Kerry: CIA Issued Bcci Warning -- Bank Is Implicated In Coffee Scheme

WASHINGTON - The Central Intelligence Agency privately warned several U.S. agencies in 1986 that the Bank of Credit and Commerce International (BCCI) had gained secret control of First American Bankshares in Washington, in violation of Federal Reserve Board restrictions, but the CIA never told the Fed, according to a member of Congress.

This detail from a special CIA working paper on BCCI was disclosed by Sen. John Kerry, D-Mass., chairman of a Senate subcommittee that was to hold a hearing today on BCCI, the Luxembourg-based bank that was indicted Monday by a New York grand jury on fraud and bribery charges.

Meanwhile, a lawsuit filed in Miami contended that the BCCI supplied more than $100 million in phony letters of credit to back a huge coffee-smuggling scheme that cheated the U.S. Customs Service.

Arguments in the case were heard in federal court yesterday.

The bank, founded by Pakistani bankers in 1972, has been the target of investigations in the United States and other countries for several years. It has been accused of widespread fraud and is alleged to have acted as a banker for gun runners, drug smugglers, corrupt dictators and money launderers.

On Monday, a New York grand jury indicted BCCI on charges of fraud, falsifying records and stealing more than $30 million. Banking regulators in eight countries seized BCCI operations earlier this month. Last year, five BCCI officers and a Colombian businessman were convicted of conspiring to launder $32 million in cocaine profits.

In other developments:

-- In Pakistan, a regional government official said BCCI's ailing founder, Agha Hasan Abedi, would not be extradited to the United States or any other country to face fraud and embezzlement charges.

-- In South Korea today, the government shut down BCCI's Seoul branch. Monetary Board officials said no customers were expected to lose money because the branch's assets exceeded its borrowings.

-- A federal court in Argentina opened an investigation yesterday into whether foreign banks operating there had laundered drug traffickers' money. Saudi financier Gaith Pharaon, a key BCCI stockholder, claimed in April that banks other than BCCI were involved in local drug money laundering.

Kerry said a CIA memorandum issued Sept. 30, 1986, warned a number of government agencies, which he did not identify, that BCCI was a criminal enterprise that had secretly controlled First American Bank since 1982.

"There is no evidence on record that any of these agencies told the Federal Reserve what they knew nor is there any evidence of federal law enforcement taking any action," Kerry said.

The chairman of First American, former Defense Secretary Clark Clifford, has said he did not know BCCI had obtained control of the Washington bank.

Bank acquisitions in the United States are subject to strict regulatory controls.

The Federal Reserve announced Monday it is seeking a record $200 million fine against BCCI. The Fed said it had uncovered evidence of secret deals between senior officials of BCCI and some of its customers to purchase shares of First American Bankshares Inc. and two other U.S. banks.

CIA Director William Webster has ordered a review of the agency's past contacts with BCCI. The intelligence agency and other branches of the government appear to have used BCCI extensively in the 1980s.

Meanwhile, according to the coffee-case lawsuit, filed by Lloyd'sof London last year, smugglers used the phony BCCI letters of credit in 1983 to get $30 million worth of coffee past customs officials and evade U.S. tariffs and quotas.

The lawsuit alleges the scheme worked by misidentifying the coffee's destination, by falsifying the country of origin, and by hiding sacks in supposedly empty containers - or containers not listed on the vessel's manifest - to get them into Miami and New Orleans.

The lawsuit charges that the scheme was headed by Munther Bilbeisi, a Florida businessman and brother of Fakhri Bilbeisi, BCCI regional manager in Jordan.

"Bilbeisi `kicked back' the illegal profits generated by the coffee smuggling scheme in the form of cash transfers and in-kind gifts to (BCCI) officers, as well as excessive fees and interest rates," the suit says.

Lloyd's became involved when Bilbeisi filed a $6 million claim in 1984 for lost coffee and art treasures he said were stolen from him.

Bilbeisi fled to Amman, Jordan, after being indicted of tax-fraud charges in Fort Lauderdale in May in connection with the coffee case. He has said all the coffee he handled was bought and sold legally.