THE global banking scandal involving Bank of Credit & Commerce International has landed atop an Argentine drug-money-laundering scandal alleged to involve figures close to President Carlos Saul Menem.Almost simultaneously with the BCCI news in early July came a federal court decision to press drug-money laundering charges against Amira Yoma, the president's former sister-in-law and former appointments secretary. While there is no known link between BCCI and charges against Ms. Yoma, many Argentines have begun to wonder if "Yomagate" does not extend further. Speculation has been rife, in part, because Yoma and the president are both of Syrian ancestry, and both had contacts with alleged BCCI front man Ghaith Pharaon, a Saudi Arabian financier. Mr. Pharaon has in recent years become a highly visible investor in Argentina, with investment projects receiving high-level support. "People never related BCCI with Yomagate until the judge [investigating Yomagate] went to BCCI to get some information," says a representative of a US bank in Buenos Aires. "Now people in the [financial] community start thinking there is some connection." Argentine banking authorities closed down the local Banco de Credito y Comercio, 99 percent owned by BCCI Holdings, in late July, though a decision had earlier been made to close the bank by the end of the year. When officials visited BCCI offices, they are reported to have found written instructions for the bankers to destroy documents on secret accounts and the institution's transactions. Pharaon met with President Menem some time ago to discuss a Hyatt Regency hotel he is building in downtown Buenos Aires. He also used the consulting services of Javier Gonzalez Fraga, who later became Argentina's Central Bank president. Both have denied anything more than a superficial connection with Pharaon.
Desperately seeking citizenship Pharaon was apparently interested in Argentine investments partly because he hoped to obtain Argentine citizenship. Laws granting Argentine citizens a right to trial at home before being extradited for trial abroad would thwart US attempts to extradite Pharaon, says Rogelio Garcia Lupo, the Buenos Aires correspondent for Tiempo de Madrid, a Spanish magazine. Mr. Lupo says in a phone interview that US investigators told him this was the reason Pharaon sued him after a book he wrote led the Argentine government to decline Pharaon citizenship. The book, called "Stroessner's Paraguay," contains a chapter about BCCI in Paraguay. "I said that in late 1987, Pharaon had arrived in Paraguay and seen [former dictator Alfredo] Stroessner, and had proposed opening a $300 million amusement park in Iguazu Falls," Lupo says, referring to the giant falls separating Paraguay, Argentina, and Brazil. "I said [in the book, that] the arrival of Mr. Pharaon in Paraguay was the beginning of a vast drug traffic money laundering operation in South America." Lupo expects the judge reviewing Pharaon's suit against him, which asked for $500,000 in damages and a year in prison, to find in his favor. The 1989 documents involved in the case are important, however, because they show Pharaon affirmed his role as an owner of BCCI, though he has since said he sold his stake in the bank in 1986. Pharaon is not in Buenos Aires now, but is reported living on his yacht in the Mediterranean.
Argentina's low-profile bank BCCI's Argentina branch apparently existed mostly to manage financing for Pharaon's hotel and jojoba plantation. "It was a very, very low-profile bank branch in Argentina, with almost no personnel," the banker said. The bank apparently did not engage in the capital-flight business, since this was loosely regulated in Argentina and more easily handled by bigger, better-known banks. In recent weeks, Menem has taken a hands-off approach to Yomagate, which has drawn into the affair two more top presidential staffers. The president's strategy now appears to be to calmly allow a judicial investigation to take its course, so that the scandal will not hurt Menem's supporting role in coming gubernatorial and congressional elections. "If the people think the president is covering up for certain people, this will affect the election," says Rosendo Fraga, a political analyst. As director of the Union for a New Majority Study Center, Mr. Fraga says his opinion surveys so far show continued support for Menem's gubernatorial candidate in the Buenos Aires province. Rosendo Fraga and other observers note that Pharaon's Argentine investments were approved and got under way, not under the Menem government, but under his predecessor, President Raul Alfonsin. Lupo, who continues to investigate Pharaon and BCCI in Argentina, says the sheer size of the bank's alleged illegal financial dealings far outclasses those activities of which Yoma is accused. "In Yomagate, you have some ... women bringing in millions of dollars in Samsonite suitcases," Lupo says. "BCCI transferred billions, by fax and wire."