Staff Report to the Commission

analytical support. In addition, one of the analysts at headquarters saw relevant material

in a case file from another field office and very helpfully brought it to Chicago’s

attention. From the Detroit perspective, however, headquarters was interested in the GRF

investigation but was swamped with work and itself understaffed.

84 Commission Staff Interview.

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93

No realistic opportunities for disruption before 9/11

The Chicago agents saw no way to make a criminal case against GRF before 9/11, even

though the agents thought they had considerable evidence that GRF was a major fundraising

operation for international jihad. The two lead agents thought about and even

discussed the possibility of mounting a criminal case, but dismissed it. They had much

smoke but no real fire—they had no direct evidence of serious criminal activity. They

could not trace the millions of dollars GRF sent overseas to any specific jihadist or

terrorist organization, although they had their suspicions. Even the electronic surveillance

coverage yielded no evidence that would conclusively prove a criminal offense.

The Chicago agents worked with the INS to pick up several GRF employees on

immigration overstays, with the goal of seeing if they would cooperate with the FBI

against their employer. This effort proved fruitless, however. They considered doing the

same with Rabih Haddad, the Detroit subject and major GRF fund-raiser, but decided it

made more sense to continue investigating him; the Detroit agents agreed.85 The Chicago

agents thought that the executive director himself was also technically out of status—he

had requested a certain status adjustment from the INS but not yet received it—though an

arrest in such a situation would be unusual. In any event, they did not ask the INS to

arrest him, preferring to continue to monitor him.

The very concept of a criminal international terrorism case was foreign to the Chicago

agents, and they did not think that the U.S. Attorney’s Office had sufficient expertise in

such cases. In addition, the agents believed that the rules regarding “the wall” between

intelligence and criminal cases prevented the case agents from even discussing

intelligence information with the U.S. Attorney’s Office. Other than in New York, there

were few criminal international terrorist (IT) investigations or cases in process. The

Chicago office was undertaking only two criminal IT investigations, neither of which

focused on al Qaeda suspects. According to the agent who supervised the GRF and BIF

cases before 9/11, the case agents had always wanted to open a criminal case, despite the

wall; but they thought that doing so would have hurt their ability to get and maintain

FISA coverage because of their perception of the Department of Justice’s restrictive

interpretations of the wall restrictions, which they understood had impaired the Chicago

office’s ability to get FISA warrants approved in the past. As result, Chicago agents were

cautious about pursuing criminal matters pertaining to ongoing intelligence

investigations.

The lead Detroit investigator also saw no prospect of a criminal case before 9/11. He said

that while working the case as an intelligence investigation he always kept in the back of

his mind that possibility, but he knew that he had nowhere near the type of evidence

required for criminal prosecution; he had his own concerns about the wall as well. In any

event, neither Detroit nor Chicago, which had the lead in formulating an overall strategy,

had sufficient evidence to move forward with criminal charges.

85 The Chicago and Detroit agents each attributed to the other the decision to refrain from detaining

Haddad, but both agree they concurred with the decision made by the other, without objection.

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94

The Chicago investigation of GRF suffered a major blow in late spring or early summer

2001 when the FISA warrants were not extended. The Chicago agents were now in the

same position as those in Detroit—deprived of electronic surveillance, their most potent

intelligence-gathering tool.

GRF’s status on 9/11

The FBI’s investigation over the several years before 9/11 led the investigating agents to

believe GRF was an organization dedicated to supporting international jihad and was

raising substantial funds in the United States toward that goal. The FBI agents developed

what they thought was a good understanding of GRF’s activities, despite significant

obstacles imposed by a dysfunctional process for obtaining NSLs and FISA warrants.

Although the FBI did the bulk of the work investigating GRF, the investigation benefited

from contributions by the intelligence community and by foreign law enforcement

sources, both of which substantially aided the FBI’s understanding of the GRF’s overseas

activities. Despite the considerable body of knowledge they had, the FBI agents believed

they lacked the evidence necessary to bring a criminal prosecution against GRF or its

principals. In any event, the perceived restrictions imposed by the wall made such a

prosecution extremely difficult, at best, and initiating a criminal investigation could have

put the FISA warrants at risk. As a result, the FBI was left with nothing to do but

continue to gather intelligence on GRF’s activities in the United States. This task was

made far more difficult by the inability to renew the FISA warrants in Chicago or obtain

FISA coverage in Detroit. The agents did not have any plan to disrupt what they believed

to be a major jihadist fund-raising operation, or any endgame for their investigation.

The origin of BIF

BIF was incorporated in Illinois in March 1992 and received tax-exempt status in March

1993. Its origins can be traced to Saudi Arabia, where in 1987 Sheikh Adel Abdul Jalil

Batterjee founded Lajnat Al-Birr Al-Islami (LBI), a Jeddah-based NGO. LBI provided

support to the mujahideen fighting the Soviets in Afghanistan, as well as humanitarian

aid to refugees of the war in Afghanistan. Batterjee, from a merchant family in Saudi

Arabia, was affiliated with a group of wealthy donors from the Persian Gulf region

known as the “Golden Chain,” which provided support to mujahideen, including

mujahideen under the leadership of Usama Bin Ladin. The U.S. government has alleged

that BIF was incorporated in the United States to attract more donations and deflect

scrutiny from LBI.

At BIF’s founding in 1992, its three directors were Batterjee and two other Saudis. In

March 1993, Batterjee and the two other Saudis were replaced by three new directors,

including Enaam Arnaout, who became BIF’s executive director, managing its day-today

operations and reporting to Batterjee. The U.S. government contends the change was

made after Batterjee came under scrutiny in Saudi Arabia for financially supporting jihad

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outside of approved channels. Despite his formal removal, Batterjee continued to play a

major role in running BIF and was in frequent contact with Arnaout from his home in

Saudi Arabia. The government contends that Arnaout was a longtime jihadist supporter,

with personal ties to Usama Bin Ladin dating back to the 1980s. He allegedly provided

military and logistical support to the mujahideen in the late 1980s and early 1990s, as an

employee of LBI and another Saudi NGO, the Muslim World League. In doing so, he

allegedly worked closely with Usama Bin Ladin and other mujahideen who later became

significant members or supporters of al Qaeda. According to INS data compiled by the

FBI, Arnaout, a native Syrian, lived in Hama, Syria, from his birth in 1962 until 1981,

when he went to study in Saudi Arabia. In 1989, Arnaout married an American citizen he

met in Peshawar, and he became a naturalized U.S. citizen in March 1994.

BIF publicly described itself as an “organization devoted to relieving the suffering of

Muslims around the world.” According to its IRS filings, it received more than $15

million in donations between 1995 and 2000.

The FBI investigation of BIF

The FBI started its investigation of BIF in 1998 as a result of a conference that a Chicago

agent attended in Washington, D.C., where he learned of foreign intelligence reports

indicating that Arnaout was involved in providing logistical support for jihadists. The

FBI in Chicago opened an FFI in February 1999, focusing on Arnaout as the key player.

The GRF case agents also served as the lead case agents on BIF investigation. Much like

the early GRF investigation, BIF investigation featured surveillance and digging through

garbage. The FBI also sought to develop sources. The trash covers were fruitful, as BIF

“threw out everything”—including telephone bills and detailed and elaborate reports on

its activities, which Arnaout demanded from his subordinates on a daily basis. The FBI

began to run down some of the names and numbers appearing in the trash. In addition, on

April 21, 1999, the agents recovered from BIF’s trash a newspaper article on

bioterrorism, in which someone had highlighted sections relating to the United States’

lack of preparedness for a biological attack.

When it opened the FFI, the FBI in Chicago knew of Adel Batterjee but had little

understanding of who he was. They later obtained records showing Batterjee was

contributing funds to BIF. In the summer of 1999, they sent what the Bureau calls a

lead—relaying information and requesting action—to Saudi Arabia, through the Legat,

for information on Batterjee. As of 9/11 they still had received no response.

Chicago submitted a FISA request in April 2000, but it was not approved until after 9/11.

Notwithstanding evidence that BIF had significant links to Usama Bin Ladin and was

sending significant amounts of money overseas, the Chicago agents could not get an

inside look at the organization that a FISA could provide. As we will later show, after

9/11 it was simply too late.

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After opening the FFI, FBI Chicago obtained NSLs for phone and bank records. The

bank records gave a good indication of the scope of BIF’s fund-raising activities.

According to contemporaneous documents, the FBI believed based on its yet to be

completed investigation that BIF was receiving approximately forty to sixty thousand

dollars a week, and that between 1997 and 1998, BIF sent more than $2.5 million to its

overseas offices in Bosnia, Azerbaijan, Pakistan, and Tajikistan.

FBI Chicago had cultivated a good human source who provided useful information on

BIF, though never any smoking guns. The Chicago agents had a much closer relationship

with the CIA on BIF than they did on GRF, because they cooperated on certain

international matters in the BIF investigation. They regularly met with the CIA

concerning BIF, received some useful information, and shared much of their information.

For example, the Chicago agents learned from the CIA important information about

BIF’s founding and the sources of its funding. Still, the CIA and the FBI did not have a

perfect relationship, and the CIA held back some information. The Chicago agents

believed the CIA wanted to shield certain information from the FBI because of fears of

revealing sources and methods in any potential criminal litigation in the United States.

The Chicago agents obtained all the bank account numbers for the BIF’s overseas offices,

which BIF had typed up and later thrown out in the trash. They provided this information

to the intelligence community, which they hoped could trace the money overseas. They

never heard anything back about such a trace, however.

The BIF investigation revealed the difficulties in securing foreign cooperation in

terrorism investigations. FBI Chicago submitted a lead to a European ally, through the

Legat, for information about European intelligence reports concerning a BIF official’s

purported involvement in the kidnapping of Americans in Kashmir. The U.S. ally never

even acknowledged the request, let alone replied. The FBI did not submit MLAT requests

for foreign records because, again, it had no criminal case.

The FBI’s New York Field Office, which ran the primary FBI investigation of Bin Ladin,

was a key source of information for Chicago. But the New York agents were

overwhelmed with work, and did not always coordinate well with their Chicago

counterparts. Although the New York agents were aware of the BIF/GRF investigations,

they sent out their own leads relevant to these investigations, annoying the Chicago

agents. The agents in New York did not have time to share information proactively,

although those in Chicago were welcome to look through New York’s files for relevant

information—which they did, gaining helpful information.86

GRF’s bank filed a money-laundering Suspicious Activity Report with the Treasury

Department’s Financial Crimes Enforcement Network (FinCEN) regarding BIF’s large

transfers of money to the Republic of Georgia. It was apparently concerned that BIF was

involved with Russian organized crime. The Chicago agents said they did not make any

requests of FinCEN before 9/11, explaining that FinCEN would not have been useful to

86 According to the BIF’s attorney, the bank actually closed the BIF’s accounts just before 9/11, forcing

BIF to find another bank in the Chicago area, which it was able to do.

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them because it could not help them trace the money once it got overseas. They knew that

BIF was sending big money overseas, and even knew the account numbers and office

directors of the BIF overseas offices that were receiving the money. Their problem was

tracing the money once it got there, and the believed FinCEN could provide no help in

this regard because, like the FBI agents, it had no access to the relevant foreign records.

Inability to bring a criminal case to disrupt BIF

Overall, BIF investigation was in the same position as the GRF investigation on 9/11: the

agents believed BIF had substantial ties to al Qaeda, was supporting jihad, and was

sending a great deal of money overseas, but they could not trace the money directly to its

ultimate destination overseas. Although they had access to considerable information, the

agents believed they still could not come close to proving a criminal case against Arnaout

or BIF. The BIF investigation was actually in worse shape because, unlike in the GRF

investigation, the agents could not get approval for electronic surveillance. The agents

tried to understand what was going on overseas, and a European agency had invited the

Chicago agents to a meeting to share information. The agents tried to go but, as had

happened with the GRF investigation, the Chicago FBI could not afford to send them.

The misunderstanding of the wall also created the same problems in the BIF investigation

as it did in that of the GRF. For all of these reasons, the FBI could not take any action

against BIF, despite what the agents considered extensive knowledge of BIF’s

malfeasance.

Like the GRF investigation, the BIF investigation lacked an endgame. Believing

themselves unable to initiate a criminal investigation and lacking any other means to

disrupt what they thought to be a major jihadist fund-raising operation with substantial

links to Bin Ladin and al Qaeda, the Chicago agents saw no options other than continued

monitoring of BIF’s activities. In this respect, the BIF and GRF investigations typified

the FBI’s pre-9/11 approach to terrorist financing. The FBI had numerous terroristfinancing

investigations under way, but the vast majority of them were pursued as

intelligence-gathering exercises by FBI intelligence agents, with little or no thought of

disrupting the fund-raising through criminal prosecution or otherwise.

Post-9/11 Developments

FBI investigations of BIF and GRF after 9/11

Everything changed almost immediately after 9/11 with respect to the BIF and GRF

investigations. Major obstacles to the investigation dropped away, more resources

became available, and the issue of terrorist financing gained new prominence among

national policymakers in Washington.

As a result, the course of the BIF and GRF investigations dramatically changed and led to

a series of events unimaginable on 9/10: the long-delayed FISA warrants were

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98

instantaneously approved; the FBI opened a major criminal investigation of GRF and

BIF; FBI agents raided the Illinois headquarters of both organizations in an

unprecedented overt FISA search; OFAC—an entity entirely unknown to the FBI case

agents before 9/11—froze the assets of GRF and BIF; NATO troops kicked in doors of

the charities’ overseas offices and carted away all their contents; and Bosnian criminal

investigators raided BIF’s office in Bosnia, seizing a treasure trove of documents directly

concerning BIF’s relationship with Bin Ladin that dated to the origins of al Qaeda.

In the immediate wake of 9/11, the Chicago FISA warrant for GRF was reinstated, and

that for BIF was finally approved. The previously moribund FISA applications from

Detroit for GRF were approved as well, as the agent was informed by an emergency call

from FBI headquarters.

But after the events of 9/11, electronic surveillance was not very useful, even though the

FBI assigned a significant number of translators to the cases. The agents believed that the

GRF subjects feared electronic monitoring in the wake of the attacks; they were

extremely cautious about their communications. The GRF FISA warrants proved

unproductive. On the other hand, electronic surveillance of BIF yielded some useful

information, including the fact that Arnaout was passing messages to Batterjee. In

addition to electronic surveillance, the agents continued other investigative techniques,

including trash covers and physical surveillance.

Coincidentally, the U.S. Attorney for Chicago, Patrick Fitzgerald, on the job for only a

couple of weeks, had extensive experience as a terrorism prosecutor and immediately

became involved in the investigation of BIF and GRF.87 Fitzgerald was very interested in

prosecuting the cases criminally and, at his urging, the FBI opened a criminal

investigation of BIF and GRF in October 2001. The intelligence cases continued as well,

and the electronic surveillance continued. Because the wall between criminal and

intelligence matters still existed, they decided to have separate case agents for the

criminal and intelligence investigations. The lead intelligence case agents moved to the

criminal case, and two new agents were assigned to the intelligence cases. The new

intelligence agents were responsible for passing information over the wall to the criminal

agents.

Fitzgerald immersed himself in the case and took a major role. He directed the FBI to

interview al Qaeda cooperators from the New York cases, who provided considerable

information on BIF and some on GRF as well. One cooperator, an admitted former al

Qaeda member and Bin Ladin associate, said that BIF engaged in financial transactions

for al Qaeda in the early 1990s. He also described how al Qaeda would take cash from

charitable NGOs, which would then cover the transactions with false paperwork. After

87 Fitzgerald took office pursuant to an interim appointment on September 1, 2001; he was formally

appointed and confirmed by the Senate in October. Fitzgerald had extensive experience prosecuting

terrorism cases as an Assistant U.S. Attorney in New York, where he prosecuted the Landmarks and

Embassy Bombings cases and served nearly six years as co-chief of the Organized Crime and Terrorism

Section.

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opening the criminal case, the agents also were able to issue grand jury subpoenas for

additional phone and bank records.

OFAC involvement and the shutdown of BIF and GRF

While the Chicago agents and prosecutors were starting to think about bringing criminal

cases against BIF and GRF, policymakers in Washington were thinking about disrupting

al Qaeda financing using whatever tools they had. BIF and GRF came to the attention of

OFAC, which began to consider them for possible designation as a supporter of al Qaeda.

To this end, OFAC dispatched two analysts to Chicago in early December 2001 to review

the FBI files and begin putting together the evidentiary packages that would support

designations.

These plans were dramatically accelerated when CIA analysts, drawing on intelligence

gathered in an unrelated FBI investigation, expressed concerns that GRF could be

involved in a plot to attack the United States with weapons of mass destruction (WMD).

Neither the Chicago agents nor the FBI headquarters analysts, who had extensive

knowledge of GRF, were consulted on this analysis, which a Chicago FBI supervisor

characterized as baseless. The WMD fears led to a plan to enter and search the overseas

offices of GRF and BIF to obtain swabbings and other evidence related to possible WMD

deployment. BIF was included because the two charities were thought to be related.

Although the WMD allegations were never corroborated, the events of 9/11 led to an

understandably cautious approach in dealing with potential threats of mass casualties.

At the same time, OFAC received word from the General Counsel of Treasury, who was

coordinating the interagency effort against terrorist financing, that it needed to designate

BIF and GRF immediately. OFAC had not yet developed the evidence necessary for a

designation under IEEPA. As a result, OFAC relied on a provision of IEEPA clarified by

the Patriot Act, which provides that OFAC could freeze the assets belonging to a

suspected terrorist supporter “during the pendency of an investigation.” Only a single

piece of paper, signed by the director of OFAC, was required.88 OFAC announced this

action on December 14, 2001, thereby effectively shutting down both charities in the

United States while gaining additional time to develop the evidentiary packages

necessary for permanent designations. This extraordinary power enabled the government

to stop the charities’ operations without any formal determination of wrongdoing.

The raids on a number of overseas offices also occurred on December 14, 2001,

conducted, in various locations, by NATO troops and U.S. government personnel. NATO

troops raided two GRF offices, and NATO publicly stated that GRF “is allegedly

involved in planning attacks against targets in the U.S.A. and Europe.”89 At the same

time, Albanian National Police, accompanied by an FBI agent, raided the GRF office in

Tirana and the home of a GRF employee, seizing $20,000 and taking swabbings for

residue of WMD.