Part 3: The collapse of a business empire

Aram Roston Investigative producer

On March 9, 1989, old Abdul Hadi Chalabi, Ahmad’s father, passed away in London; his body was loaded onto a Royal Jordanian jet, which lifted off to Syria for burial in a Shiite cemetery. The death of the old man — and the flight of his remains to the Middle East — was a kind of marker for the family, for it heralded the beginning of a spiral of collapse, as if he was the only thing holding their businesses together.

Just a month and a half after his death, in the morning hours of April 27, 1989, a group of somberly dressed accountants and lawyers stepped into the foyer of 100 Rue de Rhone in Geneva, where the Chalabi family businesses in Switzerland were headquartered. The lawyers and accountants were polite but firm. For all their businesslike appearance and formality, however, they were the financial equivalent of the Grim Reaper, implacable and stolid, sent by the venerable Swiss Federal Banking Commission. The commission notified MEBCO that its banking license had been revoked. “This is the way it is done,” said one of the Swiss lawyers who went in that day. “We had to go in and tell them, ‘Your bank has been closed. We are the liquidators.’”

Perhaps it was a good thing for the old man that he died when he did, because MEBCO Geneva, run by Hazem Chalabi, was just the first to fall in the long and painful collapse of the Chalabi enterprises worldwide. Petra Bank, in Amman, would be taken over in August, and after that Socofi in Geneva went down, and still later MEBCO in Beirut, all caught in a whirlpool that sucked away the life savings of a large number of investors. What’s more, criminal investigations would hound the Chalabis in Switzerland, Lebanon, and Jordan.

In later years, Ahmad Chalabi blamed the governments of Iraq and Jordan for the collapse of his Petra Bank. It was a frame-up, he convinced his followers, including powerful members of the U.S. political establishment. According to Chalabi, he was the victim of a massive, politically motivated conspiracy to destroy his successful operation. The real story is far more complex and disturbing, involving mysterious business deals, fraud, embezzlement, an executive’s love affair gone wrong, and secretive companies located in offshore tax havens like the Cayman Islands.

Unusual business associate
To chronicle the collapse of Petra Bank and its sister banks, it’s best to start with a look at the circle of people the Chalabis were doing business with. The most unusual of the Chalabis’ business associates was an American named Wayne Drizin. Back in the 1980s, when he met the Chalabis, he was operating in Lugano, Switzerland. Drizin would travel the world first-class, accompanied, sources say, by a small lapdog. He carried on business through a company called Welfin S.A., and he would later boast, in securities filings, that he “orchestrated the sale of Welfin S.A. to (a) Swiss-based multinational banking group indirectly wholly owned by the Chalabi Family, including Mr. Ahmed Chalabi.”

Drizin seems like a mismatch as a Chalabi business partner. He first surfaces in public record in the summer of 1980 in connection with the legalized prostitution industry in Nevada. He and a well-known madam announced they were about to purchase the famous Mustang Ranch brothel in Nevada. The brothel, a large pink structure, was home to sixty or seventy prostitutes, and was owned by the notorious Joe Conforte, an alleged mob associate. The deal attracted attention across the country, from Los Angeles to New York. Drizin said he had financing from London for the transaction, and he wasn’t shy about publicity about his grandiose plans for the infamous brothel. Drizin said he planned to buy the facility, hire an additional seventy prostitutes, and build an airstrip so that the “johns” could fly in to the place to attend to their desires. It would become a massive enterprise, if the publicity was to be believed.  But the deal fell through. Still, Drizin quickly pushed to open another brothel, clearly enthralled by the business. County commissioners balked at granting him a license, and he lambasted them. “They seem to be more interested in stopping competitive brothels than helping the county,” he told a reporter, in a unique take on the need for competition in the prostitution industry.

Drizin would later blame a series of legal troubles on various government conspiracies against him. He was charged with a felony for bouncing a check in Broward County in 1982, and that same year, records show, the Florida Bar Association disbarred him. He had bounced a check for $75,000 to one person, a check for $125,000 to another,  and then a check for $18,000 to yet a third. Years later, he would face serious trouble with the law: a federal jury in Arizona found him guilty of wire fraud in 2003.

Drizin brought the Chalabis into ventures that suggest they had a penchant for high-risk schemes rather than conservative banking. One was a 300-foot ship called the Nissilios, supposedly being built at the shipbuilding port in Piraeus, Greece. It was to be an ultraluxurious cruise liner, more elaborate than anything ever built, a concept that fed off the conspicuous consumption of the Reagan years. It would boast massive staterooms designed for the extremely rich, who would shell out $7,000 a week for them. Like so many other shipping schemes, it turned out that it was like pouring money into a hole in the water.

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