TIME - Man of the Year/CompactPublishing-TimeMagazine-TimeManOfTheYear-Win31MSDOS.iso/moy/010692/0106999.000

Text File | 1992-10-19 | 5KB | 94 lines

                                                                                MAN OF THE YEAR, Page 42

CON MEN OF THE YEAR

Masters of Deceit.


By S.C. Gwynne


    They were both self-made men who built their empires on
the ill-placed confidence of lenders and investors. One of the
con men was a Pakistani banker who exercised influence from
Washington to Beijing but was in fact running a financial
supermarket for criminals. The other was a 300-lb. tabloid
tycoon whose fatal plunge into the Atlantic was one of the most
bizarre finales in business history. When their empires came
crashing down in 1991, the debacles raised pointed questions
about the laxity of financial regulations around the world.

    Agha Hasan Abedi, founder of the Bank of Credit & Commerce
International, ranks as one of the great criminal minds of his
time, a man who built a financial web that is unlikely ever to
be completely understood. In fact, B.C.C.I. might have endured
longer had Abedi not fallen gravely ill in the late 1980s. The
frail 68-year-old could only watch from his estate in Karachi
when the branches of his bank were seized in 69 countries last
July.

    Of B.C.C.I.'s $20 billion or more in assets last year,
less than $2 billion is recoverable, the bank's liquidators
say. Most of that money disappeared in outright theft,
uncollectible loans, bribes and losses on trading. The bank's
collapse has meant disaster for more than 1 million depositors.

    Abedi made connections with power elites worldwide, from
corporations like BankAmerica to officials like former President
Jimmy Carter, whose charitable foundations received $10 million
in donations. On its darker side, B.C.C.I. provided services for
Panamanian leader Manuel Noriega, the Medellin cocaine cartel
and terrorist organizations around the world. The most nefarious
aspect of B.C.C.I. was its "black network," which engaged in
terrorism, intimidation and paramilitary actions.

    The most prominent victim of Abedi's flimflam operation
was the man whose wealth helped finance B.C.C.I.: Sheik Zayed
bin Sultan al-Nahayan of Abu Dhabi, President of the United
Arab Emirates. Investigators say approximately $2 billion of
Zayed's own money, along with $7 billion in Abu Dhabi state
funds, has disappeared into the bank's black hole. In the U.S.,
B.C.C.I.'s secret ownership of Washington's largest bank, First
American, implicated former Defense Secretary Clark Clifford.
As chairman of First American, Clifford had denied that B.C.C.I.
controlled the Washington bank; he and his partner, Robert
Altman, now face possible criminal indictment. On Dec. 19,
prosecutors and liquidators reached an agreement for B.C.C.I.
to plead guilty to U.S. racketeering charges; it will also
forfeit $550 million to shore up American banks it owned and
reimburse depositors and creditors in other countries.

    The Robert Maxwell case was stranger than most tabloid
tales. The Czechoslovak-born press baron had created an empire
financed largely through illusion, yet his holdings included the
London Daily Mirror, New York City's Daily News and Macmillan,
the U.S. book publisher. In assembling his web of 400
companies, Maxwell piled up debts, apparently without unduly
alarming the dozens of banks and other lenders that let him
borrow a sum now estimated at $7 billion.

    Suddenly, just as creditors were beginning to wise up,
Maxwell disappeared from his 180-ft. yacht and was found
floating near the Canary Islands. An autopsy ruled that he died
of either a heart attack or drowning, or a combination of the
two. But as investigators sifted through the mess he left
behind, the suspicion grew that "Cap'n Bob" had deliberately
abandoned ship. The most shocking discovery was that he had
secretly and improperly "borrowed" $1 billion from worker
pension funds to keep his companies afloat. While Maxwell's son
Kevin struggles to manage what's left of the family holdings,
most of the legacy is likely to be liquidated.

    How could the financial cops have allowed two such blatant
scandals to take place? Part of the answer is that the
international financial system is rife with offshore tax havens,
secrecy laws and virtually unregulated banking zones. Maxwell's
family trusts were incorporated in Liechtenstein, and B.C.C.I.
was incorporated in Luxembourg. Both countries are known for
their lax regulation. In each case, the con men made billions
of dollars disappear through the world's cracks and loopholes.