The Justice Department on Friday belatedly released a copy of a non-prosecution agreement finalized in July and August with an Islamic bank linked to terrorist financing networks.
The agreement with the Islamic Investment Company of the Gulf (Bahamas) Ltd. and affiliates it used to evade U.S. taxes was released only after Main Justice wrote a news article about it, and Sen. Charles Grassley (R-Iowa) and Rep. Frank Wolf (R-Va.) began making inquiries about it.
In a Senate Judiciary subcommittee hearing last week, Grassley raked DOJ National Security Division chief Lisa Monaco over the coals about the agreement – which her division didn’t even handle. The department’s Tax Division did.
Grassley wondered if the department was trying to hide the settlement because it “got a bad deal.” After Monaco was put on the hot seat, the agreement was promptly released to the lawmakers.
The department didn’t get a bad deal. To the contrary, the agreement shows that Tax Division senior litigation counsel Corey J. Smith, who was previously assigned to the National Security Division’s terrorism financing unit, did a fine job of unraveling a complex tax evasion scheme involving $280 million the bank invested in 32 multi-family real estate developments in the U.S.
Then, using an intricate web of Delaware corporations, management companies and Cayman Island vehicles, the bank disguised some $75 million in dividend distributions to its overseas investors as deductible business expenses.
The maneuver allowed the bank to evade $22.5 million in U.S. income taxes, according to the documents released by the Justice Department. The settlement requires the bank to pay $36 million in tax, penalties and accrued interest.
Bravo, Justice Department. Good job. So, why the attempt at secrecy?
The sensitivity may have been related to the fact that the Islamic Investment Company of the Gulf (Bahamas) Ltd. is wholly owned by the Dar Al-Maal Al Islamic Trust, founded by Saudi Prince Mohamed al-Faisal al-Saud.
As is well known, the Saudis are U.S. allies, but they have also funded the spread of the intolerant and fundamentalist form of Islam known as Wahhabism that has been at the root of many of the conflicts with the West.
As the New York Times and other publications have outlined, the DMI Trust has been linked to financiers for al-Qaeda and other Islamist extremist groups. Some of the DMI Trust’s early advisers were important figures in the Muslim Brotherhood. While the Brotherhood isn’t a U.S. designated terrorist group (and if it had been, this case might have remained a terrorist financing case), the Brotherhood’s role as an ideological inspiration for jihad is well documented. Hamas – which conducted a relentless campaign of suicide bombings against Israel in the 1990s – is an offshoot of the Brotherhood.
No one thinks worse of the department that it wasn’t able to pursue a hard-to-prove terrorist financing case. Using the Al Capone strategy, they got the bank on tax violations instead.
Rather, the point of forcing the department to release the settlement agreement is to put the fruit of five years or more of federal investigation into the public domain. The settlement is now what’s known as a “public source” document that anyone can analyze, regardless of security clearance.
The department hasn’t disclosed who made the decision to try to keep the settlement secret. But it’s signed by among other officials John DiCicco, a career DOJ lawyer who’s been the acting head of the Tax Division during the Barack Obama administration.
Obama only recently put forth a viable choice to head the Tax Division, nominating Fulbright & Jaworski LLP tax partner Kathryn Keneally this month.
Perhaps had the Tax Division had a politically appointed and Senate-confirmed leader, it might have reached a more politically informed view of the settlement – namely, that keeping it secret was bound to become a headache.
It is much more likely that a deferred prosecution agreement is viewed as the taxpayer’s “return information” and therefore confidential under 26 U.S.C. § 6103. When the Finance Commmittee requested the release of the agreement, subsection (f) was triggered, thus allowing release of the return information to a committee of Congress. There were not politics or political judgments involved.