Full text of Press Releases of the Board of Governors of the Federal Reserve System : Settlement of administrative proceedings against Clark M. Clifford and Robert A. Altman : Attachment 1

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UNITED
BEFORE

THE

BOARD

STATES

OF GOVERNORS

OF AMERICA

OF THE FEDERAL

WASHINGTON,

RESERVE

SYSTEM,

D.C.

)
In the Matter

of:

)

CLARK

M. CLIFFORD

ROBERT

A. ALTMAN

Institution-Affiliated
Parties of Credit and
Commerce American Holdings
N.V., Netherlands
Antilles,
a registered
bank holding
company.

Docket

No.

92-080-E-11
92-080-B-11
92-080-E-12
92-080-B-12
92-080-CMP-11
92-080~CMP-12

;
;

i
1
)

The
(the

"Board

Robert

Board

of Governors")

A. Altman

affiliated

of Governors

as that

8(b) (3) of the Federal
"FDI Act")
Commerce

(12 U.S.C.

American

and First

registered

to the Bank

of Credit

Luxembourg,

and

Second

Charges
Altman

and

N.V.,

holding

Notice

to sections

as amended

Antilles

Washington,

("BCCI")

D.C.
and

agree,

the Board

against
and 8(i)

and

(the
and

("CCAH")
("First

former

counsel

S.A.,
as follows:

of Governors

to Prohibit,

8(e)

and

3(u)

1818(b) (3)), of Credit

("Notice")
8(b),

Act,

International,

of Intent

of Hearing

("Clifford")

in sections

companies,

14, 1997,

System

and institution-

Netherlands

Inc.,

entities

On January

and Notice

is defined

and Commerce

Amended

pursuant

55 1813(u)

bank

directors

Insurance

Bankshares,

American'),

its

term

Reserve

M. Clifford

former

Deposit

Holdings,

American

and Clark

("Altman"),

parties,

of the Federal

Notice
Clifford

issued
of
and

of the FDI Act

(12 U.S.C.
the Bank

§§ 1818(b),

Holding

(12 U.S.C.

and Altman

have

pursuant

263,

or otherwise

evidence

with

waived

and

issuance,

to:

respect

(the

8(b)

"BHC Act")

55 1818 and

each

they might

1847

to any matter

implied

judicial

otherwise

in the

of any provision

in any manner

and effectiveness

Part

of taking

or set forth

review

or contest

provision

or 12 C.F.R.

for the purpose

terms

Clifford

and every

(i) a hearing

(ii) to obtain

validity,

with

hereunder,

any and all rights

(iii) to challenge

the

of the matters

set

herein.
3.

adjudication

Therefore,

solely

approval

by the Board

and pursuant

issue

reference

or law set

of fact

an admission

herewith,

of this proceeding

8(e)

forth

of wrongdoing,

of any allegation

or extended

8(b) and

of any testimony

in connection

of settlement

to sections

hearings

made

and
without

or testimony,

of the FDI Act:

.to the prohibition

action

in the Notice:
(i)

the Board
and

taking

or admission

for protracted

(a) With
brought

on any

of Governors

for the purpose

the necessity

to the

and without

or herein,

or an adoption,
implied

prior

of or finding

in the Notice

age

and section

signatures

to comply

to 12 U.S.C.

or herein;

herein;

as amended

their

consented

and have

Notice

Act,

By affixing

have

forth

Company

and 1818(i))

§ 1847(b)).
2.

herein,

1818(e)

Clifford

of Governors

ill health,

has submitted

indicating

there

that because

is no reasonable

-2-

medical

opinions

of his advanced

prospect

that he will

ever participate
bank

holding

in any manner

company
(ii)

director

of a bank

institution
Governors

since

1991.

Altman

the FDI Act,

agrees

in the circumstances
(12 U.S.C.

institutions

provided

in sections

consent

by Altman

Altman

solely

in'performing

8(e)(6)

of the Board

3(u) (4) of the FDI Act
shall

in any way

or customer,
of any bank

institution.
3(a) (ii) shall

affect

actions

Any violation
be treated

company

financial
The

depository
of an attorney,
such

described

§ 1813(u) (4)).

Altman's

or insured

of the provisions

-3-

and

or services

activities

for a borrower

as a violation

Al'cman

section.

or providing

(12 U.S.C.

or as an attorney
holding

federal

in any conduct

or limit

or 8(e) (7) of

of Governors,

in that

in the capacity

does not engage

any action

8(e) (7) (B) of the FDI

described

such

an officer

(e) (7)) , unless

in section

agency

depository

not perform

not apply to actions performed
P
to a bank holding company or insured

services

customer,

or insured

that he may

described

regulatory

that

borrower

to become

§ 1818(e) (7) (B)), of any other

provided

herein

the Board

or intention

depository

does

institution

section

as an officer

advised

company

of a

institution.

served

§§ 1818(e) (61,

written

of the affairs

or insured

has

described

(12 U.S.C.

the prior

foregoing

Altman

holding

in any capacity

obtains

company

that he has no plan

institution.

depository

has not

holding

of a bank

Act

or insured
Altman

or director

serve

in the conduct

Nothing
as a

depository

of this paragraph

of an order

of the Board

of Governors

issued

under

section

8(e)

With

reference

of the FDI Act

(12 U.S.C.

§ 1818(e)).
(b)
brought

in the Notice

compensatory

Clifford

payments

and.Altman

right,
CCAH

and Altman
title

stock

themselves

hereby

or legal

registered

registered
and

in Clifford's

name

heirs,

name

representations

or warranties,

or beneficial

right,

title

and

of First

American,

Court

the Aoard

Appointed

victims

of BCCI,

all actions
transfer

interests

upon
will

of Governors

necessary

or implied,

affixing

transfer

of BCCI,

title

make

concerning

their

and assign

interest

Appointed

American,

agree

complete

and beneficial

all

in the Shares

for the benefit

and Altman

signatures

or to the
of the

to take any
or perfect

interest

receive
assets

any distribution
of First

American

and Altman

of the proceeds
to which

waive

they would

otherwise

and

the

in the

any right

of the sale

Trustee

Shares.
(iii) Clifford

of CCAH

on behalf

and Altman

of First

to accomplish,

of all right,

and 895 shares

to the Court

for the benefit

and Clifford

to 1,802

any claim,

in the Shares.

and beneficial

Fiduciaries

and forgo

and,

expressed

and Altman

legal

directed

to make

and assigns

Clifford

Immediately

Clifford

hereunder,

action

hereunder,

(the "Shares")

successors

foregoing,

i (ii)

waive

interest

the

legal

signatures

or beneficial

in Altman's
their

their

relinquish,

notwithstanding

their

agree

and desist

as follow:

(i) By affixing
Clifford

to the cease

of the
be

entitled

as the owners

provided,

however,

respectively,
not

assert

stock

Board

from

3(b)

shall

be treated

issued

on any CCAH
of First

section

8(b)

will

other

CCAH

of Clifford
stock

American.

of the provisions

as a violation

under

895 Shares,

in any

in the names

of the assets

respectively,

of Governors

of any kind

paid

Any violation

and

the Board

registered

(iv)

895 Shares,

the 1,802

to or interest

the sale

of this

of an order

of the

of the FDI Act

(12

§ 1818(b)).
The payments

(v)
referenced

herein,

are not

fines

by Clifford
or civil

all parties

hereunder,

the Board of Governors
P
with prejudice.

Notice

(d) The Board
action
facts

and

herein,

any proceeds

of Governors

U.S.C.

than

debentures

including

paragraph

other

that

any claim

debentures

1,802

as referenced

or CCAH

Altman,

of the

against
and

circumstances

involvement

with

BCCI,
(e)

herein,

the Board

all actions

described
CCAH

promptly

will

the

take no other
out of the

or out of their

American.
any

of the other

and Clifford

to enforce

signatures

dismiss

arise

in the Notice

Notwithstanding

necessary

will

penalties.

their

that would

or First

of Governors

money

affixing

of Governors

Cl'ifford or Altman

and Altman,

any or all

provisions

and Altman

may

take

of the provisions

herein.
(f) Clifford
claims

they may

have

against

and Altman
the Board

-5

agree

to waive

of Governors,

any and all
or any

member,

officer,

relating

employee

in any manner

under
and

subject

sections

violation

Clifford

8(i)

of the Board

to the Notice

(g) Any
separately

or agent

and

of Governors,

or the provisions

of the provisions

and Altman

herein

to appropriate

(j) of the FDI Act

herein.
shall

penalties

(12 U.S.C.

§§ 1818(i)

Cj)).
(h) No amendment

effective

unless

representations,
as set
agree

forth

made

in writing

either

herein

were

to the provisions
(i) This

identical

counterparts.

be an original

shall

to the provisions

oral

by all of the parties.

or written,

made

to induce

as set

forth

document
Each

for purposes

herein

except

provisions
to

herein.

counterpart

in one or more
shall

be deemed

of this document.

(j) All communications
r
be addressed
to:

regarding

this document

(A)

Richard M. Ashton
Associate
General Counsel
Board of Governors
of the
Federal Reserve System
20th and C Streets, N.W.
20551
Washington,
D.C.

(B)

Richard A. Small
Assistant
Director, Division of
Banking Supervision
and Regulation
Board of Governors
of the
Federal Reserve System
20th and C Streets, N.W.
Washington,
D.C.
20551

(Cl

Robert A. Altman
Law Offices of Robert A. Altman
901 15th Street, N.W.
Suite 400
20005
Washington,
D.C.

-6

any of the parties

may be executed

such

those

shall

(D)

Clark M. Clifford
9421 Rockville Pike
Eethesda, BID 20814

with a copy to:
J. Griffin Lesher,
~sq.
901 15th Street, N.W.
surte 400
Washington, D.C. 20005
By order of the Board of Goven?.Ors of the Federal Reserve

&
system, effective this ??I_--day of February, 1998.

BO&BD

FEDERAL

.
.
uli&n.kOd
Clark M. CI??#!ord

GOVERNORS OF THE
RESERVE SYSTEM

William W. Wiles
Secretary of the Board

-7-

UNITED STATES OPF&XE3iIC!A
BEFORE TBB BOARD OF GOVERNORS OF THE FEDERAG RESERVE SYSTEM
WASHINGTON, D-C!.
In the Matter of
Docket Nos.
CLARK M. CLIFFORD

)

ROBERT A. ALTMAN

;

Institution-Affiliated
Parties of Credit and
Commerce American Holdings,
N.V., Netherlands Antilles,
a registered bank holding
company

;
1
I
I
I
i
1
1
)

-Y

92-080-E-11
92-080-~-11
92-080-~-12
92-080-B-12
92-080~CMP-11
92-080-CMP-I2

Second Amended Notice of
Intent to Prohibit Issued
Pursuant to Section 8(e) of
the Federal Deposit
Insurance Act, as Amended,
Notice of Charges and of
Hearing Issued Pursuant to
Section 8(b) of the Federal
Deposit Insurance Act, as
Amended, and Notice of
Assessment of Civil Money
Penalties Pursuant to
Section 8(i) of the Federal
Deposit Insurance Act, as
Amended

OF CBARGES

The Board of Governors of the Federal Reserve System
(the "Board of Governors" or the 'Board") is of the opinion that:
A.
Clark M. Clifford ("Clifford") and Robert A. Altman
("Altman"), as directors of Credit and Commerce American
Holdings, N.V., Netherlands Antilles ("CCAH") and First American
Bankshares, Inc., Washington, D-C. ("First American"),
registered bank holding companies, and as counsel for the Bank of
Credit and Commerce International, S.A.. Luxembourg, and related
entities ("BCCI"), participated in and aided and abetted BCCI's
violations of the Bank Holding Company Act of 1956, as amended
(12 U.S.C. 1841 et seq.) (the "BHC Act"), in connection with
BCCI's illegal acquisition of control of the voting shares of
CCAH through various actions set out in this Notice.

B. Clifford and Altman violated the Board's order
approving the acquisition by CCAB of First American by causing
CCAE to borrow from BCCI to acquire First American shares and
exceed the level of acquisition debt permitted by the Board's
order.
C. Altman violated the BBC Act by participating in and
aiding and abetting BCCI's violation of the BHC Act in connection
with BCCI's acquisition and retention of control of the National
Bank of Georgia ("NBG") when he structured an aspect of the
transaction by which CCAB acquired NBG to conceal BCCI's role in
the transaction from the Federal Reserve.
D. Clifford and Altman engaged in breaches of
fiduciary duty to CCAB, its shareholders, and First American by
accepting compensation from BCCI in the form of preferential
loans and profit on their purchase of stock of CCAB in 1986 and
1987 for performance of their duties to CCAB and its
subsidiaries.
E. Clifford and Altman engaged in breaches of
fiduciary duty to CCAH, its shareholders, and First American by
failing to disclose material information regarding the
acquisition of NBG, including information regarding BCCI's role
in the transaction and the risks to CCAH.
Altman made false statements to the Board in
F.
connection with the Board's investigation of the BCCI matter,
including statements concealing his and Clifford's financial
arrangements with BCCI.
Accordingly, the Board of Governors hereby institutes
these proceedings:

(I)

for the purpose of determining whether an

appropriate order permanently barring Clifford and Altman from
participating

in any manner in the affairs of a United States

depository institution or depository

institution holding company

should be issued against each of them under the provisions of
section 8(e) of the Federal Deposit Insurance Act, as amended
(the "FDI Act")

(12 U.S.C. 1818(e));

-2-

for the purpose of determining whether an

(II)

appropriate order to cease and desist should be issued requiring
Clifford and Altman to cease and desist from unsafe and unsound
practices and violations of law and regulation, and to take other
affirmative action, including payment of the Board's
investigatory costs and transfer of their CCAH shares and the
profit thereon to CCAH, pursuant to the provisions of section
8(b) of the FDI Act (12 U.S.C. 1818(b); and

(III) for the purpose of assessing civil money
penalties against Clifford and Altman pursuant to the provisions
of section 8(i) of the FDI Act
8(b) of the BHC Act

(12 U.S.C. 5 1818(i)) and section

(12 U.S.C. 5 1847(b)).

In support of this Notice, the Board of Governors
alleges the following:

JVRISDICTION
Clifford was, at all times pertinent to the charges

set forth below, a director of CCAH and its direct and indirect
subsidiaries,

Credit and Commerce American Investments, B.V.,

Amsterdam, Netherlands

("CCAI"), and First American Corporation,

("FAC"), and chairman of First American

Washington,

D.C.

Bankshares,

Inc., Washington, D.C.

("First American"), all of

which are bank holding companies within the meaning of the BHC
Act.

-3-

. .

Clifford was, at certain times pertinent to the

charges set forth below, an attorney for CCAH, CCAI, FAC, and
First American.

By reason of the positions he held as director of

and attorney for CCAH and its subsidiaries,

Clifford was at all

times pertinent hereto an institution-affiliated

party of CCAH

and its subsidiary holding companies, as defined for the purpose
of this Notice by sections 3(u) and 8(b) (3) and (4) of the FDI
Act (12 U.S.C. 1813(u) and 1818(b) (3) and (4)).
institution-affiliated

party, Clifford is subject to the removal

and prohibition provisions of the FDI Act

As an

(12 U.S.C. 1818(e)).

Clifford was. at certain times pertinent to the

charges set forth below, an attorney and agent for BCCI, a
foreign bank within the meaning of section 8 of the FDI Act (12
U.S.C. 1818).

Altman was, at all times pertinent

to the charges

set forth below, a director of CCAH, CCAI, FAC, and First
American, and president of FAC.

Altman was, at certain times pertinent to the

charges set forth below, an attorney for CCAH, CCAI, FAC, and
First American.

-4-

Sy reason of the positions he held as director,

officer, and attorney, Altman was at all times pertinent hereto
an institution-affiliated

party of CCAH and its subsidiary

holding companies, and is subject to the removal and prohibition
provisions of the FDI Act.

Altman was, at certain times pertinent to the

charges set forth below, an attorney and agent for BCCI, a
foreign bank within the meaning of section 8 of the FDI Act.

FACTVAL

AT&EGATIONS

Background
9.

On July 29, 1991, the Board of Governors issued a

Notice of Assessment
Holdings,

of a Civil Money Penalty against BCCI

S.A. Luxembourg

Commerce International

("BCCI Holdings"), Bank of Credit and

S.A., Luxembourg

Credit and Commerce International

("BCCI S.A."), Bank of

(Overseas), George Town, Cayman

International Credit and Investment

Islands

("BCCI Overseas").

Company

(Overseas), George Town, Cayman Islands ("ICIC Overseas")

(BCCI Holdings, BCCI S.A., BCCI Overseas, and ICIC Overseas are
collectively

referred to herein as "BCCI"), and related parties

(the "BCCI Notice').

The BCCI Notice charged that BCCI had

illegally acquired control of more than 25 percent of the shares
of CCAH and of the National Bank of Georgia

("NBG") without prior

Board approval through the use of nominee shareholders.

-5-

BCCI was founded in 1972 by Agha Hasan Abedi

10.

("Abedi"), Swaleh Naqvi ("Nag-vi"), and others.

Abedi represented

to various shareholders and regulatory authorities that he
intended BCCI to be a major international bank with offices
world-wide.

Abedi was president of BCCI until at least February

1988; Naqvi was chief executive officer of BCCI through October
1990.

11.

BCCI includes various foreign banks.

1991, the relevant foreign supervisors

On July 5,

took action to secure

control of the assets of the foreign banks.

By order of the

appropriate courts, the foreign banks were subsequently put into
liquidation.

12.

On December 13, 1991, BCCI pleaded guilty to

criminal charges brought by the United States and the State of
New York by means of a Superseding Information in Crim. No.
91-0655

(JHG) and Grand Jury Indictment No. 8090/91,

respectively.

The charges to which BCCI pleaded guilty included

the charge that:
between on or about 1983 and on or about
1989, on several occasions, the BCCI Group
acquired ownership of CCAH stock through
various means, including, among other things,
financing and directing the purchase of stock
by others, pursuant to various agreements or
arrangements, such as pledge agreements,
memoranda of deposits and powers of attorney,
whereby actual control of the stock would be
transferred to the BCCI Group and ICIC
Overseas, and the BCCI Group and ICIC
-6-

Overseas would have no recourse against the
personal assets of the purported buyer.

TNE ACQUISITION OF CCXEl BY BCCI

The Aoplications
13.

Before the Board of Governors

In 1978, Clifford and Altman were partners in the

Washington, D.C. law firm of Clifford, Glass, McIlwaine & Finney,
subsequently

known as Clifford & Warnke.

By the fall of 1978, a

group of investors selected by BCCI and represented by Clifford
and Altman had plans to acquire through a tender offer all shares
of Financial

General Bankshares, Inc., Washington, D.C.

("Financial General"), a multistate bank holding company.
order to facilitate

the acquisition of the shares of Financial.

General, CCAH and CCAI were formed in 1978.

CCAI would own all

the shares of Financial General, and CCAH would own all the
shares of CCAI.

On October 19, 1978, Altman, on behalf of CCAH

and CCAI, filed an application

(the "Application") with the Board

for prior approval under the BHC Act for CCAH and CCAI to become
bank holding companies by acquiring all the voting shares of
Financial General.

The Board dismissed the Application on

February 16, 1979 because Maryland law did not permit a hostile
takeover of a bank holding company.

14.

In July 1980, the BCCI investor group reached an

agreement with the management of Financial General under which
Financial General agreed to drop its opposition to the
-7-

acquisition of the company by the BCCI investors.

Following

execution of that agreement in July 1980, Clifford met in London
with Abedi, who asked Clifford to lead CCAH upon its acquisition
of Financial General.

Although Clifford had no expertise

concerning banking, he accepted the position offered by Abedi.

The July 1980 agreement between

15.

the BCCI investors

and the Financial General management eliminated the obstacle to
the Board's consideration of CCAH's application
Financial General.

to acquire

Accordingly, on October 3, 1980, Altman

resubmitted the Application on behalf of CCAH and CCAI.

On December 5, 1980, Altman wrote to Naqvi to

16.

inform him of the Board's acceptance of the Application
processing.

for

Altman stated: "I am interested in learning the

progress of efforts to obtain the needed loans for the
Investors."

17.

Clifford and Altman made numerous representations

to the Board and other regulatory authorities
have the Application

approved.

in an effort to

These representations

issues that were material to the Application,

concerned

including the lack

of financial or other involvement by BCCI in the acquisition or
operations of Financial General or the subsidiary banks after the
acquisition, and the financial burdens to be assumed by the

-8-

The Board relied on all of these representations in

Applicants.

approving the Application.

18.

In the Application,

CCAH and CCAI represented that

they would incur no more than $50 million in debt to acquire
Financial General shares pursuant to the proposed tender offer.
On June 15, 1981, Altman wrote to the Board of Governors making
an explicit commitment that "any increase in the proposed
$50 million acquisition debt to be incurred by the Applicants for
purposes of the tender offer for the common shares would
constitute a material change in the Application
would require express action by the Board."
created a wholly-owned
Corporation
debt.

(“FGBHC”)

and, therefore,

The applicants

subsidiary of CCAI. FGB Holding
to act as borrower for the acquisition

FGBHC joined in the CCAH and CCAI application

to the Board

for prior approval to acquire Financial General.

19.

On April 6. 1981, Abedi and Naqvi accompanied

Altman and a bank regulatory lawyer ("Regulatory Attorney") to
Paris to negotiate the terms of a loan to FGBHC from Barque
et Intemationale

D'Investissement

Arabe

("BAII") to finance the

acquisition of Financial General shares.

20.

On August 25, 1981, the Board of Governors, based

on the entire record, including the representations

and

commitments of the applicants made through their counsel,
-9-

Clifford and Altman, issued an order approving the applications
of CCAH. CCAI, and FGBHC to become bank holding companies by
acquiring Financial General.
on CCAH's commitment

The order was expressly conditioned

"not to incur more than $50 million

acquisition debt for the proposed acquisition without prior Board
approval."

Consummation

of the Acouisition

21.

On or around March 2, 1982, FGBHC entered into a

loan agreement with BAII (the "BAII loan") pursuant to which
FGBHC borrowed $50 million to fund its acquisition of Financial
General shares.

As discussed in the BCCI Notice, BCCI indirectly

guaranteed this loan.

As of April 16, 1982, the transaction was

completed.

22.

Upon completion of the acquisition, Clifford

became a director of CCAH, CCAI, and FGBHC, and chairman of the
board of Financial General.

Clifford chose the remaining members

of the CCAH board, which consisted of his law partner, Altman,
among others.

23.

Upon completion of the acquisition, Altman became

director and secretary of CCAH and CCAI, director and president
of FGBHC, and a director of Financial General.

24.

In August 1982, Financial General changed its name

to First American Bankshares, Inc. ("First American"), and FGBHC
changed its name to First American Corporation

25.

("FAC").

Clifford and Altman were the effective senior

management of First American, involved in a variety of decisions
from personnel to architectural design.

Altman discussed

virtually everything about the company with Clifford.

26.

During the period August 1982 through July 5,

1991, BCCI and CCAH were affiliates within the meaning of
section 23A of the Federal Reserve Act

(12 U.S.C. 371~) in that

holders of at least 25 percent of BCCI shares held at least 25
percent of CCAIi shares.

The $4.8 Million Loan and Reoavment of Acouisition
27.

Exoenses

On or around May 13, 1982, CCAI received $2.5

million from BCCI or ICIC Overseas to permit it to pay interest
on the BAII loan.

On or around July 19. 1982, an additional

$2.3 million was received from BCCI or ICIC Overseas, also for
interest payments on the BAII loan.

Instead of seeking Federal

Reserve approval for this needed additional
Clifford and Altman caused CCAH to violate

indebtedness,
the commitment that no

more than $50 million in debt would be incurred by CCAH and its
subsidiaries for the acquisition of Financial General shares, and

that BCCI and its affiliates would not fund the CCAB acquisition
of Financial General.

28.

On July 29, 1982, and August 9, 1982, C~AE'S

accountants, Ernst & Whinney Nederland

("E&W"), wrote to BCCI and

Altman concerning the $4.8 million in new funds.

The letters

discussed the $4.8 million based on the assumption that the funds
were a capital contribution by a new investor.

29.

On September 20, 1982, BCCI wrote to E&W and to

J.W. Eddie Moret

("Moret") of Equity Trust Company, N.V., CCAE's

resident manager

in the Netherlands Antilles.

that the $4.8 million

The letter stated

"will be treated as a short-term

subordinated loan from the shareholders of CCAH."

30.

On February 15, 1983, Altman informed Moret that

the "exclusive lender" of the $4.8 million loans received on
May 13 and July 19. 1982

was

Kamal Adham

("Adham" 1, a named

shareholder of CCAB.

31.

On or about February 24, 1983, Altman, on behalf

of CCAH, executed a Loan Agreement declaring
received a loan from Adham of $4.8 million.

.’

- 12 -

that CCAB had

II.

ACQUISITION

OF TIE NATIOU

BUR

OF GEORGIA

BY CCZm

Backsround

In 1975, Bertram Lance ("Lance") acquired an

32.

interest in NBG (since renamed the First American Bank of
Georgia, N.A.).
difficulties,
of NRG.

In 1977, Lance, after experiencing

financial

determined that it was necessary to sell his shares

During this same time period, he was retained by Abedi

to advise BCCI on banking investments in the United States.
Through this relationship, Lance arranged for his shares of NBG
to be sold to Ghaith Pharaon, a Saudi Arabian businessman,
principal

shareholder of BCCI, and friend of Abedi.

represented

Lance was

in this transaction by Clifford and Altman.

in turn, introduced Clifford and Altman to Abedi.

Lance,

Pharaon

borrowed from BCCI the purchase price paid to Lance for the NBG
shares.

Pharaon subsequently purchased the remaining shares of

NBG from other shareholders, again obtaining loans from BCCI to
do so.

33.

As set forth in paragraphs 179-200 of the BCCI

Notice, BCCI and NRG had a close association during the years in
which NBG was nominally owned by Pharaon.

NBG's employees

included a number of former BCCI employees, including Tariq Jamil
("T. Jarnil"), Asif Mujtaba

("Mujtaba"), and Mehdi Raza.

Some NRG

personnel regularly attended BCCI conferences, at BCCI's expense.
NRG also adopted BCCI's management style and hexagonal

- 13 -

logo, and

revised its business orientation

from a retail bank to an

international bank.

34.

In 1983, Altman became aware of the extremely

close relationship between BCCI and NBG during the period of
Pharaon's purported ownership.

In February 1983, Altman, along

with a number of NBG officers, attended a BCCI-sponsored
conference in New York, the purpose of which was to accelerate
Following the

the adoption by NBG of BCCI's corporate

culture.

BCCI presentation, William W. Batastini

("Batastini" ), executive

vice president of NBG, gave public remarks at which he expressed
his happiness at being part of the BCCI family.

Batastini and

other NBG personnel also attended BCCI's annual conference in
Athens in March 1983, at which Batastini

gave a similar address.

Altman was present for both speeches.

35.
(Georgia), N.V.

Pharaon's wholly-owned

company, Interedec

("Interedec"), held the shares of NBG through a

holding company, NBG Financial Corporation

("NSGFC").

Pharaon

executed a Memorandum of Deposit dated January 1, 1985, with BCCI
under which all of the outstanding

shares of NBGFC were deposited

with BCCI as collateral for certain credit facilities extended by
BCCI to Pharaon, and to companies owned and controlled by him.
Paragraph 17 of the Memorandum of Deposit provided that "BCC or
its nominees may exercise . . . in respect of the Securities or
any of them any voting rights as if BCC or its nominees were a'
- 14 -

sole beneficial owner thereof."

To the extent it had not already

acquired control of the shares of NBGFC. BCCI, by reason of this
Memorandum of Deposit, acquired control over all of the
outstanding shares of NBGFC by January 1, 1985.

36.

In November 1985, Saudi Research and Development

Company, or REDEC, a company owned by Pharaon, announced that it
was experiencing financial difficulties, which could lead to a
default on syndicated borrowings by Pharaon in excess of $200
million.

This announcement caused Pharaon's creditors to

consider various options, including the attachment of assets
owned by Pharaon.

The shares of NBGFC were one highly visible

Pharaon asset.

37.

BCCI itself was a major creditor of Pharaon and

the PEDEC announcement caused BCCI's auditors, Price Waterhouse,
to scrutinize more closely Pharaon's relationship with BCCI.
Price Waterhouse criticized BCCI's credit exposure to Pharaon,
and urged that it be reduced.

REDEC's financial difficulties,

and its substantial lending from BCCI, were widely reported in
the financial press and were known to Clifford and Altman in the
spring of 1986.

38.
its shares,

Because BCCI secretly owned and controlled NBG and
attachment of those assets by Pharaon's creditors

threatened BCCI with a substantial financial loss.
- 15 -

In addition,

BCCI was under pressure

from its auditors to remove from its

books non-earning assets such as the outstanding
Pharaon, and replace them with earning assets.

loans to
BCCI thus had an

incentive to cause NBG to be sold to another BCCI nominee, one
that would not be subject to levying creditors.

In addition,

BCCI had an incentive to replace its secret and possibly
defective security interest in the NBGFC shares with a new credit
that would be properly secured.

Decision

39.

to Acauire

NBG

at BCCI's

Direction

early as September 1985, prior to REDEC's

public announcement regarding its financial predicament, BCCI
began to plan the sale of NBG to CCAH.

In September 1985, Altman

met with NBG's president, Roy P.M. Carlson

("Carlson"), Guy

Freeman, its chief financial officer, and Batastini to inquire
about a possible acquisition.

At the time of these discussions,

the BHC Act and Georgia law did not permit the acquisition of a
Georgia bank by a bank holding company, such as CCAH, with
substantial deposits outside the area defined by Georgia law as
the "Southern Region."

Settins the Terms of the Transaction
40.

In October 1985, Altnnan asked A. Vincent Scoffone

("Scoffone'), Treasurer of First American,

to conduct a

preliminary evaluation of NBG for the purpose of determining a
purchase price.

In a memorandum to Altman dated October 22,
- 16 -

1985, Scoffone reported that of 185 bank purchases nationwide
within the previous 12 months,
cash.

122 were for stock and 63 were

for

He noted that the ratio of purchase price to book value

for.the purchases of Georgia banks ranged from 0.90 to 5.28, with
an average purchase price of 2.24 times book value.

Based on the

information provided to him by Altman and other publicly
available information, Scoffone estimated that NBG's tangible net
worth, which he assumed to be roughly equal to its book value,
was approximately $80 million, and that, on that basis, "a
realistic price to be paid for NBG would range from $120 million
to $180 million."

This price corresponds to between 1.5 times

and 2.25 times book value, based on a book value of $80 million.
Scoffone cautioned, however,

that "no review has been performed
Such a review is mandatory

on the quality of the asset base.
before any real meaningful

analysis can be made regarding the

tangible net worth of NBG."

41.

Abedi decided that CCAR would acquire NBG.

Shortly thereafter, Altman contacted the law firm that served as
CCAR's regulatory counsel
legal work

("Regulatory Counsel') to begin the

that needed to precede

Counsel attempted unsuccessfully
CCAR should be permitted

the acquisition.

Regulatory

to convince Board staff that

to purchase NBG notwithstanding

Georgia law problems.

the

42.

In February 1986, Robert Stevens, the president of

First American, wrote a memorandum concerning long-range planning
to First American's executive committee.

In the memorandum,

Stevens pointed out that banks were then selling for high
of book value, mostly through deals involving an

multiples

exchange of stock.

Noting that First American was privately

owned and could not engage in a stock-for-stock

transaction,

Stevens advised that the company focus its expansion efforts on
non-bank organizations
multiples

that were then selling for smaller

of book value.

This advice was ignored by Altman in

his subsequent purchase of NBG on behalf of First American.

43.
conference

In early May 1986, Altman attended BCCI's annual

in Luxembourg.

On May 7, 1986, shortly after Altman's

return from the annual conference, Scoffone prepared a second
memorandum
potential

for Altman, at Altman's request, analyzing the
acquisition of NBG by First American.

44.
shareholders'
million.

Scoffone's May 7 memorandum

identified NBG's total

equity, book value, and tangible net worth as $93.9

As with his memorandum of October 22, 1985, Scoffone

reached this conclusion without the benefit of any due diligence
or examination

of asset quality or other factors that could

affect the value of NBG.
explanation
million

Moreover, the memorandum provided no

for the abrupt increase in book value over the $80

figure used in Scoffone's October 22, 1985 memorandum.
- 18 -

In fact, much of the increase was the result of a loan from
Pharaon to NBGFC that was contributed as capital to NBG.

The

subsequent forgiveness of this loan led to a further increase in
the purchase price of NBGFC.

45.

Independent of Scoffone, in February of 1986, the

firm of Keefe, Bruyette & Woods

("Keefe Bruyette") had conducted

an evaluation of NBGFC in order to value the portion of NBGFC
owned by Pharaoh Holdings Limited, a company controlled by
Pharaon.

In preparing his memorandum

of May 7, 1986, Scoffone

did not have access to, or the benefit of the February 20, 1986,
report of Keefe Bruyette estimating NBG's value as between $130
and $144 million.

46.

The May 7 memorandum analyzed recent sales of

comparable banks, noting that the median purchase price for deals
in the preceding 12 months was 1.62 times book value.

For NBG,

Scoffone noted, this would mean a purchase price of $152 million.
Scoffone went on, however, that the median price of banks in
Georgia, Florida and South Carolina was 2.11 times book value.
He concluded without further elaboration

that "a fair purchase

price for NBG would approximate 2.25x book value" or $211
million.

Scoffone suggested a transaction consisting of $160

million in cash and $51 million in CCAH stock, and concluded that
"this transaction would be highly beneficial

19 -

to the present owner

of NBG.

The bank would be sold at a significant premium over

both the national and local median sales prices."

Negotiations and Earlv Drafts
47.

Altman was the sole representative of First

American to negotiate

the terms of the acquisition transaction.

Neither Robert Stevens, the president of First American, nor the
First American board of directors had any involvement in the
acquisition or in structuring the transaction.

Moreover, Altman

never dealt directly with Pharaon throughout the course of his
negotiations

48.

for NBG.

On May

1986,

Altman wrote to Naqvi concerning

the NBG acquisition, enclosing Scoffone's May 7, 1986 memorandum.
In his letter, Altman expressed the hope that the purchase price
could be in the range

of $160 to $175 million, noting that "we

are nearing the point at which this purchase is too expensive."
Altman noted that a portion of the purchase price would be
borrowed, and suggested that BCCI would be an appropriate source
for the borrowed funds.

Altman observed that in view of the

competing offer for NBG from North Carolina National Bank
("NCNB"), "it becomes increasingly important to conclude this
matter one way or the other," and expressed his expectation that
Naqvi would "forward this information to Mr. Abedi."

- 20 -

49.

On May 14, 1986, Altman discussed with Batastini,

who was then visiting BCCI's London headquarters,
structure of a purchase of NBG by CCAH.

the terms and

They agreed to a

purchase price of $205 million, of which $80 million would be
paid up front for an option to purchase, Andy $125 million would
be paid upon consummation of the transaction.

On May 15, 1986,

Batastini sent Altman a draft option agreement for the
acquisition of NBG by CCAH that reflected these terms.

50.

The agreement drafted by Batastini provided that

CCAH would pay the option fee of $80 million, and that Pharaon
would pledge his shares of NBGFC

to CCAH to secure repayment of

the option fee in the event the transaction did not materialize.
The proposed option agreement also allowed Pharaon to pledge the
shares of NBGFC as collateral for new borrowings from BCCI up to
$140 million -- $15 million more than the option exercise price.
These new borrowings by Pharaon would be secured by the same
shares of NBGFC that Pharaon would pledge to secure repayment of
the option fee to CCAH in the event that the option could not be
exercised.

51.

The acquisition of NBG by CCAH required prior

approval by the Board of Governors under the BHC Act.
believed

Altman

that the Board of Governors would not approve the

application if it learned of BCCI's involvement in the
transaction, and that a full explanation of BCCI's role might
- 21 -

lead to a Federal Rese_me investigation
between BCCI and CCAR.

into the relationship

Altman. knowing of BCCI's role in the

transaction, therefore took affirmative

steps to conceal BCCI's

involvement in the sale of NBG to CCAH from the Board of
Governors.

In early June 1986, Altman informed Regulatory

52.

Attorney that First American intended to obtain an option to buy
NBG.

Altman described the transaction

to Regulatory Attorney as

one in which CCAH would pay $75 million
total purchase price of $205 million,

for an option out of a

and Pharaon would borrow

the remainder of the purchase price from BCCI.

Regulatory

Attorney advised that the amount of borrowing by Pharaon secured
shares should not exceed the exercise price of $130

by his NBGFC
million.

He also advised that Pharaon should obtain his loan

elsewhere than at BCCI, since BCCI's involvement in the original
acquisition of Financial General had raised regulatory questions
and led to delay.

Altman replied that Pharaon was a major

shareholder of BCCI and would get his loan from BCCI if he wanted
to.

53.

Under the direction of Regulatory Attorney,

Regulatory Counsel prepared a memorandum
ramifications
memorandum

of the transaction.

discussing the legal

Regulatory Counsel's

discussed a transaction whereby CCAH would purchase an

option to buy NBG, BCCI would simultaneously
- 22 -

lend Pharaon the

exercise price under the option agreement,

and Pharaon would

place his stock of NBG in an escrow account with BCCI as
collateral for the option and the loan, respectively.

According

to the memorandum, as soon as CCAB was legally permitted to
acquire NBG, CCAB would exercise the option by paying down
Pharaon's indebtedness to BCCI and acquiring all of the shares of
NBG.

54.

Regulatory Counsel's memorandum

explained that the

Board of Governors has serious concerns about so-called "stakeout" arrangements by which a company agrees to acquire a bank at
some future time and obtains certain rights over that bank in the
interim.

The memorandum explained that the Board had recently

promulgated a Policy Statement on Nonvoting
order to set forth guidelines concerning

Equity Investments in

such stake-out

transactions that would ensure that the acquiring company would
not obtain control of the acquisition
approval,

The

target prior to Board

memorandum pointed out that the Board's concerns

could have an effect on the structure of the proposed
transaction, noting that "[tlhe proposed

structure may focus

unwelcome attention on the relationship between CCAH and BCCI and
raise questions as to whether BCCI has acquired control of NBG."
Later, in a discussion of the control issues raised by a BCCI
security interest in the NBG shares, the memorandum noted:

bigger problem, however, arising from BCCI's involvement in the
transaction is that it might focus closer attention on the
- 23 -

relationship between CCAH and BCCI.

An argument could be made

perhaps that CCAH and SCCI are acting together and/or as
principal and agent."

Shortly after Regulatory Counsel's memorandum was

55.

delivered, Altman sent a memorandum to Naqvi identical in all
respects to Regulatory Counsel's memorandum, but without
attribution to Regulatory Counsel, and Clifford sent a copy to
Abedi.

In his June 17, 1986, cover letter, Clifford cautioned

Abedi that the enclosed memorandum "will give you some idea of
the difficulties

56.

and complexities facing us."

In mid-June,

1986, Altman informed Regulatory

Attorney that Altman wanted the option and loan transactions to
close by the end of June.

Altman also insisted that Regulatory

Counsel draft loan documents for the loan agreement between BCCI
and Pharaon.

Regulatory Counsel billed CC?33 for the legal work

involved in drafting the BCCI-Pharaon loan documents.

Altman

acted as counsel for BCCI in connection with BCCI's loan to
Pharaon.

51.

On June 20, 1986, Regulatory Counsel prepared a

draft of an option agreement under which the shares of NBGFC
would be held by an escrow agent to secure Pharaon's obligation
to repay CCAH the option fee in the event that the option was not
exercised.

BCCI was identified in that draft as the escrow
- 24 -

agent _

Regulatory Counsel's advice to Altman, however, was that

BCCI should not act as be the escrow agent because it would be
have conflicting interests with respect to the escrowed shares:
its role as a trusted intermediary between Pharaon and CCAIi would
be compromised by its self-interest in protecting

its own

security interest in the NBGFC shares.

Concealment

BCCI's Role from the Board

Provision of Early Drafts to the Board
58.

On June 25 and June 27, 1986, Regulatory Counsel,

on behalf of CCAB, provided the Board of Governors with drafts of
the option agreement in $rder to gain the Board's assurance that
the proposed transaction did not violate the stake-out guidelines
and that CCAB would not, as a result of the option, obtain
control over NBG.

Neither Regulatory Counsel's cover letter to

the Board nor the enclosed draft option agreements included any
discussion of a simultaneous loan and a pledge of shares as
collateral

for the loan between BCCI and Pharaon.

In addition,

although the option agreements provided to the Board mentioned
the existence of an escrow agent to hold the NBGFC shares, they
did not identify BCCI as the escrow agent or include a draft of
an escrow agreement.

In the letter accompanying

the first draft

option agreement, it was represented to the Board that "Interedec
will retain all voting rights with respect to the Shares."
Altman received copies of the Regulatory Counsel letters and
draft option agreements provided to the Board.
- 25 -

59.

In late June and early July, 1986, Altman also

directed Regulatory Counsel to prepare a "back-up option" to
permit an unidentified

shareholder of CCAH to acquire NBG in the

event CCAH was unable to do so.

60.

On or about July 10, 1986, Regulatory Counsel

attorneys working on the NT3G transaction on behalf of CCAH
learned from Altman and a partner of his at Clifford & Wamke
("C&W Partner") that Pharaon's shares of NBGFC were already
pledged to BCCI pursuant to the January 1, 1985 Memorandum of
Deposit.

In response to questions posed by Regulatory Counsel,

Imran Imam (wImam"), an officer in BC$I's central support office
in London, informed C&W Partner on August 11, 1986, that Pharaon
had secured a line of credit of $80 million with the NBGFC
shares, and noted that Altman already had a copy of the
Memorandum of Deposit.
Regulatory Counsel.

C&W Partner provided this information to

Later, Altman provided a copy of the

Memorandum of Deposit to Regulatory Counsel.

Altman had not

previously informed Regulatory Counsel of the existence of the
Memorandum of Deposit.

Regulatory Counsel attorneys thought it

highly significant that the NBGFC shares were subject to an
existing security agreement, and believed that the prior security
agreement had to be addressed in order to protect CCAH from any
consequences of that prior pledge.

- 26 -

61.

On August 4, 1986, Regulatory Attorney became so

concerned about various aspects of the NBG option transaction
that he took the unusual step of writing to Altman about them.
Regulatory Attorney's

letter pointed out that:

(1) the payment

of $80 million for an option to purchase shares put CCAH at risk;
(2) under the Federal Reserve's policy concerning stake-outs,
CCAH could have no control over NBG until the acquisition was
consummated and thus could take no steps to assure that NESG was
properly managed and maintained its value in the period from the
payment of the $80 million option fee to the exercise of the
option;

(3) the option agreement contained no provision for

renegotiating

the exercise price in the event that the value of

NBG declined prior to exercise of the option:

(4) it would be

necessary to obtain legal opinions regarding the validity of
Pharaon's ownership of NBG;

(5) there was no assurance that CCAR

would be able to recover its $80 million option fee in the event
that it chose not to exercise its option; and (6) the back-up
option may be deemed by the Federal Reserve to be contrary to the
Federal Reserve's control provisions.

Regulatory Attorney sent a

copy of his letter to C&W Partner.

62.

When he received the letter from Regulatory

Attorney, Altman demanded that Regulatory Attorney immediately
come to Altman's office.

In a brief and hostile meeting, Altman

handed back to Regulatory Attorney both the original of
Regulatory Attorney's

letter and the copy Regulatory Attorney had
- 21 -

sent to C&W Partner.

Altman warned Regulatory Attorney that if

he ever wrote a similar letter again, Regulatory Attorney would
no longer represent CCAE.

63.

On September 4, 1986, Altman provided Nagvi with

draft documents relating to the option and loan transaction

for

The documents consisted of drafts of: an option

Naqvi's review.

agreement, a loan agreement, a subordination agreement, an
unconditional guaranty, and a single pledge agreement relating to
both the option and the loan.
the pledge agent.

The agreements identified BCCI as

In his cover letter to Nagvi, Altman stated

that the agreements assume that there is no debt secured by the
NBG shares "except as may be later authorized with respect to the
BCCI loan to Dr. Pharaon."

At that time, Altman was already

aware of the Pharaon debt to BCCI secured by the NBGFC shares.

64.

The documents Altman sent to Naqvi also included a

"back-up option" to be granted by Pharaon to an unnamed holder.
Altman's letter to Nagvi explained that pursuant to that
document,

"one or more of the individual shareholders of CCAH

would be in a position to acquire NBGFC at the same purchase
price in the event that CCAH is unable to do so within the 18
month period available under the main option."

65.

On October 15, 1986, Regulatory Counsel forwarded

to the Board a document described as the "latest draft option
- 28 -

agreement" being contemplated between CCAH and Pharaon.

The

document did not reveal that BCCI was to act as the pledge agent
that was to hold the NBGFC shares, and Regulatory Counsel's
letter did not include a copy of the pledge agreement that would
have revealed the planned existence of the simultaneous loan to
Pharaon from BCCI.
a pre-existing

Nor did the materials disclose that BCCI had

pledge of all NBGFC stock and voting rights as a

result of the January 1. 1985 Memorandum of Deposit, or the fact
that the parties were contemplating a back-up option arrangement
pursuant

to which the NBG shares would be placed with a CCAH

shareholder until such time as it was legal for CCAH to acquire
NBG.

66.

As of June 1986, Altman and representatives of

Pharaon had agreed to a price of $205 million for NBG.

The same

price was reflected in the draft option agreement provided to the
Board of Governors on October 15, 1986.

Although there was no

longer any pressure from a competing bid from NCNB, Altman
subsequently
million,

agreed to increase the purchase price to $220

allowing Pharaon to borrow $140 million as provided in

the original draft agreement prepared in May 1986 by Batastini.
Of the $15 million increase, $10 million was explained by
reference

to the forgiveness by Pharaon of a $10 million note

owing to him by NBGFC.
been contributed
reflected

The 810 million had, however, previously

to the capital of NBG, and was thus already

in NBG's tangible net worth as of the end of the first
-

quarter of 1986 on which Scoffone had calculated

the purchase

price.

a result of the

The remaining $5 million was purportedly

payment by Pharaon of a note payable to NBGFC.

The payment of

this note did not change the value of NBGFC at all, and should
not have resulted in a price increase.

The October 23, 1986 Ootion Aareement
67.

On October 23, 1986, all parties executed various

agreements to effectuate the planned acquisition of NBG by CCAH,
except Altman on CCAH's behalf.

These agreements included:

(1) an option agreement between Pharaon and CCAH under which CCAH
would pay an option fee of $80 million on or before November 3,
1986, and would pay an exercise price of $140 million as soon as
its acquisition of NBG became legally permissible:

(2) a loan

agreement between Pharaon and BCCI, whereby BCCI would lend
Pharaon $140 million at the time CCAH acquired an option to
purchase NBG, secured by another pledge of shares of NBG to BCCI;
and (3) a single, unified pledge agreement whereby Pharaon would
pledge the shares of NBG to BCCI's New York Agency, as pledge
agent, to secure his obligations under the option agreement and
under the loan agreement.

The option agreement dated as of

October 23 identified the New York Agency of BCCI as the pledge
agent.

68.

On November 4, 1986, Pharaon's Paris counsel wrote

to Altman to demand payment under the October 23 documentation.
- 30 -

On or about November 4, 1986, Imam informed Pharaon that CCAR
would not pay the $80 million required under the October 23
option agreement.

Imam stated that CCAH needed additional legal

opinions that its acquisition of NBG would be beyond the reach of
Pharaon's creditors.

Seoaratina the "Inteorated Transaction"
69.

In or around October 1986, Altman and C&W Partner

became concerned that the documents as then drafted in connection
with the NBG option agreement would reveal to the Board BCCI's
extensive participation

in the transaction.

On October 16, 1986,

C&W Partner called Regulatory Attorney to ask whether, under the
transaction as then contemplated, the BCCI loan to Pharaon would
become known to the Federal Reserve.

Regulatory Attorney advised

that it would, because the transaction documents would be part of
the eventual application

to the Board for prior approval to

acquire NBG, and because those documents would be part of the
records of CCAH available to the Board in any Board inspection of
the bank holding company.

C&W Partner then asked whether that

would still be true if the documents were separated so that there
were separate pledge agreements for the Pharaon loan from BCCI
and the option agreement.

Regulatory Attorney advised that so

long as the loan to Pharaon and the option agreement were part of
the same transaction,

the documents would be available to the

Federal Reserve.

- 31 -

70.

On November 20, 1986, Altman met in London with

Imam and a BCCI attorney to discuss the NBG transaction.
memorandum memorializing

In a

that meeting, the BCCI attorney wrote:

Mr. Altman stated that because the Federal
Reserve will see the Pledge Agreement they
will see the references to the Loan Agreement
and BCCI SA and will therefore want to see
the Loan Agreement.
By seeing all the
documents, they would most likely arrive at
an adverse conclusion.
Altman suggested that a better way to have
structured the agreements would have been for
the Option and Pledge Agreements to have been
executed and then perhaps 60 days later, a
Loan Agreement signed and an addendium [sic]
made to the Pledge Agreement to make BCCI a
party to the Pledge Agreement. . . .
[The BCCI attorney1 would contact [C&W
Partner] of Mr. Altman's office and appraise
[sic] him of the above.
[C&W Partner] would
prepare the fresh Pledge Agreement on the
above facts. A Closing Date should be agreed
by all the parties, Mr. Altman suggested
11.12.86 [December 11, 19861 in New York.
Mr. Altman would discuss the above with Mr.
Nag-vi and if he is agreeable, Dr. Pharaon
would be approached.

71.

The BCCI attorney's memorandum also recounted

discussions among Altman, Imam and the BCCI attorney regarding
the back-up option.

The BCCI attorney wrote:

Mr. Altman commented on his concern that the
"Back-Up Option" had not been executed by
"Holder', consideration should be given as to
who would execute the 'Back-Up Option."
Mr. Altman's concern was based on the fact
that at present, endeavors were being made to
change Georgia law to allow CCAIi to buy the
shares of NBGFC . . . if Georgia law cannot
be changed that the Backup Option would be
relied upon as an individual can buy the
shares of NBGFC.
- 32 -

72.

In a memorandum to Naqvi dated December 4, 1986,

the BCCI attorney again memorialized

the discussions underlying

the decision to separate the loan to Pharaon, and its related
pledge, from the option agreement and its pledge.

In that

memorandum, the BCCI attorney said:
[tlhe reason for having two Pledge Agreements
is that Mr. R. Altman feels that in the
previous Pledge Agreement, the references to
*Loan Agreement" would have given the Federal
Reserve cause to see the "Loan Agreement" and
possibly decide that an "integrated
transaction" was being entered into. Whereas
now, with the two Pledge Agreements, the
Federal Reserve will only see the Option
Pledge, which contains no reference to the
"Loan Agreement."

13.

As suggested by Altman in the November 20 meeting

with the BCCI attorney, a set of documents was prepared for
closing of the option agreement on December 11, 1986.

The pledge

agreement prepared in connection with that closing related only
to Pharaon's pledge to CCAH, and did not refer to the loan from
or pledge to BCCI.

14.

On December 18, 1986, CCAH, Pharaon and BCCI's New

York Agency executed an option agreement and a related pledge
agreement whereby Pharaon's NBGFC shares were pledged to BCCI as
pledge agent, and Altman directed payment to Pharaon's account at
BCCI of the option fee of $80 million.

- 33 -

15.

On December 23, 1986, the BCCI attorney prepared

another memorandum

to Naqvi that conveyed the substance of

meetings the BCCI attorney had with Altman and lawyers for
in Washington, D.C. between December 18 and 20.
attorney stated that the Option Agreement
Agreement had been signed on December

18.

CCAH

The BCCI

and related Pledge
His memorandum

continued:
After consultation with Mr. Altman and
[Regulatory Counsel], they advised that the
Loan Agreement and Pledge Agreement be signed
and dated in mid-January or early February
1987, as by then a reasonable period will
have elapsed since signing the Option and the
'integrated transaction" argument would not
be successful.
Accordingly, . . .
tentatively a closing date of January 22,
1987 has been set.

76.

On January 29, 1987, Pharaon executed a Promissory

Note to BCCI for $140 million and executed a second Pledge
Agreement with BCCI whereby Pharaon again pledged his NBGFC
shares to BCCI as collateral

for the loan.

These documents were

never provided to the Board in connection with CCAH's acquisition
of NBG.

77.

As finally executed, the Option Agreement and the

first pledge agreement contained no mention of BCCI's related
loan to Pharaon.

Thus, the original transaction, consisting of

an option, related loan agreement, and unified pledge agreement,
was restructured and documented to appear as two transactions,
all for the purpose of avoiding Federal Reserve scrutiny.
- 34 -

The Subordination Aareement
1%.

Among the documents prepared by Regulatory

Counsel

for CCAH in connection with the option agreement was a
subordination agreement pursuant to which BCCI was to subordinate
its security interest in the NBGFC shares to CCAH's interest.
The subordination agreement provided a means for CCAH to obtain
some protection over BCCI's interest in the NBGFC shares.
December 18, 1986, Altman executed the subordination
behalf of CCAH.

agreement on

BCCI, however, did not execute the subordination

agreement at that time.

Thus, if Pharaon had defaulted in his

obligation to repay the option fee, CCAH could have found itself
unable to realize on its security interest in the NBGFC shares in
view of BCCI's prior security interest in the same shares.

19.

Following the closing meeting on December 18,

1986, Regulatory Counsel brought to Altman's attention the fact
that the subordination agreement had not been executed by BCCI,
and pointed out the dangers involved in disbursing

the option fee

in the absence of the protection provided by the subordination
agreement.

Despite this advice, Altman ordered the disbursal of

the option fee.

~ltman also indicated that he would see to it

that BCCI executed the subordination agreement.

On several

occasions, Regulatory Counsel reminded Altman that he needed to
obtain the signed subordination agreement from BCCI.
did so.

He never

As a result, CCAH was put at risk and BCCI was placed in

- 35 -

a preferred position in connection with the pledges of the NBGFC
shares.

80.

On June 4,

the Board of Governors.

1991, Altman gave sworn testimony to
In that testimony, Altman falsely stated

that he was not responsible for seeing to it that BCCI executed
the subordination agreement.

81.

At the time of the closing of the option

agreement, the NBGFC shares were held in BCCI's offices in London
pursuant to the Memorandum

of Deposit, and BCCI proposed to keep

them there rather than at the New York offices of the Pledge
Agent.

Regulatory Counsel advised against this arrangement as it

posed certain risks to CCAH.

Nevertheless,

at Altman's

direction, Regulatory Counsel prepared documentation under which
BCCI's New York Agency appointed BCCI in London as its sub-agent
under the pledge agreement to permit the NBGFC shares to be held
in London until completion of BCCI's year-end audit.

These

documents were never signed at the closing.

82.

In February 1987'. Regulatory Counsel prepared for

Altman's signature a letter to the BCCI attorney regarding the
location of the NBGFC shares.

The letter recounted that CCAR had

agreed that the shares could remain in London temporarily, but
that it was CO&I's strong preference
United States.

to have them returned to the

Altman never sent the proposed letter.
- 36 -

Following execution of the agreements among BCCI,

83.

CCAH, and Pharaon, Imam became concerned that BCCI's auditors
could uncover Pharaon's January 1985 Memorandum of Deposit of the
NBGFC shares, and could conclude that Pharaon had misrepresented
his debt position to CCAH.

Thus, on March 18, 1987, Imam wrote

to Naqvi that "we require a letter from CCAH dated 18 December
to BCCI S.A., expressing their knowledge of the

1986 addressed

pledge created on 1 January 1985 and confirming their consent to
the continuation

of the pledge."

Imam's memorandum noted that

copies of the January 1985 pledge documents "are available with
On March 19, 1987, Imam conveyed his concern to

Mr. Altman."
Altman.

84.

The following day, Altman telecopied a letter to

Imam, backdated

to December 18, 1986, that contained the

requested consent.
consented

to "the pledge to BCCI S.A. of NBG Financial

Corporation
1, 1985.

The letter expressly acknowledged and

shares under the Memorandum of Deposit" dated January

The consent was conditioned upon the understanding

that

after December 18, 1986, the total amount of Pharaon's
indebtedness

to BCCI would not exceed $140 million.

The consent

letter thus eliminated CCAH's priority with respect to Pharaon's
pledge of NBGFC shares to CCAH as of December 18, 1986.

05.

Also in March 1987, BCCI and Clifford & Warnke

attorneys drafted a side agreement between BCCI and CCAH pursuant
- 3.7 -

to which BCCI guaranteed payment of Pharaon's obligations under
the option agreement with CCAR in the event that CCAH decided not
to exercise its option.

The agreement,

signed by Imam on behalf

of BCCI and Altman on behalf of CCAH, was backdated to
January 29, 1981.
Pharaon.

the day of the BCCI loan of $140 million to

This guarantee was never provided

86.

On March 13, 1997, Georgia

to the Board.

law was amended to

permit the acquisition of NBG by CCAE.

The Due Diligence Review

87.

In the spring of 1987, First American undertook

its due diligence of NBG.

Unlike a normal due diligence review,

conducted in order to determine the price to be paid for a
company, this review was ordered by Altman to determine what
First American had acquired.

88.

The First American review recounted that NBG had

paid a fee of $475,000 to BCCI "related to the development of the
CCAR option."

89.

First American compared NRG's operating

performance to that of its peer group banks.

This review showed

that as of the spring of 1987, NRG was at or near the bottom of
its peer group on a wide variety of measures,

including, among

others, return on average assets, return on average equity,
-

margin on earning

assets, non-interest

expense, percentage of

non-performing loans, and primary capital to average assets.

90.

First American's review also revealed the

extraordinary expense and unusual history of NBGFC's assumption
from Interedec of a 15-year master lease on NBG's expensive new
headquarters building.

Altman was informed that Pharaon was a

partner in the original partnership

that built the new

headquarters building, and injected himself into the building
process, adding at least $5 million to the cost of the building
(which was built by a company of which Pharaon was a 20-percent
shareholder).

In 1984, Pharaon determined

to a real estate limited partnership
cash.

to sell the building

in order to raise needed

The purchase and sale agreement, consummated on June 10,

1985, provided for a large above-market

cash payment for the

building, in return for a 15-year master lease for the building
'at a rent level well above market."

During the course of the

negotiation of the sale, Pharaon attempted to make NBGFC agree to
assume the master lease, but the company refused.

Instead, NBGFC

agreed to reclaim its $5 million investment in the building
without profit, and received a note from Pharaon for that amount.
Later, however, in connection with Pharaon's negotiations to sell
NBG in the spring of 1986, the assumption of the master lease was
effectively forced on NBGFC despite NBGFC's

"underst[anding] that

assuming the master lease would be a very bad deal for NBG," and
would add millions of dollars in costs to NBGFC.
- 39 -

91.

Altman was also informed that the cash flow

deficit resulting from the assumption of the master lease would
be between $28 million and $30 million over the 15-year life of
the lease, and that the assumption by NBGFC

of the master lease,

though effective as of May 11, 1986, was not formally documented
until December 29, 1986, eleven days after the signing of the
option agreement.

Altman was advised that "the cash shortfall

may represent a significant burden on NBGFC's profitability,
representing

from 9% to 12% on its average net income over the

next five years."

Finally, Altman was advised that the option

agreement of December 18, 1986 recounted cash as the only form of
consideration

paid for NBG, and did not mention the assumption of

the master lease as separate consideration.

92.

The

-Dlication

to Acauire NBG

On April 22, 1987, CCAH, CCAI, FAC, and First

American filed an application with the Board of Governors to
acquire NBGFC and NBG.

Altman signed the application on behalf

of the applicants, and provided the factual basis of the
application to the lawyers who prepared it.

The application

contained no mention of BCCI's involvement in the transaction, of
Clifford & Warnke's simultaneous representation of both CCAH and
BCCI in the transaction, or of Clifford's and Altman's personal
interest, as described below, in consummating a transaction that
would benefit BCCI.

- 40 -

93.

The application stated that Pharaon had control of

100 percent of the shares of NBGFC.

The application did not

disclose the existence of Pharaon's pledge of the NBGFC shares to
BCCI under the January 29, 1987 pledge agreement, or the
existence of the Memorandum of Deposit under which BCCI had the
power to vote the NBGFC

shares.

In connection with the application, the Federal

94.

Reserve Bank of Richmond wrote to Regulatory Counsel, asking to
be informed "as to the source" of the funds used to acquire
NBGFC.

On May 18, 1987, based on information provided by Altman,

the attorney responded to the Reserve Bank as follows:
In July 1986, Applicants raised $150 million
in equity capital through a rights offering
to the existing shareholders of CCAH, of
which $80 million was applied to the purchase
of NBGFC. All such new right shares of CCAH
were paid for in cash. Less than 5% of this
equity capital infusion represented
borrowings by shareholders secured by a
pledge of shares and no debt was incurred by
CCAH.
On May 19, 1987, Altman sent a copy of this correspondence to
Naqvi, noting that "we have prepared a response" to the Federal
Reserve's questions.

In fact, Altman was aware that he and

Clifford had themselves had borrowed
approximately

$14,940,272 -- or

10 percent of the $150 million raised in the rights

offering -- from BCCI to purchase CCAH shares in the 1986 rights
offering, and that they pledged their CCAH stock to secure the
loan from BCCI.

- 41 -

95.

On the basis of the record before it, including

the representations

contained in the application, the Board

approved CCAH's application to acquire NBG on June 26, 1987.

96.

On August 19. 1987, CCAH transferred the option

to purchase NBGFC to First American.

First American exercised

the option on August 19, 1987, in accordance with the option
agreement, and the option exercise price of $140 million plus
interest, was

91.

transferred to BCCI.

With respect to First American's

acquisition of

NBG, Clifford and Altman provided legal counsel to BCCI, and
thereby acted as BCCI's agents.

As such, Clifford and Altman had

fiduciary duties of loyalty to BCCI that required them to place
BCCI's interests above the interests of themselves or
unaffiliated business enterprises.

98.

The acquisition of NBGFC created a serious drain

on the financial health of First American, due in great measure
to the acceptance of the assignment of the onerous master lease
on the NBG headquarters

building.

In 1992, First American

transferred NBG to another of its subsidiaries at a fair market
value of only $90 million -- $130 million less than it had paid
for the bank only five years earlier.
American paid approximately

In addition, First

$12 million to get out of the

obligations of the master lease.
- 42 -

III.

CLIFFORD'S

99.

ANDALTMAN'S

STOCK

PURCIiASES AND SALES

Clifford and Altman determined early in their

involvement with CCAH that they would not seek large salaries as
a result of their work for the company and its subsidiaries.
Rather, as an alternative means of compensation, Clifford and
Altman desired to be compensated through the acquisition of stock
of CCAH and the eventual sale of that stock at a profit.
Accordingly, Clifford asked for and received a salary of only
$50,000 per year from CCAH.

Altman received no salary for his

positions at CCAH and its subsidiaries.

100.

Clifford and Altman sought out the services of a

law firm ("Transaction Counsel") to draft documentation which
they would use to effectuate an acquisition of CCAH shares.
Early drafts of these documents contained provisions whereby CCAH
itself agreed to issue shares to Clifford and Altman.

However,

neither Clifford nor Altman ever approached the CCAH board or the
CCAR shareholders to suggest a stock dividend plan or some other
method of their acquiring or receiving CCAH stock from CCAH
directly, for services rendered to CCAH.

101.

In accordance with their plan to receive CCAH

shares as compensation,

Clifford and Altman met with Abedi and

Naqvi, on more than one occasion, prior to the 1986 rights
offering and proposed to Abedi that in lieu of any meaningful
salary for managing CCAH and its subsidiaries,
- 43 -

they be given CCAH

shares that when sold would yield a profit of $3 million and $1.5
million, respectively.

Abedi, under pressure from Clifford and

Altman, acquiesced and agreed to this proposal.

102.

It was determined that Clifford and Altman would

acquire CCAR shares as the result of a rights offering to be
conducted in July 1986.

BCCI was to arrange for waivers of

rights shares by existing shareholders,

in order to ensure the

availability of CCAH shares for Clifford and Altman.

Clifford

and Altman would acquire these shares at the preferential rights
offering price.

103.

Despite their substantial personal financial

resources, Clifford and Altman each determined to borrow the
entire amount needed to purchase their respective shares of CCAH.
While Clifford and Altman initially requested that financing be
provided by BCCI, Naq'vi insisted that they look elsewhere,
because BCCI was under pressure from its auditors to reduce the
amount of BCCI financing secured by CCAR shares.

104.

Naqvi suggested that Clifford and Altman approach

BAII for the financing, the bank that had previously

lent money

to FAC in connection with the acquisition of Financial General.
Altman, on behalf of himself and Clifford, entered into
discussions with Nicholas D.R. Bradshaw
of W&II.

("Bradshaw"), an employee

During the course of these discussions, Bradshaw
- 44 -

informed Altman that BAII was not comfortable making the loans to
Clifford and Altman based solely on the shares of CCAH as
coliateral, even with full recourse to the borrowers.

For this

reason, Bradshaw had discussed with Altman the idea of Clifford
and Altman securing agreements, known as "put" agreements, that
would guaranty the future sale of their CCAH shares at a prearranged purchase price.

105.

As a result of the discussions between Altman and

Bradshaw, a subsequent draft of the documents related to the
impending acquisition of CCAH shares by Clifford and Altman,
dated June 19, 1986, provided Clifford and Altman with the right
to require Adham to purchase their shares, with BCCI obligated to
purchase them if Adham failed to do so.

These documents were

drafted even though neither Clifford nor Altman ever discussed
with Adham their intentions to have Adham obligated to buy their
CCAH shares.

106.

In a letter dated July 10, 1986, Altman forwarded

to Transaction Counsel a copy of draft loan documents prepared by
BAII.

Prior to providing the draft loan documents to Transaction

Counsel, however, Altman added non-recourse
draft loan documents.

Such provisions,

provisions to the

if accepted by BAII,

would limit BAII's recourse in the event of default to the CCAH
shares securing the loan, and would eliminate personal liability
on the part of Clifford or Altman.
- 45 -

Transaction Counsel forwarded

the draft documents, with the non-recourse provisions that had
been prepared by Altman, to BAII.

107.

Clifford and Altman had arranged with BCCI that

they would purchase their shares at book value, the same
preferential price granted to existing shareholders of CCAH.
However, at least as early as July 17, 1986, Altman was aware,
based on information provided to Altman by Naqvi, that a
transaction was planned in the near future in which 30 percent of
CCAH shares would be sold in three phases for $6094 per share.
On that date, Naqvi telecopied to Alman
contract for Altman's

legal review.

a short portion of a

The material provided to

Altman revealed that an unnamed company was to arrange for the
sale to unnamed investors a total of 30 percent of the shares of
CCAH in three stages.

The first of these stages was to involve

the transfer of 22,152 shares, or 9.9 percent of CCAH shares, at
a price of $6094 per share.

108.

The Articles of Incorporation of CCAH did not

require that waived shares be sold to non-shareholders at the
same price as those acquired by existing shareholders pursuant to
the existing shareholders' preference

rights.

This practice had

never occurred in connection with any CCAH rights offering prior
to the 1986 rights offering.

- 46 -

109.

In order to provide waived shares for Clifford

and Altman to acquire in the 1986 rights. offering, BCCI arranged
for a named CCAH shareholder, Mashriq Holding Company
("Mashriq") , to waive its rights to acquire

6742 shares~ of CCAH

in the rights offering held on July 25. 1986.

Mashriq thus

waived its right to acquire those shares at the rights offering
price of $2216 on July 25, 1986, although one day earlier it had
purchased shares of CCAH from existing CCAH shareholders at a
price of $4044.20 per share.

Pursuant to the 1986 rights

offering, on July 25, 1986 Clifford acquired 4495 of Mashriq's
waived shares, and Altman acquired the remaining 2247 shares,
each at the rights offering price.

110.

As of July 25, 1986, the day of the 1986 rights

offering, BCCI transferred to the CCAH share subscription account
all funds necessary for a full subscription
offering shares.

of all rights

This included nearly $15 million for Clifford's

and Altman's purchase of CCAH shares in the rights offering, even
though Clifford and Altman had not yet obtained a loan from BAII,
BCCI, or any other financial institution,

for the purchase of the

shares of CCAH.

111.

On July 29, 1986, Mashriq sold 22,152 shares of

CCAH -- the number recounted in the Suly 17, 1986, telecopy to
Altman -- to five holding companies beneficially

- 47 -

owned by Khalid

bin Mahfouz at a price of $6094 per share.

This amounted to a

sale of 9.9 percent of the outstanding shares of CCAR.

112.

By a letter dated July 30, 1986, Altman was

informed by Bradshaw that BAII could not make the loans to
Clifford and Altman based on the terms being sought by them.
Specifically,

Bradshaw stated that there had never been any

discussions with regard to non-recourse loans and that it would
not be possible

for BAII to limit its recourse just to the shares

of CCAH.

Subsequent

113.
the acquisition

to BAII's refusal to provide loans for

of the CCAR shares, Clifford and Altman

requested, and Naqvi agreed, that BCCI would provide all of the
funding for the CCAH shares already in the possession of Clifford
and ~ltman.

Naqvi agreed to Clifford's and Altman's request that

the loans be non-recourse

as to the borrowers, the only recourse

being to the CCAR shares that would secure the loans.

Naqvi also

agreed that the interest rate for the loans be at the London
Interbank Loan Rate

('Libor') with no margin above Libor.

These

loan terms were more favorable to Clifford and Altman than those
that would ordinarily
transactions,

apply in comparable, arms-length

Specifically,

under the proposed loans that had

been offered by BAII, Clifford and Altman would only have been
able to borrow up to $S million per year for two years at a rate
of 1.25 percent over Libor.
- 48 -

Subsequent to receiving the loans from BCCI, and

114.

after Clifford and Altman already had the shares of CCAH in their
possession, Altman prepared two sets of loan documents, one for
himself and and one for Clifford, and sent these documents,
already executed by Clifford and Altman, to Naqvi.

The documents

consisted of typed promissory notes (the "Typed Notes") and
pledge agreements.

In Altman's transmittal of the documents to

Naqvi he stated that the documents "confirm the loan of funds"
and "reflect an approach to the transaction that should be
acceptable."

Altman's transmittal also noted that Clifford and

Altman, although preferring to obtain all of the financing from
BCCI, remained ready to obtain a portion of the financing from
other sources, but that to do so they would require an executed
"Put Agreement,"

as BAII had required, so that the investment

could be readily liquidated at a set price.
Put Agreement

Under the proposed

that accompanied the documents, Adhsm would be

obligated to purchase Clifford's and Altman's shares at a price
identified in the Put Agreements. and BCCI would guaranty Adham's
performance.

Thus, even if Clifford and Altman had obtained

financing for their stock purchase from another financial
institution, that financing would have provided that BCCI would
ultimately be responsible for liquidating Clifford's and Altman's
investment at a substantial profit.

115.

Among the provisions of the Typed Notes prepared
specifically

by Altinan were provisions that:
-

identified the CCAH

shares as collateral for the loan; entitled BCCI, the lender, to
recourse only against the shares of CCAH with no recourse against
the borrower personally; and stated the intention of the parties
to refinance the loan at its maturity.

Similarly, the Share

Pledge Agreement prepared by Altman contained a non-recourse
provision that provided for recourse only against the shares of
CCAH with no recourse against the borrower personally.

116.

During this time period, BCCI's auditors had

begun to express concern over the amount of credit BCCI had
extended that was secured by CCA?l shares.

As of August 1986,

BCCI's advance of funds for the purchase of Clifford's and
Altman's CCAH shares from the 1986 rights offering was reflected
on the books of BCCI as a single, unsecured loan to Clifford and
Altman jointly that bore an interest rate of 2 percent over
Libor.

These terms differed significantly

from the more

favorable terms Clifford and Altman had agreed to with BCCI and
which were contained in the documentation
prepared.

that Altman had

In late October 1986, pursuant to an audit of BCCI,

Clifford and Altman received a request for confirmation of a
single loan to them from BCCI.

The audit request asked Clifford

and Altman to confirm that their loan balance as of September 30,
1986, was $15.193.245.

Based on the initial loan amount of

$14,940,272 as of July 25, 1986, the balance stated in the
request for confirmation was calculated at the approximate rate
of 2 percent above the 3-month Libor rate in effect during the
- 50 -

relevant period.

This rate was consistent with the rate of

interest that had been approved by the BCCI Central Credit
Committee and the rate of interest appearing on the books of BCCI
in connection with the loan to Clifford and Altman.

After receiving the request for confirmation,

117.

Altman complained to Naqvi that the interest rate identified on
the confirmation was well above the interest rate that had been
agreed to between them.

Nag-vi assured Altman that he and

Clifford were not responsible for the interest, because of their
previous agreement, and that this confirmation was necessary for
audit purposes.

Despite their agreement that the applicable

interest rate was Libor with no margin, Clifford and Altman
signed the confirmation request, confirming that the information
stated therein was accurate.

While Clifford and Altman knew that

the CCAH shares were collateral for the loan and that neither
Clifford nor Altman had any personal obligation to repay the
loan, they failed to identify these factors when they confirmed
the audit confirmation request.
for confirmation

Moreover, although the request

stated that the completed confirmation should be

returned directly to BCCI's auditors, Clifford and Altman
returned the signed confirmation to Naqvi at BCCI.

118.

documentation

In the latter part of 1986, Imam was gathering
for the audit of BCCI and determined that, although

he had prepared internal BCCI documentation
-

51 -

for the loan to

Clifford and Altman, he had not seen an executed promissory note
from either Clifford or Altman.

He therefore completed a

standard, one page, BCCI printed form promissory note
Note") for each of Clifford and Altman.

("Printed

Imam gave the Printed

Notes to Naqvi to have them executed by Clifford and Altman
respectively.

Naqvi, in discussions with Altman, explained that

the Printed Notes were the type of documents

that were usually

presented to the auditors and that, in the case of Clifford and
Altman, the Printed Notes would be provided to the auditors.
Printed Notes made no reference that:

The

the loans were non-

recourse to Clifford and Altman; the CCAH shares were collateral
for the loans; or the interest rate for the loans was at the
preferential

119.

rate of Libor with no margin.

Notwithstanding

the fact that Clifford and Altman

had already prepared and executed Typed Notes for the loans to
purchase the CCAH shares, Clifford and Altman proceeded to
execute the Printed Notes.

By means of an undated memorandum

Naqvi. Altman forwarded the executed Printed Notes to BCCI, along
with transmittal letters signed by Clifford and Altman
respectively and dated July 25, 1986.

The memorandum

and the

transmittal letters stated that the Printed Notes would serve as
exhibits to the Typed Notes, although the Typed Notes contain no
reference to an exhibit.

Although.the

transmittal letters stated

that "notwithstanding any provision in the printed note to the
contrary, in any and all instances where there is a conflict
- 52 -

between the provisions

of the typed note and the provisions of

the printed note, including,
concerning

the

term

without

of the note,

limitation,

source

provisions

of repayment, and

the typed note shall in all respects govern and

collateral,

control," both the Printed Notes and the Typed Notes existed
simultaneously, with neither being terminated upon the execution
of the other.

120.

Nag-vi was concerned about the disparity between

the Typed Notes, with their provisions regarding collateral and
non-recouse arrangements,

and the books of BCCI relating to the

loan to Clifford and Altman, which showed the loan as unsecured.
Therefore, Nag-vi instructed Altman to remove the collateral, nonrecourse, and refinancing provisions

from the documents that

Altman had prepared and put the provisions in a separate letter
to BCCI.

121.

Accordingly,

Altman, on behalf of himself and

Clifford, prepared revised Typed Notes and revised share pledge
agreements that made

no mention of the collateral, the non-

recourse nature of the loans, or the refinancing provisions.
Additionally, Altman prepared
the loans.

"side' letters to BCCI regarding

In these side letters, BCCI agreed to change the

basic terms set forth in the revised Typed Notes and revised
share pledge agreements

in two critical respects.

agreed that:
- 53 -

First, BCCI

"notwithstanding any provision of the Note or
Pledge Agreement (or any other document
relating to the loan by the undersigned to
BCCI) to the contrary, it is understood and
agreed that the undersigned
shall not be
obligated personally
to repay to BCCI the
loan principal
or any interest accrued
and that] BCCI shall be limited
thereoar,
solely to the undersigned's
interest in the
CCAH shares and any proceeds thereof to repay

the loan and interest thereon ... .I
Second, in place of the proposed Put Agreements,
provided

the side letters

that whenever Clifford or Altman wished to sell their

shares, ",BCCIshall arrange for the sale of said CCAH shares to
.

interested buyers in such manner, amount, and at such

prices as BCCI and [Clifford or Altmanl shall mutually
determine."

The revised Typed Notes, revised pledge agreements,

and side letters were executed by Clifford and Altman and
transmitted to BCCI.

122.

At the time that Clifford and Altman had already

received the CCAH shares and, therefore, had already received the
financing from BCCI, no documentation had been signed by Clifford
or Altman evidencing their promise to repay BCCI's loans.
Although all three of the the notes subsquently signed by
Clifford and Altman and the side letters accompanying

the revised

Typed Notes were all dated July 25, 1986, none of these documents
was prepared or executed, by either party, until well after that
date.

- 54 -

123.
Typed Notes

The BCCI auditors were never provided with the

(either in their original or revised form), the

transmittal letter for the Printed Notes which provided that the
Typed Notes' terms were controlling notwithstanding the terms of
the Printed Notes, the Pledge Agreements, or the side letters
providing

that the loans to Clifford and Altman were non-

recourse.

The auditors, who had criticized BCCI's level of CCAH-

secured lending, were shown only documentation suggesting that
the loans to Clifford and Altman were unsecured, and made
according to standard documentation

used by BCCI, using an

interest rate of 2 percent above the 3-month Libor rate.

signing the Printed Notes whose terms were not operative to the
extent that they conflicted with the Typed Notes, and by
arranging

for different terms to be effective evidenced only by

side letters, Clifford and Altman participated in BCCI's false
description

of the loans to its auditors.

124.

Clifford and Altman failed to disclose to the

other directors of CCAH, Messrs. Symington and Quesada, the
following material

facts in connection with the CCAH board's

approval of the sale of waived CCAH shares to new purchasers:
-- that Clifford and Altman intended to purchase shares
of CCAH at the 1986 rights offering,
-- that Clifford and Altman intended that the purchase
be at book value rather than at a market price,
__ that other sales of CCAH stock, outside the rights
offering, but in the same time period as the rights
offering, were planned at much higher prices,
-

-- that Clifford and Altman were financing their
purchases by means of non-recourse, preferential-rate
loans from BCCI secured by their CCAH shares,
-- that BCCI had agreed to arrange for the subsequent
repurchase of their shares at a price to be agreed upon
between Clifford and Altman and BCCI, and
-- that Clifford and Altman were simultaneously
involved in the acquisition, on behalf of CCAH, of NBG
from BCCI's customer, shareholder and debtor, Pharaon,
in a transaction that would be beneficial to BCCI, a
client of Clifford & Warnke.
125.

Each of the CCAH directors signed a Consent in

Lieu of Directors' Meeting, dated "as of July 25, 1986," relating
to the 1986 rights offering of the same date.

These Consents,

and the resolution accompanying them (also dated as of July 25,
19861,

were not prepared or sent to the CCAB directors until

February or March 1987, at least seven months after Clifford and
Altman acquired their shares of CCAH.

The consent forms

evidenced the director's consent to a corporate resolution
referred to in the consent.

The consent and the resolution were

prepared by Clifford & Warnke.

Despite the fact that Clifford

and Altman had a direct personal interest in the resolution, they
did not abstain from voting in favor of it.

Thus, they did

nothing to put their fellow directors on notice that they had a
personal interest in the resolution being approved.

126.

The resolution itself was designed to conceal

that Clifford and Altman would be the individuals purchasing some
of the waived shares at book value.

The resolution recited only

that written confirmations had been received from existing
- 56 -

shareholders

accepting or

newly-issued

shares.

from

received
Shares

naat

persons

the

did not

between

BCCI

and

CCAH

not

see

CCAH’s

copies of

the

loans

were

128 ~

in London,

the

II-I

Moreover

that

the

waived

their

there

was

$6094

per

other

Clifford and

Clifford

willing to pay

their

JuI-le

and

1987,
Altman

their

meeting, in

reiterated

identify

directors did
to

Altman

“the

waived by Mashriq.

financial

purchases.

to Regulatory

disclose to

Altman

arrangements
Nor

did

they

Counsel,

with

BCCI

reveal

despite

CCAH

the

time

obtained.

Clifford

interest payment

reveal

involvement as counsel

Counsel’s

share.

with respect

time did Clifford or

directors

per

been

financial arrangements

did not

accepting the

$2216

the

waived

the

to purchase

the

Altman

sent

letters

financial arrangements

Regulatory

CCAH.

in connection with their stock
those

agreed

apparently

was

CCAH

board

and

shares.

to 30 percent

12-i ~

had

Clifford and

who

Directors" of

who

reference

make

nonshareholder

for

to purchase

agreed

resolution did not

the

Thus,

shares,

purchase

have

who

rights offering price

the

Altman

**written confirmations have

that

and

(emphasis added)
or

waiving their preemptive rights to

each

meeting with Abedi

and

Naqvi

insisted on making an

respective loans

telephone

his insistence

from

conversation with

BCCI.
Iman,

paying interest on the

Subsequent

Altman
loans.

set forth in the side letters related to the loans, dated July
25, 1986, interest payments were not required at this time.
However, as a result of their insistence, Naqvi instructed Imam
to calculate the interest due on their loans and provided the
information to Altman.

Imam calculated the interest rate at what

he determined to be Libor, notwithstanding
Altman's signed loan confirmation

Clifford's and

effectively confirming a

substantially higher rate.

129.

In August 1987, Clifford and Altman participated

in a rights offering as shareholders

of CCAH.

Again, they

obtained loans from BCCI at Libor with no margin for the full
amount of the cost of the shares they acquired, and pledged the
shares to BCCI as collateral

for the loans.

In addition,

Clifford and Altman again executed promissory notes identical in
all material respects to the revised Typed Notes relating to
their 1986 loans, and side letters with BCCI making the loans
non-recourse, providing that Clifford and Altman were not
obligated to pay principal or interest on the loans, and
providing that BCCI would find a buyer for their shares at such
time as they desired to sell at a price to be determined by BCCI
and Clifford or Altman.

130.

In or around November 1987, BCCI again sent audit

confirmation requests to Clifford and Altman in connection with
their loans.

These requests identified the applicable rate on
- 58 -

the loans as 10.25 percent, considerably

in excess of the Libor

rate with no margin that Clifford and Altman had agreed, in their
revised Typed Notes, to pay.

The audit requests asked Clifford

and Altman to confirm the correctness of the information by
signing the confirmations, or to indicate the reasons for any
disagreement,

and to return them directly to BCCI's auditors.

Despite this request, Clifford and Altman did nothing to alert
BCCI's auditors that the auditors' understanding of the terms of
Clifford's and Altman's loans was incorrect.

131.

As a result of their initial acquisition in 1986

and the additional shares purchased

in the 1987 rights offering,

Clifford and Altman held 5446 and 2722 shares of CCAH,
All of these shares were

respectively, as of August 1987.
pledged to BCCI.

132.

Altman was aware that under Netherlands Antilles

law, a security interest in shares is perfected by noting the
pledge in the books and records of the issuer.

As BCCI's

attorney, Altman had a fiduciary duty to BCCI to ensure that its
security interest in his and Clifford's shares was perfected.

Secretary of CC?+H, Altman had the means of ensuring that BCCI's
pledge was properly recorded in CCAH's books.

Nonetheless, no

pledge of shares by Clifford or Altman to BCCI was ever recorded
in CCAH's books.

133.

In a letter dated February 8. 1988, Clifford

wrote to Naqvi to ask him to arrange a sale of some or all of
Clifford's and Altman's CCAH stock.

134.

In late February or early March 1988, Altman met

in London with Nag-vi to discuss, among other matters, the sale of
Clifford's and Altman's CCAH shares.

During the course of the

meeting, Naqvi determined that the current value of CCAH was
approximately 2.67 times the book value of CCAH.

At or around

that time, Altman agreed that he and Clifford would each pay a
commission to BCCI out of the sale proceeds,

so long as the

commission did not affect their net profit.

135.
join Altman.

At this same meeting, Naqvi instructed Imam to
Thereafter, Altman informed Imam that he and

Clifford were selling a portion of their CCAH shares and that
Abedi had previously promised Clifford a profit of $3 million and
Altman a profit of $1.5 million.

In accordance with the prior

discussions between Naqvi and Altman, Altman

instructed Imam to

calculate the number of shares, the multiplier

over the book

value of CCAH, and the selling price per CCAH share necessary for
Clifford and Altman to obtain the profit promised and to repay
the loans used by Clifford and Altman to purchase all of their
CCAH holdings.

- 60 -

136.

In a subsequent conversation after Altman had

returned to Washington, Altman instructed Imam that in addition
to ensuring that the sale of Clifford's and Altman's shares of
CCAH was sufficient to obtain the profits agreed to and to repay
the BCCI loans, it would be necessary to ensure that the sale
price was sufficient to recover any interest already paid to BCCI
on the loans and any taxes that may accrue as the result of the
sale of the CCAH shares.

Altman instructed Imam not to disclose

their conversations regarding the sale of the CCAH shares to
anyone other than Naqvi.

137.

In calculating the amount necessary to repay

Clifford's and Altman's loans from BCCI, Imam utilized the loan
balances stated on the books of BCCI, which calculated the
interest rate at Libor plus 2 percent.

Since the interest

charges utilized Imam were based on an interest rate in excess of
the interest rate that Clifford and Altman had agreed to, Altman
insisted that the excess in the interest being charged be used
for the payment of the commissions that Clifford and Altman had
agreed to pay.

138.

On or about March 20, 1988, Altman contacted Imam

and dictated the contents of a letter that Altman instructed Imam
to send to Clifford.

The letter, which Imam subsequently

prepared and dated March 21, 1988, stated that BCCI had found a
purchaser who was willing to purchase up to 4800 shares of
- 61 -

Clifford's and Altman's CCAH holdings at a price of $6800 per
share.

The letter further stated that it was expected that

Clifford and Altman would be required to pay down their BCCI
loans and that they would be required to pay a commission to BCCI
for arranging the sale.

After preparing

instructed by Altman, Imam transmitted

the letter, as

the letter to Clifford and

Altman.

139.

By letter dated March 28. 1988. Clifford and

Altman instructed Naqvi to proceed with the sale, for cash, of
4900 of their CCAH shares.

Clifford and Altman further advised

that they would repay their outstanding
that they would pay commissions

indebtedness to BCCI and

to BCCI for arranging the sale of

$1.5 million and $750,000, respectively, with such commissions
being booked as income to BCCI.

140.

On March 31, 1988, BCCI transmitted to Clifford

and Altman $21,760.000 and $10,880,000, respectively,
sale of 4800 shares of CCAH at $6800 per share.

for their

This represents

the highest price ever paid for CCAH shares in the history of the
company.

Out of the sale proceeds,

and consistent with their

agreement, on March 31, Clifford and Altman transferred to BCCI
funds sufficient to repay, in their entirety, the loans from BCCI
utilized by Clifford and Altman to purchase CCAH shares.

- 62 -

The

commission that was ultimately charged to Clifford and Altman
equalled the difference between the loan balances of Clifford and
Altman carried on the books of BCCI (at an interest rate of Libor
plus 2 percent) and the loan balances as the result of the
agreement between Clifford and Altman and BCCI (at an interest
rate of Libor).

This resulted in no additional outlay of funds

by Clifford or Altman.

According to a statement provided to the

141.

Committee on Banking, Finance, and Urban Affairs of the United
States House of Representatives, Clifford and Altman netted
approximately

$2.75 million and $1.35 million, respectively, on

their stock transactions, in addition to retaining their
remaining shares of CCAH, 2246 shares for Clifford, and 1122
shares for Altman. free and clear of any liens or other
obligations.

142.

On February 12, 1991, in sworn testimony to the

Board of Governors, Altman falsely stated that he did not know
how the purchase price of $6800 per share was arrived at, and
that he did not discuss the matter with Imam.

143.

In April 1988, Clifford and Altman entered into a

Purchase and Sale Agreement with BCCI.

Pursuant to the

agreement, BCCI agreed that upon Clifford's

or Altman's death

BCCI would purchase any CCAH shares then owned by Clifford or
- 63 -

Altman for a price of $2310 per share, calculated to be their
average acquisition price for CCAB shares.

This agreement

amounted to a promise to pay Clifford $5,188,260, and Altman
$2,591,820, for their CCAB shares upon their death, without any
regard to the actual value of the shares at that time of either
of their deaths.

Neither Clifford nor Altman provided any

consideration to BCCI in exchange for BCCI's obligation to
purchase their CCAH shares.

Nor did they disclose this agreement

to other members of the CCAH board.

rv.

TEE DECEMBER 1989 INQUIRY
144.

On December 13, 1989, a Board official ("Board

Official") wrote to Altman concerning loans from BCCI to CCAH
shareholders that might be secured by a pledge of CCAH stock.
Board Official's

letter requested "information on any loans

extended to the original or subsequent investors, either directly
or indirectly, by BCCI or any of its affiliated organizations."

145.

Altman consulted Regulatory Attorney concerning

the manner in which to respond to Board Official's request.
Altman mentioned

that there may have been loans to shareholders

by BCCI that had been paid off, and indicated that he did not
believe such loans should be of concern to the Federal Reserve.
He did not mention to Regulatory Attorney that he and Clifford
had been the recipients

of non-recourse

loans from BCCI for the

purchase of CCAH shares and secured by those shares.
- 64 -

146.

In his February 5, 1990 response, Altman wrote to

Board Official that "we do not have access here to information
regarding any financial arrangements

that might exist between a

shareholder of Credit and Commerce American Holding, N.V. and
other financial institutions, including Bank of Credit and
Commerce International,

S.A. ('BCCI').

Based on our

consultations with the resident managing director for [CCAH] in
the Netherlands Antilles, we can only confirm that no pledge or
security interest has ever been recorded on the Company's share
register by any lender."

147.

Altman's letter was false in that it failed to

disclose that he and Clifford had existing financial arrangements
with BCCI concerning the sale of their CCAH shares, both during
their lifetimes and upon their deaths.

Nor did Altman's letter

disclose the fact that his and Clifford's shares of CCAH had been
pledged to secure their loans from BCCI but that the pledge had
not been recorded.

148.

Altman's February 5 letter to Board Official

attached a letter which, he wrote, he had "just received" from
Naqvi concerning BCCI's loans to CCAH shareholders.

The letter

was carefully drafted to convey the false impression that,
although some loans to CCAH shareholders were secured by CCAH
shares, these loans had not been made for the purpose of

- 65 -

purchasing

the CCAH shares.

Altman or C&W Partner drafted the

Naqvi letter and sent it to Naqvi for signature.

VIOLATIONS

OF LAW AND

FlEGULATION

Clifford and Altman Violated the BBC Act by
Participating
in BCCl's Acquisition
of
Control of CCAE in Violation
of the BBC Act

COUNT

149.

The Bank Holding Company Act of 1956, as amended

(12 U.S.C. 1841(a)(l) and (2); 12 U.S.C. 1842(a) (I)), and
Regulation Y (12 C.F.R. 225.11) make it unlawful, except with
prior approval of the Board of Governors, for any action to be
taken that causes any company to become a bank holding company.
A company becomes a bank holding company if it owns or controls,
directly or indirectly, or acting through one or more other
persons, 25 percent or more of the voting shares of a bank.

150.

As set forth in the BCCI Notice, BCCI violated

the BHC Act by acquiring through nominees, 25 percent or more of
the voting shares of CCAH without obtaining the prior approval of
the Board.

151.

Clifford and Altman participated

in and aided and

abetted BCCI's violation of the BHC Act, through and as evidenced
by the following actions,
(a)

among

others:

Altman concealed from the Board of Governors
BCCI's violation of the BHC Act by submitting, in
February 1990, statements to the Board that he
knew to be false and that concealed BCCI's
relationship with CCAH shareholders;
- 66 -

(b)

Clifford and Altman allowed CCAH to be used by
BCCI to transfer BCCI's control of NBG from BCCI's
nominee, Pharaon, to CCAH in a transaction that
would benefit BCCI and, at the request of BCCI,
Altman subordinated the interests of CCAH to BCCI
in that transaction:

(c)

Clifford and Altman entered into loan and
repurchase arrangements with BCCI in connection
with their purchases of CCAH shares in 1986 and
1987 that made their financial interests dependent
on BCCI, which gave BCCI influence over their
actions as the senior management of CCAH.

COUNT 2

152.

Clifford and Altman Violated
the Board's
Order under the BHC Act that Approved CCAR~s
of the First American Banks
Acquisition

Clifford and Altman violated

the Board's Order of

August 25, 1981, approving the acquisition by CCAH of Financial
General, by, among other means, arranging

in May 1982 and July

1982 for CCAH to borrow funds to pay interest on CCAH's
acquisition debt under the BAII loan in violation of the express
conditions of the Order that acquisition

financing would not

exceed $50 million.

COUNT

153.

As set forth in paragraphs

Altman Violated
the BBC Act by Participating
in BCCI's Acquisition
and Retention
of
Control of National
Bank of Georgia in
of the BRC Act
Violation

179 through 200 of the

BCCI Notice, BCCI acquired control of NBG from at least
January 1, 1985 without obtaining the prior approval of the Board
as required by the BHC Act.

- 67 -

154.

Altman participated in and aided and abetted

BCCI's violation of the BHC Act in connection with its illegal
retention of control over NBG when he took affirmative steps,
including the separation of the pledge of shares to CCAH from the
pledge of shares to BCCI, to conceal from the Board the material
fact that BCCI was to lend Pharaon the full amount of the
purchase price for the NBG shares, less the amount of the option
price to be paid by CCAH.

At this time, Altman was aware that

Pharaon was serving as a nominee for BCCI in acquiring another
U.S. bank and that Pharaon had previously obtained loans from
BCCI that were still secured by shares of NBG.

Clifford and Althea Breached Their Fiduciary
Duties To CCAH, Pirat American
aad CCAH
Shareholders

COUNT

155.

Clifford and Altman breached their fiduciary duty

to CCAH and First American by accepting compensation
duties to those companies from BCCI.
compensation by

for their

BCCI provided such

(a) arranging for Clifford and Altman to purchase

stock at the 1986 rights offering at the price paid by existing
shareholders rather than at a market price,
preferential-rate,

non-recourse

Altman's stock purchases

(b) providing

financing for Clifford's and

in 1986 and 1987, (c) arranging for the

sale of a portion of Clifford's and Altman's stock in 1988 at a
price that provided Clifford and Altman with the profit
guaranteed to them by BCCI, and (d) agreeing

to buy from Clifford

and Altman any CCAH stock in their possession at the time of
- 68 -

their death, at a fixed price determined without regard to the
value of the stock at that time.

156.

Clifford and Altman breached their fiduciary

duties to the board of directors and shareholders

of CCAH and to

the board of directors of First American, by preparing and
distributing to CCAH shareholders an offering circular related to
the 1987 rights offering and by providing information to the
directors of CCAH and First American which failed to disclose all
material information regarding the acquisition of NBG, including:
that Clifford and Altman had financial arrangements with BCCI
that could cause them to favor the interests of BCCI over those
of CCAH and CCAH shareholders; and that Altman had subordinated
the interests of CCAH as a secured party to those of BCCI and
thus put CCAH at risk in connection with the NSG option
transaction.

COUNT

Altxaan

False

157.

Engaged in Violations
of
Statements
to the Board

Law by Making

Altman made the following false statements to the

Board in violation of 18 U.S.C. 1001, when:

(a)

Between February and November of 1990, Altman
informed the Board that he had no information
concerning financial arrangements between
shareholders of CCAH and any financial
These statements were false in that
institution.
Altman was aware of the following financial
arrangements between shareholders of CCAH and
financial institutions, including BCCI:
-

(i)

Altman's and Clifford's repurchase
agreement with BCCI whereby BCCI agreed
to find a purchaser for their CCAIi
shares at a price acceptable to them and
BCCI; and

(ii)

Altman's and Clifford's agreement with
BCCI that BCCI would purchase any of
their remaining shares upon their
deaths.

(b)

In April 1987, Altman caused Regulatory Counsel to
submit to the Board of Governors, in connection
with the application to acquire N%G, a statement
that less than five percent of the $150 million in
capital raised in the 1986 rights offering
represented borrowings by shareholders secured by
a pledge of CCAH shares, when at the time, Altman
was aware that he and Clifford had borrowed almost
$15 million from BCCI for their purchases of CCAH
shares, and secured such borrowings with their
CCAH shares.

(c)

On February 12, 1991, and in June and July 1991,
in sworn testimony to the Board, Altman stated
that:
(i)

he was not responsible for obtaining the
signature of BCCI to the subordination
agreement in connection with the N%G
option transaction; and

(ii)

he did not know how the sale price of
$6800 per share was arrived at in
connection with the sale of his and
Clifford's CCAH shares in March 1988,
and that he never spoke to Imam about
the issue of price.

PROHIBITION ACTIONS AGAINST CLIPPORD AND ALTNAN
A.
158.

Clifford
As set forth in this Notice, Clifford

violated the BHC Act and Regulation Y by participating
aiding and abetting the violations

of the BHC Act and

- 70 -

(a)
in or

Regulation Y by BCCI set forth in Count 1 of this Notice; (b)
violated a Board Order in violation of the BHC Act as set forth
in Count 2 of this Notice: and (c) committed breaches of his
fiduciary duties as set forth in Count 4 of this Notice.

159.

By reason of the violations

regulation, unsafe and unsound practices,

of law and

and breaches of

fiduciary duty committed by Clifford set forth in this Notice,
Clifford received financial gain or other benefit when:

(a)

Clifford was able to borrow the full purchase price of his shares
of CCAH from BCCI on extremely favorable terms that included an
agreement eliminating Clifford's personal

liability for the

loans; (b) Clifford was able to sell a portion of his CCAH shares
for a profit of approximately $6.5 million and retain the
remainder of his shares free of liens and debt; and (c) Clifford
benefitted from the legal fees charged to CCAH and its
subsidiaries from 1982 through 1990.

In addition, by reason of

the violations and breaches of fiduciary duty, First American has
suffered or will probably suffer financial loss or other damage
in that the publicity attendant to BCCI's acquisition of control
of CCAH which Clifford participated

in has had a significant

negative impact on First American.

CCAH also suffered

substantial financial loss by reason of the acquisition of NBG as
alleged in Counts 1, 2 and 4 of this Notice.

- 71 -

160.

The violations of law and regulation and the

breaches of fiduciary duty committed by Clifford set forth in
this Notice involve personal dishonesty on the part of Clifford,
including violations

of commitments made to the Board in order to

obtain Board approval of the Application.

In addition, the

violations of law and regulation, the breaches of fiduciary duty,
and the unsafe or unsound practices set forth in this Notice
demonstrate a willful or continuing disregard for the safety or
soundness of CCAR and its subsidiaries.

Altman

161.

As set forth in this Notice, Altman

the BHC Act and Regulation Y by participating
abetting the violations

(a) violated

in or aiding and

of the BHC Act and Regulation Y by BCCI

set forth in Count 1 of this Notice;

(b) violated a Board Order

in violation of the BHC Act as set forth in Count 2 of this
Notice;

participating

the BHC Act and Regulation Y by

in the violation of the BHC Act and Regulation Y by

BCCI as set forth in Count 3 of this Notice; and (d) committed
breaches of his fiduciary duties as set forth in Count 4 of this
Notice.

162.

By reason of the violations of law and

regulation, unsafe and unsound practices, and breaches of
fiduciary duty committed by Altman as set forth in this Notice,
Altman received financial gain or other benefit when:
- 72 -

(a) Altman

was able to borrow the full purchase price of his shares of CL&H
from BCCI on extremeiy favorable terms that included an agreement
eliminating Altman's personal liability for the loans; (b) Altman
was able to sell a portion of his CCAH shares for a profit of
approximately

$3.2 million and retain the remainder of his shares

free of liens and debt, and (c) Altman benefitted from the legal
fees charged to CCAH and its subsidiaries from 1982 through 1990.
In addition, by reason of the violations and breaches of
fiduciary duty, First American has suffered or will probably
suffer financial loss or other damage in that the publicity
attendant to BCCI's acquisition of control of CCAH which Altman
participated
American.

in has had a significant negative impact on First

CCAH also suffered substantial financial loss by

reason of the acquisition of NBG as alleged in Counts 1, 2 and 4
of this Notice.

163.

The violations of law and regulation and the

breaches of fiduciary duty committed by Altman set forth in this
Notice involve personal dishonesty on the part of Altman,
including violations of commitments made to the Board in order to
obtain Board approval of the Application, the willful concealment
of the control of CCAIi by BCCI and knowingly false statements
made by Altman to the Board.

In addition, the violations of law

and regulation, the breaches of fiduciary duty, and the unsafe or
unsound practices set forth in this Notice demonstrate a willful

- 13 -

and continuing disregard for the safety and soundness of CCAB and
its subsidiaries.

164.

Notice is hereby given '-hat a hearing will be

held at a time to be scheduled by an administrative
appointed by the Office of Financial

law judge

Institution Adjudication

("OFIA"), at the offices of the Board of Governors, Washington,
D.C., for the purpose of taking evidence on the charges specified
in this Notice in order to determine whether an appropriate order
should be issued under Section 8(e) of the FDI Act to prohibit
the future participation of Clifford and Altman in the affairs
of, inter u,

any insured depository

institution or holding

company thereof.

165.

The hearing described

above shall be combined

with any other hearing to be held on the matters set forth in
this Notice, including those concerning

the issuance of cease and

desist orders and civil money penalties.

CEASE AND DESIST ACTIONS
166.

Notice is hereby given that a hearing will be

held at a time to be scheduled by the administrative

law judge

appointed by OFIA, at the offices of the Board of Governors,
Washington, D.C., for the purpose of taking evidence on the
charges hereinbefore specified in order to determine whether an
appropriate order should be issued under the FDI Act requiring
- 74 -

Clifford and Altman to cease and desist from the violations and
unsafe and unsound banking practices herein specified and to take
affirmative action to correct or remedy conditions resulting from
their violations

of law and unsafe or unsound practices pursuant

to 12 U.S.C. §§ 1818(b) (1) and (b) (6) (A)-(F).

Appropriate

affirmative action may include the issuance of a cease and desist
order:
(a) requiring payment to the Board for the expenses
incurred in the investigation and prosecution of the matters
alleged in this Notice, which shall be the joint and several
liability of each of the Respondents;
(b) requiring each Respondent to cease and desist from
any further violation

of the BHC Act, the Control Act, or any

other federal banking statute;
(c) requiring each Respondent to cease and desist from
any further violation

of any Board order;

(d) requiring Altman to cease and desist from any
further making of false statements to the Board or any other
Federal banking agency:
(e) requiring Clifford and Altman to dispose of their
remaining shares of CCAH by transferring them without
consideration

to CCAH for cancellation or by assigning them to

any other entity acceptable to the Board for the ultimate
benefit of the innocent depositors and creditors of BCCI;
(f) requiring Clifford and Altman to pay to CCAH (or to
such entity identified in subparagraph
- 75 -

(e) hereof) the amount of

their after-tax profit on the sale of their CCAH stock in 1988;
and
such other relief as may be appropriate under the

(9)

circumstances of this matter to redress the violations, breaches
of duty and unsafe or unsound practices charged in this Notice.

The hearing described above shall be combined

167.

with any other hearings to be held on the matters set forth in
this Notice, including those concerning the issuance of
prohibition orders and civil money penalties.

CML

MONEY PENALTY
A.

ACTIONS

Penalties Under the BHC Act

168.

The BHC Act, 12 U.S.C. 1847(b) (1). authorizes the

assessment of a civil money penalty against any company that
violates and any individual who participates

in a violation of

the BHC Act or any regulation or order issued pursuant thereto.
Until an amendment that became effective on August 9, 1989, the
BHC Act authorized civil money penalties in the amount of $1000
per day for each day of violation; thereafter, the BHC Act
authorizes civil money penalties of $25,000 per day.

169.

Clifford's and Altman's actions in participating

and aiding and abetting XXI's

violation of the HHC Act, which

commenced in 1982 when they permitted BCCI to exercise
substantial control over CCAH and certain subsidiaries, and
- 76 -

continued until at least February 5. 1990, when Altman provided
false and misleading

information

the Board concerning BCCI's

financial relationship with CCAH shareholders, was outstanding
for at least 2592 days.

Of these, at least 2413 were before and

179 were after August 9, 1989.

170.

Clifford's and Altman's violation of the Board's

Order of August 25, 1981, approving the acquisition of Financial
General by CCAH, which commenced at least in April 1982 with the
violation of the express condition that CCAH would not borrow
more than $50 million in acquisition

financing, and continued

through January 21, 1987 when the excessive loan was repaid, was
outstanding

for a period of at least 1727 days.

171.

Accordingly,

the maximum penalty that may be

assessed against Respondents with respect to violations described
in Counts 1 and 2 is at least $8,615,000.

Penalties under the PDI Act

172.
authorizes

Section 8(i) of the FDI Act, 12 U.S.C. 1818(i),

the assessment of a civil money penalty of $25,000

against any institution-affiliated

party who violates any law or

regulation or condition imposed in writing, or breaches any
fiduciary duty, which violation
misconduct

or breach is part of a pattern of

or which conduct results in pecuniary gain or other

benefit to such party.
- 77 -

173.

Clifford's and Altman's breach of their fiduciary

duty to CCAH, First American and CCAH's shareholders commenced
July 1986 when they acquired shares of CCAH through secret
transactions with BCCI.
misconduct

This breach was part of a pattern of

and resulted in a pecuniary gain to Clifford and

Altman in the form of their profit on the sale of a portion of
their CCAH shares in 1988 and their retention of additional
shares free of associated debt.

The breach continued until

July 5, 1991, when BCCI was closed and the secret put agreement
among BCCI. Clifford and Altman effectively terminated.
Accordingly,

the maximum penalty that may be assessed against

Clifford and Altman is $18,460,000.

Altman's violations of 18 U.S.C. 1001 as alleged

174.

in Count 5 commenced on February 5, 1990, and continued through
at least July 1991.
least 512 days.

These violations were outstanding for at

Accordingly, the maximum penalty that may be

assessed against Altman is $12,800,000.

Assessments

175.

After taking into account the size of Clifford's

financial resources, his good faith, the gravity of the
violations,

the history of previous violations, and such other

matters as justice may require, the Board of Governors hereby
assesses against Clifford for the violations of the BHC Act and
Regulation Y and breach of fiduciary duty set out in Counts 1, 2
- 78 -

and 4 of this Notice a civil money penalty in an amount that is
determined to be the sum of (a) $6,500,000. less any amount
established by Clifford as having been paid as state or Federal
taxes in connection with his sale of CCAH shares in 1988; and
(b) the value of any shares of CCAH currently held by Clifford;
provided, however, that the amount of this assessment will be
reduced by any amounts paid, and the value of any shares
transferred or assigned, voluntarily or pursuant to any order
issued under section 8(b) of the FDI Act, by Clifford to CCAH or
such entity identified in paragraph 166(e) hereof.

Clifford

shall forfeit and pay the penalties as hereinafter provided.

176.

After taking into account the size of Altman's

financial resources, his good faith, the gravity of the
violations, the history of previous violations,

and such other

matters as justice may require, the Board of Governors hereby
assesses against Altman for the violations of the BHC Act,
Regulation Y, breach of fiduciary duty, and other laws set out in
counts 1, 2, 4, and 5 of this Notice a civil money penalty in an
amount that is determined to be the sum of (a) $3,200,000, less
any amount established by Altman as having been paid as state or
Federal taxes in connection with his sale of CCAH shares in 1988;
and (b) the value of any shares of CCAH currently held by Altman;
provided, however, that the amount of this assessment will be
reduced by any amounts paid, and the value of any shares
transferred or assigned, voluntarily or pursuant to any order
-

issued under section 8(b) of the FDI Act, by Altman to CCAR or
such entity identified in paragraph 166(e) hereof.

Altman shall

forfeit and pay the penalties as hereinafter provided.

Procedures

177.

Zwmlicable to Civil Money Penalties

The penalties set forth in this Notice are

assessed by the Board of Governors pursuant to section 8(i) of
the FDI Act and section 8(b) of the BHC Act, and the Board of
Governors Rules of Practice for Hearings
"Rules of Practice').

(12 C.F.R. Part 263)(the

Remittance of the penalties

set forth

-herein shall be made within 60 days of the date of this Notice,
in immediately available funds, payable to the order of the
Secretary of the Board of Governors, Washington, D.C. 20551, who
shall make remittance of the same to the Treasury of the United
States.

178.

Notice is hereby given, pursuant

8(i) (2) of the FDI Act

to section

(12 U.S.C. 1818(i) (2)). made applicable to

these proceedings by section 8(b) (2) of the BHC Act

(12 U.S.C.

1847(b) (2)), that Clifford and Altman are afforded an opportunity
for a formal hearing before the Board of Governors
these assessments.

concerning

Any request by a Respondent for a hearing

with regard to the civil money penalty proceedings

against him

must be filed with the Secretary of the Board of Governors,
Washington, D.C. 20551, within 20 days after the issuance and
service of this Notice on the Respondent.
- 80 -

179.

The hearing described above shall be combined

with the other hearings to be held on the matters set forth in
this Notice, including those concerning the issuance of cease and
desist and prohibition orders.

180.

In the even that any Respondent subject to a

civil money penalty assessment fails to request a hearing within
the aforementioned 20 day period, that Respondent shall be
deemed, pursuant to section 263.19(c) (2) of the Board's Rules of
Practice, to have waived the right to a formal hearing, and this
Notice shall, pursuant to section 8(i) (2) of the FDI Act,
constitute a final and unappealable

order, and may be referred

for collection to the United States Department of Justice.

PROCEDURES GENERALLY
181.

Each Respondent is hereby directed to file with

OFIA, Washington, D.C. 20552, an answer to this Amended Notice no
later than ten days after service hereof, as provided by section
263.20(a) of the Rules of Practice

(12 CFR 263.20(a)).

to section 263.10(a) of the Rules of Practice

Pursuant

(12 CFR 263.10(a)),

any answer filed with OFIA shall be served on the Secretary of
the Board.

As provided in the Board's Rules

(12 CFR 263.19(c)),

the failure of any Respondent to file an answer as required by
this Notice within the time provided herein shall constitute a
waiver of that Respondent‘s right to appear and contest the
allegations of this Notice.

no timely answer is filed, a

- 81 -

motion may be filed for entry of an order of default.

Upon a

finding that no good cause has been shown for the failure to file
a timely answer, the administrative

law judge shall file with the

Board a recommended decision containing
relief sought by this Notice.

the findings and the

Any final order issued by the

Board based upon a Respondent's

failure to answer is deemed to be

an order issued by consent.

182.

The hearing referred to above will be held before

the administrative

law judge appointed by the OFIA, and shall be

conducted in accordance with the provisions
the Rules of Practice.

of the FDI Act and

The hearing will be public, unless the

Board of Governors shall determine

that a public hearing would be

contrary to the public interest.

183.

With respect to his own proceeding, each

Respondent may submit, within 20 days after the issuance and
service of this Notice, to the Secretary of the Board of
Governors a written statement detailing

the reasons why the

hearings described in this Notice should not be public.

Failure

to submit such a statement within the aforementioned period will
be deemed a waiver of any interest the Respondent may have to a
private hearing.

184.

Authority is hereby delegated to the Secretary of

the Board of Governors to designate
- 82 -

the time and place and

presiding
Notice
would

and

for any hearing

to take

be authorized

respect
until

officer

any and all actions
to take under

to this Notice
such

that may

be conducted

that

the Rules

and any hearing

time

as a presiding

officer

Dated

at Washington,

D.C.,

the presiding
of Practice

to be conducted
shall

&k
this /yeay

BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM

By:

- 83 -

officer
with

hereon,

be designated.

1997.

Secretary

on this

of the Board

of January,