Shariah’s Black Box

[316] See, e.g., Devon Bank, Frequently Asked Questions, (last visited Feb. 1, 2008):

Why are your costs higher than conventional loans?

To be Shariah-compliant, our costs must be related to our actual expenses. Our products have a higher documentation fee due to the extra work in product design and assembling documents for a closing—it is not an automated process as it is for a conventional loan. Our profit rate is otherwise the same as an equivalent traditional mortgage. There are a few transaction costs that are higher because of the dictates of the specific deal structure needed to satisfy the requirements of an Islamic financing transaction, such as two deeds to record instead of one. Otherwise, all our costs are the same as a traditional mortgage. We do not charge a premium for religious accommodation.

[317] Pub. L. No. 103-325, 108 Stat. 2190 (1994) (codified as amended in scattered sections of TILA, 15 U.S.C. §§ 1601-1667).

[318] See generally C. Lincoln Combs, Banking Law and Regulation: Predatory Lending in Arizona, 38 Ariz. St. L.J. 617 (2006).

[319] See Elina Chamis, A New Cup O’ Joe: Minneapolis Coffee Retailer Plans Expansion into D.C. Market, Wash. Bus. J., Mar. 31, 2000, available at (last visited Feb. 1, 2008).

[320] See Neal St. Anthony, Venture Firm Buys Caribou; Its Investors Tapped Out, Caribou Coffee’s Founders Will Sell the Chain and Step Aside from Management Roles, Star Tribune (Minneapolis,MN), Dec. 9, 2000, at 1D.

[321] See Milestone Year for First Islamic Investment Ban, MiddleEast Newsfile, Jan. 24, 2001.

[322] Crescent Capital Soon to be Arcapita, Atlanta Bus. Chron., Feb. 28, 2005, available at (last visited Feb. 1, 2008); see also, (last visited Feb. 1, 2008).

[323] Caribou Coffee Company, Inc., Form S-1 Registration Statement (2005) [hereinafter Caribou Coffee S-1], available at

[324] Arcapita Inc. and Arcapita Bank B.S.C.(c) in fact own Caribou through a very complex off-shore ownership structure. As reported in Caribou Coffee Prospectus for its initial public offering:

(1) As of August 15, 2005, Caribou Holding Company Limited (“CHCL”) has 150,600 shares of voting stock and 6,815,038 shares of non-voting stock outstanding. 5,971,218 of the shares of non-voting stock are held by five companies (the “Five Non-Voting Holding Companies”), which areCaymanIslandentities owned by approximately 160 international investors. Arcapita Bank B.S.C.(c) (“Arcapita Bank”) holds a minority interest in three of the Five Non-Voting Holding Companies, which each own 1,587,180 shares of the non-voting stock of CHCL. 572,820 of the remaining shares of non-voting stock are held by Premium Coffee Holdings Limited, an indirect subsidiary of Arcapita Bank. The remaining 271,000 shares of non-voting stock are held by Arcapita Incentive Plan Limited (“AIPL”), aCayman Islandsentity owned by management of Arcapita Bank (including Messrs. Ogburn and Griffith). 10,040 shares of voting stock are held by each of 15 separateCayman Islandsentities formed by Arcapita Bank (the “Voting Cayman Entities”). The Voting Cayman Entities are owned by approximately 50 international investors (the “International Investors”).

Each of the Voting Cayman Entities owns 62/3% percent of the voting stock of CHCL. Each International Investor has granted Arcapita Investment Management Limited (“AIML”), a direct subsidiary of Arcapita Bank, a revocable proxy to vote its shares of voting stock in the Voting Cayman Entities on all matters. In addition, each Voting Cayman Entity has entered into an administration agreement with AIML pursuant to which AIML is authorized to vote the voting stock of CHCL held by such Voting Cayman Entity. Each administration agreement is terminable by a Voting Cayman Entity upon 60 days’ prior written notice to AIML by a vote of two-thirds of its shareholders.

(2) Arcapita Bank does not directly own any stock of CHCL, Caribou Coffee Company, Inc., AIPL or the Voting Cayman Entities. The number of shares of stock shown as owned by Arcapita Bank includes all of the shares of CHCL subject to the revocable proxies granted to AIML as described in note (1)above. Arcapita Bank is aBahrainjoint stock company.

Caribou Coffee Company, Inc., Prospectus 71 nn.1-2 (2005) [hereinafter Caribou Coffee Prospectus], available at (last visited Feb. 1, 2008).

[325] While most of this “firestorm” was local and contained to the media in Minnesota, Ohio, and Illinois, there was at least one international mainstream media outlet that picked it up. See Jon Tevlin, Caribou Severs Ties with Islamic Advisor, Star Tribune (Minneapolis, MN), July 4, 2002, at 1B; see also Christopher Dickey, Tempest in a Coffee Cup, Newsweek, June 26, 2002.

[326] For the profile on Qaradawi, see Investigative Project on Terrorism, Apologists or Extremists: Yusuf al-Qaradawi, (last visited Feb. 1, 2008); see also Anti-Defamation League, Sheik Yusuf al-Qaradawi: Theologian of Terror (Nov. 9, 2007) [hereinafter ADL Report], (last visited Feb. 1, 2008).

[327] Office of the Coordinator for Counterterrorism, U.S. Dept. of State, 2001 Report on Foreign Terrorist Organizations (2001), available at (last visited Feb. 1, 2008). Both organizations had been so designated in the previous report issued two years earlier. See Office of the Coordinator for Counterterrorism, U.S. Dept. of State, 1999 Report on Foreign Terrorist Organizations (1999), available at (last visited Feb. 1, 2008). The FTO designation is made pursuant to the Immigration and Nationality Act, as amended by the Antiterrorism and Effective Death Penalty Act of 1996, 18 U.S.C. §1189, based upon the terrorist activities described in 18 U.S.C. §1182(a)(3)(B), which in turn bring the designated terrorist organization within the scope of 18 U.S.C. §§2339 (B), the material support of terrorism statute.

[328] Coffeehouse Chain Steamed by Terror Allegations,Cleveland Jewish News, June 21, 2002, at 22.

[329] See supra note 324.

[330] Tevlin, supra note 325.

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.