$65 million Iraq cash shipment halted

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The $65 million seized by U.S. officials from a Baghdad-bound airplane yesterday may be used to pay the relatives of those killed in the September 11 attacks.

Officials stymied the loading of the money after a federal court ordered that the cash remain in the United States until it can decided if it can be used to compensate the victim's families. The money was converted assets from the Saddam Hussein government.

The federal government wants to use the money to help pay for the reconstruction of Iraq.

The last-minute ruling by the 2nd Circuit Court of Appeals -- 20 minutes before the plane was scheduled to take off -- was the culmination of a dramatic legal scramble by lawyers for the families of two persons killed in the attacks. Officials wouldn't comment where the plane was departing from.

"This was a good ruling," said Slade H. McLaughlin, lawyer for the two families. "It was our last chance to keep this money in the United States. If it had been sent to Iraq, there would be no funds within the court's jurisdiction that could be used to satisfy our judgment."

He said his clients were "extremely pleased" with the judgment.

"Boy, that's a great thing. Thank God," Raymond Smith, whose brother George perished in the World Trade Center, told Mr. McLaughlin.

Mr. Smith and his family -- along with the wife and six children of Timothy Soulas, another World Trade Center victim -- won a judgment in May entitling them to $104 million damages from the former Iraqi government. Judge Harold Baer ruled that the two families -- with the aid of evidence from former CIA Director Jim Woolsey and author Laurie Mylroie -- had proved, "albeit barely," that Iraq was involved in the attacks.

"The money was never the issue," Katie Soulas told United Press International at the time. "This isn't about just me; it's about all the victims of September 11 and all the other victims of Iraqi terror. No one should ever have to walk in my shoes or those of my children,"

The relatives had originally hoped to get paid from the $1.7 billion in Iraqi assets frozen in the United States since the first Gulf War in 1991. But by the time their case was decided, that money had already been seized by the federal government. Some of it -- $300 million -- was set aside to pay damages already awarded against the former Iraqi regime, like those won by people used as "human shields" in the first Gulf War, but nothing was kept for any subsequent judgments like that granted to Mrs. Soulas and Mr. Smith.

The families' request to have their award paid from the money seized by the federal government was denied by Judge Baer on the second anniversary of the attacks. They asked for an order instructing the government to keep the funds in the country until an appeal could be heard. Judge Baer turned down that request Friday afternoon.

Monday morning, hearing that the money was scheduled to be flown out the following day, the families filed for an appeal with the 2nd Circuit.