For years, the company has moved billions in profits to Puerto Rico to avoid taxes. When the IRS pushed it to pay, Microsoft protested that the agency wasn’t being nice. Then it aggressively fought back in court, lobbied Congress and changed the law.
Eight years ago, the IRS, tired of seeing the country’s largest corporations fearlessly stash billions in tax havens, decided to take a stand. The agency challenged what it saw as an epic case of tax dodging by one of the largest companies in the world, Microsoft. It was the biggest audit by dollar amount in the history of the agency.
Microsoft had shifted at least $39 billion in U.S. profits to Puerto Rico, where the company’s tax consultants, KPMG, had persuaded the territory’s government to give Microsoft a tax rate of nearly 0%. Microsoft had justified this transfer with a ludicrous-sounding deal: It had sold its most valuable possession — its intellectual property — to an 85-person factory it owned in a small Puerto Rican city.
Over years of work, the IRS uncovered evidence that it believed laid the scheme bare. In one document, a Microsoft senior executive celebrated the company’s “pure tax play.” In another, KPMG plotted how to make the company Microsoft created to own the Puerto Rico factory — and a portion of Microsoft’s profits — seem “real.”
Meanwhile, the numbers Microsoft had used to craft its deal were laughable, the agency concluded. In one instance, Microsoft had told investors its revenues would grow 10% to 12% but told the IRS the figure was 4%. In another, the IRS found Microsoft had understated revenues by $15 billion.
Determined to seize every advantage against a giant foe, the small team at the helm of the audit decided to be aggressive. It used special powers that the agency had shied away from using in the past. It took unprecedented steps like hiring an elite law firm to join the government’s side.
To Microsoft and its corporate allies, the nature of the audit posed a dire threat. This was not the IRS they knew. This was an agency suddenly committed to fighting and winning. If the aggression went unchecked, it would only encourage the IRS to try these tactics on other corporations.
“Most people, the 99%, they’re afraid of the IRS,” said an attorney who works on large corporate audits. “The other 1%, they’re not afraid. They make the IRS afraid of them.”
Microsoft fought back with every tool it could muster. Business organizations, ranging from the U.S. Chamber of Commerce to tech trade groups, rallied, hiring attorneys to jump into the fray on Microsoft’s side in court and making their case to IRS leadership and lawmakers on Capitol Hill. Soon, members of Congress, both Republicans and Democrats, were decrying the IRS’ tactics and introducing legislation to stop the IRS from ever taking similar steps again.
The outcome of the audit remains to be seen — the Microsoft case grinds on — but the blowback was effective. Last year, the company’s allies succeeded in changing the law, removing or limiting tools the IRS team had used against the company. The IRS, meanwhile, has become notably less bold. Drained of resources by years of punishing budget cuts, the agency has largely retreated from challenging the largest corporations. The IRS declined to comment for this article.
Recent years have been a golden age for corporate tax avoidance, with massive companies awash in profits routinely paying tax rates in the single digits, or even nothing at all. But how corporations manage to do this and keep the IRS at bay is mostly shrouded in secrecy. The audit process is confidential, and the IRS, for all its flaws, simply doesn’t leak. Microsoft’s war with the IRS offers a rare view into how a giant company maneuvers to avoid taxes — and how it responds when the government tries to crack down. ProPublica has reconstructed the fight from thousands of pages of court documents, information obtained through public records requests and accounts from current and former IRS employees.
Microsoft declined to discuss its taxes in any detail. In response to extensive questions provided in writing, the company said it “follows the law and has always fully paid the taxes it owes.”
In 2010, the IRS announced that it was creating a new unit to audit international, intra-company deals. Tech, pharmaceutical and other giants had figured out how to use these dubious deals to avoid taxes on a colossal scale. It was hardly a secret: News articles had detailed how Google, Pfizer and others saved billions. Senate hearings ensued.
Despite the publicity, nothing changed. The trend, which had taken off in the 2000s, intensified. The losses to the U.S. Treasury in uncollected taxes ran well into the hundreds of billions of dollars. In 2016 alone, according to an estimate by economists including Gabriel Zucman of the University of California, Berkeley, U.S. corporations avoided $61 billion in taxes by sending profits to tax havens.
U.S. Corporations Shifted a Larger Share of Profits to Tax Havens
The concept was simple. A U.S. company sold its most valuable asset — for a tech company, its intellectual property — to a subsidiary in a place (Ireland, Singapore, Puerto Rico, etc.) where the tax rate was extremely low.
The details of these deals were monstrously complex, making it difficult for the IRS to prove they were done solely to dodge taxes. Essentially, the IRS had to argue that the company had set the wrong price for its intellectual property. And to do that, the agency had to understand the company, its markets and its prospects top to bottom. It was a near-impossible task, and the IRS suffered some key losses in court, which only emboldened companies to stake out even more aggressive positions.
In 2011, the IRS picked Samuel Maruca to lead the new unit. A partner at the prominent law firm Covington & Burling, Maruca had spent decades advising corporations on “transfer pricing,” as this area of tax is called, and facing off against the agency on audits. He came to the job, he said, to help fix a broken system.
Maruca is the picture of a tax lawyer (thinning hair, glasses). But unlike many of his colleagues, he expresses himself clearly, sometimes in moral terms. He told peers at industry conferences that the nation’s corporations had grown excessively bold. “We would all benefit,” he said, “from a resurgence of moderation and heightened regard for principle.”
To restore balance, the IRS “must produce some winners,” he said. “I really want to make a difference.”
Maruca built a team of about 60 — agents, attorneys and economists — with half recruited from outside the agency. For the IRS, this was a notable influx of talent. But it was still modest when compared with the scale of the challenge.
Among the key advisers on the new team was Eli Hoory, an attorney who had worked under Maruca at Covington and followed him over to the IRS a few months later. Hoory, then in his mid-30s, had a shaved head and prominent nose that gave him an angular appearance. Known for being extremely bright, he was also frank and outspoken, sometimes to a fault. A graduate of the U.S. Coast Guard Academy, he’d served as a reservist during law school and studied at the London School of Economics before landing at Covington.
Maruca and his team set about canvassing the IRS’ inventory to find good targets for producing “some winners,” as he’d put it.
Microsoft’s Puerto Rico deal almost slipped by. The week before Maruca started at the IRS in May 2011, the agency, which had already been auditing the transaction for four years, completed its work and sent Microsoft its findings.
That 2011 assessment by the IRS isn’t public, but it’s clear Maruca and Hoory were unimpressed. The IRS, they thought, had been credulous, accepting too many of Microsoft’s numbers. They also thought the IRS was set up for failure. The agency had been able to retain only one outside expert, an economist. If the case went to court, Microsoft would surely summon a cast of varied experts to undermine the IRS’ position.
It seems likely, given the size of Microsoft’s Puerto Rico transaction, that the IRS in May 2011 had hit the company with a tax bill in the billions. But Maruca and Hoory thought the agency was thinking small.
Maruca told Microsoft the IRS needed more time, and in early 2012, the IRS withdrew its findings. By then, Hoory had taken leadership of the audit. He began sending new document requests to Microsoft, asking for more interviews and considering what other experts the IRS needed to round out its case. Over the next three years, he and his team amassed tens of thousands of pages and conducted dozens of interviews with Microsoft personnel. (Hoory, who still works at the IRS, declined to comment.)
The evidence they assembled told a story. It revealed how Microsoft had built a massive Rube Goldberg machine that channeled at least $39 billion in profits to Puerto Rico. It revealed a workshop of outside consultants, economists and attorneys who, as they had with other corporate clients, meticulously planned a structure that seemed to have a basis in the law, even if it violated common sense.
The documents showed that Microsoft had been caught red-handed, Hoory believed. Despite all their care in preparing for an eventual audit, the deal’s architects had left damning evidence that, he thought, made it possible for the IRS to expose the sham.
In 2003, Microsoft had a decision to make. Since 1989, it had operated a manufacturing facility in the small city of Humacao at the eastern end of Puerto Rico. The factory existed because of a tax break, and that break was due to expire after 2005.
A 2003 company memo laid out the quandary. Microsoft had about 85 employees in Humacao burning Windows and Office software onto CDs. Doing that in Puerto Rico had saved the company almost $200 million in taxes over the years. Closing the plant and outsourcing Microsoft’s CD production when the tax break expired was the obvious choice. “The cost to manufacture one CD [in Puerto Rico] is from 1.4 to almost three times the cost of outsourcing,” the memo said.
There was one alternative to closing the plant, but it would “require very aggressive tax structuring and work,” according to Microsoft’s head of international tax, Glenn Cogswell, as cited in the 2003 memo. Microsoft could create a new tax advantage by using the factory as a means to stash U.S. profits. The memo dismissed that option as impractical.
But the next year, Microsoft changed its mind. KPMG, one of the “Big Four” accounting firms, made a persuasive pitch. Microsoft should engage in that very aggressive tax structuring, after all.
KPMG had “significant experience assisting Fortune 50 companies” faced with the same problem, according to a July 2004 PowerPoint presentation to Microsoft executives. KPMG could do for Microsoft what it had done for those other giant American corporations: send U.S. profits to the island.
Puerto Rico — which has an autonomous tax system even though it’s a U.S. territory — didn’t have a particularly low tax rate, but KPMG could fix that. Its partner in the San Juan office, the PowerPoint said, had “previously advised several U.S. clients on migrations of this type and successfully negotiated significant tax holidays for U.S. companies with the Puerto Rican government.”
The next month, a team of Microsoft executives met with KPMG to hash out the details. They made sure not to leave a paper trail. “This needs to be a verbal briefing with no handouts and no e-mail,” wrote Bill Sample, a senior Microsoft tax executive, in an email scheduling the meeting. “We will do this on the white board.”
Shuttling company profits from country to country was not a new idea for Microsoft. Not long before, it had conjured deals to send its profits in Asia to Singapore and its profits in Europe and Africa to Ireland. The Puerto Rico transaction, which would cover North and South America, would be the biggest and boldest yet.
Here’s how it would work. Microsoft’s Puerto Rican subsidiary would produce all the CDs for the American market. Because it was the sole producer, it would buy the exclusive rights to Microsoft’s technology. Those licenses would entitle the Puerto Rican company to a share of Microsoft’s American profits.
According to Hoory’s calculations, the factory subsidiary would send the parent company about $31 billion over 10 years — and receive almost $70 billion in profits in return over the same period. Instead of being taxed in the U.S., where the rate was 35%, the $39 billion difference between those figures would be taxed in Puerto Rico at a rate near 0%. It was a long-term plan that could continue indefinitely.
A chart developed by the IRS’ Eli Hoory to illustrate Microsoft’s Puerto Rico deal over its first 10 years. The government presented the chart in court in 2015.
It didn’t matter that the transaction was fundamentally absurd. Microsoft would never actually sell its most valuable asset to another company, let alone to a little tropical factory. Still, there were rules for constructing and valuing deals like this, and Microsoft and KPMG set out to prove they were following them.
Minutes from meetings involving KPMG’s experts show them straining to fit the details together. “This work needs to be very detailed and [have] incredibly great documentation to refute any IRS issues,” read the notes for one meeting in March 2005.
One problem was that there was a rush to get the deal done that summer, but Microsoft’s factory wouldn’t be ready to produce 100% of the CDs that soon. As a result, the new Puerto Rican subsidiary would only be a company on paper, while the old Puerto Rican company was still pumping out CDs. In order for the transaction to seem genuine, the new Puerto Rican subsidiary needed to appear to be bona fide.
“What can we do to make this thing real?” was the question, according to the notes for another KPMG meeting. They had an answer: “Go out and do something substantial, so go out and use insurance. Point to a contract with a third party … [that] shows that something real is being done.”
The spitballing continued when KPMG’s team met with a group of Microsoft employees a few days later. “What happens when all info sent online?” was another conundrum, according to meeting notes. If customers downloaded the software instead of getting it on a CD that was produced in Puerto Rico, would the premise of the deal — that it was based on CD manufacturing — be undermined? They ultimately decided that wasn’t a problem, “because customers seem to want CDs, and we’ll put the servers down in PR and send them CDs too.”
KPMG kept its promise to land a rock-bottom rate from the Puerto Rican government. In exchange for Microsoft’s promise to hire an additional 46 full-time employees, Puerto Rico’s secretary of state agreed to grant the company a tax rate that ranged from 0% to 2% for a period of 15 years. A spokesman for KPMG declined to comment.
Over a Decade, Microsoft Stashed Billions Offshore
By the next year, Microsoft had shifted all CD production for the Americas to Puerto Rico. In a written self-evaluation, a Microsoft executive celebrated: “This was a pure tax play and because we took the factory live by July 1 we were able to start claiming the tax benefit as planned.”
But Microsoft wouldn’t be telling the IRS the transaction was a pure tax play. The two sides of the transaction were supposed to arrive at a fair, “arm’s length” price, one that an unrelated company might pay to another. Of course, Microsoft was dealing with itself, and no company of its size had ever sold anything like what it was selling. So, to arrive at a price, KPMG’s economists generated complicated models. These would provide protection if the IRS questioned Microsoft’s numbers. The price was supposedly impartial, based on a thorough analysis of all the relevant variables.
One document in particular exploded this fallacy, Hoory believed. Shortly after the deal went live, a consulting firm delivered a report to Microsoft about the Puerto Rican subsidiary. It valued the company at $30.4 billion. As Hoory later testified, the document was “effectively saying a company that was worth nothing or a nominal amount on June 30th, 2005, was worth $30 billion one day later.”
On Jan. 14, 2014, Hoory stepped in front of a room of Microsoft executives and attorneys from Baker McKenzie, Microsoft’s law firm for the audit. It was his first presentation of his team’s findings. He did not hold back, showing slide after slide that detailed the distortions and errors of the Puerto Rico deal.
“Deal of the Century Return on Investment” said one slide. According to the IRS’ analysis, the Puerto Rican subsidiary had been set up to reap a 200% annual return. It meant that Microsoft’s price for the transaction was not remotely plausible.
Hoory argued that just about every aspect of the deal should be valued differently. Just what those numbers were is not public, but it’s clear he thought Microsoft had caused the Puerto Rican subsidiary to substantially underpay for the software rights while overestimating how much profit the U.S. operation could legitimately send to Puerto Rico.
The presentation put Microsoft on notice. Their big, bold Puerto Rican deal was the target of a big, bold audit. After Hoory finished his presentation, Microsoft’s tax team “said they had to think a little,” Hoory later testified.
It’s routine for IRS agents to share initial findings with corporations under audit. The point is to see whether the two sides might come to an agreement or at least agree on certain aspects and narrow the number of issues under dispute. That was part of Hoory’s mission that day.
But a month later, Microsoft told Hoory and Maruca that it did not want to discuss resolution. Instead, the company wanted the IRS to finalize its findings. With that in hand, Microsoft could then move the fight to another part of the IRS: the Office of Appeals. There, Microsoft had good reason to think it would fare much better.
The Office of Appeals provides taxpayers big and small with an independent review. If an agent has gotten it wrong, appeals can fix it. The office also aims to stem the flood of tax disputes into the courts. It’s where taxpayers go looking to cut a deal.
IRS agents often grouse about working hard on an exam only to see an appeals officer slash the amount of tax owed. To some veterans, the Office of Appeals is known as “the gift shop.”
“No question, Exam hates Appeals,” said Gerry Ouellette, who served as an appeals officer on large corporate cases until 2012 and now works with a Boston firm that advises taxpayers facing audits.
But there’s a logic to the slashing, he said. One reason that tax bills are cut is because the IRS fears it may lose in court. Appeals officers are supposed to judge the “litigation hazard” of a case and put a number on it. For instance, an appeals officer who thinks the IRS is only 30% likely to prevail in court might settle for 30 cents on the dollar.
That’s particularly likely to happen on large, complex audits. According to a 2016 report by the IRS’ inspector general, appeals of transfer pricing audits reduced the amount of tax owed by an average of 81%.
Appeals officers often feel pressure to be lenient, said Willie Chin, a recently retired Appeals officer who handled corporate cases. “If I have to give up the penalty to resolve the case, to move the case along, that’s the idea: to move the case along,” he said. Large corporations rarely face penalties at all, a 2019 report by the IRS’ inspector general found, and when they do, they can count on an appeal to reduce or eliminate the penalties 94% of the time.
The story is different for taxpayers who aren’t represented by a battalion of attorneys and CPAs, Chin said: “In my opinion, we hammer the little guys and we let the big guys go.”
Maruca and Hoory knew all this. It was no mystery why Microsoft was so eager to appeal. But they also knew they could prevent it.
The IRS has the power to “designate a case for litigation” — in other words, force a taxpayer to skip Appeals and go straight to court. It is a move sure to anger a powerful adversary. Not only does an appeal offer the corporation a good opportunity to see the audit overturned, but it does so with the promise that it will keep the details quiet. The U.S. Tax Court, by contrast, is a public forum.
In March 2014, Hoory told Microsoft that the IRS was considering designating the case for litigation. The case was just too big and unique to send to Appeals. “It is such a huge divergence in numbers,” he later testified, “and we have put a lot of energy into it.”
Hoory’s move was aggressive, but not unprecedented. From 2010 through April 2019, the IRS designated 13 cases for litigation, according to agency documents ProPublica obtained through a public records request. The IRS refused to divulge a list of those cases, but the known instances include other large corporations facing transfer-pricing audits: Amazon, Coca-Cola and Facebook.
Maruca and Hoory had other, more radical ideas on how to tackle such a massive case.They wanted to hire a high-powered outside attorney to help the IRS. In the past, they believed, the IRS had failed in court on big, complex cases for two main reasons. The first was that the agency hadn’t done enough work uncovering evidence. It was an error they were well on their way to fixing, they thought. The other stumbling block was the agency’s inability to make a persuasive argument and tell a compelling story to a judge.
Maruca and Hoory wanted a legal star, someone with the experience of winning an enormously complex case against a gigantic foe. But such attorneys are typically found in elite law firms, where large corporate clients might balk at the firm representing the IRS.
Maruca and Hoory concentrated on finding top attorneys who didn’t usually handle tax matters. Their first choice was David Boies. He had beaten Microsoft before, when he represented the Justice Department in its landmark 1998 antitrust lawsuit against the company. But Boies had another case that created a conflict of interest and couldn’t take the assignment.
The IRS’ next choice was Quinn Emanuel, which describes itself as a “global litigation colossus without equal.” That fit the bill. In May 2014, the two sides signed a $2.2 million contract. It provided for two of the firm’s top partners, John Quinn and John Gordon, each of whom bill more than $1,000 an hour, to spend hundreds of hours on the case along with a small team of other Quinn Emanuel lawyers.
The IRS did this quietly. It wasn’t until late August 2014, on the third page of a letter to Microsoft about scheduling further employee interviews, that Hoory let word slip. The IRS “will have one or more contractors attend,” he wrote. This “may include outside counsel from Quinn Emanuel.”
It didn’t go unnoticed. For the next week, Hoory and Mike Bernard, then Microsoft’s U.S. tax counsel, fired letters back and forth. Microsoft requested a copy of the IRS “engagement letter” with Quinn Emanuel. Hoory, apparently determined not to be too helpful, responded that there was none. When Bernard expressed disbelief and asked more generally for any contract, Hoory sent over a copy of the main section of the contract.
Microsoft was “deeply concerned” about the role of Quinn Emanuel, Bernard wrote, because the firm represented Microsoft competitors like Google and Motorola. He asked Hoory for more details. “We have conflict, confidentiality and ethical concerns,” he wrote.
Hoory responded but also urged Microsoft to make it clear whether it would allow the Quinn Emanuel attorneys to participate in the interviews. When Bernard again asked for more detail, Hoory wrote that he’d been accommodating, but “we are at a decision point now.” Would Microsoft prevent the Quinn Emanuel attorneys from questioning witnesses? “If you do not agree or do not respond, the Service will consider alternatives,” Hoory wrote.
A few weeks later, Hoory arrived at Microsoft’s Redmond, Washington, headquarters with a team of a few other IRS employees, a couple hired experts and Gordon of Quinn Emanuel. On Microsoft’s side, two senior tax executives and a group of Baker McKenzie attorneys attended the interviews.
Microsoft’s outside attorneys kept a close watch on Gordon, the IRS’ outside attorney. Whenever Gordon repeatedly pressed a Microsoft employee for an answer, Daniel Rosen of Baker McKenzie jumped in. “This is being done under the proviso that you guys control this,” Rosen told Hoory, according to a transcript of one interview. “If you don’t control Mr. Gordon, then this is over.” A few days later, when Gordon pushed another Microsoft employee to clarify an answer, the scene repeated. “We’re done with this line of questioning,” Rosen said. “And Mr. Gordon’s not directing this witness to answer any questions,” he said, “Mr. Hoory can, but this gentleman cannot.”
By this time, the investigation had grown intense. Hoory and his team were racing to put their case together while pushing Microsoft to provide more documents. They were up against an approaching deadline. At the end of the year, the statute of limitations would expire. The law gives the IRS three years to complete an audit, and Microsoft had agreed several times to give the IRS more time, as large corporations often do. Microsoft had done this because it was hoping to resolve the audit without a messy court battle. Now that hope was gone, and there would be no more extensions.
As the clock ticked down, Hoory considered his options. Microsoft had both buried the IRS in paper — sending over 1 million pages, much of which Hoory later said wasn’t relevant — and, in his view, failed to send everything the IRS had asked for. If he hurriedly wrapped up the case, he ran the risk of missing crucial pieces of evidence. The stakes, he decided, were too high. So, yet again, he decided to take a remarkable step.
In audits of large corporations, the law grants the IRS a special power. It can issue a “designated summons” for documents and interviews that, with the approval of a federal judge, temporarily stops the clock. After the summons is resolved, the clock starts again. It’s a muscle move that wrenches away any control the corporation has over the audit.
Before Maruca and Hoory arrived in 2011, the IRS had not used this tool since 1996. Partly, that was because it clashed with an IRS culture that valued amicable relations with the country’s largest taxpayers. There was also the potential cost to antagonizing powerful opponents. But for Hoory, these were secondary concerns. In October 2014, the IRS issued a designated summons to Microsoft, demanding 48 categories of documents.
The IRS also summoned for interviews a roster of Microsoft employees, including Steve Ballmer, who’d recently left as CEO. KPMG, too, got a summons. The IRS then filed suit in a federal court in Seattle to enforce its demands.
Microsoft set out to quash the summonses. Its attorneys argued that federal rules exclusively permit IRS employees to question witnesses. The IRS had broken the law by allowing the Quinn Emanuel attorneys to question witnesses, according to Microsoft, and by essentially putting them in charge of the audit.
It was fundamentally wrong for the IRS to use high-powered litigators, one Microsoft attorney argued in a hearing, because “they know how to win, and that’s very different” than the IRS’ mission. The IRS was supposed to work with taxpayers to “find the right number,” she said, not focus on winning.
The marks of Quinn Emanuel’s obsession with winning were all over the IRS’ actions, Microsoft’s attorneys contended. It was the hired sharks who’d prompted the agency to deluge Microsoft with more document and interview requests. It was their idea to force those interviews to be under oath, as opposed to the more common IRS practice of conducting “informal” interviews. And it was their idea to knock on Ballmer’s door with a summons. “It’s not unusual, in high-stakes litigation,” said one of Microsoft’s attorneys, for law firms “to try to put pressure on their opponent by doing things like asking to depose the CEO.”
The dispute over the summons became an opportunity for Microsoft to put Hoory — and the sort of IRS that he represented — on trial. Hoory took the stand to defend the IRS’ actions.
At the hearing in August 2015, Philip Beck handled the questioning for Microsoft. A top litigator, he’d once been a hired gun for the government himself, having replaced Boies as counsel in the antitrust case against Microsoft. Now he was on Microsoft’s side, arguing against the government’s use of outside counsel.
Beck found Hoory to be a frustrating quarry. He would not be pinned down and had a detailed explanation for everything. After an hour of this, Beck complained, “Your Honor, we are never going to get done today if I get 10-minute answers for yes or no questions.” The judge urged Hoory to be briefer. “I will do my best, Your Honor,” Hoory replied.
Beck’s frustrations continued as Hoory clouded the simplicity of Microsoft’s case. But in one area, Hoory allowed a simple answer. Beck asked: Wasn’t this “the first time in the history of the universe” that the IRS had hired an outside law firm to help conduct an audit?
Hoory said that was correct, adding, “I guess I am a trailblazer.”
Microsoft’s complaints grew louder when Hoory and a Justice Department attorney presented the IRS’ side. In addition to laying out the Puerto Rico transaction, Hoory divulged details that made an obvious tax dodge look even worse. Microsoft’s lawyers called that “mudslinging” meant to “punish” the company “for daring to oppose the IRS.”
Hoory testified that Microsoft had used a growth rate of 4% for tax purposes while publicly reporting to investors expected growth of 10% to 12%. One error in their calculations, he said, had “understated revenues by approximately $15 billion.”
After almost four hours of testimony, Hoory stepped down. “It has been a long day,” U.S. District Court Judge Ricardo Martinez said. “Mr. Hoory talks a mile a minute, and it was hard to follow up on all of that.” He added, turning to Hoory, “Working for the IRS is a good job for you.”
Microsoft, meanwhile, was fighting on other fronts, too. Its attorneys pursued Freedom of Information Act requests to dig up as much as they could about the Quinn Emanuel hiring, eventually filing several lawsuits to force the IRS to turn over documents.
The company also turned to its friends in Congress for help. In May 2015, Sen. Orrin Hatch, R-Utah, then the chair of the committee that oversees the IRS, and who counted Microsoft as one of his top campaign contributors, fired off a letter to the IRS commissioner about “outsourcing” the agency’s audit of “a corporate taxpayer.” That “appears to violate federal law and the express will of the Congress,” he wrote, and the $2.2 million contract “calls into question the IRS’ use of its limited resources.” By that time, Republicans in Congress had cut the IRS’ budget by $1.5 billion from its 2010 peak. (A spokesperson for Hatch declined to comment.)
Hatch asked the IRS “to immediately halt” Quinn Emanuel’s work on the case. Microsoft filed a copy of the letter in court a few days later.
But Martinez ruled in favor of the IRS and its use of the special summons to suspend the statute of limitations and demand additional documents. He wrote that he was “troubled” by the IRS’ use of outside counsel since it was unprecedented and that the hiring might “lead to further scrutiny by Congress.” But, he wrote, “Microsoft has no factual basis for the grand assertion that Quinn Emanuel was or will be engaging in taxation or conducting the audit.” Rather, the firm’s role was “limited” and “under the direct supervision of the IRS.”
The IRS had clear legal authority to hire Quinn Emanuel and for its attorneys to question witnesses, the judge ruled. Microsoft would have to comply with the summons.
It was a setback for Microsoft. But as the court case ground on, the company and its allies went to work on Capitol Hill to make sure something like this never happened again.
In the autumn of 2015, a new trade group emerged. It was called the Coalition for Effective and Efficient Tax Administration, or CEETA. Among the members were Microsoft, the U.S. Chamber of Commerce and a host of other business and tech groups. The new coalition hired lobbyists at PwC, another Big Four firm and one with a stable of well-connected former government officials and congressional staff.
The new group’s clout soon became clear. In October 2015, just a few days after CEETA members fired off a letter to the IRS decrying the use of outside counsel on audits, Pam Olson, one of CEETA’s PwC lobbyists, sat down for a two-hour meeting with Doug O’Donnell, the head of the IRS division that audits large corporations.
“When it comes to the tax law, I don’t like the word ‘enforcement,’” Olson, who oversaw tax policy as a Treasury Department official in the early 2000s, said in a speech to corporate tax executives that December. “Let’s remember that the agency is the Internal Revenue Service,” she said. Olson forwarded a copy of her speech to O’Donnell, who responded, according to emails obtained by ProPublica, “Thanks for sharing — I appreciate your perspective.” He said he would pass it on to other senior IRS officials.
CEETA’s lobbyists stalked the halls of Congress, urging reforms in response to the IRS’ newfound aggression. They found a ready audience. In late 2015, a senior aide to Hatch participated in an online seminar for tax professionals along with a senior Microsoft executive. According to a description, participants discussed “the actions of an increasingly aggressive IRS” and the need for reform. (The aide, Christopher Armstrong, has since left Congress and now works as a lobbyist. He did not respond to requests for comment.)
“Focusing on litigation destroys cooperative relationships between taxpayers and the IRS,” read a document distributed by CEETA’s lobbyists to lawmakers around that time and obtained by ProPublica. The proposals targeted the three bold steps Hoory had taken in the Microsoft audit: CEETA wanted lawmakers to curtail the IRS’ ability to block taxpayers’ access to the Office of Appeals, rein in the use of designated summons and prohibit outside lawyers from questioning witnesses.
The IRS had used these tools to audit one of the world’s largest companies and in few other cases. From 2010 through 2019, it blocked appeals in 13 cases (not counting Microsoft’s), used a designated summons in one case other than Microsoft’s and hired an outside attorney on an audit once. By comparison, from 2010 through 2018, the IRS completed about 18,000 audits of corporations with assets above $1 billion.
But CEETA members warned that the tactics posed a threat to small businesses. The leader of one tech group testified before the House Committee on Small Business about the IRS’ use of “intimidation tactics.” And the Small Business and Entrepreneurship Council sent a letter to Sen. Rob Portman, R-Ohio, warning that small business owners “certainly do not have the resources to go up against a powerful $1,000-an-hour legal team in a tax dispute.”
A spokesman for CEETA, Brian Cove of Financial Executives International, said in a statement, “CEETA believed that IRS audit process changes often spread from one part of the IRS to another and could have an impact on small businesses.”
Portman introduced a bill that followed all three of CEETA’s recommendations. The next year, a bipartisan group of House lawmakers introduced a bill that largely mirrored Portman’s. CEETA cheered both times. (The lawmakers declined to comment.) Microsoft, Coca-Cola and Facebook, all companies that had had their path to appeals blocked, lobbied to support one or both bills, along with a collection of tech and business groups.
The ideas were ultimately included in a large, bipartisan bill called the “Taxpayer First Act” with a wide range of IRS reforms. The bill contained provisions similar to what CEETA had sought, though milder. The IRS would have a new process to follow in order to block appeals or designate summonses and would have to report to Congress when it did so. And the agency would now be barred from using an outside attorney to question a witness under oath. The bill passed overwhelmingly and was signed into law in July.
CEETA’s success sent a clear message to the IRS, one the agency appears to have heeded. In 2016, for example, when the IRS was locked in a battle with Facebook, the agency considered using a designated summons since the statute expiration was approaching. But the IRS did not use it, even though, according to an agency court filing, “the examination team had not completed its fact gathering efforts when the clock ran out.”
The era of daring, new initiatives has passed at the IRS. Instead, the agency appears to have largely avoided picking fights with large corporations and embraced the sort of cooperation urged by Microsoft and CEETA. In part, this is because the IRS is simply too weak. The agency has lost more than a third of its enforcement staff since 2010, and the result has been fewer audits. For corporations with assets over $20 billion, the audit rate has declined from about 100% in 2010 to under 50% in 2018.
The IRS Has Been Auditing the Largest Corporations Less Aggressively
For corporations with assets of $20 billion or more, audits that end in disagreement have become rare.
The makeup of those remaining audits tells a story, too. The number of contentious audits, where corporations disagreed with the agency’s findings, have plummeted from 185 to 25, a drop of 86%. But audits that ended in agreement have stayed relatively steady over the years. Not surprisingly, audits ending in agreement tend to result in relatively small adjustments.
Microsoft, meanwhile, has continued to reap the benefits of its offshore deals. In 2017, the last year before the new tax law cut the corporate rate from 35% to 21%, Microsoft paid $2.4 billion in taxes on $29.9 billion in income, a rate of 8%. By that point, Microsoft had stored $142 billion in profits offshore, according to its public filings. Only two other U.S. companies had accrued more, according to the Institute on Taxation and Economic Policy: Apple, with $246 billion, and Pfizer, with $199 billion.
Bringing those foreign profits into the U.S., Microsoft disclosed in 2017, would have resulted in a $45 billion tax bill. Of course, the company didn’t do that. Instead, like other companies that stashed profits offshore, it waited for a better deal. There was good reason to wait: Back in 2004, for example, Congress had passed a tax holiday that allowed multinationals to bring home foreign profits at a tax rate of 5.25%.
At the end of 2017, the Trump administration and Republican Congress came through. The Tax Cuts and Jobs Act required U.S. companies to bring home those foreign profits, but at a one-time rate ranging from 8% to 15.5%. So, instead of a $45 billion tax bill, Microsoft says it will pay $18 billion under this provision, a savings of $27 billion.
Time marches on. But the IRS and Microsoft are still in court, the clock still stopped.
The two sides most recently brawled in 2016. As before, the fight involved Hoory and the IRS taking a relatively aggressive position, and Microsoft and its allies reacting with dismay.
The dispute began when Microsoft refused to turn over some documents, most of them involving KPMG, in response to the summons. Microsoft argued the documents were protected by a privilege for tax advice. The government countered with an inflammatory claim: The Puerto Rico deal was, as Hoory put it in a filing, “illusory in nature, serving no material economic purpose except to shift income to Puerto Rico” and was thus a tax shelter.
A tax shelter is something done mainly to avoid taxes, whether legally or illegally, and the law provides far less protection for advice on such a scheme. In response, Microsoft argued that its Puerto Rican company “was a real business with real risks and was not a tax shelter.”
Its allies jumped in to help, too. The Chamber of Commerce filed an amicus brief, arguing that “the extreme positions articulated by the government … would chill businesses from obtaining and relying on the uninhibited advice of their tax advisors.” Other business groups made similar arguments.
In May 2017, Martinez ruled that he would view the disputed documents privately and then decide whether they ought to be turned over. Nearly three years later, he has yet to issue a ruling. (The judge was still reviewing the question as of early January, according to a person in his chambers.)
And so, 12 years after the IRS began its audit of the Puerto Rico deal, eight years after Hoory began his work on it, and five years after the IRS sued to enforce its summons, the audit continues.
One day, the judge will issue his ruling. Soon after, perhaps, the summons will be fully resolved, and the clock will start again. A few months later, the IRS will, at long last, officially tell Microsoft what it owes. In all likelihood, Microsoft will then file a petition in U.S. Tax Court, thus beginning a new court battle. From there, the fight could shift to a U.S. appeals court. A further appeal to the U.S. Supreme Court is certainly possible.
And then, eventually, perhaps someday in the mid-2020s, the audit of Microsoft’s 2005 Puerto Rico deal will be done.
Behind the scenes, a small team of FBI agents spent years trying to solve a stubborn mystery — whether officials from Saudi Arabia, one of Washington’s closest allies, were involved in the worst terror attack in U.S. history. This is their story.
On the morning of Sept. 11 last year, about two dozen family members of those killed in the terror attacks filed into the White House to visit with President Donald Trump. It was a choreographed, somewhat stiff encounter, in which each family walked to the center of the Blue Room to share a moment of conversation with Trump and the first lady, Melania Trump, before having a photograph taken with the first couple. Still, it was an opportunity the visitors were determined not to squander.
One after another, the families asked Trump to release documents from the FBI’s investigation into the 9/11 plot, documents that the Justice Department has long fought to keep secret. After so many years they needed closure, they said. They needed to know the truth. Some of the relatives reminded Trump that Presidents George W. Bush and Barack Obama blocked them from seeing the files, as did some of the FBI bureaucrats the president so reviled. The visitors didn’t mention that they hoped to use the documents in a current federal lawsuit that accuses the Kingdom of Saudi Arabia — an American ally that has only grown closer under Trump — of complicity in the attacks.
The president promised to help. “It’s done,” he said, reassuring several visitors. Later, the families were told that Trump ordered the attorney general, William P. Barr, to release the name of a Saudi diplomat who was linked to the 9/11 plot in an FBI report years earlier. Justice Department lawyers handed over the Saudi official’s name in a protected court filing that could be read only by lawyers for the plaintiffs. But Barr dashed the families’ hopes. In a statement to the court on Sept. 12, he insisted that other documents that might be relevant to the case had to be protected as state secrets. Their disclosure, he wrote, risked “significant harm to the national security.”
The families were stunned. They knew that the success of their lawsuit might well depend on access to the FBI’s investigation into possible Saudi involvement in the plot by al-Qaida. In a federal courthouse in Manhattan, near where the twin towers once stood, the fight over evidence had already dragged on for more than a year. Now, as the judge prepared to rule on what documents would be disclosed, the Justice Department was digging in.
Daniel Gonzalez wasn’t surprised by the hard line. A former street agent in the FBI’s San Diego field office, he was one of several retired investigators who had signed on to help the families. During the last 15 years of his FBI career, Gonzalez was a central figure in the bureau’s effort to understand Saudi connections to 9/11. But even on the inside, Gonzalez often felt as if his own government wanted no part of what he was finding.
From the day of the attacks, the trail seemed to point to Saudi Arabia. First, there was the inescapable fact that, like Osama bin Laden, 15 of the 19 hijackers were Saudis. The first two flew in to Los Angeles in January 2000 and quickly made their way to a Saudi mosque. When they moved to San Diego a few weeks later, they turned for help to a middle-aged Saudi student whom the FBI suspected of spying for the kingdom.
But as details of the 9/11 plot came into focus, the FBI line on possible Saudi involvement began to shift: When the evidence was assessed, FBI officials reported, there was no solid proof that the Saudi government or any of its senior officials deliberately aided the Qaida terrorists. Low-level Saudis with government ties might have helped the two hijackers in California, the bureau acknowledged, but there was no indication that they knew the men were terrorists — much less planning to murder thousands of Americans.
Gonzalez knew he hadn’t seen all the evidence; he had just a corner of an investigation that stretched around the world. American intelligence agencies surely had pieces of the Saudi puzzle that even senior FBI officials might not be aware of. But what Gonzalez uncovered was troubling, and he knew that bigger questions about the plot were still unanswered. “My head was already flat from banging it against the wall,” he recalled. “But I thought, We’re not done.”
Gonzalez, a tough, affable Texan, pressed on. With a small group of like-minded investigators in New York and California, he hunted down witnesses who had slipped away and circled back to clues that had been missed. The evidence they developed was nearly all circumstantial. But it added to the questions about the role of the Saudi government.
The FBI has disputed the idea that foreign-policy considerations significantly influenced its investigation. In interviews, current and former bureau officials and federal prosecutors insisted to us that they never would have hesitated to pursue any Saudi who could have been solidly linked to the 9/11 plot, even if that person never faced trial in the United States. (Saudi Arabia does not extradite its citizens.) “I have never been privy to discussions about not charging someone for 9/11 because we need to maintain a better relationship with the Saudis,” Jacqueline Maguire, a special agent in charge in New York who was closely involved in the case from the beginning, told us. “I have never heard charges be questioned for that reason.”
But others who worked on the matter, including some at the FBI’s highest levels, say that the United States’ complex and often-troubled relationship with the Saudi regime was an unavoidable fact throughout their investigations. Even as the Saudi authorities became more cooperative with the United States in fighting al-Qaida after 2003, they were minimally and grudgingly helpful when it came to the 9/11 inquiry. According to current and former officials, requests for assistance that might rattle the Saudi security agencies were frequently balanced against FBI and CIA needs for Saudi help against continuing terror threats.
How such considerations might also weigh against the appeals of the 9/11 families for a fuller record of what happened remains an open question. If anything, the transactional nature of America’s relationship with the Saudi kingdom has become more overt. In December, following the terrorist shooting by a Saudi Air Force officer that killed three Americans and wounded eight others on a Florida naval base, Trump tweeted what he said were assurances from King Salman that “this person in no way shape or form represents the feelings of the Saudi people.” Earlier last year, addressing the Saudi government’s murder of a Saudi columnist for The Washington Post, Jamal Khashoggi, Trump argued that such offenses should be seen in a broader context. “I’m not like a fool that says, ‘We don’t want to do business with them,’” he told NBC News.
Washington’s efforts to keep secrets about possible Saudi connections to 9/11 have also intensified. Former FBI agents who have made court statements in support of the 9/11 families have been warned by the bureau that they risk violating secrecy laws. Kenneth Williams — a retired agent who wrote a prescient memo before 9/11 about radical Arab students taking flying lessons in possible preparation for hijackings — said in a sworn declaration for the plaintiffs that an FBI lawyer told him that the Trump administration did not want him to help them because it could imperil “good relations with Saudi Arabia.” (The FBI declined to comment.)
The full story of the FBI’s investigation into Saudi links to the 9/11 attacks has remained largely untold. Even the code name of the case — Operation Encore — has never been published before. This account is based on interviews with more than 50 current and former investigators, intelligence officials and witnesses in the case. It also draws on some previously secret documents as well as on the voluminous public files of the bipartisan 9/11 Commission.
The Encore investigation exposed a bitter rift within the bureau over the Saudi connection. It illuminated a series of missed opportunities to resolve questions about links between one of Washington’s closest allies and the deadliest attack in the nation’s history. Richard Lambert, who led the FBI’s initial 9/11 investigation in San Diego, as the assistant special agent in charge there, says he believes that even if the FBI’s evidence of possible Saudi involvement in the case is not conclusive, it is significant enough that it should be fully disclosed. “The circumstantial evidence has mounted,” he says. “Given the lapse of time, I don’t know any reason why the truth should be kept from the American people.”
Images of the World Trade Center’s collapse were still looping on television sets in the FBI’s San Diego field office when a lead came in from Dulles International Airport, outside Washington. A blue 1988 Toyota Corolla had been found in a parking lot; it was registered to one of the suspected hijackers of American Airlines Flight 77, which took off for Los Angeles the previous morning before crashing into the Pentagon, killing 64 people on board and 125 inside the building. The hijacker, Nawaf al-Hazmi, listed a San Diego address.
Gonzalez caught the lead. At 42, he had been in the office for a decade, building a reputation as a shrewd, instinctive agent with a gift for getting people to talk. He had worked very effectively against Mexican drug traffickers and corrupt border-control agents, and he pivoted easily to the new target. “He was a phenomenal agent,” Lambert says, “what you would want to see if an agent knocked on your door. He just kept going and going.”
The address from Dulles led Gonzalez to a plain, white, two-story house in the working-class suburb of Lemon Grove. The listed owner was a 65-year-old Indian immigrant, Abdussattar Shaikh, who had taught English as a second language at local community colleges and helped establish the Islamic Center of San Diego, the city’s largest mosque. Gonzalez hurried back to prepare a search warrant at the FBI office, where snipers had taken up positions on the roof. “It was chaos,” recalls William D. Gore, who was then the special agent in charge in San Diego. “Nobody knew where the next attack would be.”
When Gonzalez returned to the Lemon Grove house the next day, a small army was mustering: an evidence-collection team, computer experts and a SWAT team with protective gear and a battering ram. Before they could get to the door, however, the professor politely opened it for them. It would be more than a week before anyone told Gonzalez that Dr. Shaikh, as he liked to be called, was in fact a long-time informant for the FBI field office.
Shaikh’s FBI handler would later acknowledge to Justice Department investigators that the professor had mentioned the two hijackers to him — but only by their first names, noting casually that they were the latest in a line of young Muslim men who rented his spare bedroom. Even had the agent dug further, he might not have discovered that Shaikh’s boarders, Khalid al-Mihdhar and Nawaf al-Hazmi, were known Qaida operatives whose names were in the databases of both the CIA and the National Security Agency. While CIA officials placed the two men under surveillance in Kuala Lumpur, Malaysia, in early January 2000 and learned that at least one of them later flew to Los Angeles, the agency did not alert the FBI to their presence until August 2001, a few weeks before the attacks.
Khalid al-Mihdhar and Nawaf al-Hazmi, the first two Qaida hijackers sent to the United States, spoke no English and knew little of the West. But the FBI could find almost no trace of where they went during the two weeks after they landed in Los Angeles in January 2000. (Photo illustration by Mark Weaver for The New York Times Magazine)
As the raid proceeded, Gonzalez escorted one of Shaikh’s new boarders outside. The young man got to know Hazmi a bit at a Texaco gas station where Hazmi briefly worked washing cars. But the guy whom Gonzalez should try to find, the boarder said, was another young immigrant who was especially close to the two Saudi men. His name was Mohdar Abdullah.
Gonzalez set up 24-hour surveillance on the Texaco station and began searching for Abdullah. The next day, as Abdullah drove into a student parking lot at San Diego State University, Gonzalez pulled up alongside him and identified himself as FBI. “What took you so long?” Abdullah asked. “I thought you’d be all over me sooner.”
Gonzalez and another agent invited Abdullah for breakfast at a Denny’s just east of the campus. The diner was one of the spots that Abdullah liked to go to with the two hijackers. Just up the hill, on Saranac Street, was the two-bedroom apartment they rented, where they often whiled away their days with Abdullah and a rotating crew of young Muslim men. Nearby was a small mosque where the three men worshipped under the guidance of Anwar al-Awlaki, the Yemeni-American imam who would emerge as an important Qaida leader before being killed in Yemen by a United States drone strike in 2011.
Over the next three days, Abdullah, then 22, sketched a picture of the hijackers’ California lives — praying daily at the mosque, going for pizza at Little Caesars, playing pickup soccer. Abdullah translated for the two Saudis, drove them on errands and registered them for English classes. He also tried to arrange flying lessons for the pair. At a San Diego airfield in May 2000, they told the instructor they wanted to skip past the single-engine Cessna and learn to fly Boeing jets. He broke off their training after the second lesson and advised them to come back when they could speak better English.
Mihdhar, who was 24, left for Yemen in June 2000 to see his wife and new daughter. Hazmi, 23, talked to Abdullah about finding a wife as well. (Computer searches suggest that he was seeking a young Mexican woman who would convert to Islam.) Although the Saudis were discreet with strangers, they clearly had strong views about United States support for what they saw as corrupt puppet regimes around the Arab world and Israel’s oppression of the Palestinians. Mihdhar also admitted to Abdullah that he had been involved with a Qaida-linked group in Yemen. But they seemed to understand little about American life and didn’t have much desire to learn.
Abdullah later said he was introduced to Mihdhar and Hazmi by Omar al-Bayoumi, a well-connected Saudi whom Abdullah knew from local mosques. Bayoumi pulled him aside, Abdullah said, and asked him to help the two newcomers settle into their lives in Southern California.
Gonzalez looks out at the former Texaco station, in the La Mesa suburb of San Diego, where the two California hijackers often hung out and where one of them worked briefly washing cars. (John Francis Peters, special to ProPublica)
After a couple of long interviews, Gonzalez was sure that Abdullah was telling the FBI less than he knew. He was a bright, garrulous guy and had made his way quickly since coming to the United States in 1998. He seemed to appreciate the opportunities he had found, but he also struck Gonzalez as a hustler. He insisted that he was horrified by what the hijackers had done and that he had no idea they could have been involved in anything so heinous. But he also seemed to have been sympathetic to the Saudis’ ideology, Gonzalez thought, perhaps even their defense of Muslims’ duty to carry out jihad.
Gonzalez could understand such conflicted feelings; he had seen that with informants before. But he was skeptical that a busy student like Abdullah would have done so much to help the visitors out of mere brotherly feeling. The agents also learned that Abdullah lied on his United States visa application, claiming to be a war refugee from Somalia when he was in fact an Italian-born Yemeni who came into the United States from Canada.
When Gonzalez told Abdullah he would need to take a polygraph, a fairly standard practice with important but unreliable witnesses, he initially agreed but later changed his mind. Gonzalez tried to hold off his bosses while he urged Abdullah to reconsider. By then, however, even the special agent in charge in San Diego was no longer calling the shots. “It was not a local decision,” Gore recalled. “Those were made in Washington and New York.”
On Sept. 21, another SWAT team descended on Abdullah outside a big-box electronics store, handcuffing him at gunpoint in the parking lot. Gonzalez thought it was overkill. “I had been building something with Mohdar, working him,” he recalled. “But headquarters says: ‘You’ve got a guy who hung out with the hijackers. What if he blows someone up?’”
Within days, Abdullah was gone, flown to New York for questioning by a federal grand jury. He was never charged in connection with the attacks, but he was indicted on a charge of immigration fraud and moved to a federal lockup. Gonzalez approached him again over the next two years but got nothing more after a public defender advised Abdullah against further cooperation with the FBI. The relationship was over.
Even before Gonzalez found Abdullah, agents began searching for Bayoumi, the hijackers’ mysterious Saudi friend. His name turned up repeatedly — on bank documents and as the co-signer on their initial San Diego lease at the Parkwood Apartments where Bayoumi also lived. Bayoumi, 43, was already known to the FBI. An employee at his previous residence had contacted the field office to report some strange goings-on: large gatherings of young Arab men; a package that came from Saudi Arabia that had wires sticking out of it and no customs papers; some suspicious wiring that a maintenance man found under Bayoumi’s bathroom sink. In September 1998, the FBI opened a preliminary counterterrorism investigation.
Little about Bayoumi added up. Although he identified himself as a graduate student in business, he rarely went to class. He drew a monthly stipend from a Saudi contracting company, but the firm was a conduit for money coming from the Saudi Defense Ministry, where Bayoumi had worked in civil aviation. At local mosques, he was known as a glad-hander who often pulled out a video camera to record gatherings. Agents learned that many worshippers suspected he was a Saudi spy.
FBI officials eventually came to share that view. “Our best assessment of him in San Diego was that he was a spy for the Saudis,” says Gore, who headed the office. But the bureau closed its preliminary inquiry in June 1999 without questioning Bayoumi. Even if he was doing intelligence work without the official cover of a diplomatic post, former FBI officials say, he would probably not have been charged with any crime because he would have been spying for an allied government. Investigators also worried that a more aggressive pursuit of Bayoumi might tip off local men he knew who were suspects in another FBI counterterrorism investigation.
The former Parkwood Apartments in the Clairemont Mesa neighborhood, where Omar al-Bayoumi helped Hazmi and Mihdhar rent their first San Diego apartment. They often used a pay phone at the Alta Dena market across the street. (John Francis Peters, special to ProPublica)
By the time the FBI began searching for Bayoumi again, right after 9/11, he had decamped to Birmingham, England, with his wife and children. At the FBI’s request, he was detained by agents of New Scotland Yard on Sept. 21, 2001. Although he was ostensibly studying for a doctorate in business ethics, his main job seemed to be running a Saudi student association. The kingdom’s security services often use such groups to monitor students for dissident activity.
FBI agents flew to Britain in the hope that they would be able to interview Bayoumi. If they gathered sufficient evidence, they thought, they might even be able to bring him back to the United States. Because of British police protocols, the FBI agents were not allowed to speak with Bayoumi directly but instead had to forward their questions to the British detectives. Bayoumi was hardly a forthcoming witness. He claimed to have met the two hijackers by chance, after hearing them speaking gulf-accented Arabic in a small halal cafe in Culver City, California. When Mihdhar and Hazmi told him they didn’t like Los Angeles, Bayoumi said that he suggested San Diego. When they turned up a few days later, he claimed, he showed them the hospitality he would have accorded any Saudi brother.
Such a casual acquaintance seemed at odds with the efforts Bayoumi made to help the two strangers. And given that Bayoumi claimed to be a mere graduate student, former FBI officials told us that they were struck by what they say was pressure on British officials for his release by the Saudi Embassy in London. After a week — and before FBI officials had a chance to fully review the documents and videotapes seized in a search of Bayoumi’s home — he was freed. He was not asked whether he had a relationship with Saudi intelligence.
After returning to Saudi Arabia the next year, Bayoumi was employed by the government in civil aviation again. In late 2002, a pro-government Saudi newspaper reported that the FBI and Scotland Yard had cleared Bayoumi “of all wrongdoing.” But United States authorities had already revoked his visa on the grounds of “quasi-terrorist activities.”
In San Diego, Gonzalez continued to sift through the circle of people who had known Hazmi and Mihdhar. It became clear that Bayoumi spent a good deal of time with the two hijackers, and that he received a significant increase in his government stipend around the time that he met them. (There was never any proof, however, that he helped them financially.)
In fleshing out details of the hijackers’ lives, Gonzalez found that they seemed to have money but lived frugally, moving out of the Parkwood rental for the less-expensive room in Lemon Grove. They also seemed to have been careful in their communications, generally using pay phones, for which FBI investigators were ultimately unable to recover call records.
In the spring of 2000, Abdullah and others told the FBI that the two Saudis became interested in a couple of American Muslim converts who were stationed in San Diego with the United States Navy. Mihdhar and Hazmi reportedly quizzed the sailors about their life on a Navy destroyer, the USS John Paul Jones, and whether the ship’s guns were loaded when they docked in port. Around the same time, another Qaida operative linked to the two Saudis was helping to organize a suicide attack that would kill 17 sailors aboard the John Paul Jones’ sister ship, the USS Cole, in a Yemeni port in October 2000.
The apartment building near the King Fahad Mosque in Culver City, California, where investigators believe that Hazmi and Mihdhar stayed after arriving in Los Angeles. According to ai friend of the Eritrean man who was said to have put them up there, a Saudi imam at the mosque asked him to help the visitors. (John Francis Peters, special to ProPublica)
Throughout this time, Hazmi and Mihdhar were living in plain sight. They used their real names on their bank account, on their vehicle registration and on the California driver’s licenses they obtained. Hazmi was even listed in the San Diego telephone book. None of this prompted CIA officials to inform the FBI of their presence in the United States.
The FBI’s 9/11 investigation, which was given the ungainly name Penttbom (a reference to the Pentagon and the twin towers), eventually compiled a detailed chronology of all 19 hijackers’ movements, financial transactions and other activities. But the agents were frustrated by one gaping hole in the timeline: They could not account for the first two weeks after Hazmi and Mihdhar landed at Los Angeles International Airport on Jan. 15, 2000.
Their arrival was the first major step in bin Laden’s plot to attack the United States, and it was a risky one. Both young men had trained and fought as jihadists in Bosnia and Afghanistan. They were known to the NSA and the CIA, as well as to Saudi intelligence, which passed some background information about them on to the Americans. Even so, they flew to the United States under their real names, passing through immigration with the tourist visas stamped in their Saudi passports.
The mastermind of the 9/11 attacks, Khalid Shaikh Mohammed, would later claim to CIA interrogators that he sent the two men to Los Angeles without any contacts at all — an assertion that both the 9/11 Commission and Danny Gonzalez found improbable. Neither Saudi spoke English. What little they knew about life in the West came mostly from a crash course in Pakistan, in which Mohammed tried to teach them to read airline timetables and telephone books and showed old Hollywood movies with hijacking scenes. Documents from the investigation show that even Mohammed doubted they could get the job done.
But, after gathering their duffel bags and clearing customs at LAX, Mihdhar and Hazmi managed to disappear. If closed-circuit cameras followed them through the airport’s international terminal, or if anyone came to meet them, no recording has ever surfaced publicly, and FBI agents on the case said they did not see one. When FBI agents canvassed dozens of hotels around Los Angeles, they found no evidence that the Saudis stayed at any of them during those first two weeks. In its detailed report on the plot, the 9/11 Commission wrote simply, “We do not know where they went.”
On orders from the FBI’s new director, Robert S. Mueller III, Penttbom set up its command center in a poorly lit room in the basement of the J. Edgar Hoover Building in Washington, where the FBI is headquartered. Various teams — including one for each hijacked flight — coordinated the work of agents around the country. It was an unusual arrangement, one that limited the autonomy of the field offices to run their own cases. Counterterrorism agents often complained before 9/11 that headquarters tightly managed the flow of intelligence information, sometimes to the detriment of investigations. Now, in the biggest case the FBI had ever undertaken, that kind of control became standard practice.
In the months after the attacks, the harried Penttbom teams logged more than 250,000 leads, most of them insignificant. But a number of clues suggested Saudi involvement: A Saudi engineering student was among the Arizona extremists reported by Williams before the attacks; in March 2002, the student was captured with Qaida bomb makers in Pakistan. Two other Saudis associated with the Arizona group were briefly detained in 1999, after one of them tried to enter the cockpit during a flight from Phoenix to Washington for an event at the Saudi Embassy. Airline officials eventually apologized to the men, but some investigators later came to suspect that they had carried out a dry run for the 9/11 hijacking plot. A Saudi woman in San Diego, a close friend of Bayoumi’s wife, received about $70,000 in payments from the wife of Prince Bandar, then the powerful Saudi ambassador to the United States. Although initially intrigued, Washington investigators eventually concluded that the vastly wealthy Bandars often gave money to Saudi expatriates.
But even as the flurry of Saudi-related clues continued, Gonzalez and other agents began to note some skepticism within the FBI hierarchy about the idea that the Saudis were linked to the case. In September 2002, Lambert, the counterterrorism chief in San Diego, was asked to help prepare Mueller’s testimony to a joint inquiry of the House and Senate Intelligence Committees that had been established to investigate intelligence failures leading up to the attacks. Mueller’s deputy, Bruce Gebhardt, explained how Lambert was to describe the Saudi role. “The bureau’s position is that there was no complicity” in the plot, Lambert recalls Gebhardt telling him. (Gebhardt says he does not remember the exchange.)
Lambert was struck by the decisive conclusion being drawn on a question he thought was far from settled. But he realized no one wanted his opinion. “I had my marching orders,” says Lambert, who is now consulting for the lawyers to the Sept. 11 families. “It was very apparent to me that that was a decision that was made at a very high level, and that’s what I wrote to.”
Parts of Mueller’s testimony on Sept. 26, 2002, remain secret, and there is no indication in the public record that he exonerated any Saudis suspected of involvement in the plot. Still, he played down the idea that the hijackers had any established support network in the United States or should have drawn FBI scrutiny. “While here, the hijackers effectively operated without suspicion, triggering nothing that alerted law enforcement,” he said.
After the Sept. 11 attacks, American intelligence agencies began to focus more deeply on the Saudi kingdom’s vast effort to spread its ultraconservative Wahhabist brand of Islam that helped radicalize thousands of young jihadis at schools in Pakistan and elsewhere. Generously funded by the Saudi royals to placate their restive clerical establishment, the campaign to spread Wahhabism extended to Europe, Africa and Australia, with a large outpost in the Washington suburbs and the gleaming King Fahad Mosque in Culver City.
Not long after 9/11, the FBI formed two new investigative teams that combined counterterrorism and counterintelligence agents to identify Saudi religious extremists and spies in the country’s diplomatic and cultural apparatus. The Bush administration later forced out dozens of Saudi diplomatic personnel in 2003 and 2004, officials say. The FBI teams also helped illuminate a shadowy network of Saudi “propagators” who moved around the United States, often with diplomatic status, spreading Wahhabist doctrine, networking in Muslim communities, doling out money to mosques and gathering intelligence.
In Los Angeles, one of those Saudi proselytizers came to the FBI’s attention soon after 9/11. A young Muslim convert reported driving Bayoumi from San Diego to Los Angeles on the day of his supposed chance meeting with the two hijackers. Beforehand, the convert told agents, Bayoumi stopped at the Saudi consulate to meet with a bearded man who worked there; later they stopped to pray at the King Fahad Mosque.
The King Fahad Mosque in Culver City, which the Saudi government opened in 1998 just down Washington Boulevard from Sony Pictures Studios. (John Francis Peters, special to ProPublica)
FBI investigators suspected that the bearded consular official might be a 32-year-old diplomat named Fahad al-Thumairy, who also served as an imam at the mosque. In August 2002, the bureau quietly sought the State Department’s approval to investigate him for extremist ties. By the time he returned to Los Angeles in May 2003 after an extended trip abroad, the State Department had withdrawn his diplomatic visa on the grounds that he might be connected to terrorist activity. Detained for two days at the airport, Thumairy was questioned only briefly before being deported to Saudi Arabia. Although agents on the Penttbom team at headquarters were apprised of the questioning, Gonzalez and other agents working the Bayoumi file locally learned about it only after Thumairy’s repatriation.
The bureau got another shot at both Bayoumi and Thumairy in Saudi Arabia, in the company of civilian investigators from the 9/11 Commission, who were preparing their report on the attacks. Those interviews, in 2003 and 2004, to which the Saudi authorities agreed only after a campaign of high-level Bush administration lobbying, were coordinated by the Saudi secret police, who also insisted on having officers at the table.
Some of the American investigators doubted Bayoumi’s testimony: He insisted that he had met Hazmi and Mihdhar only by chance, had no idea they were militants and he was just being hospitable in helping them. He denied having tasked Mohdar Abdullah to help them and generally made the case that he was a good-natured, pro-Western Muslim.
Thumairy struck his interviewers as brazenly deceitful. He insisted that he didn’t know Bayoumi even after he was told that the FBI had telephone records showing calls between them and interviews of witnesses who had seen them together. Thumairy also said that he had never met the two hijackers.
Still, both the FBI and the 9/11 Commission gave the Saudis something of a pass. To present its conclusions on the plot at a final hearing of the commission in 2004, the FBI chose its most senior counterterrorism official, John S. Pistole, along with Jacqueline Maguire, who had been selected to coordinate the Flight 77 team in 2001, little more than a year after graduating from the academy. “We have not developed any information that the hijackers had been introduced to Thumairy in that January 2000 time frame,” she testified, “nor do we have any direct connection between them and the King Fahad Mosque in that same time frame.” As for Bayoumi’s help to the hijackers, Maguire told the commissioners that it appeared to have been unwitting. The available evidence, she said, suggested their fateful meeting “was a random encounter.”
FBI Special Agent Jacqueline Maguire, a case agent on the Penttbom investigation, testifies during one of the final public hearings of the bipartisan 9/11 Commission on June 16, 2004, in Washington, D.C. (Mark Wilson/Getty Images)
Gonzalez and other agents were stunned. If the evidence on Bayoumi and Thumairy was so clearly contradictory and incomplete, the agents wondered, why had it been distilled into a virtual exoneration? Was there secret information they didn’t have?
The agents assumed that Maguire’s testimony had been vetted by the FBI leadership. But even some senior officials doubted Bayoumi’s story of an accidental meeting. Joseph Foelsch, a former supervisor of the Penttbom team, says he suspected that Bayoumi might have been trying to gather intelligence on the two Saudis. “I think he lied,” says Foelsch, who is now retired from the bureau. “I think he was trying to monitor them as part of his routine work for his government.”
There were also sharp internal differences over what to do about Abdullah, who had been jailed for two years on immigration charges. Gonzalez and other agents were convinced there was more to learn from him and that the threat of his deportation home could be critical leverage in questioning him again. They also thought he could still face criminal charges as someone who might have had advance knowledge of the Sept. 11 attacks.
In the spring of 2004, new evidence began to emerge that reinforced that suspicion. In early May, FBI officials interviewed a Belizean who had been held with Abdullah. He said that Abdullah told him, while they were locked up together, that he knew in advance about the 9/11 attacks. The Belizean passed a polygraph examination. On May 18, FBI agents interviewed a second jailhouse informant, who offered a similar story about Abdullah.
Investigators on the staff of the 9/11 Commission, having become aware of Abdullah’s importance to the FBI case, also began pushing to interview him. But Justice Department officials refused to delay the deportation. If they failed to bring criminal charges against Abdullah, the lawyers contended, he could end up “walking the streets,” as one put it. He was deported to Yemen on May 21. Weeks later, in public testimony to the 9/11 Commission, Pistole testified that whatever Abdullah knew had been “exploited to the fullest amount it could be done here.”
Gonzalez was furious. Was there any more important witness the FBI had? The commission investigators were similarly confounded. “We were told, ‘Oh, sorry, he’s gone,’” one of them recalled. “‘It’s the normal bureaucracy at work.’”
The conclusions of the 9/11 Commission, issued publicly in late July 2004, marked a subtle turn in the FBI’s own investigation. While the panel questioned Khalid Shaikh Mohammed’s claim that al-Qaida hadn’t had any kind of support network in Southern California, it refuted the notion that Saudi officials assisted the operation. The commission noted that while Thumairy had been described as a religious extremist, its investigators had “not found evidence” that he ever helped the hijackers. The report was even more exculpatory of Bayoumi, calling him a devout and “gregarious” man and “an unlikely candidate for clandestine involvement with Islamist extremists.”
The next year, the FBI and CIA issued a joint secret report on many of the same issues. According to a declassified one-page summary, the report concluded that Qaida associates and sympathizers had “infiltrated and exploited” the Saudi government. But like the commission, the agencies exonerated Bayoumi and concluded that the kingdom did not knowingly support the attacks. To this day, the Saudi government brandishes the two reports in its defense. “Saudi Arabia is and has always been a close and critical ally of the U.S. in the fight against terrorism,” says Fahad Nazer, a spokesman for the Saudi Embassy in Washington. “Any suggestion that Saudi Arabia aided the 9/11 plot was rejected by the 9/11 Commission in 2004, by the FBI and CIA in 2005, and by a second independent commission in 2015.”
At FBI headquarters, the Penttbom team pivoted to the trial of Zacarias Moussaoui, the French militant who was sentenced to life in prison in 2006 for conspiring in the 9/11 attacks. Although prosecutors laid out considerable evidence that the FBI had gathered on the larger plot, FBI agents generally found the outcome unsatisfying: Moussaoui was an erratic, possibly schizophrenic operative, who was marginalized by Qaida plotters even before his arrest in Minnesota in August 2001. He remains, however, the only person tried in federal court in connection with the attacks.
With help from one of his supervisors, Gonzalez set up a working group with agents in Los Angeles to continue pursuing their part of the inquiry. “Three thousand people were murdered,” he recalled thinking. “You’ve got to go out and work the street. Develop informants. One source leads to another.”
Mohdar Abdullah, who proved to be a crucial witness in the Encore investigation, shown in immigration detention in San Diego before his deportation to Yemen in 2004. (Earnie Grafton/The San Diego Union-Tribune)
Among the potential sources, Abdullah still seemed one of the most important. Gonzalez hadn’t heard anything of him since his deportation to Yemen in 2004. But in 2006, Canadian officials reported to the FBI and the CIA that Abdullah had applied to immigrate to Canada. Working with a Canadian intelligence officer, Gonzalez arranged to lure Abdullah to Jordan — a safer location to meet than Yemen — with an offer of a free plane ticket and a meeting to review his visa application. Still seething about his treatment in the United States, Abdullah initially refused to speak to Gonzalez. Finally, the Canadian persuaded him to sit down with the agent — for at least two minutes. The operation that ensued has not been previously reported.
As Gonzalez flew to the Jordanian capital of Amman in October 2006, he pondered how to use his allotted time. What did Abdullah want? Where was he vulnerable? What might entice him to finally open up about Mihdhar and Hazmi?
Even before Abdullah’s deportation, Gonzalez gathered information that seemed to support the prison informants’ claims that Abdullah had some forewarning of 9/11. One of Abdullah’s roommates at the Saranac Street apartment told the FBI that he seemed distraught in the weeks before the attacks. He abruptly stopped talking on the telephone. Then, he suddenly decided to marry a 16-year-old Puerto Rican girl he barely knew — a step he told friends he thought would bring him automatic United States citizenship.
This was perhaps another node of vulnerability, Gonzalez thought. The girl, a recent convert to Islam, agreed to Abdullah’s proposal. They were married hurriedly on the night of Sept. 10, 2001, in a Muslim ceremony performed under a tree in the Denny’s parking lot. From witnesses’ descriptions, Gonzalez believed the wedding was performed by Anwar al-Awlaki, who had moved to Virginia but was back in San Diego on a visit. Abdullah told us that Awlaki, whom he knew from Yemen, did not officiate.
Gonzalez knew that Abdullah and his bride “consummated the marriage,” as he put it. The union began to disintegrate even before Abdullah’s arrest 11 days later, but it gave Gonzalez an idea. He arranged for a graphics editor to dummy up a photograph of a 5-year-old child who looked like a combination of Abdullah and his former bride.
Gonzalez finally met Abdullah again in a hotel restaurant in Amman that had been seeded with FBI and CIA personnel and Jordanian intelligence officers. Abdullah greeted him with a scowl, his arms folded over his chest. When Gonzalez handed over the doctored photograph, Abdullah’s demeanor changed instantly.
“I knew I had a kid!” he said excitedly.
A tree in the Denny’s parking lot under which Abdullah married a 16-year-old girl in an Islamic ceremony on the night of Sept. 10, 2001. The couple was never legally married. (John Francis Peters, special to ProPublica)
Gonzalez was not troubled by the ruse, which had been approved by his supervisors to win over a crucial source. Over the next three days, he, Abdullah and the Canadian officer traveled around Jordan seeing the sights, sharing meals and talking about San Diego and the hijackers. Abdullah “started giving up nuggets,” Gonzalez said.
Abdullah spoke in much more detail about the hijackers, including a car trip they took to Los Angeles in June 2000 to drop Mihdhar at the airport before he flew back to Yemen to see his wife and daughter. They went to the King Fahad Mosque for the evening prayer and met an imam — Thumairy — who also met privately that evening with the hijackers. Hazmi and Mihdhar also talked with two other young men, at the mosque and at dinner, whom they seemed to know, Abdullah said. He didn’t recall their names but described one as a Yemeni college student, the other as an Eritrean with kinky hair.
It wasn’t much to go on, but FBI agents in Los Angeles identified the two young men Abdullah described. Officials said the Yemeni was a friend of Thumairy’s who supplied the Saudi Consulate with computers through a job he had at an electronics store. The Eritrean was a close friend of the Yemeni’s and a frequent visitor to the mosque. (The two men asked not to be identified out of concern for their safety and that of their families.)
FBI agents found the Yemeni, who had settled in California and hoped to raise a family, to be a willing and truthful witness. He had seen Thumairy with the hijackers on several occasions, he told them, starting in January 2000. Thumairy had also asked the Eritrean to help take care of the Saudis, calling them “very significant” visitors, people familiar with the Yemeni’s account said.
According to the Yemeni, his friend invited the two young Saudis to stay at the apartment of his sister, who lived in his building near the mosque. The sister and her husband were apparently out of town, and the Eritrean did not want two male guests in the home where he lived with his family. According to people briefed on his account, the Yemeni said that Mihdhar and Hazmi stayed in the apartment during part of the approximately two weeks they were in Los Angeles.
When agents went to interview the Eritrean in 2007, he seemed shocked that they found him. He was by then working at a good job for a big company, hoping to keep his former contacts with the hijackers in the distant past. His account differed significantly from that of his friend: the Eritrean said that the imam, Thumairy, did not ask him to take care of Mihdhar and Hazmi; rather, he introduced the two Saudis to the imam outside the mosque. The Eritrean admitted to having helped the newcomers get acclimated, steering them to nearby motels and driving them to buy groceries, according to people familiar with his account. He said the Saudis stayed at his sister’s apartment only briefly but were there on Feb. 1, the day they met Bayoumi. In later interviews, he changed that account, saying he put up Hazmi for only one night, later in the summer of 2000.
When we found him at his home, the Eritrean referred us to his lawyer. In written answers to questions he later provided, he again played down his encounters with Hazmi and Mihdhar. “It just so happened that I was the first one leaving the mosque that day and these guys started a conversation with me,” he wrote. “I tried to give them very basic help as young people new to this country, and that was it. Looking back I wish I’d never met them, but at the time I had no idea who they were or what they were about to do.”
FBI investigators considered the Yemeni’s account to be more credible. It explained why the FBI was not able to find any sign of the hijackers at Los Angeles hotels. When we recently met the Yemeni in a Western city where he works as a security guard, he would not discuss the hijackers or his statements to the FBI, referring us to his lawyer, who declined to comment.
In one of several statements made in support of the 9/11 families in their suit, a former assistant special agent in charge in Los Angeles, Steven K. Moore, wrote that the FBI found that “Thumairy was the primary point of contact for Hazmi and Mihdhar in Los Angeles.” Moore, who oversaw the early months of the 9/11 inquiry in the Los Angeles office, added that “Thumairy was aware in advance of their arrival and, through the King Fahad Mosque, had already provided a place for them to stay in Los Angeles.”
Other current and former agents said Moore’s assertions overstate the evidence. Investigators never developed conclusive proof that Thumairy knew about the hijackers before their arrival or that he arranged for their lodging in advance, they say. The agents also noted that Mohammed, the mastermind of the plot, told interrogators that he had advised Hazmi and Mihdhar to seek help from local Muslims in California because they were so ill prepared to fend for themselves. (Moore did not respond to requests for comment.)
While the breakthrough might have been a turning point in the investigation, it also coincided with new challenges for Gonzalez. He clashed with a senior agent in Los Angeles who insisted that only he and his agents could interview the new witnesses there. Later on, Gonzalez said, supervisors in the Los Angeles field office refused to waive standard protocols so that he might interview witnesses on their turf, even ones that he had developed, insisting that he forward his queries to them instead.
Photo illustration by Mark Weaver for The New York Times Magazine. Photo of Daniel Gonzalez: John Francis Peters, special to ProPublica; Documents: United States District Court for the Eastern District of Virginia.)
While the agents squabbled, officials said no one from the FBI interviewed one of the potentially more important sources in the case: the Eritrean’s sister and brother-in-law. The brother-in-law might have been an especially helpful witness, because he was a longtime employee of the United States Postal Service and presumably likely to be cooperative with another federal agency.
On a recent weekday morning, he was sitting in a plastic chair in the carport of his small suburban home. Dressed in a summer-weight caftan, he seemed at his leisure. When we asked whether two Saudi men who were later involved in the 9/11 attacks stayed at his former apartment, he paused for a moment. But he did not seem confused by the question.
“I was not there then,” he said. “I do not know what happened when I was not there.”
What about his wife? Was she home at the time?
“She was also gone,” he said.
Asked if he had been questioned about the episode by the FBI, he said he had not. He then became angry, refused to discuss the matter further and shooed us away.
After a few intense years as a cog in a vast FBI machine, Gonzalez found himself working almost on his own, seemingly forgotten by headquarters. Officially, he was working on what was considered a “subfile” investigation, a follow-on to Penttbom. But while the case wasn’t closed, his colleagues were increasingly busy with other cases and some of his supervisors were seemingly tired of his obsession.
In 2007, however, Gonzalez found an energetic new collaborator in Tommy Smith, a hard-charging New York police detective who had joined the NYPD contingent that worked alongside FBI agents on the city’s Joint Terrorism Task Force office. Smith began systematically reviewing some old evidence, including California telephone records that received cursory attention the first time around. Working with FBI intelligence analysts, Smith began to see new patterns. Although the analysis remains secret, current and former officials who have reviewed it say that it illuminated the relationships among some important subjects of the investigation and revealed some previously unidentified contacts among the hijackers and their associates.
The investigators knew, for example, that there had been numerous phone calls between the imam Thumairy and the suspected spy Bayoumi. But the new analysis pointed to a web of calls, meetings and travel that began in December 1999, less than a month before the hijackers’ arrival. Those communications involved Thumairy and Bayoumi, as well as a visiting Saudi government religious official who had hurriedly obtained a visa and then spent time in California with Bayoumi in the weeks before the hijackers flew to Los Angeles. Another figure in the web was the Yemeni-American cleric Awlaki, whom some agents suspected of acting as a spiritual adviser to the hijackers and helping them with logistics. The evidence was circumstantial, but the agents wondered: Did it point to a support network mobilizing for the hijackers’ arrival in California?
It was already known, for instance, that Bayoumi and Awlaki exchanged four calls around the time of the hijackers’ arrival in San Diego on Feb. 4, 2000. Some investigators speculated that Mihdhar and Hazmi might have used Bayoumi’s phone to call Awlaki. But further evidence showed that Bayoumi had probably called Awlaki just after emerging from the bank branch where he set up their account and helped them sign up for a credit card. Had he called Awlaki to let him know that their logistical needs were being taken care of?
Awlaki, polished and sober in his trademark wire-rimmed spectacles, was a go-to interview subject for mainstream outlets like PBS, a measured, moderate voice for Muslims in the aftermath of the attack. While a couple of San Diego witnesses told the FBI that Awlaki seemed to have a relationship with the two hijackers, he brushed it off, saying he barely noticed the Saudis.
The Yemeni-American imam Anwar al-Awlaki, who witnesses said dealt extensively with the two California hijackers, shown in October 2001, after he moved to the Dar al-Hijrah Mosque in Falls Church, Virginia. (Tracy Woodward/The Washington Post via Getty Images)
Now, however, witnesses and telephone records pointed to a stronger connection. It was Bayoumi who introduced Awlaki to the hijackers, witnesses said. Awlaki also spent considerable time with the hijackers at the Saranac Street apartment and in his study at the mosque, Abdullah and others reported. It now seemed more significant that Awlaki reconnected with Hazmi in 2001 in the Washington suburb of Falls Church, Virginia, where Awlaki had taken over a larger mosque.
The joint efforts of the San Diego and New York agents grew into a more formal inquiry of the Saudi connection, which in 2007 was code-named Operation Encore, according to former senior counterterrorism officials. By comparison to Penttbom, the effort was minuscule, and the agents knew that the case was growing colder. Still, they continued to find surprises.
As the operation gathered momentum, Gonzalez got word that some crates full of Penttbom evidence in Washington were to be moved to long-term storage or destroyed. Tommy Smith, the NYPD detective, happened to be in the capital on another case, and Gonzalez implored him to go take a look. He soon got a call back. “You won’t believe what we’ve got,” Smith told him.
In a trove of seemingly disorganized evidence taken from Bayoumi’s home in Birmingham, England, in 2001, the detective found a spiral notebook that contained a hand-drawn aviation diagram of a plane descending to strike a spot on the ground. An FBI agent who had studied aeronautical engineering concluded that the diagram showed a formula for an aerial descent like the one performed by Flight 77, the jet that Hazmi and Mihdhar hijacked, before it struck the Pentagon. Apparently, the notebook and its contents went unnoticed after Bayoumi’s detention and hadn’t been looked at again.
The significance of the drawing — like much of the evidence in the case — would be debated within the FBI. To Gonzalez and the other Encore agents, it suggested that Bayoumi might have known about or even possibly been involved in operational details of the plot. Other agents thought that such a conclusion was far-fetched and that the significance of the document was unclear. But Foelsch, the former Penttbom supervisor, said he thought that the FBI’s reaction might have been more aggressive had the diagram been discovered in the fall of 2001. “That would have been harder evidence,” he told us. “If not a smoking gun, a warm gun.”
As the Encore investigation continued, officials at FBI headquarters seemed increasingly skeptical. The team reported its progress in a series of memos summarizing the evidence it had developed. But the investigators’ conclusions were challenged regularly. In early 2010, headquarters officials objected to a draft update that an Encore analyst wrote. New York members of the team were called to the capital for another briefing, this time for the bureau’s most senior counterterrorism official, Arthur M. Cummings.
An imposing former member of the Navy SEALs, Cummings had been a mainstay of the Counterterrorism Division since 9/11, rising through the ranks and outworking most of those around him. As he listened to the Encore presentation, Maguire, the former Penttbom case agent for Flight 77, sat nearby. According to current and former officials familiar with the incident, Cummings finally said he’d heard enough. He recognized that the team had worked hard on the case, but what they had found on Bayoumi and Thumairy just wasn’t enough.
Smith was fuming, the officials said. He suggested that Cummings could close down the case if he wanted — he just needed to order that in writing. (Smith did not respond to messages asking for comment.)
Cummings told us that he did not remember details of the meeting but that he did recall his views of the dispute. “Give me something that after eight years shows we really are onto a couple of co-conspirators,” he said. “I don’t want your gut; I don’t want your theories. If you don’t have that, stop wasting my time — I’ve got other terrorists to go after.
“That’s not to say they weren’t involved,” he now says of Bayoumi and Thumairy. “They were in the orbit of the hijackers for sure. But after years of investigation — and the 9/11 investigation dug into everything it could find, with very little in terms of resource constraints — I hadn’t been presented with anything that was definitive at all.”
The frustrations of the case at times seemed less daunting to the Encore investigators than the erosion of support at FBI headquarters. Inevitably, the displeasure of some influential figures in Washington also reverberated among Gonzalez’s politically attuned supervisors. In December 2009, the Obama Justice Department secured indictments in Federal District Court in Manhattan against Khalid Shaikh Mohammed, the mastermind of the Sept. 11 attacks, and several other Qaida detainees for their roles. Although the indictments were sealed, their scope was sufficiently known inside the bureau to cast doubt on the significance of targets like Bayoumi and Thumairy.
The Encore team needed to catch a break. Then, in the summer of 2010, current and former officials said, one of the Encore analysts came across some intriguing information in FBI files about two young Saudi religious officials from the kingdom’s Ministry of Islamic Affairs. The two men, who had diplomatic status and ostensibly worked abroad as propagators, or missionaries, for Wahhabi Islam, stayed at the San Diego home of Abdussattar Shaikh before the hijackers moved in as boarders in 2000. According to one FBI document, Bayoumi also “assisted” the two men in some way during their visit.
The propagators, Adel Mohamed al-Sadhan and Mutaeb al-Sudairy, had traveled in the United States, stopping in several places that overlapped with where Hazmi, Mihdhar and other 9/11 hijackers had been. The two officials were found to have ties to suspected militants and had left the United States.
The coincidences didn’t prove anything. But the analyst learned that the two men had recently sought new visas, supposedly to study English at the University of Oklahoma. Based on information from various sources, agents suspected that their studies might be a cover for something more nefarious. This time, FBI leaders took the matter seriously enough to authorize an elaborate operation to put the two Saudis under full-time surveillance after they landed in the United States.
The episode, which has not been previously reported, ended abruptly. In the Saudi capital of Riyadh, CIA officers objected strongly to the FBI plan, one former official said. “They didn’t want to give the Saudis a black eye by letting these guys walk into a trap,” the former official said. For reasons that remain unclear, the two Saudis canceled the visit at the last minute. FBI officials suspected that someone in the Saudi government had been warned.
In April 2011, the attorney general, Eric H. Holder Jr., announced that there would be no federal court trials for the 9/11 defendants after all. Bowing to pressure from congressional Republicans, he said the suspects would instead be tried before military commissions at Guantánamo Bay, Cuba, that Obama had hoped to abandon. The following year, Encore agents began meeting with federal prosecutors in New York to discuss the possible indictment of suspects in their case.
Attorney General Eric Holder at a news conference on April 11, 2011, at which he announced that Khalid Shaikh Mohammed and other accused 9/11 plotters would be tried in military tribunals at Guantánamo Bay, Cuba. The move followed Republican-led opposition to prosecuting the defendants in U.S. federal courts. (Mark Wilson/Getty Images)
A partly declassified summary of the Encore case, written in 2012 by New York investigators, cites “evidence” that a Saudi official whose name is redacted “tasked al-Thumairy and al-Bayoumi with assisting the hijackers.” According to several people familiar with the document, it refers to a Saudi religious official with diplomatic status who served in the United States. But the FBI recently discounted the idea that the Saudi was a central figure in a support network.
That year, the arrival on the Encore team of another veteran New York detective, Efrain Vazquez, gave Gonzalez a shot of energy. It didn’t last long. The two investigators tried again to recruit Abdullah, who had moved to Sweden, as a cooperating witness, but he refused.
Reached in Stockholm, Abdullah told us he would not discuss details of his dealings with the hijackers, but railed at his treatment by American authorities. “The hijackers associated with many people in California,” he said. “Nothing happened to any of them like what happened to me. This case keeps haunting me.”
The investigators then focused on an Algerian immigrant who had worked with Thumairy at the Saudi consulate in Los Angeles. He, too, proved elusive. The team also enlisted senior FBI officials to appeal directly to their Saudi counterparts for help with the 9/11 case, former officials said. The details of two encounters in Riyadh in 2011 and 2012 remain secret, but two officials said they came to nothing at least in part because of opposition from Saudi authorities.
Such obstacles notwithstanding, several senior FBI counterterrorism officials dispute the notion that the complexities of the United States relationship with Saudi Arabia prevented the filing of charges. Many counterterrorism experts, including some Encore investigators, doubted that Saudi Arabia’s rulers would have deliberately supported al-Qaida’s effort to attack the kingdom’s most powerful ally. It was easier to imagine that a few of the extremists who flourished in the largely autonomous clerical bureaucracy might have conspired to support the plot. But proof was lacking.
Cummings says that after Sept. 11, intelligence agencies scoured communications intercepts, known as signals intelligence, and reports from human sources around the world in search of Saudi links to the plot. “None of the high-value detainees talked about it,” he said. “There was no sigint. No humint. No family members talking about it — and somebody always talks.”
Photo illustration by Mark Weaver for The New York Times Magazine. Mosque photo: John Francis Peters, special to ProPublica; Documents: United States District Court for the Eastern District of Virginia
The Encore agents tended to see what was in front of them: There did appear to have been a support network, contrary to what some senior officials insisted; Bayoumi and Thumairy might not have been “unwitting” helpers; and there was still much more to excavate. They felt that the FBI bosses were just sticking to their story.
In 2014 and 2015, FBI officials aired those conflicting views in private briefings to the review panel established by Congress to follow up on the 9/11 Commission’s work. Some presentations were led by Maguire, who testified before the commission a decade earlier. She repeated her contention that in the connection between Bayoumi and the two California hijackers “everything seems accidental.”
In its 2015 report, the review panel for the first time noted publicly an “ongoing internal debate within the FBI,” between Penttbom veterans and the Encore team, on the question of possible Saudi involvement in the 9/11 plot. The panel urged the FBI leadership to “review both perspectives and continue the investigation accordingly.” It was, at best, a tepid endorsement of Encore’s work.
In San Diego, Gonzalez’s supervisors had started to reject his requests for funds to travel to interview witnesses. In an effort to keep the work going, Vazquez quietly began billing Gonzalez’s travel vouchers to the office of the terrorism task force in New York. “Danny spent more time battling his own people than he did these perps,” Vazquez told us.
But the Encore team also found a sympathetic ear in Brendan Quigley, an aggressive, young federal prosecutor in Manhattan. In December 2015, Quigley agreed to issue grand-jury subpoenas for the Eritrean, who was said to have lodged the hijackers in Los Angeles, and the Algerian former employee of the Saudi Consulate there. The investigators’ hope was that putting the Eritrean before a grand jury without a lawyer could pressure him to tell them everything he knew. They would then try to use that information with other sources. It was an approach that even some of those involved considered a long shot.
“As an investigative strategy, talking to people about something that happened 15 years ago in the hope that they will suddenly inculpate themselves in the largest terrorist attack in history — it’s not that promising,” one former New York prosecutor said. “There was very little documentary or other tangible evidence.”
In February 2016, a team of Encore investigators flew to meet with the Eritrean and his lawyer. They were joined by a senior terrorism prosecutor in the Southern District of New York, John P. Cronan. Given the Eritrean’s willingness to speak with the investigators, Cronan told the lawyer he could disregard the subpoena, which was later withdrawn. Some of the agents were in disbelief, feeling they had been undercut. But Cronan did not believe that inconsistencies in the witnesses’ statements were particularly significant, another former prosecutor said, or that there was much point in trying to lock in his account by having him testify before a grand jury. As Cronan dug deeper into the case, he concluded that the investigators did not have nearly enough hard evidence for a successful prosecution. “Prosecutors sometimes have to have tough conversations with investigators about why evidence does not support going forward with a criminal prosecution,” Cronan told us. “It’s understandable that the investigators are passionate about their cases, but we need admissible evidence of a defendant’s guilt that we can offer in a courtroom.”
Gonzalez inside the Denny’s where he interviewed Abdullah. (John Francis Peters, special to ProPublica)
Back in New York, the terrorism prosecutors debated the case among themselves and with senior officials at the FBI. They were all working full tilt, at a moment when major attacks by the Islamic State in Europe had heightened concerns about a new terror strike in the United States. Finally, the head of the New York terrorism task force, Carlos T. Fernandez, called a meeting to decide how to proceed.
In a secure conference room at the task-force headquarters in Chelsea, Fernandez said he appreciated the Encore team’s efforts, but he thought they had come to the end of the line. Vazquez, in particular, didn’t try to hide his frustration, insisting that if they could just get the witnesses “in the box,” they could finally break through. Instead, as part of a wider reorganization of the task force, the Encore case was moved to a squad responsible for historical terrorism investigations. “The case had already been identified to be reassigned by the time that meeting happened,” Fernandez told us. “The agents, to their credit, would go to the ends of the earth to follow leads. But we needed to shift resources and deal with priorities. We couldn’t continue down the path we were on.”
Gonzalez called up the agent to whom the file was assigned and asked him if he wanted to escape the New York winter and fly to San Diego for a detailed briefing. The agent declined the offer.
The New York team was quickly broken up. The agents, analysts and a supervisor were scattered to other jobs. A respected senior analyst on the team who spent years developing terrorism expertise was moved to the FBI’s criminal section, where he was assigned child-pornography cases. In a parting shot, the analyst dispatched the Encore case file to the new unit with one last, forceful summary, laying out in 16 pages everything that the team found about suspected Saudi complicity in the plot. He then uploaded the secret document into the FBI’s electronic record, ensuring that it could not be erased.
On Jan. 13, a group of 9/11 families — survivors of the attacks and relatives of those killed — filed into a courtroom in Lower Manhattan. Filling the wooden benches and packed against the paneled walls, they listened intently as their lawyers and those of the Saudi government debated dry points of legal procedure.
The Justice Department lawyers have sometimes sat alongside the kingdom’s lawyers at such hearings, infuriating the families. Although Justice Department officials did not participate in this session, their absence did little to allay the families’ resentment over what they see as a wall of secrecy that protects only Saudi Arabia. “There’s real bitterness over the lack of justice for 9/11,” said Timothy Frolich, a bank executive who escaped the south tower of the World Trade Center but suffered severe injuries. He added, “We’re fighting on two fronts: our own government and the Saudis.”
Read More
Saudi Fugitives Accused of Serious Crimes Get Help to Flee While U.S. Officials Look the Other Way
The FBI, Department of Homeland Security and other agencies have known for years that Saudi diplomats were helping Saudi fugitives. But Washington avoided even raising the problem out of concern that it might hurt Saudi cooperation in the fight against terrorism.
When the lawsuit was filed in March of 2017, the families celebrated it as a triumph. President Obama had vetoed legislation that allowed the suit to proceed, citing international law obligations, but the Republican-led Congress overrode his veto. Since then, however, the suit has moved slowly. At this hearing, the two sides parried over how many Saudi officials and other witnesses the plaintiffs would be allowed to question during the deposition phase. One of the Saudi government’s lawyers, Gregory G. Rapawy, argued for sharply restricting the number, saying the plaintiffs had “not produced any evidence to support the allegations that Mr. al-Bayoumi and Mr. al-Thumairy acted at the direction of senior Saudi government officials in assisting the hijackers.”
On the night before the families’ White House visit last September, Gonzalez finally got a chance to meet some of them at a dinner in Washington. After retiring in 2016, he signed on as a consultant to the plaintiffs’ legal team. Two of the relatives asked him how he persevered through the frustrations of his 15-year investigation. He told them that he thought about the attacks every day. “We were all just crying,” recalls Christopher Ganci, a captain in the New York Fire Department whose father, Peter, was the highest-ranking firefighter to die in the attacks.
The day after the families’ White House visit, Justice Department lawyers filed documents in support of Attorney General Barr’s claim of state secrets. The FBI’s current counterterrorism chief, Michael C. McGarrity, made an argument that Gonzalez had heard before. “The FBI expects to continue the investigation over the long term,” he wrote. The bureau’s goal, McGarrity added, would be to bring “criminal charges against all individuals responsible for the attacks.”
Two years after Charlottesville, this Republican prosecutor is pioneering a new approach to convicting racist rioters
On June 28, in the main courtroom of Charlottesville’s federal courthouse, U.S. Attorney Thomas T. Cullen rose to his feet. It had been nearly two years since white supremacists brawled with counterprotesters at a violence-filled rally nearby; now, standing still and stoic, the tall, lean Cullen addressed the court regarding the sentencing of James Fields Jr. At the rally in August 2017, Fields, 22, had driven his Dodge Challenger into a crowd of peaceful protesters, maiming many and killing one. Having been convicted on federal hate crimes charges, Fields deserved nothing less than life in prison, Cullen argued.
From the courtroom’s wooden benches, Fields’s victims — who had come to testify about their broken bones, broken spirits and broken marriages; their lasting fear of cars, loud noises and even the light of day — listened intently. Never mind the defendant’s age and appeal for mercy, Cullen said. Hadn’t he described those who disagreed with his views as “monkeys,” “subspecies,” “kikes” and more on his social media accounts? Never mind his claim that he’d acted on impulse and without premeditation, that he’d had mental health problems. “We all face mental health issues,” Cullen pointed out, “but troubled people don’t just commit acts of mass murder or domestic terrorism.”
U.S. District Judge Michael Urbanski agreed. Fields stared blankly before him as his sentence was handed down: life in prison without parole. At the prosecution table, Cullen, his face set in its resting scowl, nodded briefly but didn’t look up from the notes he was jotting on his legal pad.
It was a win, but only a first step. Cullen, 15 months into his job as the chief federal prosecutor for the Western District of Virginia, is on a mission: to use the federal judiciary to strike a blow against mounting white nationalist violence. And nailing James Fields was arguably the easy part. The bigger challenge was the organized groups of white supremacists who had planned the massive rally with the intent to threaten and physically assault counterprotesters: How could they be held responsible?
Cullen and his prosecutors have set their sights on a white supremacist group called the Rise Above Movement, based in Southern California, charging four of its members with conspiracy to commit violence and crossing state lines to riot in Charlottesville. The prosecutors’ ironic weapon of choice against the extreme-right group: an anti-riot statute passed in the 1960s to rein in leftist Vietnam War protesters.
The case is the first time federal authorities have tried to disrupt a violent white supremacist terrorist organization on charges other than drug- or gun-dealing or murder. And it’s remarkable not just for the legal tactics involved, but because of the person carrying them out: Thomas Cullen, a Trump-appointed conservative prosecutor from a prominent Republican Virginia family. While the president and others in the GOP have mostly averted their gaze and refused to confront the phenomenon of white supremacy, Cullen is choosing to stare it down. “I could care less about politics,” he says. “Hate crimes and violence by white supremacist organizations that qualify as domestic terrorism are way up. Prosecuting them is common sense. It’s the right thing to do.”
A few weeks before the Fields sentencing, I met Cullen in a small, unadorned conference room on the first floor of the federal courthouse in Charlottesville. At 42, Cullen is easygoing and straightforward, with none of the bravado that many federal prosecutors display. He took office as the top federal lawman for the 46 counties and 17 cities of western Virginia on March 30, 2018. Except for a stint in private practice, he had served as an assistant U.S. attorney and deputy criminal chief in the Roanoke-headquartered office for the previous three years. “I felt pretty comfortable coming into this role,” he told me. “I certainly understood how the office worked.”
On his plate when he took over were
opioid pill mills along the Interstate 81 corridor;
organized gangs of Crips and Bloods in Danville, near the North Carolina line;
drug dealers in the Shenandoah Valley; and the 2017 Unite the Right rally in Charlottesville. Cullen was away from Virginia on vacation when the rally and subsequent violence took place, but from the moment he was nominated for the top job, he knew that the issue was “one I need to be involved in.”
Within 24 hours, Assistant U.S. Attorney Christopher Kavanaugh, who lives in Charlottesville and works out of the branch office there, briefed Cullen on the evidence and possible charges. Fields had already been indicted on murder charges by the state, but to send a message, the office wanted him to face federal charges as well. Based on video, Fields’s vile social media feeds and witness testimony, prosecutors believed they had a clear shot at building a hate crime case against Fields under federal civil rights laws.
But there had to be more. “It was too big an event, too awful an event, for the federal government to have that one homicide case,” Kavanaugh told me. “We asked ourselves: What other prosecutions could come of this?”
He found an answer in the more than 5,000 hours of rally video turned over to federal law enforcement by bystanders, participants and journalists. Front and center in much of the action, assaulting and beating counterprotesters including women and clergy, were four men. “This one group of guys kept sticking out,” Kavanaugh says. “They acted in lockstep. Their hands were taped. They were more equipped to fight.They were involved when violence first broke out.” He wondered, “Who are these guys?”
A detailed October 2017 article by the nonprofit investigative news service ProPublica provided crucial information. It identified members of the Rise Above Movement, a virulent neo-Nazi white supremacist group. Founded in California in 2017, RAM had grown to about 20 members by the time of the Charlottesville rally, according to court documents. Its promotional videos show members fitness training, kickboxing and occasionally throwing copies of Anne Frank’s diary into bonfires on the beach. They aimed to build up members’ physical strength in order to punish “Jews,” RAM’s catchall word for anyone it considers an enemy. “Their whole mantra is going in the opposite direction of the image of the basement-dwelling chubby guy spewing hate on his laptop,” says Kavanaugh. “They were masculine, fit, sober, respectful. They had a certain look.”
The four men prosecutors zeroed in on included RAM co-founder Benjamin Daley, a wiry 25-year-old tree trimmer from Redondo Beach, Calif., who routinely bashed “Mark Zuckerberg and his Facebook Jew police” for taking down his anti-Muslim posts. Daley had hooked up with another ardent RAM member, Michael Miselis, a 30-year-old aerospace engineering doctoral candidate at UCLA who was working as a systems engineer for defense contractor Northrop Grumman in Redondo Beach. (Miselis lost his job — and his U.S. government security clearance — after he was named in a July 2018 ProPublica article.)
Before Charlottesville, Daley, Miselis and a third RAM member, 25-year-old Thomas Gillen, had engaged in fights with counterprotesters, including antifa activists, at pro-Trump rallies in Huntington Beach and Berkeley, Calif. In the weeks leading up to the Charlottesville rally, the RAM members traded text messages about recruiting Cole White, a 24-year-old street fighter who had impressed them in Berkeley, where he worked in a hot dog shop. They were “stoked” to have persuaded such “an excellent fighter” to join them in Virginia.
The problem for the U.S. attorney’s team was finding a federal statute they could charge the men under. According to Cullen and Kavanaugh, there are precious few laws available to federal law enforcement agencies and lawyers for investigating and prosecuting domestic terrorist groups for violent rhetoric — or even outright violence. Local and state police and courts can charge crimes of assault, robbery, threats and all manner of person-to-person violence, but the federal criminal code limits the FBI and all federal agencies to investigating broader conspiracies, fraud, gun and drug trafficking, and civil rights violations — which now includes hate crimes. In many cases, defendants must cross state lines to be found in violation of federal law.
Investigating domestic terrorism can put federal agents in even more disputed terrain. Academics, lawyers and judges contest the line where First Amendment rights of free speech end and conspiring to commit violence begins. Federal law enforcement agencies have long had to navigate that line, even as the demand to rein in domestic terrorist groups grows. “The FBI is under pressure to do something it can’t do something about,” says Adam Lee, former head of the FBI’s Richmond office and now head of security for Dominion Energy. “The FBI cannot target domestic terrorist groups like an international threat. The First Amendment absolutely forbids it.” (Progressive advocates, such as the Brennan Center for Justice, dispute this, arguing that the FBI readily investigates groups on the left that it views as subversive, including environmental groups, Black Lives Matter and others.)
Prosecutors were committed to bringing the RAM four to justice, but they did not believe proving a hate crime under federal statutes was their strongest possible case. Instead, digging into federal criminal laws, they found the 1968 Anti-Riot Act, passed by Congress to punish antiwar protesters who crossed state lines to incite a riot. “If we could prove,” says Kavanaugh, that the RAM members “had intent to commit violence and they traveled across state lines, we could build a case.” Cullen didn’t need a lot of persuading. He told his prosecutors to dust off the little-used law and charge the four RAM members with conspiracy to riot. It was, Cullen told me, “our only viable option.”
In the months after he took office, Cullen gradually came to the conclusion that white supremacists and far-right domestic terrorist groups like RAM are “grave threats” to the country — and are stepping up their violence. He interviewed victims, reviewed hundreds of hours of tape, read about the radical far right, and attended domestic terrorism meetings at the Justice Department. “The cumulative weight of the evidence opened my eyes,” he says. “I felt an obligation to protect the public, to take them off the street.”
That sense of obligation may come from his upbringing. Cullen was the eldest of four children in a conservative Republican family from Richmond. Public service was drilled in by his father, Richard Cullen, a former attorney general of Virginia and former U.S. attorney for Virginia’s Eastern District. “He’s my mentor and role model,” says Cullen. “A benefit and a burden.”
By many accounts, the elder Cullen, 71, is one of the most sought-after defense lawyers in the nation for powerful Republicans in need. (He recently represented Vice President Pence in Robert S. Mueller III’s investigation into possible Trump-Russia collusion.) But the self-described “small government, individual liberty-type Republican” also had close ties to former Virginia governor L. Douglas Wilder; in 1993, he worked with the Democrat to pass a law limiting handgun purchases in Virginia to one a month. “Thomas was always around people in public life,” Richard says. “But I did not try to shape his career.”
Thomas, for his part, had no particular yearning to follow in his father’s footsteps. After graduating from Furman University in South Carolina, he enrolled in William & Mary Law School. On his second day he phoned his father. “I’ve decided not to continue here,” he said. Cullen had looked around at his fellow students at orientation and was “scared out of my mind. I didn’t feel ready.”
A year of teaching English at a military prep school, however, convinced him that he was ready. He returned to William & Mary, earning a law degree in 2004. After graduating near the top of his class, he clerked for Roger Gregory, the first African American to serve on the U.S. Court of Appeals for the Fourth Circuit.
For his first job as federal prosecutor, Cullen headed to North Carolina. Four years later, in 2010, Tim Heaphy, the U.S. attorney for Virginia’s Western District, recruited him to run his criminal division. Heaphy, as it happened, was Richard Cullen’s former law partner. Cullen knew that his colleagues might be suspicious of his hiring. “I felt the pressure,” he says. “I just worked harder to establish myself.”
In July 2017 Cullen was working in private practice in Roanoke when the state’s two Democratic U.S. senators, Mark Warner and Tim Kaine, floated his name for the job as top federal prosecutor in the Western District. Trump nominated him in February 2018, and the Senate confirmed him the next month. The president had already declared that “there were fine people on both sides” of the violence in Charlottesville, a statement that seemed to bless violent white supremacists and neo-Nazis. Cullen would look to disprove that contention in court.
Afederal grand jury indicted James Fields on June 27, 2018. Fields was already in custody on state murder charges, but the RAM four were still out there, celebrated on white nationalist websites and gloating about their fighting prowess. “We had the[m] completely surrounded,” Daley wrote on his Facebook page of the torch-lit march on the U-Va. campus, according to court documents. “I hit like 5 people.” In the spring of 2018, Daley and Miselis traveled to Germany to celebrate Adolf Hitler’s birthday at the white supremacist Shield and Sword Festival.
On Aug. 27, 2018, Cullen and his team filed arrest warrants for Daley, Miselis, Gillen and White, supporting the complaints with photos and screen shots:
White head-butting a clergyman, then
cracking heads with a female counterprotester, leaving her with blood streaming down her face; Miselis, wearing a “Make America Great Again” hat turned backward,
kicking a man as he’s falling;
Daley grabbing a woman and body-slamming her to the ground.
Cullen asked the judge to keep the warrants sealed until prosecutors could organize the arrests. Then, in the early morning hours of Oct. 2, 2018, federal agents in Southern California raided the homes of Daley, Miselis and Gillen, and brought the men to federal court in Los Angeles. White was grabbed in San Francisco.
Kavanaugh went to California to help guide the arrests. “It was important to show our presence out there,” Cullen says. “It was our case. They were coming back here.” The four suspects, facing 10 years in prison — five for each of two federal rioting charges — were taken to the Central Virginia Regional Jail in Orange.
At a news conference in Roanoke, Cullen recognized ProPublica for providing a “starting point” for the federal investigation. But “we’re not finished,” he declared. “I commit as the U.S. attorney that we’re going to follow every lead until we’re satisfied that we’ve done all we can do.” He wanted to “send a message” to white supremacists, he said, putting them on notice that they could face federal criminal charges for violent actions.
Earlier this year, in a New York Times essay, Cullen decried the rise in far right extremism as “among the greatest domestic-security threats facing the United States” and lamented that “law enforcement, at both the federal and state levels, has been slow to respond.” Federal prosecutors, he wrote, needed additional tools, such as “a domestic-terrorism statute that would allow for the terrorism prosecution of people who commit acts of violence, threats and other criminal activities aimed at intimidating or coercing civilians.”
Cullen’s outspokenness risked rebuke from a White House, a president and a political party that have tended to avoid calling out white supremacists. He allows that he put himself “out on a limb,” but he got no negative feedback — and he has no regrets. “Violent domestic terrorism is becoming tragically more frequent,” he says. “We have to respond.”
Federal public defender Lisa Lorish immediately rebutted Cullen’s case against the RAM four. On behalf of Ben Daley, she filed a motion to dismiss. Calling the federal Anti-Riot Act “overbroad” and “unconstitutionally vague,” she argued that “it seeks to punish defendants for engaging in protected First Amendment freedoms of speech and peaceable assembly.”
Cullen fired back on March 8: “The First Amendment does not, and has never, protected incitement to violence or violent actions.” And: “Participation in a political rally does not grant individuals license to engage in mayhem.” On April 19, Cole White was freed after pleading guilty and agreeing to cooperate with the prosecution. On May 2, U.S. District Judge Norman Moon denied Lorish’s motion to dismiss. With the case proceeding and video evidence stacked against them, the three remaining RAM defendants pleaded guilty the next day. (Not long after, a California judge threw out a similar case based on the Anti-Riot Act for violating the First Amendment. If appealed, the two cases could wind up before the Supreme Court.)
Three months after pleading guilty, Daley, Miselis and Gillen shuffled into court for their sentencing, dressed in orange prison suits, their hands and feet in shackles. (White would be sentenced separately.) Several days earlier, Cullen had upped the ante, asking Moon to elevate their actions to hate crimes, which would add many months to their time behind bars. “It’s crucial that we send a message of deterrence for other militant white supremacists,” he told the court.
To support the hate crimes charge, Cullen and Kavanaugh introduced fresh evidence that the men had specifically targeted Jews and women. Their signs, speech and social media were replete with anti-Semitic tropes. The prosecutors replayed images of Daley choking a woman and unearthed a text from Miselis to Daley: “lol @ u choking a bitch.” As prosecutors played video of them beating women to the ground, Miselis and Daley smirked and winked.
In the end, Moon ruled that Cullen had failed to prove that the three were motivated by hate. Based on plenty of other evidence, however, he sentenced ringleader Daley to 37 months, Gillen to 33, and Miselis to 27. All three have indicated their intention to appeal on the grounds that the Anti-Riot Act infringes on their right to free speech. But because of the length of the appeals process, they will most likely end up serving their full sentences.
After the hearing, I asked Cullen whether the two years of investigations and prosecutions were worth it. “Very,” he replied, not missing a beat. In his view, the Rise Above Movement, with a co-founder behind bars, is finished. Moreover, the case could set precedent. “My hope is you will see the use of the anti-riot statute to address these increasing problems of violent domestic terrorism,” he said. At the very least, white supremacists will need to think twice before they travel the country spreading violence. One thing’s for sure, adds Chris Kavanaugh: They’re not likely to come back to Charlottesville.
In “Winners Take All: The Elite Charade of Changing the World,” Anand Giridharadas compels us to take a deeper look at elite leaders, their institutions, and their initiatives to make the world a better place. “In the very era in which elites have done so much to help, they have continued to hoard the overwhelming share of progress, the average American’s life has scarcely improved, and virtually all of the nation’s institutions, with the exception of the military, have lost the public’s trust.”
Today’s elites are some of the more socially concerned individuals in history. Yet, according to Giridharadas, while their philanthropic missions may attempt to reform the root causes of unjust systems, many elite initiatives serve only to maintain the very power structures they claim they want to fix. So, who really benefits? To what extent are the elite working to create real progress and systemic change for people and communities?
Anand Giridharadas was a foreign correspondent and columnist for the The New York Times and currently teaches journalism at New York University. He joins us for an in-depth discussion on elite leaders, how their philanthropic efforts preserve the unjust status quo, and how communities might work together to create a more participatory democracy.
We have 74 billionaires in San Francisco and 74,000 homeless.
Philanthropy:
changes the public conversations
how many newspapers have a philanthropy correspondent?
Ask not what you can do for you country, first ask what you’ve done to your country and stop doing what you’ve done. Let’s stop the bleeding. (43:20)
Bezos made his money because workers didn’t have bargaining power in the time in which the internet rose.
Jeff Bezos should give money away in a way that can make sure there isn’t another Jeff Bezos.
Google’s maturity will have them accept that they are power, not fighting the power.
There is nothing more dangerous than a Goliath who thinks he’s a David. (Google didn’t want to release it).
Lebron James is making small change to a school (a band-aid), and using it as a cudgel against the cancer.
inviting documentary film makers to compare it with a “regular school”
