ustxtxb_obs_1992_07_04_50_00010-00000_000.pdf

H 2550 CONGRESSIONAL RECORD HOUSE April 25, 1991 FORMER BNL-NEW YORK OFFICER REPLACED EAGLEBURGER AS DIRECTOR OF LBS Symbolic of the close relationship between BNL and LBS, the former regional manager of BNL became a director of LBS soon after Mr. Eagleburger left to take his current State Department post. Mr. Renato Guadagnini, who worked for BNL for 39 years, was appointed a director of LBS in early 1989. Mr. Guadagnini was the regional manager of BNL’s U.S. operations while the Atlanta branch of BNL was illegally loaning $4 billion to Iraq apparently without his knowledge. It is hard to fathom how the person responsible for supervising BNL during the time it illegally loaned $4 billion to Iraq is qualified to be a director of another bank. ANOTHER LINK BETWEEN BNL AND LBS Another link between BNL and LBS is the chief lending officer of LBS. BNL’s Christopher Drogoul, a main conspirator in the BNL loan scheme with Iraq, had a close business relationship with the chief lending officer of LBS while both were stationed in London. On occasion that LBS lending officer, as well as the chief financial officer visited BNL’s office in Atlanta. BNL employees also visited LBS when they were in New York. LBS NOT WELL RUN WHILE EAGLEBURGER A DIRECTOR Apparently LBS was not a well run institution while Mr. Eagleburger was on its board. Upon examining the relationship between BNL and LBS in 1989, the Federal Reserve concluded: “LBS is conducting a very sloppy operation and supervision by the head office is extremely weak. Examiners have found a number of instances where there is a lack of documentation in loan participations with BNL. LBS does not have an internal audi tor.” Sloppy management was not the only trouble LBS had during Mr. Eagleburger’s tenure as directorLBS was also involved in money laundering. LBS CONVICTED OF MONEY LAUNDERING As we have seen, LBS and BNL had a significant relationship while the latter was perpetrating the largest banking scandal of all time. LBS was also involved in criminal activity during that same time period. In 1988, LBS and its chairman were indicted on charges of laundering almost $1.5 million. The chairman of LBS was eventually cleared of the charges made against him, nevertheless, a jury convicted LBS of money laundering. LBS PARENT IN YUGOSLAVIA INVOLVED IN CRIMINAL ACTIVITY A literature search of the Yugoslavian parent of LBS revealed that it also has been involved in several criminal proceedings during the past several years. Two such scandals took place in the cities of Pristina and Titograd in Yugoslavia. The Yugoslavian parent of LBS was also at the center of Yugoslavia’s largest ever financial scandalthe Agrok mere affair. Agrokmerc issued almost $1 billion worth of false promissory notes in local Yugoslavian currency. The parent of LBS and many of its affiliates arranged to purchase most of the notes. The scandal led to scores of arrests, the fall of Yugoslavia’s vice president and shook the Yugoslavian banking system and economy. LBS INVOLVED WITH ENTRADE WHILE EAGLEBURGER A DIRECTOR LBS’s association with criminal activity and criminals extended to the New York-based company called Entrade International, Ltd. and its chief financial officer, Yavuz Tezeller. Entrade International, Ltd. is a Turkish-owned New York-based trading company specializing in the international trade of goods and commodities. Here BNL shows up again, as the bank was indicted with Entrade and Mr. Tezeller for obtaining unauthorized financing for exports to Iraq often with CCC export guarantees or insurance. The Justice Department indicted Entrade and Mr. Tezeller for providing cash, houses, jewelry, vacations, and other things of value for personal use and benefit of BNL employees in consideration for the unathorized loans made to finance Entrade’s exports to Iraq and elsewhere. Entrade faces a maximum fine of $54 million. Mr. Tezeller, a Turkish national, is charged with directing Entrade’s contracts with BNL and with other entities in Europe and the Middile East owned by Entrade’s parent holding company, Enka. Mr. Tezeller has fled to Turkey. LBS also extended a $300,000 mortgage loan to Yavuz Tezeller. The Federal Reserve stated that “this loan appears to have been the first and only mortgage loan made by LBS.” Given the level of criminal involvement of LBS and its parent in Yugoslavia, and its close relationship with organizations charged with criminal activity, I have written letters to the Federal Reserve and State of New York asking them to provide more information about LBS’s operations in the U.S. as well as a more in-depth look at the relationship between LBS and BNL. EXIMBANK AND YUGOSLAVIA: IS THERE AN EAGLEBURGER CONNECTION? Mr. Eagleburger has had a long and prosperous relationship with Yugoslavia. He was Ambassador to Yugoslavia and prior to holding that post he worked in the Embassy as a foreign service officer. While at Kissinger Associates he helped set up Global Motors to distribute the Yugo and he helped LBS get started in New York. It is fair to say that over the past couple of decades Mr. Eagleburger has been one of Yugoslavia’s biggest backers in the U.S. Government. These facts could possibly explain the Eximbank exposure to Yugoslavia which stood at a whopping $1.056 billion as of March 1991. One longtime Eximbank employee stated that he “always considered Eximbank’s large exposure to Yugoslavia unusual.” Upon closer examination, Yugoslavia may be receiving special treatment from the Eximbank at this very moment. BANKING COMMITTEE DENIED ACCESS TO YUGOSLAVIA DATA Yugoslavia is now on the brink of political and economic chaos. It is being torn apart politically and the most recent Eximbank country risk analysis for Yugoslavia is not encouraging. While the Committee was able to see the country risk analyses for Iraq, John Macomber, the President of Eximbank and a friend of Mr. Eagleburger, would not permit Committee investigators access to the country risk analysis for Yugoslavia. YUGOSLAVIA ADMINISTRATIVELY SUSPENDED FROM EXIMBANK PROGRAMS Mr. Macomber recently decided to place all Yugoslavian transactions on holdeffectively suspending Yugoslavia from Eximbank programs. This was not done through the usual process which calls for Eximbank Board of Directors to make the call regarding the suspension of a country from Eximbank programs. Instead, Mr. Macomber decided to give the order to place all Yugoslavian business at the Bank on hold without allowing the Board to formally vote on suspending Yugoslavia. Without a formal board action, an American exporter has no way of knowing Eximbank will not process Yugoslavian transactions. That is unless the exporter has the foresight to call the Eximbank before going to the expense of doing business with Yugoslavian concerns. The mission of the Eximbank is to serve exporters. By not formally suspending Yugoslavia, the Eximbank may be doing a disservice to American exporters. LBS AND PARENT NOT SUSPENDED FROM EXIMBANK PROGRAMS LBS and its parent bank in Yugoslavia both participate in Eximbank programs. Both have been involved in serious criminal activity, one in the United States and the other in Yugoslavia, yet the Export-Import Bank has not suspended either bank from its programs. IS EAGLEBURGER MEDDLING IN EXIMBANK AFFAIRS? The question arises why Yugoslavia has received special treatment from the Eximbank. Has Mr. Eagleburger influenced the actions of Eximbank? Mr. Macomber has stated that Yugoslavia has not received special treatment, but that statement is hard to understand given the facts. For example, longtime Eximbank staff stated that it was rare that an Eximbank President would take a unilateral action to place business with a nation on hold. They also stated that it was unusual for the Eximbank to decide not to formally suspend a nation that is suffering from such severe economic and political problems 10 JULY 4, 1992