Of the 1998 transactions, Mr. Qadi's lawyers insist his gifts were meant merely to help the worthy cause of religious education -- in this case, an Islamic school in Yemen -- not to buy arms. However, the school itself has come under scrutiny partly because it is run by an alleged associate of Osama bin Laden. Its most famous alumnus is John Walker Lindh, the so-called American Taliban who is serving a 20-year sentence.

Mr. Qadi's lawyers say his donations originally were made to a personal friend and business associate whom the U.S. accuses of being an alleged al Qaeda operative. The funds, records show, were then transferred to Maram, a Turkish travel and trading firm.

Mr. Qadi's lawyers have collected extensive documentation indicating that the funds donated by Mr. Qadi were used to construct housing for the religious school in Yemen. To address questions about the contribution, they made available records of the original transfers and a stack of invoices and other records supporting Mr. Qadi's claim that Maram spent more than $1 million building the school in Yemen during that period.

Mr. Qadi, a pillar of the business establishment in the Saudi financial center of Jeddah, was designated a supporter of terrorism by the U.S. Treasury Department in October 2001 for his support of an Islamic charity the U.S. called "an al-Qaeda front." The move froze his assets. In numerous interviews, he has vigorously protested the terrorist label.

The Islamic financier has launched a major litigation effort to clear himself in a confidential proceeding at the Treasury Department. In voluminous filings, he has insisted that the designation is a mistake, his lawyers say. They predict he will be cleared.

In Luxembourg, Mr. Qadi has brought a case in the Court of Justice of the European Community to lift the freeze on his assets in that jurisdiction. "In all my individual, business and charitable activities, I have never supported, nor have I intended to support in any manner whatsoever, Osama bin Laden or al Qaeda," Mr. Qadi said in a statement in October.

Maram was founded in December 1996 as an Istanbul travel agency by Mamduh Salim, who is now in U.S. custody and under indictment by the Justice Department as the former chief financial officer of al Qaeda. With another Maram manager, Mr. Salim led an effort by al Qaeda in the 1990s to obtain nuclear and chemical weapons, the Justice Department charges.

From its origin as a travel agency, Maram evolved into a building contractor of sorts. In July 1997, Turkish records show, all of Mr. Salim's shares in Maram were transferred to a Palestinian man named Wael Julaidan and his business partner. Mr. Julaidan is a longtime friend of Mr. Qadi's. The U.S. government has said Mr. Julaidan worked closely with Osama bin Laden in the past, and he too is designated by the Treasury Department as an al Qaeda supporter.

Mr. Julaidan's partner at Maram, Mohamed Bayazid, has long been described as a top al Qaeda leader by the Justice Department. In a 2001 trial in New York federal court of an al Qaeda cell, the government's top al Qaeda witness described how he once went with Mr. Bayazid and Mr. Salim to receive a cylinder of purported uranium.

It was the job of Mr. Bayazid, known by the nom de guerre Abu Rida al Suri, to check the documentation of the uranium, this witness testified. "Abu Rida al Suri looked to his paper and he looked to the cylinder, and after that he say, 'OK, that is good,' " witness Jamal Al Fadl testified.

Mr. Qadi's lawyers say they don't know how Mr. Julaidan came to be in business with Mr. Bayazid, who is listed in Maram documents as the company's chairman. Mr. Julaidan's lawyer in Saudi Arabia didn't respond to requests for comment. Mr. Qadi's lawyers said they also don't know how Mr. Julaidan happened to acquire Maram from Mr. Salim, who is accused by the U.S. of helping direct the bombings of two U.S. embassies in East Africa in 1998, killing some 300 people.

The important thing, Mr. Qadi's lawyers say, is that the paper trail indicates his funds went not for weapons but to build low-cost housing for married students at Al Iman University in Sanaa, Yemen.

Al Iman, however, is not a typical college. Its curriculum primarily concerns the study and propagation of radical Islam.

The school was founded by Sheikh Abdul Mejid al Zindani, who also serves as rector. He is the leader of the Yemen chapter of the Muslim Brotherhood. Mr. Zindani fought alongside Osama bin Laden in Afghanistan, according to the U.S. government. One al Qaeda memorandum from that period, obtained by the Justice Department, reports a discussion between the two men about using the offices of Saudi charity groups in Pakistan to launch attacks.

Mr. Zindani is a U.S.-designated terrorism supporter whom the Treasury Department accuses of "actively recruiting for al Qaeda training camps." According to the U.S. agency, "Al Iman students are suspected of being responsible, and were arrested, for recent terrorist attacks, including the assassination of three American missionaries and the assassination of the number-two leader for the Yemeni Socialist party." Sheikh Zindani, whom the U.S. says is also linked to the terror group Ansar Al Islam, denies any connection to terrorism, according to news reports.

Last week, U.S. Ambassador to Yemen Edmund Hull told a Yemeni paper that the U.S. is "worried about the activities of Iman University, and we are seeking to stop the external funding that al-Zindani receives so that he can stop funding the university and activities that encourage extremism and support terror," according to an AFP report.

In a statement Wednesday, Sheikh Zindani denied the allegations. "We wonder: What right does an ambassador have to issue verdicts concerning a country's internal affairs?" he said. The U.S., he said, is "waging a campaign against all Islamic centers of learning as part of its global war on terror."

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Troubles With Treasury

Yassin Qadi has provided financing for the enterprises of four men also classified by the Treasury Department as Specially Designated Global Terrorists, according to court filings and Treasury statements.

	NAME/DESIGNATION DATE	REASON
	Yassin Qadi (pictured) Oct. 12, 2001	Directed the Muwafaq charity, which Treasury calls "an al Qaeda front that receives funding from wealthy Saudi businessmen."
	Mohammed Salah Sept. 24, 2001	Courier for the Palestinian group Hamas. The FBI says he received funding from Mr. Qadi.
	Wael Julaidan Sept. 6, 2002	Directed groups that Treasury says "provide financing and logistical support to al Qaeda." Mr. Qadi's lawyers say the two men are longtime friends and business associates.
	Ayadi Chafik Oct. 12, 2001	European director of Muwafaq. Introduced to Mr. Qadi by Wael Julaidan.
	Abdul Mejid Al-Zindani Feb. 24, 2004	Al Qaeda recruiter and supplier. His religious school was funded by Yassin Qadi and Wael Julaidan.

Write to Glenn R. Simpson at glenn.simpson@wsj.com¹