This spring the Charity & Security Network learned of several lawsuits filed in U.S. courts against nonprofit organizations (NPOs) that receive USAID funding. Using a law meant to combat fraud against the federal government by providing incentives for private citizens to act as whistleblowers (the False Claims Act), the Zionist Advocacy Center (TZAC) has alleged that three groups violated the anti-terrorist certification  in their grant agreements with USAID by providing “material support” to groups on the terrorist lists. In two of these cases, the U.S. Department of Justice (DOJ) joined the lawsuits, which were settled without trial. The third, against the Carter Center, was dismissed at the request of DOJ. TZAC says it has filed two additional cases against international NGOs. They are currently under seal.

This memo provides background on the False Claims Act, USAID anti-terrorism certification and the definition of material support. It suggests red flags NPOs should watch for and potential steps NPOs can take to protect themselves.

Read the full memo, including a copy of USAID’s June 2018 anti-terrorism certification (Annex), here.

What is the False Claims Act and how is it being used against NPOs?
The False Claims Act (FCA) allows private citizens to file suits on behalf of the U.S. government in cases of fraud. TZAC’s lawsuits claim that each of the NPOs sued provided “material support” to listed groups in Palestine, making its certification to USAID a false claim.

USAID grant agreements require grantees to sign a certification that the NPO “to the best of its knowledge, did not provide, within the previous ten years, and will take all reasonable steps to ensure that it does not and will not knowingly provide, material support or resources” to any person or group “that commits, attempts to commit, advocates, facilitates, or participates in terrorist acts, or has committed, attempted to commit, facilitated, or participated in terrorist acts.” USAID’s position is that this applies to all the organization’s activities, not just those it funds. (Note: The State Department’s certification is different and is not an issue in these lawsuits. We are not aware of any cases involving State Department grants.)

Complaints filed under the FCA are automatically sealed for 60 days while the government investigates the claims and decides whether or not they merit further action. The court can extend the sealing period for months or even years. In the meantime, neither the party being sued nor the pubic know about the case. The FCA allows for triple damages against parties found to have violated the law and the private citizens bringing suit are eligible to receive up to 30% of that amount. It is not necessary to prove intent to file a false claim or defraud the government in order to be successful with an FCA complaint. Instead, the act sets a lower standard — that the defendant had knowledge of the facts establishing fraud or a false claim.

The FCA is largely used address fraud in healthcare and defense contracting. In 2017, DOJ won $3.7 billion in FCA settlements and judgments.2 It provides a civil cause of action, although DOJ occasionally charges FCA violators with underlying crimes, mostly seen in egregious medical fraud cases.

What are the cases we know about?

The three known cases filed by TZAC are as follows:

  • American University in Beirut (AUB): In a March 2017 settlement,3 AUB agreed to pay the U.S. $700,000 after TZAC alleged that its journalist training program included representatives of al Nour Radio and al Manar TV, both of which are on the Office of Foreign Asset Control’s Specially Designated Nationals (SDN) list. In addition, the suit accused AUB of including Jihad al-Binaa, also on the SDN list, in a database connecting students with NPOs. As part of the settlement, AUB agreed to change its internal policies and procedures, including staff training, on compliance with U.S. law and to conduct periodic external audits on compliance.

  • Norwegian People’s Aid (NPA): This case was settled on March 28, 2018.4 TZAC’s complaint alleged two material support violations: a democracy training in Palestine that included people affiliated with Hamas and the Popular Front for the Liberation of Palestine (PFLP), both on the U.S. State Department’s list of Foreign Terrorist Organizations, and a program with the Iranian government to clear land mines from oil fields. NPA said it believed the certification only applied to U.S.-funded activities, but USAID said it applies to all NPA projects, regardless of funding source. NPA agreed to pay $2.025 million in order to close the case and avoid the expense of a trial. It also agreed to make changes in its internal procedures to ensure future compliance.

  • The Carter Center: Columbia granted DOJ’s motion to dismiss5 TZAC’s complaint,6 which alleged the Carter Center provided Hamas and the PFLP with material support when it hosted a 2015 meeting that included both groups and served water, fruit and cookies. TZAC issued a statement saying that while it disagrees with the outcome “there is not much to do about it” and that it will “continue investigating the Carter Center.”7 TZAC claimed such meetings constitute material support because the Carter Center provided the facilities for the meetings to take place and that if Hamas and the PFLP resolve their differences, “it will free up more resources to engage in terrorism against Israelis.”

What is “material support” anyway?

There is no clear answer to this question under U.S. law. The definition used in the USAID certification is similar to, but not the same as, the criminal prohibition in the Antiterrorism and Effective Death Penalty Act (AEDPA). See the chart below to compare (text in bold is where definitions differ). The concept of material support has also been incorporated into many executive orders issued under sanctions laws, expanding the prohibition from the criminal to civil law.

U.S. Definitions of “Material Support”
USAID’s terrorism-financing certification Criminal Prohibition in 18 U.S.C. 2339A (AEDPA)
“currency or monetary instruments or financial securities, financial services, lodging, training, expert advice or assistance, safehouses, false documentation or identification, communications equipment, facilities, weapons, lethal substances, explosives, personnel, transportation, and other physical assets, except medicine or religious materials.” as “any property, tangible or intangible, or service, including currency or monetary instruments or financial securities, financial services, lodging, training, expert advice or assistance, safehouses, false documentation or identification, communications equipment, facilities, weapons, lethal substances, explosives, personnel (one or more individuals who may be or include oneself), and transportation, except medicine or religious materials.”

The prohibitions on providing training, expert advice or assistance and personnel are particularly relevant in the context of the False Claims Act cases we have seen so far, in that the primary activities complained of involve peacebuilding-related activities.9 Since the Supreme Court’s Humanitarian Law Project 10 decision in 2010, the criminal prohibition has been applied to peacebuilding activities that involve these three terms. To clarity what is covered, in 2004 Congress passed the Intelligence Reform and Terrorism Prevention Act (IRTPA)11 with the following definitions:

  • Training: “instruction or teaching designed to impart a specific skill, as opposed to general knowledge.”

  • Expert advice or assistance: “advice or assistance derived from scientific, technical, or other specialized knowledge.”

  • Personnel: when a “person has knowingly provided, attempted to provide, or conspired to provide a foreign terrorist organization with one or more individuals (who may be or include himself) to work under that terrorist organization’s direction or control or to organize, manage, supervise or otherwise direct the operation of that organization. Individuals who act entirely independently of the foreign terrorist organization to advance its goals or objectives shall not be considered to be working under the foreign terrorist organization’s direction or control.”

In addition, the definition of material support in the Immigration and Nationality Act (INA)15 is sometimes used outside the immigration context.16 It bars support for FTOs, as well as prohibiting support (1) for the commission of a terrorist activity; (2) to individuals who have committed or plan to commit terrorist activity, and (3) to terrorist organizations as defined in subsequent sections of the INA. The third category is highly discretionary and the information on all groups or persons considered to be terrorists by the INA is not publicly available.

What red flags may indicate a False Claims Act case has been filed against an NPO?

These cases suggest several indicators or red flags that your organization should be on the lookout for:

  • Your nonprofit organization does humanitarian aid, development, peacebuilding or other work in Palestine or other areas where designated terrorist groups are active;
  • Your organization receives funding from USAID;

  • Your organization has been contacted within the last two years by USAID, including the grant administrator or Inspector General, or another government agency, seeking additional information (beyond usual reporting) about work performed either under or outside your government grant or contract;

  • Your organization is mentioned in far-right and/or Islamaphobic blogs, website postings or “news” articles.

What steps can my organization take to protect itself or respond if we are sued?

If you are concerned that there may be an investigation in a sealed case against your organization, or if you are served with a complaint under the False Claims Act the following are steps to consider taking:

  • Review your activities, policies and procedures for compliance with the USAID certification, including determining whether any groups or persons on any U.S. terrorist list are involved in your activities and if so, whether the nature of that involvement violates the material support prohibition. (Although many transactions or communications may be material support, not all contact or communications with listed entities is prohibited. See more below)
  • Consult legal counsel with specialized knowledge of the U.S. material support law. Pro bono assistance may be available. Contact the Charity & Security Network if you would like a referral

  • Do not assume TZAC’s interpretation of what violates the material support provision is correct. This group takes a very expansive view of the prohibition and courts may not agree with it.

  • Have a rapid response plan in place to address allegations that may be made against you, in litigation or the media. For some useful resources, click here