bin Laden family-Saudi-US Connections
Bin Laden Family Liquidates Holdings With Carlyle Group
By KURT EICHENWALD, New York Times
October 26, 2001
WASHINGTON, Oct. 25 - The Saudi family of Osama bin Laden is severing its financial ties with the Carlyle Group, a private investment firm known for its connections to influential Washington political figures, executives who have been briefed on the decision said today.
The decision, reached late last week, was by mutual agreement, a senior executive with the investment firm said. It came largely as a result of public controversy about the family's stake in a Carlyle fund that invests in buyouts of military and aerospace companies, the executive said.
After the Sept. 11 attacks, the investment was criticized amid speculation that the family might profit from increased military spending from America's war on terrorism.
"This wasn't done because anyone thought they did anything wrong," the Carlyle executive said. "We didn't do it with relish or great glee. We felt and they felt that it was something that was causing more attention than it deserved, so we both decided it made sense, given the circumstances, to liquidate the position."
In many ways, the move by the bin Laden family reflects the
problems the family has faced since Sept. 11, as it has struggled with tensions
between its global business interests and its connection to Mr. bin Laden,
one of 53 siblings.
The family, which publicly condemned the terrorist attack, disowned Mr. bin
Laden in the 1990's and maintains that it has no relationship with him anymore.
The majority of the family's net worth comes from its primary company, the Saudi Binladin Group, one of the most prominent construction companies in the Middle East.
But the family also invests around the globe with an array of funds and financial institutions, including several in the United States. The Carlyle investments in question are among those.
That financial and regional influence has won the family and its business an array of prominent visitors from the United States. Trips for American businesses arranged by the U.S.-Saudi Arabian Business Council, a Washington trade organization, often feature visits with the Saudi Binladin Group.
In recent years, Frank C. Carlucci, the chairman of Carlyle and a former secretary of defense, has visited the family's headquarters in Jeddah, Saudi Arabia, as have former President George Bush and James A. Baker III, the former secretary of state. Mr. Bush works as an adviser to Carlyle, and Mr. Baker is a partner in the firm.
The family's financial relationship with Carlyle began in 1994. At that time, they committed $2 million to a buyout fund, Carlyle Partners II, a tiny fraction of the $1.3 billion raised for the fund. Much of that money was then invested in the fund gradually over many years, the Carlyle executive said, as new opportunities for corporate buyouts emerged.
As a result of the recent decision to sever the financial relationship with Carlyle, the investment firm bought out the family's stake. A much smaller investment by the family in a single deal, amounting to about $20,000 or less, is also being liquidated, the Carlyle executive said.
In the week after the Sept. 11 attacks, Abdullah bin Laden picked up the telephone at his penthouse in Cambridge, Mass., and began dialing for some expert advice.
This time, it seemed, his half brother Osama bin Laden might have finally shattered the family's reputation, especially for those members who lived in the United States.
Despite the family's public disavowal of the terrorist mastermind suspect, federal agents swooped in to question family members' neighbors and friends. Reporters piled up outside their doors. More critically, companies that did business with the $5 billion family construction empire in Saudi Arabia were starting to get jittery about dealing with the family.
So the 35-year-old Abdullah bin Laden, a Harvard Law School alumnus, set out to protect the family name. Largely through intermediaries, he sought out advisers in law and political consulting, among them Stanley Arkin, the influential New York lawyer. Mr. Arkin, who declined to comment, turned down the offer. Another prominent communications expert who was contacted later called the F.B.I. to pass on Mr. bin Laden's telephone number.
His troubles that week reflect the challenge facing this wealthy merchant family as it scrambles to protect its financial holdings and reputation around the world.
It is the family of both a terrorist bent on destroying Western influence in the Middle East, and the owner of the Saudi Binladin Group, a corporate giant with tens of thousands of employees and business dealings with companies like General Electric and Motorola. (The company uses a different transliteration of the Arabic name from the usual Western "bin Laden.")
According to American business executives, family members do business with an array of financial institutions, including Goldman, Sachs, Citigroup and Deutschebank. Until earlier this month, the family also had a stake in the Carlyle Group, a Washington investment firm with ties to the luminaries in politics. The two sides decided that the controversy over the connection between the bin Ladens and Carlyle was not worth the relatively small stake of $2 million that the family had committed to the buyout firm.
Others are sticking with them, citing American officials who say they have no evidence of financial links between the family and Osama bin Laden. "We've talked to the State Department and so far as we can tell, these people are clean," said Stephen Seiler, chief executive of Hybridon, a biotech company in Cambridge in which a bin Laden brother has a small stake.
But one American executive with a longstanding corporate relationship with the family added: "Their situation is catastrophic from a business point of view. They had a pretty good brand name, but the brand name is now destroyed in many ways." Figuring out how to restore that name is proving difficult. "It's understandable the bin Ladens just want to hide," said Prof. Adil Najam of Boston University, who has studied the family. "But this will not go away, and their silence is costing them."
In the days after Sept. 11, the bin Ladens in America left for Saudi Arabia, with the assistance of Prince Bandar bin Sultan, Saudi Arabia's ambassador in Washington. Now, people who have been in contact with the family said, they are working to devise a public-relations strategy with his numerous half brothers.
Abdullah bin Laden, who has been shuttling between Riyadh, the
capital, and the company headquarters in Jidda, had hoped to come up with
a plan in a couple of days. But two weeks later, the family is still debating
what to do.
To the family, the opinion of the West is particularly important. "The
United States has been like a second home to many members of the family,"
one family member said in an interview from Saudi Arabia.
The bin Ladens must reach a consensus before taking any action. One question they may face is the family's position toward Mohammed Jamal Khalifa, a man who has been identified as Osama bin Laden's brother-in-law and who has been accused by law enforcement officials in the Philippines of having funneled money to Islamic militants. Mr. Khalifa has denied the allegation.
The bin Ladens also will not do anything that might bring disapproval from the Saudi royal family, which faces its own challenge in how to relate to its Western allies and its own Islamic supporters.
"The Saudi culture is just so different," said one American executive who knows the family well. "They are just not used to this. They move very, very slowly."
It was never supposed to turn out this way for a storybook clan. From the time the family patriarch, Mohammed bin Laden, moved from Yemen to Saudi Arabia in the first half of the last century, fortune had smiled on the family. He arrived penniless and illiterate, but his construction work won a reputation as top-notch. Business took off when he won the favor of the king, building palaces for the royal family. He and his company, the Saudi Binladin Group, won coveted contracts to restore and expand the sacred mosques at Mecca and Medina.
"You can't do much work in Saudi Arabia in our line of work without having something to do with the bin Laden enterprises," said Keith Karpe, a spokesman for Fluor, a company based in the United States that recently joined the bin Ladens in building power and petrochemical plants in the kingdom.
Osama bin Laden was born the 17th son of more than 50 children, and like the others he was given every opportunity for an education. But after his father's death in an airplane accident, Mr. bin Laden did not enter the family business; instead he found his calling in 1979, when the Soviet Union invaded Afghanistan.
Fifteen years later, his radical views led the Saudis to revoke his citizenship and his family cut him off. The government also froze his bank accounts, according to an official with the Saudi Arabian Monetary Agency, the central bank. At the same time, his siblings expanded the business, struggling to keep it separate from their increasingly infamous family member. "Osama was a taboo subject," said Dallas Vincent, an American who worked at the company in Saudi Arabia.
To Americans who worked at every level of the company, there was little doubt about the walls between Mr. bin Laden and his siblings. "He was totally ignored," said Daniel Uman, who worked as a construction manager on a 1995 S.B.G. project in Saudi Arabia. "He was totally ostracized by the family and by the kingdom." The severing of ties with Osama bin Laden has been extensive, the family member said. The terrorist maintains no stake in the family business, and receives no direct or indirect financial benefits from it, he said, maintaining that news accounts of Mr. bin Laden having control of hundreds of millions of dollars in inheritance are untrue.
On three occasions, the family sent delegations to Sudan, where Osama bin Laden lived, to try to persuade him to join the family company. They were rebuffed.
Even as the renegade's rage with the West grew, his family became fascinated by it. Salem bin Laden, who took the company reins after his father, Mohammed, died, set the pace. "He rarely stayed in one place for more than a couple of days," said Wayne Fagan, a lawyer in San Antonio who helped Salem bin Laden analyze potential investments from real estate to Hollywood westerns.
After Salem, like his father, died in a plane crash, the company fell to the next oldest son, Bakr, and a board of other half brothers. Their reach into the Western business world expanded. They established Global Administration, based in London, to manage their cash in the Western world. Largely through that company, they established their financial relationships with entities like Citigroup, Carlyle and the Fremont Group, a San Francisco investment firm that includes former Secretary of State George P. Shultz as a director.
But in business meetings, they felt compelled to apologize for the activities of Osama, even though he was still largely unknown in the West. "When I first met the group, they made it very clear that they had disowned Osama bin Laden and that they had absolutely no connection," said one American executive who began to do business with the company in the early 1990's.
With the company expanding its contacts in the West, more and more of the family members chose to attend school in Europe and America, and even live there. Boston became a hub for the family. Many lived at the exclusive Flagship Wharf condominiums in Charlestown, where one of the youngest brothers, also named Mohammed, acquired 10 apartments.
The bin Ladens of Boston largely kept to themselves in socializing. The women drove cars and flew planes, and one spurned tradition by taking her husband's and not her father's name. But they dressed conservatively and were proud of their Arabic roots.
When Mohammed's sister Sana graduated from Wheelock College after studying early childhood education, she organized a Saudi festival at the Children's Museum in Boston, with costumes, juiced mangos and camel humps that she sewed for the children to race around in.
When Mohammed and his family returned to Jidda three years ago, Abdullah, who is single, took on the role of imam for the nieces and nephews, dispensing advice and organizing their lives. Now, he is getting advice on how the family might regain the life they had here.
But Dr. Terry Bennett, a New Hampshire physician and longtime family friend, said the bin Ladens needed go only so far in making public amends. "I've sent them the advice," he said, that they should "make a one-time statement, `We are deeply apologetic,' and then close out. They should not be mea culpa- ing. It is not their fault."
JEDDAH, Saudi Arabia -- Saudi Arabia has warned the Bush administration that its perceived failure to end Israeli-Palestinian violence could prompt the kingdom to reconsider its relationship with the U.S.
At a meeting in the capital of Riyadh last week, Saudi Crown
Prince Abdullah bin Abdul Aziz Al Saud addressed a group of 150 prominent
Saudis in a bid to convince them, as well as religious forces in the kingdom,
that the government is defending Arab and Muslim interests. Crown Prince Abdullah
read from a letter he sent to President
George W. Bush on Aug. 27, according to three participants who took notes
at the meeting, in which he wrote that "a time comes when peoples and
nations part. We are at a crossroads. It is time for the United States and
Saudi Arabia to look at their separate interests. Those governments that don't
feel the pulse of the people and respond to it will suffer the fate of the
Shah of Iran."
The prince was referring to the Iranian king, Reza Pahlavi, who was forced into exile in 1979 by an Islamic revolution led by Ayatollah Ruhollah Khomeini.
Western diplomats and Saudi analysts said there was no immediate threat to the stability of the Saudi monarchy but noted that the Saudi government is walking a thin line between support for the U.S. war against terrorism and widespread popular anger at the U.S. because of its perceived support of Israel.
During a phone call with Mr. Bush late last week, Crown Prince
Abdullah reiterated his call for the U.S. to rein in Israel to prevent further
fighting with Palestinians, according to U.S. diplomats and the official Saudi
Press Agency.
A rupture between Riyadh and Washington is unlikely despite mounting Saudi
frustration with U.S. Middle East policy and unhappiness over the course of
the war in Afghanistan, U.S. and other Western diplomats said. They noted,
however, that there was a considerable amount of debate within the royal family
over the cost of the U.S.-Saudi relationship.
Saudi Arabia, the world's largest oil producer, plays a key role in controlling oil prices and production within the Organization of Petroleum Exporting Countries, moderating positions of the Arab League and supporting U.S. military control of no-fly zones in Iraq. An estimated 5,000 U.S. troops are based in the kingdom.
The U.S. diplomats said the letter from the prince, who effectively runs the Saudi government, was part of a continuing exchange between the U.S. and Saudi Arabia and was consistent with other communications between the two countries. "It was a letter from a friend to a friend trying to make plain that Saudi Arabia is in an untenable position," a U.S. diplomat said. Asked to confirm the language of the letter quoted by the Saudis, the diplomat said it had been "embellished." The diplomat confirmed that the letter "reviewed how [Saudi-U.S.] relations over the years had been mutually beneficial."
Another western diplomat said the "underlying Saudi message
is that failure to resolve the Middle East conflict will mean that Saudi Arabia
will no longer be able to do what it has done in the past. The middle ground
is shrinking.
The Saudis are worried about what happens after Afghanistan."
"There is not much difference in attitude at senior levels of the family. They believe that the baggage that goes with the U.S. relationship is very much worth it. They are trying to address concerns at the popular level and among junior members of the family," one diplomat said.
People close to the Saudi government and members of the Saudi royal family said they feared destabilization of the Islamic world if the war against Afghanistan lasts into the Muslim holy month of Ramadan, which begins in the middle of November, or if the U.S. begins targeting other nations such as Iraq.
"Ramadan is very important," said Prince Turki as-Sudairi, a member of the royal family and the publisher of Al Riyadh newspaper. "Emotions will run high. There will be more support for Islamic groups. Some governments could be toppled," he said. Asked what countries he was referring to, Prince Turki said: "Pakistan, Indonesia. We worry about civil war in Pakistan. The impact would be dramatic."
Crown Prince Abdullah has now admitted what everyone else has been thinking, which is that the U.S.-Saudi relationship is "at a crossroads."
The Journal reported yesterday that the Saudi ruler wrote to President Bush in August that "A time comes when peoples and nations part" and that "It is time for the U.S. and Saudi Arabia to look at their separate interests. Those governments that don't feel the pulse of the people and respond to it will suffer the fate of the Shah of Iran."
It's time the U.S. took the Prince up on his offer. For the strains of the war on terrorism are revealing that the long-standing U.S.-Saudi bargain can't hold. In return for oil and the occasional pro-American vote at the United Nations, Washington has looked the other way at Saudi Arabia's precarious politics. Meanwhile, the princelings have long posited that if the U.S. doesn't support the House of Saud, it will end up with a radical Muslim replacement it likes even less.
That compact looked tattered long ago, but after September 11 it hangs in shreds. U.S. support for the House of Saud has now yielded Saudi support for those waging war on the U.S. homeland. If a more radical regime is going to take hold in Saudi Arabia, better to face that fact sooner rather than later. Coping with an overtly hostile Saudi government would at least have the virtue of clarity that doesn't exist today. It would also force a decision on whether to take over the Saudi oilfields, which would put an end to OPEC.
Today the dominant fact of the U.S.-Saudi relationship is that this "friend" is a principal source of funding for al Qaeda. The U.S. Treasury has identified several Saudi charities and a prominent Saudi businessman as bankrollers of terrorism. The Saudi response has been to decline to participate in an international consortium of more than 80 nations that have agreed to block the assets of terrorist groups.
This affront comes on top of the Saudi refusal to cooperate with the U.S. investigation of the 1996 Khobar Towers bombing, in which 19 American servicemen died. Since last month's terrorist attacks in the U.S., numerous connections have also emerged between Saudi Arabia and the hijackers, some of whom carried Saudi passports.
Many of those currently under arrest are Saudis, but the official Riyadh reaction has been to overlook these facts. All of this despite the fact that 5,000 U.S. troops are based in the Kingdom -- less to protect American interests than to protect the Saudis from Saddam and other neighborhood bullies.
This contradictory relationship is not the fault of the Saudis alone; they get away with such behavior because Washington lets them. Even after September 11, senior Bush Administration officials inexplicably talk about being "pleased" with unspecified Saudi "cooperation," as if saying so will make it so. This is in keeping with a long history of U.S. complicity, led by a State Department that equates Saudi stability with the status quo.
The U.S. is so fearful of "instability" that it's afraid to criticize the current regime, much less encourage it to move in a more democratic direction. But the status quo is hardly stable. The U.S. has looked the other way while the Saudi ruling family has stifled even moderate challenges to its power. This in turn has bred radical Islam as the only outlet for dissent, which the Saudis have attempted to buy off with cash for fundamentalist mosques and schools that promote the most venomous anti-American sentiments.
The result is now not only terrorism against America but a threat to the survival of the Saudi royals too. The only thing the admirers of Osama bin Laden hate more than the United States is the House of Saud itself. Does Prince Abdullah really believe, as his letter to Mr. Bush suggests, that if somehow peace came to Palestine then bin Laden would leave them alone?
All of this is complicated by a succession struggle among princes
nearly as old as the elderly and ailing King Fahd. Oil is another complication.
It's an accident of history and geography that nearly a quarter of the world's
oil sits in these political backwaters. But as a practical matter, the debt-ridden
Saudis need the petrodollars as much as the West needs the oil. An OPEC embargo
for political reasons might send the developed world into recession, but the
West would weather it better than the Gulf countries.
So where does this leave the U.S.? The first imperative now is to stop Saudi
financing of America's enemies. This is a direct threat to U.S. national security.
It's also, however, a threat to Saudi security, something the U.S. could strive
to help them see more clearly. It would be a mistake to let the Saudis act
only behind the scenes without signing on publicly to the global effort against
terror financing. Nod-and-wink "cooperation" sends one more contradictory
signal about which side deserves to prevail.
Above all, it is in the U.S. interest to encourage the Saudis to enter the 21st century, now that they've missed the 20th. That includes a more open politics, so that the only dissenting voice is not radical Islam. Bahrain, newly liberalizing under a young emir, is proving that this can work. Five years ago that Arab nation faced political unrest, but after its democratic reforms Bahrain has had to confront relatively little anti-American sentiment now. It's past time Saudi Arabia learned a similar lesson.
Yes, the U.S.-Saudi relationship is at a crossroads. But so is the House of Saud. The current path is the one the Shah trod down, a walk into exile and chaos for his country. The alternative has its own risks, but it also has the promise of long-term survival.