Scandals: Gilt by Association

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Previously undisclosed audits show that Bank of America provided a $2.5 million loan in 1976 to start up a B.C.C.I. subsidiary in the Cayman Islands known as International Credit & Investment Co. Overseas. According to Federal Reserve documents, I.C.I.C. Overseas was the vehicle that held most of B.C.C.I.'s loans to privileged insiders, as well as its secret and illegal holdings in First American Bank in Washington.

As their holdings increased, however, Bank of America officers became nervous about the relationship. In a 1976 memo, a Bank of America officer said "many in the Bank of America feel B.C.C.I. officers withhold information from B. of A. personnel." Among other bothersome items: B.C.C.I.'s habit of doling out what a Bank of America officer described as "special patronage" to "leading political figures in the Middle East." But when Bank of America sold off its stock in B.C.C.I. to I.C.I.C. in 1980, the California bank loaned money to the Cayman Islands outfit to finance the deal. Those loans ultimately enabled Bank of America to earn $32 million on its total B.C.C.I. investment of $5 million.

Among other questions, investigators want to explore whether Bank of America wittingly helped B.C.C.I. with any of its money laundering. No evidence yet suggests that Bank of America did so, but the California bank was fined a then record $4.7 million in 1986 for 17,000 separate acts of money laundering that were unrelated to B.C.C.I.

Bank of America's problems include a civil racketeering lawsuit claiming that the bank "actively and knowingly assisted" B.C.C.I.'s takeover of First American and National Bank of Georgia. In Washington, Congressman Riggs has demanded release of internal documents from Bank of America, and his committee will hear bank officials testify on ties to B.C.C.I. The question: Given what you knew about the bank, what made you keep on doing business with it?

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