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June 23, 1999
BCCI HOLDINGS (LUXEMBOURG), SOCIETE ANONYME, ET AL., PLAINTIFFS,
ABDUL RAOUF HASAN KHALIL, ET AL., DEFENDANTS.
The opinion of the court was delivered by: Joyce Hens Green, District Judge.
In July 1991, banking regulators around the world seized the
corporations collectively known as the Bank of Credit and
Commerce International ("BCCI"), uncovering the largest
international bank failure in history. Eight years later, the
effort to determine how the BCCI debacle happened and who is
responsible for the fraud remains ongoing. This lawsuit, brought
by the court-appointed Liquidators of the BCCI Group emerged out
of that process.*fn1
The defendants are two individuals, Abdul Raouf Hasan Khalil
("Khalil") and Syed Ziauddin Ali Akbar ("Akbar"), and two
companies owned and controlled by Khalil and Akbar — Capcom
Financial Services Limited ("Capcom UK"), and Capcom Futures Inc.
("Capcom US"). Only Khalil contested this suit; Akbar and the
corporations have defaulted.
Khalil is extremely wealthy, and was perhaps the largest
depositor in BCCI. In 1987, Khalil withdrew nearly $100 million
in deposits and interest from BCCI. The Liquidators did not
contest Khalil's right to the deposited funds. What the
Liquidators do claim is that in the late 1970s and early 1980s,
BCCI's former management approached Khalil, offering to pay him
handsomely for the use of his name and prestige to disguise three
fraudulent schemes. According to the Liquidators, Khalil agreed
(1) act as a nominee shareholder of the parent
corporation of First American Bank — once the
largest bank in Washington, D.C. — to disguise
the fact that BCCI had illegally acquired an
American bank without proper regulatory approval;
(2) act as a nominee shareholder of BCCI Holdings to
disguise the fact that BCCI had considerably less
capital and support than was represented to
depositors, regulators, and the public; and
(3) allow his name, and that of his companies, to be
used by BCCI's investment arm to disguise BCCI's
risky investments and to give the appearance that
certain sizable loans were being serviced when,
in truth, they were in default.
The Liquidators further alleged that BCCI directly paid Khalil
nearly $30 million for this use of his name and that he reaped
substantially more by less direct means. The Liquidators alleged
that if Khalil had not allowed his name and prestige to be used
to disguise BCCI's true financial condition, the bank would have
been closed down much sooner, preventing significant financial
losses to thousands of creditors and depositors.
Separately, the Liquidators also alleged that Khalil conspired
with Akbar — a BCCI insider who managed the bulk of BCCI's assets
until 1986 — to create a commodities brokerage, Capcom, through
which Khalil and Akbar further siphoned substantial BCCI
Shortly after the complaint was filed, Khalil moved for
dismissal. That motion was denied. See BCCI Holdings
(Luxembourg) S.A. v. Khalil, 20 F. Supp.2d 1, 7 (D.D.C. 1997).
After lengthy discovery this case was set down for a bench trial.
Khalil moved for trial by jury under Rule 39(b) of the Federal
Rules of Civil Procedure. That motion also was denied. See BCCI
Holdings (Luxembourg) S.A. v. Khalil, 182 F.R.D. 335, 340
(D.D.C. 1998). Trial to the Court commenced on January 25, 1999
and continued on January 27, January 28, February 1 and February
This Opinion and Order constitute the Court's findings of fact
and conclusions of law as required by Rule 52(a) of the Federal
Rules of Civil Procedure.*fn3 Any conclusions of law that
constitute findings of fact or findings of fact that constitute
conclusions of law shall be considered as having been determined
accordingly. Having considered all the evidence, arguments, the
parties' proposed findings of fact and conclusions of law, and
the entire record in this matter, the Court will enter judgment
in the amount of $388,402,534, not including attorneys' fees or
costs, in favor of the Liquidators on Counts I, II, III, V, VI,
and VII. The Liquidators did not meet their burden on Count IV.
Pursuant to 18 U.S.C. § 1964(c), the damages are trebled to
BCCI was the brainchild of Agha Hasan Abedi ("Abedi"), who, in
1972, established what he hoped would become an international
Islamic bank. Initially, BCCI grew according to plan. Until taken
under control by authorities around the world on
July 5, 1991, the BCCI Group operated a coordinated international
banking network, which at its peak had more than 400 branches in
approximately 70 countries. The BCCI Group consisted of a number
of corporate entities, including the corporate plaintiffs
enumerated herein.*fn4 The BCCI Group's international banking
network included offices in several of the United States,
including the State of New York. Abedi served as the top
corporate officer of the BCCI Group from 1973 until 1988, when he
suffered a heart attack. Abedi did not testify in this trial.
Indeed, the Court heard evidence that Abedi is deceased. See
Trial Transcript ("Tr.") (Testimony of Christopher Morris,
UK-appointed Liquidator) at 136-37.*fn5
Abedi's chief lieutenant in the bank was Saiyid Mohammad Swaleh
Naqvi ("Naqvi"), who succeeded Abedi in 1988. Naqvi remained in
the senior executive position in the BCCI Group until 1990, when
control of the BCCI Group formally passed to the sovereigns of
Abu Dhabi. Naqvi served time in prison in Abu Dhabi before coming
to the United States to plead guilty to charges here. He
presently is incarcerated in FCI Allenwood, Pennsylvania. As part
of his plea agreement, Naqvi agreed to cooperate with regulatory
and law enforcement authorities attempting to unravel the
intricacies of the rise and fall of BCCI. As with most of the
fact witnesses in this case, Naqvi testified by deposition. See
Fed.R.Civ.P. 32(a)(3) (listing circumstances in which deposition
testimony may substitute for live testimony at trial).*fn6 Naqvi
was deposed in this case and in the First American case
willingly; he did not understand that his plea agreement required
him to testify in either case.
Scrivener to the fraud was Imran Mohammed Ahmad Imam ("Imam").
Imam was a BCCI officer who assisted Naqvi from 1977 to 1991.
Imam's principal assignment was to maintain records of
transactions. For example, BCCI extended loans to the individuals
who became the record shareholders of First American's parent
corporation. Some of these loans were genuine extensions of
credit, secured only by the shares; other "loans" were created to
disguise BCCI's direct equity investment in First American. Imam
kept detailed records of these transactions. Financing for the
record shareholders of BCCI Holdings was done in similar fashion,
and Imam kept records concerning the holdings of both the genuine
investors and the nominees. Imam testified through deposition in
this case. Khalil's counsel declined the opportunity to attend
and cross-examine him.
Defendant Akbar was a BCCI officer from approximately 1976 to
1986 and was in charge of BCCI's Treasury Division from 1982 to
1986. As head of the Treasury Division, Akbar was responsible for
managing and investing BCCI's funds. Additionally, Akbar was the
account officer for certain major customers of BCCI, including
Khalil. At trial, Khalil and the Liquidators agreed that Akbar
was central to most of the schemes alleged in the complaint, a
rogue extraordinaire principally responsible for establishing
shell corporations to engage in sham transactions so as to
misrepresent BCCI's economic situation to the world, gambling
BCCI's assets in the commodities markets and disguising losses
therefrom, transferring large sums of money in and out of shell
corporations in which he had an undisclosed interest, and other
illegal activities. After huge losses in the Treasury operations
came to light internally, Akbar left BCCI in 1986. He continued
to receive a salary for some time thereafter.
After leaving BCCI, Akbar engaged principally in managing
investment and financial trading businesses, acting as both the
behind-the-scenes manager of Capcom — his joint venture with
Khalil — as well as manager of his own London-based Futures
Advisory Services ("FAS").
In 1988, authorities in the United States arrested Akbar in
connection with allegations that General Manuel Noriega's drug
money was being laundered through BCCI and Capcom. Although other
BCCI employees were convicted in connection with those
allegations, it appears that Akbar and Capcom U.S. were cleared.
However, in September 1993, after BCCI had been seized, Akbar
pled guilty to 16 counts of false accounting in the United
Akbar was released from prison in the United Kingdom during the
pendency of this litigation and returned to Pakistan. Akbar was
deposed in Pakistan in both this case and in First American.
Those deposition transcripts were introduced at trial.*fn7
Defendant Khalil is a citizen and resident of Saudi Arabia. He
has been married for 36 years to Taheya Badeeb, with whom he
lives in Jeddah, Saudi Arabia along with their two sons,
daughter, and grandchildren. Khalil was educated in Saudi Arabia
and Cairo, Egypt, where he studied history. Khalil developed a
passion for museums and antiquities which he has pursued
throughout his adult life.
When growing up, Khalil stood out as one of the brightest
students in his class. After he completed school, he was one of a
select group recruited to be trained in electronics and air
traffic control at Dharan Air Force Base in Saudi Arabia. While
at the base, Khalil alone was selected to work with United States
Air Force personnel. Through that contact, Khalil learned
Upon completion of his training, Khalil served as an air
traffic controller for the Civil Aviation Department of Saudi
Arabia and an instructor of air traffic control. He also was
recruited to perform air traffic control duties during Saudi
Arabia's war with Yemen. After 22 years of service, Khalil
retired and entered the real estate business. For reasons not
entirely clear from the record, the real estate market in Saudi
Arabia surged in such a way as to allow phenomenal profits — such
as a 400 million riyal return on a 14 million riyal investment
(plus the cost of improvements) within a short period. Through
such dealings, Khalil became extremely wealthy.
As is detailed below, Khalil deposited millions of dollars, in
various currencies, in BCCI in the late 1970s and early 1980s. He
withdrew those deposits, plus interest, in 1987, but he
maintained contact with BCCI beyond that period. After BCCI was
seized, Khalil came to London voluntarily to be interviewed by
the SFO in connection with its investigation of Akbar. Unlike
most of the other persons closely associated with BCCI, Khalil
was not criminally charged, either in the United Kingdom or the
United States. However, the Board of Governors of the Federal
Reserve did bring an administrative enforcement action against
Khalil in connection with his record shareholding in the parent
corporation of First American. Although, in September 1992,
Khalil granted Federal Reserve investigators an interview in his
home in Saudi Arabia, and although, in June 1997, Khalil did
travel to the United States to be deposed in First American,
Khalil has not formally been served with the Federal Reserve's
administrative charges, which remain pending.
At present, Khalil is in poor health. He spends considerable
time working on his projects, including a huge museum filled with
more than 60,000 antiquities, which he and his family have
donated to the poor. Another project, Altayebat City, consists of
classrooms, shops and 20 different museums to train, educate,
clothe and feed the poor.
Due to poor health, Khalil's deposition in this case was
postponed, and was taken well after discovery had closed. Because
it appeared likely that Khalil would be unable to appear at
trial, the Liquidators videotaped the deposition to allow the
Court to see, hear and observe Khalil's demeanor. Most of the
was admitted into evidence, along with the videotaped version in
CD-ROM format.*fn9 The Court regrets that Mr. Khalil was unable
to testify in person at trial.
F. Kamal Adham and Sayed Jawhary
Khalil's success in school and in the civil service brought him
to the attention of Sheikh Kamal Adham ("Adham"). Adham had been
an advisor to, and was a relative of, King Faisal. Adham came to
work for the King's son, Prince Turki, who served as chief of the
Foreign Liaison Bureau and Chief of Intelligence. Adham recruited
Khalil to work in the Foreign Liaison Bureau as Adham's personal
assistant, gathering and analyzing news media articles from other
countries regarding Saudi Arabia.*fn10 Khalil also started his
own communications company designing satellite communications
systems for the government of Saudi Arabia while working at the
Foreign Liaison Bureau. Khalil worked in the Saudi Government
with Adham for 16 years.
Another close associate of Adham and Khalil was Sayed Jawhary
("Jawhary").*fn11 Jawhary is a resident of Saudi Arabia, who has
worked for Adham as a financial advisor since 1957. At relevant
times, Jawhary also provided financial advice to BCCI, for which
he was well compensated. Jawhary did not disclose the existence
or terms of this side arrangement to either Adham or Khalil.
Adham, Khalil, and Jawhary had a number of business dealings in
common. On occasion, Khalil undertook real estate transactions on
Adham's behalf. The three kept each other apprised of investment
opportunities. It was Adham who suggested to Khalil that he
deposit money with BCCI. Also at Adham's invitation, Adham,
Khalil and Jawhary became record shareholders of Credit and
Commerce American Holdings, N.V. ("CCAH"), the ultimate parent
corporation of First American Bank.*fn12 First American operated
in multiple states in the United States, with its principal place
of business being the District of Columbia.
Khalil, through Akbar, invited Adham and Jawhary to become
record shareholders in defendant Capcom UK, a United Kingdom
corporation incorporated in 1984 which was at all relevant times
a broker-dealer in futures, options and commodities. In addition
to being a shareholder, Khalil also was a director of Capcom UK.
Capcom UK formed a subsidiary in the United States, Capcom US,
to trade on the Chicago Board of Trade. Capcom U.S. is an
Illinois corporation incorporated in 1985, which was at all
relevant times a broker-dealer in futures, options and
commodities. At relevant times, defendant Capcom UK was the
registered owner of 82 percent of the shares of Capcom US. Capcom
UK also formed another wholly-owned subsidiary, Brenchase
Limited, which was incorporated in the United Kingdom.
After the collapse of BCCI, Adham and Jawhary pled guilty to
charges brought by the United States and the State of New York
for their respective roles as nominee shareholders in BCCI's
acquisition of First American. In lieu of incarceration, Adham
agreed to pay a fine of $105 million and Adham and Jawhary agreed
to cooperate with law enforcement authorities in their
investigations of BCCI's collapse.
On July 5, 1991, banking regulators in the United Kingdom,
Luxembourg, and the United States froze assets owned or
controlled by BCCI Holdings, BCCI SA, BCCI Overseas, and ICIC
Overseas. By the end of July 1991, officials in 44 countries had
closed down BCCI branches and operations in their
jurisdictions.*fn13 Commencing in January 1992, the various
plaintiff companies were placed into full liquidation and the
Court Appointed Fiduciaries were appointed. BCCI Holdings was
placed into liquidation in June 1992. ICIC Overseas was placed
into liquidation in April 1992 and ICIC Holdings was placed into
liquidation in July 1993.*fn14
In denying Khalil's motion to dismiss, this Court recognized
the validity of the Liquidators' appointments and their powers to
act on behalf of the plaintiff corporations in this case. See
Khalil, 20 F. Supp.2d at 4-5. For the reasons previously cited,
and for those advanced by the Liquidators at trial, the Court
holds that the Liquidators have standing to bring this action.
The Court also received live testimony from Christopher Morris,
one of the English Liquidators; John Gilkes, an English forensic
accountant assisting the Liquidators; Dr. Audrey Giles, the
Liquidators' expert in forensic document examination; Richard
Small, Assistant Director of Banking Supervision and Regulation
for the Board of Governors of the Federal Reserve System; and
Irving Beimler, the Liquidators' expert in credit and lending.
To prove their case, the Liquidators relied at trial on BCCI's
records documenting Khalil's relationship with the bank. Although
the corrupt former management of BCCI used the bank to carry out
fraudulent schemes from an early point in its history, in many
other respects BCCI operated as a normal business. Account
ledgers were maintained. Deposits, withdrawals, wire transfers,
and other transactions were documented in the normal course of
business. The BCCI Group followed industry custom in its numerous
dealings with banks in the United States and around the world.
Large, prestigious accounting firms audited the records of the
various BCCI entities, and certified to the public for many years
that all was above board. Indeed, among other reasons, it is
because BCCI operated as a normal business in so many respects
that it took banking regulators around the world so long to
discover the massive fraud that was masked by the surface
Some of BCCI's records concerning Khalil, and Khalil-owned
companies, document real transactions as they occurred. The
parties agree that many other BCCI records concerning Khalil
evidence sham transactions. It appears that the former management
of BCCI relied primarily on use of Khalil's name and the names of
Khalil-owned companies to disguise fraudulent transactions in the
Treasury Division. On documents reflecting false transactions,
and occasionally on those reflecting real transactions, Khalil's
name was often signed by Akbar or another BCCI employee. At trial
Khalil objected on authenticity grounds to most of the
Liquidators' exhibits. The Court admitted the exhibits into
evidence provisionally on condition that the Liquidators lay a
foundation for their admission. That was done.
To distinguish appearances from economic reality, the
Liquidators relied on two experts. Dr. Audrey Giles ("Giles")
testified as to which signatures on key documents appeared to be
Khalil's genuine signature. Khalil did not offer a competing
expert, and the Court finds Dr. Giles' testimony to be credible
and unrebutted.*fn15 The Court finds that all of the signatures
Dr. Giles testified to have been more likely Khalil's than not,
were in fact Khalil's signatures. The Liquidators also relied on
John Gilkes ("Gilkes"), who sifted through numerous documents
recovered from BCCI and checked these against available outside
sources to separate fact from fiction in the story told by the
II. KHALIL'S DEPOSIT RELATIONSHIP WITH BCCI
In or about 1975, Sheik Adham told Khalil he had a "very good
bank" in England, and suggested to Khalil that he put his money
in BCCI because the real estate
market in Saudi Arabia was "quiet." Khalil's practice up to that
point, like many living in Saudi Arabia, had been to keep his
substantial wealth in cash, primarily in Saudi currency, locked
in a strong room inside his house. Khalil testified that one
reason that Saudis generally do not use banks is that the Koran
places restrictions on followers of Islam from keeping interest
earned on deposits. In any event, in or about 1977, Khalil began
his banking relationship with BCCI. While in London, Khalil
signed account opening forms, but did not deposit any funds at
that time. Approximately three weeks later, representatives of
BCCI came to Khalil's house in Jeddah to collect the first
The details of how much Khalil deposited with BCCI are of
critical importance. The Liquidators alleged that Khalil took
from BCCI far more than that to which he was entitled. Khalil
countered that his relationship with BCCI was economically
detrimental, and that money he admits receiving from BCCI —
nearly $100 million in deposits and $27.5 million in direct
payments — was due and owing to him. At the root of this dispute
is a disagreement over the amount Khalil initially placed with
BCCI and where it was kept.
On this important point, Khalil's recollection of the details
changed between his deposition in the First American case and
his deposition in this case. In this case, Khalil testified that
a representative of BCCI who worked in Adham's office in Jeddah
came to pick up his first deposit:
Q: So you give a gentleman from the representative
office in Jeddah?
A: 50 million more or less, total.
Q: Did you count the money before you put it in the
A: It is there. Always when I sell something I take
money from the people so I do accounting. I have
three different suitcase. If this is the big —
THE INTERPRETER: 150 notes.
A: If this big one, you know, you don't have big
size, maybe you can put $10 million, maybe 50 maybe I
can put 7 million. Maybe if it's smaller I put five
million in the suitcase, because it takes size like
that. So I already count it. It is there. He's been
most of the day counting the money there.
Q: Were you with him when he counted the money?
Khalil Dep. (BCCI), Nov. 16, 1998, at 22-23.*fn16
In his First American deposition, taken 18 months earlier,
Khalil had testified that it was Akbar who came to take the first
deposit, that the money was not pre-packed, but put into
Samsonite suitcases in Akbar's presence, that there were 11
suitcases instead of 10, and that he would have deposited more,
but he ran out of suitcases. E.g., Khalil Dep. (FAC), June 4,
1997, at 11, 28, 41, 44-48, 69-70, 73-76. Khalil testified that
he made one or two comparably large deposits via suitcase, along
with periodic deposits in smaller amounts. E.g., Khalil Dep.
(BCCI) at 100-01. There are some discrepancies between his two
depositions regarding these additional deposits.
Also, in both depositions Khalil testified that his first
deposit was to be divided to pay for BCCI shares he had agreed to
purchase, to be placed in term deposits (a.k.a. deposit
accounts), and a substantial sum to be placed "in the hand" of
Akbar, which would be immediately available to pay expenses as
Khalil may from time to time direct.
At trial, Khalil acknowledged through his counsel that the BCCI
documents reflecting the total amounts deposited by Khalil show
his deposits falling far short of the amount Khalil withdrew and
received from BCCI. Khalil's first line of defense was that the
Court should disregard those records as being fabricated,
falsified, and incomplete. Along these lines, Khalil asserted
that he had deposited more with BCCI than the records reflect.
The only evidence offered to support this assertion was his own
The Court cannot agree with Khalil's assertion. It is telling
that Khalil's counsel, when offering Khalil's version of how much
he placed with the bank, was forced to argue from stray
recollections by Naqvi and Akbar, e.g., Khalil's Prop. Findings
¶ 13, because Khalil — who well remembered sums involved in real
estate transactions more than 20 years past — testified as to
having only a vague recollection and no independent records to
establish that he had placed more with BCCI than is shown in the
records on which plaintiffs rely.
The Court finds that at the time Khalil handed over suitcases
of cash, he received a receipt. See Khalil Dep. (FAC), June
4, 1997, at 69-70. The Court also finds that Khalil kept his own
record of the amount deposited. Before the money was turned over,
it was counted in a day-long exercise. Even if there had been no
receipt, Khalil knew precisely how much he had placed with BCCI.
That amount was reflected on the account statements Khalil
received from BCCI, which he closely monitored. Although on
certain occasions, Khalil complained that the amount he had
deposited, or the amount of interest credited to his account, was
not accurately reflected, the statements were adjusted at or near
the time Khalil made such complaints.
When Khalil withdrew his deposits from BCCI, he presented his
account statements to Naqvi. Naqvi suspected that the account
statements, which had been prepared at Akbar's direction,
overstated the amount Khalil had with the bank, but Naqvi was
in no position to argue with Khalil. See Naqvi Dep., Mar. 27,
1998, at 74-76; Tr. (Akbar) at 456-58. Instead, Naqvi directed
that Khalil receive the amount reflected on the account
statements Khalil had presented to Naqvi. There was no
unaccounted-for surplus. See also Tr. (Akbar) at 470.
Realizing the Court may find that many of the BCCI documents
bear sufficient indicia of reliability to be both admissible and
entitled to evidentiary weight — as has been done here — Khalil's
fall back defense was that even if the Liquidators' numbers were
accurate, those figures do not account for the fund Khalil placed
"in the hand" of Akbar, which, according to Khalil's counsel, was
a sizable fund kept outside BCCI.
Khalil's testimony was quite inconsistent on this critical
point. On a few occasions, Khalil presented testimony suggesting
that the money in Akbar's hand was kept outside BCCI. For
example, when asked about a document he penned:
Q: . . . . Does that refresh your recollection, sir,
that in fact you had current accounts at BCCI?
Khalil Dep. (BCCI) at 212; see also id. at 214 ("[T]his is my
money with Mr. Akbar putting in another bank.").
However, on closer inspection, this issue was a red herring.
Most portions of Khalil's testimony demonstrate that he knew the
money "in Akbar's hand" was kept in BCCI current accounts.*fn18
Q: . . . . Now, the first time that you put money in
the bank somebody came to your home, collected
suitcases and put all that money in deposit accounts
A: . . . . They do like this. They put little
deposit. They pay for the shares of the BCCI. They
open account from the money in the hand of Mr. Akbar,
okay. Because he needs to pay the expenses.
Khalil Dep. (BCCI) at 52.
Q: What did [Akbar] do with that money?
Q: The money that he came and took?
A: He took it to the bank. He took it and he divide
it, some in the deposit, some in his hand.
Not only did Khalil testify that all of his money was deposited
in BCCI, but he also did not introduce any records of his own, or
from any bank other than BCCI, showing that the money "in the
hand" of Akbar was kept outside BCCI. It also is highly
improbable that Khalil would have entrusted Akbar with funds to
be kept somewhere other than BCCI when Khalil was hardly
acquainted with Akbar at the time he made his first deposit with
BCCI. On the contrary, Khalil understood that BCCI was his agent
and that Akbar worked for BCCI, at least as to funds in his
deposit and current accounts. See Khalil Dep. (BCCI) at 80.
On balance, the Court finds that Khalil's references to money
"in the hand" of Akbar refer to funds kept in current accounts at
BCCI. The memorandum accounts kept by Akbar at BCCI accurately
tracked Khalil's actual deposits with BCCI. There was no fund
kept outside BCCI.
III. KHALIL'S NOMINEE OWNERSHIP OF BCCI SHARES
The Court also cannot credit Khalil's testimony that he
actually paid for any of the BCCI shares registered in his name.
BCCI shares were not publicly traded, they were sold through
private placements on an invitation-only basis. In the late
1970s, Abedi sought new shareholders in BCCI to finance the
bank's expansion. Abedi approached his friend Adham to help
recruit investors. Adham presented the "investment" opportunity
to Khalil, who agreed in principle to invest.
Abedi sought genuine capital infusions, but he also needed some
investors to act as nominee purchasers of BCCI shares. Abedi
wanted to give the appearance of new capital being placed with
BCCI without diluting his control. Abedi envisioned that
ultimately only a large institutional investor would be able to
provide for BCCI's continued viability. Naqvi explained the
"special arrangements" that BCCI offered to prospective
shareholders such as Khalil until such time as an institutional
investor could be found:
Mr. Abedi wanted to make sure that a significant
percentage of the shares is held by such holders who
would be willing to sell those shares or transfer
those shares to this new structure, whenever it takes
So he wanted to have special arrangements with some
of the shareholders to ensure that a good sized block
of shares remain available to him for the purpose of
this restructuring. And in one of those reviews, Mr.
Abedi asked me [Naqvi] that if we will find out from
Mr. Raouf Khalil whether he will hold part of his —
part of the shares in his name under an arrangement
which is like this nominee arrangement you have
Naqvi Dep. at 19. Naqvi deputized Akbar to discuss the nominee
proposal with Khalil. Khalil knowingly agreed to serve, and did
serve, as a nominee in conspiracy with senior officers of BCCI to
act as a registered shareholder of BCCI Holdings.
The Court finds that when Khalil first deposited money with
BCCI, Khalil had an understanding with Adham that some of his
funds would be used to purchase BCCI Holdings shares. However,
the Court infers from the evidence that shortly thereafter, Akbar
approached Khalil with the nominee proposal. Khalil, Akbar, and
Abedi reached an agreement by which BCCI would advance Khalil
loans on a non-recourse basis to finance the purchase of those
BCCI Holdings shares that Khalil was to own beneficially and, in
addition, Khalil would allow BCCI to "purchase" additional shares
in his name in which he would have no beneficial interest. This
agreement was entered into before any of Khalil's genuine
accounts had been debited for the purchase of BCCI Holdings
shares. At no time were Khalil's funds used for the purchase of
the BCCI Holdings shares owned beneficially by Khalil.
Although shares were accounted for in BCCI's books as either
"beneficially" owned by Khalil or nominee shares, BCCI funded all
of the share purchases in Khalil's name and Khalil had no
commercial risk with respect to any of the shares. Naqvi
subsequently learned of this new financing arrangement and
accepted it as consistent with his and Abedi's overall agreement
with Khalil. At no time did Khalil repay the loans taken in his
name to pay for his beneficial BCCI Holdings shares.
Khalil became a record shareholder of BCCI Holdings in 1979.
Senior management made its first designated nominee purchase of
BCCI Holdings shares in Khalil's name in June 1980. Thereafter,
periodically during the 1980s, BCCI management purchased
additional shares in Khalil's name. Imam recorded some of these
as "beneficial" shares and others as nominee shares. In or around
May 1985, Khalil and Akbar each signed a schedule which listed
the "beneficial" and nominee purchases, and the loans taken out
against each portion. See Naqvi Dep. 27-33 & Pls.' Ex. 1489;
Tr. (Giles) at 62-64; Pls.' Ex. 1489A.
Shares were purchased in the name of Khalil on the following
occasions in the following amounts:
Date # of Shares Share Price Principal Cost
Oct. 1, 1979 20,000.0 $125.00 $2,500,000
Dec. 21, 1979 4,000.0 $125.00 $500,000
Date # of Shares Share Price Principal Cost
June 27, 1980 40,000.0 $125.00 $5,000,000
Dec. 29, 1980 10,315.8 $125.00 $1,289,475
Dec. 31, 1981 10,526.3 $200.00 $2,105,260
Dec. 31, 1981 6,666.6 $200.00 $1,333,320
Dec. 29, 1982 21,054.0 $40.00 $842,160
Dec. 29, 1982 13,334.0 $40.00 $533,360
Dec. 27, 1984 34,386.0 $40.00 $1,375,440
Dec. 27, 1985 51,579.0 $40.00 $2,063,160
April 14, 1989 57,748.0 $40.00 $2,309,920
To make these purchases appear real, senior management of BCCI
created loans from BCCI Group companies for both the "beneficial"
and nominee share purchases. The accounting for these share
purchases as loans was false. These were paper transactions,
backed by transfers of funds from one part of the BCCI Group to
another. To effect the share purchases, funds were transferred by
wire from accounts in the Cayman Islands to accounts in the
United States, and were then transferred to accounts in
Luxembourg. The Court credits Gilkes' testimony demonstrating
that these transfers were accomplished using wire transfer
facilities in the United States. In addition, instructions
related to the transfers were sent by wire and United States
Khalil incurred no genuine, collectible debt in relation to the
"loans" used to finance his share purchases, and BCCI obtained no
genuine, collectible right to payment on the "loans" created to
finance these share purchases. With respect to the nominee
shares, Khalil had no obligation to repay the loans. With respect
to the beneficial shares, BCCI could not collect on the loans
financing those shares, but Khalil agreed that the profit he
would take from the proceeds of any sale of such shares would be
only the difference between the share price and the loan amounts
as to those beneficial shares. However, if at the time of sale
the share price was less than the outstanding loan amount, Khalil
would not be obliged to repay the difference.
Khalil signed documents which gave all rights over both the
"beneficial" and nominee shares to ICIC, and which applied the
proceeds of any sale to pay off the outstanding loans. Khalil
also signed transfer deeds in blank.
The effect of Khalil's service as a nominee was to inflate
falsely the share capital of BCCI. By agreeing to act as a
nominee, Khalil understood that he was enabling BCCI to
misrepresent to regulators, auditors and prospective depositors
that BCCI Holdings had support through the investment of share
capital by a wealthy investor when in fact that investment had
not been made and the share capital, which supported the banking
activity of the group, was in fact fictitious. BCCI records gave
the appearance that Khalil had borrowed $19,852,095 from BCCI to
purchase his BCCI Holdings shares.
IV. TRANSACTIONS DONE IN KHALIL'S NAME
Akbar proposed that BCCI management approach certain customers.
As Naqvi testified, "the basic arrangement was that . . . the
customers may be asked to permit the bank to trade in their name,
the bank will provide all the funds, and the bank will take all
the risks." Naqvi Dep. at 36. With Naqvi and Abedi's
authorization, Akbar approached Khalil to discuss this proposal.
The Court finds that Akbar did approach Khalil, but with two
proposals. The first was the nominee arrangement outlined in
Naqvi's testimony. The second proposal was Akbar's own. He
proposed that he and Khalil form a partnership to invest the
funds in Khalil's current accounts, the funds put in his hand, in
commodities, futures, and options. With great assurance, Akbar
promised Khalil returns ranging from double to triple the
interest that he could earn from BCCI. Khalil was interested in
both arrangements, but he did not want to assume any of the risk.
A. The Khalil-Akbar Partnership
As to the Akbar-Khalil partnership, each agreed that Akbar
could trade with Khalil's funds, profits would be split evenly
between the two of them, and Khalil's capital would be
guaranteed. Khalil was attracted to Akbar's entrepreneurial
energy but recognized the risks of allowing him too free a rein.
Shortly after he had agreed to both the Treasury nominee
arrangement and the Khalil-Akbar partnership, Khalil consulted
with Abedi and Naqvi concerning Akbar's trustworthiness. They
told Khalil to trust Akbar "more than the bank." And, as it
turned out, he did. The Khalil-Akbar partnership became
incorporated as Capcom UK in 1984. As will be seen, Akbar, with
Khalil's knowledge and agreement, siphoned virtually all the
start-up capital from BCCI, and Akbar managed Capcom UK's affairs
from behind the scenes until 1987.
Akbar did not fully disclose the terms of the Khalil-Akbar
partnership to Naqvi and Abedi.*fn20 Akbar was a schemer on par
with Abedi himself. Akbar sensed that down the line Khalil could
be a willing patron to finance Akbar's grander schemes. To
disguise the extent of the profits he had earned with Khalil's
funds, Akbar told Naqvi that Khalil was demanding an increase in
his fee for acting as a nominee for the Treasury trading. Naqvi
agreed that Akbar should pay Khalil off. See Naqvi Dep. at 55.
The Liquidators sought to show that a total of $1,261,968,
divided into three payments, was deposited in Khalil's accounts
in 1980 and 1981 as a pay-off. However, Gilkes was only able to
document that two of the three payments were made, and he
referred to no documents showing that these funds had come from
BCCI assets. In the absence of such evidence, the Court finds