Homegrown terrorists
How a Hezbollah cell made millions in sleepy Charlotte, N.C.
Moonlighting from his job as a deputy sheriff, Sgt. Bob Fromme was working security one day at JR Discount, a tobacco wholesaler in Statesville, N.C., when he saw three Arabic-speaking men buying a huge stash of cigarettes--300 cartons apiece. But what really caught Fromme's eye was how the men paid. They reached into shopping bags and pulled out wads of cash, bound in rubber bands. The men soon became regular customers at JR, shoving pallets of Marlboros and Winstons into waiting vans.
That was back in 1995. Over the next four years, Fromme worked with the Bureau of Alcohol, Tobacco, and Firearms in tracking the men. His suspicions would ultimately prove dead-on. The investigation revealed a multimillion-dollar tobacco smuggling ring. Copying an old Mafia scam, the men ran truckloads of North Carolina smokes--taxed at only 50 cents a carton--to Michigan, where the tax was $7.50 a carton, and illegally pocketed the difference.
The case fell to Ken Bell, a veteran prosecutor in the U.S. attorney's office in Charlotte. In tobacco-friendly North Carolina, Bell says, he wondered if he could even find a jury that would convict. Then came an unexpected visit from two FBI agents. They insisted that Bell and his boss sign nondisclosure agreements before they talked. Bell's investigators, it turned out, had stumbled onto a top U.S. cell of Hezbollah, the Lebanon-based terrorist organization. The FBI already had national security wiretaps up on two of the suspects.
Anytown, U.S.A. Bell was stunned. Charlotte, a fast-growing city of half a million, had few Muslims and even fewer Shiites, the sect followed by most Hezbollah backers. Yet, somehow, one of the world's most formidable terrorist organizations had set up shop in his backyard. Its leader, Mohamad Hammoud, lived in a middle-class neighborhood just 15 minutes from Bell's home.
Last week, Hammoud and five others were sentenced in one of the most significant terrorism prosecutions in recent years; Hammoud received an extraordinary 155 years in prison for racketeering and "material support" of Hezbollah. Begun before 9/11, Bell's investigation has helped transform the way U.S. law enforcement is tackling terrorism at home. The case also offers an inside look at the U.S. operations of Hezbollah--the Iranian-backed militia that until 9/11 had killed more Americans than any other terrorist group. The Charlotte gang is one of a dozen Hezbollah cells across the United States, law enforcement officials say. Those cells include a hard core of several dozen militants--a number with military training in Hezbollah camps--plus hundreds of supporters. Over the years, Hezbollah's U.S. backers are believed to have raised millions of dollars for the group, money often derived from criminal acts. "They are involved in a lot of different crimes here," says a top FBI official. "Copyright violations, cigarette tax violations, counterfeit violations."
Far-reaching probes, sparked by the Charlotte case, are underway in the Detroit and Los Angeles areas, home to the nation's largest communities of Lebanese-Americans. On February 4, authorities in Detroit announced indictments of 11 people allegedly tied to the Charlotte smuggling ring; two of them stand accused of funneling money to Hezbollah. Says one federal agent about Detroit: "There's much more to come."
Another important case leads back to North Carolina, law enforcement officials tell U.S. News. In December, a Middle Eastern man from Los Angeles was arrested in Asheville, N.C., carrying $279,000 in cash. He, too, was on his way to JR Discount, driving an empty tractor-trailer. Another tobacco smuggling case developed in Louisville, Ky. Still other leads point to Boston, Chicago, and New York.
Osama bin Laden gets the headlines these days, but his al Qaeda network is not the only dangerous terrorist group. "Hezbollah may be the A-team of terrorists," Deputy Secretary of State Richard Armitage said not long ago, "and maybe al Qaeda is actually the B-team." Hezbollah's former operations chief, Imad Mugniyeh, remains one of America's most wanted men; like bin Laden, he has a $25 million price on his head.
Hezbollah's rap sheet is long: 19 Americans dead in 1996 at the Khobar Towers in Saudi Arabia; 28 murdered in 1992 at the Israeli Embassy in Argentina; 300 killed in 1983, at the U.S. and French barracks in Lebanon. The group also was behind the hijacking of TWA Flight 847, the kidnappings of 18 Americans, and the torture and murder of CIA station chief William Buckley in Beirut. Last week came news that Argentine prosecutors have asked for arrests stemming from another Hezbollah strike, the 1994 bombing of a Jewish community center that left 86 dead. Among those on their wanted list: Hezbollah's Mugniyeh, the former Iranian ambassador to Argentina, and Iran's top ayatollah, Ali Khameini.
Although Hezbollah hasn't hit any U.S. targets recently, officials remain on high alert. "We see them actively casing and surveilling American facilities," CIA Director George Tenet testified before Congress last month. "They have extensive contingency plans." Since the destruction of al Qaeda's Afghan camps, Hezbollah operates what is militant Islam's largest center for terrorist training, in Lebanon's Bekaa Valley. Some intelligence analysts believe the group has an informal alliance with al Qaeda, for whom Hezbollah has provided explosives training.
Pizza man. In Lebanon, Hezbollah has many faces. While its military wing trains suicide bombers and threatens Israel's northern border, its political wing runs social services and fields politicians in the nation's parliament. Eight of the key suspects in the Charlotte case hailed from the same neighborhood of Beirut, a longtime Hezbollah stronghold. The cell's leader, Mohamad Hammoud, was, by age 15, serving in the group's militia.
Hammoud's entry into America was typical. Refused a visa by the U.S. Embassy in Syria, he made his way to Venezuela, bought a fake visa, and in 1992 flew to New York, where he demanded asylum, then promptly disappeared. He followed a family member to Charlotte, where he ended up delivering pizzas for Domino's.
Before long, Hammoud and his colleagues got into tobacco smuggling, investigators say. What began as a side job soon turned into a huge moneymaker. Each week, they packed three to four minivans with cigarettes, each load worth some $13,000. By the time of their arrest, the smugglers had raked in some $8 million--nearly a quarter of that pure profit. Officials don't know how much money the group funneled to Hezbollah but believe it was more than $100,000.
Hammoud seems an unlikely candidate to have run such a scheme. In his mid-20s, he appeared soft-spoken, almost shy. One cop described him as "a Dr. Jekyll-Mr. Hyde type" who came alive at weekly prayer meetings, rousing the faithful to contribute to Hezbollah. On weekends, he practiced the marksmanship he learned while in Lebanon. In July 2000, when federal agents arrested the group and searched Hammoud's home, they found hundreds of Hezbollah propaganda tapes, correspondence from top Hezbollah leaders, even receipts from Hezbollah for the money they had sent.
Hammoud and his followers were often ingenious. To avoid suspicion, they hired white women as ride-alongs and strapped bicycles to the back of the vehicles. Some members bought a gas station, using a fraudulently obtained loan guarantee of $1.6 million from the Small Business Administration, officials say. The men even considered taking out life insurance policies for Hezbollah fighters in the Middle East. But it is the group's sheer range of criminal activity that most struck investigators. Tobacco smuggling was only the most lucrative of their varied scams. "They're best described as part-time terrorists and full-time criminals," says FBI agent Rick Schwein, who ran much of the bureau's investigation.
Among their crimes, investigators say: bank scams, bribery, credit card fraud, immigration fraud, identity theft, tax evasion, and money laundering. Nearly all the key suspects had bogus marriages. Two of their "wives" were, in fact, lesbians who lived not with their paper husbands but with each other. The gang used so many identities that investigators had to dig through a mind-boggling 500 accounts to follow the money trail. Most of the crimes were too petty to garner police attention--and that was by design, officials believe. "Is it criminal activity? Yes," says Schwein. "But it's more. It's tradecraft."
The pattern is a familiar one to investigators. Terrorist groups are, at heart, criminal organizations. They rely on smuggling and laundered money, document fraud and front companies, and traffic in illegal weapons. Al Qaeda's Ahmed Ressam, who attempted to bomb Los Angeles International Airport in 1999, was part of an Algerian crime ring partial to credit card and bank fraud. Other terrorist groups are mired in drug dealing and kidnapping.
"A one-man crime wave." The scope of the Charlotte cell's criminal activity led prosecutor Bell to try a new tactic in the war on terrorism: He obtained indictments against the group under RICO, the antiracketeering law that has helped bring Mafia families to their knees. Bell's success has encouraged prosecutors across the country to employ the tough statute against alleged terrorists--most recently in last month's indictment of a former University of South Florida professor, Sami al-Arian, and seven others tied to Islamic Jihad. Indeed, the list of alleged crimes faced by that group reads like a Mob case: conspiracy to kill and maim, extortion, perjury, and obstruction of justice.
The son of a law professor, Ken Bell is credited with other breakthroughs in prosecuting the Charlotte cell. The case stands as the first successful prosecution using a 1996 antiterrorist law that bans "material support" to terrorists; it was under this law that Hammoud was convicted of funneling money to Hezbollah. Bell scored another apparent first by introducing into evidence records from a foreign intelligence agency--in this case, intercepts from the Canadian Security Intelligence Service, which provided damning evidence of cell members' calls to high-ranking Hezbollah officials.
Bell's team also scored big in developing informants. For years, top counter-terrorism officials have complained about how hard it is to penetrate terrorist groups. But the Charlotte case seems to offer a how-to clinic. Agents relied on more than 10 informants and cooperating witnesses. Investigators flipped not only the group's drivers and smugglers but their bogus wives as well. Most important, they flipped Said Harb.
Early on, federal agents zeroed in on Harb, a fast-talking, high-living operator who didn't quite fit in with the others. Although a Hezbollah backer from the same Beirut neighborhood as Hammoud, Harb wasn't a devout Muslim; his interests ran more to fast cars and porn sites. An expert at credit card scams and identity theft, he was described by an agent as "a one-man crime wave." He would adopt the identities of Middle Eastern students after graduation, expand their credit limits, and then "bust out" the account with huge charges. Harb went through a new identity this way every year, officials say. His phone had four different rings--each one for a different identity.
At his arrest in 2000, Harb seemed puzzled at the presence of so many agents, according to the FBI. "Why a SWAT team?" he asked. "It's not like I'm a terrorist or anything."
"Well, we're going to talk about that," replied the FBI's Schwein.
Faced with long years in prison, Harb gradually warmed to a deal with the government. In the end, his price for cooperating was refuge for his family still in Lebanon. It was a reasonable request. Hezbollah is known for taking vengeance on the relatives of those deemed treasonous. While much of America celebrated Easter last March, Bell and other officials quietly helped spirit 14 of Harb's relatives to the United States.
Death threat. Harb provided the smoking gun. He had personally gone to Vancouver, British Columbia, met with a top Hezbollah operative, and helped fund shipments to Hezbollah of a wide range of "dual use" military gear: night-vision goggles, GPS devices, mine detectors, radar, laser range finders, blasting equipment, and sophisticated software. During this time, Hezbollah's military capability in those areas improved markedly, according to U.S. officials. Ultimately, 25 people were indicted in the Charlotte case, for crimes ranging from credit card fraud to money laundering. Five suspects are still fugitives; most of the others have pleaded guilty or were recently convicted.
Despite the success, investigators are not resting easy. "Here's a terrorist support cell that sets itself up in America's heartland," explains one agent. "They have the ability to move people across borders and give them whole new identities. They have access to a constant flow of untraced cash, military training, and a network of criminal contacts to get weapons. That's not good news."
Ken Bell, too, remains cautious, sobered perhaps by a reported death threat. Once imprisoned, Hammoud allegedly plotted to blow up the courthouse and "put bullets into the skull of the arrogant, bastard prosecutor." The allegations remain unproved, but they prompted police to protect Bell's home. Still, Bell says, the government won an important round in the war on terrorism. "What we've done is create a playbook of how to identify and disrupt these groups," he says. "We brought everything we had to bear, and it worked. So it can work again."
With Monica M. Ekman
This story appears in the March 10, 2003 print edition of U.S. News & World Report.