Libel Wars

By Alyssa A. Lappen | July 18, 2005

When billionaire sheik Khalid Salim a bin Mahfouz uses the London courts to attack his critics, there is little most people can do. In dozens of cases to date, reporters and newspapers have apologized, settled or backed off completely from stories critical of bin Mahfouz. But one truth-seeker isn’t backing down.

In December 2004, investigative reporter and American Center for Democracy director Rachel Ehrenfeld bucked a dangerous trend and responded to a preposterous allegation with her own U.S. lawsuit. In Rachel Ehrenfeld v. Khalid Salim a bin Mahfouz, the author seeks a declaratory judgment that her assailant could not prevail against her in the U.S. on libel charges arising from her 2003 book, Funding Evil. The case was assigned to Manhattan Federal Judge Richard Casey, who is also handling the bulk of the 9/11 lawsuits.
Ehrenfeld’s attorney, Daniel Kornstein, considers her suit as important as New York Times v. Sullivan—the 1964 case in which the courts decided for the first time “the extent to which the constitutional protections for speech and press limit a State’s power to award damages in a libel action brought by a public official…”

“Sullivan established the modern ground rules of libel actions and they have been in place since 1964,” says Kornstein. Those standards, very friendly to reporters and writers, have put the onus of proof on libel plaintiffs. In this case, 23 copies of a book published in America were picked up in a foreign jurisdiction, which was used to seek judgment against an American. “The question is,” Kornstein concludes, “do the Times Sullivan rules mean anything in a world so dependent on the Internet, instantaneous communication and international process that did not exist in 1964.” Do they carry the same weight they were meant to carry 40 years ago?

Among those supporting Ehrenfeld in an amici filing with the U.S. District Court in New York are and the American Society of Newspaper Editors. Her legal expenses are expected to top $300,000–although she has to date received no financial backing from the publishing industry. According to the friends of the plaintiff,

When a wealthy businessman succeeds in using a carefully chosen foreign forum to attack the credibility of an American investigative author and her work, it harms that author directly and immediately. It also sends an unmistakable message to other writers and publishers that scrutinizing the activities of that businessman, and others of similar resources, is a perilous legal and financial course. American authors must have a means to affirmatively counter such attacks, relieving themselves of the stigma and the financial threat posed by such foreign judgments obtained in jurisdictions lacking free speech protections.

This need is particularly urgent today. Rarely in the history of the United States have the principles underlying our First Amendment – the need for vigorous, open debate, particularly of matters of such vital public concern as the book at issue here – been more important. The energy, drive and credibility of our investigative journalists and book authors are critical to understanding and coping with international terrorism and other threats to our society. The dangers of foreign litigation against publishers, authors and journalists become more acute daily, in direct proportion to our society’s increasing reliance on the Internet for dissemination of information and publications.

Bin Mahfouz, claiming the case is inadmissible because he does not live or work in the U.S., has moved for dismissal. But until August 2004, bin Mahfouz owned two New York City condominiums worth some $3.6 million and he reportedly continues to conduct stateside and New York business. Moreover, Ehrenfeld has been harassed on her own turf, and her reputation has been damaged.

The dramatic episode in the annals of publishing history began early on January 23, 2004, when Ehrenfeld received an email from a London law firm threatening to sue her for libel for statements in her 2003 book concerning Saudi billionaire bin Mahfouz unless she retracted, apoligized and paid fines. She refused. Nine months later, his action was filed in London—where British laws make libel especially difficult to disprove.

Ehrenfeld’s offense? Her book had reported that bin Mahfouz, the former chairman of Saudi Arabia’s largest bank, National Commercial Bank, had allegedly deposited “tens of millions of dollars in London and New York directly into terrorist accounts—the accounts of the same terrorists who were implicated in the 1998 bombings of the U.S. embassies in Kenya and Tanzania, in which 224 people were killed, including twelve Americans, and more than four thousand were injured.” [1]

The book implicated bin Mahfouz in transferring from the bank’s Zakat (charity) Committee some $74 million to the International Islamic Relief Organization (IIRO) and to the Muwafaq “blessed relief” Foundation. Muwafaq in turn allegedly deposited funds directly with al Qaeda. Finally, Ehrenfeld also indicated that much of the funding for terrorism emanates from the Saudis, including the bin Mahfouz and al Rahji families, who allegedly funnel the monies through a host of “charitable” institutions. [2]

The reporter based her account of bin Mahfouz’ alleged miscreance on a variety of reports from reputable journals and magazines, lawsuits, government documents, and data from public and anonymous government officials, among other sources. Although he denies any connection with terrorists, bin Mahfouz is among the targets of 10 lawsuits by the families of the September 11 victims, seeking damages of more than $1 trillion.

In the U.S., where Ehrenfeld lives and works (and her book was published), her allegations seem reasonable and should therefore be free speech protected by the First Amendment. Undeterred by U.S. law, however, the sheik reportedly sent emissaries at all hours to threaten Ehrenfeld. “You had better respond,” his agent told her on March 3, 2005, in delivering some documents from the British action. “Sheik bin Mahfouz is a very important person and you ought to take very good care of yourself.” [3]

In Britain, libel laws place the burden on the defendant. Law courts require a reporter to prove the truth of his or her written allegations. In her defense, she must call to testify original sources–including government officials both public and anonymous. Given the impossibility of getting former Secretary of State Madeleine Albright (among others) on the stand, Ehrenfeld chose not to respond in Britain at all. Consequently, she lost the British case by default in May.

Bin Mahfouz is no stranger to U.S. courts of criminal law. In 1992, for example, he paid $225 million (including a $37 million fine) to escape criminal charges in New York involving his role as chief operating officer of the shuttered Bank of Credit and Commerce International. Its New York and London branches were closed, and BCCI was implicated by the Central Intelligence Agency for laundering drug money and supporting international terrorists. In settling, Bin Mahfouz admitted no wrongdoing. [4]

Nevertheless, in October 2001, according to former national security advisor Richard Clarke, the U.S. Treasury Department listed Yasin al Qadi as a designated terrorist for his financial support of al Qaeda. Qadi headed Muwafaq, a Saudi “relief organization” that Clarke said “reportedly transferred at least $3 million, on behalf of Khalid bin Mahfouz, to Usama bin Laden [sic] and assisted al Qida [sic] fighters in Bosnia.” So testified Clarke before the Senate banking committee on Oct. 22, 2003.

No surprise, Bin Mahfouz did not sue the State of New York, the U.S. Senate Banking Committee or Clarke. He preferred rather to stymie the flow of information concerning his apparent misdeeds by attacking the messengers.

Ehrenfeld was hardly his only target. Bin Mahfouz and other wealthy Saudis had previously attacked other reporters and news agencies, all of which chose to apologize publicly, or settle the cases—or in the cases of some book publishers, to back off publication all together. USA Today, for one, printed a lengthy retraction concerning a November 2004 article by Marc Umile that had implicated bin Mahfouz.

As a result of bin Mahfouz’ intimidation, Gerald Posner, in Secrets of the Kingdom, makes no reference to bin Mahfouz or Muwafaq. Loretta Napoleoni removed all references to bin Mahfouz from her U.S. paperback book, Terror Incorporated. [5]

In Britain, the High Court ruled against the European edition of the Wall Street Journal in a case concerning a 2002 article that stated the Saudi authorities were monitoring 150 bank accounts for suspected ties to terrorism. The Journal mentioned that two of the accounts were those of Mohammed Jameel of Jedda, who sued and won the case, according to the New York Times.

Similarly, bin Mahfouz sued Pluto Press in the U.K. over the suggestion in Michael Griffin’s 2003 Reaping the Whirlwind that he was related by marriage to Osama bin Laden and a supporter of terrorism. Bin Mahfouz “accepted” a substantial settlement and an apology, as he did earlier for a report in the Mail on Sunday. In another case, bin Mahfouz’ litigiousness was reportedly behind the halt in British publication by Secker & Warburg in early 2004 of Craig Unger’s House of Bush; House of Saud.

In May 2004, the Times reported, bin Mahfouz had been involved in at least four libel cases in the U.K. But apparently none of bin Mahfouz’ British cases have been tried on their merits; rather, the wealthy sheik has won by default—hardly proof that reporters’ allegations against him were actually false.

Even in Britain, although he has settled several libel cases, he has (strictly speaking) not won, either. That is to say, he has not won judgments on the merits of cases presented. Against Ehrenfeld, for example, the bin Mahfouz website claims to have won a judgment against the author, although only 23 books were ever imported to the U.K. And the U.K. court awarded him a “downpayment” award of 60,000 pounds in damages and costs, with the final amount yet to be set. (Bin Mahfouz cannot collect in the U.S.) Yet bin Mahfouz’ only defense in the case was that Ehrenfeld was served with the lawsuit did not show up in London for the trial. No trial was actually held. Bin Mahfouz won “by default”–and that because Britain’s libel laws place onerous restrictions on the freedom of the press.

U.S. libel laws require plaintiffs to prove that the defendants’ allegations were false and printed either with that knowledge or reckless disregard of the facts; here, it would be difficult at best for bin Mahfouz to win a libel case.

If Judge Casey tries Ehrenfeld’s case, Kornstein hopes that it would spell the beginning of the end for libel cases brought by wealthy sheiks in London—at least so far as American reporters and publishers go. American reporters would then be free to expose those who fund terrorism.


[1] Rachel Ehrenfeld, Funding Evil: How Terrorism is Financed—and How to Stop It (Bonus Books, 2005 ed.), p. 22.
[2] Ehrenfeld, Funding Evil, pp. 37-40, 48.
[3] Rachel Ehrenfeld, affidavit in Rachel Ehrenfeld v. Khalid Salim a bin Mahfouz, U.S. District Court, Southern District of New York, Case # 04CV9641, Jun. 9, 2005, p. 5.
[4] Rachel Ehrenfeld v. Khalid Salim a bin Mahfouz, U.S. District Court, Southern District of New York, Case # 04CV9641, Dec. 8, 2004; Jeff Gerth and Judith Miller, Oct. 13, 2001, New York Times; Nathan Vardi, “Sins of the Father,” Forbes, Mar. 18, 2002.
[5] Rachel Ehrenfeld, affidavit, ibid.

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Alyssa A. Lappen is a U.S.-based investigative journalist. She is the former Managing Editor at the Leeb Group (2012-2017); a former Senior Fellow of the American Center for Democracy (2005-2008); and a former Senior Editor of Institutional Investor (1993-1999), Working Woman (1991-1993) and Corporate Finance (1991). She served six of her 12 years at Forbes (1978-1990) as an Associate Editor. Ms. Lappen was also a staff reporter at The New Haven Register (1975-1977). During a decade as a freelance, her work appeared in Big Peace, Pajamas Media, Front Page Magazine, American Thinker, Right Side News, Family Security Matters, the Washington Times and many other Internet and print journals. Ms. Lappen also contributed to the Terror Finance Blog, among others. She supports the right of journalists worldwide to write without fear or restriction on politics, governments, international affairs, terrorism, terror financing and religious support for terrorism, among other subjects. Ms. Lappen is also an accomplished poet. Her first full-length collection, The Minstrel's Song, was published by Cross-Cultural Communications in April 2015. Her poems have been published in the 2nd 2007 edition of Blood to Remember: American Poets on the Holocaust and both 2007 issues of Wales' award-winning Seventh Quarry: Swansea Poetry Magazine. Dozens of her poems have appeared in print and online literary journals and books. She won the 2000 annual Ruah: A Journal of Spiritual Poetry chapbook award and has received a Harvard Summer Poetry Prize and several honorable mentions.

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