Statements to the Congress - statement by J. Virgil Mattingly, Jr. William Taylor, and E. Gerald Corrigan to the House Committee on Banking, Finance and Urban Affairs - Transcript

Federal Reserve Bulletin, Nov, 1991

To further verify that the representations being made were accurate, the Board conducted background checks on the shareholders, soliciting information from the Central Intelligence Agency, the Departments of State and Commerce, and a foreign bank supervisor. The Board also obtained information from the SEC regarding the original acquisition and two CCAH shareholders.

None of the agencies performing background checks-the CIA and State and Commerce Departments-reported any adverse information on the investors, and the Departments of State and Commerce reported that the investors were persons of substance. Neither the Board nor any other regulator received any evidence from other sources that the representations made to them were false. The Comptroller's Office wrote to the Board, stating that its earlier concerns about the application had been addressed by the responses of the investors and their representatives. The Maryland Banking Board approved the acquisition of the Maryland bank on June 25, 1981.

On August 25, 1981, after having considered the hearing record, reports from staff members, and the views of federal and state agencies, the Board approved CCAH's acquisition of Financial General. Consummation of the acquisition was delayed, however, pending approval of the New York State Banking Department of the acquisition of Financial General's New York banks. The Department initially disapproved the application, principally because of an alleged lack of reciprocity for American banks in the investors' home countries. However, on March 2, 1982, the Department granted its approval after CCAH's commitment to divest one of the New York banks. In a subsequent letter, the Department stated that it had made a thorough investigation, that "all the information we received indicated that the investors were prestigious and reputable people," and that "the investors' character and financial responsibility warranted approval of the application." The Department further noted that "this application received more scrutiny from more regulatory agencies than any other application in recent memory. "

The acquisition was consummated on April 19, 1982. Financial General was renamed First American in August 1982. 3 Mr. Clifford became chairman of the board of First American, and Mr. Altman was named president of First American Corporation and secretary and a managing director of CCAH.

The Period 1982-87

In the years immediately after the acquisition, the Board received no indications to suggest that CCAH and First American were functioning other than in accordance with the statements made to the Board and the other regulators. The investors adhered to their commitment to inject $12 million in new capital into First American, and no dividends were paid to the investors in keeping with another commitment. On several occasions, the investors made very substantial additional capital injections, in the hundreds of millions of dollars, to support First American's activities. Both federal and state examinations of First American and its subsidiary banks by the Comptroller of the Currency, the FDIC, and the states of Maryland, Virginia, Tennessee, and New York, and of the U.S. offices of BCCI conducted during this period detected no evidence that BCCI and CCAH were improperly linked. The fact that substantial fresh capital was supplied at various times and that the investors did not take dividends from the CCAH was consistent with the representations made by the investors at the time of the acquisition that this was intended to be a personal investment. The Money Laundering Period: 1987-89 As discussed previously, the Federal Reserve through its examination function detected evidence of money laundering in 1987, and appropriate criminal referrals were made. The coordinated examinations conducted after the October 1988 indictment stemming from Operation C-Chase led to further criminal referrals. It is now apparent that the publicity surrounding BCCI's illegal money laundering activities in the United States had the understandable effect of beginning to shake loose insights into other aspects of BCCI's activities and operations in the United States and around the world that only recently have been more fully understood by the international community of bank supervisory and law enforcement officials. Insofar as the Federal Reserve was concerned, the first indications of more widespread wrongdoing in the United States began to surface in the period between late December 1988 and the summer of 1989.