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Congress passes the Civil Service Reform Act, also called the Pendleton Act, which expands on the previously passed Naval Appropriations Bill, which prohibited government officials and employees from soliciting campaign donations from Naval Yard workers (see 1867). This bill extends the law to cover all federal civil service workers. Before this law goes into effect, government workers are expected to make campaign contributions in order to keep their jobs. The law was prompted by the assassination of President James Garfield by a person who believed he had been promised a job in the Garfield administration. The law establishes a “merit system” in place of the old “patronage” system of receiving government posts. (Campaign Finance Timeline 1999; Center for Responsive Politics 2002 ; Geraci 2006 )
Ahmet Muhtar Bey Zogolli proclaims himself Zog I, King of the Albanians, creating an Albanian monarchy. Yugoslavia sees Zog’s title as a claim on all areas populated by Albanians, though scholars believe Zog had given up on Kosova as far back as 1913. This marks Zog’s switch from the pro-Yugoslavia camp to the pro-Italy camp, in return for Italian economic aid. (Kola 2003, pp. 20)
Testifying to Congress on his opposition to raising taxes on the wealthy, millionaire financier J. P. Morgan Jr. says: “If you destroy the leisure class, you destroy civilization. The leisure class can be defined by people who can afford to hire a maid.” (Hunt 9/1/2009, pp. 4)
Newly elected President Franklin Delano Roosevelt delivers his Inaugural Address in Washington immediately after being sworn into office. To a country reeling from the effects of the Great Depression, Roosevelt offers a ringing promise of economic change—the first hints of what will become his “New Deal” economic policies. “The only thing we have to fear is fear itself,” he tells the crowd, “nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.”
Acknowledges Economic Calamity - He continues: “Our common difficulties concern, thank God, only material things. Values have shrunk to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce: the savings of many years in thousands of families are gone. A host of unemployed citizens face the grim problem of existence. Only a foolish optimist can deny the dark realities of the moment.”
'Rulers of the Exchange,' 'Money Lenders' Stand Responsible - “Primarily, this is because the rulers of the exchange of mankind’s goods have failed through their own stubbornness and their own incompetence, have admitted their failure and abdicated,” Roosevelt says. “Practices of the unscrupulous money changers stand indicted. True, they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit, they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. There must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance.”
Call to Action - He continues: “This nation asks for action, and action now. Our greatest primary task is to put people to work. It can be accomplished in part by direct recruiting by the government itself, treating the task as we would treat the emergency of a war.… It can never be helped by merely talking about it. We must act, and act quickly. There must be a strict supervision of all banking and credits and investments; there must be an end to speculation with other people’s money, and there must be provision for an adequate but sound currency. These are the lines of attack.” (Time 3/13/1933)
In Belgrade, Nako Spiru, Albania’s economy minister, and Boris Kidric, Yugoslavia’s minister of industry, sign a 30-year treaty unifying Albania’s economy with Yugoslavia. They agree to coordinate economic planning, make the value of Albania’s lek dependent on the value of Yugoslavia’s dinar, equalize prices (not based on international market prices), and create a customs union under Yugoslavia’s rules. According to author Paulin Kola, Albanian communist leader Enver Hoxha praises the treaty highly, while Hoxha will later say he had many reservations. According to the Albanian communists’ official history, the Albanian government and Hoxha think economic conditions make currency parity impossible to achieve on Yugoslavia’s schedule and they say Yugoslavia sets parity “on an altogether arbitrary basis to the advantage of the dinar.” Albania also has reservations about unifying prices. It says the customs union is set up to benefit Yugoslavia, later causing shortages and inflation in Albania. Joint companies are later set up based on the convention, and Albania will complain that it is providing the capital it promised, while Yugoslavia provides not “even a penny in the original funds” but still “appropriated half of the profits.” A joint commission to coordinate the economies is created, and the Albanian government says Yugoslavia tries to “turn it into a super-government above the Albanian government.” Yugoslavia is supposed to provide two billion leks of credit in 1947, but reportedly does not provide even one billion, and credit in goods is overvalued by two to four times more than their prices in international trade. Yugoslavia provides four factories, which Albania considers too small and decrepit. The Albanian government subsequently says that the withholding of promised credit hinders the economic plan for 1947, and Albania says that the 1948 credits are also lacking. (PLA 1971, pp. 306-309; Kola 2003, pp. 78-79)
Yugoslavia’s envoy to Albania Savo Zlatic tells the Albanian leadership that, while the Central Committee of the CPA is dealing properly with Yugoslavia, there is another anti-Yugoslav position in Albania. Hoxha will later recount in The Titoites, “Whenever we raised any opposition, [the Yugoslavs] immediately thought that the Soviets ‘had prompted us,’ although, without denying their merits, in 1946 and even 1947 the Soviets regarded us mostly through the eye of the Yugoslavs.” He will specifically mention that Zlatic complains to him that an Albanian has insulted Yugoslavia by disagreeing with a Yugoslav adviser on cotton in front of Albanian farmers, with the implication that the Albanian was repeating Soviet advice, because Albanians are ignorant about cotton farming. Hoxha will write that he says, “Leave the specialists to get on with their discussions, Comrade Zlatic, because this does not impair your prestige or ours or even that of the cotton!” Hoxha will say that two or three days later, Economy Minister Nako Spiru reports that Zlatic said, “there are two economic lines in our country: the line of the Central Committee, which is correct in principle, and, parallel with this, the concretization of a second line in practice, contrary to that of the Central Committee,” which Spiru sees as an attack on him. According to Paulin Kola, only Spiru publicly opposes the economic integration, and he is the highest ranking official in close contact with Soviet officials. Zlatic objects to the slow pace of economic integration and what Yugoslavia sees as Albanian appeals to the Soviets. Specifically, the unification of prices in the two countries is supposed to be done in May, but takes until late June, and rates of pay issues in late May are not resolved until July. On June 20 or 21, Hoxha sends Spiru and Koci Xoxe, who is close to Zlatic, to meet with Zlatic about the Yugoslav concerns. Xoxe believes the accusation should be investigated, and there is tension between him and Spiru. The Albanian leadership rejects the charge of two lines, and Xoxe does not put up opposition. (Hoxha 1982, pp. 327-335; Kola 2003, pp. 87-88)
Yugoslavia’s envoy to Albania Savo Zlatic requests a meeting with Albanian Prime Minister Enver Hoxha and Interior Minister Koci Xoxe regarding the views of the Central Committee of the Communist Party of Yugoslavia (CPY) on relations between the two countries. According to Hoxha’s later account, Zlatic starts by saying, “A general decline in our relations is being observed, and especially in the economy our relations are quite sluggish.” The Yugoslavs say disputes in joint enterprises are constantly being taken to an arbitration commission, that there is an improper attitude towards the Yugoslav advisers, and that Albanians are accusing the Yugoslavs of not fulfilling their obligations while being lax about fulfilling their own commitments.
Plans for a Balkan Federation - Zlatic says Yugoslav relations with Hungary, Romania, and Bulgaria are advancing much more than relations with Albania. Further, Zlatic says Albania’s draft five-year plan is autarchic, in going beyond grain growing and light industry, when the Yugoslavs can provide the products of heavy industry. Hoxha will later say that the Albanian leadership never intended to make their economy “an appendage of the Yugoslav economy” in the way Zlatic is suggesting, although perhaps Albanian Economy Minister Nako Spiru did when he signed an Economic Convention in Belgrade (see November 27, 1946). Hoxha says Spiru kept silent about any concerns he had. Hoxha will also later claim that Xoxe knew of plans for union between Yugoslavia and Albania, but he did not. Zlatic says “The present-day Yugoslavia is its embryo, the nucleus of the federation [of Yugoslavia, Albania, and Bulgaria],” and “In practice the ‘economic union’ is the federation itself.” The Yugoslav plan is to form joint military, culture, and foreign policies later, and include additional countries. The leadership should only talk about economic unification for the time being, Zlatic says, but “this is the best way for the rapid development of the relations of our joint economies,” which is a necessity for Albania. Therefore, Zlatic says, this is not Yugoslav “pressure” to unify. Zlatic says Spiru “put his trust in the advice of the Soviets” regarding the five-year plan, creating a “wrong, unrealistic, anti-Yugoslav and anti-Albanian” plan. Hoxha will later recount saying that the Albanian leadership sent Spiru to consult the Soviets and backs the plan. Yugoslavia calls for a strengthened Co-ordination Commission, as “a kind of joint economic government,” but Zlatic cannot give Hoxha details. The Yugoslavs have not allocated funds for Albania’s five-year plan, so Zlatic says there should only be a one-year plan for 1948. Scholar Paulin Kola will later write that Zlatic says Albania receives more aid than a republic of Yugoslavia and that Zlatic repeats the Yugoslav demand that Albania not make economic agreements with other countries without Yugoslavia’s approval.
Yugoslavs Accuse Spiru of Treason - Zlatic blames all of the problems on Spiru and his allies, while Hoxha expresses doubt and says Spiru is not in control. Zlatic says Spiru lied about Yugoslavia promising 21 billion dinars to Albania. Hoxha will later say that the Vice-President of the State Planning Commission, Kico Ngjela, verifies that the Yugoslavs promised the funding. Spiru is allegedly an “agent of imperialism” sabotaging Yugoslavia’s relations with Albania and the USSR. Hoxha requests Zlatic’s statements in writing, and Zlatic is evasive. Hoxha will later say the Yugoslavs’ real attack was on him, and that the allegations were a signal to Xoxe to try to replace him. (PLA 1971, pp. 312; Hoxha 1974, pp. 750 -753; Hoxha 1982, pp. 353-373; Kola 2003, pp. 89-90)
In response to a March letter from the Albanian government to Yugoslavia, Yugoslav representative to Albania Savo Zlatic meets with Albanian Prime Minister Enver Hoxha, Interior Minister Koci Xoxe, leading Albanian communists Hysni Kapo and Pandi Kristo, and Yugoslav economic planner Sergej Krajger. In what Hoxha sees as a retreat, the Yugoslavs focus on economic unification and say that Albania and Yugoslavia should coordinate their policies, but not unify politically at this point. Yugoslavia proposes coordination of foreign policy, economic planning methodology, trade, finance, laws, passports, education, and open borders. It says coordination commissions should be created in each country, the one in Albania having an Albanian minister and a Yugoslav deputy minister, and vice versa in Yugoslavia, as “the beginning of the future joint government.” Zlatic says they should draft a joint protocol at the meeting, and Hoxha asks why the Yugoslavs refuse to commit their proposals to paper. He says Albania wants to know why they should unify, not start working on it. Kraejger says the unification only covers economic matters, but Hoxha counters that the coordination commission has not streamlined things. Kraejger says Albania is making unreasonably large requests for tweezers, boot polish, and nails, pen nibs, beverage essence, etc., but Kristo says the Yugoslavs suggested it, because they had stock to get rid of. Hoxha demands that the Yugoslavs present a document. He will later recount that Albania still had not been informed of Soviet-Yugoslav tensions, and only receives a copy of a key March 27, 1948 letter from the Central Committee of the Communist Party of the Soviet Union to the Communist Party of Yugoslavia two or three days after this meeting. (Hoxha 1982, pp. 477-484; Kola 2003, pp. 93-94)
President Dwight D. Eisenhower gives the following warning during his farewell speech: “In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.” (Carter 2004, pp. 47)
With the rise of Slovenian and Croatian influence in the LCY, and following 1968’s ethnic Albanian demonstrations, Amendments VII through XIX are made to Yugoslavia’s Constitution, giving the autonomous provinces of Kosovo and Vojvodina more autonomy. In Amendment VII, Yugoslavia is redefined as having eight instead of six constituent parts: six republics and two socialist autonomous provinces. Yugoslavia becomes the custodian of the provinces’ rights and duties, instead of Serbia, and Kosovars can elect representatives to the Yugoslav legislature. Kosovo-Metohija becomes just Kosovo, under Amendment XVIII. Kosovo gains a constitution (instead of statutes), its assembly can pass laws equal to those of a Yugoslav republic (instead of decrees), and it gains a provincial supreme court. Federal development aid is channeled to Kosovo ahead of other areas. The term national minority is replaced by nationality. Yugoslav President Josip Broz Tito will say national minority “carried a tone of inequality, as if second-class citizens were involved. When it comes to rights there can be no difference whatsoever between nations, nationalities, and ethnic groups.” A year later, Serbia will approve Kosovo’s new constitution. Following these and other changes, Yugoslavia’s Albanian population will begin gravitating towards Kosovo while Slavs will start moving out of the province. (Vickers 1998, pp. 169-170; Kola 2003, pp. 109-110)
International Telephone and Telegraph (ITT) acquires three smaller corporations, prompting the US Justice Department to file suits against ITT charging that the mergers violate antitrust laws. Between 1969 and April 1971, ITT officials meet with several Nixon administration officials, including Vice President Spiro Agnew; White House aides John Ehrlichman, Charles Colson, and Egil Krogh; Cabinet secretaries John Connally and Maurice Stans; Justice Department officials John Mitchell and Richard Kleindienst; and others, in attempts to persuade the administration to drop the lawsuits. (Wallechinsky and Wallace 1981)
International Telephone and Telegraph (ITT) offers the Nixon administration $400,000 to finance the GOP’s 1972 national convention in San Diego. (Wallechinsky and Wallace 1981) President Nixon wanted San Diego as the site of the convention, but the San Diego city government has no intention of spending lavish amounts of money subsidizing a convention it does not need. The ITT contribution, privately arranged by White House and GOP officials, is key to having San Diego as the site of the convention. In early July, the Republican National Committee announces San Diego as the convention site; eight days later, the Justice Department announces that it is dropping its antitrust suit against ITT (see July 31, 1971). Shortly thereafter, Richard McLaren, the head of the Justice Department’s Antitrust Division and an enthusiastic trustbuster whose atypical decision to let ITT off the hook confuses many observers, abruptly quits the department; within days, McLaren lands a federal judgeship without benefit of Senate hearings. Syndicated columnist Jack Anderson believes the whole deal is fishy, and will write a December 9, 1971 column to that effect, but he will not learn the entire truth behind the GOP-ITT deal until months later (see February 22, 1972). (Anderson 1999, pp. 194-200)
The Justice Department reaches a deal with International Telephone and Telegraph (ITT) to drop the government’s antitrust lawsuit against the corporation (see 1969). The “consent decree” allows ITT to keep some of the firms with which it has attempted to merge. Perhaps coincidentally, ITT is allowed to merge with the firms that are relatively profitable, and dispose of the companies that will lose money for the corporation (see May 13, 1971). (Wallechinsky and Wallace 1981)
The Organization of Petroleum Exporting Countries (OPEC) announces a planned meeting set for September 22, 1971 to call for a larger share of assets, profits, and management of oil companies operating in its countries. The relevant oil companies refuse its demands. OPEC specifically states in its announcement that it wants to “take immediate steps toward the implementation of the principle participation in the existing oil concessions.” (UPI 8/14/1971)
President Nixon officially announces the end of the gold standard system of monetary policy for international exchange of gold deposits in an evening address to the country. Nixon’s move to sever the link between the dollar’s value and gold reserves effectively ends the Breton Woods system of monetary exchange and changes the dollar to a “floating” currency whose value is to be determined largely by market influences. Nixon’s decision results from a run on gold exchanges and rampant speculation in gold markets in Europe, and he changes the US monetary policy after receiving advice from Treasury Secretary John Connally, Under Secretary for Monetary Affairs Paul A. Volcker, and others in a special working group. The dollar becomes a fiat currency, causing a brief international panic before other countries follow suit and also allow their currencies to “float.” (UPI 8/16/1971, pp. 1)
On a two day tour of Europe stopping in London and Paris to meet with finance ministers, Undersecretary of the Treasury for Monetary Affairs Paul A. Volcker meets with the finance ministers of both Britain and France to reassure their governments that the end of the gold standard is in the best interests of both governments and maintain that the United States is in no position to prevent other governments from “floating” their currencies. (New York Times 8/18/1971)
Edward M. Bernstein, former director of research for the International Monetary Fund (IMF) and attendee to the Breton Woods conference, calls on international governments to handle all reserve exchange transactions in a reserve settlement account whereby “countries would earmark their gold, SDR’s (Special Drawing Rights), dollar, and other foreign exchange” for the account. In doing so the countries would have the opportunity to settle all reserve transactions through the account, thereby eliminating excess reserve accruals and violent market influences. (Heinemann 8/26/1971)
Syndicated columnist Jack Anderson receives a memo written by International Telephone and Telegraph (ITT) lobbyist Dita Beard; the memo goes a long way towards proving that in return for hefty campaign contributions to the GOP, the Justice Department dropped its antitrust suit against the corporation (see 1969 and July 31, 1971). The memo, written on June 25, 1971 by Beard to ITT vice president Bill Merriam, is entitled “Subject: San Diego Convention.” Beard indicated her distress at the possibility of someone leaking the fact that ITT had quietly contributed $400,000 to the GOP for its 1972 convention in San Diego. Two of the few who know of the contribution, Beard wrote, were President Nixon and Attorney General John Mitchell. She asked whether the $400,000 should be donated in cash or in services, then wrote: “I am convinced because of several conversations with Louie re Mitchell that our noble commitment has gone a long way toward our negotiations on the mergers eventually coming out as Hal wanted them. Certainly the president has told Mitchell to see that things are working out fairly. It is still only McLaren’s mickey-mouse that we are suffering.” Anderson doesn’t know who “Louie” is, but he is sure “Hal” is Harold Geneen, ITT’s president. ITT had announced a $100,000 contribution, but the real amount is four times that. One of Anderson’s aides, Brit Hume, interviews Beard, and during a night of heavy drinking and Beard’s emotional outbursts, finds out that in May 1971, Beard had gone to a party hosted by Kentucky governor Louie Nunn, the “Louie” of the memo. Mitchell was at the party, and Beard was there to prime Mitchell as to what exactly ITT wants in return for its contribution and its assurance that it can secure San Diego as the GOP’s convention site. According to Beard, the deal was hatched between herself and Mitchell at Nunn’s party. Anderson quickly publishes a column based on the memo that causes a tremendous stir in Washington and the press. (Anderson 1999, pp. 194-200) (In his book The Secret Man, Bob Woodward will give the date for Anderson’s column revealing the Beard memo as February 19. This is apparently a typographical error.) (Woodward 2005, pp. 37) The White House will successfully pressure Beard to disavow the memo (see Mid-Late March, 1972).
W. Mark Felt, the number three official at the FBI, is given the memo allegedly written by ITT lobbyist Dita Beard (see February 22, 1972) by Assistant Attorney General L. Patrick Gray to have it forensically analyzed. However, Gray soon demands the memo’s return. Felt has the memo analyzed, but no solid conclusions as to its validity can be initially determined. Shortly after returning the memo to Gray, Felt receives a phone call from White House counsel John Dean; Dean tells Felt that ITT experts had determined that the Beard memo was a forgery. On March 17, as Beard is denying writing the memo, FBI analysts report to Felt that the memo is likely authentic. Before the FBI can release its findings to the public, Dean presses Felt to change the letter; both Felt and FBI Director J. Edgar Hoover refuse, and Hoover releases the finding on March 23. Hoover even refuses a direct request from President Nixon to back off on the finding of authenticity. Felt feels that the request is nothing less than pressure from the White House to cover up the ITT-GOP connection, pressure which Felt will later characterize as “in some ways a prelude to Watergate.” (Gentry 2001, pp. 716-717; Woodward 2005, pp. 37-39)
Shortly after syndicated columnist Jack Anderson reveals the existence of a memo that shows criminal collusion between the Republican Party, ITT, and the Justice Department (see February 22, 1972), CIA and White House agent E. Howard Hunt visits the author of the memo, ITT lobbyist Dita Beard, to persuade her to say publicly that the memo is a forgery, or to disavow it. Beard is currently in hospital, perhaps to treat mental and physical exhaustion and perhaps to keep her away from the press. To conceal his identity during the visit, Hunt wears an ill-fitting red wig similar to one he will have in his possession during the planning for the Watergate burglary (see 2:30 a.m.June 17, 1972). (Wallechinsky and Wallace 1981; Woodward 2005, pp. 8-39) A Justice Department official will discuss Hunt’s visit to Beard with Washington Post reporter Bob Woodward in February 1973, and tell Woodward that White House aide Charles Colson sent Hunt on the mission to convince Beard to disavow the memo. The official, reading from FBI files, will tell Woodward that Colson’s testimony to the FBI was done in his office to spare him the embarrassment of having to testify before the grand jury. The FBI did not ask Colson why he sent Hunt to pressure Beard. (Bernstein and Woodward 1974, pp. 255) On March 21, Beard will deny ever writing the memo, saying, “I did not prepare it and could not have.” Beard’s belated denial, and ITT’s quick shredding of incriminating documents referencing the connections between the antitrust deal and the convention, will partially defuse the potential scandal. The FBI will publicly claim that the memo is most likely authentic despite pressure from the Nixon White House (see March 10-23, 1972). (Wallechinsky and Wallace 1981; Woodward 2005, pp. 8-39)
After a tirade about how humiliated and angry he was when he was investigated and audited by the IRS, President Nixon demands that the same kinds of investigations be performed on the Democratic presidential candidate, George McGovern, and his campaign staff and financiers. “What in the name of God are we doing on this one?” he asks. “What are we doing about the financial contributors?… Are we looking over the financial contributors to the Democratic National Committee? Are we running their income tax returns? Is the Justice Department checking to see whether or not there are any antitrust suits (see July 31, 1971)?… We have all this power and we aren’t using it. Now what the Christ is the matter?” Nixon particularly wants the tax returns of businessman Henry Kimmelman, one of the largest financial backers of the McGovern campaign, but the new Secretary of the Treasury, George Shultz, is reluctant to use the IRS for political purposes. Nixon cannot understand Shultz’s hesitation. “What’s he trying to do, say that we can’t play politics with IRS?… Just tell George he should do it.” Nixon has Kimmelman’s tax returns within three days. By the same time, IRS audits of McGovern’s campaign and senior officials are well underway. (Reeves 2001, pp. 519-521)
The General Accounting Office (GAO) completes its preliminary report on financial irregularities inside the Nixon re-election campaign (see August 1-2, 1972). According to the report, the campaign has mishandled over $500,000 in campaign contributions, including an apparently illegal “slush fund” of over $100,000—perhaps more than $350,000. The report lists 11 “apparent and possible violations” of the new campaign finance law (see Before April 7, 1972), and refers the matter to the Justice Department for possible prosecution. The GAO agrees to delay its public issuance of its report after the committee’s finance chairman, Maurice Stans, asks GAO chief investigator Philip Hughes to come to Miami, where the Republican National Convention is in full swing, to receive more information. Another GAO investigator tells Washington Post reporter Bob Woodward that the Nixon campaign does not want the report to be made public on the same day that Richard Nixon accepts the Republican nomination for president. (Bernstein and Woodward 1974, pp. 48-56)
President Nixon responds to the report by the General Accounting Office (GAO) alleging possible illegal campaign finances in his re-election campaign (see August 22, 1972). Nixon tells reporters, “[W]e have a new law here in which technical violations have occurred and are occurring, apparently on both sides.” When asked what illegalities the Democrats have committed, Nixon says: “I think that will come out in the balance of this week. I will let the political people talk about, but I understand that there have been [violations] on both sides.” The financial director of his re-election campaign, Maurice Stans (see Before April 7, 1972), is an honest man, Nixon says, and is currently investigating the matter “very, very thoroughly, because he doesn’t want any evidence at all to be outstanding, indicating that we have not complied with the law.” Between the GAO’s and the FBI’s investigations, Stans’s own internal investigation, and an internal White House investigation by White House counsel John Dean, Nixon says there is no need for a special Watergate prosecutor, as some have requested. Of the Dean investigation: “I can say categorically that his investigation indicates that no one on the White House staff, no one in this administration, presently employed, was involved in this very bizarre incident [the Watergate burglary—see 2:30 a.m.June 17, 1972]. What really hurts in matters of this sort is not the fact that they occur, because overzealous people in campaigns do things that are wrong. What really hurts is if you try to cover it up.” (Bernstein and Woodward 1974, pp. 57; Gerald R. Ford Library and Museum 7/3/2007) A Washington Post story on the press conference highlights Nixon’s use of the phrase “presently employed,” and notes that several people suspected of campaign wrongdoing—G. Gordon Liddy, E. Howard Hunt, Maurice Stans, Hugh Sloan, and John Mitchell—no longer work for the administration. (Bernstein and Woodward 1974, pp. 57) An assistant attorney general is convinced that the Dean investigation is “a fraud, a pipeline to [White House aide H. R.] Haldeman.” (Bernstein and Woodward 1974, pp. 206) In April 1973, an associate of Dean tells Washington Post reporter Bob Woodward that there was never any such investigation, that Dean had not even discussed anything to do with Watergate as of August 29. “There never was a report,” the associate says. “Dean was asked to gather certain facts. The facts got twisted around to help some other people above him.” (Bernstein and Woodward 1974, pp. 297-298) Dean later tells Watergate investigators that he never conducted any such internal White House investigation (see June 3, 1973). (Bernstein and Woodward 6/3/1973)
In 1973, the price of oil skyrockets, bringing a huge amount of wealth to Saudi Arabia and other oil-rich Middle Eastern countries. The Center for Security Policy (CSP), a Washington think tank, will calculate in 2003 that, between 1975 and 2002, the Saudi government spends over $70 billion on international aid. More than two thirds of the money goes to Islamic related purposes such as building mosques and religious schools. This money usually supports Wahhabism, a fundamentalist version of Islam dominant in Saudi Arabia but far less popular in most other Islamic nations. CSP scholar Alex Alexiev calls this “the largest worldwide propaganda campaign ever mounted” in the history of the world. In addition, private Saudi citizens donate many billions more for Wahhabi projects overseas through private charities. Some of the biggest charities, such as the Muslim World League and its affiliate, the International Islamic Relief Organization (IIRO), are headed by Saudi government officials and closely tied to the government. The IIRO takes credit for funding 575 new mosques in Indonesia alone. Most of this money is spent on benign purposes with charitable intentions. But US News and World Report will assert in 2003: “Accompanying the money, invariably, was a blizzard of Wahhabist literature.… Critics argue that Wahhabism’s more extreme preachings—mistrust of infidels, branding of rival sects as apostates, and emphasis on violent jihad—laid the groundwork for terrorist groups around the world.” (Kaplan 12/7/2003; Kaplan, Ekman, and Latif 12/15/2003)
Sergio De Castro, leader of the Chicago University movement in Chile and the head author of “The Brick,” is made a chief economic adviser to Augusto Pinochet’s authoritarian regime almost immediately after the overthrow of the democratically elected government of Salvador Allende. During the first one and a half years of Pinochet’s rule, Chile is subject to a large array of neoliberal economic reforms. These include the privatization of state-owned firms, financial deregulation, removal of import tariffs, a ten percent cut in government spending (with the notable exception of military spending), and the termination of price controls. As a result, the cost of basic goods will skyrocket while domestic industries are put out of business by imported goods. Orlando Sáenz, who originally recruited the Chicago School graduates to redesign the Chilean economy (see September 1971-September 11, 1973), will declare the consequences to be “one of the greatest failures of our economic history.” (Klein 2007, pp. 79-80)
The CIA attempts to carry out a secretive recovery, code-named Project Jennifer, of a Soviet Golf-II ballistic submarine that sunk in April 1968 in the Pacific Ocean. The submarine, carrying nuclear missiles, had sunk in over three miles of water. Analysts believe the submarine may have been a rogue on its way to attack Hawaii. The Pentagon is capable of carrying out the necessary deep-sea recovery effort itself, but President Nixon and Secretary of State Henry Kissinger decide instead to outsource the recovery to a private firm, Summa Corporation, headed by eccentric billionaire Howard Hughes. The cover story, which has Summa attempting to mine manganese from the ocean floor, is only preserved by CIA Director William Colby feeding Watergate leads to investigative journalist Seymour Hersh to keep Hersh from finding out more about the recovery mission (see February 1975). Summa has built an enormous recovery ship, the Glomar Explorer, for the mission, and the ship goes to the site. Kissinger badly wants the submarine for verification of arms control analyses of Soviet military and nuclear capabilities, as well as for his dealings with defense hawks such as Defense Secretary James Schlesinger. The Glomar has been on site since June, but for the last two weeks an armed Soviet trawler has been near the recovery vessel, taking photographs and making the civilian crew nervous. Many in Washington worry that the Soviets may try to board the Glomar. Kissinger feels that the “intelligence coup” of the recovered sub makes the possibility of a confrontation with the Soviets worthwhile. Ford, like Kissinger and the other senior officials informed of the operation, knows that the Glomar is completely vulnerable, but if President Ford sends US naval vessels to the site, the Soviets will do the same, thus escalating the situation. Worse, the closest Navy vessels are days away. This is Ford’s first test against the Soviets. Ford orders the Glomar to continue operations, but holds off sending naval vessels to the site just yet. (Werth 2006, pp. 28-30; Pike 9/14/2006) The rescue attempt is unsuccessful; as the sub is being pulled to the surface, it breaks apart, irretrievably scattering missiles, computer components, secret codes, and everything else of real value. (Werth 2006, pp. 56) However, unconfirmed accounts say the CIA manages to retrieve a number of items, including three nuclear missiles, two nuclear torpedoes, the ship’s code machine, and various code books. (Pike 9/14/2006)
The Federal Election Commission (FEC) hands down an “advisory opinion” that, according to the mandates of the newly passed amendments to the Federal Election Campaign Act (FECA—see 1974), allows corporations to spend general funds on solicitation of donations from stockholders and employees. The case stems from an attempt by Sun Oil Corporation to solicit employees, both union and non-union, for contributions to the corporation’s PAC, SUN PAC. The FEC’s advisory opinion, which by law is binding, reads in part, “It is the opinion of the Commission that Sun Oil may spend general treasury funds for solicitation of contributions to SUN PAC from stockholders and employees of the corporation.” The FEC’s reasoning is that the money is to be segregated according to the Supreme Court’s Pipefitters decision (see June 22, 1972), businesses have for years solicited their employees for both political and non-political causes, and FECA says that contributions to a separate segregated fund may not be secured by “job discrimination” or “financial reprisals.” Neither Congress nor the unions are pleased with the ruling. If corporations had been restricted to soliciting only their stockholders, they could have solicited only twice as many individuals as the labor unions, but with the ruling in place, corporations effectively can now solicit virtually the entire workforce of the nation. It is this decision that in part sparks the “PAC boom” among corporate PACs, which sees the number and funding of corporate PACs increase dramatically. (Campaign Finance Timeline 1999)
Investigative journalist Joseph Trento will later report that in 1976, the Safari Club, a newly formed secret cabal of intelligence agencies (see September 1, 1976-Early 1980s), decides it needs a network of banks to help finance its intelligence operations. Saudi Intelligence Minister Kamal Adham is given the task. “With the official blessing of George H. W. Bush as the head of the CIA, Adham transformed a small Pakistani merchant bank, the Bank of Credit and Commerce International (BCCI), into a world-wide money-laundering machine, buying banks around the world to create the biggest clandestine money network in history.” BCCI was founded in 1972 by a Pakistani named Agha Hasan Abedi, who was an associate of Adham’s. Bush himself has an account at BCCI established while still director of the CIA. French customs will later raid the Paris BCCI branch and discover the account in Bush’s name. (Trento 2005, pp. 104) Bush, Adham, and other intelligence heads work with Abedi to contrive “a plan that seemed too good to be true. The bank would solicit the business of every major terrorist, rebel, and underground organization in the world. The intelligence thus gained would be shared with ‘friends’ of BCCI.” CIA operative Raymond Close works closely with Adham on this. BCCI taps “into the CIA’s stockpile of misfits and malcontents to help man a 1,500-strong group of assassins and enforcers.” (Trento 2005, pp. 104) Soon, BCCI becomes the fastest growing bank in the world. Time magazine will later describe BCCI as not just a bank, but also “a global intelligence operation and a Mafia-like enforcement squad. Operating primarily out of the bank’s offices in Karachi, Pakistan, the 1,500-employee black network has used sophisticated spy equipment and techniques, along with bribery, extortion, kidnapping and even, by some accounts, murder. The black network—so named by its own members—stops at almost nothing to further the bank’s aims the world over.” (Beaty and Gwynne 7/22/1991)
Founded in 1976, Faisal Islamic Bank of Egypt (FIBE) is part of the banking empire built by Saudi Prince Mohammed al-Faisal. Several of the founding members are leading members of the Muslim Brotherhood, including the “Blind Sheikh,” Sheikh Omar Abdul-Rahman. The growth of Islamic banking directly funds the political growth of the Islamist movement and allows the Saudis to pressure poorer Islamic nations, like Egypt, to shift their policies to the right. The Islamic banking boom is closely associated with the neoliberal free-trade philosophy of the Chicago School of Economics, with the free-trade prescriptions of the International Monetary Fund, and with conservative think-tanks like the Virginia-based Islamic Free Market Institute. FIBE is also closely associated with the infamous Bank of Credit and Commerce International (BCCI), which will be found to be deeply implicated in the illegal arms and narcotics trades, and with the funding of terrorist organizations when it collapses in 1991. Investigators will also find that BCCI held $589 million in “unrecorded deposits,” $245 million of which were placed with FIBE. (Dreyfuss 2005, pp. 164 - 175)
The billionaire Koch brothers, Charles and David, launch the libertarian Cato Institute, one of the first of many think tanks and advocacy organizations they will fund (see August 30, 2010). While records of the Koch funding of the institute are not fully available, the Center for Public Integrity learns that between 1986 and 1993 the Koch family gives $11 million to the institute. By 2010, Cato has over 100 full-time employees, and often succeeds in getting its experts and policy papers quoted by mainstream media figures. While the institute describes itself as nonpartisan, and is at times critical of both Republicans and Democrats, it consistently advocates for corporate tax cuts, reductions in social services, and laissez-faire environmental policies. One of its most successful advocacy projects is to oppose government initiatives to curb global warming. When asked why Cato opposes such federal and state initiatives, founder and president Ed Crane explains that “global warming theories give the government more control of the economy.” (Mayer 8/30/2010)
Beginning in 1978, a group of foreign investors attempt to buy First American Bankshares, the biggest bank in the Washington, D.C., area. This group is fronted by Kamal Adham, the longtime Saudi intelligence minister until 1979. In 1981, the Federal Reserve asks the CIA for information about the investors, but the CIA holds back everything they know, including the obvious fact that Adham was intelligence minister. As a result, the sale goes through in 1982. It turns outs that Adham and his group were secretly acting on behalf of the criminal Bank of Credit and Commerce International (BCCI), and BCCI takes over the bank. (McGee 7/30/1991; US Congress, Senate, Committee on Foreign Relations 12/1992) Time magazine will later report that “the CIA kept some accounts in First American Bank, BCCI’s Washington arm.” But additionally, “Government investigators now have proof that First American had long been the CIA’s principal banker. Some of the more than 50 agency accounts uncovered at the bank date back to the 1950s. BCCI owned the CIA’s bank for a decade.” (Castro 3/9/1992) The CIA soon learns that BCCI secretly controls the bank, if the CIA didn’t already know this from the very beginning. By 1985, the CIA will secretly inform the Treasury Department on the bank’s control by BCCI, which would be illegal. But no action is taken then or later, until BCCI is shut down. Sen. John Kerry’s BCCI investigation will later conclude, “even when the CIA knew that BCCI was as an institution a fundamentally corrupt criminal enterprise, it used both BCCI and First American, BCCI’s secretly held US subsidiary, for CIA operations. In the latter case, some First American officials actually knew of this use.” (US Congress, Senate, Committee on Foreign Relations 12/1992)
By 1979, Pakistan’s economy is on the brink of collapse. Pakistan owes large debts to international organizations such as the World Bank and the International Monetary Fund (IMF), but lacks the money to pay off its loans. The criminal BCCI bank led by Agha Hasan Abedi comes up with a scheme to save Pakistan’s economy. In 1979, the IMF says that if Pakistan increases its hard currency reserves by at least $50 million for 90 days, Pakistan’s State Bank can raise the lending limits for commercial banks. With banks able to make more loans, the economy will be able to perform better. BCCI secretly loans the State Bank the hard currency until the 90 days are over and then takes it back. Having established this system, BCCI helps Pakistan’s State Bank numerous times in subsequent years to avoid financial limitations placed on Pakistan. BCCI will finally collapse in 1991 (see July 5, 1991). (Beaty and Gwynne 1993, pp. 292-293)
The US Federal Reserve, under recent Carter appointee Paul Volcker, declares that it will begin a major policy shift by tightening the money supply. Its main method of doing so will be significant increases in the interest rate. (Campbell 2005, pp. 194-195)
Former Vice President Spiro Agnew, who resigned after pleading no contest to tax evasion charges (see October 10, 1973), serves as the intermediary in a complex $181 million deal arranged by former Nixon aides to sell military uniforms to Iraqi dictator Saddam Hussein. According to historian Stephen Ambrose, the deal is arranged by former President Richard Nixon, who recommended the deal to the supplier of the uniforms, Romanian dictator Nicolae Ceausescu. (Clines 9/19/1996)
From 1980 to 1989, about $600 million is passed through Osama bin Laden’s charity fronts, according to Michael Scheuer, head of the CIA’s first bin Laden unit. Most of it goes through the charity front Maktab al-Khidamat (MAK), also known as Al-Kifah. The money generally comes from donors in Saudi Arabia and the Persian Gulf, and is used to arm and supply the mujaheddin fighting in Afghanistan. Mohammad Yousaf, a high ranking ISI official, will later say, “It was largely Arab money that saved the system,” since so much of the aid given by the CIA and Saudi Arabia was siphoned away before it got to Afghanistan. “By this I mean cash from rich individuals or private organizations in the Arab world, not Saudi government funds. Without those extra millions the flow of arms actually getting to the mujaheddin would have been cut to a trickle.” (Dreyfuss 2005, pp. 279-280) Future CIA Director Robert Gates will later claim that in 1985 and 1986, the CIA became aware of Arabs assisting and fighting with the Afghan mujaheddin, and the CIA “examined ways to increase their participation, perhaps in the form of some sort of ‘international brigade,’ but nothing came of it.” (Coll 2004, pp. 146) However, a CIA official involved in the Afghan war will claim that the CIA directly funded MAK (see 1984 and After).
Efforts are made to improve the interest rate environment in which banks, and especially thrifts, have to operate, such as the Monetary Control Act of 1980 (see April 1, 1980), and numerous changes in the regulatory frameworks at the state and federal level. Despite all this activity, it remains the case that interest rates on sources of funds to the thrift industry lags behind those that could be paid by commercial banks and nonbanks in new vehicles such as money market accounts. Consequently, thrift bankers find it increasingly difficult to keep their businesses supplied with enough funds to sustain a profitable rate of new lending. The industry therefore cannot avoid a period of higher than historical failure levels and voluntary mergers and departures from the industry. (Brumbaugh et al. 1987)
The 23rd largest commercial bank in the country gets a package of $1.5 billion in financial assistance, in exchange for close supervision of its operations by the Federal Deposit Insurance Corporation (FDIC). The aid consists of a $1 billion bank line of credit from the Federal Reserve, a $325 million loan from the FDIC written as a subordinated note to be paid off after five years and interest-free for the first year, and $175 million in other notes to a group of commercial banks. The following year, as regulators and the banking industries search for a response to a rising incidence of bank insolvency, the First Pennsylvania agreement will be seen by some as a model. (Hill 6/8/1981)
President Jimmy Carter signs the Depository Institutions Deregulation and Monetary Control Bill into law. Carter says the bill will “help control inflation, strengthen our financial institutions and help small savers.” Among the bill’s main provisions are raising of ceilings on the interest paid to small savers and a substantial enhancement to the monetary control powers of the nation’s central bank, the Federal Reserve System. The main provisions of the law:
Permanently overrides state-imposed ceilings on mortgage rates unless states act within three years to reenact them.
Wipes out for three years interest rate limits on agricultural and business loans of more than $25,000.
Increases to 15 percent from 12 percent the maximum interest rate on credit union loans, with even higher rates possible for periods up to 18 months.
Continues use of credit union share drafts, bank’s automatic transfer accounts and remote service units.
Simplifies truth-in-lending laws.
Requires lenders to repay consumers for overcharges.
Authorizes federal savings and loan associations to expand their consumer loan and credit card operations and allows them to offer trust services.
Gives the Federal Reserve a more effective reach by establishing a universal and uniform system of banking reserves. Over an eight year period all depository institutions, including savings and loan associations and mutual savings banks, will be encouraged to post reserves with their chapter Federal Reserve banks which will be 12 percent of all transactions as opposed to the tiered structure at 16 1/4 percent, leaving those that left the Federal Reserve System prior to the enactment of this law at a competitive disadvantage until they themsleves register their funds with the Federal Reserve. (Farnsworth 4/1/1980, pp. 1)
Much of the billions of dollars in aid from Saudi Arabia and the CIA to the Afghan mujaheddin actually gets siphoned off by the Pakistani ISI. Melvin Goodman, a CIA analyst in the 1980s, will later say, “They were funding the wrong groups, and had little idea where the money was going or how it was being spent.” Sarkis Soghanalian, a middleman profiting from the aid, will later say, “The US did not want to get its hands dirty. So the Saudis’ money and the US money was handled by the ISI. I can tell you that more than three quarters of the money was skimmed off the top. What went to buy weapons for the Afghan fighters was peanuts.” Sognhanalian claims that most of the money went through various accounts held at the notoriously corrupt BCCI bank, then was distributed to the ISI and the A. Q. Khan nuclear network. (Trento 2005, pp. 318) Robert Crowley, a CIA associate director from the 1960s until the 1980s, will also refer to the aid money going to Khan’s network, commenting, “Unfortunately, the Pakistanis knew exactly where their cut of the money was to go.” An early 1990s congressional investigation led by Sen. John Kerry (D-MA) will also come to the same conclusion. (Trento 2005, pp. 314, 384)
In 1991, the Guardian will report that for at least the past ten years, the CIA has secretly had nearly 500 Britons on its payroll and has been paying them through accounts at the criminal BCCI bank. Some are in senior positions, although no specific individuals are named. Some of these informants have told the CIA details about British arms sales and other overseas business deals, sometimes before the contracts are finalized. According to intelligence sources, the informants include:
124 people in government or politics.
53 in commerce, industry, and banking.
75 in academia.
124 in communications.
90 in the media. (Norton-Taylor and Pallister 7/26/1991)
There will be no report of these informant contacts stopping after the BCCI scandal in 1991.
Norman Bailey, a member of the National Security Council (NSC) whose specialty is monitoring terrorism by tracking finances, will later reveal that in the early 1980s the NSC learns that BCCI is not just a bank but is engaged in widespread criminal activity. “We were aware that BCCI was involved in drug-money transactions,” he will later say. “We were also aware that BCCI was involved with terrorists, technology transfers—including the unapproved transfer of US technology to the Soviet bloc—weapons dealing, the manipulation of financial markets, and other activities.” The main source for the NSC about this are reports from the CIA. From 1981 on, the NSC learns of BCCI’s role in illegal technology deals for Pakistan, Iraq, Libya, Iran, and other countries. A clear picture has emerged by the start of 1984. But neither the CIA nor the NSC take any action against the bank. (Beaty and Gwynne 1993, pp. 291, 315)
After their stinging loss during the November 1980 presidential campaign, the billionaire Koch brothers, Charles and David, decide that they need to work to inculcate their brand of hard-right libertarianism into the electorate through indirect means (see 1979-1980). Therefore, they begin spending vast amounts of their personal fortunes on what purport to be independent think tanks and other political or ideological organizations. At the same time, the brothers become political recluses, rarely speaking in public and rarely acknowledging the breadth or the direction of their donations. It is hard to know exactly how much the Kochs spend and where they spend it, though public records give some of the picture. Between 1998 and 2008, Charles Koch’s foundation spends over $48 million on political funding. The Claude R. Lambe Charitable Foundation, controlled by Charles and his wife, spends over $28 million. David Koch’s foundation spends over $120 million. Koch Industries, controlled primarily by Charles, spends over $50 million on lobbying efforts. Their political action committee, KochPAC, donates around $8 million, almost all of it going to Republicans. In 2010, as in other years, Koch Industries leads all other energy companies in political donations. The brothers spend over $2 million of their personal fortunes on political donations, almost all of it going to Republicans. Ari Rabin-Havt of the progressive media watchdog organization Media Matters will say that the Kochs’ effort is unusual in its marshalling of corporate and personal funds: “Their role, in terms of financial commitments, is staggering.” Lee Fang, writing for the liberal blog ThinkProgress (an arm of the Center for American Progress), calls the Kochs “the billionaires behind the hate.” Some believe that the Kochs have either skirted, or outright broken, laws controlling tax-exempt giving. Charitable foundations must conduct exclusively nonpartisan activities that promote the public welfare. But in 2004, a report by the National Committee for Responsive Philanthropy, a watchdog group, describes the Kochs’ foundations as being self-serving, and concludes, “These foundations give money to nonprofit organizations that do research and advocacy on issues that impact the profit margin of Koch Industries.” The Kochs also use their charitable foundations to fund hard-right political organizations that, according to reporter Jane Mayer, “aim to push the country in a libertarian direction,” including: the Institute for Justice, which files lawsuits opposing state and federal regulations; the Institute for Humane Studies, which underwrites libertarian academics; and the Bill of Rights Institute, which promotes a conservative interpretation of the Constitution. David Koch acknowledges that the family exerts tight ideological control. “If we’re going to give a lot of money, we’ll make darn sure they spend it in a way that goes along with our intent,” he tells a reporter. “And if they make a wrong turn and start doing things we don’t agree with, we withdraw funding.” (Mayer 8/30/2010)
In 1981, the criminal BCCI bank sets up a charity called the BCCI Foundation. Pakistani Finance Minister Ghulam Ishaq Khan grants it tax-free status, and it supposedly spends millions on charitable purposes. Khan serves as the chairman of the foundation while also running the books for A. Q. Khan’s Kahuta Research Laboratories. Ghulam Ishaq Khan will be president of Pakistan from 1988 to 1993. (Levy and Scott-Clark 2007, pp. 126-127) BCCI founder Agha Hasan Abedi announces that he will donate up to 90% of BCCI’s profits to charity through the foundation, and he develops a positive reputation from a few well-publicized charitable donations. But the charity is actually used to shelter BCCI profits. Most of the money it raises goes to A. Q. Khan’s nuclear program and not to charitable causes. For instance, in 1987 it gives a single $10 million donation to an institute headed by A. Q. Khan. Millions more go to investments in a front company owned by BCCI figure Ghaith Pharaon. (Beaty and Gwynne 1993, pp. 290-291) An investigation by the Los Angeles Times will reveal that less than 10% of the money went to charity. (Fineman 8/9/1991) BCCI uses other means to funnel even more money into A. Q. Khan’s nuclear program (see 1980s).
In an unintroduced telephone call to R. W. Tanner, president of Vernon Savings and Loan of Vernon, Texas, Donald Ray ‘Don’ Dixon expresses interest in purchasing a small town S&L such as Vernon, which is located in a town where Dixon lived in his boyhood. Dixon does not reveal to Tanner, who does not recall having discussed the possibility of a sale of Vernon to anyone, that a mortgage insurer known to both men has given Dixon the referral. The phone call leads to a meeting between the two after a few days, during which Dixon says that if he bought the thrift he would continue the small-town, conservative style of savings and loan banking that Tanner had practiced for years. It appears to have been considered incidental by everyone at Vernon except possibly Tanner’s assistant, Woody Lemons, that Dixon’s other business affiliation was his real estate development enterprise, the Dondi Group. (O'Shea 1991, pp. 2-5, 6) Dixon also does not tell Tanner at this time that Dixon’s source of cash is to be Herman K. Beebe, a Louisiana finance and real estate businessman of wide-ranging interests and a person of note in the 1976 rent-a-bank scandal that had come to light in the collapse of the Citizens State Bank (Carrizo Springs, TX) failure, and who, it will later be revealed, is involved in numerous acquisitions of smaller thrift institutions in the southwestern United States during the early 1980s. Beebe’s involvement with Vernon through Dixon is only revealed to Tanner at the point of signing the final purchase agreement nearly one year after this. (Pizzo, Fricker, and Muolo 1989, pp. 188-192, 234, 231-235; Black 2005, pp. 38)
About one month after their first meeting in Austin (see (early 1981)), Don Dixon and R.W. Tanner sign an agreement selling Vernon Savings and Loan to Dixon for $5.8 million in cash, or about 1.4 times its book value. The deal already had verbal clearances, to Tanner, from the Texas state thrift regulator and the federal government’s regional thrift regulators in Little Rock, Arkansas. (O'Shea 1991, pp. 8) However, it will turn out that the papers signed at this time are not the final word on the terms of Dixon’s eventual acquisition of Vernon Savings and Loan. There is to be at least one more round of negotiations, which will result in a considerable reduction of the cash portion of the transaction. The deal is not finally consummated for nearly another year. (Pizzo, Fricker, and Muolo 1989, pp. 191)
The House Banking Committee approves H.R. 6267, the Net Worth Guarantee Act, by a vote of 25 to 15, with three abstaining. The approval is the first action of Congress to provide direct and specific financial assistance to troubled thrifts, although by a reported estimate in the New York Times, most of the nation’s 4,500 thrift depositories are “losing money” by this time. (Noble 5/12/1982, pp. D1, D13) Voting on the bill, which was introduced into the House by Representative and committee chairman Fernand J. St. Germain (D-RI) on May 4 (see May 4-October 15, 1982), is largely partisan: Republican members generally favor an alternative proposal by Rep. Chalmers P. Wylie (R-OH) that differs in qualifying firms at a higher current net worth, and in allowing regulators discretion over this qualification, although debate on the Wylie amendments is short-circuited by a motion to table the amendment made by Rep. Frank Annunzio (D-IL). (Noble 5/12/1982, pp. D1, D13) The Wylie provisions form the basis for the bill S.2531 which is introduced into the Senate on May 14, 1982 (see May 14, 1982). (Noble 5/12/1982, pp. D1, D13; Library of Congress 5/19/2008)
The Capital Assistance Act of 1982 is introduced by Sen. E.J. (Jake) Garn (R-UT) and three co-sponsors under the title, “A bill to provide flexibility to the Federal Savings and Loan Insurance Corporation and the Federal Deposit Insurance Corporation to deal with financially distressed institutions.” (Library of Congress 5/20/2008; Library of Congress 5/20/2008) The bill provides the following:
Amendments to the National Housing Act and the Federal Deposit Insurance Act so that the Federal Savings and Loan Insurance Corporation (FSLIC) and the Federal Deposit Insurance Corporation (FDIC) may buy capital certificates from institutions that they regulate, for the purpose of either increasing or maintaining the capital of those institutions.
Criteria that qualifying institutions must meet to receive this assistance. The criteria differ from those required by the Net Worth Guarantee Act importantly in requiring a prior net worth of three percent of assets, instead of two percent in the House version.
Parameters of the initial capital certificates, and provision for the subsequent modification of those parameters at the discretion of the FSLIC and FDIC.
Restriction of aid to cases in which this course of action is less costly than liquidation of the institution would be. (Library of Congress 5/20/2008) The most important difference between the Capital Assistance Act (CAA) and the Net Worth Guarantee Act (NWGA) is that the CAA is meant to avoid the need for a Congressional appropriation of funds. Instead of establishing a Treasury account to be drawn on to fund the assistance, as does the NWGA, the CAA would permit the assisting agencies, FSLIC or FDIC, to give the thrifts promissory notes in exchange for the thrifts capital certificates. (Staff 5/15/1982) The Capital Assistance Act of 1982 is evidently the bill that Rep. Wylie promised several days previously would be introduced into the Senate, on the occasion of the approval by the House Banking Committee of the Net Worth Guarantee Act without the amendments that Wylie had offered for that bill. The new bill in the Senate has several features of Wylie’s amendments. (Noble 5/12/1982) According to Sen. Garn, Treasury Secretary Donald T. Regan also contributed to the new bill.
Eventual Fate - On August 19, while under consideration in the Senate Banking Committe, the key provisions of S.2531 will be incorporated into S.2879 and passed to the floor of the Senate the next day. Bill S.2879 will be passed by the Senate on September 24, and ultimately incorporated into H.R.6267, the Garn-St Germain Depository Institutions Act of 1982. (Library of Congress 5/20/2008; Library of Congress 5/20/2008)
The Mexican government temporarily suspends payments of its foreign debt and requests that the US offer some form of emergency aid. It also devalues the peso again by 60 percent. (Hart-Landsberg 12/2002)
In November 2001, Swiss investigators will search the home of Youssef Nada, the leader of Al Taqwa Bank, a Swiss bank that had just been shut down by the US and the UN for alleged ties to al-Qaeda, Hamas, and other radical militant groups (see November 7, 2001). Nada and other Al Taqwa directors are prominent members of the Muslim Brotherhood. Newsweek will say, “The Brotherhood, founded in Egypt in 1928 as a religious and quasi-political counterweight to the corrupt and increasingly decadent royalist and colonial governments dominating the Islamic world, always has had two faces: one a peaceful public, proselytizing and social-welfare oriented wing; the other a clandestine, paramilitary wing.… Intelligence and law-enforcement officials say that while some branches and elements of the Brotherhood, such as the offshoots now operating in Egypt and Syria, have pledged to work for their goal of a worldwide Islamic caliphate using peaceful means and electoral politics, the Brotherhood has also spun off many—if not most—of the more violent local and international groups devoted to the cause of Islamic holy war.” Such offshoots will include al-Qaeda and Hamas. (Isikoff and Hosenball 12/24/2004) Swiss investigators discover a 14-page document from December 1982 entitled “The Project.” Nada claims not to know who wrote the document or how he came to have it, and he says he disagrees with most of the contents. The document details a strategic plan whose ultimate goal is “the establishment of the reign of God over the entire world.” The document begins, “This report presents a global vision of an international strategy of Islamic policy.” It recommends to “study of the centers of power locally and worldwide, and the possibilities of placing them under influence,” to contact and support new holy war movements anywhere in the world, to support holy war in Palestine, and “nurtur[e] the sentiment of rancor with regard to Jews.” Swiss investigators who analyze the document will later write that the strategy aims to achieve “a growing influence over the Muslim world. It is pointed out that the [Muslim Brotherhood] doesn’t have to act in the name of the Brotherhood, but can infiltrate existing entities. They can thus avoid being located and neutralized.” The document also advocates creating a network of religious, educational, and charitable institutions in Europe and the US to increase influence there. (Unknown 12/1982; Besson 10/6/2005)
Abdus Salam, a member of the nuclear proliferation ring run by Pakistani scientist A. Q. Khan (see Summer 1976 and Before September 1980), has multiple dealings with the Bank of Credit and Commerce International (BCCI) while residing in the US.
"No Payments" - Julio Bagiardi, one of Salam’s partners in a chain of retail stores, will say: “All he wanted to do was make a lot of deposits at the same bank. He insisted on keeping [all his deposits] at BCCI.” Salam is also “very forceful” in persuading Bagiardi and the other partners to do the same. If they do so, according to Salam, they will have access to “unlimited” cash and, if they make daily deposits, “it would never be a problem if we needed to get money.” In addition, “they [would] never have to pay nothing back,” as there would be “no payments.” Bagiadri will add that Salam “knew somebody” at the bank. David Reed, another partner in the retail stores, will confirm Salam had an account with the bank.
Unusually Generous Overdraft Loan - One transaction is the granting in 1989 of an overdraft, arranged with support from the branch in Park Lane, London. That branch’s manager recommends that its Tampa branch make a loan to Salam, but instead it grants him a “virtually unsecured” $120,000 overdraft line. The overdrafts are usually for customers with substantial account balances, so it is unclear why one is given to Salam, whose balance is “very skimpy,” according to sources for authors David Armstrong and Joe Trento. The line is later moved to one of Salam’s companies, Centaur Impex, backed only by a personal guarantee from Salam and Centaur’s assets. By this time BCCI is in serious trouble and the line is transferred to the Miami branch, which sues Salam for non-payment of the balance, around $50,000. Armstong and Trento’s sources will say that the fact that Salam “had the influence to obtain such a loan without any meaningful collateral” is “very curious,” adding that it “suggests that he may have had influence among highly placed people within BCCI and/or Pakistan.”
"No Recollection" of Salam - When Armstrong and Trento investigate the relationship between Salam and BCCI for a 2007 book, they will have difficulty obtaining information. The court has destroyed records, the lawyers say they have too, BCCI’s liquidators are unable to provide any information, prosecutors and investigators involved in proceedings against BCCI say they knew nothing about Salam, and the various officials of the bank where Salam deposited his money every day for years “either would not return phone calls, denied knowing who Salam was, or claimed that, while the name did ‘ring a bell,’ they could recall no specifics about their former client.” (Armstrong and Trento 2007, pp. 108-111)
The SAAR Foundation is incorporated in Herndon, Virginia, just outside Washington. It will become an umbrella organization for a cluster of over 100 charities, think tanks, and businesses known as the SAAR network. In 2002, the US government will raid the SAAR network looking for ties to the Al Taqwa Bank and the Muslim Brotherhood (see March 20, 2002). (Farah 2004, pp. 153)
The CIA sends a report on the Bank of Credit and Commerce International (BCCI) and its drug-related activities to other US government departments. It follows up with a report about BCCI’s links to notorious terrorists such as Abu Nidal, the most wanted man in the world at the time. Similar reports follow in 1986. However, the Justice Department, Treasury Department, and other departments keep silent about what they know and no action is taken against the bank. (US Congress, Senate, Committee on Foreign Relations 12/1992; Cooley 2002, pp. 93)
NBC News later reports that CIA Director William Casey secretly meets with the head of the criminal Bank of Credit and Commerce International (BCCI) from 1984 until 1986, shortly before Casey’s death. The NBC report, quoting unnamed BCCI sources, will claim that Casey met with BCCI head Agha Hasan Abedi every few months in a luxury suite at the Madison Hotel in Washington. The two men allegedly discussed the Iran-Contra arms-for-hostages transactions and CIA weapons shipments to the mujaheddin in Afghanistan. The CIA denies all the allegations. (Gordon 2/21/1992) But books by Time magazine and Wall Street Journal reporters will corroborate that Casey repeatedly met with Abedi. (Scott 2007, pp. 116) Casey also meets with Asaf Ali, a BCCI-connected arms dealer, in Washington, DC, and in Pakistan. On one occasion, Casey has a meeting in Washington with Abedi, Ali, and Pakistani President Muhammad Zia ul-Haq. (Beaty and Gwynne 1993, pp. 308)
The BBC will later suggest that US intelligence actually becomes aware of specific Abu Nidal accounts held in the criminal BCCI bank in 1984. This is because the FBI busts an illegal arms deal in New York City that involved Nidal’s BCCI accounts in London and a Nidal front company in Poland called SAS Trade at this time. (Herald Sun (Melbourne) 8/2/1991) In the 1980s, Nidal is considered the world’s most wanted terrorist. In December 1985, for instance, his network launches simultaneous attacks in Rome and Vienna, killing or wounding dozens. In 1986, the CIA tells the State Department in detail about the criminal BCCI bank’s links with Nidal and his terrorist network. They reveal that Nidal has multiple accounts at BCCI branches in Europe. (Beaty and Gwynne 1993, pp. 328) In July 1987, Ghassan Qassem, manager of one of BCCI’s London branches, is contacted by the British intelligence agencies MI5 and MI6. They tell him that they know SAS Trade has many millions of dollars worth of accounts in his branch and that the company is an Abu Nidal front. Qassem agrees to be an informant. (Walsh 1/18/2004) Nidal first opened a BCCI account in London in 1980, depositing $50 million using an alias. In addition to being a terrorist, Nidal is an illegal arms dealer and BCCI helps him buy and sell weapons, oftentimes involving British companies. (Rempel and Frantz 9/30/1991) Qassem will later claim that he saw Nidal in Britain on three separate occasions and went shopping with him. In 1983, Nidal was interviewed by police, who took him straight to the airport and put him on a plane to leave the country. (Norton-Taylor 7/30/1991; Walsh 1/18/2004) Qassem recognizes Nidal as a terrorist from a photograph in a magazine in 1987 and tells this to his BCCI superior, but he is told to keep quiet. The CIA and British intelligence use their knowledge of Nidal’s BCCI accounts to force SAS Trade to shut down in 1986, but usually they merely monitor terrorist activity. For instance, Nidal’s group teaches urban terrorist tactics to Peru’s Maoist Shining Path guerrillas in 1988. Shining Path pays Nidal $4 million for this work through his BCCI account and then attempts to bomb the US embassy in Lima later that year. Intelligence agencies also merely watch as Middle Eastern governments give tens of millions to Nidal through his BCCI accounts (see 1987-1990). In December 1989, Qassem tells his BCCI superiors that he is working with British intelligence. He is quickly fired. (Fineman 9/30/1991) Nidal learns of the surveillance and empties the accounts before they can be frozen. (Norton-Taylor 7/30/1991; Walsh 1/18/2004)
Maktab al-Khidamat (MAK), also known as Al-Kifah, is Osama bin Laden’s main charity front in the 1980s. The US government will later call it the “precursor organization to al-Qaeda” (see Late 1984). In 2005, investigative journalist Joe Trento will write, “CIA money was actually funneled to MAK, since it was recruiting young men to come join the jihad in Afghanistan.” Trento will explain this information comes from “a former CIA officer who actually filed these reports” but who cannot be identified because he still works in Afghanistan. MAK was founded in 1984 (see Late 1984) and was disbanded around 1996 (see Shortly After November 19, 1995). However, Trento will not specify exactly when CIA aid to MAK began or how long it lasted. (Trento 2005, pp. 342) Bin Laden appears to have other at least indirect contact with the CIA around this time (see 1986).
Christopher Drogoul of the Atlanta branch of the Italian Banca Nazionale del Lavoro begins embezzling funds to Iraq. The funds consist of government backed loans meant for agricultural purposes as well as unreported loans that have been made in secret. While roughly half the funds will be used by Saddam Hussein’s government to purchase agricultural goods, the remainder will be used to “supply Iraqi missile, chemical, biological and nuclear weapons programs with industrial goods such as computer controlled machine tools, computers, scientific instruments, special alloy steel and aluminum, chemicals, and other industrial goods.” Additionally, the money spent on agriculture will allow Saddam Hussein’s regime to divert a significant portion of its own funds to the task of weapons development. (US Congress 4/28/1992; Baker 3/1993) Between 1985 and 1989 roughly $5 billion makes its way to Iraq from the US. Internal government memos reveal that both the Federal Reserve and Department of Agriculture suspect that Iraq is using these funds inappropriately. Iraq eventually defaults on the government-backed loans, leaving US taxpayers with $2 billion dollars in unpaid debts. (Pizzo, Fricker, and Hogan 1/1993; Baker 3/1993)
In January 1985, the CIA delivers a secret report about the criminal BCCI back to the Treasury Department. In an extraordinary departure from standard procedure, the report is hand-delivered by a CIA agent and printed on plain paper with no markings to indicate it came from the CIA. The report is given to Douglas Mulholland, a Treasury official serving as the CIA’s main link to that department. Mulholland then hand-delivers the report to Treasury Secretary Donald Regan, and calls its contents “dynamite.” It is not known what is in the report, but the Treasury Department sends back word that it wants to know more. However, as Time magazine reporters Jonathan Beaty and S. C. Gwynne will later relate: “Suddenly, and for no apparent reason, Treasury lost all interest in BCCI.… Someone had… gotten to Regan and Mulholland, and the message had been unambiguous: back off.” The Treasury Department takes no action against BCCI, even though the evidence of the bank’s involvement in money laundering by this time is overwhelming. (Beaty and Gwynne 1993, pp. 325-328)
Ahmed Ben Bella, a former president of Algeria, reportedly holds a secret meeting at his Switzerland home attended by “major figures in some of the world’s most violent groups.” People attending the meeting include the Sheikh Omar Abdul-Rahman (known as the “Blind Sheikh”); Youssef Nada, head of the Al Taqwa Bank and a major Muslim Brotherhood figure; and Sayyed Mohammad Hussein Fadlallah, a leading Lebanese Shi’ite Muslim scholar. US government sources believe Ben Bella, who is allegedly linked to violent Sudanese and Libyan groups, called the meeting to discuss ways to spread Muslim fundamentalism into the West. (Buffalo News 7/6/1993) Shortly after 9/11, a document called “The Project” written in 1982 will be found in Nada’s house. It outlines a secret Muslim Brotherhood plan to infiltrate and defeat Western countries (see December 1982).
Osama bin Laden and Pakistan’s ISI, helped by the CIA, build the Khost tunnel complex in Afghanistan. This will be a major target of bombing and fighting when the US attacks the Taliban in 2001. (Harding 11/13/2000; Rashid 9/23/2001; Islam 9/27/2001) In June 2001, one article mentions that “bin Laden worked closely with Saudi, Pakistani, and US intelligence services to recruit mujaheddin from many Muslim countries.” This information has not often been reported since 9/11. (de Borchgrave 6/14/2001) It has been claimed that the CIA also funds Maktab al-Khidamat (MAK) (also known as Al-Kifah), bin Laden’s main charity front in the 1980s (see 1984 and After). A CIA spokesperson will later state, “For the record, you should know that the CIA never employed, paid, or maintained any relationship whatsoever with bin Laden.” (Ananova 10/31/2001)
In 1986, Maktab al-Khidamat (a.k.a. Al-Kifah), the precursor organization to al-Qaeda, opens its first branch in the US at the Islamic Center of Tucson, in Tucson, Arizona. Counterterrorism expert Rita Katz will later call the Islamic Center, “basically, the first cell of al-Qaeda in the United States; that is where it all started.” The organization’s journal, Al Jihad (Holy War), is initially distributed in the US from there. Other branches around the US soon follow (see 1985-1989). (Yardley and Thomas 6/19/2002)
A number of important future al-Qaeda figures are connected to the Tucson branch in the 1980s and into the early 1990s, including:
Mohammed Loay Bayazid, one of the founders of al-Qaeda two years later.
Wael Hamza Julaidan, another founder of al-Qaeda, and a Saudi multimillionaire. He was president of the Islamic Center starting in 1983 and leaves the US around 1986.
Wadih El-Hage, bin Laden’s future personal secretary, who will later be convicted for a role in the 1998 US embassy bombings (see 10:35-10:39 a.m., August 7, 1998). El-Hage is connected to the murder of a liberal imam at the rival mosque to the Islamic Center in 1990 (see January 1990).
Mubarak al Duri, al-Qaeda’s chief agent attempting to purchase weapons of mass destruction. (Fainaru and Ibrahim 9/10/2002; 9/11 Commission 7/24/2004, pp. 521)
Throughout the 1980s, the mosque provides money, support, and fighters to the mujaheddin fighting in Afghanistan. Around 1991, future 9/11 hijacker Hani Hanjour will move to Arizona for the first time (see October 3, 1991-February 1992) and he will spend much of the rest of the decade in the state. He will briefly live in Tucson, but his ties to earlier al-Qaeda connections there remain elusive. (Fainaru and Ibrahim 9/10/2002)
By the mid-1980s, Osama bin Laden and his mentor Abdullah Azzam jointly founded a charity front based in Pakistan which is called Maktab al-Khidamat (MAK) (which means “services office”) and is also known as Al-Kifah (which means “struggle”) (see 1984). Branches start to open in the US; the first one apparently opens in Tucson, Arizona, where al-Qaeda has a sleeper cell (see 1986). But around 1986, Khaled Abu el-Dahab, the right hand man of double agent Ali Mohamed, informally founds the branch in Brooklyn, New York, and it soon becomes the most important US branch. (Weiser, Sachs, and Kocieniewski 10/22/1998; Burr and Collins 2006, pp. 269-270) On December 29, 1987, three men, Mustafa Shalabi, Fawaz Damra, and Ali Shinawy, formally file papers incorporating Al-Kifah, which is called the Al-Kifah Refugee Center. At first, it is located inside the Al Farouq mosque, which is led by Damra. But eventually it will get it own office space next to the mosque. Shalabi, a naturalized citizen from Egypt, runs the office with two assistants: Mahmud Abouhalima, who will later be convicted for a role in bombing the World Trade Center in 1993 (see February 26, 1993), and El Sayyid Nosair, who will assassinate a Jewish leader in New York in 1990 (see November 5, 1990). (Mitchell 4/11/1993; Hosenball 10/1/2001; Sullivan, Garrett, and Rutchick 11/4/2001) Jamal al-Fadl, a founding member of al-Qaeda and future FBI informant (see June 1996-April 1997), also works at the Al-Kifah Refugee Center in its early days. (Miller, Stone, and Mitchell 2002, pp. 155) The Brooklyn office recruits Arab immigrants and Arab-Americans to go fight in Afghanistan, even after the Soviets withdraw in early 1989. As many as 200 are sent there from the office. Before they go, the office arranges training in the use of rifles, assault weapons, and handguns, and then helps them with visas, plane tickets, and contacts. They are generally sent to the MAK/Al-Kifah office in Peshawar, Pakistan, and then connected to either the radical Afghan faction led by Abdul Rasul Sayyaf or the equally radical one led by Gulbuddin Hekmatyar. (Mitchell 4/11/1993) The CIA has some murky connection to Al-Kifah that has yet to be fully explained. Newsweek will later say the Brooklyn office “doubled as a recruiting post for the CIA seeking to steer fresh troops to the mujaheddin” fighting in Afghanistan. At the same time, the Brooklyn office is where “veterans of [the Afghan war arrived] in the United States—many with passports arranged by the CIA.” (Hosenball 10/1/2001) Robert I. Friedman, writing for New York magazine, will comment that the Brooklyn office was a refuge for ex- and future mujaheddin, “But the highlight for the center’s regulars were the inspirational jihad lecture series, featuring CIA-sponsored speakers.… One week on Atlantic Avenue, it might be a CIA-trained Afghan rebel traveling on a CIA-issued visa; the next, it might be a clean-cut Arabic-speaking Green Beret, who would lecture about the importance of being part of the mujaheddin, or ‘warriors of the Lord.’ The more popular lectures were held upstairs in the roomier Al-Farouq Mosque; such was the case in 1990 when Sheikh [Omar] Abdul-Rahman, traveling on a CIA-supported visa, came to town.” One frequent instructor is double agent Ali Mohamed, who is in the US Special Forces at the time (see 1987-1989). Bin Laden’s mentor Azzam frequently visits and lectures in the area. In 1988, he tells “a rapt crowd of several hundred in Jersey City, ‘Blood and martyrdom are the only way to create a Muslim society.… However, humanity won’t allow us to achieve this objective, because all humanity is the enemy of every Muslim.’” (Friedman 3/17/1995) Ayman Al-Zawahiri, future Al-Qaeda second in command, makes a recruiting trip to the office in 1989 (see Spring 1993). (Wright 9/9/2002) The Brooklyn office also raises a considerable amount of money for MAK/Al-Kifah back in Pakistan. The Independent will later call the office “a place of pivotal importance to Operation Cyclone, the American effort to support the mujaheddin. The Al-Kifah [Refugee Center was] raising funds and, crucially, providing recruits for the struggle, with active American assistance.” (Marshall 11/1/1998) Abdul-Rahman, better known as the “Blind Sheikh,” is closely linked to bin Laden. In 1990, he moves to New York on another CIA-supported visa (see July 1990) and soon dominates the Al-Kifah Refugee Center. Shalabi has a falling out with him over how to spend the money they raise and he is killed in mysterious circumstances in early 1991, completing Abdul-Rahman’s take over. Now, both the Brooklyn and Pakistan ends of the Al-Kifah/MAK network are firmly controlled by bin Laden and his close associates. In 1998, the US government will say that al-Qaeda’s “connection to the United States evolved from the Al-Kifah Refugee Center.” Yet there is no sign that the CIA stops its relationship with the Brooklyn office before it closes down shortly after the 1993 WTC bombing. (Weiser, Sachs, and Kocieniewski 10/22/1998)
By 1987, Abu Nidal is the world’s most well-known terrorist. His group has killed over 300 people. But in 1987 his attacks generally come to a halt. A French intelligence report in 1988 explains this is because Middle Eastern governments begin paying large sums of protection money in order not to be attacked. For instance, the government of Kuwait deposits $80 million into Nidal’s BCCI bank account in London in 1987. Kuwait will later deny the payments took place, but counterterrorism experts will dismiss the denials and say that such payments to Nidal were common. In 1988, the Defense Department will conclude that one third of Nidal’s money comes from his own businesses (he is an illegal arms dealer), one third from Arab governments, and one third from various blackmail schemes. Most of these transactions, including Nidal’s arms dealing transactions, are made through Nidal’s BCCI bank account in London, and US and British intelligence has been monitoring his account there since at least 1986 (see 1984 and After). But apparently they merely gather information and make little attempt to shut down Nidal or his finances. Nidal will eventually close out his London accounts in 1990. (Carley 8/9/1991; Rempel and Frantz 9/30/1991) Nidal will finally be murdered in mysterious circumstances in Iraq in August 2002. He will apparently stop his attacks around 1994. (MacAskill 8/20/2002)
Mohammed Jamal Khalifa, bin Laden’s brother-in-law, moves to the Philippines and sets up numerous financial fronts to benefit al-Qaeda. Khalifa is not only one of bin Laden’s brothers-in-law, but he also says that during the 1980s, “Osama was my best friend. More than a brother….” (Taylor 1/16/2003; Robertson and Schuster 11/25/2004) In the mid-1980s, Khalifa was already a very senior member of the Muslim Brotherhood in Lebanon and ran the Peshawar, Pakistan, office of the Muslim World League, where he was active in sending recruits to fight the Soviets in Afghanistan (see Late 1980s). Sent to the Philippines by bin Laden in 1987 or 1988, he soon marries two Filipino women. He sets up more than a dozen businesses and charities, all of which appear to be fronts to fund the Abu Sayyaf and Moro Islamic Liberation Front (MILF) militant groups:
The Islamic Wisdom Worldwide Mission (IWWM), which will later be blamed for funneling bin Laden money to militants (see February 15, 1999 and October 8-November 8, 2002).
The International Relations and Information Center (IRIC), which is later seen as the main funding vehicle for the Bojinka plot (see Spring 1995).
The Philippine branch of the International Islamic Relief Organization (IIRO), founded in September 1991. The IIRO does some charity work, but a Philippine cabinet official will later note that it “built up the good will of the community through charity and then turned segments of the population into agents.” The IIRO is a charity suspected of funding militant activities in numerous places around the world, but the US has been reluctant to prosecute it due to its direct links to the Saudi government (see January 1996 and October 12, 2001). Khalifa is not only the first head of the IIRO’s Philippine branch, but also the IIRO’s regional director for all of Southeast Asia. The IIRO’s offices are often staffed by members of the Abu Sayyaf and MILF. For instance, one IIRO branch office director is also the Abu Sayyaf’s intelligence chief until he is killed in June 1994. (Herrera 8/9/2000; CNN 1/27/2002; Abuza 8/1/2003; Abuza 9/1/2005 )
It is estimated that as much as 70 percent of the money from these fronts are spent on militant groups. In one case, a charity that Khalifa claimed had built 30 orphanages had only built one. (Vitug 10/22/2001) The Philippines will investigate Khalifa and expel him from the country by late 1994 (see December 15, 1994 and December 1, 1994). He apparently never returns. He will no longer be directly connected to these charities, but they will all continue operating despite widely reported terrorist ties (see 1995 and After, February 15, 1999, August 9, 2000), and they will usually continue to be run by Khalifa’s close associates (see October 8-November 8, 2002 and September 25, 2003). The US will finally officially declare the Philippine branch of the IIRO a terrorism financier in 2006 (see August 3, 2006).
Leaders of the Muslim Brotherhood found the Al Taqwa Bank. This bank will later be accused of being the largest financial supporter of al-Qaeda, Hamas, the GIA in Algeria, and other organizations officially designated by the US as groups that sponsor terrorism. For instance, the Treasury Department will later claim that $60 million in funding for Hamas will pass through Al Taqwa in 1997. The bank is mostly based on both sides of the border between Swizterland and Italy, but important branches are established in Liechtenstein and the Bahamas as offshore tax havens. (US Department of the Treasury 8/29/2002) Newsweek will explain, “Al Taqwa, which means ‘Fear of God,’ was launched… by leaders of the Muslim Brotherhood, a secret society devoted to the creation of a worldwide Islamic government. The Brotherhood wanted to create a financial institution in which devout Muslims could invest their money. It would operate under strict Islamic law, which prohibits banks from charging interest. But investigators believe the convoluted structure of Al Taqwa made it easy to use as a money-laundering mechanism.… The [central] operation consisted of four men working at computers in a small apartment in Lugano, Switzerland. Lugano, which sits near the Italian border, is a kind of Alpine Tijuana, well known as a haven for tax evaders and money launderers.” (Hosenball 3/18/2002) Reportedly, in 1995, Italian investigators will tell a Swiss prosecutor that Al Taqwa and related entities comprise “the most important financial structure of the Muslim Brotherhood and Islamic terrorist organizations.” (Komisar 3/15/2002) Six members of the bin Laden family are among the original contributors to the Bahamas branch. (Simpson and Pearl 12/17/2001) A number of the bank’s leaders have ties to Nazism or fascism. For instance, when board chairman Youssef Nada was a young man, he allegedly worked with both the armed branch of the Muslim Brotherhood and Nazi Germany military intelligence. Ahmad Huber, a Swiss convert to Islam previously known as Albert Huber, is both a director of the bank and an open neo-Nazi. He proudly displays portraits of Adolf Hitler and Osama bin Laden next to each other in his house. (Finn 4/29/2002; Erikson 11/8/2002) According to a reporter who will interview him in 1995, Huber’s office is adorned with portraits of Hitler, Nazi leader Heinrich Himmler, and Islamic militants. (Wells 11/8/2001) Huber will spend decades attempting to forge links between the neo-Nazi movement and the radical Muslim movement, speaking to and networking with both groups. He will be quoted around 2001 saying that the al-Qaeda leaders he met in January 2001 are “very discreet, well-educated, and very intelligent people.”(see Late January 2001). (Williamson and Jaklin 11/8/2001; Reynolds 2/1/2002) The founder of Al Taqwa appears to be Francois Genoud, who will die in 1996. Genoud is a Swiss lawyer who funded the Nazis and served as a Nazi agent during World War II. After the war, he funded the secret Odessa organization, which enabled many notorious Nazi fugitives to escape to safe havens in South America and elsewhere. Authorities believe that Genoud uses Al Taqwa to fund international militants like Carlos the Jackal and bin Laden. He also paid for the legal expenses of ex-Nazis such as Klaus Barbie and Adolf Eichmann. Many Muslim radicals and neo-Nazis share a strong hatred for Jews and the United States. (Bushinsky 3/12/2002) Al Taqwa will be shut down shortly after 9/11 for its support of al-Qaeda, Hamas, and other groups officially designated as terrorist organizations (see November 7, 2001).
In March 2002, authorities in Bosnia, Sarajevo, will raid the offices of the Benevolence International Foundation (BIF) due to suspected funding of al-Qaeda (see March 2002). The raid will uncover a handwritten list containing the name of twenty wealthy donors sympathetic to al-Qaeda. The list, referred to as “The Golden Chain,” contains both the names of the donors and the names of the recipients (but does not mention amounts given). Seven of the payments are made to Osama bin Laden. (Prothero 2/11/2003) Most accounts will be vague on what year the Golden Chain document was written; some say 1988. (Simpson 3/18/2003) But counterterrorism “tsar” Richard Clarke will say it dates from 1989. (US Congress 10/22/2003) Al-Qaeda is formed in late 1988 (see August 11-20, 1988). The Wall Street Journal will later note, “The list doesn’t show any continuing support for al-Qaeda after the organization began targeting Americans, but a number of the Saudis on it have been under scrutiny by US officials as to whether they have supported terrorism in recent years.” (Simpson 3/18/2003) The donors named include:
The “Bin Laden brothers.” Their first names are not mentioned. They give money to Osama bin Laden. UPI will later point out that “the discovery of this document in Sarajevo calls into question whether al-Qaeda has received support from one of Osama’s scores of wealthy brothers.”
Adel Batterjee, a wealthy Saudi businessman who is also the founder of both BIF and its predecessor, Lajnatt Al-Birr Al-Islamiah. He appears to be mentioned as a recipient three times. (Prothero 2/11/2003) The US will declare him as a terrorist financier in 2004 (see December 21, 2004).
Wael Hamza Julaidan, a Saudi millionaire and one of the founders of al-Qaeda. He is listed as a recipient. The US will declare him a terrorist financier in 2002 (see September 6, 2002).
Saleh Kamel, a Saudi billionaire, and the majority shareholder of the Saudi conglomerate Dallah Albaraka. In 2003, Forbes will call him one of the richest people in the world. The list has him giving money to Batterjee.
Sulaiman Abdul Aziz al-Rajhi, another Saudi billionaire. The SAAR network, which is named after him, will be raided by the FBI in 2002 (see March 20, 2002). (Emerson 2006, pp. 400)
Khalid bin Mahfouz, another Saudi billionaire. A lawyer for bin Mahfouz will later say bin Mahfouz did contribute a small amount to fund the mujaheddin in the late 1980s, but only at the behest of the US and Saudi Arabia. (Simpson 3/18/2003)
Zahid Shaikh Mohammed, the brother of 9/11 mastermind Khalid Shaikh Mohammed (KSM), works as the head of the Pakistani branch of the charity Mercy International. A book published in 1999 will allege that this charity, based in the US and Switzerland, was used by the CIA to funnel money to Muslim militants fighting against US enemies in places such as Bosnia and Afghanistan (see 1989 and After). It is not known when Zahid got involved with the charity, but he is heading its Pakistani branch by 1988, when his nephew Ramzi Yousef first goes to Afghanistan (see Late 1980s). (Reeve 1999, pp. 120) In the spring of 1993, US investigators raid Zahid’s house while searching for Yousef (see Spring 1993). Documents and pictures are found suggesting close links and even a friendship between Zahid and Osama bin Laden. Photos and other evidence also show close links between Zahid, KSM, and government officials close to Nawaf Sharif, who is prime minister of Pakistan twice in the 1990s. The investigators also discover that Zahid was seen talking to Pakistani President Farooq Ahmad Khan Leghari during a Mercy International ceremony in February 1993. (Reeve 1999, pp. 48-49, 120) But despite the raid, Zahid apparently keeps his job until about February 1995, when Yousef is arrested in Pakistan (see February 7, 1995). Investigators learn Yousef had made a phone call to the Mercy office, and there is an entry in Yousef’s seized telephone directory for a Zahid Shaikh Mohammed. Pakistani investigators raid the Mercy office, but Zahid has already fled. (Iqbal 4/11/1995; Pallister and Wilson 9/26/2001; McDermott 2005, pp. 154, 162) It is unclear what subsequently happens to Zahid. In 1999 it will be reported that he is believed to be in Kuwait, but in 2002 the Kuwaiti government will announce he is a member of al-Qaeda, so presumably he is no longer welcome there. (Reeve 1999, pp. 48; McDermott 9/1/2002) Mercy International’s Kenya branch will later be implicated in the 1998 US embassy bombing in that country, as will KSM, Zahid’s brother (see Late August 1998).
US support for the mujaheddin slows down to “a trickle” because of concerns about dangers of promoting Islamic fundamentalism. The slack is picked up, however, by wealthy individual donors, many of whom are Saudis. These donors seem to favor the most extreme fundamentalist groups among the mujaheddin. (Yousaf and Adkin 1992, pp. 91-92)
Sen. John Kerry (D-MA) stumbles across the criminality of the Bank of Credit and Commerce International (BCCI) while investigating international drug trafficking as part of a congressional oversight committee. He soon starts a vigorous congressional investigation of BCCI, and New York district attorney Robert Morgenthau launches a vigorous investigation as well. (Tolchin 7/29/1991) However, Kerry’s and Morgenthau’s investigations are consistently stifled. Kerry will later say that, “with the key exception of the Federal Reserve, there was almost [no]… information or cooperation provided by other government agencies.” (US Congress, Senate, Committee on Foreign Relations 12/1992) Kerry will later conclude that the Justice Department in particular went to great lengths to block his and Morgenthau’s investigations “through a variety of mechanisms, ranging from not making witnesses available, to not returning phone calls, to claiming that every aspect of the case was under investigation in a period when little, if anything was being done.” After the Bank of England shuts down BCCI in July 1991 (see July 5, 1991), making big headlines, Under Assistant Attorney General Robert Mueller takes over Justice Department efforts on BCCI and assigns many new attorneys to the case. But Kerry will ultimately conclude that the indictments the Justice Department brings forth against BCCI after that time were narrower and less detailed than those of Morgenthau’s, and often seemed to be in response to what Morgenthau was doing. (US Congress 12/1992) Kerry submits his report on BCCI in December 1992, and after that investigations into BCCI peter out. President Bush will appoint Mueller to be director of the FBI shortly before 9/11 (see September 4, 2001).
During a symposium hosted by the US-Iraq Business Forum, Assistant Secretary of State Peter Burleigh encourages US companies to do business in Iraq. The business forum reportedly has strong ties to Baghdad. (Jentleson 1994, pp. 84-85)
In a memo regarding the issue of Iraq’s use of chemical weapons, Assistant Secretary of State Richard W. Murphy writes, “The US-Iraqi relationship is… important to our long term political and economic objectives. We believe that economic sanctions will be useless or counterproductive to influence the Iraqis.” (Dobbs 12/30/2002)
President Ronald Reagan signs Executive Order 12656, assigning a wide range of emergency responsibilities to a number of executive departments. The order calls for establishing emergency procedures that go far beyond the nation’s standard disaster relief plans. It offers a rare glimpse of the government’s plans for maintaining “continuity of government” in times of extreme national emergency. The order declares the national security of the country to be “dependent upon our ability to assure continuity of government, at every level, in any national security emergency situation,” which is defined as “any occurrence, including natural disaster, military attack, technological emergency, or other emergency, that seriously degrades or seriously threatens the national security of the United States.” The order instructs department leaders to establish various protocols for crisis situations, including rules for delegating authorities to emergency officials, establishing emergency operating facilities, protecting and allocating the nation’s essential resources, and managing terrorist attacks and civil disturbances. The plans are to be coordinated and managed by the National Security Council and the Federal Emergency Management Agency (FEMA). The presidential order suggests certain laws may have to be altered or expanded to carry out the plans. Although it encourages federal agencies to base the emergency protocols on “existing authorities, organizations, resources, and systems,” it also calls on government leaders to identify “areas where additional legal authorities may be needed to assist management and, consistent with applicable executive orders, take appropriate measures toward acquiring those authorities.” According to the executive order, the plans “will be designed and developed to provide maximum flexibility to the president.” Executive Order 12656 gives specific instructions to numerous federal departments:
The Department of Justice is ordered to coordinate emergency “domestic law enforcement activities” and plan for situations “beyond the capabilities of state and local agencies.” The Justice Department is to establish plans for responding to “civil disturbances” and “terrorism incidents” within the US that “may result in a national security emergency or that occur during such an emergency.” The attorney general is to establish emergency “plans and procedures for the custody and protection of prisoners and the use of Federal penal and correctional institutions and resources.” The Department of Justice is also instructed to develop “national security emergency plans for regulation of immigration, regulation of nationals of enemy countries, and plans to implement laws for the control of persons entering or leaving the United States.” The attorney general is additionally instructed to assist the “heads of federal departments and agencies, state and local governments, and the private sector in the development of plans to physically protect essential resources and facilities.”
The Department of Defense, acting through the Army, is to develop “overall plans for the management, control, and allocation of all usable waters from all sources within the jurisdiction of the United States.” The secretary of defense is to arrange, “through agreements with the heads of other federal departments and agencies, for the transfer of certain federal resources to the jurisdiction and/or operational control of the Department of Defense in national security emergencies.” The secretary of defense is also instructed to work with industry, government, and the private sector, to ensure “reliable capabilities for the rapid increase of defense production.”
The Department of Commerce is ordered to develop “control systems for priorities, allocation, production, and distribution of materials and other resources that will be available to support both national defense and essential civilian programs.” The secretary of commerce is instructed to cooperate with the secretary of defense to “perform industry analyses to assess capabilities of the commercial industrial base to support the national defense, and develop policy alternatives to improve the international competitiveness of specific domestic industries and their abilities to meet defense program needs.” The Commerce Department is also instructed to develop plans to “regulate and control exports and imports in national security emergencies.”
The Department of Agriculture is ordered to create plans to “provide for the continuation of agricultural production, food processing, storage, and distribution through the wholesale level in national security emergencies, and to provide for the domestic distribution of seed, feed, fertilizer, and farm equipment to agricultural producers.” The secretary of agriculture is also instructed to “assist the secretary of defense in formulating and carrying out plans for stockpiling strategic and critical agricultural materials.”
The Department of Labor is ordered to develop plans to “ensure effective use of civilian workforce resources during national security emergencies.” The Labor Department is to support “planning by the secretary of defense and the private sector for the provision of human resources to critical defense industries.” The Selective Service System is ordered to develop plans to “provide by induction, as authorized by law, personnel that would be required by the armed forces during national security emergencies.” The agency is also vaguely instructed to establish plans for “implementing an alternative service program.”
The Transportation Department is to create emergency plans to manage and control “civil transportation resources and systems, including privately owned automobiles, urban mass transit, intermodal transportation systems, the National Railroad Passenger Corporation, and the St. Lawrence Seaway Development Corporation.” The Transportation Department is also to establish plans for a “smooth transition” of the Coast Guard to the Navy during a national security emergency. The Transportation Department is additionally instructed to establish plans for “emergency management and control of the National Airspace System, including provision of war risk insurance and for transfer of the Federal Aviation Administration, in the event of war, to the Department of Defense.”
The Department of the Treasury is ordered to develop plans to “maintain stable economic conditions and a market economy during national security emergencies.” The Treasury Department is to provide for the “preservation of, and facilitate emergency operations of, public and private financial institution systems, and provide for their restoration during or after national security emergencies.”
The Department of Energy is to identify “energy facilities essential to the mobilization, deployment, and sustainment of resources to support the national security and national welfare, and develop energy supply and demand strategies to ensure continued provision of minimum essential services in national security emergencies.”
The Department of Health and Human Services is instructed to develop programs to “reduce or eliminate adverse health and mental health effects produced by hazardous agents (biological, chemical, or radiological), and, in coordination with appropriate federal agencies, develop programs to minimize property and environmental damage associated with national security emergencies.” The health secretary is also to assist state and local governments in the “provision of emergency human services, including lodging, feeding, clothing, registration and inquiry, social services, family reunification, and mortuary services and interment.” (US President 11/18/1988)
The Holy Land Foundation charity is established in the US, two years after Hamas was founded in the Middle East. From the very beginning, there are signs that Holy Land is supports illegal violent acts committed by Hamas. For instance, In 1990, Haitham Maghawri will apply for asylum in the US. He will tell the INS that he had been arrested several times in Lebanon, once for placing a car bomb. He will be denied asylum, but will gain permanent residence by marrying a US citizen. He then will become executive director of Holy Land. Additionally, government documents, corporate records, and Arabic-language articles show clear connections between Hamas, Holy Land, and a closely related group, the Islamic Association for Palestine (IAP). For instance, in the late 1980s, Mousa Abu Marzouk, a known political leader of Hamas living in the US, is the chairman of IAP’s advisory committee and donates hundreds of thousands of dollars to the IAP. The IAP publicly recommends Muslims should donate money to Holy Land to support Hamas in the Palestinian intifada (uprising) against Israel. According to international law, violent acts against Israeli military targets are not illegal, but such acts against civilian targets are, and Hamas freely acknowledges that it does both. As a result, financial support in the US for Hamas is controversial and often done in secret. Hamas will not be officially declared a terrorist group until 1995, and after this all US financing support for Hamas will be done in secret (see January 1995). (Reaves and McGonigle 4/8/1996; Associated Press 12/12/2001; Cohen, Manor, and Franklin 12/16/2001; McGonigle 12/20/2002)
In 2007, the New Yorker magazine will note, “American intelligence officials had been investigating [Khalil] Deek and [Abu] Zubaida’s activities since at least the late eighties,” but it will not explain why. Deek is a Palestinian and naturalized US citizen living in California for most of the 1990s who will later reportedly mastermind several al-Qaeda bomb plots. (Khatchadourian 1/22/2007) Abu Zubaida, the nom de guerre of Saudi-born Palestinian Zayn al-Abidin Muhammed Hussein (also spelled Zein al-Abideen Muhammad Hassan) (Warrick and Finn 4/22/2009) , joins the Palestinian uprising in 1987, when he is only sixteen years old. He then goes to Afghanistan, presumably joins with bin Laden, and fights there before the war ends in 1989. (Suskind 2006, pp. 95) Between 1988 and 1996, Deek is apparently involved with the Islamic Association for Palestine (IAP), a US-based charity which the US government will later call a “front group” for the Palestinian militant group Hamas. The IAP is closely tied to the Holy Land Foundation, established near Dallas, Texas, in 1989 (see 1989), and it appears the foundation was investigated from very early on. Deek is living in Dallas that year. (Schou 5/31/2001) Palestinian militant activity through organizations like the IAP may explain why these two are investigated at this time, and/or the two may have engaged in other activities. Counterterrorism expert Rita Katz will later claim that the Jordanian government “knew about Deek since the early 1990s. They had a lot of interest in him. They really considered him a major terrorist figure.” (Schou 6/17/2004) Deek and Zubaida will later work together on a number of operations, for instance using the honey trade to ship drugs and weapons (see May 2000), and masterminding a millennium bomb plot in Jordan. (Khatchadourian 1/22/2007)
The 1999 book Dollars for Terror will allege that in 1989, Mercy International, a “subsidiary of the Muslim Brotherhood, was able to establish its headquarters in the United States, in the state of Michigan, with the assistance of the CIA. The Agency provided significant logistical and financial support to this ‘humanitarian’ organization, enabling it to act clandestinely in the various Balkan conflicts as well as within the Muslim communities of several Russian republics.” (Labeviere 1999, pp. 364) Mercy International will later be tied to al-Qaeda in a number of ways. For instance, in the mid-1990s its Pakistan branch will be headed by Zahid Shaikh Mohammed, brother of 9/11 mastermind Khalid Shaikh Mohammed (see 1988-Spring 1995). (McDermott 9/1/2002) Its Kenya branch will be tied to the 1998 US embassy bombing there. Its Philippine branch is tied to Mohammed Jamal Khalifa, bin Laden’s brother-in-law. (Burr and Collins 2006, pp. 128, 188-189) Branches of this charity in different countries have slightly different names such as Mercy International-USA and Mercy International Relief Agency, and it has been claimed that the US branch has no connection with the terrorism-related branches. However, a 2003 article will draw links between the US branch and other branches. (Epstein and Schmidt 9/4/2003)
Christopher Drogoul, the manager of the Italian Banca Nazionale del Lavoro’s branch in Atlanta, is charged with making unauthorized, clandestine and illegal loans to Iraq. The loans were used by Iraq to develop its weapons programs (see 1985-1989). (Baker 3/1993)
In response to a US company’s concern that their product might be used by Iraq to develop nuclear weapons and ballistic missiles, the US Department of Commerce asks Iraq’s government to provide a written guarantee that the company’s product will be used for civilian purposes only. The Commerce Department tells the company that a license and review is unnecessary, and that there is no reason why the product in question should not be exported to Iraq. (Jentleson 1994, pp. 110)
Around $91 billion flows into the Mexican economy from foreign investors, allowing for a certain degree of economic growth. This growth slows down in 1992, however, as trade and current account deficits increase sharply. The deficits suggest a large deterioration in the country’s economic base during the 1980s. (Hart-Landsberg 12/2002)
Jordanian investigators spend 45 days in the US looking for hidden assets belonging to a Washington, DC subsidiary of Petra Bank, a Chalabi-controlled enterprise that collapsed in 1989 (see August 2, 1989). Nearly all of the US assets listed in Petra Bank’s books turn out to be worthless, with the notable exception of an auxiliary office where valuable bank records are presumably kept. The “office” is a country estate with a swimming pool in upscale Middleburg, Virginia. It belongs to the Chalabi family, which had been charging the bank a monthly rent. “There was not one business record in the whole place,” an official will later recall. (Mayer 6/7/2004)
A number of French dignitaries, including French Minister of Commerce Bruno Durieux, travels to Buenos Aires to lobby on behalf of two French companies—Compagnie Générale des Eaux and Lyonnaise des Eaux—which are trying to win a concession to operate the city’s water utility. On one visit, Durieux reportedly says that France will increase its investments in Argentina based on “how many privatizations we win.” Daniel Chain of Aguas de Buenos Aires will later recall, “The Embassy of France was hyperactive throughout the concession process. Every week it invited political leaders to lunches attended by French ministers. However, the Embassy of Great Britain, which supposedly was supporting the bid of the British company, Thames, had a low profile. It was an unequal fight.” (Santoro 2/6/2003 Sources: Daniel Chain)
A 2006 analysis compiled jointly by US and Croatian intelligence will reveal that al-Qaeda began infiltrating the Balkans region even before the start of the Bosnian war in 1992. Kamer Eddine Kherbane, a member of Algerian militant group GIA, moved to Zagreb, Croatia, in 1991 to set up a charity front at the direct request of Osama bin Laden. The organization, called Maktab al-Khidamat (MAK) or Al-Kifah, is closely tied to al-Qaeda. Its Brooklyn, New York, branch called the Al-Kifah Refugee Center is tied to both the 1993 WTC bombers and the CIA (see 1986-1993). (Kole 4/17/2006) Apparently the Zagreb branch of MAK/Al-Kifah is also called the Al-Kifah Refugee Center like the Brooklyn branch and has very close ties with that branch (see Early 1990s). A Spanish police report will later claim that Kherbane is the head of the Zagreb branch. (Goodman 12/8/2002) The analysis will allege that Kherbane used Al-Kifah “to infiltrate GIA members into Bosnia,” and that Iran and unnamed Arab countries paid for the operation through money transfers. (Kole 4/17/2006) Kherbane appears to have begun working with other radical militants in Bosnia in 1990 (see 1990).
Shortly after 9/11, the London Times will report that Osama bin Laden stayed at the London estate of Saudi billionaire Khalid bin Mahfouz. “Sources close to the bin Mahfouz family say that about 10 years ago, when bin Laden was widely regarded as a religious visionary and defender of the Muslim faith, he visited the property and spent ‘two or three days’ on the estate, relaxing in its open-air swimming pool, walking in the grounds and talking to bin Mahfouz. What the men discussed remains a mystery.” Bin Mahfouz was a major investor in the criminal Bank of Credit and Commerce International (BCCI), which is closed down around this time (see July 5, 1991). (Leppard 9/23/2001) Bin Laden was also heavily invested in BCCI at the time (see July 1991). There are other reports of bin Laden visiting London around this time (see Early 1990s-Late 1996), and even briefly living there (see Early 1994). The name “bin Mahfouz” appears on the “Golden Chain,” a list of early al-Qaeda financial supporters (see 1988-1989). Bin Mahfouz denies any terrorist link to bin Laden.
Saudi multimillionaire Yassin al-Qadi forms the Muwafaq Foundation (also known as Blessed Relief). The Muwafaq Foundation is a charitable trust registered in Jersey, an island off the coast of Britain with lenient charity regulations. (Burr and Collins 2006, pp. 121-123) Al-Qadi is said to be the chief investor, donating about $15 to $20 million for the charity from his fortune. He also persuades members of very rich and powerful Saudi families to help out. (Jackson, Cohen, and Manor 10/29/2001) The foundation’s board of directors will later be called “the creme de la creme of Saudi society.” (Gerth and Miller 10/13/2001) Saudi billionaire Khalid bin Mahfouz’s legal team will later state that bin Mahfouz “was the principal donor to the foundation at its inception in 1991 but was not involved in the running of the charity.” They also will state that the foundation was purely humanitarian and had no terrorist ties. (Bin Mahfouz Info 11/22/2005) The Muwafaq Foundation opens offices in several African countries, but it is soon suspected of providing funds for Islamic extremists. For instance, in 1992 it opens an office in Mogadishu, Somalia, at a time when al-Qaeda is assisting militants fighting US soldiers there (see October 3-4, 1993). Burr and Collins will claim “its purpose [there] consisted of transporting weapons and ammunition to Islamists in the city.” But most of the foundation’s work appears to center on Bosnia. It opens an office in neighboring Croatia in 1992, the same year the Bosnian war begins, and then in Sarajevo, Bosnia, a year later. By June 1993, group of mujaheddin fighting in the Zenica region of Bosnia form the Al Muwafaq Brigade. It consists of about 750 Afghan-Arabs and has Iranian advisers. According to Burr and Collins, it soon becomes well known in the region that the Muwafaq Foundation is funding the Al Muwafaq Brigade and at least one camp in Afghanistan training mujaheddin to fight in Bosnia. One member of the brigade is Ahmed Ressam, who will later be arrested in an al-Qaeda plot to blow up the Los Angeles airport (see December 14, 1999). In July 1995, a US Foreign Broadcast Information Service report indicates that the Muwafaq Foundation’s office in Zagreb, Croatia, is a bin Laden front. In early 1996, bin Laden will mention in an interview that he supports the “Muwafaq Society” in Zagreb. However, al-Qadi denies any ties to fighting mujaheddin. The brigade apparently disbands after the war ends in 1995 and the Muwafaq Foundation will close its Bosnia office by 1998. (Burr and Collins 2006, pp. 121-123, 137-138) A secret 1996 CIA report will claim that Muwafaq has ties to the al-Gama’a al-Islamiyya militant group and helps fund mujaheddin fighting in Bosnia and at least one training camp in Afghanistan (see January 1996). The US will declare al-Qadi a terrorist financier shortly after 9/11 but has never taken any action against the Muwafaq Foundation (see 1995-1998).
Abu Sayyaf, a militant Islamic group, is formed in the Philippines, and is led mainly by returned mujaheddin fighters from Afghanistan. Abdurajak Janjalani, who had fought with bin Laden in Afghanistan, is considered the founder of the group. (Struck et al. 9/23/2001; May 10/15/2001 ; Bengwayan 4/2005) Janjalani had befriended bin Laden while fighting in Afghanistan in the late 1980s. He and many others from the Philippines had their training paid for by the CIA and Pakistani ISI (see Late 1980s). “Osama bin Laden wanted to expand his al-Qaeda network, established in 1988, so he turned to Janjalani to establish a cell in Southeast Asia.” Many militants break from the Moro National Liberation Front (MNLF), a much larger rebel group, to join Abu Sayyaf. It will later be reported that, “Philippine intelligence officials believe [Abu Sayyaf’s] primary goal at the time was to sabotage the ongoing peace process between the MNLF and the [Philippine government] and to discredit the MNLF’s leaders.” (Abuza 9/1/2005 ) This comment takes on added meaning in light of evidence that the group was penetrated from the very beginning by the Philippine government, as a deep undercover operative became the group’s second in command and operational leader (see 1991-Early February 1995). The group begins a series of attacks by killing two American evangelists in April 1991. (Struck et al. 9/23/2001) The group engages primarily in kidnapping and extortion. It also receives early funding from Mohammed Jamal Khalifa, a brother-in-law of bin Laden, and Ramzi Yousef, the 1993 WTC bomber (see December 1991-May 1992). (May 10/15/2001 ; Elegant 8/23/2004)
In 1991, there is a surge in the number of US soldiers adhering to Islam, due to a conversion program sponsored by the Saudi government (see March-September 1991). Islamic activist Abdurahman Alamoudi approaches the US military and suggests they create a program for Muslim chaplains, similar to a longstanding program for Christian chaplains. His proposal is accepted and in 1991 he creates the American Muslim Armed Forces and Veterans Affairs Council (AMAFVAC) with the stated purpose to “certify Muslim chaplains hired by the military.” In 1993, the Defense Department certifies it as one of two organizations to select and endorse Muslim chaplains. The other is the Graduate School of Islamic and Social Sciences (GSISS). (US Congress, Senate, Committee on the Judiciary 10/14/2003; Simpson 12/3/2003) That group is run by prominent Islamic scholar Taha Jabir Al-Alwani. Most of the roughly one dozen Muslim chaplains in the US military are educated there. In 2002, the US government searches the school and Al-Alwani’s home as part of a raid on the SAAR network (see March 20, 2002). He appears to also be named as an unindicted coconspirator in the Sami al-Arian trial. Counterterrorism expert Rita Katz says Al-Alwani is a “person who supports and funnels money to terrorist organizations,” but Al-Alwani denies all terrorism ties and has not been charged with any crime. (Jacoby 3/27/2003) Most Muslim chaplains trained at GSISS then receive an official endorsement from Alamoudi’s AMAFVAC organization. US intelligence will learn in early 1994 that Alamoudi has ties to bin Laden (see Shortly After March 1994). (US Congress, Senate, Committee on the Judiciary 10/14/2003) In 1996, counterterrorism expert Steven Emerson will warn in a Wall Street Journal editorial that Alamoudi openly supports Hamas, even after the US government officially designated it a terrorist organization (see March 13, 1996). (Emerson 3/13/1996) But Alamoudi will work for the Defense Department until 1998 on an unpaid basis to nominate and to vet Muslim chaplain candidates. After that, he will give the task to others in his AMAFVAC organization. (US Congress, Senate, Committee on the Judiciary 10/14/2003) Furthermore, Senator Charles Schumer (D-NY) will later allege the US the military allowed Muslim chaplains to travel to the Middle East on funds provided by the Muslim World League, which has been linked to al-Qaeda (see October 12, 2001). Senator Jon Kyl (R-AZ) will later comment, “It is remarkable that people who have known connections to terrorism are the only people to approve these chaplains.” (Leo 10/27/2003) In late 2003, Alamoudi will be arrested and later sentenced to 23 years in prison for terrorism-related crimes. The US military will announce around the same time that it is reviewing and overhauling its Muslim chaplain program. (Leo 10/27/2003)
In March 1991, Sen. John Kerry’s Senate investigation of the criminal Bank of Credit and Commerce International (BCCI) investigation hears about a secret CIA report on BCCI that was given to the Customs Service. Kerry’s office asks the CIA for a copy, but is told the report does not exist. After months of wrangling, more and more information about the CIA’s ties to BCCI comes out, and the CIA eventually gives Kerry that report and many other reports relating to BCCI. But crucially, the CIA does not share documents on CIA operations using the bank. Kerry’s public report will conclude, “Key questions about the relationship between US intelligence and BCCI cannot be answered at this time, and may never be.” (Corn 10/26/1992; US Congress, Senate, Committee on Foreign Relations 12/1992)
In 1987, a Sudanese man named Elfatih Hassanein found the Third World Relief Agency (TWRA). By mid-1991, Bosnian President Izetbegovic contacts Hassanein, who he has known since the 1970s. The two men agree to turn TWRA from an obscure charity into what the Washington Post will later call “the chief broker of black-market weapons deals by Bosnia’s Muslim-led government and the agent of money and influence in Bosnia for Islamic movements and governments around the world.” A banker in Vienna will later call Hassanein the “bagman” for Izetbegovic. “If the Bosnian government said we need flour, he ran after flour. If they said we need weapons, he ran after weapons.” (Pomfret 9/22/1996; Schindler 2007, pp. 148) The TWRA is controlled by a committee composed of Hassanein and:
Hasan Cengic. He is in charge of arming a Bosnian militia run by the SDA party (see June 1991).
All of them are important members of Izetbegovic’s SDA party, and all but Ljevakovic were codefendants with Izetbegovic in a 1983 trial. Most payments require the approval of three of the five, except for amounts greater than $500,000, in which case Izetbegovic has to give approval. The corruption from these higher-ups is said to be incredible, with up to half of all money passing through the TWRA going into their pockets. (Schindler 2007, pp. 148-152) The TWRA is based in Vienna, Austria, and Izetbegovic personally guarantees Hassanein’s credentials with banks there. Soon, machine guns, missiles and other weapons are being shipped into Bosnia in containers marked as humanitarian aid. Hassanein is a member of Sudan’s government party and a follower of top Sudanese leader Hassan al-Turabi. Just like al-Turabi, he works with bin Laden and the “Blind Sheikh,” Sheikh Omar Abdul-Rahman. He becomes the main agent in Europe for marketing and selling video and audio tapes of Abdul-Rahman’s sermons. In March 1992, the Sudanese government gives him a diplomatic passport and he uses it to illegally transport large amounts of cash from Austria into Bosnia without being searched. (Burr and Collins 2006, pp. 140-141) The Saudi Arabian government is the biggest contributor to TWRA, but many other governments give money to it too, such as Sudan, Iran, Pakistan, Brunei, Turkey, and Malaysia. Bin Laden is also a major contributor. (Pomfret 9/22/1996) Author John Schindler will later note, “Relations between bin Laden and TWRA were close, not least because during the Bosnian war the al-Qaeda leadership was based in Khartoum, Sudan, under the protection of the Sudanese Islamist regime that was the ultimate backer of Hassanein and his firm.” TWRA also works closely with the International Islamic Relief Organization (IIRO) and most other charity fronts in Bosnia. (Schindler 2007, pp. 151-152) A later study by the Bosnian government with help from Western intelligence agencies will determine that at least $2.5 billion passed through the TWRA to Bosnia between 1992 and 1995. The study will call the TWRA “a group of Bosnian Muslim wartime leaders who formed an illegal, isolated ruling oligarchy, comprising three to four hundred ‘reliable’ people in the military commands, the diplomatic service, and a number of religious dignitaries.… It was this organization, not the Government [of Bosnia], that controlled all aid that Islamic countries donated to the Bosnian Muslims throughout the war.” (Schindler 2007, pp. 149-150)
In early 2001, anonymous US officials will say that when the notorious Bank of Credit and Commerce International (BCCI) is shut down in July 1991 (see July 5, 1991), Osama bin Laden suffers a heavy blow because he has put much of his money in the bank and he loses everything he invested there. As a result, he begins to launder money from the drug trade to make up for the lost revenue. He cooperates with Afghan warlord Gulbuddin Hekmatyar, who is already diverting profits from the Afghan drug trade to help finance Islamic terrorist movements. Others claim bin Laden begins his involvement with the drug trade several years later. (Sale 3/1/2001) It also seems that bin Laden’s financial network eventually grows to at least partly replace the role of BCCI for Islamist militant financing (see After July 1991).
The Bank of England shuts down Bank of Credit and Commerce International (BCCI), the largest Islamic bank in the world. Based in Pakistan, this bank financed numerous militant organizations and laundered money generated by illicit drug trafficking and other illegal activities, including arms trafficking. Bin Laden and many other militants had accounts there (see July 1991). (Ehrenfeld 9/30/2001) One money-laundering expert later claims, “BCCI did dirty work for every major terrorist service in the world.” (Pasternak and Braun 1/20/2002) Regulators shut down BCCI offices in dozens of countries and seize about $2 billion of the bank’s $20 billion in assets. BCCI is the seventh largest bank in the world. Sheikh Zayed bin Sultan Al Nahyan, the President of the United Arab Emirates (UAE), owns 77% of the bank at the time of its closing. He and the UAE government will end up losing about $8 billion. About 1.4 million people had deposits in the bank and will end up losing most of their money. (Levy and Scott-Clark 2007, pp. 98-99) American and British governments were aware of its activities yet allowed the bank to operate for years. The Pakistani ISI had major connections to the bank. (Ehrenfeld 9/30/2001) The Bank of England is forced to close BCCI largely because of outside pressure. Beginning in February 1991, the mainstream media began reporting on BCCI’s criminal activities as more and more whistleblowers came forward. (Levy and Scott-Clark 2007, pp. 95) However, as later State Department reports indicate, Pakistan remains a major drug trafficking and money-laundering center despite the bank’s closing. (Ehrenfeld 9/30/2001) Most of the bank’s top officials will escape prosecution, and remnants of the bank will continue operating in some countries under new names (see August 1991). A French intelligence report in 2001 will suggest the that Osama bin Laden will later build his financial network on the ruins of the BCCI network, oftentimes using former BCCI officials (see October 10, 2001). (Farah 2/17/2002)
According to investigators working with Iran-Contra special prosecutor Lawrence Walsh (see December 19, 1986), the Iran-Contra affair is closely linked to the burgeoning scandal surrounding the Bank of Credit and Commerce International (BCCI—see 1976, 1978-1982, 1981-1991, 1981-1983, 1984-1986, January 1985, December 12, 1985, February 1988-December 1992, March 1991-December 1992, and July 5, 1991.) Former government officials add that the CIA kept secret funds hidden in BCCI accounts, and used the monies to fund covert operations in Nicaragua and elsewhere. Investigators confirm that a US defense intelligence organization used BCCI to maintain a secret “slush fund” for financing covert operations. And, months before National Security Council (NSC) official Oliver North set up his network for diverting funds to the Contras (see December 6, 1985 and April 4, 1986), the NSC used BCCI to divert funds to the Contras (see Early 1986). (Lacayo, Beaty, and van Voorst 7/22/1991)
In the wake of the July 1991 shutdown of the criminal BCCI bank (see July 5, 1991), the Pakistani government indicates that it is willing to shelter BCCI figures wanted in other countries. For instance, an international arrest warrant is issued for BCCI front man Ghaith Pharaon, and Pakistan has signed an extradition treaty with the US and other countries. But in August 1991, Pakistani Interior Minister Shujaat Hussain, who has authority to block extraditions, states flatly that Pharaon is his friend and he will give him citizenship, protection from extradition, and even immunity from local prosecution. Furthermore, the Los Angeles Times reports that some other senior and mid-level BCCI managers being investigated in the US have already fled to Pakistan. Technically, BCCI is not a Pakistani bank, but 10,000 out of BCCI’s estimated 12,000 employees are Pakistani. The Times reports that Hussain has made clear that “BCCI’s blameless and blamed alike can find shelter from investigations into the bank’s conduct in any of the more than 70 countries where it operated.” Asked if Pakistan would extradite BCCI founder Agha Hasan Abedi, Hussein flatly states, “We will not allow it.” Furthermore, BCCI’s offices remain open in Pakistan and the government has stated that it will not investigate the bank. (Fineman 8/12/1991) A majority of the bank is owned by Sheik Zayed bin Sultan al-Nahayan, President of the United Arab Emirates (UAE), and the UAE similarly indicates that it will not extradite any of the 18 top BCCI managers living there. The UAE is also sitting on most of BCCI’s financial records. (Beaty and Gwynne 8/3/1992) BCCI branches in the UAE are not shut down either, but are simply renamed to become the National Union Bank. (BBC 8/5/1991) Many years later, Pakistan will still be protecting BCCI figures such as Pharaon (see June 8-August 10, 2006 and June 8-August 10, 2006).
In July 1991, the criminal BCCI bank is shut down (see July 5, 1991), and Osama bin Laden apparently loses some of his fortune held in BCCI accounts as a result (see July 1991). But while bin Laden loses money, he and his future second-in-command Ayman al-Zawahiri gain influence. Other Islamist militants have been heavily relying on BCCI for their finances, and in the wake of BCCI’s collapse they are forced to bank elsewhere. Author Roland Jacquard will later claim that “following [the bank’s closure], funds [are] transferred from BCCI to banks in Dubai, Jordan, and Sudan controlled by the Muslim Brotherhood. Some of the money [is] handed back to organizations such as the FIS [a political party in Algeria]. Another portion [is] transferred by Ayman al-Zawahiri to Switzerland, the Netherlands, London, Antwerp, and Malaysia.” (Jacquard 2002, pp. 129) Author Adam Robinson will come to similar conclusions, noting that when BCCI collapses bin Laden has just moved to Sudan, which is ruled by Hassan al-Turabi, who has similar Islamist views to bin Laden. Robinson writes, “Without a system by which money could be transferred around the world invisibly, it would be relatively simple for terrorist funds to be traced. Dealing with this crisis fell to al-Turabi. In desperation he turned to Osama.… The future of the struggle could come to rest on Osama’s shoulders.” Over the next several months, bin Laden and a small team of financial experts work on a plan to replace the functions of BCCI. Bin Laden already knows many of the main Islamist backers from his experience in the Afghan war. “During the summer of 1991 he discreetly made contact with many of the wealthiest of these individuals, especially those with an international network of companies.… Within months, Osama unveiled before an astonished al-Turabi what he called ‘the Brotherhood Group.’” This is apparently a reference to the Muslim Brotherhood. Robinson says this group is made up of 134 Arab businessmen with a collective wealth of many billions of dollars. The network will effectively replace BCCI for Islamist militants. (Robinson 2001, pp. 138-139) A French report shortly after 9/11 will confirm that bin Laden’s network largely replaces BCCI (see October 10, 2001). Right around this time, bin Laden is seen at the London estate of Khalid bin Mahfouz, one of the major investors in BCCI (see (1991)).
Khalil Deek, a US citizen and al-Qaeda operative mostly living in California, also works in Bosnia for the Islamic Relief Agency (ISRA), also known as the Islamic African Relief Agency (IARA), during the Bosnia war. (Glain and Cloud 11/17/2000) A secret 1996 CIA report will say, “The IARA office in Zagreb [Croatia] provides weapons to the Bosnian military, according to a clandestine source. The source claimed the office was controlled by officials of Sudan’s ruling party, the National Islamic Front.” (Central Intelligence Agency 1/1996) The Wall Street Journal will later claim that the “US suspects [the IARA] was involved in smuggling fighters into Bosnia from among the mujaheddin.” (Glain and Cloud 11/17/2000) Deek has a Bosnian passport. (Schindler 2007, pp. 270) Some reports identify him as a US Army veteran. (Schou 6/15/2006) Deek will later reportedly serve similar roles for al-Qaeda in Pakistan, helping to smuggle weapons (see May 2000) and direct recruits to militant training camps in Afghanistan (see 1998-December 11, 1999). While in Bosnia, he will get to know other al-Qaeda operatives later connected to various bomb plots (see January 2000). Around the same time that he is working in Bosnia, he is also being monitored by the FBI running militant training camps in California, but the FBI takes no action against him or his camps (see Early 1990s).
The Al-Kifah Refugee Center in Brooklyn, New York, is al-Qaeda’s main foothold in the US and most of the 1993 WTC bombers are closely tied to it. It had been formed in the 1980s to send militants to fight in Afghanistan and also help veteran fighters settle in the US (see 1986-1993). But the Afghanistan war against the Soviets ended in early 1989 and the winning factions soon began fighting amongst themselves (see February 15, 1989). But a new cause is on the horizon as Yugoslavia starts falling apart. By 1991, the center’s parent organization in Pakistan, Maktab al-Khidamat(MAK)/Al-Kifah begins setting up al-Qaeda charity fronts in the Bosnia region (see 1991). The main regional MAK/Al-Kifah branch in Zagreb, Croatia, is also called the Al-Kifah Refugee Center like the Brooklyn branch and has very close ties with that branch (see Early 1990s). In 1992, war breaks out in Bosnia (see April 6, 1992) and the Al-Kifah Refugee Center in Brooklyn shifts its focus fully to the Bosnia cause. For instance, the Boston branch publishes “A Call for Jihad in Bosnia.” It claims that more than 100,000 Bosnians had been killed and that thousands of Muslim girls had been kidnapped and kept in Yugoslav army camps for sex. It urges readers who wish “to provide the emerging jihad movement in Bosnia with more than food and shelter” to send their donations to Al-Kifah. And just as Al-Kifah led the effort to send US-based militants to fight in Afghanistan, it appears to do the same for Bosnia. Vanity Fair will later claim, “Dozens and perhaps hundreds of US residents are reported to have joined appeals to fight the Serbs in Bosnia.” (Scroggins 3/2005) The head of the Al-Kifah Refugee Center’s Zagreb branch, Kamer Eddine Kherbane, apparently is also one of the leaders of the mujaheddin fighters in Bosnia around this time (see 1990 and 1991). The CIA had ties to Al-Kifah during the Afghan war (see Late 1980s and After) and there is some circumstantial evidence of US government ties to it during the Bosnia war. In 1992, Ali Mohamed, a double agent and ex-US Special Forces officer with close ties to Al-Kifah, leads a group of US militants who are all ex-US soldiers to train and fight in Bosnia (see December 1992). Abu Ubaidah Yahya, an ex-US marine and security chief at the Brooklyn branch, will lead a second group of US militants to fight in Bosnia (see Spring 1993).
BMI Inc., is a New Jersey-based Muslim investment firm. Some of the lead investors have been suspected of supporting terrorism and other types of violence in the Middle East (see 1986-October 1999). In 1992, a branch of the International Islamic Relief Organization (IIRO), a Saudi charity gives $2.1 million to BMI to invest in real estate. The money disappears from BMI’s books. By 1996, the CIA will secretly report that the IIRO supports terrorism financing in many locations around the world (see January 1996). In October 1999, BMI will go defunct after it is unable to repay this money to the IIRO branch. Additionally, the IIRO branch will give BMI over a million dollars between 1992 and 1998. BMI uses some money from the IIRO and other investors to build houses in Oxon Hill, a Washington, D.C., suburb. Many well to do Muslims invest in the housing development because BMI advertises itself as investing according to Islamic principles. Most of the small investors as well as the middle class Americans who buy the Oxon Hill houses do not realize that the profits from the property sales go to Mousa Abu Marzouk, a known leader of Hamas. Marzouk is said to make $250,000 in profits from BMI real estate deals in the early 1990s. In 2004, an Immigration and Customs Enforcement court declaration will assert that significant amounts of cash obtained from BMI by Marzouk is eventually used “in furtherance of Hamas terrorist operations.” (Simpson 11/26/2002; Farah 8/20/2003; Seper 3/26/2004; Sheridan 4/19/2004) By the end of 1992, BMI will have projected revenues in excess of $25 million based largely on their real estate investments in the US. (US Congress 10/22/2003)
In 1987, Saudi millionaire Adel Batterjee founds the Islamic Benevolence Committee, a charity front supporting the mujaheddin in Afghanistan. In 1998, bin Laden’s brother-in-law Mohammed Jamal Khalifa founds the Benevolence International Corporation export-import company in the Philippines to support militant groups there. In 1992, the two groups merge and create a new Saudi charity called the Benevolence International Foundation (BIF). BIF funds charity projects, but its 1999 mission statement says its purpose is to make “Islam supreme on this earth,” and it funds radical militants as well. In 1992, it moves its headquarters to Florida in the US. Then, in 1993, it moves its headquarters again to Chicago. Battargee is replaced as head of the organization by Enaam Arnaout, but Battargee maintains a behind the scenes role. Arnaout fought with bin Laden in Afghanistan in the 1980s and in fact in 1988 the Arab News published a picture of Arnaout and bin Laden together at a mujaheddin camp in Afghanistan. Mohammed Loay Bayazid, a US citizen and one of the founder members of al-Qaeda, is made president of BIF. BIF mostly funds regions where Islamist militants are fighting, especially Bosnia and Chechnya. (Burr and Collins 2006, pp. 45-46) In 1993, bin Laden will privately name BIF as one of al-Qaeda’s three most important charity fronts (see 1993). The US will designate BIF a terrorism financier in 2002 (see March 2002) and will similarly designate Batterjee in 2004 (see December 21, 2004).
The Al-Kifah Refugee Center in Brooklyn has an office in Zagreb, Croatia, also called the Al-Kifah Refugee Center, and the links between the two are very close. Both are connected to Maktab al-Khidamat/Al-Kifah in Pakistan, which is an al-Qaeda charity front. Hassan Hakim, deputy director of the Zagreb office, says his office is linked only to the Brooklyn office. This is important because the Zagreb office is closely involved in assisting mujaheddin in the Bosnian war and the Brooklyn office is closely linked to the CIA, suggesting the CIA could be assisting the Bosnia mujaheddin through the relationship between Brooklyn and Zagreb offices. (Coll and LeVine 8/3/1993; Kohlmann 2004, pp. 41) The Zagreb office will remain open after the Brooklyn office is closed in the wake of the 1993 WTC bombing (see February 26, 1993), as all of the bombers were connected to that office. A Washington Post journalist who visits it in August 1993 describes it as being “housed in a modern, two-story building staffed by Arabs who identified themselves as Algerians.” (Coll and LeVine 8/3/1993) Like the Brooklyn office, the Zagreb office appears to be staffed with many militants involved in illegal activities:
Fateh Kamel will reportedly be involved in many attacks and is considered a leader for Ahmed Ressam, who will attempt to bomb the Los Angeles airport (see December 14, 1999).
Lionel Dumont is involved in numerous al-Qaeda plots, even as far afield as Japan.
Hocine Senoussaoui is connected with Al-Gama’a al-Islamiyya and the GIA and will be arrested in France in 1996. (Kohlmann 2004, pp. 164, 186, 189, 195)
Kamar Eddine Kherbane, head of the Zagreb office, is a known al-Qaeda operative as well as a leader of an Algerian extremist group, and allegedly will be involved in the 9/11 attacks (see September 18-20, 2001).
Hassan Hakim. A 1996 CIA report will say that he is a senior member of Algerian extremist groups and was arrested in France for weapons smuggling in July 1994.
In 1996, a CIA report will say that an Algerian national connected to the Zagreb office is “preparing for an unspecified terrorist attack in Europe…” (Central Intelligence Agency 1/1996)
After a two-year investigation, Ahmed Chalabi is convicted in absentia and sentenced by a Jordanian military court to 22 years of hard labor and ordered to return $230 million in embezzled funds from his crimes connected with the Petra Bank. The 223-page verdict charges Chalabi with 31 counts of embezzlement, theft, forgery, currency speculation, making false statements, and making millions of dollars in bad loans to himself, to his friends, and to his family’s other financial enterprises in Lebanon and Switzerland (see June 1992). (Leigh and Whitaker 4/14/2003; Hosenball and Hirsh 4/5/2004; Dizard 5/4/2004; Mayer 6/7/2004; Murphy 6/15/2004)
Jamal al-Fadl, an al-Qaeda financial agent, is sent from bin Laden’s headquarters in Sudan to Zagreb, Croatia, to gather information about the Bosnian war and the prospects of buying businesses in Croatia for al-Qaeda. In Croatia, he meets with Enaam Arnaout (who will soon become the head of the Benevolence International Foundation (BIF) in the US), and al-Qaeda operatives Abu Abdel Aziz Barbaros (a.k.a. Abdel Rahman al Dosari), and Abu Zubair al Madani, one of bin Laden’s cousins (he will later be killed fighting in Bosnia). Barbaros tells al-Fadl that al-Qaeda is seeking to create training camps in Bosnia, develop relationships with Bosnian charities, and establish businesses to help finance al-Qaeda activities. He says that BIF is providing money for al-Qaeda to buy weapons to use in Bosnia and that they have already obtained some weapons from Germany with the help of BIF and Mohammed Loay Bayazid (who also works for BIF in the US). According to a later Justice Department indictment, Barbaros also says that “al-Qaeda’s goal in Bosnia [is] to establish a base for operations in Europe against al-Qaeda’s true enemy, the United States.” Around this time, BIF begins providing food, clothing, money and communications equipment to fighters in Bosnia, including the elite Black Swans unit. (USA v. Enaam M. Arnaout 10/6/2003, pp. 24-25 ; Kohlmann 2004, pp. 16-17) In 1996, al-Fadl will defect from al-Qaeda and tell all he knows to US investigators (see June 1996-April 1997).
Jamal al-Fadl travels to Vienna and has meetings with the Third World Relief Agency (TWRA), which has its headquarters in Vienna. He opens up a Vienna bank account and al-Qaeda operative Wadih El-Hage also opens up a Vienna bank account around this time. Presumably these accounts are used by al-Qaeda to send money to TWRA for operations in Bosnia. Around the same time, al-Qaeda leader Mamdouh Mahmud Salim tells al-Fadl that al-Qaeda’s goal is to make Bosnia a base for European operations. (United States of America v. Usama bin Laden, et al., Day 21 3/22/2001; USA v. Enaam M. Arnaout 10/6/2003, pp. 24-25 ) TWRA will funnel hundreds of millions of dollars into Bosnia for illegal weapons purchases over the next several years while the US watches but fails to act. In 1996, al-Fadl will defect from al-Qaeda and tell all he knows to US investigators (see June 1996-April 1997).
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