Monday, May 16, 2005
Arafat Inc.
The search for money once controlled by the dead Palestinian leader leads to a Manhattan bowling alley, an African coffee plantation - and possibly to terrorist accounts
By DAVID BALLINGRUD, Times Staff WriterPublished May 15, 2005
Was he the visionary father of a new nation? Or was he the Palestinian godfather, boss of bosses over terrorists and thieves, a corrupter who stole billions and used the money to buy the loyalty of his supporters and line his own pockets while his people suffered?
Or was he some of both?
Yasser Arafat is dead, and the Middle East peace process has made headway in his absence. For a man whose name dominated headlines for as long as his did, Arafat disappeared without a trace, leaving most of the world guessing at what caused his death in a Paris hospital last November.
But some people are trying to answer what may be an even more important question: What became of his money?
Near the end of his life, Arafat controlled an estimated billion dollars, at least, in a tangle of secret accounts around the world. He used a holding company called PCSC, the Palestine Commercial Services Co., to buy interests in profit-seeking endeavors - from almost $300-million in the Egyptian mobile phone company Orascom Telecom Holding SAE, to almost $30-million in private holdings in the United States.
According to Bloomberg News, Arafat's U.S. holdings included $3.2-million in Virginia-based Simplexity Inc., which makes electronic commerce software, $2.1-million in New York- and Boston-based Vaultus Inc., which makes software for wireless computers, and $1.3-million in New York-based Strike Holdings LLC, which owns the Bowlmor Lanes bowling alley in Manhattan's Greenwich Village.
Arafat was 75 when he died Nov. 11, surrounded by aides, government officials and his wife, Suha, who did her best to keep the others at a distance. Suha, who lived comfortably in Paris with the couple's daughter, accused the official Palestinian entourage of trying to gain control of money that belonged to her husband, and therefore to her, when he died. After Arafat died, it was widely rumored that Suha was paid to keep quiet and disappear.
So what did happen to the money? Has it been returned to the Palestinian people, many of whom have lived for years in the squalor of refugee camps? Or is much of it still hidden in secret accounts throughout the world, controlled by militants in Arafat's inner circle, available to buy guns and bombs?The money hunt
With the Palestinian people badly in need of housing, schools and hospitals, and with money available from donor governments around the world, Arafat and his money men instead rolled the dice on a long list of venture capital gambits. They invested mostly through Ramallah-based PCSC, which Arafat controlled through his financial adviser, Mohamed Rashid.
The investments were made with tax money diverted from the Palestinian Finance Ministry, according to auditors and a report by the International Monetary Fund.
U.S. auditors, hired by the Palestinian Authority, have located and returned to the government the money in about 200 of Arafat's secret accounts. "That's about 90 percent of them," said Jim Prince of the Democracy Council, the California nonprofit hired by the PA to track down the money. Prince is president and founder of the Democracy Council and serves as director of the council's financial "transparency" project in the Middle East.
So far, so good. But the auditors have not been able to examine the accounts of the Palestine Liberation Organization, or PLO, the political organization that was, until the 1993 Oslo accords, the Palestinians' de facto government. That's important because Arafat was the head of both bodies and maintained tightfisted control over the funds of both.
When Prince and his team got inside the PA books, they found they could separate the 200 or so accounts into categories. "Many were carryovers from the old PLO days, when they were a subnational (quasi-governmental) organization and there was a reason for secrecy," he said.
"Another group of accounts were plainly corrupt, or were used to support militant activities," he said. "And the last group was personal money for Arafat, his friends and his wife."
How detailed were the books? Not very.
Until 2002, when donors began demanding more accountability, the Palestinian Authority's budget just referred to "outside accounts," said Prince. "The people who were responsible for them said to us "we told the head guy (Arafat) everything.' I blame the (international) donors for giving money when there wasn't even a treasury to put the money into."
Prince said about 90 percent of the PA's commercial assets "have been "captured.' That means located, identified and legally taken over."
But there remain the assets controlled by the PLO. Its accounts have not been examined. "I'd love to go look at the PLO accounts," Prince said, "but I doubt there is very much interest on their part to have us do that."
Despite his curiosity about PLO finances, Prince said he thinks it is probably a "threadbare" organization these days. "It still has so-called embassies around the world, and it still owns businesses and charges membership dues," he said, "but I'd be surprised if their assets were large."
But not everyone agrees. "I know well-informed people who still believe the PLO has billions hidden around the world," Prince said. He identified Dennis Ross, former special Middle East coordinator and now director of the Washington Institute for Near East Policy, as one of those people. Ross declined to comment.Is the money in the right pockets?
For years, the world's donor nations - including the United States and the European Union - have given much to ease the difficult conditions of the Palestinian people. But they fretted about Arafat's secretive handling of the money. In 2002, to ensure the money would not be used to fund terrorism, the donors finally demanded more accountability. The result was the Palestinian Investment Fund, set up to take money from the frequently corrupt government ministries and use it to stimulate economic growth.
It made Palestinian finances more transparent. It did not outflank Arafat, however.
DEBKAfile, an Internet publication devoted to analysis of Middle East political and military issues, reports that Arafat soon maneuvered around this little obstacle by appointing two chums to important PIF committees. Investments thus remained largely in the hands of this group of three.
The French government recently opened a tax and money-laundering investigation into the deposit of about 11.5-million euros (about $15-million) into the accounts of Mrs. Arafat between July 2002 and July 2003 - about the time the PIF was getting off the ground.
Auditors later found PIF money in companies in Guinea-Bissau's national airline and a coffee plantation in Zimbabwe, to name just two investments. The PIF, however, gradually has come more and more under the steady hand of Palestinian Finance Minister Salam Fayyad, a respected former official of the International Monetary Fund, chosen under pressure from the United States and EU.
That did not end the worry over missing money, however.
Edward S. Walker Jr. is president of the Middle East Institute. He previously served as assistant secretary of state for Near Eastern affairs, as U.S. ambassador to Israel and Egypt and as deputy permanent U.S. representative to the United Nations.
Last November, Walker warned there was a struggle being played out behind the scenes to control billions of dollars Arafat had stashed away in private accounts.
"Arafat ran the finances of his main political faction, Fatah, as a personal bank account. . . . (He) rewarded his allies and bought the loyalty of his opponents," Walker wrote on the Middle East Institute's Web site.
"In the mid 1980s, Arafat was estimated to control some $7-billion in numerous secret bank accounts and in widespread commercial investments. By 2003, the estimate had been lowered to about $1.3-billion. Even at that level, the funds could feed the Palestinian population for over a year and leave a considerable amount left over for social welfare projects.
"The money that was used by Arafat to corrupt and bypass the system and to sustain the conflict is now up for grabs. In the wrong hands, these secret funds will continue to support terrorism and will be used to undercut any effort to moderate the Palestinian position."
In an interview with the St. Petersburg Times a few months later, Walker said his concern has eased somewhat. "It would be very surprising to me if the PLO did not have some resources we don't know about," he said, "but it would also surprise me if they had been able to hide a lot. A lot of the new, younger members are insisting on more transparency in the organization's finances.
"It's a new game there. Abu Mazen (Arafat's replacement as PA chairman, also known as Mahmoud Abbas) can't afford to have a lot of secret accounts, or anything that could be used to accuse him of corruption. I'm feeling pretty positive. There is nobody in the position that Arafat was in - able to manipulate both people and money."A would-be godfather
Arafat may have controlled more than $1-billion, but he didn't use it to live well. In his final years, he remained holed up in his bombed-out compound in Ramallah, his life frequently threatened by his Israeli counterpart, Ariel Sharon.
"This was not about personal greed," said Nathan Brown, an expert on Palestinian politics at the Carnegie Endowment. "He did not live in comfortable settings, he did not frequent the haberdasher."
Arafat's interest was in power more than money, Brown said. "He was the Palestinian godfather," he said. "If you needed medical treatment, or housing or whatever, you went to PLO headquarters and asked for help. Most often you would get help. Maybe it wouldn't be as much as you hoped for, but you got something. He also loved to give expensive gifts to friends and their families."
His wife, Suha, was another story, Brown said. "She lived in Paris until recently and did have interest in the finer things in life. There have been a lot of rumors, but rumors with firm foundations, that she has been given a handsome allowance so she would go away." Israeli officials have said Suha received $100,000 a month before her husband's death.
Nadim Shehadi, a Middle East scholar from the London-based Chatham House, formerly the Royal Institute of International Affairs, likened Arafat's survival skills to the winner of a children's game. "In England we call it "pass the parcel,' " he said. "I believe it is called "hot potato' in the U.S.
"The parcel is passed from one to the other, and the one who gets it when the music stops loses. This was the case in Egypt, Kuwait, Jordan, Lebanon, Tunis and finally Palestine. Wherever Arafat went, there was trouble. He had to be devious to survive having so many enemies. I think money was an instrument for him, not the object."
"Was Arafat a thief? Absolutely," said Prince, who audited the Arafat accounts. "But not in the manner of other despots like Saddam Hussein, who had palaces built for himself and set up personal bank accounts. People who say Arafat did that kind of thing are simply wrong. He stole, but not for his personal benefit."
What killed the Palestinian leader may remain a secret for a long time. French doctors have said he was not poisoned, at least by any poison they are aware of. Meanwhile, Suha has reportedly taken the 558-page medical file with her to Tunis.
As with many things in the Middle East, the issue is clouded by "thousands of rumors, dozens of facts," said Brown.
The search for money once controlled by the dead Palestinian leader leads to a Manhattan bowling alley, an African coffee plantation - and possibly to terrorist accounts
By DAVID BALLINGRUD, Times Staff WriterPublished May 15, 2005
Was he the visionary father of a new nation? Or was he the Palestinian godfather, boss of bosses over terrorists and thieves, a corrupter who stole billions and used the money to buy the loyalty of his supporters and line his own pockets while his people suffered?
Or was he some of both?
Yasser Arafat is dead, and the Middle East peace process has made headway in his absence. For a man whose name dominated headlines for as long as his did, Arafat disappeared without a trace, leaving most of the world guessing at what caused his death in a Paris hospital last November.
But some people are trying to answer what may be an even more important question: What became of his money?
Near the end of his life, Arafat controlled an estimated billion dollars, at least, in a tangle of secret accounts around the world. He used a holding company called PCSC, the Palestine Commercial Services Co., to buy interests in profit-seeking endeavors - from almost $300-million in the Egyptian mobile phone company Orascom Telecom Holding SAE, to almost $30-million in private holdings in the United States.
According to Bloomberg News, Arafat's U.S. holdings included $3.2-million in Virginia-based Simplexity Inc., which makes electronic commerce software, $2.1-million in New York- and Boston-based Vaultus Inc., which makes software for wireless computers, and $1.3-million in New York-based Strike Holdings LLC, which owns the Bowlmor Lanes bowling alley in Manhattan's Greenwich Village.
Arafat was 75 when he died Nov. 11, surrounded by aides, government officials and his wife, Suha, who did her best to keep the others at a distance. Suha, who lived comfortably in Paris with the couple's daughter, accused the official Palestinian entourage of trying to gain control of money that belonged to her husband, and therefore to her, when he died. After Arafat died, it was widely rumored that Suha was paid to keep quiet and disappear.
So what did happen to the money? Has it been returned to the Palestinian people, many of whom have lived for years in the squalor of refugee camps? Or is much of it still hidden in secret accounts throughout the world, controlled by militants in Arafat's inner circle, available to buy guns and bombs?The money hunt
With the Palestinian people badly in need of housing, schools and hospitals, and with money available from donor governments around the world, Arafat and his money men instead rolled the dice on a long list of venture capital gambits. They invested mostly through Ramallah-based PCSC, which Arafat controlled through his financial adviser, Mohamed Rashid.
The investments were made with tax money diverted from the Palestinian Finance Ministry, according to auditors and a report by the International Monetary Fund.
U.S. auditors, hired by the Palestinian Authority, have located and returned to the government the money in about 200 of Arafat's secret accounts. "That's about 90 percent of them," said Jim Prince of the Democracy Council, the California nonprofit hired by the PA to track down the money. Prince is president and founder of the Democracy Council and serves as director of the council's financial "transparency" project in the Middle East.
So far, so good. But the auditors have not been able to examine the accounts of the Palestine Liberation Organization, or PLO, the political organization that was, until the 1993 Oslo accords, the Palestinians' de facto government. That's important because Arafat was the head of both bodies and maintained tightfisted control over the funds of both.
When Prince and his team got inside the PA books, they found they could separate the 200 or so accounts into categories. "Many were carryovers from the old PLO days, when they were a subnational (quasi-governmental) organization and there was a reason for secrecy," he said.
"Another group of accounts were plainly corrupt, or were used to support militant activities," he said. "And the last group was personal money for Arafat, his friends and his wife."
How detailed were the books? Not very.
Until 2002, when donors began demanding more accountability, the Palestinian Authority's budget just referred to "outside accounts," said Prince. "The people who were responsible for them said to us "we told the head guy (Arafat) everything.' I blame the (international) donors for giving money when there wasn't even a treasury to put the money into."
Prince said about 90 percent of the PA's commercial assets "have been "captured.' That means located, identified and legally taken over."
But there remain the assets controlled by the PLO. Its accounts have not been examined. "I'd love to go look at the PLO accounts," Prince said, "but I doubt there is very much interest on their part to have us do that."
Despite his curiosity about PLO finances, Prince said he thinks it is probably a "threadbare" organization these days. "It still has so-called embassies around the world, and it still owns businesses and charges membership dues," he said, "but I'd be surprised if their assets were large."
But not everyone agrees. "I know well-informed people who still believe the PLO has billions hidden around the world," Prince said. He identified Dennis Ross, former special Middle East coordinator and now director of the Washington Institute for Near East Policy, as one of those people. Ross declined to comment.Is the money in the right pockets?
For years, the world's donor nations - including the United States and the European Union - have given much to ease the difficult conditions of the Palestinian people. But they fretted about Arafat's secretive handling of the money. In 2002, to ensure the money would not be used to fund terrorism, the donors finally demanded more accountability. The result was the Palestinian Investment Fund, set up to take money from the frequently corrupt government ministries and use it to stimulate economic growth.
It made Palestinian finances more transparent. It did not outflank Arafat, however.
DEBKAfile, an Internet publication devoted to analysis of Middle East political and military issues, reports that Arafat soon maneuvered around this little obstacle by appointing two chums to important PIF committees. Investments thus remained largely in the hands of this group of three.
The French government recently opened a tax and money-laundering investigation into the deposit of about 11.5-million euros (about $15-million) into the accounts of Mrs. Arafat between July 2002 and July 2003 - about the time the PIF was getting off the ground.
Auditors later found PIF money in companies in Guinea-Bissau's national airline and a coffee plantation in Zimbabwe, to name just two investments. The PIF, however, gradually has come more and more under the steady hand of Palestinian Finance Minister Salam Fayyad, a respected former official of the International Monetary Fund, chosen under pressure from the United States and EU.
That did not end the worry over missing money, however.
Edward S. Walker Jr. is president of the Middle East Institute. He previously served as assistant secretary of state for Near Eastern affairs, as U.S. ambassador to Israel and Egypt and as deputy permanent U.S. representative to the United Nations.
Last November, Walker warned there was a struggle being played out behind the scenes to control billions of dollars Arafat had stashed away in private accounts.
"Arafat ran the finances of his main political faction, Fatah, as a personal bank account. . . . (He) rewarded his allies and bought the loyalty of his opponents," Walker wrote on the Middle East Institute's Web site.
"In the mid 1980s, Arafat was estimated to control some $7-billion in numerous secret bank accounts and in widespread commercial investments. By 2003, the estimate had been lowered to about $1.3-billion. Even at that level, the funds could feed the Palestinian population for over a year and leave a considerable amount left over for social welfare projects.
"The money that was used by Arafat to corrupt and bypass the system and to sustain the conflict is now up for grabs. In the wrong hands, these secret funds will continue to support terrorism and will be used to undercut any effort to moderate the Palestinian position."
In an interview with the St. Petersburg Times a few months later, Walker said his concern has eased somewhat. "It would be very surprising to me if the PLO did not have some resources we don't know about," he said, "but it would also surprise me if they had been able to hide a lot. A lot of the new, younger members are insisting on more transparency in the organization's finances.
"It's a new game there. Abu Mazen (Arafat's replacement as PA chairman, also known as Mahmoud Abbas) can't afford to have a lot of secret accounts, or anything that could be used to accuse him of corruption. I'm feeling pretty positive. There is nobody in the position that Arafat was in - able to manipulate both people and money."A would-be godfather
Arafat may have controlled more than $1-billion, but he didn't use it to live well. In his final years, he remained holed up in his bombed-out compound in Ramallah, his life frequently threatened by his Israeli counterpart, Ariel Sharon.
"This was not about personal greed," said Nathan Brown, an expert on Palestinian politics at the Carnegie Endowment. "He did not live in comfortable settings, he did not frequent the haberdasher."
Arafat's interest was in power more than money, Brown said. "He was the Palestinian godfather," he said. "If you needed medical treatment, or housing or whatever, you went to PLO headquarters and asked for help. Most often you would get help. Maybe it wouldn't be as much as you hoped for, but you got something. He also loved to give expensive gifts to friends and their families."
His wife, Suha, was another story, Brown said. "She lived in Paris until recently and did have interest in the finer things in life. There have been a lot of rumors, but rumors with firm foundations, that she has been given a handsome allowance so she would go away." Israeli officials have said Suha received $100,000 a month before her husband's death.
Nadim Shehadi, a Middle East scholar from the London-based Chatham House, formerly the Royal Institute of International Affairs, likened Arafat's survival skills to the winner of a children's game. "In England we call it "pass the parcel,' " he said. "I believe it is called "hot potato' in the U.S.
"The parcel is passed from one to the other, and the one who gets it when the music stops loses. This was the case in Egypt, Kuwait, Jordan, Lebanon, Tunis and finally Palestine. Wherever Arafat went, there was trouble. He had to be devious to survive having so many enemies. I think money was an instrument for him, not the object."
"Was Arafat a thief? Absolutely," said Prince, who audited the Arafat accounts. "But not in the manner of other despots like Saddam Hussein, who had palaces built for himself and set up personal bank accounts. People who say Arafat did that kind of thing are simply wrong. He stole, but not for his personal benefit."
What killed the Palestinian leader may remain a secret for a long time. French doctors have said he was not poisoned, at least by any poison they are aware of. Meanwhile, Suha has reportedly taken the 558-page medical file with her to Tunis.
As with many things in the Middle East, the issue is clouded by "thousands of rumors, dozens of facts," said Brown.
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