Staff Report to the Commission

received from Mohammed Galeb Kalaje Zouaydi, a suspected al Qaeda financier in

Europe who was arrested in Spain in 2002.

OFAC’s unclassified Statement of the Case laid out the extensive evidence indicating

GRF’s role in supporting jihad. This evidence included the pictures of sophisticated

communications equipment the FBI had found in the trash, photographs of jihadists both

alive and dead, and documents establishing GRF’s enthusiastic support for armed jihad.

For example, a GRF pamphlet from 1995 stated, “God equated martyrdom through

JIHAD with supplying funds for the JIHAD effort. All contributions should be mailed to:

GRF.” Another GRF publication stated that charitable funds “are disbursed for equipping

the raiders, for the purchase of ammunition and food, and for [the mujahideen’s]

transportation so that they can raise God the Almighty’s word[;] . . . it is likely the most

important . . . disbursement of Zakat in our times is on the jihad for God’s cause[.]”111

OFAC’s assertions and the resulting UN actions publicly designated BIF and GRF as

supporters of al Qaeda and effectively shut down these operations around the world.

109 OFAC BIF Statement of the Case.

110 Salim was later indicted for conspiracy to kill U.S. nationals, an overt act that included the 1998

embassy bombings. While in custody, he assaulted a corrections officer, inflicting grievous and permanent

injury. Testimony in the 2001 embassy bombing trial also implicated Salim in al Qaeda’s efforts to develop

WMD.

111 OFAC GRF Statement of the Case.

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BIF and GRF Challenges to OFAC’s Actions

GRF failed in its efforts to challenge OFAC’s initial asset blocking in court. On June 11,

2002, the court denied GRF’s claim for an injunction requiring the government to

“unfreeze” its assets and return its property. The court held that GRF was not entitled to

an injunction because it had failed to establish a reasonable likelihood of success on its

claims that the U.S. government had violated its constitutional rights or the laws of the

United States.112 GRF’s appeal was denied, and the U.S. Supreme Court refused to

consider the case.113 Although its legal challenge to the preliminary designation failed,

GRF has continued to litigate the issue of whether sufficient evidence existed to justify its

designation as an SDGT. As of this writing, that litigation is pending in federal district

court in Chicago.

BIF’s challenge to having its assets blocked pending investigation was stayed until the

criminal case was resolved, and eventually it was dismissed. BIF elected not to challenge

OFAC’s designation of it as an SDGT. By that time, BIF was focused on the criminal

issues, and, in any event, it was clear that BIF was dead as an organization.

Counsel for BIF and GRF expressed great frustration with the OFAC process, including

the blocking of assets without any adversarial process adjudicating culpability, their view

that the process lacked defined standards, their perception of OFAC’s unresponsiveness

to attorney inquiries and licensing requests, the use of classified evidence unavailable to

the defense, and OFAC’s reliance on evidence that would not be admissible in a judicial

proceeding. For example, BIF’s counsel was stunned to see that the administrative record

supporting BIF’s designation included newspaper articles and other rank hearsay. To BIF

and GRF’s counsel, experienced lawyers steeped in the federal courts’ rules of evidence

and due process, the OFAC designation process seemed manifestly unfair. In response,

OFAC points out that the courts have upheld the process and standards it uses in

designations, as well as the use of classified information, news articles and other hearsay

in support of the designations. OFAC further maintains that its administrative record

fully supports the designations of BIF and GRF.

Vigorous Defense in the Criminal Case

Before his plea, Arnaout vigorously litigated the criminal charges against him. As the

case moved closer to trial, the government submitted a lengthy statement of facts setting

forth the historical evidence tying Arnaout to Bin Ladin and al Qaeda. This proffer,

which included multiple voluminous appendixes, drew heavily on the documents seized

in Bosnia. The government did not provide specific evidence that BIF funded al Qaeda.

112 Global Relief Foundation v. O’Neill et al., 207 F. Supp. 2d 779, 809 (N.D. Ill. 2002).

113 Global Relief Foundation v. O’Neill et al, 748 (7th Cir. 2002), cert denied, 124 S. Ct. 531 (2003).

National Commission on Terrorist Attacks Upon the United States

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Rather, it relied heavily on evidence that predated both BIF’s creation and Bin Ladin’s

having become an avowed enemy of the United States.

Through his counsel, Arnaout asked the court to exclude all evidence related to al Qaeda,

Bin Ladin, or other terrorist groups. To Arnaout, the government’s case essentially boiled

down to diverting charitable funds to support Chechen and Bosnian fighters, and had

nothing to do with bin Ladin, terrorism, or al Qaeda. The proffer demonstrated, he

contended, that “the United States intends to try Enaam Arnaout not for acts he

committed in violation of United States laws, but rather for associations he had over a

decade ago, before he relocated to this country, with people who were at the time

America’s allies but who are now its enemies.”114 The court reserved ruling on the

evidence until trial, but in a ruling ominous to the government held that Arnaout

“persuasively argues that a significant amount of the government’s . . . proffer contains

materials that are not relevant to him nor probative of the charges in the indictment(s),

but rather are highly prejudicial matters suggesting guilt by association.”115

Conviction and Sentence

On the morning that trial was to commence, Arnaout pled guilty to one count of

racketeering conspiracy for fraudulent diversion of charitable donations to promote

overseas combatants. He admitted that BIF solicited donations by representing the money

would be used to provide humanitarian relief to needy civilians, while concealing “from

donors, potential donors, and federal and state governments in the United States that a

material portion of the donations received by BIF based on BIF’s misleading

representations was being used to support fighters overseas.”116 The supplies Arnaout

admitted that he and others agreed to provide included boots for fighters in Chechnya,

boots, tents, uniforms for soldiers in Bosnia-Herzegovina, and uniforms for a provisional

but unrecognized government in Chechnya. The court later determined that the amount of

funds diverted from humanitarian relief to support these fighters totaled $315,624.117

Arnaout never admitted to supporting al Qaeda or any other terrorist group. To the

contrary, as the presiding federal district court judge pointed out, “In its written plea

agreement, the government agreed to dismiss sensational and highly publicized charges

of providing material support to terrorists and terrorist organizations.”118

The court sentenced Arnaout to more than 11 years in prison, but flatly rejected the

government’s request that it apply the sentencing enhancement for crimes of terrorism,

which would have mandated a 20-year prison sentence. The court said plainly, “Arnaout

does not stand convicted of a terrorism offense. Nor does the record reflect that he

114 Defendant’s Motion in Limine to Exclude Evidence of Historical Events (January 13, 2003).

115 Order, Jan. 30, 2003. Separately, the court rejected the government’s proffer as insufficient to satisfy

the hearsay exception for co-conspirator statements. U.S. v. Arnaout, 2003 U.S. Dist. Lexis 1635 at *1

(Feb. 4, 2003). This order made it more difficult and riskier for the government to offer such statements at

trial.

116 Plea Agreement at 4.

117 U.S. v. Arnaout, 282 F. Supp. 2d 838, 840 (N.D. Ill. 2003).

118 United States v. Arnaout, 282 F. Supp. 2d at 843.

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attempted, participated in, or conspired to commit any act of terrorism.”119 Moreover, the

court held that the offense to which Arnaout pled guilty, racketeering conspiracy, was not

a crime of terrorism as defined by law. The court further held that applying the

enhancement would be improper because the “government has not established that the

Bosnian and Chechen recipients of BIF aid were engaged in a federal crime of terrorism,

nor that Arnaout intended the donated boots, uniforms, blankets, tents, x-ray machine,

ambulances, nylon and walkie-talkies to be used to promote a federal crime of

terrorism.”120 The court did increase Arnaout’s prison time on the grounds that he

diverted humanitarian aid from the destitute population BIF was aiding to armed fighters.

Both the government and Arnaout appealed the sentence. Arnaout challenged the court’s

enhancement of his sentence for diverting funds from needy civilians, and the

government challenged the refusal to apply the terrorism enhancement. A decision is

pending.

Although Arnaout pled guilty to a serious felony and received a long prison sentence,

many people in the Islamic and Arab communities concluded that Arnaout had been

vindicated of any charge of supporting terrorism. They interpreted the judge’s refusal to

apply the terrorism sentencing enhancement as a major defeat for the government. As Al

Jazeera told its online readers, “The U.S. government had hoped for a high profile

‘terrorism’ conviction, but the judge said the case had not been made.”121 The charge

Arnaout pled to, although undeniably serious, fell far short of what the judge derisively

called “sensational and highly publicized”  charges of supporting terrorists, which the

Attorney General himself had announced with great fanfare. A BIF lawyer believes that

Arnaout’s case, along with the shutdown of BIF, hurt and angered the Muslim

community in the Chicago area. She fears that the bad feelings left by the case

substantially reduce the likelihood of cooperation with law enforcement in the future.

Senior FBI agents in the Chicago office, who devote substantial effort to community

outreach, agreed that the plea and the court’s refusal to sentence Arnaout as a terrorism

offender led many in Chicago’s large Islamic community to see him as vindicated and to

believe the government unjustly targeted him for prosecution—“picking on a poor guy”

who is standing up for Muslims, as one agent described it.122 These agents, as well as the

case agents, agree that accepting a plea to a serious RICO (Racketeer Influenced and

Corrupt Organization Act) charge was the right decision, but believe a trial would have

allowed the government to lay out all its evidence against Arnaout in open court. They

believe the community then would have seen what the agents saw—that Arnaout and BIF

were supporting terrorism.

119 Id.

120 Id. at 845.

121 Http://english.aljazeera.net (accessed Dec. 31, 2003).

122 Commission Staff Interview.

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Status of the GRF Criminal Case

The government’s criminal investigation of GRF included the review of the voluminous

documents and computer records seized from the GRF office and interviews with GRF

personnel. Despite this effort, the government has to date filed no criminal charges

against GRF or its leadership, and any such charges appear increasingly unlikely. GRF

steadfastly denies any wrongdoing and its supporters view the government’s failure to

follow the OFAC blocking with a criminal indictment as a vindication of the

organization. GRF’s counsel contends that GRF never provided a single dollar to fund

terrorism and that the government’s evidence of suspicious links with terrorists all have

innocuous explanations. He asserts GRF is an entirely innocent victim of the

government’s attempt to take some actions to respond to public panic caused by 9/11.

The government never proved a criminal case against GRF fund-raiser Haddad. Instead,

Haddad was deported to his native Lebanon in July 2003 after an immigration judge

found him ineligible for asylum because he was a security danger to the United States, a

decision which was affirmed by the Board of Immigration Appeals. The decision to

deport him rather than continue the criminal investigation was made in Washington,

without consultation with the Detroit case agent who had investigated Haddad. Despite

the findings of the immigration judge, Haddad’s deportation generated considerable

sympathy for him and condemnation of an alleged violation of his civil rights by the U.S.

government. The government contends that ample evidence demonstrated that Haddad

had significant terrorist ties and was a substantial threat to the United States.123

Lessons of BIF/GRF

The agents and officials in these cases faced one of the most important and difficult

issues in the fight against al Qaeda and jihadist fund-raising: there is a difference between

troubling “links” to terrorists and compelling evidence of supporting terrorists. This gives

rise to a further issue: how much information does the government need before it can take

action against a potential terrorist fund-raiser?

Law enforcement officials had concluded that both BIF and GRF had substantial and

very troubling links to al Qaeda and the international jihadist movement. Government

agents had little doubt that the leadership of these organizations endorsed the ideology of

armed jihad and, in many cases, supported an extremist and jihadist ideology. Both of

these organizations raised large amounts of money in the United States, which they sent

overseas, often to or through people with jihadist connections. When the money went

overseas, it became virtually untraceable, since it could be converted to cash and sent

123It is not our purpose to assess Haddad’s culpability, but we recognize the decision not to criminally

prosecute him does not amount to an exoneration. A decision about whether to prosecute an individual can

turn on a number of factors other than his guilt, including whether unclassified evidence is available to use

in court against him.

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anywhere in the world. Moreover, BIF, at least, was plainly funding armed jihadist

fighters.

But there is another side to the story. Despite these troubling links, the investigation of

BIF and GRF revealed little compelling evidence that either of these charities actually

provided financial support to al Qaeda—at least after al Qaeda was designated a foreign

terrorist organization in 1999. Indeed, despite unprecedented access to the U.S. and

foreign records of these organizations, one of the world’s most experienced and best

terrorist prosecutors has not been able to make any criminal case against GRF and

resolved the investigation of BIF without a conviction for support of terrorism. Although

the OFAC action shut down BIF and GRF, that victory came at considerable cost of

negative public opinion in the Muslim and Arab communities, who contend that the

government’s destruction of these charities reflects bias and injustice with no measurable

gain to national security.

The cases of BIF and GRF reveal how fundamentally 9/11 changed law enforcement and

the approach of the U.S. government to those suspected of financing terrorists. In the

past, suspicions of terrorist connections often resulted in further investigation but not

action. The FBI watched jihadist sympathizers send millions of dollars overseas because

they did not have a sense of urgency about disrupting the fund-raising and, in any event,

had no practical way to do so. The 9/11 attacks changed everything. Suddenly, letting

money potentially earmarked for al Qaeda leave the United States became another

potential mass casualty attack. The government after 9/11 had both the will and the tools

to stop the money flow. Thus, the government targeted and destroyed BIF and GRF in a

way that was inconceivable on September 10.

But the question remains, was the destruction of BIF and GRF a success? Did it enhance

the security of the United States or was it a feckless act that violated civil rights with no

real gain in security? A senior government official who led the government’s efforts

against terrorist financing from 9/11 until late 2003 believed the efforts against the

charities were less than a full success and, in fact, were a disappointment because neither

charity was publicly proved to support terrorism. The former head of the FBI’s Terrorist

Financing Operations Section believes that strong intelligence indicated GRF and BIF

were funding terrorism and, although the evidence for a strong criminal terrorism case

may have been lacking, the government succeeded in disrupting terrorist fund-raising

mechanisms. At the same time, he believes the cases have not been successful from a

public relations perspective because there have been no terrorism-related convictions.

BIF and GRF still contend they never supported terrorism, and decry the government’s

conduct as counterproductive and abusive. A BIF lawyer said she understands the

government’s desire to take decisive action after 9/11 but thinks in moving against BIF

the government overreached, lost sight of what the evidence showed, sought to graft

irrelevant, dated al Qaeda allegations onto a simple fraud case, and ignored the rules of

fairness and procedural safeguards that make our system the best in the world. In her

view, the U.S. government “needs to be better than that,” especially in times of crisis

when our values are put to the test.

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Our purpose is not to try to resolve the question of whether BIF or GRF actually provided

funds to terrorists. We can, however, come to some understanding about whether the

government action against them was justified. Reviewing the materials, classified and

unclassified, available to the government makes it clear that their concerns about BIF and

GRF were not baseless. There may not have been a smoking gun proving that these

entities funded terrorism, but the evidence of their links to terrorists and jihadists is

significant. Despite the charities’ humanitarian work, responsible U.S. officials

understandably were concerned about these organizations sending millions of dollars

overseas, given their demonstrable jihadist and terrorist ties. Moreover, Arnaout has

admitted to fraudulent conduct, which in and of itself constitutes a serious felony, even

though it does not prove he funded al Qaeda.

At the same time, the government’s treatment of BIF and GRF raises substantial civil

liberty concerns. IEEPA’s provision allowing blocking “during the pendency of an

investigation” is a powerful weapon with potentially dangerous applications when

applied to domestic institutions. This provision lets the government shut down an

organization without any formal determination of wrongdoing. It requires a single piece

of paper, signed by a midlevel government official. Although in practice a number of

agencies typically review and agree to the action, there is no formal administrative

process, let alone any adjudication of guilt. Although this provision is necessary in rare

emergencies when the government must shut down a terrorist financier before OFAC can

marshal evidence to support a formal designation, serious consideration should be given

to placing a strict and short limit on the duration of such a temporary blocking. A

“temporary” designation lasting 10 or 11 months, as in the BIF and GRF cases, becomes

hard to justify.

Using IEEPA at all against U.S. citizens and their organizations raises potentially

troubling civil liberties issues, although to date the courts have rejected the constitutional

challenges to IEEPA in this context.124 As the Illinois charities cases demonstrate, IEEPA

allows the freezing of an organization’s assets and its designation as an SDGT before any

adjudication of culpability by a court. The administrative record needed to justify a

designation can include newspaper articles and other hearsay normally deemed too

unreliable for a court of law. A designated entity can challenge the designation in court,

but its chances of success are limited. The legal standard for overturning the designation

is favorable to the government, and the government can rely on classified evidence that it

shows to the judge but not defense counsel, depriving the designated entity of the usual

right to confront the evidence against it. Still, because of the difficulties of prosecuting

complex terrorist-financing cases the government may at times face the very difficult

choice of designating a U.S. person or doing nothing while dollars flow overseas to

potential terrorists.125

124 As noted above, the GRF challenge to IEEPA’s constitutionality failed in court. See also Holy Land

Found. For Relief and Dev. v. Ashcroft, 219 F. Supp. 2d 57 (D.D.C. 2002) (upholding use of IEEPA

against purported charity accused of funding terrorism).

125 The IEEPA process gives the designated person fewer rights than in the somewhat analogous

circumstance of civil forfeiture, in which the government seeks to take (as opposed to freeze) property that

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Finally, we need to keep BIF and GRF in mind as we evaluate the efforts (or lack of

efforts) of our allies as they respond to intelligence concerning persons allegedly

financing terrorism. Several former government officials have criticized the Saudi

government for its failure to prosecute individuals for financing terrorism. As one put it,

Saudi Arabia needs a “Martha Stewart”—a high-profile donor whose prosecution can

serve as deterrent to others. Much of the frustration with the Saudis results from their

apparent lack of will to prosecute criminally those persons who U.S. intelligence

indicates are raising money for al Qaeda. Although willing to take other actions based on

the intelligence—such as removing someone from a sensitive position or shutting down a

charity—the Saudis have failed to impose criminal punishment on any high-profile

donor. BIF and GRF should remind us that terrorist links and evidence of terrorist

funding are far different things. Saudi Arabia and other countries certainly have at times

been recalcitrant in seeking to hold known terrorist fund-raisers accountable for their

actions. But in criticizing them, we should remember that in BIF and GRF, the total

political will, prosecutorial and investigative talent, and resources of the U.S. government

have so far failed to secure a single terrorist-related conviction.