Monday, July 03, 2006


Exactly Which Banking Transactions Are Being Watched?

Here’s a clear statement of the contradictions involved in the administration’s attack on the newspapers that wrote about the spying on banking transactions. As most everyone on the web seems to have mentioned, there was nothing secret about the spying at all. For Christ’s sake, the agency—SWIFT— that does the watching has it’s own web site where it discusses what it does!

But the government is trying a smoke-screen. Things are tense on the hill, and there’s a good chance the current administration will find itself in trouble, assuming some strong liberals get elected; enough of them, anyway, to shift the balance of power.

It’s about protection: protecting the Saudis because we just can’t afford to offend them... There may be something to that.

By Bill Gallagher
DETROIT -- The attacks on the media, especially The New York Times, over revelations that the Bush administration has been secretly rummaging through international banking transactions, deflects attention from a far more serious issue.

The real story is not that our government is looking at networks financing terrorist operations -- a legitimate and necessary activity -- but how poorly that job is done and how the greatest source of terrorist funding escapes serious scrutiny.

Lenny Wallace, a Florida-based financial consultant, has spent nearly five years trying to get to the bottom of a $5 billion series of loans involving Citigroup and a Saudi prince. The deal saw money bouncing from Singapore to Scotland to Miami. Wallace was retained to facilitate the loans and assist the bank in investing the proceeds. What he thought was a legitimate business venture turned into a mysterious shuffle of funds for nebulous purposes.

Jack Blum is a Washington lawyer and skilled investigator who has spent years following the trail of dirty money. William Greider reports in "The Nation" on Blum's assessment of phony furor over The New York Times blowing the lid off the government tracking international banking data.

"The scandal here is not government overreach, he tells me. The scandal is the pitiful reluctance of this administration (and others before it) to get serious about the problem," Greider reports. Blum told Greider the monitoring system the Times reported on seems "unexceptional" and "so narrowly focused" it ends up producing empty information.

"Meanwhile, the biggest purveyor of terrorist money, as everybody knows, are accounts in Saudi Arabia," Blum said. "Nobody will deal with it because the Saudis own half of America."

Lenny Wallace found himself in the middle of transactions that scream out for a full investigation, but so far all he's gotten is cheap lip service. On June 28, 2005, the U.S. Department of Justice informed Wallace that the FBI was investigating his formal complaint about the deal.

Barry Sabin, the chief of the Justice Department's criminal division, wrote Wallace, "We have reviewed your letter and forwarded your correspondence to Tim McCants, Unit Chief of the Terrorist Financing Operations Section of the Federal Bureau of Investigation, for further review." More than one year later, Wallace still has not been interviewed.

"When I heard from the Department of Justice that the FBI was investigating, I thought that things would finally start to happen fast and there isn't going to be a coverup," Wallace told me last week. He sighed, "Boy, was I wrong."

The U.S. Treasury Department has been tracking suspected terrorist financing by gaining access to records involving wire money transfers from records obtained from a Belgian-based banking cooperative known by its acronym, SWIFT.

The secret program the Bush administration launched weeks after the Sept. 11 attacks focuses on large sums of money being shifted overseas and into and out of the United States. Stuart Levey, an undersecretary at the Treasury Department, told The New York Times the program "has provided us with a unique and powerful window into the operation of terrorist networks."

President Bush called the Times report "disgraceful," and he and Vice President Dick Cheney claimed the report "impeded" the covert government program. Nonsense. Blaming the media is just a ruse to rouse the administration's political base.

It was no secret to most Americans and certainly sophisticated terrorist organizations that some efforts were underway to monitor international financial transactions. The story simply exposed a previously unknown aspect of the surveillance.

Rather than condemn the media, the administration could better spend its energies getting to work and seriously investigating the scheme Lenny Wallace uncovered.

"SWIFT transactions were at the heart of what I complained about to Citigroup and then to government authorities," he said. "That was in late 2001. Our government must know all about wired money from Citigroup to Saudis, but I've never heard anything."

Wallace's work, under contract, involved helping Citigroup's Miami office in facilitating $5 billion worth of business loans and assisting in investing the proceeds. He prepared the paper work for a series of complex transactions.

The deal involved account authorizations from Citigroup's Singapore office, and all details were verified and approved at the bank's Park Avenue headquarters and at the Miami branch.

Then Wallace learned that the collateral for the loans was based on phony documents and the real intended beneficiary was to be Saudi Prince Alwalled bin Al Saud, one of the richest men in the world. At the time he happened to own $10 billion in Citigroup stock. The deal was aborted one day before the terrible events of 9/11. Coincidence?

Wallace suspected the deal involved what the Saudi government calls "Account 98" funds. Those are funds for charitable, "humanitarian" activities, and the Saudis refuse to allow any outside government access to those accounts. Wealthy Saudis are known to use Account 98 funds to funnel money to terrorist groups.

Wallace has provided detailed documentation of the fizzled transaction to Citigroup officers, the Saudi government, members of Congress, the White House and, of course, the Justice Department.

Citigroup's rap sheet in shady deals is lengthy. The bank was deeply involved in the collapse of Enron and WorldCom. Citigroup in under investigation for its role in the failure of Parmalat, the Italian dairy giant. The governments in China, Japan, Great Britain and Argentina all have probes underway into Citigroup's dealings.

The Saudi royal family and Citigroup have been cozy for decades. For 20 years, Citigroup ran the operation of Saudi American Bank, known as Samba, a suspected conduit for terrorist funds.

After 9/11, the U.S. Treasury Department did ramp up efforts to track the money laundering used to finance al-Qaeda. Then-Secretary of State Paul O'Neill worked hard and diligently, but he ran into a major obstacle -- Saudi resistance.

O'Neill's frustrations are detailed in Ron Suskind's book "The Price of Loyalty." O'Neill kept detailed notes of his work, which he shared with Suskind. O'Neill sent his deputy Ken Dam to seek help from the Saudis tracking down the money flow to Osama bin Laden.

Dam met with Dr. Jobarah Al-Suraisy, the Saudi vice minister of finance, to discuss his government's willingness to cooperate with Washington. Suskind recounts the meeting and the Saudi style of cooperation. "The vice minister, according to internal Treasury documents, told Dam that 'he did not think that they had any accounts that might help terrorism.'"

While an interagency group grappled with the "Saudi problem," O'Neill was sent a note stating that "due to domestic Saudi political sensitivities, a more private and consultative approach was needed on achieving specific action." That meant, Suskind concludes, that "the Saudis could offer no publicly detectable assistance."

Even as Bush praised O'Neill for a "great job" in going after the money funneled to the terrorists, the treasury secretary told the president, "We know there's a lot more money out there that we just can't seem to get to. It's clean money, in charities, and we don't know where it is until long after it's been allocated and spent. By then it's too late."

But no one wanted to lean on the Saudis. Suskind describes O'Neill's frustration: "Without active investigations inside the kingdom -- with the Saudis as true co-investigators -- much of what remained was just sniffing the transactional trail of the dead 9/11 hijackers, a trail that was going cold."

The trail involving Citigroup's strange dealings with a Saudi billionaire may be getting cold, too, unless someone shows some initiative.

"I was told an FBI investigation was ongoing," Lenny Wallace says. "Exactly what has been happening? How is it possible to have a real investigation if I haven't even been interviewed?"

Bill Gallagher, a Peabody Award winner, is a former Niagara Falls city councilman who now covers Detroit for Fox2 News. His e-mail address is

Niagara Falls Reporter July 3 2006

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