Part 3: The collapse of a business empire

Extent of crisis becomes clear
By early 1990, the scope of Petra Bank’s crisis was becoming clear. Some of the first devastating news came from a January 15,1990, audit the Jordanians commissioned to examine the bank’s balance sheet on the day before it had been taken over — a financial snapshot in time. The auditors from Arthur Andersen found the Petra Bank books were a massive compilation of lies or mistakes. They found enormous losses: 40 percent of the bank’s outstanding loans, about 126 million dinars ($176 million), were not being paid back, they said. The euphemism they used was “non performing.” Instead of 104 million dinars ($140 million) in cash on hand, as its books claimed, Petra had only 8.6 million dinars (about $12 million).

The auditors said the bank was undercapitalized for its size. While there were 30 million dinars in capital at the bank, or $42 million, the auditors said that was short to the tune of about 157 million dinars, or $220 million. Another interesting thing the audit found was very similar to what the auditors would find at Socofi: a vast web of insider deals. Forty-four million dinars had been lent to what was dryly called “related parties,” meaning borrowers connected to the Petra management. Meanwhile, there was a morass of deposits crossing over between Petra, Socofi and MEBCO.

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By that time Ahmad Chalabi had already fled to London. At the age of forty-five, he found himself in exile for the second time in his life. There is no way to get inside his head, but there is ample evidence that he appeared to believe the story that he would so compellingly present to the receptive audiences he found in the West: that he was the victim of persecution, the target of an elaborate conspiracy, which could almost always be traced back to his original nemesis, Saddam Hussein in Iraq.

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