BCCI Deal In Calif. Spurs Fed;Ban on Saudi, Former Bank Officials Sought
The Federal Reserve said yesterday it has begun action to bar a prominent Saudi Arabian business executive, Ghaith R. Pharaon, and three former executives of the Bank of Credit and Commerce International from any involvement ever with U.S. banking organizations because of their role in the illegal acquisition of a California bank.</br></br>The California transaction was one of many BCCI deals that banking officials in the United States and several other countries say involved fraud. Last week authorities in Luxembourg, Britain and the Cayman Islands seized BCCI operations in each country, charging that billions of dollars of depositors' money had been lost because of fraud.</br></br>In yesterday's order, the Fed said Pharaon lied when he sought permission in 1985 to acquire control of the Independence Bank in Encino, Calif., by claiming that he would be the sole owner, putting up $8.5 million of his own money and borrowing another $12.6 million to buy the bank.</br></br>Actually, the Fed charged, Pharaon had signed an agreement with BCCI that he would own only 15 percent of Independence Bank's shares and would act as an agent for a BCCI subsidiary in the Cayman Islands, which would own the other 85 percent.</br></br>The Federal Reserve is also investigating BCCI's role in the purchase of the Washington-based First American Bankshares Corp. in 1981. First American Chairman Clark M. Clifford and its president, Robert A. Altman, have said they were misled by BCCI officials into believing the bank was being acquired by Middle Eastern shareholders rather than BCCI. Clifford assured Fed officials at a hearing that BCCI would not own any part of the bank or control its policies.