Bank of  Credit and Commerce International Scandal (BCCI). UK Government Forced to Publish the Sandstorm Report (posted 9 September 2011)


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Background

After a five-year legal battle the UK government has finally released most of the Sandstorm Report on 7 September 2011. According to the Bank of England this report was the basis for the closure of BCCI in July 1991.  The report was  prepared by Price Waterhouse (BCCI auditors) for the Bank of England though it was never finalized. BCCI was the biggest banking fraud of the twentieth century. Some 1.4 million depositors lost $11bn.  Unlike many other large corporate frauds and banking scandals the UK government did not appoint inspectors to  prepare a report.  No parliamentary committee has ever been given sight of the Sandstorm Report. UK legislators pass laws without knowledge of the facts or opportunity to interrogate wrongdoers.


The UK government was ordered to release the information to Prem Sikka by the unanimous decision of three judges ( click here for court judgment) .   This is the first time that the UK government has been forced to release hitherto secret information about a banking collapse. It is the first time that it has been forced to name wrongdoers and those implicated in the scandal. the government could not hide behind the Data Protection Act and claim that it has to protect the identity of the culprits

Prem Sikka had first requested the information in March 2006 and after refusal by the UK Treasury and the Information Commissioner he pursued the matter through the courts. Throughout the case, he represented himself, incurred his own costs and did not have the benefit of any legal advisers. The government used taxpayers' resources in a  futile attempt to conceal identity of many people, including convicted criminals.

Ever since 1991, most of the Sandstorm Report has been publicly available in the US though it has been considered to be a state secret in the UK.  This censored version was obtained by AABA and made publicly available in UK in 1999 (click here).  With the digitization of the US Congress Library archives the same is now available worldwide (click here). The missing information is shown either as a blank or a dark rectangle.


Prem Sikka's request was for the missing information. It primarily concealed the names of  the wrongdoers and those implicated in the scandal. The background to the issues and the public interest arguments for publication of the missing information are contained in an affidavit filed with the court by Prem Sikka and is available here. The document shows that the UK government has erected a wall of secrecy around the BCCI frauds.

The Report

To see the information that was concealed you need to compare the censored version  with that ordered by the court.  We have already done this and have highlighted the differences in the flies listed below. These are shown in a red box. This has made the files large. To make the download manageable we have divided the files into two parts. To download it you will need Acrobat 10 or similar. Both files are large so please allow some time for download. Depending on the speed of your computer and internet connection it might take 10-15 minutes.

Sandstorm Report  Redacted Part 1  (5MB)

Sandstorm Report  Redacted Part 2 (12 MB)

Also see CONFIDENTIAL SCHEDULE 2 SECTION 40 ENTRIES IN SANDSTORM REPORT TO BE DISCLOSED. This disclosure was ordered by the court and it provides background to some of the individuals named in the Sandstorm Report (see below). Please note that this document was prepared by the UK Treasury

Please note that the report is written in code. "Sandstorm" is the code for BCCI. There are also other entities identified by code - for example "Fork" and "Tumbleweed" - but their identity is concealed. "Fork" is/was an overseas bank and directly implicated in the BCCI  frauds.

In opposing the release of the missing parts of the Sandstorm Report the UK Treasury claimed that its release would somehow  "prejudice UK's relationship with with one or more other states". In other words relationship with corrupt rulers had to take precedence over the people's right to know and call governments to account. The government's arguments were defeated.


The Names

Three judges criticised the UK government and said:

"We were surprised to see that the Treasury sought to extend the protection of the data protection principles to information about some individuals who exercised ultimate control over the whole of BCCI’s operations and were the architects of a group-wide programme of fraud and concealment, not to mention the creation of a culture that led others with positions of responsibility within the bank to follow their lead" (paragraph  42 of the judgement  ).

Paragraph  47 of the judgement said that 

"the individuals named in the Sandstorm Report were not ordinary customers, but had become involved in the many complex and frequently incestuous transactions that enabled the BCCI management and a number of organisations and individuals close to it to commit or conceal fraud. Those frauds led to severe financial hardship for many of the “ordinary” customers and we have explained in Confidential Schedule 2, by reference to each individual, why we consider that there is a legitimate interest in disclosing their involvement and that this will not cause unfairness or unwarranted intrusion into their privacy"


The UK government has clearly been engaged in a  massive cover-up. and used taxpayers' monies to fight the case and continue with its cover-up. Just look at the names of the individuals and organizations - these include well known domestic and foreign banks from home and abroad, rulers from Middle-East, business advisers and sundry. Some of the people have already been convicted of criminal activity but even 20 years later the UK government was protecting their identity.   Even worse, the UK government has been protecting individuals who died long ago. For example, BCCI founder Agha Hasan Abedi died in 1995 but his name was being concealed.  Some individuals have a colourful past and possible links with leading US politicians and Islamist fundamentalists.  Sheikh Khalid bin Mahfouz, a billionaire Saudi banker paid $225 million to settle charges of bank fraud in 1993 and died in  August 2009, but his name was still being shielded by the UK Treasury.


Some of the names concealed by the UK government include:

Sheikh Khalifa, son of Sheikh Zayed bin Sultan al Nahayan, the ruler of Abu Dhabi

Sheikh Sultan bin Zayed
Sheikh Mohammed bin Zayed
Sheikh AA Ibrahim
Sheik Hamad bin Mohammed al-Sharqi, the Emir of Fujaira
Wabel Pharoan, prominent Saudi businessman and financier
Ghaith Pharaon, one time, the No. 2 Saudi investor in the United States
Sheikh Khalid bin Mahfouz, Saudi businessman and financier and head of the largest commercial bank in Saudi Arabia
Mahfouz Family
Faisal Fulaij,  former institution-affiliated party of Credit and Commerce American Holdings, N.V., formerly the parent bank holding company over the First American banking organization.

Prince Turki
The Ruling family of Abu Dhabi gets a few mentions

The Crown Prince of Abu Dhabi is mentioned
A Darwish

Agha Hasan Abedi. BCCI founder
Sheikh Kamal Adham, Director of both BCCI. and First American (also head of Saudi Arabian intelligence)
S.M. Akbar, BCCI Grand Cayman, helped Swaleh Naqvi
Ziauddin Akbar, BCCI Treasury official,
M Azmatullah, BCCI accounts officer for major customer accounts, helped Swaleh Naqvi
Zafar Iqbal, BCCI chief executive, Head of Treasury and General Manager of Grand Cayman to 1986.
Imran Imam, accounts officer for an entiry identified as WXYZ and Dr. Pharaon.
H.M. Kazmi, BCCI officer
Abdul Raouf Khalil, a shareholder in both BCCI. and First American
Swaleh Naqvi, BCCI executive and deputy to Abedi
Ajmand Naqvi, accounts officer for an entiry identified as Tumbleweed, helped Swaleh Naqvi
N Habib-Ullah, helped Swaleh Naqvi
J. Khan, Accounts officer for Adham and Jawhary, left the bank before 1991, received $0.3 million; helped Swaleh Naqvi
D. Rizvi, BCCI executive responsible for relationship with the Virano Group - left BCCI in 1990, helped Swaleh Naqvi
H Sheikh, accounts officer of Gulf Group util 1988; paid $1.7 mllion by Swaleh Naqvi
A. Abbas, General Manager of Baharian until 1990 helped Swaleh Naqvi
Bashir Tahir, General Manager BCC Emirates
Qazar Raza, Joint Executive for Asia/Middle East, formerley General Manager for NBO
A Chaudhary, General Manager Europe
B. Chowdry, General Manager, UK Region
MM Haque, Executive for UK Region
S. Doha, Manager IBU UK Region (later with Al Rahi in London)
T Jamil, General Manager Hong Kong
S. Siddiki, Central Executive
H. Motta, Legal Department, UK Region
Jawahry

Abu Dhabi Investment Authority  (ADIA)
Al-Rahji Bankng and Investment Corporation
Robert Altman, US lawyer, acquitted of UAA charges but settled a civil lawsuit with US Feds
Arab Livestock Company ALSCO)
Attock Oil

BCP
Bear Steans
Burford
CAPCOM, brokers used by BCCI Treasury

Brenchase Limited, a subsiairy of Capcom, a company subsequenlty controlled by Z Akbar.
Capital Commodity Dealers (Capcom)
Clark Clifford, US lawyer and Presidential adviser
Dubai Islamic Bank
The Gulf Group

Gulf Investment Real Estate Co.
ATB (a UK bank)

Credit Suisse
Dubai Crescent
FIIL
French American
Gokal Brothers
Habib Bank
Government of Cameroon
Independence Bank Inc
Maram Trading Co.
National Bank of Georgia
National Commercial Bank of Saudi arabia (NCB)
Qatar Islamic Bank
Razat Associates Inc.

Refco
Royal Bank of Scotland, Singapore
Saudi Arabian Fertiliser Company (SAFCO)
Saudi Cairo Bank
Saudi National Commercial Bank  (SNCB)

Security Pacific
State Bank of India (SBI)
The Virani Group
Rudolf Wolff

Crescent
Shorafa
Stock

The Offshore, or Secrecy Jurisdictions Links

The words "Grand Cayman" were purged throughout the document (for example, see para 1.25, 4.3, 7.13). The name of a Turks and Caicos company (para 7.17), North American Finance and Investment, was also withheld. The name of Arab Livestock Company (ALSCO) and its location in Bahrain (for example, see para 7.24) and Saudi National Commerce Bank operating from Bahrain (para 6.27, 8.7, 8.12) was also withheld.  The word "Bahrain" was withheld in para 1.25. The name of  Royal Bank of Scotland, Singapore (para 3.5) was withheld.

Some Issues
  1. The UK government did not withdraw ambassadors. The UK government did not seek extradition of the culprits, shut down foreign embassies, demand trade sanctions or regime change. It just covered up the names of wrongdoers and kept parliament and the people in the dark. How can anyone trust the Bank of England or the Treasury to tell the truth about the current banking crash?
  2. The release of the information has considerable relevance to the current banking crisis. The UK government can now be forced to publish reports. They can be forced to publish the names of the wrongdoers.
  3. The UK government secrecy meant that many financial institutions were unable to make appropriate assessments of risk. Under the UK (and many other countries) law, financial institutions are required to apply the "Know Your Customer" (or KYC) tests. Since the UK government shielded the names of many wrongdoers it did not enable the institutions to assess the risks. It would be recalled that BCCI indulged in money laundering. Many of the parties associated with BCCI are still active in the business world today.
  4. The Sandstorm Report prepared by BCCI auditors Price Waterhouse documents a catalogue of fraud which had been taking place over a long period of time. Yet auditors continued to give a clean bill of health to BCCI. All audit reports were unqualified.
  5. BCCI had all the paraphernalia associated with contemporary corporate governance: audit committees, non-executive directors, mission statements, internal auditors, external auditors, vision statements and corporate social responsibility statements. Yet no one spoke up. There was no independent investigation into the governance of BCCI. The investigation and lessons may have generated a debate about better banking regulation and governance, but that was not to be. We only speculate on how the current banking crisis might have been checked if the UK government was not so keen on cover-up.