Oliver Burkeman, The Guardian

Families of victims of September 11 could lose their payout claims if they decide to sue alleged Saudi funders of terrorism, writes Oliver Burkeman 

Friday September 20, 2002

President George Bush’s "war against terrorism" has thrown up a particularly cruel irony, according to several people who lost relatives in the attacks on the World Trade Centre and the Pentagon.

It could, they say, lead to hundreds of family members bereaved on September 11 being denied millions of dollars in compensation payments.

Controversy is brewing over a class-action lawsuit filed on behalf of 600 relatives of the victims against a cross-section of the Saudi establishment – "wealthy Saudi individuals, banks, corporations, and Islamic charities" – accusing them of knowingly funding the terrorist activities of al-Qaida.

Some plaintiffs in the case say the Bush administration is pressuring them to pull out of the lawsuit in order to avoid damaging US-Saudi relations, threatening them with the prospect of being denied any money from the government’s own compensation scheme if they continue to pursue it.

Bereaved relatives who apply to the federal compensation scheme must, in any case, sign away their rights to sue the government, air carriers in the US, and other domestic bodies – a condition that has prompted some of them to call the government compensation "hush money".

They remain, however, free to sue those they accuse of being directly responsible for the attacks, such as Osama bin Laden, and – so they thought – the alleged financers of terrorism.

"It was stated very specifically that we couldn’t sue anything domestic," Cheri Sparacio, who lost her husband Tom in the World Trade Centre, told the Guardian recently. "But anything that had to do with funding terrorism, any terrorist nation, terrorist financers, we could go ahead and sue."

Kenneth Feinberg, the head of the compensation scheme, told them as much at a private meeting, they say. But now the department of justice says it is investigating whether participation in that lawsuit could disqualify the relatives from claiming government compensation.

The investigation, the plaintiffs argue, is meant to frighten them off because Washington is intent on preserving cordial relations with Saudi Arabia – above all, in the event of proposed military action against Iraq.

Ron Motley, the high-profile attorney leading the lawsuit, last month told a Staten Island newspaper that the government was protecting its "gangster" friends in Riyadh. He labelled the move a "dirty trick."

"It seems like a lot of political propaganda to try to scare us to pull out," Ms Sparacio said. Nick Chiarchiaro, whose wife Dorothy also died in the World Trade Centre, said: "Some people have already pulled out." The State Department denies that the investigation into a potential clash has anything to do with foreign policy.

If the government were to rule that pursuing the lawsuit and applying for compensation were incompatible, that would leave the relatives with an unenviable choice: seek payouts from the alleged funders of terrorism, risk losing the legal action, and waive their right to federal compensation – or drop out of the lawsuit and risk missing out on millions of dollars in punitive damages were it to succeed.

A spokesman for Mr Feinberg’s office recently told reporters that, for the victims’ families to be able to follow both routes at the same time, they would have first to prove that the targets of the legal action had been connected with terrorism.

That seemed an odd argument to make, the relatives responded, since establishing such a connection would be precisely the endpoint of the lawsuit.

Even if those eligible for government money did remove their names from the suit, potential diplomatic embarrassment could remain: many of the plaintiffs are non-dependents, who were never eligible for the compensation fund but could continue fighting for punitive payments.

The federal compensation scheme has been beset by disputes, and Mr Feinberg has several times had to modify the method used to calculate the awards in response to allegations of unfairness. Even so, few victims’ relatives have submitted applications to it yet: they are waiting, on the advice of their lawyers, to see what others do.

The first 25 payments – of between $300,000 (