Terror Watch: The Money Trail

A U.S.-based Islamic charity received millions of dollars in State Department funds for charitable work in Africa--at the same time that its overseas affiliates were allegedly funneling large sums of money directly to Osama bin Laden, according to newly released government documents. The new information about the Islamic American Relief Agency, and its parent organization in the Sudan, appears to represent the strongest evidence yet that, at least for several years in the late 1990s, U.S. taxpayer money may have been inadvertently used to finance the terrorist operations of Al Qaeda.

A team of FBI agents last week raided a small office building in Columbia, Mo., that serves as the U.S. headquarters of IARA, hauling away boxes of records and computers. At the same time, federal agents also raided the home of the group's former executive director and interviewed as many as 90 others across the United States, people who had either been donors or had other suspected ties to the group, an FBI spokesman said.

The same day, the Treasury Department froze the assets of IARA and its overseas parent, the Islamic Africa Relief Agency, after formally designating the group, its multiple worldwide affiliates and five of its senior officials as financiers of terrorism.

The FBI declined to comment on the basis for its action against IARA, which so far has resulted in no arrests. But a little-noticed Treasury statement accompanying the freezing of IARA's assets provides startling new allegations suggesting that the group and its Khartoum-based parent had far closer ties to Al Qaeda than anybody had previously suspected--even while the group was receiving hefty sums of money from the U.S. government.

"Information available to the U.S. indicates that international offices of [the Islamic Africa Relief Agency] provided direct financial support to UBL [Osama bin Laden]," the Treasury Department asserted in an Oct. 13, 2004, press release.

A phone answering machine at IARA offices in Missouri was not accepting messages today and NEWSWEEK was unable to locate officials associated with the group. A statement posted on IARA's Web site notes that the group's "charitable activities" have been suspended as of Oct. 13 but urges prospective donors to "not let this unfortunate situation keep you from giving generously to the needy" during the current Ramadan holiday.

The U.S. group describes itself on the Web site as "an independent agency" that is unaffiliated with any other organization and which "adheres to the moral and legal framework of Islamic Sharia [religious law] regarding the care of orphans" and other charitable works.

But Treasury officials portrayed the U.S. group in Missouri quite differently. They asserted that the Columbia-based group was one of 40 international offices of the Khartoum-based Islamic Africa Relief Agency and part of what the department described as the same "worldwide network."

The department statement further alleges an intricate web of connections between the worldwide charity and Al Qaeda, including that:

* IARA "commingled funds" with bin Laden and another bin Laden-affiliated charity called Maktab Al-Khidamat (MK)";

* IARA had a "joint program" with a bin Laden-controlled institute to provide assistance to Taliban fighters in Afghanistan;

* IARA and MK provided financial support for a group of Arab terrorists planning to attack U.S. military personnel in Saudi Arabia in 1997;

* a bin Laden "lieutenant" who was an expert in "terrorism, bomb planning and guerilla operations" served as the director of IARA operations in Afghanistan, and

* the overseas branches of IARA "provided hundreds of thousands of dollars" to bin Laden in 1999.

Treasury officials have so far declined to elaborate on the basis for the new claims about IARA, saying it is based on "classified" information. But Ritz Katz, a Washington-based terrorism researcher who has tracked IARA for years, said the new allegations about the group's ties to bin Laden appear to come from interrogations of Mustafa Ahmed al-Hawsawi, a wealthy Saudi financier who was a key financial contact between the September 11 hijackers and bin Laden.

As first reported by NEWSWEEK in November 2001, documents referring to al-Hawsawi were found by Irish police when they raided the Dublin office of IARA in the aftermath of the attacks on the World Trade Towers and the Pentagon. al-Hawsawi was captured in Pakistan in March 2003--along with September 11 mastermind Khalid Shaikh Mohammed--and is now believed to be in CIA custody. Like other high-level Al Qaeda detainees, virtually nothing is known about al-Hawsawi's current whereabouts or what he has said in interrogations. A CIA spokeswoman today declined to comment on whether al-Hawsawi had been the source of the new allegations about IARA's connections with Al Qaeda.

But what is most striking about the new claims is the timeline: at the very moment that the charity was allegedly heavily involved in funneling money to bin Laden, the U.S. branch was receiving ample support from the U.S. Treasury through contracts awarded by the State Department's Agency for International Development.

A U.S. AID letter dated Feb. 3, 1997, and signed by an official in the agency's Office of Procurement granted the "Islamic African Relief Agency" at the same Columbia, Mo., office raided by the FBI a $300,000 contract to provide support for a program in "child survival." The letter was provided to NEWSWEEK by The Investigative Project, a Washington-based group headed by terrorism researcher Steve Emerson, who has worked closely with U.S. government officials in tracking Islamic charities.

IARA also received another AID contract estimated at $4 million that was awarded by the U.S. Embassy in Mali in 1998 for charitable work in that country. The awards appear to be reflected in tax returns filed by IARA for those years. The group's 1999 tax return, for example, shows it received $4.1 million in income that year and used the funds to provide "child survival assistance" in Mali; "relief and assistance to refugees in Africa, Bosnia and Middle East," and sponsoring orphans in Africa and "helping thousands of needy, hungry and disaster victim persons and communities."

The U.S. financial support of IARA continued until December 1999 when AID, under pressure from Richard Clarke, then White House chief of counterterrorism under President Bill Clinton, cut off funding for the group. Clarke told NEWSWEEK he had concerns about the possible terrorist ties of a number of U.S.-based Islamic charities and pushed the State Department to sever its ties with the groups. A Dec. 29, 1999, AID memo says the contracts with IARA were being determined on the grounds that the agency's agreements were not "in the national interest of the United States."

One question that is likely to arise in future weeks is why it took the U.S. government so long to move more aggressively against the group. Law-enforcement sources say that IARA has been on the FBI's radar screen at least since 1996, when Ziyad Khaleel, one of the IARA's eight regional directors, was tracked purchasing a satellite phone for Khalid al-Fawwaz, the suspected chief of bin Laden's network in Britain. The satellite phone was later delivered to bin Laden in Afghanistan and, according to federal prosecutors, was used to facilitate the bombings of two U.S. embassies in Africa in 1998. Prosecutors are seeking to extradite Fawwaz from Britain to face charges in connection with the satellite phone. Khaleel, who left the United States, is believed to have died in a car crash in recent years, a federal law-enforcement source said.

Another person who has attracted U.S. attention is Ibrahim Buisir, who headed the Dublin office of IARA where documents containing references to al-Hawsawi were located. Buisir was one of the IARA senior officials designated by Treasury last week as a terror financier. A native of Libya, he has been living openly in Dublin since the early 1980s and has an Irish passport. Sources tell NEWSWEEK that Buisir recently appeared in court in a Dublin suburb on credit-card fraud charges, but he was acquitted after a judge ruled that key evidence was inadmissible.

Members of Dublin's journalism community say that Buisir is well known in the Irish capital where he actively participates in meetings of the National Union of Journalists. According to a union member, Buisir appeared at one union meeting within the last few days seeking to make a speech, but was not called on by meeting organizers. Union sources said that Buisir claimed to write for one or more Islamic and Middle Eastern publications, including Friday Times--described as a "fundamentalist" paper and handed out at Dublin mosques after prayer services. Those who know him said that he appears to live comfortably in Dublin, though his sources of finance are unclear. Buisir did not respond to a message seeking comment. According to a report in The Irish Independent, Buisir has previously dismissed allegations that he was helping to raise funds for Al Qaeda.

Terror Watch, written by Michael Isikoff and Mark Hosenball appears online weekly