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The Rise and Fall of an Algerian Tycoon

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The Arab Spring and its aftershocks have eclipsed almost every other story coming out of the Arab World since 2011. One of these fascinating sagas has been the rise, collapse, arrest, and trial of eccentric Algerian tycoon Rafik Abdelmoumene Khalifa. It's a relatively short story indeed, starting in 1998 and coming to a grinding halt in 2003. During the course of just five years, Khalifa made more money than Arab kings and presidents put together. He lodged at a massive €35 million complex on the French Riviera, mingled with European high society, traded in private jets, set up banks, and signed deals with Arab leaders. He ended up penniless, sleeping incognito in the London Underground. Just one year earlier this man was distributing high class Parisian apartments for-free to his senior managers, editors of ranking Algerian dailies, not counting his legal counselor Abdul Ghani Bouteflika (brother of the Algerian President). Two days ago, it was announced that he would stand trial in his native Algeria next October, on the charge of the embezzlement of more than $1 billion USD. As Islamists literately chop off heads in Iraq and Syria, Rafik Khalifa's decapitation was symbolic and no less painful. It spells out the tragic demise of a sensational figure.

A star is born

The son of an Algerian officer who co-founded his country's Secret Service, Khalifa started manufacturing pharmaceuticals and making headlines in Algeria throughout the early 1990s. In 1998, he founded Algeria's first private bank, Khalifa Bank. The Algerian poor and middle class flocked to his doors, attracted by the astronomical interest rate he was paying clients. The doctor in pharmacy-turned businessman then set up a commercial airline, Khalifa Airways, with a fleet of more than forty Airbus, Boeing, and ATR, back by a start-up capital of approximately $2 million USD. By 1999 Khalifa Airways had opened its first branch in France. The conglomerate expanded to include, among other things, a security agency, a catering service, car rentals, his own acrobatic jet team, and finally, two Paris and London-based TV stations addressing Algerian youth in Europe.

In 2001, Khalifa became sponsor of the Olympique de Marseille Football Team, and one year later, bought Villa Bagatelle in Cannes, stretched over 26,000 square meters of green lawns, trees, and splendid arched stone buildings dating back to the 1920s. On 3 September 2002 Rafik Khalifa threw a party for the world's "who's who," playing host to French actors Gerard Depardieu and Catherine Deneuve, Italian tenor Andrea Bocelli, fashion model and designer Lauren Bush. German models Claudia Schiffer and Heidi Klum were both there, and so was American supermodel Naomi Campbell and actor Jason Patric. The English musician Sting performed at the event, along with Ricky Martin, Patricia Arquette, and Pamela Anderson.

The dramatic rise to fame and power resulted in a rather speedy collapse, with little pomp and ceremony. Just like so many other billionaires, Khalifa started harboring political ambitions. He began to support ex-prime minister and presidential hopeful Ali Benflis, who was now publicly challenging all-powerful yet aging Abdulaziz Bouteflika. Algerian officialdom responded with brute force on 27 November 2002. His Algiers-based bank was first secretly banned from trading in foreign currency, and then in February 2003 two of his vice-presidents were arrested while trying to leave the country with $2 million in banknotes. Khalifa himself fled to the UK and was tried in absentia by Algerian courts. He was sentenced to five years imprisonment in March 2005 and fined €68 million. This was too soft for Algerian officialdom, which took him to yet another court in 2007 -- this time imposing heavier charges publishable by life imprisonment. This is exactly what he got, on charges of criminal association, corruption, money laundering and forgery. Before that, Khalifa had sold his €35 million villa in Cannes for €17 million. Only €3 million actually reached Khalifa's pockets.

The French justice

French courts opened his trial last June, headed by the seasoned and respected West Paris' suburb Nanterre judge Fabienne Siredey Garnier. When Khalifa fell from grace in Algeria, his French employees petitioned their government, saying that they had not been paid in months. Khalifa was accused of buying luxury property in Paris for his senior assistants -- financing acquisitions from bank depositor's funds. He also purchased from a French manufacturer three light single-engine aircrafts, for $7.5 million, in 2001. The Algerian civil aviation administration was late in issuing the operation certificate, which prevented the aircraft's registration under Algerian pavilion. The single engines were then registered in the name of a London-based subsidiary owned by Khalifa Airways. Mistakenly, French investigators considered the UK Company unaffiliated with Khalifa Airways, levying charges against it and the French manufacturer.

The planes were then sold to a Luxembourg based holding in early 2003. Ultimately they ended up in the United States; two of them with an Illinois-based firm called S&S Aviation. The court investigated the reason behind the consecutive sale of the airplanes. It suspected the London-based company to be an embezzlement vehicle. French aviation authorities confirmed its normal practice, which lifted all suspicion. The uncovering of the dramatic saga shows that Judge Siredey Garnier addressed the manufacturer's counsellor about the identity of the last purchaser, as the sale was exclusively brokered by the manufacturer's US subsidiary. He claimed to know nothing about the US firm. Ongoing investigation, however, proved that the French manufacturer knew exactly who the American subsidiary was. In fact, one of the US company's founders, Dean H. Shealy was none other than father of Mike B. Shealy, the sales manager of the French manufacturer's US subsidiary. This may explain reluctance of the manufacturer to disclose his knowledge of the end buyer's identity--the US subsidiary being exclusive broker of the entire deal.

Conclusion

The Khalifa story is a complex one indeed, worth making into a Hollywood movie. So many world capitals and celebrities are involved that it might be in everybody's best interest to keep the entire story under lock and key. Khalifa never made the money he spent. Rather he lived extravagantly from the social security and pension funds deposited at his bank through the request of Algerian officials. Eleven years down the road, nobody knows for sure how much those deposits actually were worth.

His fate was sealed by a French court on October 7, 2014. The French justice sentenced him to five-year imprisonment, with a fine of €375,000--the harshest verdict possible in French courts. Other Khalifa employees and associates received anywhere between 4-18 months of suspended prison terms. His wife was declared non-guilty, as well as the airline company EADS SOCATA, its ex-President Philippe Debrun and its Authorized Sales Representative, the renowned French/Lebanese media entrepreneur Raghid el-Chammah, founder of Euromed Group, an institutional communications and lobbying firm contracted by EADS SOCATA back in 2001. El-Chammah and two of the accused had all been involved in the 2001 sale of three TBMs airplanes to Khalifa Group. The court dismissed all charges, saying that all accusations brought against them had been nothing but baseless lies and fraud.

The Khalifa saga now awaits its verdict in Algeria. He is actually more of a hostage now in his own country, where he might be talked -- or forced -- into hiding names, exposing others, and only saying things that Algerian officials want to hear. Will the advent of democracy, accountability, and transparency in the Arab World prevent the re-occurrence of such a phenomenon? Or will the dramatic chaos emitting from the Arab Spring create fertile ground for hundreds of Rafik Khalifas throughout North Africa and the Middle East?

This post has been updated to reflect the French court ruling of October 7, 2014.