Judge Says Shuttered Charity Must Be Given Due Process

By kguinane

Created 10/21/08

In the first decision of its kind, a federal judge issued a temporary restraining order barring the Department of the Treasury (Treasury) from designating KindHearts for Charitable Humanitarian Development (KindHearts), a U.S. charity, as a supporter of terrorism without affording the organization basic due process. Treasury shut down the group "pending investigation" in February 2006, but the investigation has never been concluded and the group's assets, including about $1 million, remain frozen. The Treasury action against KindHearts is based on a provision of the Patriot Act that expanded economic embargo laws to allow all the sanctions used to seize and freeze assets of Specially Designated Global Terrorists (SDGT) when an investigation is pending. (See 50 U.S.C. 1702(a)(1)(B), 1705 and Executive Order 13224). There are no deadlines for the investigation to be completed.

On Feb. 19, 2006, Treasury froze KindHeart's bank accounts and seized all of its records, computers, and documents. Treasury did not provide formal notice with reasons for its actions, only stating generally that the assets "are blocked pending investigation" into whether the group is "controlled by, acting for or on behalf of, assisting in or providing financial or material support to, and/or otherwise being associated with Hamas." Treasury issued a press release announcing the action that provided some specific assertions that KindHearts refuted in a letter seeking reconsideration. For example, Treasury alleged that KindHearts gave more than $250,000 to the Sanabil Association for Relief and Development, which was designated as a terrorist organization in August 2003. However, according to the Toledo Blade, KindHearts board chair Dr. Hatem Elhady said the contract with Sanabil to provide aid in refugee camps occurred before Sanabil was designated.

On Oct. 9, KindHearts filed suit in the United States District Court for the Northern District of Ohio challenging the constitutionality of the process.

The complaint states that:

The lack of substantive criteria for freezing assets pending investigation and for designation is unconstitutionally vague, violating KindHearts' First and Fifth Amendment rights.
The asset freeze violated KindHearts' due process rights under the Fifth Amendment because the organization did not receive adequate notice of the basis of the freeze, did not have an opportunity for a hearing, and was not afforded a meaningful opportunity to challenge the freeze.
There is no time limit on how long the freeze may last.
KindHearts was not allowed to use its funds to pay for counsel or to access its own records to prepare a defense.
Freezing KindHearts' assets and seizing files and computers is not authorized under the International Emergency Economic Powers Act (IEEPA), which is limited to sanctions against individuals and organizations of foreign countries.
KindHearts will suffer irreparable damage to its reputation if it is designated as an SGDT, even if the designation is later lifted.

The temporary restraining order effectively maintains the status quo while KindHearts' constitutional challenge proceeds. The group is represented by the American Civil Liberties Union (ACLU) and several co-counsel.

According to the complaint, KindHearts was formed in 2002 to provide humanitarian aid, primarily in Palestine and Lebanon. It provided clean drinking water to schools, ran clinics, and sent disaster relief to victims of Hurricane Katrina and the earthquake in Pakistan. It had planned to open a hospital in Gaza in January 2007. On page 9 of the complaint, the group states, "Assistance was provided to the poor and needy without regard to political affiliation or belief. It identified recipients based on need alone, not ideology or association." These standards are consistent with the International Red Cross and Red Crescent Movement's Principles of Conduct in Disaster Response Programmes, but may be inconsistent with U.S. laws barring material support to terrorism, which bar all transactions, including humanitarian aid, with SDGTs. In areas where designated organizations control infrastructure and have popular support, it may be impossible to enforce a non-discrimination policy.

Pages 8-12 of the complaint detail extensive measures KindHearts took to comply with U.S. law, including adoption of Treasury's Anti-Terrorist Financing Guidelines. The Guidelines have been criticized by major nonprofit sector organizations, which have called for their withdrawal.

The complaint also describes KindHearts' post-shut down efforts to defend itself. Because it is illegal for any U.S. person to engage in a transaction with a group once it is designated and shut down, KindHearts' attorney had to get a license from Treasury granting permission to provide legal services. However, Treasury refused a request to allow legal fees to be paid from frozen funds until June 4. It limited the defense effort to two paid attorneys and imposed a ceiling on the number of hours to be paid. During this time, counsel wrote letters to Treasury seeking reconsideration of the asset seizure, the specific allegations against the group, and copies of KindHearts' files to assist in preparing a defense. After long delays, Treasury allowed limited access for counsel to view unclassified evidence, but the agency denied the attorneys security clearances to view the classified information the government had relied on.

On May 25, 2007, Treasury notified KindHearts' attorneys that it had "provisionally" decided to designate the group as a SDGT, but no further action has been taken. Since KindHearts has no right to a hearing where it can confront the evidence against it, and because there are no provisions for independent review of Treasury's decisions, the only remedy available was the legal challenge.

In its brief, KindHearts pointed to court decisions affording rights to Guantanamo detainees that the charity currently does not have. For example, in Parhat v. Gates, the United States Court of Appeals for the District of Columbia held that the government must provide the defense with the sources of information used to support a designation as an "enemy combatant," and that defense counsel can be given security clearances or other means to "permit an appropriate assessment of the information's reliability while protecting the anonymity of a highly sensitive source." In Bismullah v. Gates, the same court held that attorneys for Guantanamo detainees must be allowed to review classified evidence against their clients.