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.