Khalilzad, who is is a counselor at the Center for Strategic and International Studies (CSIS) and an independent businessman, is married to US-Austrian citizen and social scientist Cheryl Benard, who completed her university studies in Vienna.
From 2003-2009, Khalilzad was U.S. ambassador to Afghanistan, Iraq and the United Nations, and was responsible for advising Donald Rumsfeld and Condoleezaa Rice on near-eastern regional affairs.
The Austrian news magazine profile will on Monday reveal that Khalilzad allegedly laundered up to €1.15 million (US$1,49 million) of funds supposedly arising from trading with Iraqi and United Arab Emirates companies through the Vienna-based bank accounts of his wife.
Zalmay Khalilzad in 2008. Photo: Monika Flueckiger/World Economic Forum
The accounts were frozen by the Austrian government in February of this year, and the court actions relate to an appeal by Benard against the freeze. The source of information appears to have come from a recent embarrassing leak of documents from the Vienna court.
Benard's Austrian lawyer told profil that U.S. authorities had "no concrete suspicions until today". The Higher Regional Court of Vienna will soon make a decision on the appeal process.
Vow to fight
Khalilzad on Monday vowed to fight a decision by Austrian authorities to freeze bank accounts belonging to his wife.
Lawyers for Zalmay Khalilzad said in a statement that the diplomat and his wife, Cheryl Benard, were "vigorously contesting" the actions by Austrian prosecutors.
"No charges have been brought anywhere in the world, including the United States and Austria, against Ambassador Khalilzad or Ms. Benard," lawyers Robert Buehler and Holger Bielesz said in response to reports in Austria.
The attorneys said that "for reasons that remain unclear" an Austrian prosecutor had frozen Benard's accounts after receiving a request for information from the US Justice Department.
The attorneys said the Justice Department request had not sought seizure of assets or accounts belonging to Khalilzad and his wife.
"The (request for information) does not contain evidence of money laundering or other offenses on the part of Ambassador Khalilzad or Ms. Benard."
"An appeal against the seizure in the Austrian courts by Ms. Benard as the holder of the accounts is pending," the statement added.
"As there are no charges pending against them in the US or elsewhere, Ambassador Khalilzad and Ms. Benard are focusing their efforts on unfreezing the funds in Austria."
Portions of this story were contributed by Agence France-Presse.