Case study

The customer who 'borrowed' more money than anyone else from the fraudulent Bank of Credit and Commerce International (BCCI) was sentenced to a record 14 years in prison on 8 May 1997. Abbas Gokal, aged 61, was found guilty on 3 April 1997 of fraud and false accounting following a massive investigation conducted with the City of London Police. Hundreds of thousands of people around the world lost their savings when BCCI collapsed. This was the fifth and most important conviction by the Serious Fraud Office (SFO) of the perpetrators of the biggest banking fraud in history. With senior BCCI officials, Gokal masterminded a massive fraud, totalling approximately £800m.
Gokal's sumptuous lifestyle - flying by private jet, driving Rolls Royces and owning numerous homes around the world - was funded by BCCI customers, many of whom lost everything. One tragic example involved a father who lost the money he had saved to give his son a bone marrow transplant.
Chris Dickson, the SFO lawyer who headed the BCCI investigation, observed that "human misery is the real cost of fraud". However, Gokal has paid a heavy price for his dishonesty, which serves as a warning to anyone contemplating following in his footsteps. "Just because you wear a collar and tie doesn't mean you can escape from Justice," says Dickson.
Gulf Group was a large group of shipping companies based in Geneva which had offices in over 40 countries. From the mid-1980s Gokal and Gulf secretly received many millions of dollars from BCCI, even though he knew, as did senior BCCI management, that his companies were hopelessly insolvent. To cover up the fact that massive unsecured loans totalling more than $1.2bn (£853.5m) were being made, Gokal and his fellow conspirators falsified documents on a vast scale.
A separate fraud started in April 1987. Following the appointment of Price Waterhouse as the single auditor for the whole of BCCI, Gokal and others created a huge financial structure involving large numbers of apparently independent companies. They were in fact secretly controlled by Gulf and were little more than façades. The aim was to hide the truth from the auditors by making it look as if real commercial activity was taking place with genuine third parties, when in reality millions of dollars were going round in a circle every day between BCCI and Gulf. Money from BCCI was laundered through special conduit accounts at two New York banks, Security Pacific and French American. The 'clean' money coming out of these accounts went to Gulf and the companies it secretly controlled. Part of it was returned to BCCI to make it appear that Gulf companies were keeping up interest payments on their loans, while the rest was used to keep Gulf afloat. Of this money, $500m (£355.6m) was stolen by BCCI from the account of Sheikh Zayed, the ruler of Abu Dhabi.
Secretaries and other junior employees at Gulf headquarters in Geneva were nominee directors of the phoney businesses and were required to sign thousands of documents that were presented to Price Waterhouse. The documents were created at BCCI's so-called 'Special Duties Department' at its headquarters in London. This unit was dedicated to fabricating documents relating to Gulf, including investing commercial histories for non-existent businesses and falsifying loan agreements.
The symbiotic relationship between Gulf and BCCI meant that their fortunes were inextricably linked. BCCI's massive unrepaid loans to Gulf inevitably played a significant part in the collapse of the bank in July 1991. Gulf in its turn could not survive long without the backing of BCCI. It folded shortly afterwards, owing many hundreds of millions of dollars. The SFO's ensuing investigation uncovered documents signed by Gokal in a London safety deposit box, which showed that he and his two brothers owned and controlled the companies involved in the fraud.
Those who lost money from BCCI included local authorities, among them the Western Isles Council, which had £24m invested. Thousands of Council Tax payers will now be paying more for reduced services for years to come Westminster City Council was also owed £3.5m and Harlow Council £4.5m.
Gokal was brought to justice in July 1994 after the SFO heard that he was bound from Pakistan to the US. His plane refuelled in Frankfurt, and thanks to the cooperation of the German authorities, he was arrested and extradited from there. Gokal's trial was one of the largest ever, with more than 80 witnesses and evidence from every continent. His 14-year sentence is four years longer than the previous longest sentence handed out in an SFO case. In addition, the judge ordered that he pay £2.94m by way of a confiscation order with a further three years imprisonment in lieu.
Gokal is now appealing against his conviction on technical grounds under the Human Rights Act and also appealing against his extra three-year prison sentence, handed down recently because he would not pay the £3m that was ordered in compensation by the original trial judge.
Source: Serious Fraud Office