Fort Walton Beach Council agenda — 03-09-2010 Regular — reading text

the aggregate or at individual coffeehouses, or the market price for shares of our common stock. ( Emphasis added.) No other disclosures were made relating to Shariah -Compliant Finance SCF), other than some insights into the company' s sale -lease -back financ- ing arrangements which were treated as capital leases as required by gen- erally accepted accounting procedures ( "GAAP "). The SEC commented on the recitation of the 2002 affair in the registration statement requesting the following: " Please tell us, with a view to disclosure, more background about the statements, such as describe the statements made and identify who made them. Also revise the risk factor to clarify the risk." 70 Shariah, Law and `Financial Jihad': How Should America Respond? Caribou filed its first amended draft of the registration statement on August 15, 2005. While there was no change to the description of the 2002 affair, some additional risks were disclosed relative to financing: We may, however, enter into a new lease financing arrangement or other financing arrangement or amend our current lease financing arrangement to provide us with additional liquidity. We expect that any such financing arrangement would be structured in a manner that would be compliant with Shariah principles. Shariah principles regarding the lending and bor- rowing of money are complicated, requiring application of qualitative and quantitative standards. The negotiation and documentation of financing that is compliant with these principles are generally complex and time consuming. As such, if we have immediate liquidity needs, we may not be able to obtain financing that is compliant with Shariah principles on a timely basis. The SEC commented on the first amended registration statement by ask- ing for some additional clarity on the " disclosure concerning the majority shareholder to briefly discuss the shareholder and compliance with Shariah principles." Notwithstanding the written comments by the SEC, no material changes regarding Shariah or the 2002 affair were made to any of the subsequent four amendments to the registration statement or to the final prospectus. No changes to these disclosures have been made in any of the interim filings through the last Form 10 -K annual report. A cursory examination of the civil liability and criminal exposure issues confronting Caribou suggests that the company and its legal counsel opted to bury the Shariah black box and to ignore what it knows —or most certainly should have known —are the facts that require at the very least some further due diligence on their part and fuller disclosure. Analysis A U.S. retail chain of coffeehouses is principally owned and operated by investors from the GCC states. These investors have organized them- selves as an investment bank in Bahrain and incorporated a subsidiary in the United States. The financial structure of this company with numerous off -shore entities is complex and convoluted, utilizing literally dozens of Cayman Island offshore entities to hold the stock of Caribou. The parent company adheres to Shariah and to be certain of this has retained a 71  Case Studies: Caribou Coffee, Shariah -Compliant Finance and Main Street Shariah advisory board. The Shariah rulings of this advisory board control not just the parent company but also the operations of the retail chain. The former chairman of the Shariah advisory board was forced to resign fol- lowing the public exposure of his open support of Palestinian and Lebanese Islamic terrorist groups. The accusations of funneling charitable contributions from the principal shareholder's profits to terrorist groups were sufficiently problematic that the company requested a major U. S. law firm to make cer- tain that none of the beneficiaries of the charitable contributions were specifi- cally designated as terrorist organizations by the U.S. government. Given the foregoing, and the intimate connection between Shariah, the law of jihad, and the actual conduct of jihad, the question must again be asked: Have the lawyers for Caribou willfully blinded themselves to this con- nection, even as they disclose and represent to the investing public that their client abides strictly by Shariah? Given the Qaradawi affair described above, the company and its legal counsel were certainly on notice that one of the world' s most respected Shariah authorities had issued legal rulings based upon Shariah calling for terrorist acts against innocent civilians in Israel. Are the partial disclosures in the company' s prospectus sufficient to provide the unsuspecting post -9/ 11 investor with the material information that Shariah advocates as a general, historical and traditional matter jihad against unbelievers who reject the " invitation to Islam "? Moreover, after having experienced the 2002 affair with respect to Qaradawi, have the company's legal advisors fulfilled their fiduciary duties to conduct sufficient due diligence of the other Shariah authorities to determine if they adhere to traditional, historical and authoritative Shariah as it relates to the law of jihad? After a ten -minute Google search on the Internet, the only conclusion one could reach would be that neither the company nor its lawyers conducted even a minimal investigation, or if they did, they willfully ignored the results. For example, one of Arcapita' s long- standing and still -serving Shariah authorities is the same Mufti Usmani that haunted Dow Jones of late. As described at length above, Usmani has explicitly invoked his authority to demand " aggressive jihad" against the West. Usmani' s condemnation of a peaceful, non- aggressive approach to non -Muslims in the West is beyond debate or doubt. Had the lawyers for Caribou bothered to conduct even a minimal due diligence, they would have been confronted with three sobering facts: 1. Usmani, as a Shariah legal authority, has issued an absolute grant to Muslim terrorist combatants and their financial and logistical supporters 72 Shariah, Law and `Financial Jihad': How Should America Respond? to wage aggressive jihad against the West. Further, because Usmani is a Shariah authority, his declaration is not theory or theological; it is binding Islamic law and must be taken as such by Shariah- adherent Muslims. 2. If Usmani' s legal ruling is in fact traditional and authoritative, the Shariah black box of SCF is indeed a weapon in the jihad to destroy the Western world if it refuses to submit to Shariah. Usmani' s ruling strongly suggests by implication that SCF is hardly an embrace of the West's domination, but rather a kind of modus vivendi with the Western world until such time as Muslims have the opportunity to wage violent Jihad. In this context, SCF is part of the jihad to end the " psychological subordination" Muslims supposedly suffer when Islam is not the dominant religion in the world. 3. To the extent that terrorists will use Usmani' s legal rulings to justify attacks against Western interests, and in view of Caribou' s indirect financial support of Usmani as a paid advisor to Arcapita and given Arcapita's relationship to Usmani and its absolute control over Caribou, should Arcapita be charged with the material support of terrorism, Caribou and its assets could very well be on the blunt end of an execu- tive blocking order or post-conviction forfeiture proceeding. At the very least, the fact must be fully disclosed that Caribou is principally owned and operated by a company which embraces Shariah authorities such as Qaradawi and Usmani. And, it will hardly be sufficient to character- ize Usmani and his legal rulings through some vague or oblique reference as an " outside advisor" to its principal shareholder. Usmani is a highly regarded and respected Shariah authority by all of the Shariah authorities in the world. He sits on all of the important Shariah boards and is a leader in the industry' s standards associations. His rulings cannot be marginalized because his role, along with the other co- members of the Arcapita Shariah board, in setting the Shariah policies for Caribou are absolute, given Arcapita's controlling interest. A final note regarding the third of the sobering facts above. According to Arcapita's public representations, it pays both a Shariah charitable tax on its profits and purifies any forbidden " interest" income by contributing those funds to charity. For the 12 months ending June 30, 2007, Arcapita had set aside more than $ 2.4 million for such charitable contributions. While Arcapita allegedly hired a law firm to confirm that it did not make charitable contributions to organizations designated as terrorist organizations by the 73  Case Studies: Caribou Coffee, Shariah -Compliant Finance and Main Street U.S. government, this listing is hardly exhaustive of Muslim charities involved in funneling aid to terrorists. While Arcapita's lawyers might have taken a list of charitable contributions provided by Arcapita and cross -checked them against the designated terror- ist organizations, this is only a first step. Given the public record regarding the purpose and methodologies of Shariah, the published statements, writ- ings and legal rulings from two of Arcapita' s esteemed Shariah authorities on the law of jihad and their support of violence against Western ( including Israeli) targets, such a casual due diligence of the beneficiaries of Arcapita's charitable contributions amounts to a serious dereliction of professional responsibilities. It is a prime example of factors contributing to significant civil and criminal exposure run by those involved in Shariah -compliant finance. 74 Chapter 6: Next Steps and Recommendations 1. Recommendation: Enforce and prosecute violations of current laws on disclosure, racketeering, anti -trust, material support for terrorism and sedition. U. S. regulatory agencies have tacitly aided a special, privileged position for Shariah -compliant finance by refusing to enforce laws that are routinely enforced for other financial products and practices. This U. S. government complicity in potential Shariah -Compliant Finance SCF) civil liability and criminal exposure presents significant risks to national security and to the national economy. Shariah- compliant finance must be required to disclose fully: the specific laws and intent, including violent jihad, of Shariah; the beliefs, statements and affiliations of Shariah advisors; and the links between Shariah- enforced zakat and purification funds and material support of terrorism as part of compliance with exist- ing laws on full disclosure of risks to post 9/ 11 investors. Next Steps: Congressional oversight committees who are responsible for exposing and stopping government malfeasance have an obligation to investigate this consistent non -enforcement of existing laws for a protected" group. 2. Recommendation: Develop state and federal initiatives to investigate and monitor mosques and Islamic community centers that promote adherence to authoritative Shariah and encourage Jihad, and inform communities of Shariah and jihadist materials and other imminent threats. Such monitoring of radical Islamic institutions is routine in Europe. Next Steps: Private sector monitoring projects such as Mapping Shariah need to be expanded to more states, with closer coordination and support from local and federal law enforcement and Homeland Security officials. Local pilot projects to increase community defenses include local operations to monitor the threat, community