Iraq
The implosion of Chalabi’s Petra Bank
The neocons' handpicked leader for the new Iraq blamed Saddam Hussein for the collapse of his Amman-based bank. But a Jordanian investigation and a trail of dubious transactions show otherwise.
Honest bankers will tell you they’re in a get-rich-slow business, that any rapidly growing bank is headed for trouble. That conventional wisdom was proved correct by the record of the Ahmed Chalabi-run Petra Bank.
Within two years of its founding in 1977, the bank was the second largest in Jordan, after the extremely conservative Arab Banking Corp. Chalabi, through Petra, did bring some modern banking services to Jordan, such as Visa cards, ATMs, and innovative commercial lending. Thanks to his ties to Jordanian leaders, he was able to open branches in the West Bank. Among his partners were wealthy families from Kuwait and Saudi Arabia, and the Al Nihayan family from Abu Dhabi. (The Al Nihayan were also major shareholders in BCCI, the infamous Bank of Credit and Commerce International, which collapsed noisily in the late 1980s.)
From the beginning, there were signs of trouble. Petra made use of the Chalabi family’s international connections to move money in and out of Jordan several steps ahead of the country’s exchange controls. “They were far more efficient than the other banks,” says a Jordanian businessman. While this made it possible for Chalabi’s Jordanian clients to move funds around more rapidly than if they were banking with the more staid Jordanian competition, an ever larger part of the money from Petra Bank’s perpetual-motion machine stayed out of the country.
According to the United Kingdom’s Guardian the trigger for Petra’s closure was the decision of Jordan’s central bank governor to tighten up on the outflow of foreign exchange in order to prop up the country’s currency. When he ordered 20 Jordanian banks to deposit 30 percent of their foreign exchange holdings with the central bank, Petra alone was unable to comply. That triggered an investigation, and authorities replaced Petra’s board of directors and then closed the bank in August 1989. By then, at least $200 million could not be accounted for.
Chalabi has always insisted Saddam Hussein was somehow behind the bank’s demise, and while that claim has never held water, the details of Petra’s collapse have always been murky. But a look at documents collected by auditors from an Arthur Andersen branch in Geneva sheds some light on where the missing money went. The audit found that 40 percent of the bank’s loans and commitments were “non-performing,” or not paid back. Part of the problem was what the accountants call “related-party transactions,” in which a bank lends money to its owners, their companies, their relatives or their business partners. Fourteen percent of the bank’s assets, or about $130 million before the Jordanian devaluation, were dubious loans to, or commitments from, “related parties” — meaning members of the Chalabi family network, who had a high rate of default on them.
A similar pattern of questionable transactions was also found by the auditors of Chalabi’s brothers’ financial institutions, Socofi in Geneva and Mebco in Lebanon and Switzerland. Both collapsed in a chain reaction in 1989. According to the Arthur Andersen audit of the failed Petra Bank, the reduction in shareholders’ equity caused by “adjustments” such as disappearing deposits with foreign institutions, including Mebco and Socofi, accelerated rapidly in the 1980s. From 883,442 dinars in 1983 (roughly $2.6 million), the losses accelerated to 12.7 million dinars in 1988 (or about $38 million.) In 1989, up to the bank’s closure at the beginning of August, the loss of equity totaled some 40 million dinars, or over $120 million.
And yet Chalabi’s American backers have always bought his self-serving explanation for his bank’s demise: that Saddam Hussein did it. Tamara Chalabi, Ahmed’s daughter, was given a platform on the Wall Street Journal’s editorial page in August 2003 to argue that the bank failed because her father attempted to block Saddam Hussein’s influence in Jordan. She insists that Saddam went behind the scenes to get Jordan’s King Hussein to force the military to seize Petra Bank, and the Iraqi dictator then used his influence in Jordan to rig the audit to make the bank appear insolvent.
Jordanians and even some former Chalabi associates scoff at that assertion. For one thing, Saddam’s military power dwarfed Jordan’s in 1989. “If he wanted to crush Chalabi, he had only to ask for it,” says Hamzeh Haddad, who was the legal advisor to the Central Bank at the time of the Petra collapse. “He had no need to conceal his wishes.” Also, according to Hassan Abdul Aziz, Chalabi’s former associate and a director of the bank, Petra had been useful in financing Saddam’s Iraq.
According to a Jordanian official involved in handling the Petra affair, after Petra’s closure in 1989, the Jordanian government had to put up some $300 million to guarantee depositors’ money — a staggering blow to the oil-poor country. The total cost to the economy is estimated at $500 million. “We’re still feeling the effects of the Petra collapse in many ways,” says Mohammed Alayyan, a publisher in the capital of Amman.
Chalabi was tried and convicted in absentia on 31 charges of embezzlement, theft, misuse of depositor funds and currency speculation, and sentenced by a Jordanian court to 22 years in jail. Despite Chalabi’s claims, it’s clear the Petra Bank fraud was one crime that Saddam Hussein didn’t commit.
John Dizard is a columnist for the Financial Times. More John Dizard.
Our real Iraq losses
We left their nation in turmoil and our own country entangled in an endless "national security" nightmare
A man, left, inspects his destroyed vehicle at the scene of a car bomb attack in Ramadi, 70 miles (115 kilometers) west of Baghdad, Iraq, Tuesday, March 20, 2012. Officials say attacks across Iraq have killed and wounded scores of people in a spate of violence that was dreaded in the days before Baghdad hosts the Arab world's top leaders. (AP Photo) (Credit: AP) People ask the question in various ways, sometimes hesitantly, often via a long digression, but my answer is always the same: no regrets.
In some 24 years of government service, I experienced my share of dissonance when it came to what was said in public and what the government did behind the public’s back. In most cases, the gap was filled with scared little men and women, and what was left unsaid just hid the mistakes and flaws of those anonymous functionaries.
What I saw while serving the State Department at a forward operating base in Iraq was, however, different. There, the space between what we were doing (the eye-watering waste and mismanagement), and what we were saying (the endless claims of success and progress), was filled with numb soldiers and devastated Iraqis, not scaredy-cat bureaucrats.
Continue Reading ClosePeter Van Buren spent a year in Iraq as a State Department Foreign Service Officer serving as Team Leader for two Provincial Reconstruction Teams (PRTs). Now in Washington, he writes about Iraq and the Middle East at his blog, We Meant Well. His book, We Meant Well: How I Helped Lose the Battle for the Hearts and Minds of the Iraqi People (The American Empire Project, Metropolitan Books), will be published this September. More Peter Van Buren.
Shaima Alawadi’s murder: Hate crime or honor killing?
The murder of an Iraqi immigrant in California has stirred rumors of both a hate crime and an honor killing
Fatima Alhimidi weeps over her mother Shaima Alawadi's coffin as it arrives in Najaf, Iraq. (Credit: AP/Alaa al-Marjani) EL CAJON, Calif. – On March 21, an unknown assailant shattered Shaima Alawadi’s skull with a tire-iron-like weapon in the living room of her home. An Iraqi immigrant and mother of five, Alawadi was found by her 17-year-old daughter, Fatima, who said she was “drowned in her own blood.” Alawadi was rushed to the hospital, still alive, but she was soon taken off life support and died March 24. It was, by all accounts, a heinous crime. But was it a hate crime?
After her mother’s death, Fatima said she found “a letter next to her head saying, ‘Go back to your country, you terrorist.’” The accusation sparked outrage and brought national media attention to the murder. And yet, within days, publicity-craving Islamophobes Pamela Geller and Robert Spencer were pushing an alternative motive: that Alawadi’s death was, in fact, an “honor killing.” Geller crowed, “I surmised that the murder of Shaima Alawadi appeared to be Islamic, rooted in Islamic teachings and culture …”
Continue Reading CloseArun Gupta, a New York writer and co-founder of Occupy the Wall Street Journal, covers the Occupy movement for Salon. More Arun Gupta.
In Iraq and on “The Wire,” it’s all acting for Benjamin Busch
In a lyrical memoir, a novelist's son discusses his strange path into war -- and David Simon's TV masterpiece
Benjamin Busch Benjamin Busch’s “Dust to Dust” is a remarkable book — part military memoir, part childhood reminiscence, and also an effort to explain his relationship with his father, the celebrated novelist Frederick Busch.
And yet it is also more than all of those things. Busch is filled with complicated and fascinating contradictions. Yes, he’s the son of a famously introspective and domestic writer, who grew up in rural New York obsessed with toy guns and building massive military forts. But he studied visual arts at Vassar, where he confused everyone by joining the Marine reserves — especially his commanders, when he accidentally announced himself in a roll call as part of the “Vassar infantry.”
Continue Reading CloseDavid Daley is the senior culture editor of Salon. More David Daley.
Iraq war booster urges Syria intervention
Kanan Mikaya insists we must save a besieged people, but that's what he said about Iraq in 2003. Should we listen?
Kanan Makiya (Credit: AP/Manish Swarup) Outside of the fraudulent Ahmed Chalabi, Kanan Makiya was the Iraqi exile most influential in driving America to war with Iraq in 2003. His 1989 book “Republic of Fear” was arguably the greatest effort to chronicle and categorize the horror of Saddam Hussein’s Iraq. His 1993 work “Cruelty and Silence” was a devastating broadside aimed at the Arab intelligentsia’s refusal to admit the horrors of Saddam. Makiya’s unique credibility and eloquence (he is now a professor at Brandeis University) made him a singularly powerful voice among those who believed it was a moral imperative to overthrow Saddam and democratize Iraq. He met with President George W. Bush and spoke at the right-wing American Enterprise Institute to make his case, promising that American troops would be greeted as liberators. Peter Beinart, in his final column as editor of the New Republic, wrote in regret that he supported the war primarily “because Kanan Makiya did.”
Continue Reading CloseJordan Michael Smith writes about U.S. foreign policy for Salon. He has written for the New York Times, Boston Globe and Washington Post. More Jordan Michael Smith.
Iraq vets on the road to recovery
Sometimes the best treatment for war wounds is a long bike ride
On the road to recovery Last September, I was in the saddle of my bicycle somewhere in the middle of Pennsylvania. Dark green farms materialized from the mist as one hill rolled into another. Somewhere out here, United Airlines Flight 93 crashed.
In about a day, I would be at the exact place where the plane went down, by the sides of dozens of troops who were injured in the wars in Afghanistan and Iraq. I was chronicling a solemn moment on the 10thanniversary of the 9/11 attacks for “Recovering,” the documentary film I’m directing about troops who have turned to an unlikely recreation, bicycling, to heal from wounds such as post-traumatic stress disorder and lost limbs.
Continue Reading CloseMichael de Yoanna is a journalist and documentary filmmaker who won an Edward R. Murrow award for investigative radio journalism in 2011. You can view his past work at Salon here, visit his personal website here, and follow him on Twitter @mdy1. More Michael de Yoanna.
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