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Edited on Fri Dec-30-05 07:22 PM by blm
The Case That Kerry Cracked
By Lucy Komisar, AlterNet
One gets an eerie sense of déjà vu watching John Kerry battle the Bush clan. He’s done it once before, against the old man, President Bush’s father, though many voters have probably forgotten. That battle involved the first Bush administration’s attempt to put the lid on an investigation that connected a worldwide criminal bank to narco-traffickers, terrorists, and to Middle East money men who helped the Bush family make piles of cash. Those links connect to people now on the U.S. post-9/11 terrorist list.
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Kerry The Investigator
As a former prosecutor, Kerry knew a lot about the workings of financial crime. Kerry pointed out how billions of dollars looted from U.S. savings and loans in the 1980s — after Ronald Reagan deregulated the thrift industry — had been stashed in secret offshore accounts. After he became head of the Senate Subcommittee on Terrorism, Narcotics and International Operations, Kerry had wanted to look into cocaine trafficking by Contras fighting the Sandinistas in Nicaragua and the connection to Oliver North’s illegal offshore Contra-support operation. So, in 1986, Kerry hired Washington lawyer Jack Blum to head the investigation.
As an investigator for Senator Frank Church’s subcommittee on multinational corporations, Blum had exposed the Lockheed bribes and ITT’s attempts to destabilize the government of Salvador Allende in Chile.
“The Foreign Relations Committee was looking at the relationship between drug trafficking and arms dealing and the way we run foreign policy,” says Blum. “’Did we ignore all the stuff going on to support the war in Nicaragua?’ We got into the issue of money laundering.” Blum said he “stumbled across Lee Ritch,” who told the panel, “I used to launder my money in the Cayman Islands. The U.S. wised up, and the bankers told me to shift to Panama. In Panama, I’m told the only guy to talk to is Noriega. He sends me to BCCI.”
Blum says, “We go poking around. I found a guy who had worked for BCCI. I met him in Miami. He said, ‘That’s their major line of work. They’re a bunch of criminals.’ He goes on to say that in addition to handling drug money, they were managing Noriega’s personal finances and that the bankers who did that lived in Miami.” Noriega even carried a BCCI Visa credit card.
So Blum subpoenaed that information. He said, “There is a subplot between us and the federal government and prosecutors. We find out about coming arrests for money laundering , but the feds want to make only a limited case in Tampa; they don’t want to investigate other ramifications. Their story is they had their case and didn’t want it messed up with extraneous stuff. The notion the other stuff was extraneous boggles the mind.”
Blum began poking deeper and came across the CIA standing in the shadows. He found that during the 1980s, the CIA had prepared hundreds of reports that discussed BCCI’s criminal connections — drug trafficking, money laundering — and its control of Washington's First American Bank, part of an illegal plot to get into the U.S. banking system. He also found that this was accomplished with the help of major U.S. figures, including former Treasury Secretary Bert Lance, former Defense Secretary Clark Clifford, former U.S. Sen. Stuart Symington, ex-federal bank regulators, and former and current local, state and federal legislators.
The CIA provided its reports to Treasury Secretary Donald Regan but not to the prosecutors in Tampa. The Treasury and Customs departments also sat on evidence. Kerry tried to get the Bush Justice Department to expand the Tampa investigation or to turn its information over to the FBI or other agencies. It refused.
Blum told me, “We started with laundering drug money, but then pursued it much further and got in testimony a pretty good layout of the criminal nature of the bank. Having done that, we wrote a report and said the matter needs further investigation. But the Justice Department doesn’t pick up on any of the clues. I talked to them. I got a leading figure in the bank to turn evidence to the government, which didn’t want to listen. I taped him for three days with undercover agents in a hotel room in Miami; the government didn’t transcribe the tapes.”
The chief Customs undercover agent who handled the drug sting against BCCI was so disgusted, he quit. The Justice Department ordered key witnesses not to cooperate with Kerry, and it refused to produce documents subpoenaed by his subcommittee. The CIA also stonewalled or lied to the Kerry investigators.
As a junior senator, Kerry was further hampered because his subcommittee mandate was limited to looking into terrorism and drugs. But even that investigation was bothering too many important people, so Clayborne Pell, a Democratic senator, shut it down.
Then the Justice Department closed the Tampa case with a plea bargain that let BCCI off the hook. Kerry was furious. He thought the crooked bank should be shut down. He said the deal kept the bank alive and discouraged bank officials from telling the U.S. what they knew about BCCI's larger criminality, including its ownership of First American and other U.S. banks. However, the bank relied on its friends. Sen. Orrin Hatch (R-Utah) defended the plea bargain on the Senate floor, and then asked the bank to lend $10 million to a friend.
Following the plea agreement, the Justice Department stopped investigating BCCI for about 18 months. It even lobbied state regulators to keep BCCI open — after being urged to do that by former Justice Department personnel working for BCCI.
Kerry tried in 1990 and 1991 to get an investigation by the Senate Banking Committee, chaired by Democrat Donald Riegle. But Riegle and four of the other members of his committee had gotten money from Charles Keating, head of Lincoln Savings and Loan, who was later convicted of fraud, and they weren’t interested in drawing attention to crooked banks.
Finally, Kerry got permission to run a one-day subcommittee hearing in May 1991. Then he started holding public hearings through the banking committee, which wouldn’t staff them; he had to use his own people. “Riegle considered himself a gentlemen, because he let Kerry do that,” says Blum. “Riegle is probably the most misnamed U.S. senator.”
The bank’s friends prevented more Kerry hearings, says Blum. “They got it out of Foreign Relations,” he recalled. “We later learned that BCCI, between September 1988 and July 1991 when the bank closed, spent $26 million on lawyers and lobbyists trying to keep themselves in business. They hired people on both sides to shut down.”
But, Blum adds, “They didn’t stop me from going to the New York County DA’s office with Kerry’s blessing to assure a prosecution would ensue.” Blum went to see New York District Attorney Robert Morgenthau and told him about the Justice Department’s refusal to investigate BCCI's involvement in drug money laundering and other crimes. The Justice Department and the Federal Reserve, run by Paul Volcker, refused to aid the DA’s investigation.
However, Morgenthau got a grand jury indictment of BCCI in July 1991. It said the bank and its founders had defrauded depositors, falsified bank records to hide illegal money laundering, committed millions of dollars in larcenies and paid off public officials. It charged that BCCI had been a criminal enterprise since 1972 and had paid millions of dollars in bribes to central bankers or other financial officials in a dozen developing countries. Morgenthau named Ghaith Pharaon as a front man for BCCI who had gotten a secret loan from the bank to invest in three U.S. banks.
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The Kerry Committee report issued in 1992 was damning. It said that the White House knew about BCCI’s criminal activities, that the U.S. intelligence agencies used it for secret banking and that BCCI routinely paid off American public officials. Among the Kerry Report’s major findings:
• Federal prosecutors handling the Tampa drug money laundering indictment of BCCI did not use the information they collected to focus on — or report to federal agencies — BCCI’s other crimes, including its secret, illegal ownership of First American Bank.
• The Justice, Treasury and Customs departments failed to support or aid investigators and prosecutors.
• Following lobbying by former Justice officials working for BCCI, the U.S. attorney in Tampa accepted a plea agreement that kept BCCI alive and discouraged bank officials from revealing other crimes.
• CIA chief Casey and the agency knew, by early 1985, a lot about what BCCI was up to and didn’t inform the Justice Department or the Federal Reserve.
• “After the CIA knew that BCCI was, as an institution, a fundamentally corrupt criminal enterprise, it continued to use both BCCI and First American, BCCI's secretly held U.S. subsidiary, for CIA operations.”
• The Federal Reserve approved the first hidden BCCI takeover despite evidence the bank was behind it because it was swayed by influence-peddlers such as Clifford and because the CIA and Treasury failed to raise warnings about what they knew.
• There’s a lot about BCCI that outsiders will never know. Once the investigations started, there were seven fires in the fireproof London warehouses where BCCI stored records. In one of them, four firemen were killed.
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