Doing Business the Iraqi Way:
A Wall Street Man in Bagdad
C. Berkeley Cooks, Jr., has been in Wall Street, handling various posts for banking and investment houses, for twenty-five years. As he relates in this article, he was entrusted with a delicate commission in Bagdad in 1951. What he saw there in the course of his dealings with bankers, businessmen, and politicians tells us as much about the way of life, political, economic, and moral, of that agitated Near Eastern country as many a weighty tome.
On May 24, 1951, while glancing through the business pages of the New York Times, I came upon the following box inserted among the financial advertisements:
Man with banking experience, and, if possible, some legal knowledge, age 40 to 50. Must be American citizen with good appearance, to proceed forthwith Middle East to supervise liquidation of bank. Substantial salary and free transportation.
Presumably many of us have wondered idly what lies behind these advertisements whose writers feel strongly enough about them to pay to lift them from the anonymity of the classified pages. In this case I decided to go beyond idle curiosity. I had been in Wall Street for more than twenty-five years, I had all the listed qualifications, I was rather bored with the routine of the investment banking business, and I decided to respond. Three weeks later I had an American passport, an Iraqi visa, and a round-trip air ticket to Bagdad.
My commission, as it turned out, was to liquidate the affairs of a Jewish-owned bank which was laboring under impossible difficulties imposed by a hostile Iraqi government.
In answer to my response to “Z7235,” I had received a letter signed by J. I. Sassoon on the stationery of the American Nile Corporation, inviting me to an interview, and shortly thereafter was asked to sign a contract commissioning me to liquidate the affairs of the K. A. Zilkha Maison de Banque, which had been doing business in Bagdad since 1899. Mr. Zilkha himself, the owner of this bank as well as four other banks in the Middle East, and also of the American Nile Corporation, an export-import business, was in Paris, and it was from him that I was to receive my full instructions.
Here in New York my first task was to get a visa to Iraq—my employers could do nothing in this connection since no Jew was allowed to enter Iraq, and it was quite likely that even a Christian, going to Bagdad with the objective of defending the cause of a Jewish bank, would not be admitted. The strategy was up to me: and I decided to get letters from my former business firm, members of the New York Stock Exchange, stating that I was proceeding to Bagdad on important business in connection with banking and investments (unspecified). These impressive credentials, and I believe, too, the imposing “front” I was able to present to the consul, combined to break down the usual strict questioning. Ordinarily a confirmation by cable from the authorities in Bagdad was required before a visa for the purposes specified in my application was issued; as it happened, however, my visa was ready for me the same day I applied.
At this point, I equipped myself as thoroughly as I could for doing business in Iraq. I got a letter of introduction to the American Ambassador there from my Congressman; a general letter attesting to my character from my Senator; and I went to Washington to get information from the Division of Protective Services of the Department of State, as to what I might expect to find in Bagdad. They gave me what seemed to be excellent and informed advice. In a letter I received, before I left, from the officer in charge of the Middle Eastern area I was told:
You may be interested in some information recently received from our Embassy in Bagdad. They report that Mr. Zilkha’s Bagdad representatives appear to be confident that the Guardian General of Jewish Property will shortly issue an authorization permitting the bank to resume operations. After the exemption has been established [Zilkha, as an American citizen, was exempt from Iraq law], then the Embassy foresees no untoward danger to the person of an American negotiator, so long as he conforms to the laws of Iraq. It would be advisable, however, for you to proceed on your mission as unobtrusively as possible for there is no foolproof safeguard against the chance act of an extremist. The Embassy points out that the normal obstacles to any American not familiar with complicated Middle Eastern official and semi-official procedures, in liquidating such a banking operation as Zilkha’s, would be considerable. However, no extraordinary obstacles are foreseen beyond those normally encountered in such a procedure.
Finally, all that remained to be done was to be immunized against a variety of general, subtropical, and peculiarly Middle Eastern diseases. Unfortunately, I was told, there is no immunization for F.U.O.—“fever of unknown origins”—prevalent in Bagdad, or for Bagdad boils, which usually appear on the face, are caused by the sting of a desert fly, last about eighteen months, and leave a hideous and deep scar.
Thus equipped, I proceeded to Paris, to receive from K. A. Zilkha himself a full briefing on the situation in Iraq.
I am only an ordinarily informed American citizen; and what he had to tell me was new and, I must confess, shocking.
Mr. Zilkha, owner of the Bagdad Zilkha Bank, was originally an Iraqi citizen who had left Iraq in 1927 as the result of a blackmail threat. After living in terrible suspense and fear for the better part of a year, he had gone to Beirut, where he established a branch of his bank. In time he opened other branches, in Damascus, Cairo, and Alexandria. Mr. Zilkha had never returned to Iraq, and in 1948 he had become a naturalized American citizen.
But after the war with Israel began—and Iraq is still in a state of war with Israel—the citizenship of Iraqi Jews, whether Iraqi or American, meant nothing, and they were all treated as enemies—and indeed worse. The Zilkha Bank was required to pay a special “war tax” of 34,388 Iraq dinars ($100,000) to help finance the war against Israel. In 1950, the bank was ordered to cease all dealings and operations in foreign exchange, a very profitable department of its business. In May 1951, the bank had been finally padlocked by the Guardian General of Jewish Property and forced to cease all operations—and it had, in addition, to pay a fine of ID 1,000 ($2800) imposed for closing the bank! By this time 151,000 Jews—there had been 155,000 at the outbreak of the war—had already left Iraq, for the persecution had of course not been confined to the Zilkha bank, and person as well as property was threatened. In April 1951, advertisements in the New York press notified the refugee Iraqi Jews that those who failed to return within forty-five days would have all their property confiscated. It was not easy to draw the line between this and outright robbery.
It was for these reasons that Mr. Zilkha had decided to wind up the affairs of his Bagdad bank and since he could not return himself, he placed the advertisement which had led to my selection from about forty applicants. Now I was to proceed to Bagdad to use whatever skill I possessed to settle the affairs of the padlocked bank. Naturally, there was no question as to my personal safety—except, of course, as I from time to time remembered, there was “no foolproof safeguard against the chance act of an extremist.”
And Bagdad in the summer, I soon discovered, was not conducive to cool heads. The temperature averages 118 degrees in the shade, and to leave the plane—as I did on July 6—is like walking into an oven.
I was to live at the Alwaiyah Club, built by the British in 1915 as officers’ quarters, and which, with its extensive grounds, its swimming pool, its meals served on the lawn, its excellent servants ready to anticipate every wish, its roof on which we slept (the nighttime temperature was 100 degrees inside the club), and its truly friendly and helpful residents, made my stay as pleasant as the climate permitted. But first I needed a residential visa—and for that I was required to give written documentary proof that I was not a Jew. (It would seem that the simplest way of determining this, for an uncircumcised Gentile Christian, is by direct physical examination, but perhaps because the Moslems are themselves circumcised, the C.I.D.—Criminal Investigation Department—was satisfied with documents.)
The information I had received from the State Department before I left, I discovered, was sound, and the Zilkha Bank had been allowed to reopen the day before I landed. On July 7, the day after my arrival, I met with the two bank officers, Abdullah M. Yedid and K. M. Toeg, nephew and brother-in-law of Mr. Zilkha, to review the situation. We drew up a complete statement of condition, showing loans outstanding, deposits, and names of depositors. It was evident at a glance that the bank was insolvent owing to two huge frozen loans—about which we will have more to say later. The condition was not of course helped by the excessive and extraordinary “taxation” under which the bank was laboring. The depositors were demanding their money daily. They were almost all Jews; those who held cards signifying they were naturalized could withdraw their funds and were anxious to do so; the funds of denaturalized Jews, on the other hand, had to be turned over to the Guardian General of Jewish Property ($70,000 in deposits were thus confiscated).
We decided we needed about $160,000 in new funds to cover a possible run on the bank. I hesitated to use the regular mails to notify Mr. Zilkha in Paris of the situation because Mr. Edward F. Crocker, our Ambassador, had warned me of the possibility of censorship of mail. Luckily, I was able to make arrangements with our commercial attaché for my letter to Mr. Zilkha to go by diplomatic pouch. It was no simple matter for Mr. Zilkha to arrange to have these extra funds made available for us, since once foreign funds entered the country, Iraqi law did not permit them to get out. We hoped that, ultimately, the depositors could be paid off by the bank’s assets, if and when recovered. In that event, there would be no way of recovering the foreign money we were asking Mr. Zilkha to make available to us. What he did therefore was to arrange for a local British bank, the Ottoman Bank, to give us a loan covered by collateral deposited in a bank in New York.
In any case, Zilkha guaranteed payment in full to all depositors from his own personal fortune. His was a private bank, and under Iraqi law he was personally liable for any loss to depositors. He had plenty of cause to refuse to recognize this responsibility, in view of the persecution to which the bank had been subjected. But he did have to consider the effect such a course of action might have on his other Near Eastern banks. More significantly, the National Bank of Iraq, equivalent to our Federal Reserve bank, held the two bank officers, Mr. Zilkha’s relatives, personally responsible, and could hold over their heads the threat of refusing to permit them to leave the country.
Of course they were very anxious, as was almost every Jew in the country, to leave as soon as possible. They lived in daily fear—not for their property, which they already knew to be in large measure forfeited, but for their own safety and lives. Every day a few remaining loyal depositors would gather at the almost deserted bank building and huddle together, talking with the bank officers and telling each other of new outrages. These men had once been prosperous and active businessmen; they were now afraid to transact any kind of business at all, not knowing what new form of persecution and loss this might bring down upon them. They told me of one of their colleagues in Basrah, the only Jewish member of a firm of automobile dealers which had got into financial difficulties through mismanagement. The Moslem partners, in the prevailing hysteria, placed the entire blame on the Jewish partner; a mob dragged this man from his home and hanged him to a tree before his wife and family. (In January 1952, a month after I left Bagdad, I read of the hanging on a public gallows in Bagdad of two Jews accused of being members of a Zionist underground and caching explosives in Jewish homes and synagogues. They never received a fair trial. The New York Times of January 21 reported the executions.)
The exodus of the Jews had had a damaging effect on the business life of Iraq. A very large proportion of the trained and intelligent workers in the country were thus lost. The British banks on whom I called told me that their clerical forces had been depleted by two-thirds, and they could not find enough English-speaking, intelligent, and responsible Iraqis to replace them. I also discovered, when I tried to have some tailoring done, that all the good tailors had been Jews, and had left.
It was under these circumstances that I undertook the most difficult and delicate part of my task, the recovery of our frozen loans. I had at the first managed to establish good relations with the Governor-General of the National Bank of Iraq, Abdul Illah Hafidh, a relative of the Regent. The Governor-General was all-powerful in directing the affairs of every bank in the kingdom. Portly and middle-aged, Abdul Illah Hafidh had the reputation of being a rather pleasant and talkative man whose favorite subject of conversation was the weather—particularly during the summer. I arranged an interview with him through Lionel James Daniel Phillimore, chief cashier of the National Bank (an Englishman loaned to the National Bank as an advisor by the Bank of England), who had become my good friend. After the usual delays and formalities, I was introduced to the Governor-General at his spacious offices, and, sure enough, he began his conversation with a blast at—the weather! How was this American withstanding the fierce desert heat? Was he enjoying his stay during the torrid summer in Bagdad? Allah! Allah! Had the weather become a boon to the Zilkha Bank?
I promptly explained that excessive perspiration, healthy sterilization by the fierce sun, and daily exercise in the artesian-well swimming pool of the Alwaiyah Club had worked wonders for me and my diabetic condition.
Diabetes? The governor was also so afflicted. A solid friendship of mutual understanding was thus established. And every personal and business courtesy was shown to me thereafter in my dealings with the National Bank.
I had now to get down to the most serious part of my business—and this was to collect ID 37,500 ($105,000) from his Excellency Nouri es-Said, Prime Minister of Iraq, and ID 66,130 ($185,000) from Iraq’s former Minister to France, a leading politician who was now a drug export-import merchant, Abdul Aziz Bey al Mudhaffer. There were of course other assets: a number of small loans, Iraq government 3 per cent lottery bonds, other securities and real estate the liquidation of which was slow but not too difficult. But the greater part of the bank’s assets was tied up in these two loans to important political figures. The problem was to collect without endangering the two Jewish officers of the bank.
I decided to begin by applying “low pressure.” I called on the top officers of the three largest British banks and offered an exchange of bank-credit information on the depositors of the Zilkha Bank. It was thus learned, much to Zilkha’s surprise, that Mudhaffer had a line of credit with a number of British banks, and, much to the British banker’s surprise, that he had defaulted on $185,000 of loans from us. Nouri es-Said, on the other hand, had an absolutely clean record and was reputed to be an honorable person. Despite this reputation, none of the other banks was willing to take over his loan from Zilkha, even though it was fully secured by collateral representing stock of the Iraq Spinning and Weaving Company, a prosperous concern controlled by the royal family.
It was not long before the “low pressure” began to work. The news that an American liquidator for the Zilkha Bank was present in Bagdad quietly reached the large creditors by grapevine. More precisely, Gerald Dent, manager of the Ottoman Bank, called Mudhaffer to a conference with him. As a consequence, on July 28 Mudhaffer called in person, unannounced, at our bank. He agreed to a meeting for the discussion of a settlement of his account about six weeks from that date, on September 4. The “weather was too hot” for him to talk business before that date. I noticed, however, that his debts had been contracted in the summer heat. Apparently it was never too hot for that kind of business.
It took somewhat longer for our other major debtor to appear. But on August 23 the Prime Minister himself called at the bank accompanied by an official police escort, soldiers, guards, and screaming sirens. Nouri turned over to us a dividend check from the Iraq Spinning and Weaving Company, received on the stock we held as collateral, and also paid ID 750 ($2800) in cash, making a total payment of ID 2625 ($7800) in all to the credit of his account. Ironically, three days later, his Excellency, escort and all, returned to borrow back ID 500 ($1400) of the money he had just paid! This was on a Sunday, while I was in church. (The Bagdad business week is only four days long, the holy days of Moslems, Jews, and Christians all being observed. Business hours are 9 to 12, except for religious holidays. And during this twelve-hour work week, I rarely saw a great deal of work being done.)
We heard no further word from Nouri for two months. In the meantime he went abroad several times to negotiate with the British on the oil concessions, and it could be seen from the press that he was very busy with affairs of state.
Meanwhile, it became necessary to bring to bear all the pressure we could on Mudhaffer, to force him to keep his promise to discuss his debts on September 4. We had to overcome all sorts of excuses and alibis. Finally, in order to come to a quick settlement, I offered him a discount of approximately 80 per cent of what he owed us, and he agreed to settle for ID 12,000 ($33,000). The money was to be paid in a series of bills due monthly for twenty-four months. When it came to signing the new bills at our meeting on the evening of September 4, Mudhaffer suddenly refused, saying that “upon his honor” he would return to sign the bills the next morning at ten o’clock. We never saw him again—except for a brief glimpse of him in the back of his chauffeur-driven Cadillac, riding around the streets of Bagdad.
What could be done? A good part of the Iraqi legal profession had disappeared with the departure of the Jews. No remaining Jewish firm would dare to press such a case against a man as powerful as Mudhaffer. And no Moslem lawyer in Iraq—and I approached many of them—would undertake to defend a Jewish bank in such a suit. Mudhaffer thus made off with his gains scot-free. The reverend Archdeacon Cyril Roberts, rector of St. George’s Episcopal Church (British), where I worshiped during my stay in Bagdad, had very aptly described the Arab businessman to me: “Picture always just behind the Moslem who is dealing with you another unseen man who is thinking the /?/ruth. And then don’t believe either one of them on his oath.”
The manner in which Mudhaffer had contracted his debts throws an interesting light on contemporary business in Iraq. Most of the debt could be traced to two big deals. In the first, our Cairo branch had paid for a huge shipment of Lucky Strike cigarettes which was to be sold to the British troops in Egypt. After the deal was negotiated, it turned out that they were “Lucky Stroke” cigarettes, and the Egyptian and British governments forbade their sale. The bank was stuck with the entire lot. In spite of this, it is said that Mudhaffer smuggled out part of the shipment, sold them somewhere, and pocketed the cash. The swindling involved dazzles the imagination. The bank loan in large measure went into Mudhaffer’s pocket, since he needed only a fraction of it to pay for the “Lucky Stroke” cigarettes. He then made a “legitimate” profit on the delivery of the phony cigarettes, and finally made a third profit selling them.
The second deal was of the same order. Mudhaffer imported a large shipment of orange juice, again covered by a bank loan, for sale to the Iraq Petroleum Company. The IPC purchasing agent rejected it as unfit for human consumption, and rejected it again when Mudhaffer added sugar. Again the bank was stuck. The whole lot, he told us, had been dumped into the Tigris. (But once again it was whispered to me that Abdul Aziz Bey al Mudhaffer was not a man to be satisfied with such a solution, and that he had sold it to poverty-stricken Arabs at a fancy profit.)
On October 29, Nouri es-Said gave instructions for the transfer of the bank loan collateral we held to negotiable form, and it was sold. At one time the stock had doubled in price, and he could have sold out. Unfortunately for Zilkha and for him, he did not, and we had to take a sizable loss on his loan. Even in faraway Iraq the old Wall Street axiom was thus vindicated: “Ninety-nine per cent of all losses in the investment business are due to one thing, failure to sell.”
In December, having wrestled to the best of my ability with the “normal [and abnormal] obstacles to an American not familiar with complicated Middle East official and semi-official procedures,” I notified Mr. Zilkha, by that time back in New York, that all
that could be done had been done. There remained only the routine business of filing the final audit report of condition to the National Bank. This Yedid and Toeg could manage well enough by themselves. I had already paved the way for their official release through my good friend Lionel Phillimore. Like all other Jews leaving Iraq, however, they could take with them only 300 dinars ($840).
Mr. Zilkha’s personal loss, I estimated, was $308,000; my readers already know that the greater part of this loss came from the defaulted loans of Mudhaffer.
There is much more that might be said about my stay in Bagdad. The business practices of the Moslem present, as I think I have already indicated, a striking contrast to what we are used to in America. The most irritating and exasperating characteristic of the Moslem businessman, that is for an American, is his interminable procrastination and delay in every possible matter. The Arab Jews are efficient and punctual. The Moslems are inefficient, vacillating, and tardy. These methods, combined with the blistering summer heat, give justification to the old Arab epitaph, of which I was promptly informed by the British: “Here lies the man who tried to hurry the Middle East.” I had to throw off the hustle and bustle of New York, and take it slow, very slow and easy!
In the Bagdad business office one is likely to see, at almost any time, men in ordinary Western clothes and in colorful Arab costume drinking black coffee. Nearly everyone will be counting and toying with strings of beads called sebha. (One often hears: “Lend me your beads; I want to think.”) They will argue fiercely about some business matter; but if they come to agreement, they will shake hands, kiss each other, and all will suddenly be smiles.
I was told that an Arab proverb runs, “Drink the water of the Tigris once—you will return to drink it thrice.” The possibility arouses mixed feelings. There were, of course, the bleached white lizards that crawled on my bedroom floors and walls, the scorpions who liked to seek out a slipper, the ghastly diseases, the plague of emaciated cats who infest the banks of the Tigris and invade the city at sunset and get in everywhere—and who, it is said, have eaten up an unattended baby. But there was also the pleasant life at the Alwaiyah Club, secure behind its four-foot-thick brick construction, and its high wall patrolled by guards in Arab dress (marauders are everywhere). I shared a suite with the British bank architect, Sir Philip Edwin Dean Hirst, who was master of Fox Hounds for the Royal Hunt of Bagdad. Its cool swimming pool, tennis courts, and lawns were a veritable oasis in the desert city. The social life included dinner dances, bridge parties, cocktail parties, and outdoor movies on the lawn, and these events were attended by members of the diplomatic corps and foreign colonies, as well as many distinguished Iraqis. The social leader of this world was the Indian-born Mrs. William George St. Clement Kendall, formerly a model in London, whose husband was engaged in the export-import business and rode to the hounds of the Royal Hunt as whip.
In telling the story of my mission, I have had to use harsh words to describe the Iraqis as businessmen; I am sorry if this pains them. For the individual Iraqi, high and low, showed me the most gracious hospitality, and I was received, despite my mission, with courtesy and friendliness everywhere. I can only hope that these traits in the Iraqi character will in time make themselves felt in Iraqi business life.