Not long after he became president of the United States in 1961, John F. Kennedy gave a speech at an exclusive club in Washington. In it, he joked that his friend and personal lawyer, Clark Clifford, did not want a spot in the new administration as a reward for his long years of helping Democrats.

"You can't do anything for me," Kennedy said Clifford had told him. "But if you insist, the only thing I would ask is to have the name of my law firm printed on the back of the one-dollar bill."

Kennedy's wit cut to the heart of the matter. Beginning his third decade at the center of power in Washington, Clark Clifford was the undisputed king of the city's permanent government, the one that runs on money, politics, and influence. He had come to Washington from St. Louis in 1945 as an idealistic young aide. He stayed on to become one of the city's best-known lawyers.

His deep baritone voice, theatrical gestures, and tall frame topped by a shock of white hair gave him the look and bearing of a diplomat. Because Washington's unique brand of self-importance transforms all of its fixers into statesmen, Clifford was regarded as one of the city's wise men. In truth, he had no need for the advertising on the dollar bill. Everyone knew Clark Clifford and the unseen power he wielded.

Certainly, there was much for which to honor Clark Clifford. When Harry ~uman became president in 1945 upon the death of Franklin D. Roosevelt, Clifford had come to the White House with James Vardaman, his mentor from Clifford's hometown of St. Louis. In his later memoirs, Clifford would describe his first job at the White House as redesigning the Presidential seal, but he went on to become a speech writer and a trusted adviser to 'Thuman. He was a tactician and strategist who helped shape 'Thuman's agenda.

And he went on to become an intimate adviser and lawyer to a succession of Democratic presidents and party leaders, including Kenne dy and President Lyndon Johnson. By and large, he shunned formal power, preferring to operate backstage. With great reluctance, he agreed to serve as Johnson's secretary of defense during the Vietnam War, emerging as a hero to a generation of Democrats and war opponents by persuading the president not to escalate the bombing of North Vietnam in 1968.

His years as a 'Thuman aide and that brief stint as defense secretary were Clifford's only government service, a scant six years. What he had built his career on was navigating the shoals of government, and his seat of power was his prosperous law firm, Clifford & Warnke. His work required some expertise in law and government, particularly as Washington became more complex.

But what Clifford truly traded on was his good name and the access it brought. His word was accepted by presidents and bureaucrats alike, which made him a popular employee of corporate titans and foreign governments in search of favors in Washington. The firm's list of clients over the years read like the Fortune 500-AT&T, Firestone, RCA, Standard Oil, ABC, TWA, DuPont, Phillips Petroleum, Howard Hughes, and a host of others.

To each, when they were new clients, Clifford recited a speech that associates at his law firm could repeat from memory: "I look forward to our association. But before we proceed, there is one point I must make clear. I do not consider that this firm will have any influence of any kind here in Washington. I cannot, and I will not, represent any client before the president or before any of his staff. If you want influence, you should consider going elsewhere. What we can offer you is an extensive knowledge of how to deal with the government on your problems."

The speech was a wink at propriety, a convenient fiction. Years later, journalist Jonathan Alter would characterize it this way: "It is a distillation of everything that is phony about power in the capital in the second half of the twentieth century. The denial of 'any influence of any kind here in Washington' is Orwellian in its boldness."

One can assume that this speech was delivered to Agha Hasan Abedi when he hired Clifford to represent BCCI in the United States. In reality, it was Clifford's influence and reputation that would enable Abedi to achieve what he had failed to do with the assistance of Bert Lance.

Three Arab investors who were part of the original group seeking Financial General Bankshares had decided to proceed with a buyout. They had been joined by eleven other Arabs. All were BCCI clients and Abedi was their financial adviser on the transaction.

Abedi wanted Clifford to be their lead lawyer in the takeover effort. If they were successful, Abedi said, then the investors would want Clifford to become chairman of the banking company and assemble a manage ment team that would be above reproach. The Arabs, said Abedi, were passive investors who would not interfere in the bank's operation. They were just looking for a safe haven for their money.

Although takeovers were not his specialty, Clifford could certainly represent the investors in their dealings with the federal banking regulators, who would have much to say about the outcome of the fight. A big firm that specialized in takeovers could be brought in for the specialized work and still leave a few million in legal fees on the table for Clifford & Warnke.

Clifford's reasons for accepting the management offer would be the subject of intense, and sometimes harsh, speculation in later years. He was over seventy years old and appeared to have all the money he needed. Back in the sixties, rumor had it he was the first lawyer to make a million dollars. He never denied making that much money, only that he was the first. He lived in a stately home in Washington, with a staff of servants, and people were honestly in awe of him when he entered a hearing room or a drawing room.

Later, Clifford would claim that money was of no concern. Rather, he was eager for the new challenge of turning Financial General into a major banking force in the nation's capital, a test of his skill at a time when his peers were in retirement or in the grave.

"I didn't want to retire," Clifford later told a congressional committee in his rich voice, dragging out each word and syllable. "I didn't want to just sit on the porch and rock and wait to die. I said, 'Here is the chance. What if I could take this obscure company and build it into something important and big and impressive?"'

Some of his former law firm associates, however, would offer a different reason. They would say that Clifford's sources of business were dropping off. Even if he was not interested in retiring, many of those who had sent him business were gone. The law firm not only could use the legal fees from the takeover battle, it also could use the legal fees that could be passed its way by Clifford in his position at the helm of Financial General. To these people, admittedly not big fans of his, Clark Clifford took on the job out of greed.

Then, too, there was a psychological appeal. Despite a prominence and power that had outlasted presidents and enmeshed him deeply and powerfully in the fabric of Washington, Clark Clifford was a career supplicant. He had always had to ask for favors on behalf of himself or his clients, whether he was talking to a cabinet secretary or a plain secretary. As chairman of what would become Washington's biggest bank, he would be in a different position. Let people come to Clark Clifford with their hats in their hands for a change.

The second takeover had the earmarks of an Abedi operation from the start. The fourteen Arab investors formed a new holding company, Credit and Commerce American Holdings, in the Netherlands Antilles, another of the fraternity of secrecy havens. Even the name of the new company had the ring of BCCI. Known as CCAH, it would serve as the primary entity to make the offer to buy Financial General.

Two other companies were also created as part of the ownership chain. Credit and Commerce American Investments, or CCAI, was registered in the Netherlands as a subsidiary of CCAH. And FGB Holding Corpora tion was established in the District of Columbia to serve as the actual operating entity once control was acquired. Critics would complain that the alphabet soup of corporate shells was a device to conceal true ownership and control; Clifford would defend the different companies as tax devices.

Bank holding companies, such as Financial General, are entities that own or control more than one bank. They are regulated in the United States by the Federal Reserve Board, an agency more often associated in the public's mind with setting interest rates and keeping an eye on inflation.

On October 19, 1978, CCAH filed an application with the Federal Reserve in Washington seeking approval to proceed with the acquisition of Financial General. Three men, Kamal Adham, Faisal Saud al-Fulaij, and Abdullah Darwaish, would each control twenty-four percent of the stock in the bank. Darwaish was acting as representative of one of Sheik Zayed's sons, who was a minor. The remainder of the stock would be split among the other eleven investors. The chief lawyers on the application were Clifford and his prot6ge, Robert Altman.

The application proved premature. The Arabs had not yet made peace with the Financial General executives, and the management opposed the acquisition. In battling the takeover, Financial General's lawyers had a legal advantage that not even Clifford could surmount. Financial General's Maryland subsidiary bank was among those units opposing the takeover. Maryland had a law that prohibited the hostile takeover of any Maryland bank. The Maryland banking commissioner said the deal would violate the law. On February 16, 1979, the Federal Reserve Board dismissed the application, citing the Maryland law.

Clifford and Altman challenged the board's decision, but they also worked behind the scenes negotiating with Frank Saul, William Middendorf, and other investors aligned against them. Before the appeal could be decided, the Arab investors reached an agreement with Financial General. In July of 1980, it was announced that the Arabs would buy the company for $130 million, about $15 million more than the earlier offer. The deal still needed federal approval, and in November CCAH made another application to the Federal Reserve.

Crafting the second application required special care. The lawyers and the investors did not want this one blowing up on them. Everyone, including the staff at the Fed, was aware of the Securities and Exchange Commission consent decree on the first attempted takeover of Financial General and the role of BCCI and Abedi in the incidents that led to it. Assurances would have to be made to the regulators that BCCI was in no way involved this time around. The regulators had to be convinced that this was different. Where Bert Lance had been Abedi's hired man the first time around, a far smoother team was now in place.

The new application specified that the Arab investors would be passive and take no part in the management or operation of Financial General. The management was to rest with a board of directors that would include Clifford as chairman, his long-time friend, former Mis souri senator Stuart Symington, and retired Air Force General Elwood Quesada. In addition, an experienced banker would be chosen as president and chief executive of Financial General before final federal action on the application.

That was only the start. Clifford and company began a round of intense lobbying of the state and federal officials who would be involved in the decision. Abedi joined them for a meeting with John Heimann, who had moved up from New York bank superintendent to comptroller of the currency in Washington. Abedi stressed to him that this deal was not the same as the one that Heimann had rejected in New York. Clifford and Altman met with the banking commissioner in Maryland, providing assurances that this was a friendly transaction, well within state law. And the two lawyers met with Sidney Bailey, the Virginia commissioner of financial institutions, who was expressing objections to the sale of one of his state's banks to foreign investors.

Bailey had been a bank examiner with the U.S. comptroller of the currency for nearly twenty years before becoming the chief financial regulator in Virginia. He prided himself on running an extremely tight ship, keeping an examiner's close eye on the financial picture of all the banks in his domain.

Bailey did not like the fact that one of his state's largest banks was going to come under foreign control. Though his reasons would later be misinterpreted as a suspicion that BCCI was behind the takeover, in fact Bailey was opposed to the concept of any foreign investors owning a major bank in his domain. Indeed, at the time, Bailey made it known that he felt the fact that the owners of the bank would reside in foreign countries and be protected by a series of shell companies registered outside the United States was bad for all regulators. Clifford realized that Bailey had no legal grounds for blocking the sale, but he did not want the feisty regulator stirring things up with the Fed, so he and Altman went to see Bailey in his Richmond office.

"These are honest, honorable, upright people who would be nothing more than passive investors looking for a safe haven for their money," Clifford told Bailey. "They perceive the United States as being the best of all safe havens right now. Investing in a banking organization is the epitome of a safe haven. They have nothing more in mind than the well-being and improvement of this institution. They intend to do nothing detrimental to the institution or misuse it."

Clifford tried to ease Bailey's mind on his central objection, saying: "They will respond to any questions that any regulator might have. There is no cause for concern about these individuals, their purposes, or their relationships."

Bailey remained unpersuaded. In a voice nearly as deep as Clifford's, he summed up his objections: "You can't send the sheriff after them."

Virginia had no law against a foreign entity buying one of its banks, or any other institution for that matter. Bailey could complain all he liked, but Clark Clifford would no doubt prevail in a war of words up in Washington.

The Federal Reserve had its own concerns about the proposal. They centered on the independence of the investors from the Bank of Credit and Commerce. These concerns were obvious ones, in light of the role played by BCCI and Abedi in the earlier run at Financial General, which was stopped by the SEC. It would turn out, however, that there was little the regulators could do to discover the truth of the relationship between the bank and these customers and shareholders who claimed to be acting independently.

A key factor in the litmus test on independence was financing. Was BCCI bankrolling the purchase? The agency requested detailed information from the fourteen investors on their financial resources and the source of funds for buying the bank. The replies, most of which were certified by accountants, showed that the Arabs were people of consider able wealth and that the funds were coming from their personal resources.

That did not mean, of course, that the principals were required to come up with the $130 million in cash from their own pockets. Fifty million dollars of the money, in fact, was going to be a loan to CCAH from a small French bank, Banque Arabe et Internationale Investissement. There was nothing unusual about the loan, which would be backed by the personal guarantees of the wealthiest investors. And there appeared to be no BCCI involvement.

What the regulators failed to discover was that the French bank and BCCI had interlocking boards of directors. In other words, a person who served on the BCCI board also served on the French bank's board. In this case, the common director was Yves Lamarche, who had once supervised the Bank of America investment in BCCI.

Lamarche had gotten to know Abedi during the years that the Bank of America and BCCI were partners. It was through his role at the California bank that Lamarche had first been appointed to a seat on the board of BCCI Holdings. But he had quit Bank of America in the mid-I 970s and gone on to become the chairman and director of a new bank in Paris, Banque Arabe et Internationale Investissement. He had not, however, resigned his BCCI seat and he had retained close personal and professional ties to the bank and to Abedi. The two banks did a lot of business together.

Had the Federal Reserve uncovered the relationship between BCCI and the French bank, would it have made a difference in the outcome? Not by itself. There was nothing illegal about the relationship between the two banks. But had the interlocking boards and business dealings been disclosed, it would have suggested a possible link between BCCI and $50 million of the purchase money. That might have provided the necessary grounds for delving deeper into the exact source of the other funds. While the application to acquire Financial General did not disclose the relationship, it was no secret. The Fed staff could have uncovered the interlocking board with a little digging. They did not. Perhaps the failure to uncover the tie was an example of the faith that the staff put in the word of Clark Clifford that BCCI was not tied to the financing of the transaction.

What the regulators probably could not have discovered at the time was the secret deal between BCCI and the French bank, BAlI, that was later alleged in a 1991 Federal Reserve proceeding against BCCI. The Federal Reserve contends that BAlI was unwilling to make the $50 million loan solely on its own and had tried to assemble a syndicate of banks to share the risk. When that effort failed, BCCI stepped in and negotiated an agreement in which BCCI would guarantee the loan. BAll's attorneys rejected the idea, so another plan was needed.

The solution was a complicated one. According to the government, Adham would deposit $30 million of personal funds with BAlI as collateral for the $50 million loan. In addition, he and Fulaij would sign personal notes guaranteeing repayment of the total amount in the event of a default. In fact, the entire $30 million for the deposit was loaned to Adham through BCCI's subsidiary bank in the Cayman Islands, International Credit and Investment Company Overseas. Adham allegedly received a written document from ICIC Overseas that said that he was not responsible for repaying the $30 million. In addition, he and Filaij supposedly received written assurances that BCCI would be responsible for fulfilling their personal guarantees for the $50 million loan. In effect, BCCI had arranged for and financed the entire loan from the French bank. It had done so through a series of secret agreements kept from the regulators.

The loan arrangement was only part of the deception. Adham, Fulaij, and the other investors said in the application that they were using their own funds to purchase Financial General. Outside accountants would claim much later that, in a series of secret agreements, BCCI had loaned each of the investors the money used to buy the American banking company. In addition to the French loan, for example, Adham had agreed to put up $13 million of his own cash for his shares in Financial General. The accountants said that the money actually was a loan from BCCI, with the Financial General shares as collateral. Through similar arrangements with the others, BCCI had allegedly financed the entire acquisition and obtained the shares of the banking company as collateral. All of this, of course, was contingent upon the Federal Reserve not discovering the arrangements and approving Agha Hasan Abedi's clan destine move into the United States.

There was a curious omission in the background data collected on the Arabs, too. Checks were made with various federal agencies, such as the Federal Bureau of Investigation, the Central Intelligence Agency, and the Securities and Exchange Commission. Kamal Adham was the largest investor in CCAH, yet the CIA information on him did not disclose that he was the former head of Saudi Arabian intelligence. Federal Reserve staff members would say later that they were generally aware of Adham's past work in intelligence, but they said it was not grounds for objecting to him.

It is unclear how much the CIA knew about BCCI and its investors at this point. Later, the agency would acknowledge that it was moving money through accounts at the bank in the early 1980s. And a five-page report on BCCI written by CIA analysts in 1986 indicated that BCCI had obtained control over First American Bank, the successor to Financial General. In 1981, however, the agency did not have the total picture on BCCI. What the CIA did know for sure was that Kamal Adham had been chief of Saudi intelligence, for Adham had worked closely with the CIA and its agents in Saudi Arabia in earlier years. Eventually he had hired one of the agency's former station chiefs as a business consultant. Yet the CIA failed to report any of this to the Federal Reserve in 1981.

This was a high-profile case. There had been plenty of press about the aborted takeover effort, and there was heightened public concern over Arab investment in the United States in general. So, despite the sweeping denials in the application and in private meetings with Clifford and Altman, the Federal Reserve staff wanted a public record stating categorically that the Bank of Credit and Commerce was not involved in buying Financial General. It was unusual for the Fed to air a case in public, but this was an unusual case.

At nine-thirty on the morning of April 23, 1981, a public hearing was begun in Room B1215 of the Federal Reserve Building at Twentieth and Constitution in Washington. Present were six staff members of the Federal Reserve, led by deputy general counsel Robert Mannion, four of the Arab investors along with Clifford and Altman, and a host of other regulators from Maryland, Virginia, New York, and the comptroller of the currency.

The atmosphere was polite and friendly as Clifford shook hands with the regulators gathered in the large hearing room and introduced his Arab clients. Standing off to one side, apart from the others, was Sidney Bailey, the Virginia regulator. He had never changed his mind about the advisability of the transaction, and he was here to get his objections on the record. The more he had thought about this proposed deal, the more his opposition had solidified. There was a bit of xenophobia in his position: Bailey just did not want foreigners owning a string of banks that reached from New York through Washington and his own state. He was the only regulator to submit a list of written questions about the transaction before the hearing.

Bailey was the first speaker. As is his style, he was blunt. He ran through eight specific objections to the deal. The investors were outside the reach of U.S. laws in case of trouble. Loans and other transactions between Financial General's banks and foreign banks could not be monitored or controlled. And Bailey was concerned about the credibility of the financial statements provided by the investors, assertions he described as the "unsubstantiated claims with which the applications are replete." While Bailey had no way of knowing, among the omissions on the financial statements were the extensive lending relationships between BCCI and the prospective Financial General investors, such as Kamal Adham.

Based on what Bailey did know, the whole scheme did not seem to make sense from an investment standpoint. Why, asked Bailey, had these investors spent three years and millions of dollars to buy Financial General? Logically, the expenditure and effort seemed far beyond the financial value of the bank, particularly considering the hostility that greeted the initial bid.

"There can be little doubt that some incentive other than orthodox investment motives must have prompted this effort," said Bailey. "Virtu ally endless speculation on this question is possible. Why choose Financial General when numerous other investment choices with more attractive financial characteristics would have been available?"

Stone-faced and reading from his prepared text, Bailey answered his own question: "One obvious plausible answer to this riddle lies in the unique position of Financial General in the market. No other single financial institution is situated in both the financial and government hubs of the United States."

When Bailey finished, Mannion dismissed him with a curt thank-you. Regulators did not speak in innuendo or engage in speculation. They dealt in facts and the law. Mannion turned to the next speaker, Clark Clifford.

Here was a forum in which a man of Clifford's eloquence and stature could excel. He had made his reputation not through courtroom preeminence, rarely in fact setting foot in court. His was a mastery of the private meeting behind closed doors and the public presentation to awed government officials. These sessions are scripted and rehearsed as carefully as any courtroom drama. Clifford and Altman had spent much of the previous week crafting the opening statement that Clifford would deliver and the more detailed presentation by Altman.

A man who knows him once described Clifford's rich voice this way:

"There's that soft, confidential, complimentary tone. All your defenses go down."

After expressing his thanks for the opportunity to describe the project "in which we believe so deeply," Clifford dismissed Bailey with a polite stiletto: he would respond to the Virginia regulator's questions in writing later.

Then he wrapped himself in the flag that many in Washington would believe Clifford himself had sewn. Thoughtful Americans, Clifford explained, knew it was in the country's interest to bring back as many of the dollars as possible that were being sent to Arab oil nations. Here was a chance to repatriate some of those dollars by allowing Arabs to invest in American banking. They would be, he assured his audience, passive investors. They would leave the banking to Clifford and the men who would join him on the board of directors of the new entity, outstanding Americans one and all.

For about twenty minutes, Clifford's oratory continued. Financial General, he felt, would grow as he and his friends brought in new business from their contacts with big American corporations. There was no down side to the deal, as Clifford saw it, only a very substantial chance to improve the bank and make it grow.

"Let me conclude on a personal note," he said, lowering his voice as he described his meetings over the past months with Kamal Adham, the leading investor. "I have come to have the deepest respect for his character, for his reputation, for his honor, and for his integrity. I'm proud to be an associate of his. I look forward with real anticipation to continuing to be an associate of his. He is the kind of man with whom I like to be associated."

Just as he had wrapped himself in the flag at the outset, Clifford was now lending his mantle to Adham and, by inference, the other investors. They were good enough for Clark Clifford, so they sure as hell must be good enough for the Federal Reserve Board.

Adham was gracious, even if he was not totally candid. He was, he said, educated in Britain and Egypt and spoke five languages. He described himself as a businessman, with holdings in construction and manufacturing. He neglected to mention that in 1977 he had retired as chief of intelligence in Saudi Arabia.

A contradiction arose when Adham described how he became inter ested in Financial General. He told the hearing that he had been contacted by a friend at the Saudi embassy in Washington who suggested the bank might be a good investment. Documents released earlier in the SEC case and the civil litigation brought by Financial General in 1978 indicated quite clearly that it was Agha Hasan Abedi who had first proposed buying the shares to Adham.

Mannion seemed to accept Adham's explanation that it was he who had asked BCCI to take a look at the prospects of Financial General, but he tried to pursue the international bank's role in assembling the investors in his questioning of Faisal Saud al-Fulaij, the Kuwaiti businessman. Fulaij said that he had been looking for investments in the United States when BCCI suggested Financial General. Though they were prominent customers of BCCI, both men said they did not know initially about the other's involvement. Indeed, they said they did not recall having spoken to each other for ten years. Their mutual involvement, said Adham, was mere coincidence.

"Such things happen in our part of the world where, if I have an interest in an investment, I usually tell my friends that we have an investment like this," said Adham.

Curiously, neither Adham nor Fulaij mentioned their joint interest in the Kuwait International Finance Company, even though KIFCO had promised to loan them part of the purchase price for Financial General the first time they tried to buy it.

At the hearing, Adham also dismissed the notion that he and the other investors were fronts for BCCI, saying, "I would like to assure you that each one on his own rights will not accept in any way to be a cover for somebody else."

Questions were asked, however, about the relationship with BCCI. It was Mannion who brought up the similarity of the names-Credit and Commerce American Holdings and Bank of Credit and Commerce International.

Coincidence, replied Clifford. Credit and commerce are terms used extensively in Persian Gulf financial affairs. Added Altman, "Other than similarity in certain respects, there is no connection between those entities and BCCI in terms of ownership or other relationship."

Lloyd Bostian, Jr., an official with the Federal Reserve's office in Richmond, pursued the relationship. He noted that BCCI had been an adviser early on in the deal and might be called upon later to provide similar help.

"What precisely is their function, if any, in this proposal at the present time?" asked Bostian.

"None," replied Clifford emphatically. "There is no function of any kind on the part of BCCI. I know of no present relationship. I know of no planned future relationship that exists, and other than that, I don't know what else there is to say, Mr. Bostian."

Reflecting on the day-long session several years later, Sid Bailey described his feelings in a straightforward and homespun manner: "I felt like a mouse in a room full of dancing elephants."

On August 25, 1981, the Federal Reserve Board unanimously approved the acquisition of Financial General Bankshares by Credit and Commerce American Holdings. The investigation had uncovered no overt links with BCCI. The investors appeared to be rich. A board of directors led by prominent Americans would be appointed to oversee the operations.

In the deal that wouldn't close, there was still a hitch. The transaction could not be final until the superintendent of banking in New York approved the group's application to take over two Financial General banks there, Bank of Commerce in New York City and Community State Bank in Albany. Political problems were stalling the okay in New York.

Manfred Ohrenstein, a state senator and leader of the Democratic Party in New York, claimed that the Arab investors were trying to "sneak in the back door" to acquire the two New York banks by buying Financial General. Rather than the recycling-of-oil-money line peddled by Clifford, the New York politician saw a different motive.

"This is a sophisticated attempt to acquire a network of banks across the Eastern seaboard and put a stranglehold on the petrodollars coming into this country," charged Ohrenstein.

Clifford responded by hopping on an airplane and going to New York for a chat with Muriel Siebert, who had succeeded John Heimann as the state's banking superintendent. The white-haired lawyer assured Siebert that his clients were upstanding people interested only in returning American money to the economy and finding a safe place for their own wealth. Siebert had some qualms of her own about the deal, principally because American banks and investors did not have the same freedom to buy banks in Arab countries. In fact, in Kamal Adham's home of Saudi Arabia, foreigners were prohibited from owning any business or even land.

Clifford's clout did not reach outside the Beltway, at least this time. Chiefly through the efforts of Ohrenstein, the New York State Banking Board rejected the group's application to buy the two New York banks in November 1981. Eight votes had been needed to win and there had been only five in favor of the deal on the twelve-member board.

It was a setback, but one that could be remedied swiftly if the investors promised to sell the two New York banks once the deal was completed. That should have been simple enough, since neither bank was a large component of Financial General, but Abedi was intent on controlling banks in both New York, the financial capital of the United States, and in Washington, its government center. A compromise was proposed. The Arab investors agreed to sell their shares in the larger of the two New York banks, the Bank of Commerce. In exchange, they wanted permission for the Albany bank to open an office in New York City. There also was a threat: If the state regulators did not approve the new plan, both banks would be converted from state institutions to federal ones, essentially removing New York's jurisdiction entirely. Since federal regulators had already approved the acquisition, transfer ring the jurisdiction appeared to be little more than a formality.

On March 2, 1982, with this gun to its head, the New York banking board approved the new proposal by a vote of nine to two. In a letter to the Fed, the New York banking department said that "the information we received indicated that the investors were prestigious and reputable people."

Observed Muriel Siebert, "I've never seen so much political maneuvering in my life."

With the last obstacle removed, the takeover of this promising banking franchise in the nation's capital by a band of Arab investors was consummated on April 19, 1982. Three months later, the name of the institution was changed to First American. Clark Clifford was elected chairman of the board of the banking company. His young partner, Robert Altman, was named its president.

Before the boldly named bank could get the regulators out of its hair, however, there was another flap. Listed as one of the principals on the CCAH application to buy Financial General was Abdullah Darwaish, who was identified as the representative of one of Sheik Zayed's minor sons. Darwaish also was chairman of the Abu Dhabi Investment Authority and of the nation's Department of Private Affairs, or DPA. And, while the application was pending, he ran into trouble with the ruling family in that capacity.

As DPA head since 1975, Darwaish had been in charge of investing the billions of dollars in oil revenue flowing into the country. This was considered the sheik's money by one and all, since he was the absolute ruler. The investments were pretty conservative, with the bulk of the money invested in United States Theasury bonds.

At the end of 1981, Darwaish lost $96 million of the sheik's money investing in copper futures through an American broker living in Switzerland. The investments were registered in the name of Financiera Avenida, a Panamanian company. Sheik Zayed apparently thought his agents were buying gold. When he discovered they had plunged into the copper market and, worse yet, lost his money, he immediately placed Darwaish and his two senior assistants under arrest. Darwaish also was stripped of his positions with DPA and as representative of the sheik's son.

News of the arrests did not reach the United States until August 1982, well after the final application by the Arab investors and its approval by the Fed. In fact, the Fed learned of the incident when Jerry Knight of The Washington Post, who had been chronicling the long takeover saga, wrote a story raising questions about why the regulators had not been notified of Darwaish's arrest before it approved the Financial General takeover. The day after the article appeared, Michael Bradfield, the general counsel at the Fed, wrote a letter to Clark Clifford demanding to know what was going on with Darwaish.

In language that would one day become familiar, Clifford wrote back claiming that the Post story was "inaccurate, misleading, unwarranted, and irresponsible." Accordingly, he said, he had expressed his views to Benjamin Bradlee, the newspaper's executive editor. Further, said Clif ford, Darwaish's activities as an investment adviser to the sheik were totally unrelated to his role as agent for the sheik's son. Nonetheless, the son had decided to fire Darwaish and would supervise his investment in Financial General personally.

There were some interesting footnotes to the incident. When officials in Abu Dhabi discovered that the $96 million had been lost, they began gathering up all the documents they could find about Financiera Avenida. The bulk of the information was discovered in file cabinets at the London headquarters of the Bank of Credit and Commerce International, where the Panamanian company had been given some office space.