KARACHI, Pakistan — The Bank of Credit & Commerce International used a veil of charity, nationalism and religious piety in the country of its birth to avoid paying tens of millions of dollars in taxes. Instead, it channeled most of the huge profits it earned in Pakistan to a corporation owned by a close friend of the bank's founder, to inflationary tax-free bonds and to pet projects of Pakistan's most powerful politician, President Ghulam Ishaq Khan.

Documents obtained by The Times indicate that Ishaq Khan was serving as the nation's most senior finance official when BCCI was granted special tax-free status for its highly profitable Pakistani operations in 1981. That was the year the bank's founder, Agha Hasan Abedi, created a charitable foundation that sheltered the bank's income from taxes and earned Abedi a reputation as a larger-than-life philanthropist among most of his countrymen.

Ishaq Khan--who does not appear to have benefited financially himself--also served as chairman of the BCCI foundation when it made its largest single donations ever: $10 million in grants in 1988 and 1989 to finance a private institute for science and technology, a now-secret facility where the current project director is A. Qadir Khan, the Pakistani scientist most closely associated with the nation's attempts to build a nuclear bomb.

The foundation did assist many of Pakistan's needy and was responsible for many good works. But an analysis of 10 years of BCCI foundation accounts--obtained by The Times and verified in dozens of interviews with present and former BCCI officers--shows that less than 10% of the $60 million in profits BCCI reported it amassed here in the past decade actually went to the nation's indigent and incapacitated, to the institutions that care for them and to the religious and educational "good works" for which Abedi is best known here.

Through its large investments in government bonds that the World Bank has cited as a significant cause of Pakistan's soaring inflation and expanding black economy, the BCCI foundation actually made more money in interest alone than it ever donated to charity.

For each dollar the foundation spent to care for cancer patients or for scholarships for the poor, it spent thousands more on shares of stock in a private Pakistani cement company that has never paid the foundation a single dividend. That company is owned by Abedi's close friend, Saudi entrepreneur Ghaith R. Pharaon. Pharaon was indicted with Abedi in New York last month in the massive bank fraud scandal that has engulfed BCCI's operations in the United States.