Clark Clifford - Bank of Credit and Commerce International

Bank of Credit and Commerce International

In 1991, Clifford's memoirs Counsel to the President (co-authored with Richard Holbrooke, later U.S. Ambassador to the United Nations) were published just as his name was implicated in the unfolding Bank of Credit and Commerce International (BCCI) scandal. The scandal focused on the criminal conduct of the international bank and its control of financial institutions nationwide. The bank was found by regulators in the U.S. and the United Kingdom to be involved in money laundering, bribery, support of terrorism, arms trafficking, the sale of nuclear technologies, the commission and facilitation of tax evasion, smuggling, illegal immigration, and the illicit purchases of banks and real estate. The bank was found to have at least $13 billion in unaccounted funds.

From 1982 to 1991, Clifford served as chairman of First American Bankshares, which grew to become the largest bank in Washington, D.C. The bank was nominally owned by a group of Arab investors, but in order to assuage fears from the Federal Reserve, Clifford had assembled a board of distinguished American citizens to exercise day-to-day control. In 1991, Robert M. Morgenthau, the District Attorney for New York County (coterminous with the borough of Manhattan), disclosed that his office had found evidence that BCCI secretly owned First American. Morgenthau convened a grand jury to determine whether Clifford and his partner, Robert A. Altman, had deliberately misled federal regulators when the two men assured them that BCCI would have no outside control.

An audit by Price Waterhouse revealed that contrary to agreements between First American's nominal investors and the Federal Reserve, many of the investors had borrowed heavily from BCCI. Even more seriously, they had pledged their First American stock as collateral. When they missed interest payments, BCCI took control of the shares. It was later estimated that in this manner, BCCI had ended up with 60 percent or more of First American's stock. There had long been suspicions that First American's investors were actually nominees for BCCI. However, the audit was solid confirmation that BCCI secretly — and illegally — owned First American.

Clifford's predicament worsened when it was disclosed he had made about $6 million in profits from bank stock that he had bought with an unsecured loan from BCCI. The grand jury handed up indictments, and the U.S. Justice Department opened its own investigation. Clifford's assets in New York City, where he kept most of his investments, were frozen.

Clifford insisted that he had no knowledge of illegal activity at First American, and insisted that he himself had been deceived about the extent of BCCI's involvement. However, both Morgenthau and federal regulators argued that Clifford should have known.

A "Report to the Committee on Foreign Relations of the United States Senate," prepared by U.S. Senators John Kerry and Hank Brown, noted that a key strategy of "BCCI's successful secret acquisitions of U.S. banks in the face of regulatory suspicion was its aggressive use of a series of prominent Americans," Clifford among them. Clifford, who prided himself on decades of meticulously ethical conduct, summed his predicament up when he sadly told a reporter from The New York Times, "I have a choice of either seeming stupid or venal."

Indictments against Clifford were set aside because of his failing health.