|
Banca Nazionale Del Lavoro: Testimony of Christopher Drogoul
NOTICE: TO ALL CONCERNED Certain text files and messages contained on this site deal with activities and devices which would be in violation of various Federal, State, and local laws if actually carried out or constructed. The webmasters of this site do not advocate the breaking of any law. Our text files and message bases are for informational purposes only. We recommend that you contact your local law enforcement officials before undertaking any project based upon any information obtained from this or any other web site. We do not guarantee that any of the information contained on this system is correct, workable, or factual. We are not responsible for, nor do we assume any liability for, damages resulting from the use of any information on this site.
BCCI
Testimony of Christopher Drogoul
My name is Christopher Drogoul. I want to thank the committee
for the opportunity to appear here today. I have been hopeful for
over four years that I might get an opportunity to speak the
truth concerning this matter, and although I had intended to do
so at my trial, I will do my best to be forthright and complete
in this appearance.
I was the manager of the Atlanta agency of Banca Nazionale Del
Lavoro from 1984 until August, 1989. Although I managed the
bank in accordance with my instructions from my superiors in Rome,
when criminal charges were being considered in connection with
the activities of that branch, the bank took the position that it
was a victim of the actions of the Atlanta agency.
At the time of the search I was in France on vacation. After
learning of the search I returned to the United States to deal
with the potential problems which might arise. Prior to my return
I met with representatives of the Iraqi Central Bank, who assured
me that I should not be concerned. It had been their position to
me over several years that the lending between the Atlanta agency
and their bank was known to the United States, and that any
irregularities would be resolved with a fine against the Bank. I
was also assured by my knowledge that the General Director and
other high officials of BNL knew of my activities that I would
not be in harm's way by my return.
After the search of the Bank in August, I became aware that
the investigation by the United States Attorney's Office in
Atlanta was focused on my staff and myself. It was always been my
view that the political power of the United States and Italy
reached right down to the US Attorney's Office in Atlanta to
ensure that only those associated with the Atlanta agency
suffered the consequences of the revelation surrounding the
search of the agency in 1989, while I do not know whether Alan
Greenspan's personal visit to Atlanta shortly after the search,
or the subsequent direct contact by the Bush White House solely
contributed to the bias by the lead prosecutor in Atlanta towards
the investigation, it certainly had an impact.
The search revealed that the Atlanta agency had been funding a
number of countries, Iran, Russia, and Iraq in part through the
use of what some have called the grey book. While some might
view that activity as reflecting criminal conduct, it was not. The
need to hide from some officials, particularly Mr. Sardelli in
New York, our activities led to this record keeping process. With
the removal of Mr. Sardelli in the Spring of 1989, we had
commenced to remove all grey book entries and to place all our
activities on the books. The search prevented this from
occurring. I am aware that this process could have prevented the
State and Federal Banking authorities from learning the full
nature of our lending. However, if any legitimate audit had been
conducted the full scope of our lending would have been easily
uncovered. It was never our intention to mislead the United
States Banking authorities from knowing the extent of our
activities. Instead, I acted to carry out the objectives of BNL
and the Italian government, and that I believed were also the
objectives of the United States, in my interaction with Iraq,
Russia, and Iran.
Having been confined to a prison cell since April 1992
stripped of all my assets, and compelled to have my wife and four
children suffer the indignity of having to live on welfare, I
have had a great deal of time to consider the events of the
period between 1984 and 1991 when I was indicted in a 347 count
indictment.
It is my view that the local US Attorney's office was
overwhelmed by political pressure by the United States and Italy,
by the law firm of King and Spalding, and the lack of a competent
staff to properly investigate and understand what had occurred.
To begin to understand the Atlanta agency one must understand
who Banca Nazionale Del Lavoro is, their political relationship
to the Italian government, and how Italy itself conducts its
business affairs. The perennial corruption, and the utilization
by its politicians of entities, such as BNL, to further their own
pecuniary interests, is self-evident. Whether the activities of
BNL/Atlanta enriched any Italian political group I do not know
but it is certainly likely. I do not intend to engage in a long
winded explanation of Italy, but I would be glad to answer any
questions in this regard that the committee nay have.
I am certainly disappointed, but not surprised that Mr. Pedde,
and the others at BNL who encouraged and endorsed my actions
at
the Atlanta agency, have taken a position that I acted without
authority. I am not so unsophisticated not to realize in this
international drama that I am an insignificant figure, who can be
sacrificed in the interests of major governments. I was aware at
all time that the policy of BNL was to further the foreign policy
concerns of both the US and Italy.
As I am sure the committee is aware, following my counsel's
subpoenas to former President Bush and other officials of his
administration, the government approached us about a plea to end
this matter. Recognizing that my trial would be postponed to
1994, and my concern over the fate of my wife and my four
children I agreed to a plea which would end this nightmare.
I will now attempt to answer certain questions posed by the
Committee in its request for me to appear.
1. WHAT WERE YOUR DUTIES AT BNL?
To answer this question properly requires that one understand
the basis upon which I was originally hired, and my banking
background at Barclays.
Originally hired in December 1981 as an assistant vice
president and junior lending officer, I was promoted to vice
president and lending officer sometime in mid 1982, and in mid
1984 was appointed acting manager of the Atlanta branch. In
March 1985, my position as manager was formalized by Professor
Bignardi.
I have often asked myself why someone with little lending
experience and no managerial experience was appointed to the
position of manager at BNL Atlanta, but it is clear that I was
the only presentable individual available for the job, since the
competent Italians shied away from taking the Atlanta
stewardship, and there were no Americans in the organization who
were available to be appointed at that time. I thus received the
position by default.
Officially, the duties of branch manager are administrative;
i.e. to ensure the smooth functioning and appropriate development
of the branch's activities in its designated nine state business
development territory (which included Virginia, North Carolina,
South Carolina, Georgia, Alabama, Mississippi, Tennessee,
Kentucky and West Virginia).
However, since the branch was constituted with a small capital
base of USD 2.000.000, sufficient personnel to properly operate
the branch were not hired. Thus employees filled multiple
functions: The manager was also a business development officer, a
business development officer was also the credit manager, the
support trader was also a business development officer, the
letter of credit administrator was also a business development
officer, the operations officer acted as the comptroller, etc.
In reality, BNL Atlanta was never truly conceived of or
managed as a branch. It was instead considered to be a quasi
autonomous business development office.
Moreover, whereas every other branch in the United States
operated within its established geographic territory, BNL Atlanta
historically operated throughout the United States, and
eventually throughout the world. It was common knowledge
throughout the BNL system that BNL Atlanta officials traveled in
other branches territories, and developed business in those
geographic zones for the benefit of BNL Atlanta, that local
branch, and the head office.
Thus, when BNL Atlanta traveled to Geneva to develop commodity
business with the international grain traders based there, it was
common for BNL Atlanta officers to find a way to develop business
for the Geneva branch as well. Since most of the Atlanta branch's
business involved head office banking relationships with the
central banks and the principal commercial banking institutions
in Eastern Europe, the Middle East and North Africa, it was
common for Atlanta officers to use meetings with those
institutions as forums to develop opportunities for the
correspondent banking division at the head office.
Ted Monaco's statement to the effect that he was not alarmed
at seeing me in Baghdad is in a sense true, for all BNL knew that
Atlanta roamed the globe in search of business (in that case
though, Monaco also knew that Sardelli had limited our travel to
areas inside Atlanta's assigned geographic territory).
To summarize my duties therefore, I would say that officially
I was the senior administrator of the Atlanta office, but in
reality I was a senior business development officer of the bank
based in Atlanta responsible for developing much of the bank's
multi-national business.
Indeed, my general manager, Dr. Pedde, repeatedly emphasized
to me the need to develop strong ties to European and U.S. multi-
national corporations for the bank. Dr. Pedde eventually issued a
dictum stating that officers responsible for the development of
assigned business should travel to develop such business, rather
than head office officials.
2. HOW WOULD I DESCRIBE THE PERFORMANCE AND QUALITY OF THE VARIOUS
EXAMINERS ASSIGNED TOAUDIT THE BANK?
It is inaccurate to consider the "visits" by the Federal
Reserve Bank, the State Banking Department, and Peat Marwick
to be true audits of the branch's records, for they were not. This
statement is not intended to insult any supervisory agency.
Simply stated, the established parameters of those entities
audits did not call for a comprehensive audit.
The task of the Fed was simply to confirm that the State of
Georgia audit revealed no major problems, and thus their audit of
BNL Atlanta usually consisted of a one or two day review of the
State of Georgia' preliminary results, followed by a cup of
espresso in the manager's office.
The State of Georgia inspectors examined credit folders to
determine whether there was an inherent risk in lending to a
particular company, financial institution, or country, without
any thorough confirmation of the details reported on the branch
records. The role of the State examination was not designed to
verify the branch's records. That responsibility rested on the
shoulders of the bank's internal team of inspectors .
The Peat Marwick examination was nothing more than an
exercise to place an independent auditor's imprimatur on the branch's year
end results, and their audit consisted of a verification of the
assets and liabilities recorded on the branch's books at the
close of the financial year, without any examination of the
underlying records. By the third or fourth year of such a review,
the procedure became so banal that neither KMPG nor BNL Atlanta
considered the audit to anything more than an exercise in
protocol.
The audit performed by BNL's internal auditors was
comprehensive and thorough. Had it not been "tamed," all the
branch's activities would have been revealed, regardless of any
attempts on the part of BNL Atlanta's staff to conceal those
activities from the internal auditors. The Morgan transfer
records were never examined thoroughly, the Rafidain and Central
Bank of Iraq's records were never reviewed, the amount of funding
received from the interbank market never examined except on a
cursory basis, and on and on. I considered the internal auditors
omissions to be intentional oversights the first time, and
concluded by the second audit that there would not be any
wholesale unearthing of Atlanta's Iraqi relationship by BNL's
audit team.
Having made this statement, though, I recall many
conversations with bankers from New York, who were subjected to
numerous state and federal agency audits. They all discussed the
thoroughness of the New York audits, so perhaps the Atlanta
auditors simply viewed their responsibilities differently.
I do not personally believe that the activities of the Atlanta
office could ever have developed in New York. It would almost
seem that the environment for BNL Atlanta's was perfect.
3. TO WHAT EXTENT DID BNL NEW YORK AND BNL
ROME OFFICIALS KNOW ABOUT THE CCC OR MTL
CREDITS FOR IRAQ?
It is important to understand that in most instances approvals
to extend credit or to engage in a transaction came in verbal
form, either through BNL's regional management in New York, or
directly by telephone from BNL Rome.
In a conversation with Dr. Florio during and after a dinner
meeting in New York, we were discussing the salubrious impact
upon the branch that the CCC program had the previous fiscal
year. In particular, we were discussing the prior year's
approvals for the extension of credit to Mexico and Iraq, and I
had indicated that given the low level of risk associated with
these transactions, we at BNL Atlanta wished to continue our CCC
lending to those same countries, as well as to others. I had
mentioned to Dr. Florio that the CCC had recently accorded
significant guarantees to Mexico and Iraq for the U.S.
government's new fiscal year, and on this occasion I specifically
sought his verbal approbation to lend anew to those countries.
His reply, which I remember quite distinctly, was that although
he too saw little risk in lending under CCC, the International
Division of BNL, and he especially, were under pressure from
political forces, at that time unknown to me, which would use any
increased lending activities to Mexico as a weapon against the
Division, since the New York Branch has in years past lent
substantially to the Mexican public and private economic sectors,
both of which were embarrassingly delinquent in paying their
loans.
Here I note that BNL Rome officials informed me well afterward
that an impending new BNL administration, which sought to abolish
Dr. Florio's International Division on the grounds that it was
spending too many of the Bank's resources and not generating
sufficient profits, was seeking to use any of the International
Division's weaknesses to dismiss Dr. Florio. Hence his
trepidation to engage in further Mexican lending.
On the subject of Iraq, he evinced no particular objection to
further lending commitments toward Iraq under the CCC program,
and inquired about my specific intents. I duly noted that BNL
Atlanta had not been successful in obtaining full utilization of
our facility in favor of Rafidain Bank, and that we needed to
offer a considerably larger facility than that of the previous
year in order not to be squeezed out by the banks involved the
prior year.
At this point Dr. Florio sought assurance that the risk was as
it had been represented by the CCC. I assured him that in reality
the CCC ensured that on all defaults the borrowing bank would
make arrangements to reimburse the lending bank (BNL, in other
words) for those amounts not covered by the CCC guarantee,
usually by arranging for the borrowing institution to remit the
unguaranteed differential at the time of the CCC's debt
rescheduling at the Paris Club.
Having understood the mechanism by which the lending
institutions would be "made whole," Dr. Florio then specifically
requested from me the amount which I thought would be appropriate
for BNL to extend to Iraq. I noted that the anticipated
allocation by the CCC to Iraq would be in the area of $550
million, and that we should be prepared to extend an offer to
finance about one-half the total amount, in order to insure
utilization of our facility, and in order to have opportunities
to develop relations with the U.S. exporters shipping
commodities. I also mentioned that we might wish to underwrite
the entire facility and share the business with one or two
institutions of our choosing, although at the time I had nothing
formal in mind.
He ruminated on the matter for about one minute and a half,
and as we approached his hotel after leaving the restaurant, he
said, "Alright, go ahead with Iraq, but keep away from Mexico for
the time being." The entourage accompanying Dr. Florio
exchanged courtesies.
His group entered his hotel, BNL regional management staff
(Mr. Guadagnini, Mr. Biginelli, et al. parted company with me to
return to their homes, and I returned to my hotel.
Such was the manner of our discussions regarding credit
facilities of all sorts. Upon my return to Atlanta I notified
those parties concerned, most notably Raffaele Galiano and Paul
von Wedel. Galiano was instructed to prepare a formal proposal to
Rome, whereas von Wedel was requested to begin marketing our
services to the U.S. grain exporters in advance of our meetings
with the Iraqi CCC delegation.
The point of this story is twofold: one, to give you an idea
about how BNL bankers discussed and obtained verbal authority
from superiors regarding all sorts of requests, and two, in order
to impart to you the specific conversation in which I obtained
authority to proceed in my negotiations with the Iraqis.
As it turned out, Mr. Galiano's requests for formal approval
from the area manager in Rome with responsibility for Iraqi
institutions met with positive encouragement.
Mr. Galiano's comments regarding the status of our formal
request suggested that all was proceeding as planned. The area
manager reported conversations he had with Dr. Florio who had by
then returned to Rome indicating that all was in order, as Dr.
Florio and I had agreed, and therefore, even though we had not
yet received 'board certified' approval, everything seemed on
track, and we accordingly proceeded to negotiate with the Iraqis,
who by then were in Washington, D.C.
After the conclusion of our negotiations with the Iraqis, I
recall having spoken to Mr. Guadagnini in New York over the phone
to let him know of our success in Washington, and that we planned
to sell unwanted CCC Iraqi loans to several banks seeking to
participate.
Approximately one month later, Mr. Galiano approached me in my
office and indicated that BNL Rome would be "delaying" the
proposal regarding the CCC Iraqi loans, but that I should not be
alarmed, it was just "another instance of their slow procedural
manner." There was no indication that Dr. Florio was changing his
mind. Instead, we proceeded as usual, and, given the successful
conclusion of our negotiations, I prepared for my first visit to
Baghdad, with Mr. Guadagnini's approval, and with Mr. Biginelli's
complete awareness (Biginelli was by then the London branch
manager, and I visited with him there just prior to my departure
for Baghdad).
It was only upon my return from Iraq that I understood there
was a problem with our proposed facility, and it was expressed to
me more or less in these words:
"Yes, I know that Dr. Florio told you to proceed, but
apparently in the past several weeks he has had temporarily to
cease lending activity to Iraq; but I'm sure the situation will
be back to normal soon. Continue about your business, even though
I have or will be send you a telex declining approval of your
facility for the time. We'll work it out soon."
In hindsight, I suppose that I should have called Florio
directly and confronted him with the situation. Yet I assumed
that the "delay" would indeed be temporary, since in the past
Rome had always delivered, although sometimes well after a
verbally authorized credit had been repaid. Additionally, I
thought the problem to be linked to the same reason Dr. Florio
sought to avoid Mexican risk... to protect his division against
political swashbucklers. As a result, I gave the matter only
momentary thought.
We continued to honor our commitments, both to the Iraqis and
to the exporters, and reflected the loans accordingly on the
branch's records .
Then, while at an International Division managers meeting in
Venice, Mr. Guadagnini mentioned to me that Dr. Florio had noted
to him that BNL Atlanta's exposure to Iraq was in excess of the
first year's CCC credit line to Iraq, and it might cause
[political] problems for Florio. Accordingly, Mr. Guadagnini
asked that I regularize the Iraqi credit line as soon as I
returned.
Having had an approval of which Dr. Florio was well aware, I
was genuinely perplexed by Florio's and Guadagnini's comments.
Thus, upon my return to Atlanta, I called a meeting of the local
officers and stated something to the effect that Florio was
having difficulties in Rome politically, had found himself boxed
into a corner temporarily regarding Iraq, and had asked that we
"eliminate" for a time the Iraqi exposure above $ 100 million, to
help him. It was only in 1988 while discussing the matter of Iraq
that Ted Monaco admitted the problem Florio had with BNL's loans
to Iraq, only a part of which related to BNL Atlanta. Although
BNL Atlanta's Iraqi loans did not constitute a problem for
Florio, since ultimately we had elected to remove our branch's
Iraqi exposure from the records on the last day of the month,
thereby insuring he would have no problems from us, there were
sizable amounts of unsecured loans to Rafidain Bank authorized by
Florio for BNL's Italian branches which caused him considerable
anguish when the new BNL administration sought to find fault with
the International Division.
My next meeting with Florio was scheduled to be in New York in
October of that same year, and it was my intention to seek
clarification on the matter of Atlanta's Iraqi loans. At that
meeting, however, Nesi and Florio appeared ashen, Guadagnini had
been forced to announce his resignation, and Dr. Pedde had taken
control of the meetings, where he lamented the ineptitude of the
International Division under the guidance of Dr. Florio, who was
not even allowed to utter any formal statement to his managers.
If I am not mistaken, the ever ebullient Dr. Sardelli was
present, having flown in from the far east to be introduced to
the North American managers as the new regional manager.
The odor of controlled chaos was in the air, and all parties
became skittish and extremely cautious around each other. It was
clear there had been political upheaval at BNL Rome, and no one
either in Rome or at the foreign branches understood the new
rules by which the bank was to be operated. Florio spoke to no
one, Nesi's political base had obviously disappeared. Pedde's
position was still somewhat uncertain to us. Only Dr. Sardelli
spoke eloquently about his goals for the BNL network in North
America. It was truly a somber event, for seemingly overnight the
political hierarchy changed and rumors abounded regarding the
imminent demise of Florio and his international division.
In this environment, I did not dare burden Florio with another
problem, although I did make an effort to discuss the matter with
him, and was politely rebuffed with a comment to the effect that
the issue of CCC guaranteed loans to Iraq was insignificant in
the face of what loomed ahead for the International Division. My
dilemma appeared rather insignificant and at the same time, I was
genuinely uncertain to whom I was to direct my questions
regarding my international lendings. Guadagnini, in one of my
conversations with him about the general state of affairs,
acknowledged "apres moi, le deluge." Florio was dismissed soon
after this meeting, the International Division was erased from
the corporate organization chart, and its headquarters palazzo
across from BNL's headquarters on Via Veneto put up for sale.
Once Sardelli was installed as the new North American Regional
Manager, it was quite unclear to all branch managers whose
political interests Sardelli represented, for he was critical in
the extreme about Mr. Guadagnini's prior management team, its
lending and administrative practices, and its objectives. In
concert with Dr. Pedde, he seemingly delighted in deconstructing
Professor Nesi's international network in the U.S., Canada, and
Mexico, and deriding the previous efforts of messrs. Florio and
Guadagnini who were acknowledged Nesi lieutenants.
Yet at the same time Dr. Sardelli raged about the "fat
buffoon" who had no international experience and who appointed
political cronies to positions of importance in the BNL network
throughout the world, and particularly in New York. He openly
criticized the new administration, and after a time it became
obvious that he was not one of their men either.
It remained therefore up to each branch manager to seek his
own alliances with BNL Rome in order to protect his branch's
interests. We in Atlanta solidified our ties directly to those
individuals who were not ejected from the bank in the purge of
the International Division, and simultaneously worked hard to
understand Dr. Pedde's objectives and align our activities with
his developing strategic designs.
You will note that the initialization of concealment occurred
after Dr. Florio changed his directive to me regarding Iraq, at
least three months after he had instructed me to proceed with the
branch's CCC activities there, as his International Division was
collapsing about him. The initial process was not designed to
withhold information from BNL Rome, for Rome was aware of our
true exposure from a variety of sources, not the least of which
was the asset report sent to New York, and to Rome, every ten
days, and from the daily asset and liability reports for the
Atlanta branch which New York examined daily.
Once Mr. Sardelli settled into his position in New York, he
regularly poked and probed at our operations, and put pressure on
us daily to alter the manner in which the branch has operated for
the previous six years. He attempted to have us cease relations
with many mid size companies that had been established customers
of BNL Atlanta since the branch's inception, and originally
promoted by the previous regional management officials, yet he
sought for us to lend to new companies of similar size. He
attempted initially to curtail our commodity lending activities,
and threatened to move them to BNL New York, under the
responsibility of Albert Daiboch, an individual who did not share
the same rapport with the grain companies as Atlanta's commodity
officials. He sought to limit our travel to the southeastern
U.S., when he was plainly aware from existing documentation that
we maintained relations with corporations and banking
institutions nationwide, in western and central Europe, North
Africa and the Middle East.
In our conversations with various officials in Rome about
our difficulties with Dr. Sardelli, we were advised and
encouraged to strengthen our ties to Rome, "for Sardelli's reign
will be short"; and so we oriented ourselves towards Rome, and
kept Rome, rather than New York abreast of our activities. Dr.
Sardelli was declared 'out of the loop' and it thus became
necessary for us to mask our relations from Dr. Sardelli pending
Rome's initiatives to replace him, for his volatility only
jeopardized the relations we had established with the commodity
merchants, the industrial multinationals, the overseas importers,
and heir financial institutions. Accordingly, when the regional
management auditors came to Atlanta to convert our records onto
the Mantec accounting systems, BNL Atlanta had no choice but to
conceal our complete activity from the eyes of Mr. Sardelli, much
to the delight of BNL Rome, I might add, for now their official
responsibility ended. Additionally, we were obliged to do the
same when Dr. Sardelli's auditor, Luigi Messere, came to our
offices. Documentation which was altered and/or omitted from the
branch's records was not intended to officially mislead Rome, but
only Sardelli.
Indeed, Rome officials (and in particular Mr. Monaco) were
well aware of our activities in Iraq, but also in other
countries. They were aware in a detailed manner of most of the
transactions in which we were involved, for we obtained guidance
from them in one form or another.
Once Sardelli's departure was effected, and Mr. Lombardi
assigned to the area managership, an open flow of information to
regional management commenced and the branch's activities were
being brought into the open. Mr. Lombardi, in concert with BNL
Rome officials, were again openly assisting us to bring order to
much of the Atlanta branch's records and to obtain the necessary
formal approvals from Rome.
As you know, Mr. Monaco and his team from Rome were in Baghdad
at the same time as Paul von Wedel and I in 1988, and as
indicated by Mr. von Wedel and a colleague of Mr. Monaco, a 20 to
30 minute dialogue between Ted Monaco and myself took place
separately from von Wedel and Monaco's group. In this private
dialogue, Monaco explained to me the purpose of his trip to
Baghdad, which as I understood was to expeditiously re-negotiate
old BNL - Rafidain debt, with a view to then establishing new
facilities in favor of Iraqi government financial institutions.
I explained that von Wedel and I were in Iraq to discuss
previous years CCC and related activity, to determine the extent
of upcoming CCC allocations, and also to discuss with the Iraqi
Central Bank its earlier proposal for BNL to provide selective
project finance to U.S. and European multinationals engaged in
the reconstruction of Iraq's infrastructure. I detailed in broad
terms the level of commitment expected by Markazi, and indicated
that several government loan guarantee institutions (ECGD, Exim,
Coface, Sace, and Hermes) were all considering various projects
which could potentially be interwoven into our financial
arrangements. Monaco expressed exactly the same aspirations and
asked that I keep him informed of the results of my meeting in
Baghdad, which I did subsequently.
Within the Atlanta branch, all employees were aware of the
Iraqi loans.
In Rome, the following departments were aware of the overall
activity with Iraq:
A. Correspondent banking division (area finanza) -
unit responsible for relations with Middle Eastern and
African banking institutions.
Gian Maria Sartoretti
Teodoro Monaco
as well as several of their staff.
Monaco in particular was completely aware of the extent of
Atlanta's CCC lending, for over the years beginning in 1985 in
telephone conversations he was kept abreast of our annual CCC
pilgrimages to Washington. He knew the general amounts which BNL
Atlanta agreed to finance, and indeed encouraged me to proceed,
for he time and again indicated that Iraqi approvals would
eventually be forthcoming.
He was aware of overall extent of our MTL commitments, for he
was apprised by me initially in Baghdad of Atlanta's
negotiations, told me to develop the post Iran-lraq war
reconstruction business, and indicated that he too was developing
his lending activities along the same lines, but that he had
several administrative hurdles to surmount in Rome before he
could charge ahead.
We had regular discussions regarding Atlanta's CCC activity
and, as MTL business developed, conversations regarding those
loans also.
By 1989, Monaco was instructing BNL's Italian branches to
telephone the Atlanta office directly regarding Iraqi loans.
Although Monaco has contended that these referrals were for cash
collateralized business only, this is not the case. Cash
collateralized business was being handled by BNL London, under
Monaco's control.
B. Multinational corporation lending division (area
commerciale) unit responsible for the 1000 largest
corporations worldwide
Ademaro Lanzara
Carlo Salvatore
These officials monitored relations with BNL Atlanta's
multinational clientele and met with these companies senior
officers periodically at BNL Rome and also on occasion the these
corporation's corporate headquarters.
On several occasions, the most senior executives of
Continental Grain and Cargill visited messrs Lanzara and
Salvatore and detailed the scope and breadth of their relations
with BNL Atlanta. They met with no unusual remarks.
On another occasion, Mr. Lanzara met with officials of Nestle,
at the company's headquarters in Vevey, Switzerland. At that
time, Lanzara received complete information regarding BNL
Atlanta's activities on behalf of Nestle in Iraq. Lanzara called
me shortly upon his return to express his thanks to us for having
made his job at Nestle that much easier...for we had effectively
established a positive reputation for BNL at Nestle. The Nestle
loans were neither CCC nor MTL credits.
They were unsecured one year credits to Iraq to facilitate the
purchase of powdered milk and baby formula, amounting to an
aggregate of more than USD 50 million. Lanzara was fully aware of
these credits, and others.
C. credit division (area crediti) unit responsible
for granting credits companies based overseas
Dr. Carini
Dr. Frattini
As head of the credit area, it was Dr. Carini's role to host
the visits of senior executives from overseas multinational
corporations seeking to update the head office about their
financial standing. Thus on many occasions, Dr. Carini or his
successor, Dr. Lupo met with the same senior corporate executives
who met with Drs. Lanzara and Salvatore. Here too, these
executives have confirmed explaining to the area crediti
officials the nature of their relationship with BNL Atlanta, at
times in the same meeting or luncheon attended by area
commerciale's officials.
Dr. Frattini, a middle level officer specifically responsible
for Atlanta's credit portfolio, saw the computer reports relating
to the branch's exposure.
This exposure was reflected erratically, causing the head
office inspection centre to question Frattini on numerous
occasions about Atlanta's activities. Frattini, who visited
Atlanta and spent several weeks there, understood that Atlanta
was using its credit facilities for purposes and time periods
other than those formally approved in Rome.
Nonetheless, he continued to be one of Atlanta's strong
supporters.
Similar computer reports evidencing BNL Atlanta's exposure to
correspondent banks was reviewed too by the Rome inspection
centre, and Monaco was similarly queried about Atlanta's
activities. Given his parallel strategy to support Iraq, his team
worked with Atlanta officials to quell any suspicion in the
inspection centre.
D. office of the managing director
Dr. Pedde
Pietro Lombardi
Formerly the head of area crediti, Dr. Pedde was appointed
managing director after the initial political purges of 1986 and
1987, shortly after the Socialists under Bettino Craxi lost power
in the Italian Parliament.
Aware of Atlanta's shadow activities, through other sources,
he provided immeasurable support for BNL Atlanta, in essence
acting as the branch's protector. On occasions when I was in Rome
on official visits, he would pull me aside for short periods,
express his satisfaction with the manner in which the Iraqi
business was progressing, and encourage me to continue our Iraqi
activities, but with an emphasis on developing multi-national
industrial clients in Europe and North America.
Whenever my nemesis Dr. Sardelli in New York caused me
difficulty in New York, he intervened to protect the branch and
its activities .
He discussed particulars with me about Atlanta's Iraqi
lending, especially as it related to Italian clients, and asked
that I liase confidentially with him as required through Pietro
Lombardi, the man who ultimately replaced Dr. Sardelli in New
York.
As financing the Iraqi portfolio became too onerous a task for
the Atlanta staff, it was through Pietro Lombardi to Dr. Pedde
that I communicated our inability to continue our lending to Iraq
in the same manner, stating that Rome would have to fund this
activity directly from Rome or from other units. I expressed the
same sentiment to the Mr. Ali in Iraq, and before long both were
proposing the removal of operations to a larger venue... the
heart of the U.S. industrial belt... Chicago.
After 04 aug 89, upon my immediate return to the US, I met
with Pietro Lombardi in New York, who in essence looked at me and
said, with the expression of an individual who had been found
out, "What are WE going to do?"
In that same meeting, Mr. Carlo Vecchi, the New York branch
manager and head of treasury operations for North America, said,
"we knew what you were doing in Atlanta all along." I was not
aware until then that individuals in New York were also aware of
Atlanta's activities.
While Rome officials were informed of my activities and
somehow in liaison with Baghdad, I felt that Dr. Sardelli and New
York branch officials were in the dark. Now I knew otherwise.
E. New York regional management
Carlo Vecchi
Quirino di Mano
Several officials of the comptrollers division
Although Atlanta was careful not to disseminate information to
Dr. Sardelli's area about the activities of BNL Atlanta (hence
the need for shadow accounting) we were aware that Atlanta's
activities in the money markets would come to the attention of
New York's treasury division, and indeed, our movements in the
marketplace caused BNL New York's traders to become upset with
us. Given the branch's need for substantial amounts of funds, it
regularly squeezed New York, with its USD 7 billion portfolio,
out of the money markets. Vecchi and his senior trader, Rino di
Mano, called us to inquire on numerous occasions why, with only a
USD 750 million portfolio, we were purchasing much larger
amounts.
4. DO YOU HAVE ANY REASON TO BELIEVE THAT ANY
PART OF THE U.S., ITALIAN, OR U.K. GOVERNMENTS
WERE AWARE OF THE CCC OR MTL LOANS TO IRAQ
PRIOR TO THE BNL RAID ON AUGUST 4, 1989?
I do believe that all three countries, the United States,
Italy, and Great Britain were aware of the loans being extended
by the Atlanta agency of BNL. First of all I am aware from the
accounts offered by Paul Henderson, and the proceedings in Great
Britain against him and others, that MI5 and MI6, were being
furnished copies of all documents relating to our loans to Matrix
Churchill. Moreover, I was informed by messrs Ali and Habobi that
there were several individuals in the Matrix Churchill
organization with contacts to British intelligence, and that Mr.
Habobi's driver was an observer of TDG's activities for the
English intelligence community. These facts did not seem to
bother them, as I had mentioned in prior testimony. When I noted
to Mr. Ali that U. S. intelligence figures appeared in the
shadows of BNL Atlanta's customer portfolio he shrugged, looked
at me as if I were some sort of dunce and stated that Iraq and
the U.S. worked very closely together. He therefore did not
understand my expression of surprise.
Also, in a brief conversation with Mr. Habobi's driver, when I
was being taken to a restaurant or to my hotel, the driver stated
that he had formerly worked for the British army and, although
retired, was still obliquely involved with the British military
by virtue of his current position. He spoke to me openly as if I
too had some connection to western intelligence, which I thought
peculiar. My general view after many such encounters and
discussions was that Iraqi, Italian, British and U.S.
intelligence services were fully aware and supported BNL
Atlanta's activities. In addition, based upon my meetings with
several of our German customers involved in the MTL loans, I
considered that German intelligence was also keeping updated on
BNL Atlanta's affairs, but that there was little intelligence
sharing on their part, unlike that taking place between the
previously mentioned countries.
As to the United States, I concluded that they must have been
aware of our activities. Certainly, our loans to Russia and to
Iraq, much of which was conducted by telex and telephone, should
have been the subject of interception by U. S. authorities. In
addition, the USDA officials, who received copies of all
documentation, should have been alerted to the considerable
exposure BNL had to Iraq. The Commerce Department also
participated in the yearly negotiations for CCC allocations in
Washington, which I attended. I believe that the Commerce
Department would have also been made aware as a result of the
applications for export licenses required for these exports.
Further, the awareness of the United States officials in Iraq of
my presence, as well as statement by Wafai Dejani, led me to
conclude that United States intelligence agencies and other
United States officials were knowledgeable about our lending
activities.
It is my belief that many of the companies doing business with
Iraq under the MTL loans program had relationships with
intelligence services. Among these companies, were Lummus Crest,
Bechtel, Hewlett Packard etc. I am also aware that William
Muscarella of the XYZ Options was visited by CIA officials in
connection with his activities to build a carbide plant in Iraq.
Of course, the Committee is already familiar with the names Dale
Toler, Chap Chandler and Charles Chidiac, all of whom represented
themselves as being connected with U.S. intelligence services,
and all of whom sought to do business under the MTL program.
5. DO YOU HAVE REASON TO BELIEVE THAT THE
COMMODITIES PURCHASED BY IRAQ WITH CCC
GUARANTEED LOANS WERE DELIVERED FOR MILITARY
GOODS?
I had no awareness at the time of the events that there may
have been diversions. It is certainly not inconceivable that this
was occurring. I have subsequently learned that a BNL executive
in Italy acknowledged that such activities were taking place.
6. WHAT IS YOUR KNOWLEDGE OF BNL'S RELATIONSHIP
WITH KISSINGER ASSOCIATES? DID YOU HAVE CONTACT
WITH KISSINGER ASSOCIATES? DID YOU OR ANYONE
ELSE AT BNL EVER DISCUSS THE CCC OR MTL LOANS TO
IRAQ WITH KISSINGER ASSOCIATES?
My initial awareness of Kissinger Associates involvement in
these matters began at the time we commenced our relationship
with LBS. As time progressed I became aware that Kissinger
Associates was a component in many of the loans taking place. For
example, Wafai Dejani had told me that Henry Kissinger was the
architect of these loans as they related to U.S. foreign policy.
I had attended a speech given by Mr. Kissinger in Venice to the
International managers of BNL, and learned of his relationship as
a member of the International Advisory Board of BNL. I also
learned through conversations with the officials at LBS that
Lawrence Eagleburger was associated with Kissinger Associates,
which apparently accounted for his ability to accomplish many
tasks on their behalf. Moreover, I was aware of the trips taken
by Alan Stoga of Kissinger Associates to see the Iraqis. This
latter information was derived from individuals associated with
the Iraqi-American Business Forum, who advised me that several
officials of Kissinger Associates had traveled to Iraq to develop
business relationships for their clients.
7. PLEASE PROVIDE ANY COMMENTS YOU HAVE ON THE
JUSTICE DEPARTMENT'S HANDLING OF THE BNL
INVESTIGATION. WHY DID YOU WITHDRAW YOUR
ORIGINAL PLEA AGREEMENT WITH THE JUSTICE
DEPARTMENT? DO YOU HAVE ANY COMMENTS ON
JUDGE LACEY'S BNL REPORT?
In 1992 1 attempted to cooperate with the US Attorney's Office
after pleading guilty. Some have asked why I plead guilty in 1992
if I was indeed not guilty. There is a very simple explanation. I
had been Jailed with no hope of bail in April 1992. I had been
relegated to a Federal Defender to represent me in a very
complicated case since I had no assets, and owed my prior counsel
several hundred thousand dollars. My federal defender was not
able to understand the case, having said to me after months of
representation, "what is a letter of credit?" Feeling that it was
likely under those circumstances that I might be convicted and
face lengthy incarceration, I agreed at my attorney's request to
plead guilty.
I withdrew my original plea because I believed I had been
misled by the government. Again, from the outset of this
incident, I had been led to believe by the Iraqis and BNL that
there would be no criminal proceedings against me. They had
assured me that perhaps regulatory violations against the bank
would be brought, but that I would not be in jeopardy of going to
jail. When my federal defender persuaded me to enter my original
guilty plea, I was under the impression that if I cooperated with
the government, that I would receive a letter from them asking
the court to downwardly depart from the Sentencing Guidelines.
However, the government's attorneys didn't provide such a letter,
and instead sought to have me imprisoned for life. It was then
that my new counsel, sought to withdraw my plea.
But for the persistence of Mr. Bobby Lee Cook, and the efforts
by Judge Marvin Shoob, which led to the discovery of the CIA
documents, I would have been sentenced to jail in September,
1992. The disclosure of exculpatory materials, led the government
to agree to permit a withdrawal of my plea. It is worth noting
that Mr. Simels' efforts led to the further disclosure that there
were additional exculpatory materials in the possession of the
government, which included the debriefings of Paul Henderson by
the government's attorney prior to my indictment.
My efforts at cooperation with the US Attorney's office were
frustrated by their continued unwillingness to allow me to tell
them the truth. They would pose a question, and when I began to
tell them an answer which was inconsistent with their theory of
the case, they would either say we're not interested, or you're
lying. My then attorney kept pulling me out of the room and
warning me to just say what they want to hear, so you can get
them to write a letter seeking a downward departure in my
sentence. I finally accepted this premise and limited my
responses to say yes, you're right.
It was obvious that the government team investigating the
matter was wedded to a particular theory, in part because they
never looked at the most significant documents which had been at
the bank. I learned in the course of the debriefing that King &
Spalding had limited their opportunity to review the files at the
bank, and had kept the most important documents in their custody.
Whenever I attempted to explain matters to them I would request
specific documents, which they did not have at their offices.
They had to go to King & Spalding to obtain the requested
documents. Indeed, it was only after Mr. Simels began too
represent me that he was able to compel King & Spalding to
provide those documents to me to review. Although those files
have been sanitized since 1989, I was able to reconstruct some of
the most significant evidence pointing to BNL's awareness of my
activities.
I can only state that I was disappointed when I read Judge
Lacey's report. No one could appreciate the complexity of this
matter in the brief period of review he spent conducting his
investigation. Certainly he did not seek or obtain essential
documents to an understanding of this matter. His rejection of
the premise that the Department of Justice and other United
States agencies had attempted to cover up this matter is
extraordinary to me. I believe that all of the BNL employees from
Atlanta, who were interviewed by original BNL Task Force would
tell you that any time they attempted to implicate BNL they were
told that they were not telling the truth, or the subject was
changed. Moreover, I believe that the Department of Justice
officials that Judge Lacey interviewed had every reason to
protect themselves in their statements to him. I further believe
that had Judge Lacey pursued the information developed by
Chairman Gonzalez and Chairman Rose he could not have reached
theconclusions reflected in his report.
8. PLEASE COMMENT ON THE ITALIAN GOVERNMENT'S
USE OF BNL-ATLANTA TO FINANCE THE SALE OF
MILITARY HARDWARE SUCH AS SIDEWINDER MISSILES
AND ATTACK HELICOPTERS?
The use of BNL Atlanta to finance the Sidewinder missiles was
not surprising to me. It was one of several transactions routed
through BNL Atlanta by the Italian military. While the
instructions relating to the merchandise were often cryptic, I
was able to understand their significance. Indeed, the initial
description on the Sidewinder purchases did not refer to the
commodity being purchased. It was only after several
communications that I became aware that the purchase involved
Sidewinder missiles. I initially believed that those purchases
[copy sent by Banking Committee stopped here]
|
|
