Bank Scandal May Affect Gates’ Nomination to Head CIA

WASHINGTON —  At the same time that the Senate has decided to delay consideration of Robert M. Gates as CIA director, the controversial nomination is becoming intertwined with an investigation of the global banking scandal involving the Bank of Credit and Commerce International.

Gates, who was deputy CIA director before joining President Bush’s White House staff, is one of several current and former government officials who are being accused of trying to cover up the intelligence agency’s relationship with the bank, which was seized by banking regulators earlier this month after auditors found evidence of widespread fraud.

On Tuesday, Sen. John Kerry (D-Mass.) had called on the Senate to delay any action on the Gates nomination until the CIA discloses its involvement with BCCI. He said that the CIA has refused to provide his Foreign Relations subcommittee with information requested last May.

Earlier this week, William von Raab, former commissioner of the U.S. Customs Service, said that Gates had failed to provide him with sufficient information about the CIA’s dealings with BCCI in 1988 shortly before several bank employees were indicted on money-laundering charges.

BCCI, a Luxembourg-based bank that operated in about 70 countries, most of them in the Third World, was frequently used by CIA officials to funnel money to people in distant countries, according to law enforcement investigators.

The bank, which was founded by a Pakistani citizen, Agha Hasan Abedi, was particularly well-suited as a conduit for CIA financial assistance to anti-communist rebels in Afghanistan, according to sources. Most of the U.S. aid to the Afghan rebels went through Pakistan.

In addition, Kamal Adham, a prominent investor in BCCI as well as a major borrower, previously headed the Saudi Arabian intelligence service and has close business ties to Raymond H. Close, who was CIA station chief in Saudi Arabia in the 1970s. Investigators believe that BCCI operated, in part, to influence U.S. policy toward the Middle East.

CIA spokesman Mark Mansfield refused to comment on whether the CIA had used BCCI, noting that the agency never discusses its operations. But he added: “Any allegations of unlawful use of BCCI by the agency are without foundation.”

Von Raab, in a televised interview, said that, when he sought information from Gates about the CIA’s relationship with BCCI, he was provided a seven- to 10-page memo that he described as “well-written Pablum.” He said he later learned from British customs officials that the CIA was using the bank to make payments to persons involved in clandestine activities.

Kerry said that his staff was told earlier this year, when it sought a copy of the 1988 memo cited by Von Raab, that it did not exist. He said that the CIA later admitted having the memo but refused to provide it to his subcommittee.

In response to a letter that Kerry wrote to CIA Director William H. Webster last May, the senator said, his staff was provided a briefing by an employee who apparently knew little or nothing about the CIA’s relationship with BCCI. Among other things, he said, the CIA employee who briefed his committee staff was unfamiliar with the name of Kamal Adham.

“It is obvious to me that the CIA has not told us the full story,” Kerry said. “Given Gates’ apparent knowledge about the bank’s activities before law enforcement was aware of BCCI, the CIA’s own apparent use of BCCI, there are significant questions which the CIA should answer before we proceed further with the Gates nomination.”

In London, meanwhile, officials of Abu Dhabi publicly criticized the Bank of England for seizing BCCI and blamed Price Waterhouse, the firm that audited BCCI’s books, for failing to find the irregularities earlier. The statement was in response to pressure from the Bank of England on the ruler of Abu Dhabi, who owns 77% of BCCI, to reimburse depositors.

In response, the Bank of England issued a statement saying: “The action taken by the regulators this month in the light of the latest report (from Price Waterhouse) was absolutely necessary to protect the assets of the bank.”