The strange Abu Dhabi connection: BCCI affair

AMONG the more curious aspects of the BCCI affair was the role played by the government of Abu Dhabi, writes Chris Blackhurst.

In a graphic insight into the way the tiny oil-rich Gulf state managed its billions, Lord Justice Bingham describes how Agha Hasan Abedi, BCCI's founder, was a long-time acquaintance of Sheikh Zayed, Abu Dhabi's ruler. When Abedi formed his bank, the Sheikh and his son, the Crown Prince, were among the minority investors. The Abu Dhabi Investment Authority also became a 10 per cent shareholder.

The sheikhdom's BCCI interests were overseen by Ghanim Mazrui, who, despite heading the Central Bank of the United Arab Emirates, was not, Lord Justice Bingham notes drily, a banker.

When BCCI was in danger of total collapse in the spring of 1990 - thanks to the Informant's efforts - Swaleh Naqvi, the bank's then head, appealed to the Abu Dhabi shareholders for help.

Naqvi admitted that he and Abedi had siphoned off dollars 2.2bn ( pounds 1.3bn) of funds belonging to the ruling family's portfolio (which they managed) to staunch the bank's losses. Yet, the shareholders still decided to support him.

Lord Justice Bingham says that Mazrui claimed that 'with the exception of those relating to the Ruling Family's portfolio (our italics)' the losses were the result of unsuccessful banking and not of dishonesty.

'The Abu Dhabi authorities,' Lord Justice Bingham says, 'are not, however, untutored innocents in the world of international finance, and I cannot think they were as greatly deceived as they suggest.'

While the Abu Dhabi shareholders bailed out the bank, it was nine months before Price Waterhouse, BCCI's auditors, and the Bank of England became aware of the misuse of the ruling family's portfolio.

If, says Lord Justice Bingham, the full facts had been known at the time of the rescue, a fuller investigation could have been carried out 'or the bank would have been closed or would have collapsed there and then'.

Lord Justice Bingham's account is strongly disputed by the Abu Dhabi shareholders. On Friday, they claimed Naqvi's information 'did not in any way constitute a full or candid confession'. Naqvi, they said, had stressed that BCCI could be made profitable again.

(Photograph omitted)