Treasure Islands - Nicholas Shaxson [83]
It isn’t clear what other evidence the Bank needed. Indictments in the United States implicating BCCI in fraud dated back two and a half years; one stated that money laundering was part of its “corporate strategy.”11 Price Waterhouse had issued a qualified audit report on a BCCI subsidiary in 1989; and in 1990 BCCI employees had written to the Treasury, the Bank of England, and British ministers to warn of fraud inside the bank. That same year, Britain’s intelligence services had told the Bank of England that Abu Nidal controlled 42 BCCI accounts in London; the Bank for International Settlements in Basel had expressed concern; and in mid-1990 Price Waterhouse had discovered the so-called Naqvi files, revealing widespread fraud, fictitious companies, unrecorded deposits, manufactured loans, and evidence of stealing from depositors, findings that were passed along to the Bank of England. Still there was no action, even though BCCI headquarters were only a few minutes’ stroll down the road from the Bank
“It is difficult to see,” wrote Michael Gillard in Britain’s Observer newspaper, “how the required high ethical standards [for BCCI to be allowed to operate in Britain] fit with BCCI pleading guilty to conspiring with its own officials and two representatives of Colombia’s Medellin drug cartel to commit tax fraud and launder the proceeds of cocaine sales.”
Robin Leigh-Pemberton, the Bank of England governor, neatly encapsulated London’s see-no-evil offshore ethic. The present system of supervision, he added, “has served the community well…. If we closed down a bank every time we found an incidence of fraud, we would have rather fewer banks than we do at the moment.”12 That statement should have been evidence enough that the City of London was already the world’s premier offshore center.
The full Price Waterhouse report on BCCI remains confidential today, on the grounds that this will disturb Britain’s “international partners.” It is a clear defense of tax haven London.13
Ever since then, Morgenthau has struggled to wake people up to offshore crimes, personally pressing four U.S. treasury secretaries to pay more attention, with little result. “I remember giving a speech a couple of years ago to talk about offshore banks. It put everyone to sleep,”14 Morgenthau said. “Start talking about offshore money and their eyes glaze over.”
Just as the BCCI scandal quieted down, another offshore tale was emerging in the oil-rich African state of Angola, where I was the Reuters correspondent. Jonas Savimbi’s UNITA rebels had surrounded major towns in murderous sieges, pouring in mortar fire and trying to starve them into submission. In the city of Kuito desperate defenders were eating dogs, cats, and rats to survive, and bloodied patients were crawling from hospital beds to join armed raiding parties who would sneak out to search nearby fields, often mined, for cassava and other crops, sometimes having to fight their way back into town with provisions. The United Nations was calling it the world’s worst war, and the government was under an international arms embargo, so in 1992 it turned to secretive French Elf networks—related to the ones I would later encounter in Gabon, as described in the prologue—to help secure arms supplies. A wealthy Russian-born Jew named Arkady Gaydamak put together some $800 million in financing to help Angola procure weapons from a Slovak company, repaid in Angolan oil money, via Geneva, and get around the embargo. Later, French magistrates probing these oil-for-arms deals heard from a participant that the arrangements were “a gigantic fraud . . . a vast cash pump,” generating a 65 percent margin on the biggest arms contracts.”15 The financing trails, of course, involved many tax havens.
I tracked Gaydamak down in Moscow in September 2005, where he was under an international arrest warrant for his so-called “Angolagate” deals.16 He was eager to set the record straight