Regulators At Odds over BCCI Stake In D.C. Bank
NEW YORK - Regulators in the United States and Luxembourg are at odds over who controls the Bank of Credit and Commerce International's stake in First American Bankshares.
The question has put in limbo the Federal Reserve's plan to sell BCCI's illegal holdings in First American, an $11 billion-asset company based in Washington and run by Clark Clifford, a former presidential adviser.
Citing evidence of widespread fraud, regulators last Friday closed BCCI offices in eight nations, including Luxembourg, where the $20 billion-asset company has its headquarters.
Regulators Queried
Fed officials are maintaining that regulators in Luxembourg now control BCCI's stake in First American. "We have asked the Luxembourg authorities for instructions," a senior Fed official said Thursday.
But the ranking regulator in Luxembourg said Thursday that his country does not have a say in the disposal of the shares. "It's a U.S. [legal] problem," Pierre Jaans, director of the Luxembourg Monetary Institute, said in a telephone interview. "I am not even theoretically sure who holds that stake."
BCCI evidently owned First American shares through a secret relationship with Credit and Commerce American Holdings, a holding company based in the Netherlands Antilles, a Dutch dependency in the Caribbean. According to the Fed, BCCI illicitly acquired a stake of more than 25% - the exact amount is not clear - in First American.
Off the Books
From a purely legal standpoint, Mr. Jaans said, the stake was never entered on the books of BCCI or its parent, BCC Holdings, and therefore does not automatically come under the control of Luxembourg's regulators.
However, Mr. Jaans did not rule out the possibility that the stake might end up under his control once the investigation into BCCI's activities is completed.
Both the Fed official and a member of the law firm hired to sell the BCCI stake appeared flabbergasted by the Luxembourg regulator's position on First American.
"Of course BCCI never listed shares of First American on their balance sheet," the senior Fed official said. "The whole thing was concealed from the start."
Receiver's Role
BCCI agreed in March to sell its stake in First American, "From a U.S. legal standpoint, it's quite clear to me that a Luxembourg receiver would be compelled to live up to lawfully authorized contractual obligations" entered into by BCCI, said Sandy Martin, a partner with the Washington law firm of Patton, Bogg & Blow, which is representing BCCI.
On Friday - the day the assets were seized - Fed officials and lawyers from Patton, Bogg & Blow were finalizing plans under which the BCCI stake would have been turned over to a Fed-appointed trustee.
The trustee was to have taken control of the shares with authority to sell them off to a Fed-approved purchaser. He would also have had the authority to replace First American's current management.
"The plan has gone into abeyance," the Fed official said.
Also at issue is BCCI's majority stake in Independence Bank, a $640 million-asset institution based in Encino, Calif.
