Why France wants a UN Veto

FEATURE: Who is Roger Tamraz? This White House coffee-drinker hasa very interesting past that includes close links to BCCI andLibya

The American Spectator;

5/1/1997; James Ring Adams Kenneth R. Timmerman

The American Spectator

05-01-1997

The case of Roger Tamraz has pushed Bill Clinton's fundraisingfollies to a more sinister level, and ensnared a host of Clintonitesalong the way. Don Fowler, chairman of the Democratic NationalCommittee, interfered with the National Security Council on Tamraz'sbehalf, enlisting the CIA to help the party chase big bucks. And itwas Anthony Lake's obliviousness to this abuse of security staff thatkilled his own nomination, in spite of the self-serving preachmentsabout a confirmation system "gone haywire." For the wheeling-dealingTamraz, however, it was business as usual.

A nattily dressed Park Avenue businessman with just a trace of aFrench accent, the 57-year-old Tamraz has exploited politicians andintelligence services for nearly a quarter of a century. His careermoves in circles that transcend national boundaries, ethnicconflicts, and party lines -- and he divides his time between NewYork, Paris, and Detroit. Though this go-round he was dealing withinfluential Democrats, his oldest allies in the U. S. have been theTexas oil Republicans, including the late John Connally.

He is also frequently referred to as a "fugitive banker"; Tamrazis dodging an outstanding Interpol warrant from Syrian-controlledLebanon -- which he dismisses as retaliation for his dealings withIsrael. But another set of ties goes deep into the notorious Bank ofCredit and Commerce International (BCCI) scandal which plagued GeorgeBush and may yet taint the Clintons. So far, press attention on theChinese infiltration of Clinton's fundraising apparatus has ignoredanother primary source of foreign influence-buying -- Arab money. Andthis is where Roger Tamraz becomes such an important player.

A civilized man

Tamraz is the son of a self-made millionaire, and was raised inEgypt to be part of the cosmopolitan Middle Eastern elite. He spenthis childhood in Cairo's exclusive Zamalek district; he attendedBritish grammar schools, across the street from which Britishofficers played cricket and rode polo ponies at the fashionableGazira Sporting Club.

After taking a degree from the American University in Cairo andstudying economics at Cambridge, Tamraz crossed the Atlantic in theearly sixties to take an MBA at the Harvard Business School. Thecontacts he made on the banks of the Charles helped shape his role asan agent for the Arab elites. In 1967, Tamraz joined the Wall Streetfirm of Kidder Peabody, and he didn't take long to make his mark.Just two weeks into his tenure at Kidder, he proposed a rescue planfor the Intra Bank of Beirut that had recently failed; he soon woundup working on the project.

In late summer 1969, a coup in Libya started a chain of eventsthat greatly increased the prospects for a Harvard MBA with a MiddleEastern background. When Muammar Qaddafi, then a young army officer,overthrew King Idris IV, he promptly nationalized the oil industry.The pro-American Shah of Iran needed money for his own ambitions, andstarted to jack up the price of his oil. Major oil companies hadmeanwhile underestimated consumer demand; the ensuing shortfall waswidely misread as the start of a global exhaustion of fossil-fuelreserves: the "energy crisis" was in full swing. As Petrodollarsflooded the Middle East, middlemen like Tamraz fell into the fabulousbusiness of reinvesting the wealth in the West. But recycling thatmoney wasn't quite the clean or efficient process that starry-eyedWestern bankers thought it would be.

By 1973, Tamraz was ready to leave Kidder to found his owninvestment bank, the First Arabian Corporation. Now Tamraz was actingas the highly visible front man for a shadowy but powerful group ofSaudi backers, the most intriguing of whom was Sheikh Kamal Adham.Called al-Turki because he was raised in Istanbul, Adham was thebrother of the late King Faisal's favorite wife, Queen Iffat. Duringhis reign, King Faisal used Adham as something of a one-manintelligence agency; with help from the real CIA, Adham did the jobsurprisingly well.

Tamraz found an even more direct royal connection in PrinceAbdullah bin Musaid bin Abdul Rahman, whose father had helped rescuethe kingdom from bankruptcy in a late 1950's stint as financeminister. Another major shareholder was the wealthy (but non-royal)Sheikh Salem bin Ladin, a scion of the kingdom's largest constructioncontractor. (A renegade relative, Osama bin Ladin, was ostracized bythe family after throwing in his lot with religious extremists. See"Terrorism in Our Face," TAS, April 1997.) But the shareholderdestined for the most notoriety was a classmate from Harvard BusinessSchool named Ghaith Pharaon.

Taking Detroit

Tamraz began to work the intersection of oil money and Americanpolitics in late 1973, with the rescue of Detroit's Bank of theCommonwealth. Local businessmen were trying to put the troubled bankback on its feet when they received a feeler from a Texas lawyer. Thelawyer was Frank Van Court, from the Houston firm of Vinson, Elkins,Searls, Connally & Smith, whose name partners included JohnConnally, former governor of Texas and secretary of the treasuryunder Richard Nixon. When Van Court came to Detroit he brought alongTamraz, who told the bank owners that he was financial adviser to ayet-unnamed Middle Eastern figure. After nearly a year of soundings,Tamraz told the Detroiters he represented his Harvard classmateGhaith Pharaon.

Pharaon had gone to high schools in Paris and Beirut and thenstudied petroleum engineering at the Colorado School of Mines; laterhe switched to business at Stanford and Harvard. His father's courtconnections helped him launch his holding company, Saudi Research andDevelopment Corporation (REDEC) in 1966. By 1974, Pharaon claimed anannual income of $300 million, fueled by middleman commissions fromWestern companies looking for Saudi business. He was pouring hisapparent wealth into American hotels, chemical and oil companies, andbanks. On the eve of the Detroit deal, Pharaon had emerged as a majorshareholder in Armand Hammer's maverick Occidental Petroleum Company.

Pharaon went public as new owner of Bank of the Commonwealth inFebruary 1975. He was welcomed warmly by the auto industry, which hadbeen pursuing its own deals in the Arab world. But when hisconnections couldn't help the bank after a year of shrinkingbusiness, Pharaon turned to Tamraz for help. Tamraz's First Arabianstepped in to buy out Pharaon's shares and pump another $10 millioninto Bank of the Commonwealth; the group then installed MatthewSteckel as Commonwealth chairman. Steckel had been executive vicepresident of First Arabian and a Harvard Business School classmate ofPharaon and Tamraz. Pharaon continued to have an interest in the bankand a partnership with Tamraz.

The Pharaon Connection

Far from turning Pharaon against banks, the experience in Detroitseemed to whet his appetite. The First Arabian bailout freed him toexpand holdings elsewhere. In September 1977 he became part-owner ofthe Main Bank of Houston, a smaller institution with its ownproblems. His highly interesting group of co-owners included JohnConnally, who was then beginning to consider a presidential runagainst Jimmy Carter. The other major figure was the Saudi bankerKhaled bin Mahfouz, whose father had founded the largest privatelyowned bank in the kingdom, the National Commercial Bank of SaudiArabia. According to one history of the BCCI, Connally introducedPharaon and bin Mahfouz to Herbert and Bunker Hunt, heirs to the Huntbillions, and the Saudis joined in the Hunts' ill-fated attempt tocorner the silver market, which made them all much less rich. Inaddition to this disaster, bin Mahfouz and Pharaon were laterentangled in the largest single bank scandal in history.

Pharaon's troubles started in late 1977, when he bought theshares in the National Bank of Georgia belonging to Jimmy Carter'spolitical confidant, T. Bertram Lance. (One unsuccessful bidder forthose shares was Mochtar Riady, owner of Indonesia's Lippo Group, wholater found another entry into American politics. The deal washandled by Jackson Stephens of Little Rock's Stephens Inc.) Pharaonset up shop in Savannah, Georgia, making it the headquarters of hisAmerican subsidiary, Interedec Inc. He soon bought the nearby formerestate of Henry Ford II and threw lavish parties whose guest listsranged from the likes of Carter to Alexander Haig.

Only later did it emerge that Pharaon was not using his own moneyin the Georgia deal; as he would in later deals, Pharaon was actingas a front man for BCCI. Since it had begun operations in 1972, BCCIlost money steadily, seeking high profits by providing services todrug lords, arms dealers, spies, and terrorists -- and covering itsdeficits by fraud. By the time it was closed down in 1991, the bankwas hiding a shortfall of nearly $12 billion, making it easily thelargest single bank fraud in history. BCCI concealed the fraud bydazzling Westerners with lists of wealthy Saudi shareholders,prominent among them Tamraz's partner Kamal Adham and the Main Bankinvestor Khaled bin Mahfouz. Both Adham and bin Mahfouz laterarranged plea bargains with Manhattan District Attorney RobertMorgenthau, the most aggressive of the BCCI's investigators.

Barred from a full-scale U.S. presence by suspicious regulators,BCCI was trying a back-door entry into the American system throughoutthe eighties by illegally taking hidden ownership of severaldifferent banks. From 1977 to 1982, Pharaon bought shares in theNational Bank of Georgia and then turned them over to aBCCI-controlled bank chain based in Washington, D.C. -- FirstAmerican Bankshares, Inc.

In 1985 Pharaon was also involved in buying the Independence Bankof Encino, California, which BCCI's number two man later testifiedwas meant to be the base for an eventual BCCI relocation to the U.S.Two years later Pharaon plunged into the savings and loan racket bypurchasing a quarter of the shares of Miami's Centrust Savings Bank.A sale of bonds to BCCI kept Centrust afloat until 1990; whenregulators took over the Miami thrift, they discovered some $2billion in losses, making it one of the largest casualties of theS&L debacle.

Pharaon invested in Independence and Centrust in spite of his ownfinancial problems. In the mid-eighties, the putative energy crisishad turned into an oil glut. Along with other Saudis, Pharaon beganto take large losses -- and in December 1985, his REDEC declared amoratorium on its debt. His main profit center came to be his illegalfronting for BCCI purchases. (An administrative law judge for theFederal Reserve last year estimated that Pharaon made a profit of $91million in selling Bert Lance's old bank to BCCI.)

Pharaon is now a fugitive from federal and New York State bankfraud charges, and the Federal Reserve Board of Governors earlierthis year fined him $37 million for lying about the takeover of theIndependence Bank.

Not in the background for long

After the Detroit bail-out, Tamraz appears to have kept Pharaonat arms length. His name doesn't show up in any of the Saudi's morenotorious deals, or in the heyday of the BCCI. But one of Tamraz'sreported interests played a crucial role at a second degree ofseparation. The European financial press identifies Tamraz as anorganizer of the Paris-based Banque Arab et Internationaled'Investissements (BAII), originally jointly owned by two consortiaof sixteen Arab banks and twenty-one non-Arab ones. (Like the BCCI,the holding company was based in Luxembourg, which had limitedresources for regulation.) The BAII had close links with BCCI, evenhiring a BCCI director as its chief executive.

The BAII provided cover for BCCI. It helped fund the takeover ofFirst American. According to the Federal Reserve, it provided aletter of credit for Pharaon's purchase of Independence Bank, withoutmentioning that the financing was backed up by the BCCI. The BAII hadbad loan problems of its own, and in the summer of 1990 it was takenover by the Banque Nationale de Paris, the French central bank, at aloss of $100 million.

Tamraz re-entered BCCI's orbit after it was seized in 1991. Heoffered to pick up the pieces of the bank and pay depositors 90 centson the dollar. But his still unidentified backers soon learned howmuch this offer would really cost, and the deal collapsed. (Theultimate rescue, negotiated with majority shareholder Sheikh Zayed ofAbu Dhabi, paid about 40 cents on the dollar.)

Tamraz makes an interesting parallel with Mochtar Riady of LippoGroup. Perhaps the most spectacular of the BCCI's failures came inHong Kong, where it sparked a bank run and wiped out a good part ofthe fortune of the famous Burmese opium warlord Khun Sa. Lippo wasthe leading contender to take over BCC (Hong Kong) Ltd., until thelosses turned out to be much higher than expected.

In the current uproar over Tamraz, his links to Pharaon and BCCIhave largely been forgotten. Tamraz emerged as a politicalcontributor in the fall of 1995, when he donated $50,000 to theDemocratic National Committee. In the off-election year, his contactsat the DNC suggested the best use of his cash would be the tight racefor control of the Virginia House of Delegates. On August 25, he gave$25,000 in his own name to the Democratic Party of Virginia, andfollowed on October 19 with $75,000 in the name of Tamoil, Inc. Bythe end of 1996, his state and national Democratic contributionstotaled $177,000. After Tamraz opened his purse, White House doorsopened to him. He attended four of Clinton's coffee tastings, makinghim one of the most frequent outside guests.

Tamraz had plenty of business to talk over with theadministration. His most publicized current project is constructionof a pipeline to bring untapped Caspian Sea oil reserves to the West.Since the collapse of the Soviet empire, Central Asian oil has beenthe focus of much geopolitical wrangling. Caspian reserves couldequal those of Kuwait or even Saudi Arabia -- and four pipelineconsortia are already exploring routes through the tricky terrain ofRussia or Iran. On June 6, 1995, Tamraz announced his own plan: hisNew York-based Oil Capital Corporation wants to build a $2 billionpipeline spanning the Caucasus and traversing Turkey. The Tamrazroute would avoid Russia and Iran and eliminate the shippingbottleneck of the Bosphorus, but it requires the diplomatic feat ofreconciling newly independent Armenia and Azerbaijan, whose ethnicrivalries span millennia.

Another problem is that the bulk of Tamraz's financing is pledgedby the People's Republic of China. The China Petroleum Engineeringand Construction Company, owned by the China National PetroleumCompany, agreed to put up $1.5 billion, and provide engineering,construction, and raw materials.

Shortly before announcing the project, Tamraz spelled it out to aNational Security Council specialist on June 2. The meeting wentbadly. NSC official Sheila Heslin, who handles Central Asian andCaspian Sea affairs, later told the Wall Street Journal that she felthis pipeline proposal didn't have much chance and recommended againstfurther meetings with him.

Unsavory friends

Tamraz is still thought perhaps to have tried to intercede withthe American government on behalf of both Saddam Hussein and MuammarQaddafi. In 1983, Tamraz bought a northern Italian chain of gasstations and a refinery from Chicago-based Amoco, calling it Tamoil.Two years later, some $200 million in debt, he sold 70 percent to theLibyan Arab Foreign Bank, rejecting a bid from Kuwait. After theUnited Nations slapped a partial embargo on Libya over the terroristbombing of Pan Am flight 103, Libya turned over a controlling stakein Tamoil to private Italian investors. But the company still appearson the U.S. Treasury's list of blocked foreign assets under the nameGatoil Suisse, SA.

Proud of his name recognition, however, Tamraz brought the Tamoillabel to the U.S. in 1995, incorporating an American version inDelaware. He denies there's a connection to Libya, and on the surfacethe U.S. hasn't let up on Qaddafi. In August 1996, Clinton signed abill imposing unilateral sanctions on companies doing business withthose countries. According to backers of the measure, however, theoriginal administration version applied only to Iran; Congress addedLibya. But the administration has been slow to enforce the lawagainst Tripoli, and in October, Qaddafi even endorsed Clinton forpresident.

The Caspian pipeline and Libyan sanctions make a pretty fullagenda by themselves, but there are still areas where Tamraz mighthave wanted to exert influence. Both the Bush and Clintonadministrations have shown a marked reluctance to get to the bottomof the BCCI case, which is why the lead in unraveling the fraud hasfallen to Manhattan D.A. Robert Morgenthau. His complaints about thenon-cooperation of the Justice Department under Bush Attorney GeneralRichard Thornburgh may have been a major factor in Thornburgh'sfailure to win the U. S. Senate race in Pennsylvania in 1990, anupset widely misread as a demand for health-care reform. But curiousthings have happened under Clinton, too.

In July 1994, a crucial witness named Abbas Gokal decided tocooperate with Morgenthau's investigators; while en route to NewYork, police arrested him in Frankfurt in the name of Great Britain'sSerious Fraud Office. The British had apparently been tipped off bythe American State Department, and Gokal remains in British custody.That same month, the Justice Department sponsored a plea bargain withthe BCCI's number two man, Swaleh Naqvi, provoking an unusual protestto the sentencing judge from Morgenthau. "Naqvi has consistentlyfailed to proffer new information in a significant investigation orprosecution of unindicted individuals or anyone else in the UnitedStates," Morgenthau wrote. Privately, other investigators say Naqviwas rewarded for not talking.

One of the cases that Naqvi could have helped reached into theWhite House. A former BCCI official named S. K. A. Akbar left thebank in 1986 with about $27 million in hush money to found acommodity trading firm called Capcom. (Its major shareholdersincluded Kamal Adham.) Capcom had extremely close ties to the Chicagofirm Refco, from which Hillary Clinton made her killing in cattlefutures. (See "The Ties That Blind," TAS, August 1994.)

Naqvi was represented by the well-known former prosecutors JosephDiGenova and Victoria Toensing, who were then partners in the lawfirm of Manatt, Phelps & Phillips. The head of the firm, CharlesManatt, was a former Democratic National Committee head; anotherpartner was Clinton fundraiser and trade representative MickeyKantor. Internal BCCI documents are said to show that the bank usedthe Manatt firm to lobby the National Security Council in 1992 in anattempt to close down Morgenthau's Manhattan investigation.

Familiar faces

As noted above, the fatal blow to Anthony Lake's nomination wasthe discovery that Roger Tamraz had used the CIA to lobby the NSC.When NSC specialist Sheila Heslin recommended a cold shoulder forTamraz, Democratic National Committee chairman Don Fowler produced afavorable memo on Tamraz from a CIA specialist (who later went towork for Tamraz) and paved his way to the White House.

It wasn't the first time Fowler had crossed paths with Arabmoney. In 1978, when Fowler was Democratic Chairman of SouthCarolina, Jimmy Carter named the former South Carolina governor JohnWest as ambassador to Saudi Arabia. Prominent Southern Democrats soonbegan to do big business in the Kingdom of Saud, and one of these wasDemocratic National Committeeman Charles Ward, who owned a school busmanufacturer in Conway, Arkansas. Ward Industries landed a bigcontract to provide buses for the annual pilgrimage to Mecca, andreceived a $3 million loan from the BCCI. Ward went to Saudi Arabiato drum up more business, and took along as his consultant none otherthan Donald Fowler.

Now, we know, Fowler brought Tamraz to the White House. Tamrazbrought Pharaon to Detroit. Pharaon brought the BCCI to the U.S.. TheBCCI brought a loan to Ward Industries, which brought Donald Fowleralong for the ride. One suspects that the case of Roger Tamraz maysoon become central to the investigations of troubled Democraticfundraising.

Kenneth R. Timmerman