Part 3: The collapse of a business empire

Fleeing Jordan
On Aug. 7, 1989, in the dark of night, Ahmad Chalabi fled Amman, Jordan. He took few possessions with him, a sign either that he thought he would return soon or that the urgency of his departure left him no time to pack. He drove north, which would take him through the hills on the outskirts of the city and then toward the Syrian border. The wrath of Jordan would follow him as he left because Petra Bank, more than any other Chalabi family enterprise, left the most damage in its wake.

Back in the winter and spring of that year, Ahmad Chalabi, at his office in Wadi Saqri, had done his best to weather the storm after his father died. The problem was this: just as the Chalabi family businesses were coming apart at the seams, and the web of insider dealings was about to become exposed, the façade of health in the Jordanian economy was also shattered. Dubbed the Gucci Kingdom for its lavish  and stylish ways, the place was in turmoil: hunger, food riots, bank runs and inflation. For months the Central Bank authorities were trying to prevent the collapse of the local currency, taking a variety of restrictive monetary steps. The Jordanian government put the brakes on spending, skidding the economy into tough times as it sought to curtail waste. It was an awful mixture just when Ahmad Chalabi needed liquidity the most.

It was nothing exceptional in the scheme of things: the loose practices of the Reagan years were coming to an end, and economies seemed to be collapsing everywhere. Savings and loans were going bust in the United States. U.S. Attorney Rudy Giuliani indicted the king of Wall Street, Michael Milken. In the spring of1989, the king of Jordan brought Mohammed Said Nabulsi back into the Central Bank to try to rein in the economic havoc of the country. The diminutive economist, who had actually helped get Petra its banking license in the first place in 1978, had chaired the Central Bank from 1972 to 1985 and then worked for the United Nations in Iraq. Once Nabulsi returned to Jordan, his first job was to prop up its crumbling currency. The dinar was under attack, and he needed to go to war to defend it or the nation’s paper money would be worthless. Ahmad Chalabi mistrusted Nabulsi and viewed him as his nemesis. First, Nabulsi dropped the artificial price of the dinar and let it float a bit. Then, the Central Bank’s currency reserves were completely depleted, so he ordered all banks to help him. They were commanded to deposit, with interest, a share of their foreign funds into the Central Bank. He had that authority according to the laws of the country. So in May 1989, the Central Bank of Jordan ordered all banks to deposit 35 percent of their foreign currency in the bank. This fact is undisputed.

‘He said, "We are working on it"'
It was Chalabi’s response — or lack thereof — that ended up exposing the extent of Petra Bank’s problems, according to Nabulsi, who says Petra Bank was the only bank to deposit nothing in the Central Bank. “What happened is that all banks did it, except Petra,” he explains. Chalabi’s supporters say that Nabulsi had always had a bitter relationship with Ahmad Chalabi, and that the new Cabinet in Jordan was less friendly to him than the last. Nabulsi says he was perplexed and disturbed. Personal dislikes aside, Nabulsi says, he called Chalabi up and Chalabi tried to allay his concerns over the phone. “He said, ‘We are working on it!’” recalled Nabulsi.

Who can say what Ahmad Chalabi was thinking at this point? For some men of wealth and status, the idea that everything can come unglued is like getting suffocated, almost intolerable. There seems to be no way out. The collapse, the possibility of poverty -- they are all horrors. But worst of all is the fear of possible shame and exposure, the sense that one may look ridiculous and petty. Did Ahmad Chalabi feel these things? It’s possible. But perhaps he was immune to the psychological pressures of impending bank failure. Perhaps he did not realize just how tenuous his economic situation was. Possibly he believed he had done nothing wrong. In fact, at that time there were no public allegations of criminal misdoings by Chalabi. There may have been questions, but there were no specific allegations until several months later. On the contrary, back then, everyone assumed it was all just an accounting issue. No one knew about the various interlaced loans between the Chalabi banks.

Whatever Chalabi was thinking, Nabulsi admits that by this time he was getting concerned. The second-largest bank in Amman was not responding to his command as governor of the Central Bank. “I started to doubt the whole situation. Why is he not giving the Central Bank anything?” Nabulsi wondered. So he summoned Ahmad Chalabi to his office at the Central Bank. The two men faced each other across his desk awkwardly. Nabulsi said Chalabi, as usual, was playing with a  pocketknife as if it were a set of worry beads. And then, he says, Chalabi gave him an unusual explanation. “He claimed that all the foreign currency he was supposed to have had been redeposited in certain companies or banks.” Nabulsi was upset. “I said, ‘Look, Ahmad, this is not legal! You should be able to give me immediately something of your deposits.’”

A lawyer for Chalabi admits that Chalabi resisted depositing funds in the Central Bank as ordered, but he cannot explain why. Certainly Petra Bank had engaged in some public relations stunts to prove it had foreign currency. It once stacked U.S. currency in its lobby, for example, to show that it had reserves on hand.

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