Arafat Authority Owns a Piece Of Bowlmor Lanes
BY RODERICK BOYD – Staff Reporter of the Sun

The New York Sun
Dec 23 2004

Greenwich Village’s Bowlmor Lanes is widely known as a popular place
for drinks, children’s parties, or bowling a few games at night or
on the weekend. Less well known is that Yasser Arafat’s Palestinian
Authority gets a cut of every beer bought and pair of shoes rented
at Bowlmor, via the $799 million Palestinian Investment Fund.

Indeed, according to an analysis of the fund’s investment activity
from December 2002 to December 2003 done by Standard & Poor’s,
the Palestinian people have about $40 million worth of American
investments. These include California real-estate holdings, wireless
technology stocks, and a piece of a well-known private equity fund.

The majority of the fund’s investments were in the Middle East,
including a $285 million stake in an Egyptian mobile-phone company,
Orascam Holding SAE, and its affiliates, and a $71 million joint
venture with England’s BG group, to explore for natural-gas deposits
off the coast of the Gaza Strip.

The investment fund’s chairman and CEO, Mohamed Rachid, did not reply
to e-mail inquiries seeking comment.

The S&P valuation of the fund’s assets was commissioned by the fund
when executives of international donors requested an accounting of
the fund’s assets.

To invest in America, the S&P report shows, the fund set up holding
companies in Delaware. Much of the legwork was done by a McLean,
Va.-based private equity fund, SilverHaze Partners LLC, whose managing
partner is Zeid Masri, an American citizen with two relatives on the
fund board, according to Bloomberg News. Mr. Masri did not return
several phone calls from The New York Sun. The fund’s 5.23% ownership
stake in SilverHaze’s management company was valued at $260,000.

In the case of Bowlmor, Mr. Masri set up a Delaware holding company,
Onyx Funds LLC, to invest $1.3 million in the bowling alley’s parent
company, Strike Holdings LLC. S&P valued the stake at $930,000,
citing the illiquid nature of the investment. The valuation did not
disclose whether the investment was profitable or whether dividends
were paid on it.

In a statement sent to the Sun by email, Strike Holdings’ CEO,
Thomas Shannon, said he had taken steps to sever the relationship
with SilverHaze immediately.

“This information was never disclosed to us previously and had we
known the source of these funds, which represents approximately 2%
of our company’s equity, we would never have accepted them,” he said
of the ties to the Palestinian Authority.

Another New York company that received an investment from the
Palestinian fund is Madison Avenue’s Delma Real Estate fund, according
to the valuation documents. The fund owns two buildings in Woodland
Hills and Sherman Oaks, Calif., the documents said. The Palestinian
fund invested in Delma via a wholly-owned subsidiary, Darnel Limited,
that was worth $6.6 million at the end of last year, S&P said. The CEO
of Delma, Kevork Toroyan, did not return a reporter’s call. Mr. Toroyan
is an Armenian, and according to the Web site of a charity with which
he is affiliated, the Armenian Fund, he was a member of a group set
up to support the 1993 Oslo Mideast accords.

The Palestinian Investment Fund, whose chairman, Mr. Rachid, was
installed by Arafat in June, did not have the Midas touch when it
came to timing many of the investments, according to the valuation
documents. For example, beginning in April 2000, SilverHaze’s Mr.
Masri began investing $25 million in fund capital in Internet stocks.
The vehicle Mr. Masri set up to make the investments, Chalcedony LLC,
put only $9.9 million to work before the Internet bubble cracked,
said the valuation report. The investment in Chalcedony – controlled
entirely by Mr. Masri, according to S&P – declined in value to an
estimated $4.4 million.

The Palestinian fund was created on Arafat’s orders by “diverted”
tax receipts Israel collected on goods shipped to the territories,
according to a World Bank report released in June. The diverted funds
– the exact amounts are not known – were supposed to be given to the
Palestinian finance ministry, according to an article in Bloomberg
News’s Markets magazine.

The fund also took a stake in the Canaan Equity Offshore funds,
two investment funds managed by Canaan Partners, a high-profile
private-equity firm with $2 billion under management and offices in
Menlo Park, Calif., and Rowayton, Conn. The Palestinian fund’s stakes
in one of the funds, Canaan Equity Offshore II, was valued at $1.1
million, and its stake in the other, Canaan Equity Offshore III,
was valued at $3.6 million. A call to the fund’s general partner,
Eric Young, was not returned.

One analyst of the finances of both Arafat and the PLO, Manhattan-based
historian Rachel Ehrenfeld, said the “so-called donors” to the
Palestinian Authority – including many member states of the European
Union and the World Bank – who demanded the valuation would not have
wanted to see a full accounting of the Palestinian Authority’s finances
from its inception in 1994.

“Arafat had $10 billion in assets in mid-1994, and this one-year
snapshot contains less than $800 million,” she said. “They don’t want
to know about the other $9 billion because they don’t want to know how
rich Arafat was, or how much he paid to murder thousands of Israelis.”

Ms. Ehrenfeld, who has written and lectured extensively on terrorism
financing, was highly critical of the Palestinian fund’s rush to
transparency.

“It’s nearly useless,” she said of S&P’s valuation work. “It covers
only one year, it’s already a year old, and doesn’t offer any
comparison to the previous years.”