Battle Of Corporate Giants To Decide Bcci Payout

A battle between financial giants will decide the outcome of further payments to creditors of the Bank of Credit and Commerce International (BCCI) over the next one year.

BCCI liquidators have sued the Bank of England, auditors Price Waterhouse and the accounting firm Ernst & Young to claim about $5 billion (Rs 18,000 crore).

The Bank of England has been sued for failing to regulate the BCCI, which closed down subsequently on July 5, 1990. The other two companies are sued for failing in proper auditing and accounting checks that allowed large-scale fraud to continue for years. A verdict in the cases by the liquidators against the Bank of England and the other two companies, some of the largest firms in London, might not be out within a year. But the cases will have progressed sufficiently so that we could see which way they might go, Nick Freer, spokesman for the liquidators, said.

 

The first payout to BCCI creditors was ordered on December 10 last year. Under that creditors received 24.5 per cent of their deposits. About 100,000 depositors have received about $2.65 billion (Rs 9,500 crore) between them. Some of the payment sanctioned in the first round is still being processed.

As things stand, the liquidators are expected to pay out another 10 per cent or so of the deposits to creditors by April next year. That would mean that eight years after the bank was closed down, creditors receive only a little over a third of their deposits.

Some optimism last year that creditors may get back up to 80 per cent of their deposits appeared to have been misplaced, BCCI creditors say. We have no idea at present how much money finally gets released, one member of the Creditors Committee of the BCCI, said.

told IANS. Much depends now on the outcome of the cases against the Bank of England, Price Waterhouse and Ernst & Young.

The first round of payment was met substantially through a $1.8 billion grant from the ruling family of Abu Dhabi and from the first recoveries in the liquidation. A sum of $250 million from the Abu Dhabi grant still remains with the liquidators along with

other proceeds of liquidation. But we have to wait for a substantial amount to pay out because the administration of the payout is costly, Mr Freer said.

Recovery of further money is now expected to be a slower process, said Mr Scott. Many of the smaller claims are caught up

in a mesh of legal and accounting disputes. The liquidators are, however, expecting significant amounts of money through claims in the US.

The three principal liquidators for the BCCI in England and Cayman Islands are Mr Christopher Morris, Mr John Richards and Mr Steve Acres. But critical decisions concerning creditors are decided by a board on which elected members of the BCCI creditors committee are present.

The liquidation by the London-based team is proceeding in close consultation with liquidation of BCCI assets at other places around the world. Now in its seventh year, the liquidation process itself has become hugely expensive for creditors.

Creditors money is also being used to press the court action in London against the Bank of England and the other two firms. The fee to the liquidators and to lawyers is eating a large amount out of our due, Mr Abdul Latif, who worked with the BCCI earlier, said. The court action is a gamble and we do not expect to win a case against the Bank of England.

Former employees of the BCCI have been given a separate resettlement grant by the majority shareholders in Abu Dhabi. But

a large number of the 1,200 former employees of the BCCI in England also owe money to the Bank. The liquidators are also pursuing the former employees for money. Many have declared bankruptcy and have said they have nothing to pay.

Winning court action against the Bank of England or the other two

companies is a slender hope but the only chance creditors see of recovering a more substantial part of their money from the collapsed bank.