[Senate Hearing 107-1156]
[From the U.S. Government Printing Office]



                                                       S. Hrg. 107-1156
 
 AN ASSESSMENT OF THE TOOLS NEEDED TO FIGHT THE FINANCING OF TERRORISM

=======================================================================

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                           NOVEMBER 20, 2002

                               __________

                          Serial No. J-107-112

                               __________

         Printed for the use of the Committee on the Judiciary



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                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
EDWARD M. KENNEDY, Massachusetts     ORRIN G. HATCH, Utah
JOSEPH R. BIDEN, Jr., Delaware       STROM THURMOND, South Carolina
HERBERT KOHL, Wisconsin              CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California         ARLEN SPECTER, Pennsylvania
RUSSELL D. FEINGOLD, Wisconsin       JON KYL, Arizona
CHARLES E. SCHUMER, New York         MIKE DeWINE, Ohio
RICHARD J. DURBIN, Illinois          JEFF SESSIONS, Alabama
MARIA CANTWELL, Washington           SAM BROWNBACK, Kansas
JOHN EDWARDS, North Carolina         MITCH McCONNELL, Kentucky
       Bruce A. Cohen, Majority Chief Counsel and Staff Director
                Makan Delrahim, Minority Staff Director


                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah, 
  prepared statement.............................................    97
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont, 
  prepared statement.............................................    99
Specter, Hon. Arlen, a U.S. Senator from the State of 
  Pennsylvania...................................................     1

                               WITNESSES

Al-Marayati, Salam, Executive Director, Muslim Public Affairs 
  Council, Los Angeles, California...............................    35
Aufhauser, David D., General Counsel, Department of the Treasury, 
  Washington, D.C................................................    16
Conrad, Robert J., Jr., United States Attorney, Western District 
  of North Carolina, Charlotte, North Carolina...................     2
Gerson, Allan, Gerson International Law Group, PLLC and 
  Professorial Lecturer in Honors, George Washington University, 
  Washington, D.C................................................    30
Gurule, Jimmy, Under Secretary for Enforcement, Department of the 
  Treasury, Washington, D.C......................................    14
Lewin, Nathan, Lewin and Lewin, LLP, Washington, D.C.............    26
Winer, Jonathan M., Alston and Bird, LLP, and Member, Council on 
  Foreign Relations, Washington, D.C.............................    33

                         QUESTIONS AND ANSWERS

Responses of Robert J. Conrad, Jr. to questions submitted by 
  Senator Biden..................................................    45
Questions submitted by Senator Biden to Jimmy Gurule (Note: Mr. 
  Gurule's responses were not received prior to the printing of 
  this hearing.).................................................    51

                       SUBMISSIONS FOR THE RECORD

Al-Marayati, Salam, Executive Director, Muslim Public Affairs 
  Council, Los Angeles, California, statement....................    55
Boyd, John W., Attorney at Law, Freedman Boyd Daniels Hollander 
  Goldberg & Cline P.A., Albuquerque, New Mexico, statement......    59
Conrad, Robert J., Jr., U.S. Attorney, Western District of North 
  Carolina, Charlotte, North Carolina, statement.................    66
Gerson, Allan, Gerson International Law Group, PLLC and 
  Professorial Lecturer in Honors, George Washington University, 
  Washington, D.C., statement....................................    71
Gurule, Jimmy, Under Secretary for Enforcement, Department of the 
  Treasury, Washington, D.C., statement..........................    78
Lewin, Nathan, Lewin and Lewin, LLP, Washington, D.C., statement 
  and letter.....................................................   101
Winer, Jonathan M., Alston and Bird, LLP, and Member, Council on 
  Foreign Relations, Washington, D.C., prepared statement........   114


 AN ASSESSMENT OF THE TOOLS NEEDED TO FIGHT THE FINANCING OF TERRORISM

                              ----------                              


                      WEDNESDAY, NOVEMBER 20, 2002

                              United States Senate,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:03 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Arlen Specter 
presiding.
    Present: Senator Specter.

 OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM 
                   THE STATE OF PENNSYLVANIA

    Senator Specter. Good morning, ladies and gentlemen. The 
Judiciary Committee hearing will now commence on the subject of 
how to combat the financing of worldwide terrorism.
    With last night's passage by the U.S. Senate of homeland 
security, we have again signaled the determination of the U.S. 
Government to fight terrorism worldwide. We face enormous 
threats, as it is well-known from the cataclysmic events of 
September 11th, and the U.S. Government is in pursuit of Al-
Qaeda around the world. Al-Qaeda cannot function unless it is 
well-financed.
    There are other major terrorist organizations, such as 
Hamas and Hizballah, and there again it is a matter of 
financing. The U.S. Government has taken steps to deal with our 
allies, our friends, and some who are not our allies and our 
friends, to try to stop the financing of terrorism.
    We will hear testimony today about what has been undertaken 
with a trip in mid-October by a key Federal official to Europe 
to talk to our European allies about stopping money laundering 
and stopping the financing of terrorism. We are going to hear 
testimony about a successful criminal prosecution involving 
Hamas, and we are zeroing in on Hizballah and all other 
terrorist organizations.
    Our hearing today is going to focus on an issue which has 
not received much attention, if any, and that is the potential 
criminal liability of individuals who contribute to Hamas or 
any other terrorist organization, where those organizations are 
involved in terrorism which results in the death of Americans.
    In 1986, Congress passed the Terrorist Prosecution Act 
which makes it a Federal offense to assault, maim, or murder an 
American citizen anywhere in the world. In 1984, the United 
States exercised what is called extra-terrestrial jurisdiction 
on hijackings and kidnappings.
    Customarily, a criminal prosecution is brought in the 
jurisdiction where the incident occurred. But there is 
international law and international support for extra-
territorial jurisdiction where U.S. citizens are involved. And 
with the strafing of the Rome and Vienna airports in December 
1985, it was obvious that we needed new legislation, which I 
had introduced and became the Terrorist Prosecution Act of 
1986.
    When Hamas attacked Hebrew University and killed eight 
people, including five Americans, recently, one of whom was a 
resident of Harrisburg, Pennsylvania, those murders triggered 
the Terrorist Prosecution Act. People who contribute to Hamas, 
with its being well-known that Hamas is engaged in terrorist 
activities and well-known that they engage in murder, including 
murders of American citizens--those individuals are subject to 
criminal prosecution as accessories before the fact to murder.
    I think that message ought to be a loud and clear one which 
I hope these hearings will emphasize, that where it is known 
that you have a terrorist organization and that terrorist 
organization, like Hamas or Hizballah or Al-Qaeda or others, 
has a record of suicide bombings which result in killing of 
Americans, those contributors are liable as accessories before 
the fact.
    We have a distinguished array of witnesses today. We are 
going to proceed at this time to hear from the Honorable Robert 
Conrad, Jr., who is the United States Attorney for the Western 
District of North Carolina.
    Mr. Conrad was the successful prosecutor of 18 defendants 
for operating a Hizballah terrorist funding cell in Charlotte, 
North Carolina. The indictments occurred before 9/11, but the 
case took on added significance as a result of what has 
happened on 9/11 and since. This case was the first trial of a, 
quote, ``material support to a designated terrorist 
organization,'' close quote, charged in the United States.
    Mr. Conrad, we compliment you on your work. We thank you 
for joining us and we look forward to your testimony. As it is 
the practice of the Judiciary Committee, the opening statements 
will be timed at 5 minutes. We would like you to stay to the 
extent possible within that time. I understand in Mr. Conrad's 
case there is a video presentation, so the exception in your 
case will prove the rule, Mr. Conrad.

  STATEMENT OF ROBERT J. CONRAD, JR., U.S. ATTORNEY, WESTERN 
     DISTRICT OF NORTH CAROLINA, CHARLOTTE, NORTH CAROLINA

    Mr. Conrad. Thank you, Senator, and thank you for inviting 
me here. I would like to thank you, as well, for your 
sponsorship of the homeland security bill which passed last 
night and should be a great asset to our ability to fight 
terrorism.
    I have submitted for the record a summary of this 
PowerPoint presentation. With your permission, I would like to 
get right into it.
    Senator Specter. Thank you very much. The full summary will 
be made a part of the record and we look forward to your 
presentation.
    Mr. Conrad. Senator, this was a 4-year investigation. It 
took about 5 weeks to try, and I have condensed what I can into 
a few minutes here to present with you today.
    At the outset, I would like to tell you and the public that 
this case was prosecuted by our First Assistant U.S. Attorney, 
Ken Bell, and the cooperation that he was able to coordinate 
among law enforcement agencies is something that the Department 
is proud of and I think the American people should be proud of.
    The first slide here is just simply the badges of various 
law enforcement agencies who cooperated together in the pursuit 
of the Hizballah terrorist cell in Charlotte. It goes from the 
State and local level to the international level, and it stands 
for the position that it is amazing what can be accomplished 
when no one cares who gets the credit.
    There were prosecutorial challenges in this case that we 
didn't face in other cases. The use of confidential sources is 
something that all criminal prosecutors deal with, but in this 
connection the sources that we used--we had to protect their 
lives and the lives of their families. And so it influenced 
everything we did in the case, from charging decisions to the 
way we structured search warrants, and it was a significant 
prosecutorial challenge.
    Of course, we did utilize evidence obtained through the 
FISA Act, and it is amazing what kind of difference a day can 
make. Sitting here talking to you today, we now have a FISA 
structure that was unavailable to us when we started this 
investigation. And had we had then what we have now, I think we 
would have learned of earlier and been more effective in our 
pursuit of Hizballah in Charlotte.
    We also obtained great cooperation from the Canadian 
Intelligence Service. We learned that they had electronic 
surveillance of a Hizballah procurement cell in Canada with 
ties to our group in Charlotte, and over time we utilized 
evidence that they had obtained in their country.
    The CIPA Act provided for protection of classified 
information, and fortunately by the time we got to trial the 
information we relied upon at trial was declassified. But we 
were prepared to jump through the CIPA hoops for judges and 
defense attorneys and other witnesses who would have access to 
classified information.
    One of the most significant things about our prosecution is 
the RICO charges that we brought against this Hizballah 
terrorist cell. It was the first time in my knowledge that a 
terrorist cell had been subject to prosecution under the RICO 
Act.
    It did a number of things for us. It allowed us to call 
them what they were, and that was a Hizballah financing cell. 
It allowed us to pick up acts of illegality that were time-
barred because of the length of time it took us to uncover the 
illegal activity. And it allowed us to show to a jury 
fundraising that dated back a number of years.
    Our theory was that this group came to the country 
illegally, stayed in the country illegally, stole illegally, 
and then gave proceeds of stolen funds to Hizballah in the 
Middle East. And we could say all of that to a jury in 
Charlotte, North Carolina, as a result of the RICO charges.
    Senator Specter. Mr. Conrad, where did they come from?
    Mr. Conrad. Beirut, Lebanon, and various--they came to the 
country, as I will lay out as we go, through various 
mechanisms.
    Senator Specter. And there were 18 defendants?
    Mr. Conrad. Yes, sir.
    Senator Specter. Were there other co-conspirators or others 
involved in the plot?
    Mr. Conrad. Of the 18, there were 6 that we ultimately 
charged with material support, and there were other associates 
of the 6 who had various levels of awareness of what was going 
on. The benefit of the RICO statute is we could charge the 
whole group as an association in fact and bring all 18 before 
the United States district court.
    Senator Specter. So this large group came from Beirut, 
Lebanon, in a calculated way, coming to North Carolina, 
engaging in cigarette smuggling, which was the gravamen of 
their profits, and accumulated millions of dollars and funded 
Hizballah?
    Mr. Conrad. Yes, sir. You have succinctly summarized our 
case.
    Senator Specter. Well, you wonder on that kind of an 
operation from Beirut, with that many people going to a town in 
North Carolina on that kind of a scheme and plot, how far-
ranging their activities must be.
    Mr. Conrad. I believe that if there is a Hizballah 
terrorist cell in Charlotte, which was proven beyond a 
reasonable doubt to the satisfaction of 12 jurors, then there 
are similar cells elsewhere. And I think this is a serious----
    Senator Specter. You wouldn't ordinarily expect Charlotte 
to be the focal point of Hizballah activities, would you?
    Mr. Conrad. You would not. We were very surprised to find 
that out.
    Of course, the material support statute is a great tool in 
the Federal prosecutor's arsenal. It allows us to not only 
dismantle a financial enterprise, but in this particular case 
it allows us to seek heavy sentences for the criminal conduct 
involved.
    The material support charge we brought in Charlotte was the 
first material support charge that was ever tried to a jury in 
the country, and it is now being used in Buffalo, Detroit, 
Portland, and elsewhere. One of the advantages to the material 
support charge is that, upon a finding of guilty and the 
application of the Sentencing Guidelines, there is a severe 
sentence that is applicable as a result of that charge.
    There were other significant legal hurdles that we 
encountered and dealt with, but let me move on a little bit to 
the facts.
    What you have pictured before you is JR's Tobacco Warehouse 
in Statesville, North Carolina. JR's Warehouse is the largest 
wholesaler of tobacco products in North Carolina, and it was 
here that this case began.
    An off-duty Iredell County deputy sheriff noticed young men 
coming into this warehouse and buying bulk quantities of 
cigarettes with bags full of cash, and then he observed them 
putting those cigarettes into a van and heading north on I-77.
    Now, the only thing north of Statesville on I-77 is Mount 
Airy, the home of Andy Griffith, and a State line. And once 
that van crosses a State line, a Federal felony is committed. 
This deputy sheriff was alert enough to recognize this 
suspicious activity and contact his friends at the ATF. The ATF 
began a cigarette investigation as a result. Basically, the 
investigation began in July 1996, and the surveillance led to 
the identification of a Lebanese cigarette-smuggling 
organization.
    The nature of this case was that in North Carolina, 
cigarettes are taxed at a 50-cent-per-carton rate and no tax 
stamp is applied to those purchases. In Detroit, Michigan, the 
cigarette tax is $7.50 a carton, and so this provided the 
economic incentive to purchase bulk-quantity cigarettes in 
North Carolina and smuggle them for resale in Michigan.
    Our evidence showed that these co-conspirators averaged 
about $13,000 per van load, that they made approximately three 
to four van trips to Michigan a week, and that all told they 
purchased approximately $8 million worth of cigarettes and made 
a profit of between $1.5 and $2 million.
    Now, the difficulty with the case was that we were sitting 
in Statesville, North Carolina, a rural community, and any 
juror who sat on this case would have actually benefited from 
the illegal activity of these co-conspirators. They were, after 
all, paying retail sales tax on these purchases. The loss was 
in Michigan, where the tax there was avoided by this illegal 
activity. So at this point there was a real question as to the 
jury appeal of a case like this.
    What happened was that about this time in the investigation 
when charging decisions on the cigarette case were made, the 
FBI walked in with news that they had, through their 
intelligence investigations, discovered a Hizballah terrorist 
cell. They showed us a series of pictures that are represented 
here, and what was interesting about this is that each of these 
people pictured, whom the FBI had identified as being involved 
in a terrorist financing cell, were also our cigarette 
smugglers. And this case ceased to be about cigarettes and 
became about Hizballah. But these were intelligence sources, 
not sources we could use in a criminal case without burning 
those sources, and so a criminal investigation began on 
Hizballah.
    Senator post 9/11, people tend to forget who Hizballah is, 
in the wake of the attention focused on Al-Qaeda. But we didn't 
forget. Senator Graham, of the Senate Intelligence Committee, 
just last spring referred to Hizballah, not Al-Qaeda, as the A 
Team of terrorism. Imad Mugniyah, in contrast to Osama bin 
Laden--he said that Mugniyah made Osama bin Laden look like a 
school boy.
    Hizballah is responsible for the Marine barracks bombing in 
Beirut in 1983 that killed 241 Marines, 6 months after they 
blew up the embassy in Beirut. They were responsible for the 
skyjacking of TWA flight 847 and the shooting death of a United 
States Navy diver who was dropped on the tarmac, and they were 
responsible for a series of kidnappings in 1980, including 
Terry Anderson, and CIA Station Chief Buckley, who was tortured 
and murdered. This is the group that we were confronted with in 
Charlotte, North Carolina.
    Senator Specter. And they continue to the present time, Mr. 
Conrad, to practice terrorism on the southern Lebanon border 
going into Israel.
    Mr. Conrad. Yes, sir.
    Senator Specter. And they are reputedly financed by Iran 
and assisted by Syria, so they are a very formidable force.
    Mr. Conrad. One of the things that we did in this 
investigation is we executed 18 search warrants of residences 
of the people we identified as being part of this RICO 
enterprise. And at the residence of Mohamad Hammoud, the main 
target of this investigation, we uncovered this video.
    The scene you are about to see is from that video from the 
house of Mohamad Hammoud and it depicts members of the martyr 
squad from Hizballah taking an oath.
    [Videotape shown.]
    Senator Specter. Now, what is this a picture of, Mr. 
Conrad?
    Mr. Conrad. This is a video taken from the home of Mohamad 
Hammoud and it depicts members of a martyr squad taking an 
oath.
    Senator Specter. Who took the video?
    Mr. Conrad. We don't know who took the video. We found it 
in the home of Mr. Hammoud.
    Senator Specter. It was taken there, not knowing that it 
would be subject to seizure and observation by law enforcement 
officials?
    Mr. Conrad. Yes, sir, and quoting from the trial testimony, 
the translator translated what you just heard from the 
secretary general of Hizballah saying, ``We will answer the 
call and we will take an oath to detonate ourselves, to shake 
the grounds under our enemies, America and Israel.'' And then a 
group responds, ``We will answer to your call, Hizballah. We 
will answer to your call, Hizballah.''
    Senator Specter. And that occurred in North Carolina?
    Mr. Conrad. Yes, sir.
    A second video was seized with, again, the secretary 
general of Hizballah speaking to a crowd, and he is saying 
``Death to America.'' And the crowd is repeating behind him, 
``Death to America and death to Israel.'' The crowd replies, 
``Death to Israel.''
    Senator Specter. Where did that scene occur, if you know?
    Mr. Conrad. It is our understanding that those were 
speeches given in Beirut, Lebanon, and found in the home of 
Mohamad Hammoud in Charlotte, North Carolina.
    Senator Specter. Thank you.
    Mr. Conrad. If I could speak briefly about the two main 
targets of the investigation, Mohamad Hammoud and Mohamad Atef 
Darwich, and Darwich's cousin, Ali Fayez Darwich, they came 
into the United States in 1992 through Venezuela. They bought 
fraudulent U.S. visas for $200. They landed at JFK, dropped the 
credentials in the trash can, and claimed asylum. Their reason 
for asylum was that they were being persecuted by Hizballah.
    What happened after that is amazing. They were given a 
hearing date and released, never to appear again.
    Senator Specter. Were they granted asylum?
    Mr. Conrad. They never even applied for it after that.
    Mohamad Hammoud three times was denied a visa from 
Damascus. At trial, he was asked why he went to Damascus for a 
visa. He indicated no special reason. He was cross-examined on 
the fact that he went to Damascus because Hizballah has blown 
up the embassy in Beirut.
    This slide is a picture of several of the convicted 
defendants. Each of them engaged in marriage fraud to stay in 
the country. Some of them tried three times before it finally 
worked.
    Approximately 500 bank accounts, credit card accounts, and 
other financial accounts were examined via a Federal grand jury 
subpoena and Federal search warrants. The number of aliases and 
fraudulent identities in this case was simply amazing.
    Mohamad Hammoud had two valid North Carolina drivers' 
licenses, one in his name, one in an alias. He also obtained 
other financial identities by either purchasing or being given 
student accounts. People who had come to UNC-Charlotte and 
other universities and gone back to Lebanon would leave their 
account identifications with Mohamad Hammoud, creating an 
adoptive identity.
    His brother, Chawki Hammoud, had multiple identities, and 
what is very interesting is on the far right there is a Social 
Security card and an employment authorization card in the name 
of Haven Shaveski. This name never came up in the investigation 
and we had expert testimony at the trial that the fact that you 
would have an identification never used was perfect terrorist 
trade craft, that you would have an identity and never use it 
unless, of course, you had to.
    Said Harb, another co-defendant, had multiple credit cards 
and identities. In fact, he had a notebook of fraudulent 
identities. His theory was that if you declare bankruptcy, 
every 7 years your credit is cleaned and you can start over 
again. He had seven sets of false identities and his theory was 
to bust out credit cards one identity per year, $150,000 or 
more tax-free, and then just put that aside and 7 years later 
pick it up and use it again. We caught him in the second year 
of that----
    Senator Specter. Is there any way for the credit card 
companies or law enforcement to track that and stop someone 
from these multiple identities?
    Mr. Conrad. With the threat of terrorism and the 
significant role that identity theft and identity fraud play in 
that threat, I hope that that is a focused concentration of law 
enforcement throughout the country. It is in Charlotte, North 
Carolina.
    A simple slide: of course, it is always nice when co-
defendants take pictures of themselves with ill-gotten gains.
    We learned through the FBI that Said Harb, our cigarette 
smuggler and credit card con artist, was involved in Hizballah 
procurement activity in Canada. We began slowly to take baby 
steps with the intelligence service in Canada and acquired 
information from them over time, first for search warrants 
which enabled us to look for Hizballah-related material; 
second, for purposes of detention hearings, and ultimately for 
use at trial, where we convinced a Federal district court judge 
in Charlotte to admit Canadian Intelligence Service summaries 
of intercepts as exceptions to the hearsay rule in the trial of 
this case.
    Here are a few of those intercepts. In the first one----
    Senator Specter. What was the basis for the exception to 
the hearsay rule? That sounds like a pretty sophisticated 
ruling, having tried a few of those cases myself.
    Mr. Conrad. It was two-fold. One was the public records 
exception. The Canadian Intelligence Service is actually a 
public agency whose stated purpose under law is to perform 
surveillance of this fashion, and we were successful in making 
that argument.
    Senator Specter. And what was the quality of the 
cooperation by the Canadians?
    Mr. Conrad. It was outstanding ultimately, slow at first, 
some degree of reluctance to share information with American 
prosecutors that maybe they hadn't shared with the RCMP in 
cases before. But their cooperation with us was outstanding.
    The second theory was past recollection recorded. We were 
prepared to bring down the operators of the surveillance 
equipment in light disguise to testify at trial at one point 
when these things were fresh in their minds that they recorded 
in the fashion that they did. And once the judge admitted that 
and was going to permit us to let them testify in light 
disguise, the defendants stipulated to the admissibility of 
these intercepts.
    One of the defendants who is still a fugitive is Mohamad 
Dbouk. Mohamad Dbouk is such a major player in the Hizballah 
organization that on five separate occasions, his application 
to be a martyr was rejected. Hizballah is such an organized 
terrorist group that they actually have application forms for 
martyr duty. Dbouk applied five times----
    Senator Specter. Application forms for martyrdom?
    Mr. Conrad. To be a martyr.
    Senator Specter. That is a special application?
    Mr. Conrad. Yes, sir, and he was rejected five times 
because of his significance to this organization.
    Senator Specter. What are they looking for? What are the 
qualifications to be a martyr?
    Mr. Conrad. I don't think there are a whole lot of 
qualifications to be a martyr.
    Senator Specter. Why was he turned down?
    Mr. Conrad. I think when you are qualified, they don't want 
you to be a martyr. He was such a significant player that they 
would rather get other people other than him to perform that 
role.
    Senator Specter. Too important to be a martyr?
    Mr. Conrad. Yes, sir.
    Senator Specter. But you say separate application forms?
    Mr. Conrad. Yes, sir.
    Senator Specter. Like applying for a job or applying to law 
school or medical school?
    Mr. Conrad. Yes, sir. That is what our investigation 
revealed.
    Senator Specter. Do you have a copy of such an application? 
We would like to put one in the record.
    Mr. Conrad. This was human intelligence source information 
to us.
    Dbouk remarked in this intercept that he did not care about 
anything and was committed to securing all the items for the 
brothers at any cost to avoid going to hell, and to secure a 
place in heaven by so doing.
    Senator Specter. You might focus on that for a just minute, 
Mr. Conrad. I was asked yesterday as to whether our homeland 
security bill would deter Al-Qaeda, and whether the President's 
activities in Prague at the NATO meeting would deter Al-Qaeda. 
And I responded that Al-Qaeda and Hizballah and Hamas are 
motivated by deep religious views and are, as you have noted, 
searching for a place in heaven.
    I think it would be useful if you would expound on that 
just a little bit as to the kind of an enemy you are dealing 
with here and how ruthless and how dedicated and how determined 
they are.
    Mr. Conrad. I agree with that assessment of the seriousness 
of their motivation, and it is unlikely that the threat of 
criminal prosecution would deter their violent acts. However, I 
think a successful criminal prosecution would disrupt their 
organized violent activities.
    Senator Specter. And incarceration would disrupt their 
criminal activities.
    Mr. Conrad. Yes, sir, and that was our goal.
    This next intercept involved a communication from Mohamad 
Dbouk to Hassan Laqis, the head of procurement for Hizballah. 
Dbouk tells Laqis that he is ready to do--near the last 
sentence, ``I am trying to do my best to do anything you want. 
So, please, you must know that I am ready to do anything you or 
the Father want me to do, and I mean anything.'' The Father, 
our intelligence sources confirmed to us, is Imad Mugniyah, the 
most serious terrorist in the Hizballah organization.
    This is a lengthy intercept, the significance of which is 
that Mohamad Dbouk, in the course of discussing life insurance, 
refers to a person who might, in a short period of time, go for 
a walk and never come back.
    Senator Specter. Mr. Conrad, you might explain why some 
part of the sheet is blacked out, the redactions, for those who 
are unfamiliar with FBI reports.
    Mr. Conrad. Yes, sir. We have presented both at trial and 
before you today a declassified version of the intercepts that 
were shared with us both by the Canadian Intelligence Service 
and as a result of our FISA warrants.
    This next intercept is a conversation between a fugitive 
defendant and Mohamad Dbouk in which they talk about Imad 
Mugniyah. Dbouk says he knew who Imad was. ``Amhaz inquired if 
Imad was working with the young men,'' believed a reference to 
Hizballah members such as Laqis. Dbouk revealed that Imad was 
the whole story.
    And then in the next intercept, just talking about Imad 
Mugniyah was a terribly dangerous thing to say. Amhaz asked why 
Dbouk said what he said and Dbouk answered, ``Would anyone 
bring up Imad's name possibly as being associated with Imad 
here in Canada or in any other country and stay alive?''
    Quickly, on the next slides, our source information was 
telling us that one of the members of the Charlotte cell was 
going up to Canada to get false drivers' licenses and false 
credit cards, and the method of transfer was that these false 
documents were put in a cigarette package.
    It was greatly appreciated by us when CIS shared 
information with us and showed us a series of photographs of 
our defendant from Charlotte in Canada taking, first, a credit 
card out of a cigarette pack and then a driver's license--an 
amazing corroboration of the human intelligence information we 
were getting.
    Senator here are some of the things charged in the 
indictment that were procured by this criminal activity and the 
subject of expert testimony in our case as to their dual-nature 
use by a terrorist organization: night vision devices; 
surveying equipment; global positioning systems; mine and metal 
detectors; video equipment; advanced aircraft analysis and 
design software; stun guns; hand-held radios and receivers; 
cellular phones; nitrogen cutters, which I understand are for 
cutting metal underwater; mining, drilling and blasting 
equipment; military-style compasses; binoculars; naval 
equipment; radars; dog repellers; laser range-finders; camera 
equipment.
    Senator this is a picture of the main target, Mohamad 
Hammoud, who was only 19 when he entered the United States via 
Venezuela in 1992. We asked ourselves, how could this person 
maintain a leadership role in an organization like this?
    One of his main contacts is Sheikh Abbas Haraki, who is the 
leader of Hizballah for all of Beirut, and much older than Mr. 
Hammoud. This is a FISA intercept of a conversation between Mr. 
Haraki and Mr. Hammoud. If I could take a moment to play it for 
you, one of the things you will note is the affectionate tone 
between the two gentlemen. This is an intercept of a 
conversation in about May of 2000 as Israel is withdrawing from 
Lebanon.
    [Audiotape played.]
    Senator Specter. Mr. Conrad, why don't you repeat what is 
on the screen so the record can pick it up?
    Mr. Conrad. This is the translation of a conversation 
between Mohamad Hammoud and Sheikh Abbas Haraki, the leader of 
Hizballah for all of Beirut, in which they are congratulating 
each other on the withdrawal of Israel from Lebanon in May of 
2000.
    I will go quickly through some of these slides. I know I am 
over time.
    Senator Specter. How much longer do you expect to be, Mr. 
Conrad?
    Mr. Conrad. A few minutes.
    These were all additional intercepts of conversations 
between our group in Charlotte and others, letters or 
intercepts talking about the opportunity to provide material 
support to Hizballah from the United States.
    Senator Specter. Any references beyond North Carolina?
    Mr. Conrad. No, sir, other than the fact that one of our 
individuals was working with a group in Canada and coordinating 
a procurement out of Canada as well.
    This is a still photo of Sheikh Haraki off a video seized 
from Hammoud's house with the Hizballah flag on the podium. A 
series of receipts for material support to----
    Senator Specter. Speaking from Lebanon?
    Mr. Conrad. Yes, sir, a series of receipts from Lebanon for 
money sent to Hizballah by members of our organization in 
Charlotte.
    So, in conclusion, ultimately 25 individuals were charged 
with, first, cigarette tracking, and later RICO wire fraud, 
marriage fraud, and ultimately material support. At the moment, 
there are five fugitives, four of them charged with material 
support.
    This is what we are dealing with, Senator. This is a home 
movie seized from Mohamad Hammoud's residence. It is a picture 
of his nephews in Lebanon, and the trial testimony revealed 
that these two nephews were encouraged by adults to tell who 
they were. And initially the children are not very responsive 
and they are slapped in the face and commanded, ``Tell them who 
you are, tell them who you are,'' to which ultimately the 
little boy in red there says, ``Hizballah,'' age 3.
    Senator Specter. They start them at a very early age.
    Mr. Conrad. Yes, sir.
    This is a picture of defendant Mohamad Hammoud, age 15, at 
the Hizballah center with his AK standing next to a picture of 
the Ayatollah Khomeini.
    Senator Specter. Mr. Conrad, how do you combat that? How do 
you combat indoctrination of children and teenagers?
    Mr. Conrad. From the U.S. Attorney's perspective, you do 
what you can with the effects of that indoctrination wherever 
you can.
    Senator Specter. We have to start at a much earlier phase, 
and that is something that this Committee is working on.
    Mr. Conrad. Senator, if I could just show you a few slides, 
this is defendant Mohamad Darwich, who brought in a family 
friend to say there was nothing Hizballah-related about this 
group. And when asked about this photograph, he identified 
Mohamad Darwich as his cousin. On cross, he was asked if 
Darwich was a member of any militia and he said no, despite 
this picture.
    On the second picture, they asked this witness who the 
person on the left was and he said, ``My cousin, Mohamad 
Darwich.'' And the prosecutor, Ken Bell, said, ``Holding a 
gun?'' And he said, ``Yes, holding a gun, a very big gun.'' But 
this did not trigger any response that there was militia 
activity by Darwich, nor did this picture. His testimony was it 
is just a group of guys hanging out, nor that picture.
    Senator Specter. And these pictures were taken where?
    Mr. Conrad. They were taken in Lebanon and seized in 
Charlotte.
    These are the two principal defendants, Mohamad Hammoud and 
Mohamad Atef Darwich, in Charlotte, North Carolina, and from 
the Washington Monument, in a place we never wanted to see 
them. We accomplished our goal of disrupting and dismantling a 
financing cell in Charlotte. Whether we did more is anybody's 
guess.
    Thank you, Senator.
    Senator Specter. Well, that is very impressive, Mr. Conrad. 
It speaks for itself and it raises the immediate question, if 
this is going on in Charlotte, North Carolina, involving 
millions dollars in smuggling on a plot coming out of Beirut, 
what is happening in other places in the United States? This is 
a matter which requires very intensive investigation.
    What was the result of the trial?
    Mr. Conrad. The result of the investigation is that 18 
people have pled or been found guilty.
    Senator Specter. Have they been sentenced?
    Mr. Conrad. They await sentencing in most every case.
    Senator Specter. What do the guidelines call for?
    Mr. Conrad. With a material support charge and a 12-level 
enhancement under the guidelines, and also a criminal history 
category 6 which is triggered by this kind of conviction, the 
judge can throw away the key. The statutory maximum, however, 
is only a 15-year statutory maximum, and that might be one 
thing that the Senate should look at.
    Senator Specter. Do you think we ought to reevaluate the 
sentencing there for tougher prison terms?
    Mr. Conrad. If the guidelines trigger a 30-year-to-life 
sentence but a defendant can only get a 15-year sentence as the 
result of a statutory maximum, perhaps that is something for 
you to consider. In this case, we have box-cared 40-some 
charges.
    Senator Specter. We will take a look at that. That is the 
purpose of the hearing to see if the penalties are adequate.
    Mr. Conrad, when you talk about people in Lebanon, and you 
showed pictures of planning, conspiracy, incitement to 
violence, what action would you recommend as to those people?
    American citizens have been murdered as a result of 
Hizballah activities. You had the Marine barracks, which you 
have already identified, in 1983. You had the man thrown out of 
the airplane on the tarmac, a most brutal killing in connection 
with hijacking.
    Could you give us some idea as to how many murders 
Hizballah has been involved in involving Americans, United 
States citizens?
    Mr. Conrad. I think prior to 9/11, they were responsible 
for more murders of United States citizens than any other 
terrorist organization known to us.
    Senator Specter. And a good many of those occurred after 
1986, so they would be subject to the Terrorist Prosecution 
Act, with jurisdiction attaching as of that date.
    Mr. Conrad. Yes, sir. One of the hopefully significant 
things of this investigation--there are four people charged 
with material support who are fugitives, one in Canada, and 
three we believe are living in Lebanon. We would love to bring 
those people someday before a court of justice in the United 
States.
    Senator Specter. Well, the United States is moving against 
Al Qaeda key people. You saw what happened in Yemen not too 
long ago, with military action taken against Al-Qaeda key 
figures. Would you recommend that for Hizballah key figures 
outside the United States?
    Mr. Conrad. Yes, sir, and I hope that extradition efforts 
and other rendering efforts might someday be fruitful here.
    Senator Specter. It is pretty hard to extradite from 
Lebanon.
    Mr. Conrad. And Canada.
    Senator Specter. But it is possible to do other things in 
Lebanon.
    Mr. Conrad. Yes, sir. At the very least, the world has 
become a smaller place for those individuals.
    Senator Specter. You mentioned FISA, the Foreign 
Intelligence Surveillance Act. Have you had an opportunity to 
study the lengthy opinion of the appeals court that was handed 
down 2 days ago?
    Mr. Conrad. I am not posing as an expert in that area, but 
I have read that decision.
    Senator Specter. Well, it is a very far-reaching case. It 
goes back and disagrees with circuit court opinions which had 
concluded that the primary purpose had to be intelligence-
gathering, and picked up the legislative history and noted the 
intertwining of foreign intelligence and criminal conduct.
    There have been concerns raised about the civil liberties 
point of view which are legitimate concerns, and the court said 
you could not use the Foreign Intelligence Surveillance Act if 
there is only criminal activity. But if there is an 
intertwining, then law enforcement does have a legitimate role.
    This Committee is going to do some hearings on that. It is 
a very, very important subject. The courts had interpreted the 
Foreign Intelligence Surveillance Act to say the primary 
purpose had to be intelligence-gathering. In the legislation 
last fall, the so-called PATRIOT Act, the Congress changed that 
to ``significant purpose.''
    The Justice Department has argued that if foreign 
intelligence-gathering is significant, then the primary purpose 
can be law enforcement. The court didn't go quite that far, but 
I would be interested in your views at a later date as to how 
the interpretation by the appellate court would have affected 
your work. That case may well yet end up in the Supreme Court.
    Mr. Conrad. Yes, sir.
    Senator Specter. Well, Mr. Conrad, we thank you for the 
very impressive job you have done here. To take a criminal 
prosecution as complex as this from beginning to end--I know 
from my own experience how difficult it is and it is a great 
result. And perhaps an even greater result is putting the 
American people on notice as to how far-reaching Hizballah's 
tentacles are. If they go to Charlotte, North Carolina, watch 
out.
    Mr. Conrad. Thank you, Senator.
    Senator Specter. Thank you very much, Mr. Conrad.
    [The prepared statement of Mr. Conrad appears as a 
submission for the record.]
    Senator Specter. We turn now to our panel No. 2: Mr. James 
Gurule, Under Secretary for Enforcement, Department of the 
Treasury, and Mr. David Aufhauser, General Counsel for the 
Department of the Treasury.
    Mr. Gurule traveled to Europe very recently, in mid-
October, to provide several European governments specific 
information on selected high-impact targets so that they could 
be designated ``terrorist financiers'' and have their assets 
blocked.
    Those involved reportedly were wealthy Saudis with assets 
in Europe who provided financial support to Al-Qaeda. That is a 
major, major problem about the Saudis financing Al-Qaeda, 
something that has to be looked at very, very hard.
    Mr. David Aufhauser is General Counsel to the Department of 
the Treasury and has a key role as chairman of the Interagency 
Task Force on Terrorist Financing, which comes under the ambit 
of the National Security Council.
    So you men are right in the center of high-level efforts to 
block terrorist funding.
    Mr. Gurule, I understand this is your first appearance to 
testify in a congressional hearing on these important subjects. 
We thank you for coming and look forward to your testimony.

  STATEMENT OF JIMMY GURULE, UNDER SECRETARY FOR ENFORCEMENT, 
          DEPARTMENT OF THE TREASURY, WASHINGTON, D.C.

    Mr. Gurule. Thank you, Senator Specter, for holding this 
important hearing, and thank you for inviting me and my 
colleague, David Aufhauser, who you stated is the General 
Counsel of the Department of the Treasury.
    I would like to take a few minutes of my opening statement 
and discuss the actions that the Treasury Department has taken 
to identify, to disrupt and dismantle the financial networks 
that are supporting Al-Qaeda and other terrorist groups.
    It is also a pleasure to be here today with United States 
Conrad, from the Western District of North Carolina. As you 
have heard, he has been involved in a very important and 
cutting-edge terrorist-related case that involved extensive 
interagency, international cooperation. I am particularly 
pleased with the contributions that Treasury law enforcement 
made, specifically the ATF and IRS CI.
    I would also like to thank you and this Committee for the 
important work that you have done, the tools that you have 
given the Treasury Department in the form of the USA PATRIOT 
Act. We have been actively involved in implementing the 
regulations, publishing the regulations to implement the 
legislation, and to actually utilize these important 
provisions.
    What distinguishes the Department of the Treasury and its 
operational law enforcement components is the Department's 
unique resources and extensive financial investigative 
expertise, and want to emphasis there ``financial,'' which has 
been developed over decades. These resources come from many 
Treasury law enforcement agencies, including the Customs 
Service, the Secret Service, FinCEN, IRS CI, the Office of 
Foreign Assets Control, and other important Treasury offices.
    The Treasury Department is also in a unique position to 
leverage its relationships with domestic and foreign financial 
institutions and foreign finance ministers in the war against 
terrorist financing.
    Treasury's focus is both systemic and financial. We are 
looking at systems, ways, methods that terrorists use to raise 
and to move money globally, both through traditional financial 
systems, banks, but also through non-traditional mechanisms 
such as charities, hawalas, bulk-cash smuggling, and we have 
seen, in addition, trade-based money laundering.
    We follow the money through these systems to identify 
targets through public designations, the blocking actions that 
we have taken, regulations, and investigation. Through these 
means, we are able to cripple terrorist access to these formal 
and informal financing channels.
    Our strategy is comprehensive and it is long-term. The 
President has stated repeatedly that this is a long-term 
effort. He is committed to combatting terrorism for the long 
term, not only in the form of Al-Qaeda, but other terrorist 
groups that threaten freedom and democracy around the world.
    This strategy focuses on seven areas: first, targeted 
intelligence-gathering; second, freezing of suspect aspects; 
third, law enforcement investigative actions; fourth, 
diplomatic efforts and outreach, if you will, quiet diplomacy; 
fifth, smarter regulatory scrutiny; sixth, outreach to the 
financial sector, looking for ways to establish important 
partnerships with the public sector, with the government and 
the private financial sector; and, last, capacity-building for 
other governments in the financial sector to ensure that their 
regulatory systems are not vulnerable to money laundering and 
terrorist financing.
    Let me speak first to the value of the designation process. 
This is clearly the most visible and immediately effective 
tactic of our comprehensive strategy. This has been to 
designate and block the accounts of terrorists and those 
associated with financing terrorism.
    In fact, just yesterday the United States designated the 
Benevolence International Foundation and two sister entities in 
Canada and Bosnia, and submitted these names to the United 
Nations Sanctions Committee for worldwide designation. So we 
are taking action to designate terrorist financiers and cutoff 
their access to U.S. financial institutions, but at the same 
time work with the international community so that the 
international community can take action to cutoff their access 
to foreign banks throughout the world.
    I believe that this effort to date has been a very 
successful effort. It has resulted in the designation of 250 
terrorist-related individuals, terrorist financiers and 
entities, and it has resulted in the blocking of over $113 
million in terrorist-related funds globally.
    Senator Specter. 113?
    Mr. Gurule. $113 million, Senator.
    Senator Specter. Terrorist funds have been seized, blocked?
    Mr. Gurule. Have been blocked. The effect of this is that 
$113 million have been prevented from going into the hands of 
terrorists and terrorist organizations for use to finance 
future terrorist acts.
    Let me just make one last point. I realize that my time is 
short, but I think it is important to emphasize that the 
effectiveness of these designations cannot and should not be 
measured strictly by the number of terrorist-related 
designations and the amount of money blocked. I mean, obviously 
this is important, but it is not the principal goal and 
objective.
    More important than these numbers is the disruptive and 
deterrent effect that the designation process has on the actual 
and potential terrorist financing networks. Specifically, these 
designations advance global interests in suppressing terrorist 
financing by the following--and then I will conclude--first, by 
shutting down the pipeline by which designated parties move 
money to support terrorism; second, by informing third parties 
who may be unwittingly financing terrorist activity of their 
associations with supporters of terrorism; third, by deterring 
undesignated parties that might otherwise be willing to finance 
terrorist activity; next, by exposing terrorist financing money 
trails that may generate important investigative leads that 
will assist the U.S. Government in identifying terrorist cells 
in this country and abroad; fifth, by forcing terrorists to use 
more costly and informal means to move money, and riskier means 
to move money, in essence, to move them out of their comfort 
zone and cause them to use less proven methods of moving money 
such as bulk-cash smuggling; and then, last, by supporting our 
diplomatic effort to strengthen other countries' capacities to 
combat terrorist financing.
    Finally, let me just comment that, for me, over the last 
year-plus that I have been involved in this undertaking, what 
has surprised me the most is the extent to which charities are 
being used to raise money and to move money to support 
terrorist activities.
    To date, the U.S. Government has designated 15 Islamic 
charities that are connected to terrorist financing, and we 
have blocked internationally approximately $20 million in 
terrorist-related funds, and domestically a little over $8 
million of terrorist-related funds.
    With respect to my trip, I would just add that I was in 
Europe last month. I visited five countries in 5 days. Three of 
those countries represented important international financial 
centers. I visited Switzerland, Liechtenstein and Luxembourg to 
meet not only with the finance ministers of those countries, 
but also to meet with the bankers associations to talk to them 
about ways in which we can enhance our efforts and make it more 
difficult for terrorists to access foreign banks and move 
money.
    I also had an opportunity to travel to Copenhagen and to 
Stockholm. When I was in Copenhagen, my purpose there was to 
meet with the Chair of the EU clearinghouse. The EU has a 
clearinghouse process that is similar--there are some 
significant differences, but similar to the U.S. process of 
designation of terrorist financiers and entities. There, the 
concern was how to make the EU process more agile, more 
efficient, more expeditious in terms of designating terrorist 
financiers by the EU.
    Then, last, with my visit in Stockholm, it was to meet with 
the incoming president of FATF, the Financial Action Task 
Force. In June of 2003, Sweden will assume the presidency. We 
have been working very closely that important multilateral 
organization to establish international standards against 
terrorist financing.
    So with that, again let me thank you for this important 
hearing and I am happy to respond to any questions that you 
might have, Senator.
    [The prepared statement of Mr. Gurule appears as a 
submission for the record.]
    Senator Specter. Thank you very much, Mr. Gurule. I will 
have some questions, but first I want to turn to Mr. David 
Aufhauser, General Counsel at the Department of the Treasury.
    Welcome, Mr. Aufhauser. We look forward to your testimony.

STATEMENT OF DAVID D. AUFHAUSER, GENERAL COUNSEL, DEPARTMENT OF 
                 THE TREASURY, WASHINGTON, D.C.

    Mr. Aufhauser. Thank you, sir. I have a very brief 
statement if you would like to hear it.
    Senator Specter. I would.
    Mr. Aufhauser. I have done a little less traveling than the 
Under Secretary, but I was in Cambridge, England, on September 
11th of 2001, and I was attending an international conference 
on money laundering and it was populated by a lot of luminaries 
in the field--judges, chief judges, the head of Interpol, the 
head of Europol, and a few general counsels.
    Although it was a pretty sober affair, it was also an 
affair of some self-congratulation because we had made over two 
decades of work on money laundering some advances on a pretty 
bedeviling, taxing problem. We had elaborate computer screens, 
we had predictive models, we had profiles of conduct, we had 
some captures, we had some indictments, we had some 
forfeitures, all suggesting that we were making some gain on a 
pretty tough issue.
    The disintegration of the World Trade Center silenced 
everybody in Cambridge. It was a crowd of 400 people who prided 
themselves on the badges that they wore. And like most of you 
in this room, time and time again, in an audience of 400, we 
watched the building fall.
    The silence wasn't just a demonstration of the awfulness of 
what we were watching. What it was, I think--and I might be 
projecting here, but what I think it was also was a realization 
by the professionals in the world that chase and hunt money 
that perhaps we had been looking at the world through the wrong 
end of a telescope, and that the priorities were changing 
before our eyes.
    Instead of the priority of worrying about illicit money 
being cleansed and finding a place for concealment and hiding, 
what we really had to turn to and focus on, and perhaps had not 
properly focused on earlier in time, was trying to capture 
clean money that was spirited around the world intended to 
kill.
    The next morning, they put me on a military jump seat and 
flew me home, and I thought that the Treasury Department, 
particularly the general counsel of the Treasury Department, 
would do the orthodoxy, which is to make sure we collect our 
tax revenues, make sure we sell our bonds, and then ship all 
the money across the river to the Pentagon to conduct a war.
    But this is anything other than a common war and it 
requires a pretty unorthodox way of going about things. It is 
actually shadow warfare. That is a term that we have heard, and 
the primary source of the stealth and the mobility of the 
conduct of the war is money and it is money that fuels the 
enterprise of terror.
    It also happens to be, fortunately, its Achilles heel. It 
leaves a signature, an audit trail, and that audit trail 
proves, in my judgment, to be the best single means of 
identification and prevention and capture. Indeed--and this was 
alluded to earlier by the testimony of the Under Secretary--
much of the intelligence that we gather in this war is suspect. 
It is the product of treachery and deceit and interrogation and 
bribery and listening and trying to read encrypted talk.
    But books and records that are not intended for public 
oversight to do not lie; they are literally the diaries of the 
enterprise of terror. That is kind of a melodramatic statement, 
but I don't actually think it is possible to overstate the 
importance of the war campaign against terrorist financing. You 
can stop the killing if you can stop the flow of money.
    I also don't want to understate the difficulty of the 
chore. Ours is a deliberately open and porous economy, and the 
ways to game it are near infinite. Moreover, the problem is 
international in scope. The overwhelming bulk of the assets 
that we seek to freeze, the cash-flow that we hope to slow, and 
the records that we hope to audit are beyond the oceans that 
surround us. To act alone would justly invite criticism.
    So once I returned to Washington, Secretary O'Neill and the 
Treasury team set about to craft an ambitious program of a 
campaign against terrorist financing and it consists, as the 
Under Secretary has already stated, of a number of steps.
    The first is an executive order that raises the standards 
of conduct and due diligence of financial intermediaries, and 
explicitly targets even unwitting underwriters of terror for 
the seizure of their assets.
    The second is U.N. Security Council resolutions that mirror 
the same and criminalize terrorist financing. The third is more 
scrutiny at the gateways of the U.S. financial markets under 
the PATRIOT Act.
    The fourth is extensive public diplomacy to champion the 
need and the wisdom for international vigilance. The fifth is 
engagement of central bankers and finance ministers in the 
private pursuit of terrorist funds. And the sixth is outreach 
to the private sector for assistance in the identification, 
location, and apprehension of terrorists and their bankers.
    Much of that effort is overseen by a policy coordinating 
Committee which the Senator referred to, established by the 
National Security Council which I chair. Although we all have 
feet of clay, as best as humanly possible, it is one Government 
working in concert, sharing their intelligence resources to 
fight the campaign against terrorist financing.
    But the task remains unusually daunting. The material 
issues that face us include and insatiable appetite for 
actionable intelligence, which I know you know a great deal 
about, sir; increasing demands by coalition partners that we 
share the intelligence; and, frankly, a chorus of competing 
voices that risks confusion of our message.
    As the Under Secretary said, this is not just a box score 
game. Only a small measure of the success in the campaign is 
counted in the dollars of frozen assets. The larger balance is 
found in the weariness and the caution and the apprehension of 
donors; in the renunciation abroad of any immunity for 
fiduciaries and financial intermediaries who in the past would 
have sought refuge in notions of benign neglect and 
professional discretion rather than in vigilance; in pipelines 
that we know have gone dry; in the flight to old ways of value 
transfer, like gold bullion and precious gems, rather than 
digitized electronic commerce, and the ability for us to focus 
our resources on those avenues of last resort for value 
transfer; and, finally, in the gnawing awareness on the part of 
those who have banked terror in the past that the symmetry of 
the borderless war that they have declared now means that there 
is no place to hide the capital that they are underwriting 
terror with.
    I have one last point, with your permission. It is a short 
story, but I think it is pretty instructive of how we go about 
things. The Federal Reserve Bank in New York abuts the 
perimeters of the World Trade Center. It is an imposing and 
impregnable building, and it is the nerve center of the 
execution of U.S. monetary policy.
    It also literally houses the wealth of nations. Buried deep 
in the vaults of the New York Fed is the wealth of nations--$63 
billion worth of gold reserves of hundreds of countries. It all 
had to be abandoned for the first and only time in history when 
the----
    Senator Specter. You say $63 billion in gold reserves?
    Mr. Aufhauser. Yes, sir, in gold bullion reserves.
    It all had to be abandoned when the World Trade Center 
collapsed. The structural integrity of a third building, World 
Trade Center 7, was threatened by an inferno burning in the 
center of it, and the prospect of its toppling recommended 
evacuation for the New York Fed.
    Now, this was a first for the fortress-like Fed, as I told 
you. My counterpart, the general counsel up there, Tom Baxter, 
who is a member of my Committee, by the way, sir, raced through 
the building, assuring himself that each and every one of his 
colleagues was out safely.
    Once satisfied, Tom prepared himself to descend the steps 
of that rather majestic building. There was a palpable sense of 
urgency. The World Trade Center was still smoldering and there 
was the risk of the third building toppling. Police sirens were 
blaring and the Fed's own police were urging Tom to run down 
the stairs.
    But, first, he turned to lock the door, only to recognize 
it doesn't lock from the outside. $63 billion of gold in an 
open building and the last man out, so Tom hesitated. He 
thought of all the alternative ways of returning and winding 
his way through a maze of corridors and parking lot alleys to 
secure the building. But entreaties of the police prevailed and 
Tom joined them and was sped to a place of refuge where his 
colleagues were.
    When he arrived, he immediately telephoned Chairman 
Greenspan to report the good news that all employees were safe, 
out, and accounted for, and evacuation had gone without 
incident. The chairman had only one question: ``Tom, did you 
lock the door?'' The answer, of course, was, no, we did not 
lock the door and we will not lock the door. If we do that to 
our financial markets, the bad guys win.
    So with perfect intelligence, we wouldn't need something 
like the PATRIOT Act. In that respect, it is a default 
mechanism, but a badly needed one, because we don't have 
perfect intelligence. Indeed, the predicate for everything we 
do is actionable intelligence, sir.
    I welcome the opportunity to discuss that with you perhaps 
in another venue that doesn't jeopardize operations and sources 
and methods and the like, but I will try to be as responsive as 
I can be this morning to any questions you otherwise pose.
    Thank you, sir.
    Senator Specter. So the officials of the Fed just left $63 
billion in gold unsecured?
    Mr. Aufhauser. Well, actually, it is buried pretty deep in 
the bedrock of Manhattan, well below the subway system, and 
there is a safe.
    Senator Specter. Lucky these fellows from North Carolina 
didn't know about it.
    Mr. Aufhauser. Yes, sir.
    Senator Specter. How much would $63 billion in gold weigh?
    Mr. Aufhauser. More than you and I can carry.
    Senator Specter. It wouldn't take a whole lot for that. 
That is quite a story, and it is enormously serious, the work 
that you men are up to. I am glad to see what you are doing, 
and it shows areas where we have to be very, very vigilant.
    Mr. Aufhauser, when you commented about the donors and the 
apprehension of them, and identification of the donors and 
discouraging the donors, I think that is a very, very key 
point.
    Mr. Gurule talks about the charities at the outset of his 
testimony, and then he talks about 15 Islamic charities. It is 
true that some of those charities have traditional charitable 
purposes in mind to help people, help widows, orphans, and help 
the destitute. But where the dollars are intermingled with 
funding terrorists, funding murderers, those donors have to be 
on notice that they are culpable, that they are liable, and 
that the jurisdiction of the United States attaches where U.S. 
citizens are murdered.
    People who make contributions, once they know--you have to 
have knowledge that there is terrorist activity and there has 
to be the assistance of that group, but that is pretty apparent 
from the history of Hizballah, Hamas, and Al-Qaeda. Where these 
donors are put on notice that they could be liable for being 
accessories before the fact to murder, an accessory is equally 
guilty with the principal under the law. That is the law of 
accessories, so that our quest here for the donors is very well 
placed and very well calibrated.
    Mr. Gurule, when you made your trip--and there may be some 
of this you would want to comment about in camera, in a closed 
hearing, but the issue of the Saudis is a very, very big one. 
We have not yet come to grips with the bombing of the Khobar 
Towers from 1996, where 19 U.S. military personnel died and 400 
were wounded. The FBI was thwarted from questioning the people 
who were in custody.
    Fourteen of the suicide bombers were Saudis. Osama bin 
Laden is a Saudi. There are public reports from our 
intelligence Committees about the Saudis financing Al-Qaeda. 
They do so under the representation that they are charitable, 
but that only goes so far. They know what Al-Qaeda is doing.
    To what extent, if you can make a public disclosure, have 
your activities been directed to discouraging Saudi financing 
of Al-Qaeda?
    Mr. Gurule. Well, I think we have made some important 
progress with the Saudis on this issue, on this problem of 
terrorist financing, and let me just illustrate with a couple 
of examples.
    In fact, in March of this year, the U.S. Government and the 
Saudi Arabian government jointly designated an Islamic charity 
by the name of Al Haramain. This was the Somalia and the 
Bosnia-Herzegovina branches of Al Haramain. So we jointly 
designated these branches of this particular Saudi-based 
charity and these names were forwarded to the U.N. Security 
Council for addition to the U.N. list.
    As early as September of this year, the U.S. and Saudi 
Arabia jointly referred to the Sanctions Committee an 
individual by the name of Wa'el Julaidan, an associate of Osama 
bin Laden and a supporter of Al-Qaeda, for designation and 
blocking.
    And perhaps even more important is the fact that we have 
been working very closely with the Saudis on ways to enhance 
oversight of Saudi-based charities. And one of the fruits, I 
think, of our joint actions has been an oversight Committee 
that was recently established in Saudi Arabia, referred to as 
the Saudi Higher Authority for Relief and Charity.
    This is a Committee that is making recommendation to the 
crown prince of Saudi Arabia on ways to better regulate, better 
control, and make more transparent these charities so they are 
not vulnerable to abuse by terrorist financiers and so the 
money is only going to support legitimate humanitarian efforts 
and activities, not terrorism-related activities.
    Senator Specter. How can that be accomplished, Mr. Gurule? 
If the money goes into the charity, who can supervise the 
disbursement of the funds to be sure that those moneys do not 
go to terrorists?
    Mr. Gurule. I think that one of the ways that they are 
looking at doing this--and this again is based upon a recent 
meeting, in fact, yesterday that David Aufhauser and I held 
with the foreign policy adviser to the crown prince where we 
discussed at some length this issue, and we are going to be 
engaged in further discussions. They are looking at 
establishing an oversight agency that would audit these 
charities, conduct internal audits of these charities to 
determine who the money is going to.
    Senator Specter. Who would those auditors be?
    Mr. Gurule. Well, they would be internal auditors within 
the Saudi government, part of this oversight agency that would 
be responsible for overseeing the activities and the 
transparency----
    Senator Specter. Would it be possible to structure some 
international participation there? I would feel a lot more 
comfortable if the Saudis weren't auditing the Saudis. We have 
had some experience with auditors with conflicts of interest.
    Mr. Gurule. Certainly, I can appreciate that. Well, this is 
certainly something that we could raise with the Saudi 
government. I think it is important, though, nonetheless to 
recognize the fact that the Saudi government is moving forward. 
They have recognized the problem. I think that they have 
acknowledged the problem and they are taking, I think, 
important steps. They may be first steps and they may be baby 
steps, but they are taking steps to address the problem and 
they are working with us in that effort. So that is 
encouraging.
    Senator Specter. Do your conversations with the Saudis 
include the issue of the Saudis financing Palestinian suicide 
terrorists, giving money to those individuals and their 
families?
    Mr. Gurule. That subject has been raised. By the way, that 
subject has been raised in a broader scope with respect to our 
European allies as well. When I traveled to Europe in October, 
I raised at each of my stops and visits this issue that is a 
vexing issue for the U.S. Government, and that is a distinction 
that is often made by European countries with respect to the 
military wing of Hamas, for example, and the political and the 
social wing of Hamas.
    They are willing to take action against the military wing 
in terms of blocking and designations, but less willing, 
reluctant, to take action against the social or the political 
wing. The U.S. Government does not make that distinction. If 
the money is going to Hamas, we do not believe that there is a 
bank account for humanitarian activities and a bank account 
that is being maintained for terrorist activities.
    Senator Specter. Well, it is a distinction without a 
difference, the political wing and the military wing. The 
political wing has funds and they co-join in a body and those 
funds are made available to the military wing.
    Mr. Gurule. Well, we certainly believe that it supports the 
infrastructure of Hamas. It directly or at least indirectly 
supports the activities of Hamas, including terrorist 
activities, and we are working with our allies to see if we can 
move them away from that distinction and into taking more 
aggressive action against supporters of Hamas and Hizballah.
    Senator Specter. Well, if we come to the point where we 
proceed criminally against a contributor to Hamas for being an 
accessory to murder of the five Americans murdered at Hebrew 
University and there is a defense that it went to the political 
wing and not to the military wing, I have had a fair amount of 
experience as a prosecuting attorney, a district attorney, and 
that kind of an argument doesn't have much credence with a 
jury. People better not try to defend themselves on the ground 
that they are dealing with the political wing and not the 
military wing when those funds are interchangeable.
    When you said you were successful on cutting off the 
funding for some $113 million, do you have any ballpark figure 
as to the extent of the money that is involved here? $113 
million s a very impressive figure, but obviously there is a 
lot more. Is that the tip of the iceberg? Are we really dealing 
with funding into the billions?
    Mr. Gurule. It is very difficult to define the scope and 
magnitude of the problem with respect to the funds that are 
available to support terrorism. I think the fact that we have 
blocked, frozen, if you will, $113 million is significant, but 
I think it is even more significant that we have been able to 
cutoff important channels of funding, and specifically 
financial networks like Al Barakaat.
    With respect to Al Barakaat, an organization that we 
believe has tentacles, if you will, that reach as many as 40 
countries around the world, on the one hand when we designated 
Al Barakaat in the United States back in November of last year, 
we blocked just a little over $1 million. But more importantly, 
we basically dismantled that network for moving money.
    In the process, we cutoff a channel that we believe had 
been moving as much as $20 million or more a year to support 
the UBL and Al-Qaeda. So, again, sometimes the money itself, 
the amount of money that has been blocked does not tell the 
true story, the full story of the effect and the impact of our 
actions.
    But to be more direct and responsive to your question, I 
can't give you a precise figure as to the amount of money that 
is out there that is available.
    Senator Specter. But we are dealing with large sums.
    Mr. Gurule. Huge sums.
    Senator Specter. If you intercepted $113 million, you can 
speculate or estimate it is many, many times that.
    Mr. Gurule. That is fair. I would agree.
    Senator Specter. Mr. Gurule, do you need any more 
legislation on the freezing of assets? Is there anything we can 
do for you here to start some legislation through to help you? 
This is the right place to come.
    Mr. Gurule. Thank you, thank you, and we appreciate your 
support. The PATRIOT Act has been very valuable, provided us 
some very valuable tools. Just recently, Deputy Secretary Ken 
Dam established a USA PATRIOT Act task force. This is a task 
force that Mr. Aufhauser and I, as well as Under Secretary 
Taylor and Under Secretary Fisher, serve on. It is chaired by 
the Deputy Secretary and its purpose is to evaluate the 
effectiveness of the PATRIOT Act provisions and come back to 
Congress and ask for any amendments, any changes as we identify 
them.
    Senator Specter. Well, we are very interested in responding 
to your needs. It took us a little time to get the homeland 
security bill. Senator Lieberman and I introduced on October 
11, 1 month after 9/11, and it took too long and it was touch 
and go up until the last minute. The House of Representatives 
last Wednesday passed a bill which was materially different 
from the bill that we had expected, and when you go to the fine 
print many of us were very unhappy with a great deal of what 
was in the bill. They say that you don't like to see either 
sausage or legislation made, but that bill bordered on giving 
sausage a bad name. It was a very tough matter.
    Mr. Aufhauser. Can I take you up on your offer and give you 
some ideas?
    Senator Specter. Sure. I made it to you as well, Mr. 
Aufhauser.
    Mr. Aufhauser. We actually have a bill up here right now. 
When we name a charity such as Benevolence or Global Relief or 
Holy Land as a terrorist organization under the executive order 
and IEEPA, its 501(c)(3) status continues in place and we have 
to go through a rather elaborate procedure at the IRS to revoke 
that license and the revocation proceedings threaten to expose 
important information.
    So we have asked Congress, and it has been passed by the 
House and I think it is--I must confess I don't know if you are 
still in session today, but if not this lame duck session, then 
in January we have asked for a very simple amendment to the 
Internal Revenue Code which would say that when we name a U.S. 
domestic charity as a terrorist organization, its 501(c)(3) 
status is suspended and/or revoked. So that is issue one. So 
that is automatic.
    Second, one of the powers that you granted the Treasury 
Department, in particular, under the PATRIOT Act is called 
Section 311, which is the power to designate persons or even 
jurisdictions, whole countries, as primary money laundering 
concerns, and there are severe consequences if they are named 
as such by the Secretary of the Treasury.
    In those proceedings, we do not enjoy the same privileges 
of keeping classified information secret that we do in IEEPA 
proceedings. So we would like a parallel provision to protect 
evidence so that we can present it ex parte, in camera, in 
Section 311 proceedings that mirrors what you all granted us in 
the PATRIOT Act with regard to the execution and the 
implementation of the International Emergency Economic Powers 
Act. I can put that in writing to you, too.
    A third percolating thought, because I heard your question 
about accessories to murder, is we want to be clearly 
understood that we think those who bank terror are equally 
culpable to those who commit it.
    Senator Specter. Good.
    Mr. Aufhauser. That is point one. That is what the Under 
Secretary and I and Secretary O'Neill are about on this mission 
on terrorist financing. Again, I meant it when I said if we 
stop the money, we stop the killing.
    Having said that, I think you know better than anyone, 
having prosecuted cases--and I know from defending cases with 
the likes of Brendan Sullivan and Edward Bennett Williams--that 
it is difficult for you to make a case for aiding and abetting 
in the absence of a knowing of specific intent of the actual 
injury that is worked.
    An idea that might be worth looking at by the Committee and 
by your staff is borrowed from an area of law where I used to 
practice, which is public welfare offenses in the environmental 
area or in the food and drug area, and that is the notion of 
reckless endangerment, knowing and reckless endangerment.
    It is possible to get a serious felony for people who bank 
something like Hamas without having to demonstrate that they 
knew with certainty or beyond a reasonable doubt that it was 
going to result in the death of an American. So that is another 
idea that I think you could profit from looking at.
    One last point, if I can, also on the Saudi issue, and I 
know you didn't intend it. We are not at war with Islamic 
charities. In fact, we applaud them. It is important that what 
we do is not perceived incorrectly as having declared a 
campaign to undercut Islamic giving and Islamic charities. It 
is a tenet of their faith, as it is a tenet of most people's 
faiths, that charitable giving is good and should be applauded.
    We have, however, declared war on counterfeit charities, 
and where it gets very, very difficult is that deliberate 
strategic decisions are made by terrorists to use a charity, 
frequently unwitting to the charity's fiduciaries, in a manner 
to divert money because of lax financial controls and the like, 
because the charities have outposts throughout the world in 
trouble spots which are not well-policed.
    So when we talk to the Saudi government, for example, about 
more rigor in the audit and management of money that goes 
through charities, it is really an exploration with them of how 
to manage financial controls well so that money doesn't get 
diverted.
    Senator Specter. Well, I believe that it is indispensable, 
as you have noted, to make the distinction between what is 
really charitable work. Islamic giving and Islamic charities 
are to be commended, and Islam is a great religion and we have 
to avoid painting with a broad brush. We have to be very 
specific. But when the distinctions are made between a military 
wing and a political wing, that simply will not stand up.
    Mr. Aufhauser. We are in heated agreement with you on that. 
The idea that there is a firewall there is counterfeit.
    Senator Specter. So that has to be pursued. From my work in 
chairing the Intelligence Committee in the 104th Congress back 
in 1995 and 1996, I have a lot of questions about the degree of 
cooperation of the Saudi officials.
    When I went and talked to the crown prince about the Khobar 
Towers, it was a stone wall. And when FBI Director Louis Freeh 
went there on several occasions to question those suspects--and 
I have wondered whether those suspects were involved with Al-
Qaeda and ultimately with 9/11. We did not have a chance to 
question them. There was a car bombing in Riyadh shortly before 
the Khobar Towers was blown up.
    I believe we have to press the Saudis much harder. We have 
got 5,000 of our military out there in the middle of the desert 
protecting Saudi Arabia. We talk about cooperation by the 
Saudis in the movement by the U.N. as to Iraq and we are not 
getting it. So I think it is important to be very precise in 
what we are asking for, and very demanding. You have to be 
fair. You have to acknowledge charities, but if it crosses the 
line, we have got to be very tough about it.
    I think your idea on reckless endangerment is a good idea. 
At common law, if there is a reckless disregard for the safety 
of another resulting in death, that is the equivalent of 
malice, which supports a prosecution for murder in the second 
degree. So you do not have to prove premeditation or the same 
level of criminal intent on reckless endangerment, and I think 
that is a good suggestion. It is good to have lawyers sit down 
and talk every now and then.
    Well, this has been very fruitful, Mr. Aufhauser and Mr. 
Gurule. I thank you for what you are doing and we will pursue 
the suggestions that you have made. I think when you talk about 
the revocation of a 501(c)(3), you are talking about something 
very different from detaining someone or denying someone 
liberty or having a search warrant and seizing property. You 
are talking about really a privilege which is given, a benefit 
which is given. The Treasury Department of the U.S. Government 
can determine that. We don't have to exercise excessive largess 
if there is reason to pull back.
    And tell that Pennsylvanian, Secretary Paul O'Neill, that 
we thank you for your good work and thank him for his work.
    Mr. Gurule. Thank you very much.
    Mr. Aufhauser. Thank you, sir.
    Senator Specter. We will now go to panel No. 3. While panel 
three is being seated, I think it worth noting that other 
Senators are not here today to participate in this hearing 
because late last night the Senate finished its business and we 
had a last vote on the continuing resolution. When the Senate 
concludes its voting, there are many, many plans. Many of my 
colleagues were in the air before 7 a.m. this morning.
    Senator Leahy, the chairman, and Senator Hatch, the ranking 
Republican, have statements which we will include, without 
objection, in the record.
    [The prepared statements of Senators Leahy and Hatch appear 
as submissions for the record.]
    Senator Specter. Senator Leahy had asked me to chair this 
hearing, even though we do not have the same party designation, 
because of his agreement that the hearing was important and 
because of the work which I have done on the Judiciary 
Committee and in law enforcement before.
    We had asked the Holy Land Foundation to attend and testify 
to give other points of view, a hearing, an audience, but they 
declined, saying that they did not have adequate time to 
prepare once the notice of the hearing was given. So we will 
maintain an open record. If they wish to submit something for 
the record or if they wish to be heard, we will give them an 
opportunity for a public hearing at a later time.
    Our first witness is Mr. Nathan Lewin, who represents the 
family of David Boim, a dual U.S.-Israeli citizen who was 
murdered by Hamas terrorists in a drive-by shooting in Israel. 
Mr. Lewin has instituted suit against a number of charities and 
has had considerable experience in the field.
    We welcome you here, Mr. Lewin, and look forward to your 
testimony.

 STATEMENT OF NATHAN LEWIN, LEWIN AND LEWIN, LLP, WASHINGTON, 
                              D.C.

    Mr. Lewin. Thank you very much, Senator Specter. My name is 
Nathan Lewin. I am a lawyer in private practice in Washington, 
D.C., in a family law firm called Lewin and Lewin that I 
operate with my daughter, Alyza Lewin, who is here with me 
today.
    I was a prosecutor with the Department of Justice many 
years ago, and I practiced white collar criminal defense law 
and appellate litigation. I have represented former President 
Richard Nixon and Attorney General Ed Meese while he was 
Attorney General in an independent counsel proceeding. I have 
argued 27 cases in the Supreme Court of the United States, and 
have taught at Harvard, the University of Chicago, Georgetown, 
Columbia, and George Washington University law schools.
    I am gratified to have received your invitation to testify 
on the subject of the assessment of the tools needed to fight 
the financing of terrorism because I believe I have discovered 
the cheapest means from the perspective of the American 
taxpayer to fight the financing of terrorism from sources 
within the United States.
    The principal tool for this battle is, I believe, America's 
private litigators, lawyers who are ready to bring private 
lawsuits at no taxpayer expense against private organizations 
and individuals who provide funds to organizations that engage 
in terrorist acts abroad or in the United States.
    Senator Specter. Excuse me one moment. We have people in 
the hall, people who have come in. You are welcome to come up 
front and have seats. There is no additional charge. Anybody 
who is in hallway needn't stand in the hallway. I believe that 
you are all taxpayers, so we will try to provide seating for 
you.
    You may proceed, Mr. Lewin.
    Mr. Lewin. I was saying, Senator Specter, that I thought 
this was the cheapest way from the American taxpayer 
perspective of deterring individuals and charities in the 
United States from supporting terrorism.
    I speak from personal experience. Sometime in 1997, when I 
was visiting the state of Israel, as I frequently do, I was 
introduced to Joyce and Stanley Boim, the parents of David 
Boim, a young man who was killed by Hamas terrorists in May 
1996 when he was only 17 years old.
    David, who was born in the United States to American 
citizen parents, was standing at a bus stop near the school he 
attended when a car drove past and shot randomly at passengers 
boarding a bus and others standing nearby. The killers were two 
members of Hamas, the organization that immediately took credit 
for the attack. One of the killers went on to be a suicide 
bomber in September 1997, in the heart of Jerusalem, when he 
killed seven others, including a young girl who was an American 
citizen, and wounded 192, including several young American 
students.
    The second, the driver of the car, is named Amjad Hinawi. 
He confessed when he was finally brought to trial in a court in 
the Palestinian Authority in early 1997. An American State 
Department representative, Mr. Abdelnour Zaibeck, witnessed the 
confession and reported on it. Hinawi received a slap on the 
wrist from the Palestinian court. Although he was found guilty 
and sentenced to 10 years in prison at hard labor, he has been 
seen walking around free in Palestinian territory.
    I testified about this outrage and the inexplicable failure 
of the Department of Justice to indict Hinawi and seek his 
extradition in a subcommittee proceeding chaired by you, 
Senator Specter, in March 1999. Absolutely no progress has been 
made in the more than 3 years since that time.
    There is no reason in the world why a confessed murderer of 
an American student shot in cold blood while waiting at a bus 
stop has not been criminally charged by American authorities 
and brought to trial in an American court.
    I have met with the Department of Justice three times on 
this subject and have received no satisfactory explanation 
whatever. And there has not been a single criminal prosecution, 
Senator Specter, under the statute that you referred to that I 
think you were involved in getting enacted, the Act of 1986, 
which makes this a criminal act that should be prosecuted by 
American authorities. Not a single person killed in Israel, 
American citizen killed in Israel, has been the subject--none 
of the killers of those people have been the subject of an 
indictment in a United States court.
    The Boims asked me then whether they had any remedy at all 
under American law, and I did what maybe too few lawyers do 
today and I looked at the statute books. I found that in 1991 
and 1992, Congress had passed anti-terrorism laws, including 
what is now 18 U.S.C. 2333, that gave American citizen victims 
of such terror anywhere in the world a civil remedy, with 
treble damages and attorneys' fees, against those who commit 
murder or assault.
    Obviously, there was no purpose in suing Mr. Hinawi, who 
has no funds, if he can be found, and no funds that can be 
reached for a judgment. And his confederate killed himself and 
seven others in a later suicide bombing. Against whom can such 
a statute be used?
    Over initial objections from my then-partners, I drafted 
and filed a lawsuit against those who enabled the perpetrators 
to kill David Boim, the organizations in the United States that 
collected funds and provided other support for Hamas in the 
years preceding May 1996.
    I was challenged by my partners, by friends, and other 
lawyers who wanted to know why I was suing the leading Muslim 
charity in the United States, the Holy Land Foundation for 
Relief and Development, and others that were engaged in 
purportedly charitable activities in the Middle East.
    I responded that the defendants in my case, none of whom 
are foreign governments or government agencies, knew that they 
were also funding violence by Hamas directed against civilians. 
I sued in Federal district court in Chicago, in the Northern 
District of Illinois, because the United States had seized $1.4 
million in a civil forfeiture action based on allegations of 
money laundering on behalf of Hamas. I hoped that the Boims, 
who were the victims of Hamas terrorism, would be able to reach 
those funds.
    Our complaint was filed on May 12, 2000. On January 11, 
2001, District Judge George Lindberg denied motions by the Holy 
Land Foundation and other defendants to dismiss the complaint. 
I agree to the defendants' request for an interlocutory appeal 
to the Court of Appeals for the Seventh Circuit because I 
believed it important that the litigation's deterrence to 
contributions for terrorism receive great prominence.
    Briefs were filed and the case was set to be argued on 
September 25, 2001, and then came September 11th. The judges on 
the court of appeals, realizing the importance of the issues 
they were being asked to decide, asked the Department of 
Justice to file a friend-of-the-court brief. We argued the case 
on September 25, and in November 2001 the Department of Justice 
filed its brief supporting my argument that any organization 
that contributes to a terrorist organization, with knowledge 
that it engages in terrorism, is an aider and abettor of the 
terrorism and is civilly liable for damages.
    The Court of Appeals accepted that argument in a landmark 
decision issued on June 5 of this year, which is called Boim v. 
Quranic Literacy Institute and is reported at 291 F.3d 1000. 
The Holy Land Foundation did not seek Supreme Court review and 
we are now engaged in the discovery process.
    We are fortunate to have the volunteer assistance of a 
major Chicago litigation firm, Wildman Harold Allen and Dixon, 
of Chicago, and specifically Stephen Landes and Richard Hoffman 
of that firm, in this time-intensive discovery stage. If not, 
we would not be able to continue with this exceedingly 
important lawsuit. And this brings me to my recommendations for 
legislative amendments that are essential to make this 
deterrent to the funding of terrorism work.
    First, although 18 U.S.C. 2333 provides for very 
substantial damage awards, treble damages and attorneys' fees, 
it does nothing to enable lawyers to pursue litigation prior to 
a final judgment. I and the firms I have been with since I 
began this project have invested approximately $1 million of 
attorneys' time in this case. Although $1.4 million of seized 
funds is sitting in the clerk's office in the Federal court in 
Chicago, we have received not one penny for the heretofore 
successful prosecution of this action.
    The law should provide that if a plaintiff is successful in 
defeating a motion to dismiss, he automatically recovers 
attorneys' fees and out-of-pocket expenses from the defendants. 
That will enable the private attorneys general, such as myself 
and Mr. Gerson and the a attorneys who are bringing his 
lawsuit, to continue to prosecute these cases to a successful 
conclusion. Otherwise, well-financed defendants can exhaust a 
plaintiff's lawyer in all the preliminary skirmishes that have 
marked this case.
    Second, funds that have been seized by the United States 
from defendants in----
    Senator Specter. Mr. Lewin, you are at about double time 
now. Could you sum at this point?
    Mr. Lewin. I will. I am coming to a conclusion.
    My second point is that the funds that have been seized 
should be made available for the payment of plaintiffs' 
attorneys' fees whenever the plaintiffs have prevailed at the 
pre-trial stages.
    We sued the Holy Land Foundation. On December 4, 2001, 
President Bush, Attorney General Ashcroft and Secretary of the 
Treasury O'Neill announced that they were seizing the assets of 
the Holy Land Foundation because they were used to support 
schools and indoctrinate children to grow into suicide bombers.
    Now, those seized funds are being used at a rapid rate to 
pay lawyers for the Holy Land Foundation for their work in 
challenging the seizure and in defending against our lawsuit. 
If the litigation goes on long enough, all the money that has 
been seized will be spent paying the lawyers for the Holy Land 
Foundation. They have lost their challenge to a seizure in a 
recent district court decision here in the District of 
Columbia, where the district court held that they had 
connections with Hamas, that they were actively involved with 
Hamas leaders, and that they provided financial support to the 
Hamas suicide bombers. Their lawyers are being paid top dollar 
from seized assets. Why should not the plaintiffs' lawyers also 
receive compensation for the work they have done?
    Third, the law should authorize the distribution and the 
availability of information that Federal prosecutors gain in 
their investigations to the private attorneys general. 
Prosecutors are loathe to share information. There should be a 
provision that grand jury and other investigative materials 
should be disclosed to private attorneys for their actions 
under court----
    Senator Specter. Mr. Lewin, we have that point. Do you have 
any other specific points, because we are going to have to move 
on?
    Mr. Lewin. OK, then let me just say my two other proposals 
are that the statute of limitations be amended and that causes 
of action--that the theories that we have established in our 
litigation be specifically provided in the statute. Aiding and 
abetting, which you have spoken about, Senator Specter, should 
be specified in the statute as a basis for civil liability, and 
individual responsibility by individuals who contribute to 
these organizations.
    I thank the Committee for the opportunity to testify here 
this morning in this very, very important endeavor to cutoff 
what the Senator has called, and I think what everybody else 
has called, stopping the money to stop the killing, to 
discourage the donors. I think that is the effort that should 
be made by the statutes.
    Thank you.
    [The prepared statement of Mr. Lewin appears as a 
submission for the record.]
    Senator Specter. Well, thank you very much for your 
testimony, Mr. Lewin. I am very distressed that the Department 
of Justice has not acted under the Terrorist Prosecution Act. 
You noted the hearing we had 3 years ago that went into the 
case in some detail. You have performed extraordinary service 
not only to your clients, but to America in pursuing this 
matter, and I will have some questions for you when we move 
forward on the panel.
    Our next witness is distinguished lawyer Allan Gerson, co-
counsel on a case filed by September 11th victims against the 
financiers of Al-Qaeda. He was involved in representing Pam Am 
103's victims' families and their claims against Libya, very 
extensive experience in this field.
    Thank you for joining us, Professor Gerson, and we look 
forward to your testimony.

  STATEMENT OF ALLAN GERSON, PROFESSORIAL LECTURER IN HONORS, 
         GEORGE WASHINGTON UNIVERSITY, WASHINGTON, D.C.

    Mr. Gerson. Thank you, Senator Specter. I am very 
appreciative of this opportunity to appear here today to 
contribute to the terribly important and urgent goal that this 
Committee has set for itself: assessing the tools needed to 
fight the financing of terrorism.
    Surely, Senator Specter, the standard by which these tools 
can be assessed must in large measure revolve around the 
progress that has been made in securing for the families of the 
victims of 9/11 the rights guaranteed to them under recent U.S. 
antiterrorism legislation. It is through these initiatives that 
they seek to hold accountable those responsible for 
facilitating the murders of their loved ones, and that begins 
with the proposition that the root of the problem lies in the 
financing of terrorism.
    First, I would like to express gratitude to you, Senator 
Specter, and the entire Committee on behalf of the over 3,600 
individual family members that Ron Motley, my partner in this 
endeavor, and I have the honor to represent. They understand 
that your continuing interest and involvement in the justice of 
their cause will enable them to play the important role carved 
out for them in the war against terrorism.
    Senator Specter, 9/11 was the work of terrorists that 
preach global jihad. The mass rallies of the Nazis and the 
fanning of bigotry and hatred have now been replaced by the use 
of global jihad's adherence to the Internet and the click of a 
computer mouse. Yet, I fear, Senator Specter, that we are still 
using--and I will try to illustrate this in my remarks--
antiquated and obsolete techniques and ideas to deal with 
today's threats.
    The victims of 9/11 were, of course, predominantly 
civilians, and yet today these families, the families of the 
victims, have the capacity to strike back, but if, and only if, 
their hands are not tied. They must be allowed to invoke the 
full force of our laws.
    As Secretary of State Powell recently noted, ``The 
coalition against terrorism must advance on all fronts--
political, financial, legal and military--to root out 
terrorists wherever they live and plot.'' Indeed, President 
Bush almost immediately following the September 11th attacks 
proclaimed, ``Our goal is to deny terrorists the money they 
need to carry out their plans. Our weapons are military and 
diplomatic, financial and legal.''
    Today, the families of the 9/11 victims are in the front 
ranks of those fighting the war on the financial and legal 
fronts. Their weapon is the legal process. Their principal 
target is terrorism's financial underbelly, and it is no 
accident that the organized 9/11 families call themselves 
Families United to Bankrupt Terrorism, for they are essentially 
acting through their lawyers, as Harvard Professor Alan 
Dershowitz has characterized it, as private attorneys general, 
stepping in where the Government is constrained by economic and 
political considerations.
    In this regard, our legal team has assembled highly 
experienced litigators to scour records in 13 countries on 
behalf of the suit we have filed entitled Burnett, et al. v. Al 
Baraka Investment and Development Corp. here in the District 
Court for the District of Columbia.
    The suit names over 100 defendants in a complaint that 
spans 1,000 pages, with the third amended complaint to be filed 
this Friday. In addition, a more recently filed case in New 
York, Ashton, et al. v. al Qaeda, et al., names many of the 
same defendants on behalf of approximately an additional 1,000 
9/11 family members. The defendants in the Burnett suit are 
primarily Saudi banks, charities, institutions, wealthy 
contributors, and individuals, some of whom have very close 
associations with the government of Saudi Arabia.
    In this effort, we have the active assistance of the 
governments of Russia, Uzbekistan, Israel, and Bosnia, to name 
but a few. We have the active cooperation of the judiciary and 
the government's prosecutorial arms in Spain and in Germany. 
Indeed, in Germany we are preparing as I speak to appear on 
behalf of the families as co-plaintiffs in a criminal 
prosecution against one of the alleged 9/11 plotters, a 
procedure permitted under German law. This will enable us to 
see evidence that is fresh, to call witnesses, and to 
strengthen our case.
    For example, one of the items obtained in our global 
investigatory efforts and which will be noted in the third 
amended complaint which we will be filing on Friday is a 
document that shows fund transfers made by the Saudi American 
Bank located here in Washington's Watergate Hotel complex--
payments made to the Middle East that ultimately ended up in 
Hamas's pockets for the purpose of suicide bombings in Israel. 
We intend to demonstrate that this financing pattern served as 
a template for funding Al-Qaeda. We have also obtained judicial 
cooperation in tracking the Al-Qaeda money trail that, as 
reported by the New York Times on September 21 of this year, 
ran from Saudi Arabia through Spain and directly to the 
perpetrators of 9/11.
    Senator Specter, for all of these reasons, I believe we are 
making good progress in using the tools that Congress has 
already made available to us. I am not here to ask for new 
legislation. Rather, I come to thank you for what the Committee 
has made possible and to make one specific request.
    I respectfully urge you to do all in your power to make 
sure that those advances not be frustrated by pernicious 
maneuverings by those who persist in viewing the 9/11 families 
suit as unwarranted interference in America's foreign policy.
    Credible reports that our Government might be considering 
stalling or otherwise impeding the suit were reported in the 
New York Times on October 25, and as a result a large 
delegation of family members promptly came by bus loads from 
New York to stand vigil before the Capitol on November 1 to 
insist that our Government stand with them and not against 
them.
    Regretfully, I am not in a position to assure the families 
that the cause for their great anxiety and fear of betrayal has 
passed. In a full-page, open letter to the President that 
appeared in the Washington Post on November 1, they asked that 
President Bush, quote, ``disavow any effort by our Government 
to disarm us as we join you in the fight against terrorism,'' 
end quote. No response has been forthcoming.
    Today, recourse to the courts by American citizens against 
the perpetrators of terrorism is surely a constitutional right. 
It cannot be taken away or suspended without violating the due 
process and taking of property provisions of the Fifth 
Amendment.
    What is needed is an affirmative statement that there will 
be no interference in the 9/11 families' efforts to seek 
redress. Beyond that, I would hope that, wherever practicable, 
there would be active cooperation in the sharing of evidence 
because, if I may conclude, it is in this context, a context of 
cooperation and sharing of documents between courts, 
involvement of private plaintiffs all along the way, making 
sure that evidence that does not turn stale, and allowing them 
to go into areas where for economic or other reasons 
governments are loathe to tread, that we have the essential 
elements of the new international public-private partnerships 
that are essential in enabling us to successfully wage the 
fight against terrorism.
    Thank you, Senator Specter.
    Senator Specter. Thank you, Professor Gerson. The Congress 
has supported these claims with legislation on civil rights of 
action and I do not believe that the executive branch will 
impede what you are doing. You may come to a point where you 
are seeking to attach assets of some foreign government where 
you may have some difficulties. Many of us on Capitol Hill have 
been supportive of you there, as well. We will monitor it all 
very closely and we are available to be of assistance.
    Mr. Gerson. We enormously appreciate that expression of 
support, Senator Specter.
    [The prepared statement of Mr. Gerson appears as a 
submission for the record.]
    Senator Specter. We turn now to Mr. Jonathan Winer, former 
U.S. Deputy Assistant Secretary of State for International Law 
Enforcement, a member of the Council on Foreign Relations, and 
a member of task force that recently published a report on 
terrorist financing.
    Thank you for joining us, Mr. Winer, and we look forward to 
your testimony.

   STATEMENT OF JONATHAN M. WINER, ALSTON AND BIRD, LLP, AND 
     MEMBER, COUNCIL ON FOREIGN RELATIONS, WASHINGTON, D.C.

    Mr. Winer. Thank you very much, Mr. Chairman. I am grateful 
for the opportunity to testify before you on the 
administration's use of the tools provided them to fight 
terrorism over the past year, and to discuss the findings of 
the report of the Independent task Force on Terrorist 
Financing, sponsored by the Council on Foreign Relations and 
chaired by Maurice Greenberg.
    I have been working in the field of anti-money laundering 
for some two decades. Since September 11, 2001, we have 
accomplished more in the past year than I thought would be 
achieved during my entire lifetime. Over the past year, the 
administration has undertaken a herculean task of transforming 
the tools provided to it by the Congress in the PATRIOT Act 
into practical realities. By and large, they have done a 
remarkable job. As always, there are a few things that can 
still be done.
    In light of the discussion today, I would like to turn 
directly to the charity issue. I think we still need to 
consider further action on Islamic charities, such as 
subjecting them to the Bank Secrecy Act. Some of these 
charities turn President Lincoln's quote on its head; it is 
charity toward none and malice unto all.
    After I testified before the Senate last year, right after 
September 11, one Islamic charity I listed on a chart as being 
alleged to have ties to terrorism gave me an ultimatum: I 
retract what I told the Senate or they would sue me. On the 
very day they were planning on filing the lawsuit against me, 
the defamation action for my constitutionally protected 
testimony before the Congress, President Bush shut them down as 
a terrorist finance organization. You have heard about them 
earlier today. It was the Holy Land Foundation.
    Senator Specter. Well, there you are, Professor Gerson. Do 
you see the cooperation from the executive branch?
    Mr. Gerson. We welcome it.
    Mr. Winer. That was the Holy Land Foundation that gave me 
that ultimatum.
    I am tremendously concerned that funds from some of these 
charities have been used to purchase interests in otherwise 
legitimate U.S. businesses. I think that there is a penetration 
of other institutions that some of these charities have been 
able to engage in and it is going to be tremendously important 
to investigate that and go after it.
    I have also seen that charity fraud and charity abuse is 
not limited to Islamic charities, as we have seen in the 
Washington area recently. I have encountered abuses of 
charities in many contexts during my time in Government, both 
on the Hill and in the executive branch. Our regulation of 
charities at the Federal level is minimal to non-existent, and 
charities are not today expressly covered by U.S. money 
laundering regulations.
    I would urge consideration of whether the administration 
should use its existing authorities to treat charities as 
financial institutions for the purposes of the Bank Secrecy 
Act, and thereby become subject to Federal examination for 
compliance with our anti-money laundering laws. We are asking 
insurance companies and loan and finance companies to be 
subject to examination, we are asking hedge funds to be subject 
to examination, but not charities.
    Second, I would suggest that the Secretary of the Treasury 
should use his powers under Section 311 of the PATRIOT Act to 
designate foreign jurisdictions or financial institutions for 
special measures for enhanced scrutiny. This is a power the 
Congress gave the Secretary in the PATRIOT Act. The Treasury 
hasn't used the power.
    It is hard for me to understand that the Treasury has not 
identified even one foreign country or one financial 
institution that poses an unacceptable level of money 
laundering or terrorist finance risk, and therefore hasn't 
subjected a single one to the lesser level of sanctions 
available to the United States under Section 311.
    Mr. Aufhauser has asked for some additional protections in 
order for them to use the Section 311 authority. I can't assess 
whether the absence of those protections precludes such action, 
but I think using that particular authority would send a very 
strong signal to financial institutions in other jurisdictions 
that we are going to protect ourselves.
    Third, I believe the U.S. Government should be developing 
international standards for regulating and tracking gold and 
other precious metals and jewels that are used for trans-
national terrorist finance. The U.S. has had an exemplary 
investigation of money laundering through gold by Italian 
organized crime and Colombian drug traffickers in the Colon 
Free Zone, in Panama.
    Dubai is the largest gold trading zone in the world. There 
really is more that we should be doing to try and create a 
standardized international global regulatory regime for 
tracking and regulating gold and other precious metals and 
gemstones subject to abuse especially across borders. One means 
of doing it might be through the existing G-8 anti-terrorist 
group led by Treasury.
    Fourth, you have heard quite a bit about problems for the 
private sector and the administration sharing information. I 
believe that in that connection, further information needs to 
be shared about our actions vis-a-vis halawadars, alternative 
remittance systems.
    There is no location today where the public can go to 
determine whether a money transfer business has registered with 
the Government, as they are all required to do under the Bank 
Secrecy Act and the PATRIOT Act. FinCEN has a confidential 
system for Federal prosecutors to use. Not all of them know 
about it. I have talked to some who had no idea it existed, but 
they have such a system.
    The information is not public. I think it should be public, 
who has registered and who hasn't. It would have a lot of 
positive assistance for the financial institutions that don't 
want to do business with unregistered money service businesses.
    Last, and this relates to the information-sharing issue as 
well, the private sector has to be brought in as a partner to 
governments in combating terrorist finance. British law 
enforcement has referred to the private sector as the deputy 
sheriffs who have been deputized to assist the government in 
going after the bad guys and protecting us against them.
    I believe the U.S. could work with private sector 
institutions and non-governmental institutions to create white 
lists of financial institutions and perhaps charities that, 
regardless of the legal environment in their home jurisdiction, 
commit to the highest level of due diligence, anti-money 
laundering, and anti-terrorist finance procedures, and agree to 
a system of external assessment of compliance, precisely the 
idea, Mr. Chairman, that you raised in the Saudi context. 
External assessment for compliance is a critical element for 
such a white list.
    In addition to the reputational benefit from being included 
on such a white list, inclusion on the list could be a factor 
taken into consideration by the World Bank, the International 
Monetary Fund, and other IFIs in considering which financial 
institutions to put their money through, as well as by USAID 
and its counterparts in the rest of the world.
    Mr. Chairman, these suggestions have been endorsed by the 
distinguished bipartisan group of the Council on Foreign 
Relations on which I participated. I thank you for the 
opportunity to testify before you today.
    [The prepared statement of Mr. Winer appears as a 
submission for the record.]
    Senator Specter. Well, thank you very much, Mr. Winer. We 
appreciate your being here.
    We now turn to Mr. Salam Al-Marayati, Director of the Los 
Angeles-based Muslim Public Affairs Council, who authored an op 
ed piece in the New York Times to the effect that Muslim 
charities should not be prosecuted, but rather the officers of 
those charities if they support terrorism.
    We welcome you here and look forward to your point of view, 
sir.

  STATEMENT OF SALAM AL-MARAYATI, EXECUTIVE DIRECTOR, MUSLIM 
        PUBLIC AFFAIRS COUNCIL, LOS ANGELES, CALIFORNIA

    Mr. Al-Marayati. Thank you, Mr. Specter. I would like my 
full testimony in writing to be submitted for the record.
    Senator Specter. Without objection, your full testimony 
will be made a part of the record.
    Mr. Al-Marayati. Thank you, and I will keep my time limit 
to 5 minutes so I will keep my remarks very brief.
    Senator Specter. Thank you.
    Mr. Al-Marayati. The Muslim Public Affairs Council has 
issued its counter-terrorism policy position paper in 1999. It 
presented it to the Clinton administration, and it has also 
submitted it to the Bush administration. In the paper, we talk 
about means of dealing with this problem of financing terrorism 
without shutting down charities in whole or making blanket 
indictments against charities.
    We believe that the effective way to combat terrorism is 
there must be a culture of understanding and cooperation among 
all Americans, between government officials and law enforcement 
on the one hand, and ordinary citizens and communities on the 
other hand. Unfortunately, this tool of partnership is being 
threatened today.
    I would like to talk a little bit about zakat, alms-giving, 
religious freedom, and national security. First, in terms of 
zakat, this is the religious obligation of every Muslim. It is 
one of the five pillars of Islam. It is similar to the 
Christian tradition of tithing. Zakat is the major 
manifestation of social justice in Islam.
    American Muslim charities make special appeals for the 
needy, whether in terms of feeding the homeless or in helping 
refugees abroad. American Muslims become very disturbed when 
reading reports that funds intended to uplift the downtrodden 
are used for violent purposes or are frozen under suspicion of 
being used for violent purposes.
    A very unfortunate climate has been created in which 
Muslims who donate money are being associated with nefarious 
activities. Just as it is wrong to associate all American 
Catholic charitable giving with the activities of the IRA, it 
is just as wrong to associate American Muslim giving with 
terrorism.
    Fundraising by American Muslim charities has been conducted 
in cooperation with and support from local American Muslim 
communities and their mosques. If it is proven that directors 
of any institution were guilty of embezzlement of funds, then 
those individuals should be subjected to the full extent of the 
law, and they will be met with stiff opposition from American 
Muslims as well.
    The funds should either be returned to the donors or should 
be directed to the needy through legitimate non-governmental 
channels. If any wrongdoing is proven in an open court, 
government diversion of those funds for any purpose other than 
the donor's intent would be a misdirection of those funds a 
second time.
    The shut-down of American Muslim charities has 
detrimentally affected innocent people working or volunteering 
their time to the non-profits. Incriminating innocent people 
results in a tragic attack on the character of humanitarian 
activists throughout America.
    MPAC has argued that the U.S. Department of the Treasury 
should provide guidelines for meeting new anti-terrorism 
standards in order for American Muslim charities to demonstrate 
accountability in their fundraising and financial 
disbursements. We are encouraged that the Treasury Department 
has issued voluntary best practices for U.S.-based charities.
    We have argued that the tools to combat terrorism are 
optimized in an open, democratic process, and preserving our 
democratic traditions in America is paramount for effectively 
combatting terrorism. Short circuits to justice usually lead to 
a false sense of security. MPAC works with other groups to 
oppose the use of secret evidence in the courts, asks for open 
hearings, and protests indefinite detentions.
    In an ideal setting, American Muslim charities serve a 
national security interest by promoting a positive image of 
America throughout the Muslim world. Unfortunately, the view 
that American Muslims are a harassed or persecuted religious 
minority is gaining ground overseas, partially because of the 
blockage of the Muslim charities.
    Another important aspect of this problem is the issue of 
religious freedom, which the U.S. has championed in recent 
years, yet seems to be back-tracking on as a result of new 
anti-terrorism standards. The United States risks being 
perceived as failing to adhere to the values we are promoting 
abroad.
    Last, Muslim charities which meet the urgent development 
and subsistence needs of many of the Muslim world's poor, 
dispossessed and destitute can be used to enhance our national 
security interest by helping to mitigate some of the factors 
that breed extremism and violence.
    Thank you very much.
    [The prepared statement of Mr. Al-Marayati appears as a 
submission for the record.]
    Senator Specter. Thank you very much, Mr. Al-Marayati, for 
your testimony.
    Mr. Lewin, beginning with you in sequence of direct 
testimony, are the funds which have been frozen in the Holy 
Land Foundation available for disbursement to their attorneys?
    Mr. Lewin. Yes, they are available and they are used by 
their attorneys.
    Senator Specter. How can that be if the funds are frozen?
    Mr. Lewin. Well, pursuant to the regulations of the 
Treasury Department, the funds that are frozen and proceedings 
to freeze those funds are made available to attorneys to defend 
in that case. In other words, the argument that is made is that 
as a constitutional matter, the organization that is being sued 
should be entitled to defend itself.
    Senator Specter. No limitation, not even if those fees 
totally deplete the fund?
    Mr. Lewin. Well, there is no indication that there would be 
any limitation. I will tell you that in our case, in Chicago, 
there is an attorney who is a very fine counsel. He comes up 
from New Mexico for every status conference in Chicago and is 
being paid out of that fund, even though our case is not the 
case in which the freezing of those funds is an issue.
    But nonetheless, because the funds may be used by counsel, 
to our knowledge, they are being distributed for his attorney's 
fees. And our concern is that this litigation may last long 
enough that by the time it is over, there will be nothing left 
because the attorneys defending these cases will simply have 
depleted the funds.
    Senator Specter. Mr. Lewin, how do you propose to establish 
liability for the Holy Land Foundation?
    Mr. Lewin. We believe that it was public knowledge in the 
United States from newspapers well before 1996 that Hamas was 
engaged in violence and murder of civilians in Israel and in 
the Middle East. This was known through the media to everybody 
who ran the foundation, and indeed to people who contributed to 
it.
    Therefore, we believe the foundation, when it contributed 
to Hamas, although they claim they were trying, as I think had 
come out in prior testimony, to contribute only to its 
charitable activities such as hospitals----
    Senator Specter. Does the Holy Land Foundation have genuine 
charitable activities?
    Mr. Lewin. The Holy Land Foundation, I think, has genuine 
charitable activities, but the problem is that they also engage 
in financing terror, which is what the President and the 
Attorney General and the Secretary of the Treasury found when 
they seized its funds.
    You don't have to show that the foundation or the 
organization is engaged exclusively in terrorist activities, 
but if they do so to a substantial degree by contributing to 
Hamas, which is what was found and what the district judge 
found to be true, then their funds may be seized and they are 
engaging in illegal funding of terrorism.
    Since they contributed to Hamas, and we believe that their 
own literature showed that they knew they were contributing to 
Hamas violence as well as to Hamas charities----
    Senator Specter. How do you prove that they knew they were 
contributing to Hamas violence?
    Mr. Lewin. Well, that is going to be proved, we think, A, 
by the fact that it was public knowledge that Hamas was engaged 
in violence, and they contributed to Hamas. And, B, it is going 
to be proven through discovery by the testimony of their 
officers, whom we will subject to examination on the question 
of what they knew about the people to whom they contributed, 
the organizations to which they contributed.
    Senator Specter. How do you deal, Mr. Lewin, with the 
considerations and the contentions raised by Mr. Al-Marayati 
about freedom of religion and about the basic tenet, as Mr. Al-
Marayati articulates it, for Islam to help on charitable goals?
    Mr. Lewin. Let me begin my answer by just a personal note. 
I don't think there has been any lawyer in the United States 
who has been more involved in trying to protect freedom of 
religion than I have. I have argued a number of cases in the 
Supreme Court under the Free Exercise Clause, and I am very 
concerned about that both with regard to Jewish citizens and 
Muslims and Catholics and all minorities in the United States.
    I believe that freedom of religion can be protected by 
ensuring that the charities that collect for charitable 
purposes have internal guidelines which make sure that they 
disburse their funds only for peaceful, charitable purposes. If 
they send it abroad, as the Holy Land Foundation did, they may 
not send it abroad to an organization that engages in violence.
    Senator Specter. Mr. Al-Marayati, would you accept that 
approach as a limitation on internal audits? That might not be 
too hard to accomplish if it would satisfy Mr. Lewin. What do 
you think?
    Mr. Al-Marayati. Well, yes, and we are representing really 
not the charities themselves, but the donors. And the issue is 
if the charities don't fulfill their obligations by filing the 
proper tax forms or conduct the audits, then they are at fault 
and the question is what to do with the money that the donors 
intended to give to the needy. That money should not be used 
for lawyers fighting battles out in court. That money should 
not be used for another country or another purpose altogether.
    Senator Specter. How do you deal with the considerations 
which have been raised throughout this hearing about Hamas, for 
example, having a political wing and a military wing, when the 
funds can move from one to other?
    A contributor may say, I want to give it to the charitable 
wing, but when you see what Hamas does at Hebrew University, is 
Mr. Lewin right or wrong when he talks about notice to the 
public as to what Hamas is really up to?
    Mr. Al-Marayati. Well, I agree that if a group is on the 
foreign terrorist organization list, then any support financial 
for that group is a violation of the law and is a criminal act. 
And any person who conducts such a financial support for that 
group should be held liable. The charity itself should not be 
held liable.
    For example, if the United Way's chief executive officer 
commits fraud, the charity of the United Way should not be held 
liable. The donors to the United Way still want that money to 
go for the proper purposes. But the issue of what happens 
abroad--the Treasury Guidelines are making it available for 
Muslim charities to demonstrate transparency not only here in 
terms of the financial fundraising, but in terms of the 
financial disbursements over there.
    I think by following those guidelines and by having an 
authentic accrediting agency, then we can overcome this problem 
of intermingling of funds between legitimate charity needs and 
terrorist activity.
    Senator Specter. But the United Way doesn't have a military 
wing.
    Mr. Al-Marayati. I agree, but I am talking about in terms 
of the problem of embezzlement and liability of the officer 
himself.
    Senator Specter. Well, embezzlement is always available as 
a criminal prosecution if some officer takes the money that 
belongs to the organization. But where you have an organization 
like Hamas which is well-known for the military wing, do you 
think it inappropriate to say to donors to Hamas, with what has 
been on the public record, that they are not knowingly 
contributing funds in a direction which will be used for 
murder?
    Mr. Al-Marayati. Donors should be notified if that is the 
case. If the case is the money is going to a foreign terrorist 
organization, then donors should be notified and the money 
should not go through those channels anymore.
    My argument is we believe as American Muslim donors--and I 
am not here to support any foreign group. We don't take money 
from any foreign governments. I am not here to even support the 
foreign governments that were made an issue today. But as 
donors, we believe that money can go to those in need in the 
West Bank and Gaza Strip without necessarily intermingling 
those funds with terrorist activities.
    Senator Specter. Mr. Winer, when we talk about regulations, 
should there be more regulations? Should there be Federal 
legislation to deal with charities to try to make the dichotomy 
which Mr. Al-Marayati suggests?
    Mr. Winer. First of all, I think it would be useful for 
this Committee to look generally speaking at the issue of 
regulation of charities and whether the current regulation of 
charities at the Federal level, which is essentially an IRS 
matter, is sufficient.
    Senator Specter. What do you think? We are calling you as 
an expert here.
    Mr. Winer. The short answer is no.
    Senator Specter. Not sufficient?
    Mr. Winer. Not sufficient.
    Senator Specter. What more should we do?
    Mr. Winer. There has to be some mechanism for examination 
and monitoring at least of larger charities, certainly of 
larger charities that are operating internationally.
    Senator Specter. Examination and monitoring?
    Mr. Winer. Yes.
    Senator Specter. Would you propose Federal legislation to 
accomplish that?
    Mr. Winer. What I would propose in the first instance is 
that the PATRIOT Act, which gives the Secretary of the Treasury 
the authority to designate certain kinds of institutions as 
susceptible to sufficient money laundering risk that they 
should be covered by the PATRIOT Act, should consider whether 
charities or certain types of charities should be required to 
be listed as financial institutions and must be subject to 
examination in the same way we are subjecting insurance 
companies, for example.
    Senator Specter. So you think the Secretary of the Treasury 
has sufficient authority under the so-called PATRIOT Act?
    Mr. Winer. Yes, sir, and under the Bank Secrecy Act, I do, 
sir.
    Senator Specter. Well, you have had a lot of experience 
with this, Mr. Winer, with the Council on Foreign Relations. 
The Committee would be interested in your views as to what 
supplemental legislation would be appropriate.
    Mr. Winer. I will consider that further and respond.
    Senator Specter. That really is what we are looking at 
here, whether there ought to be more legislation. Mr. Lewin 
would like to have access to those funds before he gets a 
judgment. He thinks a motion to dismiss ought to be sufficient, 
and we will entertain those thoughts. We can legislate on that.
    Professor Gerson, how are you going to collect from Al-
Qaeda?
    Mr. Gerson. Well, our focus is not simply Al-Qaeda. Our 
focus is much, much broader than that.
    Senator Specter. You have a third amended complaint?
    Mr. Gerson. We have a third amended complaint.
    Senator Specter. Now, as your complaint, do you have a 
first amended complaint and then a second amended complaint, 
and now you have a third amended complaint?
    Mr. Gerson. That is correct.
    Senator Specter. Your pleading file must be very thick.
    Mr. Gerson. It is enormous, and the reason it is enormous 
is because we have become, in effect, private attorneys general 
doing what the families of 9/11 have asked us to do, which is 
to focus on one issue, and that is accountability.
    Senator Specter. How many families do you represent?
    Mr. Gerson. We represent about 3,600 family members at this 
particular point, and we continue to represent more families 
everyday and they tell us repeatedly it is well and good to 
listen to members of the administration. Some of them have 
testified today about new regulatory reforms that are going on, 
greater cooperation between the United States and the Saudi 
government in this regard. But we are interested in 
accountability because we want deterrence. We don't want a 
repetition of what occurred to our loved ones to happen to 
other loved ones. And that can't happen without accountability, 
so that is our focus.
    Senator Specter. Are some of the families whom you 
represent among those from Flight 93 which crashed in 
Shanksville, Pennsylvania?
    Mr. Gerson. Yes.
    Senator Specter. How many do you represent there, if you 
know?
    Mr. Gerson. It is over a dozen. I am not exactly sure.
    Senator Specter. We had a memorial service on September 11 
this year, and the families were there and it was a most moving 
situation where the families came from all over the country to 
visit the site where their loved ones had gone down on Flight 
93, and very, very poignant and a tremendous need.
    Mr. Gerson. Well, out of this terrible tragedy, the 
families are trying to salvage something that will be beyond 
themselves and be a legacy to all Americans.
    Senator Specter. And you believe you have a realistic 
change of identifying financial institutions where you can 
recover damages for 9/11?
    Mr. Gerson. Senator, I spent the last week in Spain working 
with the Spanish authorities under a special procedure that was 
authorized by Judge Robertson of the district court here.
    Senator Specter. Give me one illustration as to how you 
propose to establish liability and collect money from somebody.
    Mr. Gerson. Well, liability is established by using the 
standard that Attorney Nat Lewin referred to earlier in the 
landmark Boim case. It is not incumbent upon us to prove that 
individuals that contributed to charities had actual knowledge 
of particular horrific acts that were going to be committed.
    Senator Specter. So you are looking to contributors to Al-
Qaeda?
    Mr. Gerson. We are looking to the financial institutions 
that contributed part of their own revenues, sitting on their 
board of directors.
    Senator Specter. You have already filed this publicly. Can 
you name one financial institution? I am trying to get a 
specific idea as to how you are proceeding.
    Mr. Gerson. Sure. I will give you a list of the names of 
some of them.
    Senator Specter. No. Just give me one and tell me what your 
approach is, your theory, how you are going to prove your case, 
and how you are going to collect the money.
    Mr. Gerson. Well, we are naming a number of organizations 
in Spain, for example, which goes beyond the focus strictly on 
Saudi-related institutions.
    Senator Specter. And you have jurisdiction in the United 
States?
    Mr. Gerson. We have jurisdiction in the United States.
    Senator Specter. And service?
    Mr. Gerson. We have already completed service on many of 
these banks. Many of the banks have financial holdings in the 
United States. The Saudis, for example, have on their own about 
$860 billion in the United States. We are intent on----
    Senator Specter. You are going after the Saudis?
    Mr. Gerson. Saudi interests. We have not named the 
government of Saudi Arabia as a defendant at this point.
    Senator Specter. Saudi interests. Name one Saudi interest, 
just so I have an idea.
    Mr. Gerson. Well, I mentioned earlier the Saudi American 
Bank, which is located in the Watergate, will be named as a 
defendant.
    Senator Specter. The Saudi American Bank?
    Mr. Gerson. Yes. They will be named as a defendant this 
Friday.
    Senator Specter. What did the Saudi American Bank in the 
Watergate do?
    Mr. Gerson. They served as a conduit for the transfer of 
funds to Hamas, we allege, and to Al-Qaeda.
    Senator Specter. OK, and do you have to show knowledge on 
their part?
    Mr. Gerson. We have to satisfy the standard that the 
Seventh Circuit Court of Appeals spoke about in the Boim case, 
which is not actual knowledge, but constructive knowledge; that 
is that a reasonable person understanding the circumstances had 
reason to believe that this money was going to be used for 
terrorist purposes.
    Senator Specter. For Al-Qaeda and Hamas, and if you can do 
that, of course, they know what Al-Qaeda and Hamas are up to?
    Mr. Gerson. Yes, of course.
    Senator Specter. Sure.
    Well, listen, thank you very much.
    Mr. Lewin. Could I just make one more point in response to 
the exchange you had here, just a very hypothetical----
    Senator Specter. Just one more point? Frankly, Mr. Lewin, I 
doubt that you can make only one point, but go ahead.
    Mr. Lewin. I will. This one, I promise, will----
    Senator Specter. You are free to comment even if it is more 
than one point.
    Mr. Lewin. All right. I think the analogy with regard to 
the Holy Land Foundation and the money being given to Hamas is 
as if the United Way disbursement Committee said, we are going 
to give 15 percent to Murder, Incorporated. Now, if they did 
that, then I think everybody would know that that is illegal 
and it is involved in murder.
    I don't understand why the Holy Land Foundation, if it is 
says ``I am giving some percent to Hamas formally,'' can say, 
``well, OK, now as a charity we are free of that.'' I think 
that is what Mr. Al-Marayati is saying. The charity shouldn't 
be held responsible for the fact that it has given money to 
Murder, Incorporated. That is what it has done.
    Senator Specter. Mr. Al-Marayati, you are entitled to 
respond.
    Mr. Al-Marayati. Yes, thank you. Well, first of all, let's 
go to other examples. For example, you had the Jewish Defense 
League that targeted our office on December 17. The FBI 
notified us. It was a group of Jewish terrorists who were 
involved in that activity. They killed Alex O'Day, allegedly, 
in 1985. The culprits have not been brought to justice. So are 
those who supported the Jewish Defense League going to be held 
with the same standard as American Muslims today are being held 
in terms of supporting other charities?
    You mentioned the point about the distinction between the 
political wing and the military wing. In 1995, the Congress 
actually allowed Sinn Fein, the political wing of the IRA, to 
operate. I am not saying that that is the road we need to take 
today because we live in a different era, but the point is we 
have many Muslims in need throughout the world.
    The hot spots involved in terms of charitable giving are 
going to involve the West Bank and Gaza Strip, Kashmir, 
Chechnya, Bosnia. Those are the areas where the front line of 
the war on terrorism is being fought. So we have to work more 
closely together with the Government and with law enforcement 
because I think there needs to be a paradigm shift where 
American Muslim charities are being used as a partner for 
national security abroad and for counter-terrorism here even 
domestically in a more constructive way.
    Senator Specter. Mr. Winer, you can have the last word.
    Mr. Winer. Thank you, sir. It is a very bad thing when a 
witness, given an opportunity by a chairman of a Committee like 
this, doesn't take advantage of it, so let me take advantage of 
your previous question.
    Senator Specter. It happens all the time.
    Mr. Winer. The Committee could consider the possibility of 
creating a receivership for any charity found to have had its 
legitimate funds commingled with terrorist funds and 
appointment of a Federal receiver. In that case, the Federal 
receiver would then be in a position to be able to continue the 
legitimate activities of the charity, while shutting down and 
stopping any potential leakage of that charity into 
illegitimate areas.
    Thank you, sir.
    Senator Specter. Well, thank you very much, gentlemen. I 
think it has been very productive hearing. I admire what you 
are all doing. You, Mr. Lewin, and you, Professor Gerson, on 
tackling these matters are private attorneys general is very, 
very important. The Government cannot maintain all these cases.
    Our courts are open to citizens and that is why we 
legislated as we did to give rights of action and treble 
damages and counsel fees, on the analogy to the antitrust 
field. The lawyers are very frequently criticized, and I think 
very, very often unjustifiably, because cases are undertaken 
which are extremely difficult. They are undertaken without 
being on a retainer or without having an hourly rate which is 
paid. Very substantial costs have to be advanced--filing fees, 
deposition costs, travel. So you are to be commended in the 
greatest tradition of the American legal profession.
    Mr. Al-Marayati, we are very much concerned about the 
issues you raise on freedom of religion and about the Islamic 
religion and charitable matters and helping the needy. That is 
commendable, but we are going to have to draw the line and I 
think Mr. Winer may be able to help us with some practical 
suggestions from the Council on Foreign Relations to draw that 
line.
    But this Judiciary Committee is going to be very active. I 
have already given instructions, Mr. Lewin, to followup on the 
hearing we had 3 years ago. It is just not right that the 
Justice Department has not acted. I have discussed those 
matters with the Israeli Prime Minister, Prime Minister 
Netanyahu, back in 1996, and Chairman Arafat. There ought to be 
extradition; there definitely should be extradition. There 
ought to be teeth there.
    We are available to legislate in the field. We appreciate 
your suggestions and we are going to be pursuing this matter 
further so that people are on notice we are dealing with Al-
Qaeda or Hamas or Hizballah. When money goes there and it is 
known what the purposes are, people can be responsible as 
accessories before the fact to murder, or as the suggestion was 
made, for reckless endangerment, which would not require the 
same specific intent that is equal to malice which would 
support a prosecution for second-degree murder.
    So thank you all and that concludes our hearing.
    [Whereupon, at 12:30 p.m., the Committee was adjourned.]
    [Questions and answers and submissions for the record 
follow.]
    [Additional material is being retained in the Committee 
files.]

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