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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.
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].
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.
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.
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.
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.
Abedi thus relied on the Sheikh's resources to finance his rapid
expansion, not through capital investment, but as a huge depositor. The
result was BCCI's finances quickly became so intermingled with the
finances of Abu Dhabi that it was difficult even for BCCI insiders to
determine where one left off and the other began. Whether Abu Dhabi
insiders, including Abu Dhabi's representative on BCCI's board of
directors, Ghanim Al Mazrui, knew of this intermingling, remains an open
question.
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BCCI banking scandal.
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