Auditor Sees Substantial BCCI Assets in the U.S.
LONDON - The collapsed Bank of Credit and Commerce International still has "several hundred million dollars" of potentially recoverable assets in the United States, according to an auditor's report.
But BCCI creditors and depositors may have difficulty obtaining these funds as part of a worldwide liquidation, because of the prospect of very heavy fines and civil penalties in the United States, according to Touche Ross & Co., the accounting firm aiding BCCI's regulators.
In its report, detailing the latest progress on the winding up of the fraud-plagued bank, Touche Ross provided no estimates on what might be realizable in claims against First American Bancshares Inc., the bank that the Federal Reserve says was secretly owned by BCCI.
Unit Already Fined
A $200 million penalty against BCCI and affiliates has already been levied for the hidden arrangements to acquire control of the Washington-based bank.
In addition to the fine, BCCI faces a number of other civil actions, including a federal indictment in the District of Columbia charging BCCI and individuals with conspiracy to defraud and racketeering.
Touche Ross said in the report that it is doing all it "reasonably can to attempt to maximize a return for creditors" from BCCI operations in the United States.
$190 Million Written Off
In an indication of its doubts over successfully claiming back U.S.-based assets, the firm's report showed it has written off $190 million of BCCI balances with branches of American banks, where BCCI assets have been frozen.
Regulatory sources in Europe make no secret of their disquiet at the way extensive litigation is being pursued against BCCI in the United States, to the likely detriment to depositors and creditors around the world.
"Only one country, the U.S., is taking action on this scale, which is likely to hemorrhage away through legal costs, fines, and penalties the funds available for a full worldwide settlement," said one official closely associated with the liquidation process, who asked not to be named.
Depositors Petition U.S.
A lobbying group formed to protect many of the 800,000 depositors of BCCI worldwide recently urged the U.S. not to impose major fines on the scandal-ridden bank, fearing this would reduce the funds that could be ultimately be paid out to its creditors.
The group has already written to the Federal Reserve Board protesting penalties imposed on the bank.
While the report did not disclose all the individual holdings of BCCI assets by U.S. banks, it did disclose that BankAmerica Corp., a founding BCCI stockholder in the early 1970s, holds an estimated $176 million in an unspecified form.
BankAmerica has started a court action to try to bring all competing parties into a single group to resolve disputes over these funds. The next hearing on that action is due in mid-January.
The Touche report acknowledged that no buyers could be found for BCCI's credit card and travelers check operations, run in affiliation with MasterCard International and Visa International.
About 89,000 credit cards were issued, on which about $50 million was owned.
A Complicated Start
Negotaitions started with 17 parties for the sale of the card operation; detailed negotiations took place with four of these.
But negotiations failed because price indications received were significantly below the value likely to be achieved by collecting from cardholders.
Steps are now being taken to collect outstanding card debts, the report said.
Similarly, no buyer was identified for BCCI's Visa travelers check operation, which had some $770 million of checks in stock. Steps are being taken to wind down the checks business and reclaim debts.
Overall, the report assessed BCCI's worth at only $1.1 billion in the wake of massive fraud by its senior executives. In liquidation, the bank will have assets of only $1.16 billion against debts of $10.6 billion.
Recovery Called Sparse
As a result, depositors are unlikely to recover a significant portion of their money for several years, based on the institution's current worth.
However, the High Court in London has agreed to a further adjournment of BCCI liquidation hearings. This is to give time for Touche Ross and the Abu Dhabi government, the bank's main shareholder, to try to organize a compensation plan for depositors.
This could involve the Persian gulf state in potentially injecting up to $3 billion of funds into a pool for compensation, bankers said.