Where's Arafat's Money?

By Matt Rees/ Jerusalem With Jamil Hamad/ Ramallah; Aharon Klein/Jerusalem

One mystery of Yasser Arafat's life seemed unsolved at the time of his death: How much money did he have, and where is it? In the mid-1990s, Arafat controlled a financial empire worth at least $3 billion. By the time of his death, he was down to his last $1 billion, according to Israeli intelligence estimates. Palestinian leaders believe his widow Suha would like to make off with what is left of his cash, a suspicion deepened by her charges last week that Arafat's successors were "trying to bury [him] alive."

But Arafat's widow may not receive as much as she might hope. People involved with the Palestinian leader's finances say Suha's outburst came after she learned that Arafat signed over at least $800 million to the government of the Palestinian Authority two years ago. Several hundred million dollars more in cash for the P.L.O. and Arafat's Fatah faction devolved to the new leaders of those groups, who detest Suha. Top Palestinian officials say Suha wants the new chief of the P.L.O., Mahmoud Abbas, and Palestinian Prime Minister Ahmed Qurei to give her money out of the P.L.O.'s party coffers. But the organization is not as flush as it once was. A senior P.L.O. official says "they'll pay her a pension, and that's it."

So what happens to the rest? For years investigators have followed Arafat's money trail in an effort to find out how the billions of dollars donated to the Palestinian cause have been spent. Although many details of Arafat's financial dealings remain murky, the evidence suggests that by his death, the Palestinian leader had squandered much of the fortune he had built in the name of his people. Before the 1991 Gulf War, Arafat received millions from gulf states, including at least $50 million a year from Saudi Arabia. Palestinians working in the gulf had to pay tax to the P.L.O. He spent the cash on stipends and services for the 4 million Palestinian refugees, but most of it went to finance "military operations" and buy the support of cronies. The money started to dry up in 1991, when Arafat backed Saddam Hussein in the Gulf War and lost the support of governments in the gulf, which expelled most of their Palestinian workers, cutting Arafat's tax revenue.

The Oslo peace process provided a brief windfall for the Palestinians, bringing Arafat $4 billion in donations from the U.S., the European Union, Japan and sales tax gathered by Israel that was passed on to him. But much of that was wasted or skimmed by corrupt Arafat associates. When a Palestinian Authority audit exposed the corruption in 1997, Arafat ordered future audits to be kept secret.

Although he led an ascetic existence in Ramallah, Arafat lavished money siphoned from Palestinian coffers on cronies, family members and militant groups. There was income from bank accounts and businesses spread across the world, often held in others' names. A senior Palestinian intelligence official says Arafat had a stake in a Hebron furniture company and a Syrian sewing factory. Senior Palestinian security officials tell TIME that Arafat shipped money to the gunmen of the Aqsa Martyrs Brigades. The most conspicuous recipient of Arafat's largesse was Suha. People familiar with Arafat's finances say the Palestinian leader sent Suha $200,000 a month out of the Palestinian Authority's budget for the Office of the President. French authorities are investigating transfers of $11.5 million from Swiss banks to Paris accounts in Suha's name at the Arab Bank and at BNP Paribas Bank, a French bank.

In August 2002, international donors forced Arafat to sign over his investments to the Palestine Investment Fund, which was audited by U.S. accountants and managed by Palestinian Finance Minister Salam Fayyad, a former International Monetary Fund official. After scouring corporations throughout the Arab world and bank accounts in the Cayman Islands and Luxembourg, the auditors identified $800 million, which has been made a part of the Palestinian Authority's official budget. "It's the most successful financial reform in the Arab world," says Jim Prince, president of the Los Angeles--based Democracy Council and head of the audit team.

People close to Fayyad's investigation tell TIME that last year the auditors discovered that Arafat was guilty of skimming $2 million a month from the gasoline trade in the territories. Breaking the gasoline smuggling and corruption boosted the Palestinian Authority's official treasury by $10 million a month and cut gas prices for ordinary Palestinians. But Arafat's death means his followers may never know just how much more they may be owed. --By Matt Rees/ Jerusalem. With Jamil Hamad/ Ramallah and Aharon Klein/Jerusalem