ABU DHABI: BCCI'S FOUNDING AND MAJORITY

SHAREHOLDERS

Introduction

There was no relationship more central to

BCCI's existence from its inception than that
between BCCI and Sheikh Zayed and the ruling
family of Abu Dhabi.

Abu Dhabi was present at BCCI's creation as

one of two providers of BCCI's capital. It was
BCCI's largest depositor, and its largest
borrower, and for most of BCCI's existence, its
largest shareholder. The relationship between
the two entities was, as Price Waterhouse told
the Bank of England days before BCCI's
closure, "very close," with BCCI providing
services to the ruling family of Abu Dhabi far
beyond the ordinary relationship of a bank to
either its shareholders or depositors.(1)

There are numerous examples of the centrality

of the Abu Dhabi relationship to BCCI, and its
unusual nature.

In 1972, when BCCI was created, Abu Dhabi

shareholders purchased 20 percent of its stock
with an investment of $500,000, and then
generously agreed to have that interest drop
to just over one percent of BCCI just three
years later.

In January, 1978, when BCCI decided to enter

the United States and purchase shares in
Financial General Bankshares, and needed two
additional names, the ruling family of Abu
Dhabi supplied them.

In 1980 and 1981, when BCCI needed a

purchaser for Bank of America's shares in BCCI,
and had no one other than its bogus Grand
Caymans bank-within-a-bank, ICIC, to buy
them, Abu Dhabi stepped in once again to
increase its interest in BCCI.

Throughout the 1970's and 1980's, the Abu

Dhabi ruling family and the Abu Dhabi
government placed billions of dollars in
deposits at BCCI and its affiliates, such as ICIC,
giving BCCI and its head, Agha Hasan Abedi,
the right to manage those assets, and a power
of attorney to act in the name of Sheikh Zayed.

In 1990, when accountants and regulators in

the United Kingdom found fraud at BCCI, the
Abu Dhabi ruling family and government
stepped in again, agreeing to formally buy the
bank, assert control, guarantee its losses,
replace BCCI's head with the head of its own
BCCI affiliate, the Bank of Credit and
Commerce Emirates (BCCE), move BCCI's
operations and records from London to Abu
Dhabi, and work on a plan to find a way to save
the bank despite its having acknowledged
"mishandling" at least $2.2 billion of Abu
Dhabi's money.

By July 5, 1991, when BCCI was closed globally,

the Government of Abu Dhabi, its ruling family,
and an investment company holding the assets
of the ruling family, were the controlling, and
official "majority" shareholders of BCCI --
owning 77 percent of the bank. But since the
remaining 23 percent was actually held by
nominees and by BCCI's alter-ego ICIC, Abu
Dhabi was in fact BCCI's sole owner.

After July 5, 1991, it was in Abu Dhabi that

most of BCCI's top officials remained, where
they remain under the control of the Abu Dhabi
government, under conditions said to be
luxurious, which the Abu Dhabi government
refuses to discuss. While there, they have
remained incommunicado, and out of the reach
of foreign investigators, unwilling, or unable,
to tell the world what happened.

In short, there is no question that the

relationship between Abu Dhabi and BCCI was
central to both, and that no adequate
understanding of BCCI is possible without an
understanding of the Abu Dhabi relationship.
Yet according to the testimony presented to
the Subcommittee by Abu Dhabi, that
relationship was one that boiled down to little
more than victim (Abu Dhabi) and criminal
(Abedi and BCCI). In essence, according to Abu
Dhabi, BCCI abused Abu Dhabi's trust by
stealing deposits and mismanaging a bank it
owned, making Abu Dhabi by its own account
BCCI's largest victim, losing what it describes
as some $6 billion in all.

Thus, by Abu Dhabi's account, it never knew

that most or all of BCCI's shareholders were
front-men or nominees for BCCI, including the
heads of state of several of the smaller
sheikhdoms of the United Arab Emirates of
which Sheikh Zayed is president, sheikhs who
are generally understood to treat Sheikh Zayed
with great deference. It never knew that such
prominent shareholders as Kamal Adham and
A.R. Khalil, two successive heads of Saudi
intelligence, were also nominees for the bank,
along with such well-known Middle Eastern
financial figures as Faisal Fulaij of Kuwait and
Ghaith Pharaon of Saudi Arabia. Unlike these
other figures, who were part of BCCI's
deceptions, and who by Abu Dhabi's account
participated in BCCI's schemes to deceive Abu
Dhabi, Abu Dhabi contends it was innocent of
wrongdoing, and utterly duped.(2) To quote the
testimony of Abu Dhabi's witness before the
Subcommittee, Ahmed Al Sayegh:

We didn't know anything about the bank [BCCI]

because of our passive role in the past [prior to
taking control in April 1990].(3)

However, unlike any other shareholder, officer,

attorney, agent or depositor of BCCI, Abu
Dhabi has been in the position, since April,
1990, of having total control over BCCI's
records. At least eighteen of its key officers,
who have remained held incommunicado and
under house arrest in Abu Dhabi since BCCI's
collapse. During that period, Abu Dhabi has
chosen not to make any of these witnesses
available to U.S. law enforcement. While it did,
temporarily, make some key documents
available to the Federal Reserve concerning
the involvement of non-Abu Dhabi figures in
BCCI's wrongdoing prior to BCCI's closure, it
has at all times prevented federal investigators
from having free access to BCCI's records, and
all access to those records has been ended
since July 5, 1991.

Thus, Abu Dhabi has remained throughout the

past fourteen months in the position of being
able either to prove its assertions, or risk
disproving them, through the simple act of
granting access to the critical BCCI information
it alone controls, in witnesses and documents.
Yet it has chosen not to do so. In the process,
Abu Dhabi has made, and broken, repeated
commitments to provide both witnesses and
documents to the Justice Department, the New
York District Attorney, and the Senate, going
as far back as November, 1990, and continuing
to the present.

Given Abu Dhabi's suppression of critical

information about its role in BCCI, its
contention that it is innocent of all wrongdoing
in connection with BCCI, would, on this basis
alone, inevitably be viewed with some
skepticism.

But despite Abu Dhabi's withholding of

essential witnesses and documents, BCCI
financial records obtained to date by
investigators, together with testimony and
statements from BCCI insiders, outline a
picture of the relationship which suggests that
Abu Dhabi officials were indeed knowing
participants in substantial wrongdoing
pertaining to BCCI's activities in the United
States and elsewhere, that members of the
Abu Dhabi ruling family participated in risk-
free investments in BCCI banks, and that Abu
Dhabi officials engaged, as of April, 1990 on
some issues and on others much earlier, in a
cover-up of fraudulent activity involving BCCI,
which continues, in substantial part, to this
day.

Findings

** Members of Abu Dhabi's ruling family appear

to have contributed no more than $500,000 to
BCCI's capitalization prior to April 1990,
despite being the record owner of almost one-
quarter of the bank's total shares, with a book
value of over $750 million as of December 31,
1989. However, the Abu Dhabi Investment
Authority, holder of a 10 percent interest in
BCCI beginning in 1980, appears to have made
some cash payments for its interest in BCCI,
which had a book value of approximately $250
million as of December 31, 1989. An unknown
but substantial percentage of the shares
acquired by Abu Dhabi overall in BCCI appear
to have been acquired on a risk-free basis --
either with guaranteed rates of return, buy-
back arrangements, or both.

** The apparent interest held in BCCI by the

Abu Dhabi ruling family, like the apparent
interests held by the rulers of the three other
gulf sheikdoms in the United Arab Emirates
who owned shares of BCCI, materially aided
and abetted Abedi and BCCI in projecting the
illusion that BCCI was backed by, and
capitalized by, Abu Dhabi's wealth. However,
Abu Dhabi provided BCCI only the use of its
name rather than substantial capital, until at
least 1980-1981. At that time, "investments"
made in BCCI by the Abu Dhabi Investment
Authority to purchase shares of BCCI sold by
the Bank of America to ICIC, appear to have
involved actual payments from Abu Dhabi,
according to some documents, on a no-risk,
guaranteed return basis.

** Shares in Financial General Bankshares held

by members of the Abu Dhabi ruling family in
late 1977 and early 1978 appear to have been
nominee arrangements, adopted by Abu Dhabi
as a convenience to BCCI and Abedi, under
arrangements in which Abu Dhabi was to be
without risk, and BCCI was to guarantee the
purchase through a commitment to buy-back
the stock at an agreed upon price. Later, one of
the two original members of the Abu Dhabi
ruling family in fact sold back his shares to
another BCCI front-man, Kamal Adham.

** Abu Dhabi's representative to BCCI's board

of directors, Ghanim al Mazrui, received
unorthodox financial benefits from BCCI in no-
risk stock deals which may have compromised
his ability to exercise independent judgment
concerning BCCI's actions; confirmed at least
one fraudulent transaction involving Abu
Dhabi; and engaged in other improprieties
pertaining to BCCI; but remains today in place
at the apex of Abu Dhabi's committee
designated to respond to BCCI's collapse.

** In April, 1990, Abu Dhabi was told in detail

about BCCI's fraud by top BCCI officials, and
failed to advise BCCI's external auditors of
what it had learned. Between April, 1990 and
November, 1990, Abu Dhabi and BCCI together
kept some information concerning BCCI's
frauds hidden from the auditors.

** From April, 1990 through July 5, 1991, Abu

Dhabi tried to save BCCI through a massive
restructuring. As part of the restructuring
process, Abu Dhabi agreed to take
responsibility for BCCI's losses, Price
Waterhouse agreed to certify BCCI's books for
another year, and Abu Dhabi, Price
Waterhouse, the Bank of England, and BCCI
agreed to keep all information concerning
BCCI's frauds and other problems secret from
BCCI's one million depositors, as well as from
U.S. regulators and law enforcement, to
prevent a run on the bank.

** After the Federal Reserve was advised by

the New York District Attorney of possible
nominee arrangements involving BCCI and First
American, Abu Dhabi, in an apparent effort to
gain the Federal Reserve's acquiescence in
BCCI's proposed restructuring, provided
limited cooperation to the Federal Reserve,
including access to selected documents. The
cooperation did not extend to permitting the
Federal Reserve open access to all BCCI
documents, or substantive communication with
key BCCI officials held in Abu Dhabi, such as
BCCI's former president, Swaleh Naqvi. Access
was sufficient, however, to permit the Federal
Reserve to identify critical documents
regarding frauds involving non-Abu Dhabi
shareholders and borrowers of BCCI and BCCI
itself pertaining to CCAH/First American, the
National Bank of Georgia and the
Independence Bank. That access ended with
the closure of BCCI July 5, 1991.

** From November, 1990 until September 21,

1992, Abu Dhabi failed to provide documents
and witnesses to U.S. law enforcement
authorities and to the Congress, despite
repeated commitments to do so. Instead, it
actively prevented U.S. investigators from
having access to vital information necessary to
investigate BCCI's global wrongdoing. As of
September 21, 1992, Abu Dhabi began making
certain documents available for review by U.S.
law enforcement, in a move apparently timed
to coincide with the publication of this report.
No representation has been made by Abu
Dhabi, or by U.S. law enforcement, as to the
significance or completeness of the documents
Abu Dhabi selected for law enforcement review
at its Washington, D.C. Embassy. Moreover,
none of the BCCI officials held in Abu Dhabi
have yet to be made available for interview by
U.S. law enforcement. At the time of writing of
this report, none of the newly available
documents had been made offered by Abu
Dhabi for review by the Subcommittee.(4)

** The proposed agreement between Abu Dhabi

and BCCI's liquidators to settle their claims
against one another contains provisions which
could have the consequence of permitting Abu
Dhabi to cover up wrongdoing it may have had
in connection with BCCI.

** Answers by Abu Dhabi's representative to

key questions from the Subcommittee about
Abu Dhabi's role in BCCI, were non-responsive,
evasive, and misleading, although for the most
part artfully crafted to avoid being literally
untrue.

** There is some evidence that the Sheikh

Zayed may have had a political agenda in
agreeing to the involvement of members of the
Abu Dhabi ruling family and its investment
authority in purchasing shares of Financial
General Bankshares, then of CCAH/First
American. This evidence is offset, in part, by
testimony that Abu Dhabi share purchases in
the U.S. bank were done at Abedi's request
and did not represent an actual investment by
Abu Dhabi until much later.

Origin and Nature of BCCI-Abu Dhabi

Relationship

The chapter on BCCI's early history describes

in detail the early history of Abu Dhabi and
BCCI, which is recapitulated in summary form
here.

Abu Dhabi is the largest and wealthiest

member of the United Arab Emirates, an oil-
rich federation of sheikhdoms, formed in 1971,
whose rulers own all the land and natural
resources of their nations in fee simple
absolute, with no distinctions being made
among the wealth of the ruler, his family, and
the nation itself. Sheikh Zayed of Abu Dhabi,
installed in 1966 as head of the newly wealthy
oil state through a British-led coup against his
brother in 1966, soon after developed a
relationship with Agha Hasan Abedi, head of
the United Bank of Pakistan. Six years later,
when Abedi decided to form BCCI, he did so
after receiving the blessing of Sheikh Zayed,
and a commitment of support. That support
involved a tiny capital contribution to the bank
by Abu Dhabi -- $500,000 -- and a huge
placement of petrodollars.

As set forth in the chapter on BCCI's early

history in some detail, the relationship
between BCCI and Sheikh Zayed exceeded
normal standards of bank/client relationships
in a number of respects. BCCI was not merely a
bank owned in part by Sheikh Zayed. Sheikh
Zayed was not merely BCCI's largest depositor.
BCCI for many years handled almost every
financial matter of consequence for the Sheikh
and his family, as well planning, managing, and
carrying out trips abroad, and a wide range of
services limited only by the desires of the Al
Nayhan family itself.(5)

In his testimony of May 18, 1992, Abu Dhabi's

representative Ahmed Al Sayegh suggested
that Abedi's role in Abu Dhabi has been much
overstated:

When Mr. Abedi was a respected banker and

founder of BCCI, his role, therefore, was
limited to his bank. . . . His role in the case, I
guess, was limited to inducing potential
investors in making commitments to his bank,
whether buying shares or placing deposits. . .
He was not a financial advisor [to Abu Dhabi or
Sheikh Zayed].(6)

Other information obtained by the

Subcommittee from many sources
demonstrates that Al Sayegh's testimony on
this point was untrue. In fact, for over twenty
years, Abedi created and managed a network
of foundations, corporations, and investment
entities for Abu Dhabi's ruling family, of a
complexity similar to the network he had
created at BCCI itself. BCCI handled the
financing arrangements for many of these
entities, and managed a variety of Abu Dhabi's
portfolio accounts in U.S. dollars.(7) As far back
as 1969 and 1970, when Abedi was still head of
the United Bank in Pakistan, Abedi established
a cargo shipping company, the Hilal Group,
operated by Associated Shipping Services,
Limited, London, as an operational company
for Abu Dhabi's Department of Private Affairs.
Though primarily used to own cargo ships, the
entity was also used for trading in equities,
holding property investments, and other direct
investments. One of the entities owned by Hilal
Group, Progressive Investment, had Abedi on
its board. Later, when BCCI established the
Cromwell Hospital in London to provide a
medical facility for the Abu Dhabi ruling family
and other prominent Middle Easterners, Abedi
arranged for the financing of the purchase for
Abu Dhabi through a complex series of
transactions involving BCCI and a shell
corporation holding Sheikh Zayed's interests
by which BCCI lent the funds for the hospital in
pounds against dollar accounts of the
Department of Private Affairs, with the result
that the hospital investment did not appear on
the books of the Department.(8)
Moreover, BCCI and Abu Dhabi also engaged in
a series of joint ventures, managed by BCCI,
throughout the 1980's. Typical of such
ventures was the China-Arab bank, a joint
venture of BCCI and the Abu Dhabi Investment
Authority, established in China in 1985
coincident with BCCI's opening of offices in
China, to use funds from Abu Dhabi to invest in
China. BCCI accounting records show a number
of other ventures involving BCCI and Abu Dhabi
in China, as well as numerous financial
relationships involving BCCI and Abu Dhabi
interests throughout the 1980's.(9)

Contrary to Al Sayegh's testimony, Abedi had

broad authority over the investments and
finances of the ruling family until his stroke in
1989. As the present chairman of the
Department of Private Affairs of Sheikh Zayed,
Ghanim Al Mazrui testified in civil litigation in
1982, Abedi could even be viewed as an official
of the Abu Dhabi government, because of his
position on the Abu Dhabi committee
responsible for overseeing Abu Dhabi's
wealth.(10)

As Bert Lance observed, the relationship was

exceedingly intimate:

Mr. Abedi . . . had, in effect, for lack of a better

term, been kind and attentive to Sheikh Zayed
when he was still wandering around in the
desert and he had all his assets in his tent
somewhere . . . I think this is important to you
as you search for the truth, to understand that
that relationship went back a long way -- and it
went back before Sheikh Zayed became "the
richest man in the world" at that point in time,
with an income of some $4 billion or $5 billion,
as the press reported; that there had been a
relationship that had developed that Mr. Abedi
had helped Sheikh Zayed when he had no real
power or influence . . . Sheikh Zayed had
absolute and total trust and coincidence in Mr.
Abedi, that whatever Mr. Abedi said or
suggested was something that Sheikh Zayed
would look on with favor; that Mr. Abedi had, in
effect, built the house where we were [meeting
with Sheikh Zayed in his palace] outside of
Lahore without any guidance or direction from
Sheikh Zayed, and it was that sort of
relationship. It was very, very unique.(11)

BCCI also provided members of the Abu Dhabi

ruling family with personal services, ranging
from Sheikh Zayed's own modest needs to the
more elaborate requirements of his sons and
members of his retinue. A history of BCCI's
protocol department, and its relationship to
Abu Dhabi, is set forth in the chapter on BCCI's
early history.

Throughout the first critical decade of BCCI's

eighteen year existence, as much as 50% of
BCCI's overall assets were from Abu Dhabi and
the Al Nayhan family, who were earning about
$750 million a year in oil revenues in the early
1970's, an amount that rose to nearly $10
billion a year by the end of the decade. Until
the formation of a separate affiliate, the Bank
of Credit and Commerce Emirates (BCCE), BCCI
functioned as the official bank for the Gulf
emirates, and handled a substantial portion of
Abu Dhabi's oil revenues. And yet from the
beginning, there was an oddity about this
central relationship: at no time while Abedi
was in charge of BCCI did Abu Dhabi hold more
than a small share of BCCI's recorded shares.
Abu Dhabi appears not to have invested
substantial funds in BCCI, but instead to have
insisted on guaranteed rates of return for the
use of its money. Thus, rather than being a
major investor in BCCI, in the early years, Abu
Dhabi only agreed to place extremely large
sums of money as deposits at the bank, which
BCCI used in lieu of capital.

As a result of the Abedi-Zayed agreement,

Abedi now had essentially unlimited resources
to create BCCI. He could now act
simultaneously as manager of billions of
Sheikh Zayed's personal wealth, as banker to
the United Arab Emirates of which Sheikh
Zayed was chief of state, and as chairman of a
new bank that had guaranteed assets of
hundreds of millions of dollars from its
inception.(12)