Knockoff sales may finance terrorists, panel is told

WASHINGTON -- Buying knockoff designer handbags and Hello Kitty T-shirts on street corners may ultimately be helping terror groups like Hezbollah and Hamas, law enforcement officials and analysts testified yesterday.

Profits from faux Chanel, Louis Vuitton, and Prada purses, scores of pirated DVDs, and counterfeited clothing and other goods have been traced to supporters of terror organizations, the analysts said.

''We have encountered suspects who have shown great affinity for Hezbollah and its leadership," Lieutenant John Stedman of the Los Angeles Sheriff's Department testified at a hearing of the Senate Homeland Security Committee.

In one example, Stedman said, a counterfeiting suspect had hung small Hezbollah flags and a picture of the group's leader in his home. In another, the suspect had a Hezbollah tattoo on his arm.

Hezbollah's terror capabilities equal those of Al Qaeda, and ''anything they do to fund their activities should be of our concern," said terror specialist Matthew Levitt, a former FBI intelligence official.

Levitt said the FBI also believes that Hamas deals in counterfeit and pirated goods, including cigarettes and computer software.

It is unclear how much terrorists are involved in counterfeited goods, and examples given yesterday were largely anecdotal.

But authorities contend terror groups have become more involved in counterfeit sales since the United States cracked down on terror-financing schemes wired through banks and charities.