Under a plea deal, Enaam Arnaout, a Syrian-born U.S. citizen, pleaded guilty to a single racketeering conspiracy count as jury selection was about to begin.
"In entering a plea today, Mr. Arnaout made a decision that he believes is in the best interest of his family, the charity and the American Muslim community," said Arnaout's attorney, Joseph J. Duffy.
"One has to question whether a fair and impartial jury could be found anywhere in America today that could sit in judgment of an Arab-American in a case involving allegations of terrorism," he added.
U.S. Attorney Patrick Fitzgerald said in a statement: "We are confident that if the defendant follows through on his commitment to cooperate truthfully that today's guilty plea will be a beginning, not an end, of a sustained effort to make sure that violence overseas is not funded from Chicago."
"This is a nice deal for the government," says CBSNews.com Legal Analyst Andrew Cohen.
"It gets a guilty plea here without having to divulge during trial precisely how it discovered that Arnaout funneled money to the Chechen rebels and that ought to help the feds with current investigations that focus on the money trail and its link to terrorism."
The charges against Arnaout, 41, were announced in October by U.S. Attorney General John Ashcroft and were a major part of the government's effort to halt the flow of U.S. dollars for terrorists.
Federal prosecutors have said that Arnaout was close to bin Laden in Afghanistan in the 1980s and used his Benevolence International Foundation, based in suburban Chicago, to support the al Qaeda network.
Had the case gone to trial, prosecutors planned to call as a witness an al Qaeda member, Jamal Ahmed al Fadl. They said in court papers that he would testify that bin Laden spoke of using Arnaout's charity to transfer funds around the world to places where al Qaeda was engaged in operations.
"I don't know whether this deal means the government had no proof that Arnaout was directly funding al Qaeda operations or whether prosecutors simply decided to cut a deal," says Cohen, "in order to save resources and turn Arnaout into a government asset, someone who will now cooperate with the feds in the area of the legal war on terror."
Arnaout could be sentenced to 20 years in federal prison. No sentencing date was set. Prosecutors said they might ask for a considerably lighter sentence if he cooperates in future investigations.
In his 12-page plea agreement, Arnaout said he began soliciting funds through his foundation out of his office in suburban Palos Hills in May 1993. But he acknowledged that "a material portion" of the funds went to "support fighters overseas."
He acknowledged that he and others agreed to provide boots for rebels fighting Russian troops in Chechnya and boots, tents and an ambulance "intended for ultimate use by soldiers in Bosnia-Herzevogina."
Arnaout admitted doing so while telling donors, many of them American Muslims who thought they were doing their religious duty by contributing, that their money was helping only widows, orphans, refugees and the poor.
Arnaout was arrested April 30 as he was seeking court permission to leave the country, saying he wanted to visit his sick mother in Saudi Arabia. At the time, he was under round-the-clock FBI surveillance.
The storefront office where the foundation operated for a decade was raided Dec. 14, 2001, and the group was placed on notice it was suspected of funding terrorism.
The same day the group's bank accounts were frozen by the government.
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