‘Never Going to Get Out From Under’ : Troubles in Legal Arena Add to Khashoggi’s Woes

A luxuriously appointed DC-8 jetliner, for years the “flying penthouse” and prized possession of Saudi Arabian financier Adnan Khashoggi, sits on the auction block at an airfield near here, the latest casualty in the collapsing financial empire of a man once regar1684366368citizen.

“It’s sad. There’s really nothing he loves more than that plane,” one Khashoggi associate said.

But, for the financially beleaguered Khashoggi, an international arms dealer who played a key middleman role in secret White House-sanctioned sales of arms to Iran, the pending loss of his cherished DC-8 is only part of his troubles.

Already Khashoggi has lost his $50-million yacht Nabila, repossessed last year by agents of the Sultan of Brunei over unpaid debts secured by the vessel. The yacht was subsequently resold to New York financier Donald Trump.

And, in recent months, Khashoggi has been forced to sell his ranch in Kenya, to refinance property holdings around the world and to close down some offices. In two weeks, his prestigious Park Lane offices here will be abandoned because, associates say, he no longer can afford the lease.

His troubles are also mounting in legal arenas, from tax and bankruptcy courts to grand juries investigating business dealings between Khashoggi and ousted Philippine President Ferdinand Marcos.

“Adnan is under siege--even more than he knows,” an aide said. “The poor man’s never going to get out from under.”

Perhaps most symbolic of his worsening financial condition is the forced divestiture of his DC-8.

The jetliner, which has transported sultans and starlets, ambassadors and arms merchants, was the scene of a nationally televised interview with Khashoggi and Iranian arms middleman Manucher Ghorbanifar shortly after the secret White House arms sales to Iran became public late in 1986. Much of America got a glimpse of the posh interior.

Avoided by Arabs

Some Khashoggi aides now link his apparently accelerating financial decline to his role as an early middleman in the Iran arms sales. Not only did he lose an estimated $7 million, they said, but his participation put in jeopardy continuing business relations with Arab leaders troubled by Khashoggi’s dealings with their enemies in Iran and Israel.

“Some Arabs just don’t want to be seen with Adnan anymore,” a Khashoggi friend said. For example, Khashoggi had difficulty meeting with top officials in Cairo earlier this week during attempts, still under way, to negotiate an arms sale with the Egyptian government, a source said.

Even an immediate agreement with Cairo, however, would not produce sufficient income fast enough to save Khashoggi’s DC-8. It is being sold to satisfy a debt of about $19 million to Aetna Life & Casualty Co. of Connecticut.

Sale Expected Soon

Wednesday is the deadline for bids to be submitted to Price Waterhouse & Co., the international accounting firm handling the sale of the $35-million jetliner on behalf of Aetna. The plane was seized last year, and a Price Waterhouse spokesman said that he expects a sale to be negotiated from among “a number of interested parties” within a short time after bidding closes.

Loss of the four-engine jetliner has left Khashoggi with only his much smaller DC-9, a twin-engine aircraft. Several months ago, the DC-9, too, was grounded briefly until a $2-million claim was settled.

Friends say Khashoggi has joked that, if it gets any harder for him to move around, he may have to jump out a window. “Of course, he’s joking. Adnan is a natural optimist. He always sees the sunshine,” an associate said.

It may become increasingly difficult to see beyond the storm clouds on Khashoggi’s horizon, however.

Last year, French authorities raided Khashoggi’s apartments and his yacht to seize numerous pieces of fine art that the Philippine government charged had been stolen by Marcos and spirited to Khashoggi to sell for a share of the profits. Now, in France, Switzerland and the United States, investigators are looking into art transactions and into real estate and other business deals in which Khashoggi is suspected of helping Marcos sell disputed Philippine assets.

Tax Problem in France

Also in France, Khashoggi is the subject of a tax investigation stemming from allegations that he may not have paid some property assessments for up to 10 years. He could be liable for as much as $20 million and face criminal penalties as well, according to one source.

And, in the United States, where a bankruptcy judge has frozen Khashoggi’s personal and corporate assets, creditors have filed suits accusing Khashoggi and his brother, Essam, of draining millions of dollars from corporate treasuries they controlled to pay personal debts.

Khashoggi associates concede that the one-time billionaire could be personally liable for more than $100 million once those bankruptcy claims are settled. Damage claims already exceed $230 million.

For now, it appears that Khashoggi’s empire is being propped up primarily through liquidations and refinancing, essentially devouring itself to keep cash flowing to meet immediate needs.

Aided by Saudi King

In recent months, for example, he refinanced his New York penthouse apartment in Olympic Towers and other loans held by a French bank, shifting the debts to the National Bank of Riyadh, sources said, and pulling out about $20 million in cash. The refinancing was made possible, one source said, by personal intervention on Khashoggi’s behalf by King Fahd of Saudi Arabia.

“He’s not solving his debt problems, he’s simply putting them off,” a source noted.

Khashoggi did sell outright his Ol Pejeta Ranch in Kenya for a reported $5 million, a price believed to be top dollar. But even that move was greeted with some skepticism:

“Five million dollars just gets Adnan Khashoggi to next week. He doesn’t need a $5-million hit--he needs a $100-million hit,” a Khashoggi associate said.

The same source predicted that Khashoggi’s only escape from his current financial crisis is a $100-million bailout from the Saudi throne.

“Adnan needs another gift from the king,” he said.