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"Farah's drum-tight presentation of evidence to substantiate his allegations will be difficult to dispute, and his stark and straightforward writing style makes this book hard to put down."
- Publishers Weekly (starred review)

"Farah's swiftly moving narrative introduces a cast of characters worthy of a Le Carré novel, ranging from tough-talking CIA agents to canny African operators to the super-villainous former Soviet officer responsible for arming both sides in the Afghan civil war. . . Immensely valuable for those who follow the movements of international terrorists-who, by Farah's account, walk among us on all sides."
- Kirkus Reviews

Why has the money trail around al Qaeda grown so cold? And how is it that, despite President George W. Bush's vow to "choke off the flow of terrorist money" in the wake of 9/11, terror groups are clearly still able to fund their operations worldwide, as evidenced by the Bali bombing in October 2002, the May 2003 suicide attacks in Riyadh, Saudi Arabia, and the March 2004 train bombings in Madrid that left 199 people dead and more than 1,800 others injured?

As revealed in BLOOD FROM STONES: The Secret Financial Network of Terror (Broadway Books; May 4, 2004; Hardcover; $24.95) by veteran investigative reporter Douglas Farah, the alarming answer to these questions is that al Qaeda and other terrorist organizations such as Hezbollah have long followed a financial diversification strategy that has rendered the crackdown by U.S. and other governments almost useless. The effectiveness of this strategy has been aided by diverse factors: the rapid deregulation that came with financial globalization, which has enabled instantaneous financial transfers that are hard to trace; bitter in-fighting, disorganization, and lack of central control among U.S. intelligence agencies which continue to hamper our efforts to combat terrorism; and specific intelligence failures by the CIA which, on at least two occasions, missed the connection between al Qaeda and the West African diamond trade.

Discovery of the al Qaeda Diamond Trail

Farah first stumbled upon the connection between al Qaeda and the illicit African diamond trade a few weeks after the September 11, 2001 attacks on New York City and Washington DC, while serving as the West Africa Bureau Chief for the Washington Post. Over lunch in Abidjan, Ivory Coast, Cindor Reeves, a veteran of West Africa's murderous underworld of diamond trading and black-market arms deals, described to Farah a safe house he had rented in the Liberian capital of Monrovia on behalf of a group of Arab diamond dealers protected by then-Liberian president Charles Taylor. These Arabs, he reported, were furiously buying millions of dollars of diamonds at above-market prices from rebels in neighboring Sierra Leone. They had also put pictures of bin Laden on their walls and spent much of their free time watching videos of Palestinian suicide bombings.

"That conversation ultimately launched me on a journey across four continents that would give me a unique window into the uncharted world of terrorist financing," writes Farah, whose book uncovers for the first time the interlocking web of commodities, underground transfer systems, charities, and sympathetic bankers that support terrorist activities around the world. Sharing information he obtained far ahead of what U.S. intelligence agencies knew as they scrambled to understand al Qaeda's money in the aftermath of the 9/11 attacks, Farah takes readers inside a shadowy world that stretches from the killing fields of Sierra Leone, where, in exchange for diamonds, terrorists paid cash to some of the most brutal killers in Africa, to the gold markets of the United Arab Emirates and the secretive diamond trading center in Antwerp, Belgium, and from money merchants in Pakistan to the suburbs of Washington DC, Detroit, Chicago, and Dallas where radical Islamic charity organizations adept at raising funds serve as a sophisticated financial front for terrorist organizations, siphoning off millions of dollars to fund violence and terror.

How al Qaeda Built a Global Financial Network Resistant to Western Retaliation

In 1999, in the aftermath of the August 1998 attacks on the U.S. embassies in Kenya and Tanzania, the Clinton Administration froze $240 million belonging to al Qaeda and the Taliban in Western banks-most of it in the form of gold reserves on deposit with the U.S. Federal Reserve. Realizing their vulnerability, al Qaeda's leaders subsequently moved tens of millions of dollars from banks into diamonds, gold, tanzanite, emeralds, and sapphires, commodities that are easy to transport, smuggle, and convert yet difficult to track. With diamonds and other commodities in hand, al Qaeda operatives turned towards home grown money merchants in countries such as Saudi Arabia, Dubai, and Pakistan, relying on a network of sympathetic and enterprising network of gold merchants, gemstone buyers, and hawala-a traditional Arab and Asian trust-based system of moving funds through brokers-to convert commodities into cash and cash into commodities such as weapons, ammunition, satellite telephones, or gold. Observes Farah, "U.S. and European intelligence missed this shift completely."

Al Qaeda's Africa Connection

As detailed in BLOOD FROM STONES, al Qaeda's foray into the world of West African diamond trading was not the first by a terrorist group. For years, Lebanon's Hezbollah used diamond riches to fund its causes; by the early 1980s, all factions in Lebanon's civil war derived substantial funding from the Sierra Leone diamond trade. Al Qaeda itself had been active in the 1990s in both East and West Africa, and evidence from the trial of Wadih el Hage, who had worked for several years as bin Laden's personal secretary and who was convicted for plotting the U.S. embassy bombings in Kenya and Tanzania, showed that al Qaeda's interest in diamonds stretched back several years. This evidence has, however, been largely overlooked by intelligence officials and investigators.

Al Qaeda's entrée into the West African diamond trade in the late 1990s was provided through Ibrahim Bah, a Libyan-trained Senegalese who had fought with the mujahadeen in Afghanistan and whom Charles Taylor had entrusted to handle the majority of his diamond deals. Bah arranged for al Qaeda operatives to buy all diamonds possible from the RUF, the Charles Taylor-supported rebel army that controlled much of neighboring civil-war-torn Sierra Leone. "The rebels used the cash from al Qaeda to buy the weapons. The stones gave al Qaeda a fail-safe way to hide its assets outside banks and other financial institutions," writes Farah. "Belgian investigators later traced $20 million through a single account they believe was used by al Qaeda to purchase diamonds."

In June 2001, during a visit to the rebel-controlled "blood diamond" fields in Sierra Leone, Farah observed first-hand a frenzy of activity spurred by the recent arrival of strangers offering exorbitant prices for the better-quality stones. No one knew who these buyers were, he reports. "They just dubbed the new patrons 'bad Lebanese,' believing them to be part of the Lebanese diamond-buying network that had controlled diamond sales in the country for decades."

It was only months after the tragic events of 9/11 that Farah would discover the true identity of the mysterious buyers who had cornered the West African diamond market. When he showed Cindor Reeves, his Liberian source, a two-page spread of mug shots of the FBI's Most Wanted Terrorists in Newsweek magazine, Reeves quickly identified Khalfan Ghaliani, Fazul Abdullah Mohammed, and Abdullah Ahmed Abdullah, described by the FBI as a "top bin Laden advisor," as the men who had rented the safe house in Liberia and whom he had taken to the diamond fields. Farah subsequently confirmed Reeves' identifications at a tense face-to-face meeting with the commanders of the RUF from whom the al Qaeda operatives had purchased diamonds. "The buyers, the 'bad Lebanese,' were in fact senior operatives of Osama bin Laden's al Qaeda network," he writes. "The purchase of millions of dollars of diamonds was a desperate race against time to convert terrorist cash into a commodity that could survive U.S. retaliation. The tactic went undetected until it was too late."

The CIA Drops the Ball, Then Covers Its Tracks

Farah's story revealing the al Qaeda connection to illicit diamond trading as well as the complicity of Ibrahim Bah and Charles Taylor ran on the front page of The Washington Post on November 2, 2001, and was picked up by wire services and radio reports around the world. Days later, Farah was informed by the U.S. government that there were "credible threats" of "retribution" against him for the story and he was forced to evacuate from Africa with his family.

In response to Farah's story, the U.S. government said it had no information about any al Qaeda ties to diamonds in West Africa. However, the CIA requested that Farah brief a group of its analysts about how he had obtained his story. At an initial meeting at CIA headquarters in Langley, Virginia, in late November 2001, the analysts Farah met with were dismissive of his story. "It was clear from the questions that some of the agents were concerned I was going to write that there had been a massive intelligence failure in their not detecting the diamond trail," he writes. As it turned out, the CIA was worried about more than that. "What I didn't know when I first met with the CIA," states Farah, "was that they had, in fact, already blown several opportunities to dig into the diamond story. There were indeed footprints to try to cover."

Nothing the intelligence community could have known would have changed 9/11. But following the evidence would have made it much easier to trace illegal funds. The first time the CIA had ignored compelling information that would have shed light on the diamond trade between Liberia's Charles Taylor and those close to al Qaeda took place in February 2001. Hoping that the U.S. government would agree to forgive an outstanding warrant against him for check fraud in exchange for information about diamonds-for-weapons deals he had witnessed, Allie Derwish, a Lebanese-American diamond dealer who had initiated the diamond deals that eventually led to al Qaeda, contacted the U.S. embassy in Belgium. After waiting several days for a response, Derwish finally won a meeting with a political officer from the U.S. embassy to whom he described the safe house in Liberia, diamonds for weapons deals and the roles of key players including Ibrahim Bah, whose satellite phone number he provided. While Derwish's information created a stir within the National Security Council in Washington, the U.S. Justice department balked at making a formal deal with him and the CIA said it had no interest in his information. Derwish was told to stop calling the U.S. embassy.

The CIA missed a second opportunity in the days immediately preceding the 9/11 al Qaeda strike against the U.S., when Cindor Reeves called the U.S. embassy in Sierra Leone to warn of an impending attack against American interests. At a meeting with a political officer from the U.S. embassy on September 10, Reeves recounted how he had been with Ibrahim Bah a few days previously when Bah received a phone call from an Arabic speaker. Hanging up the phone, Bah told Reeves to wait and see what would happen to the United States, which thought it was the world's policeman, in the next few days. "The U.S.," asserts Farah, "won't comment on that meeting."

Although the details of Farah's reporting have been corroborated by European intelligence agencies, nonprofit organizations such as Global Witness, and the UN-backed Special Court that has indicted Charles Taylor for crimes against humanity and issued a warrant for his arrest, the CIA continued, as recently as February 2003, to maintain that there was no evidence of an al Qaeda tie to the diamond trade. At the same time, as Farah details in BLOOD FROM STONES, to protect itself against Congressional outrage about its failures, the CIA actively sought to discredit journalists such as Farah as well as their sources. Farah made Cindor Reeves available to the CIA for questioning (a move he deeply regrets). But the intelligence officials deliberately set Reeves up to fail a polygraph exam, in order to say Farah's main source was not trustworthy. They later alleged Reeves failed every single question, questions that centered on why he had lied to Farah about the al Qaeda connection. They also paid Ibrahim Bah for information and tried to recruit him as a permanent CIA asset. "All of a sudden, it dawned on me what the CIA had done," writes Farah. "but I still couldn't believe it. After discreet inquiries, a senior U.S. official with access to the intelligence confirmed my suspicions. The whole meeting with CR, he said, was 'a set up. It was meant to show your source as being unreliable for two reasons: to be able to discredit him if his meetings with embassy personnel ever became public; and to clear the way for dealing with Bah, who can now be portrayed as reputable.'"

U.S. Counterterrorism Policy in Deep Disarray -
How Bureaucratic Squabbles and Lack of Central Control Have Hampered Our Ability to Cut Off the Flow of Terror Money

As described in BLOOD FROM STONES, the failure of the CIA to recognize and respond effectively to the connection between al Qaeda and the West African diamond trade, while troubling in itself, is symptomatic of a broader inability of the U.S. government to effectively go after al Qaeda's elaborate financial structure as well as of a counterterrorism policy in deep disarray.

Throughout the Bush administration, charges Farah, "government rhetoric about the war on terror has masked a lack of sustained interest in fighting the threat on the ground." The Clinton administration had begun to take seriously the threat of al Qaeda and international terrorism, but terrorism was not a priority for the Bush administration when it came into power; and, after 9/11, the war on Iraq diverted crucial resources and manpower from the overall counterterrorism strategy. The problems with the current system have been exacerbated by the sheer volume of "threat information" that senior officials must sift through, as well as by rapid turnover of senior level officials at the State Department, Pentagon, and other agencies, as exemplified by the successive resignations-in a short period of time-of Dick Clarke, General Wayne Downing, and Rand Beers as the top White House counterterrorism advisor. This turnover, maintains Farah, "has taken a toll on counterterrorism efforts. Decades of experience and knowledge have been lost at the time when they are most needed. Some of those who left blamed their dissatisfaction, in conversations with friends and colleagues, on the insular nature of Bush's inner circle, the inability to present unbiased intelligence, and the increasingly dysfunctional intelligence process itself."

"The efforts to cut off the flow of money to terrorists have not been exempt from the dysfunctionality," writes Farah, who describes how in-fighting and lack of cooperation and coordination among U.S., agencies- including between the FBI, Customs, and the Treasury, and between the FBI and the CIA-has long undermined America's ability to mount a coherent response to the terrorist threat. "For twenty months after 9/11, efforts to track and freeze terrorist funds were hampered by a bitter and bureaucratic turf battle over which government agency would be responsible for investigating terrorist financing," he observes, pointing out that it was only in May 2003 that a Memo of Understanding between Attorney General Ashcroft and Homeland Security Secretary Tom Ridge finally gave the FBI sole control over terrorist-related financial investigations. While cooperation among government agencies has since improved, more than two years after 9/11 the United States remains far behind in the race to cut off the flow of money, the lifeblood of terrorism.

A riveting-and deeply unsettling-work of investigative journalism that shows not only how terrorists are able to orchestrate complex and expensive attacks but also why our ongoing and future wars on terrorism will be so difficult to win, BLOOD FROM STONES is the first book to tell the crucial, untold story of one of the least understood, but most pivotal, battlefields in that war.

BLOOD FROM STONES

The Secret Financial Network of Terror
By Douglas Farah
Published by Broadway Books
Publication Date: May 4, 2004
Hardcover; $24.95; 240 pages
ISBN # : 0-7679-1562-3

About the Author

Douglas Farah has been an award-winning member of the investigative staff and a foreign correspondent for The Washington Post and other publications. In March 2000, the Post named him West Africa bureau chief. He was stationed in Abidjan, Ivory Coast, until threats on his life forced him and his family to evacuate. Since January 2004, he has worked as a consultant and senior fellow at the National Strategy Information Center, writing on national intelligence matters. He lives in Washington, D.C., area with his wife and three children.

To schedule an interview with Doug Farah, please contact David Drake at Broadway Books at 212-782-9001 or ddrake@randomhouse.com