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Well Connected, A Saudi Mogul Skirts Sanctions

by Glenn R. Simpson
WALL STREET JOURNAL

ISTANBUL, Turkey — Yassin Qadi is a well-known multimillionaire, founder of a large supermarket chain here and a close friend of the Turkish premier. “I trust him the same way I trust my father,” Prime Minister Recep Tayyip Erdogan said on national television last year.

But the Saudi businessman also is a major financier of Islamic terrorism with close business associates who are members of al Qaeda, according to the U.S. Treasury and the United Nations Security Council. At Washington’s request, the Security Council ordered Mr. Qadi’s assets frozen a few weeks after the Sept. 11, 2001, terrorist attacks in the U.S.

The asset freeze has largely crippled Mr. Qadi’s international business empire. But previously undisclosed records show he has managed to free up millions of dollars of holdings in Turkey, in apparent violation of the Security Council sanctions — and without incurring punishment by Turkish authorities.

The case of Mr. Qadi shows the challenges Washington faces in separating friend from foe in the Islamic world. The records detailing his business activities also suggest how easy it can be to skirt sanctions designed to restrict funding of terrorism — especially for well-connected figures.

Mr. Qadi’s friendship with the prime minister also plays into the growing debate in Turkey over the role of Islam in a secular society. Turkey’s Parliament for the first time yesterday elected a politician with an Islamist background, Foreign Minister Abdullah Gul, to the presidency. Immediately after being sworn in, Mr. Gul pledged impartiality, saying, “Secularism — one of the main principles of our republic — is a precondition for social peace.” But the development nonetheless has heightened concern about the direction this pivotal nation, poised between East and West, is taking.

Within Turkey, a Muslim nation of 70 million with a constitutionally mandated secular government, the role of Islam has been the subject of intense debate in recent years, as rising religious sentiment clashes in some quarters with the country’s longstanding commitment to secularism. Mr. Erdogan and his Justice and Development Party are broadly popular, but their Islamist roots draw criticism and provoke controversy, especially among critics in the military.

Amid this debate, Mr. Erdogan has been blasted for his ties to Mr. Qadi by political opponents in Turkey and some conservatives in Washington, who say the Turkish government has a hidden Islamist agenda. Mr. Qadi — who lives near the Red Sea city of Jidda, the Saudi business capital — denies all links to terrorism and says his U.N. blacklisting is unjust. Officials of Mr. Erdogan’s Justice and Development Party and aides to the prime minister didn’t respond to requests for comment.

Pro-Western Rule
Since coming to power in 2002, the Justice and Development Party has run one of the most pro-Western governments to rule Turkey. It has encouraged a Western-style market economy and made painful overhauls in a bid to join the European Union. The party just won an overwhelming new mandate in parliamentary elections.

But tensions are likely to persist. U.S. diplomats lodged strong objections last year when the Erdogan government intervened in Turkish courts to try to lift the freeze on Mr. Qadi’s Turkish assets, according to U.S. officials. The Turkish government reversed course.

“That Erdogan personally vouches for this man…raises the possibility that the prime minister of Turkey is far less interested in combating terrorism than he says,” said former Defense Department aide Michael Rubin, a conservative critic of the Turkish government who has close ties to top officials in the Bush administration.

The cosmopolitan Mr. Qadi is an architect by profession who trained with the Chicago-based firm Skidmore, Owings & Merrill in the 1970s. He speaks fluent English and has a son who is an American citizen. Mr. Qadi, whose own father belonged to Jidda’s business elite, inherited several million dollars in 1988. He also married into money by wedding a member of the Jamjoom family, one of Saudi Arabia’s leading business clans, and is now an influential business figure whom the Saudi media and other Saudi businessmen often defend against U.S. and U.N. terrorism allegations.

The sanctions prohibit international travel by Mr. Qadi, a longtime globe-trotter. It is unclear whether his assets are frozen in Saudi Arabia, which some U.S. officials and private-sector experts claim has failed to take action against powerful business figures suspected of supporting terrorism. In an effort to reclaim his reputation, Mr. Qadi has filed civil suits in the United Kingdom, Switzerland, Turkey and other countries. He has also submitted voluminous briefs to the U.S. Treasury in Washington. All of these efforts have been unsuccessful to date.

Mr. Erdogan has defended his friendship with Mr. Qadi, saying the Security Council’s terrorist blacklist doesn’t prove someone is a terrorist.

Guy Martin, a London-based lawyer for Mr. Qadi, called his terrorist designation “a gross and ongoing miscarriage of justice.”

Mr. Qadi, whose business empire is based mostly in Saudi Arabia, is a longtime partner of Turkish businessman Cüneyd Zapsu, as well as other key Justice and Development Party figures. Over the past year, Turkish media and opposition leaders have disclosed that Turkey’s financial police investigated the activities of Mr. Qadi and alleged al Qaeda supporters in Turkey. That led them to delve into the relationships of Mr. Qadi and other Saudis with senior Justice and Development figures, including Mr. Erdogan.

Among Mr. Qadi’s largest Turkish investments is the discount-supermarket chain BIM, one of Turkey’s biggest companies, with more than 1,500 outlets and annual sales of about $1.5 billion. BIM, which trades on the Istanbul Stock Exchange, is a discounter modeled in part on Wal-Mart and other low-price chains. Mr. Zapsu also was among BIM’s founding partners.

Mr. Zapsu, who in 2001 helped Mr. Erdogan found the Justice and Development Party, also supported an Islamic charity Mr. Qadi founded that is at the center of the U.S. and Security Council decision to freeze the Saudi businessman’s assets. A Turkish financial-police report seen by The Wall Street Journal found that in the 1990s, Mr. Zapsu and his mother gave $300,000 to Mr. Qadi’s Muwafaq charity, which U.S. officials labeled a front for al Qaeda shortly after 9/11.

Central Intelligence Agency reports say Muwafaq, now defunct, specialized in purchasing and smuggling arms for Islamic radicals. The U.S. government’s special commission on the Sept. 11, 2001, attack and law-enforcement agencies have cited Saudi-backed Islamic charities as a primary source of funding for al Qaeda.

Mr. Zapsu also has business ties to two Islamic banks funded with Saudi capital — Dallah Al Baraka and Dar Al Mal Al Islam — that were accused of supporting al Qaeda in civil suits filed by families of Sept. 11 victims in the U.S. District Court for the Southern District of New York. Both defendants adamantly deny the allegations, and the court dismissed claims against Al Baraka.

Mr. Zapsu said in an email that his business and personal relationships with Mr. Qadi were investigated by Turkish police. He said prosecutors decided last year “that there was no reason for a court case and no wrongdoing.” Mr. Zapsu said he sold his interest in BIM in 2003 and no longer is involved with the company.

Finance Probes
Two reports by Turkey’s financial police allege potential money-laundering and other possible crimes by Mr. Qadi and unnamed associates. But Turkish prosecutors declined to bring criminal cases in both 2004 and 2006, citing a lack of e
vidence. Mr. Erdogan’s political opponents say the probes were quashed by the Finance Ministry. The top officer on the case was recently fired. According to the government, he abused his authority to investigate top politicians.

Mr. Qadi arrived in Turkey in 1996, within a month of alleged al Qaeda logistics coordinator Wael Julaidan. The two men are longtime business partners and engaged in large transactions with a Turkish firm controlled by two of al Qaeda’s top leaders, according to business records and U.S. intelligence files. Lawyers for Mr. Julaidan say he denies supporting al Qaeda.

A lengthy paper trail involving an offshore company in the Isle of Man shows how millions of dollars of assets in Turkey once controlled by Mr. Qadi have been shifted in recent years to his associates, in potential violation of the U.N.’s asset freeze. Corporate records show a 26.4% stake in BIM that was originally controlled by Mr. Qadi passed to two of his business partners, through a company called Worldwide Ltd. in the Isle of Man, a tax haven in the U.K.

Worldwide originally was controlled by several people who use the same Jidda business address as Mr. Qadi. In 2004, two Jidda businessmen who are longtime associates of Mr. Qadi took control of Worldwide, Isle of Man filings state. The following year, when BIM released a new financial report, Worldwide disappeared from its list of major shareholders and the two businessmen appeared on the list for the first time. Together with another Isle of Man company, they control precisely 26.4% of BIM shares.

One of the men, Abdul Ghani Al Khereiji, is a longtime business partner of Mr. Qadi who co-founded the Muwafaq charity, records show. He didn’t respond to requests for comment. The other new BIM shareholder, architect Zuhair Fayez, also is a longtime associate of Mr. Qadi. Mr. Fayez said in an email that his shares in Worldwide “were not purchased from Mr. Qadi,” but he didn’t elaborate.

Transferred Stake
In a statement, BIM said Worldwide transferred its stake to the two men in March 2005. “Our information…is that the assignment procedures were made in accordance with the law,” BIM said. The company said it “has no knowledge of the share structure of Worldwide.” If Mr. Qadi benefited from the sale of Worldwide shares, that would breach the U.N. sanctions against him.

Some of Mr. Qadi’s dealings in Turkey are recounted in a 2006 book, “Charitable Terrorist,” by Nedim Sener. Mr. Qadi has filed a defamation suit in an Istanbul court against Mr. Sener, who in the Turkish daily Milliyet also wrote of a real-estate deal involving Mr. Qadi that may also violate the Security Council sanctions. The sanctions, legally binding on U.N. member states, ban any large financial transactions or international travel by the roughly 350 individuals designated as terrorists or their sponsors.

Christophe Payot, a spokesman for the U.N.’s sanctions committee, declined to discuss any possible violations by Turkey or Mr. Qadi. The panel’s chairman announced in May it would examine “possible instances of noncompliance” with the al Qaeda sanctions.

The U.N. sanctions aren’t always effective, according to experts on the subject. Many countries either don’t write or police laws to enforce them, or aren’t equipped to track designees who use offshore companies and complex corporate structures. In the case of Mr. Qadi’s Turkish assets, the problem is that “there are so many ways of structuring and layering things, they are not clearly his assets,” said Victor Comras, an attorney and former U.N. terror-finance expert.

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