The real scandal.

SENATOR John Kerry (D., Mass.) is currently a Washington hero for uncovering the nefarious deeds of the Bank of Credit and Commerce International. The villains--the folks being investigated in Congress and savaged in the press-are Justice Department and Federal Reserve functionaries who supposedly failed to crack down on the bank.

But how heroic is Senator Kerry really? When his investigation got too close, BCCI shut it down with relative ease. How it did so illustrates something about how Washington works.

In 1988, Panamanian defector Jose Blandon, formerly Manuel Noriega's right-hand man, testified that Colombian drug money was being laundered by BCCI in Panama and the United States. Kerry's subcommittee--the Senate Foreign Relations subcommittee on terrorism, narcotics, and international operations--voted to subpoena BCCI's records on its Panama operations and summon BCCI officials to testify. Had the investigation proceeded with appropriate speed, BCCI might have been shut down three years ago--with many millions of depositors' money saved.

But there were two major delays. The first has been well publicized. Congressional action was postponed several months to avoid compromising a Customs--Justice Department undercover investigation of the bank's money laundering. That investigation duly produced eight arrests of BCCI employees in Tampa in October 1988.

The second delay was more serious and less justified. When subpoenas were issued to bring documents and witnesses before the committee, Clark Clifford--Democratic elder statesman, sometime lawyer for BCCI, and Chairman of First American (a U.S. bank secretly and illegally owned by BCCI)--took evasive action. In August of 1988, he convinced Senate Foreign Relations Committee Chairman Claiborne Pell (R., R.I.) to extend the subpoena deadline. Next, he visited Kerry, shortly before hearings were due to begin in September. Kerry's office claims Clifford simply assured the senator that BCCI was squeaky clean and happy to cooperate. Even if that were so, Kerry should have challenged the claim in light of Blandon's testimony and reports his staff had collected about BCCI's ownership of First American.

In any case, after Clifford's visit, Kerry canceled the planned hearings; they were never rescheduled. The following spring, for reasons which are still mysterious, Kerry dismissed Jack Blum, his chief investigator. Blum--a portly fifty-year-old attorney, a veteran of the Senate's ITT-Chile investigation of the Seventies, variously described by co-workers of both parties as a Sherlock Holmes and an Inspector Clouseau--went on to help Manhattan District Attorney Robert Morgenthau break the BCCI case.

John Kerry is an ambitious man. Had he kept the investigation alive, it would have boosted his career tremendously. Unstead, for over two years he made desultory attempts to get First American to deliver the subpoenaed documents. Only when other investigators--the Federal Reserve and the Bank of England as well as Morgenthau--came out with fines and indictments did he manage to hold further hearings, in August of 1991. Why did Kerry drop the ball?

From the beginning, Kerry seemed to view his subcommittee's investigations as a political football. When he brought Blum on board in early 1987, he was probing for evidence of drug-running by the anti-Communist Nicaraguan resistance. Geryld Christianson, Claiborne Pell's chief staffer for the Foreign Relations Committee, says that though Pell had "a philosophical aversion to having investigations done by his committee," he agreed to fund Kerry's probe to see "whether or not President Reagan may have been suppressing law enforcement for foreign-policy considerations."

Kerry and Blum spent a year tracking down every leftist conspiracy theory along these lines, including the bizarre claims, emanating from the far-Left Christic Institute, of a thirty-year CIA-run drug ring that virtually controls the U.S. Government. The claims would later be smirked at even by Mother Jones. Having spent over a hundred thousand dollars to bring an assortment of Latin American rogues and Communists to Washington, to absolutely no avail, Kerry was becoming a laughing-stock, attacked by Republican subcommittee members like Mitch McConnell (R., Ky.) for irresponsible partisan use of the constitutional investigative powers, and losing the respect and trust of his own party.

This is not how congressional investigations are supposed to work. According to the conventional scenario, based on Watergate, the bizarre accusations and questionable testimony are picked up by the press, repeated, perhaps even substantiated. The committee's subpoena power and the press's lack of responsibility combine for maximum information gathering or innuendo mongering, while the committee's official imprimatur and the press's nominal objectivity lend credibility to the allegations. But Kerry had chased rumors too absurd even for Washington. In a city where appearance is all, this is fatal.

In part, Kerry had fallen prey to the intrinsic problem of conspiracy theories: the overwhelming majority of them are not true, and Occam's Razor will reject the true-but-improbable along with the false. A good investigatior is part genius, part crank: to ferret out one genuine conspiracy, he will pursue a thousand imagined ones. Jack Blum fits the bill.

Flights of Fancy

BLUM AND Kerry now decided to switch the focus of the investigation. Blum finally listened to the staff of Senator Jessee Helms (R., N.C.), who say they had been steering him away from the Christic lunacy and toward investigations which they had been engaged in, and which Senator Christopher Dodd (D., Conn.) declined to pursue when the Democrats gained control of the Senate in 1986. It was these staffers who put him in touch with Jose Blandon. In other words, the only real breakthrough John Kerry ever provided on BCCI was actually supplied to him by the Left's bete noire, Jesse Helms.

With their funds and credibility running out, Blum and Kerry now scheduled hearings with Blandon--and they struck paydirt, linking Noriega to the Colombian cocaine cartels. They only incidentally stumbled on BCCI, the middleman. More enticing was other testimony linking Noriega to the CIA--which all good conspiracy theorists know is linked to George Bush. Pell duly authorized Kerry's investigations for another year.

Later, when the hearings began to go the wrong way, Pell shut them down. Geryld Christianson faults Blum for this. He blames Blum for delaying the subpoenas for four months (as requested by the Justice Department), pointing out that he and Pell only gave BCCI a one-month extension. Anyway, how long can you drag investigations out? "Someone like Jack would still be investigating today because he would bet sidetracked." On the other hand, says Christianson, "if some vital earth-shaking revelation had been produced by Blum's investigation, Senator Pell would have extended it" for another budget year. A reasonable interpretation is taht Pell was willing to reauthorize hearings in 1988 because any charge could be believed of Reagan, Bush, and the Contras. Not so of BCCI and Clark Clifford in 1989.

Meanwhile, Blum did get somewhere by proceeding on his own. According to documents filed in Miami Federal District Court, at the time Kerry canceled the September 1988 hearings, Blum had enough to make Clark Clifford very nervous indeed. Noriega's banker, Amjad Awan of BCCI's Tampa branch, told an undercover Customs agent that Clifford and/or his partner, Robert Altman, persuaded and aided him to attempt to leave the country to avoid a subpoena. Before Awan could leave, he was caught by the October 1988 Customs--Justice sting against BCCI/Tampa. Clifford and Altman have denied telling Awan to flee (obstructing a congressional investigation would constitute a felony).

Kerry's justification to Blum for canceling those hearings, says Blum, was that partisan politics would paralyze the committee during an election year: "with Noriega as a major issue in the presidential campaign, Senator Kerry thought the political environment was too tough." But this explanation is feeble: not only was Noriega never a major campaign issue, but Kerry's probe was becoming bipartisan, the BCCI-Clifford connection replacing the Noriega--CIA-Bush one. To be sure, Kerry and Blum violated bipartisan protocol by failing to inform Republican committee members and staff that they had uncovered this second front. Eric Felton reports in the September 9, 1991, Insight that, when deposing Awan on September 30, 1988, Blum avoided mentioning Clifford, First American, or the warning to flee the country--even though he was aware that Awan could give testimony damning Clifford.

In short, Kerry chased every Republican will-o'-the-wisp, but only stumbled over BCCI. And when a continued investigation treatened his own party, he began to go slow. This would explain his readiness to drop an investigation that he had originally hoped would make his name, just when it was finally on point of coming up with the goods.

But there is also evidence that the fall of BCCI would have hurt Kerry's career directly. Clark Clifford, Robert Altman, and another law partner donated $4,000 to Senator Kerry and $1,000 to Senator Pell in early 1989--long after Clifford visited Kerry as BCCI's lawyear-lobbyist, long after Kerry had heard of the secret links between Clifford and BCCI. Insight's Eric Felton makes the additional point that Senator Kerry's impropriety-- receiving a donation from someone under suspicion in his own investigating--cannot be put down to botched staff communications: Kerry met Clifford at the fundraising party Pamela Harriman threw to kick off his 1989--90 re-election campaign, so he was presumably alerted to the possibility of a contribution.

Moreover, for the 1987-88 election cycle Kerry served as Chairman of the Democratic Senational Campaign Committee (DSCC), the Senate Democrats' very own political-action committee. In that capacity, he appointed David L. Paul, the head of CenTrust, a high-flying Florida savings and loan, as head of the DSCC's Majority Trust--the private-sector "partner" who could deliver the money.

CenTrust was closed by federal regulators in early 1990 at a cost to taxpayers of over $2 billion. That is bad enough. But it has now been established that BCCI had a tentacle in CenTrust: Ghaith Pharaon, the Saudi who had already served as a front man when BCCI acquired The National Bank of Georgia (later to become First American) from Bert lance, Jimmy Carter's budget director. The Federal Reserve cited three major reasons for the record $200-million fine it levied against BCCI this year. One was the illegal takeover of First American, but two were related to CenTrust.

The Fed noted BCCI's hidden ownership, through Pharaon, of at least 5 per cent of CenTrust stock as of April 14, 1989. BCCI apparetly wanted control of a Miami bank to expand its money-laundering operations. First American was not well located for that purpose. According to a subsequent, limited investigation of the BCCI--CenTrust connection by James G. Phillips for Senator Orrin Hatch (R., Utah), by the time federal regulators shut CenTrust's doors in 1990, BCCI had acquired at least 28 per cent of its stock--which constitutes legal control under federal law. Senator Howard Metzenbaum (D., Ohio), who has apparently declined to hold hearings on the Hatch report, received a $1,000 donation from CenTrust in 1987.

The Fed's second charge concerned BCCI's illegal "parking" of some $25 million in CenTrust bonds in mid 1988. Pharaon had petitioned regulators to keep CenTrust open; they agreed on condition that the thrift immediately beef up its vanishing capital base with a $200-million issue of subordinated debentures. CenTrust moved quickly, but succeeded in selling only $150 million, including $25 million to BCCI. Two months later, CenTrust bought the bonds back from BCCI at par value. It also bought back the other investors' $125 million in bonds; the other investors, however, got only 62 cents on the dollar. The Federal Reserve determined that the $25 million was merely "parked" at CenTrust long enough to fool the regulators.

Indeed, CenTrust, BCCI, and the Democrats seem to have been one big, happy family. CenTrust donated hundreds of thousands of dollars to Democrats in PAC money alone. In addition, I have discovered that the "non-political" CenTrust Foundation also poured cash into Democratic coffers, including $100,000 to the now notorious (Jimmy) Carter Center (of which $50,000 came from Pharaon and was merely laundered through CenTrust) and $25,000 in 1989 to Senator Alan Cranston's Center for Participation in Democracy, also the prime beneficiary of Cranston's friendship with Charles Keating. Beginning in January 1989, CenTrust also paid $48,000 to DSCC finance chairman Steven Wilson under the heading "overcoming regulatory issues" with federal bank investigators. In January 1989, Wilson donated $1,000 to Senator Kerry.

David Paul was personally very much involved in this largesse. He threw fundraisers for the Democrats on his thrift's $67-million yacht. He gave them free rises on his corporate jet. And, in an event extraordinary even for what Democrats call the Decade of Greed, he invited Senators John Kerry and Wyche Fowler (a Georgia Democrat and another friend of CenTrust) to his December 1988 French Chefs gala dinner, for which six chefs were flows in from Paris to provide a feast costing $123,000--all expenses paid by CenTrust.

So, as a senator running for re-election, John Kerry received donations directly from Clark Clifford, who was a BCCI attorney and former chairman of a bank secretly and illegally owned by BCCI. As chairman of the Democratic Senatorial Campaign Committee, he raised funds in close cooperation with David Paul, whose thrift was deeply enmeshed with BCCI. As a subcommittee chairman, Kerry proved dilatory in following up indications that BCCI was an international rogue.

"It becomes terribly painful for senators to go after these guys who gave them at the money," says Jack Blum. Later they may be faced with the choice of "doing nothing or doing something to upset a major funding source." In the end, "all too often it becomes too easy to do nothing."

Senator Kerry is an extremely luckly man. If he were a Republican, all this might amount to a scandal.