Bringing in-depth reporting of crime and corruption in high places
THE MONEY FOUNTAIN
Dark Face of International Finance
the Nugan Hand Bank affair of the late seventies, bank crashes have
followed a slick and familiar template. Narcotics trafficking, gun
running, CIA covert ops., money laundering and fraud on a massive
scale are just some of the ingredients that have sent bank after bank
crashing to its knees. Once the smoke clears bank depositors and shareholders
are left picking up the tab.
Yet tough regulation even when emplaced are easily and regularly evaded. Banking and crime are Cimmerian hand-maidens for the simple reason that banks are where the money is. Having access to the money and being "connected" is the name of the game where the stakes are other people's money. This is the dark side of the financial community, a hidden face that largely goes unreported until, that is, a major banking scandal hits the front pages. Squirming under the glare of public attention successive bank disclosures have revealed the sinister connections that leading banks have with organised crime and the intelligence community. The money-shuffler's of spooksville need "black" funds to finance covert operations and appear happy to exchange guns and military hardware for dope that is, in turn, peddled for dollars used to finance other black operations. This happy-go-lucky "Ferris wheel" approach to money-raising on the part of the intelligence community reveals a long history of entanglements with the Mafia.
crime syndicates are now the single largest business sector on the
planet and set to grow. They just love banking. Having accumulated
a staggering $820 billion from investment interest over the last decade,
the Mafia is now estimated to earn $250 billion a year from their
legitimate investments.2 Dozens of nations who maintain strict bank
secrecy laws are de facto providing full banking services to these
mandarins of dirty money. A large number of banks are actually owned
by Mafia syndicates.3 Some of the largest and most respectable appear
content to turn a blind-eye and earn massive commissions from laundering
dirty money4. The prudent image of bankers is just that - an image.
Banking survives purely on depositor confidence making it the biggest
ongoing "confidence trick" 5 the world has ever witnessed. That confidence
has been dented by one scandal following on the heels of another.
Seven years later the bank collapsed following the discovery of Frank Nugan's body slumped in his Mercedes. Clutching a gun in one hand and sporting a hole through the head, Nugan was also holding a bible that contained an embarrassing list of names including William Colby, DCI of the CIA, and Bob Wilson, the House Armed Services Committee's ranking Republican. Others names listed had a variety of backgrounds, ranging from known narcotics traffickers, politicians and businessmen to personalities from sport and the media. Beside each name was listed amounts running into five and six numbers. Following public outrage the US Senate held an investigation into Nugan Hand's operations. Amongst other things it discovered that the bank operated a branch at Chiang Mai, Thailand, heart of Triad country. The branch was dedicated to laundering the Golden Triangle's heroin revenue. Connected to the bank's office by an interconnecting door was the DEA's local office, a premises that was also shared by the CIA6.
the same time that Frank Nugan's skull was developing powder-burns,
Michele Sindona, a free-wheeling financial whiz kid and consigliere
for the Sicilian Mafia had purchased and driven to the wall, New York's
Franklin National Bank, with losses totalling $40 million - Ranked
the 29th largest bank in the US it became the biggest crash on record
at that time. Establishing a fictitious company, Fasco AG in Lichenstein,
Sindona was able to obtain a majority interest in the Italian based
Banca Privata Finanziera. BPA was an excellent acquisition for Sindona
for not only did it have a close relationship to Britain's blue-chip
Hambros Bank, but also had a preferential partnership arrangement
with Continental Illinois Bank of Chicago, owned and presided over
by David Kennedy - later to become Finance Minister in the Nixon administration.
Continental Illinois was later to spectacularly crash in the mid-eighties,
only to be rescued with an estimated $4 billion tax dollars.
Sindona's connection to the Mafia probably dates back to WW11 when he joined in the Mafia preparations for American landings in Sicily. However, it was during the 1970's that the Sicilian Mafia choose him as their money-man. Four years later, in 1974, Don Michele's world began collapsing around him. It was later discovered that he had been skimming off the mob's narcodollars which he was charged with laundering. Incarcerated in prison for his part in the Franklin Bank crash Sindona was later found dead in his cell. A dose of strychnine laced in his coffee brought a 25 year sentence to an abrupt end7. If Sindona's death was anything it was too late. His intimate involvement with another bank that crashed with massive losses was to have calamitous and far reaching effects in Italy's ruling elite as well as the spooks of Langley.
Banco Ambrosiano was the largest private bank in Italy until it collapsed in 1982 with losses approaching a massive $2 billion. At the centre of the scandal was Roberto Calvi, Chairman of Ambrosiano and lodge-brother of Licio Gelli, a shadowy "Grand Master" of the Italian P-2 (Propoganda 2) Masonic lodge. Gelli - once an oberleutnant in Himmler's SS - held the reins of power and knew how to use them, for which he was dubbed the "puppet-master". A consummate blackmailer, he kept a secret record of wrong-doing of all those he came into contact with, and wasn't shy in using it to his advantage. P2 included in its membership roll highly placed politicians, cabinet members, heads of the Italian armed forces and the intelligence services, together with leading industrialists, media magnates, judges, Mafiosi, members of the Vatican Curia and, of course, high-flying financiers - including Sindona. P-2's "elite" membership - linked by their extreme right wing political views - perfectly dove-tailed with the CIA's long standing desire to eradicate communism from the Italian political scene.
The P-2 and Banco Ambrosiano scandal broke when Calvi was found "suicided" on 17 June 1982. With his hands tied behind his back and a rope around his neck, he had been suspended from London's Blackfriars Bridge, in what some saw as a ritual killing. Calvi was P2's banker and had been involved in embezzling massive sums of money out of his bank and into secretive offshore companies in Lichenstein and elsewhere; a number of which were linked to the Vatican Bank. P2 was responsible for a number of CIA backed political atrocities at the time, including the bombing of Bologna railway station in August 1980, where 85 innocents were slaughtered - and mischievously attributed to left-wing terrorists.
It took ten years before the real story came out. Francesco Mannino Mannonia a penitito (defector) from the Sicilian Mafia confirmed in 1992 that Calvi was strangled by Francesco di Carlo, the mob's Heroin "traffic manager" at the instruction of Pippo Calo, of the Corleone family. We now know that Calvi together with Gelli and Sindona were embezzling the Mafia out of a fortune. Gelli was "handling" a large sum of money for the Corleonesi, which he passed to Calvi who promptly used it to shore up his failing bank. Smart to the last, Gelli helped the mob recover "tens of billions of Lire" before bolting out of sight8. Despite his best efforts he was eventually arrested in Switzerland, where he had travelled to arrange the secret transfer of $120 million of Ambrosiano's lost loot. Bribing a guard with $20,000.00 he managed to escape and once over the French border climbed aboard a helicopter for the short trip to Monaco, home of P-2's "super-lodge". From Monaco he travelled to Paraguay - a favourite bolt-hole of many of his war-time Nazi comrades - and disappeared from sight. The missing billions were never recovered.
The Ambrosiano affair was significant for revealing the web of inter-connections that existed within Italy's ruling class. On the one hand the CIA were using P-2's "covered" (secret) lodge and illicit funds to conduct covert warfare on Italy's communists. At the other extreme it demonstrated the Mafia's total infiltration of Italian business and politics; a feat achieved following their induction into Masonry. Antonino Calderoni, a Mafia defector, revealed that during 1977 Mafia bosses were formally invited to join a covered Masonic lodge and agreed to do so on the understanding that they would learn the secrets of Masonry, but would not reveal Mafia secrets. "Men of Honour who get to be bosses belong to the Masonry: this must not escape you" another Mafia defector, Leonardo Messina, revealed. "Because it is in the Masonry that we can have total contact with businessmen, with the institutions, with the men who administer power..." Messina went on to add that the Mafia's secret association with Masonry is "an obligatory passage for the Mafia on a world level."9 Masonry, like the intelligence community, banking and the Mafia, share a common interest in secrecy. Similarly they all have a common interest in money, especially other people's money.
that had been forged and which lay behind Italy's greatest yet banking
debacle were to be re-enacted years later in America. By far the greatest
banking rip-off of all time, the Savings & Loan scam sees the
same cast of players at work. "Something very significant happened
during our country's savings-and-loan crisis, the greatest financial
disaster since the Great Depression. It happened quietly, secretly,
without any fanfare and attention. It happened before our very eyes
and we knew it not. What we missed was the massive transfer of wealth
from the American taxpayer to a select group of extremely rich, powerful
people." These ominous words opened the introduction to Pete Brewton's
massively researched book The Mafia CIA & George Bush - the untold
story of America's greatest financial debacle.10 Brewton, an award-winning
investigative journalist, spent years tracing the subterranean web
of inter-connections that sat at the heart of this affair that looted
the American tax-payer of close to $1 trillion. However, there was
more to the S&L affair than these words portrayed.
Back in his VP days, Bush intervened with federal regulators in a corrupt Florida Savings & Loan that close friends, his sons Jeb and Neil, and a handful of Mafia associates were systematically plundering. The thrift eventually went belly-up to the tune of $700 million. For a man who regularly keeps a "plausible deniability" diary, whose hidden background includes his CIA operational activities pre-dating his appointment to DCI by fifteen years, and who, moreover, had questionable links to the pock-faced Panamanian dictator - Columbian cartel money-launderer and one time CIA asset - Col. Manuel Noriega, the thought of his sons cherry-picking thousand dollar bills off the S&L money tree is all in a days play11.
In any complex financial scam, the really important question is to discover where the looted funds eventually come to rest. As with Nugan Hand, Franklin and Ambrosiano debacles, this question has never been satisfactorily answered for the S&L scam. However, despite a perpetual smoke-screen some interesting facts have emerged. In another Florida S&L bust that cost $200 million in a shady land deal, the cash disappeared down the sunset-trail of Du Pont's St. Joe Paper Co. The trail went cold in Jersey, one of the Channel Islands. The Channel Isles have long been an off-shore tax haven with strict banking secrecy, and as a consequence a large contingent of foreign banks have offices there. It is now believed that the looted funds were ultimately used by CIA cut-outs to procure weapons for Iraq.12
A central figure in the S&L sale of the century, was Walter Mischer, a close friend of Senator Lloyd Bentsen, and a long time "acquaintance" of George Bush. Mischer was closely "connected" to the New Orleans Marcello family, one of the most powerful Mafia families in the country. Never a "one family" man, he also did business with Mafia associates from New York and Chicago. Mischer is considered to be the most powerful man in Texas, and certainly one of the richest. His "I'm just a country boy" demeanour belies a sharp, analytical business mind and an icy streak of ruthlessness. With a finger in every pie, his influence stretches wide to include, business, crime, finance, the intelligence community and domestic and international politics. Brewton believes that Mischer "is without peer in Texas and perhaps in the entire country." Regarded as a pragmatist he generally bets both ways in the political election stakes, placing money on both the rear and fore-legs of the horse we've come to know as "Demopublican" politics.
Another figure who weaved his crooked way through the S&L tale is Herman K. Beebe, the so-called godfather of the dirty Texas S&Ls, and associate of the Louisiana mob. Beebe and Mischer are long term business associates. Herman also, co-incidentally, has known connections to the Marcello family. While both men were busy "burning-out"13 the odd couple dozen savings and loans, Beebe was transferring $3 million in "seed" money from his bank, Bossier Bank & Trust, to Harvey McLean Jr., to establish the small Washinton DC based Palmer National Bank that boasted a board that at one time or another largely featured in the White House telephone directory. The board chairman, Stefan Halper, was a member of the Nixon White House. His father-in-law, Ray S. Cline, formerly Deputy Director of Intelligence at the CIA and one of the old OSS "China" veterans, was a top foreign policy and defense adviser in the Bush Presidential campaign. Other board members included John Barnum, Deputy Secretary of the Department of Transportation (1974-77), Frederick V. Malek (Nixon's White House Personnel chief and the Bush-Quayle campaign manager), William Kilberg (Department of Labor 1973-77 and member of the Reagan-Bush transition team) and John A. Knebel, President Ford's Secretary of Agriculture.
Palmer National was the bank of choice for the National Endowment for the Preservation of Liberty's (NEPL) fund raising activities that provided $10 million to Col. Oliver North's covert gun-running programme that saw weapons shipped South to Nicaragua, and East to Iran. This operation was essentially the brain-child of former DCI William Casey, who cunningly revived the old "conduit" system of money laundering that had been used with great success during the fifties to secretly fund Nazi war criminals, recruited to spearhead the ex SS "freedom-fighters" scheduled for deployment behind enemy lines in the event that the Soviets invaded Europe14. Casey used North as his cut-out, thus kick-starting the on-going row between the Pentagon and the CIA about who should conduct "covert ops". North's superiors in the Pentagon have never forgiven him for being the CIA's manikin. At the same, Ray Cline, who had retired from the CIA and formed a family-owned company called SIFT Inc., was "advising" Major General John Singlaub - the principal operations officer in the Nicaraguan arms affair.
Bush was wearing his S&L hat on his off-days, his all singing
- all dancing gun, dope n' money laundering operations were about
to receive a damaging blow, as yet another massive financial scandal
hit the front pages. Half a dozen regional offices of the Italian
based Banca Nazionale del Lavoro were raided by FBI agents following
a tip off from two junior officers of BNL Atlanta.15 The BNL affair
seamlessly follows the well oiled template with the involvement of
the CIA, Britain's SIS, Presidents Reagan and Bush, Prime Minister
Thatcher and two of Italy's most corrupt senior politicians; Bettino
Craxi and the Mafia-linked Giulio Andreotti. It was to reveal the
international covert network that was engaged in illegally shipping
arms to Iraq's dictator, Saddam Hussein. Even during the height of
Operation Desert Storm, CIA operatives were frantically attempting
to put together an urgent assignment of U.S. made SAM missiles destined
for Iraq's bloody war-machine. By a happy co-incidence, BNL, owned
by the Italian Treasury, was run by a close friend and lodge-brother
of Andreotti. Alberto Ferrari, who reined as BNL's director-general,
was a notorious member of P-2. Nor was he alone in his Masonic affiliations.
BNL, dubbed 'the bank of the P-2' "was quickly shown to have among
it upper echelons, a veritable nest of P-2 operatives..."16 with intimate
connections to the most powerful figures in successive US administrations.
BCCI aggressively set out to launder the Columbian cartels massive drugs money that would eventually see up to forty other banks directly or peripherally involved - many of them blue-blooded luminaries of the banking firmament. Setting up a branch in Panama, BCCI soon cut a deal with Panama's Noriega, opening an account for him in the name of Zorro. Dirty funds were collected and wired to Europe. From there Certificates of Deposit (CD's) were issued that could be used as collateral against loans issued. Another technique involved cycling the money through an affiliated company, Capcom Financial Services, who's huge futures and options business was an ideal laundering vehicle.
Discontented with just the narcotics industry, BCCI developed close ties to the "spook" community, maintaining accounts for Israel's Mossad, America's CIA, Britain's SIS, France's DGSE plus the security services of Pakistan and Switzerland. The CIA's accounts with BCCI covered several years of covert operations on the part of that agency. Principally, payments were made to finance Afghan rebels and to bribe General Noriega. Almost unbelievably its customers also included the notorious Abu Nidal terrorist organisation, and the Iranian backed Hezbollah - long regarded as the arch enemies of the western intelligence community. Abu Nidal's Fatah Revolutionary Council had a $60 million account at London's fashionable Sloane Street branch. At the same time the bank was responsible for financing deals in which Mossad provided weapons to Arab terrorists. Peru, buckling under the burden of sovereign debt, used BCCI to hide its cash reserves away from the grasping hands of creditor banks. Outdoing the security services of many small nations the bank also ran its own global intelligence network known as the "black network" employing an estimated 1500 trained operatives. Based in Karachi, this network "of hand-picked individuals who underwent a one year training course in psychological warfare, spying techniques and the use of fire-arms."19
banks aren't colluding with spooks and organised crime they appear
to settle back and engage in dubious "in-house" business. Most don't
hit the headlines being swept away from the glare of the media by
red-faced executives. One of those that wasn't so lucky was Daiwa
Bank Ltd. Squirming with loss of face, Daiwa executives announced
to a round-mouthed media that Toshihide Iguchi, a small - time Japanese
trader working out of Daiwa's New York office, had racked up a $1.1
billion loss trading US Treasury bonds. Stretching credulity beyond
belief, Daiwa claimed that the 44 year old Iguchi, following a modest
trading loss of $ 200, 000, spent the next eleven years writing 30,000
"unauthorised" tickets in an attempt to reverse his misfortune. This
equates to a staggering $400, 000 per trading day, making Iguchi one
of the unluckiest suckers the world of high finance has ever encountered.
All the signs are that the Barings affair is a straight forward case of "bonus-fever" amongst the senior executives who benefited from excessive annual bonuses. Nevertheless there may be more to it than that. The fact that their inexperienced young SIMEX trader, Nick Leeson, didn't contribute one dime to the banks bottom line throughout his three year tenure as the "big swinging dick " on the Singapore futures exchange is beside the point. Leeson contrived to report profits by creating false accounting entries and thus year on year was able to conjure a host of ghost profits - carefully hiding his real month on month losses that eventually grew to a teeth-grinding $1.6 billion. His superiors, the banks senior executives, delighted with the performance of their star in the east, awarded themselves bonuses of $1.6 million plus for year end 1993. Despite crashing with massive losses the directors walked to new jobs with the Dutch financial group ING, who galloped to the rescue. Snug in their new sinecures, they negotiated $152 million in back bonuses covering the tragic year 1994 - where reported earnings of $320 million in reality concealed accumulated losses of $260 million, soon to increase sixfold.
It is now clear that Leeson didn't operate alone. Those tagged with assisting and/or colluding with him include the CEO Peter Norris and the Director of Finance, Geoffrey Broadhurst20 Discovering the degree of complicity involved at senior levels, 23 directors and senior staff were forced to resign by their new Dutch owners. This did not stop the Bank of England, Britain's banking regulator, from publishing a caveat-ridden and poorly investigated report. The report chronicles the Bank of England's less than zealous efforts to apportion blame to anyone other than Leeson, but does catalogue a list of impediments to its investigation. These include the accidental destruction of "significant classes" of records within the offices of Barings London, which are cited as being "missing", "corrupted" or not "routinely retained." The sleuths of Threadneedle Street did not, however, once venture inside the door of Barings offices during their entire investigation. Had they done so it is not outside the realms of possibility that they may have discovered "significant classes" of documents corrupting away before their very eyes.
nobody is saying which banks provided the immense funding that the
Barings operation consumed. Nor are they revealing why these banks
would so readily lend funds that amounted to a cool $1.4 billion to
a small bank with an insignificant net worth. Seeking to clarify this
point I asked the Bank of England to name which banks provided funds
to the group and whether they formed a formal or informal syndicate.
I was politely told that "we don't have this information, but if we
do it's confidential and not available." A curious answer indeed.
Meanwhile, the only casualty besides, of course, the banks shareholders
- who with unspeakably poor grace continue to grumble about their
missing $160 million - is Leeson. Found guilty and given a six year
sentence he now resides in Singapore's Changi prison. Some believe
he joins Daiwa's Iguchi as a scapegoat, demonstrating that when the
bucks go down in the "connected" world of high finance, those who
had most to gain, do not21.
Operating within the CIA is a small team known as the "Fifth Column". Staffed by experienced computer hackers using a Cray supercomputer, this group track dirty money accumulated in secret offshore bank accounts by "scores of high level U.S. political figures".23 Once the funds are tracked and the secret authorisation code located the money is electronically swept-up and deposited in the U.S. Treasury. Intelligence sources estimate that in excess of $2 billion has been gathered in this manner and none of the now-poorer high profile figures are contemplating lodging complaints. Illegal? You betcha' it is, but no more than any one of a dozen other operations that have previously come to light.
A great many more bank scandals can be expected in the coming years. Why this should be so is simple. It's not their money they're playing with. It's yours and mine. If a bank goes belly-up, culpable bank executives slide into other cushy jobs with other banks or disappear down the sunset-trail toting a swag-bag of "lost" loot - sometimes both. Simply stated high-finance is a "connected" world where president's touch shoulders with mobsters; bankers shake hands with Masons; regulators buckle under political pressure; law enforcement protects crime; the CIA "does its thing" and fortunes can be and are won.
of themselves that theirs is a "prudent" profession. In the last analysis
this is true. Nothing can be more prudent than playing with and losing
other people's money.
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