Congressman Jim Saxton (R-3rd/NJ) has carefully reviewed the following report on PA fiscal corruption involving the misuse of American funding. "The report objectively demonstrates the need for additional watchdog measures by the United States in dealing with the reality of Palestinian financial malfeasance in misusing funds from donor countries," Saxton commented. 

Congressman Saxton recommends it as necessary reading in order to fully comprehend the depth of Palestinian violations of fiscal obligations detailed in the Middle East Peace Facilitation Act (MEPFA).

The following report details the embezzlement of US taxpayer funding by Yasir Arafat and other members of the Palestinian National Authority. The enclosed reports indicate that the controls established by the World Bank were circumvented by the PA to enrich the coffers of the embezzlers. This thievery was brought to the attention of the US Administration in the summer of 1995 and ignored, with no controls established for auditing.

Additional information is provided showing how an American agency USAID is funding the PA in disseminating virulent anti-Semitic and inciteful propaganda. USAID denied any funding to the VOP (Voice of Palestine) while information from Gaza indicates the VOP received funding through USAID and secondary sources.

Portions of two GAO (US General Accounting Office) reports state that Arafat refused to cooperate in accounting for monies received at least two times. Other portions of the GAO report show that USAID and other groups promised additional information approximately 1 ½ years ago, yet no information is available. Indeed, after a request by Rep. Gilman and Sen. Helms, portions of the study, based on letters they received, indicating corruption were turned over to the CIA who classified the study and removed its availability from public scrutiny.

The US administration ignored evidence of corruption and in a display of hubris said: State Department, MR. BURNS (March 3, 1997): “Well, our view is that the Palestinians are meeting their commitments to the Israelis and to us that they have made consistently for the last four years.” 

At a hearing of the Senate Foreign Relations Committee September 18, 1997 to consider the nomination of Martin S. Indyk for Assistant Secretary of State for near Eastern Affairs, the following exchange took place:

SEN. GRAMS: Just a couple other quick question. The Holtz (sp) fund, as you know, was established in 1993, $2.4 billion, which would go to the Palestinian Authority. But reports in May of this year, reports that -- by a PA Monitoring Institute, that stated as much as $326 million of about $866 million in the budget so far for 1997 has been misused or wasted. Is the Palestinian Authority Monitoring Institute report on corruption and misuse of funds -- is that accurate? 

MR. INDYK: I gather that there was some questions about its accuracy, but the overall thrust of its conclusions, we feel, are accurate and they cause considerable concern. They have been a cause of concern for the

Palestinian Legislative Council. And Chairman Arafat himself has set up another committee to investigate these corrupt practices. 

I would just point out that none of the money that the Congress had voted for aid to the Palestinians goes to the Palestinian Authority. It goes to fund projects that are administered by USAID, which lets out contracts but supervises all of the expenditures of those monies for those direct projects. And we have full accounting transparency and accountability for the funds that we provide as aid to the Palestinians. 

SEN. GRAMS: So you feel the U.S. is assured that the funds provided by American taxpayers for the Palestinians are being used legally and efficiently and wisely. 

MR. INDYK: That's correct. As ambassador to Israel it was my responsibility to oversee the aid program to the Palestinians. And so I had direct responsibility for that, and I believe that this statement is accurate. 

SEN. GRAMS: What auditing and monitoring procedures are in place that are going to assure this? 

MR. INDYK: USAID has a whole series of regulations designed to ensure transparency of contracting procedures and expenditures of money and reporting procedures. That is all under U.S. government regulations. All

of the money is accounted for in that way. 

That the US administration thwarted the wishes of the US public is made clear by a poll run by Luntz Research Companies, May 2, 1995. The poll showed:

1. 78%:12% agree that the PLO should be held ACCOUNTABLE to its COMMITMENTS as a PRECONDITION for receiving US financial assistance. 
2. 78%:11% believe that US funds should be suspended until the PLO removes terrorist groups, such as Hamas, operating from PLO-controlled areas. 
3. 73%:15% maintain that in order to get US funds, the PLO must eliminate the clauses calling for Israel's destruction from its Charter. 

Vanishing US Funds & US Administration Complicity

by Murray Kahl*

The dilemma constantly faced by advocates of the peace process is whether the process is transcendent over a corrupt PA dominated by an authoritarian and corrupt Yassir Arafat. Information has surfaced to indicate that it is no longer a question of how corrupt Arafat and his PA are but rather the extent of their misdeeds. 

Corruption is rampant and perceived as a root cause of Palestinian unrest. This problem is serious enough to prompt pro-Palestinian groups to uncharacteristically criticize Arafat as shown in Appendix A. The major flow of funding for the PA is described in the GAO report of 1995:

The World Bank established the Holst Fund as a central repository for donations to help the Palestinian Authority pay start-up expenses and short-term operating costs. The World Bank is responsible for overseeing the use of these funds on behalf of the contributing donors. In 1994, the Holst Fund disbursed approximately $51 million to the Palestinian Authority and PECDAR. This total includes a $10-million contribution from the United States. 

Task Force Investigation Provided Proof of Arafat Embezzling US Funds

The US administration ignored an investigation by the House Task Force on Terrorism & Unconventional Warfare, chaired by Congressman Jim Saxton (R-3rd/NJ), containing PA secret documents on the illegal use of funding by the PA. This report proved and documented in the summer of 1995 that Arafat was embezzling funds through PECDAR. Yet, no attempt was made to stop funding him or even increase auditing and supervision of the expenditure of US taxpayers' money. 

See Appendix B:

Recent Initiative by Congressman Saxton 

The degree of corruption is yet unexplored and as reported 1 on July 29, 1997, “a Palestinian legislative panel investigating government corruption today urged Yasser Arafat to dismiss his Cabinet and recommended charges be filed against some ministers.” 

The investigative committee was set up in response to a “state comptroller's report two months ago that found $326 million of the Palestinian autonomy government's $800 million annual budget had been squandered through corruption or mismanagement. Privately, sources indicate that though the PA report indicates about 36% of the funds were misused, the true figure is up to about 85 to 90 percent. Conspicuous in its absence in the report — as in the comptroller's audit — was an investigation of Arafat's office itself.” 2. The report was damning; the Arab press . reported: 

According to officials in Arafat's office, the next few days should see a major reshuffling in the PA's agencies. The shakeup will affect the Palestinian Council of Ministers and the security apparatus. The enquiry led by 'Abd-al-Rahim has completed its consideration and endorsed the findings of the GOA's report.

The misappropriated funds break down as follows: A total of $167 million as concessions offered by the Ministry of Housing to investors who bought state-owned land in line with a decision by the Palestinian Cabinet, which provided for a 40 percent discount on the land's value after it was assessed by a special committee; a total of $24 million in customs exemptions on 1,550 brand new vehicles bought by returnees; $80 million from tax evasion with dodgers pleading dire economic conditions brought about by the closures instituted by Binyamin Netanyahu's government; $24 million in medical expenses paid to cover the cost of treatment in Israeli hospitals; bills worth $5 million for cellular phones used by Palestinian officials; and $7 million paid for superfluous printed material.

The AP reported that, “The panel's six-week inquiry found wide-ranging abuses, including the diversion of contributions from international donors, and said much of the Palestinian autonomy government's $800 million annual budget had been mismanaged. It called on Arafat to “dissolve the entire Cabinet.” 

Arafat immediately issued one of his predictable statements indicating that he would take immediate action. According to Marwan Kanafani, a spokesman for Arafat, “the report was “a good thing”' and said the report provides “a strong basis” for a Cabinet reshuffle that Arafat was already planning.” Arafat was planning on action!

Arafat’s first non-action was announced by 'Azzam al-Ahmad, minister of public work in the Palestinian National Authority, in the Arab press 4. “Al-Ahmad disclosed that Palestinian President Yasir 'Arafat rejected the collective resignation tendered by the Palestinian Government following the Palestinian Legislative Council's recommendation to form a new government. The recommendation was made in light of the Public Control Commission's report, which addressed corruption in the Authority's establishments.”

The degree of corruption was addressed by others in Arafat’s cabinet and Palestinian Legislative Council member Rawiyah al-Shawwa by Samir al-Hijjawi in Amman 5. who said: 

No one can deny that some PA officials have committed some abuses. These abuses took different forms such as bribes, the abuse of power, the misuse of public funds, the monopolies, the widespread nepotism, and the unequal opportunities.

We raised these issues several times in the PC and signaled the danger caused by the spread of these problems in a society which is still in the first stages of building itself.

It is clear that Palestinian unrest and dissatisfaction with the PA led to street support of Palestinian groups such as HAMAS and Islamic Jihad. Yet, a clever Arafat successfully diverted attention from his responsibility in diverting funds from legitimate, infrastructure development, and blamed Israel at a national unity conference held by terror groups as reported in the PA mouthpiece al Quds 6, “... and on the other hand on dealing with the Palestinian people in the spirit of peace and on the basis of equality and respect -- away from the policy of siege, starvation, and the imposition of collective punishment.” 

The First Signs of Ignoring the Report:

The Jordanian authorities have received some Palestinian information indicating that Palestinian President Yasir 'Arafat intends to deal with the issue of corruption within the [Palestinian] National Authority [PA] quietly and without overreacting, particularly in view of the situation in the Palestinian territories.

According to this information, provided by responsible Jordanian sources, 'Arafat left it up to the Palestinian Legislative Council [PLC] to decide, without any interference on his part, and that is why, based on the report by the presidential investigation committee which, after completing its work, put the report at the president's disposal, it decided to ask 'Arafat to change the government ministers within two months or by September.

The sources told Al-Sharq al-Awsat that it was decided that the government's resignation and even the debate which took place during that session at the end of last July should be kept secret, and that all that was announced was that President 'Arafat said that he could not accept their resignation under the present difficult circumstances that the PA is going through.

The sources said that the Jerusalem operation has put an additional burden on 'Arafat's plan for changes in the Palestinian institutions in the light of the report on corruption, and that the end-of-September deadline which the PLC has set to that effect will be extended for more than two months to enable 'Arafat to put his changes in place. That is why he has told all his ministers and senior officials to keep quiet during this period with regard to everything related to the changes and the corruption issue. 

Arafat Denies all Charges

We told Abu-'Ammar [Arafat]: "What about the charges of theft and embezzlement of PA funds leveled by the Palestinian Legislative Council against some PA ministers?

Abu-'Ammar strongly denied these charges. He said: All that happened was that we were lax in collecting customs fees from returnees. All countries exempt returnees from these taxes, which amount to $336 million. We were also lax in collecting electricity, water, and telephone bills in the refugee camps, dating back to the days of the intifadah. I want to assure you that our accounts are checked carefully by the World Bank and the IMF. At the conference recently held in Washington and attended by all the donor countries, these two institutions testified that our financial transactions were sound." 

There it is, a complete dismissal of all charges concerning US funds vanishing (and other funding by donor countries). Much of the funding to the Palestinians is through the Holst Fund and on to (PECDAR) The Palestinian Economic Council for Development and Reconstruction.

PECDAR says that:

PECDAR was established after the signing the Palestinian-Israeli Declaration of Principles (DOP, OSLO I) an international donor conference was held in Washington in October 1993 to mobilize international aid to assist the Palestinian people to develop their economy through financing infrastructure, health and education programs and promoting the private sector as a contribution to the peace process.

The Palestinian Council for Development and Reconstruction (PECDAR) was established in November 1993 to organize, administer and disburse international aid in an effective and efficient way. It was assigned by the Palestine Liberation Organization (PLO) and the newly-formed Palestinian National Authority (PNA) to prepare and monitor development projects financed by foreign aid and to coordinate the activities of the donor countries in the Palestinian Territories. PECDAR reports that “Acting on the economic guidelines of the PNA, PECDAR has evolved to become the development think-tank of Palestine and the implementing agency assigned by the PNA, the World Bank and the donor states to propose, select and implement foreign aid-funded projects as well as to coordinate and facilitate the flow and allocation of the funds. 

PECDAR’s main offices are in Jerusalem (Dahiat-al-Barid) and in Gaza. Its resources consist of the assistance provided from donor states as well as international and regional organizations; allocations to PECDAR in the general budget and loans approved by the PNAOrganization and Administrative Structure.

PECDAR is part of the PLO Executive Committee and the Palestinian National Authority (PNA) and reports to both of them. It is governed by a 14-member board with President Yasser Arafat as its President. 

PECDAR’s Department of Finance and Administration consists of three main directorates: Personnel, Budget and Accounting, Support Services. Their reported responsibilities include:

× Responsibility for the administrative, financial and personnel affairs of PECDAR. 

× Supervision of aid funds and their use according to conditions agreed upon with the World Bank and the major donors.

× Financial execution of projects contracts and payment to contractors.

× Responsibility for the accounts and financial resources generated by agreements signed between the PNA and the World Bank and other donor groupings (EU, Islamic Development Bank, Arab Fund for Economic Development) 

Impressive fiduciary responsibilities and understandably accountable for abuse of funds. However, while Congress halted funding to the PA under MEPFA an alternative source of US funding is a US agency called USAID who turns a blind eye to this thievery and corruption and continues to supply even more funding to the PA. 

Who and what is USAID? USAID reports:

In these times of tight federal budgets, many Americans have asked, why foreign aid? The answers are simple: the small portion of the federal budget that assists developing nations is directly in the best interests of the United States and has produced a striking record of accomplishment. Public opinion polls on foreign assistance reveal two important trends: (1) Most Americans grossly overestimate the size of America's foreign assistance program; and (2) A strong majority of Americans believe modest assistance to the less fortunate reflects American values.

In short, America is doing well by doing good through USAID's participatory development activities.

Brave and honorable words, unfortunately it is questionable as to whether USAID lived up to its initial goals. USAID is a splendiferous creature, birthed in the 60's whiplash morality as the lynchpin of US real politick, yet we find controversy as USAID subordinates American morality to a political response in international relations. For example, environmentalists were furious when they discovered that an African group, lobbying for the resumption of the ivory trade, received its funding from a community development program in Zimbabwe. This program also allows trophy hunting of big cats, rhinos, and elephants, and receives an average of 2 ½ million dollars of American aid every year. 

When Senator Barbara Boxer learned of this she said, “American taxpayers would be horrified if they knew that we are supporting the killing of the elephant.” And the Humane Society of the US said, “Using your tax dollars to promote elephant killing is an outrage!”

US tax dollars given by USAID is funneled through a group in Zimbabwe called CAMPFIRE who has received more than 20 million dollars since 1989.9 And this pattern of channeling funding through intermediaries is the difficulty we find in tracing the end recipient in the Middle East.

Fairness dictates that USAID be asked about reports such as one indicating that USAID has been financing the anti-Semitic and holocaust revisionist Voice of Palestine (VOP). A number of calls were placed to USAID beginning on August 29 of this year asking if USAID was used to assist the VOP. Three weeks and three phone calls later, a USAID representative responded by saying that she had investigated, spoken to a number of people, and said that USAID has not financed the VOP and will not do so. Yet, we read in a Philadelphia Enquirer of September 7 (Appendix C):

The Palestinian Broadcasting Corp. is a creature of the 1993 peace accords, which afforded Palestinians the first trappings of self-rule. The “Voice of Palestine” radio broadcasts began in 1994, television the following year.

The network was nurtured with about $500,000 in equipment and training from the U.S. Agency for International Development [USAID] and with more than $6 million in aid from the European Union, according to network chairman Raddwan Abu Ayyash. A spokesman for the United States Information Service in Jerusalem said he could find records for only $70,000 in U.S. aid spent on training and TV cameras, but he added that the United States provided other funding for the network.

Whether the US is doing well by supporting USAID funding the PA is questionable as long as the funding is misused and not given to those who were destined to be the recipients. 

Sources point out that USAID is expected to respond to charges of disinformation by saying:

• They misunderstood 
• They did not give the money directly to the VOP 
• The funding given was misused without their knowledge. 
• The funding was diverted from other funds 
• Any or all of the above (or any other creative excuse) 

The funding is large and USAID reports for 1997:

WEST BANK AND GAZA

FY 1997 Economic Support Funds: $75,000,000 

While activities financed under the U.S. Government pledge for support to the peace process were only initiated within the last 18 months, tangible benefits have already been achieved. Budgetary support through the multi-donor World Bank "Holst" Fund, with USAID providing nearly $40 million, helped finance salaries for 29,000 public sector employees (mostly teachers and health care workers) to facilitate the transition to autonomous Palestinian provision of governmental services in the West Bank and Gaza. USAID-financed interventions in voter education and election administration and observation were instrumental in the success of the electoral process. The USAID program described below is positioned to play an important role in supporting Palestinians at this historic juncture in their development.

Other Donors:

In recognition of the serious problems faced by the new Palestinian Authority and the historic opportunity presented by the peace process, donors pledged $2.4 billion in assistance to Palestinians at the October 1993 Conference to Support the Middle East Peace Process. As part of this pledge, the U.S. Government committed to provide $500 million over a 5-year period. Of this total, USAID will administer $375 million; the remainder will be provided through the Overseas Private Investment Corporation (OPIC). 

USAID announced as one of its’ accomplishments: 

In January 1996, Palestinians elected an Executive Authority Head and 88 members of a self-governing Council (with both legislative and executive powers).

Municipal elections are scheduled for later in 1996. These elections, per se, can be considered an accomplishment of the peace process as supported by the USAID program.

At this point, Palestinians must focus on further transition towards self-rule, including the establishment of democratic checks and balances, and the development of accountable and transparent governance.

Whether USAID is accomplishing its goals is up to American taxpayers. The majority of Congress has voiced its views.

Another US government source investigating PA funding is the Government Accounting Office (GAO). The GAO reports were requested by Benjamin A. Gilman, Chairman, Committee on International Relations House of Representatives, to investigate allegations of corruption and there are two reports available publically from the GAO. In the first in 1995, the GAO reported that the response from the CIA for the results of their investigation regarding PA corruption were unavailable and that “none of the CIA material used in our report could be declassified.”

In the GAO report of 11/28/95, GAO/NSIAD-96-23, the GAO reported:

Media allegations of tangible assets proved difficult to confirm or refute. Since at least the mid-1980s, newspaper and magazine articles have identified general or specific assets alleged to be owned or controlled by PLO or its economic arm--Samed.

For example, several media reports alleged that PLO owns or controls several national airlines around the world. We were unable to confirm such allegations. In general terms, we did establish that Samed operated a number of different businesses in the past, including agricultural cooperatives, a film studio, a children's clothing factory, and a shoe factory. According to a State Department cable, PLO owned a duty-free shop in Tanzania that subsequently closed down. The cable also notes that "the PLO has other money-making ventures here. A popular Middle Eastern restaurant, the Cedars Club, is run by the PLO. Undoubtedly, there are other economic enterprises as well."

Salaries for the PA militia were seized by the PA and recorded in the GAO report:

One major PLO expense transferred to the Palestinian Authority was the salaries of former PLO militia members hired by the Palestinian Authority to join its police force. Other transferred expenses included social welfare expenses, martyr family payments, civil servant pensions, and supplementary civil servant salary costs. 

It is clear that the GAO could not fully analyze PA expenditures as they reported:

These budgets have been rudimentary in nature and generally do not include detailed cost and revenue schedules, although early versions of the budget did include footnotes that stated certain PLO expenses were included in the Palestinian Authority's budget. It is unclear whether other PLO costs (such as those costs associated with its office in Tunis and a number of overseas missions) are included in the budget since they are not explicitly identified. The World Bank and the International Monetary Fund are working with the Palestinian Authority to improve its accounting and budget development apparatus. A more formal budget is not expected until 1996. 

Under the peace accord, PLO and Israel must approve all proposed police force hires to prevent the hiring of former known or suspected terrorists. 

In a stunning display of hubris, Arafat is quoted in the GAO report as refusing to cooperate:

Chairman Arafat has stated publicly that he would refuse to accept donor controls over funding and has launched several attempts to frustrate these controls. He initially attempted to appoint himself as PECDAR's director but was rebuffed by the donors who demanded that a more independent director be appointed. He established competing decision centers in the Palestinian Authority and Tunis in an attempt to diminish PECDAR's role as a central contact point for donor aid. He also worked directly with certain donors to establish marquee development projects, such as airports, without the involvement of PECDAR officials. 

In appendix I of the GAO report the following statement appears that also points out the unwillingness of the PA to account for funding:

The starting point for our review was an attempt to obtain financial information directly from the Palestine Liberation Organization (PLO). PLO told us to provide written questions on the information we required and then declined to respond to them. PLO also chose not to respond to our written request for meetings with PLO and Palestinian Authority officials in the self-rule territories. 

That Arafat ignored all restrictions is clear as stated in the GAO report: “For example, in violation of its grant agreement with the World Bank, the Palestinian Authority spent $2 million of Holst funds on martyr payments.”

“Unusual” expenses are explained unsatisfactorily by the GAO:

However, less attention has been paid to the Palestinian Authority's expenditures, and the donors have agreed to pay for certain costs, most notably civil servant and police salaries, without an adequate analysis of the support for such costs. For example, it is not clear why the Palestinian Authority needed to hire about 9,000 employees to replace the approximate 1,600 Israeli employees who previously worked for the Israeli civil administration. Nor is it clear why the Palestinian police force has grown to an 18,000-member force when the Gaza/Jericho Agreement between PLO and Israel stipulates a 9,000-member force for the Gaza/Jericho enclave.

The second GAO report was issued in 1996: Benefit of the Palestinian Authority (Letter Report, 01/08/96, GAO/NSIAD-96-18)

The study was to investigate the following questions asked by Jesse A. Helms

Chairman, Committee on Foreign Relations United States Senate and Benjamin A. Gilman Chairman, Committee on International Relations House of Representatives

A series of letters allegedly prepared by the Palestinian Authority's Finance Minister and the Director General of the Palestine Economic Council for Development and Reconstruction (PECDAR) indicates that $138 million from unidentified sources was "diverted" in late 1994 to finance several covert transactions. These transactions include purchasing land and building apartments in Jerusalem, funding a Palestinian journal, and providing financial support to groups inside Israel that are sympathetic to the Palestinian cause. 

In response to Congressional concerns that U.S. assistance may have been involved in these transactions, this report discusses (1) the financial controls established by the World Bank and the U.S. Agency for International Development to monitor the use of U.S. funds provided to the Palestinian Authority, PECDAR, or the Palestine Liberation Organization officials for budget support purposes and (2) what controls the U.S. Agency for International Development established over project funds provided to other U.S. government agencies, private contractors, non-governmental organizations, private voluntary organizations, and the United Nations for the benefit of the Palestinian Authority.

The results of the report show say that USAID hired an Egyptian accounting firm to audit records:

In the case of the $5 million the United States spent on Palestinian Authority police salaries in 1994, USAID hired an Egyptian audit firm to accompany the PLO's paymaster to verify individual payment records and to provide an overall accounting of disbursed funds. 

Excuses, Secrecy, and Stonewalling

The GAO did not find any additional problems other than the ones reported in the 1995; however, the CIA report is still classified and the 1996 report is not complete and further reports were promised by various agencies. We have not been able to locate these reports and question the secrecy surrounding these expenditures.

Works Cited

1. PA Corruption Panel Issues Conclusion, RAMALLAH, West Bank (AP, July 29, 1997) 
2. All but Arafat Investigated, RAMALLAH, West Bank (AP) July 30, 1997 By Samar Assad, Associated Press 
3. Report 'Uncovered' 'Corruption' Cases in PA, Amman al-Hadath in Arabic 28 Jul 97 p 10 Report by Iyad Khalifah 
4. Official Says 'Arafat Rejected Cabinet Resignation, Amman al-Aswaq in Arabic 5 Aug 97 p 1, 17 Report by Nasir 'Arif 
5. Palestinian Council Member on Corruption, Torture, No Elections, PA Responsibility for Overall Dissatisfaction, London Filastin Al-Muslimah in Arabic Aug 97 pp 18-20, 

6. National Unity Conference Termed 'Important and Positive,' Jerusalem Al-Quds in Arabic 21 Aug 97 p 13"National Unity and the Challenges of the Stage" 

7. Arafat’s Reaction to the PNC Corruption Report, London Al-Sharq al-Awsat in Arabic 19 Aug 97 p 3 "'Arafat Is Dealing With the Corruption Issue Quietly and Without Overreacting" 

8. The Denial, Cairo al-Wafd in Arabic 27 Aug 97 p 1 

9. The Elephant Lobby, Newsweek, September 8, 1997

Appendix A: 

[Posted by Mideast Realities, a pro-Arab group. September 7, 1997] 

COURAGEOUS PALESTINIAN COUNCIL TAKES BOLD ACTION 

ARAFAT DOES NOTHING. CORRUPTION CONTINUES UNCHECKED 

MER - Washington - 6 Sept: 

There is no State of Palestine and the situation is far more comparable to the Apartheid of old in South Africa than freedom. Indeed, the Palestinian people face a situation far worse today than was the case before the Intifada.

The recent bold effort by the "Palestinian Legislative Council" to expose the extreme and blatant corruption by the Israeli-created "Palestinian Authority" is quite unique. 

The following article will appear in the September-October issue of Challenge Magazine about why and how the Palestinian Council spoke up in such an unprecedented manner: 

Something's Rotten in the Nonstate of Palestine 

Corruption under Arafat: the Legislators Speak 

by Roni Ben Efrat with Assaf Adiv & Stephen Langfur 

Within the Palestinian Authority (PA) there is an office entitled General Control (GCO). In May it issued a report that included a startling claim: because of corruption $326 million, roughly one fourth of the PA s budget, disappeared in 1996. The Palestinian Legislative Council (PLC), which is elected by the people, commissioned nine of its members to check these findings. On July 29 they presented their report. In a stormy Council session, which Arafat did not bother to attend, the legislators called on the president to dissolve his government by September, form a new one based on experts, and bring those suspected of corruption to trial. Some of the gravest suspicions concern two of Arafat s senior ministers, Nabil Sha at and Jamil Tarifi.

I asked Dr. Kamal Sharafi, who headed the committee of nine, why the Council found it necessary to check the report of the PA s comptroller. Sharafi: "The GCO report was an important contribution toward correct administrative procedures, but it had flaws. There were simple arithmetical errors. In many cases the GCO inspectors had written detailed accounts which did not make it into the final version. Many violations were ignored or left hanging. The main problem, though - which we have tried to correct - was the lack of conclusions. The GCO report failed to accuse persons by name, whether directors or ministers. You might have thought it was the Palestinian people that had stolen the money! The GCO did not ask the Attorney General to formulate indictments. The result was a series of wishy-washy, toothless recommendations, calling weakly for reform and delivering a few hazy warnings, whereas what was needed was a cry for legal action." 

The PLC Committee s "report on the report" notes further flaws. 

(1) The GCO failed to check important companies and public institutions that receive funding from the PA. These include the Petroleum General Commission, the al-Baher Company, the Tobacco Company, and the Palestinian Broadcasting Corporation. (Challenge has reported on the corruption in several of these; see Issues 39 and 43.) 

(2) The GCO confined itself almost exclusively to Gaza. Its report covered less than a tenth of the ministries, institutions, municipalities, and non-governmental organizations receiving benefits from the PA. 

(3) It stayed clear of the many security forces, although the Council turned up evidence that they are full of illegal practices, meddling where they have no business. The GCO also kept away from President Arafat s office. (PLC Report, pages 3,4, and 30.) 

The PLC Committee s mandate restricted it to checking the GCO report. It could not undertake an independent investigation into areas which the latter had not touched. Despite this limitation, and despite lack of cooperation on the part of the PA comptroller as well as several ministries, the findings are chilling. The overall picture is one of a mafia-style government, where the main point of being in public office is to get rich quick. The Palestinian citizen, after thirty years of neglect under Israel, has fallen into the hands of a ruling class whose motto appears to be, "Eat, drink and be merry." The PA budget and the funds from the donor nations flow around and around within the closed circle of the few, who live a life of luxury while the people they are supposed to serve go hungry. In matters of health care and basic commodities, says the PLC Committee, the little person is a victim of dubious deals between the Palestinian and Israeli ruling elites. This conclusion may seem sweeping, but it arises from every page of the Committee s report. Except for the Ministry of Education and that of Statistics, even the few untainted offices are described as inefficient and unprofessional. The report notes excessive duplication of tasks and overlapping of responsibilities, especially between the West Bank and Gaza. 

The PLC Committee cites many kinds of corruption. There are ministers who violated their responsibilities to the point of endangering lives. There are unsupervised bank accounts containing what are supposed to be public funds. There are cronyism and nepotism, monopolies, releases from customs. Wherever greed can get its foot in, the space appears to have been filled. In this article we shall concentrate on three ministries where corruption is especially rife. We shall then briefly survey most of the others. 

1. The Ministry of Health (Minister: Riad al-Zanoun) 

Bad or expired drugs were used to treat cancer patients in ministry medical centers. With regard to other medicines as well, the Gaza branch of the ministry used drugs which the West Bank branch had rejected because they failed to meet specifications and had not been registered. Suspicion: Health ministry officials were (and are) in cahoots with a company called Al-Shifa, which imports medicines into Gaza. The report names Dr. Ziad Sha th, general director of the ministry s pharmaceutical division, who allowed Al-Shifa to bring in the unregistered drugs on the pretext that registration was underway. 

On another get-rich note, Al-Shifa imported several drugs as donations from Egypt: exempt, therefore, from customs and value-added tax (VAT). It then turned around and sold them to the Health Ministry including customs and VAT. Suspicion: Al-Shifa was aided in this exercise by one Khamis Najjar, a director of the ministry in Gaza, and by the Minister of Civil Affairs, Jamil Tarifi, a name we shall soon encounter again. The Committee recommended that Arafat direct the PA Attorney General to prosecute the three men named above. 

In addition, a fifth of the Health Ministry s budget went to medical expenses abroad. ("Abroad" includes Israeli hospitals.) The Council found this figure rather high. In some cases it was Arafat who ordered the transfer of patients abroad; he had the Finance Ministry deduct the money from the Health Ministry s budget without notifying the latter. There is also the case, still pending, of Dr. Ibrahim Abu Hmeid, who was appointed to coordinate the distribution of patients among hospitals in Jordan. Several Jordanian hospitals have accused him of receiving bribes and embezzling funds. The Committee asserts that he had accomplices. Its report also raises the inevitable question: Where in all this was the Minister of Health? (PLC Report, pp. 7-8.) 

2. The Ministry of Planning and International Cooperation (Minister: Nabil Sha at) 

Nabil Sha’at is known to millions as one of the chief Palestinian negotiators. 

The council found many offenses. For example, any ministry is supposed to open a separate account with the Ministry of Finance for each of its projects. Thus Finance holds the money given by funders for the project, and it can supervise expenditures. Sha at s ministry, however, opened separate accounts. Thus ministry officials could conspire with officials of a donor country, open an account together, and manipulate the funds without the knowledge of Finance. This practice has also opened the door for ministry officials to appoint themselves to jobs in the ministry s projects, giving themselves fat second salaries. The private account gives rise to another perk as well: You hire someone to a project for a large salary, but by prior agreement you pay the person less. The difference goes into what is called a "black box." Sha at and his director-general control the black box. They hid it from the GCO, but the Council Committee found it. 

Other ills in the Ministry of Planning: 

Tenders were granted under suspicious circumstances to companies with family connections to people in the ministry. 

Within the ministry s projects, there was often no regard for budgets; purchase prices were high; there was a lack of competition and a lack of transparency.

The ministry used project funds to cash personal checks for the Minister. 

These practices have damaged the PA s credibility with the donor nations. 

The Committee has called for an investigation of Nabil Sha ath together with three of his deputies. (PLC Report, pp. 15-16.) 

3. The Ministry of Civil Affairs (Minister: Jamil Tarifi) 

The Committee devotes four closely-written pages to this ministry, to which the GCO had given only scant attention. 

The largest area of offense concerns the granting of exemptions on import duties, especially in the matter of automobiles. This can be a lot of money: the duty can amount to half the price of the (pre-duty) car. The right to grant customs exemptions is vested in the Finance Ministry, not in Civil Affairs. The latter was able to get a foot in, however, in the following manner: All imported goods must enter through Israel. Israel collects the customs on goods which are destined for the Palestinian areas and then transfers this money to the PA. Someone from the PA had to be present at the Israeli gateways, therefore, to tell the Israelis which goods to exempt. Logically, this should have been someone from Finance, but in fact it was Civil Affairs Minister Jamil Tarifi who got the task, perhaps because of his many Israeli connections, which date from before the Intifada. Infringing on the prerogatives of Finance, Tarifi personally exempted cars, furniture, and other goods, including the medicines mentioned above. The paperwork was slipshod or nonexistent. Many cars, after receiving Tarifi exemptions in the name of this or that governmental body, were converted to private ownership. This was the case, for example, with a certain Mercedes, which wound up belonging to none other than... the Coordinator of Customs Exemptions in the Ministry of Civil Affairs. 

At Oslo Israel permitted a few thousand PLO members to return. The PA granted them exemptions from customs. This opened the door to abuse: many a car was exempted on the fictitious claim that it belonged to a returnee. Such a one is Ibrahim Awad Abdel Qader Salameh, 75 years old, supposedly the proud owner of a brand new Jaguar. He does not get to use it much. The family members of Minister Tarifi are always taking it out for a spin. 

A country without industry or natural resources depends heavily on customs duties. The loss of money through false exemptions amounts to a serious blow. 

Tarifi’s list goes on. Israel issues work permits, and the PA s ministries of Labor and Interior are supposed to distribute them. But here too Civil Affairs got a foot in -- again, it seems, thanks to Tarifi s connections with Israel; his ministry gets work permits and hands them out without telling anyone. 

Unknown to the Ministry of Finance, Tarifi illegally imposed fees on trucks bringing goods to and from Jordan. At one point, says the Committee, he got the Israelis to close the Jordanian border for two weeks to all trucks bringing cement except those of a company called al-Karmel, which belongs to his eldest son. 

The Committee sums up Tarifi s offenses by calling them "a blatant attack on public funds." It asks that the Attorney General bring the Minister to justice. (PLC Report, pp. 17-21.) 4. Examples from other Ministries. 

Finance (Minister: Muhammad Nashashibi): The Council Committee criticizes this office for losing control in areas which it is supposed to regulate, like customs exemptions and project accounts. Several officials, it notes, took advantage of their positions to establish private companies. (PLC Report, pp. 5-6.) 

Agriculture (Minister: Abdel Jawad Saleh): The Committee found evidence of many violations, but it did not go into detail. (Ibid.,p.9.) 

Public Works (Minister: Azzam al-Ahmad): Most purchases were made by direct order, always from the same importers, rather than by tender. Mr. al-Ahmad states that the violations took place before there was a minister for Public Works. (Ibid.) 

Social Affairs (Minister: Intisar Wazzir): This office failed to use proper procedures in the handling of large donations and in distributions to the needy. (Ibid., pp. 9-10.) 

Post and Communication: Among various offenses, this stands out: Many telephones which are supposed to be in government offices have found their way to the private homes of officials and employees. The PA pays their phone bills. (Ibid., p. 10.) 

Housing (Minister: Abdel Rahman Hamad): The earlier GCO report noted serious administrative, legal, and financial violations, most of which occurred during the term of the former minister, Dr. Zakarieh al- Agha. The violations include (1) a housing project which was carried out in defiance of regulations, using materials that did not match specifications; (2) questionable allotments of land; and (3) the plunder of sand, one of Gaza s few and nonrenewable resources. The Committee made inquiries, but the ministry failed to cooperate in response. (Ibid., p. 12.) 

Interior. The GCO report exposed the manipulation of state funds. The ministry gave the Council Committee a "positive and reliable response." (Ibid., p. 13.) 

Culture (Minister: Yasser Abed Rabo): The minister charged the public $7,671 to install a central heating system in the house he is renting. Almost 90% of the ministry employees are in administrative positions, although many lack educational qualifications. (Ibid., p. 14.) 

Information (same minister). Large sums are budgeted for purposes not connected to the ministry s work, including a $10,000 personal allowance for the minister. (Ibid.) 

Supplies (also called Rations) (Minister: Ali Shaheen): This winter people in Nablus got sick because they ate flour whose date had expired. A PLC member, Khussam Khader, exposed the case, showing that old flour had been repackaged. The Council laid the responsibility on the Ministry of Supplies and passed a law redefining its role. Yet the ministry continues to interfere in the sale of flour. It worked in cahoots with a Finance Ministry official, Muhammad Jaradah, using public money to import flour through a company which Mr. Jaradah heads. The Supplies Ministry also blocked the border to other companies, so that Mr. Jaradah s would have the monopoly. (Ibid., p. 21.) 

Transport (Minister: Ali Qawasmeh): Because of slipshod office procedures the PA has lost control over the use of government cars, though it pays all the costs. The Transport Ministry illegally converted some government cars to private ownership without notifying Finance, which is supposed to oversee public property. (Ibid., pp. 22-23.) Youth and Sport: Ministry officials used donated money, intended for renovating playgrounds, to cover private expenses. (Ibid., p. 23.) 

Local Governance (Minister: Sa eb Erakat) This ministry supervises municipalities and village councils. The GCO report covered only thirty of the latter, but it exposed administrative, financial and legal violations. The Committee demanded a response to the GCO findings, but the ministry has refused to cooperate. (Ibid., pp. 25-26.) 

Monetary Authority. The committee found excessive and unjustified expenses, as well as discrepancies between financial files and daily books. (Ibid., p. 26.) 

TV and Radio Broadcasting Agency. Purchases and tenders are not subject to supervision. As in the case of all ministries and agencies, income is supposed to be transferred to the Finance Ministry for supervision and control, but this is not done. (Ibid., p. 27.) 

All nations suffer from corruption, but who would have expected so much so soon? One reason, the Committee report makes clear, is the chaos that prevails in rules and regulations, in defining spheres of authority, and in norms of financial management. (Ibid., p. 28.) All beginnings are difficult, and this is no exception. But other beginnings have a grace which this one lacks. Such widespread corruption could not take hold if the leaders had any national feeling, or sense of community, or higher purpose. These things were surrendered at Oslo. The PA is the creature of Oslo, where a national hope was betrayed for the sake of personal power. That was the arch-corruption. The present examples are its offspring. 

Amid the gloom there remains a spark of light: the fact that the PLC Committee report could appear at all. Once again the legislative council has proved, despite its limitations, that there are those who seek to establish a new Palestinian society on foundations of sound administration and public rectitude. We spoke, for example, with Ali Girbawi, a professor in Political Science at Bir Zeit University and head of the Palestinian Independent Commission for Citizens Rights. In response to the Committee report, he said, "I think that the Palestinian Legislative Council has found its own strength. I don t think they were aware that they could do what they have done. Now they have realized that they have an impact. If they will hold the executive to account, the people will support them." 

The Committee report exposed the alienation, even hostility, between the PA s executive and legislative branches. The entire Council approved the report, including PLO supporters close to Arafat, whereas most cabinet ministers took it as a declaration of war. Soon after its publication, sixteen ministers gave letters to Arafat signaling their readiness to resign if he wished. (The sixteen did not include Nabil Sha ath, Jamil Tarifi, and Yassir Abed Rabu.) Public opinion in the West Bank saw this collective performance merely as a ploy aimed at taking the sting from the report. Kamal Sharafi, head of the Committee, told Challenge: "We didn’t ask anyone to resign. We only demanded that Arafat disperse the cabinet, bring in the Attorney General, and put the guilty on trial. As far as we re concerned, any ministers who are cleared can become part of the new cabinet." 

In the meantime an additional factor has emerged. Even as the PLC Committee was conducting its investigation, Arafat appointed Taib Abed al-Rahim, General Secretary of the Presidential Office, to make a detailed inquiry into acts of corruption. The result has been yet another report, 200 pages long, which Arafat is keeping to himself. There are, then, three studies of corruption: that of the GCO, that of the PLC, and now this. The bevy of reports may reduce the overall impact. If Arafat refuses to deal with that of the PLC and ignores its recommendations, the Council will be exposed in all its impotence. Kamal Sharafi, however, counsels against despair. "Let s wait till September," he says. Meanwhile, corruption is thriving. 

* * * * * * * * 

CHALLENGE Magazine is an independent journal in English which reflects on the realities of the Israeli Palestinian conflict. It is published bi-monthly and is one of the most forthright and courageous English publications. Challenge Magazine, POB 41199, Jaffa 61411, Israel.

Appendix B:

PLO DOCUMENTS

Although there have been various citing of violations by the PLO and the PNA (Palestinian National Authority) of the agreements signed by Arafat, following are summations of recently-disclosed documents of specific violations. These not only demonstrate the disregard for the spirit of the agreements, but also indicate the urgent response required by the facilitator of the accords (the US) at this junction. 

These documents are a series of top-secret documents -- exchanges of letters between Muhammad Nashashibi, the PLO/PNA Minister of Finances, and the leadership of the Palestinian Economic Council for Development and Reconstruction (PECDAR). PECDAR was established on November 4, 1993, as an independent body entrusted with the distribution of foreign donations for the rebuilding and improvement of the Palestinian economy free of any political considerations; Arafat and the PLO/PNA were to have no role in the administration of PECDAR. PNA can not have funds transferred from or to PECDAR. PECDAR is supposed to be supervised by the World Bank. However, in July 1994 PECDAR distributed an internal chart depicting it as being directly subordinate to the PLO/PNA. Moreover, the entire leadership of PECDAR is comprised of Arafat loyalists. 

In general, all the 28 top-secret documents constitute a series of 14 pairs: Each pair is comprised of (1) a letter over the signature of Nashashibi, the PLO/PNA Minister of Finance, with instructions to transfer funds to specific individuals and projects, and (2) a response from PECDAR confirming that the instructions were followed and the monies transferred. In his letters, Nashashibi invariably stresses that his instructions are on behalf of Yassir Arafat and/or based on Arafat's decisions. All the responses from PECDAR are concluded with the request to inform Yassir Arafat that the instructions were fulfilled and implemented. (Concerning the last sentences in the PECDAR letters: In some of the letters, the phrasing in Arabic is vague - that is, it could be read as either "the" instructions/orders or "his" [Arafat's] instructions/orders. In others, including Document 4, the sentence reads specifically to inform Arafat that "his instructions" or "his orders" were implemented.) 

Following are the Documents in order of importance: 

Document 1

August, 1994. Nashashibi's instructions on behalf of Arafat to funnel $20 million to clandestine political activities inside Israel to strengthen pro-PLO forces, including Members of Knesset, and organizations as the beginning of PNA political presence among Israeli Arabs. Nashashibi writes that Arafat ordered that "PNA's activities will expand inside Israel and concentrate on the Arabs and Palestinians inside", pushing them to work toward "the establishment of the Palestinian State that includes the city of Jerusalem." Among the specific tasks of this prograrn are financing political parties and individual politicians supporting the establishment of a Palestinian State, spread of financial support to local bodies, social organizations and charities in order to push them to political activism. Dr. Tibi is in charge and the money was deposited in his clandestine personal accounts abroad. 

Document 2

August, 1994. Nashashibi's instructions on behalf of Arafat to arrange clandestine funding to acquire land in Jerusalem. The acquisition is a part of the "consolidation of the foundations of the Palestinian States while concentrating on Jerusalem in order to solidify our foot hold there and increase our activities there in an active and strong manner. " The letter stresses the clandestine character of the deal "because we do not want to have this activity appear under the name of the PNA so that it would not be utilized against us for political reasons in international circles by the other side ... particularly the American administration." Therefore, $15m were allocated for clandestine transfer to Dr. Tibi for a host of ostensibly private land acquisition and development projects in East Jerusalem. 

Document 3

August, 1994 (Following Document 2). Instructions on behalf of Arafat to arrange clandestine funding for apartments in Jerusalem to be given to loyal Arabs. Dr. Tibi is to supervise this project for which $12 million is allocated. 

Document 4

November, 1994. Nashashibi issued instructions on behalf of Arafat for clandestine funding for Raymonda Tawil, Arafat's mother-in-law, and Ibrahim Qar'in to open a Palestinian publicity center, ostensibly independent and without acknowledgment of connection with Arafat, in "Arab al-Quds [Jerusalem], the Capital of Palestine." PECDAR's response stresses that Raymonda Tawil was thanking Yassir Arafat in person for the funding. 

Documents 5,6,7

Documents 8,9,10

Series of documents in which Nashashibi informs PECDAR that Arafat decided to order a close loyalist, Dr. Amin Haddad, to establish several companies, including import-export operations, under private auspices so as to maintain control over the local economy and employment in the West Bank. In its response, PECDAR confirmed that the funds were transferred to Haddad's private accounts, and (in Document 8) that they have Haddad's assurance that "this stock company belongs to the PNA and is only a trust in his hands." 

Documents 11,12,13

Nashashibi writes to PECDAR that in order to establish "effective control over the commercial market," that is, to control the financial market and key import-export financing, throughout the West Bank, Arafat ordered the establishment of a series of import-export companies, insurance and contracting firms to be overseen by Jamil Tarifi, an Arafat crony. These companies should also be established, and the funding for them be transferred, in a clandestine manner so as to ensure that they appear privately owned. 

Document 14

Nashashibi writes that the establishment of a chicken farm was directed by Arafat in order to divert Palestinian workers from internationally-controlled development programs. He instructs PECDAR on behalf of Arafat to clandestinely transfer $1. 5 million to Ibrahim Qar'in. In its response, PECDAR confirms that the sum was transferred clandestinely from its "special accounts" to the private accounts of Ibrahim Qar'in. Nashashibi concluded his letter with the comment that Arafat gives special importance to this project because it is creating a PNA-controlled employment. The PLO repeatedly seeks to establish alternatives to the various development programs launched by the international donors in order to ensure that the PNA/PLO remains the main and choice employer. 

Appendix C:

Philadelphia Inquirer: U.S Gov't and European Community Finance PLO Broadcasts

Sunday, September 7, 1997

Broadcasts' warlike tone angers Israelis listening to a PLO network. 

By Barbara Demick

INQUIRER STAFF WRITER

RAMALLAH, West Bank -- A schoolgirl, perhaps 8 years old and all nervous giggles, stands before a television camera and sings in a squeaky voice:

I am a daughter of Palestine . . . 

Koran in my right hand, in my left -- a knife.

A slightly older girl with her ponytail wrapped in a checkered kaffiyeh gives an

emotional recitation of a poem for Palestinian leader Yasir Arafat:

I am finished practicing on the submachine gun of return . . . 

We swear to take vengeful blood from our enemies for our killed and wounded.

We will board a bustling boat which will take us to Jaffa.

The girl approaches Arafat, who plants congratulatory kisses on her cheeks.

These are excerpts from children's programs broadcast on Palestinian television, a facility funded in part by American aid. They are the basis of what might be called Exhibits A and B in a case the Israeli government is mounting against the Palestinian Authority. It says the fledgling Palestinian radio and television network is being used as a powerful propaganda tool to incite hatred against Israel.

The excerpts are from broadcasts aired before three suicide bombers killed four Israelis in Jerusalem on Thursday, but they are considered all the more incendiary by Israelis in the aftermath of the latest Islamic terror attack. The images of violence and death on the broadcasts are especially galling to many Israelis because of repeated pledges by Arafat to crack down on terrorism. After a June 30 suicide bombing of a Jerusalem market killed 15 Israelis, Prime Minister Benjamin Netanyahu threatened to jam the broadcasts. He didn't carry out the threat, but he is expected to voice the complaint when Secretary of State Madeleine K. Albright visits this week.

The Palestinian Broadcasting Corp. is a creature of the 1993 peace accords, which afforded Palestinians the first trappings of self-rule. The ``Voice of Palestine'' radio broadcasts began in 1994, television the following year.

The network was nurtured with about $500,000 in equipment and training from the U.S. Agency for International Development and with more than $6 million in aid from the European Union, according to network chairman Raddwan Abu Ayyash. A spokesman for the United States Information Service in Jerusalem said he could find records for only $70,000 in U.S. aid spent on training and TV cameras, but he added that the United States provided other funding for the network. 

The network is based in Ramallah, a sun-bleached West Bank city that has become the de facto seat of government for the Palestinian Authority. Abu Ayyash, a prominent journalist who was jailed by the Israelis in the 1980s, denies the broadcasts incite, but concedes they relay an increasingly angry mood among Palestinians.

``I can't put love longs and dances on television when people are being killed,'' Abu Ayyash said, referring to Palestinians killed while taking part in attacks on Israeli soldiers. ``Journalists have to be part of society and reflect what is happening on the ground.'' 

To some extent the debate over Palestinian media mirrors the larger debate about

Arafat himself: The conflict between his conciliatory statements, usually in English, to diplomats, and his often incendiary speeches in Arabic to his Palestinian political constituency.

Israeli officials protested last month when Arafat embraced a Hamas leader and

delivered an anti-Israeli tirade to supporters in Gaza in which he declared, ``all options are open'' -- a clear implication that armed struggle remained a possibility.

Palestinian TV broadcasts the usual mixture of sports, movies, cartoons, talk shows and news. Most of it is not nearly as violent as, say, the police dramas on American television, but the shows do reflect a society preoccupied with war and struggle. In a show about the opening of Palestinian schools, girls in frilly white dresses were shown dancing – incongruously -- with Kalashnikov rifles that they twirled like batons. In another broadcast, a schoolboy, asked what he got out of summer camp, answered: ``I am defending the homeland and undergo training like army drills.''

There is a children's quiz show about great figures in Palestinian history -- many of whom are considered heroes by Palestinians, but terrorists by Israelis.

One show featured Izz Al-Din Al-Qassam, a sheik who was killed by the British in

1935. The military wing of Hamas, the Islamic resistance movement, which has carried out many terrorist bombings in Israel, was named for Qassam. 

The heroine of another episode was Delal Al-Magribi, a woman who commanded a bus hijacking near Haifa in 1978. Thirty-four Israelis and nine Palestinian commandos, Magribi among them, were killed. The quiz-show emcee referred to Magribi as ``our sacred martyr.''

Under the peace accords, the Palestinians were allowed to set up a police force, but not an army. But it is hard to tell the difference in some of the Palestinian footage -- shot MTV-style with inspirational music accompanying shots of police marching in formation, drawing rifles and diving under burning barricades.

In one rapid and heavily edited sequence in a music video, an Israeli soldier is shown firing a gun. Then, a quick cut and a shot of a girl falling in a forest.

The television excerpts were taped and translated from Arabic by the Palestinian Media Review, a private, nonprofit organization run in part by former Israeli security specialists. English-language transcripts were shown to Abu Ayyash, who said they appeared to be accurate, but added that they represented only a few examples from hours and hours of programming. 

David Bar-Illan, Netanyahu's spokesman, says he is most distressed by the broadcasts designed to influence children. ``The unfortunate thing is that it leaves very little hope for a better relationship between the two peoples . . . especially if children are being taught to hate Israelis,'' he said.

Ghassan Khatib, an independent media analyst and head of the Jerusalem Media and

Communication Center, says the Palestinian programming has grown more militant since Netanyahu came to power in 1996, coinciding with the souring relationship between the Israeli and Palestinian leadership.

``I think in the beginning, when the Palestinian Authority first took over in 1994, they were speaking in a very moderate voice, avoiding anything that was very hostile or critical of Israel,'' Khatib said. ``Later, it changed. The mood became hostile. I don't think the Palestinian Broadcasting Corp. is to blame. I think they are reflecting the views of official Palestinians.'' 

One article in the peace accords says that Israel and the Palestinian leadership must ``foster mutual understanding and tolerance and shall accordingly abstain from incitement, including hostile propaganda.'' But exactly what constitutes incitement -- and what is merely the free expression of opinion -- is a matter of intense debate. 

Itamar Marcus, codirector of the Palestinian Media Review, says the problem with Palestinian broadcasting lies not strictly in what is said, but in the mood created. ``It is a whole atmosphere of a nation preparing for war,'' Marcus said.

Marcus is particularly critical of Palestinian TV's habit of broadcasting maps of Palestine that include all of Israel -- not just the West Bank and Gaza, the territories that Palestinians expect to make up a future Palestinian state.

``There is no sense here that they are willing to accept Israel as a neighbor,'' Marcus said. 

Voice of Palestine radio referred to Thursday's suicide bombing as a ``terrorist attack,'' but in ``occupied Jerusalem.'' 

Under an unusual structure, the Palestinian Broadcasting Corp. reports directly to Arafat, bypassing the Palestinian Ministry of Information. He is able to dictate its content while shaping a different message when addressing diplomats, Israel and the Western news media.

In September 1996, on the day before protests over a tunnel opening in Jerusalem's Old City led to clashes in which 61 Palestinians and 15 Israelis died, Arafat told Palestinian police: ``The believers shall fight for the cause of Allah. They shall kill and be killed. . .. . Our blood is a small price to pay for the cause.''

Addressing a news conference as the clashes spread, he spoke of the need to ``calm the situation down.''

Last month, during another widely broadcast speech delivered to the Palestinian

legislative council during a visit by U.S. envoy Dennis Ross in which Arafat promised to crack down on terrorism, the Palestinian leader said: ``We must confront them. We must confront them. . . . We must confront them in every sense of the word.'' 

Arafat carefully refrains from any references to “the Jews'' or even to ``the Israelis,” usually specifying that his anger is directed toward the Netanyahu government and often going out of his way to praise other Israelis. With some exceptions, the same applies to other senior Palestinian officials.

The Israeli government, however, has complained about the Mufti Ikrama Sabri, who in a recent Friday prayer broadcast by radio from Jerusalem's Al-Aqsa mosque, called for ``Allah to take revenge on behalf of his prophet against the colonialist settlers who are sons of monkeys and pigs.'' 

Abu Ayyash and other broadcast officials contend that if they had the resources to carefully scrutinize Israeli television, they would find an equal or greater number of inflammatory anti-Arab statements.

``People sometimes make extreme statements, especially on our live shows. I can't put plaster over their mouths,'' Abu Ayyash said. ``At times, I've tried to soften the mood, but if this is the way people think, these are the kinds of things they say.

``What I won't do, though, is become a branch of Radio-Television Israel. That is what Netanyahu would like us to do and that is an occupier's mentality,'' Abu Ayyash said. ``This is Voice of Palestine. We have to reflect our own culture and our own history.''

END

Appendix D

PA Sets Up `Secret' Firm To Purchase Jerusalem Land -- More on Plan To Purchase Property 

Tel Aviv HA'ARETZ in Hebrew, 19 Jun 95 p A4 

[Report by Yosef Algazi and Nadav Shragay] 

Additional documents, which seem to indicate the Palestinian Authority's [PA] intention to attempt to purchase real estate in East Jerusalem, were published yesterday. In reaction, PA Chairman Yasir 'Arafat called this "yet another cheap plot." A statement published by a PA official yesterday said that the PA had decided to demand that the Israeli Government conduct a thorough investigation "in order to discover who was behind this distribution of false documents." 

According to the PA, the documents published yesterday and on 17 June were forged as part of a disinformation campaign by extreme right-wing circles with the aim of sabotaging the peace process on the eve of the signing of the new agreement. "They seek to embarrass the Israeli Government more than they want to embarrass the PA. It is no coincidence that some of the people mentioned in the documents are employed at the Orient House in East Jerusalem," the PA official said. The PA was reportedly considering legal suits against some of the newspapers which published the documents. 

Yesterday, Dr. Ahmad al-Tibi said that PA Treasury officials, when presented with the documents, asserted: "these are childish forgeries. The documents are written in faulty Arabic and the forged signature of Treasury head Zuhdi al-Nashashibi is not very convincing." 

Among the documents disseminated yesterday is a letter allegedly sent in August 1994 from the Palestinian Economic Committee on Development and Reconstruction (PECDAR) to PA Treasurer Muhammad Zuhdi al-Nashashibi. The letter confirms that PA Chairman Yasir 'Arafat's instructions with regard "to establishing a real estate company centered in Jerusalem, which would purchase properties in East Jerusalem, the capital of the Palestinian state, and the Old City" have been fulfilled.

Right-wing sources claim that analysts believe that the letter -- a copy of which was sent to HA'ARETZ -- came in reply to the instructions on the matter sent 10 days earlier by al-Nashashibi to PECDAR (which were reported by HA'ARETZ yesterday). The missive stated that contact had been made with "brother Ahmad al-Tibi," and that the latter had supplied "the financial information, the way, and the means," in which he preferred to receive the sums needed to begin the project. 

According to these sources, the letter, signed by Samir Hulaylah, an aide to Abu-'Ala' [Muhammad Quray'], states: "the money-transferring process is sophisticated and convincing, and the other side, regardless of its ability, will be unable to discover how the transfer was made. We have contacted the financial source which transferred (the sum) to him, and he has confirmed the money's arrival. We wish to inform brother commander Abu-'Amar [Yasir 'Arafat] that the orders have been implemented fully and in complete secrecy." 

The sources claim that the letter is printed on official PECDAR stationary and is marked "top secret," just like the PA's instructions on this matter to PECDAR. The letter also carries a handwritten message stating: "the perusal of this document is forbidden without special permission from the president." 

An investigation by HA'ARETZ into the identity of the members of the special committee, reportedly mentioned in the PA's letter of instructions to PECDAR (published yesterday) indicates that at least some of them were indeed involved in land deals and money issues pertaining to the Palestinians in Jerusalem. 

Over the past few months, many properties have been purchased in East Jerusalem with the PLO's encouragement. One of them is a house on Qumranim Street in the Old City purchased from a man called Samir Hazu. 

Two other letters received by HA'ARETZ yesterday show that in August 1994, the PA instructed PECDAR, via al- Nashashibi, "to purchase buildings containing ten apartments or more," and allocated $12 million for this purpose. PECDAR is warned that this activity should not be conducted on behalf of the PA, "in order to avoid exposure (of the PA)." These letters also mention Dr. Ahmad al-Tibi as the head of the committee handling the matter. 

PECDAR's reply to al-Nashashibi from 31 August 1994, says that "the transfer of $12 million in the same way is no longer possible," and that "half the sum ($6 million) can be transferred at once with the other half being paid a month later." The letter states: "Brother Dr. al-Tibi has agreed to divide the sum and said that there is no urgent need at the moment and therefore a delay will cause no harm." These two letters are also classified as "top secret." 

'Arafat Said Using PA Funds for Jerusalem Land 

Jerusalem Channel 2 Television Network in Hebrew, 1800 GMT 19 Oct 95 

[Political correspondent 'Imanu'el Rosen video report] 

[Anchor 'Adi Talmor] Yasir 'Arafat tried to use funds donated to the Palestinian Authority [PA] to take over land in Jerusalem and to support Israeli Arab parties, according to PA secret internal documents. The liaison is Ahmad al-Tibi. The Palestinians claim the documents are forged. Our political correspondent 'Imanu'el Rosen has the details: 

[Begin recording] 

[Rosen] These are the offices of PECDAR [Palestinian Economic Committee on Development and Reconstruction] in Ramallah; in other words, the body responsible for the flow of funds to the PA. Here the decisions are made on how to divide up the millions of dollars donated by the donor states and the United States.

These documents, which reached Likud Knesset Member [MK] Beni Begin, on the face of it show that the PA has ambitious and much more embracing aims than just autonomy on the West Bank. In these four letters, PECDAR promises PA Finance Minister Muhammad al- Nashashibi to act on 'Arafat's instructions to purchase land and houses in East Jerusalem and to transfer funds to Israeli Arabs and Arab parties running in the Knesset elections. 

For example, one of the letters by al-Nashashibi to the PECDAR chairman says: Leader Abu-'Ammar -- that is, 'Arafat -- has decided that PA activity will be expanded to Israel and will focus on Palestinian Arabs inside Israel in the following areas - - we will mention only two: to help the Arab parties that support the establishment of a Palestinian state and to aid local councils in financial trouble. PECDAR's reply: You are requested to tell brother leader Abu-'Ammar that the order has been implemented in full secrecy and to pay attention to the type of activity. Some $10 million is mentioned.

[Begin] These documents prove that we should no longer have any illusions. For the PLO, the Oslo agreement cannot end at the Green Line. The PLO sends its long arms into the State of Israel.

[Rosen] On Jerusalem, al-Nashashibi writes to PECDAR: Since the PA is dealing with the establishment of support systems for the foundations of the Palestinian state and since we do not want that activity to be appear in the PA's name, our leader and brother -- that is, 'Arafat -- decided to set up a land company based in Jerusalem to deal with the procurement of land in East Jerusalem. The company's manager will be Dr. Ahmad al-Tibi. PECDAR's response: We were in touch with Dr. al-Tibi and received from him information about the bank and how he prefers the initial funds for the plan -- $15 million -- to be transferred. The transfer of the funds is to be executed in a sophisticated way so that no side can find out how it is done. By the way, all the documents are headlined Top Secret and carry 'Arafat's unequivocal order to keep the activities secret. [end recording]

[Talmor] We now have 'Imanu'el Rosen in the studio. 'Imanu'el, the Palestinians firmly claim that the document is forged. So what is their credibility? 

[Rosen] They also said six months ago that a copy of a similar document was forged. Al-Tibi hired investigator Eli Sade, who examined the documents and found faults. For example, the fact that the letters by al-Nashashibi -- who is completely nonreligious -- twice carried the expression bismallah [in the name of God]. Sade reached the conclusion that the documents are forged. Al-Nashashibi claimed that his signature on the documents is authentic, but that they contained falsifications. We showed Sade the new documents, which are originals. He has still not been able to give us his findings, but he has a feeling that these are also forged. We note that other elements believe that these are authentic documents.

[Talmor] If it transpires that the documents were written by the PA, what is the significance?

[Rosen] Whether they are authentic or not -- or something in between -- Israeli defense sources and others have been saying for a long time that these are the PA's chief aspirations: On the one hand, Jerusalem and all that that signifies; on the other, Israeli Arabs. Al-Tibi has already announced he will be running in the Knesset elections. These things should therefore not surprise us since they merely reconfirm information we already have.

[Talmor] Here are reactions to the report: The Likud said it is additional proof that the government has a systematic policy to divide Jerusalem. Likud Secretariat Chairman 'Uzi Landau said that during the Knesset's winter session he will raise a motion stipulating that over 80 MK's will be required to approve concessions on Jerusalem.

Tzomet said that it has often called for pressing charges against al-Tibi for collaborating with the enemy although he is an Israeli citizen, but all its demands have been rejected by the government, which itself collaborates with 'Arafat. 

West Bank: Hawatimah on 'Corruption,' 'Arafat Ties 

Amman al-Majd in Arabic 11 Aug 97 p 5

Interview with Nayif Hawatimah, secretary general of the Democratic Front for the Liberation of Palestine, by Mary 'Isa in Damascus; date not given

[Hawatimah] ... Nonetheless, this is hard to achieve as long as the Palestinian Authority continues to repress the national ranks, as long as corruption is uncurbed, and as long as the people's funds continue to be squandered without fear of punishment. That is why we are engaged in a dialogue with the leaders and rank and file in the Fatah Movement and Hamas [the Islamic Resistance Movement] as well as with nationalist figures.

['Isa] Have you taken notice of the reports prepared by the Central Control Commission regarding the spread of huge corruption within the lobbies of the Palestinian Authority? If your answer is in the affirmative, how would you comment on this?

[Hawatimah] We have in our possession a report prepared by the Central Control Commission, which came in 600 pages; a report prepared by the Ministerial Committee headed by al-Tayyib 'Abd-al- Rahim, which came in 129 pages; and a report prepared by the Legislative Council's Financial Committee, which came in 60 pages. All these reports show that the octopus of corruption is spreading in all areas of the Palestinian Authority and its security and intelligence arms. Furthermore, these reports recommended the resignation of the entire Palestinian cabinet. They acknowledged that $326 million; that is, 43 percent of the 1996 budget, was embezzled; that 35 percent of this budget was spent on security agencies; and that 12.5 percent of the budget went to 'Arafat's office. Some 9.5 percent of the budget; that is, $73 million was left to the entire population of the West Bank and the Gaza Strip, who total 2.5 million people. With regard to the Palestinian diaspora, they got nothing of this budget.

Before these reports saw the light of day, we urged 'Arafat to heed the appeals of the people and realities in this regard. This was contained in a letter I sent him through 'Abbas Zaki [member of the Fatah Central Committee and member of the Palestinian Legislative Council] in reply to an oral message 'Arafat sent me in April through Zaki. In our appeals in this regard, we clearly underlined the need to deal blows to Mafia gangs and corruption within the lobbies of the Authority's organs.

Now, these reports, all of which were prepared by the Authority itself, recommend the dismissal and trial of five ministers, rebuking two others, and questioning another. They also demand an investigation of why monopolies, chief among which are the Petroleum Corporation, the al-Bahr Company, the Tobacco Company, the Cement Corporation, the Palestinian Broadcasting Corporation, and the Cereals Corporation were placed under the control of brother 'Arafat's office. Likewise, the revenues of 12 basic commodities do not find their way to the Authority's treasury, are not subject to auditing, and are not deemed part of the general budget; not to mention the second budget [the second treasury], whose assets are deposited in four Israeli banks. These assets are in excess of $500 million. These assets, which are fetching 16-23 percent interest, are used for speculation on a par with the shekel.

This is a far cry of the hunger suffered by our people in the West Bank, the Gaza Strip, and East Jerusalem. This also shows how the Palestinian Authority is neglecting the Palestinian diaspora, who unleashed the revolution and the PLO. This is a joint far cry appealing for an end to corruption, and for the dismantlement of these institutions, so that there may be room for the launch of new institutions that would be highly efficient, trustworthy, and accountable. Consequently, we demand public trials attended by human rights organizations and representatives of donor nations to curb the spread of corruption that has spared nothing.

['Isa] But some of the ministers whose names were mentioned in the reports said that the charges against them are politically motivated and that they are aimed at dismissing them.

[Hawatimah] I firmly believe that these ministers want to turn their backs on all these reports that implicated them in corruption scandals. I would like to tell you in all honesty that the reports, copies of which are in our possession, are clear. Moreover, several officials affiliated with the Palestinian Authority, including Hanan 'Ashrawi, 'Abd-al-Jawad Salih, and others, commended the accuracy of the reports. However, they affirmed that these reports did not address the activities of the monopolies working under the direct supervision of brother 'Arafat's office. Given all of the above, all files must be opened and referred to court. First of all, all the ministers whose names are mentioned in the reports must be relieved of their posts and sent to court, as happens in all world states. They must undergo transparent trials in the presence of international observers.

['Isa] With regard to 'Arafat, is it possible that he is unaware of this huge corruption?

[Hawatimah] We within the revolution and the PLO, as well as Palestinian laymen, cannot assume that the ruler is good and that it is his entourage that is corrupt. I will address this issue in a book that will see the light of day soon. The ruler is well aware of many things being done by his entourage. Nonetheless, he is not necessarily aware of all the minute details. He knows a lot about what is going on around him. The self-rule authority is coming face-to-face with a huge report. There is huge corruption, and brother Abu-'Ammar is aware of many things in this regard.

CHRISTOPHER REMINDS ARAFAT OF NEED FOR ACCOUNTABILITY 

At their meeting yesterday in Gaza, US Secretary of State Warren Christopher reiterated to PLO Chairman Yasser Arafat the need to cooperate with the international community's requirement of economic accountability as a precondition for receiving economic aid. The potential donors and the World Bank are still endeavoring to help the Arabs understand the need for documentation. Yediot Ahronot, 22 July, 1994

ARAFAT CALLS "FINANCIAL ACCOUNTABILITY" A SLOGAN

PLO Chairman Yasser Arafat reduced demands for financial accountability to keep track of money granted to the Palestinian Authority to being a mere "slogan". Arafat then claimed that delays in transferring promised funds from donor countries was endangering autonomy and the future of the peace process. Ha'aretz & Jerusalem Post, 13 September 1994

PLO FUNDS MISAPPROPRIATED

Monies that were to be used to pay the salaries of PLO police officers were used for a shadow security force under the leadership of Yassir Arafat.

A senior official of the U.N. Relief and Works Agency (U.N.R.W.A.), who was responsible for the handling of $500,000 that was to be given to the police. The official has been summoned to the Austrian capital to explain what happened to the money. The official, Jabr Nabahim, has also been charged with diverting $100,000 to his private bank account. Jerusalem Post, July 7, 1994

PALESTINIAN AUTHORITY BEING PROBED FOR MISAPPROPRIATION OF FUNDING

The London Sunday Times reports that two international donor states and a UN agency are investigating allegations that British overseas development aid intended to pay salaries of Palestinian police was used instead for a shadowy security force under the command of PLO Chairman Yasser Arafat, according to the London Sunday Times. (Jerusalem Post, 7 November 1994)

PLO HAS $10 BILLIONS IN ASSETS

According to American Intelligence sources, the PLO participated in a number of terrorist attacks against US targets and in 1993, after the Gulf War, the PLO, Hamas and Hizbullah signed a pact of cooperation in Khartoum jointly pledging to fight America and the West. The pact has never been rescinded. (Reported by Rachel Ehrenfeld, author of "Narcoterrorism" and "Evil Money", ) Jerusalem Post, November 23, 1994 

PEACE WATCH: AID TO PALESTINIAN AUTHORITY WENT TO PLO SUPPORTERS IN LEBANON

On the eve of the donor nations' conference in Brussels yesterday, Peace Watch (an independent, non-partisan monitoring organization) published a detailed report on international monetary aid to the Palestinian Authority. The report includes the revelation that most of the first 'portion' of aid, $13 million, was sent to fund the PLO in Lebanon to prevent defection from the ranks of Fatah to opposition groups there.

The report detailed why donor nations are slow to come through with their promised aid to Palestinian Council for Development and Reconstruction (PECDAR). The reasons include 1) PLO Chairman Yasser Arafat's refusal to comply with the donor nations' fundamental condition that accounting and bookkeeping be done properly. 2) Arafat appointed as PECDAR head Farouk Kaddoumi, head of the PLO's political department, who is well known as an opponent of the Declaration of Principles and represents Fatah's most radical wing. Making the basic internal disagreements within the PLO imbedded within the PECDAR structure. 3) Despite the fact that Arafat agreed that PECDAR would be the mechanism for the transfer of financial aid to the Palestinian Authority, his men have established parallel apparatuses and are encouraging donors to funnel money through them instead. (Peace Watch Press Release November 28) 

Despite this, the World Bank signed an accord with PLO Chairman Yasser Arafat for $58 million in credit to the Palestinian Authority for emergence projects. The money is being provided by Saudi Arabia ($30 million), Denmark ($18 million), and Switzerland ($10 million). Jerusalem Post November 30)

Last week, Tourism Minister Uzi Baram was asked in a radio interview, "What if the Palestinians continue to attack us even if they do get enough money to rehabilitate Gaza?" He replied, "I'll go to the American Consulate and apply for a visa." (Jerusalem Post , November 22, 1994)

U.S. IS DISAPPOINTED IN ARAFAT 

The Washington Times 

Arafat misusing U.S. aid, GAO analysis, letters say 

PLO Chairman Yasser Arafat has used millions of dollars in international and U.S. aid to fund clandestine political operations in Jerusalem, according to documents obtained by The Washington Times. 

Copies of Palestinian Authority correspondence show that the Palestinian Economic Council for Development and Reconstruction (PECDAR) - a body almost completely funded by international donors including the United States - has secretly purchased land in Jerusalem in a bid to strengthen PLO claims to the city. 

The letters also show PEDCAR funds have been used to reward Mr. Arafat's friends and relatives, including his mother-in-law. 

They indicate that Mr. Arafat, president of the new Palestinian Authority in Gaza and the West Bank, has sought to use international aid to strengthen political allies at the expense of non-members of his al-Fatah faction of the Palestinian Liberation Organization (PLO). 

The United States donated $100 million to the Palestinian Authority last fall on the understanding that the money would be used to develop the economies of Gaza and the West Bank. Republican congressmen recently voiced alarm at increasing reports of Mr. Arafat's alleged misuse of international donations. 

Rep. John Saxton, New Jersey Republican, who has secured his own copies of PEDCAR correspondences condemns Mr. Arafat’s diversion of U.S. and European Union aid to “projects in direct violation of the peace agreements with Israel.” 

Mr. Saxton is seeking a hold on any further U.S. money being sent to help the fledgling Palestinian state. Nearly S500 million is to be donated to the Palestinians later this year. 

“I believe that before we spend another dollar on aid to the PLO, we need certain questions answered - namely, how much of our aid is being used to advance the condition of the Palestinians and how much is being used to fund the pet projects of Arafat?” 

Sen Alfonse D'Amato and Rep. Mike Forbes, both New York Republicans, have introduced legislation that would cut off further aid unless stringent conditions are met. 

Rep. Benjamin Gilman, chairman of the House International Relations Committee, has also cast doubt on the need for massive international aid to the PLO, which governs the Palestinian Authority. 

Prompted by a British intelligence assessment that the PLO has assets worth $8 billion to $10 billion and annual revenues of up to $2 billion, Mr. Gilman requested in May a General Accounting Office analysis of the finances of the PLO. 

The GAO report was completed in June, but in a highly unusual move, the CIA insisted it be classified. U.S intelligence sources have told The Times that the analysis basically confirms the British findings. Mr. Gilman has written to the GAO comptroller general demanding that the report be published. 

The Palestinian Authority documents secured by The Times consist of letters exchanged by Mr Arafat's finance minister, Muhammad Zuhdi Alnashashiby, and the PEDCAR chairman. 

The letters were written last summer and all, shortly after international aid started to flow. All the letters are marked “Top Secret” and “Not to be read without the permission of the president.” 

One letter from Mr. Alnashashiby lists among the group's high priorities the building of a PLO presence in “holy Jerusalem.” 

It informs the PECDAR chairman that Mr, Arafat wants to set up a land corporation in Jerusalem with an initial capital outlay of $15 million. The corporation's activities must not be traced back to the Palestinian Authority, it cautions. 

Mr. Alnashashiby writes: “We stress that it is the desire of the comrade leader Abu Amar [Mr. Arafatl that the meetings of this group be held secretly and its activities should not be noticed and it should keep its documents and registries away from the other party [Israel].” 

PEDCAR correspondence also shows that $20 million was secretly used to fund covert political activities, including the financing of political parties and the reequipping of a Palestinian newspaper, the Journal of the Return. 

An additional $12 million was allocated on orders of Mr. Arafat tor the purchasing of apartments in Jerusalem. These apartments were to be given to al Fatah loyalists. 

Throughout the correspondence, Mr. Alnashashiby stresses the importance of keeping money transfers secret. 

The Palestinian Authority and the World Bank Will Bypass Pecdar: Foreign Aid Will Now Be Transferred Directly to the PA . The Holst Fund Has Temporarily Stopped Dispensing Aid, Peace Watch, September 13, 1995

The Palestinian Authority (PA) and the World Bank agreed last week to bypass the Palestinian Economic Council for Development and Reconstruction (PECDAR) and transfer aid directly to the PA via its economic ministries, primarily the Ministry of Finance, headed by Mohamed Nashashibi. According to Peace Watch sources, both at the PA and the World Bank, PECDAR will cease to be the address for foreign aid to the PA and the account manager for the Holst Fund. 

PECDAR, headed buy PA Minister of Economics Ahmed Quria, was originally created in 1993 as an institution designed to uphold Western standards of "transparency and accountability: and to be the official address for foreign aid to the PA. PECDAR's existence was a central condition of the PA receiving the $2.5 billion aid pledged over five years by the donor nations in Washington (October 1993). From the perspective of the donor nations, concerned about the PA's commitment to basic financial standards, the decision to bypass PECDAR could be seen as a retreat from the World Bank's long-standing demand that the PA maintain certain standards of "transparency and accountability."

As detailed in previous Peace Watch Reports, ever since the creation of the PA there has been tension and competition for funding between PECDAR, the Finance Ministry and the Ministry of Planning, headed by Nabil Sha'ath. The competition between the various ministries also led to confusion among the donor nations, with many unsure of the correct address for their aid. Only last month, according to sources among the donors, Nabil Sha'ath sent a letter to all the donor nations stating that he was the official address for aid within the PA. Accordingly, the designation of the Finance Ministry as the main recipient of foreign aid came as a surprise to many donors.

The new arrangement is likely to affect the donor nation conference, set to convene after the signing of the interim agreement between the PA and Israel. Without PECDAR as the recipient, it is possible that the PA will have more leeway in spending foreign aid. According to Peace Watch sources, the conference will be held in Madrid in the middle of October, and not in Washington as previously expected where now there will only be a meeting of Ministers and experts.

In another development, sources at the World Bank have revealed to Peace Watch that the Holst Fund has not been operating since June and recent contributions to the fund have not been transferred to the PA. The only money that has been transferred has been to pay police salaries for June and July. As a result of the suspension of operation of the Holst Fund other employees of the PA have not received their full June and July salaries. The workers received advances on their salaries from unknown sources, most likely in the form of loans from Palestinian banks in the territories and from direct European aid to the PA.

According to sources at the World Bank, from its inception until it stopped dispensing aid in June 1995, the Holst Fund had disbursed $108.5 million to the PA via PECDAR. At the end of July, the Holst Fund had a balance of more than $20 million, including $438,000 from Australia, $310,000 from Austria, $2.5 million from Israel, $4 million from Italy, $3 million from Japan, $130,000 Luxembourg and $2 million from the UK. An additional $35 million has also been pledged by the donor nations to the Holst Fund. After a formal agreement is signed between the World Bank and the PA on the new function of the fund, it is expected that the money will once again flow from the Holst Fund to the PA via the Finance Ministry. 

Flourishing Deals Overseas

Who, Today, Controls the Economic Empire Which the PLO Created Overseas? "Arafat and His Friends Are Not Transferring the PLO's Overseas Assets to the Ownership of the [Palestinian] Authority," Says Palestinian Council Member Khosam Hadad. "This Is One of Our Economy's Biggest Disasters."

Where is the money? This question disturbed many people last week, following the publication regarding Yasser Arafat's secret account. "Where is the money?" asked the residents of the Palestinian Authority as they sought to clarify what exactly is being done with the taxes collected by the monopoly owners and those who control the crossings and loading zones. "Where is the money?" the Knesset Finance Committee sought to clarify, on Tuesday, in a special discussion, which was convened following the findings of the Ha'aretz "Weekend Supplement" (4.4.97), to which senior Israeli Finance Ministry officials were summoned. "Where is the money" asks Palestinian Legislative Council member Khosam Hadad, this time meaning the PLO's overseas assets.

The size and worth of these assets -- which the Palestine Liberation Organization has accumulated in the 33 years of its existence -- are still a mystery. "Nobody knows the truth about the PLO's assets abroad," says former minister Moshe Shahal. "In the peace talks, we did not dare to raise the issue." Who controls these assets today?

The PLO was a very powerful economic organization, that has received billions of dollars from Saudi Arabia and the Gulf states since 1967. A large part of the assets come from taxes levied by the Arab countries: approximately 5% of the salary of every Palestinian who worked in their areas was deducted at the source and transferred to the organization's accounts in Switzerland and Spain. This collection alone brought in approximately $50 million annually. "In total, the PLO made profits of something like $50 million a day," said Eli Halachmi, who was head of the economic branch in the research arm of IDF Military Intelligence at the end of the 1970s. "The organization had astounding properties. They had many straw companies which aided their penetration of the European market. The Kuwaitis helped them buy shares of companies such as Mercedes. They exercised great economic influence in France, Switzerland, Italy, Holland and Scandinavia."

In order to rule over its economic operations, in 1970 the PLO established the organization "Samed", or by its full name "The Organization of the Sons of Palestinian Martyrs", which has been headed since then by Ahmed Kari'a (Abu-Allah). Samed conducted many investments in the name of the PLO and its management was highly secretive and directly reported to Yasser Arafat, who also personally signed its cheques. Part of Samed's activities the PLO was interested in revealing, from a public relations standpoint. The organization published a magazine, "Samed al-Iktzadi" (The Economic Samed), with many pictures of Palestinian women working at sewing and weaving and Palestinian men sowing fields in agricultural farms in Africa and Lebanon. According to the statistics given in Guy Bechor's "PLO Lexicon", Samed employed several thousand workers in Lebanon until Israel expelled them in 1982. They were considered Fatah activists in every way, including in the compensation tables, for example.

Under the umbrella of Samed a number of associations operate including the Manufacturer's Association, the Trade and Marketing Association, the Agriculture and Agricultural Produce Association, the Research and Publications Department, and the Department for Disseminating Films and Propaganda. The latter initiated and distributed a number of propaganda films and films pertaining to the Palestinian struggle. At the end of the 1980s, it initiated the production of a full length film and invested millions of dollars, including the drafting of foreign actors and cameramen. The raw material was sent for editing in a laboratory in Rome. One night in July 1989, the laboratory was broken into and not a trace of the Palestinian's film was left. 

The Samed magazine identifies its' branches economic activities and in general, reports on the organization's participation in a large number of economic exhibitions and its joint activities with the countries of the Eastern Bloc (until it fell apart) and with black Africa. Samed opened 20 Chambers of Commerce in various countries, such as Japan, Thailand and China in Asia, Guinea and Mali in Africa, Hungary and Poland in Eastern Europe, and France and Italy in the West. In its record years, Samed had 26 set exhibitions. The reports of Samed acknowledge its participation in weapons factories. The organization noted that it has a weapons factory in South Yemen and in Princedom of Brunei. Guy Bechor shows that at the end of the Iran-Iraq War in 1988, Arafat presented a gift of an RPG launcher manufactured by Samed to Iraqi President Saddam Hussein

It is a little difficult because of this to take at face value the words of Dr Maher al-Kurd, the Palestinian Authority's Deputy Minister of Economics and Commerce. Dr al-Kurd absolutely and categorically denies everything. According to him, Samed's assets consisted of farms, for the most part farms in Lebanon which were destroyed by the IDF invasion in 1982. "After the war", adds al-Kurd, "they were left with a few projects in Africa, mainly in Somalia and Sudan. The civil wars and drought in those countries destroyed the farms. Samed had no property other than farms. No shares, no Swiss bank accounts. If only all the rumors were true."

It is difficult to estimate how much the PLO's assets are really worth. In an article published by Eric Lurun in "Le Figaro" he claims that hundreds of millions of dollars of PLO money was transferred from Lebanon to Switzerland at the beginning of the IDF siege of Beirut in 1982. Already in the 1970s, with the help of the Soviet Union, and in particular the "Moscow Narodny" Bank, Arafat and a number of his aides arranged investments on Wall Street, in the City of London, and in a number of Arab banks. The PLO also invested in large industrial concerns that were floated on the Frankfurt, Tokyo and Paris stock exchanges, as well as in real estate in the Mayfair area of London. Until the Gulf War in 1991, writes "Le Figaro", the cash reserves of the PLO came to $7 million. Arafat divided this mighty sum between a number of accounts in Zurich and Geneva, in such banks as Union of Suisse Bank, and Chemical Bank of New York. In Israel, the figures cited in "Le Figaro" are considered exaggerated, but the assertion that the PLO was in the 1970s and 1980s a very strong economic force is accepted. Its bank accounts were spread across the globe, including in eastern Jerusalem, and were registered in the names of various private individuals, [never in the name of the PLO] including that of Ahmed Kari'a (Abu Alla). If one considers the sums received by the PLO in the form of taxes and contributions, and subtracts from this its various outlays -- on strengthening its structure, on propaganda and on operations, the differential is hugely on the side of the earnings. 

If Yasser Arafat ever sits down to write his economic memoirs, he will also be able to solve the question of the disappearance of Samir Najem A-Din. This mysterious man, a Palestinian resident in Saudi Arabia, is today in

the seventh decade of his life, if he is still alive. A-Din has been portrayed in the Western press as one of the leading PLO money men, as the head of a secret arm concerned with the transfer of funds for confidential purposes. He led the "SAS" whose name came from the first initials of the names of its three managers: Samir Najem A-Din, Adnan Al-Kilani and Sakir Farhan. This triumvirate managed business interests straddling the world, via BCCI, the same institution at the center of scandal five years ago. It was founded by a group of Sheikhs from the United Arab Emirates, and was closed in 1992 in a joint operation of Interpol and the World Bank. The western media reported then that the bank was a giant launderer of illegal funds, including the funds of many underground and terror organizations. Its management sat in Pakistan, but the orders came out of Abu Dhabi. 

Legal officers managed to confiscate 20 billion dollars, 75% of the assets of the Bank in 69 states. The closure of the bank also led to the discovery of account number 80820577, in the name of Samir Najem A-Din, from which money was taken for a variety of purposes. On 13th of March, 1984, for example, the owner of the account instructed the bank to transfer $17,000 to the Dafex arms factory in Portugal. Two weeks later he ordered the transfer of $100,000 to the account of Munzer Al-Kazar in Banco De Bilbao in Spain. Al-Kazar is a Syrian citizen close to the regime in Damascus, whose name has been linked in recent years to a number of illegal actions taken on behalf of Palestinian terror organizations, among them the bombing of the Pan-Am plane over Lockerbie. 

In an interview with the BBC after the liquidation of the bank, Rasan Ahmed Kassem, manager of the branch in Sloane Street in London, related that A- Din opened the account with a deposit of $50 million, and that most of that money was used for arms purchases in Britain. The true role of Najem a-Din is made yet more elusive by the claim that he was the money man for the Abu Nidal organization, which split off from the PLO already at the beginning of the 1970s, in which case he could not be connected to the secret accounts of Arafat. A directive given by Najem A-din to the bank, in which he orders the monthly transfer of 10,000 pounds to the account of Amin al-Banna, apparently the cousin of Abu Nidal, is used as a basis for this claim. Al-Banna is suspected of involvement in the murder of Issam Sartawi, Arafat's political adviser.

According to various sources of information, the PLO participated in the establishment of the airline of the Maldive Islands, and afterwards was one of the owners of the airline of Guinea-Bissau. An Israeli official says that Fayez Zaidan -- head of the Palestinian Aviation Authority today — managed this company in the past. Samed also acquired a duty-free shop at Tanzania's international airport in Dar e-Salaam. In 1986, the PLO representative in Zimbabwe, Ali Khalima, said that, "this is merely an investment," and that in the same period, Samed also dealt in purchasing additional shops in Zimbabwe and Mozambique. Last week, a western diplomatic official -- who requested that his name not be mentioned -- said that various Palestinian Authority officials have confirmed the existence of airlines and duty-free shops in Africa which belong to the PLO. Even so, the same Palestinians have claimed that many of these assets -- over the years -- suffered heavy losses for the PLO, with some of them in a state of bankruptcy.

The opposition to Arafat inside the PLO, and the various factions which quit the organization, such as that led by Abu Zaim (Attalah Attalah) in 1986, have uncovered a long series of financial transfers benefitting senior PLO officials and secret bank accounts under the Rais' direct supervision. In his book, Inside the PLO, journalist David Halevy describes a complex network of such secret accounts, which were designed for financing exceptional actions and special operations. According to Halevy, the PLO treasury disburses approximately $150 million annually to the chairman's network of private accounts. He points out that Arafat had so much money that he was able to lend money to countries such as [the former] North Yemen and Congo, [the former] Lebanese President Amin Gemayel and others. Many Palestinians are sure that Arafat is not tainted by personal corruption, but nobody is sure that the many funds under his control are being utilized for goals known to, and accepted by, a majority of the Palestinian people. The policy of the PLO and its leader have also directly influenced both his economic and his political situation. His support for Saddam Hussein after his invasion of Kuwait brought about a cessation in the Gulf states' support for the PLO and the expulsion of hundreds of thousands of Palestinian workers. The organization almost went bankrupt. It is known that part of Samed's assets were sold during that period in order to finance the PLO's regular activity; it is not clear what part. Approximately one year ago, the American Congress' oversight committee held a secret investigation into the subject and even collected testimony from private and official Israeli experts. The investigation's report was not published. Even so, it is known that the examiners did not succeed in unequivocally determining the worth of the PLO's overseas assets.

Khosam Hadad, a Palestinian Legislative Council member from Nablus, says: "One of the greatest disasters of our economy is that Arafat and his friends are not transferring the PLO's overseas assets to the ownership of the [Palestinian] Authority, a step which could greatly aid economic development here." After his expulsion from the territories in 1988, for Fatah activity, Hadad filled various posts at PLO headquarters in Tunis. "The PLO still has a great many assets in various countries," testifies Hadad. "We have companies, we have real estate, and we have investments in a range of areas. Over the years, the problem has been that the lack of a framework to supervise these assets. Private elements have exploited this for their [own] needs. The [Palestinian] Authority -- instead of becoming a proper body -- is continuing Arafat's own way and lacks supervision over everything related to money."

Abu-Allah, the head of Samed and Chairman of the Palestinian Parliament was not happy to cooperate. "I know nothing about the income of the PLO abroad," he said.

Q: Can we talk about Samed?

A: "I know nothing about Samed."

Q: But you are the organization's chairman?

A: "I know nothing about Samed. If you want to talk about the peace process which is going mad right in front of your eyes, please. Do you want to talk about the Palestinian legislative branch -- no problem. But about the PLO abroad or Samed, I know nothing, really nothing. Thank you and goodbye."

* Murray Kahl, Publisher of Israeli & Global News, Adjunct Professor, Palm Beach Community College

 Source: Corruption within the Palestinian Authority, 1997