(6 of 6)
According to the GAO report, Elliott set up an offshore trust company based in London and Zurich. The trust company was in turn owned by several Cayman Islands shell corporations, so it could not be traced to Salinas. The trust was managed by a Swiss subsidiary of Citicorp.
This was the basic method, minus any involvement by Citibank, that Ferdinand Marcos employed to spirit money out of the Philippines. This model "really is how it works, how dictators steal their countries to the ground," says Jack Blum, one of the authors of the recent U.N. report on financial havens. "Marcos buys an offshore company in the Isle of Man. This shell company then opens a bank account in the Caymans, managed by a trust company in Bermuda. The Philippine National Oil Co. makes payments to these untraceable accounts, and no one's the wiser."
Citibank ran into further private-banking trouble in Pakistan. In 1995, according to a New York Times story last January that quoted Pakistani government investigators and documents, Citibank's private bank opened several accounts for Asif Ali Zardari, husband of then Prime Minister Benazir Bhutto. Zardari's accounts were officially held through an offshore company in the British Virgin Islands. It was through his account at Citibank's private bank in Geneva that some $40 million flowed, according to the Times. (Pakistan's then President Farooq Leghari in 1996 dismissed Bhutto from office on charges of corruption and misrule, which she denies, saying, "I have no ill-gotten money.")
Zardari, now held on murder and corruption charges, also denies any wrongdoing and describes the accusations against him as politically motivated. Citibank closed Zardari's account after it was informed of criminal prosecutions. The bank is cooperating with Pakistani officials in the investigation.
Such incidents as the ones involving Zardari and Salinas have regulators and bankers in the U.S. and elsewhere worried. Rodolfo Bogni, head of private banking at UBS, says he is pushing for more thorough due diligence as the bank expands its prodigious worldwide private-banking operations. "The fundamental task of the private banker is to know one's client," he says. "And we have to watch political personalities very closely." At Barclays private bank in London, Michael Thomalin, global head of private banking, says that "as a matter of principle, we do not do business with politicians." Officials of the larger private banks say it's very much in their interest to police themselves, lest their governments tighten regulations--and lest they attract the sort of attention that Citibank got last week.
--With reporting by Adam Zagorin/Washington