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Jordan Takes Dim View of a Rising Star in Iraq

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Times Staff Writer

Hailed by some in the Pentagon as a pro-American visionary and an emerging leader of the new Iraq, Ahmad Chalabi evokes quite a different response in Jordan, where he spent 12 years and left behind economic chaos, a court conviction on numerous financial charges -- and a lengthy prison term he never served.

The Iraqi dissident’s sojourn here engendered a complex web of ambition, money and political intrigue. When he arrived in 1977, he dazzled and charmed his way into the highest echelons of Jordanian society, including the Hashemite palace. He was considered to be a cultured financial innovator with an Eastern mind and Western outlook.

By the time he left, he was widely regarded as a crook who robbed a gullible nation and got away with it.

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“There is one difference between him and [Osama] bin Laden,” observed Najib Farah, a shopkeeper here who says he lost $9,000 when Chalabi’s Petra Bank collapsed in 1989. “Bin Laden is an honest man, and Chalabi is a thief.”

The failure of the Petra Bank in Amman, the Jordanian capital, cost this already poor country nearly $1 billion, according to government officials, and nearly crippled its flagging economy. Stockholders lost their investments, and some depositors are still waiting to be reimbursed.

Chalabi fled to Syria. A Jordanian court convicted him in absentia, sentencing him to 22 years of hard labor for embezzlement, misuse of the nation’s funds and illegal currency speculation.

Chalabi later surfaced in London living near ritzy Park Lane. A few years later, he founded the Iraqi National Congress, made up of exiles dedicated to the overthrow of President Saddam Hussein.

Jordan’s political leaders have publicly questioned whether Chalabi should lead the homeland he left as a teen. Foreign Minister Marwan Muasher called him a “divisive character” lacking in credibility.

“Chalabi would be arrested if he were to come here today,” Information Minister Mohammed Adwan said. “For us he is a convict, and until he clears his name in court he will remain so.”

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But Monday, retired U.S. Army Lt. Gen. Jay Garner, the civil administrator for Iraq, said Chalabi, 58, and four other prominent Iraqis already are meeting to discuss their nation’s future and probably will be a part of a U.S.-appointed nine-member Iraqi leadership to be formed this month.

Chalabi has claimed that he was set up by the Iraqi president, working in cahoots with the Jordanian government. The former banker says his dissident activities infuriated the Iraqi regime, which used its political and economic ties to Jordan’s King Hussein to have Petra shut down. The Jordanian monarch, who died in 1999, and Saddam Hussein were not related.

Chalabi, who is now in Iraq, could not be reached for comment for this report. However, a close advisor, speaking from Baghdad, said Jordanian intelligence working with Iraq circulated pamphlets in 1989 claiming that Chalabi was an agent of Israel. They also tried recruiting employees of Petra to inform on Chalabi, he said.

“There was an increasing pattern of harassment and intimidation. The Iraqi ambassador was making vocal protests about Chalabi’s activities there,” said the advisor, who requested that he not be named. “In 1989, Jordan’s economy was almost entirely dependent on Iraq. The Iraqis had infiltrated newspapers, student groups and trade unions. In the end, the Jordanians engineered the collapse of Petra at the behest of Saddam.”

Political intrigue, wars in the shadows and deception are part of the landscape of Jordan, which lies at the crossroads of the turbulent Middle East. It is a fragile, byzantine place where outsiders -- Palestinians, Iraqis, Israelis and Muslim militants -- fight their battles and jostle for influence. Chalabi stepped into this world, even courted it, and then claimed that it tried to devour him.

Ahmad Chalabi was born to a wealthy and politically well-connected family that fled Iraq in 1958 when King Faisal II was overthrown in a military coup that paved the way for Baath Party rule a decade later.

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Educated at MIT, Chalabi later received a doctorate in mathematics at the University of Chicago. In 1977, he came to Jordan to explore the idea of opening a bank.

Bassam Saket, an Oxford-educated economist who was secretary-general of the royal court and close friend to King Hussein and the monarch’s brother, then-Crown Prince Hassan, said Chalabi first sought him out to propose a business deal.

“Ahmad asked my family if we wanted to join forces with him to start a bank, and we declined,” recalled Saket, who now heads the Jordanian Securities Commission, the equivalent of the U.S. Securities and Exchange Commission.

Like others, Saket said he fell under the spell of the erudite Iraqi.

Chalabi, Saket said, was keen on making an entrance, arriving in a luxury car accompanied by servants. “He was seeking power and glamour,” Saket said.

Others found that Chalabi’s charm had limits.

“If you don’t obey him, he will destroy you,” said the owner of a currency exchange business in Amman who had worked closely with Chalabi and asked that his name not be used. “He is nice when you don’t have business with him.... But he is a very dangerous man. He wouldn’t give you a penny unless he could make a dollar from you.”

Chalabi built Petra Bank into the third-largest financial institution in Jordan. Using computers and other technology, he streamlined its operations, making Petra a model of modernization in the kingdom. It was the first bank in Jordan to use automated teller machines and process Visa cards. Unlike other local bankers who went home at 2 p.m., Chalabi rarely left the office before midnight.

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Money flowed into Petra, including millions of dollars from Iraqi exiles, Jordanian officials said.

“He transferred a lot of the Iraqi money outside” Jordan, said Mutaih Kabirit, who heads the Jordanian Money Changers Society and was a friend of Chalabi.

The banker’s acquaintances who spoke with The Times said they never heard him criticize Saddam Hussein at the time, except for the occasional passing comment, suggesting that he wasn’t then deeply involved with politics. And they dismissed the idea that King Hussein conspired with Iraq’s leader to railroad Chalabi out of Jordan.

“King Hussein knew Saddam was bad, but politics is politics. Jordan is a country that cannot afford to cut relations with its neighbors, and it has paid heavily in the past when it did,” Saket said. “But King Hussein respected the law of politics -- there were red lines he wouldn’t cross.”

He said Chalabi didn’t start the London-based Iraqi National Congress until several years after leaving Jordan. “It was never on the table at all when he was here,” Saket said.

In 1987, regulators said, they began seeing “smoke” over Petra Bank.

The institution was speculating on the troubled Jordanian dinar and received a warning from the country’s Central Bank to stop, Saket said. At the same time, Petra deposits were being transferred to other financial institutions run by the Chalabi family in Beirut, Geneva and Washington.

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“Some of our banks became hostage to Chalabi” as their money flowed overseas, Saket said.

By 1989, the nation was in trouble. The dinar, previously worth $3, had lost half its value. At one point Jordan had only enough money to fund one month of imports.

The Central Bank, under the direction of its then-governor, Mohammed Said Nabulsi, ordered all banks to deposit 30% of their holdings in the Central Bank to prop up the ailing dinar. Petra was the one bank that couldn’t comply, Saket said.

Fearing a collapse, Nabulsi removed Chalabi as chief executive and a committee was appointed to oversee the bank. After reviewing Petra’s books, Nabulsi concluded that something was terribly wrong.

According to court documents obtained by The Times, millions of dollars had been shuffled between Petra and the Chalabi family’s other financial institutions in the form of loans and deposits without collateral or guarantees of any kind. Phony bank accounts had been created to cover bad debts and embezzlement, according to the court.

“I went to Ahmad’s house and said, ‘Ahmad, what the hell are you doing? Is there something you are doing wrong?’ ” Saket recalled. “He said that everyone was ganging up on him and he couldn’t stand to see his bank run by a bunch of idiots,” referring to the government-appointed committee.

The bank was quickly besieged by creditors and depositors. The Chalabi family’s overseas institutions were shut down.

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“If he says the collapse of Petra in Jordan was a conspiracy between Saddam and King Hussein, how does he explain the banks in Switzerland and Lebanon?” Saket said.

Chalabi’s advisor offered the same explanation used in the collapse of Petra: Iraq did it.

“There was a lot of jealousy among the Swiss over the Chalabi family because they dominated the Visa card business,” he said. “And Barzan al Tikriti [Saddam Hussein’s half-brother] ran a huge overseas trading empire in Geneva and urged the Swiss to shut Chalabi down.”

The Swiss determined that loans at the bank did not have proper collateral and closed it, Chalabi’s advisor said. In Jordan, efforts to keep Petra afloat ultimately failed. The nation’s treasury, its people and foreign investors took the fall. The initial cost was listed as about $300 million, but now government officials say it was closer to $1 billion -- a devastating loss in a relatively poor nation.

Some financial experts and traders believe that Nabulsi was too quick to dump Chalabi and shut down the bank. He made a bad situation worse, they say, and with enough time Chalabi might have saved Petra.

“He should not have closed the bank. Chalabi told him that with $100 million he could have saved it,” said Kabirit of the money changers group. “If he were given more time, the crisis would have been less.”

Saket agreed that the decision may have been premature. But he blamed Chalabi rather than Nabulsi, who declined to comment for this report.

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“The question mark is over Ahmad’s character. He should not have fled,” Saket said. “He should have made it right.”

But Chalabi wasn’t taking any chances with Jordanian justice.

A few days after losing control of the bank, he left for Syria. There are rumors that Crown Prince Hassan drove the getaway car, with Chalabi stashed in the trunk. Saket said that given Hassan’s high profile, it was unlikely that he could have pulled off such a move without being noticed. Chalabi’s advisor said the ex-banker drove himself.

“He left because a senior officer in Jordanian intelligence told him he should leave because he was about to be delivered to Saddam,” the advisor said. “He left because he feared for his life. Now he feels his name and his family’s name have been besmirched and he feels betrayed by the Jordanian government.”

On April 9, 1992, Chalabi was found guilty in State Security Court of 31 counts of embezzlement, sentenced to 22 years in prison and ordered to return more than $100 million.

In addition to embezzlement, the court found that Chalabi tampered with records, used false documents, plundered assets, bought bad debts, speculated on currency and used Petra’s income to trade in gold while smuggling the proceeds out of the country.

It said Chalabi ignored every Central Bank order and, by buying up dollars, seriously drained the nation’s foreign currency reserves.

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Jordan’s civil courts are independent, but military courts handle all cases involving state security. The latter have been criticized as being prone to government interference. Still, verdicts can be appealed and officials insist that the process is fair.

“It was a major scandal,” said Adwan, the information minister, noting that if Chalabi returned he would be given a new trial. “He can clear his name.”

The advisor said Chalabi has no plans to return.

Chalabi has said King Hussein offered him a royal pardon, which he turned down because it implied guilt.

Saket said that’s not what happened.

“In 1992, King Hussein met Chalabi in London and offered him the chance to come back to Jordan and clear his name. Ahmad said he wanted a royal pardon first,” Saket said. “King Hussein said he couldn’t do such a thing. How could he give a royal pardon first? What would the country have thought?”

By this time, Chalabi had turned his considerable intellect and financial resources away from business and into politics, where his attention has remained.

Key Pentagon officials are said to be pushing him toward leadership in Baghdad, while the State Department and CIA doubt that he can muster wide support among ordinary Iraqis.

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Asked whether he had confidence in Chalabi, Defense Secretary Donald H. Rumsfeld said in a televised interview May 4 that he didn’t “know the man well.”

“He is there, he is contributing, and how it will shake out, what his role will be, what other people’s role will be remains to be seen,” Rumsfeld said.

The idea of a leadership role for Chalabi in Iraq is galling to many Jordanians, who say that if the United States stands for justice and democracy then it certainly cannot promote a convicted criminal as head of state.

In Amman’s quiet Abdoun neighborhood, Najib Farah threw up his hands in disgust.

“When the bank closed, we were in chaos. It was only because of our reputation in the neighborhood that we survived,” said Farah, standing behind mountains of almonds and dates in his small shop. “I think he is not worthy to lead Iraq, the mother of our culture. If he becomes the president, we will know he is just an American puppet with an Arab face.”

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