Excerpt from document summary
(S) In the latest in a long string of questionable
business deals, the Ben Ali clan has recently entered the
banking business, assuming leadership of Tunisia's most
profitable private bank -- Banque de Tunisie (BT). In April,
Alya Abdallah, wife of Foreign Minister Abdalwahab Abdallah,
became President of BT

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P 281204Z MAY 08
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Content
S E C R E T SECTION 01 OF 03 TUNIS 000568

SENSITIVE
SIPDIS

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

E.O. 12958: DECL: 05/28/2018
TAGS: EFIN, EINV, KCOR, TS
SUBJECT: BEN ALI, INC. TAKES OVER A BANK

REF: A. TUNIS 365
B. 07 TUNIS 1433
C. 06 TUNIS 1673
D. 06 TUNIS 1672
E. 06 TUNIS 1630
F. 06 TUNIS 1622

TUNIS 00000568 001.2 OF 003

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

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Summary
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1. (S) In the latest in a long string of questionable
business deals, the Ben Ali clan has recently entered the
banking business, assuming leadership of Tunisia's most
profitable private bank -- Banque de Tunisie (BT). In April,
Alya Abdallah, wife of Foreign Minister Abdalwahab Abdallah,
became President of BT, replacing Faouzi Bel Kahia, the
highly respected banker who held the post for 16 years.
According to an Embassy banking contact, Bel Kahia was
forcibly removed to create an opening for Abdallah. Since
taking office, Abdallah has replaced three members of the
board -- two of them former ministers -- with insiders such
as Belhassen Trabelsi, the President's brother-in-law and
oft-cited as the ringleader behind Ben Ali clan corruption
(Refs C, D, E, F). Abdallah also canceled a decision taken
by shareholders to increase the number of shares. BT shares
have fallen nearly 25 percent since the changes. End Summary.

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Mrs. Abdallah's Power Play
--------------------------

2. (S) Alya Abdallah, wife of Foreign Minister Abdelwahab
Abdallah, was appointed President of Banque de Tunisie (BT)
in April, replacing Faouzi Bel Kahia, the highly respected
banker who held the post for 16 years. Abdallah was
officially nominated by the board of directors and her
position will be ratified by BT shareholders at the next
general assembly. BT is Tunisia,s most profitable and best
managed private bank. While most Tunisian banks remain
saddled with non-performing loans, BT's assets are strong and
2007 net profits are expected to be in the neighborhood of
160 million dinars. Although Abdallah comes to BT from her
position as chairman of the board at Union Internationale de
Banque (UIB -- majority-owned by Societe Generale), Embassy
contacts are quick to point out she is not qualified for
either position.

3. (S) Prior to UIB, Abdallah's only banking experience was
as the head of human resources at state-owned Societe
Tunisienne de Banque (STB). As one contact, a former bank
chairman himself, complained, "she has never been a banker
and has no financial experience." Abdallah's tenure at UIB
is reported to have been rocky, with stories of shouting
matches between Abdallah and the French General Manager.
According to the former bank chairman, Abdallah asked Central
Bank Governor Taoufik Baccar to get rid of the GM. The GM
was asked to leave the country, which he did. Abdallah then
asked Baccar for a new position, with her sights on Banque de
Tunisie's presidency.

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Out With the Old...
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4. (S) Although BT and former president Bel Kahia enjoy
excellent reputations in the Tunisian banking community,
several factors made BT ripe for takeover. BT is fully
private, but held by numerous small shareholders, with the
largest stakeholder -- French Industrial and Commercial
Credit (CIC) -- holding only 20 percent of the bank. Faouzi
Bel Kahia is reportedly suffering from multiple sclerosis.
Although Bel Kahia's illness provided this opening, rumors
indicate and an Embassy contact in the industry confirmed
that Bel Kahia was pushed out. Bel Kahia had wanted to stay
through the bank's General Assembly, during which BT's

TUNIS 00000568 002.2 OF 003

stellar 2007 profits will be reported. According to this
contact, Bel Kahia was visited twice by Baccar: during the
first visit Bel Kahia pleaded to stay, but during the second
visit Baccar told him he was out, to which Bel Kahia is
reported to have responded with tears. The contact noted
that the level of the governor's intervention in this
situation was unprecedented. Bel Kahia was rumored to have
chosen a successor, who had already been approved by the
board. While not currently involved in politics, Bel Kahia
is a friend of the regime, serving previously as Minister of
Transport and Director General of state-owned Tunisair.
Since assuming her new position, Abdallah has removed three
members of the board -- Abderrazak Rasaa, former Deputy
Minister of Finance, Ilyes Jouini, Professor at Dauphine
University in Paris, and Tijani Chelli, a former Minister of
Public Works, Minister of Telecommunications and Minister of
Economy,

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In With the New
---------------

5. (S) Although the departure of three notable board members
is a surprise, it was one replacement in particular that drew
the attention, and ire, of the Tunisian business community.
Abdallah named Belhassen Trabelsi, the President's
brother-in-law and widely believed to be the key player in
Ben Ali clan corruption, to the bank's board of directors and
also to the credit committee. Trabelsi has reportedly been
involved in a wide range of corruption schemes -- with
stories ranging from him setting up shop in a gas station
across from the airport to facilitate customs shipments in
return for large bribes and to expropriating property at will
from hapless homeowners. In February, Trabelsi began buying
huge numbers of BT shares (20,000 a day), drawing attention
to his interest in the bank. His current stake in BT is
unknown. In addition to Trabelsi, Lotfi Hamrouni, chairman
of the Hamrouni Group, and Ali Bakir, SFBT (Tunis
Refigeration and Brewing Company) -- Tunisia's Coca-Cola
bottler, were named to the board.

6. (S) In addition to changing the composition of the board,
Abdallah cancelled a communique issued by the shareholders
prior to her arrival. The shareholders signed a Pacte
d,Actionnaires to double their shares and increase bank
capital. The former banker characterized the pacte as an
effort by shareholders to protect their influence within the
bank. BT shares have fallen 25 percent since Abdallah
cancelled the communique. The former bank chairman noted
that control of BT is a significant boon to the family,
giving them a financial tool at their disposal with which
they can acquire and finance new ventures. As such, bank
performance is a secondary concern.

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Comment
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7. (S) Tunisia's financial sector is already plagued by
high-levels of non-performing loans, many of which are a
result of corrupt banking practices. Belhassen Trabelsi's
position on any bank board, or credit committee, would be
significant cause for concern. In the case of BT, his
participation jeopardizes the integrity of Tunisia's premiere
banking institution. Moreover, the Central Bank Governor's
involvement in this scenario casts doubt on his ability or
willingness to serve as an independent actor. Serious
efforts at banking sector reform were just dealt a heavy blow.

8. (S) Tunisians are unable to complain publicly, but do so
loudly in private about crony capitalism and ill-gotten
gains. Rumors of familial corruption have become widespread
in Tunisia, with Banque de Tunisie just one of many examples.
Despite their frustration, many Tunisians are quick to
absolve Ben Ali of any direct responsibility and lay the
blame squarely on the Trabelsis. Yet, claims that he is
unaware of the situation strain credibility. GOT insiders
and the President's extended family are reaping the benefits

TUNIS 00000568 003.2 OF 003

from Ben Ali's continued reign, but in doing so have
undermined the effectiveness and credibility of the
government. Even if the money is not flowing into Ben Ali's
bank account, he bears responsibility for what happens on his
watch. 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 A, B). Faced with high unemployment
and high prices, Tunisians are simultaneously confronted with
obvious corruption and conspicuous displays of wealth. The
frustration is palpable, but it appears there is no end in
sight. End Comment.

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