Scandals: Cashing In on Blue Chips

In a drab Senate hearing room fittingly dominated by a vast map of the world, witnesses gave the first public testimony last week in the biggest and most brazen financial scandal of all time. Speaking in blunt terms that brought gasps from the packed chamber, they charged what TIME and other media reported in July: the criminal enterprise known as the Bank of Credit & Commerce International thrived as a $20 billion worldwide cash conduit for thugs ranging from terrorists to narcotraficantes, while Washington and other capitals turned a blind eye. "This is a story of big-time, big-money con artists," said Massachusetts Democrat John Kerry, chairman of the Senate Foreign Relations subcommittee that held the two-day hearings. "It's a story of international lawlessness and extraordinary greed, which is becoming the centerpiece of recent history."

The sessions were part of a global offensive of probes and law-enforcement actions against the rogue bank, which regulators seized last month in most of the 69 countries where it operated. The latest moves shed harsh new light on the shadowy institution and brought it fully and irrevocably into the public arena, where it promises to become a hot political issue in the U.S. and elsewhere for months to come. Among last week's developments:

-- A New York State grand jury indicted B.C.C.I. and its two principal officers for fraud, bribery, grand larceny and money laundering after a two- year investigation led by Manhattan District Attorney Robert Morgenthau. B.C.C.I., said Morgenthau, had looted depositors of more than $5 billion in "the largest bank fraud in world history." Named as defendants were Agha Hasan Abedi, the Pakistani founder of B.C.C.I., and countryman Swaleh Naqvi, who had been the bank's chief operating officer. But bringing the pair to trial could prove impossible. Pakistan said last week it will refuse to extradite the ailing Abedi, 68, who is a hero in his homeland for organizing the Third World's largest bank.

-- The Federal Reserve Board fined B.C.C.I. $200 million for illegally acquiring control of three prominent U.S. banking institutions. Chief among them was First American Bankshares, Washington's largest bank holding company, which is headed by former Defense Secretary Clark Clifford and his law partner Robert Altman. Clifford and Altman, who served as attorneys for B.C.C.I. throughout the 1980s, have denied knowing it owned First American. The other two secretly owned banks were the National Bank of Georgia, which Ghaith Pharaon, a Saudi tycoon and B.C.C.I. front man, acquired from Carter Administration official Bert Lance, and Miami's CenTrust Savings. Pharaon used B.C.C.I. funds to become a partner of financier David Paul, who built CenTrust into a giant house of cards before it collapsed last year at a cost to taxpayers of more than $1.7 billion.