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Robert Morgenthau

As the U.S. District Attorney for New York County, Robert Morgenthau has wielded his power to gain a reputation for ruthlessly pursuing white-collar crime and bringing down powerful corporations. In the early 1990s, Morgenthau rose to national fame when he brought down the Bank of Credit and Commerce International (BCCI) for its involvement in what he said was the “largest bank fraud in world financial history.” Led by Morgenthau, the prosecution found billions of dollars in company funds unaccounted for, and uncovered links between BCCI, terror financiers, and international drug trafficking. In the 2005, Morgenthau also helped send Tyco International CEO Dennis Kozlowski to prison for cheating the corporation’s shareholders out of roughly $400 million.

During the Kennedy and Johnson presidential administrations, Morgenthau served as U.S. Attorney for the Southern District of New York. At that post, he helped create a new department that pursued cases involving securities fraud and bribery of public officials. In 1969, after clashing for months with officials from the Nixon White House, Morgenthau was forced out of his post. He returned to private life until 1974, when he was elected to the office of District Attorney for New York County.

Before Morgenthau brought down BCCI in 1991, the corporation—a joint creation of the CIA and the Saudis—was the go-to money launderer for Colombian drug runners, terrorist financiers, and a variety of dictators, including Augusto Pinochet of Chile, and Manuel Noriega of Panama. BCCI was alleged to have been involved with the 1980s Iran-Contra scandal, and at one time helped Union Bank—which was founded by Prescott Bush, the grandfather of President George W. Bush— to evade money-laundering laws. One-fourth of BCCI was owned by Khalid bin Mahfouz, a Saudi businessman, whom the United Nations would later label a financial sponsor of terrorism.

While BCCI’s holdings, and by extension, its executives, grew wealthy during the 1980s, the bank’s depositors were collectively losing billions of dollars. Suspicious financial transfers led to an FBI investigation headed by Robert Mueller, the future director of the Federal Bureau of Investigation. That inquiry, however, was aborted for procedural and jurisdictional problems, and a congressional hearing would later find that Mueller “botched” the job. Morgenthau took control of the BCCI case soon thereafter, and found the bank to be involved in a laundry list of illegal activities. His investigation concluded that more than $12 billion in BCCI funds were unaccounted for, and the bank was shut down primarily on fraud charges. (After the bank’s downfall, Mahfouz entered into a $225 million settlement to avoid federal fraud and racketeering charges.)

As of early 2008, Morgenthau, now 88 years-old, continues to prosecute corporate crime as the head of the New York District Attorney’s office. “The system of corporate governance, of checks and balances, has really broken down,” he says.

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Good Guys | Government Officials | International Finance

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