A photo dated March 16, 2002 shows Mohammed Rashid, then the financial adviser to late Palestinian leader Yasser Arafat, during a meeting with a U.S. delegation in the West Bank city of Ramallah. (Patrick Baz/AFP/Getty Images)

A two-year-old Palestinian court charged with combating corruption handed down its first major conviction this month, ruling that a man widely considered a pretty big fish — the late Palestinian leader Yasser Arafat’s former economic adviser — had embezzled millions of dollars.

Some analysts praised the verdict, calling it a positive step for a Palestinian system long plagued by graft. But as the case escalated this week into an ugly public spat between the convicted embezzler, Mohammed Rashid, and the dominant Fatah political party, it has also raised questions about whether the Palestinian Authority is using its nascent anti-corruption drive to suppress critics.

It is hard to find anyone here who thinks Rashid, a murky figure who was swiftly convicted in absentia, has clean hands. But Rashid has spent most of the past decade outside the Palestinian territories, and he is allied with a key adversary of Palestinian Authority President Mahmoud Abbas, the former Gaza Strip security chief Mohammed Dahlan. Last month, there was an international outcry after Palestinian authorities sought to ban Web sites linked to the two — one of which Rashid has used to disparage Abbas — and detained critical journalists and bloggers.

“It looks like a reaction to a political dispute, not a continuous fight against corruption. Why Mohammed Rashid now?” said Hani al-Masri of the Palestinian Center for Policy Research and Strategic Studies. “The act would be more powerful if it were taken against someone inside the political system.”

In recent days, Rashid has accused Abbas of score-settling, and he has made unsubstantiated allegations that Abbas, whom he calls the “Sultan of Ramallah,” holds millions of dollars in slush funds, some of it from donor aid. The Fatah Central Committee, in a statement, countered that Rashid is “one of the models of treachery” it sees plotting against Abbas, “who represents the will of the Palestinian people and has become a symbol of steadfastness in the face of pressures and conspiracies.” Abbas has not commented on the matter.

Public disillusionment

Analysts said the dispute is unlikely to damage Abbas, whose popularity has sagged as his efforts to win Palestinian statehood stagnate but who retains strong support among Western backers. But they said it could further fuel public disillusionment with the Palestinian Authority. One recent survey indicated that a majority of Palestinians think the largely ­foreign-funded body is plagued by corruption and is not serious about stopping it.

“There is still a lot of favoritism and patronage and off-the-books payments,” said Mouin Rabbani, a Jordan-based senior fellow with the Institute for Palestine Studies, who argued that foreign supporters of the Palestinian Authority have often turned a blind eye to such activity.

Anti-graft activists say the problem has diminished since the 2004 death of Arafat, whose administration was notoriously corrupt and opaque. Abbas and Prime Minister Salam Fayyad have won plaudits from international financial institutions for increasing transparency in public spending.

One Palestinian official, who was not authorized to speak publicly on the topic, said the focus on older cases reflects that change, not a political agenda.

“It doesn’t mean there is no problem now. But it’s much less than before,” the official said.

A 2011 World Bank study noted that ordinary Palestinians report little personal experience with corruption despite the widespread public perception that it exists. But the study also recommended that the Palestinian Authority step up corruption investigations and prosecutions.

Since 2010, that task has been the domain of a new anti-corruption commission and court. Rafik al-Natshe, the head of the commission, said it is willing to charge anyone it can build a case against — including Abbas and other top leaders.

“We do not act upon words and rumors. We only act if you present us with documents and evidence,” said Natshe, who called the commission “100 percent, totally independent.”

Of more than 80 cases investigated by the commission, few have led to charges against prominent officials, and only Rashid’s has resulted in a court verdict. Defense attorneys have managed to stall the trials of two cabinet ministers who resigned after being charged last year, Natshe said. Rashid, who was charged in late April with stealing public funds during Arafat’s rule, was convicted quickly because he did not appear to defend himself, Natshe said.

Robert Blecher, an analyst for the International Crisis Group, said that track record was uninspiring.

“The workings of the anti-corruption commission are secretive, so it’s impossible to have a real sense of what it is doing and why,” he said. “What is clear is that its choices about what to investigate are selective.”

Access to money

Blecher and other observers said Rashid was an unsurprising investigation target. For one thing, he had access to money: Rashid, an Iraqi Kurd and former journalist who had worked his way into Palestinian political circles, ended up managing Arafat’s finances after the establishment of the Palestinian Authority in 1994 and overseeing many investment projects inside the Palestinian territories.

The anti-corruption court sentenced him to 15 years in prison for various instances of embezzlement, and it ordered him to return $33.5 million, Natshe said. Rashid’s whereabouts are unknown.

What’s more, Rabbani said, Abbas is known for being thin-skinned, and he has often appeared to lash out at people who criticize the wealth of his two businessman sons — as both Rashid and Dahlan have done.

Many here say Palestinian officials were angered by a recent series of hour-long interviews in which Rashid, who has rarely spoken publicly since Arafat’s death, described his “political memory” to the Dubai-based network al-Arabiya. Included in the interviews were his recollections of bad blood between Abbas and Arafat. A Fatah statement last week accused the network of conspiring with Rashid to “slander” Abbas.

The Palestinian Authority has weathered previous corruption controversies. In 2010, Fahmi Shabaneh, an intelligence official who had headed anti-corruption investigations, exposed a sex scandal involving an Abbas aide and went public with a raft of other allegations. Palestinian officials denounced him as an Israeli collaborator, and anti-graft activists faulted him for not backing up his claims.

Now facing unrelated charges in an Israeli court and what he deemed threats from Palestinian authorities, Shabaneh rarely leaves his home in Israeli-controlled East Jerusalem. From behind his large wooden desk, he runs a Web site on which he continues to rail against corruption.

“It is betrayal to thousands of martyrs who sacrificed their life for the Palestinian cause,” Shabaneh said. “If we want a Palestinian state, we need to be upright people.”

Special correspondent Samuel Sockol contributed to this report.