Chalabigate
"Weapons of Mass Deception"
2003-05-12
Banker, Schmoozer, Spy
To his American friends, Ahmad Chalabi is a democrat and a paragon of Iraqi patriotism. To his enemies, he’s a crook. Does he have the stuff to reshape Iraq?
A NEWSWEEK investigation
By Christopher Dickey and Mark Hosenball
May 12, 2003 issue - In the battered precincts of Baghdad’s Hunting Club, Ahmad Chalabi holds forth on the bright future of his country and the sordid history of his enemies. The Iraqi financier and freedom fighter, just returned to his homeland after 45 years in exile, says he’s taken possession of 25 tons of documents from Saddam Hussein’s secret police, and he’s thinking how best to use them.
He and his brothers have been the victims, as he tells it, of many conspiracies by Saddam and by Jordan’s late King Hussein. According to Chalabi, even Swiss bankers and Saddam’s brother Barzan collaborated on schemes to destroy the family’s banking empire abroad. But now Ahmad Chalabi could turn the tables on his many old enemies.
“It’s a huge thing,” Chalabi told NEWSWEEK. “Some of the files are very damning.” And some of the most incriminating, Chalabi implies, could tell a lot about the royal family—in neighboring Jordan. That is where Chalabi built and lost a banking empire in the 1980s, before he was forced to flee and convicted in absentia of fraud and embezzlement. King Abdullah, who has ruled Jordan since 1999, “is worried about his relationship with Saddam,” says Chalabi. “He’s worried about what might come out.” He hints there was an especially close tie—”a subsidiary relationship”—between the then Prince Abdullah and Saddam’s infamous elder son, Uday. But Chalabi gives no details. “Jordan is a neighbor,” says Chalabi in a tone of polite menace. “We don’t want to have some [of the present king’s] early indiscretions poison the relationship.” Yet what could be more poisonous than allegations too vague to refute?
CORRUPT AND UNRELIABLE?
Ahmad Chalabi: banker, politician, schmoozer, spy. Some American officials, particularly leading Pentagon hawks, regard him as a true democrat and a paragon of Iraqi patriotism, an aristocrat who gave up a potential life of comfort and ease to fight against Saddam at a time when few others dared. Critics, including officials from the CIA and State Department, characterize Chalabi as a corrupt and unreliable ally. A NEWSWEEK investigation, with which Chalabi cooperated, shows that his own and his family’s financial institutions were shut down by authorities in Switzerland, Lebanon and Jordan because of questionable practices and unsecured loans. The cost to investors and depositors was tens of millions of dollars. Nobody doubts that Chalabi’s an audacious operator: how else can you describe someone who, after an absence from Iraq of nearly half a century, takes over a prime piece of Baghdad real estate—with a small militia of American-trained and -outfitted gunmen at his side—and starts planning to completely remake his country and the politics of the Middle East?
Over the years Chalabi has cultivated Israelis and Iranians, Washington lawyers and Kurdish warlords, journalists, spies, tribal chieftains and congressional aides——whoever it took to serve his purpose of removing Saddam, returning to Iraq and putting himself near the center of power. An Israeli official recalls Chalabi’s response when asked why he had set up an office in Tehran: “I’m no novice. I know what these bastards want. But I have no recourse.” Now that Chalabi is ensconced at the Hunting Club, the Israeli official says, he “understands democracy and he could be a bridge between the local clans and international trends, but he has too many enemies... I wouldn’t like to be his insurance agent.” Another old friend, archneoconservative Richard Perle, told NEWSWEEK: “I don’t know anyone who knows him well who doesn’t think highly of him, and I don’t know anyone who doesn’t know him at all who doesn’t speak ill of him.”
‘IT’S ASTONISHING HOW LITTLE SUPPORT HE HAS’
That goes for many Iraqis inside the country. Nobody in Iraq can be sure what Chalabi’s agenda is, or who his real allies are. A high-ranking U.S. military-intelligence officer told NEWSWEEK he was stunned when he began talking to locals, even anti-Saddam locals, about Chalabi’s credibility. “It’s astonishing how little support he has,” the officer said. When a U.S. general asked the officer what he was hearing, the officer told him, “I’m sorry to say it, sir, but I’m afraid we’re backing the wrong horse.” In fact, this 58-year-old MIT-trained mathematician embodies the fractal contradictions facing the United States as its troops settle into the occupation of a country bitterly divided about its future, and a region passionately attached to the hatreds of its past. Who will lead Iraq? What role should Washington have in that process? Does it want a reliable client, or a ruler with popular support in the Iraqi street? Might Ahmad Chalabi eventually be that man?
The greatest burden Chalabi bears continues to be the widely repeated allegation that he’s a crook. The NEWSWEEK investigation into his family’s business reveals a complex man maneuvering in a world where money often is put to the service of politics, and politics is a life-or-death occupation. From previously secret court documents in Switzerland, as well as interviews with concerned officials in Amman, Beirut and Geneva, it is clear that the Chalabi family banks would have been in serious trouble regardless of Saddam Hussein’s machinations. But Chalabi’s extremely close ties to the inner circles of the Jordanian government—at a time when Jordan was becoming increasingly dependent on the Iraqi dictator’s good will—surely heightened those risks.
The story begins with Chalabi’s father and grandfather, who had been prominent politicians as well as businessmen when a Hashemite monarchy (installed by the British) ruled Iraq from 1921 until a military coup in 1958. Forced into exile, the Chalabis built a banking business abroad, founding financial institutions in Geneva, Beirut and Amman. In 1977, Ahmad established Petra Bank in Jordan, which grew over the next two years to become the second largest of the 17 banks in the country. In the ultraconservative financial environment of Jordan, Petra stood out for such local innovations as the introduction of ATMs and Visa cards.
JORDAN AND SADDAM
But by the late 1980s, according to former Central Bank director Said Nabulsi, Jordan was facing a financial crisis. Much of the country’s income had been in the form of contributions by rich Gulf states. Those dried up, yet spending continued, especially on arms deals with lucrative commissions for some government officials. By 1988, the Central Bank’s foreign-exchange reserves were exhausted, said Nabulsi, and the Jordanian dinar was forced to devalue by 50 percent. The effect was to make Jordan ever more dependent on its one loyal Arab benefactor—Saddam Hussein.
At the same time the Chalabi family bank in Switzerland, Mebco Geneva, had come under scrutiny from Swiss regulators. In April 1989 they revoked its license. “The result of this action in Switzerland was to cause a run on the other financial institutions in the group [Mebco Beirut and Petra],” says Chalabi. He claims that by mid-May the situation had been “stabilized.” But as Swiss investigators, the Jordan Central Bank and the Lebanese stepped up their inquiries, more and more dubious loans from one Chalabi institution to another surfaced on the books.
Chalabi initially thought he could ride out the storm. He was more than just a banker in Jordan; by this time he was the personal benefactor of many of the country’s officials. “I made it a policy of Petra to provide loans in small amounts to military officers, NCOs, soldiers, Royal Guards and intelligence officers,” says Chalabi. “The royal family, apart from the king [Hussein], were always in need of cash, as their income and sporadic gifts from the king were always less than what was required to sustain even an upper-middle-class life in Amman. Many of these royals were friends of myself and my family for many generations. They came to me for help to pay for schooling for their children, for medical bills and other expenses.”
A GOOD BANKING RISK?
Chalabi’s relations were especially close with the king’s brother, Hassan bin Talal, who was then crown prince: “Prince Hassan borrowed money from Petra in his own name to cover public expenses that were expected of him.” In addition to support for the prince’s favorite charities, there was money for the tribes, for his guards, for military aides and to cover the expenses of diplomatic trips abroad. Chalabi said he “felt that the heir to the throne was a good banking risk.” (Shortly before he died in 1999, King Hussein changed the succession in favor of his son Abdullah.) The total loaned by Petra to Prince Hassan, Chalabi says, “was about $20 million.” Ironically, after Petra was seized by the Jordanian government, that amount was paid back to it “by King Hussein from Saddam’s funds,” according to Chalabi.
Saddam’s influence in the kingdom had grown enormously by the early 1980s, and on at least one occasion he demanded that a suspected opponent be handed over without any trial or court proceedings. The suspect, Hadi al Subaiti, was relinquished and then killed by Saddam’s security forces in 1981. Since Chalabi himself was increasingly active in efforts to thwart economic or other assist-ance to the Iraqi regime by that time, he had reason to be worried. Then Petra Bank was seized on Aug. 2, 1989. Chalabi says both a senior intelligence official and Prince Hassan warned him to leave the country. Chalabi drove across the border to Syria in his own car five days later.
Yet none of these political intrigues fully explains the financial legerdemain that Swiss and other investigators were turning up in the various Chalabi institutions. After losing its license, the Chalabis’ Swiss bank had to file for bankruptcy. Soon, so did a related family “trading company” called SOCOFI. About $160 million in claims were filed by angry SOCOFI creditors (many from the Middle East). But according to a secret Swiss bankruptcy report obtained by news-week, there was a big hole in the company’s balance sheet: about $100 million worth of outstanding loans to members of the Chalabi family and their companies. This included a $2 million loan to a Swiss software company run by Ahmad. (Chalabi says his company couldn’t repay the loan because it, in turn, was owed money by the failed family bank.) In September 2000, two of Ahmad’s brothers pleaded no contest to charges that they had broken the Swiss penal code in connection with SOCOFI.
Under increasing pressure, the Chalabi financial companies collapsed one by one. SOCOFI Geneva folded in early 1990. Then Mebco Beirut, which had actively funded the Shiite Amal militia during the 1980s while it was waging a war on Palestinian groups. Two more Chalabi family members were charged with fraud, and convicted in absentia. When NEWSWEEK went to the Beirut court last week to pull the records, the main file, No. 37837, was empty and the computer memory supposed to list the documents was blank.
The Chalabis who had run the Beirut bank disappeared from Lebanon, just as those in Switzerland had left the country after the collapse of the banks there. According to the secret Swiss bankruptcy report, even the safe-deposit boxes held by SOCOFI were empty, except for some backup floppy disks. A storage facility supposed to hold valuable Oriental rugs no longer had anything in it.
The big loser, however, was Jordan. When the government seized Petra, it assumed its debts, and the eventual run on the bank cost it, according to Nabulsi, some $500 million, or 10 percent of the country’s gross domestic product. Chalabi was subsequently tried in absentia in a military tribunal. He was sentenced to 22 years in prison.
Jordanian officials say Ahmad Chalabi could receive a new trial and defend himself in court if he went back. But for the moment, he’s unlikely to do that. Banking is no longer his game. His business now is the future of Iraq.
With Kevin Peraino, Rod Nordland, Melinda Liu and Colin Soloway in Baghdad, Tom Masland in Beirut, Dan Ephron in Tel Aviv, Owen Matthews in Tehran and Michael Hirsh in Washington
URL: http://msnbc.msn.com/id/3068557/
This site may contain copyrighted material the use of which has not always been specifically authorized by the copyright owner. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.
A NEWSWEEK investigation
By Christopher Dickey and Mark Hosenball
May 12, 2003 issue - In the battered precincts of Baghdad’s Hunting Club, Ahmad Chalabi holds forth on the bright future of his country and the sordid history of his enemies. The Iraqi financier and freedom fighter, just returned to his homeland after 45 years in exile, says he’s taken possession of 25 tons of documents from Saddam Hussein’s secret police, and he’s thinking how best to use them.
He and his brothers have been the victims, as he tells it, of many conspiracies by Saddam and by Jordan’s late King Hussein. According to Chalabi, even Swiss bankers and Saddam’s brother Barzan collaborated on schemes to destroy the family’s banking empire abroad. But now Ahmad Chalabi could turn the tables on his many old enemies.
“It’s a huge thing,” Chalabi told NEWSWEEK. “Some of the files are very damning.” And some of the most incriminating, Chalabi implies, could tell a lot about the royal family—in neighboring Jordan. That is where Chalabi built and lost a banking empire in the 1980s, before he was forced to flee and convicted in absentia of fraud and embezzlement. King Abdullah, who has ruled Jordan since 1999, “is worried about his relationship with Saddam,” says Chalabi. “He’s worried about what might come out.” He hints there was an especially close tie—”a subsidiary relationship”—between the then Prince Abdullah and Saddam’s infamous elder son, Uday. But Chalabi gives no details. “Jordan is a neighbor,” says Chalabi in a tone of polite menace. “We don’t want to have some [of the present king’s] early indiscretions poison the relationship.” Yet what could be more poisonous than allegations too vague to refute?
CORRUPT AND UNRELIABLE?
Ahmad Chalabi: banker, politician, schmoozer, spy. Some American officials, particularly leading Pentagon hawks, regard him as a true democrat and a paragon of Iraqi patriotism, an aristocrat who gave up a potential life of comfort and ease to fight against Saddam at a time when few others dared. Critics, including officials from the CIA and State Department, characterize Chalabi as a corrupt and unreliable ally. A NEWSWEEK investigation, with which Chalabi cooperated, shows that his own and his family’s financial institutions were shut down by authorities in Switzerland, Lebanon and Jordan because of questionable practices and unsecured loans. The cost to investors and depositors was tens of millions of dollars. Nobody doubts that Chalabi’s an audacious operator: how else can you describe someone who, after an absence from Iraq of nearly half a century, takes over a prime piece of Baghdad real estate—with a small militia of American-trained and -outfitted gunmen at his side—and starts planning to completely remake his country and the politics of the Middle East?
Over the years Chalabi has cultivated Israelis and Iranians, Washington lawyers and Kurdish warlords, journalists, spies, tribal chieftains and congressional aides——whoever it took to serve his purpose of removing Saddam, returning to Iraq and putting himself near the center of power. An Israeli official recalls Chalabi’s response when asked why he had set up an office in Tehran: “I’m no novice. I know what these bastards want. But I have no recourse.” Now that Chalabi is ensconced at the Hunting Club, the Israeli official says, he “understands democracy and he could be a bridge between the local clans and international trends, but he has too many enemies... I wouldn’t like to be his insurance agent.” Another old friend, archneoconservative Richard Perle, told NEWSWEEK: “I don’t know anyone who knows him well who doesn’t think highly of him, and I don’t know anyone who doesn’t know him at all who doesn’t speak ill of him.”
‘IT’S ASTONISHING HOW LITTLE SUPPORT HE HAS’
That goes for many Iraqis inside the country. Nobody in Iraq can be sure what Chalabi’s agenda is, or who his real allies are. A high-ranking U.S. military-intelligence officer told NEWSWEEK he was stunned when he began talking to locals, even anti-Saddam locals, about Chalabi’s credibility. “It’s astonishing how little support he has,” the officer said. When a U.S. general asked the officer what he was hearing, the officer told him, “I’m sorry to say it, sir, but I’m afraid we’re backing the wrong horse.” In fact, this 58-year-old MIT-trained mathematician embodies the fractal contradictions facing the United States as its troops settle into the occupation of a country bitterly divided about its future, and a region passionately attached to the hatreds of its past. Who will lead Iraq? What role should Washington have in that process? Does it want a reliable client, or a ruler with popular support in the Iraqi street? Might Ahmad Chalabi eventually be that man?
The greatest burden Chalabi bears continues to be the widely repeated allegation that he’s a crook. The NEWSWEEK investigation into his family’s business reveals a complex man maneuvering in a world where money often is put to the service of politics, and politics is a life-or-death occupation. From previously secret court documents in Switzerland, as well as interviews with concerned officials in Amman, Beirut and Geneva, it is clear that the Chalabi family banks would have been in serious trouble regardless of Saddam Hussein’s machinations. But Chalabi’s extremely close ties to the inner circles of the Jordanian government—at a time when Jordan was becoming increasingly dependent on the Iraqi dictator’s good will—surely heightened those risks.
The story begins with Chalabi’s father and grandfather, who had been prominent politicians as well as businessmen when a Hashemite monarchy (installed by the British) ruled Iraq from 1921 until a military coup in 1958. Forced into exile, the Chalabis built a banking business abroad, founding financial institutions in Geneva, Beirut and Amman. In 1977, Ahmad established Petra Bank in Jordan, which grew over the next two years to become the second largest of the 17 banks in the country. In the ultraconservative financial environment of Jordan, Petra stood out for such local innovations as the introduction of ATMs and Visa cards.
JORDAN AND SADDAM
But by the late 1980s, according to former Central Bank director Said Nabulsi, Jordan was facing a financial crisis. Much of the country’s income had been in the form of contributions by rich Gulf states. Those dried up, yet spending continued, especially on arms deals with lucrative commissions for some government officials. By 1988, the Central Bank’s foreign-exchange reserves were exhausted, said Nabulsi, and the Jordanian dinar was forced to devalue by 50 percent. The effect was to make Jordan ever more dependent on its one loyal Arab benefactor—Saddam Hussein.
At the same time the Chalabi family bank in Switzerland, Mebco Geneva, had come under scrutiny from Swiss regulators. In April 1989 they revoked its license. “The result of this action in Switzerland was to cause a run on the other financial institutions in the group [Mebco Beirut and Petra],” says Chalabi. He claims that by mid-May the situation had been “stabilized.” But as Swiss investigators, the Jordan Central Bank and the Lebanese stepped up their inquiries, more and more dubious loans from one Chalabi institution to another surfaced on the books.
Chalabi initially thought he could ride out the storm. He was more than just a banker in Jordan; by this time he was the personal benefactor of many of the country’s officials. “I made it a policy of Petra to provide loans in small amounts to military officers, NCOs, soldiers, Royal Guards and intelligence officers,” says Chalabi. “The royal family, apart from the king [Hussein], were always in need of cash, as their income and sporadic gifts from the king were always less than what was required to sustain even an upper-middle-class life in Amman. Many of these royals were friends of myself and my family for many generations. They came to me for help to pay for schooling for their children, for medical bills and other expenses.”
A GOOD BANKING RISK?
Chalabi’s relations were especially close with the king’s brother, Hassan bin Talal, who was then crown prince: “Prince Hassan borrowed money from Petra in his own name to cover public expenses that were expected of him.” In addition to support for the prince’s favorite charities, there was money for the tribes, for his guards, for military aides and to cover the expenses of diplomatic trips abroad. Chalabi said he “felt that the heir to the throne was a good banking risk.” (Shortly before he died in 1999, King Hussein changed the succession in favor of his son Abdullah.) The total loaned by Petra to Prince Hassan, Chalabi says, “was about $20 million.” Ironically, after Petra was seized by the Jordanian government, that amount was paid back to it “by King Hussein from Saddam’s funds,” according to Chalabi.
Saddam’s influence in the kingdom had grown enormously by the early 1980s, and on at least one occasion he demanded that a suspected opponent be handed over without any trial or court proceedings. The suspect, Hadi al Subaiti, was relinquished and then killed by Saddam’s security forces in 1981. Since Chalabi himself was increasingly active in efforts to thwart economic or other assist-ance to the Iraqi regime by that time, he had reason to be worried. Then Petra Bank was seized on Aug. 2, 1989. Chalabi says both a senior intelligence official and Prince Hassan warned him to leave the country. Chalabi drove across the border to Syria in his own car five days later.
Yet none of these political intrigues fully explains the financial legerdemain that Swiss and other investigators were turning up in the various Chalabi institutions. After losing its license, the Chalabis’ Swiss bank had to file for bankruptcy. Soon, so did a related family “trading company” called SOCOFI. About $160 million in claims were filed by angry SOCOFI creditors (many from the Middle East). But according to a secret Swiss bankruptcy report obtained by news-week, there was a big hole in the company’s balance sheet: about $100 million worth of outstanding loans to members of the Chalabi family and their companies. This included a $2 million loan to a Swiss software company run by Ahmad. (Chalabi says his company couldn’t repay the loan because it, in turn, was owed money by the failed family bank.) In September 2000, two of Ahmad’s brothers pleaded no contest to charges that they had broken the Swiss penal code in connection with SOCOFI.
Under increasing pressure, the Chalabi financial companies collapsed one by one. SOCOFI Geneva folded in early 1990. Then Mebco Beirut, which had actively funded the Shiite Amal militia during the 1980s while it was waging a war on Palestinian groups. Two more Chalabi family members were charged with fraud, and convicted in absentia. When NEWSWEEK went to the Beirut court last week to pull the records, the main file, No. 37837, was empty and the computer memory supposed to list the documents was blank.
The Chalabis who had run the Beirut bank disappeared from Lebanon, just as those in Switzerland had left the country after the collapse of the banks there. According to the secret Swiss bankruptcy report, even the safe-deposit boxes held by SOCOFI were empty, except for some backup floppy disks. A storage facility supposed to hold valuable Oriental rugs no longer had anything in it.
The big loser, however, was Jordan. When the government seized Petra, it assumed its debts, and the eventual run on the bank cost it, according to Nabulsi, some $500 million, or 10 percent of the country’s gross domestic product. Chalabi was subsequently tried in absentia in a military tribunal. He was sentenced to 22 years in prison.
Jordanian officials say Ahmad Chalabi could receive a new trial and defend himself in court if he went back. But for the moment, he’s unlikely to do that. Banking is no longer his game. His business now is the future of Iraq.
With Kevin Peraino, Rod Nordland, Melinda Liu and Colin Soloway in Baghdad, Tom Masland in Beirut, Dan Ephron in Tel Aviv, Owen Matthews in Tehran and Michael Hirsh in Washington
URL: http://msnbc.msn.com/id/3068557/
This site may contain copyrighted material the use of which has not always been specifically authorized by the copyright owner. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.
Milton Frihetsson, 05:22
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