aveterra (aveterra) wrote,

Коррупция 10 (аналитический обзор) англ.

`Separate Investment'

``It was a separate investment they wanted to do, so we created a partnership that they owned," Zeid Masri says. ``We wanted to separate it from other investments" held by PCSC.

Masri says the investment came about because he was a classmate of Strike Holdings founder Thomas Shannon at the University of Virginia's Darden Graduate School of Business Administration, where Masri earned an MBA in 1992.

SilverHaze Partners has also invested in Strike Holdings, Masri says. Shannon didn't return phone calls to his New York office requesting comment.

Masri worked at New York-based Bessemer Trust Co. in the alternative asset management group and at Baltimore-based Alex. Brown & Sons, now part of Frankfurt-based Deutsche Bank AG, as a principal in the principal investing group, according to SilverHaze's Web site.

He also managed Chalcedony LLC for PCSC, which set aside $25 million for Chalcedony to make investments starting on April 4, 2000, when the Internet bubble was popping, according to the valuation reports released by the Palestine Investment Fund. Chalcedony invested just $9.9 million -- which had shrunk in value to $3.9 million by January 1, 2003, the reports say.

E-Commerce Company

For example, Chalcedony bought a $140,000 stake in a fund run by Bethesda, Maryland-based Novak Biddle Venture Partners that had dropped to $36,824 in that time. It purchased a $3.2 million stake in Simplexity, the e-commerce software maker, that had plunged to $408,799, the S&P valuation shows. Its $2.1 million investment in Vaultus, the maker of software for hand-held computers, had dropped to $1 million, the valuation shows.

PCSC came to Masri to invest around 2000, based on word of mouth, he says. ``This came through somebody that was recommended to us, and that's how that relationship began," he says. ``We manage money for families, ourselves and small institutions."

Masri says his main contacts in the territories were administrators of PCSC who consulted with him on investments. He says he met Arafat's adviser, Rachid, the PCSC chairman, only occasionally.

As the Palestine Investment Fund has taken over management, Masri's role has dwindled, he says. Companies that PCSC invested in knew whose capital it was, Masri says. ``When we invest, people want to know where the money is coming from," he says. ``We're 100 percent comfortable about where the money came from."

Camp David Talks

When Masri began making the investments in 2000 and 2001, Arafat's reputation in the U.S. was good, Masri says. President Bill Clinton hosted Arafat as a peacemaker at the Camp David presidential retreat in Maryland in July 2000. Those talks collapsed after Arafat rejected a proposed settlement with Israel that included shared sovereignty over Jerusalem.

Two months later, in September 2000, violence broke out in Israel and the Palestinian territories after Ariel Sharon, head of the conservative Likud party, visited Jerusalem's Temple Mount, known to Muslims as the Haram al-Sharif, or Noble Sanctuary. U.S. President George W. Bush took office in January 2001, and the following month Israeli voters, disillusioned with the peace process, elected Sharon prime minister.

Arafat Shunned

After Sharon took office on March 7, 2001, both he and Bush refused to restart talks with Arafat, blaming him for the violence that has since claimed at least 990 Israeli and 3,440 Palestinian lives.

Even as Bush refused to talk with Arafat, there was no prohibition against Arafat or the Palestinian Authority investing in the U.S. The financial sanctions relating to Palestinian organizations are against groups the U.S. designates as terrorist, according to the U.S. Treasury Department. They include Hamas and al-Aqsa Martyrs Brigades, which says it's an offshoot of Arafat's Fatah guerrilla movement.

Arafat's government had one of its first contacts with the world of private equity in 1998, when Tel Aviv-based Evergreen Partners, a venture capital firm that manages $610 million, organized a fund to invest in the Palestinian territories.

Peres led the effort to raise $65 million for a Peace Technology Fund, says Tel Aviv-based Tirza Florentin, 40, who was general manager of the fund. ``It was money that was raised from international investors, Israelis and Palestinians, to invest in the Palestinian territories," she says of the fund, run by Evergreen, that made investments from 1998 to 2000, when violence broke out in the West Bank and Gaza.

Peace Technology Fund

The Peace Technology Fund invested in the local phone company, Palestine Telecommunications, known as Paltel, and Palestine Development & Investment Ltd., known as Padico, which invests in Palestinian real estate and companies, Florentin says. Investors included the Palestinian Authority; Bank Leumi Le-Israel Ltd., the country's biggest state-owned bank; and International Finance Corp., a Washington-based member of the World Bank Group that provides money for private-sector projects in the developing world, she says.

``The idea was the private-sector development and growth would promote peace," Florentin says. For now, ``it's on hold," she says.

As Evergreen was investing in the Palestinian territories for the peace fund, it was also helping PCSC find places to put its money around the world, according to the Palestine Investment Fund documents.

Evergreen Partners

In November 1999, Evergreen formed Evergreen Partners U.S. Direct Fund III LP, incorporated in the Cayman Islands, to which PCSC committed $8 million for investments in Israel, the U.S. and the U.K. That partnership is one of three that together form the Evergreen Partners Direct Fund III, which had total committed capital of $170.5 million at the end of 2002, according to S&P's valuation of the PCSC investment.

PCSC's share constitutes 4.7 percent of the total fund and has a market value of $2.3 million because of the illiquidity of some of the holdings, according to S&P.

Evergreen Partners Direct Fund III's holdings have included a stake in Los Gatos, California-based Actona Technologies Inc., a file management software maker that San Jose, California-based Cisco Systems Inc., the world's largest maker of equipment to link computer networks, bought in August for $82 million.

The Evergreen Partners Direct Fund III made 3.7 times its money on the sale, being paid $22 million for what was originally a $6 million investment in Actona, according to Evergreen's Web site.

Selling Holdings

The Palestine Investment Fund now holds PCSC's share of the Evergreen fund. As its managers had planned, the Evergreen fund is in the process of selling holdings as the companies mature, through initial public offerings or private sales, according to Evergreen's Web site, which doesn't show overall returns paid to investors.

Other investors in the Evergreen Partners Direct Fund III and the two earlier Evergreen funds include Charlotte, North Carolina- based Bank of America Corp., the third-largest U.S. bank, and the Teachers Retirement System of the State of Illinois, according to Evergreen's Web site.

Since the Palestine Investment Fund began operating on January 1, 2003, it has hired six investment managers locally to monitor its assets, according to the annual report. Profits go to the Palestinian Authority budget, and access to the fund's two bank accounts requires the approval of two directors and the general manager.

Consolidating Assets

``We decided that all the assets must be controlled, must be under this investment fund," says Azmi Shuaibi, 55, chairman of the Palestinian legislature's economy committee. Shuaibi resides in Ramallah, has been a member of the legislature since 1996 and heads the Palestinian chapter of Transparency International, a Berlin-based anticorruption group. ``We don't want to give to any one person the power to invest and where to invest."

The Palestine Investment Fund has a seven-member board, and Fayyad, the finance minister, is chairman. Rachid, Arafat's economic adviser, is the fund's CEO and general manager, according to the annual report. Rachid didn't respond to phone messages left at his office in Cairo or e-mails sent to two addresses. Fayyad didn't return phone messages left with his staff.

Over the past two years, Fayyad, Rachid and their staff have been weighing which assets should be sold in order to keep the Palestine Investment Fund in line with the primary aim of its charter: developing the Palestinian economy within a democratic process.

Bowling Alley

One investment that might not meet that goal is the bowling alley. Bowlmor Lanes does brisk business with Wall Street, boasting a client list on its Web site that includes Morgan Stanley, Lehman Brothers Holdings Inc., Credit Suisse First Boston, JPMorgan Chase & Co., Bear Stearns Cos. and Citigroup's Salomon Smith Barney unit. Bowlmor also promotes bar mitzvah parties and offers a kosher caterer.

To Masri, such investments don't seem incongruous. ``At the end of the day, we all do business together," he says. ``It's just business." As records of Arafat's investments show, such business didn't always yield profits. The Palestinian leader had the same mixed record as an investor that he had as a peacemaker.

This article ran on the Bloomberg Wire Service on December 23rd, 2004

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