Washington Times, December 2, 2002

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Washington Times, December 2, 2002

UPI, May 3, 1983

    …In west Beirut, the second explosion in as many nights ripped through the Hamra district, injuring at least three people, officials said. An American University Hospital spokesman said they were injured apparently by smoke and flying glass. The explosion struck a shopping area about a block from the Commodore Hotel, where reporters traveling with Secretary of State George Shultz were lodged. The blast ripped through a building containing the Mebco Bank and several small shops including a Japanese airline office. Its cause was not immediately clear.


The American Banker, October 23, 1985

    A Current Listing of Edge Banks And the People Who Manage Them By Rita Kay Meyer

Name: Petra International Banking Corp.

    Date established: October 19, 1983

    Who runs Edge Bank: Mohamed R. Chalabi

    Age: 30

    Title: general manager

    Number of employees: 26

Total Assets ($000)

    Dec. 31, 1984 59,717

    Dec. 31, 1983 23,074


Financial Times, October 23, 1986

    Arab Banking 2; Finance Groups Penetrate Barrier

    By William Dullforce

    The visible Arab banking presence in Switzerland is predominantly Lebanese, is heavily concentrated on Geneva and is concerned primarily with the managing of the wealth of private investors…

    The crisis in Lebanon in the 1970s prompted local banks to look for safer havens in Paris, London and Switzerland. Two important arrivals in 1976 were Audi Bank and the Banque de Commerce and Placements, a subsidiary of BCCI, London, in which the principal shareholder is the Al-Nahayan family of Abu Dhabi…

    From Switzerland Audi Bank has moved into the US, where it has established a NY affiliate, tapping a similar market for companies and individuals of Lebanese origin. In February a representative office was set up in Miami to cater for Lebanese and other customers in Latin America…

…Another relative newcomer, Mebco bank, is part of the Mebco-Petra

    group which includes the Middle East Banking Company, Beirut, the National Bank of Sudan and Petra Bank of Amman.


Legal Times, February 1, 1988

    DIGESTS & DOCKETS; Federal Digests US Court Of Appeals For DC Circuit; Civil Procedure; Pg. 23

    …Appellant First Chicago International Bank (FCI) brought a suit under the Racketeer-Influenced and Corrupt Organizations Act in the US District Court for the District of Columbia against United Exchange Company (UNEXCO), a currency trading company with its sole place of business in Jordan; Petra Bank, a Jordanian banking concern; and Petra International Banking Corp. (PIBC), a subsidiary of Petra with its sole place of business in DC.

    The complaint alleged that the three defendants had defrauded FCI of $23 million through a check-kiting scheme involving the transfer of large sums of money between certain accounts at FCI in NY and PIBC in the District. After FCI pursued preliminary discovery unre-lated to the merits, UNEXCO moved to dismiss the complaint for lack of personal jurisdiction. Petra and PICB conceded personal jurisdiction.

    Twelve days after oral argument on the jurisdictional motion, Petra and PIBC filed motions to dismiss on the merits under Rules 12(b)(6) and 12(h)(2); the court treated them as motions for summary judgment because of their reliance on matters outside the pleadings.


The Washington Post, May 23, 1989


    …ODD LOTS 1989 Export Excellence Awards, given each year by the District to firms that make significant increases in export sales, will go to MVM Security Inc., specialists in security systems, Petra International Banking Co, the international law firm Mason, Fenwick and Lawrence…


Newsday, June 22, 1989

    Guardian Bank Closed Amid Fraud Charges

    By Nicholas Goldberg

    The Guardian Bank, a 17-year-old Long Island institution that for years has been teetering on the edge of bankruptcy, was closed down by federal

    agents yesterday morning, amid charges of gross mismanagement and fraud…At the same time, more than a dozen FBI agents raided the executive offices of its subsidiary, the NY Guardian Mortgagee Corp., seeking documents about allegations of misappropriated funds and personal loans to the bank's owner, Louis B. Bernstein…

    Maloney said there also were allegations that Guardian Bank engaged in a "sham divestiture" of New York Guardian that involved misappropriating funds from the subsidiary and funneling them through a Swiss bank. According to the affidavit for the search war-rant, Bernstein improperly transferred $5.4 million to Mebco Bank in Geneva, which in turn lent $5 million back to a 3rd company owned entirely by Bernstein. That company then bought 2 Guardian Bank subsidiaries - including the mortgage company - for $1million.…Maloney said his office, the FBI and other federal agencies are continuing the investigation.


AP, June 21, 1989

    Bank and Mortgage Investment Companies Taken Over by Government

…US Attorney Andrew Maloney said investigators obtained search

    warrants based on allegations of self-dealing and misuse of bank resources. They cited transactions made by Louis B. Bernstein, president of New York Guardian and the largest shareholder of Guardian Bank.

    Maloney said that among the allegations was that Bernstein was involved in a sham divestiture in which $5.4 million was improperly transferred from New York Guardian to Mebco Bank of Geneva. The Swiss bank than lent $5 million to LBB Co., a company owned by Bernstein, and LBB bought New York Guardian and another Guardian Bank subsidiary,Guardian Diversified Services Inc, for $1million


Financial Times, August 18, 1989

    The Battle For Lebanon

    Central Banker Fighting To Keep A Devastated Economy Afloat By Lara Marlowe

    …Since Bank Almashrek, Lebanon's second largest bank, collapsed last December in a welter of bad loans, five Lebanese banks in Europe have been shut by French and Swiss banking authorities. One of these, Banque de Participations et de Placements (BPP) in Lugano and Paris, was related to Almashrek. But the three banks which shut in April,May and July - Middle East Banking Company (Mebco) in Geneva, United Banking Corporation (UBC) in Paris and Lebanese-Arab Bank in Paris - had

    unrelated liquidity problems.In Beirut, the news from Paris and Switzerland created panic among deposit-ors of Mebco, Banque du Credit Populaire (the parent of UBC) and Lebanese Arab Bank, and added to growing distrust among small depositors who increasingly prefer to bank with French or other non-Lebanese banks in Beirut…


MidEast Markets, September 4, 1989

    Jordanian banks' crisis

    The management committee of the newly-merged Petra Bank and Jordan-Gulf Bank has called in the internationally renowned team of accountants, Arthur Anderson, to review the affairs of the new venture. The move marks the latest attempt to salvage confidence in the activities of the commercial banking sector in Jordan.

    The brief of the consultants is initially being confined to the activities of Petra Bank. Arthur Anderson is being asked to look into the affairs of the bank both inside the kingdom and abroad. It will then advise the committee on the restructuring of the new outfit. In addition to its international reputation, it is believed that Arthur Anderson was selected for the task because it already had a local pres-ence in Jordan. It is expected to report to the committee in stages in view of the complexity of the affairs of the new bank.

    The two banks were merged at the beginning of August because of concern at the health of both institutions. It has long been government policy to encourage the merger of financial institutions in order to consol-idate this sector where there is too little business for the commercial banks, finance houses and insurance companies in the market. Some voluntary mergers have already taken place amongst the latter 2 categories. This is the first merger between 2 commercial banks, and the first to be ordered, rather than encouraged, by the Central Bank of Jordan.

    The Central Bank, which has emerged as newly interventionist and purposeful since the recall of a former governor, Mohammed Said Nabulsi, to head the institution, appointed the six-man management committee.It is led byWalid Asfour, a former industry and trade minister and a member of an old merchant family. His deputy, Jawad Anani, has also held the indus-try and trade portfolio and has been a labour minister. Most recently he was head of the Royal Scientific Society. The committee also includes the Central Bank's head of bank supervision department, Ahmed Abdul Fattah.

    The committee was also to have included the former chairman and general manager of the Petra Bank, Ahmed Chalabi. He was the inspiration behind a bank which rapidly acquired a reputation for ambition and innovation

    amidst a commercial banking sector in Jordan which is generally cautious and conservative. Despite only being formed in 1978 it quickly emerged as 1 of the most dynamic and important banks in the kingdom. For instance it was the first Jordanian bank to issue a credit card.

    As well as being an innovative banker Ahmad Chalabi, an Iraqi by origin, had been integrated into Jordanian society. He is generally known as having close links with Crown Prince Hassan, and has bank lent to institutions identified with the royal family.

    Whereas Petra Bank profited from the boom years, it was disproportionate-ly affected by the recession in the kingdom. Its lending strategy resulted in a crop of bad debts, a problem which also afflicts the smaller Jordan-Gulf Bank. The combined bad debts of the new bank are believed to amount to $81m.

    Although he was given a place on the new committee, Mr Chalabi did not remain in Jordan to take up the position. He left the country sometime in the middle of August. His appointment to the committee would seem to have been a gesture of goodwill by the Central Bank to the end that it was not contemplating moves against him and would not do so, providing his co-operation was assured.


Washington Post, September 14, 1989

    Hussein Needs All His Survivor Skills Now

    By Jim Hoagland

…Hussein had been off the screen for US and Israeli policy makers since

    August 1988, when he abandoned Jordan's sovereignty over the West Bank territory occupied by Israel in 1967.By taking Jordan out of any immediate Middle East peace efforts, Hussein complicated US diplomacy and exacerbated Israel's internal political struggle over Palestinian nationalism.

    The Bush administration has seemed ambivalent in its dealings with Hussein.The decision to open a political dialogue with the PLO increased fears in Amman that Washington may come to support the dream of Israel's right wing: transforming Hussein's East Bank kingdom into a Palestinian-ruled state that will absorb Palestinian nationalism.

    The concern about wavering US support may have helped trigger Hussein's still unexplained decision to turn to the Baathist regime in Iraq in search of security and cash. In recent months, Jordan has helped Iraq ship large quantities of artillery and ammunition into Lebanon for use against Syria. The result has been to break the political truce Hussein had labored so

    hard to reach with Syria and to suck Jordan far more deeply into the Lebanese quagmire than Hussein has ever allowed before.

    The switch of alliances has led to diminishing stability in Jordan, however. Syria is encouraging radical Palestinian guerrillas to launch attacks on Israel from Jordanian territory, a tactic that exposes Jordan to Israeli retaliation. At home, anonymous leaflets attacking the king for corruption were widely circulated in Amman in early June in what foreign observers found to be a surprising lapse by Jordan's normally omnipresent security services. This has strengthened the suspicion that these services have been penetrated by the Islamic extremists of the Moslem Brotherhood.

    The pamphlets' accusations of profiteering leveled at Hussein stung the king, who insisted on appearing before the armed forces' senior officer corps this summer to protest his innocence. Some of the officers openly mocked the king during his talk; others greeted his assurances that Jordan would soon recover economic stability with stony silence.

    These officers, and others in Jordan who live on fixed salaries, have been squeezed viciously by the plunge in the value of the Jordanian dinar (worth half as much today as it was 14 months ago on foreign-exchange markets) and by raging inflation. On top of this comes a new banking crisis provoked by the government's decision to expropriate Jordan's second-largest and most dynamic financial institution, the Petra Bank, a move that has further weakened international confidence in Jordan's economic management.

    The Petra affair seems to have heavy political overtones involving the king's surprising new friendship for the Baathists in Baghdad, who were among the Arab revolutionaries who overthrew and killed Hussein's cousin, King Faisal of Iraq, in 1958. The president and founder of Petra bank is Ahmed Chalabi, whose family was prominent in politics and banking in Iraq under the monarchy and therefore also close to the Hashemites of Jordan.

    But leaflets began to appear this summer in Amman alleging that Chalabi, a Moslem Shiite, was supporting Iran against Iraq. Reports circulated that Iraq was demanding that he be turned over to Iraqi security. Then came a Jordanian military decree ordering his bank merged with another outfit and placed under government control. Travel bans were issued against a dozen people working at the bank, a senior executive was arrested without being charged, and in August Chalabi left the country hurriedly for an unknown destination.

    Petra Bank, which operates a Washington branch, had pioneered credit-card data processing in the Middle East and in some parts of Europe. Now that business is in ruins, and Petra's other operations teeter on the verge of

    collapse, threatening to bring down other sectors of the Jordanian business community.

It is hard to understand how Hussein thinks Iraq can help him out of this

    deepening financial hole. Baghdad went $100 billion into debt to fight its

    war with Iran. Jordan will have to stand in a long line to get back any of the

    $1 billion it lent Iraq, as the spreading banking scandal involving loans to

    Iraq by the Atlanta branch of Italy's BNL shows…

The Economist, September 30, 1989

    Iraq; Banking on credit

    SEPTEMBER brought gloom to Iraq; its attempt to force Syria out of Lebanon by supporting General Michel Aoun collapsed, and the general was forced to accept a ceasefire on Syria's terms. But on September 18th Iraq's new pipeline across Saudi Arabia to the Red Sea quietly came on stream, boosting the country's export capacity by 50% to 3.35 mbd. The second event may prove the more significant.

    The neighbours fear that, with more military muscle, Iraq will turn into a regional bully. Its meddling in Lebanon

    intended to make Syria pay for having supported Iran during the Gulf war - was widely condemned by fellow-Arabs. The Iraqis feel, that they defined the Arab world from revolutionary Iran, and so earned the right to play a leading role in Arab affairs. Their former radicalism seems to have faded, for now. They have aligned themselves with the moderate Arabs of Egypt, Jordan and North Yemen in the Arab Co-operation Council, a would-be common market.

    Iraq's smaller Gulf neighbours are edging away and cuddling up to Iran. Saudi Arabia cannot do that, since its fierce row with Iran over the annual Muslim pilgrimage, the Haj, has again turned bloody: on September 21st the Saudis beheaded 16 Kuwaiti Shias found guilty of planting bombs in Mecca this year. The Saudis have signed a non-aggression pact with Iraq…

Financial Times, September 26, 1989

    Jordan Reels From Another Banking Blow

    By Andrew Gowers

    As if they did not already have enough economic problems to contend with, the Jordanian authorities have recently been struggling to defuse a home-grown financial crisis which has dealt yet another blow to fragile confidence on the country's banking system. In Amman and in Washing-ton, officials of Jordan's Central Bank are picking over the affairs of Petra Bank, the kingdom's third-largest bank, and a smaller institution, Jordan Gulf Bank, both of which are now under government control following the discovery of financial irregularities. Mr Ahmad Chalabi, Petra's chairman, has left the country amid threats of legal action and its chief currency dealer is in jail.

    The Government, which plans to merge the 2 banks, is worried about how much it will end up having to fork out - whether in local currency or precious foreign exchange - to support them. And foreign bankers are left wondering whether they are in for any more shocks from Jordan's notoriously overcrowded banking market.

    The saga began on August 3, when the Government's Economic Security Committee used martial law regulations to announce it was taking over the two banks and merging them to "meet the requirements of international banking transactions." A new management committee, chaired by Mr Walid Asfour, a former trade and industry minister, was appointed to replace the bank boards and Petra executives were barred from leaving the country.

    While the rest of Amman's financial community was not completely surprised to discover that Petra Bank had problems, it was stunned by the Government's move, for which no detailed explanation was given Immediately after the announcement, there was a run on both Petra and Jordan Gulf and interbank lines were severed, prompting the Central Bank to pump in an estimated $164m to keep the two institutions liquid.

    Mr Ali Sarraf, Petra's chief dealer, was arrested trying to board a flight for London, apparently carrying bank documents. Mr Chalabi left the country last month - on holiday, as he later claimed, while protesting his innocence. "No one told me I was banned from leaving," he explained to international news agencies. The Economic Security Committee, insisting that Mr Chalabi had left the country by "illegitimate means," added: "We put Chalabi on the supervisory committee to give him a chance to cooperate with the new management and disclose the bank's troubles, but he chose to run away from his duties and leave the country illegally." The style of the chairman's exit was astonishing to ordinary Jordanians. In the 12 years since he founded the bank, Mr Chalabi, scion of a wealthy Iraqi Shia family, had developed a reputation not only for his commercial ambitions but also for his high-level political contacts.

    Petra's expansion was aggressive: during Jordan's ill-fated economic boom in the early to mid-1980s, it lent widely to the private sector at un-comfortably competitive spreads, notably in connection with trade to Iraq, and launched a pioneering credit card operation. By 1987 - the last year for which a balance sheet has been published - its assets of JD291m ranked it third in the country, behind Arab Bank and the specialist Housing Bank.

    The Chalabi family maintained a stake in two other banks - Jordan Gulf and Cairo-Amman, as well as in an investment company and many other busin-esses in Jordan.Abroad, they set up banks in Lebanon and Switzerland un-der the name of Mepco and a subsidiary,Petra International, in Washington.

    Many bankers had harboured suspicions about Petra since a minor run on the bank two years ago. In particular, they worried about the solidity of its loan portfolio, some 30% of which was invested in companies where it had a stake of 10% or more, and its currency trading activities, in which it worked closely with an informal network of money changers now virtually closed down by the Government. Senior officials at the central bank were also undoubtedly aware that something was wrong.

    One local banker says he repeatedly discussed the issue with the central bank in the first few months of this year and twice warned Mr Zaid Rifai, the former Prime Minister, that Jordanian banking regulations were being violated. A member of the new management committee adds: "Petra Bank survived for 4 years on the fringes of the law and through its loopholes. It committed many unorthodox banking transactions."

    What seems to have brought the problems to a head is the foreign exchange crisis Jordan has suffered during the last year. When the free-market value of the dinar plunged last autumn, it was common knowledge in Amman that Petra Bank was among the most active purchasers of dollars. Yet when the central bank - now under firm new management -

    sought to enforce a requirement on banks to deposit 35% of their foreign exchange holdings with it as part of its efforts to prop up the currency, Petra was unable to comply. One of the authorities' aims in taking over the two banks was probably to assert their control over the currency.

    However, examination of the books appears to have revealed a much more complex mess, stretching from Amman to Washington. The management committee, which has engaged accountants Arthur Andersen for the task, is not prepared to give details until efforts to verify the bank's assets and liabilities are complete. However, two central preoccupations have emerged:

    The need for provisions against likely loan losses in Jordan. It re-mains unclear whether the central bank, which has promised to honour the

    "legitimate commitments of the two banks," will be forced to inject capital and, if so, how much.

    The international network, and in particular the Washington subsidiary, in which Mr Chalabi's brother Talal has a 30% stake. A senior central bank official is in Washington examining Petra International, which is reported to have been a principal outlet for the Amman parent's foreign currency holdings. Depending on the use to which that money was put, the central bank may find itself also faced with liabilities in foreign exchange, at a time when it can ill afford to spare any.

    No one in Amman doubts that decisive action was needed to save Petra Bank from itself. As one foreign banker put it: "If Petra Bank had gone down, it would have added one hell of an economic shock on top of the foreign exchange disaster."

    However, the almost universal question is why nothing was done to rein Petra in before - a question that many observers answer by pointing to Mr Chalabi's friends in high places, including within the central bank.

    It is already abundantly clear that these friends did not include Dr Moham-mad Said Nabulsi, the widely respected new central bank governor. Since being reappointed to the post in May, he has asserted his institution's independence and taken a firm grip on exchange rate policy. The Petra Bank issue may prove to be an equally important credibility test.

    However, independent banking analysts believe that in acting swiftly last month, the central bank has contained the problem. "The banking system itself seems to be in reasonable shape," says Mr Ramin Habibi, chief economist at Capital Intelligence, the Cyprus-based bank rating agency. Jordanian banks generally "are pretty liquid and conservative - even dull."

    Ultimately, assuming the immediate financial difficulties can be overcome, the effects could even turn out to be salutary. Dr Nabulsi wants to strengthen the Jordanian financial sector by encouraging some of the 13 local banks to merge. The Petra debacle might be just the sort of jolt the system needed.


Financial Times, September 27, 1989

    Arab Banking 6; Long, Difficult Road Ahead

    By Andrew Gowers

    In finance, as in politics, this has been a turbulent year for Jordan. Bankers in the kingdom have scarcelyhad time to catch their breath as the economy has shifted abruptly from faltering boom to outright recession,

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