You must remember BCCI of London
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BCCI, THE CIA AND FOREIGN INTELLIGENCE
Introduction
The relationships involving BCCI, the CIA, and members of the United States and foreign intelligence communities have been among the most perplexing aspects of understanding the rise and fall of BCCI. The CIA's and BCCI's mutual environments of secrecy have been one obvious obstacle. For many months, the CIA resisted providing information to the Subcommittee about its involvement with and knowledge of BCCI. Moreover, key players who might explain these relationships are unavailable. Some, including former CIA director William Casey, and BCCI customers and Iranian arms dealers Ben Banerjee and Cyrus Hashemi, are dead. Others, including most of BCCI's key insiders, remain held incommunicado in Abu Dhabi. While promising in public hearings to provide full cooperation to the Subcommittee, to date the Abu Dhabi government has refused to make any BCCI officers available for interview by the Subcommittee. Former BCCI chairman Agha Hasan Abedi remains severely incapacitated due to a heart attack. Finally, some persons in a position to know portions of the truth have denied having any memory of events in which they participated and of documents which they reviewed.
A baseline for assessing the BCCI-CIA story is the CIA's official record of its use of BCCI and its targeting of the bank, as set forth in several hundred CIA records created from 1982 through 1992. That record was, by and large, accurately represented by CIA acting director Richard Kerr in public testimony on October 25, 1991, supplemented by more detailed, classified testimony on October 31, 1991. Unfortunately, that record also contains ostensible gaps in knowledge on the part of the CIA about the activities of key contacts in the Middle East for U.S. intelligence -- including BCCI shareholders Kamal Adham and Abdul Raouf Khalil, and BCCI customer and Iran/Contra arms merchant Adnan Khashoggi -- which strain belief.
Outside the documentary record provided to the Subcommittee by the CIA, there is additional material, consisting of BCCI documents, testimony from BCCI officials and insiders, and extrinsic, circumstantial and historic information describing other substantial contacts between BCCI and the intelligence community. These include contacts between BCCI and:
** former U.S. intelligence officials, including a former head of the CIA;
** former and current foreign intelligence officials; and
** individuals engaged in covert operations on behalf of the United States government, including in the Iran/Contra affair.
In addition, the Subcommittee has received allegations of meetings between former CIA director William Casey and BCCI's head, Agha Hasan Abedi.
CIA officials have told the Subcommittee that the CIA as an institution has rules requiring the creation of written records on every activity engaged in by the Agency, and on all significant information reported to the Agency. In the summer of 1991, the CIA engaged in what its officials described as a "dumb" or "brute force" review of its documents, essentially reviewing all possible files for information on BCCI, rather than relying on knowledgeable individuals to select such information. The review located a substantial amount of material generated by the CIA throughout the 1980's, which was produced in July and August, 1991 for CIA internal reviews, in September and October for the Congressional intelligence oversight committees, and beginning in March, 1992, to the Subcommittee.
Unfortunately, there remains a wide disparity between the CIA's official account of critical relationships between BCCI and persons associated with the CIA, and the information available from other sources, including BCCI's own records. One is left with the choice of accepting the official record, which requires an assessment that the other contacts between BCCI and U.S. intelligence figures and operations are coincidental, or of assuming that the full story of BCCI's relationship to the United States has been intentionally veiled by critical players on both sides of that relationship.
The Subcommittee Investigation and the CIA
The Subcommittee's contact with the CIA regarding BCCI began in March, 1991, when staff learned from a Subcommittee source that the CIA had prepared a report concerning BCCI's criminality which was made available to Customs in late 1988. Cleared staff contacted the CIA's congressional liaison office to request a copy of the document. The staff was told that no such document had ever existed. Perplexed, staff contacted its source to determine whether he was certain that the material had been provided. The source referred staff to former Customs Commissioner William Von Raab, who confirmed the existence of the document. Staff contacted the CIA a second time, and informed the agency that a senior Reagan administration official had viewed the document. Again, the Subcommittee was told that no documents concerning BCCI had ever been created by the CIA.(1)
Staff then met with Von Raab, who revealed that not only had the CIA provided him with a briefing paper regarding BCCI, but that he obtained it through the offices of then-CIA assistant director Robert Gates, who referred to BCCI as "the Bank of Crooks and Criminals." Von Raab also advised the Subcommittee that Customs agents handling the C-Chase investigation of BCCI had discovered in the course of their work several BCCI accounts that were actually accounts held by the CIA. Von Raab told Subcommittee staff that his agents were told to cease their investigation of those particular accounts.(2) However, in an interview with Subcommittee staff, AUSA Mark Jackowski denied that he had ever uncovered any CIA involvement with the bank and Assistant Attorney General Robert Mueller testified that "at no time ...has anyone from the CIA ... attempted to obstruct or interfere with the Department of Justice's investigation and prosecution of BCCI."(3)
On May 14, 1991, Senator Kerry wrote CIA Director Webster to again request the briefing paper on BCCI prepared by the CIA, as well as information on the CIA's own use of the bank. No reply was received in response to this letter from the CIA for over two months, during which BCCI was closed globally following its seizure in the United Kingdom by the Bank of England on July 5, 1991.
In the meantime, cleared staff requested a formal briefing from CIA staff concerning the CIA's knowledge of BCCI's activities. The CIA provided an oral briefing at its offices in June, 1991 at the "secret" level, consisting of very general information concerning BCCI's use by drug traffickers, material which was by then already largely a matter of public record. The briefer provided by the CIA to Congressional staff was unfamiliar with other basic information about BCCI, such as the names of BCCI's shareholders, including former Saudi intelligence chief Kamal Adham, the key figure in BCCI's secret takeover of First American, and the CIA's former principal contact in the Arab Middle East. Further, the briefer also appeared to be ignorant of the principal analytic documents concerning BCCI previously prepared by the CIA and disseminated to Executive Branch agencies, which contained this and other more important information about BCCI.(4)
On July 23, 1991, CIA director Webster replied to Senator Kerry's May 14 request by letter, admitting to the existence of two documents concerning BCCI, which were described as "extremely sensitive" and therefore restricted to being held by the Senate intelligence committee.(5) On reviewing these memoranda, Senator Kerry recognized that the earlier of the two documents, created in early 1986, contained startling information -- that the First American Bank in Washington was secretly owned by BCCI. The distribution list attached to the memorandum indicated that the CIA had communicated this information at the time to the Treasury Department. These was no indication that either Treasury or the CIA had ever advised the Federal Reserve, the primary regulator of First American, of this critical information.
Senator Kerry asked Judge Webster to declassify immediately the fact that the CIA had known as of 1986 that BCCI owned First American, and to begin the process of declassifying the entirety of both memoranda. On July 31, 1991, the CIA advised Senator Kerry that he could reveal the information concerning BCCI's secret ownership of First American, but no other information from the memos. The CIA had not yet acknowledged its own use of BCCI to the Subcommittee, or provided access to any other materials prepared by the CIA concerning BCCI.
When the single sentence from the 1986 memorandum was declassified, Senator Kerry supplied it immediately to the Federal Reserve, whose counsel expressed shock that the CIA, Treasury, State Department, and Office of the Comptroller of the Currency had possessed this information in 1986 and never provided it to the Federal Reserve.(6)
On August 2, 1991, with Congress in recess, acting CIA director Richard Kerr chose to provide the first public account of the CIA's involvement with BCCI at the National Press Club, to a group of high school students, who were not permitted to ask questions.
During the August recess, the Senate Select Committee on Intelligence began its audit of the CIA's relationship with BCCI, and requested that the CIA provide its auditors with all documents prepared by the CIA concerning BCCI. In the same period, the CIA began its own internal reviews of its handling of BCCI, including a management review, an intelligence review, and an "independent investigation" by the CIA's statutory Inspector General.(7) By the end of August, 1991, the CIA had determined that there were several hundred reports on BCCI by the CIA, of which perhaps four dozen contained substantial information regarding the bank.
Through early October, 1991, in response to further requests from Senator Kerry, the CIA continued to refuse to declassify any of the remainder of the information concerning BCCI on the ground that to do so might imperil sources and methods. The CIA also remained unwilling to permit staff outside the Intelligence Committees to review this material. As CIA legal staff later explained it, the CIA was unaccustomed to providing information pertaining to oversight issues to staff outside the Intelligence Committees, and felt uncomfortable with the questions being posed by the Subcommittee.(8)
Ultimately, Acting Director Richard Kerr agreed to testify before the Subcommittee concerning BCCI in public, after Senator Kerry advised the CIA that the nomination of CIA director Robert Gates would be delayed until the CIA provided such testimony.
On October 25, 1991, Acting Director Kerr testified in open session before the Subcommittee regarding the CIA-BCCI relationship, expressing from his opening statement his personal discomfort about providing information concerning intelligence matters in public:
As an intelligence officer for 30 years, I find myself a little reluctant in an open hearing to talk about intelligence, intelligence sources, and intelligence methods, and the information that we acquire through that process (emphasis added).
Despite Kerr's reluctance, the information contained in his testimony, summarized below, substantially advanced the Subcommittee's knowledge of the official record regarding the CIA's contacts with BCCI. For example, the Subcommittee learned for the first time that there were not two memoranda regarding BCCI prepared by the CIA, but hundreds which had been disseminated to other agencies. Kerr also disclosed that he had provided the Treasury Department with information about BCCI's secret ownership of First American in 1985, a year earlier than previously known, and implying the existence of a separate memorandum to Treasury not previously acknowledged.
Kerr refused to answer a number of questions in open session. In closed session the following week, Kerr acknowledged that several of the questions he refused to answer did not refer to classified information or concern national security. Instead, he had refused to discuss the information in open session because he felt uncomfortable discussing information in public that might embarrass the United States, or any U.S. agency or official.(9)
Initially, Kerr resisted providing the Senators serving on the Subcommittee the opportunity to review the documentary material pertaining to BCCI created by the CIA, suggesting instead that the CIA provide the Senators only general information characterizing the number of reports and the general substance, to "protect sources and methods." Following the closed session, during which Senator Kerry pressed again for the documents, it was agreed between the Subcommittee and the CIA that all the memoranda prepared by the CIA concerning BCCI would be sent to the Senate Intelligence Committee storage facility to permit review. Months later, that material had still not been provided.
Finally, on February 18, 1992, some eleven months after the Subcommittee had first sought information concerning BCCI from the CIA, Director Gates, after meeting with Senator Kerry, directed the CIA to permit staff to review additional records at the CIA pertaining to BCCI. Following this directive from Gates, the CIA for the first time made substantial information regarding its knowledge of BCCI available to the Subcommittee, although information on CIA operations using the bank remained unavailable, channeled solely to the Congressional intelligence committees.
The Subcommittee review culminated in the CIA agreeing to declassify certain material from the 1985 memorandum about BCCI, discussed below.
The Official Record
The CIA's first user request in connection with BCCI was from the Federal Reserve in 1981, which asked the CIA whether the CIA had any derogatory information concerning the Middle Eastern shareholders who were about to buy Financial General Bankshares (FGB), which later became First American Bankshares, through the holding company CCAH. The CIA, after reviewing its records, told the Federal Reserve that it had no derogatory information on the shareholders, who included Kamal Adham and Abdul Raouf Khalil, the past and then-current Saudi intelligence liaisons to the United States.(10)
The CIA did not tell the Federal Reserve that Adham and Khalil were foreign intelligence liaisons of the United States, nor did it advise the Federal Reserve that both Adham and a third FGB shareholder, Faisal al-Fulaij, had been the subject of a Securities and Exchange Commission probe in connection with violations of the Foreign Corrupt Practices Act by Boeing and Lockheed for arms sales to Saudi Arabia.(11)
There is conflicting evidence as to whether the Governors of the Federal Reserve were aware of the intelligence background of any of the CCAH shareholders. However, at the staff level at least the Federal Reserve did learn in 1981 of both the intelligence contacts of Adham and the SEC probe into his and Fulaij's alleged receipt of bribes.(12) Former Federal Reserve Chairman Paul Volcker, who signed the order approving the application of CCAH shareholders to take over Financial Bankshares, testified before the Senate Banking Committee in early 1991 that he "wasn't aware" of Mr. Adham's intelligence background, and that "he was sure that it might send an eyebrow or two up," and that "it might provoke further investigation."(13)
Because BCCI was not officially purchasing FGB, and a condition of the purchase was that BCCI not be involved in the transaction except as an investment advisor, the Federal Reserve did not ask the CIA about BCCI itself. If it had done so, it would likely have learned about BCCI's involvement in money laundering.
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