This is a follow-up to my previous dispatches regarding the corruption of the Palestinian Authority and Yasser Arafat's financing of the al-Aqsa Martyrs Brigades and other terror groups. The March 17, 2003 issue of Forbes magazine (advance copies of which were released to the press yesterday), ranks PA Chairman Yasser Arafat sixth among the world richest people in a new category reserved for "kings, queens, and despots," just behind England's Queen Elizabeth in fifth place. Saudi Arabia's King Fahd tops the list at $20 billion. Forbes writes that Arafat has "feasted on all sorts of funds flowing into the PA, including aid money, Israeli tax transfers, and revenue from a casino and Coca-Cola bottler. Much of the money appears to have gone to pay off others... [from] payments to alleged terrorists and $1,500 in "tuition" for security officers, to $10 million, reportedly paid by a company controlled by friends of Arafat, for a 50-ton shipment of weapons from Iran. Take the money out of his hands, reform a corrupt financial system and you could reduce the violence." I attach 4 stories (with summaries first): 1. "'Forbes': Arafat worth $300m" (The Jerusalem Post, February 28, 2003). The Forbes figure is modest in comparison to other estimates of Arafat's riches. An Israeli intelligence official told the Knesset last year that Arafat's net worth is $1.3b. In 1995, the U.S. General Accounting Office compiled a report on Arafat's finances, but it was kept secret due to "national security interests." 2. "Billionaires: Kings, Queens & Despots list" (Forbes magazine, March 17, 2003). "Valuing these fortunes is a tricky business. Why do we separate these folks from our main ranking? They don't exactly represent success stories of entrepreneurial capitalism," states the magazine. 3. "Auditing Arafat" (Profile of Yasser Arafat in Forbes magazine, March 17, 2003). "The Palestinian leader has more than Israeli tanks to worry about. He may be brought to heel by, of all things, honest financial accounting... Financial reforms might succeed in hampering the flow of money to terrorists  might even end up toppling Arafat himself. Money keeps Arafat in power. With a tight grip on much of the $5.5 billion in international aid that has flowed into the PA since 1994, he appears to have overseen virtually all disbursements... Take the money out of his hands, reform a corrupt financial system and you could reduce the violence." 4. "Banking on terror" (By Rachel Ehrenfeld, The Jerusalem Post, February 27, 2003). "A rumor that the European Parliament had passed legislation to begin an investigation into the Palestinian Authority's use of EU funds, is just that. Francois Zimeray, a MEP (Socialist Party, France) was quoted in Ha'aretz on February 24 as saying to the World Jewish Congress that such an investigation is underway. He either misspoke or was misquoted... "In June 2002, after international condemnation of the PA's corruption... the EU decided to continue its financial aid to the PA on the grounds that it is not convinced that Israel will continue to transfer the money to the PA. This decision not only perpetuates the EU's unwillingness to account for the whereabouts of money it gave to the Palestinians, but also the EU's lack of accountability and transparency. Instead of coming clean, the EU Commission headed by Patten, and the Conference of Presidents thought it was better to sweep the investigation under the carpet. Only this time the red on the carpet is the blood of the victims of terrorism." (Rachel Ehrenfeld is a subscriber to this email list.)

FULL ARTICLES

“FORBES”: ARAFAT WORTH $300M

'Forbes': Arafat worth $300m

By Melissa Radler

The Jerusalem Post

February 28, 2003



Palestinian Authority Chairman Yasser Arafat made Forbes magazine's list of the world richest people in a new category reserved for kings, queens, and despots.



With a personal fortune of at least $300 million stashed away in Swiss banks, Arafat is featured in Forbes special annual issue on the world's top 500 billionaires.



Arafat placed No. 6 on a list of world leaders in the "kings, queens, and despots" category. Saudi Arabia's King Fahd topped the list at $20 billion, and Saddam Hussein was fourth with $2b.



Forbes wrote that Arafat has "feasted on all sorts of funds flowing into the PA, including aid money, Israeli tax transfers, and revenue from a casino and Coca-Cola bottler. Much of the money appears to have gone to pay off others. New Finance Minister Salaam Fayad is cleaning up the PA's finances, cutting off much of Arafat's cash flow."



The Forbes figure is modest in comparison to other estimates of Arafat's riches. In a briefing delivered last August to the Knesset Foreign Affairs and Defense Committee, OC Intelligence Maj.-Gen. Aharon (Farkash) Ze'evi reported his net worth at $1.3b. In 1990, the CIA reportedly estimated that Arafat and the PLO had between $8b. and $14b. worth of assets at their disposal. In 1995, the US General Accounting Office compiled a report on Arafat's finances, but it was kept secret due to "national security interests."



Kept off the official billionaires list because, according to the accompanying text, "they don't exactly represent success stories of entrepreneurial capitalism," Arafat, Saddam Hussein, and Fidel Castro, worth $110m., made it onto the list of rogue rich instead. The section features a two-page spread titled "Auditing Arafat," which surmises he "may be brought to heel by, of all things, honest financial accounting."



While dictators were amassing fortunes last year, Forbes found that regular billionaires were losing money. Over the past year, the number of billionaires dropped to 476 from 497, and the net worth of the new not-as-rich dropped $140b. to $1.4 trillion, equal to the GDP of England.



Microsoft chief Bill Gates took first place as the world's wealthiest man, with a declining worth of $40.7b., down from $52.8b. last year and $90b. in 1999. Warren Buffet, who lost $5b. over the past year, kept his No. 2 slot, with $30.5b.





BILLIONAIRES  KINGS, QUEENS & DESPOTS

Billionaires

Kings, Queens & Despots

Forbes magazine

March 17, 2003



Valuing these fortunes is a tricky business. We exclude, for example, assets held in trust for a nation  like Buckingham Palace. It belongs not so much to Queen Elizabeth II as to the British state, much as the White House belongs to the U.S. government. Some estimates are fuzzier than others. We calculate Fidel Castro's wealth as a percentage of Cuba's GDP. Why do we separate these folks from our main ranking? They don't exactly represent success stories of entrepreneurial capitalism.



Name / Title / Country / Age / Estimated worth



King Fahd Bin Abdul Aziz Alsaud / Crown Prince & King / Saudi Arabia / 80 / $20 billion

Sultan Haji Hassanal Bolkiah / Sultan / Brunei / 56 / $11 billion

Hans Adam II / Prince / Liechtenstein / 58 / $2 billion

Saddam Hussein / President / Iraq / 65 / $2 billion

Queen Elizabeth II / Queen / United Kingdom / 76 / $525 million

Yasser Arafat / President / Palestinian Authority / 73 / $300 million

Queen Beatrix Wilhelmina Armgard / Queen /Netherlands / 65 / $250 million



Fidel Castro / President / Cuba / 76 / $110 million





AUDITING ARAFAT

Auditing Arafat

By Nathan Vardi

Forbes magazine

March 17, 2003

The Palestinian leader has more than Israeli tanks to worry about. He may be brought to heel by, of all things, honest financial accounting.



Frozen out by the Bush Administration and hemmed in by the Israeli military, Yasir Arafat is now facing a new threat: the cutoff of funds from his very own Palestinian Authority. Financial reforms might succeed in hampering the flow of money to terrorists  might even end up toppling Arafat himself.



Money keeps Arafat in power. With a tight grip on much of the $5.5 billion in international aid that has flowed into the PA since 1994, he appears to have overseen virtually all disbursements, from $600 payments to alleged terrorists and $1,500 in "tuition" for security officers, to $10 million, reportedly paid by a company controlled by friends of Arafat, for a 50-ton shipment of weapons from Iran.



Take the money out of his hands, reform a corrupt financial system and you could reduce the violence. That's the thinking of U.S. and European officials who insisted on the appointment of a new finance minister for the PA. Salam Fayyad, 50, is the chain-smoking Palestinian technocrat armed with little more than a Ph.D. in economics from the University of Texas who got the finance job last June. Israel has responded by resuming the transfer of $30 million or more per month in tax revenues to the PA, disbursements that were frozen in December 2000 following an outbreak of terrorist bombings. Israel may even release the $500 million-plus that piled up during the freeze.



"I am here to tell you it's not Arafat's money anymore," says Fayyad, sitting in his office in Ramallah, three miles from the Arafat base that Israeli tanks have all but destroyed. A portrait of the Palestinian leader looms above him. "I'm not going to accept anything but total transparency."



He is using standard accounting to take control of the PA's mysterious finances and open them up for all to see. Arafat's three main sources of cash: foreign aid, Israeli tax transfers and profits from PA-controlled companies. Fayyad's first move was to consolidate the PA's funds into a single treasury account under his control. That change ended the autonomy wielded by ministerial fiefs that were free to collect their own revenues and redistribute the funds as they saw fit.



It amounts to a direct attack on Arafat's elaborate patronage system, which ensures the loyalty of the Palestinians' fractious factions. "He is always ready to pull money out of his pocket to buy people," says Said Aburish, an Arafat biographer. An Israeli intelligence report pegs Arafat's personal holdings at $1.3 billion (a claim dubbed "ridiculous" by the Arafat camp), but Israeli officials say Arafat uses his largesse mainly to buy friendships.



"Until the last six months PA money was a power instrument for Arafat," says Eran Lerman, a retired colonel in Israel's military intelligence. "Calling what Fayyad is doing a threat to Arafat is an understatement." Fayyad, for his part, dismisses any such notion. Arafat, he says, "is the person who appointed me, and I am confident in a few months we will have one of the most accountable systems around."



In late December Fayyad took another step toward that goal. He submitted the first publicly disclosed PA budget, a $1.3 billion plan approved by the Palestinian Legislative Council. Auditing of the spending is being supervised by Ernst & Young, hired by the United Nations, and Deloitte & Touche, hired by the U.S. His latest move: the February delivery of the first meaningful annual report, conducted by Standard & Poor's, on the finances of ten PA-owned businesses once controlled by Arafat. Fayyad has lumped these and other interests together in the Palestine Investment Fund, of which he now is chairman, though the fund is managed by Arafat's trusted financial adviser, Mohammed Rachid.



The businesses include a 23% stake in the Jericho casino (worth $28.5 million) and 20% of a Tunisian telecom company ($50 million), as well as a $55 million firm that controls most of the cement imported into the territories and 13 accounts holding an estimated $73 million. At Fayyad's behest S&P is now valuing the fund's other 50 or so holdings, including a gasoline monopoly that is believed to net $1 million a month.



Israeli officials began releasing tax proceeds in July, beginning with a trickle of $14 million payments, rising to $58 million in February. The money, which is deposited into the central account Fayyad controls, includes excise taxes of up to $8 million a month collected by Israel on oil sold to Palestinian-controlled areas. The oil-tax collections  some $500 million from 1996 to 2000  previously flowed into a separate account controlled by Arafat and Rachid.



In the past that kind of latitude let Arafat create a public sector of 125,000 people consuming $660 million, half the annual budget. This includes $240 million for a security force of 53,000 agents, most of them members of Fatah, Arafat's political party, which often receives a 1.5% cut. Now Fayyad is trying to replace the cash payments and create a paper trail, thwarting commanders who skim off the top. Security chiefs are resisting the effort.



Despite Fayyad's reforms, however, Arafat will continue to hold some financial clout. His office is budgeted for $74 million this year, though Fayyad is quick to point out that the spending is now watched carefully by a finance ministry official and the hired auditors. And some signs indicate that Arafat has stashed other money offshore. An Israeli businessman, alarmed that he might be facilitating terrorism, claimed in December that he was hired by Arafat to funnel some $300 million into Swiss bank accounts that Arafat and Rachid control. The attorney general of Israel is investigating. At least $10 million of that sum was used to buy a stake in an Algerian telecom outfit. Fayyad has taken control of that equity; Rachid insists the rest was used by the PA for other investments.



Still, says Azmi Shuaibi, a Palestinian Legislative Council member: "We are afraid if something happens to Arafat, we will not know where all the money is."





BANKING ON TERROR

Banking on terror

By Rachel Ehrenfeld

The Jerusalem Post

February 27, 2003



A rumor that the European Parliament had passed legislation to begin an investigation into the Palestinian Authority's use of EU funds, is just that. Francois Zimeray, a MEP (Socialist Party, France) was quoted in Haaretz on February 24 as saying to the World Jewish Congress that such an investigation is underway. He either mis-spoke or was misquoted.



On February 2, 170 members of the EU Parliament demanding accountability, despite Commissioner Chris Patten's strong objection, signed a petition to open a parliamentarian investigation into the EU's aid to the PA.



The following day the European Anti-Fraud Office (OLAF) announced that it has begun an external investigation "in relation to allegations of misuse of funds donated by the European Union in the context of EU budgetary support to the Palestinian Authority."



What has taken OLAF so long?



The PA's own documents demonstrating how the PA and Yasser Arafat used EU funds to pay for terrorism were discovered by the IDF and have been available for over a year.



Volumes of the Palestinian Authority's own documents, including many graced by Arafat's own signature, ordering the Palestinian Ministry of Finance the recipient of hundreds of millions of dollars in EU budgetary aid (The EU's annual budget is about $101 billion) and additional $950 million in humanitarian aid just for the year 2002 to pay members of the al Aksa Martyrs Brigade for killing Israeli citizens, or else for procurement of explosives and illegal weapons.



These and similar documents motivated Ilke Scroeder (Green Party, Germany) and a small group of like-minded ethically conscious European Parliamentarians to demand a full parliamentary investigation.



Finally, on February 13, the Conference of Presidents of the European Parliament decided that instead of a full investigation, setting up a "Working Group" to look into the matter would be enough. But don't hold your breath, this "Working Group" is made of the very same members of the Budgetary and Foreign Affairs Committees who were supposed to monitor how the PA was spending the EU's taxpayers' money.



EU donations to the PA since the Oslo Accords have included demands for accountability, and similar demands have been attached to the EU's direct budgetary assistance since the PA began attacking Israel in September 2000. However, despite EU claims to the contrary, no real effort to monitor how the money it provided the PA was actually spent has ever taken place. The EU claims that the International Monetary Fund (IMF) monitors the PA budget, and EU.



Comissioner for External Affairs Chris Patten maintains that "EU assistance has clear conditions attached to it and is closely monitored by the IMF at the Commission's request."



His office has also stated that, "the IMF conducts a close review of monthly fiscal information covering the whole of the PA budget, including the wage bill."



In bold contrast however, IMF staff members have contradicted Patten's claim on several occasions. The director of the IMF's Middle Eastern Department, George T. Abed, acknowledged on September 2002 that "with weak institutions and a budget of nearly $1 billion, there has, no doubt, been some abuse."



And he added that even "the Palestinian Legislative Council itself has complained about this," and finally that "the IMF does not and cannot control downstream spending by the various Palestinian agencies."



The EU has been arguing that it will only accept the fact that the money it sends has been funding terrorism if there are mechanisms to identify how each individual Euro is spent.



But as money is fungible; and as the EU gave direct funding toward PA salaries, and additional money to the PA Ministry of Finance for various projects; and as the PA's own records prove that it used the Ministry of Finance to pay for terror activities, what other evidence is needed to show that the PA allocated money received from the EU to fund terrorism?



In June 2002, after international condemnation of the PA's corruption, Arafat appointed a new Minister of Finance, Salam Fayyad. He is a former IMF official who, assisted by outside experts, began an attempt to overhaul the corrupt system. As a result, Israel agreed to renew its transfer of payments for Palestinian tax funds, which it had withheld fearing the money would go to fund terrorism.



These payments, unlike the EU's are being monitored by a special group of accountants brought in by the US. However, there are already reports that Arafat ignores and circumvents Fayyad, by ordering others in the Ministry of Finance to pay to known terrorists, thus continuing to assert his control over the PA's funds.



Despite all this, the EU decided to continue its financial aid to the PA on the grounds that it is not convinced that Israel will continue to transfer the money to the PA.



This decision not only perpetuates the EU's unwillingness to account for the whereabouts of money it gave to the Palestinians, but also the EU's lack of accountability and transparency.



Instead of coming clean, the EU Commission headed by Patten, and the Conference of Presidents thought it was better to sweep the investigation under the carpet. Only this time the red on the carpet is the blood of the victims of terrorism.