A Win for the Good Guys
And a setback for sharia-compliant finance in America.


Last week’s news on the judicial front was dominated by the California supreme court’s ruling on gay marriage and President Obama’s nomination of Judge Sonia Sotomayor to the Supreme Court. Largely unremarked was another potentially seismic decision, one made in federal court regarding Islamic law, which is called sharia.

Eastern District of Michigan judge Lawrence P. Zatkoff handed down the decision, in a case involving an alleged violation of the constitutional separation of church and state. The issue is whether a government-owned company, AIG, can market sharia-compliant insurance products. (To be sharia-compliant, an investment vehicle must be created and structured in ways that do not violate Islamic law.) In a well-reasoned and cogently argued opinion, Judge Zatkoff refused to dismiss the case prior to factual discovery.

Kevin Murray, an Iraq War combat veteran, Catholic, and American taxpayer, brought the lawsuit, Murray v. Treasury Secretary Geitner and Federal Reserve Board. Mr. Murray’s taxpayer status affords him “standing” to bring the claim against the government, which has acquired nearly 80 percent ownership and total control over AIG through an $80 billion cash infusion orchestrated by the Fed last fall. Shortly thereafter, Congress created the TARP Fund, which allocated billions more to bail out “distressed,” too-big-to-fail institutions. AIG was first at the trough, getting another $40 billion. The giant insurance concern has returned to that trough several times since, for a total taxpayer exposure to date of more than $150 billion.

The problem with all of this public largesse is that AIG sponsors, pays for, and aggressively markets sharia-compliant insurance products. The practice of sharia finance has created lucrative advisory positions for often radical imams, who get paid to guarantee the religious “purity” of sharia-compliant products. Such vehicles typically follow the Muslim principle of zakat and donate a slice of their profits to charity. Unfortunately, many of the charities receiving these funds have links to terrorism. Mr. Murray objects to his funds’ being used to legitimate and promote sharia law, when that is the same law that calls for jihad. For that matter, sharia allows Saudis, Iranians, Sudanese, Somalis, Afghans, Taliban members, and other adherents to justify the following: the execution of apostates who decide to abandon the faith; the criminalizing of “Islamophobic blasphemy”; the punishment of petty crimes with amputations, floggings and stonings; and the repression of “non-believers” from practicing their respective religions freely and openly.

AIG – read the federal government – now is in the business of selecting which sharia-adherent “authorities” shall be enlisted to determine whether or not a given product is sharia-compliant. In early maneuvering on Murray v. Geitner et al., the government moved to dismiss the case on two grounds. First, its lawyers argued that Mr. Murray did not have standing to bring this lawsuit. Second, they contended that, even if he did have standing, the government acted in buying AIG without any intent to promote or become involved in religious questions.

Judge Zatkoff rejected the first objection to the suit by noting that the courts have allowed a narrow exception to the general rule that payment of taxes does not grant a citizen standing to bring cases against the government. That exception is triggered in the case of a claim alleging a violation of the Establishment Clause, and when there is a specific legislative grant for spending that implicates the First Amendment. The judge found both conditions were met.

On the second substantive issue, the Court noted, “The circumstances of this case are historic, and the pressure upon the government to navigate this financial crisis is unfathomable. Times of crisis, however, do not justify departure from the Constitution.” Judge Zatkoff then summarized the relevant facts:

In this case, the United States government has a majority interest in AIG. AIG utilizes consolidated financing whereby all funds flow through a single port to support all of its activities, including Sharia-compliant financing. Pursuant to the Emergency Economic Stabilization Act, the government has injected AIG with tens of billions of dollars, without restricting or tracking how this considerable sum of money is spent. At least two of AIG’s subsidiary companies practice Sharia-compliant financing, one of which was unveiled after the influx of government cash. After using the $40 billion from the government to pay down the $85 billion credit facility, the credit facility retained $60 billion in available credit, suggesting that AIG did not use all $40 billion consistent with its press release. Finally, after the government acquired a majority interest in AIG and contributed substantial funds to AIG for operational purposes, the government co-sponsored a forum entitled “Islamic Finance 101.”

The judge concluded that “these facts, taken together, raise a question of whether the government’s involvement with AIG has created the effect of promoting religion and sufficiently raise Plaintiff’s claim beyond the speculative level, warranting dismissal inappropriate at this stage in the proceedings.

Given the stakes – a finding of unconstitutional behavior would implicate billions of dollars’ worth of government spending – it is predictable that the Department of Justice will seek summary judgment following discovery. The plaintiff’s case, however, will be a relatively easy one to prove. The facts are, as Judge Zatkoff observed, damning: The government owns and controls AIG. Taxpayer funds authorized by an explicit legislative grant are being used to pay sharia authorities — in other words, they’re being used to legitimate and promote Islamic religious law.

Thus, the District Court’s ruling in this case takes on considerable importance. It makes possible the exposure in a court of law of the insidious workings of our sharia-adherent enemies – and the extent to which they are being enabled by the executive branch and what is left of the now largely government-owned American financial sector. A proper judicial review of the facts could mark the beginning of the end of sharia-compliant finance in this country – and, with luck, a reversal of fortune for the larger campaign to bring sharia to this country, of which the AIGs and their sharia-compliant products are but the leading edge.

– Frank J. Gaffney Jr. is president of the Center for Security Policy in Washington. David Yerushalmi is the Center’s general counsel, and co-lead counsel with the Thomas More Law Center in representing Mr. Murray.


Sign up for free NRO e-mails today:

NRO Polls on LockerDome

Subscribe to National Review