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GIBSON: A Palestinian professor here in the United States accused of financing terror overseas and the feds hot on the money trail, getting help from Israel.

Investigators coming up with evidence they say shows cash sent to an Israeli bank by Sami Al-Arian ended up in the hands of four convicted terrorists. Professor Al-Arian adamantly denying the allegations, calling them lies.

Joining us now for more on the case, former federal prosecutor John Loftus.

So we've heard about this Sami Al-Arian before. Bill O'Reilly caused quite a bit of trouble for Mr. Aria some time ago. Where is he now, and what is he doing at the moment?

JOHN LOFTUS, FORMER FEDERAL PROSECUTOR: Sami Al-Arian is suspended with full pay. I'd like to have his kind of work.

GIBSON: From the University of South Florida.

LOFTUS: The University of -- yeah. He was a computer science teacher, a brilliant man, and, unfortunately, he had this other side to him. He is number two in the world of the Palestinian Islamic Jihad terrorist group, been a major player in terrorism since 1990.

GIBSON: So what is the allegation that he did in -- so -- in, as it's put, funneling money?

LOFTUS: Sami set up phony charities in Florida that would launder money from the Saudis, from Switzerland, and then distribute it to his terrorist group overseas.

There's no doubt that Professor Al-Arian knew the money was for terrorism. Among the documents seized in his office back in 1995 was a handwritten letter bragging about a terrorist attack two weeks previously in Israel and asking for money to carry out more of them.

GIBSON: In what state is the investigation of him? You say suspended with pay, and he's here -- still here in the United States. Can we assume that the feds are closing in on him?

LOFTUS: Well, we would have to be assuming that for the last 12 years. This has been the most drawn-out investigation.

Part of the problem is that Sami's terrorist group gets a lot of their money from the Saudi government, and that's a political embarrassment, and, for a long time, everybody looked the other way at Professor Al-Arian's money laundering.

After September 11th, the rules have changed.

GIBSON: But, Mr. Loftus, if the investigation has gone on for a dozen years -- pardon the argument -- but I'm sure Sami Al-Arian says, "there must be nothing there. Otherwise, they would have come down on me with everything they've got and hauled me away to the slammer and I'd be charged by now."

LOFTUS: The question is not that there's nothing there. Is it -- what's left within the statute of limitations.

There's no doubt that Sami's a terrorist. We have videotapes of his terrorist conventions where he's screaming, "Death to America. Death to Israel." The people are asking for $500 to kill a Jew. There's no doubt he's a terrorist.

The problem now for the government is how to play catch up quick. Now they found that, in 1996, that Sami ordered fertilizer from Saudi Arabia, the kind that can be used for explosives. They're looking at his money laundering.

But the problem now is that the government is running very desperately to make a case against Professor Al-Arian after 12 years of neglect.

Is the case of Sami Al-Arian why the feds jumped with both feet on a guy like Shishani, who shows up coming back from Indonesia with some checks in his briefcase?

LOFTUS: The Israeli government has said that the Professor Al-Arian case is a huge embarrassment when you look at the U.S. files of how little was done, and so it's not surprising now that the federal government is jumping on to every money launderer they can find.

GIBSON: I mean...

LOFTUS: If you want to stop terrorism, cut off their supply of money. That's the number one thing we can do to send it.

GIBSON: Why do you think -- I mean, is there any other reason but the embarrassing Saudi connection that Sami Al-Arian has been able to carry on, as you describe it, with impunity?

LOFTUS: No, and I was told by many people in the U.S. intelligence and law-enforcement community that that was the reason they were not allowed to prosecute Al-Arian earlier. They didn't want to embarrass the Saudi government.

GIBSON: John Loftus, former federal prosecutor, coming to us from Tampa on the story of a University of South Florida professor, Sami Al- Arian.

Mr. Loftus, thanks again. Appreciate it.

LOFTUS: Thank you, John.

GIBSON: Coming up on the big story, Hornets, Tomcats, Hawkeyes, and Prowlers. Heather Nauert will take you behind the scenes of the battle ax, the Navy's newest carrier, the USS Harry S. Truman.

Then, we'll tell you about plans to create a floating base for special operations commandos.

And the president's court battle. We'll look at the politics behind judicial nominations and why the federal courts just don't have enough judges.

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