Tuesday, August 24, 2004

Bank with close ties to Bush administration engulfed in scandal

The Justice Department announced on Friday that it is launching a criminal investigation into Riggs Bank. In recent months, the Washington-based bank has become engulfed in a scandal related to charges of money-laundering, corruption and terrorist financing. Riggs, which touts itself as “the most important bank in the most important city in the world,” has been known for decades as the bank of the Washington elite, including politicians, foreign ambassadors and the wealthy. It has held presidential accounts stretching back to the time of the Civil War, and is a prominent fixture in the political and social establishment of the nation’s capital.

Or rather, it was a prominent fixture. In July, PNL Financial Services agreed to buy Riggs for $779 million. The sale will become final by early next year. The bank’s prominent embassy and international operations will be shut down in an attempt to bury a scandal that has the potential of becoming much larger. That an institution like Riggs could so quickly disintegrate is an indication of the extent of the corruption that has overtaken American finance and government. There are three separate activities for which Riggs has come under investigation: (1) its relationship with the Saudi royal family and the potential financing of two of the September 11 hijackers through an account owned by the wife of the Saudi ambassador; (2) its relationship with the corrupt and dictatorial regime of the oil-rich West African country of Equatorial Guinea; and (3) its banking business with the former military dictator of Chile, Augusto Pinochet.

The public revelations concerning the bank’s relationship with Saudi Arabia came mainly through the publication of a Newsweek article on December 2, 2002 (“The Saudi Money Trail”). The news magazine reported that in January 2000, two of the hijackers who were on the plane that crashed into the Pentagon—Nawaf Alhazmi and Khalid Almihdhar—received monetary aid and other assistance from Omar al-Bayoumi.

Alhazmi and Almihdhar are at the center of suspicions of US government complicity in the 9/11 attacks—and for good reason. The CIA had identified the two as early as January 2000 as Al Qaeda operatives, and the Washington Post reported in June 2002 that the FBI also knew of the two from January of 2000. Yet they were allowed to enter the US and live openly in San Diego for 18 months prior to the terrorist attacks on New York and Washington. Newsweek reported in September 2002 that the roommate of Alhazmi and Almihdhar in San Diego was an FBI informant!

According to the December 2002 Newsweek article on Riggs Bank, al-Bayoumi “apparently did work for Dallah Avco, an aviation-services company with extensive contracts with the Saudi Ministry of Defense and Aviation, headed by Prince Sultan, the father of the Saudi ambassador to the United States, Prince Bandar. According to informed sources, some federal investigators suspect that al-Bayoumi could have been an advance man for the 9/11 hijackers, sent by Al Qaeda to assist the plot that ultimately claimed 3,000 lives.”

Al-Bayoumi may have been receiving assistance in his activities from sections of the Saudi royal family. The Newsweek article states: “About two months after al-Bayoumi began aiding Alhazmi and Almihdhar, Newsweek has learned, al-Bayoumi’s wife began receiving regular stipends, often monthly and usually around $2,000 and totaling tens of thousands of dollars. The money came in the form of cashier’s checks, purchased from Washington’s Riggs Bank by Princess Haifa bin Faisal, the daughter of the late King Faisal and wife of Prince Bandar, the Saudi envoy who is a prominent Washington figure and personal friend of the Bush family. The checks were sent to a woman named Majeda Ibrahin Dweikat, who in turn signed over many of them to al-Bayoumi’s wife...”

Dweikat’s husband, Osama Basnan, is reported to be a sympathizer of Al Qaeda and is known to have had friendly relations with the two hijackers, Alhazmi and Almihdhar.

Al-Bayoumi apparently came under suspicion shortly after the attacks of September 11. He was picked up by British intelligence, which found evidence that he had made two phone calls to diplomats at the Saudi Embassy in Washington. However, he was released and is reported to be in Saudi Arabia.

Further, according to Newsweek: “Osama Basnan showed up in Houston last April [2001] while Saudi Crown Prince Abdullah came to town with a vast entourage en route to President George W. Bush’s ranch. According to informed sources, Basnan met with a high Saudi prince who has responsibilities for intelligence matters and is known to bring suitcases full of cash into the United States.”

There are suspicions that Basnan may have been a member of Saudi intelligence, suggesting that Saudi intelligence was closely monitoring, if not aiding, the activity of the September 11 hijackers through its accounts at Riggs.

Newsweek noted that the FBI, as of December 2002, still had an investigation open into the transactions. In July 2003, the FBI accused Riggs Bank of failing to abide by anti-money-laundering (AML) regulations.

Prior to and after the attacks of September 11, it was not unusual for Saudi clients to transfers of millions of dollars in and out of the bank with no questions asked. This was in violation of AML regulations, which require the reporting of all transaction involving such large sums of money.

The bank was eventually fined $25 million in May 2004 for violating these regulations. However, the FBI has issued a statement saying it found no evidence of terrorist financing. The Bush administration has refused to release the intelligence behind the investigation, citing “national security concerns.”

Even after the FBI’s accusations in July 2003, the bank continued to allow massive cash transfers by the Saudi ambassador. Under pressure, the bank announced this past March that it was closing all Saudi accounts.


On July 14, 2004, the Minority Staff of the US Senate Permanent Subcommittee on Investigations, at the request of Democrat Carl Levin, the ranking minority member of the subcommittee, issued a report that dealt mainly with the bank’s accounts for Equatorial Guinea and Augusto Pinochet.

The report found that “the evidence reviewed by the Subcommittee staff establishes that, since at least 1997, Riggs has disregarded its anti-money laundering (AML) obligations, maintained a dysfunctional AML program despite frequent warnings from OCC [Office of the Comptroller of the Currency] regulators, and allowed or, at times, actively facilitated suspicious financial activity.” The OCC, a branch of the Treasury Department, is responsible for regulating nationally chartered banks.

Equatorial Guinea was Riggs’ largest client. It held over 60 accounts at the bank, with varied holdings of $300-700 million. Its ruler, Teodoro Obian Nguema Mbasogo, came to power in a military coup in 1979 and is infamous for his corruption and brutality. Relations with the United States became strained in the mid-1990s, when the Clinton administration broke off diplomatic ties. However, these were restored by the Bush administration in 2003. The country holds interest for the United States because of its large oil reserves.

Riggs appears to have held both Equatorial Guinea government treasury accounts and the personal accounts of Obiang, his family members, and ministers in his government.

According to the subcommittee report, Riggs “serviced the EG [Equatorial Guinean] accounts with little or no attention to the bank’s anti-money laundering obligations...” For example, “Riggs opened multiple personal accounts for the President of Equatorial Guinea, his wife, and other relatives; helped establish shell offshore corporations for the EG President and his sons; and over a three-year period, from 2000 to 2002, facilitated nearly $13 million in cash deposits into Riggs accounts controlled by the EG President and his wife.”

Riggs also opened an account that received large sums of money from oil companies that did business with Equatorial Guinea, including Exxon Mobil, Amerada Hess, Marathon Oil and ChevronTexaco. Riggs allowed the wire transfer of over $35 million from the account to two unknown companies. “The Subcommittee has reason to believe that at least one of these recipient companies is controlled in whole or in part by the EG President.”

Riggs appears to have acted as a conduit for large-scale bribes or other corrupt machinations between the giant oil corporations and the dictator of a country with which they were eager to do business. The report also noted that these oil companies made a number of large payments (sometimes valued at over $1 million) to individual officials or family members for a variety of services.

The manager of Riggs’ accounts for Equatorial Guinea was Simon P. Kareri, who was eventually fired by the bank in January 2004. According to a bank employee, on more than one occasion Kareri visited the Equatorial Guinean embassy and returned with a suitcase full of $3 million in cash, which was deposited in the bank with no reports to financial regulators.

According to the subcommittee report, “The bank leadership permitted [Kareri] ...to become closely involved with EG officials and business activities, including advising the EG government on financial matters and becoming the sole signatory on an EG account holding substantial funds. The bank exercised such lax oversight of the account manager’s activities that, among other misconduct, the account manager was able to wire transfer more than $1 million from the EG oil account at Riggs to another bank for an account opened in the name of Jadini Holdings, an offshore corporation controlled by the account manager’s wife.”

In addition to its dealings with the Saudi royal family and Equatorial Guinea’s dictator, Riggs had a close relationship with the former dictator of Chile, Augusto Pinochet. Pinochet held numerous active accounts at Riggs between 1994 and 2002, even while he was under house arrest in Britain and his assets were supposedly frozen.

According to the subcommittee report, “The aggregate deposits in the Pinochet accounts at Riggs ranged from $4 to $8 million at a time.... Riggs account managers took actions consistent with helping Mr. Pinochet to evade legal proceedings seeking to discover and attach his bank accounts.... Riggs opened multiple accounts and accepted millions of dollars in deposits from Mr. Pinochet with no serious inquiry into questions regarding the source of his wealth; helped him set up offshore shell corporations and open accounts in the names of those corporations to disguise his control of the accounts; altered the names of his personal accounts to disguise their ownership; transferred $1.6 million from London to the United States while Mr. Pinochet was in detention and the subject of a court order to attach his bank accounts; conducted transactions through Riggs’ own accounts to hide Mr. Pinochet’s involvement in some cash transactions; and delivered over $1.9 million in cashiers checks to Mr. Pinochet in Chile to enable him to obtain substantial cash payments from banks in that country.”

The scope of the corruption, money-laundering and other suspicious activities is indeed astonishing. While it was engaged in these activities, the bank operated under the not-so-watchful eye of the Office of the Comptroller of the Currency. In spite of clear indications of regulatory violations at least as early as 1997, the OCC took no actions.

Particularly closely involved with the OCC’s investigation into the Pinochet accounts was the comptroller’s examiner-in-charge, R. Ashley Lee, who worked at the OCC from 1998 to October 2002. According to the subcommittee report, “In 2001, [Lee]...advised more senior OCC personnel against taking a formal enforcement action against Riggs, because the bank had promised to correct identified AML deficiencies. In 2002, he ordered examiners not to include a memorandum or work papers on the Pinochet examination to the OCC’s electronic database.”

Lee went to work for Riggs two weeks later, quickly becoming an executive vice president and the chief risk officer. The subcommittee report states: “During his next 18-months at the bank, he attended a number of meetings with OCC personnel related to Riggs’ AML problems,” despite regulations prohibiting former OCC employees from attending meetings on OCC-related maters.

The revelations of the activities at Riggs Bank demonstrate how commonplace and extensive criminal activity has become within the American financial and political establishment. Not coincidentally, the bank’s activity has a great deal in common with certain features prominent in the Bush administration: the heavy influence of oil interests, the close ties with the Saudi ruling elite, the funding and support given to dictators and former dictators, including General Pinochet.

The relationship of Riggs to the Bush administration is more than tangential. Riggs owns a money management firm, J. Bush & Co., operated by Jonathan Bush, the brother of George H.W. Bush and the current president’s uncle.

Jonathan Bush played a very important role in helping find investors for the various failed oil businesses that George W. Bush ran before he began his career in politics. Jonathan Bush also helped raise money for George H.W. Bush and is a former chair of the New York Republican State Finance Committee. In 2000, he was briefly named president and CEO of Riggs Investment Management Company (RIMCO), a wholly owned subsidiary of Riggs Bank.

While Jonathan Bush appears not to have been directly involved in the Saudi, Pinochet or Equatorial Guinean accounts, his position at Riggs is an indication of the close ties between the bank and the Bush family.

Moreover, Riggs is owned by the Allbritton family, a Texas family with close ties to the Republican establishment. Joe Allbritton, the former head of Riggs who bought the bank in the mid-1970s, is a friend of the Bush family. His son, Robert Allbritton, is the current chairman and CEO.

The Allbritton family is known among the Washington elite for the party it traditionally holds after the annual Alfalfa Club dinner, hosted to mark the birthday of Robert E. Lee, the southern general in the Civil War. The New York Times (“A Washington Bank, A Global Mess,” April 11, 2004) notes, “The Alfalfa roster includes presidents, politicians, diplomats and business impresarios, all bound together by being either formidably influential or fabulously rich. Attendees have included luminaries like Prince Bandar bin Sultan, Saudi Arabia’s ambassador to the United States; Jack Valenti, the president of the Motion Picture Association of America; and others with surnames like Greenspan, Kissinger and Rehnquist. President Bush and Vice President Dick Cheney made their first joint public appearance after the Sept. 11 terrorist attacks at the Alfalfa gathering in 2002.”

Valenti, who, like Allbritton and Bush, is a former Texas businessman, is also on the board of directors of Riggs Bank.

A television station also owned by Allbritton was in the news earlier this year after it refused to air an ad critical of the Bush administration’s policy in Iraq.

Perhaps even more than the Enron scandal, the Riggs scandal is a deeply political scandal. No doubt, much of what went on at Riggs remains to be uncovered. With the announced sale of Riggs to PNL, which will be completed by early next year, the owners of the bank are clearly attempting to contain the scandal’s fallout.

Source: World Socialist Web Site

Saturday, August 14, 2004

Germany admits Namibia genocide

Germany has offered its first formal apology for the colonial-era massacre of some 65,000 members of the Herero tribe by German troops in Namibia. German minister Heidemarie Wieczorek-Zeul told a commemorative ceremony that the brutal crushing of the Herero uprising 100 years ago was genocide. But the German government has ruled out compensation for victims' descendants.

A group of Herero has filed a case against Germany in the United States demanding $4bn in compensation.

"We Germans accept our historic and moral responsibility," Ms Wieczorek-Zeul, Germany's Development Aid Minister, told a crowd of some 1,000 at the ceremony in Okokarara. "Germany has learnt the bitter lessons of the past."

But after the minister's speech, the crowd repeated calls for an apology.

"Everything I said in my speech was an apology for crimes committed under German colonial rule," she replied.

Ms Wieczorek-Zeul repeated that there would be no compensation, but she promised continued economic aid for Namibia which currently amounts to $14m a year.


Driven into desert

The Herero rebelled in 1904 against German soldiers and settlers who were colonising south-west Africa.

In response, the German military commander, General Lothar von Trotha, ordered the Herero people to leave Namibia or be killed.

Germany argues that international laws to protect civilians were not in force at the time of the conflict.

Herero chief Kuaima Riruako said the apology was appreciated but added: "We still have the right to take the German government to court."

However, correspondents say the lawsuit filed in the US three years ago against the German government and two German companies is seen as having a limited chance of success.

Source: BBC

Friday, August 6, 2004

Inside the matrix

The quaint brotherhood in the liquidations industry is starting to fall apart, showing up some astonishing tactics. One meaning for Mafiosi, according to the Merriman-Webster dictionary, is a person who is a member of a group of people likened to the Mafia; especially: a group of people of similar interests or backgrounds prominent in a particular field or enterprise. It would probably be stretching a point to describe a group of people networked within South Africa’s liquidations sector as Mafiosi. Nevertheless, they do have an overriding interest in generating mountains of filthy lucre. And they are now being subjected, to increasing doses of public exposure.

There is perhaps one major – and totally surprising - factor that would disqualify the group as Mafia. Where the original Mafia were linked by origin as Sicilians, this group is as diverse as it gets. There are Muslim elements, such as liquidator Enver Motala, who was arrested on July 2 on charges of fraud and corruption. There are Jewish elements, in attorneys Stan Rothbart, and in Motala’s only remaining partner, Norman Simon, and also their disgruntled ex-partner, Mervyn Swartz.

And then there are the black players: on the fringes ex-justice minister Penuell Maduna, and Vusi Pikoli, who is still director general of the justice department. The picture would be incomplete without a middle-aged, bespectacled white Afrikaner, represented by Leon Lategan, one of Motala’s chief button men, and a senior officer in the Masters Office, the unit of the justice department which appoints liquidators according to its “unfettered discretion.”

One of Lategan’s most unforgettable Motala appointments was seen in respect of RAG, a R1-bn bankruptcy. Maduna intervened in that case, long after the original four liquidators had done all the work, and appointed Motala as fifth liquidator. The action was struck out by the High Court. Maduna then simply appointed Lategan as an extra Master in the Pietermaritzburg Masters Office, and Lategan simply appointed Motala to RAG, apparently in contempt of court. The appointment has, however, stuck.

Other key players fit in-between this group. Take Enver Daniels, the Chief State Law Adviser, who became acting MD of the Masters Business Unit on January 29, 2003. Daniels, who has recently been on study leave to complete his doctoral thesis in law, was a Marxist way back when, like Pikoli. Again, Pikoli knows Maduna very well from their days in exile from the apartheid regime, and so on.

Like most such organisations, there has been lots of training involved within this network. Simon and Swartz selected Motala as their front man for converting their business, SBT Trust, into a “black empowered” entity. The basis for this selection has never been understood. For one thing, Motala had been arrested on charges of fraud and corruption, back in 1989, amid an alleged massive sugar swindle in Middleburg, Mpumalanga. The case has yet to be prosecuted; the file just seems to keep traveling around the country for reasons that cannot be fully explained. However, in the 1990s, Motala acquired lots of experience in liquidations – but on the receiving end. According to Mohan Patel, a medical doctor who loaned hundreds of thousands of rands to Motala in and around the mid-1990s, Motala went from one bankruptcy to the next. Some of the businesses were burned to the ground, in accidents no doubt. Today, Patel is just one of the many judicial opponents that Motala faces. Patel is sore about suing Motala for return of loans and interest, but fails to understand how Motala could be so insensitive to Patel’s role, then anyway, as a friend helping when Motala was down and out. Well, not quite, recalls Patel. At the time, Motala was the apparent owner of two luxury BMWs, a sports Mercedes Benz and a Porsche. The way Patel remembers it, at least one of those cars was mysteriously stolen from Motala.

And then fast forward to the year 2000, by which time Motala had enjoyed the full benefits of being trained by some of the “best” in the brotherhood. At the time, an offensive to clear the way for Motala was being waged. At the end of 1999, Oliver Powell, one of the country’s leading liquidators, had been “bust” by Maduna.

On December 9, 1999, Maduna stated that “possible prosecutions for alleged corruption at the Pretoria Master’s Office were expected as early as next month.” It was not just Powell’s premises that had been raided. On October 24, 1999, the Scorpions, an investigative unit of the National Prosecuting Authority (NPA, itself a unit of the justice department), also searched the Centurion home of the Master of the Pretoria High Court, Ben Nell. In November 1999, Nell and two of his deputies, Charles Stewart and Eugene Januarie, were suspended with immediate effect. To this day, none of the prosecutions that Maduna promised have materialized. On the contrary, Powell has won two major court cases this year, and orders that every last thing seized from him be returned. Powell’s final big case will see him suing – in their present and/or previous capacities - Maduna, Jan Swanepoel (then head of the Scorpions, now of PricewaterhouseCoopers), Basil Nel (then of PricewaterhouseCoopers) and a former Sunday Times journalist, Amanda Vermeulen, for R60-m. It has hardly escaped attention that when Motala was arrested on July 2, 2004, his arraignment, following search and seizure, was by the Serious Economic Offences Unit (SEO), an elite unit of the South African Police Services.

The Scorpions and SAPS are as chalk and cheese. In full, the Scorpions are the Directorate of Special Operations, National Prosecuting Authority (NPA). The NPA national director, Bulelani Ngcuka, has been in his position since mid-1998, and was thus Scorpions overlord when Powell’s business and personal life were ruined. Two weeks ago, news emerged that Ngcuka was resigning after only six years of his ten-year contract. Ngcuka reports to the new justice minister, Brigitte Mabandla. In another world, national police commissioner Jackie Selebi reports to the Minister for Safety and Security, Charles Nqakula. It is clear that Motala has not been investigated by the Scorpions. On the contrary, Motala has on more than one occasion publicly advertised that he was working with the Scorpions (for example, in the RAG and Krion cases), and has even been described in some media reports as the “Scorpions liquidator.”

The rivalry between the Scorpions and the SEO is hardly a secret. Maduna’s apparent protection of Motala may yet be countered by Maduna’s potential nemesis, in the form of Mike Tshishonga, a deputy director general in the justice department. In October 2003, Tshishonga blew the whistle, alleging that his political boss had a nepotistic relationship with Motala; further, that Maduna had “abused the infrastructure and staff of the justice department for the purposes of advancing his personal interests,” and that Maduna had endangered South Africa’s criminal justice system.

Beyond the criminal charges that Motala faces, his nemesis may well prove to be Garveni Creations, fast on its way to being the most infamous South African bankruptcy ever. This week, John Cameron, attorney to one of Garveni’s major creditors, PG Bison, released an independent report on the Garveni estate. It contained shocking new information, of a most detailed kind, on and around the behaviour of Motala, whose appointment to Garveni was voided by the High Court on April 29.Cameron alleges that “as has been suspected, the estate of Garveni has been maladministered by Motala and Frans Langford [the co-liquidator], their conduct being highly unprofessional, irregular and improper and deserving of the highest censure and in due course, will be the subject matter of various complaints and civil proceedings.” In earlier court papers, Cameron had alleged that the conduct of Motala in and around the Garveni case had been “prima facie suggestive of fraudulent conduct . . . the existence of fraudulent conduct is fortified and substantiated;” that “[Motala’s] appointment was sought and obtained under a very unusual set of circumstances, all of which are suggestive of fraud.” Among the more-alarming disclosures in Cameron’s new report, is that Neville Shifren, previously the CEO and major shareholder in Garveni, met Motala early in May this year; that is, after Motala had been removed as a Garveni liquidator. Motala presented Shifren with accounts of Knowles, Husein Lindsay, Inc (KHL), a prominent Johannesburg law firm. One of its senior partners, Mohamed Junaid Husein, had acted for Motala throughout the Garveni matter (and apparently continues to act for Motala). Shifren was presented with KHL accounts in an amount “in excess of R500 000.”Cameron states that, in regard to such accounts, Motala, after making certain calculations, demanded that Shifren “pay 50% thereof.” To this, Shifren reacted that “he would consider no such payment, to which Motala reacted that if that was the case, he would be locking up the premises and would prevent GOF [Garveni Office Furniture] from removing any further items therefrom.”The KHL account would have eaten a big chunk out of the Garveni estate, which had been valued initially at R4-m. Cameron’s new report shows that Rothbart also submitted “one account” to the Garveni estate. Rothbart’s “invoice does not indicate exactly what services were rendered and in regard to what matter and naturally, as Motala has failed to provide the relevant information, it is uncertain as to what professional services were rendered.” The Garveni estate also made out cheques to Motala’s brother, and to the son of Simon.

The nepotism first emerged at the “417” enquiry into RAG. There, the Masters Office is represented by Stephan du Toit, senior counsel, assisted by Rafik Bhana (apparently a relative of Motala) and Soraya Hassim (previously, or perhaps still, Motala’s fiancée, and the only apparent female member of the cast), and Husein. In the RAG matter, Rothbart represents Motala.Déjà vu. In the latest big liquidations event, the R1-bn-plus bankruptcy of MP Finance, more popularly known as Krion, a giant pyramid scheme, four liquidators were originally appointed in August 2002. On January 6, 2004, Lategan appointed two further Krion liquidators. One of them was Motala. One of the original liquidators Koos van Rensburg, of Negota KVR, asked Lategan to supply his reasons for appointing the new liquidators. Lategan failed to respond. Instead, Rothbart replied in writing that he now acted for Lategan and that further correspondence must be addressed to him. Rothbart’s letter appeared to have been the clearest admission that it is Motala, and not Lategan, who was making the Master’s decisions. There has been similar evidence that Motala stage-managed the RAG matter, and perhaps others, directly through Maduna’s offices.

Source: Money Web