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(Abedi created the UAE. He planted the idea of the UAE as a federation to
Sheikh Zayed. These people had no standing anywhere in the world. They
were smugglers and tribesmen. When Sheik Zayed would come for months in
Pakistan, not even a policeman would give him any attention.
Staff interview, Abdur Sakhia).
BCCI's conception, growth, collapse, and criminality are inextricably
linked with the personality of its founder, Agha Hasan Abedi, who in turn
was a product of the unique conditions of Muslim India in the final period
of British rule prior to partition, and the first years after partition.
These were years of fundamental change in the region, involving the
creation of an entire new ruling class in both Hindu and Moslem India to
replace the departing British foreign service. While the period created
special opportunities for a newly-emerging professional class in both
countries, Abedi and many of the others who later became prominent in
Pakistani banking made up a special class.
In India, they had grown up as members of a minority, of ineradicably
lower status than similarly educated Hindus, despite their university
educations. Following partition, these Indian Moslems migrated northward
to the new Muslim state of Pakistan, but remained forever regarded as
outsiders by the natives. Accordingly, as they settled in the
newly-developing cities, such as Karachi and Lahore, they formed a
clannish class of Muslim professionals who kept themselves apart from
other Pakistanis.
Abedi himself was especially suited to succeed in the post-colonial
environment, given his family's experience in northern Indian in
Mahmudabad, where his father had served the Rajah. At the Rajah's court,
Abedi was exposed to great wealth, and to the concept that access to it
could be had for anyone who managed to make himself indispensable to the
person who controlled such wealth.
Abedi also learned that the previously immutable laws of the British
colonial power could be changed, at whim, by the new Indian and Pakistani
rulers that followed, and that as often as not, legal obstacles to any
goal could be eliminated if they interfered with the plans of a
sufficiently important political figure. These were lessons which Abedi
applied throughout his career as a banker, and at the core of BCCI's
unique history.
A history of BCCI, prepared in 1982 by Khusro Karamat Elley, a key figure
in BCCI's secret management of First American, provides a rosy,
public-relations view of Abedi's career to the founding of BCCI a decade
earlier.
The story begins in the early forties, when the Habib family of India set
up a Bank in Bombay, India. They started hiring young graduates as trainee
officers and among the first was a young and warm hearted individual named
Agha Hasan Abedi. In 1947, when Pakistan was formed, the Habibs [as
Moslems] moved their bank to Pakistan.
The Habibs ran the bank like a family business. All decisions were
centralized with family members and working hours were long and hard. Agha
Hasan Abedi rose very rapidly but soon found the atmosphere to be too
restrictive for the great number of ideas welling up inside him. In 1958
he left Habib Bank and was able to get together Investors to form a new
bank to be known as United Bank. The Central Bank in Pakistan gave the
license and was quite happy with Mr. Abedi's statements that he wanted to
make this the largest bank in Pakistan.
They however did find it disturbing when he described to them in great
detail how high the salaries of the employees of this bank would be, what
would be the quality of the offices and the extent of the mechanization
that he would go into. Within ten years, United Bank became the second
largest bank in Pakistan and all that Mr. Abedi envisioned, relating to
the facilities, the staff, and relating to the high quality of appearance
of the offices, and to the modern outlook of the Bank, had been achieved.
Additionally, the Bank had opened branches overseas in quite a few
countries including the Middle East. The Bank was already poised to become
the largest bank in Pakistan but political conditions were making it
apparent to Mr. Abedi that Pakistan could probably not form the basis for
an operation of the size which he and his team were capable of.
This internal BCCI history focuses on key elements of BCCI's operation
already present in the Habib and United Banks: a close knit family
structure for management, high salaries and benefits to motivate
employees, unusually luxurious offices for the purpose of impressing
customers, aggressive expansion, beginning with the Middle East, and
Abedi's refusal to live within the constraints of governments.
Press accounts of Abedi's life from the 1970's and 1980's typically note
Abedi's wish for his success to be seen as a Pakistani version of a
Horatio Alger story: success in the material world as being merely the
logical reward for piety, hard work, sobriety, discipline, and loyalty.
Internal BCCI documents make clear Abedi's ability to motivate his
employees to work exceptionally hard. Yet in this, Abedi approach was
little different from other successful super-salesmen. What distinguished
Abedi's method as a banker was his focused attention on cultivating
individuals of wealth, deemed "high net worths," at BCCI, and those who
controlled wealth, such as Pakistani government officials.
Abedi's Charisma: By all accounts -- ranging from statements made by Bert
Lance to Jimmy Carter to the Pakistani bankers who went to work for him at
BCCI -- Agha Hasan Abedi was a man of extraordinary personal charisma.
That charisma was the glue which held BCCI together. Its absence following
Abedi's stroke in early 1989, which led to Carter arranging an emergency
heart transplant for him, had a substantial impact on BCCI's ability to
survive the drug money laundering indictments in Tampa and the banks
subsequent misfortunes.
According to former BCCI chief financial officer Massihur Rahman, who
worked alongside Abedi for nearly two decades, Abedi was a man whose
personality dominated all those around him, who could simultaneously turn
great personal powers to good and to evil.
I remember looking into his eyes and seeing God and the Devil balanced
equally in them. He was already an older man when he began BCCI, and he
was determined to not to waste time in taking his vision and turning it
into something very big.
Abedi asked the total devotion of everyone around him. Should one of his
employees decide to abandon an Abedi project, he took it personally, as if
it reflected badly on Abedi himself, and would focus every attention in an
effort to persuade the employee to change his mind.
For example, when BCCI officer Abdur Sakhia received two offers from other
banks and decided to leave BCCI, Abedi refused to accept the situation:
I said I have to leave. They said you can do what you want, but please
stay we wont let you go. I said, Mr. Abedi you are making things very
difficult. I have two offers, one from Citicorp and one from BOP Canada.
He started crying. It was absolutely heartbreaking. We used to sit in
15,000 square feet of open space. Mr. Abedi is at the head of the room and
he started crying. We are people from the East, we are not trained to
handle things like that. I said Mr. Abedi, my fate is in your hands, you
can do with me what you like.
Abedi As Pakistani Political Paymaster: Abedi's earliest successes were
largely the result of his having recognized the importance in Pakistan of
providing payoffs or other under-the-table services to Pakistani
officials, especially the leadership of any current governing party. For
example, when the United Bank was formed in 1959, Abedi appointed as
chairman of its board I. I. Chundrigar, the former Prime Minister of
Pakistan, who was a close confidante of Pakistani's then current prime
minister, Ayub Khan. Abedi maintained close ties to Khan's government,
later hiring General Khan's minister of information to become the
"publisher" of a BCCI promotional magazine, "South."(5) When the Pakistani
military government was replaced following the debacle that resulted in
the severance of East Pakistan into Bangladesh, Abedi became just as cozy
with Pakistani "socialist" Ali Bhutto, Khan's ideological opposite. When
Bhutto was overthrown in 1978 in a military coup, Abedi swiftly changed
allegiances again to Bhutto's successor, Islamic "puritan" General Zia.(6)
Zia later executed Bhutto for financial crimes, in which Abedi, among
others, was clearly involved, while forming close ties to Abedi, on whose
financial skills he increasingly relied.
Abedi's personal involvement in Bhutto's "crimes" was described officially
in a White Paper issued by the Government of Pakistan in July, 1978 on
"The Conduct of the General Elections in March 1977." In a section
analyzing the illegal funding of campaign activities for the PPP, the
party of Bhutto, the White Paper describes how "the other large source of
funds was the money brought in by Agha Hasan Abdi [sic]" amounting to "two
or three crores of rupees." A later reference to Abedi in the White Paper
describes his "travels . . . loaded as he used to be with bagfuls of
money."
Abedi also sought out key pillars of the Pakistani private sector,
securing the Saigol family as a key client of Abedi's in three successive
banks -- Habib, United, and then BCCI. The Saigol group was one of the
major industrial and trade groups in Pakistan by the mid-1950's, with its
initial fortune made in textiles, and as close to "old wealth" as existed
at the time within Pakistan's commercial class. Abedi first secured the
Saigol account while at Habib, and took the account with him when he left
to form United Bank, making the Saigol's United's principal shareholders.
At the time, some in Pakistani's commercial community wondered how Abedi
had managed to take the important Saigol relationship from the Habib Bank.
Thirty years later, Price Waterhouse was to detail the reason -- Abedi's
willingness to reschedule millions in loans to the Saigols whenever they
found it inconvenient to repay them.
Through these and similar relationships, Abedi built the United Bank into
the second largest bank in Pakistan, complete with a protocol department
responsible for taking care of the personal needs of VIPs. As founder,
president and Chairman of United, Abedi was already a great success in
Pakistani terms. But Abedi himself felt this was insufficient to meet his
ambitions. And so Abedi increasingly began to focus on "high net worth
individuals" outside Pakistan to liberate him from the inherent
limitations of being nothing more than a very big fish in a Pakistan which
Abedi viewed as too small to accommodate his vision.
Impact of Nationalization: By the early 1970's, there was an ongoing
tension between Abedi's ambition to move beyond Pakistan, and that of the
Pakistani government to keep Pakistani institutions generally and Abedi's
bank specifically under its control. From the time he took power,
Pakistani Prime Minister Ali Bhutto, typifying the socialist cast of much
of the former colonial world in this period, was threatening to
nationalize the banks, as he already had nationalized other sectors.
Accordingly, Abedi began moving forward with the initial steps to form
BCCI as a Pakistani-managed bank outside of Pakistan. When Bhutto in turn
learned about Abedi's attempt to circumvent his new socialist order, he
not only went ahead with plans for nationalizing the United Bank, but
promptly placed Abedi under house arrest.
While under house arrest, Abedi further developed his scheme for his new
institution. Unlike United Bank, it would operate in a manner to defy the
ability of the Pakistani government, or any other, to impede any objective
it might seek. It would be the first global, international, and indeed,
trans-national bank, and something more: a charity, a foundation, a
shipping empire, an insurer, a brokerage firm, a commodities exchange, a
publishing house, a world-class hospital for the rich, a real estate
empire, an employee cooperative, an Islamic investment bank, and a Third
World powerhouse.
As a politicized, post-colonial Pakistani, Abedi frequently articulated
the goal of achieving equality of status with the financial institutions
of the former colonial powers. During the colonial period, millions of
Indian and Pakistani expatriates had fanned out across British possessions
to become the commercial class in many of them. But they had not yet
developed their own financial institutions, and had still to rely on
European financial institutions to do business, institutions whose
attitude towards them ranged from ignorance to neglect to contempt. A bank
of their own would treat them better, be able to do far more to help them,
and make itself great at the same time.
As Abedi explained while under house arrest to Massihur Rahman, who later
became his chief financial officer at BCCI:
Up to that stage in the early 1970's there were mostly national banks and
savings banks. The few banks which are international are indeed the
colonial banks from Britain, France, Germany, and lately from America. So
they were normally not international, they were really national banks, big
national banks of countries which were international in network only. So
he felt that if a genuinely global bank would be started bridging all the
Third World countries and also bridging the first world, there would be a
unique banking structure which could be very, very useful socially and
also very profitable.
The nationalization of Pakistani banking which provided the impetus for
BCCI also insured that BCCI would retain the Saigol relationship, as a
substantial portion of their businesses were also nationalized by Bhutto
in 1972. Nationalization also provided other Pakistani businessmen with
powerful motivation to find a bank that could not be controlled by the
Pakistani government. The most important of these proved to be the Gokal
brothers, Pakistanis who became in the 1970's, through BCCI lending,
owners of the largest shipping empire in the world, with a business that
ultimately included commodity trading, general trading, manufacturing,
financial services, and real estate.(12) In addition to freeing them from
the threat of Pakistani appropriation, BCCI provided both the Saigols and
the Gokals one key service from BCCI that no other bank could provide --
the freedom to defer repayment of past loans and to borrow new money at
will. Moreover, both clients received a special privilege similar to that
afforded BCCI's own officers: when something went wrong and they lost
money, BCCI would help them cover it up. This was a matter not just of
loyalty to ones intimate business associates -- it was also a matter of
sound business practice, as recognizing losses on the loans would have
hurt BCCI's balance sheets.
Critical Elements of BCCI's Creation: Abedi needed five things to create
BCCI. First, a bank secrecy and confidentiality haven, which he found
first in Luxembourg, and then in Grand Caymans. Second, a source of
capital, $2.5 million, which Abedi ultimately obtained from Bank of
America, supplemented by another $500,000 from Sheikh Zayed of Abu Dhabi.
Third, a source of initial assets, $100 million, of which at least half
were provided as deposits by Sheikh Zayed. Fourth, a group of like-minded
Pakistanis to operate the bank. These were now widely available as a
result of Bhutto's nationalization of their banks. Lastly, credibility in
the international community, through a relationship with an established
Western financial institution which would provide prestige to BCCI, but
not interfere with its unique approach to banking. This too was provided
by Bank of America during BCCI's formative years.
The most critical of these five elements was the relationship between BCCI
and Abu Dhabi.
Abedi and Sheikh Zayed of Abu Dhabi: Abu Dhabi is the largest and
wealthiest member of the United Arab Emirates, an oil-rich federation of
sheikhdoms with a combined population of under 1.5 million, bordering on
Saudi Arabia and Oman, with one of the world's highest standards of living
as a result of oil wealth. Like all of the Gulf sheikdoms, Abu Dhabi is
unusual among modern states in that its ruler, and the ruling family, owns
all the land and natural resources of the country in fee simple absolute,
with no distinctions being made among the wealth of the ruler, his family,
and the nation itself. As lawyers for Abu Dhabi have described it:
By tradition and historical background of the Trucial States, the ruler of
an Emirate owns all of the land of his State. However, he allots land to
his subjects individually for their use. Similarly, all the natural
resources of the States are also regarded as the personal property of the
ruler and his heirs who enjoy complete authority to utilize them as they
consdier fit.
As early as 1967 Abedi's high net worth customers included the ruler of
Abu Dhabi, Sheikh Zayed bin Sultan Al Nahayan, and his family. The
illiterate Sheikh, a formerly impoverished desert Bedouin, was the
recently installed head of a newly wealthy oil state who owed his power to
a British coup against his brother in 1966. The brother had been deposed
for having been unwilling to spend Abu Dhabi oil revenues for any purpose,
including easing conditions for members of the British foreign service
posted there.
After installing Sheikh Zayed, British officialdom had failed to pay
attention to his desire to be taken seriously as an important world
political leader. By contrast, Abedi viewed Sheikh Zayed to be a
potentially important resource. By one account, the relationship began
when Abedi made the decision to fly to Abu Dhabi in 1966 to solicit the
right of the United Bank to take deposits from the thousands of Pakistani
workers assisting in its modernization. Travelling with one assistant and
bringing an oriental rug as a gesture of goodwill, Abedi secured Sheikh
Zayed's permission for the United Bank to open a branch in Abu Dhabi.(16)
By a second account, Abedi beat out the Habib Bank for taking care of
arrangements for Sheikh Zayed's first bustard hunting and falconry
vacation in Pakistan, personally waiting patiently outside the Pakistani
government guest house while the Sheikh napped, and securing the right to
handle the Sheikh's logistics when he awoke.
By 1967, what had begun with Abedi handling the Sheikh's falconry and
bustard-hunting trips in Pakistan, and the finances of Pakistani workers
in Abu Dhabi, wound up with Abedi running the Sheikh's financial life. As
far as Pakistani bankers observing the relationship were concerned, Abedi
coordinated everything for Sheikh Zayed, from the building of the Sheikh's
palaces in Pakistan, the furnishing of his villas in Morocco and Spain,
his medical appointments, to the digging of wells for his homes in the
desert.(18) As BCCI officer Abdur Sakhia put it,
Digging a well or two was a minor cost of doing business. Abedi's
philosophy was to appeal to every sector. If you were religious people he
would help you pray.
From the point of view of BCCI, Sheikh Zayed and his family were
ill-equipped to handle the demands of the modern world, and in the early
days, dependent on Abedi and Abedi's bank for their every need. Even in
the late 1970's, Sheikh Zayed, whose personal tastes were quite simple,
would on trips abroad routinely write checks for $100,000 or $200,000 at a
time for members of his retinue to spend as they liked, written on the
back of a matchbook or a piece of toilet paper. This practice continued
until BCCI officers provided the Sheikh with a gold checkbook and insisted
that drafts be written on it.(20) As Akbar Bilgrami described his
experiences with Zayed:
He would pray or listen to the news. He had a court jester-type person who
made him laugh and told him poetry. He was a simple man, simple but
shrewd. On a trip to spain which lasted two weeks, his retinue spent $20
million, but he only spend $400 on himself the entire trip for two dogs
whose price he negotiated down from $1,000.
He was a simple man who did not spend a lot of money on himself. It is
part of Arab culture. The Sheikh is a sort of farther figure. It is hard
for him to say no to people, especially because he knows that everybody
knows that he has the money. He would carry about a briefcase filled with
expensive watches, Cartiers, Rolexes.
Among BCCI officers it was believed that the United Arab Emirates itself
owed its creation to Abedi, who came up with the idea as a means of
reducing instability among the gulf emirates and increasing the stature of
Sheikh Zayed.(22) As Sakhia recalled:
Abedi created the UAE. He planted the idea of the UAE as a federation to
Sheikh Zayed. These people had no standing anywhere in the world. They
were smugglers and tribesmen. When Sheik Zayed would come for months in
Pakistan, not even a policeman would give him any attention. Yet two
months after meeting Abedi, Sheikh Zayed finally gets a state visit to
Islamabad and meets the President of Pakistan which then became the first
country to give him any status. The first embassy of UAE was opened in
Pakistan and the second in London, and both were staffed by Abedi's
appointments.
Staff interview, Abdur Sakhia, October 7, 1991).
In time, Sheikh Zayed would unburden himself to Abedi, and tell Abedi that
he felt ignored by westerners, a sentiment he later repeated to Bert
Lance, as Lance recalled to Senate investigators, and in testimony on
October 24, 1991.
I remember a long conversation I had with Sheikh Zayed at his palace
outside of Islamabad. There were three of us there: Bert Lance, Abedi, and
Sheikh Zayed. The Sheikh was unhappy that the US hadn't paid any attention
to him. The US Ambassador hadn't focused on him. . . He was being reated
in a manner that really wasn't befitting the strategic importance or the
fiscal importance of the UAE. [Zayed was] concerned about the
discrimination as it related to the UAE vis-a-vis other Arab countries . .
. receiving more attention and more concern than the UAE was.
It is absolutely clear from BCCI documents that Abedi's relationship with
the Sheikh of Abu Dhabi and the Al Nahayan family was the foundation of
the establishment of the bank without which BCCI never could have come
into existence. 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 capitalized
BCCI, but instead to have insisted on guaranteed rates of return for the
use of its money.
As Akbar Bilgrami, who handled Sheikh Zayed's personal finances in the
late 1970's at BCCI, has described it, BCCI provided Zayed with great
benefits for what appeared at the time to be very little risk. Zayed
deposited substantial funds, amounting to billions of dollars, in BCCI,
receiving a guaranteed rate of return on these deposits -- sometimes as
high as 1.5 percent over LIBOR, a standard European funds rate. In return
for a relationship that was costing him little and indeed, making him
profits, Sheikh Zayed received the prestige and benefits of having people
all over the world believe it was his bank, without his own funds being at
risk.(25) Thus, rather than being a major investor in fact 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.
An eyewitness to BCCI's creation described Abedi's elation after Sheikh
Zayed agreed to back his new bank in a scene that took place in late 1972,
in the late evening, in the living room of a Pakistani banker in Abu
Dhabi. Abedi addressed the Pakistanis present in the following terms:
It is truly the grace of God that the prayers of all the U.B.L. [United
Bank of Pakistan] employees who had to flee Bangladesh and who had been
kept on the U.B.L. payroll by us, have been provided a source of
livelihood by God. The Sheikhs have been kind enough to give me their
trust and support the new bank that we are creating for these employees.
Abedi used the expression "rizq," or "providence" to describe the deal he
had consummated with Sheikh Zayed. But there would have been a number of
compelling reasons for Sheikh Zayed to respond to Abedi's offer. Sheikh
Zayed was financially unsophisticated and in need of assistance from
someone he could trust to handle his finances in a manner that would meet
his personal, cultural and political needs. These included the need for
secrecy as to the location and size of his wealth, given the political
instability within the region; the need to adhere to Islamic law, through
structuring transactions so that they could be profitable and safe without
the payment of interest in violation of that law. There was, moreover, no
one within Abu Dhabi who the Sheikh could trust to provide the adequate
secrecy. Indeed, apart from Abedi, Sheikh Zayed may well have known no one
inside or outside Abu Dhabi with the apparent sophistication to handle
finances of the magnitude that were being generated by the petrodollars.
In any case, Abedi had already been attending to all of the Sheikh's
personal needs in Pakistan for five years, thereby demonstrating his
ability to make the relationship worry-free for the Sheikh.
Abol Helmy, an Iranian BCCI officer, described the relationship as a
logical outgrowth of the post-colonial period in the Third World:
The British ruled India, Pakistan, and the Arab countries. Traditionally,
the Indians and then the Pakistanis because of the Moslem thread that
linked them became the civil servants for the British working in the Gulf.
It was a continuation of the policies of the Empire.
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.(28) Moreover, Sheikh Zayed was accustomed
to the use of nominees, as nominee purchases were frequently employed
whenever he wished to buy anything to avoid the price increasing if the
Sheikh's name had been mentioned as part of the negotiations.
One consequence of this arrangement, however, was that Abedi's success was
overly dependent on his relationship with Abu Dhabi and its assets. He was
managing the Sheikh's resources, he had use of them, and if he did not
meet the Sheikh's needs, he could lose everything. Recognizing this
dependence, Abedi made it a practice to insure that BCCI would provide
whatever the Sheikh required, whenever the Sheikh or his family wanted it.
As BCCI records demonstrate, payments, often characterized as loans, were
made to members of the Abu Dhabi royal family on an as-needed basis by
BCCI, without any regard as to whether these same resources were also
being committed elsewhere. With Abedi relying on the Sheikh's resources to
finance his rapid expansion, 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.
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