Abu Dhabi ready to pay $1.5bn to BCCI administrators

Abu Dhabi is finally set to hand over $1.55bn (pounds 1bn) of compensation to the administrators of Bank of Credit and Commerce International (BCCI), nearly five years after it was shut down following the world's biggest banking fraud.

The deal, due to be completed in the Middle East this week, is the first part of a $1.8bn global settlement by the Gulf state, BCCI's former majority shareholder. The money will enable the administrators, accountancy firm Deloitte & Touche, to make the first payment of 20p in the pound to BCCI's long-suffering creditors.

"There are so many slips between cup and lip, but we're close to signing. It'll be this week. The payout timing is still targeted for this summer," said a source close to the deal.

Sources warn, however, that there are still key legal hurdles to overcome, chief among them a legal action by three groups of creditors to queue- jump. This is still before the UK courts.

BCCI was closed down by regulators around the world after more than $10bn disappeared amid allegations of fraud, money laundering and illegal arms financing.

Founded in 1972 by Pakistani banker Aga Hassan Abedi, BCCI once had $24bn of assets and operations in 71 countries before it was exposed as a thoroughly corrupt organisation.

Abedi fled to Pakistan, where he died in August, but a number of key executives have been jailed in the UK, US and Middle East.

In the latest BCCI trial, the Serious Fraud Office is prosecuting shipping tycoon Abbas Gokal on fraud charges. The trial will start on 3 June. The Gokal family's Gulf shipping group was one of BCCI's biggest customers, and it is alleged that it conspired to create false loan documents and mislead the auditors.

Deloitte & Touche has recovered more than $3.3bn of BCCI's assets but has run into flak over charging fees of $200m while creditors have yet to see a penny.

In the legal minefield that still envelopes the whole case, a Luxembourg court is expected to rule by the end of May on whether those fees should be reduced.

The UK High Court has also yet to hear the case from former employees and a group of Middle East banks, led by Saudi-owned Faisal Islamic Bank, as to why their claims should take precedence over those of other creditors.

The administrators are also waiting for the court to decide whether it can sue the Bank of England for alleged negligence because it did not close down BCCI sooner.

The $1.8bn compensation package with Abu Dhabi was originally agreed in November, 1994, but it only gained legal clearance a year later after employees dropped objections over treatment of their claims.

The Gulf state, which claims its was just a victim of the scandal, originally proposed a $1.7bn compensation deal in 1992, which was also held up by employee opposition.

Meanwhile the professional fees incurred in the case - which stood at a total of $491m as of January - continue to mount inexorably.