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May. 14 2010 — 2:29 pm | 455 views | 0 recommendations | 0 comments

Harrod’s Sale Crowns Mohamed Al-Fayed World’s Craziest Billionaire

When feisty Egyptian retail mogul Mohamed Al-Fayed announced earlier this week that he sold his prized luxury store Harrods to the Qatari royal family for $2 billion, it marked his official entry to the who’s-who list of ten-digit fortunes.

Yes, the headline here is not that what al-Fayed did yesterday was crazy- in fact it may be the sanest thing he’s ever done- but that his reported $1.32 billion cut now makes him a certified billionaire. And given his colorful track record, rife with (alleged) bribery,  vicious feuds and bizarre conspiracy theories he has a strong case for now being the world’s craziest.

And that’s a dense field. Hitherto May 10’s announcement, the distinction probably belonged to self-proclaimed “#1 King of All Fun” generic-drug kingpin Stewart Rahr, though even he had stiff competition from an increasingly-senile Sumner Redstone and the irrepressible Mark Cuban.

Why does Al Fayed trump them all? Many reasons, but these three loom largest:

1. His Faux-Paranoia

Most billionaires are a little cagey- and for very good reason. As any poor soul who’s had the misfortune of winning the lottery can tell you, public wealth is a big burden: an infringement on you and your family’s security, privacy and a source of unmanageable junk mail. But Al Fayed’s raging paranoia is legendary and also inauthentic. As recounted in Maureen Orth’s engrossing 1995 expose in Vanity Fair:

Fayed has a personal security staff of 38-two teams that alternate, one week on, one week off, at his residence at 60 Park Lane, at his country house in Oxted, where his family lives, and at his castle in Scotland.  His “close-protection team” consists of 8 or 10.  One assumes that the millions of dollars this security costs and the level of his apparent paranoia, which extends to wearing only clip-on ties so that he cannot be strangled, must mean that Fayed’s life is under constant threat.  Not so, according to a half-dozen former guards I interviewed, who say that his security is mainly for show.

via Vanity Fair’s famous exposé of Mohamed ‘Al’ Fayed, by Maureen Orth.

2. His Genuine Paranoia

Not a charmingly-eccentric brand of neuroticism, mind you- but a rather repellant fear of anything “beneath” him. Again, as reported by Orth back in 1995:

Whenever Fayed suffers a spate of bad publicity, the press seems to be flooded with stories and pictures of him helping needy children.  In fiscal 1994, Fayed had House of Fraser donate £800.000 ($1.2 million) to charity.  Yet Fayed’s fear of germs is such, say ex-employees, that he can, barely stand to touch the children who get him so much positive press.  He does not allow his own children to attend the annual Harrods Christmas party, they say, for fear of contamination, and he keeps Wet-wipes in his pockets so that after shaking every little hand he can wipe his own.

3. He’s completely delusional

Evidence? It’s almost too plentiful to list here but it includes a) a conviction that the British government conspired to kill Princess Diana and his son Dodi Fayed in the 1997 car crash, b) the fact that in order to convince the government that he had the cash to buy Harrods back in 1984, he drafted a completely-fabricated press release claiming (among other things) that he hailed from an “old, established Egyptian family” of industrialists and was educated in British schools. And c) his defamation lawsuit against Vanity Fair for their critical profile was summarily dismissed.

I will grant Al Fayed this- he does win “Best Appearance by a Billionaire on Da Ali G Show.” No small feat, especially for a man who is paranoid, delusional and (one would think) completely lacking a sense of humor:

Apr. 28 2010 — 2:09 pm | 227 views | 2 recommendations | 5 comments

Obama’s Entrepreneurship Summit: Propaganda or Progress?

In case you missed it, the “new beginning” to US-Muslim relations kicked off Monday. The difference is palpable, no?

Well, maybe no. Not yet- but the two-day Presidential Summit on Entrepreneurship which ended yesterday at the White House is evidence of a promise fulfilled. Back last June in his much-ballyhooed speech in Cairo, Obama vowed to host a conference of prominent business people and leaders from predominantly-Muslim countries to network, discuss the region’s pressing economic problems and identify ways the US can help.

In terms of participation, the summit seemed a sure success, with attendees including Muslim rockstars of commerce like Grameen Bank-founder and microfinance-Evangelist Mohammad Yunus, Arif Naqvi, head of Arab private equity giant Abraaj Capital and Sudanese billionaire Mohammed Ibrahim, founder of mobile group, CelTel International. And as a diplomatic maneuver, it’s a smart strategy: after all, what topic could be more unifying and less-controversial than economic empowerment (aka turning a buck)? Especially when- as it is at this summit- the emphasis is on social as well as financial returns. Steering the Muslim-American dialogue to something other than terrorism, profiling, war and oil is not only a welcome change from the same old discourse, it’s an important chance to focus on the dual crisis of surging population growth and high unemployment endemic to the Middle East.

But is a feel-good confab with roundtables on vague subjects like “Promoting Entrepreneurship and Enabling Business” and “Culture of Entrepreneurship” really going to get us anything beyond a modicum of goodwill from a few economically-progressive Muslim leaders? Is it a legitimate sign of progress? Not by the history-books standard:

“In some ways Cairo is not going to be fulfilled until you get grander solutions to some of the big geopolitical problems,” said Juan Zarate, an analyst at the Center for Strategic and International Studies. “The president is going to be judged by his ability to move those big issues much more so than whether or not he hosts a conference at the White House,” he said.

Via: NewsDaily: Obama fulfills Cairo pledge with entrepreneur summit.

And is the White House really the best host of an event espousing the merit of entrepreneurialism? Particularly at a time when the administration has been so publicly battling the “unchecked greed” of  capitalism. As Tim Kane, a researcher at the Kauffman Foundation for Entrepreneurship noted:

To be fair and balanced, I’m not sure all of the White House folks get entrepreneurship and you get a sense some want to talk about social entrepreneurship instead. Believe me, the delegates from the Middle East noticed, and one would-be entrepereneur commented to me that, “We need help creating wealth before we start talking about giving it back.”

via Grading the Presidential summit on entrepreneurship – CSMonitor.com.

And how realistic is it, that these entrepreneurs will be able to launch or grow their businesses in a region that’s overwhelmingly under autocratic (real or virtual) rule? Andrew Albertson, director of the Project on Middle East Democracy, is not optimistic:

Washington does the region no favors by offering an entrepreneurship summit, one of its new initiatives, while avoiding the root problems hindering business such as political decay and corruption.

via Losing Cairo? | Foreign Policy.

Yet despite the fluff, spin and potential futility surrounding the whole gathering, Obama should still be lauded for holding it, for these 3 reasons:

1. New businesses- and the jobs they create- are critical to the Middle East’s near-term future.

According to a recent report by the Brookings Institution, the region’s youth unemployment rate is nearly twice that of the world at large. This, despite the fact that its youth population also happens to be one of the world’s best-educated demographics. Millions of educated but jobless youths in a region where the education and health care system, infrastructure and natural resources are already strapped is a recipe for discontent. If these quasi- or outright- autocratic rulers care to keep their populace pleased, they’d be best to empower entrepreneurs.

2. Speaking of discontent…

While there is no hard-and-fast evidence that poverty breeds terrorists (or that there is any petri dish for terrorists, anywhere), there is loads of anecdotal evidence that there is a link between a country’s youth unemployment and its homegrown terrorists. Frustrated, disenfranchised young people with schooling but little opportunity to use it to better their lives is a common profile of terrorist offenders and exactly the population nonprofits like the Education for Employment Foundation try to reach. EFE’s mission is to provide supplemental vocational and technical education to young people in predominantly-Muslim countries- future entrepreneurs or their potential employees.

3. The Summit focuses on what unites us

Again with the money thing. But seriously, encouraging and enabling people all over the world to make a living, support their families and innovate is, in my opinion, a more concrete and sensible approach to pushing democracy than any “Winning hearts/mind” campaign strategy of the Bush administration. A world of billionaires would probably still not be entirely peaceful but a world where people have the agency to improve their lives might be one in which folks have one less thing to fight over.

Apr. 19 2010 — 8:05 pm | 329 views | 1 recommendations | 10 comments

Goldman’s Fraud: Ignorance, Meet Arrogance

In sifting through the reams of damning documents and news stories that have surfaced over the past three days, it is perversely comforting to rediscover the icky truth behind financial implosions in general and the subprime debacle in particular: no one- no one- knew what the hell they were doing.

I say “comforting” because every time I try to suss out the salient details of any issue having to do with credit-default swaps, collateralized loans or subprime derivatives, I get so confused and lost I wonder if I am perpetrating my own personal fraud- moron hack journalist. So the news frenzy set ablaze last Friday by the SEC’s civil fraud case against Goldman Sachs has granted us a new opportunity to gawk at the stunning hubris of some Wall Street traders and remember that common sense has not yet been rendered irrelevant by ad networks, quant models, the iPod or Wikipedia.

To get a handle on just how much the involved parties didn’t know, a little background is helpful:

1. What’s the SEC’s suit all about?

In short, the SEC is accusing Goldman Sachs, the lionized Harvard of investment banks, of lying to investors. In finance- as in relationships- not telling the whole truth is tantamount to lying. When Goldman hawked to investors a shiny new product- a synthetic collateralized debt obligation tied to the performance of subprime residential mortgage-backed securities (sounds sexy- surely someone smart put it together) back in early 2007, they didn’t bother to tell investors that the fund’s holdings were chosen with the help of an independent hedge fund (billionaire John Paulson’s Paulson & Co.) who wanted the fund to fail. While Goldman was marketing the fund on the premise that the housing market was sound, bear Paulson was betting housing would flop and, the SEC alleges, made the portfolio pics accordingly. Spoiler alert: he was right. Paulson made $3.5 billion shorting subprime in 2007. [For more background, check out the SEC's formal complaint- it's surprisingly readable].

2. So what was in this fund, exactly?

A big pile of dodgy debt. No kidding. Investment banks nationwide binged on subprime mortgage securities back in the heyday of the housing bubble. High-risk mortgages- the kind banks were normally loathe to give out because of the high likelihood of default- were suddenly hot on Wall Street. Investors developed complex statistical models to determine borrower behavior (defaults, prepayments, etc.) driving bond value. Fancy algorithms- portfolio analytics- developed by the super-genius “quant” traders at banks showed that distributing risk over a broad “basket” of loans could turn subprime loans into safe ones. So by bundling some very risky loans in along with a heap of not-so risky loans, you had an AAA-rated product. A rock-solid way to mint money. The same way that mixing some arsenic into a pie crust recipe will make for an overall perfectly-healthy treat. Make sense? No? You’re right- it doesn’t make sense. These two Brits articulate the nonsensical-ness of it all rather nicely:

Because Paulson had a gloomy view of the future of mortgage securities, he participated in the market largely through Credit Default Swaps, insurance contracts which paid out a premium if a loan defaulted. Paulson essentially, had a lot to gain if housing went bust and (the SEC alleges) his firm influenced the Goldman fund’s portfolio picks to emphasize the dodgiest of the debt.

3. Why is this Goldman’s fault? Seems like Paulson is the bad guy.

Paulson so far hasn’t been implicated in any shenanigans though there’s a case that he should be. Goldman made the critical mistake not to be disclose to prospective investors the involvement of Paulson & Co. and their bearish view. In their response, they say ACA an “independent and experienced portfolio selection agent” and the largest investor in the fund, selected the portfolio. But how independent were they if they were the largest investor? And selected from what- a list given to them by Paulson?

The moral takeaway- and the thing that is really going to tarnish Goldman (and the stock market) in the long run is how arrogant and clueless those involved come across. “Fabulous Fab,” the named orchestrator behind the particular fund, is a straight-to-screen character. His now-famous 2007 email says it all:

“More and more leverage in the system, The whole building is about to collapse anytime now…Only potential survivor, the fabulous Fab[rice Tourre]… standing in the middle of these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!! (sic)” he wrote in an email to a friend in January 2007, according to the SEC.

via ‘Fabulous Fab’ emails revive broker conflicts – MarketWatch.

Surely politics has more than its share of ignorance and arrogance and the timing of the SEC probe could not be more politically-perfect for the Dems and Obama’s financial-reform agenda. But fraud is fraud and meddling in things you don’t fully understand is always a bad idea, be it home renovation or statistical derivatives models.

Apr. 14 2010 — 5:29 pm | 424 views | 1 recommendations | 1 comment

Qatar’s Visa Revenge

If the US is waiting for an apology from Qatar for last week’s insolent-ambassador incident, they are wasting their time. Qatar has been silent since last Wednesday’s flap but if this recent news out of the Qatari Embassy is any indication, they are kind of pissed off:

The Government of Qatar recently informed the U.S. Embassy that as of May 1, 2010 U.S. citizens will no longer be able to apply for tourist visas on arrival in Qatar.

via US State Department Info on Qatar.

The announcement goes on to detail how the Qatar-bound can go about figuring out how to obtain a visa- by contacting the Qatari Embassy, the Qatari Ministry of the Interior and a number of other red-tape-ridden governmental agencies. This is a drastic change from the country’s previous laissez-faire policy of doling out Visas upon arrival in Doha. And it’s not just Americans getting a chillier reception- residents of 33 other countries (including France and the UK) are reportedly also affected by the new restrictions.

The sudden change has caused a firestorm in the Twitter-sphere with confused, annoyed, inconvenienced expats and business travelers feeling a lot less welcome in a country that had until now been aggressively touting itself as a hot destination for business, culture and the arts. It has also miffed hotel execs, concerned about the law’s potential impact on a nascent tourism industry.

Given its global-domination ambitions, why would Qatar do this? Government officials are (unsurprisingly) mum but rowdy commenters on the Gulf News and wire service Zawya were full of theories:

#1 Security:

January’s assassination of a top Hamas official in Dubai (by assassins holding forged European passports) has rattled authorities across the Gulf- vigilante justice perhaps not being as commonplace in the GCC as elsewhere in the Middle East. Says one Edy Abbott:

This is one way to prevent the Mossad from using Qatar as their play ground. It seems European, Australian and Canadian passports can be forged quite easily without being punished and Qatar doesn’t want to see another 30 Mossad agents roaming its streets on a man hunt.

via Qatar To Tighten Visit Visa Regulations For UK, US Nationals.

#2 Bureaucratic Quid Pro Quo:

Qataris face arduous Visa processes prior to arrival in many major Western and Asian countries. Why shouldn’t the playing field be leveled? Per Marjorie:

This is part of Qatar’s new “reciprocity” kick. A few months ago they switched to a reciprocity system for driver’s licenses: American licenses can’t be automatically converted to Qatari ones, because the US doesn’t automatically convert Qatari licenses.

Via Global Voices Online » Qatar: Expats outraged by plans to scrap visa-on-arrival policy.

#3: Revenge for Long-Simmering Indignities:

Specifically, indignities having to do with racial profiling in the post-9/11 world. Says Wael Hallaj:

By any means the Qatari move to impose a visa on Europeans and Americans is a right one, the justification is clear and reasonable…Qatari citizen are humiliated at the European checkpoints.

Via New visa law set to isolate Qatar « ArabianMoney.

While it’s highly unlikely that Qatar immigration officials are acting from a purely punitive perspective, the Arab world’s sensitivity to visa and travel issues is very real and (particularly after last week’s diplomatic dust-up) very raw. As one Gulf diplomat put it to The Washington Post last week, last week’s incident “never would have happened” had the ambassador been Swedish.

But in the long run is this a good decision for Qatar’s economy? Seeing as the economic development plan they’d been cautiously unrolling over the past ten years relied heavily on courting international universities (filled with international students), journalists from all over and a veritable United Nations of energy companies, the answer seems to be no. As one Gulf blogger put it:

Whoever made this decision has perhaps not thought through the full consequences. It makes a mockery of the hundreds of millions spent promoting Qatar as a country ‘open for business’ and is a particular disincentive for multinationals to locate operations in the country.

via New visa law set to isolate Qatar « ArabianMoney.

And yet- as last week’s episode made clear- every country has the right to protect its borders. Maybe we shouldn’t be so quick to judge.

Apr. 8 2010 — 4:54 pm | 187 views | 2 recommendations | 2 comments

Qatar Above Reproach?

You know that bad kid in the neighborhood? The one who shoplifts, loiters and sells your kid pot but who you can never rat out because his mom is your boss’s sister? The US government sure does and they’re now in the awkward process of trying to delicately deliver a smackdown to a citizen of a nation they’d rather not piss off.

The “bad kid” in question here is of course Mohammad al-Madadi, the Qatari diplomat who made the boneheaded decision to take a smoke in an airplane lav yesterday and then crack a terrorist joke when caught. Not so funny, least of all to the flight’s 162 other passengers who experienced the distinct terror of having two F-16 fighters intercept the Denver-bound flight. All told, the incident was a scary shock, just three months after the attempted Christmas day bombing, and cost taxpayers an easy $1 mil.

Censure, you ask? Not for diplomats. While an ordinary citizen would face steep consequences for such cavalier comments (not to mention the federal crime of in-flight smoking) al-Madadi is protected under the archaic provision known as diplomatic immunity:

Under international protocol — the 1961 Vienna Conventions on Diplomatic Relations — diplomats in foreign countries enjoy broad immunity from prosecution. That immunity can only be waived by a diplomat’s home government, something that is rarely requested and even more rarely granted.

via The Associated Press: Officials: Plane scare diplomat to be sent home

This rule is familiar to most diplomats as the “park anytime, anywhere for however long,” pass and is typically more of a nuisance than a threat. One would think however, that in the case of truly-egregious flaunting of US law, officials would take action. Not necessarily.

But even without charges being pressed against him and without such a waiver, the U.S. could have moved to declare Al-Madidi “persona non grata” and expel him from the country. However, officials said they would not pursue this, given the close nature of U.S.-Qatari ties and the importance the country plays in the Middle East.

Had al-Madadi been so unfortunate as to hail from Yemen, Kyrgyzstan or maybe Mauritius he very likely would have been on the first plane home. But Qatar is different. Not only does the tiny Persian Gulf country lay claim to the world’s largest reserve of Liquified Natural Gas (or LNG, a form of energy considered environmentally-superior to oil fuel or coal), they boast a $65 billion Sovereign Wealth Fund and a burgeoning stock market that’s skirted the region’s financial slump thanks to its leaders’ slow-and-steady approach to economic development. And did I mention they are peaceful, pretty darn liberal (for the Gulf) and have embraced freedom of the speech more genuinely than arguably any other country in the region?

So yes, as a rare, stable ally in a contentious part of the world, Qatar is absolutely getting special treatment. It’s not fair but it is strategic and probably wise. Al-Madadi’s biggest crime here is arrogance. And although it might win favor with a certain hardcore subset of self-dubbed “Patriots” to send him packing, insulting Qatar is not worth the political price. If Qatar wants to compensate us for the time and trouble of a military jet entourage, we should take it. Gas, cash and priceless works of art accepted.

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    About Me

    I am a Brooklyn-based, Boston-born freelance writer beguiled by the lives, moves, thoughts and impact of those heroes of capitalism (or plain lucky bastards) we call billionaires. My fascination with these moneyed Masters of the Universe started while I was a reporter at Forbes Magazine where I spent my days tracking and tallying billion-dollar fortunes from Aspen to Auckland.

    Before Forbes I worked for Outside Magazine in Santa Fe- just long enough to pick up a pair of cowboy boots and an addiction to green chile- and prior to that did a stint shuffling papers for rich Emiratis at a Dubai investment bank before deciding it was much more interesting to stalk them than work for them.

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