LONDON, Nov 2: A lawsuit launched against the Bank of England more than 12 years ago, charging that central bank officials turned a blind eye to activities which eventually led to the 1991 collapse of Bank of Credit and Commerce International, collapsed in spectacular fashion on Wednesday.
The lawsuit, brought by the BCCI’s liquidators Deloitte and Touche against the central bank and 22 of its present and former staff, came to an abrupt halt when all allegations were unconditionally withdrawn at London’s High Court.
Deloitte said it dropped the case after the Chancellor of the High Court, Sir Andrew Morritt, gave a judgment earlier on Wednesday in which he found it was “no longer in the best interests of creditors for the litigation to continue”.
As a result, Deloitte withdrew the 1.0-billion-pound (1.47-billion-euro, 1.77-billion-dollar) claim, which had been brought on behalf of 6,500 depositors in Britain who lost out when rogue bank BCCI went bust in 1991 with debts of around $16 billion.
The BoE, which was Britain’s financial regulator at the time, had denied the allegations that it neglected its duty to supervise the BCCI, which collapsed after widespread fraud was uncovered.
Judge Stephen Tomlinson said that the case against the BoE was “wholly without foundation.”
The litigation began in 1993, but only reached the court in January 2004 — making it the first lawsuit filed against the BoE in its 300-year history.
“If the case were to continue, it could last for several more years allowing for appeals and involve further enormous costs,” Deloitte said, adding that the group has spent around 38 million pounds pursuing its case.
Creditors have thus far recovered nearly $6 billion from the liquidation.
Bank of England Governor Mervyn King welcomed the move, saying the case should never have been mounted in the first place.
“There has never been a shred of evidence to support these disgraceful allegations, and the case has collapsed as we always expected it would,” he said.
“The foolish determination to pursue a hopeless case for so long has also led to a huge waste of creditors’ and taxpayers’ money, and I hope everyone concerned will take a close look at how and why such a very weak case took 12 years to come to an end.
“The Bank will be seeking the largest possible compensation for its costs.”
BCCI was set up in the 1970s by a group of high-ranking Pakistanis, including its head, Agha Hasan Abedi.
Among the many misdeeds which led to its collapse, BCCI secretly channelled many millions of dollars into Gulf Group, a Geneva-based shipping giant, even though the senior management of both companies knew that Gulf Group was insolvent.
Gulf Group head Abbas Gokal and his fellow conspirators falsified documents on a vast scale and engineered an intricate money laundering operation.
The BCCI case has been described by Britain’s Serious Fraud Office as “the biggest fraud in banking history”.—AFP
