Liquidators find dollars 12.4bn 'black hole' in assets of BCCI: Hopes for recovery of missing funds pinned on lawsuits for billions of dollars against auditors and Saudi sheikh (CORRECTED)

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The Independent Online

LIQUIDATORS of Bank of Credit and Commerce International said yesterday they had identified a dollars 12.4bn 'black hole' in the bank's assets.

Touche Ross, the liquidators, revealed the shortfall in a statutory report to the Department of Trade and Industry on the liquidation of BCCI SA, 18 months after the Bank of England co-ordinated the shut-down of the bank following massive long-term fraud. Just 6.7 per cent of BCCI's assets has been recovered to date and only another 4.5 per cent is likely to be realised.

Christopher Morris, joint liquidator, said yesterday that any prospect of filling the gap left by the dollars 12.4bn asset shortfall would come from legal actions the liquidators have launched against the auditors of BCCI, Price Waterhouse and Ernst & Young, as well as writs against Sheikh Khalid bin Mahfouz, head of the Saudi Arabian bank NCB. Mr Morris said they were suing each party for 'many several billions of dollars'.

In an unconnected move, Sir Jeffrey Bowman, chairman of Price Waterhouse Europe and joint chairman of the firm's world organisation, announced earlier this month that he will retire on 30 September. Sir Jeffrey, 58, was senior partner of PW in the UK from 1982-91, the years in which PW audited BCCI.

In another move, the liquidators this week served a writ for bankruptcy against the Asian businessman Nazmu Virani, head of Control Securities, in relation to sums the liquidators claim Mr Virani owes to BCCI.

Mr Morris said that legal action against the banking regulators responsible for supervising BCCI, including the Bank of England, was still a possibility. 'If there are any actions which make it our duty to bring actions against the regulators, then we will bring them,' he said.

The only other way of recovering more money for BCCI's 500,000 creditors worldwide lies in unravelling a number of highly complex investment structures put together by former BCCI employees involving billions of pounds, mainly in the Middle East.

The dollars 12.4bn represents the shortfall in the values of the assets listed in BCCI's books at 5 July 1991. The estimated realisable values fall some pounds 2.15bn short in the British side of the liquidation alone.

The liquidators have managed to gather in some dollars 719m of assets to date, compared with payments of dollars 280m, of which some dollars 133m (pounds 74.6m) are liquidators' fees. Mr Morris said that liquidators' fees had been the subject of 'considerable but uninformed comment'. He stressed that worldwide liquidators' fees represented only 1.9p in the pound of creditors' claims. Roughly a fifth of liquidation expenses so far relate to potential future recoveries, he added.

Mr Morris criticised a small number of creditors who have lodged an appeal in the Luxembourg courts against the proposed payout of 30p-40p in the pound, funded by the liquidators and BCCI's majority shareholder, the state of Abu Dhabi. He said that the appeal may not be heard until the middle of the summer. The creditors concerned, he suggested, might lose their position of influence on the court-appointed BCCI creditors' committee following a mass meeting of all BBCI creditors at Wembley Arena on 27 May, which will vote in a new committee.


Control Securities has asked us to point out that, contrary to the implication of a story on 24 April, Nazmu Virani is not a director of the company and has not been since April 1992.