251,287 cables indexed
Reference ID: 08TUNIS679
Subject: CORRUPTION IN TUNISIA: WHAT'S YOURS IS MINE
Origin: Embassy Tunis, Tunisia Classification: SECRET
Created:23 Jun 2008 Released:07 Dec 2010
Tags: ECON, EFIN, EINV, KCOR, PGOV, SOCI, TS

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S S 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, financial
consultant Ezzeddine Saidane (protect)
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. Roger Bismuth
(protect),
XXXXXXXXXXXX
a strong supporter of the government and member of
Chamber of AdvisorsXXXXXXXXXXXX, 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. SaidaneXXXXXXXXXXXX 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. Saidane, a former chairman
at Arab Banking Corporation,
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. Venture capitalist Alaya Bettaieb
(protect)
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. SaidaneXXXXXXXXXXXX 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