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Bank of Credit and Commerce International (BCCI)

Q: What was the involvement of Khalid Bin Mahfouz in the BCCI affair in 1991?
A: Khalid Bin Mahfouz was an investor in BCCI and for a time a non-executive director. At no stage did he hold an executive position in the bank. When BCCI collapsed, Khalid Bin Mahfouz, together with others, was indicted in New York State on the grounds that he had withdrawn sizeable investments in the bank just before its collapse. Khalid Bin Mahfouz vigorously contested the allegations because he had acquired the right to "put" his shares in BCCI at the time he made his investment, and had legitimately exercised that right.

In 1993, after protracted litigation, the criminal case against Khalid Bin Mahfouz was dropped, as was an investigation being undertaken by the Federal Reserve Board into the acquisition of First American Bank. In settling all pending matters, Khalid Bin Mahfouz jointly agreed with Haroon Kahlon, another defendant, to pay approximately US $225 million, the vast bulk of which was used by BCCI's court appointed liquidators in settling claims of depositors and creditors who had suffered loss through the BCCI collapse.

The key facts in this matter are:

• The indictment by the New York State grand jury was for a technical violation of law, similar to a "preferred distribution" prior to a bankruptcy. While categorized a "fraud", there was no "theft' committed or "false statements" made or alleged i.e. this was not a crime of "moral turpitude".

• Unlike the other defendants, Khalid Bin Mahfouz did not plead guilty to any "lesser offence" e.g. a misdemeanour.

• The December 1993 settlement agreement with the State of New York and the Federal Reserve made it clear that Khalid Bin Mahfouz had admitted no wrong doing or liability with respect to any allegations or claims.

• The indictment against Khalid Bin Mahfouz was dismissed.

• Khalid Bin Mahfouz was never accused of engaging in the various illegal activities purportedly associated with BCCI, such as money laundering, drug trafficking and arms dealing.

• Khalid Bin Mahfouz was convicted of neither a crime nor misdemeanour and is free to travel to and do business in the USA.