Arafat’s “Kleptocracy” Revisted

[This manuscript was originally prepared a year ago and is still relevant today, as Arafat tightens his grip on the control of the PA – DB]

Imagine former Enron CEO Kenneth Lay, who plundered his company’s assets before its demise, pleading poverty and then asking world leaders and financial institutions to help support the jobless employees and destitute pensioners of Enron. Imagine Lay actually receiving money from donors around the world and then skimming a sizable percentage himself and a handful of his cronies.

Would tax payers in donor countries remain silent if they knew their governments continuously dished out at least $4.7 billion (and possibly as much as $8 billion depending on the accounting method) to a group that offered no financial transparency? Do these scenarios sound incredible? Not if you substitute the names Yasser Arafat for Kenneth Lay and Palestinian Authority for the Enron executives. Unfortunately this is fact and not fiction and the joke is on American, European and Israeli tax payers who have been footing the bill since 1993 when Arafat and his thugs took control of the PA. With a combination of cunning con and excellent PR, Arafat has turned the plight of hundreds of thousands of ordinary Palestinians living in squalid refugee camps into a multi-billion dollar empire for himself and a handful of his PA cohorts. The more donor countries and organizations give contributions earmarked as aid to the indigent Palestinian populace, the richer Arafat and his cronies get. Though there have been dozens of articles for nearly a decade exposing Arafat’s mega-billion-buck scam, the officials in charge of spending the taxpayers’ money, have ignored these allegations and kept sending the checks to the PA. As early as December 2, 1992 the WALL ST.JOURNAL EUROPE published an article entitled “Don’t Underrate Arafats Bank Account” by Rachel Ehrenfeld. She later went on to coin the PA regime as a “Kleptocracy”.

Today, Dr. Ehrenfeld is the Director of the New York based Center for the Study of Corruption & the Rule of Law (CII). The center conducts comprehensive evaluation of corruption practices for the development of an International Integrity Standard with the help of a team of anti-corruption specialists who codify, measure and explore the most prevalent forms of corruption in the public and private sectors, nationally and internationally. Yasser Arafat ‘s “Kleptocracy” has been studied by the center since the Oslo agreement.

According to Ehrenfeld, the PLO, the precursor of today’s PA, had eight principal sources of income which produced an annual income of at least $1.5 billion:

1. Official contributions from Arab states;
2. The Palestinian Liberation Tax Fund – a 3.5-to-7% tax on Palestinian workers in Arab states;
3. Income from investments;
4. Donations from wealthy Palestinians and various philanthropic organizations;
5. Extortion (“protection” charges for companies or states from terrorist operations);
6. Illegal arms deals;
7. Drug trafficking;
8. Fraud and other criminal activities.

Background

Shortly before the Oslo agreement, Britain’s National Criminal Intelligence Service (NCIS) published an estimate of the PLO’s loot in a 1993 briefing paper on organizations threatening the UK, calling it “the richest of all terrorist organizations.” The NCIS estimated the PLO’s ill-gotten gains at $8-10 billion. This report was preceded by a CIA report from 1990 estimating that the PLO had between $8-14 billion.

With the signing of the Oslo accords, the PLO terrorist group was given legitimacy instantaneously under the new name Palestinian Authority. Arafat and the heads of the PLO became the “legitimate” leaders of the PA and were recognized as representatives of the Palestinian people by every sovereign state including the Rabin-Peres government of Israel. The Israeli leaders were under the assumption that the PLO would be disbanded and its billions would be transferred to the PA treasury to be invested in public infrastructure. Instead the money stayed in PLO coffers controlled by Arafat and a handful of his confidants. Furthermore, immediately after Oslo, Arafat pleaded PA poverty and set out, kafeya in hand, on a world aid tour, claiming that the peace process would collapse without financial support from the international community.

Exactly how much money Arafat and the PA have pocketed is difficult to ascertain. According to Richard Chesnoff who quotes Ehrenfeld in a New York Daily News article, The United States General Accounting Office (GAO) conducted an investigation of Arafat and the PA’s wealth as early as November 1995. But the findings were kept secret because the Clinton administration, eager not to rock the peace process boat, insisted (via the CIA) that the publicity would hurt the “national security interest.”

A 1996 report by the PA comptroller revealed that out of an annual budget of $800 million (coming mostly from foreign aid), 40% or $326 million had literally disappeared from PA coffers through corruption and mismanagement. The comptroller concluded:

“The overall picture is one of a Mafia-style government, where the main point of being in public office is to get rich quick.” Arafat suppressed the report but promised reform.

Other disclosures

Dr. Ehrenfeld says she has documents supporting all her allegations against Arafat’s misdeeds Though her center’s findings on PA corruption are probably the most authoritative and go into the greatest detail, they are certainly not the only source of evidence on how the Palestinian Authority pockets money earmarked for humanitarian aid.

On July 12, 2002, Sari Nusseiba, the PA Minister for Jerusalem Affairs and President of Al Khuds University, openly admitted in an interview on the website Proche-Orient www.proche-orient.info/xjournal_pol_int.php3?id_article=2911, that “PA officials are Guilty of Corruption and Bribery”. When asked about Arafat’s personal involvement in the corruption, Nusseiba carefully answered; He [Arafat] is not known as a corrupt individual, but, “I could be wrong…He does not use the money to buy houses and estates.”

Arafat is too clever to buy ostentatious villas in PA controlled areas for his own personal use while ordinary Palestinians live in squalor. Instead he sends the money abroad: On June 5, 2002, the Kuwaiti daily Al-Watan published documents it received from a Cairo branch of an Arab bank showing that Arafat had deposited $5.1 million into his personal account – to support his wife and daughter, who live in Paris and Switzerland. According to the same report, the money came from Arab aid funds that had been allocated for the Palestinian people.

Al-Watan also reports that Muhammed Rashid, one of Arafat’s top ‘and most influential’ advisors, received instructions from the “President” to buy 14% of the shares of the Jordanian Cement Company with funds received by Arafat from the Arab Gulf states. Apparently as Israeli forces destroy more Palestinian homes and buildings in retaliation to terrorist homicide bombings, the price of cement goes up in light of increased demand due to the needed reconstruction of these houses. As the western countries pay for the reconstruction, Arafat’s shares in his cement business sky rocket. Nevertheless, many Hebron residents complained that funds earmarked for the Committee for the Reconstruction of Hebron Homes, never reached the people entitled to them. Rather, they were distributed to the PA leaders close to Arafat and to several top officials of the Fatah movement, headed by Arafat.

According to Jacky Hogi in an article for the Hebrew daily Ma’ariv, this same “economic advisor” Rashid controls major PA gasoline interests, a flour mill in Gaza, and partial ownership in the now closed Jericho casino.

However Rashid’s biggest source of income is a company called “Behar” which is really a front for the largest “protection” racket in the PA controlled areas. Businesses large and small pay protection money to Behar, to smooth the way to get licenses from the PA, avoid workers’ disputes other accidents and hazards that could befall a business and its owners. Hogi lists examples:

• In Hebron, the police (whose salaries are paid by Rashid’s patron, Arafat collect a “protection” tax of $50 a month from grocers in the shuk.

• In Tulkarm, a businessman paid $100,000 to one of the intelligence services after his brother was arrested on suspicion of cooperation with Israel. After the payment, the brother was still not freed.

• A gas station owner in Jericho reports that security personnel fill up at his station and never pay.

In a 1997 paper, Ehrenfeld claimed that Rashid also controlled over 65% of the charitable organizations in the PA, including the biggest in Gaza. Thus for every dollar given to a Palestinian charitable organization, Rashid and his boss Arafat get a cut. Ehrenfeld’s paper concurs will the poignantly vivid account by Charles Radin which appeared in the Boston Globe on July 8, 2002:

Abu Daya and many others interviewed on a recent general food distribution day were upset by what they saw as corruption in the UN agency that parallels the corruption of the Palestinian Authority.

“My neighbor has a Mercedes, his sons have jobs, and he receives rations from UNRWA as a hardship case,” Abu Daya said. “He has bought land, he has built a house, and he still is listed as a hardship case,” entitling him to free supplies of flour, rice, and other foodstuffs over and above what ordinary refugees receive.

Inside food distribution compounds, outside their gates, and at nearby stores, the coupons Palestinians use to claim emergency food aid made available through the UN agency by international donors are bought and sold. The food itself, in packages clearly marked “not for resale,” is openly resold.

Faez Abu Amri, a temporary food-distribution worker for the UN agency, says that “90 percent of the people who are getting this food aid do not need it,” while the truly needy get less than they should have.

“I see people with boats, stores, and jobs” who get the food and resell it, or sell their food coupons, he said.

The PA “police” and civil servants who number approximately 121,000 (out of a population of 3 million) get their salaries from foreign donors are not exempt from paying tribute to their don. The money arrives in either dollars or euros but Arafat’s servants are paid in Israel shekels after a 25% deduction in the exchange rate and a 3.7% surcharge. Where does the money go?

Mary Curtius of the Los Angeles Times reveals that Ahmed Qurei, better known as Abu Alaa, the Arafat’s hand-picked prime minister of the PA, built a $2 million, 12 room villa cum swimming pool, lush landscaping, privacy wall and guard tower in Jericho.

Recent food riots probably made Qurei nervous. In May, he suddenly abandoned his house. The plaque tacked onto the perimeter wall says that Queri had dedicated it to the “Samed Institute, Workshops of the Children of the Martyrs.” Other top PA officials such as Planning minister Nabil Sha’ath and former Prime Minister Mahmoud Abbas, and Arafat’s security advisor Mohammed Dakhlan are also resented by the Palestinian populace for their lavish life style at the expense of the people.

Israeli soldiers manning road blocks have told this writer that Palestinians while undergo searches often complain openly; “Why are you searching me, you are the ones responsible for bringing Arafat back”. Other soldiers have heard Palestinians vow: “after we finish this intifada with you Jews, we will make an intifada against [Hanan]Ashrawi, [Saib]Erikat, and [Nabil] Sha’ath!

Curtius quotes Ziad abu Amr, a Palestinian legislator and academic who said we are fed up with seeing “an official whose salary is $1000 a month who buys property worth millions. There was a lot of stealing, extortion, and bribery. We had a group of people who became wealthy by illegitimate means.”

The LA Times article also relates the story of PA auditor genaral, Jarar Kidwa, a cousin to Arafat. In May of 1997, Kidwa issued a report on PA corruption. It detailed misuse of funds by the PA departments and caused such an uproar that Arafat never allowed Kidwa to publish another report. Kidwa claims that Arafat said “I am not allowed to make my report public, [because] our enemies can use it against us”. Kidwa acknowledged that he has never been allowed to audit the budgets of the security services or Arafat’s office. Nowadays only one other man sees his report–his cousin Yasser.

Intelligence experts are convinced that on going demonstrations by disgruntled Palestinians frustrated with the rampant corruption in the PA regime convinced Arafat years ago his rule was becoming shaky. The experts feel that the present war with Israel was launched by Arafat, in large measure, to deflect internal protest to an outside common enemy.

The $50 Billion “Paupers”

How much is the PLO net worth today? About a year ago, London Daily Telegraph and other papers revealed that computer hackers had broken the security code of the PLO’s computer system, uncovering records of about $8 billion the PLO held in numbered bank accounts in New York, Geneva, and Zurich, and smaller secret accounts in North Africa, Europe, and Asia. The newspaper also unearthed further secret holdings of the PLO – including front companies, shares on many stock exchanges, European real estate, and considerable holdings in Mercedes-Benz, the national airlines of the Maldives, Guinea-Bissau and Nicaragua as well as duty-free stores at the Jomo Kenyatta Airport in Nairobi and Murtala Mohammad International Airport in Lagos, Nigeria. According to a 1991 report from the Task Force for Unconventional Warfare, US House of Representatives’ Republican Resource Committee these holdings gave the PLO a base for forged travel documents and airline tickets. Dr. Ehrenfeld estimates that in the year 2000 PLO assets totaled about $50 billion (up from $32 billion recorded in 1998). Naturally, Arafat and his men denied these figures.

In March of 2003, the Jerusalem Post reported that Forbes magazine now listed Arafat as one of the world’s wealthiest people with a personal fortune estimated at $300 million stashed away in secret Swiss accounts, Arafat is among those featured in the magazine’s annual listing of the well-to-do. In a new category introduced this year entitled “Kings, Queens, and Despots,” Forbes places Arafat in a respectable sixth place, right after Queen Elizabeth II of England, but ahead of Queen Beatrix of the Netherlands. Who ever said that terrorism doesn’t pay?

While acknowledging that it is “a tricky business” to assess exactly how much Arafat and others on this select list might truly be worth, Forbes wryly notes that they deserve their own separate ranking because, “They don’t exactly represent success stories of entrepreneurial capitalism.” In Arafat’s case, that is putting it mildly. For a man who used to boast about being married to the Palestinian revolution, he has done more than his fair share of plundering his own people, treating their public resources as his personal ATM machine to be looted at will. Otherwise how is it possible that someone whose official salary is several thousand dollars a month can amass a personal fortune of $300 million at least. Even if you take into account the $1 million in Nobel Prize money, it is impossible to accumulate such a large fortune in so little time honestly.

By and large western donors are guilty of a serious cover-up, despite the documentation and allegations of appalling PLO criminality. The sums involved from illegal activities are clearly vast. Yet, the international media, organizations, and donor governments all seem to have been struck by “willful blindness”. Why? Before the present intifada there were those who felt that an internal house cleaning of Arafat’s regime would lead to a breakdown of the “peace talks”. After three years of war, this argument is now without any foundation, but the same proponents of this view still say no to removing Arafat. They claim that if the Arafat regime is removed, it will be replaced by Hamas, Islamic Jihad, or some Islamic fundamentalist entity that would destabilize the entire region and possibly the world. They still feel that Arafat is the lesser of the evils and he will be content as long as he continues to get paid. They are in denial that the Palestinian street is a tinder box on the verge of explosion. When the spark is finally ignited, the Palestinian scene will be reminiscent of the French reign of terror and the Bolschevik Revolution.

The American administration is aware of this possible scenario and has called for reform of the entire PA apparatus. Arafat felt the US pressure and made anemic attempts to show compliance by “relinquishing” power to two hand-picked cronies Mahmoud Abas and Abu Alla. Both failed miserably as prime minister not only because they were undermined by Arafat but also because they have achieved great wealth at the expense of the Palestinian People.

Recently King Abdullah of Jordan requested that President Bush give Arafat another chance in trying to save the “road map” and the President responded by saying Arafat is incapable of fighting terror. Mr. Bush’s statement is only a half-truth because Arafat and the entire Palestinian Authority are incapable of reform because they are too busy robbing their own people. Mr. Bush, the US State Department and even the Israel Government are aware of this graft and corruption but choose not to expose it. Meanwhile, donor nations are still paying, their tax payers are oblivious to where their tax money is going and Arafat and his PA Gang are laughing all the way to the bank. The only ones who remain suffering are hundreds of thousands of Palestinian people.

The writer is a Jerusalem based consultant and researcher. He is founder of the consulting firm Creative Business Solutions.