On May 1, 2012, lawyers for KindHearts for Charitable Humanitarian Development, the Ohio-based charity shut down “pending investigation” by the Treasury Department in February 2006, announced a settlement agreement with Treasury ending the litigation on terms favorable to the charity. In 2009 the federal district court for the Northern District of Ohio ruled that the process Treasury used to shut the charity down while investigating alleged ties to terrorism violated the constitution, and ordered further proceedings on what remedy Treasury should provide. The settlement ends the litigation by allowing KindHearts to pay its debts and distribute the remaining funds among a list of approved charities before it dissolves. At that point Treasury will remove KindHearts from its terrorist list and pay its attorneys fees.
This timeline details the issues and procedural history of the case, which illustrates the problems created by using post 9/11 emergency measures for long term regulation of charities in the national security context.
Note: Page numbers for quotes refer to text of the August 2009 court ruling in KindHearts for Charitable and Humanitarian Development, Inc. v. Timothy Geithner, et al, Case No. 3:08CV2400. “OFAC” refers to Treasury’s Office of Foreign Assets Control.
From Freezing Assets “Pending Investigation” to “Provisional Determination”
|1/22/2002||KindHearts for Charitable Humanitarian Development incorporated in Todedo, Ohio with the goal of providing humanitarian aid without regard to religion or political affiliation.|
|2002 to 2006||KindHearts seeks guidance from Treasury and implements Treasury’s Anti-Terrorist Financing Voluntary Guidelines.|
|Jan-Feb 2006||Department of Justice serves grand jury subpoenas on KindHearts board members and accountants Ernst & Young, requiring them to produce all records relating to KindHearts from January 2002 to Feb. 17, 2006.|
|2/19/2006||OFAC freezes about $1 million in KindHearts assets and executes search warrant seizing all records, computers, equipment, publications from headquarters and residence of President Khaled Smaili.|
|2/19/2006||OFAC sends “blocking notice” to KindHearts stating that:
1.) all property is blocked “pending investigation into whether KindHearts is subject to designation pursuant to Executive Order 13224 “for being controlled by, acting for or on behalf of, assisting in or providing financial or material support to, and/or otherwise being associated with Hamas.”
2.) no prior notice provided because OFAC determined assets could be transferred, making block/freeze ineffectual, and
3.) KindHearts could challenge action by sending a letter stating its position and providing evidence to the Director of OFAC
|2/19/2006||OFAC releases a press release with more specific information than blocking notice. It alleges that “KindHearts officials and fundraisers had coordinated with Hamas leaders and made contributions to Hamas-affiliated organizations” including such organizations in the West Bank and Lebanon. The press release asserted that KindHearts was founded to replace the Hamas-affiliated Holy Land Foundation for Relief and Development [HLF] and the al-Qaida-affiliated Global Relief Foundations [GRF].|
|4/2006||KindHearts’ attorney sends letter to OFAC opposing freezing assets, “but OFAC failed to respond to it.” [p. 7]|
|11/29/2006||KindHearts’ attorney requests copy of OFAC administrative record in the case, but “It received no response.” [p. 7]|
|5/27/2007||OFAC notifies KindHearts that it had made a “provisional determination” that KindHearts is a Specially Designated Global Terrorist, and “for the first time acknowledged receiving KindHearts’ challenge to the block pending investigation.” [p. 8] There is no provision for a “provisional determination” in IEEPA or Treasury regulations.The notice also included 35 unclassified documents OFAC relied on. It indicated classified and privileged information was also used and provided a three page summary of the classified evidence.
The OFAC letter “provided no explanation of the specific charges it was considering against KindHearts or why it thought the evidence supported a potential designation.” [p. 8] However, it said KindHearts could present additional information before a final determination and that OFAC would forward any new, non-classified information for KindHearts’ response.
KindHearts’ Ongoing Attempted Defense at OFAC
|2/2006 to 2/2008||OFAC denies license to allow KindHearts to use blocked funds to pay its attorneys.|
|6/14/2007||KindHearts requests access to its own records, now held by OFAC and the Department of Justice. It also seeks access to the full classified record used by OFAC.|
|6/25/2007||KindHearts sends OFAC a 28 page submission “in which KindHearts attempted to, in its words, ‘guess at and address OFAC’s concerns.’ It attached to that a 1369-page submission of supporting evidence. OFAC never responded to this submission.” [p. 9]|
|6/27/2007||KindHearts asks OFAC for declassification review of evidence used in blocking notice.|
|8/10/2007||OFAC agrees to conduct declassificaiton review and says it will give KindHearts 30 days to respond once material is provided. Did not specify when review would be completed.|
|8/13/2007||KindHearts requests “further clarification of charges against it and an extension of time until forty-five days after the completion of the declassification review. KindHearts stated it needed the extension to receive meaningful process.” [p. 10]|
|8/14/2007||OFAC denies KindHearts request for access to its own documents, saying U.S. Attorneys Office (prosecutors) has most of them.|
|Ongoing||“OFAC claims it ‘misplaced’ the June 25, 2007, submission. It does not, however, state what consituted ‘misplacing,’ how it happened, or may have happened, or when, if ever, and how it located the submission.” [p. 9, fn 4]|
|4/2008||U.S. Attorneys Office “provided KindHearts with an electronic copy of a subset of the seized documents, but did so subject to stringent conditions. Under a protective order, KindHearts members and officers could not view the documents without court approval, and KindHearts counsel could not print or electronically copy any documents.” [p. 9, fn 3]|
|8/16/2007||OFAC tells KindHearts it may contact employees in preparing a defense, but any documents discovered are blocked property that cannot be used with a license from OFAC and counsel must give OFAC identifying information about it. KindHearts’ counsel objects in letters in October and December, 2007.|
|OFAC approves license “allowing KindHearts counsel to receive copies of blocked documents necessary for them to provide legal services to KindHearts.” [p. 11]|
|6/2008||OFAC changes policy on attorneys fees after consituttional challenge in another case, allowing KindHearts to use a limited amount of frozen funds to pay for legal fees.|
|10/9/2008||KindHearts files a complaint in Federal District Court in Ohio seeking a temporary restraining order and preliminary injunction against Treasury’s final designation and continued enforcement of the blocking order. It subsequently moves for summary judgement on its constitutional claims under the Fourth and Fifth Amendments.|
|10/9/2008||Judge James Carr issues order barring Treasury and OFAC from designating KindHearts without providing basic due process.|
|12/2008||OFAC provides KindHearts with declassified version of its blocking and provisional determination memos.|
|1/2009||OFAC declassifies additional material in blocking memo.|
|1/30/2009||Judge Carr issues a protective order requiring that “The government shall forthwith commence producing copies at its expense of all seized materials to counsel of record for KindHearts, and as well, as provided herein, to such representatives of KindHearts as counsel shall designate.”|
|2/27/2009||Ten nonprofits file friend of the court brief supporting due process for KindHearts.|
|8/18/2009||Judge Carr rules that OFAC and Treasury violated KindHearts rights by seizing its assets without sufficient notice or means of appeal, in violation of the Fourth and Fifth Amendments.|
U.S. District Court Judge James G. Carr issued a temporary restraining order against Treasury barring further action against KindHearts. The court said the action is necessary for it to consider a remedy to the constitutional violations against KindHearts, as found in its August 2009 ruling. It ordered the parties to submit briefs on the remedy issue by Jan. 11, 2010.
|5/10/2010||Judge Carr orders a post-seizure probable cause review by the court. To address due process issues he ordered:1.) an ex parte, in camera meeting with the government to determine what classified evidence will give KindHearts adequate notice, and whether that evidence is capable of further declassification or adequate summarization. In the case where summarization of the classified material is insufficient or impossible, then KindHearts’ counsel will be able to review the documents under a security clearance, but will not be able to discuss them with KindHearts.
2.) KindHearts must then be given a meaningful opportunity to respond to the allegations. If classified documents are at issue, the hearing will be closed.
|12/31/2011||In late December 2011, Kindhearts announced it is dissolving, the Associated Press reports. According to a Dec. 31, 2011 court filing, KindHearts and the government have reached a settlement that “provides for a number of preliminary steps prior to dismissal of this case. The parties anticipate completing those steps by July 1, 2012.”|
|5/01/2012||Lawyers for KindHearts for Charitable Humanitarian Development announced a settlement agreement with Treasury ending the litigation on terms favorable to the charity. The three-page settlement agreement spells out a step-by-step process for resolving the case by allowing KindHearts to pay its debts and distribute the remaining funds among a list of approved charities before it dissolves. At that point Treasury will remove KindHearts from its terrorist list and pay its attorneys fees. Neither side admitted to any wrongdoing.|