Fed Assesses a $37 Million Penalty Against Pharaon for BCCI Dealings
WASHINGTON -- The Federal Reserve Board said Tuesday that it assessed a $37 million penalty against Saudi Arabian financier Ghaith Pharaon for illegal dealings with Bank of Credit and Commerce International.
The action -- the largest civil money penalty that the Fed has levied against an individual -- resulted from an investigation into the ownership of Independence Bank, Encino, Calif.
The Fed, which previously fined BCCI $200 million and sought to bar Mr. Pharaon and other officials from the U.S. banking industry, concluded that he served as an agent for BCCI in acquiring Independence Bank and concealed his relationship with the scandal-plagued banking empire.
Mr. Pharaon, who was not available for comment, has contended that he acted as an independent investor in gaining control of the California bank in 1985.
Multiple Lawsuits Pending
But a day before the Fed announced its penalty, Independence Bank filed a $42 million lawsuit against Mr. Pharaon and a former chairman, Kemal Shoaib, alleging breach of contract, fraud, violations of racketeering laws, and other offenses.
The lawsuit -- like the Federal Reserve determination -- said Mr. Pharaon had a secret "nominee agreement" that gave 85% ownership of Independence Bank to a BCCI-related firm.
Compounding Mr. Pharaon's legal troubles, the Department of Justice, acting on behalf of the Fed, has filed a suit in United States District Court in New York to freeze Mr. Pharaon's assets in the U.S., pending the completion of the Federal Reserve enforcement action. The court issued a temporary order on Tuesday freezing Mr. Pharaon's assets.
Mr. Pharaon, according to the Fed, violated the Bank Holding Company Act by aiding and abetting the unlawful acquisition of Independence shares by BCCI. The Fed charged Mr. Pharaon with filing "false and misleading regulatory reports with the board," and "intentionally concealing" the fact that he was a nominee or agent of BCCI.
Mr. Pharaon, 50, will have the opportunity to appear before an administrative law judge to present his case on Nov. 5.
A month after Mr. Pharaon agreed to buy Independence for $23 million, the Fed said, he entered into an agreement with a BCCI affiliate called ICIC Overseas. It is claimed that he acted as a nominee for the affiliate in acquiring Independence.
All the shares of Independence were to be held in Mr. Pharaon's name. Only 15% of the shares would be Mr. Pharaon's as beneficial owner; he held the remaining 85% in a fiduciary capacity for ICIC.
In addition to owning Independence Bank, Mr. Pharaon has 4.9% of Metrobank in Los Angeles.
PHOTO : Ghaith Pharaon Said to be agent of BCCI