Did U.S. State Department hide document to protect Arab Bank?

September 22, 2014

 On Friday morning, jurors in federal court in Brooklyn began deliberating whether Jordan’s Arab Bank is responsible for financing Hamas terror attacks that killed or injured dozens of Americans in Israel and the Palestinian territories. Within hours of the jury retreating to the jury room to decide the case, plaintiffs’ lawyer Michael Elsner of Motley Rice received a response to a request for documents he filed with the U.S. State Department in 2008 under the Freedom of Information Act.

The State Department’s response was meager – one undated memo and a few emails – but contained a nugget of previously unknown information. According to the newly disclosed memo, titled “Ongoing Hamas fundraising operations in Saudi Arabia,” the U.S. government believed that the Saudi Committee for the support of the Intifada al-Quds “was forwarding millions of dollars in funds to the families of Palestinians engaged in terrorist activities, including those of suicide bombers.” In 2003, according to the memo, the U.S. even presented its evidence on the Saudi Committee’s illicit funding operations to the Saudi government.

The State Department memo, which was partly declassified in October 2012, would have been quite helpful to plaintiffs’ lawyers in the Arab Bank case. One of their chief accusations has been that Arab Bank officials helped the Saudi Committee promote the second Palestinian Intifada by processing $35 million in payments to Palestinians injured or imprisoned in the uprising and to the families of those killed in the violence, including suicide attackers.

Arab Bank has defended the Saudi Committee payments as humanitarian aid, arguing that no government – including the U.S. Office of Foreign Assets Control – identified the Saudi Committee as a financier of terror. “The first thing to remember,” bank lawyer Shand Stephens of DLA Piper told jurors in his closing argument on Thursday, “is that between 2001 and 2004, there was no government in the world that said the Saudi Committee was a prohibited organization for anything, let alone terror financing.”

The newly disclosed memo doesn’t say that the U.S. government contemplated adding the Saudi Committee to the OFAC terrorist blacklist, but it certainly undercuts Arab Bank’s arguments that the State Department regarded the committee as a charitable organization. Arab Bank’s defense at trial would have been weaker if plaintiffs’ lawyers had been able to show jurors the memo.

It’s no accident they weren’t, one of the victims’ lawyers told me Monday. Elsner, the Motley Rice lawyer who asked the State Department for relevant records in 2008, said it was “astonishing” that the response to his request came immediately after the record closed in the Arab Bank trial.

“It indicates that the State Department was trying to withhold the document from public viewing” while the trial was under way, Elsner said. Another lawyer for victims in the Arab Bank case, Gary Osen, said in an email: “The exact date of disclosure could be a function of the bureaucratic process, but six years cannot be an oversight.”

The plaintiffs’ lawyers have good reason to suspect that the State Department is interested in protecting Arab Bank, which is the biggest bank in Jordan, an important U.S. ally in the Middle East. Last term, the U.S. Supreme Court asked the solicitor general to submit a brief outlining the government’s position on Arab Bank’s request for review of an order severely sanctioning the bank for failing to turn over bank records to terror victims. As the New York Times chronicled in a terrific piece last April, the issue split the Obama administration. The State Department wanted the government to side with Jordan and Arab Bank; Treasury and Justice reportedly preferred advising the Supreme Court to deny review of the sanctions order. (The government’s brief ended up recommending that the justices pass on Arab Bank’s appeal, which they ultimately did.)

Discussions of this case between Arab Bank and the State Department go back at least as far as 2010, according to a batch of emails that was also part of Friday’s response to Motley Rice’s FOIA request. In September 2010, Arab Bank lawyer Eric Lewis of Lewis Baach sent a letter to Harold Koh, who was then the State Department’s legal advisor, asking for the department’s support when Arab Bank filed an appeal at the 2nd U.S. Circuit Court of Appeals. Lewis noted that he’d just met with William Burns, then the undersecretary for Political Affairs, and was writing at Burns’ suggestion to request a meeting to brief Koh or his staff on the case.

The followup emails indicate that a meeting was scheduled, but what happened afterward is still a mystery because the content of subsequent State Department emails is redacted. The U.S. government didn’t end up taking a position when Arab Bank’s appeal was before the 2nd Circuit.

Private terror-finance litigation is complicated for governments, which have to balance sometimes conflicting interests in supporting victims and pursuing their own national security strategies. The State Department’s response to Motley Rice, however skimpy the record, is one more example of those conflicts.

The State Department didn’t immediately respond to my request for comment. A spokesman for Arab Bank declined to comment on the newly released documents, which will obviously not affect the case against the bank, or on Elsner’s contention that the State Department withheld the memo to shield Arab Bank.

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