by Russ Baker
By 1976, Gerald Parsky was assistant secretary of the Treasury, the undisputed go-to man for the Saudis on oil and money. And by then Poppy Bush had been brought back from China and installed as CIA director. One reason, already mentioned, was to put a benign face on the controversial agency at a time when it was receiving harsh public criticism. But there was another reason. Poppy’s secret past with the agency and his powerful connections at the epicenter of the oil-money culture in Texas would help him to implement the growing secret relationship with the Saudis. In this, Poppy worked closely with his counterpart at the Saudi General Intelligence Division (GID), Kamal Adham, who was also head of the separate agency charged with protecting the Saudi royal family. Adham had a third important connection, his longtime friendship and business partnership with bin Mahfouz—the man who hired Jim Bath.
In a now familiar pattern, years later, when Kamal Adham would be caught up in an explosive banking scandal, Poppy Bush would, improbably, deny even knowing him. It was implausible that the U.S. spy chief would not know his Saudi counterpart during that era, but that did not stop Poppy, who said, “I don’t know anything about this man except I’ve read bad stuff about him.”37 Indeed, when Adham was told that the White House press office had reconfirmed Bush’s disavowal, the Saudi expressed disbelief and even amazement, remarking, “It is not possible for the president to say that.”
For his end of the bargain, Poppy had quickly begun to put all manner of heightened protective measures in place on behalf of the Saudi leadership. The danger to the top Saudis was real. A mullah had issued an edict proclaiming the Saudi royal family corrupt. And in March 1975, at a conference, one of King Faisal’s nephews pulled a gun out of his shumagh (the traditional Saudi headdress) and shot the king dead. As rumors circulated that Faisal had been assassinated in a foreign plot, the CIA and Saudi security authorities launched an investigation. Meanwhile, the royal family moved swiftly to name his successor: Crown Prince Khalid would become king, and Fahd, known for his pro-Western views, would be his crown prince.
Three days after Faisal’s death, his successor, King Khalid, told the Beirut Daily Star that the killing had been “an isolated act by a deranged person without any foreign scheming.”38 The assassin was swiftly beheaded in public eighty-five days after Faisal’s death,39 and life went on in Saudi Arabia. But at the highest levels, the leadership knew that it could not trust many of their own relatives. Poppy is believed to have dispatched his former number-two man in the CIA, Vernon Walters, to work full time with the Saudi government to improve security.40
Trading on the Saudis’ fear, Poppy was in a position to ask for almost anything. And apparently he did. As we shall see, for many ensuing years almost everything that he, his friends, and his family members—including George W. Bush—were involved with was subsidized, mostly secretly, by the Saudis. The Saudis began to play a role comparable to that played earlier by the shah of Iran and the Philippine dictator Ferdinand Marcos as secret benefactors of Richard Nixon. In all, the relationship would result in more than $1.4 billion in investments and contracts passing from the wealthiest family in the world (and its surrogates) to the Bush apparatus over the course of two decades.41
The House of Bath
“Bush was responsible for Bath’s relationship with the Arabs from the onset,” said Charles W. “Bill” White. Much of the Bath-Saudi story would not be known were it not for White, a former Navy pilot and Annapolis graduate who was recruited from the Harvard Business School in 1978 by Lan Bentsen, Bath’s real estate partner, to provide what Bentsen described as “pedigree” for Bath.
Bentsen was himself a graduate of the Harvard Business School and the son of Texas’s democratic senator Lloyd Bentsen, who had defeated Poppy Bush in the Texas Senate race in 1970. White told the Canadian Broadcasting Corporation,
When [Lan] found that I was a Navy fighter pilot, he said that there was an Air Force fighter pilot in Houston that I should meet—a pilot who the Bentsen family and the Bush families were already in business with. And he said that this fellow James R. Bath needed someone to run a series of real estate companies that would be grubstaked by not only the political families, but also by some foreign nationals—the Saudis. And so I came down for an interview and met Jim Bath.42
Bath interviewed White in his Rayalle Minerva V/STOL aircraft, which he kept at Houston’s Hobby field. During the interview, Bath actually landed this plane on a farmer’s field to relieve himself off the wing—a display of bravado presumably intended to impress White.
Though both were bright, personable, and former fliers, White and Bath couldn’t have been more different: White was an earnest, spit-and-polish man with a talent for balance sheets and an obsession with playing by the rules. Bath was a folksy and crafty wheeler-dealer with a passion for secrets and bold schemes.
Nevertheless, Bath took quickly to White, dubbing him “CW.” And in his relationship to White, Bath began showing why he and George W. had been kindred spirits. Not only did Bath, like W., enjoy joking and assigning nicknames, but, as he moved away from his role as W.’s minder, he also revealed the extent to which he too could be something of a wild man.
“Bath was very forthright with me when we went into business together in 1978. He said: ‘Bill, I come from a poor background, I have no money of my own and this relationship with the Bushes and the Saudis is of paramount importance to me because I derive all of my capital and all of my business contacts from that relationship.’ ”43 White says Bath told him that he was personally recruited by George H. W. Bush when the senior Bush was CIA director in 1976. In all likelihood, though, he was actually recruited much earlier.
“He explained that the Saudis had basically entered into a quid pro quo relationship with Bush and that Bush when he was CIA director worked with the head of Saudi Intelligence, and the CIA trained the Palace Guard to protect the Saudi royal family, which was concerned about a fundamentalist revolution.”44
“My understanding of it is that Bath represented the Bush interests and bin Laden/bin Mahfouz interchangeably represented the Saudi royal family interests,” said White. “People who have tried to vilify the bin Laden family or the bin Mahfouz family fail to realize that the Saudis have a very patriarchal society and that, according to Bath, neither of those families sneeze without the Saudi royals’ blessing. I mean everything they do is at the [behest of ] the Saudi royal family. As a matter of fact, bin Mahfouz’s bank, NCB, is the only bank that was not nationalized in Saudi Arabia. All the rest of the banks were nationalized in 1974 except National Commercial Bank (NCB), which is privately owned by bin Mahfouz. That’s where the Saudi royals keep all their personal money.”45
The two Saudis entered into a business relationship with Bath. They would provide the money, and he would be the front man and manager of the enterprises.
Salem bin Laden and Khalid bin Mahfouz arrived in Houston shortly after Jim Bath flew that clunky plane out to Riyadh. In sharp contrast to his notorious brother, Bin Laden was a gregarious, Westernized, English-speaking, cocktail-loving international playboy. He traveled with an entourage and threw parties with prominent Houston businessmen and attorneys in attendance; Salem entertained the crowd by playing the piano and singing. Bin Mahfouz, tall and thin, was more enigmatic and reserved—the scion of a Saudi banking empire with hopes of expanding its franchise into the United States. One helpful asset was his $3.5 million French château-style house in the posh River Oaks section of Houston, which would become known as Houston’s Versailles. Huge crowds would gather at what the irreverent Bath referred to as “the Big House.”
It would soon be apparent that some, if not most, of this Texas-Saudi connection had to do with the growing off-the-books covert intelligence operations in which Poppy was deeply immersed. Between them, the wealthy Saudis and Americans controlled what amounted to an empire. And that empire needed planes, income, and intelligence.
On his arrival in the United States, Salem bin Laden had immediatel
y set about purchasing planes and equipment for his family’s giant construction firm. He also bought houses in Central Texas’s Hill Country and outside Orlando, Florida. He launched an aircraft services company in San Antonio, Bin Laden Aviation, ostensibly to manage his small fleet of airplanes.46
Bath’s principal business was JB&A, Jim Bath and Associates, his aircraft brokerage company.47 It was staffed almost exclusively by former military pilots who held top-secret security clearances. From the same offices, he also ran an entity called Binladen-Houston, which procured heavy construction equipment for shipment overseas. Bath received a 5 percent personal interest (in lieu of a paycheck) in every purchase that he made using bin Laden money.48
The growing holdings of Saudis, such as Khalid bin Mahfouz and Salem bin Laden were almost always hidden in trusts, which were set up by some of Houston’s biggest law firms. Baker Botts and Vinson & Elkins both represented the Saudis.49 The names of the Saudis almost never appeared, but rather those of nominees, front men, or lawyers functioning as trustees.
“He spent probably ninety-five percent of his time, I’d call it handholding the Arabs,” said White. “He bought a bank for them. He bought an airport for them. He started an airline for them among other ventures in Houston, and was the nominee or the front man for their own ership of these various entities. He would spend most of his time dealing with their interests while I concentrated on running our real estate development company.”50
It is important to note that White’s bona fides and credibility as a source have been verified by numerous journalists and government investigators who have consulted him, and he has been cited over a period of nearly twenty years by news organizations ranging from the Wall Street Journal to Time to the Canadian Broadcasting Corporation.
Certainly no one was in a better position than White to observe the origin and growth of the Saudi-Texas connection.
CHAPTER 14
Poppy’s Web
SO LONG AS POPPY HEADED THE CIA, working to build an extended off-the-books intelligence network, the center of action was at agency headquarters in Langley, Virginia. But with Poppy’s ouster from the CIA directorship in early 1977, the hub shifted with him to Houston. Officially, Poppy was returning to the traditional family business: banking. Wealth in America had been steadily shifting westward since Prescott Bush turned in his Yale baseball cleats for a banker’s wing tips, so it was fitting that the son should become a Texas banker.
And what a great time to get back into the business. A 1970 law had made it possible for banks to expand rapidly into giant holding companies. One such entity was the Dallas-based First International Bancshares (FIB). At FIB’s Houston location, Poppy set up his government-in-exile. During his time with the company, Bush would serve as chairman of the Houston subsidiary’s executive committee and join the boards of the Dallas-based parent and a subsidiary of First International in London.
First International had no trouble getting the needed approvals from the Federal Reserve for its steady diet of acquisitions. While it brought fifty banks under its umbrella, FIB was turned down only once.
In some ways, First International was a kind of twin to Republic National Bank in the Dallas oil-intelligence world. In the 1950s, when Poppy’s “uncle” Neil Mallon was assembling his off-the-books covert operations via Dresser Industries and the Dallas Council on World Affairs, First International had sent high executives to the council’s first planning meeting. (Its competitor, Republic, had done so as well.) First International’s association with the Bush family went back many years. In the summer of 1967, young George W. Bush worked as a clerk-bookkeeper at its Houston affiliate, earning $250 for the stint.1
First International was not your friendly neighborhood bank. Rather, it was a Texas powerhouse whose principals reached well beyond banking into the netherworld of intelligence and intrigue. The holding company chairman, Robert H. Stewart III, came from a family with long-standing personal ties to J. Edgar Hoover. FIB was intimately associated with the powerful Bass, Hunt, and Murchison families. Its largest shareholder was Joe Allbritton, whose D.C.-based Riggs Bank held the accounts for several embassies, including Saudi Arabia.2
Most important, First International itself did a lot of business with Saudi Arabia. George H. W. Bush has said he cannot remember what he did for the bank, but Bill White claims Poppy was a Mercantile Division consultant paid to bring in Arab deposits. According to White, the bank played an important role in handling massive transfers of Saudi funds. It even provided a revolving line of credit for Salem bin Laden. The president and CEO of FIB’s London merchant bank, on whose board Poppy Bush sat, was a former FBI agent and employee of Magnolia Oil, the company that provided employment to several figures who associated with Lee Harvey Oswald. It is believed that much of the Saudi business flowed through the London affiliate.
After Bush came on board in 1977, FIB began a massive expansion. First International (known as “Interfirst” by 1980) would merge with its rival Republic to form First RepublicBank, which became the biggest commercial bank in Texas. Fourteen months later, the giant holding company failed, resulting in a $3.5 billion federal bailout.
The demise of First Republic Bank was part of a broad-based failure of financial institutions that—encouraged by the Reagan, Poppy Bush, and Clinton administrations—had combined voracious acquisitions of smaller banks with a spree of speculation and usury that in particular devastated the Texas economy and sent commercial banks into bankruptcy.
A major cause behind the bank failures was the erosion of consumer protections that Franklin Roosevelt had put in place in the aftermath of the Wall Street crash of 1929. The effort to weaken FDR’s protective mechanism began under President Nixon, continued under Ford and Carter, and was characterized as a positive development called “deregulation.” It greatly accelerated under the Reagan-Bush administrations, finally imploding under W. in the form of a collapsing housing market and fortunes lost in arcane financial instruments called “derivatives.”
The collapse of FDR’s safety net may have looked like a disaster to economists and to the ordinary taxpayers footing the bill for these risky ventures, but it also represented the fulfillment of a dream expressed by Prescott Bush and his confreres: to see Roosevelt’s hated New Deal brand of “socialism” undone. That it was undone, in steps, by Prescott’s son Poppy and grandson W. is hardly coincidental.
Banking institutions of all sizes have played crucial roles, wittingly and unwittingly, in the repatriation and investment of petrodollars in the West, and in the movement of monies to finance intelligence operations and undeclared wars. But all of this was nothing compared to the role played by an enterprise called BCCI. The involvement of the Bushes and their friends in this international scheme is not easy to tease out of the welter of sub rosa actions and relationships, but it is there nonetheless.
The Outlaw Bank and Its Spooky Customers
The sprawling global banking empire called Bank of Credit and Commerce International (BCCI), which emerged in the 1970s and was shuttered in 1991, is largely forgotten today. But not long ago it was occupying headlines as the world’s biggest-ever financial fraud. BCCI, though it called itself a bank, was really much more. It was a vast entity connected to the Pakistani military regime and key Gulf states, with banks and branches in seventy-three countries, including at least fifty developing ones. Although its founder, Agha Hasan Abedi, along with his top brass, emphasized their Muslim religiosity, the institution would apparently do anything for anyone willing to pay for services that needed to be kept quiet. These ranged from helping Pakistan obtain a nuclear bomb to financing secret arms deals on behalf of the West, while simultaneously serving as a money-distribution network for West-hating terrorist organizations.
At its peak BCCI wielded immense political and financial power in world capitals. It was a de facto international crime syndicate, a one-stop banking center for everyone from dictators to drug lords to intelligence services. BCCI eng
aged in blackmail and provided underage girls to major clients. The reality was like a scene out of a James Bond movie, replete with every imaginable form of villainy and the obligatory bikini beauties. BCCI provided “banking services,” broadly defined, to the likes of Saddam Hussein, terrorist mastermind Abu Nidal, Panamanian dictator Manuel Noriega, and even the elusive heroin kingpin of Asia’s Golden Triangle, Khun Sa.
Completely amoral, it seemed to be connected to people in power throughout the world. It was the ultimate expression of the dark side of strategies purportedly designed to help people and produce peace and security. The funding for BCCI had, since its inception, come from ordinary people in developing countries, particularly in the form of remissions from guest workers, such as Pakistanis and Filipinos working in Persian Gulf countries. When it collapsed, literally millions of BCCI patrons, scattered throughout the developing world, suffered, and many lost their life savings.
Starting in 1988, during Poppy Bush’s last year as vice president and continuing through his presidency, a handful of investigators and prosecutors— notably Manhattan District Attorney Robert Morgenthau and Senator John Kerry—got on the trail of this syndicate. Although they met mysterious resistance from the highest levels of the Reagan-Bush and then Poppy Bush administrations, by 1991 they managed to persuade British banking authorities to spearhead a global raid that brought the bank’s activities to a halt. The Manhattan District Attorney’s Office told the Bank of England, directly and indirectly, that it would be seeking to indict the London-based BCCI for operating as a Ponzi scheme. The Bank of England recognized that a New York indictment would precipitate a run on the bank, with an unfair distribution of bank assets to the first people who could withdraw their funds and nothing for the rest. To prevent that, the Bank of England, working with authorities in other countries, closed BCCI worldwide.