PHILIP SHENON, NEW YORK TIMES: The desert kingdom of Saudi Arabia has been one of Americas closest allies in the Arab world for more than sixty years. But allegations of the country's ties to terrorism are putting the friendship -- founded on oil -- in jeopardy.

Just this week, the Treasury Department sent an investigator to Europe to seek support in freezing the assets of wealthy Saudis accused of sponsoring terrorism.

And a new report released by a task force of intelligence experts, including many former U.S. government officials, finds a financial link between Saudi Arabia and Osama bin Laden's terror network.

LEE WOLOSKY, FORMER OFFICIAL AT THE NATIONAL SECURITY COUNCIL: The taskforce concluded in respect to Saudi Arabia that for years individuals and charities based in Saudi Arabia have served as a primary financial source for Al-Qaeda, and that for years the Saudis have turned a blind eye to this problem.

PHILIP SHENON: Lee Wolosky was an official at the National Security Council during the Clinton and Bush administrations.

LEE WOLOSKY: Saudi banks, charities, individuals, businesses, mosques, web-based initiatives all these are funding Al-Qaeda.

PHILIP SHENON: The Saudi government has responded to the report calling it an opinion based on false and inconclusive information, and saying "the task force is clearly out of touch with current activities."

Since September 11th the Saudi kingdom has been under great scrutiny for its alleged ties to terrorism. Fifteen of the 19 hijackers were from Saudi Arabia. And now, in addition to the task force report, other evidence since the attacks increasingly points to a direct connection between Saudi money and extremist groups, including Al Qaeda.

All of this has some Americans asking tough questions about the Saudis' role in the September 11th attacks.

LIZ ALDERMAN, PLAINTIFF: These kinds of acts cannot occur unless there's financing, unless there's money.

PHILIP SHENON: Liz and Steve Alderman's son Peter was killed at the World Trade Center.

LIZ ALDERMAN: I became aware that an awful lot of this funding was coming from Saudi Arabia, who are supposed to be our friends

STEVEN ALDERMAN: There are people who are culpable because they're complicit. And I want them. And I don't want to kill them, I want money from them, and I want enough money from them so they'll never be able to do this again.

PHILIP SHENON: Using the American legal system as their weapon, Liz and Steve Alderman have banded together with more than 2000 other relatives of victims of the September 11th attacks. Together, they filed a one trillion dollar civil suit against mainly Saudi individuals, businesses, banks and charities, almost all of them Saudi, the families believe helped finance the terrorist attacks. Ron Motley is lead attorney representing the families.

RON MOTLEY, LAWYER FOR PLAINTIFFS: Our intent is to let the American people and the families know who funded terrorism and to get the people who are funding it to stop.

PHILIP SHENON: Motley, one of the nation's top plaintiffs attorneys, is best known for getting a landmark 350 billion dollar settlement from big tobacco in the 1990s. Now, he says he's prepared to fight what he calls "the case of a lifetime".

PHILIP SHENON (ADDRESSING MOTLEY:: If you were facing a jury tomorrow, in this case, could you give me a sense what your opening statement would be?

MOTLEY: A trail of blood followed a trail of money.

PHILIP SHENON: And you would show what?

MOTLEY: I would show that the banks, the institutions that we've sued, charities that we've sued, and the individuals that we've sued facilitated the events of September the 11th. By knowingly giving money, aid, comfort and encouragement to Bin Laden. And his murderous gang of cowards.

PHILIP SHENON: The 600 page complaint filed by Motley's team in a Washington, DC court in august, claims that "Saudi Arabian money has financed terror while its citizens have promoted and executed it"

MOTLEY: We're talking about individuals, people, who took their own money out of their own pockets, knowingly gave it charitable institutions that were well known within Saudi Arabia, the Middle East and to intelligence services to be funding terrorists. Period. That's what this lawsuit is about.

PHILIP SHENON: The lawsuit does not just focus on groups in the shadows. It also accuses major Saudi businesses, including Saudi Arabia's oldest and largest bank, of funneling money to terrorist groups.

Even prominent members of the Saudi royal family are named in the suit. Prince Sultan, the king's brother and the country's defense minister is alleged to have donated millions of dollars to charities the lawsuit specifically links to Al Qaeda.

PHILIP SHENON: Is it possible, these prominent Saudis who are giving money to these charities don't understand that money may be funneled off to Al Qaeda or other terrorist groups?

MOTLEY: That might be their defense but it won't wash because we have documentary evidence to the contrary.

PHILIP SHENON: Most startling, Motley claims to be able, for the first time, to draw a direct link between a member of the Saudi royal family and some of the hijackers.

PHILIP SHENON (ADDRESSING MOTLEY): Could you give us a sense of what sort of documents you've got?

MOTLEY: There was contact being made between a member of the Royal family and two of the hijackers. Put it that way. And we have documentary evidence of that.

PHILIP SHENON: Motley is making big claims, but it's impossible to evaluate his sources because he is not willing to provide the evidence while his investigation is still underway.

Another defendant named in the suit is Prince Turki al Faisal, the former head of Saudi intelligence and the new ambassador to Britain. His own father King Faisal was assassinated by terrorists.

PRINCE TURKI AL FAISAL (FORMER HEAD OF SAUDI INTELLIGENCE ON CNN): We've always cooperated with United States on any subject that has to do particularly about terrorism.

PHILIP SHENON (ADDRESSING MOTLEY): What is it you know about Prince Turki and his ties to Al Qaeda?

MOTLEY: I know a lot about Prince Turki and his ties to Al Qaeda. A lot of it's in the complaint and a lot of it's coming in daily. Let Prince Turki come to the United States and when we finish Prince Turki he'll be Prince Cooked Goose.

PHILIP SHENON: Former Senator Wyche Fowler was the U.S. Ambassador to Saudi Arabia from 1996-untill last year.

WYCHE FOWLER, FORMER U.S. AMBASSADOR TO SAUDI ARABIA: Saudis are not in the business of funding terrorists against their friend the United States.

PHILIP SHENON: In the past, he has worked closely with the Saudi royal family FOWLER: If, Turki al Faisal were somehow complicit in any actions against those, our victims on September 11th in New York and Washington and Pennsylvania, I guess the only word I can say is, I would be astonished. Prince Turki was the head of the, the equivalent CIA for almost thirty years. American educated, at Georgetown, uh, a man known in his own country as having impeccable character.

PHILIP SHENON: Fowler is equally surprised by the allegations against Prince Sultan, the kings brother.

FOWLER: I would be astonished if Prince Sultan, uh, is shown to have been involved in any criminal or terrorist activity. He has a tremendous reputation for charitable giving, for generosity.

MATTHEW LEVITT, SENIOR FELLOW, WASHINGTON INSTITUTE FOR NEAR EAST POLICY: I think the only thing that people can really say-- with any measure of authority is that members of the royal family did in fact give substantial amounts of money to organizations that have since been linked to international terrorist groups.

PHILIP SHENON: Matthew Levitt is a former FBI counter-terrorism analyst. He now works on tracing the funding of extremist groups.

LEVITT: Did they know for certain that these organizations were linked to international terrorist groups? I can't prove one way or the other. The bottom line is: they're looking the other way - and they're choosing to look the other way.

PHILIP SHENON: Saudi Arabia is the spiritual center of the Muslim world. Its citizens follow a strict interpretation of the Koran. Charitable giving, known as Zakat, is one of the main pillars of Islam. In Saudi Arabia citizens voluntarily give billions of dollars each year to Muslim causes around the world. This money is often unregulated and difficult to track. But there are clues.

Levitt points to a charity supported by King Fahd himself, the Saudi High Commission for Aid to Bosnia. The group was linked to terrorist activity after a raid on its offices by NATO forces last October. The raid turned up incriminating files, including photos of past terrorist targets, crop-duster manuals, and a map of Washington pinpointing U.S. government buildings.

Another group that has received funding from the Saudi royal family is the International Islamic Relief Organization:

LEVITT: This organization was linked to the 1998 East Africa Embassy Bombings. Individuals who have been indicted, convicted for their roles in that bombing were employees of this-- International Islamic Relief Organization.

Ultimately, a very disturbing percentage of the funds that support Al Qaeda terrorist activity comes from charitable and humanitarian organizations that are based in Saudi Arabia.

PHILIP SHENON: But these kinds of connections have been difficult to uncover.

Since the investigation that followed the 1996 bombing at Khobar Towers, in Saudi Arabia, which left 19 U.S airmen dead, American law enforcement officials have voiced their frustrations about Saudi intelligence cooperation.

The Bush administration says they have received the complete support of the Saudis since September 11th, but many intelligence analysts disagree.

LEVITT: Across the board, there's a lot that we don't know because there's a lot of cooperation we're not getting. So, we don't know how much the Saudis know. We don't know how much they could know. It's clear that it's more than what we're getting right now, cause we're not getting a whole lot.

PHILIP SHENON: The allegation that the Saudis are not cooperating in the war on terror has strained what had been a long friendship. From the historic meeting in 1945 between King Abdul Aziz and Franklin Delano Roosevelt to the close ties between the Bush family and King Fahd, oil has always been at the core of the relationship. Saudi Arabia sells on average 1.5 million barrels of oil to the United States every day, and it has worked to keep oil prices steady.

WYCHE FOWLER: They have worked in concert with us to keep oil prices stable and make sure that the American economy was not hurting by spikes in, in oil prices

PHILIP SHENON: Over time, the strategic alliance has grown beyond oil, to include military cooperation.

FOWLER: The military relationship has been extraordinarily important, going back at least fifty years.

PHILIP SHENON: During the 1980's, Saudi money, both from government funding and private charitable giving, supported the U.S. backed Mujahadeen, Islamic fundamentalists fighting the Soviets in Afghanistan. Later, in 1991, Saudi troops joined the U.S. effort in the Gulf War, and Americans have maintained bases in the Saudi desert ever since.

Youssef Ibrahim is a Senior Fellow at the Council on Foreign Relations.

YOUSSEF IBRAHIM, SENIOR FELLOW AT THE COUNCIL ON FOREIGN RELATIONS: On September 10 and until September 10 I, I, I can only describe the Saudi relationship as a-- honeymoon --

PHILIP SHENON: He covered the Middle East for many years as a NEW YORK TIMES reporter. And has recently worked for British Petroleum.

IBRAHIM: Suddenly the atmosphere in the United States towards Saudi Arabia changed. As, as we all know there's been streams of ink that have run in opinion, editorial and opinion and by pundits attacking Saudi Arabia.

SAUDI AD: In the war on terrorism, we all have a part to play, one country has been an ally for over sixty years,

PHILIP SHENON: The Saudi government has tried to repair its image in the United States launching a multi million dollar ad campaign highlighting the history of cooperation between the two countries.

SAUDI AD: Arresting over two hundred suspects including Al Qaeda members and a force for blocking over 70 million in terrorist assets world-wide.

PHILIP SHENON: But for the families of the September 11th victims, the benevolent U.S./Saudi history is not enough.

LIZ ALDERMAN: If the Saudis are our friends, and if they say they're our friends, then they should start acting like our friends.

PHILIP SHENON: The lawsuit has caused an uproar in Saudi Arabia.

IBRAHIM: This is a serious breach of honor, and I think both the Saudi population and the Saudi government did not differ in this reaction -the shock was pervasive.

PHILIP SHENON: The Saudi embassy in Washington has declined comment on the lawsuit. But in a statement issued last week the Saudi say that "The Kingdom of Saudi Arabia has taken deliberate action to root out sources of terrorism and shut down its financing."

And American officials tell the NEW YORK TIMES that in recent weeks the Saudis have voiced their protest over the lawsuit to the Bush administration. The State Department says it has no comment on the suit. But a department official speaking on the condition of anonymity acknowledged that government lawyers are closely watching the case.

PHILIP SHENON (ADDRESSING MOTLEY): Are you prepared to have your lawsuit do real damage to the relationship between the United States and Saudi Arabia?

MOTLEY: So be it. If it happens, it happens. That's not our intent. If it happens, it happens. Tell Prince Turki to keep his money in his pocket or give it to a legitimate charity.

PHILIP SHENON: As the Motley team prepares to move into the discovery phase of the case, there is growing concern among bankers and economists about what might happen if the court freezes the assets of the Saudi defendants. Bankers fear it could trigger a mass exodus of Saudi money from the U.S. economy.

PHILIP SHENON (ADDRESSING FOWLER): How substantial is the Saudi investment in this country?

FOWLER: Billions and billions of dollars. I think there have been attempt to, uh, quantify it over the years. But whether it is, uh, two hundred billion, or six hundred billion, or eight hundred billion, uh, you know, nobody really knows. They feel like, not only America is the strongest country in the world, has the strongest economy, but so many were educated here, that we are their friends.

PHILIP SHENON: Such good friends in fact, that the Saudis maintain large real-estate holdings in Florida, Texas, and Colorado. They also own major stakes in AOL/Time-Warner, Citibank, and Disney.

But since September 11th, the Saudi investment has been shrinking. Youssef Ibrahim estimates that as much as 200 billion dollars has already been moved out of the U.S. since the attacks. He fears that the lawsuit could make the situation worse.

IBRAHIM: If this lawsuit results in effect in-- a court order to freeze Saudi assets, it will have the impact of an atomic bomb on Saudi/American relationships.

PHILIP SHENON: Ibrahim says he and indeed all Americans should be prepared for a backlash.

IBRAHIM: I can see some Saudis actually filing class suit against the CIA for training and creating this monster called Al Qaeda. people tend to forget that we created that monster to fight the Soviet Union. Osama bin Laden was our absolute darling through the 80s.

PHILIP SHENON: For now, the lawsuit is going forward. But questions still remain about the strength of the case and the legal precedent for such action. Motley insists that he has the evidence, and the will, to win.

MOTLEY: We're not just making things up. This is based on documentary evidence. This is based on informants. It's based on testimony uh, in criminal trials. It's based on affidavits filed by criminal prosecutors in foreign countries. It's based on financial records that have been seized as a result of criminal investigations. This is not just some redneck from South Carolina making up stuff about Saudi Arabia.

PHILIP SHENON (ADDRESSING MOTLEY): But if, as you know, the Saudis and their friends in Washington say that you're blowing smoke, that these theories have been around for years about the Saudi ties to terrorism and nobody's been able to prove it. You won't be able to prove it. That you want to have these idle threats out there so that they'll capitulate and pay off the family.

MOTLEY: Let me, let me say this about that. Most of the families don't want the money. They don't care if the money is burned they just want the money out of the pockets of the people who finance terrorism. And they'll just say that we're blowing smoke. I'd go ask the tobacco executives if we're blowing smoke.

PHILIP SHENON: The families say they hope to make a difference by cutting the financial lifeline for future acts of terror.

LIZ ALDERMAN: The basic reason for this suit, is to find the truth and to stop this from ever happening again.