From Private Eye:

In the City

Any post-war Iraq is certain to see the emergence of some less than pristine figures from the back-stabbing world of Iraqi exile politics as the new faces in Baghdad. As in Afghanistan, Iraq’s post-Saddam leaders – assuming the country does not implode like the former Yugoslavia in an orgy of faction fighting and score settling – will be largely those bought and paid for by Washington and London.

In Afghanistan these are only either American-cloned businessmen or warlords boosting the opium crop that Tony Blair claimed was a key reason for Britain declaring war on the Taliban. Iraq is very different. It not only has oil – the second largest reserves in the world from which US oil companies were already the hidden biggest single customer under the UN orchestrated oil for food programme – but a well developed and educated business elite, many of whom either fled Saddam or moved abroad to become part of his procurement and financial network.

As in post-war Germany and Japan, many of these individuals will be relied upon to provide the forest of fig leaves needed to hide what would be perceived as an illegal US occupation.

One of those Iraqi exiles from whom much is likely to be heard in coming weeks and months is Ahmad Chalabi, the Bush-backed but London-based head of the Iraqi National Congress. Unfortunately for his paymasters, Chalabi is not the most popular figure inside Iraq or its neighbour Jordan. Not just because he is widely seen as an American stooge but because of his key role in the collapse of the Petra Bank - a banking crash which has left Iraq’s would-be leader accused of embezzlement and facing possible arrest in Jordan where he was sentenced to 22 years in prison, fined more than $50 million and ordered to pay $178 million compensation. Hardly the best reference for nation-building.

Chalabi comes from a wealthy Shi’ite family which fled Iraq in 1958 when the Ba’ath party overthrew the monarchy. He built up the Petra Bank into neighbouring Jordan’s third largest bank. His family also opened associated banks in Lebanon, Switzerland and Washington.

The Chalabi empire flourished through the 1980s as Saddam benefited from US and British support for his war with Iran - a smiling Donald Rumsfeld was pictured meeting the axis of evil. The bank lent extensively to those trading with Saddam. But the Jordanian economy dangerously overheated and in 1989 there was a major crisis when the Jordanian dinar collapsed.

A new central bank governor demanded that all local banks deposit 30% of their dollar holdings with the central bank. Petra was unable to comply. An internal investigation was launched. General manager Chalabi left in the boot of a car for Syria and next surfaced in Thailand. His chief currency dealer was arrested trying to board a plane for London with bank documents. A local banker commented: “Petra Bank survived for four years on the fringes of the law and through its loopholes. It committed many unorthodox banking transactions”.

Petra was taken over and liquidated by the government to protect local depositors who had $300 million in the bank. The official investigation uncovered largescale fraud including embezzlement, breaches of foreign exchange regulations, missing accounts, fictitious assets and illicit transactions in Jordan and abroad, according to the central bank.

Petra was said to have exceeded legal lending limits, opened branches without approval and failed to submit accounts to the central bank within the three-month time limit. Chalabi was said to have bought interests in local companies and acquired property in Jordan and abroad with bank funds which were registered to his family. There were disputes about foreign liabilities with Visa International, the Bank of Tokyo and the Federal Reserve Bank in Washington. Total losses at Petra have estimated at up to $500 million.

Petra’s problems had been exacerbated by Chalabi’s efforts to bail out his brothers in Lebanon and Switzerland. The Mebco banks there were closed. Chalabi’s two brothers were given a suspended prison sentence in Switzerland three years ago for presenting false documents.

In 1992 Chalabi was sentenced to 22 years hard labour in absentia by a state security court on 31 charges of embezzlement, theft, misuse of depositers’ funds and speculation with the Jordanian currency. A civilian court also reportedly convicted Chalabi of embezzlement in 1994 over $2 million transferred from the bank to a company controlled by his associates. Another court ruling in 1995 ordered him to pay $178 million in damages. A further fine of $22 million was reported later that year bringing to almost $250 million with previous fines the amounts Chalabi was reportedly due to repay.

Chalabi has always vehemently denied any crime and blames Petra’s closure on political in-fighting within the Jordanian Royal Family. His rise has owed much to his closeness with Crown Prince Hassan. He has tried unsuccessfully to have the conviction and sentence quashed. Not surprising given the way he is viewed in Jordan. Former central bank governor Mohammed Nabulsi denounced the man who would be Iraq’s new leader as the “master cook” who had cooked the Petra books and “one of the most notorious crooks in the Middle East”.

If Chalabi is Bush’s favourite then the Iraqi exile with the greatest clout with Blair may well be Nadhmi Auchi, head of London-based Luxembourg-registered General Mediterranean Holdings (GMH). It has former Liberal leader Lord David Steel as a director, once employed ex-Labour minister Keith Vaz and is well known in top Labour circles. Multi-millionaire Auchi is expected to play a role in post-Saddam Iraq.

His exile credentials are impeccable. He left Iraq – where he had worked in the oil ministry – more than 20 years ago. Two of his brothers were executed or murdered by Saddam. Yet his name has cropped up in pre-Gulf War deals with Iraq where big commissions were paid.

This week in Paris a huge corruption trial involving payments made by the state-owned Elf oil group is due to begin. One of these payments relates to the 1990 purchase by Elf of the Spanish Ertoil refinery from its Kuwait owners via Auchi. A $40 million profit/commission is said to have been paid on the way through to grease the deal. Three years ago the French issued an international warrant to arrest Auchi for questioning after he declined to go to France. French attempts to question him in Britain or extradite him were rejected by the Home Office on the grounds that the requests did not comply with British requirements. Auchi has denied any wrongdoing and his lawyers have always maintained he would be happy to help if the correct procedures were followed.

Auchi has also been linked to a 1986 bid to build a pipeline from Iraq to Saudi Arabia by a Franco-Italian group. A payment of up to £10 million is said to have been made for obtaining the contract – reputedly with the help of Saddam’shalf-brother, Barzan al-Takriti.

Auchi also played an intermediary role in the purchase of Italian frigates by the Iraqi navy in 1980. Auchi claimed commissions of $17 million on behalf of a Luxembourg company in 1982 from the Italian shipbuilding company Cantieri Navale Riuniti.

Once again Auchi denies any wrongdoing in these matters or that he worked with Barzan and disputes suggestions from other Iraqi exiles that he has continued to maintain contacts with the Saddam regime – blaming the fact that he has campaigned for the lifting of sanctions on humanitarian grounds.

More embarrassing for his British political friends is that the GMH-controlled Regent Laboratories is under investigation by the serious Farce Office over allegations of massive over-charging and price fixing of generic drugs. Regent and supposedly rival suppliers are also being sued for up to £400 million in damages by the NHS.

Outside Iraq the end of the war will also launch the hunt for Saddam’s billions creamed off from the oil sales since he seized power. The focus of that search is likely, as ever, to be Switzerland and in particular the network of Iraqi businessmen who have been accused of acting as fronts for Iraq’s external investments and bank deposits. This was a network supposedly masterminded by Barzan before he was recalled to Iraq.

One of those high on the list of targets is expected to be an Iraqi Christian businessman Hassum Rassam, who lives in considerable style with his family near Geneva. Rassam has always dismissed suggestions that he was “Saddam’s banker”; but such denials have failed to convince British and US intelligence. Rassam’s family have homes in Britain and corrupt Inland Revenue investigator Michael Allcock went house-hunting for him in Surrey. Rassam’s relatives continue to have business interests in Britain. Exactly what Rassam’s business interests are in Switzerland – other than the Lanvin concession in Geneva – has mystified local investigators.

But then given the curious history of Chalabi and Auchi, perhaps even Rassam will have a role to play in the democratic paradise that Iraq is about to become.