http://online.wsj.com/article/SB10001424052748704679204575646880193400368.ht ml
* DECEMBER 3, 2010, 1:55 P.M. ET Jordan Intervenes in U.S. Terror-Funding Suits * <http://online.wsj.com/article/SB10001424052748704679204575646880193400368.h tml> smaller By <http://online.wsj.com/search/term.html?KEYWORDS=THOMAS+CATAN&bylinesearch=t rue> THOMAS CATAN WASHINGTON-Jordan is stepping up efforts to shield its biggest bank from several lawsuits in New York that claim it helped fund terrorist operations, cases that are stirring tensions between the U.S. and one of its closest Middle East allies. A set of related U.S. civil suits filed in federal district court in Brooklyn, N.Y., against Arab Bank PLC allege the bank knowingly routed compensation payments from Saudi donors to suicide bombers' families. The suits' plaintiffs also allege the bank helped finance groups such as Hamas and Palestinian Islamic Jihad, the U.S. considers terrorist organizations. Arab Bank denies the charges. Jordan has taken the rare step of intervening directly on behalf of Arab Bank, following a series of what people familiar with the matter say were unsuccessful attempts to get the U.S. government to weigh in on the case. In a brief last month, Jordan backed an Arab Bank appeal that argued that the U.S. judge hearing the cases is unfairly punishing the bank for failing to turn over what it says are confidential client records. Jordan's brief said the judge's sanctions could be both ruinous for the bank and "potentially calamitous" for the economies of the Middle East. It also suggested that key U.S. foreign policy goals in the region-such as fighting terrorism or pursuing peace between Israel and the Palestinians-could be endangered. The matter shows the uncomfortable choices the U.S. government faces as terrorism victims pursue justice in the country's courts. "On the one hand, [the government] may be concerned about any judgment that would threaten viability of Arab Bank, given the important role it plays in Jordan," says John Bellinger, the State Department's former top legal adviser, who is now at law firm Arnold & Porter. "On the other, they wouldn't want to appear to be standing in way of victims of terrorism." Following six years of legal wrangling, the first case, involving Americans allegedly killed by Hamas, is winding its way toward trial at the Brooklyn court. There, in July, Judge Nina Gershon imposed harsh sanctions on Arab Bank after it refused to hand over client records in more than a half dozen related civil cases, citing bank secrecy laws in Jordan and other countries in which it operates. Judge Gershon said Arab Bank should be punished to stop it from gaining an unfair advantage from its "recalcitrance" to produce the records. She found the available evidence showed the missing documents would likely substantiate the plaintiffs' claims. So she ruled that a jury at an upcoming trial would be free to infer, from the bank's refusal to produce the records, that it knowingly provided financial services to terrorists. Under the order, the bank would also be barred from arguing that it didn't know that people who received payments were terrorists, or that it didn't intend to commit any offenses-a key defense-because those assertions could conceivably be proved or disproved by the missing documents. Jordan's brief, filed last month to New York's Second Circuit Court of appeals, assailed the July order as an "affront to the Kingdom's sovereignty." The bank, it said, faced financial ruin because, under the judge's guidelines, it would almost certainly be found liable of knowingly supporting terrorism. Jordan's brief also argued that any damage to the bank, a crucial cog in the Middle East's economy, could undermine global counterterrorism efforts by pushing customers into underground financial system where transactions cannot be tracked. It argued that it could trigger political instability and imperil the Middle East peace process. Wages to Palestinian officials, for example, are paid through Arab Bank. Jordan is a close partner of the U.S. in its effort to broker peace between Israel and the Palestinians, as well as its counter-terrorism efforts. In recent years, top Jordanian officials have repeatedly asked U.S. officials from the State Department, Treasury and the White House National Security Council to intervene in the case, say people familiar with the matter. So far, the U.S. government has declined its requests. The U.S. State Department and the Jordanian embassy in Washington declined to comment. The plaintiffs in the current cases say Jordan's intervention is unwarranted and could set a dangerous precedent for the U.S. justice system. "I don't recall a foreign country ever to have argued, in a suit in which it is not directly involved, that a U.S. court judgment should be overturned because it would imperil diplomatic relations," said Allan Gerson, an attorney representing some of the plaintiffs. Such a stance, he adds, "can have grave consequences for the ability of foreign governments to intervene in our judicial system." Arab Bank denies the allegations against it, saying it merely provided "routine banking services" to people it didn't know were implicated in terrorism. "Arab Bank has a long history of promoting economic development, stability and security in the Middle East, including in Jordan, one of America's closest allies, and the territories under the control of the Palestinian Authority," says Kevin Walsh, an attorney for the bank. The bank has asked the New York appeals court to examine whether Judge Gershon's order went too far, denying it a chance to defend itself. Arab Bank has also received expressions of support from the Lebanese government and the Palestinian Authority, which said in letters to the court that lifting their privacy laws would cause people to shun the formal banking system. Arab Bank paid a $24 million civil penalty in 2005 after U.S. banking regulators found it lacked adequate money-laundering controls to prevent it from being used for terrorist financing. The bank said it agreed to the fine and the consent order to put the matter behind it. [Non-text portions of this message have been removed] ------------------------------------ -------------------------- Want to discuss this topic? 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