Arafat 'diverted' donor funds

A US congressman has demanded an urgent review of American aid to the Palestinian National Authority (PNA) after accusing its chairman, Yasser Arafat, of diverting funds donated by Western nations.

Jim Saxton, a member of the powerful National Security Committee in the House of Representatives, is seeking to force the Clinton administration to withhold "certain amounts'' from $500m (pounds 312m) promised in aid, "in response to certain PLO violations of the agreement" with Israel and Western donors.

In his speech to the House, Mr Saxton presented evidence of misuse of funds by the PNA and accused Mr Arafat of using most of the donated money to "further his political and strategic goals beyond the confines of Gaza and Jericho''. The money was donated by Western countries, including the US and Britain, to improve conditions for the population in the self- ruled areas and to speed up the peace process. Mr Saxton told the House that the funds were illegally diverted to finance secret property purchases in Jerusalem, to bribe and enrich Mr Arafat's associates, and to subvert the parliamentary process in Israel.

Documents obtained by the Independent appear to back Mr Saxton's claim, indicating that between August and December 1994, more than $87m was diverted into projects designed to enhance Mr Arafat's influence in the West Bank, Israel and Europe.

Letters marked "top secret'', and signed by the PNA Treasury Secretary, Mohammed Zuhdi el-Nashashibi, were sent to Ahmed Quraie, known as Abu Alaa, the director of the Palestinian Economic Council for Development and Re-construction (Pecdar). The latter is an independent body set up to oversee the allocation of funds for Gaza.

"The aim, as identified by the leader Abu Amar [ Mr Arafat],'' wrote Mr el-Nashashibbi in a memorandum dated 15 August 1994, "is to spread the activities and influence of the [Palestinian] National Authority inside Israel, and to concentrate on Arab-el-dakhel [Israel's Arabs].'' Abu Alaa is supposed to be independent from the PNA; yet he was instructed to finance a committee "consisting of members of the Knesset, local politicians and clergymen.''

Several letters exchanged between the PNA treasury and Pecdar emphasised the need for "total secrecy and concealment of the committee's activities.

The man entrusted with the task, and given $10m to carry it out, was Dr Ahmed el-Teibie, the gynaecologist of Suha Arafat, the PLO leader's wife. The funds - between $10m to $30m - should, according to the request, be transferred in a way that "would make it impossible to trace'', to finance establishing import and export and insurance companies, as well as purchasing real estate in Jerusalem and funding newspapers loyal to Mr Arafat.

The recipients, according to Mr el-Nashashibi's correspondence, were "approved by the chairman'', and all were loyal members of Mr Arafat's Fatah, the dominant group within the PLO. Letters exchanged in November 1994 indicate that $2.5m was diverted to finance a West Bank journalist, Ibrahim el-Qara'een, in developing a pro-Arafat magazine Alouda (The Return).

The money was sent to the account of a French-registered company owned by Mr Qara'een and Raymonda el-Tawil, Mr Arafat's mother-in-law.