The collapse of a dream
On Friday 5 July 1991, the Bank of England moved to close down BCCI operations in UK, simultaneously banking authorities in Luxembourg and Cayman Islands took action to freeze BCCI assets and stop all their banking functions. Over the weekend 14 other countries including US, Japan, Spain and Germany moved to shut down BCCI activities and seize the assets of the Bank within their respective domain. Such action was taken because BCCI was believed to be on the verge of financial collapse following allegations of massive fraud. Mr Pierre Jaans, Director Luxembourg’s Monetary Institute, which overseas banking in the country and where BCCI was registered said that the Bank had posted huge operating losses in 1990 which had not been made public and thus had to take huge loans to cover the losses as there was no capital left. Mr.Pierre Jaans further alleged that being insolvent, BCCI had engaged in conspiracy to deceive clients, shareholders and auditors. The Bank’s accounts were already overdue and the auditors, namely Price, Waterhouse and Co, had reservations which necessitated immediate action to safeguard the interests of depositors, bona fide creditors and the shareholders themselves. This punitive measure has brought BCCI to its knees, financial institutions work on the basis of depositor confidence, the combination of shutting down operations and loss of market reputation means that as an effective banking institution BCCI is finished in international circles.
Some move against BCCI was anticipated, the scope could never ever be envisaged. Before any financial institution collapses there are tell tale signs about the impending catastrophe, even if these are forced by internal financial shenanigans. Except for the drug money laundering case, relentlessly being pursued in the US, there were no real warning signals. The Bank of England must have had considerable proof about the alleged fraud before it engaged in such sweeping action, it is unimaginable that they would subject hundreds of thousands of depositors in over 69 countries to such acute financial distress, most of these are of Asian origin and in effect has wiped away their business strength developed over many years of hard work. Price, Waterhouse and Co had certified BCCI’s accounts for 1987, 1988 and 1989, the major fraud seems to have been perpetrated in 1990. If the misdemeanour took place during the certified period, then we shall wait to see what punitive action is taken against Price, Waterhouse and Co.
BCCI’s problems really started once the Bank moved into the US, the largest commercial arena in the world, a classic case of ambitious overreach. Limited by stringent US Federal Laws, BCCI bought up (through proxies) existing US entities, most notably First American Bank with its existing business network. BCCI took counsel from a respected US law-firm consisting of luminaries like Clark Clifford and Robert Altman, who fronted as the senior banking executives and also helped BCCI to lobby in the right places. Obviously, BCCI must have been advised that they were on the right side of the fine line dividing them from wrongdoing. The adverse publicity evoked by the then famous drug money laundering case brought into focus questionable interpretation of Federal Laws, as an entity BCCI’s banking existence in the USA came into jeopardy, particularly when the Noriega connection was established. While there is no doubt that many other banks, US and European, were (and are still) deeply involved in drug money laundering and other shenanigans, BCCI was the first major international bank from Asia with a wide network of branches, having no permanent sovereign base the rank upstart was an appropriate entity for targeting. In the presence of a blue-ribboned network of western banks servicing drug money launderers, one does wonder why only BCCI was singled out for come-uppance.
A lot of hue and cry has been raised about the liquidation action being a Jewish conspiracy initiated by the Jewish lobby to destroy the financial credibility of a newly emerging Asian bank of Muslim origin. This reaction cannot countenance the many facts of misdemeanour, malfeasance cannot be swept under a cloak of emotionalism, the racist motives inputed are not based on logic or concrete evidence. On the surface the benefits derived by BCCI’s collapse will be to traditional financial bastions, to that end there seems to be a modicum of truth in the conspiracy theory. The fact remains that if fraud was committed then BCCI is fully culpable. To back up their fraud charge one expects that the Serious Frauds Office or London Police Fraud Squad have made any individual arrests or hand down indictments against those not present.
Agha Hassan Abedi was in control of BCCI till February 1988 despite the fact that BCCI had taken, along with many other western banks, considerable beating in financial dealings in 1986 and had to bring in an outside investor in the form of Khalid Bin Mahfooz of National Commercial Bank of Saudi Arabia to shore up its capital-base by taking 30% of the shares. Shaikh Zayed Bin Nayhan had been maintaining a 30% interest in BCCI, almost since inception. Shaikh Zayed’s support to Abedi enabled him to continue to maintain his authority over the Bank till the massive heart attack in February 1988 effectively decapacitated him. The effective No 2 in BCCI was Swaleh Naqvi with a slate of senior executives of equals assisting him consisting of Amir Siddique, Saleem Siddiqui, Iqbal Rizvi, Imtiaz Ahmed and Abdul Hafeez. Zafar Iqbal, who had started his banking career with UBL’s McLeod Branch in Lahore as Manager and joined the BCCI after posting to the UAE had become the Chief of BCCI in UAE mainly because of his close contacts with the ruling family, his role being of a roving “treasurer” and general factotum of sorts. Bashir Tahir was Zafar Iqbal’s No 2 in UAE.
Whenever Agha Hassan Abedi travelled he was usually accompanied by Dr Khaled Hameed who was responsible for his medical care. When Abedi had a massive heart attack during a visit to Lahore and was admitted in Shaikh Zayed Bin Nayhan Hospital, renowned Harley Street specialists were flown in for his care. Subsequently when he had the cardiac arrest that led to his partial paralysis, there was not one experienced doctor in sight in the hospital. The throat incision was so crude that it has left a permanent speech impairment. In London a few months later, the famous Dr Magdi did a heart transplant on him. Today Abedi survives as a semi-invalid in Karachi, having relinquished physical control of the Bank over 3 1/2 years ago in February 88, the date of the first heart attack. Once it was clear that Agha Hassan Abedi was medically handicapped, his closest colleagues threw loyalty overboard and moved quickly to consolidate their control over the Bank. The induction of Khalid Bin Mahfooz of Saudi Arabia and his senior executive nominees in 1986 had threatened Abedi’s inner circle led by Swaleh Naqvi. In their anxiousness to ward off impending takeover by Mahfooz they threw their weight behind their nominal subordinate in Abu Dhabi, Zafar Iqbal. In turn Zafar Iqbal influenced Shaikh Zayed Bin Nayhan to increase his shareholding in BCCI to 77%, effectively buying out Khaled Bin Mahfooz. As a reward for his services, Zafar Iqbal became the new head of BCCI, effectively taking over Abedi’s position in 1989, duly solemnising it in 1990 with the physical departure of Abedi. History has repeatedly shown that functionaries can never replace visionaries.
There is some evidence of corporate skullduggery here. Dr Khaled Hameed, the Bank’s in-house physician did not have a background as a doctor of any repute. His main task was to monitor the health of the senior executives of the Bank, Abedi was his prime responsibility. Despite the fact that his patient had had an exhausting trip in the USA and had been advised coronary by-pass, he was allowed to journey to Lahore, in effect Abedi was physically prone to a stroke and it happened. Subsequently, family sources insist that Dr Khaled Hameed seems to have mismanaged Abedi’s medical care, they say he was too busy organising golf/social sessions with late President General Zia for the visiting Harley Street physicians flown-in from London for Abedi’s care. Not a single experienced doctor was present when the second and more damaging attack took place in the hospital. While the good doctors could hardly be expected to stand vigil 24 hours over their patient it does look strange that Dr Khalid Hameed had not better organised Abedi’s medical attention during the periods of his absence from the Hospital. What happened afterwards becomes even more difficult to comprehend, despite Dr Hameed’s perceived ineptitude and negligence in carrying out his primary medical responsibility, he was promoted to be the Head of Cromwell Hospital, BCCI’s showpiece medical complex in London. On the face of it it seems very much as if he was being rewarded for his failure, giving credence to the family’s conspiracy theory. Abedi did not even have any executive power after February 1988, even over the career of BCCI’s corporate doctor, inspite of the man’s alleged failure the man prospered within BCCI!
Abedi was a visionary, as genuises are apt to do, he surrounded himself with supposedly loyal functionaries who could carry out his bidding faithfully but had no great potential to function on their own, they did not reward his confidence in them by reciprocating at least with loyalty. The functionaries fought to retain the power and comfort they had got used to, even going so far as accepting junior position under their nominal subordinate, Zafar Iqbal. The whole idea of the cabal was to survive, they had not been selected for the organisational and management capabilities that their leader had, but for their supposed loyalty which turned out to be a figment of imagination. The Bank became essentially rudderless for the past three years, the leadership crisis deepening after Khaled Bin Mahfooz pulled out in 1989. Zafar Iqbal may have been a useful money manager for the Abu Dhabi ruling family, being the boss of the BCCI world conglomerate seems to have exceeded his professional capacity, this is now apparent from BCCI’s shambles.
With Asians having limited access to funds from western financial institutions, BCCI was perfectly positioned to help them in their business ventures, fully 60,000 Asian owned businesses in UK alone have been affected. Asians are the worst hit in the present crisis, decades of hard work and toil have been lost, some of them will see their life savings eaten up in the ensuing liquidation. One must concede that there must have been massive fraud but whatever the chicanery, it was committed by individuals within the Bank who should have been taken to task. The fact that many millions of US dollars of illegally acquired money in the names of corrupt politicians and bureaucrats are in jeopardy is no consolation. It now appears that Shaikh Zayed Bin Nayhan had injected in Pounds Sterling 650 million only a week or so earlier to shore up the bank as per a restructuring programme agreed to on June 25 in Luxembourg. The UAE ruler is a great friend of UK and the Bank of England’s action without consulting this sovereign entity is not only surprising, but shocking. For Shaikh Zayed Bin Nayhan this amounts to a severe loss of face and prestige, keeping in view Arab sensibilities it becomes a personal affront, particularly because he was poised to inject in another US $ 4 billion. Preliminary talks are now being carried out between the representatives of the UAE ruler and the Bank of England’s executives, there is some hope and speculation that BCCI may be bailed out by the UAE ruler, surviving in some shape or form.
Abedi set out to accomplish a dream, he has lived to see his dream being destroyed in alien lands by hands alien to his vision. While millions will suffer the consequences, mostly the Asian middle class settled in UK, one doubts that any Asian will ever again attempt to enter the lists of those who control the world’s purse strings. The lessons here will not be easily forgotten, there can be no third world penetration into the sacred world of finances, that is an elite club that brooks no outsiders. Ultimately it will seem that this precociousness was Abedi’s real misdemeanour (and BCCI’s ultimate undoing), different sets of rules seems to have been applied by vested interest, in this respect the laws of the western world lose the perception of fairplay, that is the greatest casualty of the BCCI debacle. The Asian psyche tends to lean towards the conspiracy theory, to that end this is a disaster to the hope of amity among the peoples of the world, post-Kuwait we dreamed of an era where peace and stability coincided with the aspirations of the New World Order. One can get away by destroying the dreams of one man, unfortunately in doing so it has also destroyed the livelihood of millions in a move seen to be a racist vendetta. This will have terrible consequences in the years to come, maybe even spawn a new breed of financial terrorists.
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