Where Did Arafat Stash the Money?

[R.A. Hettinga]

<http://online.wsj.com/article_print/0,,SB110124561472582236,00.html>

The Wall Street Journal


 November 24, 2004

 WORLD NEWS


Where Did Arafat Stash the Money?
For Palestinian Authority,
 Credibility Could Depend
 On Tracking Down Funds

By FARNAZ FASSIHI
Staff Reporter of THE WALL STREET JOURNAL
November 24, 2004; Page A11


RAMALLAH, West Bank -- As the Palestinian Authority enters the post-Yasser
Arafat era, the tracking down of funds controlled by the deceased leader --
rumored to be in the tens of millions of dollars -- will affect the
authority's credibility at home and abroad and the potential for clashes
among its factions.

Some Palestinian officials already have called for questioning of Mr.
Arafat's closest aides, and now interim successors, Mahmoud Abbas and Ahmad
Qurei, and his wife, Suha Arafat. Officials have pledged to determine
exactly the amount and location of the money. This week, a statement issued
by the Al Aqsa Martyrs Brigade, a militant group in the West Bank, warned
the new government of corruption among some top officials and vowed to take
the law into its own hands if action isn't taken within a month.

"Officially, the money is supposed to be with the Finance Ministry, but
millions of dollars are invested around the world and no one knows where
they are," said Hassan Khreisheh, first deputy speaker of the legislative
council who has led several probes into government-corruption charges.
"This is unacceptable to any Palestinian."

Over the decades, as Mr. Arafat carried the flag of the Palestinian
struggle, he accumulated money donated by countries, businesses and
individuals to support his movement and help the Palestinian people. Until
the Persian Gulf War in 1991, Gulf countries donated millions of dollars a
year to the Palestinian cause, and Saudi Arabia alone sent an annual check
of $50 million, or about $38 million, a year to Mr. Arafat. He used this
money to support Palestinian refugees in Arab countries, as well as to fund
some of the security groups within the Palestine Liberation Organization,
the umbrella organization headed and controlled by Mr. Arafat.

Aid from Gulf countries slowly diminished after Mr. Arafat backed Saddam
Hussein's 1990 invasion of Kuwait, but Mr. Hussein stepped in to make up
for lost income. The money was stashed in foreign bank accounts, with some
invested in commercial entities around the world.

The International Monetary Fund in a September 2003 report said that from
1995 to 2000, the Palestinian Authority's assets may have exceeded $898
million. That report concluded that much of its revenue from taxes was
invested in a variety of commercial enterprises that nominally belonged to
the authority, but that the "substantial revenue" they generated was being
diverted, as was revenue from monopoly contracts for cement and petroleum.

The report said the enterprises operated "with no transparency or
accountability." Under the arrangement worked out through the 1994 Oslo
Accord, Israel collected value-added and excise taxes on purchases by
Palestinians, and was to remit the money to the Palestinian Authority. But
money -- particularly from excise taxes on petroleum, tobacco and alcohol
-- was diverted, some to an account in a Bank Leumi branch in Tel Aviv, the
report said. Mr. Arafat and his financial adviser, Mohammad Rachid,
controlled the account, according to the IMF.

A major overhaul launched in 2002 by the new minister of finance, Salem
Fayyad, succeeded in transferring control of the bulk of assets from Mr.
Arafat to the government. Since January 2003, all funds have been separated
into two categories: the Palestinian Authority's assets of $300 million to
$700 million in 79 commercial ventures, the largest being a
telecommunication company operating in Algeria and Tunisia, which is now
considered public money; and the PLO's money, whose sum remains a mystery
but is estimated in the tens of millions of dollars by independent auditors
who investigated the funds.

Under political pressure from donor countries, Mr. Arafat agreed the
authority's money could be tracked down throughout the Arab world,
registered and secured in the Palestinian Investment Fund, which requires
at least three official signatures for any withdrawal and is audited by the
Democracy Council, an American nonprofit group hired by Mr. Fayyad.

But no watchdog was ever hired to monitor the PLO funds, and according to
James Prince, who leads the American auditing team, "the PLO funds are
totally opaque." According to some officials and investigators, Mr. Arafat
used that money to buy loyalties, and this stash came from the authority's
presidential budget of close to $40 million -- as well as various illegal
cuts Mr. Arafat allegedly was receiving from petroleum smuggling and from
fees paid by trucks crossing the Gaza Strip border.

"They took away his political and physical power, and all he had was
financial power," Mr. Prince said. "He went around with cash and threw
money around."


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R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
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