Paradis fiscaux et judiciaires

BCCI settlement costs top $1.2bn

jeudi 15 mai 2003

BCCI settlement costs top $1.2bn

· Lawyers reap rewards of 11-year liquidation

· Creditors to receive another $1bn

Jill Treanor

Thursday May 15, 2003

The Guardian

Creditors of Bank of Credit and Commerce International are to receive another $1bn (£600m), it was announced yesterday as it emerged that the cost of the 11-year liquidation had topped $1.2bn.
The liquidators of BCCI - still regarded as the biggest and most complex bank fraud in history - remain confident that more money will be returned to creditors, particularly if a long-running legal case against the Bank of England is successful.

The fourth dividend announced yesterday, which is to be paid next month, means that 75% of all claims have now been met - considerably more than the 5% to 10% that the liquidators Deloitte & Touche predicted soon after they were appointed in 1991.
The total cost of the liquidation, which has spanned 70 countries and affects more than 70,000 creditors, is put so far at $1.2bn. Deloitte & Touche revealed it had received almost $300m for its work in the English jurisdiction alone.

According to the annual return filed to the Department of Trade and Industry yesterday, the total cost in the English jurisdiction is $770m. This includes $173m in legal fees and $70m for property costs.

The costs run up by the Bank of England to fight the claim that it failed in its duties as a regulator have only been revealed for the last two years when it spent £17m on legal fees. Further details may be revealed in court next week.

The House of Lords declared in March 2001 that the case should be heard as quickly as possible but the Bank of England is trying to win the right to appeal an order that it disclose 20 files related to the Bingham inquiry, the official investigation into the collapse.

The trial is scheduled for January 2004.

John Richards, the partner at Deloitte & Touche who has spent the last 11 years working on the liquidation, said claims were continuing to be pursued against Bank of America and State Bank of India as well as a $326m damages claim against Abdul Raouf Khalil, a former BCCI customer who was found to have participated in the fraud.

The liquidators are trying to establish whether a gold museum in Saudi Arabia thought to have been owned by Khalil recently burned down. They are optimistic about recovering some assets from Khalil following a pledge by the governor of the board of grievances in the kingdom to look into the matter, but Ralph Preece, Deloitte liquidator, admitted that the recent bombings in Riyadh linked to al-Qaida may affect the process.

Once the fourth dividend is paid, the liquidators will have paid out $5.7bn. While this is 75% of all existing claims, the original claims put in when BCCI collapsed in 1991 amounted to $16bn.

Mr Richards said the payment of the fourth dividend was made possible when former employees of BCCI agreed to a settlement of their claims that they were tarnished by the "stigma" of having worked for the bank. Among the beneficiaries of the liquidation process are 30 local authorities, including the Western Isles and Bury council, which had deposits or other exposure to BCCI which was largely owned by Abu Dhabi.

Stan Monaghan, a former Bury council employee who sits on the creditors’ committee, said : "Ten years ago people were offering to buy our debt for 10%. [Now we have 75%]. Hopefully there will be another dividend, particularly as a result of the litigation against the Bank of England.

"It has been costly but nobody expected we’d get 75% back. You get what you pay for."

Creditors had to wait until 1996 for their first dividend which was 24.5% of the total. Further payments were made in June 1998 and May 2000.

The liquidators continue to hold over $1bn to cover the costs of on-going litigation which they aim to release if the judgments go in their favour.

’A truly gargantuan task’

BCCI collapsed in 1991 and is still being unravelled. The liquidation has involved court proceedings around the world and is likely to last at least another five years.

Its liquidation was described by the then vice chancellor Sir Donald Nicholls as a "truly gargantuan task"

Along the way :

· 88,000 boxes of documents have been put together and are now gathering dust. Storage payments are part of the $70.1m of premises costs run up by the liquidators.

· About 100 accountants and lawyers are still working on the liquidation full-time although the number has fallen substantially from the early days in 1991 and 1992. They have their own office - Westgate House - in central London.

· The government has retained $47.2m for VAT which is not recoverable by the liquidators.

· The Bank of England has spent £17m in the last two years to defend itself against legal action over the way it regulated BCCI.

· Abas Gokal’s Gulf Group was a major borrower from BCCI. He was found guilty of false accounting and conspiracy in April 1997. He was sentenced to 14 years and must serve a further three years because he has not paid £3m to the liquidators.

Following the money

Liquidation costs ($m) to January

liquidators 296.1

lawyers 173.3

liquidators’ expenses 15.4

liquidators’ committee 3.6

payroll 47.8

premises 70.1

other professional fees 14.9

insolvency service fees 13.3

sundries 15.5

VAT costs 47.20

other 72.2

total 769.4

· Source : Deloitte & Touche

Guardian Unlimited © Guardian News and Media Limited 2007

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