Dec. 30 (Bloomberg) -- Citigroup Inc., which has denied handling accounts for Yasser Arafat, managed equity fund investments for Arafat's Palestine Commercial Services Co., newly disclosed Palestinian Authority financial records and interviews show.

Arafat controlled Palestine Commercial Services, known as PCSC, Palestinian legislators Hanan Ashrawi and Azmi Shuaibi said in interviews. PCSC, based in the West Bank city of Ramallah, is owned by the Palestinian Authority, of which Arafat was president before he died on Nov. 11 in Paris at the age of 75.

The investment funds were held in PCSC's ``Citibank Account #7/306579/007,'' and were worth $6.8 million on Jan. 1, 2003, according to a valuation of the account by Standard & Poor's, the McGraw-Hill Cos. unit that the Palestinian Authority hired to value the investments.

``It may be that Citi had no idea or any way of knowing that Yasser Arafat was part of it,'' said Jon Burnham, chairman of New York-based Burnham Securities Inc. and manager of the $130- million Burnham Fund, which includes shares of Citigroup, the world's biggest bank. ``Why they're denying it, I don't know.''

Citigroup's policies require it to know the identity of its clients and the source of their funds, according to anti-money laundering rules the bank submitted to the U.S. Senate Governmental Affairs Committee in 1999.

The Palestine Investment Fund posted an 18-page S&P report on the Citigroup account on the Internet this month on its Web site. The S&P report says the Citigroup account contains funds managed by Citigroup and its affiliates.

Invested in Bowling Alley

PCSC is the same company that invested $1.3 million in New York-based bowling alley operator Strike Holdings LLC, the owner of Manhattan's Bowlmor Lanes. Strike Chief Executive Officer Thomas Shannon, 39, said last week he's returning the money after learning of the link to Arafat.

Leah Johnson, a spokeswoman for New York-based Citigroup, declined to comment on PCSC's Citigroup account or the Citigroup- run funds in it.

``Citigroup does not have any accounts for Yasser Arafat, and we never have,'' she said on Dec. 23, repeating a Nov. 19 statement by spokeswoman Shannon Bell. ``We have the same statement we had last week,'' Johnson said Dec. 28 in an e-mail.

In September, Citigroup shut its private banking business in Japan after officials of the Japan's Financial Services agency said the bank hadn't properly screened clients.

Arafat's Role

Ashrawi, 58, a former member of Arafat's cabinet, said that Arafat founded PCSC. Shuaibi, 55, chairman of the Palestinian legislature's economic committee, said Arafat controlled the company.

There is no indication that Citigroup was aware Arafat controlled PCSC or that the funds in the account were used for anything other than investing.

Details of PCSC's Citigroup account are contained in the report by S&P, and in another report commissioned by the Palestinian Authority from the Los Angeles-based Democracy Council, a non-profit group that promotes democratic institutions.

The account is part of $799 million of investments disclosed in documents the Palestinian Authority has released.

The funds in the account were valued by S&P as of Jan. 1, 2003, based on Citigroup account statements, the report says.

Citigroup Funds

PCSC's Citigroup account had $2.56 million in Asia Enterprise Limited, an investment group that buys and sells companies in Asia through CVC Capital Partners Asia Pacific I LP, a Cayman Islands partnership, according to the S&P report.

CVC Capital Partners Asia Pacific is a joint venture between Citigroup and London-based CVC Capital Partners, a former Citigroup unit that is now a private buyout firm, according to CVC's Web site.

The Palestinian account also held $653,696 in the CitiEquity Continental Europe Fund, a mutual fund that invests in European companies, S&P said.

The report also lists $3.7 million in Realty Equity Ventures, whose REV Holding Co. was incorporated in the Cayman Islands so that non-U.S. investors could buy real estate in the U.S., the S&P report said.

Buildings in New York

The company invests in offices, apartments, hotels and industrial buildings in New York, California, Florida and other U.S. states, according to the S&P report. S&P didn't give further details of REV Holding's relationship with Citigroup beyond the statement that the investments were run by Citigroup and its affiliates.

As of the valuation date, the Citigroup account also held cash and $541,140 in a computer technology fund run by New York- based Amerindo Investment Advisors Inc.

Walid Al-Nassan, a money manager at Amman, Jordan-based Cairo Amman Bank, oversaw the Citigroup account for PCSC, according to the Democracy Council report. Amman-based Al-Nassan, identified by his office staff as Cairo Amman Bank's assistant manager for research and investment, didn't return phone calls requesting comment.

The Palestinian Authority had no direct management of the funds in the account, according to the council report. ```Citibank Account' consists of an investment account managed by Citibank and directed through PCSC's account manager at Cairo Amman Bank,'' the Council report said.

`Controlled by the President'

Cairo Amman doesn't comment on specific accounts or clients, said Sami Saidi, deputy regional manager for the Palestinian territories.

Arafat and his financial adviser, Mohamed Rachid, controlled PCSC's holdings outside of the Palestinian Authority's finance ministry and budget, said Karim Nashashibi, the International Monetary Fund representative in the West Bank and Gaza.

``It was basically controlled by the president and his chief economic financial adviser,'' Nashashibi said at a September 2003 briefing in Dubai, when the IMF released a report on the economy of the West Bank and Gaza.

Arafat appointed Rachid as chairman of the PCSC, a June 2004 World Bank report shows.

Facing pressure from international donors to bring more transparency to Palestinian finances, in 2002 Arafat started turning over the PCSC's holdings to a new Palestine Investment Fund, overseen by Palestinian Finance Minister Salam Fayyad, a former IMF official.

Account on Web Site

PCSC turned over the Citigroup account to the new fund on Jan. 1, 2003, according to the S&P report. PCSC had held the account since at least Aug. 6, 2002, the date on which S&P says the Palestinian Authority contracted it to value the investments.

Fayyad and Rachid didn't respond to e-mails and phone messages left at their offices this week requesting comment on the Citigroup investments.

The Palestine Investment Fund has posted the reports about the Citigroup account and other investments on its Web site, http://www.palestineinvestmentfund.com.

To contact the reporter on this story: Vernon Silver in Rome at vtsilver@bloomberg.net

Last Updated: December 30, 2004 00:04 EST