Going After Terrorism’s Financiers Is the Right Strategy, But the Law Needs Reform
[Particularly relevant as the Holy Land Foundation verdict came down today.]

By JENNIFER VAN BERGEN from May 1st, 2006, Findlaw.com

The basic strategy of rooting out terrorism by targeting its financiers is inarguably a sound one. But the major means the Bush Administration is employing to serve this goal – civil forfeiture under the International Emergency Economic Powers Act (IEEPA) – sweeps far too broadly.

This approach has been used to shut down several large Muslim charities – leaving beneficiaries bereft. But given the law’s defects, and the severely limited judicial review permitted under it, a great injustice may well have been done.

Civil Asset Forfeiture Laws: Reform Occurred, But Not to IEEPA

Civil asset forfeiture laws used in the War on Drugs have always been constitutionally and ethically problematic. Some of these laws were reformed in 2000 – but, crucially, not the new one added to IEEPA by the PATRIOT Act and now the primary one being used in the War on Terror.

In the 1980s and 1990s, no criminal conviction – indeed, no criminal charge — was required for property to be seized under civil forfeiture. All that was needed was probable cause that the property (not the owner) was connected with criminal activity — with the burden of proof then shifting to the owner to prove that it was not.

In addition, the laws allowed the seizing police agency to keep the proceeds — creating an unethical symbiotic relationship between drug lords and law enforcement. (Of course, the government cannot legally make a profit from the sale of drugs, but it can legally retain and benefit from the acquisition of yachts, mansions, bank accounts, or cash.)

The Civil Asset Forfeiture Reform Act of 2000 (CAFRA) improved matters a bit. It placed the burden on the government to prove by a preponderance of evidence that the property was properly forfeited; provided an “innocent owner” defense, by which the owner could prove he or she had no idea the property was being used for crime; and included hardship and compensation provisions. But CAFRA, through forfeiture proceedings, still allowed law enforcement to retain the seized assets.

CAFRA’s improvements, however, did not affect forfeiture under the favored mechanism by which War-on-Terror forfeitures are now made: IEEPA, which was amended by the PATRIOT Act to authorize civil forfeitures under Presidential emergency powers.

According to Stefan D. Cassella, Deputy Chief of the Asset Forfeiture and Money Laundering Section of the Department of Justice, forfeiture under IEEPA is “specifically exempted from CAFRA and from virtually all of the other evidentiary and due process requirements of federal forfeiture law.” (Emphasis added.)

Despite CAFRA, then, under IEEPA the owner bears the burden of proving that his property is not subject to confiscation. And under IEEPA, all property may be forfeited (not just that associated with criminal activity — including title to such property – reviving the constitutionally-suspect “forfeiture of estate”).

And IEEPA still retains the worst aspects of civil forfeitures: It’s still the case that no criminal charges need ever be filed for multimillion-dollar forfeitures to occur, and that law enforcement may retain the seized assets. (Or, rather shockingly, under the PATRIOT Act amendment, law enforcement can now give the assets to any agency or person designated by the President “for the benefit of the United States.”)

The Problem with the Laws That Are Being Used For “War on Terror” Seizures

Unsurprisingly, forfeiture under IEEPA – forfeiture, that is, that falls outside CAFRA’s much-needed reforms — has become the tool of choice in the War on Terror. And IEEPA forfeitures contain even fewer protections and more constitutionally suspect elements than did the pre-CAFRA civil forfeiture laws.

(The DOJ distinguishes IEEPA forfeitures from “civil forfeitures.” However, both post-CAFRA general-purpose civil forfeitures and IEEPA forfeitures are civil forfeitures, not resulting from a criminal trial.)

Here’s how it happened:

Shortly after 9/11, on September 23, 2001, President Bush, relying on his powers under IEEPA (before it was amended by the PATRIOT Act), issued Executive Order 13224. This authorized the blocking of assets of particular specified individuals and groups (later defined as “Specially Designated Global Terrorists” or SDGTs). It also authorized the Secretary of State or the Secretary of Treasury, in consultation with the Attorney General, to subsequently add to the list of those individuals and groups.

Under this Order, individuals and groups may be designated merely for posing “a significant risk of committing acts of terrorism” or of being “otherwise associated” with designated individuals or entities.

That’s right: The Order embraces both guilt-by-association (attending the same mosque, perhaps?), and guilt-through-perceived-propensity – concepts one might have thought we had jettisoned in the McCarthy Era. No wonder, then, that the current list of entities and persons under EO13224 is massive.

Then, on October 26, 2001, Congress passed the USA PATRIOT Act. That Act added a provision to IEEPA that authorizes the blocking and seizure of assets of individuals and groups designated as terrorists. (This essentially permanently codified EO13224 into IEEPA. IEEPA’s original purpose was to enable the President to economically blockade foreign nations.)

The Specially Designated Global Terrorists (SDGT) list (utilized under IEEPA) blocks “all property and interests in property” of designated terrorists and individuals who materially support them. This list is maintained by the Office of Foreign Assets Control in the Treasury Dept. (OFAC), which also enforces the forfeitures. (Thus, IEEPA forfeitures are often called OFAC forfeitures.)

The designation is done by the President, or the Secretary of State or Treasury, under consultation with the Attorney General. As Georgetown law professor David Cole explains in his book Enemy Aliens, the PATRIOT Act amended IEEPA to, in effect, “authorize the Treasury Department to freeze assets on the mere assertion than an individual or entity is under investigation for potentially violating IEEPA.”

(The PATRIOT Act also similarly amended the general-purpose civil forfeiture statute to include a new provision — 18 USC sec. 981(a)(1)(G) — authorizing forfeiture of assets belonging to anyone engaged in terrorism, affording an individual a “source of influence” over a terrorist organization, or derived from or used to commit an act of terrorism. But in practice, IEEPA – not the amended general-purpose provision – has been cited by the government as providing its authority for war-on-terror seizures. Again, that’s no surprise: IEEPA is easier to use. The general-purpose provision contains the CAFRA protections; IEEPA does not. Further, the IEEPA forfeiture provision essentially allows seizure on the basis of a predetermination – via designation — without traditional criminal due process, to ascertain who is and who is not a criminal.)

The Trouble with Designations – And How They’ve Shut Down Muslim Charities

If all these designations were infallible, and the process for defending them was fair, then this situation wouldn’t be troubling. But the truth is, the designations are about as far from infallible, and the process for defending against them is about as far from fair, as one could imagine.

As noted above, the designation itself can occur virtually on a whim – based on an investigation for a potential violation, on guilt-by-association, or on guilt-by-perceived-propensity. If an Executive Branch hunch triggers an investigation, that could ostensibly be enough.

After the designation occurs, property can be frozen without judicial process: Indeed, in 2002, then-Deputy Treasury Secretary Kenneth W. Dam admitted that “all that [is] immediately necessary [is] to promulgate an executive order invoking the President’s authority under [IEEPA] to go after not just terrorists but also their financial supporters, to announce the designations, and to transmit the blocking orders to U.S. financial institutions.”

It was under these provisions that the Treasury Department froze the assets of three of the largest Muslim charities in the United States.

After the designation occurs, and the property is frozen, can the individual or organization challenge it in court?

The answer is, technically, yes. But the process is deeply unfair. Organizations are prohibited from seeing the entire record if classified information is used, and may not contribute to the record (thus preventing them from countering the designation). If the designation is supported by the administration’s record, the court essentially must rubber- stamp it. There is thus virtually no real judicial review of the designation. (Further, given the immediate freezing of assets, the group or individual may not be able to afford to pay an attorney.)

The government can support the freeze order with secret evidence – evidence that the designated group has no opportunity to see or confront. As David Cole points out, “The use of secret evidence means that the government never has to show that the groups engaged in any illegitimate activities in a publicly transparent way.”

(In addition, under PATRIOT Act amendments to general-purpose civil forfeitures, which may apply to IEEPA, the government can even offer evidence that would otherwise be inadmissible if a court finds that complying with the Federal Rules of Evidence would jeopardize national security, and deems the evidence “reliable.”)

David Cole sums up the problems with IEEPA forfeitures:

“In shutting down three of the largest Muslim charities in the United States, the government . . .invok[es] an obscure administrative regime that allows it to bypass the criminal process altogether. Under [IEEPA], the president has unilaterally banned all transactions with the charities, frozen millions of dollars, and effectively closed them down, all without a criminal conviction, a criminal charge, or even an administrative hearing.”

The Cost: A Large Humanitarian Gap, and the Reasonable Perception of Bias

As noted above, a result of these profoundly unfair and unconstitutional procedures, entire Muslim charities have been brought down — potentially leaving a large humanitarian gap.

Yet, according to OMB Watch — a nonprofit research and advocacy organization dedicated to promoting government accountability on fiscal issues — authorities have failed to produce any solid evidence of terror financing by these U.S.-based charities. (At a minimum, authorities haven’t deigned to share any such evidence with the public, the courts, or the charities).

That point is especially troubling, given sweeping post-9/11 investigative powers and expensive government investigations that should have given the government the power to find copious evidence of wrongdoing, if wrongdoing was actually occurring. (For instance, the unlawful NSA warrantless wiretapping program could have been – and for all we know, was – used to track calls from heads of U.S.-based Muslim charities to literally anyone outside the United States.)

With Muslim-Americans already facing post-9/11 suspicion and bias, both from other Americans and from the government, targeting Muslim charities sends an ugly message: The message that the government is selectively targeting Muslim charities.

Despite crime within the Catholic Church – in the form of clergy child sexual abuse, and related cover-ups that no one, at this point, can deny – no civil forfeiture of Church assets has, to my knowledge, occurred.

Halliburton has been under investigation by OFAC and the Department of Justice since 2001 for doing business with Iran, which is listed as a sponsor of terrorism. Rather than seizing and freezing assets “pending an investigation,” however, OFAC and Justice proceeded in a way the nonprofit world would envy. Rather than seizing and freezing Halliburton’s assets, OFAC sent an inquiry to Halliburton requesting “information with regard to compliance.”

And, the Treasury Department has worked with Saudi charities to help them restructure to avoid designation and freezing of assets. No explanation has been given for why Muslim charities have not received similar assistance.

Kay Guinane, OMB Watch’s director of Nonprofit Speech Rights, says, “The real tragedy behind closure of Muslim charities is the fate of people in need of humanitarian assistance, who are doing without because the funds have been frozen by the U.S. and sit in the bank, benefiting no one.”

As OMB Watch points out, such treatment of Muslim charities hurts, not helps, the war on terrorism.

Findlaw Editor: This column originally appeared on April 19. The need for some corrections and additions was subsequently brought to the attention of the author and the editors. Accordingly, this revised and expanded version supersedes the version that originally appeared on this site. As with all columns posted on Writ, the views expressed in this column are those of the author and do not necessarily reflect the views of FindLaw.

Jennifer Van Bergen, a journalist with a law degree, is the author of THE TWILIGHT OF DEMOCRACY: THE BUSH PLAN FOR AMERICA (Common Courage Press, 2004). She writes frequently on civil liberties, human rights, and international law. Her book, ARCHETYPES FOR WRITERS, about the characterization method she developed and taught at the New School University, will be out in 2007. She can be reached at jvbxyz@earthlink.net.