Is the U.S. Government Getting Sucked Into Shariah-Compliant Finance?

by Frank Gaffney, Jr.

The insurance giant AIG has lately become the poster child for corporate risk-taking, mismanagement and greed. Its unimaginably large losses, rooted in insurance it extended to financial companies engaged in subprime mortgage-backed transactions, have destroyed both AIG's corporate reputation and balance sheet.

Indeed, but for the fact that Treasury Secretary Henry Paulson – who during his days running Goldman Sachs had extensive ties to AIG – deemed the insurance firm "too large to fail," the company would surely have gone under by now. Instead, Mr. Paulson gave AIG well over $40 billion of the slush-fund Congress intended to bailout the financial sector (part of a total $150 billion the U.S. has sunk in AIG to date). As a result, you and I and our fellow taxpayers have been saddled with ownership of nearly 80% of this once high-flying and now-floundering global insurance enterprise.

Another result of AIG's nationalization is, if anything, even more worrisome.

It turns out that AIG has a subsidiary specializing in "takaful" – insurance products that are purportedly "Shariah-compliant." I say purportedly because – while they have been cynically deemed "pure" (halal) by Shariah advisers that AIG employed for the purpose of making such certifications – the Islamic code expressly prohibits business transactions that involve risk. Consequently, insurance products designed to hedge against risk are inherently "impure" or haram.

Whatever the status of AIG's "takaful" products under Islamic law, the U.S. government now has a vested interest in their financial success. Uncle Sam has become Uncle Shariah.

In so doing, Henry Paulson has acted in a manner that not only appears to smack of a conflict of interest and egregious disregard for the public's fiduciary interests. He also seems to have violated the Constitution.

The First Amendment of the Bill of Rights has long been interpreted as prohibiting the establishment of any national religion or conferring upon one religion a preference over others. By taking a massive stake in a company that explicitly promotes Islam's Shariah law, the U.S. government is acting at odds with both of these revered principles.

Fortunately, an important legal initiative has just been launched aimed at blocking Mr. Paulson and the Federal Reserve Board from engaging in this sort of unconstitutional behavior via Shariah-Compliant Finance (SCF) and other commercial transactions. A lawsuit filed December 15th in U.S. district court in Michigan by an Iraq war veteran named Kevin Murray contends that:

"The Shariah-based Islamic religious practices and activities that the government-owned AIG engages in – activities that are funded and financially supported by American taxpayers, including Plaintiff, who is forced to contribute to them – are antithetical to our Nation's values, customs, and traditions with regard to religious liberty, religious tolerance, and the proscriptions of the First Amendment. These government-funded activities not only convey a message of disfavor of and hostility toward Christians, Jews, and those who do not follow or abide by Islamic law based on the Quran or the teachings of the Prophet Mohammed, but they also embody actual commercial practices which are pervasively sectarian and which disfavor Christians, Jews, and other 'infidels,' including Americans."

The litigation seeks relief in ways that would be far-reaching at a time when the U.S. government has bought not only most of AIG but owns some 20 other financial institutions – and seems intent on encouraging their embrace of Shariah-Compliant Finance. (Notably, in November, Mr. Paulson's fellow Goldman Sachs alumnus and point-man for the financial sector bailout, Assistant Treasury Secretary Neel Kashkari, convened an "Islamic Finance 101" seminar where officials in the "policy community" were propagandized by Harvard University professors and other champions of the SCF industry.)

The court is being asked to rule that, among other things, the defendants' "policy and practice of approving, endorsing, promoting, funding, and supporting Shariah-compliant finance" and "the United States government's ownership interest in and use of taxpayer money to financially support AIG and its Takaful Insurance business, which is pervasively sectarian, violate the Establishment Clause."In addition, Murray v. Paulson seeks a permanent injunction against such practices both with respect to AIG and Shariah-Compliant Finance more generally.

Most Americans remain unaware of the menace posed by Shariah, let alone the extent to which it is being insinuated stealthily into our country. Happily, the latter is the subject of an excellent new book by the acclaimed scholar of Islam, Robert Spencer, entitled, Stealth Jihad: How Radical Islam is Subverting America Without Guns or Bombs.

Murray v. Paulson therefore provides not just an opportunity for an urgently needed constitutional ruling and injunctive relief with respect to the U.S. government's submission to Shariah. This lawsuit brought on Mr. Murray's behalf by one of the nation's preeminent public interest law firms, the Thomas More Law Center, and by the formidable litigator/Shariah expert David Yerushalmi, who also serves as the Center for Security Policy's general counsel, affords the American people a vital teaching moment: Official promotion of Shariah law is unconstitutional and, given Shariah's inherently seditious nature (it explicitly requires the violent overthrow of all non-Islamic governments in favor of a global theocracy), acquiescence to its insinuation in this country constitutes a felony offense known as "misprision of treason."

We cannot tolerate and must not permit Uncle Sam's morphing into Uncle Shariah. Prompt action by the courts on Murray v. Paulson may spare us that monstrous transformation.