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No Bailout for Jihad

FrontPage Magazine interviews litigator David Yerushalmi regarding his and the Thomas More Law Center's lawsuit against Treasury Secretary Henry Paulson.

FrontPage Magazine
By Jamie Glazov
December 23, 2008

FrontPage Interview’s guest today is David Yerushalmi, a litigator specializing in securities law, public policy relating to national security, and public interest law. He serves as general counsel to several policy think tanks, including the Center for Security Policy in Washington, D.C., headed up by former Reagan administration official Frank Gaffney, and the Institute for Advanced Strategic & Political Studies in Potomac, Maryland. Mr. Yerushalmi is the author of an upcoming Utah Law Review article examining in-depth the civil liability and criminal exposure for U.S. financial institutions engaged in Sharia-compliant finance. He is licensed and practices in Washington D.C., New York, California, and Arizona. Visit his policy website, the Society of Americans for National Existence (SANE).

FP: David Yerushalmi, welcome to Frontpage Interview.

Yerushalmi: Thank you, Jamie. Good to be back with you.

FP: On Monday, Dec. 15, 2008, a federal lawsuit was filed against U.S. Treasury Secretary Henry M. Paulson, Jr. and the Federal Reserve Board to stop all bailout funds from going to American International Group, Inc. ("AIG"). What is this about?

Yerushalmi: In late September 2008, the US Treasury decided it could not allow AIG to fail. AIG is this country’s, if not the world’s, largest insurance company. AIG was failing because it took outrageous and stupid risks by selling what are called credit default swaps (CDS), which in effect are an insurance policy against defaults by corporate borrowers. AIG used this new fangled business product, created (or at least popularized) in just the last few years, to "insure" the sub-prime mortgage securities which could only amount to good investment paper if the real estate market never had a serious downturn. Well, the market soured and, as we all know now, the sub-prime paper is worthless and AIG was left holding the proverbial empty bag and obligated to pay its rather absurd "insurance policies" -- the CDS products it sold to create a multi-trillion dollar business during the good years out of thin air.

To structure this deal, the USG (meaning the Treasury), laundered money to the New York Federal Reserve Bank which acts as a private entity when in fact it is just an appendage of the US Federal Reserve. But that is a legality we don't need to discuss here. The Fed and the NY Fed decided it needed to provide AIG with an $85 billion credit facility (like a revolving credit charge card). To get their grubby huge hands on this money, AIG had to hand over preferred stock (preferred means it has special benefits over regular shareholders) which would allow the Treasury (note this benefit went to the real player here not the Fed and not the NY Fed) to receive 79.9% of any dividends paid and to vote with the common stockholders in an amount equal to that 79.9%.

Jamie, by anyone's definition, if you control 79.9% of the voting rights of a company, you not only own the company you control it. That is de facto and de jure control. The company can do nothing you don't want it to. Period.

Later, in December, the Treasury effectively added another $40 billion and the Fed another $25 billion to bring the total bailout up to $150 billion.

So, this now gets us to the point that whatever AIG is doing it is effectively acting on behalf of the USG through a notion called in the law ‘state action’. If a private entity is really controlled by or acting in the place of government, that entity must abide by the protections in the US Constitution against government violations of our civil liberties. And of course this makes sense because if it were not the law, the USG could violate the Constitution at will by just setting up and acting through private companies.

The constitutional liberty at stake here is that the federal government will not act to promote or advocate or get entangled in a religious activity or doctrine because that would amount to a violation of the Establishment Clause of the First Amendment. Now, keep in mind that the courts have interpreted this Establishment Clause to keep the USG or any its agencies or ‘state actors’ from such innocent conduct as school vouchers where a parent might just use the voucher to send his or her child to a parochial school or allowing the display of the Ten Commandments in a courthouse or even suggesting to a public school elementary science class that evolution is a scientific theory and not fact and the students need not disavow wholesale other notions of creation (see, e.g., J. Scalia’s dissent in the denial of certiorari in Tangipahoa Parish Board Of Education V. Freiler).

In this case, the USG is actively promoting, through its ownership and absolute control of AIG, not just a religious law, but a theo-political doctrine that seeks the destruction of the religious liberty enshrined and protected by the First Amendment. If that is not violative of the First Amendment under existing law, I am not sure what would be.

FP: So what’s the basis of the lawsuit?

Yerushalmi: The basis is that AIG—which is now a state actor by virtue of the USG’s control and ownership of 79.9%—intentionally promotes Sharia-compliant businesses and insurance products, which by necessity must comply with the 1200 year old body of Islamic law based on the Qur’an and other Islamic canon, which demands the conversion, subjugation, or destruction of the infidel West, including the United States.

To help achieve these objectives and with the aid of 150 billion of federal tax dollars, AIG employs a three-person Shariah Advisory Board, with members from Saudi Arabia, Bahrain, and Pakistan. According to AIG, the role of its Sharia authority "is to review [its] operations, supervise its development of Islamic products, and determine Sharia compliance of these products and [its] investments." What AIG and the US government won’t tell you is that Sharia is a body of Islamic law and jurisprudence that seeks a one world hegemony or Caliphate and advocates jihad or murder as a legitimate, legal, and even obligatory means to that end.

FP: How are you personally connected to this lawsuit?

Yerushalmi: I am co-lead counsel along with the attorneys at the Thomas More Law Center. I am tasked with focusing on the specific financial aspects of the bailout and the Shariah-compliance elements. The Thomas More Law Center is focusing on the First Amendment components.

FP: How exactly does the AIG bailout work and what involvement does the USG have in AIG’s various business affairs including Shariah?

Yerushalmi: Beyond what I have explained above, what is important to know is that the Treasury could have structured this deal in any number of ways. It could have lent the money to AIG or just give it a grant. But instead, and for reasons only known to Treasury officials, they opted to take a direct ownership interest and to control AIG in absolute terms by granting itself the power to vote 79.9% of the voting rights of the company. What is also interesting is the fact that the Treasury, after it had decided to do this deal announced and conducted a course for all of its bureaucrats and technocrats called Islamic Finance 101. And, as one would expect, it was a course taught by cheerleaders of Shariah and Shariah-compliant finance. There was not one voice in the half-day seminar that even dared raise the rather troubling aspect of Shariah that calls for the death of apostates and for Shariah-faithful Muslims to engage in violent jihad against infidels such as the United States. Not a word about the fact that there is no Shariah-based political order (such as Saudi Arabia, Iran, or Sudan) that allows for religious freedom. Yet, the USG is conducting its affairs as if Shariah is just another "ethical" religious legal code like all others.

FP: Why do we care if AIG is offering a Muslim-friendly insurance product as just another way to make money even if the USG is now a shareholder? Doesn’t the USG invest in other companies that might offer religious consumers unique products? For example, what if the USG invests federal employee pension plan funds in a company that publishes books, including a line of religious books?

Yerushalmi: We should care a great deal. First, when the USG invests federal employee pension plans it is acting as an employer, not a government agency per se. In fact, the investment has nothing to do with the government’s tax and spending authority. Second, the investment in such plans is generally through an intermediary investment fund which in turn only invests passively and through minority holdings. In this case, we have the USG acting not as an employer but expressly through its tax and spending authority and taking an absolute controlling position. AIG is in effect nationalized. It is a government company.

But, beyond these strictly legal arguments, there is an overarching concern. Can it really be the case that we want the USG involved in a theologically based legal doctrine that calls for our conversion, subjugation or murder? Have we abdicated even the rudiments of good sense in the name of a PC-driven, non-judgmental multi-culturalism? If we have, we have abdicated our very right to exist as a nation.

FP: Sharia has an ugly jihad side, but how does AIG’s Shariah-insurance products promote jihad?

Yerushalmi: First, the Shariah authorities themselves tell us that Shariah is a holistic and indivisible whole and that you cannot carve out "business law Shariah" from any other of its constituent parts, like the law of jihad. And, you can see this in that part of Shariah called civil law or fiqh al-muamalat. According to Shariah, AIG cannot invest its takaful funds in a business that might rent space to a church, because that would violate the principle of not supporting any religion other than Allah’s. Further, AIG may invest its funds in a military armament factory for Muslim armies but not US or infidel armies. In other words, these laws which seemingly have nothing to do with business concerns or ethics but rather everything to do with theo-political concerns apply as forcefully to Shariah-compliant finance as the laws on interest. And, of course the reason for this we know because the Shariah authorities tell us: Shariah makes no distinction between religion, law, politics and war. It is all subsumed under Allah’s law called Shariah.

Second, the very Shariah authorities who have the legitimacy to be Shariah board members for such an international concern are themselves advocates of violent jihad or they are the students and disciples of such Shariah authorities. For example, AIG employs Mufti Imran Usmani, who is the son, student and disciple of Mufti Taqi Usmani, the very authority who sat on the Dow Jones Islamic Index Shariah advisory board for almost 10 years beginning in 1999 and who wrote a book and had it translated into English also in 1999 which called on western Muslims to rise up and engage in violent jihad against the West. Now, either Dow Jones was recklessly blind to this fact or willfully blind to it. Now, we see that AIG and the US Treasury have succumbed to the same reckless disregard of what are now quite obvious facts. But, alas, we are talking about a Treasury and a USG generally that closed its eyes while AIG and the rest of the US financial industry leaped into the sub-prime and CDS markets with what can only be described as a fatal death wish.

FP: How involved is AIG and by extension now the USG in advancing and promoting Sharia? How does AIG conduct this Sharia business?

Yerushalmi: In short, the AIG takaful insurance business is Shariah compliant because it does not formally take premiums to insure against the death of the insured because Shariah does not allow a business deal based upon a future contingency. Instead, AIG pools the funds of the investor/insureds and then it invests those funds. The investor or his beneficiaries can redeem that investment and its allotted profit upon the death of the insured.

The overall transaction must be reviewed and approved by the Shariah authorities by examining the various contracts and making sure they all comply with Islamic law. This in turn requires an in-depth examination of the Quran, the Hadith (the normative sayings and behavior of Mohammed as told by reliable sources and subsequently canonized by the early Shariah authorities), and usul al fiqh or Islam jurisprudence. Then these Shariah authorities must examine each investment AIG makes to be certain that the company receiving the investment is Shariah compliant (e.g., that it does not profit from, or pay, interest; manufacture alcohol or pork; rent space to a church; or provide arms or supplies to the US military). Finally, these Shariah authorities must calculate the zakat or charitable contribution that AIG must pay on behalf of the pooled investors based upon the profits. Then, the Shariah authorities have to approve which Shariah-compliant charities are selected to receive these funds because, again, AIG could not support a church charity but it could support mujahideen fighting infidels in Israel as just one example.

As you can see, AIG and by implication now, the USG, is deeply involved in a whole host of religious legal questions.

FP: What do you expect to gain by bringing this lawsuit? What tangible results?

Yerushalmi: Three things. One, a decision by the court that the USG must either get out of AIG or AIG must get out of Shariah.

Two, we want to force the USG, especially the Treasury, to confront Shariah and the fact that it is not just some religious law about not taking interest or selling alcohol. It is an entire corpus juris that drives the global jihad—and that is not what we say but what the very leading lights among the Shariah authorities who work for western financial institutions say.

Three, we want to use this litigation to make a policy point to other banks and to the public. This is not about a Christmas tree in the public square or even about Muslims demanding some religious accommodation. This is a full-fledged national security issue because Shariah is the common threat doctrine espoused and adhered to by the global mujahideen who share no common national interests, culture or language. What they do share is their strict adherence to Shariah and its law of jihad.

FP: David Yerushalmi, thank you for joining Frontpage Interview.

Yrushalmi: As always, it is a real pleasure.

Jamie Glazov is Frontpage Magazine's editor. He holds a Ph.D. in History with a specialty in Russian, U.S. and Canadian foreign policy. He is the author of Canadian Policy Toward Khrushchev’s Soviet Union and is the co-editor (with David Horowitz) of The Hate America Left. He edited and wrote the introduction to David Horowitz’s Left Illusions. His new book is United in Hate: The Left's Romance with Tyranny and Terror. To see his previous symposiums, interviews and articles Click Here. Email him at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .


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