In the spring of 2018, 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), as of May 2020 the Zionist Advocacy Center (TZAC) has alleged that four 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. In the fourth, against Oxfam Great Britain, TZAC moved the court to dismiss the suit. TZAC says it has filed two additional cases against international NGOs and three against higher education institutions. The pending cases are currently under seal.
This memo provides background on the False Claims Act, USAID anti-terrorism certification and the definition of material support of terrorism. It suggests red flags NPOs should watch for and potential steps NPOs can take to protect themselves.
See a PDF of the complete memo, including copies of USAID’s June 2018 and revised May 2020 anti-terrorism certifications (Annex) and the revised Standard Provision.
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 an anti-terrorism certification (ATC). Until May 2020, the ATC stated 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.” (See text of this version of the ACT on p. 6)
On May 18, 2020, USAID revised the look-back provision in the ATC to three years (rather than ten). It also eliminated the vague requirement that the grantee had no such transactions “to the best of its knowledge,” replacing it with a requirement that the grantee did not “knowingly engage in” prohibited transactions. Finally, USAID added a knowing standard to the limit on assistance to beneficiaries, barring assistance if the “applicant knew or had reason to believe that one or more of these beneficiaries was subject to U.S. or UN terrorism-related sanctions.” The previous certification only included the “reason to believe” standard. (See test of new ACT on p. 9)
USAID’s position is that the certification (both the new and the old) 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.)
Also in May 2020, the agency revised its Standard Provision on Preventing Transactions with, or the Provision of Resources or Support to Sanctioned Groups and Individuals (Standard Provision) to clarify that grantees need only check U.S. government and UN terrorist lists when screening partners and other persons or entities. This eliminated problematic language that required the recipient to “consider all information about that individual or entity of which it is aware and all public information that is reasonably available to it or of which it should be aware.” (See text of new Standard Provision on p. 10)
The definition of material support of terrorist has not been changed, as that is a statutory definition and must be changed by Congress. The revised ATC and Standard Provision will apply to all USAID partner agreements signed after the date of the revisions and are not retroactive.
Complaints filed under the FCA are automatically sealed for 60 days while the government investigates the claims and decides whether 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 public know about the case. The FCA allows for triple damages against parties found to have violated the law and the private citizens that bring 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. It provides a civil cause of action, although DOJ occasionally charges FCA defendants with underlying crimes, mostly in egregious medical fraud cases.
What are the cases we know about?
The four known cases filed by TZAC are as follows:
- American University in Beirut (AUB): In a March 2017 settlement, 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. 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: On May 31, 2018 the U.S. District Court for the District of Columbia granted DOJ’s motion to dismiss TZAC’s complaint, 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.” 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.”
- Oxfam GB: On December 18, 2019, TZAC filed a Notice of Voluntary Dismissal following DOJ’s motion to dismiss. In the lawsuit, TZAC alleged that Oxfam’s Gaza Urban and Peri-Urban Agricultural Platform, which works to address food insecurity and decrease dependence on foreign aid and markets, supports ministries tied to Hamas (which is on the U.S. terrorist list) and the Palestinian Authority (which is not).
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.
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. Since the Supreme Court’s Humanitarian Law Project 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) with the following definitions
In addition, the definition of material support in the Immigration and Nationality Act (INA) is sometimes used outside the immigration context. 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:
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:
 In its Motion to Dismiss DOJ said there was no allegation that the meeting was funded by USAID or that the Carter Center failed to fulfill its grant obligations to USAID. It had not concealed its activities. It also noted that while TZAC had a “difference of opinion with the Carter Center about how to resolve conflict in the Middle East” its complaint “does not allege facts addressed to the elements it or the United States must prove to establish violations of the FCA.” In dismissing the case, the court did not rule on whether the Carter Center had provided material support.