abedi, he had been the one who had first planted the idea of what would become the UAE in Sheikh Zayed’s mind.5
Abedi was something of a cosmopolitan, an internationalist, and an opponent of classical colonialism in the developing world. At the same time, he opposed socialist currents sweeping across the Middle East and elsewhere. A self-described liberal, he first conceived of BCCI as a “world bank, a global bank for the third world.”6 With backing from Sheikh Zayed, the Saudi royal family, and probably the Saudi intelligence service, what developed was something else entirely. BCCI’s expertise was in money laundering, capital flight, fraud, and much, much worse.
While the conventional narrative presents BCCI as an enterprise whose origins lay in Pakistani-Saudi networks of power, influence, and finance, there have also been allegations that the bank’s origins also involved the CIA. A 1992 report published in Newsweek cites an anonymous former officer of BCCI and its predecessor, United Bank, as well as a close associate of Abedi’s, who asserted that Abedi “had worked with the CIA during his United Bank days and that the CIA had encouraged him in his project to launch BCCI, since the agency realized that an international bank could provide valuable cover for intelligence operations.”7 This same source specifically mentioned Richard Helms, CIA director from 1966 until 1973, as having been involved in the bank’s creation. He told Newsweek, “What I have been told is that it wasn’t a Pakistani bank at all. The guys behind the bank weren’t Pakistani at all. The whole thing was a front.”8
According to Beaty and Gwynne, the bank’s organizational structure was divided between two very different worlds. On the front-facing side, “more conventional departments of [BCCI] handled such services as laundering money for the drug trade and helping dictators loot their national treasuries.” On the back end, meanwhile, was something that was called the “black network,” which reportedly continued after the demise of the bank. This black network “operates a lucrative arms-trade business and transports drugs and gold,” engages in sex trafficking and maybe even murder-for-hire. In some cases, it even helps shape the military capacities of entire nations.9
Thus, BCCI supported the work of A.Q. Khan, a Pakistani nuclear physicist and engineer known as the father of Pakistan’s nuclear weapons program. This work had begun after India tested the “Smiling Buddha,” their own nuclear weapon, in 1974 and it was carried out under the auspices of Khan Research Laboratories. The clandestine laboratory operated several front groups, one of which was the Ghulam Ishaq Khan Institute of Engineering Sciences and Technology. A “philanthropic” arm of BCCI, the BCCI Foundation, provided funding for this institute.10
According to Beaty and Gwynne, BCCI obtained, on behalf of Pakistan and Iraq, an experimental weapon called a “Columbine head.”11 Columbine heads were allegedly a type of thermobaric bomb, better known as a “fuel air explosive,” as they suck in the surrounding air to create a powerful explosion.
It was not all bombs, however, when it came to BCCI’s activities in Abedi’s home country. The bank also played an important role in tightening relations between Pakistan and states in the Persian Gulf. The economic development of Saudi Arabia and Abu Dhabi had been built on the massive flow of cheap labor from Pakistan. There was a reciprocal flow of money from those states back to Pakistan through migrant remittances, that is, money sent by laborers to their families at home.
In the developing world, remittances are often a complicated issue, with the lack of strong banking sectors and financial regulations resulting in everything from overcharging for financial transactions to outright theft. BCCI stepped into this world and soon made itself the primary conduit for the flow of such money. It was a win-win for all parties: the functioning of this system solidified the use of Pakistani labor by states in the Persian Gulf, while Pakistan received in-flows of foreign currencies. It was good for BCCI, too: the remittance float was registered on BCCI’s balance sheets, allowing the bank to appear far more cash-rich than it really was.12
Other services that BCCI provided for the Arab ruling families included the procurement of “Pakistani prostitutes … typically teenage girls, known as ‘singing and dancing girls.’”13 When discussing these types of activities, the Congressional report on BCCI came close to revealing the bank/black network dichotomy discussed by Beaty and Gwynne in TIME. The head of BCCI’s Pakistan operations was a close friend of Abedi named Sani Ahmad. Nazir Chinoy, BCCI’s general manager for France and Africa, told investigators that “Sani was the trusted man for things no one else was supposed to know. We were the technocrats. Sani Ahmed would handle the things we wouldn’t, like get girls. If anyone paid anyone any money [as a bribe], Sani would have been the one to do it.”14 BCCI’s role in sex trafficking, including of minors, is discussed in chapter 11.
Early on, BCCI saw a pipeline into the US financial system as being necessary to its success. The earliest attempts to cement this connection saw Abedi court American Express. This plan was abandoned when American Express demanded significant influence over BCCI’s internal activities. Abedi then pivoted toward Bank of America, one of the largest American banks that, since the 1960s, had been active in the Eurodollar trade. Bank of America became a large stakeholder in BCCI, holding some 30 percent of the stock, and a number of the bank’s officials joined the BCCI board.
Bank of America later sold that 30 percent, expressing concern over BCCI’s activities. It looked like Bank of America was engaging in due diligence, but appearances were deceiving. As the Congressional BCCI report pointed out, Bank of America “would in fact retain correspondent banking relations with BCCI, continually seek additional business from BCCI, collude in least one of BCCI’s purchase of foreign banks through nominees in South America, and earn a great deal of money from the relationship until BCCI’s closure.”15
Ultimately, Bank of America’s sale of the shares simply allowed BCCI to further develop its complicated web of front companies, proxies, and offshore entities that it used to mask its activities. The bank turned to ICIC (Overseas) Limited, set up in the Caymans by BCCI, to act as a clearinghouse to sell shares of BCCI subsidiaries.16
Beyond their relationship with Bank of America, BCCI’s major penetration of the US financial system came through the bank’s involvement with Bert Lance, a prominent banker from Atlanta and a close friend of Jimmy Carter. He served as an advisor to Carter’s 1976 presidential campaign and was subsequently named director of the Office of Management and Budget (OMB). However, Lance was soon forced from his post under the cloud of scandal. In the words of the Congressional BCCI report, “By September 21, 1977, when Bert Lance tendered his resignation from the position of director of the [OMB] to President Jimmy Carter, Lance had become the most notorious banker in the United States.”17
Lance’s notoriety was directly related to the National Bank of Georgia, of which Lance had become president in 1975. His time there was marred by controversy. For instance, he had particularly tense relations with the bank’s parent company, Financial General Bankshares (FGB), “for making loans which both exceeded his lending limit and were not secured by collateral.”18 These activities, as well as similar ones that Lance had carried out at other banks, haunted him during his time at the OMB, particularly when Carter asked Congress “to suspend ethics rules that would have forced Lance to sell 190,000 shares of stock he owned in National Bank of Georgia. He based his request on the ground that Lance would lose $1.6 million if he was forced to sell, because the bank’s stock was depressed.”19 His request instead resulted in a sweeping investigation into Lance’s banking practices.
Lance was also violating regulations by engaging in other financial activities while serving in public office. FGB’s major stockholder and controller, Gen. George Olmsted, was under orders from the Federal Reserve to unload his stock due to laws governing holding companies. He approached Lance for help, and Lance began the hunt for buyers for their holdings in FGB and National Bank of Georgia.
Olmsted is an intriguing figure, and his history in banking might shed some light on why FGB was such a hot commodity in the 1970s. During World War II, Olmsted wore many hats, with involvement in everything from managing lendlease arrangements to working in intelligence in the China-Burma-India theater. After the war, he took control of International Bank in Washington, DC, and built a business empire with extensive holdings in other banks, real estate, and insurance companies. It was through International Bank that he bought his controlling stake in FGB. Another major International Bank holding was the Cayman Islands-based Mercantile Bank & Trust. Mercantile was one of the many banks that composed Paul Helliwell’s dark money network, and it owned a stake in his Castle Bank & Trust.20
During his last days as director of OMB, Lance put Olmsted in touch with J. Middendorf, who had served as Secretary of the Navy and as ambassador to the Netherlands under President Nixon. Middendorf was also close to Carter, who had offered to retain him as Navy Secretary. Middendorf opted instead for a career in the private sector. He was immediately intrigued by Lance’s plan, and the “Middendorf Group” was put together to take over FGB.
The Middendorf Group consisted of prominent business figures like Jackson Stephens, the Arkansas kingmaker behind Stephens, Inc.; the banker Jorge Pereira; and Armand Hammer of Occidental Petroleum. Stephens, discussed in greater detail in the next chapter, was particularly important to the whole chain of events involving FGB and its takeover by BCCI. He had known Lance since at least 1975, likely through their mutual support for Jimmy Carter, whom Stephens had allegedly known since their days at the Naval Academy. Stephens and Lance continued to work together on selling-off FGB even after the Middendorf Group fell apart. Reportedly, Stephens was involved in the bank’s convoluted affairs because he “wanted FGB to use a company he controlled, Systematics Inc., for its data processing business.”21
Other prospective buyers had different motives. Armand Hammer, for example, saw a gold mine of valuable information that could be leveraged for political and economic gain. FGB “had outstanding loans to more than one hundred US senators and congressmen.… Hammer explained that all these congressional borrowers had submitted statements to the bank that revealed their precise financial status, including their debts, earnings, real estate holdings, other assets.… Hammer had blackmail in mind.”22 As will be mentioned in Chapter 9, Hammer’s father had been a spy for Soviet intelligence, and suspicions that he too had a relationship with the security-intelligence apparatus of the USSR dogged Armand Hammer for years. This makes his interest in using FGB for the “financial blackmail” of American senators and congressmen particularly significant.
However, Hammer eventually abandoned his takeover scheme and sold off his shares to BCCI frontmen. It is possible that his encounter with the bank was not a one-off event, however, as throughout the 1970s, roughly one million shares in Hammer’s Occidental Petroleum were held by one of BCCI’s agents, Ghaith Pharaon. In a New York Times blurb on the arrangement, Pharaon was described as Occidental’s representative in Saudi Arabia.23 Later, Occidental partnered with the London-based Attock Oil Co. Ltd., which was led by a handful of BCCI players. These included Pharaon and Kamal Adham, the former Saudi intelligence chief and co-founder of the Safari Club.24
BCCI came to be involved with FGB only after the Middendorf Group had begun to split apart. The primary agents in the BCCI takeover of FGB were Lance, Stephens, and Eugene Metzger, a Washington attorney who had formerly served in the Justice Department and the Office of the Comptroller of the Currency. It appears that BCCI was first interested in the FGB subsidiary, National Bank of Georgia. During a meeting with a BCCI representative in Little Rock, Arkansas, Stephens and Lance suggested that they purchase FGB. Shortly thereafter, the pair, joined by Metzger, began to accumulate large holdings of FGB stock, purchased on both the open market and from individual shareholders. These shares were then sold to investors operating on behalf of BCCI, including Kamal Adham.
By January 1978, BCCI had secretly gained control of 20 percent of FGB. Facing a hostile takeover, the bank’s leadership hit back with a lawsuit aimed at Abedi, Lance, Metzger, Stephens, and Stephens’ companies Stephens Inc. and Systematics.25 The US Securities and Exchange Commission launched its own suit, charging securities fraud. To defend itself against this legal onslaught, the “Lance group” retained the services of Clark Clifford and Robert Altman. According to Clifford and Altman, this was their first interaction with BCCI. Their timeline may not have been entirely truthful, however, considering the contents of a Washington Post article from December 1977. In the article, Altman is quoted as saying that Lance was involved with “Middle Eastern financial interests” and had set up for them “a holding company to direct their capital into banks and other U.S. investments.”26
The SEC suit was settled quickly, but the challenge posed by FGB tossed roadblock after roadblock in BCCI’s path. The battle dragged on for a year before a Maryland judge ruled in favor of FGB, stating that the bank could not be acquired via hostile takeover. BCCI was blocked but not defeated. Clifford selected three of his close associates to act as hidden proxies for BCCI’s interests and managed to get them onto the board of FGB. One of these individuals, former Senator Stuart Symington, was also made the chairman of a company, registered in the Netherland Antilles, called Credit and Commerce American Holdings N.V. Credit and Commerce American Holdings’ stock was owned by various BCCI principals, and it acted as the holding company for Credit and Commerce American Investments B.V.
Another man involved in Credit and Commerce American Holdings was Mohammed Rahim Motaghi Irvani, an Iranian billionaire and a business partner of former CIA director Richard Helms.27 Irvani, referred to in the BCCI Affair as “BCCI’s lead front-man in the original takeover” of FGB, was directly assisted by Helms in these efforts. As a result, media reports later noted that “U.S. Senate investigators are examining dealings between Helms and Irvani that it said raise questions about the CIA’s knowledge of BCCI’s evolution into a criminal organization.”28
Helms and Irvani also had interlocking business interests with Roy Carlson, the Bank of America executive who had overseen the bank’s 1972 purchase of 30 percent of BCCI’s shares. In 1975, Carlson left Bank of America to oversee the business interests of Irvani.29 Years later, Carlson became vice president at Helm’s consulting firm.30 Both Carlson and Abedi also had documented ties to BCCI. Carlson had accompanied Abedi on business trips, while Irvani had been recruited into BCCI’s affairs directly by Abedi himself.31
This maze-like structure of offshore companies hid the ultimate controlling body, which of course was BCCI. By forming yet another layer, a dummy company set up beneath Credit and Commerce American Holdings, BCCI was able to evade the prohibition of regulators and finally take control of FGB. Clifford and Altman relayed to regulators that these new purchasers were in no way connected to BCCI, and despite the overwhelming abundance of evidence that they were BCCI proxies, the Federal Reserve and other regulators began the approval process. In this sudden about-face, the US government appeared to be simply ignoring the obvious.
Catherine Austin Fitts, former assistant secretary for housing–federal housing commissioner at the US Department of Housing and Urban Development during the George H.W. Bush administration and an investment banker with the Hamilton Securities Group and Dillon, Read & Co., was placed on the board of First American Bankshares (the name of FGB following its takeover by BCCI) following the collapse of BCCI in 1991. She later stated that, after reading through troves of documents regarding the bank’s activities prior to its implosion, it was clear that there was “no way” its clandestine activities were carried on without the full knowledge of the Federal Reserve, specifically the Federal Reserve Bank of New York, and the White House.32 Did such knowledge extend back to the when BCCI finally gained control of FGB?
After the takeover, FGB was rechristened First American Bankshares, and an impressive plan for growth was launched. Clifford stated that he wanted First American “to be one of the twenty biggest banks in the country,” and, by 1989, it held over $11.5 billion in assets.33 It also embarked on a close working relationship with its hidden parent company. Dozens of BCCI subsidiaries held accounts at First American branches, and Abedi arranged for BCCI managers to take top positions at the bank.
Meanwhile, Abedi courted US politicians and developed a particularly close bond with Jimmy Carter.
As BCCI burrowed deeper into the US financial system, Abedi and his close cohorts became involved with the Carter Presidential Center. Abedi, Adnan Khashoggi, and Clifford were all large donors to the center, and BCCI became a mega-donor to a third world development project set up by Carter called Global 2000. Abedi was selected to serve as co-chairman of Global 2000, while Carter himself was the acting chairman.34
Another politically connected philanthropic outfit that BCCI became connected to was called the Chiefs of Police National Drug Task Force (COP), which received money from First American.35 The head of COP was the Utah senator Orrin Hatch, who became a defender of BCCI during its collapse and who had ties to a number of its principals. Another figure involved in COP was Randy Anderson, the son of DC journalist Jack Anderson whose roles in Watergate and the Profumo Affair were discussed in previous chapters.
First American’s board included Robert Keith Gray, who joined shortly after the bank was renamed.36 Seven years later, in 1988 – after Gray had rejoined Hill & Knowlton, with his Gray and Company becoming a subsidiary of the firm – H & K was retained by BCCI after the bank was indicted in Tampa for drug-money laundering. As part of its campaign to distance BCCI’s image from illicit activity, H & K “disseminated materials discrediting persons and publications whose statements were later proved accurate about BCCI’s criminality.”37
As for FGB’s/First American’s subsidiary, National Bank of Georgia – it was purchased by BCCI front man and business partner of Armand Hammer, Ghaith Pharaon. While the Office of the Comptroller of the Currency expressed concern over the purchase, the regulators ultimately allowed these transactions to go through. Roy Carlson, the former Bank of America executive who first forged ties between that bank and BCCI, was “recruited by Abedi to run the National Bank of Georgia” after it was purchased by Pharaon.38 Several years later, Pharaon resold the bank to none other than First American.
Pharaon, it should be mentioned, maintained significant political connections of his own. Just prior to his first encounter with Bert Lance, he had bought a large block of stock in the Main Bank of Houston, Texas. Another Arab investor was the Saudi billionaire Khalid bin Mahfouz, the power behind the prominent National Commercial Bank. Like Pharaon, bin Mahfouz was extremely close to BCCI and even owned shares in the bank. Later, in 1986, plans were underway for bin Mahfouz to take over both BCCI, and Credit and Commerce American Holdings, but internal auditors for National Commercial raised too many questions about the arrangement.39
Other investors in Main Bank alongside Pharaon and bin Mahfouz included John Connally, the former governor in Texas who was soon to become a major player in the world of defrauding savings and loans. There was also James R. Bath, a close friend of George W. Bush and, according to his former partner, Bill White, a CIA asset who had been personally recruited by George H.W. Bush in 1976, when Bush was director of the Agency.40
Bath had a long career in aviation, real estate, and finance. Early on, he became a vice president at the Texas division of Atlantic Aviation, which was controlled by the powerful DuPont family. This was followed by Bath/Bentsen Interests, a real estate development company that he co-founded with Lan Bentsen, the son of future Clinton treasury secretary, Lloyd Bentsen Jr. In 1976, the year he was reportedly recruited by G. H.W. Bush and the CIA, he created Jim Bath and Associates. Almost immediately thereafter, Bath’s career took a rapid, upward ascent: “He was named as trustee for Sheikh Salem bin Laden of Saudi Arabia.… Bath’s job was to handle all of bin Laden’s North American investments and operations.”41 He also was made the trustee for bin Mahfouz’s US investments.
Russ Baker, in Family of Secrets, recounts how Bill White told him that Bath’s recruitment by G. H.W. Bush was intimately connected to the growing relationship between Saudi Arabia and Texas oil.42 Bath, it seems, was something of a middle man for these two parties – and his presence alongside the two BCCI-linked individuals, Khalid bin Mahfouz and Ghaith Pharaon, should be understood in that context.
BCCI’s reach extended far beyond Saudi Arabia, Pakistan, and the United States, as it was truly global in scope. The bank maintained, for example, a presence in the People’s Republic of China. During the “reform and opening up” of the PRC under the leadership of Deng Xiaoping, BCCI was the second foreign bank to open branches in the country. It “secured substantial deposits from the Chinese government and its business affiliates”; according to the BCCI Affair, Chinese officials and government entities lost around $500 million when the bank collapsed.43 BCCI also maintained joint ventures with other businesses within China. One of these was the China-Arab Bank, a joint venture with the Abu Dhabi Investment Authority.
At the time, the relationship between the PRC and the Soviet Union was considerably strained – and yet BCCI was in the USSR as well. In an appendix to the BCCI Affair titled “Matters for Further Investigation,” the joint activities of BCCI and the Foreign Trade Mission of the Soviet Union in London was highlighted as significant, but little information was added. The report states that “obtaining the records of those financial transactions would be critical to understanding what the Soviet Union under Brezhnev, Chernenko, and Andropov was doing in the West.”44
One clue as to USSR-connected activities was reported by Jonathan Beaty and S. C. Gwynne in their book on BCCI. Beaty was told by a German arms dealer, whom they refer to as “Heinrich,” that the Soviets were buying Western high technology via BCCI – in this instance the Navstar GPS system.45
Throughout the third world, BCCI presented itself as a development bank. This allowed it to gain intimate access to governments, emerging markets, and the financing systems that they required. It was the “second largest of all lenders to the Congo,” while in Cameroon it developed close ties to the country’s finance ministry – and bribed them to take high-interest loans from the bank.46 The BCCI Affair charges that BCCI cultivated relationships with the United Nations outpost and the US embassy in Cameroon as well. In Nigeria, meanwhile, BCCI cozied up to the nation’s central bank and apparently traveled with their top financial functionaries throughout the world. One witness reported that, at a meeting of the World Bank in Seoul, they had observed “one of the BCC[I] officers with a lot of cash, handing it out to the staff of the central bank of Nigeria.”47
In Jamaica, BCCI became the intermediary between the state and the world financial system. It handled “essentially every foreign current account of Jamaican government agencies.”48 US government agencies were involved in this corruption of the Jamaican government, as BCCI became “involved in financing all of Jamaica’s commodity imports from the United States under the U.S. Commodity Credit Corporation.”49 The CCC itself was no stranger to skullduggery. As will be seen, it was implicated – along with BCCI and several connected banks – in the transfer of armaments and munitions to Iraq at the height of the Iran-Iraq War.
Through the Gulf Group – headed by Abbas, Mustafa, and Murtaza Gokal – BCCI had a foothold in global shipping. Abedi was particularly close to Abbas Gokal, the main figure in Gulf ’s shipping lines. He had courted him early on in BCCI’s existence, and an ever-escalating series of loans fueled the Gokal’s maritime interests, allowing the family to quickly control an impressive fleet. The Gulf Group and BCCI were so fundamentally interwoven, acting as practical extensions of one another, that when BCCI collapsed, the resulting shockwaves profoundly destabilized Gulf.50
Like Ghaith Pharaon, Abbas Gokal sometimes acted as a front man or proxy for BCCI. In 1975, for example, he attempted to acquire Chelsea National Bank, a small New York City bank. Regulators very quickly recognized that Gokal had practically no familiarity with the ins and outs of bank ownership – and they saw how closely tied he was to BCCI. In 1976, Gokal admitted that, upon acquiring the bank, he had planned to bring in a BCCI management team to run its operations.51
In the early 1980s, Gokal approached the intelligence/organized crime-linked Bruce Rappaport with an offer to buy 50 percent of his Inter Maritime Bank. Rappaport declined the offer and instead sold 19.9 percent of the bank’s shares to the Gulf Group and added Abbas to his board of directors52 Later, when he was shuffled off to prison for his fraudulent activities with BCCI, Abbas’ personal secretary went to work for Rappaport.
Was Gokal fronting for BCCI in Rappaport’s organization? It seems likely, as Rappaport himself maintained numerous ties to the bank. One of his top money managers, the Swiss banker Alfred Hartmann, was himself a BCCI frontman, while Rappaport held a significant stake in the illustrious Bank of New York, which was one of BCCI’s correspondent banks. Bert Lance, meanwhile, had mentioned Rappaport in his testimony before the official BCCI inquiry, stating that he believed that Rappaport had been dispatched by William Casey, Rappaport’s close friend, to spy on him and keep tabs on BCCI. “Lance said that Rappaport maintained contact with him for a period of years until the death of Director [William] Casey,” the BCCI Affair states, before adding that Lance “failed to mention in his testimony that despite his suspicions of Rappaport, he arranged with him to have one of his sons work in the financier’s New York bank.”53
Both Rappaport and BCCI were also engaged in various activities in the oilrich nation of Oman. BCCI had been active there since 1973, when, together with Bank of America, it set up the National Bank of Oman. Peter Truell and Larry Gurwin, in False Profits, note that the National Bank of Oman “became one of BCCI’s biggest units, with fifty-five branches.”54 Tellingly, the BCCI Affair suggests that “BCCI may have been moving money through the National Bank of Oman to fund the war in Afghanistan,” before adding that the National Bank of Oman and its CEO, Qais-Al Zawawi, also did business with CIA director Casey’s associate, Bruce Rappaport.55
Interestingly, one of the most active players in Oman’s oil market was John Deuss, the enigmatic oil trader whom Ted Shackley had gone to work for after leaving the CIA. In fact, Deuss reportedly hired Shackley specifically to help him operate in Oman.56 According to one of Deuss’ associates, journalist Susan Mazur, Deuss’ main contact in Oman was Qais-Al Zawawi of the National Bank of Oman. Could there have been a connection with the purported use of the bank by the CIA to finance the Afghan Mujahideen? It is certainly possible. As mentioned in the last chapter, there are rumors that EATSCO, the freight forwarder managed by Shackley’s crony Thomas Clines, was involved in the movement of arms and other war supplies to the Mujahideen.
Yet another major player in Oman during this period was a firm called Tetra Tech International. Once a subsidiary of Honeywell, Tetra Tech was run by former CIA officer James Critchfield, who was not only an old Middle East hand, but also a close associate of Shackley. In 1979, Tetra Tech was “given supervisory control … over the operations of [eleven] government ministries.”57 Major construction projects, the management of ports, the telecommunication infrastructure, the post office, and food inspections were just a handful of the things that Tetra Tech controlled in Oman. In addition, as noted in the last chapter, Donald Jameson, a CIA veteran who went to work for Tetra Tech, had been one of the attendees of the Le Cercle meeting tied to the October Surprise plot.
As the BCCI Affair makes clear, investigators also suspected a potential connection between Tetra Tech International and the similarly named Tetra Finance, a Hong Kong-based financial outfit that was closely integrated with the Hong Kong Deposit and Guaranty Company.58 Playing an active role in each of these institutions was John Shaheen, one of William Casey’s “Hardy Boys” and a central figure in the October Surprise plot. Shaheen was paid by each bank to broker deposits and to court wealthy Arabs to join their boards. Individuals who maintained a post on the board of each included Hassan Yassin, Kamal Adham’s successor as Saudi intelligence chief and a cousin of Adnan Khashoggi. Another was Al Mazrui, the head of the Abu Dhabi Investment Authority and director at BCCI.
Once again, BCCI appears, albeit surrounded by heavy fog, in the background of the covert conflicts of the 1980s. The support for the Mujahideen was just one of many such instances. Another is the Iran-Contra affair. A global web of operations and cooperating and competing factions, each with logistical networks dedicated to arms dealing, drug smuggling, and money laundering, the complexity of Iran-Contra is simply mind-boggling. Despite its involution, at nearly every level of these interlocking components and operations, one invariably finds the tendrils of BCCI.
BLACK EAGLE
When the Kerry Commission on terrorism, narcotics, and international operations was underway in the early 1990s, longtime BCCI executive Amjad Awan was one of the witnesses called to testify. Awan told the commission that he had acted as the banker for Manuel Noriega, the strong-man who had first come to power in Panama in 1983. Noriega would deposit “$3 million at a time in $100 bills” in BCCI, while Awan would disperse “$20,000 payments to Panamanian politicians at Noriega’s request.”59
Furthermore, according to Awan, Clark Clifford’s partner Robert Altman had personally intervened to obscure the massive flow of Noriega-connected funds into BCCI. As BCCI collapsed and regulators and politicians subpoenaed internal bank documents, Altman hid them by having them relabeled as “attorney work product.”60
A sizable chunk of Noriega’s wealth came from his deep involvement in the Latin America drug trade. According to Carlos Lehder, the Medellin cartel boss who had worked closely with Robert Vesco in the Bahamas, Noriega reached an agreement with Pablo Escobar and other Medellin leaders that made Panama a transshipment point for Colombian cocaine destined for the US. In exchange for “$1000 for each kilogram of cocaine and a percentage of every dollar of drug proceeds flown to Panamanian banks,” Noriega was purported to have guaranteed the safe passage of drug flights in and out of various airstrips across the country.61
Partial corroboration of Lehder’s claims comes from Steven Kalish, an American drug smuggler who worked closely with Noriega’s pilot, Cesar Rodriguez. Kalish was made a partner in Servicios Turisticos, a Panamanian airline owned by Rodriguez and Noriega, and was given “special military protection for shipments of money into the country.”62 According to Kalish, the relationship between Noriega and the Medellin cartel did not fully blossom until 1984, when he arranged for some of their cohorts to be released from Panamanian jail.
Noriega was also a CIA asset and had been since 1967, becoming the Agency’s eyes and ears in Panama. He became particularly close to George H.W. Bush when the future president was director of the CIA. Peter Dale Scott and Jonathan Marshall write that, in 1976, “CIA director George Bush arranged to pay Noriega $110,000 for his services [and] put the Panamanian up as a house guest of his deputy CIA director.”63 Noriega enjoyed a similar camaraderie with Bush’s rival, CIA director William Casey, who is alleged to have met with Noriega repeatedly in Washington, DC.
That Noriega served as both de facto drug baron and the CIA’s man in Panama became an issue for the US during the early 1980s, when Casey launched the first operations to support the Nicaraguan Contras in their fight against the ruling Sandinistas of Nicaragua. According to various journalists writing in the late 1980s this operation was code-named “Black Eagle.”64
Howard Kohn and Vicky Monks, in their 1989 Rolling Stone article on the operation, stated that, very early on, Casey recruited Israel’s Mossad “to arrange for the acquisition and shipping of weapons to the Contras.”65 As noted in the last chapter, Mossad had its own man in Panama, Michael Harari, who worked as an arms trafficker and security consultant for Noriega. The “Harari network,” as it was later dubbed, overlapped with the drug smuggling networks that were operated in Panama by the Medellin cartel. Though he was no longer officially in the employ of Mossad by this point, Harari’s activities were funded to the tune of $20 million from Israel.66
José Blandón, one of Noriega’s top advisors, later told journalists that Harari had worked with Duane Clarridge, the head of CIA operations in Latin America, and Donald Gregg, Vice President Bush’s National Security Advisor, to establish a network of bases for logistical support of the Contra conflict. Kohn and Monks appear to corroborate Blandón’s story, writing that the vice president’s office did have a role in the Black Eagle operation and that the man on the ground had been Donald Gregg. They add that the airstrips in Panama utilized by the CIA were the same as those being used by the Medellin cartel and that the arrangement between these parties had first been set up by Israel.
Independent accounts show that the prime years that Black Eagle was purported to have been running, 1982 and 1983, were busy ones for the US and Israel.67 In November 1982, the US government admitted to supporting rebel forces in Nicaragua. By March of the following year, the CIA had set up a $50 million intelligence apparatus in Latin America that was largely focused on Nicaragua, and US military advisors were placed in Honduras to advise the main Contra group, the Fuerza Democrática de Nicaragua or FDN. In the summer of 1983, the New York Times reported that Israel, at the urging of the US, was providing arms, confiscated from the PLO in Lebanon to the Contras.
In 1984 and 1985, Black Eagle began to fall apart. This was in no small part thanks to Noriega. As Kohn and Monks noted:
While helping to raise funds for the contras, Noriega was pursuing a favorite pastime – adding to his store of potential political-blackmail material. An insatiable collector of “negative information” about both friends and foes, Noriega is known to have hidden video and audio equipment in government offices to record meetings and phone calls. Early in the Black Eagle operation, according to Blandón, Noriega began to compile a dossier about the role of Bush and his staff. In the dossier is said to be copies of status reports sent to Gregg and videotapes of meetings held in Noriega’s office, plus a special report that Blandón prepared about Black Eagle on Noriega’s orders.68
With Noriega acting increasingly bold, tensions reportedly developed between US and Israeli operators throughout Latin America, each worried that the other would hang them out to dry if the link between the pro-Contra efforts and the Medellin drug flights was revealed.
Another issue was the increasing unpopularity of the Contra war in the US. Beginning in 1982, a series of laws passed by Congress limited the ability of the Reagan administration to provide military aid to Contra groups. This reached its apex with the 1984 Boland Amendment, which prohibited all US military aid to the Contras and hampered the CIA’s Nicaraguan operations. With a crisis mounting, Casey began to search for an alternative system that would allow him to continue the covert war. Soon, with the aid of his new protégé Oliver North, “the Enterprise” would be up and running.
The Enterprise appears to have been named as such because it was fundamentally a money-making endeavor, and its numerous tendrils and interlocking components cut across as many business ventures as they did covert operations. It was also an offshoot – if not a direct continuation – of Shackley’s private-intelligence apparatus. Richard Secord, who had been involved in the overbilling scam at the Pentagon that provided funding for EATSCO, was one of North’s right-hand men in the Enterprise’s money networks. Joining him was Albert Hakim, another veteran of Shackley’s world, as was Thomas Clines. As alluded to previously, the arms-for-hostage deals that ultimately torpedoed the Enterprise’s activities had come to North’s attention from a complex changing of hands. It had originated, however, in a meeting between Shackley and Iranian interests.
North, a marine and veteran of the Vietnam War, was apparently recruited into Shackley’s network in the early 1980s. In 1981, he joined the National Security Council (NSC), and in 1983 – right in the middle of Black Eagle – he became the NSC’s deputy director for political-military affairs. During his first two years at the NSC, however, he was an assistant to Robert “Bud” MacFarlane, who soon became Reagan’s National Security Advisor. MacFarlane’s career had depended on his development and maintenance of connections to prominent players. For instance, he had served as military assistant to Henry Kissinger and accompanied him on his secret trips to China. At the end of the 1970s, he was appointed by John Tower to head the US Senate Committee on Armed Services, and in 1981 he became an assistant to Alexander Haig. Tower’s critical role in the subversion of US national security by aiding Robert Maxwell in the PROMIS scandal is detailed in chapter 9. Notably, Tower and Maxwell had first been brought together by Henry Kissinger.
According to Joseph Trento, MacFarlane’s early work for Kissinger had been arranged by his mentor, Col. Jack Brennan, who was Nixon’s last chief of staff.69 Brennan and MacFarlane had stayed in touch over the years, and, at some point, North, while working under MacFarlane, was introduced to Brennan’s associate, Lt. Col. James M. Tully. Tully was close to Shackley and Secord.
Trento writes that he was told by Marine colonel and sometimes CIA asset William Corson that North had informed him about his growing ties to this crowd, who were then being used to operate off-the-books operations for the CIA and the National Security Council. “It was then that I realized what had happened,” Corson reportedly said. “These dumb bastards got sucked into the old Ed Wilson crowd: Shackley, Secord, Clines. The administration had let these guys in the tent, and it was only a matter of time before they owned the circus.”70
THE STRUCTURE OF THE ENTERPRISE
The basis for the Enterprise was a company founded by Richard Secord and Albert Hakim in 1983 called Stanford Technology Trading Group International (STTGI). It was one of many similarly-named companies that the pair had set up. They had formed the nearly identical Stanford Technology Corporation in the 1970s, and had since set up StanTech Services S.A.; Stanford Technology Corporation Services, S.A.; and Scitech, S.A, among others. A year after STTGI was formed, North introduced Secord to Adolfo Calero, the leader of the FDN, the CIA’s preferred Contra group. An arrangement was made where, thanks to a sizable cash donation from Saudi Arabia, STTGI would buy arms and resell them to the Contras.
This basic business arrangement rapidly ballooned during 1985 and 1986. Throughout 1985, Manucher Ghorbanifar (who, as previously noted, had brought an arms-for-hostages deal to Shackley), Israel’s David Kimche, and Michael Ledeen met multiple times to discuss the possibility of an arrangement between the Reagan administration, Israel, and Iran. Ledeen often reported back to McFarlane, who was by then National Security Advisor, on these meetings. At the end of August of that year, a US arms package – including 100 TOW missiles – was dispatched to Iran via Israel.71 The initial financing for this shipment, which was routed through his accounts at BCCI, was provided by Adnan Khashoggi.
Ledeen was, at this time, operating from North’s office at the NSC, though he later claimed that North was unaware of the arms sales. North, he continued, was busy trying to arrange for the freeing of the hostages in Lebanon. Ledeen was likely dissembling: according to the Tower Report, McFarlane told President Reagan that Israel has “taken it upon themselves” to sell arms to Iran in order to try to get hostages released.72 Roughly a month after this first arms sale, Kimche contacted McFarlane with news that one of the hostages was to be released, and more would follow. Records show that North was tasked with handling this situation.
By October, North was holding meetings with Ledeen and Ghorbanifar as well as Al Schwimmer and other players on the Israeli side of the operation in DC. The arms sales continued smoothly for the next several months. January 1986 was when the operation took on another dimension. During the course of a meeting between Oliver North, Edwin Meese, and Amiram Nir, Israeli prime minister Shimon Peres’ top counterterrorism advisor, Nir reportedly suggested to North that funds from the arms sales could be diverted to support the Contras. Shortly after this meeting, funds now destined for the Contras began to be routed through the Enterprise’s byzantine maze of corporate shell and holding companies.
The Enterprise maintained dozens of accounts held in the names of various dummy companies, usually in Swiss banks such as Credit Suisse. The primary receiving accounts, which dispersed money outward into the corporate compartments set up for the ongoing operations, included Energy Resources International, Lake Resources Inc., and the Hyde Square Park Corporation.73 North’s Israeli co-conspirators may have had access to these accounts as well.74
In order to manage this complex web, the Enterprise retained the services of Willard Zucker and the Geneva company he worked for, Compagnie de Services Fiduciaire or CSF. Zucker, a US tax lawyer, “had provided Hakim with financial services since the mid-1970s, when Hakim still lived in Iran.”75 Zucker’s connection to these players is made all the more interesting because of his background. He had been affiliated with Investors Overseas Services and had gained a seat on the mutual fund’s board during the ouster of its founder, Bernard Cornfeld.76 There are various rumors and suggestions that Zucker was one of Vesco’s proxies whom he arranged to get onto the IOS board.
Zucker’s role in Vesco’s takeover was obliquely referenced in a letter he wrote to Hakim concerning a trip he took to Seattle to discuss a series of business ventures with other Enterprise partners. Zucker states in the letter that he had met a businessman from Colorado who was involved in a venture with the politically connected oilman John M. King. The man offered to send Zucker materials relating to the venture, but Zucker declined. He added to Hakim that King “hates my guts because I helped bring down King Resources, the Colorado Corporation.”77
IOS had been involved with King Resources in some oil-and-gas ventures in the late 1960s, while King Resources acted as one of IOS’ biggest clients. King was close to Edward Cowett, IOS’ general counsel, director, and a member of its executive team. When IOS began to fall apart, Cowett conspired to help King take control of the company from Cornfeld. It was not meant to be. King failed and his King Resources slid into bankruptcy, while Vesco, King’s competitor, claimed the mutual fund.
In June 1982, CSF set up a Bermuda-based subsidiary called CSF Investments Ltd. Legal work for this company was carried out by Conyers Dill & Pearman – one of the preeminent firms specializing in offshore finance, with outposts across the Caribbean, London, and Hong Kong. The firm’s cofounder, Nicholas Bayard Dill, was a powerful presence in Bermuda politics. He and his law partner, James Pearman, were directors of Coastal Caribbean Oils & Minerals Ltd. According to the National Security Archive’s Iran-Contra chronology, Secord owned stock in this same company in the early 1980s.78 Later, when Contra support operations were fully underway, CSF Investments was used to acquire aircraft.
The Enterprise maintained numerous companies to manage the aviation wing of the Contra support operations. Southern Air Transport (SAT), the CIA proprietary airline utilized in the Contra airlift that was previously Air America (and before that, Civil Air Transport), worked closely with an Enterprise dummy company, registered in Panama, called Albon Values Corp. David Rogers, a journalist for the Wall Street Journal, wrote that “public records in Panama City list employees in the Geneva firm, [CSF], as principals in Albon Values Corp.… Roland Farina, an accountant at CSF, and Jacques Mossaz, an attorney at the Swiss firm, are listed as principal officers in Albon Values, which was registered by a Panama City law firm, Quijano & Associados, frequently used by CSF.”79
Costa Rica was one of the main staging grounds for North’s pro-Contra operations. Land belonging to John Hull, an American rancher, was the main location for the Contra airlift. Hull, who reportedly received a $10,000 monthly retainer from the Enterprise, claimed to have been the CIA’s main liaison with the Contras between 1982 and 1986.80 His involvement in covert operations seems, however, to have begun before 1982. Two years earlier, a far-right paramilitary group used his ranch as their base to launch an attack on a left-wing Costa Rican radio station.81 Hull was also reportedly close to the Free Costa Rica Movement, that country’s branch of the World Anti-Communist League.
In frequent contact with Hull was Robert Owen, who had been selected by North to serve as his own liaison to the Contras. Owen – unsurprisingly – had ties to Shackley that went back to the Vietnam War, and through him he had met Neil Livingstone.
Livingstone, as discussed, had been involved in Panama with Michael Harari, which opens the possibility that he may have been involved with Black Eagle. After Owen served a stint on the staff of Senator Dan Quayle, Livingstone recruited him to work at Gray and Company, the PR firm set up by Robert Keith Gray during his time away from H & K.82
Under the auspices of a PR campaign for the Contras, Livingstone set up a nonprofit organization called the Institute for Terrorism and Subnational Conflict, located in the Washington, DC, offices of the American Security Council. What it was really designed to do, according to the Congressional report on the Iran- Contra affair, was to act as an Enterprise cut-out to pay Owen for his work.83 To receive these funds, Owen set up his own organization, the Institute for Democracy, Education, and Assistance (IDEA).
The same day that IDEA was formed, Owen set up a sister organization, the Council for Democracy, Education and Assistance.84 One of the council’s directors, aside from Owen, was a retired Air Force general, John Flynn, who had reportedly been recruited by Hull to serve in that role. The council took in some $66,000 in donations for the Contras, all reportedly from the fundraising activities of conservative activist Carl “Spitz” Channell. In 1984, Channell had organized a tax-exempt foundation for the purpose of soliciting donations. This foundation, the National Endowment for the Preservation of Liberty was North’s vehicle of choice for garnering private donations for the Contras and other worldwide “freedom fighters” being backed by the Reagan administration.
Through the National Endowment for the Preservation of Liberty, money provided by wealthy donors courted by North and his associates – individuals like Texas oilman Nelson Bunker Hunt, Ellen Garwood, the daughter of a prominent New Deal-era administrator, and prolific confidence man E. Trine Starnes – would be flushed into an offshore banking system.85 Channell’s partner was a PR man by the name of Richard Miller, who maintained a company called International Business Communications. Money from the National Endowment for the Preservation of Liberty would flow to International Business Communications, which in turn would deposit the money into bank accounts in the Cayman Islands under the name of “I.C., Inc.” I.C., Inc. would then move the money to Enterprise bank accounts in Switzerland belonging to Lake Resources.86
Another fundraising apparatus utilized by the Enterprise was Citizens for America.87 Founded by conservative activist Lewis Lehrman, Citizens for America was, for a time, run by the infamous lobbyist Jack Abramoff. Citizens for America’s executives met personally with President Reagan. The organization would reappear during the Franklin child abuse scandal in Nebraska (discussed in chapter 10), as Lawrence King, the man at the center of that sexual-abuse ring, was a board member of and donor to Citizens for America during the Contra years.
By 1985, cracks in the Boland Amendment were forming, and the covert apparatus was ready to take full advantage of the opportunities at hand. Congress was still blocking “lethal aid,” but it authorized the State Department to move “humanitarian” supplies to the Contras. A special organization, the Nicaraguan Humanitarian Assistance Office (NHAO) was set up under the leadership of Ambassador Robert Duemling. From the outset, the NHAO was an extension of the Enterprise. It provided money to Owen’s IDEA, and Owen himself became an NHAO consultant. The CIA, meanwhile, recommended and vetted the companies that the office utilized to move the aid.88
This vetting process brought in a number of intriguing partners. One of these was the shrimp company Frigorificos de Puntarenas and its sister firm, Ocean Hunter. As previously discussed, Frigorificos was found to have been footing the bill for the storage of Robert Vesco’s aircraft in Costa Rica and was itself run by representatives of the Colombian drug cartels. One principal of both companies, Luis Rodriguez, was found by the FBI to have been “funding the Contras through ‘narcotics transactions.’”89
At the same time that the State Department was unlocking funds for Frigorificos and its principals were busy at work in the blossoming cocaine trade, North, Owen, and rancher Hull were working closely with those behind Frigorificos and Ocean Hunter on developing maritime warfare capacity for the Contras.90 Memos written by Owen refer to Frigorificos/Ocean Hunter ships being used as “motherships” for these operations. Incredibly, they also reference a “DEA person who might help with the boats.”91
Another curious pair of companies that simultaneously received NHAO funds, got tapped by the Enterprise for military support, and were implicated in drug-running operations were SETCO Aviation and Hondu Carib. Hondu Carib had been formed by Frank Moss, who had been a pilot for SETCO. According to the report of the Kerry Commission on narcotics trafficking, SETCO “had a longstanding relationship with the largest of the Contra groups, the Honduras-based FDN.”92 The aviation company, importantly, had been set up by “Honduran cocaine trafficker Juan Matta Ballesteros.”93 Matta, described in the press as the “boss of bosses of Mexico’s cocaine industry,” mainly partnered with the Cali cartel, which, by the 1990s, had overtaken the Medellin cartel as the dominant drug empire in Colombia.94
Matta and other members of his organization, the Guadalajara, were implicated in the kidnapping, interrogation, brutal torture, and murder of DEA agent Enrique “Kiki” Camarena, which took place in early February 1985. The cartel boss who had personally ordered the kidnapping of Camarena, Felix Gallardo, was reported to have bragged in court that he had “[supplied] arms to the Contras” and had brought together a network of drug traffickers “to finance their [the Contras] cause during 1983 and 1984, in exchange for protection.”95
Phil Jordan, former director of the DEA’s El Paso Intelligence Center, later reported that he was informed by Mexican authorities that “CIA operatives” were present for the interrogation and torture of Camarena and had made tape recordings of the agent’s final hours.96 Hector Berrellez, the DEA agent who led the investigation into Camarena’s death, stated that the CIA provided the DEA with those tapes. Camarena was first kidnapped by members of La Dirección Federal de Seguridad (DFS), a now-shuttered Mexican intelligence agency and secret police. When Felix Gallardo was boasting of his ties to the Contras, he also claimed that Contras were being trained at a law-enforcement training facility maintained by the DFS, which was acting as a front for the CIA.97
Frigorificos and Ocean Hunter, SETCO and Hondu Carib – these are just a few of the CIA-vetted companies that were recommended to the State Department for the delivery of “humanitarian aid” to the Contras. There was also Vortex, a Miami-based aviation concern run by Michael B. Palmer. The Kerry Commission report notes that, at the time Vortex was getting NHAO contracts for supply runs, “Palmer was under active investigation by the FBI in three jurisdictions in connection with his decade-long activity as a drug smuggler, and a federal grand jury was preparing to indict him in Detroit.”98 One of Vortex’s employees in this period, Joseph Haas, “was suspected of involvement in drug trafficking and had been a suspected marijuana trafficker since 1984.”99 He had also been a CIA contract agent but was “‘taken off ’ CIA’s payroll” in 1987 “because he had gone to work for a US law enforcement agency.”100
Vortex was brought to the NHAO’s attention by Pat Foley, described in the Kerry Commission report as the “president of Summit Aviation.”101 What the report left out, however, was that Foley had been (or had continued to be) a CIA operative and had earlier flown 747s on behalf of Flying Tiger Lines, the aviation company set up by the Chennaults and where Robert Keith Grey had maintained a spot on the board.102 Summit Aviation, too, had a fascinating history: it had been founded by Richard C. du Pont Jr., a member of the illustrious DuPont chemicals family and the son of one of the great boosters of aviation in the 1930s. Besides Summit, Richard Jr. served as a director at Edward du Pont’s Atlantic Aviation, where the aforementioned CIA asset and Bush ally, James R. Bath, had served as vice president.
In September 1983, a Cessna 404 twin-engine propeller plane entered the airspace of the Nicaraguan capital of Managua and began a miniature bombing run. The aircraft was quickly shot down, and Sandinista authorities found that it had been dispatched from Costa Rica. A subsequent investigation in the US press revealed that the plane had come from a company called Investair Leasing Corporation, headed by the former vice president of the CIA proprietary airline Intermountain Aviation. Before its doomed flight, it had been purchased by Summit Aviation, which had modified it with bombing capabilities and machine guns.