President Bush’s call to change the Palestinian leadership and to bring reform, accountability, and transparency to the Palestinian Authority should focus attention on the financial corruption of Arafat’s regime. Before Bush’s speech, Condoleezza Rice, the national security adviser, accurately summed up the situation in the San Jose Mercury News: “Frankly, the Palestinian Authority, which is corrupt and cavorts with terror, . . . is not the basis for a Palestinian state moving forward.” Judging by the response of Yasser Arafat and his lieutenants, however, no such change is likely anytime soon.
How corrupt is the PA? How much money have Arafat et al. stashed away? Where did the money come from? How long have we known about it?
The first public evidence that Arafat’s Palestine Liberation Organization had at least $10 billion came to light when the Pakistani-owned rogue Bank of Credit and Commerce International was shut down by the Bank of England on July 5, 1991. Britain’s National Criminal Intelligence Service (NCIS) published its own estimate of the PLO’s loot in a 1993 briefing paper on organizations threatening the UK, calling it “the richest of all terrorist organizations.” NCIS estimated the PLO’s ill-gotten gains at $8-10 billion. In addition, the PLO enjoyed an annual income of about $1.5-2 billion from “do nations, extortion, payoffs, illegal arms dealing, drug trafficking, money laundering, fraud, etc.”
In the U.S., the General Accounting Office investigation of Arafat and the PA’s wealth in November 1995 was kept secret because the CIA insisted that the publicity would hurt the “national security interest.” This despite the CIA’s own report in 1990 that the PLO had $8-14 billion.
Then came the Oslo accords. Following the 1993 ceremony on the White House lawn, Arafat pleaded poverty and set out, hat 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 his gang have pocketed is hard to ascertain. But the conspicuous consumption of Arafat and his inner circle – rows of ostentatious villas, shopping sprees in Paris, and late-model Mercedes-Benzes – has not gone unnoticed by ordinary Palestinians, who live in dismal conditions.
When $326 million disappeared from PA coffers in 1996, the Palestinian Legislative Council established a special commission to investigate corruption within the PA. The ensuing report found that nearly 40 percent of the PA’s $800 million annual budget (coming mostly from foreign aid) had been lost through corruption and mismanagement. The PA’s comptroller wrote: “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.
In October 1999, Azmi Shuaibi, chairman of the PLC’s Budget Committee, had harsh words for the PA at the 9th International Anti-Corruption Conference in Durban, South Africa: “The recent corruption found in the PA is similar to the corruption that exists in the rest of the Arab countries’ governments.”
Soon after, the London Daily Telegraph 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 companies, European real estate, and shares in Mercedes-Benz and the national airlines of the Maldives and Guinea-Bissau – totaling about $50 billion for the year 2000 (up from $32 billion recorded in 1998). Naturally, Arafat and his men denied the report.
Ongoing demonstrations by disgruntled Palestinians frustrated with this corruption convinced Arafat that his rule was becoming shaky. It was in large measure to deflect internal turmoil that he launched the intifada.
In 2000, Arab countries pledged $1 billion to the PA to ease the economic hardship of the Palestinians. Past dealings with Arafat, however, prompted them to demand that “Chairman Arafat show complete transparency in the funds” and provide a detailed report on how the money would be spent. Arafat refused to comply, and the Arab leaders suspended transfer of the money, telling the PLO chairman that they were doing so “for fear that the money will end up in the wrong pockets.”
By April 2001, however, things had changed: Arab donor countries, recognizing in Arafat’s intifada a convenient distraction from their own countries’ problems, began pumping money again into the PA. At least $45 million per month was transferred directly to Arafat, most notably from the Saudis and Saddam Hussein. This money was not given to alleviate the suffering of the Palestinian people, but to fund PLO terrorist training and organizations, such as Islamic Jihad and the al Aqsa Martyrs Brigades. Recently, the monthly donations from Arab nations were increased to $55 million, in addition to the hundreds of millions of dollars raised in special events to fund the escalating intifada, such as the now infamous Saudi telethon to raise money for the families of Palestinian homicide bombers.
Money flows in from the European Union, too. Despite voluminous evidence of use of aid money to fund terrorism collected by the Israeli Defense Forces at Arafat’s compound in Ramallah – including handwritten instructions from Arafat himself – millions of dollars continue to pour in from the EU. Why? Chris Patten, the EU commissioner, wrote on May 7 that “the EU had not seen any hard evidence that the EU funds have been misused to finance terrorism or for any other purpose.”
“Arafat Bombs, Europe Pays” was the headline of the German newspaper Die Zeit on June 7. The newspaper’s special investigation into EU funding revealed that at least 4.1 billion euros have flowed from the EU to the PA since the autumn of 1993, in addition to hundreds of millions of euros in grants contributed by individual European countries. When the Israelis stopped transferring the PA’s share of revenues from import duties after realizing where the money was going, the EU stepped in to replace those funds. Each month since June 2001, 10 million euros have been paid directly to Arafat.
Die Zeit reported that a few European legislators called for an end to the funding for fear that the money was being used to fund terrorism. But Chris Patten dismissed these concerns, praising “Europe’s especially strict mechanisms for ex-ante and ex-post controls.” Not even the interception of the illegal arms shipment from Iran on the Karine-A fazed EU bureaucrats. So, the financial umbilical cord from Europe to the PA remains, and the IMF representative charged with monitoring how the funds are used admits that “we do not oversee how every euro is spent, because we are not auditors.”
On June 19, following a slew of homicide bombings by Arafat’s al Aqsa Martyrs Brigades, the EU parliament voted to give an additional $17.7 million to the PA. According to the Associated Press, “Patten conceded that corruption in Yasser Arafat’s Palestinian Authority and other problems made it impossible to know where every euro finally ended up [because] ‘it’s an impossible question to ask in the real world.'”
But perhaps some in the Arab world have had enough. On June 5, the Kuwaiti daily Al-Watan published documents it received from a Cairo branch of a Middle Eastern 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.
By now, EU aid to Arafat and the PA has reached at least $4.5-5 billion. U.S. aid to the PA runs about $75 million annually, not including the millions of dollars sent each year from private sources. Corruption is rife, and today the Palestinians are further away from democracy than ever before. As long as Arafat controls the PA’s funds and he and his gang remain in power, no real reform is possible.
Dr. Rachel Ehrenfeld is the Director of the Manhattan based Center for the Study of Corruption & the Rule of Law, and the author of the forthcoming book: “Funding Evil; Follow the Money Trail” (Bonus Books).