By William Fisher
In a major decision overturning a Bush-era policy – which has been followed by the administration of President Barack Obama -- a federal court has ruled that it is unconstitutional for the U.S. Treasury Department to freeze a charity's assets – effectively putting it out of business with virtually no due process.
That’s what happened in 2006 to an Ohio-based charity called Kind Hearts for Charitable Humanitarian Development, Inc. The U.S. Treasury Department's Office of Foreign Assets Control (OFAC) froze KindHearts' assets without a warrant, notice or a hearing, based simply on the assertion that OFAC was investigating whether the charity should be designated as a "specially designated global terrorist" (SDGT).
Federal District Judge James G. Carr ruled Monday that in the future the administration must obtain a warrant based on probable cause before seizing an organization's assets. In KindHearts' case, the court held that the government must remedy its failure to get a warrant in this case by demonstrating that it had probable cause at the time it froze KindHearts' assets.
Judge Carr also ruled that OFAC violated the U.S. Constitution’s Fifth Amendment's guarantee of due process by failing to provide KindHearts notice of the charges against it or a meaningful opportunity to respond. He held that OFAC must remedy these failures by declassifying or adequately summarizing the classified evidence against KindHearts or by allowing KindHearts' counsel to view the classified evidence pursuant to security clearances and a protective order.
In order to comply with the Constitution, the judge ruled, Congress must fix the law to require a warrant be obtained based upon probable cause before taking such action. The court also found that the Treasury Department's failure to give the charity notice of the basis for freezing its assets violated the Constitution by preventing the charity from being able to meaningfully respond to the freeze.
The ruling reverses a policy developed by the Administration of President George W. Bush in the wake of the terrorist attacks of September 11, 2001.
The ruling came in a lawsuit filed in November 2008 by the American Civil Liberties Union, the ACLU of Ohio, and several civil rights attorneys.
KindHearts was never been found to have engaged in any wrongdoing and has never been designated an SDGT. But as a result of the freeze pending investigation, it would be a crime for anyone to do any business with KindHearts. The charity also had no access to its own property.
Co- counsel in the case was David Cole, a professor at Georgetown University law school and one of the country’s preeminent constitutional lawyers. He told IPS, "The process for freezing charities' assets has been defective from the outset. No charity has yet been afforded notice of the charges against it, and the entire process has been shrouded in secrecy.”
Cole sounded this hopeful note: “With this decision, we may be moving toward fairness, at last, for those targeted by OFAC. If due process means anything, it must mean that the government has to tell you what their charges and evidence are before shutting you down and freezing all your assets."
He added, "For years, the government has insulated its terrorist-designation decisions from any meaningful review by denying the frozen charities even the most basic constitutional requirements of due process," said Georgetown Law Professor David Cole, co-counsel for KindHearts. "Yesterday's decision confirms that such freezes are unconstitutional by requiring the government to provide KindHearts what it has been denied all along – a fair chance to clear its name."
KindHearts' founders established the charity in 2002 – after the government shut down a number of other charities – with the express purpose of providing humanitarian aid both abroad and in the U.S. in full compliance with the law. OFAC froze KindHearts' assets despite the charity’s efforts to implement OFAC policies and even to seek its guidance. The government’s action was based simply on the assertion that the charity was "under investigation." OFAC then threatened to designate KindHearts as a "specially designated global terrorist" (SDGT) based on classified evidence, again without providing it with a reason or meaningful opportunity to defend itself.
In October 2008, a federal judge granted the ACLU's request for an emergency order blocking the government from designating KindHearts as an SDGT without further judicial review. In August 2009, the court ruled for the first time that the government cannot freeze an organization’s assets without obtaining a warrant based upon probable cause. The court also held that the government violated KindHearts' right to due process by freezing its assets without providing it adequate notice of the basis for the freeze or a meaningful opportunity to defend itself.
President Barack Obama conceded in his Cairo speech soon after taking office that U.S. rules on charitable giving “have made it harder for Muslims to fulfill their religious obligation.”
Since then, civil rights advocates have been pressing the president to turn his words into action. For example, the Muslim Public Affairs Council (MPAC) has joined other nonprofit organizations in urging Obama to follow up on his commitment to work with Muslim Americans to revise charitable giving rules.
In a letter to the president, the organizations outlined a set of principles for new rules governing charitable giving and operations, and said government policy “must address systemic problems.”
The government, it said, should “provide clear standards for permissible charitable and development activity that are consistent with long-standing norms for humanitarian operations,” such as the Code of Conduct for the International Red Cross and Red Crescent Movement and Non-Governmental Organizations (NGOs) in Disaster Relief.
It must provide a fair opportunity for charities accused of supporting terrorism to defend themselves; protect charitable assets from indefinite freezing and allow these resources to further the charitable mission donors intended to support; and withdraw the Treasury Department's Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S.-based Charities.”
For Muslims, charitable giving is a religiously-mandated obligation known as “zakat.”