Khashoggi's father was the personal physician to the Saudi King, and Khashoggi used that connection to become a middleman for people seeking to sell arms to Saudi Arabia. However, the Saudi royal family became troubled by Khashoggi's extravagant life style, and in 1975 King Khalid, acting with the Saudi Council of Ministers, issued a decree which retroactively banned "any middleman, sales agent, representative or broker" from receiving commissions on arms sales to his country.
When Congress prohibited the Ronald Reagan administration from providing aid to the Contras in Nicaragua, an elaborate plan was implemented to sell arms to Iran and to use the profits to finance the Contras. Khashoggi played a role by providing a "bridge loan" to finance the arms sales. Khashoggi was found to have borrowed money for these arms purchases from the later-bankrupt financial institution the Bank of Credit and Commerce International (BCCI) with Saudi and US backing.
Khashoggi was arrested in Switzerland on April 19, 1989 and extradicted to the United States on charges that he had helped Imelda Marcos smuggle money out of the Philippines. In 1990, a United States federal jury in Manhattan acquitted Khashoggi and Mrs. Marcos of racketeering and fraud.
From 1983 to 1989, Khashoggi served on the Board of Trustees of American University in Washington, DC. Khashoggi pledged to donate $5 million toward a sports complex at AU, and the new $20 million building was named in his honor. However, he defaulted on his pledge and the building was renamed.
- David Leigh and Rob Evans. "Biography: Adnan Khashoggi", Guardian News and Media Limited, 7 June 2007. Retrieved on October 26, 2016.
- Michelle Green. Unveiling Adnan Khashoggi: a Provocative Biography Tells of His Deals, His Wealth and His Women. Time Inc. Retrieved on October 26, 2016.
- Martindale, Steven. "ADNAN, THE SULTAN, THE SWAMI AND ME", Washington Post, July 30, 1989. Retrieved on October 26, 2016.
- "Imelda Marcos Acquitted : Cleared of Looting Philippines to Buy N.Y. Skyscrapers : Khashoggi Also Freed in Blow to Justice Dept.", Los Angeles Times, July 2, 1990.
- "Arms Dealer Goes From Riches To Jail", Chicago Tribune, July 20, 1989. Retrieved on October 26, 2016.
- "Newsmakers: In Arresting Move, School's Board Drops Khashoggi", LA Times, May 5, 1989. Retrieved on October 26, 2016.
- "Washington Talk: Briefing; Waiting for Khashoggi", New York Times, December 31, 1987. Retrieved on October 26, 2016.