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BCCI Granted Temporary Protection in Manhattan Bankruptcy Court

August 3, 1991

NEW YORK (AP) _ A company appointed to liquidate Bank of Credit and Commerce International - a bank charged in a worldwide fraud scandal - asked a federal bankruptcy court judge Friday to protect its assets from an explosion of competing claims.

The London accounting firm Touche Ross was seeking an injunction in U.S. Bankruptcy Court in Manhattan against all pending action against BCCI.

U.S. Bankruptcy Court Judge James Garrity said he would temporarily restrain governmental agencies from liquidating BCCI assets.

Lawyers from BCCI argued that unless company assets in a U.S. holding company were frozen, American creditors and depositors might end up with unfairly large shares.

BCCI lawyers said British officials had given them until December to work out the best way to distribute the bank’s assets worldwide and they wanted a similar arrangement in the United States.

Garrity said he would hold another hearing Aug. 9.

The Bank of England appointed Touche Ross to liquidate BCCI’s assets as regulators try to pay off creditors following the July 5 seizure of the bank.

Allegations against the bank include fraud, drug-money laundering, holding accounts for terrorists as Abu Nidal, brokering illegal arms for Iran and Iraq, and bribing politicians.

The proceeding before U.S. Bankruptcy Court Judge James Garrity was called late Friday afternoon. The Federal Reserve, New York State Banking Department and U.S. Attorney’s Office also had attorneys at the hearing.

The bank regulators were attending to ensure any ruling by the court wouldn’t interfere with their actions against BCCI.

″Obviously, we have an interest that our enforcement proceedings go forward,″ said Rich Ashton, a Fed lawyer in Washington.

″It would inhibit our enforcement action,″ said Sal Morabito, of the New York State Banking Department. Morabito said state regulators already have seized a BCCI office in New York.

He speculated the filing by Touche Ross, if successful, would conflict with the state’s liquidation proceedings.

Touche Ross was seeking an order preventing the filing of new lawsuits or regulatory orders against BCCI Holdings (Luxembourg) SA, which is the holding company for BCCI banks in Britain and other countries worldwide.

Since the seizure of BCCI, at least one lawsuit has been filed to sort out the competing claims against BCCI’s assets.

A unit of BankAmerica Corp. of San Francisco last week asked a federal court in New York to sort out ownership of $177.4 million in BCCI-related funds frozen in BankAmerica accounts following the seizure of the scandal- plagued bank a month ago.

The Bank of England spearheaded the freeze of $20 billion of BCCI assets in a stunning crackdown on July 5 that paralyzed BCCI’s 69 branches around the world. BCCI has an estimated 1.25 million depositors.

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