Prologue – The Tragedy Of An Aging Appollo

Clark McAdams Clifford sat before the congressional rabble he had wowed in years past, explaining why the multimillion-dollar stock deal that had been arranged and financed for him by the Bank of Credit and Commerce International had been a fitting reward for his stellar service as chairman of First American Bankshares in Washington, D.C.

First American, Clifford noted, had prospered since 1982 under leadership that he and Robert Altman, his protege and law partner, had provided: Assets had quintupled, profits quadrupled. In the first few years Clifford had taken only token compensationña paltry $50,000 a year. By 1986, Clifford explained, First American’s stockholders "wanted a closer bond with Mr. Altaian and me," cemented by a stake in the company’s continued prosperity.

But this time the House Banking Committee wasn’t buying it. The members greeted Clifford’s testimony on that September day in 1991 with hostile skepticism. This legendary wise man, whose extraordinary persuasive talents had carried him to the apex of prominence and wealth, could hardly persuade anyone that his stock deal didn’t stink.

"I think it’s the stock deal that cost Clark the esteem of people who admired him in Washington," says a longtime friendly acquaintance of Clifford’s. "It was such a phony deal."

Was it? Hindsight is always twenty-twenty. And Clifford projects such unwavering belief in his own innocence that even one of his prosecutors doubts that he consciously did anything corrupt in dealing with BCCI. "I believe that Clark Clifford doesn’t think he was guilty of anything," this prosecutor says. "He thinks it’s what he did all his life. It’s good advocacy."

But the appearances are so bad that Clifford’s care-fully burnished reputation for probity had melted away by the time of the hearing. That was ten months before he and Altaian were battered this July 29 by simultaneous indictments from Manhattan district attorney Robert Morgenthau and federal prosecutors in Washington, D.C. At the heart of both cases is the allegation that the two lawyer-bankers defrauded bank regulators and enriched themselves over a 14-year period by helping BCCI covertly control First American.

Part of the appearance problem is the sheer size of the bonanza reaped by Clifford and the 45-year-old Altman. As of March 1988, it mounted (if only briefly) as high as $33 million in stock and cash: The two made a combined profit of $9.8 million ($4.1 million after tax) in 20 months by buying and then selling stock in First American’s holding company; they also retained stock that was then arguably worth as much as $22.9 million (it’s worth far less, if anything, now).

This fortune was bestowed less by First American’s ostensible stockholders than by BCCI, which arranged the purchases and sales and financed the deal with sweetheart loans. And BCCI, which Clifford and Altman had promised federal regulators would have no control over them or First American, stood exposed by mid-1991 as a worldwide criminal enterprise.

Worse still, while their stock deal was unfolding, Clifford and Altman allegedly did BCCI a big favor by having First American buy the National Bank of Georgia from since-indicted Saudi tycoon and BCCI stockholder Ghaith Pharaon for a suspiciously fat $220 million, most of which went straight to BCCI to cover Pharaon’s debts.

And, it is now clear, Clifford and, especially, Altman took pains to hide from regulators, from their fellow board members, and from their own law partners at Clifford & Warnke both BCCI’s generosity to them in the stock deal and BCCI’s interest in the Georgia bank deal. It was this succession of carefully crafted nondisclosures and partial disclosures that dragged these two brilliant careers into the muck of alleged criminality.

Clifford and Altman concede nothing: no improprieties, no conflicts of interest, not even an error in judgment. They admit only to having been deceived about BCCI’s secret ownership of a major interest in First American, as were many others, including regulators worldwide and BCCI’s outside auditors.

"Our consciences are clear," Clifford has sworn. He and Altman have defended their actions in detailed House and Senate testimony and, to no avail, in long pre-indictment sessions with prosecutors and Federal Reserve Board investigators.

They have also grasped for innocence by association, pointing out that prominent law firms, including Wachtell, Lipton, Rosen & Katz and Milbank, Tweed, Hadley & McCloy, worked closely with them as counsel on the matters for which they now stand indicted. But Clifford and Altman have not specified whether they gave these lawyers all the key facts. The Wachtell firm supports Clifford and Altman’s position on certain points, but indicates it may not have been fully informed on others. And Milbank partner Baldwin Tuttle appears to be a key prosecution witness on some issues, although perhaps a key defense witness on others.

It now appears that Clifford will be denied – or spared – the opportunity to confront his accusers in court: A trial might well amount to a death sentence for the distinguished legal legend, in the unanimous view of doctors chosen by a federal judge and by the Justice Department, as well as Clifford’s own doctors, because Clifford’s diseased, 85-year-old heart could not survive the stress.

Could Clark Clifford really be a criminal – this aging Apollo who sat at Harry Truman’s right hand, who stopped the bombing of Hanoi as Lyndon Johnson’s Defense secretary, who became the first million-dollar-a-year Washington superlawyer, who practiced political law for decades without ever getting caught at the seamier forms of influence peddling, who won the admiration of many of the nation’s leading citizens?

How could Clifford ever have gotten himself into such a fix? Did he really embark – well past the age of 70 and a millionaire many times over – on a bribery conspiracy with a bunch of Arabs he hardly knew? Or was he just a slick influence peddler all along, a guy who finally got caught? Was he a noble old man led blindly down the garden path by the ambitious Altman, as Clifford’s friends (but not Clifford) whisper? Or are Clifford and Altman both being persecuted by gonzo prosecutors bringing bogus charges – what one Clifford sympathizer calls "a gang rape" – to sate the bloodlust of journalistic and congressional mobs?

One explanation is suggested by a Clifford friend, who is sure that Clifford could "never knowingly act in a corrupt manner." Asked how Clifford could have taken so much money through BCCI without smelling something rotten, this friend recalls hearing Clifford tell many years ago of having charged a client $10,000 for a brief telephone consultation. When the client complained, this friend says, Clifford shrugged it off by saying to the client, "You can go to your country club this weekend and brag about it."

"I think Clark Clifford thought he was worth it," the friend adds. "Here is a guy who didn’t hesitate to charge phenomenal legal fees, just because he was Clark Clifford. He thought he was doing an honor to everyone he associated with, whether they were friends or clients or whatever. And with age that sort of thing becomes more pronounced."

A less charitable analysis might be that Clifford’s titanic self-esteem and unbroken record of successes blinded him to ethical pitfalls – and opened the way for him to be sucked into BCCI’s game.

There is also an intriguing lesson in all this, about how easily modern prosecutors can characterize as criminal the kind of conduct that grows incrementally out of what many lawyers would characterize as artful, aggressive advocacy. The available evidence suggests that Clifford and Altman are neither wronged innocents nor blatant crooks. The conduct for which they stand indicted has a resemblance – more than many lawyers would like to think – to the kind of high-powered, close-to-the-line advocacy sometimes practiced at the most prestigious law firms.

You start out doing what any good lawyer would do: giving the benefit of the doubt to a client’s less-than-plausible assurances; restructuring a transaction to get around a legal technicality or to avoid unwelcome scrutiny of troublesome features; artfully doctoring a disclosure to avoid drawing regulators’ attention to awkward facts that might create problems; papering over conflicts of interest with the necessary consents.

And you end up in a prosecutor’s cross hairs.

Of course, most lawyers, shielded by the attorney-client privilege and the background presumption that it’s their job to help clients get around legal obstacles, never have their most questionable strategems put under an unforgiving prosecutorial microscope.

But Clifford and Altman grasped for greater rewards than most lawyers when they decided to double as bankers and become their own clients. They began by doing the kind of smooth lawyering Clifford had done all along, gliding around legal impediments and obfuscating BCCI’s role to avoid unwelcome attention from regulators. But a crucial distinction is that they ended up doing this not just on behalf of clients but on behalf of themselves. So the question becomes not whether they went too far as advisers and advocates – itself a thorny issue, as we found in the Kaye, Scholer case – but whether their conduct on their own behalf was criminal. And as they got ever more entangled in conflicts of interest, which they rationalized with a hubris reminiscent of Sophoclean drama, they became what many lay people suspect lawyers of being: They let ambition and greed corrupt their judgment and lead them ever-deeper into a pattern of duplicity.

All this, however, does not necessarily make them criminals – let alone show that they deserve to have Morgenthau’s prosecutors treating them like drug kingpins by seeking a grossly excessive $40 million forfeiture and freezing the entire $19 million that Clifford held in New York investment accounts.

In fact, both the New York and federal cases against Clifford and Altman are littered with weaknesses: the absence of victims, or at least American victims, with real losses attributable to the actions of Clifford and Altman (who in fact helped bring more than $500 million in Arab investments into the U.S. via First American); the paucity of evidence that BCCI’s global criminality infected die banking operations of First American (where no depositor ever lost a cent); the difficulty of identifying any unambiguous violations of clear legal rules; and the prosecutors’ consequent resort to circumstantial evidence of vague conspiracies.

Then there is the sheer implausibility of the notion that a man as rich and respected as Clifford would risk everything by embarking on a criminal enterprise in his eighth decade. "It just does not tally with one’s understanding of human behavior," Clifford told a Senate panel last year. "In sixty-three years [of practice] there had never been a cloud against my name."

Federal prosecutors were unsure enough of their case against Clifford, according to sources close to the case, that a final decision to charge him was not made until late in the day on the eve of the indictments. And lawyers close to the case on both sides say that even in Morgenthau’s office, where the BCCI investigation has been a source of pride and fawning publicity, there was vigorous debate about the proposed charges.

Indeed, Clifford and Altman might well never have been indicted at all but for some bad luck: the revelation – apparently a surprise to them – that the rich Arabs to whom they had rented out their respectability were the perpetrators of one of history’s greatest financial frauds. The exposure of BCCI as a global Ponzi scheme created a clamor for prosecutions, fueled by complaints that federal agencies had ignored years of warning signals. And the fall of BCCI exposed Clifford and Altman to scrutiny of confidential communications that otherwise would have been cloaked by the attorney-client privilege forever.

Certainly Morgenthau deserves credit for cracking BCCIs global scheme. Yet a study of his widely lionized indictment of Clifford and Altman and the available evidence leaves the impression that if pressed to specify just one discrete thing that Clifford or Altman did that was clearly illegal – take your best shot – the prosecutors would have trouble coming up with a crisp response. The best answer might be that these are very smart men, far too sophisticated to get caught in an obvious crime, but that they nonetheless flouted the law by a 14-year pattern of activity that gives off the telltale stench of criminality.

The centerpiece of the Morgenthau indictment – now set for trial on January 4 (though it’s likely to be postponed, and to proceed without Clifford) – is a charge that Clifford and Altman schemed with three co- defendants and two co-conspirators, from 1978 through 1991, to defraud bank regulators and enrich themselves by systematically abetting and concealing BCCI’s alleged control over First American. The two lawyers are also charged with bribery conspiracy and receiving commercial bribes – the sweetheart stock deal and BCCI nonrecourse loans to finance it, as well as fat legal fees – in exchange for helping BCCI covertly influence First American’s purchase of the National Bank of Georgia, among other things.

In addition, Altman alone is charged with three counts of falsifying business records (annual reports filed with the Federal Reserve Board for 1987, 1988, and 1989) and three counts of filing the same false records with the state. These charges all hinge on the theory that Altman "omitted to make a true entry" by failing to disclose BCCI’s alleged role in First American’s affairs.

Most of the state’s charges against Clifford and Altman are based on theories that the federal prosecutors apparently considered too nebulous or far-fetched to put in their somewhat narrower indictment – which is focused on alleged deception of regulators. For example, the federal prosecutors chose to charge neither that Clifford and Altman’s enrichment by BCCI amounted to bribery, nor that the annual reports Altman filed with the Federal Reserve (and the state) were false or misleading.

The federal prosecution, which involves many of the same facts, was deferred, probably forever, on September 10, when U.S. district judge Joyce Hens Green of Washington, D.C., agreed to let the eager Morgenthau go first. This was the course urged, over vigorous defense objections, by both state and federal prosecutors and – in an unusual episode of crossjurisdictional, ex parte judicial lobbying – by John Bradley, the judge presiding over the New York case.

The defendants – who have told friends that they fear they cannot get a fair trial in the Manhattan state court because of Morgenthau’s political influence and their perception that Judge Bradley is pro-prosecution – had wanted to confront their accusers in the District of Columbia, where Clifford’s doctors would be nearby and, Clifford says, he would have a better chance of surviving a trial.

The fall of Clark Clifford is gripping tragedy, on a grander scale than is common today. The clues to whether he is more sinner or sinned against – more deceived or deceiver – lie in the details of a 14-year saga.

As the story unfolds, Clifford and Altman meet up with President Jimmy Carter’s buddy, Bert Lance, who introduces them to the Pakistani mastermind behind BCCI. The lawyers ally themselves with a cast of rich Arab potentates (who prove to be sly deceivers) and bring along big-time lawyers including Martin Lipton. Then, as BCCI’s global empire begins to crumble, Clifford and Altman are eyed by government investigators – some of whom are easily persuaded that all is well – until the lawyers ultimately cross swords with Morgenthau’s brilliantly quirky in-house conspiracy theorist, prosecutor John Moscow, and find themselves facing trial.

Well start with a scene from the middle, one that Morgenthau’s prosecutors in New York will seek to burn into the jurors’ minds as evidence of Altman’s criminal intent.

In early August 1986 Altman receives a letter with which he is mightily displeased. The author is Baldwin Tuttle, a partner at Milbank, Tweed, Hadley & McCloy who has handled bank regulatory work for Clifford and Altman for eight years. The subject is the Clifford-Altman plan to have First American’s holding company, Credit and Commerce American Holdings (CCAH), purchase the National Bank of Georgia.

Tuttle’s message is that he is concerned about several legal and business risks that CCAH would run under Altman’s plan to pay an $80 million option fee to the Georgia bank’s ostensible owner, Pharaon. As both Tuttle and Altman allegedly knew by then, Pharaon was a financially troubled BCCI stockholder who had already deposited his Georgia bank stock with BCCI as security for loans that the $80 million would be used to pay down.

After reading the letter, Altman summons Tuttle to his office. According to a 141-page civil complaint filed by the Federal Reserve against Clifford and Altman this July, "In a brief and hostile meeting Altman handed back to Regulatory Attorney" – that’s Tuttle – "both the original of Regulatory Attorney’s letter and the copy Regulatory Attorney had sent to [a partner of Altman’s at Clifford & Warnke]. Altman warned Regulatory Attorney that if he ever wrote a similar letter again, Regulatory Attorney would no longer represent CCAH."

Prosecutors will draw this story out of an acutely uncomfortable Tuttle and present it to the jury as evidence that Altman knew he was putting his own company at grave risk for the benefit of BCCI, spurning sound legal advice, and covering his tracks by purging both copies of the letter from his files.

Paul Warnke, Clifford’s fellow senior partner at Clifford & Warnke, is said to have commented at a firm meeting that if Altman really spoke that way to Tuttle, Tuttle "should have thrown Altman out the window." (Warnke did not respond to interview re¨quests.)

But Tuttle did nothing of the kind, as defense lawyers will stress. They will dismiss the episode as showing only Altman’s understandable annoyance at Tuttle for sending out a cover-your-ass letter overstating some remote risks of which Altman was already well aware – risks that never materialized.

The cross-examination of Tuttle might go something like this: "You and your firm continued working on the Georgia bank purchase, didn’t you, Mr. Tuttle? And you helped structure it, didn’t you? And wasn’t it your law firm – not Mr. Altman – that filed all the paperwork with the Federal Reserve? Now, Mr. Tuttle, you wouldn’t have done all that if you had thought there was the slightest illegality, would you? Mr. Altman never told you to do anything illegal, did he? And you worked for him and Mr. Clifford right up to 1991, didn’t you?

"And you haven’t been indicted, have you, Mr. Tuttle?"

To which the prosecution’s rebuttal will be that Altman concealed some critical facts, facts that would have magnified Tuttle’s concerns about Altman’s handling of the Georgia bank deal and BCCI’s involvement. Like the fact that as of Tuttle’s dressingdown, Altman and Clifford already had been floated $14.9 million in sweetheart loans by BCCI to buy CCAH stock through BCCI at a bargain rate. And the fact that their hopes of making a big profit depended on BCCI’s finding a buyer for their stock, as it ended up doing 20 months later.

And so Tuttle will be pushed back and forth, until he is black and blue and the jurors are numb.

Chapter One – Seduced By Banking

"Flying on the private jet of Phillips Petroleum on the way to handle a case with Clifford in the mid-seventies, [Edward Bennett] Williams gleefully acted out a pantomime of a delegation of Arabs visiting Clifford in his office. Williams, a perfect mimic, imitated Clifford gravely telling the visiting sheiks, ‘You understand, of course, that I can only get you access.’ Then Williams imitated the Arabs winking and grinning as they shoved a bag of gold across Clifford’s desk. Clifford watched this performance with some distaste. Now, Ed,’ he interrupted, you know it doesn’t work that way.’ Williams just laughed " – Evan Thomas in his 1991 book on Williams, The Man To See

Even before Clifford fell in with the BCCI crowd, recalls an old friend of his, he had "this sort of kooky desire to run a bank . . . the sense of running something dynamic like that, and the action and the excitement and the prestige." He seemed impressed, adds another old friend, by the bowing and scraping to which the big-shot bankers were treated when they strolled into the Burning Tree Club in Maryland for a round of golf. He liked to imagine himself as a banker:’ "And people would say, ‘Mr. Clifford, it’s so good to see you,’ and that sort of thing. You know, people might need a loan someday," recalls the friend.

Just being the famed counselor to presidents, former defense secretary, archetypal superlawyer, and multimillionaire was not enough. Clifford wanted more.

BCCI was not Clifford’s first banking connection, nor his most seamy. More than 20 years ago he sat with other prominent Washingtonians – and with one W. A. "Tony" Boyle – on the board of the National Bank of Washington, which was then 75 percent-owned by one of the most notoriously corrupt labor unions in the nation: the United Mine Workers, of which Boyle was president.

By late 1970 lawsuits had generated widespread publicity about UMW abuses, including the union bosses’ milking of their own miners’ pension fund by keeping as much as $70 million in a non-interest-bearing account in the union’s bank. The income that should have swelled the pension fund was instead being converted into profits for the bank, which in turn paid dividends into the union’s treasury. Thus were bankrolled the lavish salaries, limousines, nepotistic practices, and other indulgences of Boyle and his henchmen, along with the directors’ fees.

After The Washington Monthly ran a piece in November 1970 focusing on the bank board’s bland acquiescence in the union’s use of its bank to cheat its pensioners, Clifford called Charles Peters, the editor. According to Peters’s 1988 autobiography, Clifford said he was "deeply troubled" by the article and that "you may be sure that I will examine the situation carefully."

"I had admired Clifford when he worked in the White House under Harry Truman," wrote Peters, "so I waited for him to resign with a public repudiation of Boyle and his entourage. But the repudiation never came. Clifford quietly left the bank board more than a year later. The other members stayed on."

Boyle was later convicted of ordering the 1969 murder of union insurgent Joseph Yablonski, his wife, and his daughter.

The banking careers that landed Clifford and Altman in criminal court began several years after Clifford parted company with the National Bank of Washington, with a phone call during the Labor Day weekend of 1977 from Bert Lance, then-President Carter’s close friend and budget director.

Lance, the personable, jowly country boy who had made it big in Georgia banking, called Clifford because he was in legal and political trouble over questions about alleged improprieties at two banks he had run, including the National Bank of Georgia.

Clifford, then 71, was a natural choice for Lance. No lawyer was considered wiser in the ways of Washington. None was listened to with more respect. And none could come so close to lending his client innocence by association. When Lance went to testify on Capitol Hill, he got treated better just because this living legend, who barely knew him, was by his side. As Lance started to read his statement, Clifford quieted a distracting buzz of conversation simply by raising his arm.

Also in Lance’s corner was Altman, a sharp, extremely hardworking, fiercely ambitious 30-year-old, brimming with a self-confidence that struck his detractors as arrogance. He had already been anointed by Clifford as his law firm’s rising star. Some friends even say that Clifford sees Altman as the son he never had.

"[Altman] is a very brilliant lawyer, a very brilliant person," says a former Clifford & Warnke partner who speaks fondly of Clifford. "He could run down the law and run down the evidence as expeditiously as anyone I ever saw. . . . Bob [Altman] is very ambitious and has almost as much ego as Mr. Clifford. . . . He was kissing Clifford in a prominent place, and [Clifford’s] ego let him respond to that very nicely."

At the hearing Lance took the offensive, in a statement mostly drafted by Altman, blasting critics in Congress and elsewhere for hanging him with rumor and innuendo. But Lance was beyond saving by the time he called in Clifford. Lance’s banking career, marked by sloppiness and cronyism at best, gave the press and Congress ample fodder for a scandal feeding frenzy. Lance bowed to the inevitable and resigned as budget director on September 21, 1977.

He found himself out of a job and desperately in need of money, which he hoped to raise by selling his 12 percent interest in the National Bank of Georgia and renting out his connections and expertise. Lance’s reputation as a banker was in tatters. But his reputation as a crony of the president’s had survived.

Such a man has his uses, and within weeks of his resignation Lance was sought out by Agha Hasan Abedi, the Pakistani banker who had founded BCCI in 1972. Growing at a phenomenal pace, BCCI was becoming a global empire, fueled by Abedi’s charisma, by his pipeline to oil-rich Arabs, and – as became apparent many years later – by pervasive bribery and fraud.

(Abedi and his right-hand man at BCCI, Swaleh Naqvi, are co-defendants with Clifford and Altman in the New York case, but unlikely to stand trial. Abedi is an invalid in his native Pakistan, resisting extradition; Naqvi is under house arrest in Abu Dhabi, the oil sheikdom whose ruling family ended up owning most of BCCI and a large chunk of First American.)

Abedi badly wanted a banking presence in the United States, especially in New York, the international banking center. But his efforts to acquire such a foothold had been repeatedly thwarted by the U.S. government. It was not that BCCI was regarded as a rogue bank – not then, anyway. Rather, federal regulators were prepared to block it from buying any U.S. banks because it was not subject to consolidated regulation by a lender of last resort anywhere – not in Luxembourg, where it was chartered, nor in the Cayman Islands, its other legal home, nor in London, its operational headquarters. BCCI also had no con¨solidated auditor and cloaked its affairs in secrecy.

Lance signed on as a consultant with Abedi – after, Lance says, he asked Clifford to check the Pakistani banker’s reputation and got a positive report. Abedi – whose BCCI payroll boasted a collection of politically connected figures around the world – helped bail Lance out from his crushing debts by hav¨ing a BCCI affiliate lend Lance $3.6 million on extraordinarily friendly terms: no interest rate set, no due date, and no collateral. "In time, the payment came to be understood as a consulting fee, or retainer, "according to a Senate subcommittee report.

Abedi also helped Lance get $2.4 million for his stock in the National Bank of Georgia, arranging a sale of the bank for almost twice the previous market value of its stock. The buyer was Ghaith Pharaon, a rich Saudi who was a close personal friend of Abedi’s and a stockholder in, and large borrower from, BCCI. Lance was represented in the deal by Clifford and Altman. Abedi did much of the negotiating for Pharaon, who, it is now known, was fronting for BCCI: The bank financed much of the purchase and secretly acquired control of half of the stock that was bought in Pharaon’s name.

Lance did some things for Abedi, too. He recommended and helped Abedi pursue an effort to buy control of Financial General Bankshares (later to be renamed First American Bankshares), a Washington, D.C.-based holding company with banks in D.C., Virginia, Maryland, Tennessee, and – most critical to Abedi – New York.

Lance also advised Abedi to put "an outstanding American citizen who has no blemish" in charge of the takeover effort to avoid "perception problems," as Lance told the Congress. In the fall of 1977 he introduced Abedi to Clark Clifford.

"I found him to be pleasant and a man of importance," Clifford said of Abedi in Senate testimony last year. The man not only ran an up-and-coming international bank, Clifford noted; he was also investment adviser to "a number of important and very wealthy Arabs."

Clifford had long had an affinity for money, evidenced by the staggering fees he charged and the enormous draw he took out of his law firm. "He’s always wanted a lot of money, never thought he had enough money," muses one Clifford acquaintance. Abedi controlled billions.

In addition, Abedi had a good reputation then. The Economist described him as "highly regarded in the banking world." The Bank of America owned 30 percent of BCCI and vouched for its respectability. Clifford prided himself on not putting his own reputation on the line for just any client who walked in the door; Abedi checked out.

Abedi, Clifford told the House Banking Committee last year, "felt that our standing and our reputation would be an asset" to him and his associates.

But a few minutes later in the same testimony, Clifford drew a fine distinction in responding to a question about whether he had sensed that Abedi was in the market for influence peddlers: "They needed a lawyer…. I had no warning at any particular time that part of their strategy was to identify themselves with people who had respectable positions and good reputations."

A similar penchant for having it both ways permeated Clifford’s career: He has often recounted a little speech that he made to new clients, stressing that he was not in the business of influence-peddling, or even (in the modern euphemism) of access-selling. Yet it is hard to understand how Clifford could justify the eye-popping fees that he charged except on the unstated premise that he was providing a lot more than wise counsel.

Clifford’s initial work for BCCI clearly did involve real lawyering – the litigation of what became the most bitterly contested takeover attempt ever aimed at an American bank. Clifford and Altman ended up representing Lance, Abedi, BCCI, and several individual Arab investors when their quiet effort to accumulate a major stake in Financial General was met with lawsuits in early 1978.

According to one of their adversaries, Clifford and Altman fought "vigorously and creatively" throughout the widely publicized takeover battle, acting not as Washington fixers but as "excellent lawyers."

The battle began after BCCI had accumulated 17 percent of Financial General’s shares in the open market, ostensibly on behalf of four individual Arab investors who used BCCI as their investment adviser. Seeking to avoid Securities and Exchange Commission disclosure requirements, BCCI bought just under 5 percent of the company in each investor’s name-claiming, incredibly, that the four were not linked and, therefore, did not have to file a 13(d) disclosure with the SEC, as is required of anyone or any group buying more than 5 percent of a public company.

Despite a contemporary BCCI document seeming to suggest that he had blessed this transparently illegal strategy of nondisclosure, Clifford has denied any role in it and claimed that he abandoned it as soon as he came into the case, in early 1978.

In any event, this initial strategy was challenged in a February 1978 lawsuit by Financial General’s management, and a March 1978 SEC suit, charging 13(d) violations. U.S. district judge Oliver Gasch of Washington, D.C, ultimately agreed with the private plaintiffs in April 1978, rejecting the BCCI group’s argument that it was merely a collection of individuals who coincidentally used BCCI as their investment adviser. Finding Abedi and BCCI to be the moving force in the takeover effort, with ostensible investors even giving BCCI the authority to vote their shares, Judge Gasch enjoined the BCCI group from proceeding without public disclosure of its holdings and intentions.

Clifford and Altman responded by doing what comes naturally to lawyers confronted with legal and regulatory obstacles: They restructured the takeover attempt to get around the obstacles. The revised bid still came from the same group of rich Arabs, all closely linked to BCCI. But the roles were rearranged: Since the "investors" had fooled nobody by pretending not to be acting together, they settled the SEC’s suit (the day it was filed) by declaring themselves a group from that point forward and openly launching a hostile tender offer. And since the Federal Reserve was not about to approve a bank takeover openly spearheaded or financed by Abedi’s largely unregulated bank, BCCI melted into the background, ostensibly serving only as an adviser to the Arab investors, three of whom also happened to be major BCCI stockholders. Abedi’s public role was minimized. The role of the lead investor was stressed.

That was Sheik Kamal Adham of Saudi Arabia, then a wealthy, powerful, suave, and respected figure in Saudi and Egyptian political circles, now a cooperating witness against Clifford and Altaian. His wealth was reduced last July by a $105 million payment exacted by Morgenthau’s office as part of a plea bargain.

Meanwhile, since the 20-lawyer Clifford & Warnke lacked takeover litigation expertise, Clifford called in Martin Lipton and his firm, Wachtell, Lip-ton, to battle Financial General’s takeover gladiators from Skadden, Arps, Slate, Meagher & Flom. To handle regulatory work, Clifford retained Baldwin Tuttle, who had been deputy general counsel of the Federal Reserve until he spun through the revolving door in 1977 and joined the Washington, D.C., office of Kutak, Rock & Huie. (Tuttle later moved to Mil-bank, Tweed’s D.C. office.)

Skadden’s lawyers attacked the BCCI group represented by Clifford and Altman in 1978 in terms that appear remarkably prescient today:

"The facts developed to date strongly suggest that BCCI will effectively control the operations of [Financial General] if the forthcoming tender offer by the Middle Eastern defendants is successful," Skadden’s Douglas Kraus asserted in an August 29, 1978, affidavit. "It is apparent that BCCI would not only manage the operations of [Financial General] but is also actively engaged… in selecting the management team that would run [Financial General] if the tender offer succeeds." (Today Kraus declines to comment.)

Skadden’s prescience in 1978 may present the firm with a problem now: In May 1991 Skadden partners Robert Bennett and Carl Rauh became mainstays of the Clifford-Altman defense team. And Morgenthau’s prosecutors have debriefed several Skadden partners – probably about the 1978 deal.

Chapter Two – Fancy Footwork

&quo;Had I ever needed a lawyer myself, I would have turned to Ed Williams. . . . Williams defended his unpopular clients on the grounds that, under our system of government, every person had a right to the best defense within the existing laws. Every defendant had a right – and his lawyer an obligation – to test the law to its limits to get the best possible outcome from the courts. That was what made the law work. To the lawyer, there was no such thing as a loophole." – Clark Clifford in his 1991 autobiography, Counsel to the President

In March 1980 the Financial General takeover turned friendly when the BCCI group raised its price high enough to persuade Financial General’s management to drop its opposition.

But two hurdles remained for the Arab investors: getting approval for the acquisition from the Federal Reserve Board and from banking regulators in New York State, where Financial General operated two small banks.

The Fed, in particular, wanted to be sure that BCCI was not financing the takeover, and would not end up owning Financial General or exercising any control over its management. The Fed also wanted assurance that the Arab purchasers would not encumber the company with debt or use its banks to pursue their own commercial or political agendas. This presented a problem for Clifford and Altman because so many signs that BCCI had in fact originated and directed the takeover effort had already surfaced in the preceding litigation.

At the same time, though, Clifford and Altman knew that the Fed’s bureaucrats couldn’t be too picky in screening wealthy would-be foreign investors: It was Federal Reserve policy to encourage foreign investments in U.S. bank stocks to help pump up bank capital.

Clifford worked this angle in his pitch at an extraordinary Federal Reserve Board hearing on April 23, 1981, to consider the Arab investors’ application to acquire Financial General. "It is in the interest of our country," Clifford told the regulators (headed by Fed deputy general counsel Robert Mannion), "to bring back to the United States as many of the dollars as we can that through the years we send over to the OPEC countries." He also suggested that Arab investments might beget even larger Arab deposits.

The regulators’ own investigations produced positive reviews of the wealth and characters of Sheik Kamal Adham and other leaders of the investment group (which had grown to 14 members). Alan Cohen, acting superintendent of the New York Banking Department, said in a 1982 letter to Congress that the application to acquire Financial General "received more scrutiny from more regulatory agencies than any other in recent memory." Federal Reserve officials also said at the time that they used all the government’s resources, including the Central Intelligence Agency and the State and Commerce Departments, to check out the investors; they found nothing unacceptable, or even worrisome.

(The CIA apparently did not mention to the Fed that Adham had long been head of the Saudi intelligence agency and, in the words of a recent congressional report, "the CIA’s principal liaison for the entire Middle East from the mid-sixties through 1979." )

But with all its money, clout, and character references, the investment group’s greatest asset may have been Clark Clifford’s golden name. It would have taken a bold bureaucrat, at that time, to suggest that Clifford couldn’t be trusted.

And Clifford was not just vouching for his clients. Even more, he was putting his own name on the line in the most direct way. For by July 1980 Clifford had accepted Abedi’s offer to direct CCAH, the holding company that would run Financial General after the takeover; Altman would be on the CCAH board as a director and become president of Financial General (later renamed First American).

"I am prepared to give the majority of my time to [the bank] in the future," Clifford pledged at the 1981 Fed hearing. "I intend . . . that I will devote my primary attention to this."

Clifford and Altman – who now stress that they prepared the application for Federal Reserve approval of the takeover with the help of the Wachtell firm and Baldwin Tuttle – provided the Fed with numerous ironclad, written assurances in applications and related letters that BCCI would not buy any stock as part of the acquisition; would have no role in financing the acquisition; and would have no role in managing the company thereafter.

Clifford also promised at the 1981 hearing (and elsewhere) that the new Arab owners would be &quo;passive investors," and were "not going to concern themselves with the operation" of the company; that the investor group would finance the acquisition mostly with their own money, borrowing no more than $50 million from the Arab-owned, French-chartered Banque Arabe et Internationale d’lnvestissement (BAII), which was more acceptable to the Fed than BCCI because it was subject to French regulation; and that the new owners would not pledge their shares as security for any loans.

This would leave Financial General and its banks to be run without interference by Clifford and a distinguished board, including former senator Stuart Symington of Missouri, one of Clifford’s closest friends. The package offered to the Fed was almost too good to be true: $170 million in Arab petrodollars to start, more on the way, and no Arab control.

These commitments were, to be sure, subject to a few qualifiers – some would say loopholes – to which Clifford and Altman give great prominence now; BCCI had in the past acted as banker and investment adviser to the Arab applicants (some of whom were also identified as BCCI stockholders), and as Clifford and Altman’s "communications link" to them, and BCCI would perform a similar role in the future. And, it was noted, BCCI might lend money to the investors after the acquisition.

But in 1981, at the April 23 hearing, all the emphasis was on BCCI’s lack of involvement. Clifford, accompanied by Altman and Baldwin Tuttle (under whom hearing chair Mannion had worked at the Fed), presented Adham and the three other Arab investors in attendance as wealthy principals who were fronting for nobody and would themselves exercise no control over the bank’s management. Adham and his fellow investors also insisted that they had not been acting either as a group or as nominees for BCCI when it had started buying shares in their names in 1977.

Some of the regulators greeted the latter assertions with polite incredulity. But Clifford was ready to stake his own reputation on the probity of Adham. Calling the Saudi sheik "His Excellency" throughout the hearing, Clifford said: "I have come to have the deepest respect for his character, for his reputation, for his honor, and for his integrity. I’m proud to be an associate of his.- He is the kind of man with whom I like to be associated. He is sophisticated."

No Tony Boyle he. And rich as they come: Adham testified that his $30 million investment in Financial General was well "within my means." Clifford hinted delicately that rejecting the solemn pledges of such estimable plutocrats would reflect ethnic bigotry. And nobody at the hearing was so indelicate as to mention published (if unproven) allegations that His Excellency had taken millions in questionable payments, politely known as commissions, from The Boeing Company to help it sell planes in Egypt and elsewhere in the Mideast. (Clifford may have had some inkling how that sort of thing worked. He represented McDonnell Douglas in a 1978 case that involved alleged bribes to sell planes in Pakistan.)

The Fed’s Mannion asked about the similar-sounding names of the holding company seeking to buy Financial General – Credit and Commerce American Holdings – and the Bank of Credit and Commerce International. Clifford explained that it was mere coincidence: "I think generally the terms "Credit" and "Commerce" are terms that are used extensively in the Persian Gulf in financial affairs," he said.

Added Altman: "There is no connection between those entities and BCCI in terms of ownership or other relationship."

And when another regulator asked precisely what function BCCI would have, Clifford seemed to leave no ambiguity: "None. There is no function of any kind on the part of BCCI.- I know of no present relationship. I know of no planned future relationship that exists, and other than that, I don’t know what else there is to say."

In effect, that wonderful, sonorous voice was saying: Trust me. I’m Clark Clifford. The implicit message to the Fed’s regulators in 1981 was the same as Clifford’s express appeal to a Senate subcommittee a decade later: "My word has been important here for a great many years in Washington, and I ask you to take it."

The Fed took it, approving the acquisition in August 1981 without ever pinning down BCCI’s possible future role in any detail. And at Clifford’s request, the Fed kept the names of most of the 14 Arab investors – including members of the ruling family of Abu Dhabi – secret for more than 12 years. Adham had explained the reason at the hearing: "The man in the street, surrounded by all the problems in [the Middle East], when they see some of the notable men in the area make investments outside, they might lose confidence, and this is really the main thing that some of the rulers, in particular, are afraid of."

The New York Banking Department gave its approval in March 1982, on condition that First American, as Financial General was renamed that year, divest one of its New York subsidiaries, the Bank of Commerce. The state gave the company permission to open a New York City branch of its upstate subsidiary, Community State Bank, which was renamed First American Bank of New York. Earlier Clifford had given legislators in Albany assurances similar to those he gave the Fed. "I put my reputation at stake on it," he told them, "one that I value highly over the last fifty-three years of practice."

But even before these approvals were completed, according to the 1992 Morgenthau indictment, Clifford and Altman already had begun breaking the solemn assurances they had given about their independence from BCCI.

Chapter Three – An Ambiguous "Link": In Bed With BCCI

"The only laws that are permanent are the laws of nature. Everything else is flexible. We can always work in and around the laws. The laws change." – BCCI’s Agha Hasan Abedi, according to former BCCI U. S. operations chief Abdur Sakhia at a Senate staff interview

As it turns out, the entire presentation to the Fed in 1981 was one big fraud, according to Morgenthau’s prosecutors and Federal Reserve findings in 1991 based on a trove of internal BCCI documents. In fact, the prosecutors and the Fed assert, Adham and the other three investors at the hearing were really nominees for BCCI, which had bought CCAH shares in their names using "loans" that the investors had no obligation or intention to repay. The loans were secured by the CCAH shares, which BCCI was authorized to hold, to vote, and to sell while retaining the profits for itself; the nominees were paid fees for letting their names be used (including at least $2 million for Adham), and were indemnified against any losses. BCCI controlled at least 25 percent of the CCAH shares from the start, and about 60 percent by 1991. Even the $50 million loan from BAII had been indirectly guaranteed by BCCI – which had an interlocking board of directors with BAII – through a complex series of transactions involving Adham.

Clifford and Altman deny having known any of this. And although they had increasingly powerful reasons to suspect BCCI’s covert ownership of CCAH as time passed, there is no evidence establishing that they knew of it in 1981.

Clifford was quite plausible – with respect to 1981, at least – when he told the House Banking Committee last year: "When someone says to me, ‘I really think you should have known,’ the true fact is – they would have done anything other than let us know.- That would be the day that we would leave."

The argument goes: Why would Abedi, Adham, and their associates risk rubbing Clifford’s and Altman’s noses in the fact that they were being used as front men for a fraud? Why risk losing such valuable dupes? And if Clifford and Altman seemed a bit credulous of what Abedi and company were telling them, aren’t lawyers supposed to give their clients the benefit of the doubt?

State and federal prosecutors have not alleged that Clifford and Altman knew in 1981 – or even in 1990, for that matter – about BCCI’s secret ownership of the CCAH stock. The current prosecutions hinge on the spongier claim that from the start, and until they were pushed out of First American in August 1991, the two lawyer-bankers violated their promises to the government and defrauded the regulators by helping BCCI exercise covert control over the management of First American.

The evidence of this alleged covert control is largely circumstantial. For instance, just days before the April 1981 hearing, according to the Fed complaint, Altman had sent BCCI’s Swaleh Naqvi some biographical information about Daniel Callahan, a candidate for CEO of Financial General /First American with whom Clifford had met. Clifford (who chaired First American’s board) later flew with Callahan to London to present him to Abedi and Naqvi. Callahan laid out his plans for First American to the BCCI leaders, stressing that he would want exclusive operational control. He did not get the job.

Three other candidates for CEO of First American also were interviewed by Abedi in the early 1980s, while four candidates for high-level spots at the First American Bank of New York met with BCCI’s founder. In late 1982 Abedi allegedly offered Joseph Feghali the New York CEO job, along with a seven-year contract and $100 million in capitalization, before Feghali had ever spoken with Clifford or Altman, for whom he would ostensibly be working.

All this seems hard to square with the spirit of Clifford and Altman’s commitments to the regulators. So, too, was their acceptance on behalf of CCAH in August 1982 of more than $30 million advanced by BCCI to help complete the acquisition of Financial General’s outstanding shares; Altman and BCCI allegedly papered over these advances months later by attributing them to new investments by four Arab stockholders, according to the Fed complaint.

But it is debatable whether any of these activities violated the letter of Clifford’s and Altman’s commitments to the regulators. Thanks to the qualifiers – the loopholes – the Fed’s approval of the acquisition incorporated some gaping ambiguities. What difference was there in terms of practical control between BCCI owning stock in First American, which was forbidden, and its acknowledged role as investment adviser and "communications link" to the titular owners of all of the stock? Was Clifford’s sending prospective CEOs to be interviewed by BCCI’s Abedi – in what could be characterized as courtesy calls upon the investors’ chosen representative – inconsistent with Clifford’s assurances to regulators that the investors would be "passive"? Or were such interviews appropriate in light of Adham’s April 1981 testimony that "our major objective will be to ensure that well-qualified Americans be selected" for the CEO position and as directors? Were Clifford’s consultations with Abedi those of a subordinate getting his marching orders, or those of a consummate lawyer-diplomat politely notifying his client of his own, independent decisions? Was the $30 million BCCI advance in 1982 a forbidden loan to CCAH to finance the acquisition, or a simple accommodation to the investors?

All unclear. As good lawyers will, Clifford and Altman had left themselves wiggle room.

But in sliding these slippery distinctions past the regulators, Clifford and Altman had gotten themselves into two dangerous games. The first was a game of hide-the-ball about any subsequent dealings with BCCI, since the regulators might well have questioned whether these dealings were consistent with the commitments Clifford and Altman had made. This game was easy enough at first, when the regulators weren’t asking questions. But as time went on it would require increasingly elaborate concealments of BCCI’s role, ultimately leading to criminal charges of deceiving the Fed and the New York State Banking Department.

The second was a game of ongoing "consultation" and "communication" with Abedi, from whom Clifford and Altman had pledged their utter independence, but upon whom they became utterly dependent – for their continuance in office, for new infusions of hundreds of millions of dollars in Arab capital to fund their dreams of banking glory, for a growing and eventually commanding percentage of Clifford & Warnke’s revenues, and ultimately for their own stock deal.

In contrast to his testimony at the 1981 Fed hearing about the Arab investors’ passivity and BCCI’s lack of involvement, Clifford explained his relationship with BCCI’s Abedi this way to the House Banking Committee last year: "The shareholders are our owners. They are our bosses, and we need to report to them as any corporate officers need to report to their shareholders. We were told to do it by means of reporting through these two men [Abedi and Adham]. We followed that."

Clifford also stressed that Abedi and Adham, as agents of the investors, "gave me total management control of First American," and that he made all the final decisions. "I give you my word under oath," he said. "At no time did we turn to them for a decision."

But in managing the company and making those decisions, Clifford and Altman could disregard Abedi’s wishes only at their peril. That wasn’t exactly the kind of total independence from BCCI that had been advertised to the regulators.

Clifford alone flew to London 26 times between 1978 and 1991 – often on the supersonic Concorde – to meet with Abedi, other BCCI officials, and sometimes Adham. Rarely did Clifford or Altman speak with the other investors directly, although, as former BCCI head of U.S. operations Abdur Sakhia told a Senate committee last year, they "were not Bedouins in the desert," but rather sophisticated businessmen well-versed in the use of the telephone.

Meanwhile, personal relations between the two lawyers and Abedi seem to have been warm. When Altman was married in January 1984 to Lynda Carter, television’s Wonder Woman – with Clifford as his best man – Abedi was on the guest list. His gift for the bride was a new Jaguar.

"That is the kind of thing that is done in the circles in which he operated in the Middle East," Altman blandly explained when asked at the House banking hearing about the gift, "but as far as a personal relationship, our dealings were almost entirely business."

Especially the business of launching the First American Bank of New York. Several former BCCI and First American employees have told investigators that from 1982 through at least 1984, BCCI’s Abedi dictated key management decisions concerning the New York bank to Clifford and Altman, including high-level hiring, firing, and capitalization. Contemporary documents lend support to these claims.

In particular, the Fed complaint alleges that Abedi ordered Clifford and Altman to lease offices at 350 Park Avenue far more spacious, lavish, and costly than they wanted or needed, and that "Clifford and Altman objected but were overruled by Abedi." The lawyers allegedly complied to satisfy BCCI’s desire for the New York bank to set itself up in style near BCCI’s own office at 320 Park, perhaps looking toward a future merger.

Former BCCI employees are expected to testify that while still employed at BCCI, they began active participation in the management of First American Bank of New York, helping choose directors, staff, auditors, and lawyers, and negotiating to purchase branch offices. Two BCCI employees – Khusro Elley and Aijaz Afridi, who were sent to First American Bank of New York by Abedi in 1983 and became senior vice-president and executive vice-president, respectively – took those positions at First American while continuing to receive supplemental compensation and employee benefits from BCCI.

"When Elley, concerned that the arrangements could violate U.S. banking regulations, told Altman that he was receiving a salary differential payment from BCCI," the Fed complaint states, "Altman told Elley that he "didn’t want to know’ about it." Afridi, the complaint says, spoke with BCCI officials almost daily while he was with First American and returned to BCCI in 1987 to manage its operations in Spain.

Meanwhile, both First American and Pharaon’s National Bank of Georgia were openly discussed within BCCI, and with outsiders, as being part of the BCCI family of banks, according to former BCCI employees and contemporaneous documents.

"It is nothing but one institution," former BCCI U.S. operations chief Abdur Sakhia told Senate investigators. "In any management discussions and any discussions on our future in the United States, we would think of three entities – BCCI, National Bank of Georgia, First American, or, then, Financial General – in the same breath. Who would be going where, who would work in which entity, what area of business will be handled by which entity, allocation of businesses, markets, geographical territories."

How much Altman (who attended BCCI annual conferences and other meetings) and Clifford knew of such internal BCCI discussions will be disputed at the trial. Sakhia and other BCCI officials have told Congress and the prosecutors that the lawyers had to have known that BCCI viewed First American almost as a subsidiary.

Still, the evidence does not suggest that Clifford and Altman were obedient lackeys for every BCCI request, or that BCCI’s influence pervaded First American’s banks. Some of the evidence even suggests a sort of power struggle between Altman and the BCCI people over who was running the First American Bank of New York. For example, Afridi "felt that Altman was not permitting him to run First American on BCCI lines and yet he was answerable to Mr. Abedi for profits," according to comments by Nazir Chinoy, former head of BCCI’s Paris branch, in a Senate staff interview.

The prosecutors have so far cited little if any evidence even hinting at any BCCI influence – ever – over the operations of the First American banks outside New York, or at any BCCI influence after about 1985 over the New York bank.

Clifford and Altman have said that rather than submitting to BCCI control, they were taking advantage of BCCI’s New York office and its expertise in the worlds of New York and international banking. They add that any appearance of BCCI control that this may have created was a temporary phenomenon occasioned by First American’s need to create a new bank from scratch in New York City. "We had nothing in the city," Altman told a subcommittee of the Senate Foreign Relations Committee chaired by John Kerry (D-Massachusetts) in October 1991. "We had no staff. We had no location. We had no resources."

On the other hand, the Kerry subcommittee’s final report, which was issued this October, concludes that First American had no need to open a New York City bank at all, let alone rush to set one up under such difficult circumstances. The New York operation proved to be a money-loser and a serious drain on First American, the report asserts. So, the argument goes, Clifford and Altman deliberately sacrificed First American’s best interests to please BCCI.

Perhaps. Yet one need not posit such a cynical scheme to explain First American’s ill-fated investment in its New York bank. Rather, Clifford and Altman’s central motivation may well have been to build First American into an impressive international banking empire – for First American’s own sake, and for their own. That, of course, would require both a New York presence and the help of BCCI and the Arab oil wealth to which it held the key.

Clifford and Altman would hardly be the first managers, or the first lawyers, to confuse the best interests of their firm with their own desires to build monuments to their grandiose visions of themselves.

Chapter Four – For Greater Glory

"The day came – I sensed it was coming some time – in London, when Abedi and Kamal Adham said, ‘Mr. Clifford, we want you to come in and take over the operation of First American Bankshares.’- Now, this is very personal. I was seventy-five years old at the time. I had been practicing law for over fifty years. -This offer was a challenge to me." – Clark Clifford, House Banking Committee testi…

Prologue – The Tragedy Of An Aging Appollo

Clark McAdams Clifford sat before the congressional rabble he had wowed in years past, explaining why the multimillion-dollar stock deal that had been arranged and financed for him by the Bank of Credit and Commerce International had been a fitting reward for his stellar service as chairman of First American Bankshares in Washington, D.C.

First American, Clifford noted, had prospered since 1982 under leadership that he and Robert Altman, his protege and law partner, had provided: Assets had quintupled, profits quadrupled. In the first few years Clifford had taken only token compensationña paltry $50,000 a year. By 1986, Clifford explained, First American’s stockholders "wanted a closer bond with Mr. Altaian and me," cemented by a stake in the company’s continued prosperity.

But this time the House Banking Committee wasn’t buying it. The members greeted Clifford’s testimony on that September day in 1991 with hostile skepticism. This legendary wise man, whose extraordinary persuasive talents had carried him to the apex of prominence and wealth, could hardly persuade anyone that his stock deal didn’t stink.

"I think it’s the stock deal that cost Clark the esteem of people who admired him in Washington," says a longtime friendly acquaintance of Clifford’s. "It was such a phony deal."

Was it? Hindsight is always twenty-twenty. And Clifford projects such unwavering belief in his own innocence that even one of his prosecutors doubts that he consciously did anything corrupt in dealing with BCCI. "I believe that Clark Clifford doesn’t think he was guilty of anything," this prosecutor says. "He thinks it’s what he did all his life. It’s good advocacy."

But the appearances are so bad that Clifford’s care-fully burnished reputation for probity had melted away by the time of the hearing. That was ten months before he and Altaian were battered this July 29 by simultaneous indictments from Manhattan district attorney Robert Morgenthau and federal prosecutors in Washington, D.C. At the heart of both cases is the allegation that the two lawyer-bankers defrauded bank regulators and enriched themselves over a 14-year period by helping BCCI covertly control First American.

Part of the appearance problem is the sheer size of the bonanza reaped by Clifford and the 45-year-old Altman. As of March 1988, it mounted (if only briefly) as high as $33 million in stock and cash: The two made a combined profit of $9.8 million ($4.1 million after tax) in 20 months by buying and then selling stock in First American’s holding company; they also retained stock that was then arguably worth as much as $22.9 million (it’s worth far less, if anything, now).

This fortune was bestowed less by First American’s ostensible stockholders than by BCCI, which arranged the purchases and sales and financed the deal with sweetheart loans. And BCCI, which Clifford and Altman had promised federal regulators would have no control over them or First American, stood exposed by mid-1991 as a worldwide criminal enterprise.

Worse still, while their stock deal was unfolding, Clifford and Altman allegedly did BCCI a big favor by having First American buy the National Bank of Georgia from since-indicted Saudi tycoon and BCCI stockholder Ghaith Pharaon for a suspiciously fat $220 million, most of which went straight to BCCI to cover Pharaon’s debts.

And, it is now clear, Clifford and, especially, Altman took pains to hide from regulators, from their fellow board members, and from their own law partners at Clifford & Warnke both BCCI’s generosity to them in the stock deal and BCCI’s interest in the Georgia bank deal. It was this succession of carefully crafted nondisclosures and partial disclosures that dragged these two brilliant careers into the muck of alleged criminality.

Clifford and Altman concede nothing: no improprieties, no conflicts of interest, not even an error in judgment. They admit only to having been deceived about BCCI’s secret ownership of a major interest in First American, as were many others, including regulators worldwide and BCCI’s outside auditors.

"Our consciences are clear," Clifford has sworn. He and Altman have defended their actions in detailed House and Senate testimony and, to no avail, in long pre-indictment sessions with prosecutors and Federal Reserve Board investigators.

They have also grasped for innocence by association, pointing out that prominent law firms, including Wachtell, Lipton, Rosen & Katz and Milbank, Tweed, Hadley & McCloy, worked closely with them as counsel on the matters for which they now stand indicted. But Clifford and Altman have not specified whether they gave these lawyers all the key facts. The Wachtell firm supports Clifford and Altman’s position on certain points, but indicates it may not have been fully informed on others. And Milbank partner Baldwin Tuttle appears to be a key prosecution witness on some issues, although perhaps a key defense witness on others.

It now appears that Clifford will be denied – or spared – the opportunity to confront his accusers in court: A trial might well amount to a death sentence for the distinguished legal legend, in the unanimous view of doctors chosen by a federal judge and by the Justice Department, as well as Clifford’s own doctors, because Clifford’s diseased, 85-year-old heart could not survive the stress.

Could Clark Clifford really be a criminal – this aging Apollo who sat at Harry Truman’s right hand, who stopped the bombing of Hanoi as Lyndon Johnson’s Defense secretary, who became the first million-dollar-a-year Washington superlawyer, who practiced political law for decades without ever getting caught at the seamier forms of influence peddling, who won the admiration of many of the nation’s leading citizens?

How could Clifford ever have gotten himself into such a fix? Did he really embark – well past the age of 70 and a millionaire many times over – on a bribery conspiracy with a bunch of Arabs he hardly knew? Or was he just a slick influence peddler all along, a guy who finally got caught? Was he a noble old man led blindly down the garden path by the ambitious Altman, as Clifford’s friends (but not Clifford) whisper? Or are Clifford and Altman both being persecuted by gonzo prosecutors bringing bogus charges – what one Clifford sympathizer calls "a gang rape" – to sate the bloodlust of journalistic and congressional mobs?

One explanation is suggested by a Clifford friend, who is sure that Clifford could "never knowingly act in a corrupt manner." Asked how Clifford could have taken so much money through BCCI without smelling something rotten, this friend recalls hearing Clifford tell many years ago of having charged a client $10,000 for a brief telephone consultation. When the client complained, this friend says, Clifford shrugged it off by saying to the client, "You can go to your country club this weekend and brag about it."

"I think Clark Clifford thought he was worth it," the friend adds. "Here is a guy who didn’t hesitate to charge phenomenal legal fees, just because he was Clark Clifford. He thought he was doing an honor to everyone he associated with, whether they were friends or clients or whatever. And with age that sort of thing becomes more pronounced."

A less charitable analysis might be that Clifford’s titanic self-esteem and unbroken record of successes blinded him to ethical pitfalls – and opened the way for him to be sucked into BCCI’s game.

There is also an intriguing lesson in all this, about how easily modern prosecutors can characterize as criminal the kind of conduct that grows incrementally out of what many lawyers would characterize as artful, aggressive advocacy. The available evidence suggests that Clifford and Altman are neither wronged innocents nor blatant crooks. The conduct for which they stand indicted has a resemblance – more than many lawyers would like to think – to the kind of high-powered, close-to-the-line advocacy sometimes practiced at the most prestigious law firms.

You start out doing what any good lawyer would do: giving the benefit of the doubt to a client’s less-than-plausible assurances; restructuring a transaction to get around a legal technicality or to avoid unwelcome scrutiny of troublesome features; artfully doctoring a disclosure to avoid drawing regulators’ attention to awkward facts that might create problems; papering over conflicts of interest with the necessary consents.

And you end up in a prosecutor’s cross hairs.

Of course, most lawyers, shielded by the attorney-client privilege and the background presumption that it’s their job to help clients get around legal obstacles, never have their most questionable strategems put under an unforgiving prosecutorial microscope.

But Clifford and Altman grasped for greater rewards than most lawyers when they decided to double as bankers and become their own clients. They began by doing the kind of smooth lawyering Clifford had done all along, gliding around legal impediments and obfuscating BCCI’s role to avoid unwelcome attention from regulators. But a crucial distinction is that they ended up doing this not just on behalf of clients but on behalf of themselves. So the question becomes not whether they went too far as advisers and advocates – itself a thorny issue, as we found in the Kaye, Scholer case – but whether their conduct on their own behalf was criminal. And as they got ever more entangled in conflicts of interest, which they rationalized with a hubris reminiscent of Sophoclean drama, they became what many lay people suspect lawyers of being: They let ambition and greed corrupt their judgment and lead them ever-deeper into a pattern of duplicity.

All this, however, does not necessarily make them criminals – let alone show that they deserve to have Morgenthau’s prosecutors treating them like drug kingpins by seeking a grossly excessive $40 million forfeiture and freezing the entire $19 million that Clifford held in New York investment accounts.

In fact, both the New York and federal cases against Clifford and Altman are littered with weaknesses: the absence of victims, or at least American victims, with real losses attributable to the actions of Clifford and Altman (who in fact helped bring more than $500 million in Arab investments into the U.S. via First American); the paucity of evidence that BCCI’s global criminality infected die banking operations of First American (where no depositor ever lost a cent); the difficulty of identifying any unambiguous violations of clear legal rules; and the prosecutors’ consequent resort to circumstantial evidence of vague conspiracies.

Then there is the sheer implausibility of the notion that a man as rich and respected as Clifford would risk everything by embarking on a criminal enterprise in his eighth decade. "It just does not tally with one’s understanding of human behavior," Clifford told a Senate panel last year. "In sixty-three years [of practice] there had never been a cloud against my name."

Federal prosecutors were unsure enough of their case against Clifford, according to sources close to the case, that a final decision to charge him was not made until late in the day on the eve of the indictments. And lawyers close to the case on both sides say that even in Morgenthau’s office, where the BCCI investigation has been a source of pride and fawning publicity, there was vigorous debate about the proposed charges.

Indeed, Clifford and Altman might well never have been indicted at all but for some bad luck: the revelation – apparently a surprise to them – that the rich Arabs to whom they had rented out their respectability were the perpetrators of one of history’s greatest financial frauds. The exposure of BCCI as a global Ponzi scheme created a clamor for prosecutions, fueled by complaints that federal agencies had ignored years of warning signals. And the fall of BCCI exposed Clifford and Altman to scrutiny of confidential communications that otherwise would have been cloaked by the attorney-client privilege forever.

Certainly Morgenthau deserves credit for cracking BCCIs global scheme. Yet a study of his widely lionized indictment of Clifford and Altman and the available evidence leaves the impression that if pressed to specify just one discrete thing that Clifford or Altman did that was clearly illegal – take your best shot – the prosecutors would have trouble coming up with a crisp response. The best answer might be that these are very smart men, far too sophisticated to get caught in an obvious crime, but that they nonetheless flouted the law by a 14-year pattern of activity that gives off the telltale stench of criminality.

The centerpiece of the Morgenthau indictment – now set for trial on January 4 (though it’s likely to be postponed, and to proceed without Clifford) – is a charge that Clifford and Altman schemed with three co- defendants and two co-conspirators, from 1978 through 1991, to defraud bank regulators and enrich themselves by systematically abetting and concealing BCCI’s alleged control over First American. The two lawyers are also charged with bribery conspiracy and receiving commercial bribes – the sweetheart stock deal and BCCI nonrecourse loans to finance it, as well as fat legal fees – in exchange for helping BCCI covertly influence First American’s purchase of the National Bank of Georgia, among other things.

In addition, Altman alone is charged with three counts of falsifying business records (annual reports filed with the Federal Reserve Board for 1987, 1988, and 1989) and three counts of filing the same false records with the state. These charges all hinge on the theory that Altman "omitted to make a true entry" by failing to disclose BCCI’s alleged role in First American’s affairs.

Most of the state’s charges against Clifford and Altman are based on theories that the federal prosecutors apparently considered too nebulous or far-fetched to put in their somewhat narrower indictment – which is focused on alleged deception of regulators. For example, the federal prosecutors chose to charge neither that Clifford and Altman’s enrichment by BCCI amounted to bribery, nor that the annual reports Altman filed with the Federal Reserve (and the state) were false or misleading.

The federal prosecution, which involves many of the same facts, was deferred, probably forever, on September 10, when U.S. district judge Joyce Hens Green of Washington, D.C., agreed to let the eager Morgenthau go first. This was the course urged, over vigorous defense objections, by both state and federal prosecutors and – in an unusual episode of crossjurisdictional, ex parte judicial lobbying – by John Bradley, the judge presiding over the New York case.

The defendants – who have told friends that they fear they cannot get a fair trial in the Manhattan state court because of Morgenthau’s political influence and their perception that Judge Bradley is pro-prosecution – had wanted to confront their accusers in the District of Columbia, where Clifford’s doctors would be nearby and, Clifford says, he would have a better chance of surviving a trial.

The fall of Clark Clifford is gripping tragedy, on a grander scale than is common today. The clues to whether he is more sinner or sinned against – more deceived or deceiver – lie in the details of a 14-year saga.

As the story unfolds, Clifford and Altman meet up with President Jimmy Carter’s buddy, Bert Lance, who introduces them to the Pakistani mastermind behind BCCI. The lawyers ally themselves with a cast of rich Arab potentates (who prove to be sly deceivers) and bring along big-time lawyers including Martin Lipton. Then, as BCCI’s global empire begins to crumble, Clifford and Altman are eyed by government investigators – some of whom are easily persuaded that all is well – until the lawyers ultimately cross swords with Morgenthau’s brilliantly quirky in-house conspiracy theorist, prosecutor John Moscow, and find themselves facing trial.

Well start with a scene from the middle, one that Morgenthau’s prosecutors in New York will seek to burn into the jurors’ minds as evidence of Altman’s criminal intent.

In early August 1986 Altman receives a letter with which he is mightily displeased. The author is Baldwin Tuttle, a partner at Milbank, Tweed, Hadley & McCloy who has handled bank regulatory work for Clifford and Altman for eight years. The subject is the Clifford-Altman plan to have First American’s holding company, Credit and Commerce American Holdings (CCAH), purchase the National Bank of Georgia.

Tuttle’s message is that he is concerned about several legal and business risks that CCAH would run under Altman’s plan to pay an $80 million option fee to the Georgia bank’s ostensible owner, Pharaon. As both Tuttle and Altman allegedly knew by then, Pharaon was a financially troubled BCCI stockholder who had already deposited his Georgia bank stock with BCCI as security for loans that the $80 million would be used to pay down.

After reading the letter, Altman summons Tuttle to his office. According to a 141-page civil complaint filed by the Federal Reserve against Clifford and Altman this July, "In a brief and hostile meeting Altman handed back to Regulatory Attorney" – that’s Tuttle – "both the original of Regulatory Attorney’s letter and the copy Regulatory Attorney had sent to [a partner of Altman’s at Clifford & Warnke]. Altman warned Regulatory Attorney that if he ever wrote a similar letter again, Regulatory Attorney would no longer represent CCAH."

Prosecutors will draw this story out of an acutely uncomfortable Tuttle and present it to the jury as evidence that Altman knew he was putting his own company at grave risk for the benefit of BCCI, spurning sound legal advice, and covering his tracks by purging both copies of the letter from his files.

Paul Warnke, Clifford’s fellow senior partner at Clifford & Warnke, is said to have commented at a firm meeting that if Altman really spoke that way to Tuttle, Tuttle "should have thrown Altman out the window." (Warnke did not respond to interview re¨quests.)

But Tuttle did nothing of the kind, as defense lawyers will stress. They will dismiss the episode as showing only Altman’s understandable annoyance at Tuttle for sending out a cover-your-ass letter overstating some remote risks of which Altman was already well aware – risks that never materialized.

The cross-examination of Tuttle might go something like this: "You and your firm continued working on the Georgia bank purchase, didn’t you, Mr. Tuttle? And you helped structure it, didn’t you? And wasn’t it your law firm – not Mr. Altman – that filed all the paperwork with the Federal Reserve? Now, Mr. Tuttle, you wouldn’t have done all that if you had thought there was the slightest illegality, would you? Mr. Altman never told you to do anything illegal, did he? And you worked for him and Mr. Clifford right up to 1991, didn’t you?

"And you haven’t been indicted, have you, Mr. Tuttle?"

To which the prosecution’s rebuttal will be that Altman concealed some critical facts, facts that would have magnified Tuttle’s concerns about Altman’s handling of the Georgia bank deal and BCCI’s involvement. Like the fact that as of Tuttle’s dressingdown, Altman and Clifford already had been floated $14.9 million in sweetheart loans by BCCI to buy CCAH stock through BCCI at a bargain rate. And the fact that their hopes of making a big profit depended on BCCI’s finding a buyer for their stock, as it ended up doing 20 months later.

And so Tuttle will be pushed back and forth, until he is black and blue and the jurors are numb.

Chapter One – Seduced By Banking

"Flying on the private jet of Phillips Petroleum on the way to handle a case with Clifford in the mid-seventies, [Edward Bennett] Williams gleefully acted out a pantomime of a delegation of Arabs visiting Clifford in his office. Williams, a perfect mimic, imitated Clifford gravely telling the visiting sheiks, ‘You understand, of course, that I can only get you access.’ Then Williams imitated the Arabs winking and grinning as they shoved a bag of gold across Clifford’s desk. Clifford watched this performance with some distaste. Now, Ed,’ he interrupted, you know it doesn’t work that way.’ Williams just laughed " – Evan Thomas in his 1991 book on Williams, The Man To See

Even before Clifford fell in with the BCCI crowd, recalls an old friend of his, he had "this sort of kooky desire to run a bank . . . the sense of running something dynamic like that, and the action and the excitement and the prestige." He seemed impressed, adds another old friend, by the bowing and scraping to which the big-shot bankers were treated when they strolled into the Burning Tree Club in Maryland for a round of golf. He liked to imagine himself as a banker:’ "And people would say, ‘Mr. Clifford, it’s so good to see you,’ and that sort of thing. You know, people might need a loan someday," recalls the friend.

Just being the famed counselor to presidents, former defense secretary, archetypal superlawyer, and multimillionaire was not enough. Clifford wanted more.

BCCI was not Clifford’s first banking connection, nor his most seamy. More than 20 years ago he sat with other prominent Washingtonians – and with one W. A. "Tony" Boyle – on the board of the National Bank of Washington, which was then 75 percent-owned by one of the most notoriously corrupt labor unions in the nation: the United Mine Workers, of which Boyle was president.

By late 1970 lawsuits had generated widespread publicity about UMW abuses, including the union bosses’ milking of their own miners’ pension fund by keeping as much as $70 million in a non-interest-bearing account in the union’s bank. The income that should have swelled the pension fund was instead being converted into profits for the bank, which in turn paid dividends into the union’s treasury. Thus were bankrolled the lavish salaries, limousines, nepotistic practices, and other indulgences of Boyle and his henchmen, along with the directors’ fees.

After The Washington Monthly ran a piece in November 1970 focusing on the bank board’s bland acquiescence in the union’s use of its bank to cheat its pensioners, Clifford called Charles Peters, the editor. According to Peters’s 1988 autobiography, Clifford said he was "deeply troubled" by the article and that "you may be sure that I will examine the situation carefully."

"I had admired Clifford when he worked in the White House under Harry Truman," wrote Peters, "so I waited for him to resign with a public repudiation of Boyle and his entourage. But the repudiation never came. Clifford quietly left the bank board more than a year later. The other members stayed on."

Boyle was later convicted of ordering the 1969 murder of union insurgent Joseph Yablonski, his wife, and his daughter.

The banking careers that landed Clifford and Altman in criminal court began several years after Clifford parted company with the National Bank of Washington, with a phone call during the Labor Day weekend of 1977 from Bert Lance, then-President Carter’s close friend and budget director.

Lance, the personable, jowly country boy who had made it big in Georgia banking, called Clifford because he was in legal and political trouble over questions about alleged improprieties at two banks he had run, including the National Bank of Georgia.

Clifford, then 71, was a natural choice for Lance. No lawyer was considered wiser in the ways of Washington. None was listened to with more respect. And none could come so close to lending his client innocence by association. When Lance went to testify on Capitol Hill, he got treated better just because this living legend, who barely knew him, was by his side. As Lance started to read his statement, Clifford quieted a distracting buzz of conversation simply by raising his arm.

Also in Lance’s corner was Altman, a sharp, extremely hardworking, fiercely ambitious 30-year-old, brimming with a self-confidence that struck his detractors as arrogance. He had already been anointed by Clifford as his law firm’s rising star. Some friends even say that Clifford sees Altman as the son he never had.

"[Altman] is a very brilliant lawyer, a very brilliant person," says a former Clifford & Warnke partner who speaks fondly of Clifford. "He could run down the law and run down the evidence as expeditiously as anyone I ever saw. . . . Bob [Altman] is very ambitious and has almost as much ego as Mr. Clifford. . . . He was kissing Clifford in a prominent place, and [Clifford’s] ego let him respond to that very nicely."

At the hearing Lance took the offensive, in a statement mostly drafted by Altman, blasting critics in Congress and elsewhere for hanging him with rumor and innuendo. But Lance was beyond saving by the time he called in Clifford. Lance’s banking career, marked by sloppiness and cronyism at best, gave the press and Congress ample fodder for a scandal feeding frenzy. Lance bowed to the inevitable and resigned as budget director on September 21, 1977.

He found himself out of a job and desperately in need of money, which he hoped to raise by selling his 12 percent interest in the National Bank of Georgia and renting out his connections and expertise. Lance’s reputation as a banker was in tatters. But his reputation as a crony of the president’s had survived.

Such a man has his uses, and within weeks of his resignation Lance was sought out by Agha Hasan Abedi, the Pakistani banker who had founded BCCI in 1972. Growing at a phenomenal pace, BCCI was becoming a global empire, fueled by Abedi’s charisma, by his pipeline to oil-rich Arabs, and – as became apparent many years later – by pervasive bribery and fraud.

(Abedi and his right-hand man at BCCI, Swaleh Naqvi, are co-defendants with Clifford and Altman in the New York case, but unlikely to stand trial. Abedi is an invalid in his native Pakistan, resisting extradition; Naqvi is under house arrest in Abu Dhabi, the oil sheikdom whose ruling family ended up owning most of BCCI and a large chunk of First American.)

Abedi badly wanted a banking presence in the United States, especially in New York, the international banking center. But his efforts to acquire such a foothold had been repeatedly thwarted by the U.S. government. It was not that BCCI was regarded as a rogue bank – not then, anyway. Rather, federal regulators were prepared to block it from buying any U.S. banks because it was not subject to consolidated regulation by a lender of last resort anywhere – not in Luxembourg, where it was chartered, nor in the Cayman Islands, its other legal home, nor in London, its operational headquarters. BCCI also had no con¨solidated auditor and cloaked its affairs in secrecy.

Lance signed on as a consultant with Abedi – after, Lance says, he asked Clifford to check the Pakistani banker’s reputation and got a positive report. Abedi – whose BCCI payroll boasted a collection of politically connected figures around the world – helped bail Lance out from his crushing debts by hav¨ing a BCCI affiliate lend Lance $3.6 million on extraordinarily friendly terms: no interest rate set, no due date, and no collateral. "In time, the payment came to be understood as a consulting fee, or retainer, "according to a Senate subcommittee report.

Abedi also helped Lance get $2.4 million for his stock in the National Bank of Georgia, arranging a sale of the bank for almost twice the previous market value of its stock. The buyer was Ghaith Pharaon, a rich Saudi who was a close personal friend of Abedi’s and a stockholder in, and large borrower from, BCCI. Lance was represented in the deal by Clifford and Altman. Abedi did much of the negotiating for Pharaon, who, it is now known, was fronting for BCCI: The bank financed much of the purchase and secretly acquired control of half of the stock that was bought in Pharaon’s name.

Lance did some things for Abedi, too. He recommended and helped Abedi pursue an effort to buy control of Financial General Bankshares (later to be renamed First American Bankshares), a Washington, D.C.-based holding company with banks in D.C., Virginia, Maryland, Tennessee, and – most critical to Abedi – New York.

Lance also advised Abedi to put "an outstanding American citizen who has no blemish" in charge of the takeover effort to avoid "perception problems," as Lance told the Congress. In the fall of 1977 he introduced Abedi to Clark Clifford.

"I found him to be pleasant and a man of importance," Clifford said of Abedi in Senate testimony last year. The man not only ran an up-and-coming international bank, Clifford noted; he was also investment adviser to "a number of important and very wealthy Arabs."

Clifford had long had an affinity for money, evidenced by the staggering fees he charged and the enormous draw he took out of his law firm. "He’s always wanted a lot of money, never thought he had enough money," muses one Clifford acquaintance. Abedi controlled billions.

In addition, Abedi had a good reputation then. The Economist described him as "highly regarded in the banking world." The Bank of America owned 30 percent of BCCI and vouched for its respectability. Clifford prided himself on not putting his own reputation on the line for just any client who walked in the door; Abedi checked out.

Abedi, Clifford told the House Banking Committee last year, "felt that our standing and our reputation would be an asset" to him and his associates.

But a few minutes later in the same testimony, Clifford drew a fine distinction in responding to a question about whether he had sensed that Abedi was in the market for influence peddlers: "They needed a lawyer…. I had no warning at any particular time that part of their strategy was to identify themselves with people who had respectable positions and good reputations."

A similar penchant for having it both ways permeated Clifford’s career: He has often recounted a little speech that he made to new clients, stressing that he was not in the business of influence-peddling, or even (in the modern euphemism) of access-selling. Yet it is hard to understand how Clifford could justify the eye-popping fees that he charged except on the unstated premise that he was providing a lot more than wise counsel.

Clifford’s initial work for BCCI clearly did involve real lawyering – the litigation of what became the most bitterly contested takeover attempt ever aimed at an American bank. Clifford and Altman ended up representing Lance, Abedi, BCCI, and several individual Arab investors when their quiet effort to accumulate a major stake in Financial General was met with lawsuits in early 1978.

According to one of their adversaries, Clifford and Altman fought "vigorously and creatively" throughout the widely publicized takeover battle, acting not as Washington fixers but as "excellent lawyers."

The battle began after BCCI had accumulated 17 percent of Financial General’s shares in the open market, ostensibly on behalf of four individual Arab investors who used BCCI as their investment adviser. Seeking to avoid Securities and Exchange Commission disclosure requirements, BCCI bought just under 5 percent of the company in each investor’s name-claiming, incredibly, that the four were not linked and, therefore, did not have to file a 13(d) disclosure with the SEC, as is required of anyone or any group buying more than 5 percent of a public company.

Despite a contemporary BCCI document seeming to suggest that he had blessed this transparently illegal strategy of nondisclosure, Clifford has denied any role in it and claimed that he abandoned it as soon as he came into the case, in early 1978.

In any event, this initial strategy was challenged in a February 1978 lawsuit by Financial General’s management, and a March 1978 SEC suit, charging 13(d) violations. U.S. district judge Oliver Gasch of Washington, D.C, ultimately agreed with the private plaintiffs in April 1978, rejecting the BCCI group’s argument that it was merely a collection of individuals who coincidentally used BCCI as their investment adviser. Finding Abedi and BCCI to be the moving force in the takeover effort, with ostensible investors even giving BCCI the authority to vote their shares, Judge Gasch enjoined the BCCI group from proceeding without public disclosure of its holdings and intentions.

Clifford and Altman responded by doing what comes naturally to lawyers confronted with legal and regulatory obstacles: They restructured the takeover attempt to get around the obstacles. The revised bid still came from the same group of rich Arabs, all closely linked to BCCI. But the roles were rearranged: Since the "investors" had fooled nobody by pretending not to be acting together, they settled the SEC’s suit (the day it was filed) by declaring themselves a group from that point forward and openly launching a hostile tender offer. And since the Federal Reserve was not about to approve a bank takeover openly spearheaded or financed by Abedi’s largely unregulated bank, BCCI melted into the background, ostensibly serving only as an adviser to the Arab investors, three of whom also happened to be major BCCI stockholders. Abedi’s public role was minimized. The role of the lead investor was stressed.

That was Sheik Kamal Adham of Saudi Arabia, then a wealthy, powerful, suave, and respected figure in Saudi and Egyptian political circles, now a cooperating witness against Clifford and Altaian. His wealth was reduced last July by a $105 million payment exacted by Morgenthau’s office as part of a plea bargain.

Meanwhile, since the 20-lawyer Clifford & Warnke lacked takeover litigation expertise, Clifford called in Martin Lipton and his firm, Wachtell, Lip-ton, to battle Financial General’s takeover gladiators from Skadden, Arps, Slate, Meagher & Flom. To handle regulatory work, Clifford retained Baldwin Tuttle, who had been deputy general counsel of the Federal Reserve until he spun through the revolving door in 1977 and joined the Washington, D.C., office of Kutak, Rock & Huie. (Tuttle later moved to Mil-bank, Tweed’s D.C. office.)

Skadden’s lawyers attacked the BCCI group represented by Clifford and Altman in 1978 in terms that appear remarkably prescient today:

"The facts developed to date strongly suggest that BCCI will effectively control the operations of [Financial General] if the forthcoming tender offer by the Middle Eastern defendants is successful," Skadden’s Douglas Kraus asserted in an August 29, 1978, affidavit. "It is apparent that BCCI would not only manage the operations of [Financial General] but is also actively engaged… in selecting the management team that would run [Financial General] if the tender offer succeeds." (Today Kraus declines to comment.)

Skadden’s prescience in 1978 may present the firm with a problem now: In May 1991 Skadden partners Robert Bennett and Carl Rauh became mainstays of the Clifford-Altman defense team. And Morgenthau’s prosecutors have debriefed several Skadden partners – probably about the 1978 deal.

Chapter Two – Fancy Footwork

&quo;Had I ever needed a lawyer myself, I would have turned to Ed Williams. . . . Williams defended his unpopular clients on the grounds that, under our system of government, every person had a right to the best defense within the existing laws. Every defendant had a right – and his lawyer an obligation – to test the law to its limits to get the best possible outcome from the courts. That was what made the law work. To the lawyer, there was no such thing as a loophole." – Clark Clifford in his 1991 autobiography, Counsel to the President

In March 1980 the Financial General takeover turned friendly when the BCCI group raised its price high enough to persuade Financial General’s management to drop its opposition.

But two hurdles remained for the Arab investors: getting approval for the acquisition from the Federal Reserve Board and from banking regulators in New York State, where Financial General operated two small banks.

The Fed, in particular, wanted to be sure that BCCI was not financing the takeover, and would not end up owning Financial General or exercising any control over its management. The Fed also wanted assurance that the Arab purchasers would not encumber the company with debt or use its banks to pursue their own commercial or political agendas. This presented a problem for Clifford and Altman because so many signs that BCCI had in fact originated and directed the takeover effort had already surfaced in the preceding litigation.

At the same time, though, Clifford and Altman knew that the Fed’s bureaucrats couldn’t be too picky in screening wealthy would-be foreign investors: It was Federal Reserve policy to encourage foreign investments in U.S. bank stocks to help pump up bank capital.

Clifford worked this angle in his pitch at an extraordinary Federal Reserve Board hearing on April 23, 1981, to consider the Arab investors’ application to acquire Financial General. "It is in the interest of our country," Clifford told the regulators (headed by Fed deputy general counsel Robert Mannion), "to bring back to the United States as many of the dollars as we can that through the years we send over to the OPEC countries." He also suggested that Arab investments might beget even larger Arab deposits.

The regulators’ own investigations produced positive reviews of the wealth and characters of Sheik Kamal Adham and other leaders of the investment group (which had grown to 14 members). Alan Cohen, acting superintendent of the New York Banking Department, said in a 1982 letter to Congress that the application to acquire Financial General "received more scrutiny from more regulatory agencies than any other in recent memory." Federal Reserve officials also said at the time that they used all the government’s resources, including the Central Intelligence Agency and the State and Commerce Departments, to check out the investors; they found nothing unacceptable, or even worrisome.

(The CIA apparently did not mention to the Fed that Adham had long been head of the Saudi intelligence agency and, in the words of a recent congressional report, "the CIA’s principal liaison for the entire Middle East from the mid-sixties through 1979." )

But with all its money, clout, and character references, the investment group’s greatest asset may have been Clark Clifford’s golden name. It would have taken a bold bureaucrat, at that time, to suggest that Clifford couldn’t be trusted.

And Clifford was not just vouching for his clients. Even more, he was putting his own name on the line in the most direct way. For by July 1980 Clifford had accepted Abedi’s offer to direct CCAH, the holding company that would run Financial General after the takeover; Altman would be on the CCAH board as a director and become president of Financial General (later renamed First American).

"I am prepared to give the majority of my time to [the bank] in the future," Clifford pledged at the 1981 Fed hearing. "I intend . . . that I will devote my primary attention to this."

Clifford and Altman – who now stress that they prepared the application for Federal Reserve approval of the takeover with the help of the Wachtell firm and Baldwin Tuttle – provided the Fed with numerous ironclad, written assurances in applications and related letters that BCCI would not buy any stock as part of the acquisition; would have no role in financing the acquisition; and would have no role in managing the company thereafter.

Clifford also promised at the 1981 hearing (and elsewhere) that the new Arab owners would be &quo;passive investors," and were "not going to concern themselves with the operation" of the company; that the investor group would finance the acquisition mostly with their own money, borrowing no more than $50 million from the Arab-owned, French-chartered Banque Arabe et Internationale d’lnvestissement (BAII), which was more acceptable to the Fed than BCCI because it was subject to French regulation; and that the new owners would not pledge their shares as security for any loans.

This would leave Financial General and its banks to be run without interference by Clifford and a distinguished board, including former senator Stuart Symington of Missouri, one of Clifford’s closest friends. The package offered to the Fed was almost too good to be true: $170 million in Arab petrodollars to start, more on the way, and no Arab control.

These commitments were, to be sure, subject to a few qualifiers – some would say loopholes – to which Clifford and Altman give great prominence now; BCCI had in the past acted as banker and investment adviser to the Arab applicants (some of whom were also identified as BCCI stockholders), and as Clifford and Altman’s "communications link" to them, and BCCI would perform a similar role in the future. And, it was noted, BCCI might lend money to the investors after the acquisition.

But in 1981, at the April 23 hearing, all the emphasis was on BCCI’s lack of involvement. Clifford, accompanied by Altman and Baldwin Tuttle (under whom hearing chair Mannion had worked at the Fed), presented Adham and the three other Arab investors in attendance as wealthy principals who were fronting for nobody and would themselves exercise no control over the bank’s management. Adham and his fellow investors also insisted that they had not been acting either as a group or as nominees for BCCI when it had started buying shares in their names in 1977.

Some of the regulators greeted the latter assertions with polite incredulity. But Clifford was ready to stake his own reputation on the probity of Adham. Calling the Saudi sheik "His Excellency" throughout the hearing, Clifford said: "I have come to have the deepest respect for his character, for his reputation, for his honor, and for his integrity. I’m proud to be an associate of his.- He is the kind of man with whom I like to be associated. He is sophisticated."

No Tony Boyle he. And rich as they come: Adham testified that his $30 million investment in Financial General was well "within my means." Clifford hinted delicately that rejecting the solemn pledges of such estimable plutocrats would reflect ethnic bigotry. And nobody at the hearing was so indelicate as to mention published (if unproven) allegations that His Excellency had taken millions in questionable payments, politely known as commissions, from The Boeing Company to help it sell planes in Egypt and elsewhere in the Mideast. (Clifford may have had some inkling how that sort of thing worked. He represented McDonnell Douglas in a 1978 case that involved alleged bribes to sell planes in Pakistan.)

The Fed’s Mannion asked about the similar-sounding names of the holding company seeking to buy Financial General – Credit and Commerce American Holdings – and the Bank of Credit and Commerce International. Clifford explained that it was mere coincidence: "I think generally the terms "Credit" and "Commerce" are terms that are used extensively in the Persian Gulf in financial affairs," he said.

Added Altman: "There is no connection between those entities and BCCI in terms of ownership or other relationship."

And when another regulator asked precisely what function BCCI would have, Clifford seemed to leave no ambiguity: "None. There is no function of any kind on the part of BCCI.- I know of no present relationship. I know of no planned future relationship that exists, and other than that, I don’t know what else there is to say."

In effect, that wonderful, sonorous voice was saying: Trust me. I’m Clark Clifford. The implicit message to the Fed’s regulators in 1981 was the same as Clifford’s express appeal to a Senate subcommittee a decade later: "My word has been important here for a great many years in Washington, and I ask you to take it."

The Fed took it, approving the acquisition in August 1981 without ever pinning down BCCI’s possible future role in any detail. And at Clifford’s request, the Fed kept the names of most of the 14 Arab investors – including members of the ruling family of Abu Dhabi – secret for more than 12 years. Adham had explained the reason at the hearing: "The man in the street, surrounded by all the problems in [the Middle East], when they see some of the notable men in the area make investments outside, they might lose confidence, and this is really the main thing that some of the rulers, in particular, are afraid of."

The New York Banking Department gave its approval in March 1982, on condition that First American, as Financial General was renamed that year, divest one of its New York subsidiaries, the Bank of Commerce. The state gave the company permission to open a New York City branch of its upstate subsidiary, Community State Bank, which was renamed First American Bank of New York. Earlier Clifford had given legislators in Albany assurances similar to those he gave the Fed. "I put my reputation at stake on it," he told them, "one that I value highly over the last fifty-three years of practice."

But even before these approvals were completed, according to the 1992 Morgenthau indictment, Clifford and Altman already had begun breaking the solemn assurances they had given about their independence from BCCI.

Chapter Three – An Ambiguous "Link": In Bed With BCCI

"The only laws that are permanent are the laws of nature. Everything else is flexible. We can always work in and around the laws. The laws change." – BCCI’s Agha Hasan Abedi, according to former BCCI U. S. operations chief Abdur Sakhia at a Senate staff interview

As it turns out, the entire presentation to the Fed in 1981 was one big fraud, according to Morgenthau’s prosecutors and Federal Reserve findings in 1991 based on a trove of internal BCCI documents. In fact, the prosecutors and the Fed assert, Adham and the other three investors at the hearing were really nominees for BCCI, which had bought CCAH shares in their names using "loans" that the investors had no obligation or intention to repay. The loans were secured by the CCAH shares, which BCCI was authorized to hold, to vote, and to sell while retaining the profits for itself; the nominees were paid fees for letting their names be used (including at least $2 million for Adham), and were indemnified against any losses. BCCI controlled at least 25 percent of the CCAH shares from the start, and about 60 percent by 1991. Even the $50 million loan from BAII had been indirectly guaranteed by BCCI – which had an interlocking board of directors with BAII – through a complex series of transactions involving Adham.

Clifford and Altman deny having known any of this. And although they had increasingly powerful reasons to suspect BCCI’s covert ownership of CCAH as time passed, there is no evidence establishing that they knew of it in 1981.

Clifford was quite plausible – with respect to 1981, at least – when he told the House Banking Committee last year: "When someone says to me, ‘I really think you should have known,’ the true fact is – they would have done anything other than let us know.- That would be the day that we would leave."

The argument goes: Why would Abedi, Adham, and their associates risk rubbing Clifford’s and Altman’s noses in the fact that they were being used as front men for a fraud? Why risk losing such valuable dupes? And if Clifford and Altman seemed a bit credulous of what Abedi and company were telling them, aren’t lawyers supposed to give their clients the benefit of the doubt?

State and federal prosecutors have not alleged that Clifford and Altman knew in 1981 – or even in 1990, for that matter – about BCCI’s secret ownership of the CCAH stock. The current prosecutions hinge on the spongier claim that from the start, and until they were pushed out of First American in August 1991, the two lawyer-bankers violated their promises to the government and defrauded the regulators by helping BCCI exercise covert control over the management of First American.

The evidence of this alleged covert control is largely circumstantial. For instance, just days before the April 1981 hearing, according to the Fed complaint, Altman had sent BCCI’s Swaleh Naqvi some biographical information about Daniel Callahan, a candidate for CEO of Financial General /First American with whom Clifford had met. Clifford (who chaired First American’s board) later flew with Callahan to London to present him to Abedi and Naqvi. Callahan laid out his plans for First American to the BCCI leaders, stressing that he would want exclusive operational control. He did not get the job.

Three other candidates for CEO of First American also were interviewed by Abedi in the early 1980s, while four candidates for high-level spots at the First American Bank of New York met with BCCI’s founder. In late 1982 Abedi allegedly offered Joseph Feghali the New York CEO job, along with a seven-year contract and $100 million in capitalization, before Feghali had ever spoken with Clifford or Altman, for whom he would ostensibly be working.

All this seems hard to square with the spirit of Clifford and Altman’s commitments to the regulators. So, too, was their acceptance on behalf of CCAH in August 1982 of more than $30 million advanced by BCCI to help complete the acquisition of Financial General’s outstanding shares; Altman and BCCI allegedly papered over these advances months later by attributing them to new investments by four Arab stockholders, according to the Fed complaint.

But it is debatable whether any of these activities violated the letter of Clifford’s and Altman’s commitments to the regulators. Thanks to the qualifiers – the loopholes – the Fed’s approval of the acquisition incorporated some gaping ambiguities. What difference was there in terms of practical control between BCCI owning stock in First American, which was forbidden, and its acknowledged role as investment adviser and "communications link" to the titular owners of all of the stock? Was Clifford’s sending prospective CEOs to be interviewed by BCCI’s Abedi – in what could be characterized as courtesy calls upon the investors’ chosen representative – inconsistent with Clifford’s assurances to regulators that the investors would be "passive"? Or were such interviews appropriate in light of Adham’s April 1981 testimony that "our major objective will be to ensure that well-qualified Americans be selected" for the CEO position and as directors? Were Clifford’s consultations with Abedi those of a subordinate getting his marching orders, or those of a consummate lawyer-diplomat politely notifying his client of his own, independent decisions? Was the $30 million BCCI advance in 1982 a forbidden loan to CCAH to finance the acquisition, or a simple accommodation to the investors?

All unclear. As good lawyers will, Clifford and Altman had left themselves wiggle room.

But in sliding these slippery distinctions past the regulators, Clifford and Altman had gotten themselves into two dangerous games. The first was a game of hide-the-ball about any subsequent dealings with BCCI, since the regulators might well have questioned whether these dealings were consistent with the commitments Clifford and Altman had made. This game was easy enough at first, when the regulators weren’t asking questions. But as time went on it would require increasingly elaborate concealments of BCCI’s role, ultimately leading to criminal charges of deceiving the Fed and the New York State Banking Department.

The second was a game of ongoing "consultation" and "communication" with Abedi, from whom Clifford and Altman had pledged their utter independence, but upon whom they became utterly dependent – for their continuance in office, for new infusions of hundreds of millions of dollars in Arab capital to fund their dreams of banking glory, for a growing and eventually commanding percentage of Clifford & Warnke’s revenues, and ultimately for their own stock deal.

In contrast to his testimony at the 1981 Fed hearing about the Arab investors’ passivity and BCCI’s lack of involvement, Clifford explained his relationship with BCCI’s Abedi this way to the House Banking Committee last year: "The shareholders are our owners. They are our bosses, and we need to report to them as any corporate officers need to report to their shareholders. We were told to do it by means of reporting through these two men [Abedi and Adham]. We followed that."

Clifford also stressed that Abedi and Adham, as agents of the investors, "gave me total management control of First American," and that he made all the final decisions. "I give you my word under oath," he said. "At no time did we turn to them for a decision."

But in managing the company and making those decisions, Clifford and Altman could disregard Abedi’s wishes only at their peril. That wasn’t exactly the kind of total independence from BCCI that had been advertised to the regulators.

Clifford alone flew to London 26 times between 1978 and 1991 – often on the supersonic Concorde – to meet with Abedi, other BCCI officials, and sometimes Adham. Rarely did Clifford or Altman speak with the other investors directly, although, as former BCCI head of U.S. operations Abdur Sakhia told a Senate committee last year, they "were not Bedouins in the desert," but rather sophisticated businessmen well-versed in the use of the telephone.

Meanwhile, personal relations between the two lawyers and Abedi seem to have been warm. When Altman was married in January 1984 to Lynda Carter, television’s Wonder Woman – with Clifford as his best man – Abedi was on the guest list. His gift for the bride was a new Jaguar.

"That is the kind of thing that is done in the circles in which he operated in the Middle East," Altman blandly explained when asked at the House banking hearing about the gift, "but as far as a personal relationship, our dealings were almost entirely business."

Especially the business of launching the First American Bank of New York. Several former BCCI and First American employees have told investigators that from 1982 through at least 1984, BCCI’s Abedi dictated key management decisions concerning the New York bank to Clifford and Altman, including high-level hiring, firing, and capitalization. Contemporary documents lend support to these claims.

In particular, the Fed complaint alleges that Abedi ordered Clifford and Altman to lease offices at 350 Park Avenue far more spacious, lavish, and costly than they wanted or needed, and that "Clifford and Altman objected but were overruled by Abedi." The lawyers allegedly complied to satisfy BCCI’s desire for the New York bank to set itself up in style near BCCI’s own office at 320 Park, perhaps looking toward a future merger.

Former BCCI employees are expected to testify that while still employed at BCCI, they began active participation in the management of First American Bank of New York, helping choose directors, staff, auditors, and lawyers, and negotiating to purchase branch offices. Two BCCI employees – Khusro Elley and Aijaz Afridi, who were sent to First American Bank of New York by Abedi in 1983 and became senior vice-president and executive vice-president, respectively – took those positions at First American while continuing to receive supplemental compensation and employee benefits from BCCI.

"When Elley, concerned that the arrangements could violate U.S. banking regulations, told Altman that he was receiving a salary differential payment from BCCI," the Fed complaint states, "Altman told Elley that he "didn’t want to know’ about it." Afridi, the complaint says, spoke with BCCI officials almost daily while he was with First American and returned to BCCI in 1987 to manage its operations in Spain.

Meanwhile, both First American and Pharaon’s National Bank of Georgia were openly discussed within BCCI, and with outsiders, as being part of the BCCI family of banks, according to former BCCI employees and contemporaneous documents.

"It is nothing but one institution," former BCCI U.S. operations chief Abdur Sakhia told Senate investigators. "In any management discussions and any discussions on our future in the United States, we would think of three entities – BCCI, National Bank of Georgia, First American, or, then, Financial General – in the same breath. Who would be going where, who would work in which entity, what area of business will be handled by which entity, allocation of businesses, markets, geographical territories."

How much Altman (who attended BCCI annual conferences and other meetings) and Clifford knew of such internal BCCI discussions will be disputed at the trial. Sakhia and other BCCI officials have told Congress and the prosecutors that the lawyers had to have known that BCCI viewed First American almost as a subsidiary.

Still, the evidence does not suggest that Clifford and Altman were obedient lackeys for every BCCI request, or that BCCI’s influence pervaded First American’s banks. Some of the evidence even suggests a sort of power struggle between Altman and the BCCI people over who was running the First American Bank of New York. For example, Afridi "felt that Altman was not permitting him to run First American on BCCI lines and yet he was answerable to Mr. Abedi for profits," according to comments by Nazir Chinoy, former head of BCCI’s Paris branch, in a Senate staff interview.

The prosecutors have so far cited little if any evidence even hinting at any BCCI influence – ever – over the operations of the First American banks outside New York, or at any BCCI influence after about 1985 over the New York bank.

Clifford and Altman have said that rather than submitting to BCCI control, they were taking advantage of BCCI’s New York office and its expertise in the worlds of New York and international banking. They add that any appearance of BCCI control that this may have created was a temporary phenomenon occasioned by First American’s need to create a new bank from scratch in New York City. "We had nothing in the city," Altman told a subcommittee of the Senate Foreign Relations Committee chaired by John Kerry (D-Massachusetts) in October 1991. "We had no staff. We had no location. We had no resources."

On the other hand, the Kerry subcommittee’s final report, which was issued this October, concludes that First American had no need to open a New York City bank at all, let alone rush to set one up under such difficult circumstances. The New York operation proved to be a money-loser and a serious drain on First American, the report asserts. So, the argument goes, Clifford and Altman deliberately sacrificed First American’s best interests to please BCCI.

Perhaps. Yet one need not posit such a cynical scheme to explain First American’s ill-fated investment in its New York bank. Rather, Clifford and Altman’s central motivation may well have been to build First American into an impressive international banking empire – for First American’s own sake, and for their own. That, of course, would require both a New York presence and the help of BCCI and the Arab oil wealth to which it held the key.

Clifford and Altman would hardly be the first managers, or the first lawyers, to confuse the best interests of their firm with their own desires to build monuments to their grandiose visions of themselves.

Chapter Four – For Greater Glory

"The day came – I sensed it was coming some time – in London, when Abedi and Kamal Adham said, ‘Mr. Clifford, we want you to come in and take over the operation of First American Bankshares.’- Now, this is very personal. I was seventy-five years old at the time. I had been practicing law for over fifty years. -This offer was a challenge to me." – Clark Clifford, House Banking Committee testimony, September 11, 1991

While managing First American through CCAH from 1982 through 1991, Clifford and Altman also acted as counsel to both thereby representing themselves. Plus they were counsel to BCCI, the very active representative of the supposedly passive investors, and to the investors themselves. These multiple roles created grave potential conflicts of interest not only for Clifford and Altman but for their law firm as well.

A partner in Washington who knows Clifford says that if he himself had undertaken so many potentially conflicting roles at one time, "my younger partners would have jumped me.- Somebody should have said, ‘You can’t do that. You’re on all sides of everything, representing too many people in the same situation and not making the proper investigation of what they’re telling you.’ "

But at Clifford & Warnke nobody told the senior partner that he couldn’t do what he wanted to do. Clifford had quite deliberately kept his firm small to keep control in his own hands. He alone made the final decision on what each partner’s draw would be each year. And he and Altman alone decided how to handle the banking clients.

The Washington lawyer speculates that if he had asked Clifford for advice about vouching for Middle Eastern clients whose statements would be difficult to check, "Clark would have said, ‘Don’t touch it,’ and would have given all the right reasons not to do it. But when it came to him, the temptation was apparently just too great."

Just what made it so tempting for Clifford is one of the great puzzles of this story. He was 75 years old when he took charge of First American in 1982. There wasn’t all that much money in it for him for the first four years: a $50,000 salary as chairman, plus a not inconsiderable share of Clifford & Warnke’s legal fees. He had long since piled up many millions more dollars than he ever would need, with his workaholic, relatively frugal life-style. He had a towering reputation. Why risk it – why risk anything – by getting in bed with BCCI?

One piece of the explanation is Abedi’s extraordinary personal charisma. He had a remarkable talent (as did his underlings) for cultivating a diverse array of well-connected friends. There were African and Latin American political leaders who wanted bribes, Arab potentates who wanted young girls to enjoy on their hunting trips to Pakistan, a Panamanian general named Noriega who wanted to launder drug money.

And there were other, high-minded sorts like former prime minister James Callaghan of Great Britain, the Reverend Jesse Jackson, and former President Jimmy Carter, who met Abedi through Bert Lance. Carter liked Abedi’s talk of providing better banking services to Third World peoples, Abedi’s fat contributions to Carter-affiliated charities and the Carter presidential library, and Abedi’s corporate jet, in which Carter traveled the world, often in the company of Abedi, to meet with leaders of Third World countries. According to last month’s report by Senator Kerry’s subcommittee, Carter’s "personal prestige and aura of integrity were put to use by BCCI as it went about mixing bribery and flattery to obtain access to the foreign reserves and other assets of numerous Third World countries."

"Abedi’s philosophy was to appeal to every sector," former BCCI official Abdur Sakhia told Senate investigators. "President Carter’s main thing was charity, so he gave Carter charity. [Pakistani president] Zia’s brother-in-law needed a job, he got a job. [Bangladesh president] Ashrafs mistress needed a job, she got a job. Admission of your son to a top college, he would arrange it somehow."

What Clifford most craved in the early 1980s, and what Abedi gave him, was something exciting and prestigious to do – all the better that it fulfilled his long-standing interest in running a bank.

Clifford’s law practice was not what it had been. "There was nothing particularly exciting going on" at Clifford & Warnke as the 1980s dawned, Clifford later told the House Banking Committee. The corporate CEOs and general counsel with whom he had long had lucrative retainer agreements were retiring or dying. Republican Ronald Reagan was ensconced in the White House, where Clifford had earned pariah status with a comment at a private dinner party (which leaked into print) that the president seemed "an amiable dunce."

The future of Clifford & Warnke was far from secure. Partners worried incessantly about where the business would come from once Clifford stopped bringing it in. What better way for Clifford to endow his law firm than by locking up the steady flow of fat fees that comes to the general counsel of one of the biggest banks in town?

Clifford had seen the life drain out of friends who had retired; his closest friends are now dead. "I have worked all my life," he told the House Banking Committee. "That is what my life has been, just work. It has kept me alive and, I hope, able and vigorous. I didn’t want to retire. I didn’t want to just sit on the porch and rock and wait to die.

"I said, ‘Here is a challenge; this is a real test.-I wonder if I could take this obscure company and build it into something important and big and impressive.’ "

Important. Big. Impressive. Clifford was not the type to fade away doing charity work. He took pride, friends say, in being chairman of First American, and he liked the big oil portrait of Chairman Clifford that dominated its boardroom.

"It was from heaven," says a lawyer who worked on the takeover litigation. "He could do this for the next five to ten years, then he could retire and still be on the board at age ninety. I mean, this was just perfect."

Harry McPherson of Washington’s Verner, Liipfert, Bernhard, McPherson and Hand, a warm friend and steadfast defender of Clifford’s who had been the then-defense secretary’s closest ally in Lyndon Johnson’s White House, recalls Clifford arriving at a dinner party a few years ago, "having flown that day from London – eighty years old or so – he was alive!"

In 1968 the two friends had worked together to persuade LBJ to stop escalating the Vietnam War. Now, 20 years later, recalls McPherson, Clifford the lawyer-banker was savoring "the thrill of going to Europe and elsewhere to meet with all these high rollers."

Meanwhile, as time went by, the legal fees from First American were increasingly carrying Clifford’s firm: Between 1978 and 1990 Clifford & Warnke (which never had more than about 20 lawyers) collected fees totaling nearly $17 million from First American, its holding companies and subsidiaries, and BCCI, according to the Morgenthau indictment. By the late 1980s, according to a report in Legal Times last year that one Clifford & Warnke partner indicates is close to the mark, the banks were generating over $2 million a year, more than one third of the firm’s total revenues, and Clifford’s annual draw was about $1 million. Says one former partner: "A substantial portion of the firm’s income came from the bank – more than would be healthy."

Chapter Five – The Georgia Bank Changes Hands – Or Does It?

"Our attorneys are, they’re heavyweights. I mean, Clark Clifford is, is sort of the godfather of the Democratic Party.-It might sound far-fetched, it might be stupid, but my assessment is that-we own a bank based in Washington.-It’s called First American Bank.-BCCI was acting as adviser to [the stockholders]. But truth of the matter is that the bank belongs to BCCI." – BCCI official Amjad Awan, in a Miami hotel bar conversation taped by a federal undercover agent, September 9, 1988

The events that got Clifford and Altman indicted began in late 1985 and 1986 with three roughly simultaneous developments: They began moving toward a $220 million purchase of the National Bank of Georgia (formerly owned by Bert Lance) from Abedi’s friend (and, we now know, front man) Ghaith Pharaon; they served as counsel to BCCI in connection with a closely related $140 million BCCI loan to Pharaon, which Altman allegedly concealed from regulators; and they got BCCI to arrange and finance their own stock purchase, which left them dependent on BCCI to arrange a profitable sale.

Clifford and Altman have said that they had CCAH, First American’s holding company, buy the Georgia bank because it was a good deal for CCAH at a price no higher than necessary to beat out another bidder. Far from doing this as a favor to BCCI, the two lawyers contend, they proceeded after the purchase to sever the close ties to BCCI that the Georgia bank had forged when Pharaon owned it.

Prosecutors will seek to prove that Clifford and Altman made an exceedingly bad deal for their company, and did so because they were being paid bribes – through their stock deal – to rescue BCCI from a huge loan exposure to (and an illegal nominee agreement with) the financially troubled Pharaon by shipping more than $200 million in cold cash via Pharaon to BCCI.

Jurors may well find themselves scratching their heads trying to figure out who did what for whom. The evidence shows that most of the $220 million purchase price appears to have done a perfect round trip: First BCCI secretly supplied CCAH with the money it used to buy the Georgia bank from Pharaon; then BCCI took the same money back in payment of Pharaon’s debts. The evidence raises the possibility that the whole deal was a BCCI charade to hide problems from auditors.

The detailed allegations about the National Bank of Georgia purchase – as well as other events in the Morgenthau indictment – focus heavily on Altman. Clifford’s fingerprints are here and there; Altman’s are everywhere.

But far from pointing at Altman to exculpate him-self, Clifford has embraced his protÈgÈ without apparent reservation. "At no time," Clifford intoned in his House banking testimony, "have I questioned his loyalty or his judgment or his wisdom or the propriety of the matters that he was handling."

"Then you felt that he kept you completely informed?" a House member asked. "He kept me informed, "Clifford responded.

Some Clifford friends have whispered that Altman dragged the elder statesman down. "Altman is a spectacularly ambitious, flashy – extremely flashy – guy who ingratiated himself with Clifford," says one Clifford friend. "He’s got this rich, showbiz wife and this enormous mansion in Potomac [a Maryland suburb] ." But others stress Clifford’s longtime insistence on controlling everything he was involved in. They say that Altman, who can be charming but is notorious for sometimes affecting a haughty, cutting manner, may have played the bad cop role for Clifford, who treats friend and adversary alike with elaborate courtliness.

According to the New York indictment, Clifford spoke to Abedi in the fall of 1985 about Pharaon’s financial problems and a possible CCAH acquisition of the Georgia bank; meanwhile, the Fed complaint states that Altman met with officials of the Georgia bank that fall to inquire about a possible acquisition.

By late 1985 Pharaon’s problems became widely known, and First American was poised to try to buy the Georgia bank out from under him. Abedi, allegedly, was a major motivator behind such a deal.

As prosecutors theorize, Abedi had been concerned by Pharaon’s debts because Pharaon’s Georgia bank holdings were secretly, and illegally, controlled by BCCI: BCCI had controlled half of the stock ostensibly owned by Pharaon since he bought the Georgia bank from Bert Lance and others in 1978; and by the end of 1985 BCCI had obtained possession and voting control over the other half, as security for loans on which Pharaon had defaulted. If Pharaon’s other creditors attached his stock, BCCI’s secret interest might be exposed, bringing down the wrath of U.S. regulators. BCCI would also be threatened with a huge loss. The episode might end by toppling the entire BCCI global house of cards.

Abedi’s solution, according to the Fed complaint, was to have CCAH bail out Pharaon and BCCI by buying the Georgia bank. Abedi "decided and announced" this plan, the Fed claims, at a November 1985 meeting in Miami with Clifford, Altman, and others during a BCCI conference.

Altman later told BCCI’s Abdur Sakhia that Altman was not pleased with Abedi’s decision and would not have bought the Georgia bank of his own free will, according to the Fed complaint. Altman will surely deny this.

A preliminary analysis valuing the Georgia bank at $ 120-180 million was done for Altman by First American’s treasurer, A. Vincent Scoffone, in October 1985. An independent valuation done by another firm in February 1986 (of which Clifford & Warnke had a copy) placed the value of the Georgia bank at $130-144 million. But as First American and Pharaon continued to talk, the price kept going up. In May 1986 Scoffone reached a new estimate of $152-211 million.

Scoffone explained in a May 7, 1986, memo to Altman that while a $211 million price would be "fair," given the advantages of the Atlanta location, it would also be "highly beneficial to the present owner," Pharaon, and represented "a significant premium over both the national and local median sales prices."

In a letter to BCCI’s Naqvi the next day, Altman said he hoped the price could be in the $160-175 million range, because "we are nearing the point at which this purchase is too expensive." But just a week later, at a meeting at BCCI’s headquarters in London with an official of the Georgia bank, Altman signed an agreement in principle for CCAH to pay $205 million.

Altman has said these price escalations reflect a bidding war in the spring of 1986 between CCAH and the North Carolina National Bank (NCNB), which, by some accounts, had offered to pay Pharaon as much as $210 million in NCNB stock.

CCAH was paying cash, a more desirable commodity. Still, according to the Fed complaint, later in 1986 Altman agreed to raise the price from $205 million to $220 million for no consideration, even after there was no longer a competing bid from NCNB, The defense, however, may contend that the price actually came to less than $220 million, after accounting for two side deals.

Price aside, a problem in structuring the deal was that a Georgia law barred out-of-region bank holding companies like CCAH from buying Georgia banks. A lobbying campaign was planned to get an amendment through the state legislature. But success was not assured.

And in the meantime, Pharaon wanted a big new loan from BCCI, secured by his Georgia bank stock. Accordingly, by the summer of 1986 a proposed structure had emerged under which CCAH would pay Pharaon $80 million for an option to buy the Georgia bank, contingent on removal of the legal impediment – and BCCI would simultaneously make Pharaon a new loan of $125 million (later raised to $140 million). The $125 million to be paid by CCAH upon completion of the purchase months later (also later raised to $140 million) would go to BCCI to pay off Pharaon’s loan. In addition, during the option period Pharaon’s stock in the Georgia bank was to be pledged, in a single document, as security both to CCAH for the option fee and to BCCI for the new loan, with BCCI acting as the escrow agent.

Baldwin Tuttle and his colleagues at the Milbank firm, which was regulatory counsel for CCAH and First American, voiced a series of concerns about this proposed structure during the summer of 1986. First, Tuttle "advised that Pharaon should obtain his loan elsewhere than at BCCI, since BCCI’s involvement in the original acquisition of Financial General had raised regulatory questions and led to delay," according to the Fed complaint. "Altman replied that Pharaon was a major shareholder of BCCI and would get his loan from BCCI if he wanted to," the complaint asserts.

The Milbank firm also wrote in a June 1986 memo to Altman: "The proposed structure may focus unwelcome attention on the relationship between CCAH and BCCI and raise questions as to whether BCCI has acquired control of NBG [the Georgia bank].-An argument could be made perhaps that CCAH and BCCI are acting together and/or as principal and agent."

Clifford sent a copy of this memo to BCCI’s Abedi in London, with a cover note warning that it would "give you some idea of the difficulties and complexities facing us."

It is not entirely clear what aspect of the CCAH-BCCI relationship the Milbank firm wanted to divert attention from. But prosecutors are likely to pound hard on this memo as evidence of a shared understanding among the Milbank lawyers, Clifford, Altman, and BCCI that something needed to be concealed.

The Milbank lawyers were also concerned that CCAH’s security interest in Pharaon’s stock might be subordinate to BCCI’s. Then the Milbank lawyers learned in July 1986 – allegedly several weeks after Altman had learned – that Pharaon’s shares in the Georgia bank werealready pledged to BCCI as security for previous loans.

This issue apparently helped prompt Tuttle’s August 4, 1986, letter that so displeased Altman. Tuttle’s letter warned that the payment of $80 million as an option fee would put CCAH at risk; that there was no assurance the $80 million could be recovered if the deal did not go through; that the option agreement had no provision for renegotiating the total price in case the value of the Georgia bank declined during the option period; and that legal opinions would be needed regarding the validity of Pharaon’s ownership of the Georgia bank. (The last point may have reflected a suspicion that BCCI might be deemed the real owner.)

Altman’s alleged response – coldly returning Tuttle’s letter and a copy that Tuttle had sent to another Clifford & Warnke partner, and threatening to fire Tuttle if he ever wrote a similar letter – is seen by prosecutors as a determined effort to prevent the creation of records that would show Altman putting CCAH at risk to accommodate BCCI (though defense lawyers will likely say it was merely Tuttle’s effort to cover himself).

Still, later in 1986 Altman did restructure the proposed transaction – according to the Fed complaint, for the purpose of preventing disclosure of BCCI’s role to the Fed, whose approval CCAH needed to acquire the Georgia bank. The restructuring allegedly crystalized after an October 1986 phone call in which a Clifford & Warnke partner asked a Milbank lawyer whether, under the proposed dual-pledge structure, the BCCI loan to Pharaon would become known to the Fed. The response was yes, because the transaction documents would all have to be included in the application for Fed approval. The C& W partner then asked whether the same would be true if the stock pledges pertaining to CCAH’s option agreement and to the BCCI-Pharaon loan were in separate documents. Yes again, the Milbank lawyer said, as long as the two deals were part of the same transaction.

So on November 20, 1986, according to three memos by BCCI lawyer Saleem Malik in London that have been filed in federal court, Altman told Malik and BCCI’s Imran Imam at a meeting in London that the proposed structure posed a problem: It would alert the Fed to BCCI’s role. "By seeing all the documents, " Malik paraphrased Altman as saying, the Fed "would most likely arrive at an adverse conclusion."

At Altman’s suggestion, according to the Malik memos and other evidence, the transaction documents were redrawn to defer formalization of Pharaon’s new BCCI loan until several weeks after the signing of CCAH’s option agreement. With the two deals thus separated, the documentation filed with the Fed about the Georgia bank acquisition could, the Milbank lawyers agreed, omit any reference to BCCI and its existing and proposed loans to Pharaon.

This still left the concern that CCAH’s $80 million security interest might be deemed subordinate to the security interest that BCCI already held in the Georgia bank’s stock. Tuttle has told investigators that he repeatedly urged Altman to safeguard CCAH’s priority by getting BCCI to sign a subordination agreement. Altman never did so.

On December 18, 1986, Altman closed the option agreement and had the $80 million option fee sent to Pharaon’s account at BCCI, which used most of the money to pay down Pharaon’s loans.

The final twists and turns that followed are described by prosecutors as proof of Altman’s putting CCAH further at risk to scratch BCCI’s back; defense lawyers, presumably, will describe them as astute planning to protect CCAH.

On March 20, 1987, according to the Fed complaint, in response to a BCCI request for something to show its auditors, Altman explicitly subordinated CCAH’s security interest to BCCI’s – precisely the opposite of what Tuttle had urged – by way of a letter backdated to the option date, December 18,1986.

But about the same time Clifford & Warnke apparently got back some protection for CCAH by drafting a side agreement with BCCI in which BCCI guaranteed payment of Pharaon’s obligations to return the $80 million option fee if the purchase did not go through.

Altman has not yet publicly responded in detail to the charge that he deliberately subordinated CCAH’s security interest. But one can imagine the outlines of a defense (one to which Tuttle might lend support): "I didn’t just change the form of the transactions when I arranged to close the option deal before Pharaon got his new BCCI loan; I changed the substance. Even if BCCI liked the change because they didn’t want Federal Reserve scrutiny of their loan to Pharaon, that wasn’t my reason. My reason was to give CCAH’s security interest priority over BCCI’s, by arranging for CCAH’s to attach prior in time. The Milbank firm filed our application with the Fed, and we made all the legally required disclosures. And the BCCI guarantee we got in March 1987 was all the security we needed."

Altman might even be tempted to say: "I wasn’t stooging for the BCCI people; I was outlawyering them." But that might highlight another pesky question: Why were you acting as counsel to BCCI (in connection with the new Pharaon loan) in a deal in which BCCI had such a palpable conflict of interest with your own bank?

In any event, the purchase of the Georgia bank did go through, and the risks to the option fee about which the Milbank lawyers had been concerned never materialized. The Georgia legislature removed the legal obstacle in March 1987, thanks to the parties’ million-dollar lobbying campaign (which included such time-honored techniques of legislative advocacy as free trips for lawmakers to Florida).

The CCAH application to the Fed for permission to buy the Georgia bank – signed by Altman on April 22, 1987, and filed by the Milbank firm – did not mention BCCI’s deep involvement. The application stated that Pharaon had control of 100 percent of the Georgia bank’s shares, without disclosing BCCI’s possession and voting control of those shares under its old and new pledge agreements with Pharaon.

A belated CCAH due diligence review, done after CCAH had paid the $80 million option fee on December 18, 1986, found numerous problems at the Georgia bank, according to the Fed complaint. They included subpar financial performance, the bank’s recent assumption of an extraordinarily expensive lease from another Pharaon company, and questionable ties to BCCI, such as the Georgia bank’s paying to fly Abedi to the opening of Jimmy Carter’s presidential library in Atlanta in October 1988.

Clifford and Altman nonetheless proceeded with the purchase without seeking to reduce the price or to avoid assuming the lease. On August 19, 1987, the $140 million balance went straight to BCCI, which kept most of the money (as it had the $80 million option fee) as payment of Pharaon debts.

And where did the $220 million come from? Mostly from BCCI, according to the Fed, in the form of more secret loans to CCAH investors – just like BCCI’s loans to Pharaon. In two new CCAH offerings in July 1986 ($150 million) and August 1987 ($115 million), the Fed claims, BCCI put up the purchase price for the investors in return for pledges of the stock.

And where did Altman put the $150 million raised in July 1986 for the many months before it was soaked up by payments for the Georgia bank? On deposit with BCCI, of course, according to the Fed complaint and the Morgenthau indictment.

One specific allegation is that Altman put CC AH at risk to bail BCCI out of a liquidity crisis in 1986 and 1987 by putting the $150 million (and what was left of it after payment of the option fee) on deposit in uninsured accounts at offshore BCCI affiliates. The defense contends that these deposits were safe, that CC AH never lost a penny on them, and that they paid a higher interest rate than could be had at any U.S. bank

If you believe the Fed complaint, the purchase of the National Bank of Georgia "created a serious drain on the financial health of First American," until the Georgia bank was transferred to another First American subsidiary in 1992 at a fair market value of only $90 million.

The lawyers will no doubt contest at trial whether this $130 million plunge in valuation shows that CCAH had paid an inflated price five years before, or rather reflects the real estate crash that has depressed so many bank stocks.

Chapter Six – Sweet Deal, Saccharin Aftertaste

"What had driven a man of such exceptional intelligence to bring himself down through such dubious financial arrangements? I would ask myself this question many times in the years that followed. Born poor, he wanted both the glory of public service and the wealth of a successful private lawyer. Because he was unwilling to live within the combined income of an Associate Justice and of his wife, a highly regarded Washington lawyer, the conditions were created for his downfall." – Clark Clifford, discussing Justice Abe Fortas in Counsel to the President

It was no mere coincidence, prosecutors claim, that the Georgia bank deal started taking shape about the same time in late 1985 that BCCI was arranging for Clifford and Altman to get a great bargain on a nice chunk of CCAH stock, while giving them nonrecourse loans for the entire $14.9 million price, so that they would not have to spend a dime of their own money or incur any liability or risk.

Years later, investigators looking into the stock deal would raise their eyebrows at some peculiar behavior on the part of the Mashriq Corporation, one of CCAH’s purported stockholders, that helped provide Clifford and Altman with their bonanza. On July 25, 1986, Mashriq waived its rights as an existing stockholder to buy 6,742 new CCAH shares at the book value price of $2,216 per share, as part of the $150 million offering. Yet just the day before, Mashriq had paid $4,044 per share to buy a larger block of identical shares from another stockholder.

It’s still not entirely clear why Mashriq would act in such a seemingly irrational fashion, spending $12.3 million more than it had to for the 6,742 shares it could have had at book value. Nor is it clear how much Clifford and Altman knew about Mashriq’s July 24 purchase. But it is clear what happened to the 6,742 shares: Clifford and Altman got them, for book value, after BCCI had arranged for Mashriq to waive its rights to them.

Clifford paid $9.96 million for 4,495 shares, and Altman paid $4.98 million for 2,247 shares. The price was a terrific deal, especially compared with another new investor’s purchase of a large block of shares that month at $6,094 per share – more than 2.7 times what the two lawyers paid. If $6,094 is taken as indicating the stock’s value in the marketplace (such as it was) in July 1986, Clifford and Altman’s combined holdings were worth $26 million more than they had paid for them.

Clifford and Altman have defended their stock deal as similar to those that successful executives routinely get from grateful stockholders. They had taken extremely modest compensation in their first four years running First American, Clifford has explained. They had few executive perquisites by industry standards. Their hope from the beginning had been to buy CCAH stock if the company prospered under their leadership.

"I wasn’t in this to try to make some money," Clifford told the House Banking Committee, quite plausibly. "Later on, when we built it up, I saw no reason why these wealthy investors should not compensate us for what we had done in building up the value of their company, but that wasn’t the reason that I went into it."

By 1985, with First American having enjoyed four years of sustained growth – deposits tripling to more than $7.2 billion, profits doubling – Clifford and Altman inquired through BCCI’s Abedi, as usual, about getting some CCAH stock. Abedi reported back that the Arab investors liked the idea, according to Clifford. "It seemed so routine at the time," Altman later told a Senate panel. "These people were making hundreds of millions of dollars as a result of our effort."

Wachtell, Lipton advised Clifford to get nonrecourse financing because otherwise, in the event of his death, his estate would be burdened by a large debt to finance stock for which there might be no ready market. BCCI was agreeable, according to Clifford, because it knew the value of the collateral.

"The negotiations for the loan were conducted under very friendly circumstances," Clifford conceded in Senate testimony. But he said this reflected only the fact that "Abedi was pleased because he had recommended the [CCAH] stock to the investors [in the first place]," and they wanted an "additional bond" to inspire Clifford and Altman to be "as successful in the future as we had been in the past."

Clifford’s and Altman’s lawyers have stressed in court papers that the Wachtell firm "counseled Mr. Clifford and Mr. Altman as to the structure and terms to be included in the loan agreements and took the lead in preparing the loan documents." But these court papers are conspicuously silent on whether the Wachtell firm blessed the loans while having knowledge of all the material facts, such as the interest rate and the term of the loans – not to mention BCCI’s role in the contemporaneously unfolding purchase of the National Bank of Georgia. (The lead Wachtell partner on the matter, James Fogelson, is deceased. A partner speaking for the firm says that if all the prosecutors’ allegations about the BCCI loans to Clifford and Altman are true, then the Wachtell firm was unaware of significant facts.)

In portraying the loans as arm’s-length business transactions, Clifford and Altman have stressed that they paid more than $1 million in interest on the loans in the summer of 1987, some nine months before they got any cash out of the stock deal.

The biggest problem with Clifford and Altman’s explanation of the stock deal is the absence of any reason for BCCI to do them so many favors, other than the expectation of getting something in return – or, perhaps, an identity of interest between BCCI and the ostensible owners of CCAH/First American that was at odds with Clifford and Altman’s past and future assurances to the Fed.

Not only did BCCI arrange with Mashriq to make the 6,742 shares available to the two lawyers in July 1986. Not only did BCCI contract at the time of their purchase to find Clifford and Altman a buyer whenever they might want to sell – as they ended up doing in March 1988, for a huge profit. BCCI also gave Clifford and Altrnan an incredibly sweet deal in financing their purchases, loaning them the full purchase price on extraordinarily generous terms.

For starters, BCCI charged Clifford and Altman only the London Interbank interest rate, which at the time was 6.75 percent – 1.25-1.75 percent below the prime rate then being charged by big U.S. banks to blue-chip corporate borrowers.

How sweet was that? Before arranging their loans with BCCI, Clifford and Altman had been negotiating through the Wachtell firm with another bank – BAII, which had loaned the $50 million to CCAH in 1982 to acquire Financial General – to borrow far less money at an interest rate at least 1.25 percent above the London Interbank rate.

BCCI made it sweeter still by agreeing in a side letter that Clifford and Altman "shall not be obligated personally to repay to BCCI the loan principal or any interest." BCCI’s only recourse in the event of default would be to take the stock, which Clifford and Altman pledged as collateral. BAII had balked at the two lawyers’ demand for such nonrecourse loans, even though BCCI had offered to guarantee repayment.

BCCI loaned the two another $3.5 million on the same terms to buy 1,426 more new CCAH shares on August 14, 1987 – just five days before the proceeds were sent to BCCI via Pharaon to complete CCAH’s purchase of the National Bank of Georgia.

In Senate testimony last year, Clifford and Altman were unable to recall a single instance in which First American had made anyone a loan on such favorable terms as BCCI gave them.

Less than 19 months after Clifford and Altman had bought their first batch of CCAH stock, Clifford asked BCCI’s Naqvi to find a buyer for some or all of it, by letter dated February 8, 1988.

According to Clifford’s congressional testimony, the two lawyers moved then because the market in bank stocks was strong and they wanted to generate cash to pay off their loans. Clifford recalled telling Naqvi that "we would be pleased" to get 2.5 times book value, based on reports that some bank stocks were going for that much; Naqvi found a purchaser willing to pay 2.6 (actually 2.69) times book, and, Clifford said, "I was perfectly satisfied."

Satisfied, indeed. The two lawyers sold 3,200 of Clifford’s shares and 1,600 of Altman’s for $32.6 million – $22 million more than they had paid for those shares. Their combined pretax profit after paying off all their BCCI loans (including those used to pay for the stock they retained) and sales commissions was $9.8 million. The price was $6,800 per share, the highest ever paid in the history of CCAH. That was more than three times what the two lawyers had paid 20 months earlier. It was more than double what Clifford and Altman’s stock was actually worth at the time, according to a subsequent estimate by BCCI’s auditor, Price Waterhouse. It was also more than double the ratio of book value for which most publicly traded big bank stocks were selling at the time.

Clifford and Altman have said that the above numbers are misleading, and that their after-tax profits were only $2.75 million and $1.35 million, respectively, a modest reward for their stellar service at First American from 1982 to 1988.

But even that overlooks the 3,368 shares that they were left owning free and clear after the March 1988 sale. A minimum value for those shares was set when, in April 1988, BCCI contracted to buy any shares owned by Clifford or Altman at the time of his death for $2,310 per share; that would have come to $5.2 million for Clifford and $2.6 million for Altman. Moreover, if valued at the record-high $6,800-a-share that Clifford and Altman had just been paid, the 3,368 shares they retained were worth $22.9 million in 1988. Of course, those shares are worth a lot less now – a Clifford acquaintance says they may be virtually worthless – and (as Price Waterhouse found) may have been worth a lot less then (although that’s not an argument that would lie well in the mouth of Clifford or Altman).

These are the apparently established facts of the stock deal. It looks worse, however, if one credits some of the detailed, and presumably disputed, allegations of Morgenthau’s prosecutors and the Fed:

ï Clifford’s February 8, 1988, letter to Naqvi pro posing a sale was, according to the Fed, really written some time later and backdated. (The evidentiary basis of this allegation has not been made public.) The alleged purpose was to predate a crippling heart attack and stroke suffered on February 9 by Abedi. February 9, 1988, also marked another in the long chain of events that was to bring BCCI down: That day former Panamanian consul Jose Blandon testified in hearings before Senator Kerry’s subcommittee that BCCI was handling drug money for General Manuel Noriega.

ï Contrary to Altman’s sworn testimony to the Fed last year that he did not know how the $6,800-per-share price had been set, the Morgenthau indictment and the Fed allege that Altman had set it himself. He allegedly did so not by calculating what the stock was worth, but by telling BCCI’s Naqvi and Imran Imam at meetings in London and in subsequent phone calls to calculate a price that would give Altman and Clifford net profits of $1.5 million and $3 million, respectively, after paying off all their loans and taxes. Altman also allegedly insisted that the price be set high enough to allow him and Clifford to pay BCCI a combined $2.25 million "sales commission"; Imam calculated that this would require a price of $6,800 a share.

Later, says the Fed, Altman "called Imam to dictate to him the contents of a letter to be sent from BCCI to Clifford. On March 21, 1988, Imam sent Clifford the letter as dictated by Altman, notifying him that a purchaser had been found who was willing to buy up to 4,800 shares at $6,800 per share."

ï When the deal closed on March 31, 1988, the Fed complaint says, "the purported buyer, Mohammed Hammoud, like Clifford and Altman, paid for the shares with the proceeds of a loan from BCCI, and pledged the purchased shares as collateral for the loan." A power of attorney signed by Hammoud, which was found in BCCI’s records, gave Altman the power to buy or sell shares at his discretion on Hammoud’s behalf. Altman has testified he was unaware of it.

Hammoud, a now-deceased Beirut businessman, was described in Senate testimony by BCCI’s former chief financial officer, Masihur Rahman, as a "front man" for BCCI.

During Clifford’s and Altman’s Senate testimony, Senator Kerry wondered why Hammoud would pay Clifford and Altman $6,800 per share for 4,800 shares in March 1988 when, as CCAH records indicate, he had paid far lower amounts in 1986 ($2,216 per share), 1987 ($2,430), and 1989 ($2,774). "It looks like there is something going on," observed Kerry.

Clifford patiently explained that the low-priced purchases in 1986, 1987, and 1989 were new stock offerings available to existing stockholders like Hammoud at book value; Hammoud’s hunger for annual portions of new CCAH shares was apparently such that he was willing to pay a lot more in 1988, Clifford suggested, when there was no such offering.

Clifford’s and Altman’s BCCI financing and pledge of their stock was, by the way, somewhat akin to the secret nonrecourse loan-stock pledge deals that BCCI turns out to have had from the beginning with some or all of CCAH’s Arab investors.

"At that point, a great light ought to have dawned," says one lawyer who (unlike the prosecutors) credits Clifford’s claim that he did not previously have reason to know of BCCI’s secret deals with the "investors." But by Clifford and Altman’s account, they never had a glimpse of a suspicion that their own secret deals with BCCI might be part of a broader pattern. "In all these years we didn’t encounter a single suspicious circumstance," Clifford told the House Banking Committee.

According to the state and federal indictments of Clifford and Altman and the Fed complaint, the lawyer-bankers concealed their BCCI financing terms and other sweetheart aspects of the stock deal from their two fellow CCAH directors, from everyone at First American itself, from the Milbank firm, and from regulators.

As for Clifford and Altman’s partners at Clifford & Warnke, most did not even know that Clifford and Altman owned CCAH stock until they read all about it on the front page of The Washington Post on May 5, 1991. The article sent shock waves through the community of Clifford acquaintances, especially his partners, who arguably should have been offered a share in the stock deal, and who had a vital interest in knowing about the conflicts of interest in which it involved their firm.

Name partner Paul Warnke did not return several phone calls seeking an interview about the Clifford-Altman case, but a friend of his says: "What Paul really can’t forgive [Clifford] for is, when they made those stock deals, they didn’t tell others in the law firm."

"I think it stunk [not to include the firm]," says a longtime partner of Clifford’s. "That was the one thing that stunk. … A partner is supposed to be one hundred percent committed to the law firm, and he and Altman made this a separate deal."

The minute I read about it," says another former partner, "I knew that the firm was not going to make it out, that the element of personal enrichment and the element of nondisclosure would give the case against them an intuitive appeal." And, indeed, the scandal machine was already moving into high gear.

Chapter Seven – Keep Your Eye On The Birdie

"We weren’t trying to hide the fact that we had loans. It just didn’t seem to be of any particular moment." – Robert Altman, in Senate subcommittee testimony, October 24, 1991

Clifford and Altman never did disclose their BCCI loans to the Federal Reserve, which heard of them in January 1991 from new lawyers for BCCI at Patton, Boggs, & Blow, and got the full story only by subpoenaing Clifford and Altman and inspecting BCCI documents in Abu Dhabi in March 1991.

Clifford and Altman did note their stock interests in CCAH, though not their BCCI financing, in annual reports filed with the Fed in 1987 and thereafter as required by law. The lawyers say they had no legal obligation to tell the Fed about the loans, nor even any reason to suppose that it might be interested in them.

And Fed officials have conceded in congressional testimony that neither the law nor the commitments Clifford and Altman had made in 1981 barred the two from using BCCI financing to buy CCAH stock, or required them to volunteer information about their financing to the Fed.

This testimony shows that "what has become the focal point of the government’s theory, that Messrs. Clifford and Altman purposely withheld or concealed from the Federal Reserve the existence of their loans from BCCI, is not supported by the very witnesses who the government now asserts were deceived by these alleged nondisclosures." Or so contended Clifford and Airman’s defense lawyers, in a motion in the federal criminal case.

But failure to make spontaneous disclosure is one thing. Filing false statements with the Fed, and responding in an intentionally deceptive manner to its inquiries, are federal crimes. And that is what Altman is alleged by prosecutors to have done.

One such deceptive statement, according to the Fed complaint, came in a May 18, 1987, response to a Federal Reserve inquiry as to the source of the funds used to acquire the National Bank of Georgia. This letter, sent by the Milbank firm based on information allegedly supplied by Altman, said that "less than five percent" of the $ 150 million raised in the 1986 offering "represented borrowings by shareholders secured by a pledge of shares." But in fact nearly 10 percent of the $150 million – $14,940,272, to be exact – represented borrowings by Clifford and Altman alone, secured by their pledges of shares to BCCI.

Considering the importance that the regulators had attached to the relationship between CCAH and BCCI before the Fed’s 1981 approval of CCAH’s acquisition of Financial General, the Fed showed remarkably little interest in that relationship over the next eight years.

The Fed’s curiosity was piqued only slightly by BCCI’s indictment for drug money laundering in Tampa in October 1988, and by reports from federal law enforcement officials in early 1989 that BCCI employees had said BCCI secretly owned First American. The Fed was satisfied by Altman’s allegedly misleading statement to an examiner in January 1989 that (in the words of the Fed complaint) "he did not know about any understandings or financial arrangements that might exist between any CCAH shareholder and BCCI." The Fed also shrugged off a report about BCCI and First American in August 1989 from a representative of Morgenthau’s office, which was beginning to poke into BCCI’s affairs.

Finally, when the Bank of England told the Fed in late 1989 that some CCAH stockholders had outstanding BCCI loans, which might be secured by CCAH stock, the Fed roused fitfully from its long slumber.

William Ryback, a senior Federal Reserve international bank superviser, wrote Altman a letter on December 13, 1989, requesting "information on any loans extended to the original or subsequent investors [in CCAH], either directly or indirectly, by BCCI or any of its affiliated organizations."

A straightforward answer to this letter would, of course, have had to list BCCI’s now-repaid loans to Clifford and Altman, at the very least. But Altman found a way around doing that, in a series of responses to Ryback over the next several months. Nor did Altman mention these loans to Baldwin Tuttle, with whom Altman consulted on how to answer Ryback’s letter.

"We didn’t disclose it in response to Mr. Ryback’s letter, as it was nonresponsive," Altman asserted in Senate testimony last year. He explained that he had told Ryback orally that it would be burdensome to seek information on every loan BCCI had ever made to any CCAH investor, and Ryback had responded, orally, by narrowing his inquiry. All Ryback really cared to know, Altman told the senators, was whether any BCCI loans had been used to finance the original acquisition, or were still outstanding.

This reformulation of the Ryback inquiry enabled Altman to slalom through without mentioning his and Clifford’s loans, which they had repaid in March 1988. In fact, in his Senate testimony Altman indicated that it had never crossed his mind that the Fed might possibly be interested in his and Clifford’s dealings with BCCI – that is, in knowing that the two people running First American had already made a bundle with the help of sweetheart loans from BCCI, and were still hoping to make another bundle by selling more shares with BCCI’s help in the future.

"It was not a question of withholding information that we could have provided to [Ryback]," Altman testified. "It was, this is not what he is interested in. … I didn’t think anything of it. It was a loan that was made. It was a loan that was repaid."

But even if Altman had no obligation to tell Ryback about his and Clifford’s BCCI loans, according to the federal indictment, Altman committed a felony in his February 5, 1990, written response to Ryback’s December 13, 1989, letter.

Altman wrote that "we do not have access here to information regarding any financial arrangement that might exist between a shareholder" of CCAH and BCCI or any other financial institution.

The federal indictment charges that this assertion "knowingly and willfully concealed and covered up by trick and device a material fact," because Altman and Clifford "had a financial arrangement" with BCCI. Specifically, under still-outstanding share repurchase agreements, BCCI had promised not only (in 1986 and 1987) to find buyers for Clifford’s and Alt-man’s shares whenever they might want to sell, but also (in April 1988) to buy their remaining shares for BCCI’s own account at their deaths.

That was not the only allegedly misleading thing about Altman’s February 5, 1990, letter. He also wrote: "We can only confirm that no pledge or security interest has ever been recorded on the company’s share register [in the Netherlands Antilles] by any lender." Altman did not mention that there had nonetheless existed at least two pledges of CCAH shares to BCCI – his and Clifford’s – that for reasons best known to Altman and BCCI had never been recorded on the share register.

Altman’s letter to Ryback also said that "I have to- day received" a January 31 letter from BCCI’s Naqvi, which Airman enclosed. The Naqvi letter stated that the acquisition of Financial General "was not financed in any respect by BCCI." This statement was "known by Airman to be false," the Fed complaint says – not to mention contrived; the complaint adds that "Altman or [one of his law partners] drafted the Naqvi letter and sent it to Naqvi for signature."

Still, any prosecutor trying to make the charge of criminal deception of Ryback stick will have to contend not only with arguments about whether share repurchase agreements are "financial arrangements," but also with claims that any technical inaccuracies in Altman’s reponses were not material to the Ryback inquiry.

Ryback "has no memory of altering his original request," according to Senator Kerry. (Ryback did not return phone calls.) But Altman appears to have witnesses: A memo to the file allegedly prepared by Altman, Turtle, and Altman’s partner J. Griffin Lesher says that at a May 8, 1990, meeting they had with four Federal Reserve officials, Ryback "indicated he was not really interested in subsequent loans from BCCI" and "emphasized that his limited concern was only to inquire as to any BCCI financing of the original acquisition."

Ryback added, according to this memo, that if Altman could get Naqvi’s consent to send his January 31, 1990, letter denying any BCCI financing of the acquisition to "the regulatory authorities overseas which apparently had first raised the matter with him," Ryback "should be able to "close his file on this matter.’"

Altman quickly secured Naqvi’s consent, and the Fed’s regulators went back to sleep, at least for a few more months. Their lullaby included several more Altman communications with Fed officials during 1990 on BCCI’s relationship with First American in which he never mentioned he and Clifford’s personal deals with BCCI.

But while Altman’s artful dodges "had tied Ryback up in knots," as a lawyer sympathetic with the prosecution puts it, investigators in the Senate and in Morgenthau’s office were beginning to pick up a strong scent of BCCI ownership of First American.

Chapter Eight – A Posse Of New York Prosecutors

"In going after BCCI, [New York district attorney Robert] Morgenthau’s office quickly found that, in addition to fighting off the bank, it would receive resistance from almost every other institution or entity connected to BCCI. The greatest resistance came from BCCI, BCCI’s shareholders, and BCCI’s multitude of prominent and politically well-connected lawyers." – Report of Senator Kerry’s subcommittee, September 30, 1992

From 1987 to 1989, when Senator Kerry chaired a series of hearings for the Senate Foreign Relations Committee on the impact of drugs and money laundering on U.S. foreign policy, one of his chief sleuths was Jack Blum, whom Kerry had lured from private practice in early 1987 at the age of 45 to become special counsel to the foreign relations committee.

During the course of his investigations for Kerry, Blum – an intellectual with a yen for conspiracy theories – had heard from several sources that BCCI was up to its ears in money laundering worldwide and that it owned a bank in the U.S. In early 1989 Blum went to prosecutors in the Tampa U.S. attorney’s office, who had handled the October 1988 money laundering case against BCCI. That case had ended with a guilty plea, contingent upon no further corporate prosecutions in Tampa.

"I had this cooperating witness who laid out in fairly dramatic detail the full dimensions of the troubles in BCCI," explains Blum. "Not everything we know today, but a good start in broad outlines…. But I could tell the [Tampa] prosecutors were totally skeptical."

For their part, Justice Department prosecutors thought Blum was "a wacko," according to a later report by the Kerry committee (which also noted that some Justice prosecutors seemed to have treated the Senate panel’s probe with disdain). After a while, Blum says, "It was clear that Tampa was not going to pick up the ball." ("The information supplied by Mr. Blum’s witnesses … was not of evidentiary value," asserts a Justice response to the Kerry report.)

Meanwhile, Blum had his own suspicions – completely unsubstantiated – that Clifford and Altman, acting as lawyers for BCCI, had talked to "people on the Hill to make sure that the [Kerry] investigation did not continue," he says. So in March 1989, shortly before Blum (who is now a partner at Washington, D.C.’s Lobel, Novins, Lamont & Flug) left Kerry’s staff, he looked for an ally to the north: He took his information to New York County DA. Robert Morgenthau.

Why the Manhattan prosecutor? Among other things, Blum notes that by this time a reliable Deep Throat had told him that the U.S. bank that BCCI supposedly owned was First American, which had, as Blum puts it, "big offices on Park Avenue." Furthermore, in February 1988 Morgenthau had impressed Blum when he stated before Kerry’s subcommittee that he feared that $5-10 billion of drug money was being laundered annually through New York banks. At that appearance Morgenthau had said that his office intended "to spend more resources now in trying to trace [illegal] funds."

Morgenthau also appealed to Blum because of his reputation as an independent prosecutor whose own genes and pedigree might incubate him from genuflecting to people in power – people such as Clifford and Altman. Morgenthau’s father, Henry, was secretary of the Treasury under President Franklin D. Roosevelt; Henry Morgenthau’s father in turn had served as Woodrow Wilson’s ambassador to Turkey. The D.A.’s mother was related to Governor Herbert Lehman of New York and had been a close friend of Eleanor Roosevelt’s. Morgenthau’s own cavernous office at One Hogan Place is peppered with photographs of the Kennedy clan and letters to his father from F.D.R. "The Boss," as his staff of 500-plus prosecutors refers to him, is known for a few well-placed tentacles of his own.

"Morgenthau has enormous access," says Michael Cherkasky, the D.A.’s chief of investigations who helped oversee the BCCI case. "He can get to people and find out things with just a phone call. And believe me, BCCI was a case where that would prove invaluable."

Blum met first with Morgenthau personally and then with Cherkasky. Blum minced no words: "I told them that this was the largest bank fraud in history," he recalls. "That there was no money in the bank, and that it was this gigantic Ponzi scheme. And that all of this was hidden through all sorts of different accounting facilitated by the fact that the bank was offshore everywhere."

Morgenthau was intrigued. "More than many people, Morgenthau understands the significance of the banking industry, and how vulnerable it can be," Cherkasky notes. "He sees the influence of the Middle East on the British financial community and fears the same thing could happen here."

But if Morgenthau was interested, Cherkasky was skeptical – a posture he would take at various junctures during the BCCI investigaton. "I never had an epiphany about this case," says Cherkasky. "It was always Bob Morgenthau who had the epiphany. Blum is a respectable guy. He came to us with credentials, but here he is telling me these giant conspiracy theories. And I have to tell you, I am not a true believer in those kinds of conspiracies. After ninety minutes with Blum I am giving Morgenthau a briefing and he is saying, ‘This is very interesting.’ And I’m going, ‘Maybe so. But what can we do with it?’"

One of the first things Morgenthau and Cherkasky did was assign the case to assistant D.A. John Moscow, who in his 20 years in the office has earned a reputation as a brilliant, if at times deliberately obscure and quirky, "true believer." Over the years Morgenthau had increasingly tapped Moscow for abstruse white-collar cases requiring a special breed of hound dog.

"I said to Morgenthau, ‘Well, if we’re going to do this, the only person to do it is John Moscow,’ re-calls Cherkasky. "John was like, ‘What are you getting me into?”"

I remember the boss telling me that there was this dirty bank that we should take down," says Moscow, 44, a graduate of Harvard Law School. "And fairly soon I thought that this would end up being a five-year operation. I have to tell you I was not pleased."

Those familiar with the cast of characters smile at the thought of Moscow on the trail of Clifford and Altman. Laughs one lawyer sympathetic to the prosecution: "If you think of Clifford as a sort of unctuous king smoothy and Altman as Gordon Gekko to the max, Moscow is like an extremely opinionated and somewhat arrogant Columbo. A Harvard Law, New York version of Columbo. He can infuriate you one minute and be a mensch the next."

Adds an investigator: "[Moscow] is kind of the antithesis of Bob Altman. Altman’s the sort of guy that right out of law school knows exactly what he wants to do, which is make a helluva lot of money. [He] ingratiates himself with a superlawyer, marries Wonder Woman, has a kind of effete air about him, wears double-breasted suits. Moscow is a street fighter. His office is a rat-hole…. You go there to meet him and he has to scratch around for a couple of coffee mugs, and washes them out with a paper towel. I don’t think he’s personalized this with Altman – but I don’t think Altman’s his kind of guy."

Both Cherkasky and Morgenthau cite several reasons why Moscow came to mind. For one, he is exceptionally dogged. For another, Moscow has a mind that readily vaults to conclusions – mental leaps that to the more prudent may seem not only ill-advised but something of a stretch – a trait that they suspected might play well in the BCCI case. In its earliest incarnation the case was a maze of theories, many quite bizarre and internecine, backed by a paucity of evidence. "It’s important to remember that Blum came to us with a lot of allegations but no real proof," notes Cherkasky. "I mean really none. And that by no means scared off John [Moscow]. To the contrary, John has this uncanny ability to glean things from limited documentation." (Moscow’s love of riddles is matched by his ability to speak in them – something that confounds colleagues and adversaries alike. "Frequently I will say "Great, John, that sounds great, but what are you talking about?’" notes Cherkasky. "Then the question becomes, ‘Is this as solid as John thinks it is?’ and, then, ‘Can we prove it?’ Those kinds of conversations have been very interesting in BCCI.)

Initially, Morgenthau and Moscow could only turn to public sources such as Moody’s Investor Service to learn about BCCI’s and First American’s respective structures. But they quickly surmised that, for its part, First American was a mesh of five holding companies in several jurisdictions. "I had never seen a situation like that," says Moscow. As for BCCI, he adds, "I started asking questions like, ‘Who owns the bank? Where does it come from? Who, where, why, how?’" Moscow says. "When you can’t get past who, you know you have a problem. The bank was offshore to all points. The old continent obscured by fog."

Chapter Nine – A Breakthrough In Evidence

"The Price Waterhouse audit report … reportedly showed that 60 percent of BCCI Holding’s shares were pledged to secure loans ($1.3 billion) to shareholders of BCCI which were never serviced. Bill [Ryback] feels that BCCI has been lying to us for years and he would like to have Clark Clifford and Robert Altman investigated for their role in withholding that vital information." – An internal Federal Reserve memo dated December 18, 1990

Shortly after he began working on the case, Moscow found an informant who insisted that First American’s owners were all nominees for BCCI, which owned and controlled the shares bought in their names. However, proof to support such hearsay remained elusive. In particular, much of the documentation for the bank’s transactions was overseas – key evidence, for example, lay with the Bank of England – and was thus protected by the bank secrecy laws of other countries.

At first people at the Bank of England were like, ‘Excuse me! We’re British. We’re not going to cooperate with some local prosecutor,’" remembers Blum. "Morgenthau’s people had to fight for every little thing they got."

By mid-1990 Moscow and his team were pursuing a multitude of subpoenas but were not getting very far. At one point, according to Moscow, the D.A.’s office even subpoenaed the garbage bins from BCCI’s New York office." We heard that different records that had been subpoenaed were being thrown out," he says. "So the next step was quite literally to subpoena the garbage bags from the building agent, which ended up having some important stuff in them."

Explains Cherkasky: "The biggest problem we had in the beginning was just getting our hands on hard information that we could use to subpoena people and put pressure on witnesses with. We knew what we were looking for, but we just couldn’t get it. If you served a subpoena on BCCI in New York, they would say we can’t give that information to you because we don’t have to. You don’t have any right to it. Yes, it got discouraging."

But any such difficulties apparently only titillated Morgenthau, who was becoming personally immersed in the case. "I will tell you that without Bob Morgenthau’s belief in this case, we might very well have given up," Cherkasky insists. "Even when John [Moscow] would start to doubt it, Morgenthau just kept on pushing. Particularly early on when it was all such a puzzle."

"I would be kidding you if I said that I immediately sensed all the ramifications of the case," says Morgenthau. "But I did see the public policy implications. And the case intrigued me. I have always been interested in the use of foreign bank accounts and the implication for banking here. But in the beginning we were really in need of a breakthrough."

That they finally got in October 1990, when BCCI’s former chief financial officer, Masihur Rahman – who in his capacity as the chairman of the bank’s internal review committee had firsthand knowledge of what a mendacious financial maze the bank was – contacted Morgenthau’s office and arranged a meeting. Rahman provided the jewel that pushed the investigation forward: He told the prosecutors of a recent Price Waterhouse audit of BCCI prepared for the Bank of England that ended up being the key to breaking the case open. For one thing, the report delineated in great detail that BCCI had huge losses – which the bank had been covering up – reported to be about $1.5 billion. For another, the report documented that BCCI did, in fact, own First American through nominees – which various sources had whispered first to Blum and later to prosecutors.

Morgenthau instructed Moscow to take Rahman’s information to the Federal Reserve Board, which had been balking at formally investigating BCCI until it had hard evidence of fraud. As an arm of the federal government, the Fed had far more sweeping jurisdiction than their counterparts at One Hogan Place. "Nobody has real jurisdiction overseas," explains Cherkasky. "But the Federal Reserve certainly has the contacts and reciprocal agreements that would allow them to get information we couldn’t get." Like the valuable Price Waterhouse audit.

"For a while there," says Moscow, "my main job was keeping the Fed going. Just getting them acquainted with what I was hearing. You have to remember they were not used to being lied to, and here they were confronted with a very strongly entrenched machine [BCCI] that was lying. They did not know what to do, what documents to look for. On the other hand, I knew what I was looking for, but did not have any subpoena power in England…. [And] the documents that I needed were in England."

"The Fed was in a funny position," says another source sympathetic to the prosecution. "If all this were true, it was the Fed who had been deceived so blatantly about BCCI and First American. So on the one hand they were embarrassed. They had some egg on their face. The line investigators [at the Fed] were fired up and really wanted to get to the bottom of how the Fed had been lied to, if they’d been lied to. [But] the people at the top – [including] the ones who had been in a position of being deceived – they were the ones who were real skittish.

"On the other hand," this source continues, "they were going to look very bad if they didn’t cooperate and help New York, which the guys up there had to remind them of. It was dicey…. [But] that very good information from Rahman gave the Fed something to sink their teeth into."

In December 1990 senior Fed superviser Bill Ryback – who had spent the past year allegedly being misled by Altman – flew to London, where he got a look at the Price Waterhouse report from Zafar Iqbal, who had replaced Naqvi as chairman of BCCI in May 1990. The report lived up to its advance billing, apparently, casting shadows not only on BCCI but on Clifford and Altman as well. But according to an internal Fed memo, Ryback did not take any written notes on the report and "refrained from taking a copy of the PW report lest Mr. Moscow of the New York district attorney’s office subpoena such records."

Moscow and Morgenthau knew of Ryback’s trip and clearly had hoped that he would return with the audit in hand. The fact that Ryback came back without it strengthened their realization that they might have to get it on their own.

Meanwhile, in the wake of Ryback’s trip, the Fed officially opened its BCCI investigation in January 1991. The first month the Fed sent its newly mobilized investigators into various U.S. offices of First American and BCCI. As the Clifford and Altman defense team stresses, the investigators found no evidence of BCCI influence over First American’s routine operations. But in the D.C. office of First American they scrutinized the wire transfers of money between BCCI and First American. "Asking about that dollar flow led to production of documents on stock transactions between BCCI and Clifford and Altman," says one prosecutor.

The Federal Reserve also did some transatlantic sleuthing, in March 1991 sending representatives to Abu Dhabi, the Middle East emirate whose ruling family owned 77 percent of BCCI as of May 1990 and was among the largest CCAH stockholders. "They found a hell of a lot in Abu Dhabi," says one prosecutor. The investigators turned up what were basically nominee agreements relating to the ownership of First American. They also uncovered further detailed documentation relating to Clifford and Altman’s nonrecourse loans and stock deal that would ultimately feature so prominently in Morgenthau’s July 1992 indictment of the two lawyers (as well as the federal indictment and the Federal Reserve’s civil complaint).

"They came back with documents from what we call the Naqvi file," explains one Manhattan prosecutor. "[There were] documents on loans to all the nominees and shareholders, including Clifford and Altman." According to this source, the Naqvi file included worksheets on which BCCI’s Imam tabulated the profits that Clifford and Altman allegedly had specified that they wanted to make on their March 1988 stock sale.

"That put the investigation into Clifford and Altman specifically on absolutely a different plane," says another Manhattan prosecutor. "The question was, why would BCCI do this for Clifford and Altman?

"It was real clear early on that they were involved up to their necks," this source adds. "But now we had something that looked like real proof. I literally remember John [Moscow] going into Morgenthau [with copies of the nonrecourse loan agreements uncovered in Abu Dhabi] and saying, ‘Look at this! This isamazing.‘ It was a very big day for us. A very big’Oh, wow!’"

Of course, investigators were not focused on Clifford and Altman at this point – their main emphasis was BCCI itself. And before prosecutors could get too excited, they still needed the Price Waterhouse report documenting BCCI’s losses – or at least an official copy of it. In early 1991 one of the D.A.’s sources had sent the office a bootleg copy of the report. Says one prosecutor: "We had gotten a copy of a report that we shouldn’t have had. But it was not an official copy, so it was a sticky situation." (The prosecutors had promised the person who had sent the report to them that they would do nothing to reveal that they had it.)

"The key for us," this prosecutor stresses, "was that we needed publicly to have an official copy. We needed that report as confirmation that BCCI had fraudulently stated its value to the world. Finally we lad a document that had hard facts and numbers, and through it we could question individual auditors. [But] we needed an official copy that [the auditors] would acknowledge was a business record that we could put into evidence.

"It was a very bizarre situation, but then this whole case is full of bizarre situations like this," this source laughs. "Believe me, this is a case where you don’t know if your phones are being tapped. We were regularly having our phones sweeped. We knew a lot of powerful people worldwide were trying to stop us from doing this case. Everybody and everything had code names.

"And John, " this source continues. "John didn’t just think his phones were tapped. He knew his phones were tapped! In some ways John was part of the problem, because he has a reputation as this eccentric, and a lot of people presumed this was just another one of his escapades. Particularly when you put him together with all these sheiks and Arabs and Third World drug money! Lawyers representing certain witnesses in this case would often demand that Cherkasky be there when John was interviewing their clients because of John’s reputation.

"Anyway," this source observes, "things got on a more normal, productive keel when the Bank of England guy came over to talk to us and we finally got our own official, do-with-what-we-will copy of the Price Waterhouse report."

In the end it was Morgenthau’s personal finesse that sent the report stateside. In March of 1991 Eddie George, the Bank of England’s deputy governor, traveled to New York to visit Morgenthau. "This had everything to do with who Bob Morgenthau is and who his family is," says Cherkasky. "I remember the first day that George came to visit Morgenthau. Morgenthau has George in his office and starts to give him a flavor as to who George is dealing with, that he is not just some low-level, hick local prosecutor. This is Robert Morgenthau. I mean, he didn’t have to come right out and say, ‘Do you know who I am? I am a scion of a great American family.’ But when you walk into Morgenthau’s office and see pictures of the Kennedys and Roosevelt, you can get the idea."

Morgenthau and George met for several hours and not only talked about BCCI but also reminisced about their experiences in England during World War II, and about mutual acquaintances in London. "After that initial meeting they have dinner, exchange home phone numbers," says Cherkasky. And the Bank of England had turned over the report.

In the meantime, Morgenthau had elicited the help of one of his close friends, Steven Kaufman, who had served as his chief of the criminal division when Morgenthau was U.S. attorney for the Southern District of New York in the late 1960s. Kaufman, who now has his own firm in Manhattan, has in the past represented Price Waterhouse in several matters. At Morgenthau’s request, Kaufman contacted people at Price Waterhouse in England and put in a good word for his old friend.

"After Morgenthau breaks the ice, John [Moscow] can start building his own, day-to-day relations with these people who are going to be key witnesses in the grand jury," explains Cherkasky. "And Morgenthau continues to reinforce the relationship for John.

"The Price Waterhouse report proved the straw-men ownership of First American," Blum asserts. "And that really put the fire under everyone to act."

Cherkasky agrees: "Once the Bank of England officers were on board, they in turn could authorize others who had seen the original BCCI documents to talk to us. So finally we were really on our way.

Chapter Ten – Turf Wars

"The natural tendency of prosecutors is to compete [with one another]." – Laurence Urgenson, acting deputy chief of the criminal division of the Justice Department

But the D.A.’s office was facing some turbulence due to an escalating problem on this side of the Atlantic: As the investigation gained evidentiary steam thanks to cooperation from the Federal Reserve, the Bank of England, and Price Waterhouse, the D.A.’s relations with the Department of Justice were disintegrating.

As of early 1991, when Morgenthau’s investigation was just beginning to snowball, the Department of Justice was pursuing BCCI via its individual U.S. attorney’s offices in D.C., Miami, Atlanta, and Tampa. The two efforts began clashing in February 1991, after Moscow asked the Tampa prosecutors for copies of undercover audiotapes on which BCCI officials had told investigators that BCCI owned First American. He was told that no such tapes existed.

"They were lying, and we knew it," asserts one Manhattan prosecutor. "They were trying to cut us out of the investigation. Every day and twice on Sunday there are turf wars between prosecutors, but this was different. Very different."

Adds Moscow: "I kept telling the Tampa prosecutors that I knew the tapes existed. And I offered to get them confirming information about the circumstances under which the tape had been made, down to the serial number on the recording machine and who was sitting with whom in the room where they were made." Shortly the Tampa prosecutors conceded the existence of the tapes, explaining that their previous denials had reflected an agreement they had made with certain parties to keep the recordings secret.

But the fun had just begun. In early March 1991 Morgenthau sent assistant district attorney Richard Preiss down to Tampa to retrieve possible evidence. "He’s the attack dog of the team," says Cherkasky. "But even Preiss is getting stonewalled…. So Morgenthau starts making a lot of fuss with the Department of Justice in Washington, asking what the hell is going on, why won’t the feds help us?"

Robert Genzman, the U.S. attorney in Tampa, says any suggestion that his office tried to thwart Morgenthau’s investigation is "erroneous." When Preiss and his colleagues came to Tampa, Genzman says, they were given access to exhibits and tapes, also debriefing undercover and case agents who had worked on the earlier investigation into BCCI laundering Colombian drug money.

Genzman did turn over the confidential tapes to Morgenthau, accompanying them with a letter that warned Morgenthau not to leak their contents to the press. The implication that Morgenthau needed such advice prompted outrage among the New York prosecutors. "We were all very offended," says Cherkasky.

"It was never our intent to insult Mr. Morgenthau or his office," reponds Genzman, who adds that Morgenthau has never personally informed him of this alleged insult.

"Well, maybe Morgenthau did not personally communicate this to Genzman," says Cherkasky, "but I can tell you that there are certainly people in Genzman’s office who knew how we felt."

Relations between Justice and the Manhattan D.A. reached a nadir in late July 1991, after Morgenthau indicted BCCI, its related entities, and two of its founders, Abedi and Naqvi, on charges of defrauding depositors, falsifying bank records to hide illegal money laundering, and committing larcenies of more than $30 million.

"We go ahead and, without regard to [Justice], we do our indictment," says Cherkasky. "They were not pleased. We have shown them up…. Things couldn’t have gotten any worse. They were bad-mouthing us, accusing us of leaks. They were saying personal things about Morgenthau, the idea that he can’t be trusted. We were hearing this from a variety of very good sources, and Morgenthau was, needless to say, very unhappy.

"And we were bad-mouthing them," continues Cherkasky, "being very vocal about the lack of cooperation we were getting, telling anybody who would listen to us – people on the Kerry committee, other senators, and so forth. And [Justice was] very sensitive about that."

"There was some bitter criticism out of Manhattan," agrees Laurence Urgenson, now the acting deputy chief of the Justice Department’s criminal division, "and those criticisms were having a receptive ear in Congress."

In early August Cherkasky, Preiss, and Morgenthau executive assistant James Kindler met to discuss the infighting with Robert Mueller III, the chief of the Justice Department’s criminal division, and several other top-level Justice officials. Cherkasky describes the meeting’s tone as confrontational to the extreme. "I played very hard ball," recalls Cherkasky. "There were a series of other low points, but that meeting sort of said it all. I really believe that this was as bad as relations can get in law enforcement."

Things finally began to turn around in the late summer of 1991, after Attorney General Dick Thorn-burgh left to run for Senate in Pennsylvania and was replaced by William Barr, a former partner at D.C.’s Shaw, Pittman, Potts & Trowbridge who most recently had served as deputy attorney general.

"We received a direct order right from the top that they don’t want to see any bickering [or] squabbling," explains Urgenson. "Bill Barr made it very clear that he wanted the squabbling to stop, and it stopped."

"Barr reaches out and talks to us, talks to Morgenthau," Cherkasky recollects. "He is saying, ‘Look, we want to help.’"

Cherkasky also points to some personnel moves early in the Barr administration that helped to smooth things over. For one thing, Urgenson moved from being chief of Justice’s fraud division to his current position in the criminal division and thus became more involved in BCCI. He and Cherkasky had worked together on a variety of matters in 1986 and 1987 when Urgenson served as first assistant to Andrew Maloney, the U.S. attorney for the Eastern District of New York. Says one former Eastern District prosecutor: "[Urgenson] is great at meetings. Very deliberative, weighs all sides. I can see why he could help out with all this infighting."

In addition, Cherkasky points to the promotion of Ira Raphaelson, the former U.S. attorney for the Northern District of Illinois, to the post of special counsel to the deputy attorney general George Ter-williger III. "Part of Raphaelson’s job is to make sure that this relationship works," says Cherkasky. "Raphaelson is superb and works closely with Barr. So when we talk to Raphaelson, which we do a lot, it is like having a direct line to Barr."

Along with this enhanced cooperation with the Manhattan investigation, the Justice Department also invigorated its own BCCI forces, which, according to Urgenson, have included personnel from seven U.S. attorney’s offices, the U.S. Customs Service, the Drug Enforcement Administration, the Internal Revenue Service, and the Federal Bureau of Investigation.

The new spirit of cooperation began to show fruit last November, when Cherkasky, Preiss, Mueller, Urgenson, and Raphaelson met in Washington to discuss the possibility of accepting a joint BCCI plea agreement. In September the Department of Justice had indicted BCCI in Miami and Washington on charges of defrauding regulators, money laundering, and violations against the IRS. "This is when the relationship really changes," says Cherkasky. "The following weekend, John [Moscow] goes to London with Mueller and Urgenson to discuss a plea with the Bank of England and the BCCI liquidators.

"There was still some mistrust, but we began doing a lot of shuttling back and forth between New York and Washington," Cherkasky continues. "My relations with Bob Mueller were terrible last summer [1991], and now I think he is great, a great lawyer and a friend."

Just before Christmas of 1991, Morgenthau and Justice announced their joint plea: BCCI pled guilty to the fraud and larceny charges filed in Manhattan as well as the federal charges, and agreed to pay $550 million in restitution.

"This was the first thing we do together, and it’s like night and day," Cherkasky smiles. "Now Mueller is trying to help us, assuring us that as we go forward we will have access to all of their stuff, all their grand jury transcripts, and so forth. Now we are really heartened that we can get the documents to build our other cases. And they have all kinds of access to things we don’t. Like they have treaties with the Cayman Islands, where a lot of the evidence was, that allow for reciprocity."

In fact, the joint plea opened the door to a host of critical new evidence for prosecutors in both New York and Washington that could be used to pursue individuals involved with BCCI: The plea agreement delineates in detail the cooperation that BCCI must now provide in terms of witnesses and paperwork. "If they don’t give us the goods, they will be violating the pleas," says Cherkasky. "For the first time we have the company coming forward and giving us documents that allow us to travel to Pakistan and other places around the world to interrogate people."

Adds Moscow: "The plea removed a lot of existing obstacles, such as conversations that were protected by attorney-client privilege, or things that fell under the rubric of attorney work product. Now you’ve got the client [BCCI] saying, "I did it. I’m guilty. I waive my rights.’ So now you can call a lot of people in front of the grand jury."

"This would all be critical to the next phase," says Cherkasky. "Which we had determined would be Clifford and Altman."

Chapter Eleven – A Wall Of Defense

"Messrs. Clifford and Altman are defendants in a very serious criminal proceeding…. They should not be treated as if they are the spoils of competing prosecutors. They have literally become pawns." – Court filing by Skadden partners Robert Bennett and Carl Rauh, August 17, 1992

In August 1991 Clifford and Altman resigned their positions as chairman and president of First American under pressure. They spent the better part of two days that fall testifying before the House Banking Committee and Senator Kerry’s subcommittee. While the two lawyer-bankers maintained an outward display that this was all a terrible misunderstanding, their friends and acquaintances talked of the toll the matter was taking. "I ran into Altman at the store sometime last year," says one Washington lawyer who knows him. "I said I was sorry to hear of his troubles, but he kind of tried to shrug it off, saying that those prosecutors in New York were way off-base. That they had no idea what they were doing. But my God, what a mess!

"And I have to tell you," this lawyer confides. "There are people around here who have wanted to give them the benefit of the doubt, but that business of those amazing loans they [received] really got people shaking their heads. But when I saw Bob that day in the store, he really was trying to seem blase, that those New York guys were way off on the wrong track."

For his part, Altman had first heard from "those New York guys" in June 1990 when Moscow called him to tell him that he was investigating BCCI and would like to talk. The next thing he knew, Moscow says, he received a call from Robert Fiske, Jr., the former U.S. attorney for the Southern District of New York who is now a partner at Davis Polk & Wardwell and one of the country’s premier litigators. Fiske told Moscow that he was representing Clifford and Altman.

The lore of the case, according to one source, has it that sometime in mid-1990 Clark Clifford called his friend Martin Lipton, the name partner at Wachtell, Lipton who had worked on the original Financial General takeover deal, and said, "Ed [Edward Bennett] Williams is dead, so I can’t hire him. Who is the best criminal defense lawyer in the country?" Clifford went on to hire Fiske.

A partner who returned phone calls placed to Lipton says that the recommendation for Fiske came not from Lipton but from litigators at Wachtell who were meeting with Clifford and Altman. This partner explains that Wachtell itself "was unable to represent Clifford and Altman in this capacity because we anticipate that some of our people will be called as witnesses as to events that occurred between 1978 and 1982."

A year later, in May 1991, Clifford and Altman also hired Altman’s friend Carl Rauh and his partner Robert Bennett of the Washington, D.C., office of Skadden, Arps, Slate, Meagher & Flom – the same firm that had opposed Clifford and Altman in the Financial General deal (though neither Rauh or Bennett were involved). Rauh and Bennett (who was special counsel to the Senate ethics committee’s investigation of the Keating Five) have the unusual distinction of representing two former Defense secretaries simultaneously, the other being Caspar Weinberger. Says one source sympathetic to the defense: "By that time it became clear that Clifford and Altman would need lawyers in Washington because of the activity that was heating up in the Senate, Federal Reserve, and various U.S. attorney’s offices."

How much has it cost Clifford and Altman to hire these two mega-firms to defend themselves against criminal charges? At least $7.9 million, before they’ve even gotten to trial, according to information obtained by prosecutors in connection with the freeze of Clifford’s assets.

In July 1991, shortly after the offices of BCCI had been shut down worldwide, Clifford – trademark fedora in hand – arrived at One Hogan Place to be questioned by Moscow, Cherkasky, and others. Noticeably absent at the interviews was Morgenthau himself, but it was not for lack of desire. (Interestingly enough, Clifford and Morgenthau, two longtime Democrats who had for so long moved in concentric circles of power, had never actually met.)

"The boss was just chomping at the bit, dying to be there when we interviewed Clifford," laughs Cherkasky. "I thought we’d have to take him out of the building. But we didn’t want him to be even close to what was said there, so that there would be no possible way for him to be called as a witness."

Says another source in the D.A.’s office: "I think the boss finally got the idea that it might not be a good idea for him to be there when he asked the seventh or eighth person what they thought of the idea and received a resounding ‘No!’"

One prosecutor notes that on several occasions the defense team requested a personal tete-a-tete between Clifford and Morgenthau. "Their position was that it was ultimately Morgenthau who would make any decision on whether to indict," this source says. "But only on the rarest of occasions does Morgenthau meet One prosecutor notes that on several occasions the defense team requested a personal tete-a-tete between Clifford and Morgenthau. "Their position was that it was ultimately Morgenthau who would make any decision on whether to indict," this source says. "But only on the rarest of occasions does Morgenthau meet personally with defendents or potential defendents. So their request was denied."

Clifford’s performance at the meeting with the prosecutors was vintage Clifford, according to a source in the D.A.’s office. His tone was stentorian and mellifluous, his fingers often flexed in what has become known as the "Clifford steeple," and his answers were vague in the most gentlemanly of ways. "He came up with his barrage of lawyers [including Fiske, Bennett, and Rauh] and the prosecutors talked to him for portions of two days," this source says. "He was very gracious and there were a lot of questions that he did not answer in a very gracious way. No, it’s not that he refused to answer questions exactly. But you might, say, ask him what did you know about BCCI in 1977, and he would answer with what he knew in 1983. That is a hypothetical, but it gives you the tone. His answers were heard by a number of people who would ultimately have a say in whether or not charges should be brought against him. I guess you could say it furthered the decision to indict because nobody who heard him was persuaded he was innocent."

At one point, this source continues, "he was asked whether or not he knew that Sheik Adham [the First American investor allegedly fronting for BCCI] was involved in Saudi intelligence and he said he did not. Well, it is well known that Adham was involved in Saudi intelligence. So there seemed to be something of an inconsistency there." (In the 1970s numerous published reports had indicated that Adham had headed Saudi Arabia’s intelligence service and served as a liaison to the CIA.)

Clifford’s interview was followed in September 1991 by Altman’s. According to one source, soon after Altman’s interrogation began, the prosecutors stopped the discussions and told him to come back when he felt he could be "more able to talk." (A second interview did not occur until December.) "We would ask him what did you do on such and such an occasion and would get back the answer of we did such and such," this source continues. "It was a very interesting plural thing."

Skadden’s Bennett responds angrily that he "will not comment on the contents of the meetings with the district attorney’s office of New York, because of an understanding that they were confidential in nature." He does say, however: "If these statements were made by members of Morgenthau’s office, they are false, irresponsible, and unprofessional. Clifford and Altman were fully cooperative with this investigation and fully responsive to all inquiries."

Adds Davis Polk’s Fiske: "I would not want to get involved in what I believe was a confidential conversation. But to the extent that this characterization [of Clifford as evasive] will appear in the magazine, I disagree with it."

According to one source in a position to know, prosecutors have tried in vain to separate the two targets. The prosecutors "have given Clifford every opportunity-. Not only did he not walk away [from Altman], he has embraced him," this source says. "His view has been, ‘If Bob Altman says he informed me, then he informed me.’ "

Over the course of 1991 and 1992 the defense team traveled several times to One Hogan Place – including three key meetings involving Fiske, Bennett, and Rauh – to urge prosecutors not to indict Clifford and Altman. Their efforts would go unrewarded.

Chapter Twelve – Dual Indictments And Dueling Over Venue

"The defendants have asked for a swift and speedy trial. We are prepared to give them one." – John Moscow in New York Supreme Court, August 5, 1992

Morgenthau’s team entered 1992 with a mandate to focus on Clifford and Altman, but it was easier said than done. "The case was just such a fertile minefield," notes one prosecutor. "We needed separate groups to scrutinize the various roads [we] could take. [It] was a time – of stepping back and seeing what we had."

"We really needed to see whether or not a case could be brought [at all]," says another prosecutor. "The question was, do we have the evidence. Moscow thought we did. But no final judgment was made until the end when, believe me, we had looked at everything."

First off, Cherkasky assigned former U.S. Supreme Court clerk Alan Michaels to analyze the 6,000-7,000 pages of New York grand jury transcripts – which have since ballooned to 9,000 pages – to see what evidence they contained against specifically Clifford and Altman. In addition, Morgenthau and Cherkasky had a separate team of three assistant district attorneys investigating Sheik Khalid Bin Mahfouz, a major investor in BCCI and the chief operating officer of The National Commercial Bank of Saudi Arabia. (On July 1 Mahfouz and his associate Haroon Kahlon were indicted on charges of defrauding depositors, regulators, and auditors of BCCI.)

Furthermore, at Cherkasky’s request Moscow assigned a team to look into who, if anybody, could be charged with international enterprise corruption under New York’s Organized Crime Control Act, the state version of the federal Racketeer Influenced and Corrupt Organizations act. Such an indictment would address BCCI’s worldwide criminality and would include predicate acts that occurred outside the U.S. – for example, bribes that occurred in such far flung locales as Pakistan and the Ivory Coast. The indictment also would carry the most serious penalties: up to 25 years in prison (compared to seven years for a normal fraud charge, under New York law).

"In the winter of 1992 we have a series of meetings where I am telling John [Moscow] that I want prosecution memos on every aspect of this case," recalls Cherkasky. "And then I am assigning different people to defend these positions. This has to do with who will be included in what indictment, the strengths and weaknesses of the various cases."

Cherkasky was also hearing from Clifford and Altman’s lawyers. "The defense lawyers are insisting that their guys are not guilty," says one source sympathetic to the prosecution. "The prosecutors are getting these book-size written submissions. Even to the end [defense lawyers] have denied that their guys had any knowledge whatsoever about a connection between BCCI and First American."

(In fact, friends of the defense assert that the prosecutors spent months during late 1991 and early 1992 scrounging for evidence against Clifford and Altman and found nothing new.)

By the late spring and early summer the Manhattan prosecutors were drafting indictments. One source in a position to know notes that a key question was whether to include Clifford and Altman in the more serious worldwide enterprise corruption charges. "Will Clifford and Altman be included in that indictment?" recalls this source. "Moscow thinks they should be. Cherkasky doesn’t-. And Morgenthau was not going to make any kind of decision until the sifting-through process was done."

Meanwhile, the Department of Justice was working on its own case. According to one source sympathetic to the prosecution, in the early summer top-level Justice officials asked Morgenthau’s office, which was nearing indictment, to slow down so that the two jurisdictions could move simultaneously. This source and one prosecutor add that it was not until late in the day on July 28, less than 24 hours before the indictments were to be announced, that the Justice Department decided to include Clifford in its indictment. Says one of these sources: "For evidentiary reasons, [Justice] was undecided whether or not go with Clifford until literally five o’clock the afternoon before. The line prosecutors in the D.C. U.S. attorney’s office were opposed to including him, and the supervisory [prosecutors] wanted to." (Remember, there is far more documentation of Altman’s role in the events on which the federal indictment hinges – the National Bank of Georgia deal, Clifford and Altman’s BCCI loans, and the alleged deception of the Federal Reserve in 1989 and 1990 – than of Clifford’s.)

On July 29 both jurisdictions proceeded: The Justice Department announced that it had charged Clifford and Altman with conspiracy to defraud the Federal Reserve and to enrich themselves by helping BCCI covertly control First American, and had charged Altman alone with two specific counts of misleading federal regulators; and Morgenthau indicted Clifford and Altman along with Abedi, Naqvi, and Faisal Saud Al Fulaij (an alleged nominee for Abedi) on charges of scheming to defraud, conspiracy to commit commercial bribery, and receiving a commercial bribe. Morgenthau also issued a second indictment, charging Abedi, Naqvi, Ghaith Pharaon, and Al Fulaij with enterprise corruption. (The Fed also issued its civil complaint the same day.)

According to one prosecutor, Morgenthau and his team had decided about ten days earlier that they would proceed with two separate cases. Cherkasky called Carl Rauh on Friday, July 24, to let him know of his office’s intentions, says one source. "There was still some discussion," this source explains. "But [the defense lawyers] knew basically what Morgenthau was doing. They knew that he had made a determination that [Clifford and Altman] should be charged."

Although friends of the defendants like to say that Cherkasky opposed indicting Clifford and Altman altogether, he denies it: "That is not the case," says Cherkasky. "Until the last ten days or so, I just had not made up my mind. And I was very up front with Carl Rauh about this. But when I made up my mind, it was to go with this indictment. I was opposed to indicting them on the enterprise corruption charges. I was in favor of splitting the two indictments. And I told Rauh that that was going to be my recommendation to Morgenthau."

Says Moscow: "The defense likes to spin it that Mike [Cherkasky] hasn’t wanted to indict. But his job all along has been to be the skeptic. To make sure that we can prove all of this. And the indictment that we went with is the indictment that Mike wanted."

On the same day that the indictments came down, Morgenthau also announced that Sheik Kamal Adham, the key BCCI front man in its ownership of First American, and his associate Sayed Jawhary had pled guilty in New York County to the misdemeanor of violating New York banking law and had agreed, as part of the plea, to cooperate fully with the ongoing BCCI investigations and to pay $105 million in restitution. (Adham’s company also pled guilty to a federal corporate felony that carried no threat of incarceration and no additional fine.)

Over the past several months Moscow had been talking to Adham and his lawyers, D.C. solo white-collar specialist Plato Cacheris and Edward McDonald of New York’s Reboul, MacMurray, Hewitt, Maynard & Kristol. Adham, who might well have been included in both New York indictments, was interested in pleading because he wanted to be able to travel freely in the United States without the threat of arrest – from Morgenthau’s prosecutors or the feds. During the week of July 8 Moscow met with Adham and his lawyers in London, but the session ended without an agreement. "The plea they were suggesting was unacceptable," says Moscow. Then, Moscow notes, in the middle of July, Cacheris called and asked, "How about this instead of that?"

"[Moscow] was literally too busy putting the finishing touches on the Clifford, Altman, and OCCA indictments to negotiate with Cacheris," says one source in the D.A.’s office. "So Cherkasky gets involved." Since Adham wanted to be assured that there would be no federal charges against him, "Morgenthau needed the sign-off from Justice," this source continues. Initially the feds were insisting upon a personal felony plea by Adham, according to Cacheris, but, after some lobbying by the D.A.’s office, they accepted the corporate plea. "Morgenthau’s people put the deal together, and Justice fell in line," says Cacheris.

"Justice agreed to let New York get the publicity and credit," says one source in a position to know. "It was just such a turnaround from the warring between those two jurisdictions of only a year before. That just strengthened the trust between the two offices."

However, the relations between New York and Washington were still vulnerable. Because as they smiled and announced their indictments, officials from Justice and the D.A.’s office had yet to resolve who would get the first crack at taking Clifford and Altman to trial. Thus, the joint indictments on July 29 set off a flurry of jousting over trial dates.

On July 31 U.S. district judge Joyce Hens Green set the federal trial date for October 26. Then, on August 5, New York Supreme Court judge John Bradley – over vociferous opposition from Skadden’s Bennett and Davis Polk’s John Cooney, Jr., Fiske’s co counsel – set October 22 as the date for the New York trial to begin.

At the August 5 hearing in front of Judge Bradley, Moscow asserted that the defense wanted the federal trial to go first because if Clifford and Altman were acquitted on those charges – which the D.A.’s office maintained (and Justice denied) were narrower and thus weaker – a New York double jeopardy statute would bar a successive trial for essentially the same conduct. Bennett countered that the federal trial should precede the state’s because Clifford’s doctors had insisted that a New York trial would be nothing short of a "death sentence" for the ailing 85-year-old. Cooney added that if Clifford – who has repeatedly said he wants vindication via his day in court – were allowed to stand trial in Washington, he would at least be able to "have the comforts of his home each day."

The week following the August 5 hearing, Morgenthau wrote Judge Green arguing that, due to the double jeopardy threat, "comity and the public interest strongly militate in favor of trying the New York indictment first.

"This is not to belittle in any way the serious federal charges against Messrs. Clifford and Altman," Morgenthau wrote. "The point is simply that any disposition of that narrower indictment that precluded a speedy and full resolution of the New York indictment would leave the state’s interests unvindicated and might rightly leave the public wondering whether justice had been served."

Morgenthau’s letter surprised people at Justice, where longstanding policy would very probably bar a second trial of Clifford and Altman by the feds if the New York case went first. "I don’t think anybody is going to tell you that Mr. Morgenthau consulted with us or asked us [prior to writing the letter]," says Justice’s Urgenson. "We had no understanding with the district attorney as to who would go first."

According to one source in a position to know, earlier drafts of Morgenthau’s letter to Judge Green had contained much stronger language, including that the New York prosecutors deserved a first shot at a trial because they had been far more aggressive than their counterparts at Justice in cracking the case. But, according to this source, Cherkasky talked Morgenthau into sending a less inflammatory message.

The same week Morgenthau sent his letter, Urgenson traveled to New York to talk with Cherkasky. "Those meetings were followed with meetings between me, John [Moscow], Urgenson, and Mueller," Cherkasky recollects. "Urgenson and Mueller were persuaded that it was best for the case for us to go first."

Observes Urgenson: "The people [here] who were going to try the case were enthusiastic about it and disappointed with our decision to defer-. But the issue was what was the justification for blocking Morgenthau’s prosecution."

In a hearing on August 18 Justice Department lawyers told Judge Green that they would defer to their counterparts in New York. On September 10 – citing a telephone conversation with Judge Bradley in which he promised that the New York trial would begin by January 4, 1993 (unless the defense obtained a postponement), and last no longer than six weeks – Judge Green ruled that the Manhattan case would go first. A transcript of the judges’ phone conversation shows Bradley urging Green to "agree to let the state case precede the federal case" and noting "the amount of work that’s been put into the state case."

"You bet Morgenthau made sure he got to go first," says former Kerry investigator Jack Blum. "The feds would have looked like fools if they had argued to go first. Morgenthau deserved it."

A friend of Clifford’s asserts that one reason Justice officials were willing to cave in to Morgenthau’s interests was because, when push came to shove, they did not really believe in their case. "They didn’t have the guts to go forward to try Clifford," this source says. "The idea that you bring a major federal case against the likes of Clifford and then you defer to a state prosecutor is on its face preposterous. If they thought that they had a really strong case, they would have been in there screaming and yelling that the federal trial should go forward. The fact of the matter is, they chickened out."

Urgenson denies this vehemently, asserting that "we were ready, willing, and able to go forward."

Chapter Thirteen – United They Stand

"You might survive or thrive separately. If you stay together, you may sink together." – New York state judge John Bradley to Clifford and Altman at an August 5, 1992, hearing

At the August 5 hearing Judge Bradley did more than listen to the attorneys spar over trial dates. He also questioned Clifford and Altman over their decision to share counsel. Addressing Clifford, Bradley admonished, "The evidence might show that Altman had many dealings with BCCI that you did not participate in." Clifford realized, did he not, that "if you have the same lawyer, the evidence against Mr. Altman might flow over to you, whereas if you had a different lawyer, that lawyer might be able to show that you are not involved."

Clifford indicated that he understood all that very well, and he and Altman reiterated their desire to remain a team. Bradley noted, "I’m not convinced that you’ve made the correct decision – but you have made a knowledgeable and intelligent waiver of separate counsel."

But at a sidebar during the August 5 hearing Cooney told Bradley that it was not clear that Davis Polk would continue to represent Clifford and Altman. The defendants had been unable to pay outstanding bills owed to Davis Polk, explained Cooney, citing the fact that on July 27 Bradley had frozen some of their assets.

Two weeks later, at a hearing on August 19, Fiske – who had recently concluded a nine-month trial in Florida – told Judge Bradley that, given the likelihood that the New York trial would proceed first (which had not been clear on August 5), the defendants had reversed their previously stated position and decided to hire separate, New York-based attorneys: Clifford had retained Charles Stillman of Stillman, Friedman & Shaw and Altman had retained Gustave Newman of Newman & Schwartz. Fiske explains that Clifford and Altman’s earlier agreement to joint representation had been based on their expectation that the Washington trial would go first. All along, Fiske says, Davis Polk would have recommended that Clifford and Altman retain separate counsel if the case went to trial in New York.

At the hearing Moscow immediately attacked the switch (unsuccessfully), asserting that the new defense team would use this development to argue that they needed extra time to prepare – so then the federal trial would indeed proceed first. "I would oppose the removal of Davis Polk as a substantive matter," the prosecutor insisted, "because it would then be used by counsel to avoid the trial here."

The defense did not really deny that Clifford and Altman would be pleased if the switch in lawyers had the side effect of deep-sixing the state trial by allowing the feds to go first. But they claimed that there were other, more than sufficient justifications for Clifford and Altman to make this change, principally Judge Bradley’s warnings against proceeding with the same law firm. In addition, friends of Clifford and Altman say the defendants had been disappointed that Fiske had been in trial in Florida since November 1991 and thus was less accessible than they had hoped. There has also been talk in legal circles that Clifford and Altman wanted trial counsel more familiar with New York Supreme Court than the white-shoe Davis Polk attorneys – though Fiske asserts that he recommended Clifford and Altman hire new trial lawyers who had not previously represented them jointly.

Says one prosecutor: "There’s no question that as time went on, most of the contact [between Morgenthau’s office and the defendants] was with Bennett and Rauh because Fiske was in trial in Florida.

"We picked up vibes all along that there was some tension between the New York and the Washington defense camps," this source continues. "There were also vibes that the client was unhappy because Fiske was not around."

Adds another attorney in a position to know: "Bob Fiske is a truly great guy and a great lawyer. But there was some unhappiness with Davis Polk. Fiske being in trial for almost a year did not help. I guess it was very difficult for [Clifford and Altman] to feel as if Fiske was was closely involved."

Fiske counters that he was available for all key meetings with prosecutors, at least one of which was held on a Saturday specifically to accommodate his trial schedule. "All I can say to you is that [Clifford] never expressed that concern to me," he adds.

Says one source sympathetic to the defense: "I wouldn’t put too much in store about Bob Fiske being on trial [in Florida]. I wouldn’t then infer that he was out of it when it came to this case-. From what I understand he was in constant phone contact with Clifford."

Charles Stillman says he did not know he was being considered for the case until he received a phone call from Clifford himself during the first week of August. Stillman had never met Clifford, but he was no stranger to Bennett and Cooney. In 1986 the three lawyers had spent six weeks together representing co-defendants in a criminal fraud case in federal district court in D.C. and had remained friendly since then.

"When I went down to talk to Clifford, he already had Gus Newman’s name," says Stillman, 55. "I told Clifford that if he chose me, I would like very much to work with Gus." Between the two of them, Newman and Stillman have amassed some 70 years of practice. While Stillman’s firm is known predominantly for its federal white-collar practice, Newman – who began his career as a lawyer on Court Street in Brooklyn – has shuttled between state and federal court. Most recently, Newman, 65, successfully represented Congressman Floyd Flake on fraud and tax evasion charges in the Eastern District of New York, and he is scheduled to go to trial later this month in the Eastern District defending Victor Orena, a reputed Colombo mob leader, on RICO charges. He is also no stranger to One Hogan Place: "Gus Newman is an old adversary," says one prosecutor. "You see him a lot down here."

As for the Manhattan D.A.’s office, as of press time Morgenthau had not decided on the final complexion of his trial team, other than the fact that Moscow will take the lead. In addition, according to Moscow, Anthony Leffert, a line prosecutor in the criminal division of the Justice Department who has been working extensively on the case for the last year and who was slated to try the federal case had it gone to trial, has been cross-designated to assist Moscow.

But interviews with a dozen lawyers who know Moscow – and praise his brains and tenacity – suggest that given his cryptic way of asking questions and presenting information, Moscow may not be the best person to try the case. Indeed, over the years Moscow has become known for some big losses as well as wins. In one of his most recent big trials, in November 1988, just five months before he began working on BCCI, Moscow suffered a high-profile loss when a jury acquitted personal injury lawyer Theodore Friedman of charges that he had suborned perjury in a 1985 negligence case against New York City.

"Look, Moscow deserves to do the case," says one former Manhattan prosecutor. "He’s the one who slogged through it, so it would be hard to take it away from him. But he needs a lot of refinement. The trick to this case is to keep it very organized and simple. And simplicity isn’t one of John’s strengths. There’s a real risk here of losing the jury."

Or as another former colleague of Moscow’s puts it, "Moscow’s incredibly smart, but his problem is that he sees the whole forest and he doesn’t realize that you need to see the trees. And he has the most terrible habit of speaking in riddles. You’ll be like, ‘John, what the hell are you saying? – That is not necessarily a good trait at all in front of a jury."

Still, Morgenthau is clearly committed to Moscow – and may even help him out in preparing for trial. Since the early days of the case, Morgenthau and Moscow have worked hand in glove. Morgenthau, who rarely strays from the eighth-floor executive suite at One Hogan Place, often has been sighted perusing documents in Moscow’s office. "He is down [there] all the time," says one assistant district attorney.

"The boss is running this case to a highly unusual degree," notes another assistant in the office. "To the point where sometimes some of us have to fight for time with him on other matters. He’s interviewing people, the whole nine yards. And, yes, it’s true, he may not be in court every day with John, but believe me, he’ll be there, helping with strategy, everything."

Epilogue

What’s A Jury To Do?

"It is entirely possible that my judgment was not all that I might have hoped it would be. I enjoyed the challenge of the First American case. I am gratified that we made the success of the effort that we did. But I have wondered some since whether it might not have been better if I had just stuck to the law." – Clark Clifford, on his decision to become a banker, in House Banking Committee testimony

As the lawyers drifted into Judge Green’s courtroom on the morning of September 10, 1992, John Moscow stood out. With his light tan suit and knowing half-smile, the visitor from New York seemed a different breed from the dark-suited Justice Department prosecutors and Skadden defense lawyers gathering at counsel tables for a status conference.

Clark Clifford eased his ailing 85-year-old frame into the courtroom, slow and stooped, aged but still elegant, with fedora in hand. Then he spotted Moscow, the dogged assistant D.A. who had been treating him as a common criminal, who had frozen $19 million of his assets, who was trying to flush his once-golden name down a sinkhole of sleaze.

Clifford walked right up to him, extended his hand, flashed a broad smile, and said "good morning" in his famous baritone. Moscow took the offered hand, nonplussed.

No such pretense of cordiality passed between Robert Altman and Moscow, who hopes to send the budding superlawyer away for years of hard time.

Who will come out the winner when Moscow focuses his hound-dog pursuit on Altman – assuming Clifford is dropped from the case for medical reasons – before a jury? The state’s case has plenty of weaknesses. But it will not be easy to be in Altman’s shoes, trying to persuade a New York jury that you ran a big, multistate banking company for a decade without ever figuring out that it happened to be secretly owned and (allegedly) covertly controlled by the same folks at BCCI – your clients at BCCI – who had arranged and financed your sweetheart stock deal, and who had benefitted from your purchase of the National Bank of Georgia.

The Morgenthau indictment is full of long, convoluted charges, with dozens of allegations about ambiguous events that may confuse jurors. While Moscow is betting some of it will stick, a lawyer friend of Clifford’s is betting on Altman: "The cosmetics of this case are not good [for the defense], but the weaknesses of this case will be evident at the trial."

Among them: The prosecutors will have to rely on mounds of dense documentation of complex and confusing transactions, and on a gaggle of witnesses likely to be sitting ducks for cross-examination. There are tainted former BCCI officials like Abdur Sakhia, front men like Kamal Adham, and reluctant witnesses like Baldwin Tuttle, who may well resist the prosecutors’ portrayal as criminal of actions in which they had a greater or lesser degree of participation.

And there appears to be no smoking-gun evidence, not even from Adham, whose $105 million bought him a misdemeanor plea in which he admitted so little wrongdoing as to cast doubt on his usefulness in incriminating others.

Then there is the paucity of evidence that First American’s routine operations were corrupted or controlled by BCCI, or that American money was siphoned off for BCCI’s benefit. As the Kerry report notes, "The regulators found only limited evidence that BCCI, its shareholders, or customers had received preferential treatment from First American. Thus, in a sense, BCCI had made only limited use of the asset it had bought."

Given this, when all is said and done the jurors may wonder why prosecutors are nit-picking over which group of foreigners really owned a bank that, arguably, was operated honestly and professionally.

Nor will it be easy to keep the jurors awake. Just to have an inkling of what was going on during the nearly two-year process of negotiating and completing the Georgia bank deal, for example, jurors will have to absorb more than most lawyers ever do about priorities among secured creditors, pledges of shares, the perfecting of security interests under Netherlands Antilles law, escrow agents, subordination agreements, and similar arcana.

Once the jurors have figured ail that out, they can puzzle over why BCCI would want to be both secret seller and secret buyer of the Georgia bank, and how much Clifford and Altman knew about BCCI’s deals with Pharaon and CCAH’s Arab investors, and whether the wiring back and forth of all that Arab oil money affected the well-being of First American – or of any American – one way or the other.

Moreover, Morgenthau’s office may not be able to do much with what may be the strongest evidence of deliberate deception by Altman: his 1990 responses to the inquiry by Bill-Ryback of the Federal Reserve. The Justice Department built a separate felony count on this evidence. But the Morgenthau indictment does not even mention Ryback’s inquiry, perhaps because deception of the Fed appears to violate no New York law.

So maybe Altman will dodge this particular bullet as adroitly as he dodged Ryback. However that plays out, Altman’s slippery responses to Ryback are worthy of inclusion in law school ethics texts as a classic example of how too-clever-by-half lawyering can give rise to a plausible charge of criminal deception – and, as well, to a plausible defense.

While Altman is no doubt well aware of the flaws in the state’s case, he may not take much comfort from them. For he is also smart enough to understand that jury appeal may not be his strong suit, with his jet-set image, his $3.5 million mansion, his I’m-better-than-you demeanor, and his burden of explaining why it had been perfectly proper for him to make more money in one sweetheart stock deal than most people make in a lifetime.

As an Altman friend who is worried about his chances at trial puts it, he’s "too good-looking, too well married, [he’s] had too good a life." This combined with a manner that can sometimes project charm but often exudes arrogance, makes people envious. It makes them want to believe that Altman must have done something sleazy to have gotten so far so fast.

And if convicted, Altman can’t count on going to one of, those genteel, minimum-security prisons to which federal white-collar convicts are sent. He could end up doing hard time alongside violent state-convicted criminals at a place like Attica. That prospect might tempt almost anyone (even if convinced of his own innocence) to consider a plea bargain.

Still, prosecutors are in for a surprise, says another acquaintance of Altman’s, if they think he will be a pushover: "He’s a very, very dangerous person to put in a corner-. Bob is a winner. Pressure sharpens him. He is capable of charisma-. He’s got an enormous capacity to end up on top, a tremendous inner force."

Adds a lawyer who has worked with Altman: "I’ve seen him be one tough SOB-. Among the British lawyers [who worked with Altman on BCCI matters], he was known as Klaus Barbie. It was partly in jest but there was an edge to it. He had a streak in him of sonofabitch. But I never thought he was anything but honest."

Then there is the Clifford factor. Until now, far from casting aspersions at Altman to clear himself, Clifford has embraced his young colleague. And while Clifford’s health seems all but certain to preclude his own trial, that would not necessarily bar him from showing up as a witness for Altman. "He would be willing to die on the witness stand for Altman," speculates one Clifford friend. It would, in any event, be compelling testimony: the grand old statesman risking his life to vouch for the utter probity of his protege.