THE B.C.C.I. SCANDAL; After Plea Bargain by Sheik, Question Is What He Knows

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Two weeks ago, New York City prosecutors sat down with lawyers for Sheik Kamal Adham, a former chief of intelligence in Saudi Arabia, and told them their client was running out of time: he was about to be indicted in the multibillion-dollar fraud and conspiracy case surrounding the Bank of Credit and Commerce International.

"We didn't know the magic date, but we knew it would be soon," said Plato Cacheris, one of Sheik Kamal's attorneys.

For the sheik, this posed a quandary. He could ignore the indictment, remain in his mansion in Jidda, and simply not travel to countries that had easy extradition arrangements with the United States. He could also come to New York, face the charges and risk imprisonment. Or, he could try to cut a deal.

Sheik Kamal chose the deal, one that after two weeks of brutal negotiations will cost him more than $100 million in fines and restitution, but almost guarantee he will stay out of American prison -- and one that also requires him to provide information .

What does Sheik Kamal know? Beyond the Scandal

He is charged with fraud, accused of acting as one of the front men on behalf of B.C.C.I. in its hidden purchase of the First American Bank in Washington. In addition to any knowledge he may have of the B.C.C.I. financial scandal -- the largest in the history of banking -- prosecutors have speculated that his own high-ranking position in Saudi intelligence might well have given him insight into B.C.C.I.'s connections to intelligence communities around the world.

They say that his extensive business dealings in the West might help resolve one of the other big mysteries of the B.C.C.I. case: Given that officials of the bank have been accused of paying enormous sums in bribes in 10 countries, did they make any payoffs to American politicians?

Prosecutors said they believe Sheik Kamal actually knows a great deal, and that this, coupled with his willingness to pay a large cash settlement, is what moved the negotiations. Mr. Cacheris, however, insisted that his client knows very little that would broaden the investigation.

Little is known about why Sheik Kamal decided to pay such a large fine and cooperate with prosecutors.

Law-enforcement officials say that remaining in Saudi Arabia may have held no attraction for the 63-year-old sheik, who favors tailored suits, speaks impeccable English, owns extensive American real estate, and keeps an apartment in midtown Manhattan.

But making a deal had another result, one that may be important to the Saudi leaders from whom Sheik Kamal has been estranged in recent years -- it keeps him from being a trial defendant in a case that has greatly embarrassed the Saudi Government. Playing His Hand

At first in his dealings with investigators, Sheik Kamal took the tough stance, that he could resist prosecution by staying in Saudi Arabia. "We played that card," said Mr. Cacheris, who admits it was in an unsuccessful hand, partly because his client "did not wish to lead the type of life restricted to him."

But when prosecutors called his bluff, and let Sheik Kamal know he was to be indicted, the Saudi businessman quickly offered a settlement. Prosecutors and defense lawyers say that from the start he was willing to pay $100 million.

"He was willing to pay his share," Mr. Cacheris said. He said it was important to the sheik that a portion of the money would reimburse people hurt by the fraud. Reaching a Compromise

But the grueling negotiations almost fell apart several times, usually because of details, like the allotment of the money. The discussions nearly collapsed last weekend, they said, over whether information he provided could ultimately be used against him, but a compromise was reached.

Finally, Sheik Kamal agreed to answer all of the prosecutors' questions, and gave them the power to rescind the deal if he did not fully cooperate.

As the B.C.C.I. scandal has unfolded over the years, it has been regarded as the tragic story of the downfall of the most prominent defendant, former Defense Secretary Clark M. Clifford, First American's former chairman and a legendary Washington power broker.

But a closer examination shows that it is also a Saudi scandal, a case that is slowly shedding light on the role a handful of palace insiders played in the huge fraud.

In addition to Sheik Kamal, whose half-sister, Iffat, was married to the former King Faisal, charges have also been filed by prosecutors in Manhattan against Sheik Khalid bin Mahfouz, chief operating officer of the National Commercial Bank, the largest bank in Saudi Arabia. Sheik Khalid is viewed as King Fahd's personal banker. Reports of Diplomatic Episode

Indeed, Bush Administration officials say that when the indictment of Sheik Khalid was announced, King Fahd himself summoned the American Ambassador to express his deep concern. The officials, who spoke on the condition of anonymity, said the King asked Ambassador Charles Freeman to get the American Government to issue a statement attesting that the criminal case was an isolated incident and that it had nothing to do with the stability and honesty of the Saudi banking system. The officials said that Mr. Freeman replied that such a statement was impossible to make during a criminal investigation.

This encounter, the first reported instance in which the Saudi royal family has responded to the B.C.C.I. inquiry, illustrates how deeply embarrassing the scandal surrounding the bank has become for the Saudi rulers, and the strain it has placed on the delicate relationship between the United States and Saudi Arabia.

But prosecutors working for Manhattan District Attorney Robert M. Morgenthau said in interviews that they had received no pressure from Washington to reach a settlement with Sheik Kamal, or in any other aspects of their inquiry.

Administration officials have said that they have been working behind the scenes to see that the widening scandal does not harm the relationship with Washington's closest Arab ally.

One Administration official said the American response to the Saudi requests, was, essentially, "Look, as you know, our judicial system operates independently,"

Law-enforcement officials, who insisted on not being identified, said Sheik Kamal's cooperation helped seal the indictment of Mr. Clifford and Robert A. Altman, the former chairman and president, respectively, of the Washington bank. The case against them involves charges that the men, both lawyers, helped cover up B.C.C.I.'s secret control over American financial institutions. Some Gaps Acknowledged

The officials acknowledged that the case is largely circumstantial, that they lack the bank insider who can testify about instances in which Mr. Clifford and Mr. Altman discussed a coverup scheme.

Mr. Cacheris, in an interview, said his client can provide some help with the case by testifying that B.C.C.I. officials viewed First American Bank as one of their holdings. But he said Sheik Kamal cannot directly implicate Mr. Clifford and Mr. Altman.

"We do not think he can give direct evidence against Clifford and Altman," Mr. Cacheris said. "If he could do that, believe me, I would not have even let him plead to a misdemeanor."

But the officials said Sheik Kamal will in any event help their case, by adding live testimony from a bank insider to a prosecution built largely on dry documents.

Beyond the role that Sheik Kamal might play in the prosecution of Mr. Clifford and Mr. Altman, Mr. Morgenthau said that with the sheik's cooperation, "We expect to learn a great deal more about B.C.C.I. and those who conducted the affairs of this enormous enterprise." Led Intelligence Agency

As head of Saudi Arabia's tiny foreign intelligence service from 1965 to the late 1970's, Sheik Kamal was the liaison with the Central Intelligence Agency and a dozen other foreign intelligence agencies. He used his position in the Government -- and his close relationship with King Faisal -- to make money, branching out into investment banking and real estate projects in Lebanon, Egypt and Dubai.

The C.I.A. has said it did use B.C.C.I., but for legal banking purposes; the bank has also been used by international terrorists.

Referring to Sheik Kamal, Vincent Cannistraro, the C.I.A.'s deputy chief of station in Saudi Arabia from 1975 to 1978, said, "He was both a wheeler-dealer with a tremendous number of contacts in the Middle East and was also the principal point of contact with all the foreign intelligence agencies."

Sheik Kamal is no stranger to the use of political influence, either. Last fall, while he was under Federal investigation, the sheik succeeded in embarrassing President Bush when he hired as a legal adviser Ed Rogers Jr., a lawyer who had been senior aide to the White House chief of staff, John Sununu.

After it was disclosed that Mr. Rogers had signed a two-year $600,000 contract with the sheik, Mr. Bush expressed concern about "the perception of impropriety." Mr. Rogers subsequently withdrew from his contract.