BCCI AND LAW ENFORCEMENT:

District Attorney of New York

Introduction
While the Justice Department's handling of
BCCI has received substantial criticism, the
office of Robert Morgenthau, District Attorney
of New York, has generally received credit for
breaking open the BCCI investigation.

It did so not on the basis of having any

witnesses or information available to it which
were not available to other investigators,
including the Justice Department, and the
Federal Reserve. Rather, District Attorney
Morgenthau broke the case because he
recognized BCCI's importance and significance
as a case of global international organized
crime, and devoted sufficient attention and
resources to force out the truth.

As District Attorney Morgenthau testified, he

made the decision to target BCCI once the
bank's activities came to its attention because
of his recognition that prosecuting a financial
institution handling many millions in drug
money could, in the long run, have as much
impact on fighting crime as the hundreds of
prosecutions his office was making every week
against traffickers themselves in New York.

[J]ust as illegal drugs are smuggled into this

country, illegal profits must be smuggled out.
The sums involved are truly staggering . . . the
simple truth is that the wire transfer and the
bank book are as much the tools of the drug
trade as the scale and the gun. . . the nexus
between drugs and money means that if we
are to succeed in the war against drugs, we
must be as vigorous in our prosecution of
corrupt bankers as we are of street dealers.(1)

In going after BCCI, 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, including at various times,
BCCI's multitude of prominent and politically
well-connected lawyers, BCCI's accountants,
BCCI's shareholders, the Bank of England, the
British Serious Fraud Office, and the U.S.
Department of Justice. Each, while professing
to cooperate with the District Attorney, in fact
withheld information from the District Attorney
and in some cases, impede, delay, or obstruct
his inquiry for months. Ultimately, Morgenthau
proved BCCI's criminality, not because of
information or cooperation provided by other
government agencies -- with the key exception
of the Federal Reserve, there was almost none
-- but because BCCI had left a trail of evidence
of wrongdoing there for anyone with the
tenacity to pursue it.

Information From Senate Aide Initiates

Investigation
In the late spring of 1989, Jack Blum, who had
been the chief counsel to the Subcommittee
investigation concerning "Drugs, Law
Enforcement, and Foreign Policy," during 1987
and 1988, went to New York to meet with
prosecutors working for District Attorney
Robert Morgenthau concerning information he
had about criminal activity involving BCCI.

Blum knew Morgenthau's reputation as an

aggressive prosecutor, and had worked with
Morgenthau in the course of the 1987-1988
Subcommittee investigation. Morgenthau had
testified as the lead witness before the
Subcommittee in February, 1988 concerning
the importance of money laundering in
attacking crime. In that testimony, he had
stated that some $5 billion to $10 billion a year
was being laundered through New York banks
and other financial institutions, suggesting
that laws combatting money laundering were
inadequate, and that the New York banks had a
role in preventing the laws from being
tougher.(2) In that testimony, Morgenthau made
a commitment to the Subcommittee concerning
his approach to money-laundering:

We are going to spend more resources now in

trying to trace [illegal] funds. I think we are
going to be successful, although, again, that is
a labor-intensive kind of activity.(3)

Based on the statements made to the

Subcommittee by Morgenthau, Blum believed
he might be in a position to follow up on the
information Blum had developed about BCCI in
connection with his work for the Senate. As
Blum testified, he believed he had critical
information and witnesses about BCCI's
criminality, and had taken that information in
March, 1989 to the U.S. Attorney for the Middle
District of Florida in Tampa who had
prosecuted BCCI on money laundering charges
as a result of the Operation C-Chase sting.
Blum had brought in two witnesses with
information concerning, and arranged for a
lengthy conversation to take place between
him and the witnesses under circumstances
where they could be secretly taped by the
government. Moreover, Blum had convinced
both of the witnesses to cooperate with the
Justice Department. Yet in Blum's view, after
all of his efforts,

the Justice Department had done nothing with

the information:

The strange thing is that after that effort to

put this all in the hands of the Justice
Department -- and I might add that at the time
I went to Miami, at the instruction of the
chairman [Senator Kerry], I shared with the
agents working the case materials we had
gathered, memos I had written, and other
materials we had gathered, so that they would
have a complete picture of what we knew.

I waited for something to happen, and what

happened was, I started getting calls from the
two guys I took to Tampa who said, they're not
following up. Then I talked to the agents, and
the agents said well we're very busy. We're
working on preparations for the trial.

No follow up, and I began to worry that

something was very wrong with this case. In . .
. late May, I decided that I would bring this
matter to another jurisdiction, and that was
New York. Our Federal system mercifully allows
for parallel activities. If the State government
fails, the Federal Government is there, and vice
versa. . .

So I went up to New York and I talked to Bob

Morgenthau and essentially told him what I
knew. On the basis of the same evidence,
essentially, and he ultimately communicated
with the same witnesses, he produced the
indictment that you read about the other day.(4)

After Blum met with Morgenthau, he was

introduced to other prosecutors in the New
York DA's office, and debriefed them. He told
them he believed BCCI had engaged in money-
laundering in New York, and described the
evidence that BCCI owned First American.
Morgenthau's prosecutors found his
information to be startling, and viewed it with
skepticism. As Michael Cherkasky,
Morgenthau's chief of investigations later
stated:

Blum's story was ridiculous. [He said] the

entire Third World was involved and that they
had bought and sold entire governments and
maybe some United States officials. It was a
fascinating tale -- this guy was telling us the
world was corrupt!(5)

Morgenthau decided to move forward, and

assigned the investigation of the case to John
Moscow, an experienced fraud prosecutor.
Moscow in turn interviewed Blum's witnesses,
looked at documents, investigated the case
Blum brought to them, and, in Cherkasky's
words, Blum's "'story' was proven to be true."(6)
While the Justice Department prosecutors who
had the most information about BCCI regarded
Blum as a "wacko," and his information as
worth little, the New York District Attorney's
office took it seriously, investigated it, and
proved it out.

BCCI's Reputation