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BCCI HOLDINGS

June 23, 1999

BCCI HOLDINGS (LUXEMBOURG), SOCIETE ANONYME, ET AL., PLAINTIFFS,
v.
ABDUL RAOUF HASAN KHALIL, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Joyce Hens Green, District Judge.

          OPINION AND ORDER

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 to:

  (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 assets.*fn2

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 11, 1999.

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 $1,165,207,602.

I. DRAMATIS PERSONAE

A. Agha Hasan Abedi

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

B. Swaleh Naqvi

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.

C. Imran Imam

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.

D. Ziauddin Akbar

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 Kingdom.

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

E. Abdul Khalil

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 English.*fn8

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 800-page transcript 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.

G. Capcom

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.

H. The BCCI Liquidators

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.

I. Additional Witnesses

The Court also received deposition testimony from a number of former officers, directors, or employees of Capcom. Khalil also presented deposition testimony from prosecutors in the United Kingdom concerning their opinion of Khalil's and Akbar's relative culpability.

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.

J. Documentary Evidence

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 normalcy.

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 BCCI documents.

II. KHALIL'S DEPOSIT RELATIONSHIP WITH BCCI

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: Yes.

Q: 10 suitcases?

A: 10 suitcases.

Q: Saudi riyal cash?

A: 50 million more or less, total.

  Q: Did you count the money before you put it in the
  suitcases?
  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?

A: Oh, yes, oh, yes.

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.

In other respects, Khalil's testimony concerning his deposits was largely the same in both depositions. For example, Khalil testified that although all the cash deposited came from money in his house, some of it belonged to partners whose identity he could not reveal. See, e.g., Khalil Dep. (BCCI), Nov. 16, 1998, at 30-33. Khalil stated that money placed in term deposit accounts was jointly owned by these unnamed partners, and that money placed in current accounts belonged solely to Khalil. Whether these partners in fact existed is immaterial because in any event Khalil had sole authority to transact business with these funds.

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 testimony.

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 For example:

  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
  at BCCI?
  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?

A: Which 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.

Id. at 54.*fn19

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
  place.
    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
  described.

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
                                                        ___________
          TOTAL                                         $19,852.095
                                                        ===========

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 mail.

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

Shortly after Khalil agreed to hold BCCI Holdings shares as a nominee, his agreement with BCCI management expanded. Abedi still sought new sources of capital to fund the bank's expansion. One potential source of income was to increase the bank's trading operations. New financial instruments, certain kinds of futures and options, had been introduced into the London markets. Akbar, as a senior officer in BCCI's Treasury operations had become the bank's lead trader. From the evidence, the Court infers that Akbar had met with early success in the markets, and he was eager to manage a larger pool of funds for trading purposes. He also was eager to share in some of the returns he was providing to the bank.

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 that ...


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