The Sentry
On September 10, 2023, two dams near Derna, in eastern Libya, collapsed amid a strong rainstorm. The ensuing flood killed at least 4,352 people and displaced almost 45,000, while another 8,000 remain missing and should be presumed dead.
Since the disaster, journalists and nongovernmental organizations have highlighted several factors that contributed to the collapse, including suspected corruption that may have led to the dams’ extreme frailty.
In this report, The Sentry sheds additional light on these schemes, linking them to the Dabaiba family’s leadership of the Organization for the Development of Administrative Centers prior to 2011 and showing how new corruption risks under the Haftar family could lead to similar infrastructure failures in the future.
Among several factors contributing to the loss of life and material damage in Derna was the dams’ poor condition.
From 2007 to 2010, Libya’s General Water Authority (GWA) paid Arsel İnşaat Company Limited, a minor Turkish construction firm, and other companies for rehabilitation work that never happened.
Such inaction was indicative of a broader pattern of corruption that affected much of Libya’s non-oil-related construction and maintenance, especially in the years leading up to the 2011 uprisings. Schemes such as those affecting the maintenance of Derna’s dams were largely orchestrated through the Organization for the Development of Administrative Centers (ODAC), a state-owned body then controlled by relatives of Abdelhamid Dabaiba, the current prime minister in Tripoli, western Libya.
Today, post-disaster, the reconstruction of Derna is underway. In this ongoing process, Field Marshal Khalifa Haftar’s family, which rules eastern and southern Libya, has complete control of new infrastructure contracts.
Early indications suggest that the Haftar clan may be resorting to corrupt practices similar to those of the Dabaibas, potentially using foreign companies as conduits to divert public funds.
Despite having occurred more than 15 years ago, the anomalies in ODAC’s interactions with Arsel remain acutely relevant in present-day Libya. They illustrate how officials may have exploited existing companies to steal billions from their own country’s public coffers.
This suspected transnational method of theft, or variations thereof, may be being employed in 2024—a time when large-scale infrastructure projects are used by Libyan leaders to justify spending significant public funds. By uncovering past fraud and scrutinizing contemporary contracting practices, this report seeks to contribute to the prevention of further corruption in Libyan infrastructure.
Dubious and Deliberate
In November 2007, the GWA awarded a $30 million contract to Arsel, a small Turkish firm, for the maintenance of the Derna dams—a decision that was heavily influenced by ODAC and its leadership. In the years that followed, until the 2011 uprisings, Arsel failed to carry out any tangible work on the Derna dams, despite receiving timely payments from the Libyan state.
This failure to perform can be traced to the corrupt practices of ODAC and its leaders, who benefited from the complicity of others involved in the project, including the GWA and Arsel’s management.
A thorough examination of the project’s negotiation, scope, payment history, and facilitation reveals a pattern of irregular behavior and red flags for corruption. Such unlawful practices and systemic failures not only contributed to the 2023 catastrophe in Derna but also mirrored issues affecting dozens of contracts across pre-2011 Libya involving foreign firms, many based in Turkey.
The common thread was the family then in control of ODAC—the Dabaibas.
ODAC’s influence
Ali al-Dabaiba, the current prime minister’s cousin and the head of ODAC from 1989 to 2011, exerted significant influence on the GWA’s November 2007 decision to sign a contract with Arsel for maintaining the Derna dams. Between 2007 and 2010, ODAC awarded Arsel a portfolio of about 15 projects, including parts of a university campus in Benghazi and housing units in al-Marj, the total value of which amounted to approximately $1 billion.
From hand-picking the Turkish company to managing its relationship with the Libyan state, Ali al-Dabaiba dominated the discussions and negotiations with Arsel. By so doing, he greatly influenced the GWA’s own decision to hire the Turkish firm.
Until ODAC awarded Arsel the $1 billion package of projects, the Ankara-based company was relatively unknown, with no experience abroad, having handled only modest domestic projects averaging about $20 million each.
Nevertheless, ODAC’s leader favored Arsel over other larger and more experienced Turkish firms,29 suggesting that Ali al-Dabaiba may have had an ulterior motive for the selection. Indeed, ODAC had a record of hiring unqualified contractors.31Arsel was no exception: it would go on to demonstrate significant shortcomings throughout its dealings in Libya. Neither Ali al-Daibaba nor ODAC responded to a request for comment.
Malfeasance, not negligence
After the GWA signed the contract with Arsel in November 2007, the project experienced almost 18 months of unexplained delays. From April 2009, when the project kicked off, to the onset of political unrest in February 2011, the Derna dam project was marked by a slew of administrative and operational irregularities, particularly in the interactions between Libyan officials and Arsel.
Administrative irregularities
Advance payments for the project circumvented standard procedures. Arsel received a direct advance payment of about 25% of the contract sum, even though it was common practice at the time for the advance payment to be set at 15% or less, with at least a third of that being placed into an escrow account.
In addition, Arsel paid neither the mandatory 2% tax nor the required 0.5% contribution to the Social Security Fund. These exceptions suggest a deliberate effort by high-ranking Libyan officials to ensure that Arsel enjoyed immediate access to the funds, raising the possibility of their diversion or misuse.
The scope of the project also raises questions. In 2003, a Swiss consultancy was commissioned to assess the situation in Derna. The resulting report concluded that the two existing dams needed bolstering, including through the addition of hydraulic devices, and that a third dam should be built to ensure the safety of Derna’s inhabitants downstream.
Yet when the Libyan state hired Arsel in 2007, it confined the project to modestly strengthening the two dam structures— even though funds were available for more substantive work.
More troublingly, after the Turkish company submitted its initial proposal for a light rehabilitation of the two existing dams, Libyan officials insisted on an even more rudimentary version, a move that suggests a potential plan to have Arsel spend less than it was to receive from GWA for the dam rehabilitation work.
What’s more, despite Arsel’s contract including no third dam and none having been built, the company falsely claimed on its website that its 2007-2012 Derna mission involved “constructing another third dam in between.”
A lawyer representing the owners of the now-defunct Arsel did not respond to a request for comment.
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