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Aga Khan's Dealings Stir Questions of Financial Transparency
Nov. 23 (Bloomberg) -- As 50,000 followers watched, Sultan Mohamed Shah Aga Khan III, wearing a silk coat and blue turban, hefted his 243.5 pounds onto a brocade chair connected to a scale loaded with diamonds. The event in India in 1946 was to mark the 60th anniversary of his role as spiritual leader of the Ismaili Muslims and to raise cash from his followers.
Shah's grandson and successor, His Highness Prince Karim Aga Khan IV, still collects cash from his followers, who typically tithe 12.5 percent of their income to the imam. He has chosen a quieter approach than his ancestor.
``The Western world saw this as a Muslim leader being weighed in a very public ceremony and all that money going into his pocket,'' the Aga Khan, 68, says. That's incorrect, he says. ``I don't think any reasonably educated Western individual would think that all the assets of the Vatican belong personally to the pope,'' he says.
Unlike the pope, who received $51.7 million in 2004 from Catholic contributions known as Peter's Pence, the Aga Khan won't say how much he raises from his followers each year or break out how the money is spent. Nor will he disclose all the sources of the $325 million that his development network, which has diplomatic status in 10 countries, plowed into projects last year.
And he won't give performance figures for the Aga Khan Fund for Economic Development SA, a Geneva-based holding company that owns stakes in 90 companies. All profits and dividends from the companies and projects are reinvested, he says.
Transparency
Such secrecy about finances isn't warranted, says Jermyn Brooks, a Berlin-based director of Transparency International, a nongovernmental organization that monitors corruption and promotes accountability.
``They are engaged in the public sphere, they claim special status, they collect funds from members of the public and governments, so they should publish their accounts,'' Brooks, 66, says. ``Accountability and transparency are the other side of the coin of trust and credibility.''
The scarce information about Ismaili finances bothers Akbarally Meherally, 77, whose father helped load diamonds onto the scales in 1946 after making a large cash donation. ``He has never submitted any proof of what he's doing with Ismaili tithes,'' Meherally says of the Aga Khan. He quit the sect in 1988. ``The lack of transparency was one of the reasons,'' he says.
Private Tithes
The Aga Khan says Ismaili tithes are a private, religious matter. His institutions disclose relevant information to donors, lenders and investors on individual projects, says John Ferguson, a spokesman for the Aga Khan. Unlike aid organizations such as Oxford, England-based Oxfam, the Aga Khan doesn't actively solicit funds from the general public, Ferguson says. Any donations are accounted for, he says.
In addition to money from his Ismaili followers, the Aga Khan obtains bank loans and grants from Western governments and aid organizations to finance his empire. The Aga Khan's companies, with total sales in 2004 of $1.36 billion, stretch from Pakistan's No. 2 lender, Habib Bank Ltd., to Kenyan bean farms, to the just-opened Serena Hotel in Kabul, where rooms start at $250 a night -- about what the average Afghan makes in a year.
He also owns stakes in two car dealerships in Edmonton, Alberta: Mayfield Toyota Ltd. and T&T Honda Ltd.
The Aga Khan has also expanded the institutions started by his grandfather into a nondenominational network of 325 schools, two universities, 11 hospitals and 195 health clinics in 30 countries, mostly where poorer Ismailis live, from Tajikistan to Uganda.
Fees
Most of the institutions charge their clients -- even the poorest -- fees. A 74-acre (30-hectare) public park he opened in March 2005 in Cairo charges three Egyptian pounds (52 U.S. cents) to enter.
The Aga Khan says his goal is to create schools and hospitals that can support themselves, while fostering economic growth in the world's poorest countries.
``They're fee paying because in the long run, what you're trying to do is to create self-sustaining institutions,'' says the Aga Khan, a British citizen who travels with a French diplomatic passport and lives in a chateau 26 miles (42 kilometers) north of Paris. ``You've got to get the economy moving.''
`Philanthropy, Not Charity'
Outsiders say that approach makes sense. ``The Aga Khan is promoting self-reliance,'' says Vartan Gregorian, 71, president of New York-based Carnegie Corp., which awarded the Andrew Carnegie Medal of Philanthropy to the Aga Khan in October. ``It's philanthropy, not charity.''
Adds Paul Kaiser, 43, associate director of the University of Pennsylvania's African Studies Center, who has studied Ismaili health services in East Africa, ``Services can be expensive for locals, but that doesn't undermine that the expertise wouldn't be there otherwise.''
Such efforts aren't always welcome, particularly among more conservative proponents of Islam. In 2003, the Karachi-based Aga Khan University got $4.5 million from the U.S. Agency for International Development to start a new, Western-style exam board for schools. That angered conservative clerics and politicians who view the U.S. with suspicion.
Qazi Hussain Ahmad, president of Pakistan's Jamaat-e- Islami, a religious opposition party, urged the university to scrap the plan.
Looting and Burning
In May, a mob looted and burned the Aga Khan Development Network office in the northeastern Afghanistan town of Baharak. ``We're seen as key implementers of projects undermining the mullahs, and they hate it,'' says Aly Mawji, 36, a British Ismaili who is the Aga Khan's representative in Kabul, with diplomatic status. ``If we don't take action, we are leaving these places to turn into breeding grounds for extremism.''
In Afghanistan, the development network, the Aga Khan's umbrella organization, has built schools, hospitals, roads and bridges and owns 51 percent of Roshan, the country's biggest cell-phone service company.
The Aga Khan's lifestyle -- he owns stables of Thoroughbreds and races speedboats, and his second divorce is being dissected in Europe's gossip pages -- is criticized by some Muslims. ``Racehorses involve gambling, a major sin in Islam,'' says Azzam Tamimi, 50, a spokesman for the London-based Muslim Association of Britain. ``His hotels sell alcoholic drinks, which Islam prohibits. You cannot as an imam be associated with any of this.''
Divorce
James Wolfensohn, 71, former head of the World Bank who has known the Aga Khan for 20 years, says he regards him as two people. ``One is the public face, who sustains the highest standards in the developing world,'' he says. ``The other is the gossip stuff, and I have no comment on that.''
A French court is hearing his second divorce, from Gabriele zu Leiningen, a German-born former pop singer and law graduate who's 26 years his junior. His first wife, British former model Sally Croker-Poole, auctioned $27.7 million of jewels, including the 13.78-carat Begum Blue diamond, after their divorce in 1995. Both wives took Arabic names and converted to Islam when they wed.
``She is a woman scorned,'' says Tim Bell, a London-based media adviser hired by Begum Inaara, as zu Leiningen, 42, is now known. ``She wishes to get a financial settlement and move on.''
The Aga Khan's personal fortune includes stud farms in France and Ireland that have yielded four English Derby and three Prix de l'Arc de Triomphe winners since 1981. In the 1960s and 1970s, he developed a virgin strip of coast on the Italian island of Sardinia into Costa Smeralda, where Italy's billionaire prime minister, Silvio Berlusconi, and others have vacation homes.
Malta, Ibiza
And in 1992, the Aga Khan and his friend Gianni Agnelli, the late Fiat SpA chairman, smashed the transatlantic speed record with their 220-foot (67-meter), 50,000-horsepower speedboat Destriero.
The Aga Khan currently owns an undeveloped piece of coast on the Spanish island of Ibiza, and he's considering plans for a luxury development on Malta and a project to transform a military arsenal on the Italian island of La Maddalena into a harbor for big yachts, says Enzo Satta, 60, a Sardinian architect who says he has worked for the Aga Khan on the ventures.
Ismailis dismiss questions about the Aga Khan's wealth and private life. ``What's important is the guidance he gives and the development of the unique network he has created,'' says Naguib Kheraj, 41, a British Ismaili who's chief financial officer of Barclays Plc, the U.K.'s third-biggest bank.
Prophet Muhammad
Born in Geneva to an English mother and half-Indian, half- Italian father, the Aga Khan claims descent from Fatima, the daughter of Islam's prophet Muhammad, via the Fatimid rulers, who founded Cairo in 969 A.D. They later transferred to Syria and Iran, where they were known and feared by medieval European crusaders as the Assassins.
The Aga Khan's great-great-grandfather moved the family to India in 1842 after leading an unsuccessful revolt in Iran and then assisting British officers on military campaigns in Afghanistan.
Sultan Mahomed Shah, the Aga Khan's grandfather, became imam in 1885 and served as president of the League of Nations, the doomed forerunner of the United Nations, from 1937 to 1939. During his lifetime, Indian-born Ismailis built communities in East African countries such as Kenya and Tanzania, which were also part of the British Empire.
Rita Hayworth's Stepson
Shah unsuccessfully petitioned the British government for land for his own state. Following World War II, many Ismailis, whose numbers are estimated at 15 million by the Aga Khan's secretariat in France, moved to Europe and North America.
Shah, who was married four times, skipped his eldest son, Aly Khan, and anointed his grandson Karim to succeed him. Karim became the Aga Khan at age 20 in 1957, when Shah died at age 79. Karim's younger brother Prince Amyn, 68, is now a director of the Aga Khan Fund for Economic Development. Hollywood's Rita Hayworth was Aly Khan's second wife and Karim's stepmother. They had a daughter, Yasmin.
Educated at Switzerland's Le Rosey private school after spending World War II in Kenya, the current Aga Khan studied Islamic history at Harvard, where he earned a bachelor's degree, with honors, in 1959.
As the imam approaches the 50th year of his reign, he says he wants to be known for his philanthropy and his faith. ``The facts are there, but they're not very visible in the Western world because it's all happening in the developing world,'' he says.
Kenyan Farmers
One example of how his program works can be found among the 20,000 subsistence farmers in Kenya's central highlands who are under contract to the Aga Khan's Frigoken Ltd.
Farmer Jane Njeri, a 25-year-old mother of four, picks ripe beans and places them into a cracked, white plastic beaker tied around her waist. Frigoken supplies her with seeds and fertilizer, guarantees a purchase price for the beans and packages them for export to Europe.
Frigoken pays Njeri about 10,000 Kenyan shillings ($132) a year for her beans, more than three times what she earns from the sale of other crops such as bananas and sugar cane. ``I'll use the money to pay my children's school fees,'' she says.
Frigoken is owned through the Aga Khan Fund for Economic Development, which aims to develop profitable companies that bring jobs and services to some of the world's poorest countries, says Anwar Poonawala, 59, a French Ismaili who's a director of the fund.
Aga Khan Fund
Its companies currently employ 30,242 people, he says. The Canadian car dealerships are a legacy from the 1980s, when the fund helped Ismailis settling there, he says. Poonawala declines to disclose the fund's profits, citing its status as a private company.
The Aga Khan owns all but seven of the fund's 175,000 shares, according to the Registre du Commerce in Geneva. The fund is the economic arm of the Aga Khan Development Network, which also has units covering culture and social development projects such as schools and hospitals. The network employs 20,000 people.
The Aga Khan, who travels the world in a Bombardier Global Express jet, declines to comment on how much of the money for his philanthropy comes from his own personal wealth and how much from followers.
``I've never discussed my personal income, and I wouldn't do that,'' he says. ``Every generation of the family has made its investments, and fortunately, some of them have been very, very good indeed.''
Money Laundering
In ``The Memoirs of Aga Khan,'' published by Cassel & Co. in London in 1954, the present imam's grandfather wrote that he kept a ``small fraction'' of his followers' offerings for himself.
Lack of transparency got an Ismaili leader into jail in the U.S. On May 18, 1987, Nizamudin Alibhai, an Ismaili community leader in Texas, boarded an American Airlines flight from Dallas-Fort Worth Airport to London's Gatwick Airport with $1.1 million stuffed in a burgundy flight bag.
Prosecutor Stewart Robinson said Alibhai took $27.3 million out of the U.S. on a total of 33 journeys, breaking a law requiring transfers of more than $10,000 to be declared. Alibhai was charged in Dallas with money laundering for five specific transatlantic journeys, in which he took a total of $4.3 million to London from 1985 to 1987. He was sentenced to seven years in prison.
`Secret Religious Duty'
Alibhai's lawyer said he was performing a secret religious duty. In his memorandum in support of the motion for a reduction of the sentence, defense lawyer Vincent Perini wrote, ``A history of persecution by repressive African governments and fundamentalist Muslim groups have required the Ismailis to keep their activities private.''
The cash was deposited in London because there were no reporting requirements in the U.K. at the time, Perini wrote. His memorandum also included a letter dated March 8, 1990, from Fried, Frank, Harris, Shriver & Jacobson LLP, the imam's Washington-based lawyers, which said the Aga Khan had set up a U.S. bank account for Ismaili tithes following the trial.
``Our client does not direct or control the system of offerings,'' the letter said. ``The contributions, and their collection, have always been conducted by volunteers. These offerings are then primarily used by the Aga Khan to support religious activities and to support a multitude of development projects in the third world.''
Funding Sources
The Aga Khan's followers are unable to answer detailed questions about the sources of funds for their projects. Sher Lakhani, a Canadian Ismaili manager of Geneva-based Aga Khan Education Services SA, doesn't know the breakdown of the $20 million used to build a high school in Mombasa on Kenya's coast.
Mahmud Jan Mohamed, Nairobi-based managing director of Serena Hotels, doesn't know how much of the $19.3 million plowed into the Kabul hotel in the Aga Khan's name came from the imam and how much came from Ismailis. ``All I know is, construction has never been stopped for lack of funds,'' says Mohamed, 52, a Kenyan Ismaili.
Some of the money for the Aga Khan's projects comes from grants and loans from Western governments through organizations like the U.S. Agency for International Development. In 2004, the Aga Khan Foundation, which kick-starts health, education and rural development projects, got commitments of $71 million from donors like the U.S. government, says Tom Kessinger, 64, the foundation's American general manager.
World Bank, Blackstone
``The staff is among the most qualified in the region,'' says Dwight Smith, USAID's assistant mission director in Kenya. USAID granted $35 million to the Aga Khan's projects in Asia and Africa from 1999 to 2004, says Harry Edwards, a Washington-based spokesman for the organization.
The Aga Khan's companies borrow from commercial and development banks and raise funds from investors. In 2003, the World Bank's International Finance Corp. unit lent $7 million to help build the $36 million Serena Hotel in Kabul.
Development funds owned by the Norwegian and Dutch governments also invested $5 million each in the hotel. In April 2005, Afghan mobile-phone company Roshan got $35 million from the Asian Development Bank, which is owned by a group of Asian governments.
Commercial partners include Blackstone Group LP, which is raising the world's biggest buyout fund. In Uganda, the Aga Khan's Industrial Promotion Services is planning a $500 million hydroelectric dam with Blackstone's Sithe Global Power LLC, a New York-based power producer.
Risk Protection
Sithe Vice President Jason Oliver says the Aga Khan's philanthropic reputation protects them from political risks. ``If you just had a U.S. power producer coming in on its own, there wouldn't be as much interest in the deal coming off well,'' Oliver says.
In Afghanistan, the Aga Khan's partners include a company controlled by Bracknell, England-based Cable & Wireless Plc, which owns 37 percent of Roshan. The Afghan cell-phone company has raised more than $160 million of loans since 2002, with $24.5 million coming from the Aga Khan Fund for Economic Development, says Altaf Ladak, Roshan's chief marketing officer.
Roshan has 600,000 customers and 500 employees. The company is profitable, says Chief Executive Officer Karim Khoja, a Canadian Ismaili. He won't say how much it earned on sales of $93 million in 2004.
In remote tribal areas, where women traditionally wear head-to-toe burqas and aren't allowed out of family compounds, Roshan has found a way of boosting its sales and helping vulnerable women with no male relatives: The company uses them as sales representatives, selling them prepaid phone cards to sell to other women.
After the Taliban
``If we had 50 companies like Roshan, we would have a solution to the drug problem, as we would raise professional standards and boost jobs,'' says Ashraf Ghani, 56, chancellor of Kabul University and a former finance minister. Afghanistan is the world's largest producer of opium.
Since the fall of the Taliban in December 2001, the Aga Khan Development Network has channeled $380 million into Afghanistan, home to more than 300,000 Ismailis. Of that, $145 million came from the Ismaili imamate, and the balance came from donors, lenders and other investors in the Aga Khan's companies.
The network fed 500,000 during a drought in 2002; built three bridges, 12 health centers and 26 schools; and repaired cultural sites including the mausoleum of former Afghan king Timur Shah in Kabul, says Mawji, the Kabul representative. It has also extended 6,400 microloans to farmers and traders and trained 189 midwives and doctors.
Kenyan Newspapers
The Aga Khan's first company in the developing world was in Kenya, where he spent part of his childhood. In 1960, he set up Nation Media Group Ltd., a newspaper publisher in Nairobi. ``African political parties were coming into existence,'' the imam says. ``Communication about the thinking that was taking place amongst African leaders and communicating to the African, in a sense, electorate, was something which was really essential.''
Today, the company is publicly traded, with a market value of about 13 billion Kenyan shillings. Nation Media had sales of 4.8 billion shillings and a profit of 641 million shillings in 2004. The company has grown in a region where there are frequent challenges to press freedom, says Dennis Aluanga, the company's finance director.
Nation Media is one of 16 Kenyan companies in which the Aga Khan's fund for economic development owns stakes. The others include Frigoken, the bean exporter, and the Kenyan unit of Serena Hotels, Tourism Promotion Services Ltd., which is also listed on the Nairobi Stock Exchange.
Beyond Companies
The Aga Khan says his mission goes beyond starting companies. ``Countries that have weak health systems, weak education systems, weak financial systems are countries that in 10, 20 years are going to be marginalized by global forces,'' he says.
In the coastal Kenyan city of Mombasa, the Aga Khan Madrasa Resource Centre provides training and support to pre-school teachers in poor Islamic communities. The program was started in 1986 when Sunni Muslim leaders complained that their children were falling behind in Kenya's schools, where English is the language of instruction.
The Sunni children were attending Islamic preschools where they were taught the Koran in Arabic and Swahili, says Najma Rashid, 41, the Sunni Muslim director of the resource center. That left the children at a disadvantage when they entered English-language state schools. The resource center trains teachers of English.
Preschool
In Majaoni, a village north of Mombasa, teacher Zenab Yusuf sits on the floor of her classroom, which is decorated with nursery rhymes and stories about Muhammad written in English.
Her class of 3-year-olds, which meets behind the village mosque, sings in English for a visitor: ``One little, two little, three little Muslims, four little, five little, six little Muslims. . .''
On the other side of Mombasa stands a $20 million school built out of white coral-rock bricks and modeled after Andover, Massachusetts-based Phillips Academy, whose alumni include U.S. President George W. Bush and the Aga Khan's son, Prince Rahim.
Religion isn't even part of the syllabus at the school, which opened in 2003 and has 525 students, ages 5 to 19. ``We'll cover that ground in personal and social development classes,'' Lakhani, 56, says.
Afghanistan to Mozambique
Fees at the academy are $2,700 a year -- more than double the average Kenyan's annual income. About 20 percent of the students will be on scholarship, Lakhani says.
The Aga Khan plans to build 17 more such academies from Afghanistan to Mozambique. He says the schools will help develop African and Asian leaders who can propel their countries to prosperity in the future. ``I'd like to see many more universities in the Islamic world, more schools, many more teaching hospitals,'' he says.
The Aga Khan also needs to prepare the next leader of the Ismaili sect, who is to be named in his will. The Aga Khan has two sons from his first marriage: Prince Rahim, 34, a director of the fund for economic development, and Prince Hussain, 31, who works on cultural projects.
Another candidate is the son from his second marriage, Prince Aly Muhammad, 5.
A male has always held the title, though some Ismailis are debating whether tradition can be broken so Princess Zahra, 35, the Aga Khan's daughter, can inherit the title.
`More Trust'
She is the most visibly active of the children, working with the Aga Khan's schools and hospitals, Lakhani says, in addition to running his personal interests in racehorses.
Such a choice would be risky. ``She would be the best, but then we would have every single Wahabi on our backs,'' says Aly- Khan Satchu, an Ismaili who lives in Mombasa. Wahabism is the puritanical version of Islam that's dominant in Saudi Arabia.
No matter who the Aga Khan's successor is, he -- or she -- will face the same questions about transparency and requests for financial disclosure.
``It's in their interest to generate more trust and be more successful in the future,'' Transparency International's Brooks says.
Aga Khan's Dealings Stir Questions of Financial Transparency
Nov. 23 (Bloomberg) -- As 50,000 followers watched, Sultan Mohamed Shah Aga Khan III, wearing a silk coat and blue turban, hefted his 243.5 pounds onto a brocade chair connected to a scale loaded with diamonds. The event in India in 1946 was to mark the 60th anniversary of his role as spiritual leader of the Ismaili Muslims and to raise cash from his followers.
Shah's grandson and successor, His Highness Prince Karim Aga Khan IV, still collects cash from his followers, who typically tithe 12.5 percent of their income to the imam. He has chosen a quieter approach than his ancestor.
``The Western world saw this as a Muslim leader being weighed in a very public ceremony and all that money going into his pocket,'' the Aga Khan, 68, says. That's incorrect, he says. ``I don't think any reasonably educated Western individual would think that all the assets of the Vatican belong personally to the pope,'' he says.
Unlike the pope, who received $51.7 million in 2004 from Catholic contributions known as Peter's Pence, the Aga Khan won't say how much he raises from his followers each year or break out how the money is spent. Nor will he disclose all the sources of the $325 million that his development network, which has diplomatic status in 10 countries, plowed into projects last year.
And he won't give performance figures for the Aga Khan Fund for Economic Development SA, a Geneva-based holding company that owns stakes in 90 companies. All profits and dividends from the companies and projects are reinvested, he says.
Transparency
Such secrecy about finances isn't warranted, says Jermyn Brooks, a Berlin-based director of Transparency International, a nongovernmental organization that monitors corruption and promotes accountability.
``They are engaged in the public sphere, they claim special status, they collect funds from members of the public and governments, so they should publish their accounts,'' Brooks, 66, says. ``Accountability and transparency are the other side of the coin of trust and credibility.''
The scarce information about Ismaili finances bothers Akbarally Meherally, 77, whose father helped load diamonds onto the scales in 1946 after making a large cash donation. ``He has never submitted any proof of what he's doing with Ismaili tithes,'' Meherally says of the Aga Khan. He quit the sect in 1988. ``The lack of transparency was one of the reasons,'' he says.
Private Tithes
The Aga Khan says Ismaili tithes are a private, religious matter. His institutions disclose relevant information to donors, lenders and investors on individual projects, says John Ferguson, a spokesman for the Aga Khan. Unlike aid organizations such as Oxford, England-based Oxfam, the Aga Khan doesn't actively solicit funds from the general public, Ferguson says. Any donations are accounted for, he says.
In addition to money from his Ismaili followers, the Aga Khan obtains bank loans and grants from Western governments and aid organizations to finance his empire. The Aga Khan's companies, with total sales in 2004 of $1.36 billion, stretch from Pakistan's No. 2 lender, Habib Bank Ltd., to Kenyan bean farms, to the just-opened Serena Hotel in Kabul, where rooms start at $250 a night -- about what the average Afghan makes in a year.
He also owns stakes in two car dealerships in Edmonton, Alberta: Mayfield Toyota Ltd. and T&T Honda Ltd.
The Aga Khan has also expanded the institutions started by his grandfather into a nondenominational network of 325 schools, two universities, 11 hospitals and 195 health clinics in 30 countries, mostly where poorer Ismailis live, from Tajikistan to Uganda.
Fees
Most of the institutions charge their clients -- even the poorest -- fees. A 74-acre (30-hectare) public park he opened in March 2005 in Cairo charges three Egyptian pounds (52 U.S. cents) to enter.
The Aga Khan says his goal is to create schools and hospitals that can support themselves, while fostering economic growth in the world's poorest countries.
``They're fee paying because in the long run, what you're trying to do is to create self-sustaining institutions,'' says the Aga Khan, a British citizen who travels with a French diplomatic passport and lives in a chateau 26 miles (42 kilometers) north of Paris. ``You've got to get the economy moving.''
`Philanthropy, Not Charity'
Outsiders say that approach makes sense. ``The Aga Khan is promoting self-reliance,'' says Vartan Gregorian, 71, president of New York-based Carnegie Corp., which awarded the Andrew Carnegie Medal of Philanthropy to the Aga Khan in October. ``It's philanthropy, not charity.''
Adds Paul Kaiser, 43, associate director of the University of Pennsylvania's African Studies Center, who has studied Ismaili health services in East Africa, ``Services can be expensive for locals, but that doesn't undermine that the expertise wouldn't be there otherwise.''
Such efforts aren't always welcome, particularly among more conservative proponents of Islam. In 2003, the Karachi-based Aga Khan University got $4.5 million from the U.S. Agency for International Development to start a new, Western-style exam board for schools. That angered conservative clerics and politicians who view the U.S. with suspicion.
Qazi Hussain Ahmad, president of Pakistan's Jamaat-e- Islami, a religious opposition party, urged the university to scrap the plan.
Looting and Burning
In May, a mob looted and burned the Aga Khan Development Network office in the northeastern Afghanistan town of Baharak. ``We're seen as key implementers of projects undermining the mullahs, and they hate it,'' says Aly Mawji, 36, a British Ismaili who is the Aga Khan's representative in Kabul, with diplomatic status. ``If we don't take action, we are leaving these places to turn into breeding grounds for extremism.''
In Afghanistan, the development network, the Aga Khan's umbrella organization, has built schools, hospitals, roads and bridges and owns 51 percent of Roshan, the country's biggest cell-phone service company.
The Aga Khan's lifestyle -- he owns stables of Thoroughbreds and races speedboats, and his second divorce is being dissected in Europe's gossip pages -- is criticized by some Muslims. ``Racehorses involve gambling, a major sin in Islam,'' says Azzam Tamimi, 50, a spokesman for the London-based Muslim Association of Britain. ``His hotels sell alcoholic drinks, which Islam prohibits. You cannot as an imam be associated with any of this.''
Divorce
James Wolfensohn, 71, former head of the World Bank who has known the Aga Khan for 20 years, says he regards him as two people. ``One is the public face, who sustains the highest standards in the developing world,'' he says. ``The other is the gossip stuff, and I have no comment on that.''
A French court is hearing his second divorce, from Gabriele zu Leiningen, a German-born former pop singer and law graduate who's 26 years his junior. His first wife, British former model Sally Croker-Poole, auctioned $27.7 million of jewels, including the 13.78-carat Begum Blue diamond, after their divorce in 1995. Both wives took Arabic names and converted to Islam when they wed.
``She is a woman scorned,'' says Tim Bell, a London-based media adviser hired by Begum Inaara, as zu Leiningen, 42, is now known. ``She wishes to get a financial settlement and move on.''
The Aga Khan's personal fortune includes stud farms in France and Ireland that have yielded four English Derby and three Prix de l'Arc de Triomphe winners since 1981. In the 1960s and 1970s, he developed a virgin strip of coast on the Italian island of Sardinia into Costa Smeralda, where Italy's billionaire prime minister, Silvio Berlusconi, and others have vacation homes.
Malta, Ibiza
And in 1992, the Aga Khan and his friend Gianni Agnelli, the late Fiat SpA chairman, smashed the transatlantic speed record with their 220-foot (67-meter), 50,000-horsepower speedboat Destriero.
The Aga Khan currently owns an undeveloped piece of coast on the Spanish island of Ibiza, and he's considering plans for a luxury development on Malta and a project to transform a military arsenal on the Italian island of La Maddalena into a harbor for big yachts, says Enzo Satta, 60, a Sardinian architect who says he has worked for the Aga Khan on the ventures.
Ismailis dismiss questions about the Aga Khan's wealth and private life. ``What's important is the guidance he gives and the development of the unique network he has created,'' says Naguib Kheraj, 41, a British Ismaili who's chief financial officer of Barclays Plc, the U.K.'s third-biggest bank.
Prophet Muhammad
Born in Geneva to an English mother and half-Indian, half- Italian father, the Aga Khan claims descent from Fatima, the daughter of Islam's prophet Muhammad, via the Fatimid rulers, who founded Cairo in 969 A.D. They later transferred to Syria and Iran, where they were known and feared by medieval European crusaders as the Assassins.
The Aga Khan's great-great-grandfather moved the family to India in 1842 after leading an unsuccessful revolt in Iran and then assisting British officers on military campaigns in Afghanistan.
Sultan Mahomed Shah, the Aga Khan's grandfather, became imam in 1885 and served as president of the League of Nations, the doomed forerunner of the United Nations, from 1937 to 1939. During his lifetime, Indian-born Ismailis built communities in East African countries such as Kenya and Tanzania, which were also part of the British Empire.
Rita Hayworth's Stepson
Shah unsuccessfully petitioned the British government for land for his own state. Following World War II, many Ismailis, whose numbers are estimated at 15 million by the Aga Khan's secretariat in France, moved to Europe and North America.
Shah, who was married four times, skipped his eldest son, Aly Khan, and anointed his grandson Karim to succeed him. Karim became the Aga Khan at age 20 in 1957, when Shah died at age 79. Karim's younger brother Prince Amyn, 68, is now a director of the Aga Khan Fund for Economic Development. Hollywood's Rita Hayworth was Aly Khan's second wife and Karim's stepmother. They had a daughter, Yasmin.
Educated at Switzerland's Le Rosey private school after spending World War II in Kenya, the current Aga Khan studied Islamic history at Harvard, where he earned a bachelor's degree, with honors, in 1959.
As the imam approaches the 50th year of his reign, he says he wants to be known for his philanthropy and his faith. ``The facts are there, but they're not very visible in the Western world because it's all happening in the developing world,'' he says.
Kenyan Farmers
One example of how his program works can be found among the 20,000 subsistence farmers in Kenya's central highlands who are under contract to the Aga Khan's Frigoken Ltd.
Farmer Jane Njeri, a 25-year-old mother of four, picks ripe beans and places them into a cracked, white plastic beaker tied around her waist. Frigoken supplies her with seeds and fertilizer, guarantees a purchase price for the beans and packages them for export to Europe.
Frigoken pays Njeri about 10,000 Kenyan shillings ($132) a year for her beans, more than three times what she earns from the sale of other crops such as bananas and sugar cane. ``I'll use the money to pay my children's school fees,'' she says.
Frigoken is owned through the Aga Khan Fund for Economic Development, which aims to develop profitable companies that bring jobs and services to some of the world's poorest countries, says Anwar Poonawala, 59, a French Ismaili who's a director of the fund.
Aga Khan Fund
Its companies currently employ 30,242 people, he says. The Canadian car dealerships are a legacy from the 1980s, when the fund helped Ismailis settling there, he says. Poonawala declines to disclose the fund's profits, citing its status as a private company.
The Aga Khan owns all but seven of the fund's 175,000 shares, according to the Registre du Commerce in Geneva. The fund is the economic arm of the Aga Khan Development Network, which also has units covering culture and social development projects such as schools and hospitals. The network employs 20,000 people.
The Aga Khan, who travels the world in a Bombardier Global Express jet, declines to comment on how much of the money for his philanthropy comes from his own personal wealth and how much from followers.
``I've never discussed my personal income, and I wouldn't do that,'' he says. ``Every generation of the family has made its investments, and fortunately, some of them have been very, very good indeed.''
Money Laundering
In ``The Memoirs of Aga Khan,'' published by Cassel & Co. in London in 1954, the present imam's grandfather wrote that he kept a ``small fraction'' of his followers' offerings for himself.
Lack of transparency got an Ismaili leader into jail in the U.S. On May 18, 1987, Nizamudin Alibhai, an Ismaili community leader in Texas, boarded an American Airlines flight from Dallas-Fort Worth Airport to London's Gatwick Airport with $1.1 million stuffed in a burgundy flight bag.
Prosecutor Stewart Robinson said Alibhai took $27.3 million out of the U.S. on a total of 33 journeys, breaking a law requiring transfers of more than $10,000 to be declared. Alibhai was charged in Dallas with money laundering for five specific transatlantic journeys, in which he took a total of $4.3 million to London from 1985 to 1987. He was sentenced to seven years in prison.
`Secret Religious Duty'
Alibhai's lawyer said he was performing a secret religious duty. In his memorandum in support of the motion for a reduction of the sentence, defense lawyer Vincent Perini wrote, ``A history of persecution by repressive African governments and fundamentalist Muslim groups have required the Ismailis to keep their activities private.''
The cash was deposited in London because there were no reporting requirements in the U.K. at the time, Perini wrote. His memorandum also included a letter dated March 8, 1990, from Fried, Frank, Harris, Shriver & Jacobson LLP, the imam's Washington-based lawyers, which said the Aga Khan had set up a U.S. bank account for Ismaili tithes following the trial.
``Our client does not direct or control the system of offerings,'' the letter said. ``The contributions, and their collection, have always been conducted by volunteers. These offerings are then primarily used by the Aga Khan to support religious activities and to support a multitude of development projects in the third world.''
Funding Sources
The Aga Khan's followers are unable to answer detailed questions about the sources of funds for their projects. Sher Lakhani, a Canadian Ismaili manager of Geneva-based Aga Khan Education Services SA, doesn't know the breakdown of the $20 million used to build a high school in Mombasa on Kenya's coast.
Mahmud Jan Mohamed, Nairobi-based managing director of Serena Hotels, doesn't know how much of the $19.3 million plowed into the Kabul hotel in the Aga Khan's name came from the imam and how much came from Ismailis. ``All I know is, construction has never been stopped for lack of funds,'' says Mohamed, 52, a Kenyan Ismaili.
Some of the money for the Aga Khan's projects comes from grants and loans from Western governments through organizations like the U.S. Agency for International Development. In 2004, the Aga Khan Foundation, which kick-starts health, education and rural development projects, got commitments of $71 million from donors like the U.S. government, says Tom Kessinger, 64, the foundation's American general manager.
World Bank, Blackstone
``The staff is among the most qualified in the region,'' says Dwight Smith, USAID's assistant mission director in Kenya. USAID granted $35 million to the Aga Khan's projects in Asia and Africa from 1999 to 2004, says Harry Edwards, a Washington-based spokesman for the organization.
The Aga Khan's companies borrow from commercial and development banks and raise funds from investors. In 2003, the World Bank's International Finance Corp. unit lent $7 million to help build the $36 million Serena Hotel in Kabul.
Development funds owned by the Norwegian and Dutch governments also invested $5 million each in the hotel. In April 2005, Afghan mobile-phone company Roshan got $35 million from the Asian Development Bank, which is owned by a group of Asian governments.
Commercial partners include Blackstone Group LP, which is raising the world's biggest buyout fund. In Uganda, the Aga Khan's Industrial Promotion Services is planning a $500 million hydroelectric dam with Blackstone's Sithe Global Power LLC, a New York-based power producer.
Risk Protection
Sithe Vice President Jason Oliver says the Aga Khan's philanthropic reputation protects them from political risks. ``If you just had a U.S. power producer coming in on its own, there wouldn't be as much interest in the deal coming off well,'' Oliver says.
In Afghanistan, the Aga Khan's partners include a company controlled by Bracknell, England-based Cable & Wireless Plc, which owns 37 percent of Roshan. The Afghan cell-phone company has raised more than $160 million of loans since 2002, with $24.5 million coming from the Aga Khan Fund for Economic Development, says Altaf Ladak, Roshan's chief marketing officer.
Roshan has 600,000 customers and 500 employees. The company is profitable, says Chief Executive Officer Karim Khoja, a Canadian Ismaili. He won't say how much it earned on sales of $93 million in 2004.
In remote tribal areas, where women traditionally wear head-to-toe burqas and aren't allowed out of family compounds, Roshan has found a way of boosting its sales and helping vulnerable women with no male relatives: The company uses them as sales representatives, selling them prepaid phone cards to sell to other women.
After the Taliban
``If we had 50 companies like Roshan, we would have a solution to the drug problem, as we would raise professional standards and boost jobs,'' says Ashraf Ghani, 56, chancellor of Kabul University and a former finance minister. Afghanistan is the world's largest producer of opium.
Since the fall of the Taliban in December 2001, the Aga Khan Development Network has channeled $380 million into Afghanistan, home to more than 300,000 Ismailis. Of that, $145 million came from the Ismaili imamate, and the balance came from donors, lenders and other investors in the Aga Khan's companies.
The network fed 500,000 during a drought in 2002; built three bridges, 12 health centers and 26 schools; and repaired cultural sites including the mausoleum of former Afghan king Timur Shah in Kabul, says Mawji, the Kabul representative. It has also extended 6,400 microloans to farmers and traders and trained 189 midwives and doctors.
Kenyan Newspapers
The Aga Khan's first company in the developing world was in Kenya, where he spent part of his childhood. In 1960, he set up Nation Media Group Ltd., a newspaper publisher in Nairobi. ``African political parties were coming into existence,'' the imam says. ``Communication about the thinking that was taking place amongst African leaders and communicating to the African, in a sense, electorate, was something which was really essential.''
Today, the company is publicly traded, with a market value of about 13 billion Kenyan shillings. Nation Media had sales of 4.8 billion shillings and a profit of 641 million shillings in 2004. The company has grown in a region where there are frequent challenges to press freedom, says Dennis Aluanga, the company's finance director.
Nation Media is one of 16 Kenyan companies in which the Aga Khan's fund for economic development owns stakes. The others include Frigoken, the bean exporter, and the Kenyan unit of Serena Hotels, Tourism Promotion Services Ltd., which is also listed on the Nairobi Stock Exchange.
Beyond Companies
The Aga Khan says his mission goes beyond starting companies. ``Countries that have weak health systems, weak education systems, weak financial systems are countries that in 10, 20 years are going to be marginalized by global forces,'' he says.
In the coastal Kenyan city of Mombasa, the Aga Khan Madrasa Resource Centre provides training and support to pre-school teachers in poor Islamic communities. The program was started in 1986 when Sunni Muslim leaders complained that their children were falling behind in Kenya's schools, where English is the language of instruction.
The Sunni children were attending Islamic preschools where they were taught the Koran in Arabic and Swahili, says Najma Rashid, 41, the Sunni Muslim director of the resource center. That left the children at a disadvantage when they entered English-language state schools. The resource center trains teachers of English.
Preschool
In Majaoni, a village north of Mombasa, teacher Zenab Yusuf sits on the floor of her classroom, which is decorated with nursery rhymes and stories about Muhammad written in English.
Her class of 3-year-olds, which meets behind the village mosque, sings in English for a visitor: ``One little, two little, three little Muslims, four little, five little, six little Muslims. . .''
On the other side of Mombasa stands a $20 million school built out of white coral-rock bricks and modeled after Andover, Massachusetts-based Phillips Academy, whose alumni include U.S. President George W. Bush and the Aga Khan's son, Prince Rahim.
Religion isn't even part of the syllabus at the school, which opened in 2003 and has 525 students, ages 5 to 19. ``We'll cover that ground in personal and social development classes,'' Lakhani, 56, says.
Afghanistan to Mozambique
Fees at the academy are $2,700 a year -- more than double the average Kenyan's annual income. About 20 percent of the students will be on scholarship, Lakhani says.
The Aga Khan plans to build 17 more such academies from Afghanistan to Mozambique. He says the schools will help develop African and Asian leaders who can propel their countries to prosperity in the future. ``I'd like to see many more universities in the Islamic world, more schools, many more teaching hospitals,'' he says.
The Aga Khan also needs to prepare the next leader of the Ismaili sect, who is to be named in his will. The Aga Khan has two sons from his first marriage: Prince Rahim, 34, a director of the fund for economic development, and Prince Hussain, 31, who works on cultural projects.
Another candidate is the son from his second marriage, Prince Aly Muhammad, 5.
A male has always held the title, though some Ismailis are debating whether tradition can be broken so Princess Zahra, 35, the Aga Khan's daughter, can inherit the title.
`More Trust'
She is the most visibly active of the children, working with the Aga Khan's schools and hospitals, Lakhani says, in addition to running his personal interests in racehorses.
Such a choice would be risky. ``She would be the best, but then we would have every single Wahabi on our backs,'' says Aly- Khan Satchu, an Ismaili who lives in Mombasa. Wahabism is the puritanical version of Islam that's dominant in Saudi Arabia.
No matter who the Aga Khan's successor is, he -- or she -- will face the same questions about transparency and requests for financial disclosure.
``It's in their interest to generate more trust and be more successful in the future,'' Transparency International's Brooks says.
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