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Charity cases: why has the Bush Administration failed to stop Saudi funding of terrorism?

On September 20, 2001, nine days after the terrorist attacks on New York and Washington, D.C., President Bush stood before a joint session of Congress and pledged to "starve terrorists of funding." Since then, federal investigators have, in fact, compiled lists of suspected terrorist financiers, raided alleged front groups, and frozen nearly $200 million in assets. But despite those efforts, the United States has made only limited progress in blocking the funding of terrorists. Al Qaeda and other Islamic terrorist groups remain well financed. And one of their major sources Of funding, a network of Islamic charities financed by Saudi Arabia, remains relatively uninterrupted. Its tough talk notwithstanding, the Bush Administration has failed to take decisive action against this significant source of terror financing--in part, it seems, to protect the government of Saudi Arabia and its friends in Washington.

The Bush Administration has adopted an approach to Saudi terrorist funding that would best be described as hands-off. For example, last summer it censored the twenty-eight pages on the subject from a congressional report on the September 11 attacks and refused to release the names of Saudi entities suspected to be financiers of terrorism. Even the administration's apparent successes in stemming the flow of Saudi terrorist funding appear far less impressive on closer scrutiny. Since September 2001, the administration has designated hundreds of individuals and organizations, including several Islamic charities, as terrorists or sponsors of terrorism and frozen their assets. Yet Saudi organizations and individuals have emerged relatively unscathed. One of the first Saudi groups designated had already been defunct for years, while one of the group's founders--who himself has been listed by the United States as a sponsor of terrorism--still has assets that remain untouched. And although in January the Treasury Department designated several branches of the Saudi charity al-Haramain, U.S. officials declined to freeze the assets of the group's dozens of other offices worldwide, including its headquarters in Riyadh.

In other cases, the Bush Administration made a conscious decision not to pursue major Saudi conduits for terrorist funding. The clearest example involves two ostensible charities that are long known to have funneled money to Al Qaeda--the International Islamic Relief Organization (IIRO) and the Muslim World League (MWL). Both are financed directly by the Saudi government. MWL is an evangelical organization that was created to help spread Wahhabism, the Saudi brand of Islamic fundamentalism; IIRO is a humanitarian relief organization that operates primarily in Muslim countries. Yet a 1996 CIA report alleged that IIRO helped to fund six militant training camps in Afghanistan, and noted that the former head of the group's Philippines office--Osama bin Laden's brother-in-law--had been linked to plots to "target the pope and U.S. airlines." U.S. intelligence officials also believe that MWL employees were involved in the 1998 bombing of two U.S. embassies in Africa. Although both IIRO and MWL were known to have funded Al Qaeda, U.S. government sources indicated to Newsweek in October 2001 that the Bush Administration left the two organizations off the list of designated terrorist groups in order to spare the Saudi government from embarrassment.

On top of this, the most promising domestic inquiry into these Saudi groups has been dismantled. In March 2002, as part of a Customs Service investigation known as Operation Green Quest, government investigators raided the Virginia offices of IIRO and MWL, along with a number of other Saudi-backed charities and businesses. Although the raids mined up concrete evidence that elements of the network had funded individuals and groups designated as terrorists by the United States, no assets have been frozen and the few, belated arrests in this case have been made on charges unrelated to terrorist financing. In particular, Abdurahman Alamoudi, who heads a group called the Success Foundation--which in the late 1990s absorbed the U.S. operations of IIRO--has been charged only with accepting money from Libya and with immigration violations, despite evidence, seized from the offices of Success and other groups he controls, of their material support not just for Hamas but for two known Al Qaeda fronts. (Alamoudi was once caught on tape remarking that he disapproved of the 1998 bombings of U.S. embassies in Africa only because no Americans were killed, and that instead he preferred more "strategic" targets such as the Jewish community center in Buenos Aires, which had been bombed in 1994.) Now, under an agreement between Attorney General John Ashcroft and Department of Homeland Security head Tom Ridge signed in May 2003, the Customs Service--part of Homeland Security since last March--has relinquished control of its counterterrorism investigations to the FBI, which repeatedly had refused to turn over critical investigative files to Green Quest agents. This deal between Ashcroft and Ridge effectively shut down Green Quest, quashing the one serious--if flawed--probe into domestic terrorist financing.

Part of the Bush Administration's reluctance to confront the Saudis over terrorist financing may have less to do with embarrassing a key ally in the Middle East than with embarrassing the United States itself.

Cracking down on IIRO and MWL, for example, would threaten to expose not only Saudi support of terrorism but also America's own role in helping to create what would eventually become part of Al Qaeda's funding network. During the 1980s the United States actively promoted the use of these and other Islamic charities as part of a joint U.S.-Saudi effort to fund the Afghan mujahedeen in their fight against the Soviet Union. The Reagan-Bush Administration, in cooperation with the Saudi government, funneled millions of dollars to the Afghan rebels through these charities to preserve "deniability" of its support for a covert proxy war. When the scheme succeeded and the Soviets withdrew in 1989, the United States simply mined its back, leaving in place the funding apparatus it had helped to create. It also left behind extensive training and logistical facilities, an elaborate network of trans-Islamic organizations, large quantities of military hardware, and, more importantly, a large and experienced army of expert Islamic guerrilla fighters anxious to carry on their struggle. It was at that point, in the midst of the first Bush Administration, that Osama bin Laden began transforming the mujahedeen funding network into a support structure for his newly created anti-Western jihadist organization--Al Qaeda.

Meanwhile, elements of the erstwhile mujahedeen funding network, most notably IIRO and MWL, were expanding their operations and establishing offices worldwide, including in the United States. During the next decade these organizations became prime conduits for Saudi financing of groups, including Al Qaeda, now regarded by the United States as terrorist organizations. Thus the Islamic terrorism financing structure that the Bush Administration now proposes to crush is, in part, an outgrowth of the Reagan-Bush Administration's Cold War effort to undermine the Soviet Union--a classic example of "blow-back." For the Bush Administration to designate groups such as IIRO and MWL as terrorist financiers would risk unwelcome questions about the wisdom of having funded and trained an army of Islamic militants. Doing so would also expose the intelligence community to criticism for its failure to adequately monitor these former allies and their extensive funding network.

But the dilemma, for the Bush Administration, extends far beyond issues of history. Many prominent politicians--not least among them the Bushes--have for years maintained close political, business, and personal dealings with the Saudi royal family and, more generally, Saudi interests. The extent of the administration's difficulties on this front became clear shortly after the Green Quest raids in March 2002. Just two weeks after the Customs task force raided the Saudi-backed groups in northern Virginia, two leading Muslim activists with ties to the groups were allowed to meet with Paul O'Neill, then the secretary of the Treasury Department (which, at the time, controlled Customs) to complain about the conduct of the raids. The meeting was arranged by Grover Norquist, the influential Republican activist; Norquist is also the founder and former chair of the Islamic Institute, a conservative Muslim outreach group in which both of the men who met with O'Neill are officers and which has received funding from some of the raided individuals and groups, including Abdurahman Alamoudi.

And the connections do not end there. One of the Muslim activists who met with O'Neill was Talat Othman, a longtime friend and former business associate of President Bush. The two served together on the board of the Texas-based oil company Harken Energy starting in the late 1980s and have remained close ever since. Othman sat on Harken's board as the representative of Abdullah Taha Bakhsh, a Saudi business magnate and a close associate of suspected terrorist financier Khalid bin Mahfouz. Bakhsh now heads an oil company that is a subsidiary of Halliburton, the energy giant formerly run by Vice President Dick Cheney.

In addition to his work at the Islamic Institute, Othman serves on the board of Amana Mutual Funds Trust, an Islamic investment group that had close ties to raided entities and yet was not itself targeted. At the time of the Green Quest raids, in March 2002, at least four figures from the targeted groups were affiliated with Amana, including M. Yaqub Mirza, the individual who set up the U.S. branch of MWL, the fund-raising arm of the U.S. branch of IIRO, and many of the other raided organizations. Despite Mirza's presence on the board, and despite the fact that large sums of money from the suspect groups have moved through Amana, Green Quest agents chose not to raid the firm.

Overall, despite the Bush Administration's public commitment to combat terrorist financing, its progress in shutting down the Saudi sponsors has been limited. By contrast, some in Congress seem inclined to move more aggressively: the Senate Finance Committee, for instance, recently asked the Internal Revenue Service to turn over tax and financial records for at least twenty-five Muslim charities, several of which, including IIRO and MWL, have been under federal scrutiny for possible links to terrorism. Yet the Bush Administration remains timid. The actions it has taken against the Saudis have been largely symbolic, and have done little to stem the flow of funds. Meanwhile, responsibility for domestic terrorist-financing investigations is once again in the hands of the FBI, which has so far proven itself ill-prepared for the task.

Some of this may be attributable to bureaucratic infighting. The administration may also be trying, quietly, to prod the Saudi government toward shutting off terrorist funding on its own; there are, in fact, signs that the Saudis may belatedly be moving in that direction. But it also seems clear that the administration has made a calculated decision to spare a strategic and oil-rich ally, and its friends in Washington, from embarrassment. As the administration is now learning, despite the President's famous assertion that "you are with us or you are with the terrorists," the distinction is not always so clear-cut.

Published March 2004, Harper's Magazine