Shariah’s Black Box

[191] Common law fraud did not originally impose a duty to disclose; rather, once a statement represented something as fact, it had to be truthful. Materiality gets at “truthfulness” in that “half-truths” can be as misleading as false statements. The development of the law on the disclosure of omitted facts has always lagged behind the duty to disclose the whole of a truth partially told. For a discussion in this development relative to securities fraud cases, see Loss & Seligman, supra note 10, at 910-918.

[192] This would be the case whether a company made no disclosure at all or represented itself as focused on “socially responsible” or “ethical” investing without any mention of Shariah. If the business model was in fact based upon Shariah, this would remain a material fact. See infra notes 380-381 and accompanying text (discussing Azzad Asset Management).

[193] Recent media stories about the Shariah criminal law include only recently a Muslim convert to Christianity sentenced to death, a rape victim sentenced to lashes, and thieves having their hands amputated. See, e.g., Josh Gersten, Widespread Outrage At Afghan Facing Death For Abandoning Islam, N.Y. Sun, Mar. 21, 2006. For a scholarly look at the Shariah criminal law from the time of the Ottoman Empire until today, see Rudolph Peters, Crime and Punishment in Islamic Law: Theory and Practice from the Sixteenth to the Twenty-first Century (2005).

[194] See supra note 162.

[195] For Shariah as expressed by Shariah authorities over the past millennium, see David Cook, Understanding Jihad; Peters, supra note 163; Coughlin, supra note 24, at 83-223.  See generally, The Legacy of Jihad 141-367 (2005).

[196] The SEC documents from which this narration is drawn can be found through a Lexis search: for the Halliburton “No Action Letter” file, see 2003 SEC No-Act. LEXIS 433 [hereinafter Halliburton No-Action File].  For General Electric, see 2005 SEC No-Act. LEXIS 137 [hereinafter GE No-Action File]. For a broader article discussing these cases in some detail in the context of compliance by foreign subsidiaries of U.S. corporations, see Terence J. Lau, Triggering Parent Company Liability Under United States Sanctions Regimes: The Troubling Implications Of Prohibiting Approval And Facilitation, 41 Am. Bus. L.J. 413 (2004).

[197] 17 CFR 240.14a-8.

[198] The rule sets the floor at less than 5% of assets at the end of the current fiscal year; and less than 5% of gross earnings and net income. Id.

[199] See Halliburton No-Action File, supra note 196. Halliburton raised other objections such as the requested proxy statement included factual errors.

[200] The Global Security Risk Database was a first of its kind approach to ferreting out companies doing business in “terror sponsoring states.” The work was carried out and published by the Center For Security Policy, a Washington, D.C.-based policy think tank headed by former Reagan administration official Frank Gaffney. For the Global Security Risk Database, see The Ctr. For Sec. Policy, The Terrorism Investments of the 50 States (Aug. 12, 2004), available at (last visited Jan. 30, 2008). For an overall review of the “Divest Terror” program spearheaded by the Center for Security Policy, see Center for Security Policy, Divest Terror Initiative, (last visited Jan. 30, 2008).

About David Yerushalmi

Mr. Yerushalmi is a lawyer specializing in litigation and risk analysis, especially as it relates to geo-strategic policy, national security, international business relations, securities law, disclosure and due diligence requirements for domestic and international concerns. David Yerushalmi has been involved in international legal and constitutional matters for over 25 years. David Yerushalmi is today considered an expert on Islamic law and its intersection with Islamic terrorism and national security. In this capacity, he has published widely on the subject including the principle critical scholarship on Shariah-compliant finance published in the Utah Law Review (2008, Issue 3). This work and the empirical investigation known as the Mapping Shariah project in America was the focus of a recent monograph published by the McCormack Foundation and the Center for Security Policy.