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### Viewing cable 08TUNIS679, CORRUPTION IN TUNISIA: WHAT'S YOURS IS MINE

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
08TUNIS679 | 2008-06-23 13:01 | 2010-12-07 21:09 | SECRET | Embassy Tunis

`

    VZCZCXYZ0000
    PP RUEHWEB

    DE RUEHTU #0679/01 1751355
    ZNY SSSSS ZZH
    P 231355Z JUN 08
    FM AMEMBASSY TUNIS
    TO RUEHC/SECSTATE WASHDC PRIORITY 5219
    INFO RUCNMGH/MAGHREB COLLECTIVE PRIORITY

` `

    SS E C R E T TUNIS 000679

    SIPDIS

    STATE FOR NEA/MAG (HARRIS)
    STATE PASS USTR (BURKHEAD)
    USDOC FOR ITA/MAC/ONE (NATHAN MASON), ADVOCACY CTR
    (REITZE), AND CLDP (TEJTEL AND MCMANUS)
    CASABLANCA FOR FCS (ORTIZ)
    CAIRO FOR FINANCIAL ATTACHE (SEVERENS)
    LONDON AND PARIS FOR NEA WATCHER

    E.O. 12958: DECL: 06/23/2018
    TAGS: ECON KCOR PGOV EINV EFIN SOCI TS
    SUBJECT: CORRUPTION IN TUNISIA: WHAT'S YOURS IS MINE

    REF: A. TUNIS 615
    ¶B. TUNIS 568
    ¶C. TUNIS 365
    ¶D. TUNIS 169
    ¶E. TUNIS 113
    ¶F. 07 TUNIS 1489
    ¶G. 07 TUNIS 1443
    ¶H. 07 TUNIS 1433
    ¶I. 06 TUNIS 2848
    ¶J. 06 TUNIS 1673
    ¶K. 06 TUNIS 1672
    ¶L. 06 TUNIS 1630
    ¶M. 06 TUNIS 1622
    ¶N. 01 TUNIS 2971

    Classified By: Ambassador Robert F. Godec for Reasons 1.4 (b) and (d).

    -------
    Summary
    -------

    ¶1. (S) According to Transparency International's annual
    survey and Embassy contacts' observations, corruption in
    Tunisia is getting worse. Whether it's cash, services, land,
    property, or yes, even your yacht, President Ben Ali's family
    is rumored to covet it and reportedly gets what it wants.
    Beyond the stories of the First Family's shady dealings,
    Tunisians report encountering low-level corruption as well in
    interactions with the police, customs, and a variety of
    government ministries. The economic impact is clear, with
    Tunisian investors -- fearing the long-arm of "the Family" --
    forgoing new investments, keeping domestic investment rates
    low and unemployment high (Refs G, H). These persistent
    rumors of corruption, coupled with rising inflation and
    continued unemployment, have helped to fuel frustration with
    the GOT and have contributed to recent protests in
    southwestern Tunisia (Ref A). With those at the top believed
    to be the worst offenders, and likely to remain in power,
    there are no checks in the system. End Summary.

    -------------------
    The Sky's the Limit
    -------------------

    ¶2. (C) According to Transparency International's 2007 index,
    the perception is that corruption in Tunisia is getting
    worse. Tunisia's ranking on the index dropped from 43 in
    2005 to 61 in 2007 (out of 179 countries) with a score of 4.2
    (with 1 the most corrupt and 10 the least corrupt). Although
    corruption is hard to verify and even more difficult to
    quantify, our contacts all agree that the situation is headed
    in the wrong direction. When asked whether he thought
    corruption was better, worse, or the same, XXXXXXXXXXXX
     exclaimed in  exasperation, "Of course it's getting worse!"
    He stated that  corruption could not but increase as the culprits
    looked for  more and more opportunities. Joking about Tunisia's
    rising  inflation, he said that even the cost of bribes was up. "A
    traffic stop used to cost you 20 dinars and now it's up to 40
    or 50!"

    -----------------
    All in the Family
    -----------------

    ¶3. (S) President Ben Ali's extended family is often cited as
    the nexus of Tunisian corruption. Often referred to as a
    quasi-mafia, an oblique mention of "the Family" is enough to
    indicate which family you mean. Seemingly half of the
    Tunisian business community can claim a Ben Ali connection
    through marriage, and many of these relations are reported to
    have made the most of their lineage. Ben Ali's wife, Leila
    Ben Ali, and her extended family -- the Trabelsis -- provoke
    the greatest ire from Tunisians. Along with the numerous
    allegations of Trabelsi corruption are often barbs about
    their lack of education, low social status, and conspicuous
    consumption. While some of the complaints about the Trabelsi
    clan seem to emanate from a disdain for their nouveau riche
    inclinations, Tunisians also argue that the Trabelsis strong
    arm tactics and flagrant abuse of the system make them easy
    to hate. Leila's brother Belhassen Trabelsi is the most
    notorious family member and is rumored to have been involved
    in a wide-range of corrupt schemes from the recent Banque de
    Tunisie board shakeup (Ref B) to property expropriation and
    extortion of bribes. Leaving the question of their
    progenitor aside, Belhassen Trabelsi's holdings are extensive
    and include an airline, several hotels, one of Tunisia's two
    private radio stations, car assembly plants, Ford
    distribution, a real estate development company, and the list
    goes on. (See Ref K for a more extensive list of his
    holdings.) Yet, Belhassen is only one of Leila's ten known
    siblings, each with their own children. Among this large
    extended family, Leila's brother Moncef and nephew Imed are
    also particularly important economic actors.

    ¶4. (S/NF) The President is often given a pass, with many
    Tunisians arguing that he is being used by the Trabelsi clan
    and is unaware of their shady dealings. XXXXXXXXXXXX
     a strong supporter of the government and member of
    XXXXXXXXXXXX, told the Ambassador that the problem is
    not Ben Ali, but "the Family" going too far and breaking the
    rules. Nevertheless, it is hard to believe Ben Ali is not
    aware, at least generally, of the growing corruption problem.
    This might also reflect the seeming geographical divisions
    between the Ben Ali and Trabelsi fiefdoms, with the Ben Ali
    clan reportedly focused on the central coastal regional and
    the Trabelsi clan operating out of the greater Tunis area and
    therefore, generating the bulk of the gossip. The Ben Ali
    side of the Family and his children and in-laws from his
    first marriage are also implicated in a number of stories.
    Ben Ali has seven siblings, of which his late brother Moncef
    was a known drug trafficker, sentenced in absentia to 10
    years prison in the French courts. Ben Ali has three
    children with his first wife Naima Kefi: Ghaouna, Dorsaf and
    Cyrine. They are married respectively to Slim Zarrouk, Slim
    Chiboub, and Marouane Mabrouk -- all significant economic
    powers.

    --------------------------------------------
    This Land is Your Land, This Land is My Land
    --------------------------------------------

    ¶5. (S/NF) With real estate development booming and land
    prices on the rise, owning property or land in the right
    location can either be a windfall or a one-way ticket to
    expropriation. In summer 2007, Leila Ben Ali received a
    desirable tract of land in Carthage for free from the GOT in
    order to build the for-profit Carthage International School
    (Ref F). In addition to the land, the school received a 1.8
    million dinar (US $1.5 million) gift from the GOT, and within
    a matter of weeks the GOT had built new roads and stoplights
    to facilitate school access. It has been reported that Ms.
    Ben Ali has sold the Carthage International School to Belgian
    investors, but the Belgian Embassy has as yet been unable to
    confirm or discount the rumor. XXXXXXXXXXXX asserted
    that the  school was indeed sold for a huge, but undisclosed sum.
    He  noted any such sale would be pure profit since Ms. Ben Ali's
    received land, infrastructure, and a hefty bonus at no cost.

    ¶6. (S/NF) Construction on an enormous and garish mansion has
    been underway next to the Ambassador's residence for the past
    year. Multiple sources have told us that the home is that of
    Sakhr Materi, President Ben Ali's son-in-law and owner of
    Zitouna Radio. This prime real estate was reportedly
    expropriated from its owner by the GOT for use by the water
    authority, then later granted to Materi for private use. A
    cafe owner recounted a similar tale to an Embassy employee,
    reporting that Belhassen Trabelsi forced him to trade in a
    cafe he previously owned in a prime location for his current
    cafe. The cafe owner stated Trabelsi told him he could do
    whatever he wanted there; if 50 dinar bribes to the police
    were not effective, Trabelsi said the owner had only to call
    him and he would "take care of it."

    ------------
    Yacht Wanted
    ------------

    ¶6. (S/NF) In 2006, Imed and Moaz Trabelsi, Ben Ali's nephews,
    are reported to have stolen the yacht of a well-connected
    French businessman, Bruno Roger, Chairman of Lazard Paris.
    The theft, widely reported in the French press, came to light
    when the yacht, freshly painted to cover distinguishing
    characteristics, appeared in the Sidi Bou Said harbor.
    Roger's prominence in the French establishment created a
    potential irritant in bilateral relations and according to
    reports, the yacht was swiftly returned. The stolen yacht
    affair resurfaced in early 2008 due to an Interpol warrant
    for the two Trabelsis. In May, the brothers were brought
    before Tunisian courts, in a likely effort to satisfy
    international justice. The outcome of their case has not
    been reported.

    ------------------
    Show Me Your Money
    ------------------

    ¶7. (S) Tunisia's financial sector remains plagued by serious
    allegations of corruption and financial mismanagement.
    Tunisian business people joke that the most important
    relationship you can have is with your banker, reflecting the
    importance of personal connections rather than a solid
    business plan in securing financing. The legacy of
    relationship-based banking is a sector-wide rate of
    non-performing loans that is 19 percent, which remains high
    but is lower than a high of 25 percent in 2001 (Ref I).
    Embassy contacts are quick to point out that many of these
    loans are held by wealthy Tunisian business people who use
    their close ties to the regime to avoid repayment (Ref E).
    Lax oversight makes the banking sector an excellent target of
    opportunity, with multiple stories of "First Family" schemes.
    The recent reshuffle at Banque de Tunisie (Ref B), with the
    Foreign Minister's wife assuming the presidency and Belhassen
    Trabelsi named to the board, is the latest example.
    According to a representative from Credit Agricole, Marouane
    Mabrouk, another of Ben Ali's sons-in-law, purchased a 17
    percent share of the former Banque du Sud (now Attijari Bank)
    shares immediately prior to the bank's privatization. This
    17 percent share was critical to acquiring controlling
    interest in the bank since the privatization represented only
    a 35 percent share in the bank. The Credit Agricole rep
    stated that Mabrouk shopped his shares to foreign banks with
    a significant premium, with the tender winner,
    Spanish-Moroccan Santander-Attijariwafa ultimately paying an
    off the books premium to Mabrouk. XXXXXXXXXXXX
     recounted that when he was still  at his bank he used to receive
    phone calls from panicked  clients who stated that Belhassen Trabelsi
    had asked them for  money. He did not indicate whether he advised
    them to pay.

    -----------------------
    The Trickle Down Effect
    -----------------------

    ¶8. (S) While the stories of high-level, Family corruption are
    among the most flagrant and oft-repeated, Tunisians report
    encountering low-level corruption more frequently in their
    daily lives. Speeding tickets can be ignored, passports can
    be expedited, and customs can be bypassed -- all for the
    right price. Donations to the GOT's 26-26 Fund for
    development or to the Bessma Society for the Handicapped --
    Leila Ben Ali's favored charity -- are also believed to
    grease the wheels. Hayet Louani (protect), a well-connected
    member of Parliament, faced increased pressure from the GOT
    after refusing several "requests" to donate money to
    Trabelsi's soccer team. XXXXXXXXXXXX reported
    that customs inspectors demanded 10,000  dinars to
    get his goods through customs; he did not reveal  whether
    or not he acquiesced to the demand.

    ¶9. (S) Nepotism is also believed to play a significant role
    in awarding scholarships and offering jobs. Knowing the
    right people at the Ministry of Higher Education can
    determine admission to the best schools or can mean a
    scholarship for study abroad. An Embassy FSN stated that the
    Director of International Cooperation, a long-time contact,
    offered to give his son a scholarship to Morocco on the basis
    of their acquaintance. If you do not know someone, money can
    also do the trick. There are many stories of Tunisians
    paying clerks at the Ministry of Higher Education to get
    their children into better schools than were merited by their
    test scores. Government jobs -- a prize in Tunisia -- are
    also believed to be doled out on the basis of connections.
    Leila Ben Ali's late mother, Hajja Nana, is also reported to
    have acted as a broker for both school admissions and
    government job placement, providing her facilitation services
    for a commission. Among the complaints from the protestors
    in the mining area of Gafsa were allegations that jobs in the
    Gafsa Phosphate Company were given on the basis of
    connections and bribery.

    ---------
    Mob Rule?
    ---------
    ¶10. (S/NF) The numerous stories of familial corruption are
    certainly galling to many Tunisians, but beyond the rumors of
    money-grabbing is a frustration that the well-connected can
    live outside the law. One Tunisian lamented that Tunisia was
    no longer a police state, it had become a state run by the
    mafia. "Even the police report to the Family!" he exclaimed.
    With those at the top believed to be the worst offenders,
    and likely to remain in power, there are no checks in the
    system. The daughter of a former governor recounted that
    Belhassen Trabelsi flew into her father's office in a rage --
    even throwing an elderly office clerk to the ground -- after
    being asked to abide by laws requiring insurance coverage for
    his amusement park. Her father wrote a letter to President
    Ben Ali defending his decision and denouncing Trabelsi's
    tactics. The letter was never answered, and he was removed
    from his post shortly thereafter. The GOT's strong
    censorship of the press ensures that stories of familial
    corruption are not published. The Family's corruption
    remains a red line that the press cross at their own peril.
    Although the February imprisonment of comedian Hedi Oula
    Baballah was ostensibly drug-related, human rights groups
    speculate his arrest was punishment for a 30 minute stand-up
    routine spoofing the President and his in-laws (Tunis D).
    International NGOs have made the case that the harsh prison
    conditions faced by journalist Slim Boukdhir, who was
    arrested for failing to present his ID card and insulting a
    police officer, are directly related to his articles
    criticizing government corruption. Corruption remains a
    topic relegated to hushed voices with quick glances over the
    shoulder.

    ------------------------
    The Elephant in the Room
    ------------------------

    ¶11. (S) Several Tunisian economists argue that it does not
    matter whether corruption is actually increasing because
    "perception is reality." The perception of increasing
    corruption and the persistent rumors of shady backroom
    dealings has a negative impact on the economy regardless of
    the veracity. Contacts tell us they afraid to invest for
    fear that the family will suddenly want a cut. "What's the
    point?" Alaya Bettaieb asked, "The best case scenario is that
    my investment succeeds and someone important tries to take a
    cut." Persistently low domestic investment rates bear this
    out (Ref H). Foreign bank accounts, while illegal, are
    reportedly commonplace. A recent Ministry of Finance amnesty
    to encourage Tunisians to repatriate their funds has been an
    abject failure. Bettaeib stated that he plans to incorporate
    his new business in Mauritania or Malta, citing fear of
    unwanted interference. Many economists and business people
    note that strong investment in real estate and land reflects
    the lack of confidence in the economy and an effort to keep
    their money safe (Ref C).

    ¶12. (S) Thus far, foreign investors have been undeterred, and
    according to Tunisian business contacts, largely unaffected.
    Foreign investment continues to flow in at a healthy rate,
    even excluding the privatizations and huge Gulf projects
    which have yet to get underway. Foreign investors more
    rarely report encountering the type of extortion faced by
    Tunisians, perhaps reflecting that foreign investors have
    recourse to their own embassies and governments. British Gas
    representatives told the Ambassador they had not encountered
    any impropriety. XXXXXXXXXXXX stated that several years ago
    Belhassen Trabelsi attempted to strong arm a German company
    producing in the offshore sector, but that after the German
    Embassy intervened Trabelsi was explicitly cautioned to avoid
    offshore companies. Despite pronouncements about increasing
    domestic investment, the GOT focuses heavily on increasing
    FDI flows to the country, particularly in the offshore
    sector. Nevertheless, there are still several examples of
    foreign companies or investors being pressured into joining
    with the "right" partner. The prime example remains
    McDonald's failed entry into Tunisia. When McDonald's chose
    to limit Tunisia to one franchisee not of the GOT's choosing,
    the whole deal was scuttled by the GOT's refusal to grant the
    necessary authorization and McDonald's unwillingness to play
    the game by granting a license to a franchisee with Family
    connections.

    -------
    Comment
    -------
    ¶13. (S) Although the petty corruption rankles, it is the
    excesses of President Ben Ali's family that inspire outrage
    among Tunisians. With Tunisians facing rising inflation and
    high unemployment, the conspicuous displays of wealth and
    persistent rumors of corruption have added fuel to the fire.
    The recent protests in the mining region of Gafsa provide a
    potent reminder of the discontent that remains largely
    beneath the surface. This government has based its
    legitimacy on its ability to deliver economic growth, but a
    growing number of Tunisians believe those as the top are
    keeping the benefits for themselves.

    ¶14. (S) Corruption is a problem that is at once both
    political and economic. The lack of transparency and
    accountability that characterize Tunisia's political system
    similarly plague the economy, damaging the investment climate
    and fueling a culture of corruption. For all the talk of a
    Tunisian economic miracle and all the positive statistics,
    the fact that Tunisia's own investors are steering clear
    speaks volumes. Corruption is the elephant in the room; it
    is the problem everyone knows about, but no one can publicly
    acknowledge. End Comment.

    Please visit Embassy Tunis' Classified Website at:
    http://www.state.sgov.gov/p/nea/tunis/index.c fm
    GODEC

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