But they don't exist say the Palestinians. They don't exist say the Egyptians, so ... it doesn't matter if they are not functional, because something that doesn't exist cannot be either functional or not. The non-existent tunnels cannot cause or create fraud, because they don't ... EXIST.
Tunnel fraud leaves Gazans on verge of financial ruin
For years, a network of underground smugglers' routes from Egypt to the Gaza Strip has supplied a besieged population with everything from cement to cattle. But now a series of major scams has destroyed the dreams of desperate investors who saw the tunnels as a path out of poverty
Peter Bradshaw in Gaza City
The Observer, Sunday 7 June 2009
Jawad Tawfiq, a 52-year-old Gazan actor and director, was dubious at first, but his nephew insisted. If they could scrape together enough money, the nephew said, large profits could be made from investing in the tunnels that snake beneath the Egyptian border.
"They were liars," Tawfiq said bitterly last week. "They took my money to put in their own pockets. And we are being offered a fraction of what we gave them."
At first the tunnels emerged as smuggling routes; then they became the vital lifeline for a Gaza under economic siege by Israel. But many people who invested in the tunnels now see them quite differently - as a source of ruination.
The tunnel schemes were advertised as opportunities for doubling and trebling money by unscrupulous figures linked to powerful businessmen in Gaza and, allegedly, to senior officials in Hamas, but have instead led to huge losses for ordinary residents of the Strip.
According to Hamas's economics minister, Ziad al-Zaza, whose office is investigating the issue, some $100m has been taken fraudulently from would-be entrepreneurs. Others suggest the figure could be closer to $500m.
There have been many brutal phases in Gazan history, culminating in the Israeli invasion at the turn of the year, which laid waste much of the Strip's fragile infrastructure. But the hitherto untold story of the great Gazan tunnel scam is notable for being self-inflicted and, therefore, particularly depressing for a beleaguered population.
As Omar Shaban, an analyst from a local thinktank, says: "The harm done to Gaza goes well beyond the savings lost in the investment schemes. The tunnels distort Gaza's social structure. They destroy the values that a state requires to function. In fact, they present no values that people can believe in."
The tunnels are not supposed to exist at all. As the war in Gaza ground to a close in January, Israel insisted on a ceasefire condition that the subterranean network be closed.
Yet there are now scores of them - more than ever before - snaking ever closer to each other. On the Egyptian side, bribes and an unwillingness to close off Gaza keep open the tunnels and smuggling routes. Analysts say that Israel knows this full well, but finds their existence convenient because they take pressure off the argument for reopening the Gaza crossings.
What comes through the tunnels is what keeps Gaza afloat economically. Metal ladders lead down brick-lined shafts into layers of shored-up sandy tunnels through which are winched bags of cement, cigarettes, cheese, children's bicycles and car parts. Even herds of lowing cattle are led through the larger workings.
Above ground, amid the Israeli bomb craters and ruined houses where the tunnels begin, their entrances are patrolled both by their owners and black-clad men from Hamas.
It is easy to see the smuggling routes as a heroic resistance to a crippling economic blockade. But many Gazans now reject the tunnels' status as an indispensable lifeline. In the most recent incident, investors in a tunnel scheme being promoted by one Ihab al-Kurdi were informed that their money was "gone" - without explanation.
To add insult to injury, they were pressurised last week into signing confidential contracts with Kurdi's "company" offering them 16.5% of the money they put in, in exchange for not complaining, an offer many investors apparently felt they could not refuse.
If Jawad Tawfiq has not been bankrupted, his frightened neighbour, who asks to be identified only as "Umm Mohammed", is in a different situation. She sold all her gold and jewellery, which she had bought after working abroad, to add to a pot of money collected by her family, totalling $17,000. Now she will also have to find money to repay what she borrowed from her son's fiancée.
"I trusted them," she said last week. "The middleman we dealt with seemed so honest. He was a religious man. He seemed so nice. I lost everything and now I'm poor. If it wasn't for the salary I receive from the Palestinian Authority, I would be begging now."
It has not only been Tawfiq and his neighbour who have lost out. The same stories are being repeated from Gaza City down to Khan Younis and up to Beit Hanoun: of people who sold their houses and cars, borrowed against dowries and from relatives to invest in tunnel schemes and got burnt.
And while some victims insist they know those who made large sums - mainly relatives of those managing the investments - they are angry that there appears to be no opportunity for restitution, and no proper explanation of what occurred.
In the "intolerable" situation that is Gaza, as described last week by President Barack Obama in Cairo, the lure of such schemes was understandable. With few opportunities to do business, trade or even work, the chance to make money out of the illicit cross-border trade with Egypt seemed like a godsend. But this is the tale of a Gaza success story that turned sour.
The victims name two companies run by Wael al-Rubi, in addition to that of Kurdi, as being the major movers behind the tunnel schemes, names confirmed by Zaza as being under investigation. While neither of these men was well known in Gaza business circles before the launch of the schemes, the men who sold the investments on their behalf were representatives of well-known merchant families.
"The tunnels are the worst thing that ever happened to Gaza," says Tawfiq. "It has poisoned it. It has turned Gaza into a prison economy. And for what? For chocolate and bicycles."
What led to the catastrophic losses for many Gazans is difficult to unravel. But some, including Zaza, insist the investment schemes, launched before Israel's assault on Gaza in late December and January, were a criminal scam from the start.
Investors and tunnel operators interviewed by the Observer describe a shadowy network of relationships between a number of businessmen, including some Hamas officials, all taking their cut. Many victims explain how a relative who had met someone involved in an investment scheme had recruited other family members and friends to a kind of pyramid venture that they would discover had fallen apart only when the principals were arrested by Hamas. Usually they were encouraged by the example of someone they knew who had made large sums of money.
On occasion, investors were told by middlemen selling the schemes that the venture was being promoted by a senior Hamas figure, the former interior minister Said Siam, who was killed this year in an Israeli attack. Siam was alleged to have approached local Gaza businessmen and tunnel owners with a plan for a large-scale investment in the tunnels backed by the group.
Hamas denies this. What is certain is that huge sums of money were raised before the project mysteriously imploded, ruining many of the investors.
While Hamas, through Zaza, denies that the organisation was ever involved in a scheme to invest large sums in the tunnels, he does say that some of those involved in the investment "mirage" used their proximity to senior Hamas figures as a cover for what was little more than "robbery".
"Hamas had no relation to the scheme. It is a fantasy," Zaza said last week. "Kurdi said he had good relations with people in government, but what they were selling was a lie. And the problem is not over yet."
But if the schemes run by Kurdi and Rubi were elaborate cons, the relationship between Hamas and the tunnels and the investment schemes is not quite as clear-cut as Zaza describes it. Indeed, one Gaza family that invested heavily in Kurdi's tunnels scheme was the Deri clan, a family with a substantial involvement in Hamas's military wing, which reputedly lost $3m, and allegedly kidnapped Kurdi to get its money back. Some of the most prominent figures in the real tunnel-building business, some of them active for almost 20 years, have in recent years been closely associated with the group.
Zaza says that some of the money has been recovered after his officials seized records, including, he says, details of more than 3,000 phone calls, as part of his investigation. He is unable to say what has happened to the majority of the cash, beyond stating with some certainty that it has not left the Gaza Strip.
The Observer has established that some money has been funnelled into charities and a religious foundation as a cover for the activities of some of those most heavily involved. Other money, it appears, was diverted to officials, while large sums were spent on houses, cars, land and other luxury items in a place where a 10-year-old Daewoo can cost $12,000.
And while Zaza has calculated the money taken from investors at about $100m, Shaban believes the cost of the tunnels scam run by Kurdi and Rubi are far higher. "You see people becoming millionaires in two or three weeks. But what do those people represent? Nothing that is transparent or good or valuable. And so people cheat their families and their neighbours, because people are desperate. How come such illegal things have become acceptable?"
While many have lost their savings and possessions, others who worked deep underground have lost their lives. During a visit to several tunnels being used to transport petrol and cement, the Observer was told that a double collapse two weeks earlier had trapped four teenagers beneath the Egyptian border, two of whom died on the day the Egyptian authorities finally agreed to dig them out.
On the border, tunnel operators - largely Rafah families - give accounts that corroborate the involvement of Hamas in the genuine tunnels. They describe paying taxes of 15-20% to Hamas to operate their often lethal ventures. But they deny, however, that the fake investment schemes that have impoverished the likes of Jawad Tawfiq ever had anything to do with real tunnel operations. The operators also speak of corrupt Hamas security officials who have become wealthy by turning a blind eye to some of the more questionable goods coming under the border, not least Tramadol, a highly addictive prescription drug currently wreaking havoc in Gazan society.
A big tunnel costs $120,000 to construct and run; an average-size one that is little more than a crawl-way about $90,000. Then, in addition to the taxes, a tunnel owner must pay $3,000 for a permit from the municipality.
On top of that, there is the blood money for the families of the children and youths who are killed.
We are ushered in to photograph two tunnels quickly. The speed, we were told, was necessary to avoid Hamas officials seeing pictures being taken.
"Someone was working on one big enough to bring through cars," says one tunnel worker. "It was 90% finished before it collapsed." They tell the story of the "princes of the tunnels", the nickname for three Hamas men they say became hugely rich from their involvement, who brought through cars in pieces for themselves.
"The people who run the tunnels are just ordinary people," says one tunnel operator. "But then people saw the money to be made. Hamas figures invested in some of the tunnels. They have their own one for moving money and wanted people, but no one is supposed to talk about that. People thought they could make money out of it. And people got greedy."
Jawad Tawfiq and his neighbour are not happy with the explanations that have been offered for their loss. "So if there was no real investment in the tunnels, where is the money?" he angrily demands. "Where is the other 84% that has gone missing? It is impossible that it has simply disappeared.
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