Three former charity officials were convicted of conspiracy to defraud the IRS because they did not include a description of their newsletter content in their tax-exempt status application and annual IRS filings – the government alleged that the group supported jihadist movements in its articles. Although prosecutors spoke broadly about use of charitable funds to support “jihad,” the trial court judge banned references to terrorism. The case and its surrounding circumstances raise questions about the free speech rights of nonprofits and the level of detail required when reporting to the IRS. 

Case Summary

On Jan. 11, 2008, three former leaders of an Islamic charity based in Boston were convicted of tax fraud and making false statements because they did not include a description of their newsletter and its content in their tax-exempt status application and annual Internal Revenue Service (IRS) Form 990 filings. The prosecution argued that the now-defunct group, Care International, supported jihadist movements in articles in its newsletter and postings on its website. The defense argued that no funds went to jihadist groups and that the leaders were being prosecuted for expressing unpopular political views. The convictions, which could result in prison terms of up to five years, are being appealed. The circumstances of the case, combined with public statements of the prosecutors, raise questions about the free expression rights of nonprofits and the level of detail required when reporting to the IRS.

Care International was formed in 1993 and collected $1.7 million over a ten-year period for “providing assistance to victims of natural and man-made disasters…” The criminal case began in May 2005 with an indictment charging Muhamed Mubayyid and Emadeddin Muntasser with concealing material facts from the IRS, conspiring to defraud the United States, filing false tax returns, and making false statements to the FBI. A third defendant, Samir Al-Monia, was charged later. The factual basis of the charges was that the group raised funds for publications supporting jihad, as well as its humanitarian operations, and that it concealed the fact that it was an outgrowth of another nonprofit, Al-Kifah, whose Brooklyn branch had been linked by the media to the World Trade Center bombing in 1993. The defense argued that the Boston branch of Al-Kifah was separate and that the defendants started Care to break away from the New York group.

Although the prosecutors spoke broadly that Care used its funds to “support” jihad, the only evidence they presented related to publications, including their newsletter, Al-Hussam, which was also the name of Al-Kifah’s newsletter. According to a Nov. 28, 2007, Worcester Telegram article, prosecutors read lengthy articles from the newsletter to the jury, while the judge frequently warned them that the defendants had the right to hold and publish their views. The convictions were for the technical crime of not informing the IRS that the group would publish such articles. However, in an FBI press release after the conviction, prosecutors made statements that indicate their motivation in bringing the case was to discourage such publications. U.S. Attorney Michael J. Sullivan said, “Today’s convictions should be a warning to organizations or persons who intend to fund their support of any militant organization or goal, including mujahideen and jihad, by abusing our nation’s tax laws, that they will be proactively investigated and prosecuted to the fullest extent of the law.”

The Worcester Telegram reported that Judge F. Dennis Saylor, who presided over the trial, disputed the government’s claim that the case was about terrorism, saying there was no evidence of terrorism presented in the trial. During the trial, Judge Saylor banned references to terrorism and repeatedly reminded the jurors that the case was about tax fraud.

A U.S. District Court judge later overturned the tax conspiracy convictions, saying the evidence didn’t support the verdict. The case was sent back to the district court for sentencing.

The case leaves open the question of when a nonprofit could be prosecuted for advocating views the FBI deems “militant.” Charities and religious organizations are not limited to providing services to qualify for tax exemption under Sec. 501(c)(3) of the tax code. In fact, 26 C.F.R. 1.501(c)(3)-1(d)(2) explicitly states that:

[t]he fact that an organization, in carrying out its primary purpose, advocates social or civic changes or presents opinion on controversial issues with the intention of molding public opinion or creating public sentiment to an acceptance of its views does not preclude such organization from qualifying under section 501(c)(3) ….”

Free Speech Questions Linger

Concerns about the freedom of association and the right to express unpopular points of view in organizational newsletters remain after conspiracy charges against three officers of a defunct Muslim charity, Care International, Inc., were dismissed in Boston on June 3. Two other convictions were upheld, including one against the former treasurer of the organization because he failed to report newsletters supporting “jihad” to the IRS.

Ruling from the bench, U.S. District Court Judge Dennis Saylor IV overturned three convictions for conspiracy to defraud the IRS by obtaining tax-exempt status in 1993 for Care International. The group ceased operations in 2003. Saylor said there was no proof of conspiracy when the group was created. The three leaders have been in prison since their conviction in January 2008. After the ruling, Samir Al-Monla was released, and sentencing for the other two defendants, Emadeddin Muntasser and Muhammed Mubayyid, is scheduled for June 12. Attorneys for both sides said they are considering appeals.

Prosecutors from the U.S. Attorney’s office admitted the group spent funds to assist widows, orphans, and disaster victims around the world but also said the group supported violent jihad. However, the defendants were not charged with material support of terrorism, and the judge said no evidence of use of charities to promote terrorism was produced during trial, despite the extremely broad claims made by prosecutors. The evidence of the alleged support was limited to statements in the group’s newsletter.

Failure to disclose the newsletter articles was one basis of Mubayyid’s conviction for filing a false tax statement in 2000, which was upheld. The prosecution’s theory that publication of such articles is a crime unless reported to the IRS raises fundamental free speech issues. Harvey Silvergate, attorney for Muntasser, told the Worcester Telegram, “There has never been a prosecution under this theory … absolutely every — not most every — application for tax-exempt status would potentially be the basis of a criminal charge…. Invariably you have to omit a huge amount of information or else have a 16,000 page application.” In addition, the right to hold and advocate unpopular points of view is clearly protected. The 1969 U.S. Supreme Court ruling in Brandenburg v. Ohio said, “Speech can only be curtailed when it is intended to and has the effect of causing imminent lawless conduct. Mere abstract advocacy of violence, however objectionable, may not be barred.” Muntasser’s conviction for making a false statement about a visit to Afghanistan was also upheld.

The prosecution also argued that the defendants failed to report that Care International was an outgrowth of the Al-Kifah Refugee Center, which media reports linked to the 1993 attack on the World Trade Center. The basis of the argument appears to be Muntasser’s past relationship to Al-Kifah, which he left after 1993. At trial, the defense argued that Al-Kifah was separate and that the defendants started Care to break away from it. News reports about the trial do not include information about evidence of control or a formal relationship between the two groups. More information may become available when the judge’s written order is filed, but for now, the “outgrowth” theory raises questions about freedom of association and whether nonprofits must report all past affiliations of their leaders and employees in order to avoid possible criminal prosecution.

Appeals Heard

On Oct. 4, 2010, three leaders of Care International Inc., a defunct Massachusetts charity, argued their appeal of convictions for failing to report information about the charity’s newsletter to the Internal Revenue Service (IRS).   In 2005 federal prosecutors accused them of supporting jihadist movements.

The First U.S. Circuit Court of Appeals held a 75-minute hearing to consider the appeals of three related cases that resulted in two of the men being convicted for tax violations and making false statements to the FBI. The attorney for Emadeddin Muntasser, Kathleen Sullivan, says the evidence linking her client and the conspiracy to fraudulently maintain the charity’s tax-exempt status is weak. The “false statement charge for Mr. Muntasser is not a slam dunk for government,” Sullivan said.

Michael Andrews, an attorney for another defendant said his client should not be held accountable for how paperwork was filed years before he joined the charity. If he were to be held liable, Andrews said it would send an “incredibly chilling” message to the nation’s thousands of small charities. “What the government seeks to do to impose a rule, on penalty of criminal incarceration, that if you volunteer, you have an obligation to go back and look at the founding documents and see what is declared and [also look at] any other correspondence to the IRS,” Andres said.

Information about each of the convictions being appealed:

  • “Muhamed Mubayyid was sentenced in June 2008 to 11 months in prison and three years of supervised release for a scheme to conceal information from the IRS, three counts of filing of false tax returns and one count of obstruction of the IRS. A jury also convicted Mubayyid of conspiracy to defraud and impede the IRS, but Judge Dennis Saylor IV of the District of Massachusetts granted his motion for acquittal on that count.
  • Also in June 2008, Saylor sentenced Muntasser to a year in prison, plus three years of supervised release for making a false statement to an FBI agent — that he never traveled to Afghanistan. Saylor also granted Muntasser’s motion for acquittal after the jury convicted him of a scheme to conceal material facts and conspiracy to defraud the IRS.

A jury acquitted Samir Al-Monla of making false statements to the FBI and convicted him for scheme to conceal and conspiracy to defraud the IRS. In June 2008, Saylor entered a judgment of acquittal for Al-Monla on those charges.”

Convictions Reinstated

On Sept. 1, 2011 a federal appeals court reinstated the convictions for three former charity officials for conspiracy to defraud the IRS. Although Emadeddin Muntasser and two others were found guilty in January 2008 of fraudulently seeking tax-exempt status for their Massachusetts based charity, Care International, a U.S. District Court judge had later overturned the tax conspiracy convictions, saying the evidence didn’t support the verdict. The case was sent back to the district court for sentencing.