Two charged in Pakistani spy services’ alleged funneling of money via U.S. group

July 19, 2011

Pakistani intelligence services have secretly spent millions of dollars through a front group over the past 20 years to lobby Congress and the White House and funnel contributions to members of both parties, according to Justice Department charges unveiled Tuesday.

The center of the alleged scheme was the Kashmiri American Council and its executive director, Syed Ghulam Nabi Fai, who is accused in federal court documents of acting under the direct supervision of Inter-Services Intelligence, or ISI, Pakistan’s spy agency.

The allegations come at a time of deteriorating relations between the Obama administration and the Pakistani government, which is angry about secret U.S. operations that led to the killing of al-Qaeda leader Osama bin Laden. Pakistan has kicked out more than 100 U.S. military advisers in recent weeks, while the Obama administration announced it is delaying $800 million in military aid.

A criminal complaint filed in Alexandria against Fai and a second defendant, Zaheer Ahmad, outlines a long-running and elaborate plot in which Pakistani intelligence officials exercised de facto control over the Kashmiri council, which sponsored well-attended conferences in Washington, organized congressional trips to Kashmir and met with State Department and White House officials.

In total, the FBI estimates that the group received up to $700,000 per year from Pakistani government sources, according to the complaint. The nonprofit group reported much smaller budgets in its annual reports to the Internal Revenue Service.

Prosecutors also allege that the group served as a conduit for political contributions, both secret and public, that may have reached $100,000 per year. The biggest single recipient of disclosed contributions was Rep. Dan Burton (R-Ind.), a longtime pro-Pakistani advocate on Kashmir, who expressed shock Tuesday at Fai’s arrest.

Fai, 62, and Ahmad, 63, both of whom are U.S. citizens, were charged Tuesday with acting as agents of a foreign government without registering with the Justice Department as required by law. If convicted, they would face up to five years in prison.

Fai was arrested at his Fairfax home Tuesday morning and was ordered to remain in jail pending a detention hearing Thursday. Ahmad is believed to be living in Pakistan and remains at large, U.S. officials said.

The Pakistani embassy in Washington declined to comment on the case. “Mr. Fai is not a Pakistani citizen, and the government and embassy of Pakistan have no knowledge of the case against him,” an embassy spokesman said.

The charges allege a particularly brazen case of foreign influence-peddling, which is heavily regulated under U.S. laws aimed at limiting propaganda by overseas nations or companies. Foreign nationals are strictly prohibited from spending money on U.S. elections.

The case also suggests an aggressive effort by Pakistan to beef up its influence in Washington, particularly in connection with the longstanding conflict with India over Kashmir. India has long had a formidable lobbying presence in Washington, and its supporters wield significant clout when it comes to campaign contributions to members of Congress.

One informant told the FBI that Fai was handpicked to head the Kashmiri council by ISI, which provided “verbatim” statements that were disseminated by the group. The council was created “to propagandize on behalf of the Government of Pakistan with the goal of uniting Kashmir,” the informant said.

The Kashmiri council is perhaps best known for organizing an annual Kashmir Peace Conference on Capitol Hill. Although billed as independent, speakers and materials for the event were actually approved by the Pakistani government, according to the criminal complaint.

“This is essentially the uncovering of an illegal influence operation that’s been going on for decades here in Washington, with Pakistani fingerprints all over it,” said Daniel Markey, a senior fellow for India, Pakistan and South Asia at the Council on Foreign Relations. “They are relatively prominent lobbying faces in the small community of people who follow Kashmir.”

Markey said officials in Islamabad will likely view the charges as retaliation for Pakistani criticism of U.S. spying efforts there. The State Department declined to comment on the timing of the case, which has been under investigation for years.

The charges come at a particularly sensitive time for U.S.-Pakistan relations, as the two governments struggle to smooth over tensions that flared after the May 2nd raid that killed bin Laden in the northwest Pakistani garrison town of Abbottabad. The killing, and the months of secret preparations that preceded it, have riled public opinion in Pakistan over the presence of U.S. agents inside the country.

Pakistani spy chief Lt. Gen. Ahmed Shuja Pasha, who heads the ISI, was in Washington last week to visit with acting CIA director Michael Morell. Gen. David Petraeus, the outgoing U.S. commander in Afghanistan who will soon be heading the CIA, also visited Islamabad last week as part of ongoing talks over the tensions.

Kashmir, an overwhelmingly Muslim region, is divided between India and Pakistan and claimed as rightful territory by both countries. The two nations, both nuclear powers, have fought three wars over the region since gaining independence from Great Britain in 1947.

Federal Election Commission records show that Fai and Ahmad have donated at least $30,000 to campaigns and political parties, including a $250 donation from Fai to President Obama two days before the November 2008 election. An aide for Obama’s 2012 reelection campaign said the contribution would be returned.

The biggest beneficiaries were the National Republican Senatorial Committee, which received $9,500 from Fai, and Burton, who received about $10,000 from Fai and Ahmad since 1997, FEC records show.

Burton is founder of the House Kashmiri caucus and has traveled to the region on trips sponsored by Fai’s group. He has long advocated for a settlement to the conflict that would favor Pakistan over India.

Burton said in a statement Tuesday that he has known Fai for 20 years and was “deeply shocked” by his arrest. Burton said he will donate any illegal contributions to the Boy Scouts of America.

“I had no inkling of his involvement with any foreign intelligence operation and had presumed our correspondence was legitimate,” Burton said. “For as long as I’ve known him, Dr. Fai has been either a permanent legal resident of the United States or a citizen, and as such any political contributions I may have received from Dr. Fai over the years are completely legal.”

Fai adamantly denied any wrongdoing in letters and e-mails sent last year to the Justice Department, which had warned him of the need to register under the Foreign Agents Registration Act if he was acting on behalf of a foreign power. Indian press reports had emerged claiming that he was a Pakistani agent.

“KAC or I have never engaged in any activities or provided any services to a foreign entity,” Fai wrote to Justice officials in April 2010. “And KAC or I have never had any written or oral agreements with Pakistan or any other foreign entity.”

But in an affidavit filed with Tuesday’s complaint, FBI agent Sarah Webb Linden wrote that Fai “has acted at the direction and with the financial support of the Government of Pakistan for more than 20 years.”

No one answered the door Tuesday evening at Fai’s home in Fairfax, an elaborately landscaped brick house set back from the street in a quiet suburban neighborhood near the Fair Oaks section of the county. A gold minivan parked in the long driveway had a vanity plate with the word “Muzamil,” a common Islamic name.

Staff writers Caitlin Gibson and Jason Ukman and staff researcher Lucy Shackelford contributed to this report

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