Riggs Bank Had
Longstanding Link
To the CIA Ties May Pose Challenges
For Prosecutors Investigating Money Laundering at Bank
By MARTIN FACKLER and ROBERT BLOCK Staff Reporters of THE WALL STREET JOURNAL December 31, 2004; Page A4
WASHINGTON -- Riggs Bank, which is under investigation by the Justice Department for money laundering, has had a longstanding relationship with the Central Intelligence Agency, according to people familiar with Riggs operations and U.S. government officials.
That relationship, which included top current and former Riggs executives receiving U.S. government security clearances, could complicate any prosecution of the bank's officials, according to private lawyers and former prosecutors.
Riggs, a storied Washington institution that used to refer to itself as the "bank of presidents," has come under intense scrutiny following revelations that it overlooked tens of millions of dollars in suspicious transactions by Saudi diplomats and dictators from Africa and South America.
Regulators have fined Riggs, a unit of Riggs National Corp., $25 million, and the breakdown in internal controls at Riggs has prompted a nationwide crackdown to force the nation's biggest banks to strengthen their efforts to thwart potential money laundering.
In Washington, though, the focus is shifting to the continuing criminal probe, which needs to be resolved for Riggs to complete its sale to Pittsburgh-based PNC Financial Corp.
The transaction's closing already has been delayed until April. A person close to the PNC-Riggs discussions says executives are optimistic the Justice Department probe will be largely wrapped up by then.
"We are proceeding with our integration plans while Riggs is working to meet the closing requirements," PNC spokesman Pat McMahon said.
Prosecutors are exploring whether the money-laundering violations are of a criminal nature, in addition to investigating possible embezzlement and kickbacks by a former employee.
Channing Phillips, a spokesman for the U.S. Attorney in Washington, declined to comment.
"It is Riggs policy neither to confirm nor comment on client relationships," a Riggs spokesman said.
The relationship with the CIA could prove problematic because it could cast a different light on the bank's dealings with two U.S. foreign-policy allies, former Chilean dictator Augusto Pinochet and Prince Bandar bin Sultan, Saudi ambassador to Washington.
Given the intelligence connections to Riggs, prosecutors could be faced with proving that the bank's failure to disclose financial activity by the foreign officials wasn't implicitly authorized by parts of the U.S. government.
"Any time you throw the CIA or the intelligence community into the mix, it adds a complication," said Washington defense lawyer E. Lawrence Barcella, a former federal prosecutor who investigated various intelligence-community figures in the 1970s.
Potential defendants could try to claim they were working for the government, he says, and in a criminal trial, "jurors who often pass their time away reading Robert Ludlum or John Grisham novels might be inclined to believe it, whether it's accurate or inaccurate," he added.
Prince Bandar's connections to the CIA have long been a significant, albeit little-discussed, aspect of the Riggs affair. During the initial phase of the controversy over Saudi accounts at Riggs in early 2003, Prince Bandar detailed his work for the CIA in a meeting with Treasury Secretary John Snow, according to current and former U.S. intelligence officials who interpreted the disclosure as an explanation for the prince's large unexplained cash transactions at Riggs.
The meeting took place at the Treasury Department's headquarters on Pennsylvania Avenue, which is across the street from Riggs headquarters. A spokesman for Prince Bandar declined to comment on the specifics of the discussions with Mr. Snow, as did the Treasury Department. During the 1980s, Prince Bandar helped fund the anticommunist Nicaraguan Contra rebels at the request of the White House and CIA, and later helped support Afghan rebels fighting the Soviet Union. More recently, he helped broker a diplomatic rapprochement between the U.S. and Libyan dictator Moammar Gadhafi.
The CIA has a longstanding but indirect relationship with Mr. Pinochet, a longtime Cold War ally of the U.S., through his former chief of secret police, Manuel Contreras, according to scholar John Dinges, author of a book on the Chilean dictatorship.
Mr. Contreras banked at Riggs, according to a 1979 State Department cable obtained by the nonprofit National Security Archive. From the 1990s through 2003, Riggs officials allegedly hid some of Mr. Pinochet's dealings with the bank from regulators, one key focus of the criminal inquiry by the United States attorney for the District of Columbia. Pablo Rodriguez, a lawyer for Mr. Pinochet, wasn't available to comment, according to an assistant reached by phone at his office in Santiago, Chile.
The Riggs relationship to the Chilean government was far more extensive than known, previously undisclosed internal Riggs documents show.
A summary of former Chairman Joe L. Allbritton's "international business development activities" states that the Chilean military's international mission offices had more than $50 million deposited at Riggs in 1996, including $30 million from the Chilean Air Force solicited by Mr. Allbritton personally on a trip to Chile.
The bank generated income from letters of credit to the Chilean military for procurements, the document states, and helped arrange funding for purchases of F-16 aircraft.
As of February 2002, Chilean government deposits at Riggs exceeded $100 million.
"Mr. Allbritton met Pincohet twice in his life and didn't speak his language and didn't have any communication with him directly," a spokesman for Mr. Allbritton, Paul Clark, said.