Family of Secrets: The Bush Dynasty, America's Invisible Government, and the Hidden History of the Last Fifty Years (46 page)

Though both were bright, personable, and former fliers, White and Bath couldn’t have been more different: White was an earnest, spit-and-polish man with a talent for balance sheets and an obsession with playing by the rules. Bath was a folksy and crafty wheeler-dealer with a passion for secrets and bold schemes.

Nevertheless, Bath took quickly to White, dubbing him “CW.” And in his relationship to White, Bath began showing why he and George W. had been kindred spirits. Not only did Bath, like W., enjoy joking and assigning nicknames, but, as he moved away from his role as W.’s minder, he also revealed the extent to which he too could be something of a wild man.

“Bath was very forthright with me when we went into business together in 1978. He said: ‘Bill, I come from a poor background, I have no money of my own and this relationship with the Bushes and the Saudis is of paramount importance to me because I derive all of my capital and all of my business contacts from that relationship.’ ”
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White says Bath told him that he was personally recruited by George H. W. Bush when the senior Bush was CIA director in 1976. In all likelihood, though, he was actually recruited much earlier.

“He explained that the Saudis had basically entered into a quid pro quo relationship with Bush and that Bush when he was CIA director worked with the head of Saudi Intelligence, and the CIA trained the Palace Guard to protect the Saudi royal family, which was concerned about a fundamentalist revolution.”
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“My understanding of it is that Bath represented the Bush interests and bin Laden/bin Mahfouz interchangeably represented the Saudi royal family interests,” said White. “People who have tried to vilify the bin Laden family or the bin Mahfouz family fail to realize that the Saudis have a very patriarchal society and that, according to Bath, neither of those families sneeze without the Saudi royals’ blessing. I mean everything they do is at the [behest of ] the Saudi royal family. As a matter of fact, bin Mahfouz’s bank, NCB, is the only bank that was not nationalized in Saudi Arabia. All the rest of the banks were nationalized in 1974 except National Commercial Bank (NCB), which is privately owned by bin Mahfouz. That’s where the Saudi royals keep all their personal money.”
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The two Saudis entered into a business relationship with Bath. They would provide the money, and he would be the front man and manager of the enterprises.

Salem bin Laden and Khalid bin Mahfouz arrived in Houston shortly after Jim Bath flew that clunky plane out to Riyadh. In sharp contrast to his notorious brother, Bin Laden was a gregarious, Westernized, English-speaking, cocktail-loving international playboy. He traveled with an entourage and threw parties with prominent Houston businessmen and attorneys in attendance; Salem entertained the crowd by playing the piano and singing. Bin Mahfouz, tall and thin, was more enigmatic and reserved—the scion of a Saudi banking empire with hopes of expanding its franchise into the United States. One helpful asset was his $3.5 million French château-style house in the posh River Oaks section of Houston, which would become known as Houston’s Versailles. Huge crowds would gather at what the irreverent Bath referred to as “the Big House.”

It would soon be apparent that some, if not most, of this Texas-Saudi connection had to do with the growing off-the-books covert intelligence operations in which Poppy was deeply immersed. Between them, the wealthy Saudis and Americans controlled what amounted to an empire. And that empire needed planes, income, and intelligence.

On his arrival in the United States, Salem bin Laden had immediately set about purchasing planes and equipment for his family’s giant construction firm. He also bought houses in Central Texas’s Hill Country and outside Orlando, Florida. He launched an aircraft services company in San Antonio, Bin Laden Aviation, ostensibly to manage his small fleet of airplanes.
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Bath’s principal business was JB&A, Jim Bath and Associates, his aircraft brokerage company.
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It was staffed almost exclusively by former military pilots who held top-secret security clearances. From the same offices, he also ran an entity called Binladen-Houston, which procured heavy construction equipment for shipment overseas. Bath received a 5 percent personal interest (in lieu of a paycheck) in every purchase that he made using bin Laden money.
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The growing holdings of Saudis, such as Khalid bin Mahfouz and Salem bin Laden were almost always hidden in trusts, which were set up by some of Houston’s biggest law firms. Baker Botts and Vinson & Elkins both represented the Saudis.
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The names of the Saudis almost never appeared, but rather those of nominees, front men, or lawyers functioning as trustees.

“He spent probably ninety-five percent of his time, I’d call it handholding the Arabs,” said White. “He bought a bank for them. He bought an airport for them. He started an airline for them among other ventures in Houston, and was the nominee or the front man for their own ership of these various entities. He would spend most of his time dealing with their interests while I concentrated on running our real estate development company.”
⁵⁰

It is important to note that White’s bona fides and credibility as a source have been verified by numerous journalists and government investigators who have consulted him, and he has been cited over a period of nearly twenty years by news organizations ranging from the
Wall Street Journal
to
Time
to the Canadian Broadcasting Corporation.

Certainly no one was in a better position than White to observe the origin and growth of the Saudi-Texas connection.

CHAPTER 14

Poppy’s Web

S
O LONG AS POPPY HEADED THE CIA, working to build an extended off-the-books intelligence network, the center of action was at agency headquarters in Langley, Virginia. But with Poppy’s ouster from the CIA directorship in early 1977, the hub shifted with him to Houston. Officially, Poppy was returning to the traditional family business: banking. Wealth in America had been steadily shifting westward since Prescott Bush turned in his Yale baseball cleats for a banker’s wing tips, so it was fitting that the son should become a
Texas
banker.

And what a great time to get back into the business. A 1970 law had made it possible for banks to expand rapidly into giant holding companies. One such entity was the Dallas-based First International Bancshares (FIB). At FIB’s Houston location, Poppy set up his government-in-exile. During his time with the company, Bush would serve as chairman of the Houston subsidiary’s executive committee and join the boards of the Dallas-based parent and a subsidiary of First International in London.

First International had no trouble getting the needed approvals from the Federal Reserve for its steady diet of acquisitions. While it brought fifty banks under its umbrella, FIB was turned down only once.

In some ways, First International was a kind of twin to Republic National Bank in the Dallas oil-intelligence world. In the 1950s, when Poppy’s “uncle” Neil Mallon was assembling his off-the-books covert operations via Dresser Industries and the Dallas Council on World Affairs, First International had sent high executives to the council’s first planning meeting. (Its competitor, Republic, had done so as well.) First International’s association with the Bush family went back many years. In the summer of 1967, young George W. Bush worked as a clerk-bookkeeper at its Houston affiliate, earning $250 for the stint.
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First International was not your friendly neighborhood bank. Rather, it was a Texas powerhouse whose principals reached well beyond banking into the netherworld of intelligence and intrigue. The holding company chairman, Robert H. Stewart III, came from a family with long-standing personal ties to J. Edgar Hoover. FIB was intimately associated with the powerful Bass, Hunt, and Murchison families. Its largest shareholder was Joe Allbritton, whose D.C.-based Riggs Bank held the accounts for several embassies, including Saudi Arabia.
²

Most important, First International itself did a lot of business with Saudi Arabia. George H. W. Bush has said he cannot remember what he did for the bank, but Bill White claims Poppy was a Mercantile Division consultant paid to bring in Arab deposits. According to White, the bank played an important role in handling massive transfers of Saudi funds. It even provided a revolving line of credit for Salem bin Laden. The president and CEO of FIB’s London merchant bank, on whose board Poppy Bush sat, was a former FBI agent and employee of Magnolia Oil, the company that provided employment to several figures who associated with Lee Harvey Oswald. It is believed that much of the Saudi business flowed through the London affiliate.

After Bush came on board in 1977, FIB began a massive expansion. First International (known as “Interfirst” by 1980) would merge with its rival Republic to form First RepublicBank, which became the biggest commercial bank in Texas. Fourteen months later, the giant holding company failed, resulting in a $3.5 billion federal bailout.

The demise of First Republic Bank was part of a broad-based failure of financial institutions that—encouraged by the Reagan, Poppy Bush, and Clinton administrations—had combined voracious acquisitions of smaller banks with a spree of speculation and usury that in particular devastated the Texas economy and sent commercial banks into bankruptcy.

A major cause behind the bank failures was the erosion of consumer protections that Franklin Roosevelt had put in place in the aftermath of the Wall Street crash of 1929. The effort to weaken FDR’s protective mechanism began under President Nixon, continued under Ford and Carter, and was characterized as a positive development called “deregulation.” It greatly accelerated under the Reagan-Bush administrations, finally imploding under W. in the form of a collapsing housing market and fortunes lost in arcane financial instruments called “derivatives.”

The collapse of FDR’s safety net may have looked like a disaster to economists and to the ordinary taxpayers footing the bill for these risky ventures, but it also represented the fulfillment of a dream expressed by Prescott Bush and his confreres: to see Roosevelt’s hated New Deal brand of “socialism” undone. That it was undone, in steps, by Prescott’s son Poppy and grandson W. is hardly coincidental.

Banking institutions of all sizes have played crucial roles, wittingly and unwittingly, in the repatriation and investment of petrodollars in the West, and in the movement of monies to finance intelligence operations and undeclared wars. But all of this was nothing compared to the role played by an enterprise called BCCI. The involvement of the Bushes and their friends in this international scheme is not easy to tease out of the welter of sub rosa actions and relationships, but it is there nonetheless.

The Outlaw Bank and Its Spooky Customers

The sprawling global banking empire called Bank of Credit and Commerce International (BCCI), which emerged in the 1970s and was shuttered in 1991, is largely forgotten today. But not long ago it was occupying headlines as the world’s biggest-ever financial fraud. BCCI, though it called itself a bank, was really much more. It was a vast entity connected to the Pakistani military regime and key Gulf states, with banks and branches in seventy-three countries, including at least fifty developing ones. Although its founder, Agha Hasan Abedi, along with his top brass, emphasized their Muslim religiosity, the institution would apparently do anything for anyone willing to pay for services that needed to be kept quiet. These ranged from helping Pakistan obtain a nuclear bomb to financing secret arms deals on behalf of the West, while simultaneously serving as a money-distribution network for West-hating terrorist organizations.

At its peak BCCI wielded immense political and financial power in world capitals. It was a de facto international crime syndicate, a one-stop banking center for everyone from dictators to drug lords to intelligence services. BCCI engaged in blackmail and provided underage girls to major clients. The reality was like a scene out of a James Bond movie, replete with every imaginable form of villainy and the obligatory bikini beauties. BCCI provided “banking services,” broadly defined, to the likes of Saddam Hussein, terrorist mastermind Abu Nidal, Panamanian dictator Manuel Noriega, and even the elusive heroin kingpin of Asia’s Golden Triangle, Khun Sa.

Completely amoral, it seemed to be connected to people in power throughout the world. It was the ultimate expression of the dark side of strategies purportedly designed to help people and produce peace and security. The funding for BCCI had, since its inception, come from ordinary people in developing countries, particularly in the form of remissions from guest workers, such as Pakistanis and Filipinos working in Persian Gulf countries. When it collapsed, literally millions of BCCI patrons, scattered throughout the developing world, suffered, and many lost their life savings.

Starting in 1988, during Poppy Bush’s last year as vice president and continuing through his presidency, a handful of investigators and prosecutors— notably Manhattan District Attorney Robert Morgenthau and Senator John Kerry—got on the trail of this syndicate. Although they met mysterious resistance from the highest levels of the Reagan-Bush and then Poppy Bush administrations, by 1991 they managed to persuade British banking authorities to spearhead a global raid that brought the bank’s activities to a halt. The Manhattan District Attorney’s Office told the Bank of England, directly and indirectly, that it would be seeking to indict the London-based BCCI for operating as a Ponzi scheme. The Bank of England recognized that a New York indictment would precipitate a run on the bank, with an unfair distribution of bank assets to the first people who could withdraw their funds and nothing for the rest. To prevent that, the Bank of England, working with authorities in other countries, closed BCCI worldwide.

But the complicity of high officials in the United States and elsewhere, in at least some aspects of BCCI’s operations, was never fully exposed, as inquiry after inquiry hit walls where supposed “national security” interests were involved. BCCI had aided the CIA, British MI-6, the Israeli Mossad, Saudi and Iranian intelligence together with the North Koreans, the Chinese, and above all the Pakistani military, and all parties were afraid that their own secrets would be compromised.

Robert Mueller, chief of the Justice Department’s criminal division under Poppy (and later FBI director under W.), failed to establish any high-level governmental culpability—though BCCI could never have functioned without protection at the highest levels.

Had Mueller looked at what his own investigators had found, he might have discovered the identity of one such enabler: William Casey, who was CIA director during the Reagan-Bush administration. According to reporters Jonathan Beaty and S. C. Gwynne, Casey had met regularly with Abedi, the founder and defacto head of BCCI.
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Casey allegedly struck a deal in which BCCI would serve as a major conduit for covert operations—that is, a way to wash the hundreds of millions in funds that were not authorized by Congress or the American people for use in Afghanistan, Central America, and elsewhere. The Senate Committee investigating CIA-BCCI ties also found evidence of meetings between Casey and Abedi.
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One of the figures implicated in BCCI’s activities in the United States was its largest shareholder, none other than Jim Bath’s partner Khalid bin Mahfouz. Mahfouz ended up paying $225 million to settle fraud allegations in 1993 as part of a deal in which New York state dropped criminal charges. Mahfouz’s own Saudi bank, National Commercial Bank, was barred from operating in the United States.

Nothing, however, was ever made of the Bush connection to all this. Mahfouz’s ties to Jim Bath were not raised, and therefore, neither was Bath’s connection to the Bush family. It is worth noting that the Treasury Department official responsible for scrutinizing BCCI’s affairs in the Reagan-Bush administration was assistant secretary for enforcement John M. Walker Jr.—who happened to be Poppy’s cousin.

A Veiled Attempt at Banking

Even before John Walker got the job of overseeing such institutions as BCCI, others close to Bush were already on the other side of the covert banking customer-service counter. At the very time Poppy was at First International Bank, across town in Houston a number of his friends were starting up the Main Bank, with a paltry seventy million dollars in assets.

Main was to BCCI what a tiny hatchling is to a giant condor. But it achieved one thing that BCCI failed to do: publicly creating a joint banking venture between Saudis and Texans. The name conjured up images of Main Street, USA, though it would more accurately have been named after one of the wide, palm-lined boulevards of Riyadh.

In fact, the innocent name cloaked a darker reality. Main Bank brought together the Saudi geopolitical agenda, funding for U.S. covert operations, and related money-laundering, as well as the chance to make a buck. Among Main’s principal investors were Bush’s friend Jim Bath, his Saudi billionaire business partner Khalid bin Mahfouz, and Mahfouz’s fellow Saudi billionaire, Ghaith Pharaon.

A fourth member of the Main Bank team was John Connally, the former Texas governor and former secretary of the Treasury under Nixon.
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Con-nally was by then a partner in the Houston oil industry law firm of Vinson & Elkins, and probably the top Texas lawyer handling Arab money. Poppy Bush had worked with Connally over the years, but they had always been political rivals. Now both men were gearing up to seek the Republican nomination for president—and here Connally was enmeshed in Bush’s convoluted milieu.

What most distinguished the tiny Main Bank was the highly unusual amount of
cash
the bank disbursed—more than ten million dollars a month in hundred-dollar bills.
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The authorities often consider such untraceable money flows to be signs of criminal activity, particularly money laundering, and often connected with drugs. Cash, however, is also the principal tool of covert operations. In the case of Main Bank, whatever the intent, the practice brought no substantial scrutiny.

Lancing Carter

Such operations were, of course, small potatoes compared to the real action: controlling the White House. Even before Poppy Bush reached the pinnacle of the intelligence establishment, he and his associates knew that given the cries for reform in America following Watergate, there was a strong chance that Gerald Ford, who had succeeded Nixon, would not be reelected. As the 1976 election approached, there was a great likelihood a Democrat would prevail. If you had to hedge your bets, you’d look for a Democratic nominee who would be as cooperative as possible. Thus, key power brokers embraced Jimmy Carter, who then was governor of Georgia.