Numerous reports have documented the suffering of the Palestinian people in the disputed territories. This is a human tragedy that is the direct result of the failure of the Palestinian leadership and the corruption of the Palestinian Authority (PA).

The principal reason for the worsening plight of the Palestinians is the strategic choice Yasser Arafat made to engage in violence rather than negotiations. Following his rejection of Israel’s offer of an independent Palestinian state, Arafat escalated the level of terror. Neither he nor prime ministers Abu Mazen or Abu Ala have fulfilled their road map commitment to dismantle the terrorist infrastructure and end the violence. Meanwhile, the Palestinians’ standard of living has declined dramatically.

The problems facing the Palestinian people and the PA economy are not due to a lack of resources. Instead of feeding, housing, and employing Palestinians, significant amounts of financial aid have been siphoned off by Yasser Arafat and other PA officials for their personal benefit.

The Palestinians living inside the Palestinian Authority have been given far greater international financial support than most other suffering peoples. Since the signing of the Oslo Accord in 1993, the U.S. government has committed more than $1.3 billion in economic assistance to the West Bank and Gaza Strip. Since the end of 2000, Arab states have transferred to the PA monthly financial aid of $45 million (since April 2002 this sum was increased to $55 million). The EU transfers to the PA approximately $9 million monthly. By the end of 2001, the Palestinians had received $4 billion (the figure is now closer to $5.5 billion) since the 1993 Oslo agreements. This is the equivalent of $1,330 per Palestinian. By comparison, the Marshall Plan to rebuild Europe after World War II provided $272 per European (in today's dollars).

These PA revenues do not include the $8-14 billion in assets the Palestine Liberation Organization is believed to have accumulated over the years through drug trafficking, illegal arms dealing, money laundering, fraud, extortion, and legal investments.

We hear a great deal about the suffering of the Palestinian refugees, but most of these refugees live in camps under the direct control of Yasser Arafat. With all of these resources, why hasn’t he managed to build a single home for one refugee family? Where is all the money, and why hasn’t it been used to help the Palestinian people?

A 2003 report by the International Monetary Fund revealed that Yasser Arafat diverted approximately $900 million from the PA Finance Ministry into secret accounts that he alone controlled. Forbes ranked Arafat number 6 on a list of the richest “kings, queens, and despots” with a fortune of $300 million.

Jawad Ghussein, former Secretary General of the Palestinian National Fund, told Haaretz in August 2002 that Arafat “took aid money and contributions that were earmarked for the Palestinian people to his own account.” On June 5, 2002, the Kuwaiti daily Al-Watan published documents showing that Arafat had deposited $5.1 million from Arab aid funds into his personal account to support his wife and daughter who live in Paris and Switzerland.

In 1996, $326 million disappeared from the PA and the Palestinian Legislative Council established a commission to investigate the loss. The subsequent report concluded that nearly 40 percent of the PA’s $800 million budget had been lost through corruption and mismanagement. The PA’s comptroller wrote: “The overall picture is one of a Mafia-style government, where the main point of being in public office is to get rich quick.”

This only tells a small part of the story of the criminal behavior of Arafat and other PA officials. A study by Dr. Rachel Ehrenfeld of the American Center for Democracy noted that senior PA figures, in cooperation with Hamas and other Palestinian terrorist organizations, have made millions from counterfeiting operations involving CD’s, DVD’s, clothing, cosmetics, and schoolbooks.

The PA has also engaged in the counterfeiting of Israeli, Jordanian, and Kuwaiti currency. In April 2002, the Israeli army found large quantities of counterfeit Israeli currency in Arafat’s compound in Ramallah.

Ehrenfeld reported that some PA officials engage in shakedowns of the population. These include everything from arbitrary charges of traffic violations to demands of large bribes to kidnaping for money. A businessman from Tulkarm, for example, was forced to pay $100,000 for the release of a brother who was arrested by the PA security service for “collaboration” with Israel.

Mohammed Dahlan, former head of the PA security services in the Gaza Strip, supplemented his salary by collecting protection money from suppliers of oil, cigarettes, and other commodities, receiving kickbacks for issuing licenses, and demanding border crossing fees. Dahlan’s counterpart in the West Bank, Jibril Rajoub, was similarly reported to have extorted protection money from oil distributors, to have received kickbacks from the Jericho casino, and to have stolen intellectual property.

Forbes wrote that Arafat “feasted on all sorts of funds flowing into the Palestinian Authority, including aid money, Israeli tax transfers, and revenue from a casino and Coca-Cola bottler. Much of the money appears to have gone to pay off others.”

Arafat’s slush funds allow him to buy loyalty and maintain his dictatorial regime. For example, he gave $50,000 for the wedding of the daughter of then cabinet minister Nabil Amr, doubled the living expenses of the son of minister Nabil Shaath while he went to school in France, and paid $100,000 for the deputy in charge of the information portfolio for construction of a home.

Records seized by Israel showed that hundreds of activists in Fatah and local branches of terrorist organizations, such as the Tanzim and the Al Aqsa Martyrs Brigades, were put on the list of PA employees so they drew salaries that allowed them to engage in attacks against Israel without having the worry about earning a living.

Arafat has created 27 monopolies to insure that he and his loyalists profit from every industry affecting the lives of Palestinians, such as cement, flour, oil, cigarettes, iron, and commercial sand. For example, Arafat’s economic advisor Muhammad Rashid, together with Suha Arafat (Arafat’s wife) and communications advisor Nabil Abu-Roudayna, co-own pharmaceutical and apparel monopolies. Rashid and another Arafat advisor, Hassan Asfour, co-own an oil monopoly. Onetime Planning and Cooperation Minister Nabil Shaath, (accused by a Palestinian Legislative Council investigation of embezzling ministry funds) has a computer monopoly; and Abu Ala (the new Prime Minister) is co-owner of cigarette and dairy monopolies.

The Palestinian people deserve better. But their plight will not improve by sending more money to Arafat. Their suffering will end only when representative leaders come to power who have the will and the capability to reform the corrupt Palestinian Authority, dismantle the terrorist networks, and engage in peace negotiations.

Fact Sheets: The Palestinian Money Trail