According to a 2004 civil complaint now winding its way to trial, the bank’s purported customers got ahold of Jacob “Kobi” Mandell when he and a buddy skipped school in May of 2001 to hike near the Mandell’s place in Tokoa,Israel. The professional rescuers found the pair two-days later with skulls caved in and bodies mutilated.
He was an eighth-grader.
Palestinian Hezbollah claimed those pair of victories, but according to the claim, the Popular Resistance Committees are broadly understood to have been behind the attack.
The bank’s customers also managed to reroute the currents of Gloria Kushner’s life on May 19, 2002 as she shopped in an open-air market. A suicide bomber detonated a vest full of nails, screws and bolts and Kushner caught a fair amount of them; she was among the 50 lucky ones who took the flak in their spines, jaws, eyes and knees. Three weren’t as fortunate as she was: They took in their skulls and chests and died.
Oddly, both Hamas and the Popular Front for the Liberation of Palestine claimed credit.
In a 2005 complaint, a 23-year old Hamas suicide bomber named Shadi Toubasi walked into the Arab-owned Matza restaurant in Haifa and detonated a bomb surrounded by nails and bolts into the late lunch crowd, leaving 15 dead and 40 wounded.
Toubasi was also a customer of the bank, according to the claim.
The bank in question is Arab Bank, an Amman, Jordan-based bank with about $50.6-billion in assets and more than $780-million in profit last year. The complaints allege that Arab Bank played a key role in what could be termed “The bureaucracy of terror.” Specifically, that the bank’s maintenance of at least seven separate accounts for Hamas-linked so-called charitable foundations facilitated the rapid transfer of donations (given by Arabs as zakat, a mandatory charitable tithe) between valid and efficient social-service groups and their sister organizations, the armed units that carry out the bombing attacks.
Just as importantly, Arab Bank allegedly also maintained the accounts that Hamas and PIJ used to pay out the families of the killed, wounded and captured operatives and leaders. The $5316 payments to the so-called martyrs (known as Shahid) were, according to the suits, remarkable recruiting mechanisms in that they represented more than a year’s wages in the poverty-racked Gaza Strip and West Bank. Indeed, the Bank used Hamas and PIJ-issued Martyrs Kits to administer payments to the families of suicide bombers.
Arab Bank also lent a material amount of prestige and gravity to the fund-raising efforts of Palestinian relief efforts. In 2002, as Saudi-led telethons raised more than $100-million for the Support of the Intifada Al Quds, the presence of Arab Bank assured donors wary of the endemic corruption of the Yassir Arafat Fatah regime that the money would at least get to a well-capitalized, professionally-run institution.
These aren’t merely the assertions of trial lawyers seeking a payday.
They largely port onto the claims the Office of the Comptroller of the Currency and the Financial Crimes Enforcement Network made in a sharply worded 2005 release that accused the bank of failing to adequately control suspicious activity and for not maintaining proper anti-money laundering programs.
The finding also carried a $24-million penalty. To comply with the escalating U.S. demands for transparency, Arab Bank ceased doing its own dollar-denominated business at its New York city branch and now conducts transactions via correspondent-banking relationships in the U.S. with J.P. Morgan Chase, HSBC and Wells Fargo. [The FI.com sought comment from all three banks, but only HSBC replied. See here.]
Arab Bank’s Washington, D.C.-based public relations counsel, Bob Chlopak, did not return an E-mail seeking comment. In the past, Chlopak–who has also done lobbying on behalf of the bank, including receiving $220,000 in 2005, the year the OCC levied its fine–has argued elsewhere that the bank provided “routine and lawful” banking activities to the likes of the Saudi Committee. [Click here for an example of Arab Bank’s motion-to-dismiss arguments.] On other occasions, Arab Bank’s lawyers have advanced less traditional arguments on its behalf, claiming that some nations view the acts that Arab Bank was purportedly party to–suicide bombings, assaults and the like–as morally acceptable given the politcal climate. [See page 40 of a 2007 letter here, in which Judge Nina Gershon of the Eastern District of New York fairly directly dispatches this argument.]
Last Wednesday, matters took a turn south for Arab Bank when Judge Gershon delivered an unsparing rebuke of Arab Bank and its efforts to avoid discovery in the Linde case. Rejecting the bank’s claim that it could not produce documents and account information about the activity in the Hamas and PIJ accounts for fear of violating privacy laws in Jordan, Lebanon and Palestine, Gershon noted that Lebanon and Jordan’s rules make clear that in matters of terror financing, any such privacy rules are void.
In a devastating blow, Gershon said that when and if the case gets to trial, the jury can presume “Adverse inference,” or more plainly, that Arab Bank–per the lawsuit claims–continued to knowingly provide key financial services to groups like Hamas and its leaders long after they had been designated terrorist groups in the U.S. and Europe.
This puts Arab Bank in a Morton’s Fork, caught between two very, very unpleasant choices.
On the one hand, Arab Bank can go into court in front of 12 people who have been instructed that they are hiding evidence that greatly supports their opponent’s cases in a courthouse a few miles from Ground Zero. Their ultimate liability in such a case could conceivably begin well into the hundreds of millions of dollars. Given the Judge’s ruling, even settling out of court becomes an expensive proposition.
On the other, they walk away from it all, shut their U.S. branch at 520 Madison Avenue in Manhattan and cease doing dollar-denominated business. At that point though, they are largely shut out of the global economy in that they cannot offer their corporate customers throughout the Middle-East an ability to move money into or out of the U.S. or its currency. It is, in a sense, choosing professional suicide.
There is, of course, a third choice–Arab Bank could produce the documents and, given the repeated public and legal claims of innocence, press its interests in court.
But this is the one option they appear to have ruled out even though they have the possibility of suffering a brutal legal judgement or even a body-blow to their 80-year old banking franchise. In short, it is a curious state of affairs when disobeying the plainly written demands of a Federal Judge becomes a legal tactic.
The question, then, becomes why? How did a substantial institution like Arab Bank get on the horns of such a dilemma?
Looking at Arab Bank’s annual reports over the decades provides an answer as to how the bank could find itself in such hot water.
In a word: There is a direct line between views of the founders of Arab Bank and the provision of banking services to Hamas years after they were named terrorists. Perhaps another way of putting this is that Arab Bank was built to be the banking intermediary for the political and economic aspirations of Arab Nationalism. When the results of the Six-Day war in 1967 cast this premise into doubt, the bank philosophically aligned itself with the PLO and whatever other institutions emerged, presumably such as Hamas, that would challenge Israel.
In 1957, Arab Bank chairman Abdul Hameed Shoman led off his letter to investors in the 1956 annual report with a no-holds barred summary of the actions of “Britain, France and their puppet ‘Israel’” in attempting to exterminate “Arab Nationalism.” But for the “prowess of the Egyptians, their army and government,” per Shoman, “The invaders failed to achieve their objective.” Acknowledging that the “Zionists still cling desperately to the Gaza Strip and parts of Sinai in spite of the fact that the United Nations have repeatedly called on them to withdraw…”
The 1964 report celebrated numerous achievements of Arab unity including the founding of the Palestine Liberation Organization whose mission, Shoman said, would be to seek the “Return of the occupied part of Palestine to the Arabs.”
In 1968, Shoman took the gloves off, coming close to calling for a multi-year holy war. Decrying the “Zionist Occupation” and its evil hold on “Our beloved holy places,” he argues that “With the expansionist policy of the Zionists unmasked” there was little to do for Arabs but to “Sacrifice the lives and offer the money needed for the self-defense and for the liberation of their sacred places and all their occupied territories.”
The 1970 report offers more of the same: The Black September combat between the Jordanian military and factions of the PLO was “Tragic…fighting among Arab Brethren can only hurt our cause and serve the evil designs of the Zionist enemy.”
Of course, most every bank in the U.S. also prides itself on appealing to the local tastes and mores. Banks in Boston do a good business in selling co-branded Red Sox and Patriots credit cards and in polygot New York, English is virtually a second language in many teller’s windows. Throughout the Southeast, banks happily convert into shrines to the local high-school or college football teams every autumn. So it is for Arab Bank, except instead of boosting civic pride in the local quarterback, they played a bureaucratic role in peddling dreams of an eternal paradise for the soldiers in a 60-year old war.
There is a bitter irony at the heart of Arab Bank’s troubles in the U.S. justice system.
Time spent in Arab Bank’s financial filings reveal it to be something that has become exceedingly rare on these shores: A conservative and well-run bank. Its lending practices appear to be both diverse and sound, and while it operates in 30 countries, it has never sought to minimize its retail presence, serving their clients even as civil wars and insurrections raged. Unlike the majority of its American and British peers, it appears to have viewed its balance sheet not as a trading ledger with a retail banking franchise attached, but, rather, something that should be treated with respect. To cap it off, in 2008, a year where many American banks became wards of the state, Arab Bank crossed $1-billion in earnings for the first time.
But it is all for naught. Arab Bank stared at the abyss and recently, the abyss has started staring right back.
For decades fear of the “Zionist” other served the bank well and led its managers, for both political and professional reasons, to stridently support the abolition of the state of Israel. Now, in courtroom 6D in the Eastern District of New York, years away from the twisted buses and smoking restaurant ruins in Israel, a day of reckoning may have arrived.
And somewhere in Jordan, in a server room or on a backup disc, lie a series of documents that a bank’s management are risking their professional lives to keep from the light of day.