After a draining day and a half of wrangling, the group gathered in the London conference room was nervous and exhausted. If the participants failed to reach agreement, they would be facing each other in courtrooms around the world for 10 years, fighting over $550 million left over from the biggest bank scandal in history: the collapse of the Bank of Credit and Commerce International.
The American officials and the lawyers from New York, Luxembourg and a dozen other places were meeting secretly at the offices of a British law firm, seeking a compromise that would settle U.S. civil and criminal charges against BCCI and preserve its U.S. assets for its victims.
After a noontime break, George Terwilliger, the no-nonsense, 41-year-old acting deputy attorney general from Washington, and Brian Smouha, the 53-year-old former Olympic runner and court-appointed leader of BCCI's worldwide liquidation, took their seats side by side at the head of a conference table where 25 colleagues were working. They had worked it out over lunch. "Make a deal. We have agreed to agree."
Terwilliger shared in the collective sigh of relief that swept the room. As he headed back to Washington for the swearing in of his boss, Attorney General William P. Barr, that Monday, Nov. 23, he was confident that the intense negotiations of the previous month were about to pay off.
Today, U.S. District Judge Joyce H. Green in the District will decide whether the deal will stick. The agreement settling the charges against BCCI is opposed by 10 foreign governments, central banks and private corporations that say they too were among BCCI's victims but were left out of the agreement and stand to get none of the $550 million.
Yesterday, a judge in New York rejected a similar plea from a foreign creditor to block the agreement.
"The plea agreement at the heart of this case is a precisely written, scrupulously constructed and rigorously negotiated document," said U.S. District Judge John F. Keenan of New York's southern district.
This is a story about the deal, of often contentious negotiations in Washington, London and New York, involving 50 or more lawyers and government officials from half a dozen federal agencies. Nearly a dozen of them gave their accounts to The Washington Post, but asked that their names not be used.
Among other things, most agreed, the successful conclusion was a striking exception to the bureaucracy's natural tendencies toward mistrust, red tape and turf wars.
The parties came together with distinctly different interests, but found common ground in wanting to assure the health of U.S. bank companies illegally owned by BCCI, including Washington's First American Bankshares Inc. and other bank companies in Georgia and California. As well, they sought to return money to BCCI's victims abroad and prosecute the individuals responsible for the crimes.
High on the Justice officials' agenda was their department's good name. For months, critics in Congress and the media had suggested that the administration's investigation of BCCI had been half-hearted. Partly in response, Barr, then deputy attorney general, had formed a task force on BCCI headed by Robert S. Mueller III, assistant attorney general in charge of the criminal division.
Also on the government's side were representatives of New York District Attorney Robert M. Morgenthau, who brought criminal charges against BCCI in July, and the Federal Reserve Board, which sought a record $200 million civil fine against the Luxembourg-based bank, accusing it of fraud, money-laundering, bribery, theft and the secret ownership of the U.S. bank companies.
The other principal actors were BCCI's "liquidators," led by Smouha, a slight, bespectacled man who resembles actor Ben Kingsley. The senior banking partner at the London accounting firm of Touche Ross & Co., Smouha was appointed by a court in Luxembourg, where BCCI was incorporated, to oversee the dismantling of the bank. He reports back to courts in London, the Cayman Islands and Luxembourg and represents the interests of creditors and depositors of the bank. It's his job to get as much money back for them as possible.
Smouha, who combines an understated British charm with a steely negotiating manner, has been involved in sorting out other corporate messes. He spent nearly four years in the early 1980s untangling the affairs of the Italian finance group Banco Abrosiano, where nearly $1 billion was missing. Smouha eventually recovered about 80 percent of the money.
In late October, negotiations between the Fed and U.S. lawyers representing Smouha broke down. The Fed was concerned that there should be a screening process for individuals who were to get money back from BCCI. In essence, who would separate the bank's good depositors from the crooks?
Liquidators representing BCCI in foreign countries believed they should handle the screening process, while U.S. negotiators thought it should be handled in this country, since most of its assets were here.
It was a "touchy area of international diplomacy," according to one source, and required negotiations at a higher level of government.
For the first time, Smouha called Terwilliger and they agreed to meet at the Justice Department on Thursday, Nov. 14. Many of the parties saw it as a chance to approach the negotiations not just on behalf of the Fed or New York, but on behalf of the whole U.S. government.
Smouha began the meeting at the Justice Department by talking about the ongoing civil negotiations and the problem with the screening process. But Terwilliger upped the ante. He told the group that BCCI had far more serious problems. Justice Department criminal charges would soon be forthcoming and BCCI might be asked to forfeit all of its U.S. assets.
The shock showed on Smouha's face, participants said.
Any settlement covering civil and criminal charges would have to include BCCI's pleading guilty to racketeering charges, paying substantial fines and cooperating with the investigation of wrongdoing by individuals, Terwilliger said.
During a break in the meeting, Smouha and attorneys from the two firms representing the liquidators in the United States -- New York's Shearman & Sterling and Washington's Nussbaum & Wald -- retreated to a small conference room down the hall, while Terwilliger and other Justice Department lawyers went into Barr's office for a quick meeting.
Only a few minutes later Smouha came back, sat down, smiled and in his charming British way said, "Where do we begin?"
Now it was the Justice Department's turn to be surprised.
It was a risky proposition for both sides, participants said. The Justice Department could be perceived as weak if it undertook settlement talks on criminal charges too quickly. The liquidators, who needed the approval of foreign courts on any action that affected the assets of BCCI, also were taking a chance by moving forward.
A significant player in the game of a global settlement was not present -- New York District Attorney Morgenthau. The liquidators did not want to have to negotiate a separate peace with the hard-bargaining Morgenthau, and Justice officials wanted to secure his cooperation in order to quiet any criticism from Congress, where Morgenthau's standing was high.
The parties met until late in the evening and decided to explore a global settlement. Moreover, the talks would have to remain secret, they agreed. And they had to have Morgenthau on board.
"We were not going to go forward without Morgenthau in lock step with us," said one official at the Justice Department.
The next day, the Justice Department sent the liquidators a strong indication of what could lay in store if there was no global settlement: A federal grand jury here charged BCCI and three Middle Eastern businessmen, including Saudi financier Ghaith R. Pharaon, with illegally taking over Independence Bank of Encino, Calif.
As for cooperation between New York and the federal government, the 72-year-old Morgenthau needed the Justice Department nearly as much as it needed him. He had brought much-ballyhooed indictments in July, long before Justice was seriously in the game. But the charges of violations of state banking laws were against Agha Hasan Abedi, founder of the bank, and Swaleh Naqvi, the bank's chief operating officer until 1990. Neither was likely to come to trial in the United States. And because BCCI's assets were tied up in the liquidation process, it would not be easy to collect a fine from the corporation.
In return for his agreement in a global settlement, Morgenthau wanted Justice to push for BCCI to plead guilty to his indictment, give him access to witnesses and documents for his ongoing investigation, pay the expenses for his case and pay a $10 million fine. The $10 million figure was "literally picked out of the air," according to one source.
Barr agreed to his demands.
The distrust that had built up between New York and Justice during the era when Richard Thornburgh was attorney general seemed to be over.
John W. Moscow, an assistant of Morgenthau's, and Ira Raphaelson of Justice became the point men on that cooperation. Moscow, the deputy chief of the investigative division, had dealt with Raphaelson before, when Raphaelson was a prosecutor in Chicago, so they started out on good terms.
Raphaelson became the Thomas Jefferson of the pact, drafting dozens of agreements to come up with the final document.
After the November agreement in London, there still were major problems to be overcome, the most nettlesome being the prosecutors' demands to get their hands on BCCI documents held by the liquidators that might help in future prosecutions of individual BCCI defendants.
But the liquidators did not want to violate bank secrecy laws or waive the attorney-client privilege in a way that could be used against them in future lawsuits.
Despite all the progress they had achieved, these demands threatened to kill the deal. In an eleventh-hour phone call, Terwilliger told Smouha that Justice would walk away from the agreement if it didn't get the cooperation it wanted. Ultimately, Smouha agreed.
All the parties, it seems, ultimately got what they wanted.
The government got BCCI, through its court-appointed representatives, to plead guilty to racketeering crimes in the United States and to forfeit its $550 million in assets here. They got assurances of cooperation to pursue other individual crimes, and half of BCCI's assets were put in a fund to be used by U.S. bank companies illegally owned by BCCI.
Morgenthau got a guilty plea to the charges in New York and a $10 million fine. The liquidators got $275 million to go back to foreign countries where BCCI had depositors.
Justice officials met with regulators from a score of Washington agencies to get approvals. Fred Davis, a Shearman & Sterling attorney for the liquidators, flew to Luxembourg and argued for two hours in French to get the court's approval. The agreement was then delivered in private to Judge Green.
On Dec. 18, the Justice Department, with much fanfare, announced its coup. Twenty state and federal officials -- from Robert S. Mueller III, assistant attorney general for the criminal division, to Richard C. Breeden, chairman of the Securities and Exchange Commission -- signed the agreement. Smouha and four other court-appointed representatives signed for BCCI.
In a court appearance in Washington on Dec. 9, Green asked Smouha if he was asking her to accept the plea agreement. "Yes, please, your honor," Smouha said.
Green then seemed to sum up the feelings of many of the government and private lawyers who had worked on the agreement and who filled the courtroom: "A vast amount of work has been done by many on this," she said. "We will see what the final conclusion of it is."
Staff writer Mark Potts contributed to this article.