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Palestinian cement sold to Israel for barrier, probe finds

RAMALLAH, West Bank -- Thousands of tons of cement sold to Palestinian businessmen at below-market prices by Egypt to help rebuild communities devastated by years of war with Israel have been resold at huge profits to the Israelis, for use in building Israel's controversial separation barrier and settlements in the occupied territories, according to an investigation by Palestinian legislators.

Palestinian Authority officials have assisted in the scheme, allowing the businessmen to make millions of dollars and depriving the Palestinian government of tax revenues, according to the probe. The businessmen, using permits given to them by a high-ranking member of Palestinian leader Yasser Arafat's Cabinet, sold the cement to Israeli contractors at a 50 percent profit.

In addition to aiding the Israeli projects and producing up to $5.5 million in profits for the middlemen, the cement arrangement cost the Palestinian public treasury as much as $1.6 million in uncollected taxes, according to the investigators. They say it is unclear whether the practice is continuing.

Public and international anger at corruption in the Palestinian Authority has been on a sharp rise in recent weeks; the cement sales represent the largest and most specific example of abuse to emerge so far.

Arafat, who publicly condemns the West Bank barrier as an "apartheid wall" and settlements as "criminal Zionist aggression," was alerted to the involvement of senior Palestinian officials and businessmen months ago, within weeks after it began, investigators said in interviews. The Palestinian Authority controller, who reports directly to Arafat, confirmed in a separate interview that he notified Arafat in writing what was happening, and that it was made possible by permits issued by Minister of Economy Maher al Masri.

Arafat referred the issue to Prime Minister Ahmed Qurei, who referred it to the generally powerless legislative council. After a seven-month investigation, a special committee of the council submitted a detailed and documented report on the abuses to Qurei, who referred it to the Palestinian attorney general -- minus several key pieces of evidence, according to members of the committee.

"Yasser Arafat knew about [the cement deal] and did not do anything," said Hasan Khreisheh, the legislative council member from Tulkarem who chaired the investigation. "God knows why. It is both corruption and against our national interest. We expect our officials to build our state, not to help in the building of the settlements and the wall."

Masri yesterday agreed to respond to questions about the matter in a telephone interview, then did not keep the appointment. He recently was quoted on a Palestinian news website as acknowledging that some cement had gone to Israel, but said the reported quantity was greatly exaggerated in an attempt to smear his reputation.

According to Khreisheh, the legislative council committee, and Egyptian press reports, sales of cement to Israel by influential Palestinians began last September, after a German-Jewish businessman with companies in Haifa and his Cairo-based Egyptian partner contracted with an Egyptian company for 120,000 tons. There was a shortage of high-quality cement in Israel at the time, the committee found.

Word of the deal reached Egypt's antinormalization committees -- citizens' groups opposed to normalization of relations with Israel -- and those committees conveyed highly detailed information on the arrangements to the newspaper Al Arabi, an organ of the nationalistic Arab Democratic Party. The newspaper published reports characterizing the deal as a "five-star scandal," after which Egyptian officials pressured the supplier to stop selling cement to Israeli companies.

The Israeli-Egyptian partnership then approached leading Palestinian suppliers of ready-mix concrete, including Jamal Tarifi, brother of Jamil Tarifi, minister of civic affairs in the Palestinian Authority. The Palestinian companies obtained permits from Minister of Economy Masri to import 420,000 tons of Egyptian cement for use in Palestinian construction projects.

Jamal Tarifi and a top official of Masri's office traveled to Egypt to assure officials there, both in person and in writing, that the cement would not go to Israelis, according to government controller Jarar al Qidweh.

As a result of the permits and assurances, Khreisheh said, the Palestinians were able to purchase cement for $22 a ton, compared with the $26 a ton being charged to other customers in the Arab world. It was transported to a border crossing in the Sinai Peninsula on trucks supplied by the Israeli-Egyptian partnership, and at that point title was transferred to the Haifa-based company, which paid $34 to $35 a ton.

The Palestinian companies paid no taxes into the Palestinian treasury on the transfer, though they should have paid in 17 percent of their profits, the committee found. The deal also apparently produced a major windfall for the Israeli-Egyptian partnership, as the market price for cement in Israel, where one company holds a virtual monopoly, is around $57 a ton.

Khreisheh said the investigative committee, of which he was chairman, was able to document all key aspects of the dealings, and that it supplied these documents to Qurei. But, he said, some vital documents -- including videotape of the border transfers and copies of some of the permits that made the scheme possible -- were not included in materials that Qurei's office referred to the Palestinian attorney general.

Committee members met unofficially with representatives of the attorney general at Ramallah's Grand Park Hotel early this week and provided them with duplicates of the omitted documents.

A Globe inquiry in 2001 found that Qurei had a financial interest in a company that was then supplying Israeli contractors cement for building houses on West Bank land that has been annexed to Jerusalem; there is no indication of any participation of that company in the current arrangements.

Khreisheh said the cement dealings, which were widely rumored among Palestinians long before the committee made its report to the legislative council last week, have had a dramatic negative effect on political leaders' efforts to maintain rank-and-file Palestinian opposition to the settlements and the separation wall.

"Before this, if a Palestinian man who was trying to feed his children would accept work" on such projects, "we would have put him in prison," Khreisheh said. "But after these permits and support from the executive, we cannot do anything. We cannot punish small men when the heads of ministries are doing such things."

Nabil Amr, an outspoken advocate of reform in the Palestinian Authority, last week narrowly survived assassination in Ramallah, and Khreisheh said in the interview that, since becoming involved in the cement investigation, "I have had threats. I put responsibility for my personal security on Mr. Yasser Arafat," he said.

Sa'adi Krunz, a member of the cement-investigation committee who also chairs the legislative council's budget and finance committee, said yesterday that council leaders met Monday night with Arafat on this and other corruption issues, and that the Palestinian leader promised them that Masri, Tarifi, and other ministers accused of corruption by reformist politicians would not be appointed to Cabinet jobs in the future.

"We are pinpointing top officials who should be punished," Krunz said. "I hope it will be a turning point in dealing with corruption."

Globe correspondent Sa'id Ghazali contributed to this report. Charles A. Radin can be reached at 

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