Four years after the charity was founded, U.S. Treasury froze KindHeart’s bank accounts and seized all of its records, computers and documents and almost $1 million in assets pending an investigation into whether the charity was “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 designated KindHearts as a Specially Designated Global Terrorist in 2007 and KindHearts sued the government. A federal judge found the asset freeze to be an unlawful seizure of property under the Fourth Amendment and that the lack of adequate notice and explanation for the designation was a denial of KindHearts’ Fifth Amendment right to due process. In 2012, lawyers for KindHearts announced a settlement with Treasury that removed the charity from its terrorist list, required Treasury to pay KindHearts’ attorney’s fees, and allowed the charity to pay its debts and distribute remaining funds to a list of approved charities.
The KindHearts for Charitable Humanitarian Development (“KindHearts”) litigation against the Treasury Department (“Treasury”) represents judicial recognition of the danger of counterterrorism measures gone too far.
In May 2012, lawyers for KindHearts announced a settlement agreement with Treasury ending the litigation on terms favorable to the charity. The settlement allowed KindHearts to pay its debts and distribute the remaining funds among a list of approved charities before it dissolved. Treasury would then remove KindHearts from its terrorist list and pay its attorneys’ fees. While neither party admitted to any wrongdoing, according to an ACLU press release, this was the first instance in which the government agreed to de-list a frozen organization and allow it to distribute its assets. (For a detailed timeline of the litigation and preceding steps, see here.)
The settlement stemmed from an August 2009 ruling by Judge Carr of the U.S. District Court for the Northern District of Ohio that the process by which Treasury froze KindHearts’ assets “pending investigation” violated the U.S. Constitution. He held that the freeze, which essentially shut the charity down, was an unlawful seizure of property under the Fourth Amendment, and that the lack of notice and explanation for Treasury’s action constituted a denial of KindHearts’ Fifth Amendment right to due process. He also indicated that Treasury’s decision to allow KindHearts access to only $27,040 for payment of its attorneys was “arbitrary and capricious.” (For more analysis of the decision, see here.) The court’s decision was heralded as a positive change by Muslim charities, for which investigation by Treasury has previously become a “kiss of death.”
Treasury’s actions flowed from the International Emergency Economic Powers Act (IEEPA) and Executive Order 13224. The latter, signed by President Bush on September 23, 2001, granted Treasury and other government agencies broad authority to identify and block the assets of foreign individuals and entities suspected of committing or planning to commit terrorist acts. The USA PATRIOT Act expanded Treasury’s authority to designate organizations as Specially Designated Global Terrorists (“SDGT”) to include asset blockage “during the pendency of an investigation” into whether an organization met the standards for an SDGT. Acting under this authority, Treasury froze KindHearts’ bank accounts and seized all of its records, computers, and documents in February 2006.
KindHearts was formed in 2002 to provide “emergency relief; water and general sanitation; sheltering refugees; sponsorship of orphans, widows, and poor families; medical and health care; rehabilitation and renovation; vocational training and education; and independent income generation and economic growth.” The group 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. KindHearts claimed that it provided assistance “to the poor and needy without regard to political affiliation or belief,” and that recipients were identified “based on need alone, not ideology or association.”
This work ground to a halt with Treasury’s freeze and seizure of nearly $1 million in assets, with no notice or explanation beyond that the assets were “blocked pending investigation” into whether the group was “controlled by, acting for or on behalf of, assisting in or providing financial or material support to, and/or otherwise being associated with Hamas.” When Treasury later provided additional detail, KindHearts attempted to refute the allegations. After Treasury “provisionally” designated the group a SDGT in May 2007, with no other options to force a review or reconsideration, KindHearts choose to file suit in October 2008.
KindHearts’ complaint requested a preliminary injunction to prevent Treasury from designating it as a supporter of terrorism and challenged the constitutionality of the government’s previous actions. Judge Carr, in addition to ultimately finding the process unconstitutional, granted several injunctions preventing Treasury from designating KindHearts without due process. In one such order, Carr stated, “By requiring KindHearts to respond to allegations that I have found constitutionally lacking, KindHearts must, as a result, effectively disprove a negative if compelled to proceed before I provide whatever remedy I determine is proper. This constitutionally inadequate notice, moreover, has severely prejudiced KindHearts’ ability to respond especially in light of defendants’ arbitrary and capricious denial of KindHearts’ requests to pay attorneys fees with its own blocked resources. To analogize, KindHearts is not only blindfolded, but also has its hands tied behind its back.”
Numerous nonprofit organizations were concerned with the implications of the KindHearts litigation. Ten advocacy groups filed an amicus brief that expressed their support for the due process rights of nonprofits accused of supporting terrorism. The brief took no position on the facts of the KindHearts case but instead provided background information on the broader impacts the government’s overreaching policies had on charitable programs. It even went so far as to state that government barriers “have created a climate of fear and intimidation among nonprofit organizations, discouraging them from doing their critical humanitarian work – particularly in conflict-torn regions that are most in need – for fear of being arbitrarily subjected to these actions and policies themselves.”
In May 2010, Carr devised a number of novel remedies to address Treasury’s Fourth and Fifth Amendment violations. For the unwarranted search and seizure, he ordered a post-seizure probable cause review to determine whether there was reasonable ground at the time of the original seizure to believe that KindHearts was subject to designation. Regarding the lack of adequate notice and opportunity to respond, he held that there should be an ex parte, in camera meeting to determine what classified documents would give adequate notice and whether they could be summarized or declassified for KindHearts’ counsel, and that the group should then have a meaningful opportunity to respond to the allegations. And finally, he remanded the decision on attorneys’ fees to OFAC to be re-determined based on proper rules ordered by the court.
The KindHearts litigation marks an important point in the campaign to protect civil society space from the encroachment of counterterrorism and other protective measures. Judge Carr’s open recognition of the violation of KindHearts’ constitutional rights is significant. And though Treasury admitted no wrongdoing, the settlement is indicative of an understanding that similar actions in the future would not be accepted without resistance.