DAR AL HARB - U.S.A.- MASSACHUSETTS: A MOSLEM EQUITY FIRM VIOLATING IRS TAX CODE

U.S. Probes Equity Firm Tied to Islamic Investors
By David Cho
Washington Post Staff Writer

The counterterrorism division of the Justice Department is investigating whether a private equity firm in Boston that manages hundreds of millions of dollars for Muslim investors overseas violated tax laws.

The investigation of Overland Capital Group was disclosed in a filing with U.S. District Court in Boston and reported by the Wall Street Journal yesterday.

The filing claims that Overland and a subsidiary of Dar Al-Maal Al-Islami Trust (DMI), a financial group in Geneva, conducted acts "that implicate potential violation of the Internal Revenue Code." The filing does not mention terrorism, though it was submitted by a U.S. attorney who works in counterterrorism.

Subsidiaries of DMI, an umbrella organization for Islamic financial institutions, have been named as suspects in probes by U.S. counterterrorism agencies. DMI also is a defendant in a civil lawsuit brought by families of victims of the Sept. 11, 2001, attacks, who claim that it funded al-Qaeda. DMI has denied those claims and noted that none of its officials has been charged with terrorism-related crimes.

DMI officials say it has no direct relationship to Overland. But corporate filings in the U.S. show that the firms have a joint venture called First Leasing Bank in Bahrain. The Journal reported that DMI's chief executive headed some of Overland's investment ventures.

DMI was founded in the early 1980s by Prince Mohammed al-Faisal al-Saud, a member of the Saudi royal family. It caters to investors who want to follow the Koran, which prohibits the collection of interest payments.

Overland was founded in October 2001 and has investments worth $1.5 billion, mainly in real estate, according to its Web site. Chief executive James M. Godec said in a written statement yesterday that Overland "followed both the letter and the spirit of the law in every instance" and that he would "vigorously defend our reputation."

The filing came to light through litigation between Overland and a former employee, Laird A. Fairchild, who claimed that he was wrongfully dismissed. Fairchild cooperated with federal investigators after his termination, an act that Overland said violated his confidentiality agreements with the company.

Overland and the DMI subsidiary sued to compel Fairchild to reveal to them what he had told federal investigators. Through its filing in Boston, the Justice Department obtained a court order that allowed Fairchild to remain silent.

Geoffrey Harper, Fairchild's attorney, said yesterday that U.S. attorneys went to "elaborate lengths" to make sure that Fairchild would not reveal what he told government investigators. He said the Justice Department has concerns beyond the tax practices of Overland and DMI.

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