Scandals / Banking / Global

Adams, James Ring and Frantz, Douglas. A Full Service Bank: How BCCI Stole Billions Around the World. New York: Pocket Books, 1992. 381 pages.

Manhattan district attorney Robert Morgenthau called it "the largest bank scandal in world financial history." The Bank of Credit and Commerce International was present almost everywhere around the globe, but was regulated nowhere. By taking advantage of a system of shell corporations and off-shore branches, BCCI built a huge Ponzi scheme with money from depositors, many from Third World countries. They also laundered money for drug cartels and arms merchants, and performed banking services for other undesirables, including the CIA and terrorist Abu Nidal. In the U.S. they were able to operate through First American Bankshares after paying fat "bonuses" to Clark Clifford and Robert Altman. Jimmy Carter and Bert Lance were also involved with BCCI.
[BCCI logo]

The authors get bogged down with too much detail and too many descriptions of minor characters, particularly when describing the U.S. Customs Service undercover operation that resulted in the first indictments against BCCI in 1988. But on the whole this book is an excellent overview of BCCI, and is more readable than similar books on banking fraud, a topic which can quickly become rather technical. James Ring Adams is a journalist who specializes in banking, and Douglas Frantz reports for the Los Angeles Times from its Washington bureau.


Beaty, Jonathan and Gwynne, S.C. The Outlaw Bank: A Wild Ride Into the Secret Heart of BCCI. New York: Random House, 1993. 399 pages.

Of the several books in NameBase about the Bank of Credit and Commerce International, this is the spookiest, and has the most material about BCCI's connections to shadowy figures in organized crime and the international intelligence community (these days it's difficult to distinguish between the two). Surprisingly enough, the authors were Time magazine's point men on the story -- a magazine that doesn't often support the sort of journalism that won these authors two awards for persistent and fearless reporting. To top it off, we almost missed this book, and spotted it only by chance six years later, in a used bookstore. Most curious: another vapor-scandal, here today and gone tomorrow.

Author Jonathan Beaty was close to the people working on Robert Morgenthau's investigation of BCCI, just as the massive dimensions of BCCI's "Black Network" were beginning to unfold. The book is presented as something of a day-by-day thriller, with Beaty risking his neck while meeting sources in Middle Eastern countries, where the long, spooky arm of BCCI thuggery was strongest. Time magazine's generous expense account would get him in, but could Time's editors and the local U.S. ambassador get him out? This book is a fascinating look into the dark side of BCCI -- a side that doesn't come across in other reporting we've seen.


Clarke, Thurston and Tigue, John J. Jr. Dirty Money: Swiss Banks, the Mafia, Money Laundering, and White Collar Crime. New York: Simon and Schuster, 1975. 216 pages.

Written over 22 years ago, this one is still timely, but needs to be updated. It's an excellent survey of the entire range of illegal techniques involving the movement of money, and each chapter is illustrated with case histories. You have dirty money (the product of a criminal act) that needs to be laundered (disguised), and clean money that needs to be dirtied (corporate contributions to Nixon's 1972 campaign). There are Swiss banking laws, offshore banks competing with the Swiss, Mafia couriers who move cash across borders, and dummy shell corporations in Liechtenstein and Panama that are used to further disguise the money trail. (Pop quiz: If you are carrying lots of cash, should you lie on the U.S. customs declaration form? If you lie and they find the money, they get to keep it. If you don't lie, you can bring in as much as you like. But it had better be well-laundered, because you may spark their interest.) Two of the ten chapters are on "paperhanging" -- the market in counterfeit or stolen securities.

The authors know what they're talking about. Both worked in the U.S. Attorney's office in New York in supervisory roles, specializing in international business, tax fraud, and foreign banks. This office gets the action, because money transactions all go through New York at some point.


Ehrenfeld, Rachel. Evil Money: Encounters Along the Money Trail. New York: HarperCollins, 1992. 298 pages.

Rachel Ehrenfeld is one of a group of semi-investigative reporters who made a name for themselves by playing up evidence that international terrorism was Soviet-sponsored. Another is Claire Sterling. Now that the old angles have been overtaken by events, both of them find their investigations leading in other directions. In 1990 Sterling came out with a fine book on the Sicilian Mafia and the Pizza Connection, and Ehrenfeld, an Israeli who lives in New York City, has written this volume on drugs and money-laundering. Each begins to discover that corruption is closer to home than they once believed.

Ehrenfeld includes fifty pages on BCCI, and has chapters describing the "narcocracy" in Colombia and Lynden Pindling's drug-dependent regime in the Bahamas. Other chapters look at Medellin money-laundering techniques, including some in the U.S., based on court records and media accounts. With 294 foreign banks operating in the U.S., the regulatory system is no match for those who need to launder huge sums of money. "All too often it is the privileged and the well heeled who promote, distribute, and launder the profits from this illegal trade.... Adam Smith's `invisible hand,' a metaphor for enlightened self-interest in a free market society, is now stabbing itself in the back."


Hutchison, Robert A. Vesco. New York: Avon Books, 1976. 442 pages.

Twenty years ago, Robert Vesco was known as the biggest swindler of the twentieth century. But then he lost his title. Deregulated corporate raiders began trickling down on the little guy, and greed was soon considered macho on Wall Street. Vesco's mistake is that he was ahead of his time. Because of this he became a wanted man, at which point he figured he might as well get into drug smuggling. This book is mainly about Investors Overseas Services, a huge Swiss-based mutual fund empire founded by Bernard Cornfeld and looted by Vesco. The author, who knew Cornfeld personally, describes the off-shore, corporate-shell shenanigans used by Vesco in mind-numbing detail. The best parts of the book depict Cornfeld's playboy lifestyle, the Nixon- Vesco connection, and how Vesco bought the president of Costa Rica.

After this book was published, Vesco moved to the Bahamas in search of a better political climate. He aligned himself with prime minister Lynden Pindling, and then with drug smuggler Carlos Lehder. By 1981 he had outlived his welcome in the Bahamas, and in 1983 moved to Cuba. Most observers assume that Castro tolerated the Vesco-Lehder connection for a price. Lehder was eventually extradited to the U.S. from Colombia, and is currently serving a life sentence in Florida. In 1995, Cuba announced that Vesco had been placed under house arrest, but the reasons behind the arrest remain unclear.


Kwitny, Jonathan. The Crimes of Patriots: A True Tale of Dope, Dirty Money, and the CIA. New York: W.W. Norton, 1987. 424 pages.

When Frank Nugan was found dead in Australia in 1980, it was accepted as a suicide and the sighs of relief could almost be heard in Langley, on the other side of the globe. But then William Colby's business card was found in Nugan's wallet, and Nugan's partner, Michael Hand, had been a contract agent for the CIA in Vietnam. Australian authorities began tracking Nugan Hand Bank, which developed into the most fun story of Golden Triangle drugs, money-laundering, profiteering, corporate shell games, and financial fraud that has yet surfaced in the CIA's unofficial history.

The most intriguing aspect of Nugan Hand Bank was the list of Yankees who were in on the scam. Theodore Shackley, Richard Secord, Thomas Clines, and Edwin Wilson played peripheral roles, while Gen. Edwin Black ran the Nugan Hand Hawaii office, Gen. Erle Cocke ran the Washington office, Gen. LeRoy Manor ran the Philippine office, Colby was their lawyer, former CIA deputy director Walter McDonald was a consultant, Adm. Earl Yates was president of Nugan Hand, and Robert Jantzen, a former CIA station chief in Thailand, got out of Nugan Hand when he smelled drugs. He needn't have bothered; apart from Kwitny's Wall Street Journal articles in 1982, Nugan Hand received little coverage and no official interest in the U.S., perhaps because evidence was lacking that it was a direct CIA proprietary.


LeBor, Adam. Hitler's Secret Bankers: The Myth of Swiss Neutrality During the Holocaust. Secaucus NJ: Birch Lane Press (Carol Publishing Group), 1997. 261 pages.

In the early 1990s, the World Jewish Restitution Organization and the World Jewish Congress, with help from U.S. Senator Alfonse D'Amato, put pressure on Switzerland to compensate holocaust victims for stolen money and property that the Nazis had deposited in Swiss banks. Other wartime Jews opened accounts in Switzerland at the first hint of trouble ahead, but for years Swiss bankers demanded death certificates from surviving heirs before releasing assets, even though no such certificates were issued at Auschwitz.

This book reveals the extent of Swiss collaboration with the Nazis. Despite its stolen gold from Belgium and Holland, the Nazis needed foreign currency to pay for the war machine. The happy combination of formal Swiss neutrality, along with discreet and uninquisitive Swiss bankers, allowed the Nazis to exchange this gold for currency. The Swiss-based Bank for International Settlements, and its American president, Thomas McKittrick, also worked alongside Nazis to keep international finance fluid throughout the war. After demolishing the myth of Swiss neutrality on economic matters, the author looks at the Swiss wartime record for accepting Jewish refugees who were fleeing the Nazis. There are some troubling details, but on balance this issue turns out to be something of a mixed bag.


Lernoux, Penny. In Banks We Trust. Garden City NY: Anchor Press- Doubleday, 1984. 310 pages.

Penny Lernoux was a practicing Catholic and prize-winning journalist who lived in Bogota until shortly before her death from lung cancer in October, 1989 at the age of 49. She moved to Latin America in 1962, first working for the U.S. Information Agency and then as a bureau chief and correspondent for Copley News Service. In 1974 she began free-lancing; her work has appeared in Newsweek, The Nation, Harper's, Atlantic Monthly, Business Week, and the National Catholic Reporter.

"In Banks We Trust" was a brilliant departure for Lernoux; either she was an ace reporter on any subject, or those who do specialize in banking and international finance have been too quiet for too long. She includes chapters on the Penn Square collapse, Citibank, Mafia money, Nugan Hand and the CIA, drug laundries, the World Finance Corporation and the CIA, and the Vatican Bank scandals. This was before the S & L mess and before BCCI was blown, but already it's an impressive list. From the introduction: "It is not surprising that the Mob prefers a bank patronized by the CIA, since both are involved in illegal activities, only the CIA calls its work covert action. Any bank that serves the CIA by funneling agency money into covert work must hide the trail through paper fronts, and such fronts are precisely what organized crime needs to wash its dirty money."


Naylor, R.T. Hot Money and the Politics of Debt. Montreal: Black Rose Books, 1994. 532 pages. Available in French, Spanish, Italian and Portuguese.

Except for some material in postscripts, this book was written during 1986-87. The topic of hot money is even more vital today than it was then, due to increased globalization of markets, as well as to the emergence of organized crime in Eastern nations since the collapse of communism. R.T. Naylor is professor of economics at McGill University in Montreal, where he specializes in black markets, smuggling, and money laundering.

Hot and homeless money comes in two types: one is legitimate in origin but then its owners engage in tax evasion and capital flight, and the other is of criminal origin which may be seeking sanctuary in the banking system as a first step toward legitimizing itself, at least in appearance. Banks also participate in the criminal economy in two ways: insiders use the bank's legitimate funds illegally and then hide the diversion with accounting tricks, or legitimate banking functions are used to hide, move, and launder explicitly criminal money and to make covert, usually illegal, payments. This second use is facilitated by offshore banks with their secrecy laws, and by the telecommunications revolution that has made electronic fund transfers so commonplace. Today, internationally-organized criminal activity is such a substantial part of the global economy that many banks cannot afford to look too closely at their biggest customers.


Seagrave, Sterling and Seagrave, Peggy. Gold Warriors: America's Secret Recovery of Yamashita's Gold. New York: Verso, 2003. 332 pages.

When Japan was defeated in 1945, it became known to U.S. insiders such as General Douglas MacArthur, Harry Truman, and John Foster Dulles, that vast amounts of gold bullion and other treasure had been buried at dozens of locations in the Philippines. This gold was war booty from Japan's brutal imperialism in Korea, Manchuria, and China, stretching back to the turn of the century. The massive burial effort was sanctioned by Hirohito, and POWs were used to do the digging. After the bullion was trucked in, the laborers were buried alive so that the locations could be kept secret.

Over the years, hundreds of adventurers have followed dozens of cryptic treasure maps, and much of the gold has been recovered. Ferdinand Marcos got some of it during the 1970s, but this book shows that the U.S. got a good chunk of it also, immediately after the war. Truman decided to keep it secret, and intelligence agents deposited the gold in banks around the world. This secret stash helped insure U.S. hegemony. It not only meant that the U.S. could control the price of gold (which is why the dollar was based on it), but it was also used to finance foreign aid and covert operations. Even today, according to the authors, certain events in high finance, and the piracy and exploitation behind them, cannot be fully understood without knowing about these secret deposits.


Solomon, Steven. The Confidence Game: How Unelected Central Bankers Are Governing the Changed Global Economy. New York: Simon & Schuster, 1995. 606 pages.

The mobility of global capital skyrocketed in the 1980s. Foreign currency exchange transactions increased fourteen fold to $1 trillion every day (twice the foreign exchange reserves of all world central banks), while world trade merely doubled. In the 1990s, all manner of future-dated instruments became popular. Some call it a "casino society"; these financial markets are almost completely speculative, and very sensitive to bad news. It all has to balance at the end of the day on the clearing-house computers that track money movements between banks. If someone fails to meet their obligations, there's the threat of chain-reaction and meltdown.

Central bankers in the U.S. are known as the Federal Reserve System, but Germany, Switzerland, Britain, France, and Japan also have their counterparts. Working together, it's their job to put out any fires that might consume the system. It's not as if they have the resources for the task -- no one can control these unpredictable markets, and nations are increasingly at their mercy. Consequently these central bankers use bluff, secrecy, and innuendo, hoping to calm the waters by presenting an air of insider confidence. This book is richly detailed from 250 interviews. Stay tuned, it could get interesting.


Truell, Peter and Gurwin, Larry. False Profits: The Inside Story of BCCI, the World's Most Corrupt Financial Empire. New York: Houghton Mifflin, 1992. 522 pages.

Peter Truell, a staff reporter for the Wall Street Journal based in Washington DC, and Larry Gurwin, a veteran financial writer who now works for a private investigative firm in DC, have put together the best book yet on the Bank of Credit and Commerce International. Both authors were early BCCI watchers -- Gurwin with an article in Regardie's in May 1990, and Truell in the WSJ a few days later.

This is the story of banking fraud on a massive scale, beginning with Pakistani financiers and Arab sheikhs, and ending with hundreds of plush offices in 73 countries. BCCI sucked in Washington power elites, former U.S. presidents, drug money from Afghanistan to Panama, arms smugglers, and terrorists -- all in the same breath. Ultimately BCCI was a $30 billion Ponzi scheme that came crashing down in 1991, robbing depositors of their life savings throughout the Third World. Clark Clifford and Robert Altman (who owns a mansion and is married to Wonder Woman) said "Oops, we had no idea!" as BCCI was stuffing millions into their pockets. Clifford is too old for trial but Altman will be tried in 1993. Most cynics expect Altman to do as well as Michael Milken, who received a ten-year sentence in 1990 and then walked out of prison, still a very rich man, after serving less than two.


Walter, Ingo. The Secret Money Market: Inside the Dark World of Tax Evasion, Financial Fraud, Insider Trading, Money Laundering, and Capital Flight. 2nd edition. New York: HarperBusiness, 1990. 377 pages.

This scholarly work is replete with numerous examples of slime that floated to the surface from the underground world of high-finance and illicit wheeling-dealing, which is why we put it in NameBase. It is well- written, tightly-argued, and very informative, alternating between statistics on the dimensions of the secret money market, descriptions of escapades that ended in prosecutions, discussions of how accounts are opened in places like the Cayman Islands, and matter-of-fact observations about the effectiveness of SEC monitoring and regulation.

One suspects, however, that if this book sells well off campus it's because readers want to know how NOT to get caught. Off-shore banking, tax shelters, insider trading, and the arcane world of Swiss financial privacy are treated in rich detail, while more difficult scams such as fraud and organized crime within the savings and loan industry are not treated at all. But then Ingo Walter, professor of business administration, probably finds it difficult to keep on top of the high-capital crime curve from his office at New York University.


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