Bringing in-depth reporting of crime and corruption in high places
THE MONEY FOUNTAIN
The Dark Face of International Finance
by David Guyatt
At about the same time that Frank Nugan’s skull was developing powder-burns, Michele Sindona, a free-wheeling financial whiz kid and consigliere for the Sicilian Mafia had purchased and driven to the wall, New York’s Franklin National Bank, with losses totalling $40 million – Ranked the 29th largest bank in the US it became the biggest crash on record at that time. Establishing a fictitious company, Fasco AG in Lichenstein, Sindona was able to obtain a majority interest in the Italian based Banca Privata Finanziera. BPA was an excellent acquisition for Sindona for not only did it have a close relationship to Britain’s blue-chip Hambros Bank, but also had a preferential partnership arrangement with Continental Illinois Bank of Chicago, owned and presided over by David Kennedy – later to become Finance Minister in the Nixon administration. Continental Illinois was later to spectacularly crash in the mid-eighties, only to be rescued with an estimated $4 billion tax dollars.
The “connections” that had been forged and which lay behind Italy’s greatest yet banking debacle were to be re-enacted years later in America. By far the greatest banking rip-off of all time, the Savings & Loan scam sees the same cast of players at work. “Something very significant happened during our country’s savings-and-loan crisis, the greatest financial disaster since the Great Depression. It happened quietly, secretly, without any fanfare and attention. It happened before our very eyes and we knew it not. What we missed was the massive transfer of wealth from the American taxpayer to a select group of extremely rich, powerful people.” These ominous words opened the introduction to Pete Brewton’s massively researched book The Mafia CIA & George Bush – the untold story of America’s greatest financial debacle.10 Brewton, an award-winning investigative journalist, spent years tracing the subterranean web of inter-connections that sat at the heart of this affair that looted the American tax-payer of close to $1 trillion. However, there was more to the S&L affair than these words portrayed.
History’s Biggest Ever Scam
The “select group of extremely rich, powerful people” that Brewton fingers, include the CIA, President George Bush, Senator Lloyd Bentsen, a swag-sack of other influential Texan’s and well-known members of the Mafia. For the CIA it had access to a vast pool of “black funds” that enabled it to engage in illegal activities including Iran-Contra and Middle-East weapon deals. Brewton’s all too realistic view is that this group of inter-connected “businessmen” recognized that the S&L industry, was perfectly structured for a mammoth scam. Backed by government guarantees and regulators who would bow to the right kind of pressure, the S&L’s were like a ripe plum waiting to be plucked.
Back in his VP days, Bush intervened with federal regulators in a corrupt Florida Savings & Loan that close friends, his sons Jeb and Neil, and a handful of Mafia associates were systematically plundering. The thrift eventually went belly-up to the tune of $700 million. For a man who regularly keeps a “plausible deniability” diary, whose hidden background includes his CIA operational activities pre-dating his appointment to DCI by fifteen years, and who, moreover, had questionable links to the pock-faced Panamanian dictator – Columbian cartel money-launderer and one time CIA asset – Col. Manuel Noriega, the thought of his sons cherry-picking thousand dollar bills off the S&L money tree is all in a days play11.
In any complex financial scam, the really important question is to discover where the looted funds eventually come to rest. As with Nugan Hand, Franklin and Ambrosiano debacles, this question has never been satisfactorily answered for the S&L scam. However, despite a perpetual smoke-screen some interesting facts have emerged. In another Florida S&L bust that cost $200 million in a shady land deal, the cash disappeared down the sunset-trail of Du Pont’s St. Joe Paper Co. The trail went cold in Jersey, one of the Channel Islands. The Channel Isles have long been an off-shore tax haven with strict banking secrecy, and as a consequence a large contingent of foreign banks have offices there. It is now believed that the looted funds were ultimately used by CIA cut-outs to procure weapons for Iraq.12
A central figure in the S&L sale of the century, was Walter Mischer, a close friend of Senator Lloyd Bentsen, and a long time “acquaintance” of George Bush. Mischer was closely “connected” to the New Orleans Marcello family, one of the most powerful Mafia families in the country. Never a “one family” man, he also did business with Mafia associates from New York and Chicago. Mischer is considered to be the most powerful man in Texas, and certainly one of the richest. His “I’m just a country boy” demeanour belies a sharp, analytical business mind and an icy streak of ruthlessness. With a finger in every pie, his influence stretches wide to include, business, crime, finance, the intelligence community and domestic and international politics. Brewton believes that Mischer “is without peer in Texas and perhaps in the entire country.” Regarded as a pragmatist he generally bets both ways in the political election stakes, placing money on both the rear and fore-legs of the horse we’ve come to know as “Demopublican” politics.
Another figure who weaved his crooked way through the S&L tale is Herman K. Beebe, the so-called godfather of the dirty Texas S&Ls, and associate of the Louisiana mob. Beebe and Mischer are long term business associates. Herman also, co-incidentally, has known connections to the Marcello family. While both men were busy “burning-out”13 the odd couple dozen savings and loans, Beebe was transferring $3 million in “seed” money from his bank, Bossier Bank & Trust, to Harvey McLean Jr., to establish the small Washinton DC based Palmer National Bank that boasted a board that at one time or another largely featured in the White House telephone directory. The board chairman, Stefan Halper, was a member of the Nixon White House. His father-in-law, Ray S. Cline, formerly Deputy Director of Intelligence at the CIA and one of the old OSS “China” veterans, was a top foreign policy and defense adviser in the Bush Presidential campaign. Other board members included John Barnum, Deputy Secretary of the Department of Transportation (1974-77), Frederick V. Malek (Nixon’s White House Personnel chief and the Bush-Quayle campaign manager), William Kilberg (Department of Labor 1973-77 and member of the Reagan-Bush transition team) and John A. Knebel, President Ford’s Secretary of Agriculture.
Discontented with just the narcotics industry, BCCI developed close ties to the “spook” community, maintaining accounts for Israel’s Mossad, America’s CIA, Britain’s SIS, France’s DGSE plus the security services of Pakistan and Switzerland. The CIA’s accounts with BCCI covered several years of covert operations on the part of that agency. Principally, payments were made to finance Afghan rebels and to bribe General Noriega. Almost unbelievably its customers also included the notorious Abu Nidal terrorist organisation, and the Iranian backed Hezbollah – long regarded as the arch enemies of the western intelligence community. Abu Nidal’s Fatah Revolutionary Council had a $60 million account at London’s fashionable Sloane Street branch. At the same time the bank was responsible for financing deals in which Mossad provided weapons to Arab terrorists. Peru, buckling under the burden of sovereign debt, used BCCI to hide its cash reserves away from the grasping hands of creditor banks. Outdoing the security services of many small nations the bank also ran its own global intelligence network known as the “black network” employing an estimated 1500 trained operatives. Based in Karachi, this network “of hand-picked individuals who underwent a one year training course in psychological warfare, spying techniques and the use of fire-arms.”19