Before the 11 September attacks, Prince Muhammad al-Faisal al-Saud felt welcome in America. A member of the Saudi royal family and a pioneer of Islamic finance, he was a pillar of a Saudi business establishment that has long relished its ties with the US.
Since then he has kept his distance. The company he founded in 1981, Dar al-Maal al-Islami Trust (DMI)—a Bahamas-incorporated holding company with a portfolio of Islamic banks in Bahrain, Niger, Egypt and Pakistan—is a defendant in a consolidated$1 trillion (Rs40.5 trillion) lawsuit brought by the families of those who died on 11 September and his lawyers have advised him not to set foot in the US as the case winds its sluggish way through federal court in Lower Manhattan.
Though the prince was originally named in the case, the lawsuits against him were dismissed in 2005. The prince is less well known—he shuns publicity—than two of his brothers, Prince Saud al-Faisal, the Saudi foreign minister, and Prince Turki al-Faisal, the former Saudi ambassador to the US. But as chairman of DMI, he is the public face of the sprawling financial conglomerate, which has been accused of aiding terrorism. More than that, the princeand by extension DMI represent vividly the discordant views that have surrounded Islam and money since 11 September.
Some see him as a founding father of Islamic finance, a thriving piece of the global economy that approaches$800 billion in assets; others view the prince, a follower of the puritanical Wahhabi sect of Islam, as the invisible hand behind a flow of money toAl Qaeda.
Fuelled by soaring oil prices and an increasingly open investment climate, capital is flowing to West Asia, often steered to institutions like DMI and its subsidiaries, which, to comply with Islamic law, shun interest and speculation in favour of investments in which the borrower and lender share both risk and reward.
Yet, in the wake of the attacks on 11 September, the tendency to connect the businesses of established Muslim financiers to Islamic extremism continues. That point became clear last year duringthe outcry over whether DP World, a Dubai-based port operator, should run terminals in the US.
Even now, such suspicions show no sign of abating. Many other Muslim institutions have been named in the suit, and last month Mariane Pearl, the wife of the slain Wall Street Journal reporter Daniel Pearl, sued Habib Bank, the largest bank in Pakistan, accusing it of providing banking services to charities that supported terrorist organizations. For the prince, his legal difficulties and a growing resentment of US policies in West Asia have put a strain on what traditionally has been a robust business relationship.
“There has been a cloud on relations,” said Richard A. Debs, an advisory director at Morgan Stanley and vice-chairman of the US-Saudi Arabian Business Council. “There is disaffection—people think Prince Muhammad has been unfairly persecuted and attacked. I just don’t see the connection between Islamic finance and Islamic extremism.”
In the case of DMI, others are not so sure. This year, the justice department’s counter-terrorism division disclosed that it was investigating whether clients of a DMI subsidiary, via a private equity fund once owned by DMI, avoided paying their shareof taxes.
In their complaint, lawyers for 11 September relatives argue that the early alliances formed by the prince with conservative political and religious figures in Sudan and Egypt as well as the banking services DMI has provided to people and organizations who would be declared terrorists after 11 September are proof that the prince and the trust have “conspired with Al Qaeda and the other defendants to carry out terrorist attacks.”
A lawyer representing DMI, James J. McGuire, denies any such intent. “The fact that DMI unknowingly had an account with someone who was later deemed a terrorist is hardly evidence that the bank isinvolved in terrorism,” McGuire said.
To support their case, investigators for the plaintiffs have gathered documents that show that Wael Jelaidan, a suspected founder of Al Qaeda who was designated a terrorist by the US government in September 2002, maintained an account at Faisal Finance, DMI’s Swiss banking unit, from January 1997 to July 2003 that grew to be as large as $405,000. Jelaidan, through his lawyer, Martin F. McMahon, has denied links to terrorist organizations.
An even more significant client of Faisal Finance—now called Faisal Private Bank—was Yassin Abdullah Kadi, a prominent Saudi businessman and a past shareholder of DMI who was designated a terrorist in October 2001 for his ties to Islamic charities accused of providing financial support to terrorists. Bank records from Faisal Finance show transactions by Kadi as late as February 2003, more than a year after his designation. Kadi has denied that he has ever supported terrorist organizations and he is contesting his designation.
Other documents collected by plaintiffs show that two extremist groups in Pakistan that have been designated by the US for their support of terrorism maintained deposit accounts at Faysal Bank Ltd, DMI’s banking affiliate there. One is Lashkar-e-Toiba, an armed group fighting India in the disputed region of Kashmir, and another, Lajnat al-Dawa, is a Kuwait-based foundation that has links to Al Qaeda, according to the US treasury’s website.
According to McGuire, DMI’s lawyer, the accounts were frozen as soon as the clients had been either put on a designated list or banned in Pakistan. The accounts of Kadi and Jelaidan are active only to the extent that investment payouts are recorded and fees are paid to Faisal, he said.
The complaint also focuses on the ties Prince Muhammad had with religious personalities like Hassan al-Turabi from Sudan, who was a supervisory director of the trust from 1982 to 1992, and Yusuf al-Qaradawi, who was an early religious adviser to the trust until he left in 1994.
Turabi was a once-powerful political figure in Sudan who welcomed Osama bin Laden to the country in 1991. Faisal Islamic Bank in Sudan, a past affiliate of the trust, was a major financial sponsor of Turabi, the complaint contends. And Qaradawi, a prominent Islamic scholar from Egypt, has been linked to the Muslim Brotherhood, although he did condemn the 11 September attacks. Finally, the complaint highlights some fiery language used by Prince Muhammad in a 1984 letter to shareholders in which he says, “May Allah bless your jihad and allyour efforts.”
Michael E. Elsner, a lawyer representing the 11 September relatives, said that it is the mix of these pieces of evidence that underpins the case. And even if DMI has now cut ties and frozen accounts, he said that having such people on the board and providing financial services to businessmen who would be designated as terrorists are signs of DMI’s sympathy towards Islamic extremism. “All this creates a picture that DMI provided material support to Al Qaeda,” he said. “And if the accounts are frozen, why are they accepting investment payouts?”
But Khalid Abdullah Janahi, the chief executive of DMI since 1998, who has overseen a period of substantial growth for the company as the market for Islamic finance has boomed, sees something more insidious at work: latent prejudice, compounded by a broader bias he has encountered since 11 September.
“Suddenly the hatred of the petrodollar days is back,” he said. A gruff, burly man who was a partner at Price Waterhouse before coming to DMI, his voice rises as he explains that jihad can also mean a non-violent struggle for a pure, legitimate end. He added: “Rarely in the Western media do I read anything about our food, our culture, our painting or our poetry. I just read how bad we are as Muslims.”
At DMI’s administrative headquarters in a gleaming glass building on the outskirts of Geneva, the only evidence of the trust’s Saudi origin is a painting of a pensive King Faisal, the father of Prince Muhammad, which hangs in its main conference room. Janahi is dressed in a conservative suit and he takes pains to explain that Islamic finance is a global business that has attracted the likes of Goldman Sachs and HSBC to compete with DMI.
Technically a trust, DMI functions as a holding company, with ownership stakes in Islamic banks in Pakistan, Egypt and Africa, investment banks in Bahrain and the Faisal private bank in Geneva. It also manages $1.5 billion for largely Muslim clients, invested exclusively in businesses and funds that are in tune with Islamic law, like real estate and private equity.
Since recording a loss in 2000, its fortunes have soared as capital has flowed to the region and the trust posted a record profit of $52 million last year. Yet the spectre of the lawsuit hangs over the company, and it has spent millions of dollars on legal fees. “We will take this case to the Supreme Court if need be,” Janahi said. DMI’s motion to dismiss, along with 107 similar motions from other defendants in the case, awaits a decision from judge George B. Daniels ofthe federal district court in Manhattan.
While he will not discuss specific accusations, the idea that an established entrepreneur like the prince—before DMI, he ran a venture in Jeddah that aimed, unsuccessfully, to bring icebergs to Saudi Arabia—would knowingly finance terrorism offends Janahi’s pragmatic sensibilities.
“These people are all part of the system,” he said, referring to many well-known West Asian businessmen named in the suit. “There is no way they are going to pay people to hang themselves.”
Ibrahim A. Warde, an expert on Islamic finance at the Fletcher School at Tufts University, has written a book, out this summer, called The Price of Fear. In it he contends that contrary to popular perception, there is no monolithic financial pool sustaining Al Qaeda—a view that is supported by the 11 September Commission’s report on terrorism financing. “There is this idea that it is money that makes terror possible,” he said. “So DMI, as an Islamic bank, has a few strikes against it.”