Use of the U.S. False Claims Act (FCA) to attack nonprofit organizations’ programs in Palestine took a setback in late December 2019 when the Zionist Advocacy Center’s (TZAC) FCA case against Oxfam Great Britain was dismissed. On Dec. 18 TZAC filed a Notice of Voluntary Dismissal, following the decision of the U.S. Attorney for the Southern District of New York’s November motion to dismiss. TZAC alleged Oxfam’s Gaza Urban and Peri-Urban Agricultural Platform (GUPAP), which worked to address food insecurity and decrease dependence on foreign aid and markets, violated the terms of its grant from USAID.
The U.S. District Court unsealed TZAC’s case against Oxfam GB on February 20, 2018. The complaint alleged that GUPAP provided material support to terrorism, contrary to its anti-terrorism certification to USAID. TZAC argued that because GUPAP allegedly supported ministries tied to both Hamas, which is on the U.S. terrorist list, and the Palestinian Authority (which is not), Oxfam GB’s certification to USAID is false. Although Oxfam’s GUPAP program was funded by the Swiss government and not USAID, the USAID certification applies to all activities of an organization regardless of funding source.
The complaint alleged that, because the Ministries of Agriculture and National Economy are part of the government in Gaza and Hamas controls the government, GUPAP provided material support to Hamas by assisting the ministries with the agricultural program.
This is similar to arguments TZAC made in past cases. However, in this case, TZAC expanded its legal theory to claim that the ministries are “nominally subdivisions of the Palestinian Authority,” which it claimed is an “entity” that supports terrorism by providing financial support to family members of people injured or killed in the conflict with Israel; this included families of people convicted or accused of terrorist offenses. TZAC called this a “pay to slay” scheme, bringing hotly contested issues of fact and policy into the gray area surrounding the definition of material support. TZAC sought triple damages under the FCA.
False Claims Act Basics
The False Claims Act is a U.S. law that imposes liability on those that knowingly defraud government programs. Private parties, called “relators,” can bring these suits on the government’s behalf. 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. During this time the defendant (and the public) has no notice that a case has been filed. The court can extend the sealing period for months or even years.
Once the government has investigated the claims, it may choose to:
- join the lawsuit,
- ask that the case be dismissed or
- allow the complaining party to proceed on their own.
For more information see our Issue Brief: False Claims Act Lawsuits: What Nonprofits Need to Know
TZAC’s complaint, claimed that Oxfam GB is part of a larger confederation that is “anti-Israel,” citing NGO Monitor (an advocacy group that engages in disinformation, according to the Policy Working Group, which is comprised of Israeli ex-diplomats, academics and others).
The complaint listed 30 USAID grants to Oxfam between October 2013 and September 2017, amounting to over $53 million in funds.
The U.S. initially declined to intervene and exercise its statutory right to take over the case, and on Sept. 20, 2019 told the court it planned to file a motion to dismiss. Oxfam later told the New Humanitarian that “We are aware of the lawsuit and reject the allegation made in it.”
The argument that any assistance or support to the Palestinian Authority is material support, despite the fact that it is not on the terrorist list, attempts to stretch the law beyond the limits of how it is currently applied. The U.S. government has provided funding to the Palestinian Authority in the same time frame that Oxfam supported the GUPAP program. If TZAC’s reasoning is taken to its logical conclusion, the U.S. government has violated its own material support prohibition, as have any other entities that have done business with or worked with the PA. That may explain why the U.S. declined to intervene in the case.
Motion to Dismiss
DOJ’s memorandum in support of its motion to dismiss noted that the government investigated TZAC’s allegations and in July took the position it would not intervene. However, on Sept. 20 it notified the court that it would move to dismiss. It noted that the False Claim Act allows for dismissal over TZAC’s objections, if the court allows TZAC an opportunity to be heard on the issue.
The memorandum argued that the government has discretion to seek dismissal under its law enforcement powers. In addition, the government argued that allowing TZAC to proceed with the case would “impose a substantial burden on government resources” and interfere “with government policies and the administration of its programs” and “implicate the Government’s foreign policy positions and international aid programs.” The government notes that a relator’s “subjective disagreement with the Government’s investigative strategy and ultimate decision does not provide the Court with a basis to second-guess the Government’s decision to dismiss the case.” [p.13]
The government further argued that the court should avoid decisions that could impair the governments decisions in foreign policy and national security. It said [p. 12]:
Should the pending litigation go forward, Relator would ask this Court to adjudicate whether alleged actions purportedly involving certain foreign entities constitute material support of terrorism and violate the certification language contained in USAID’s grants to Oxfam. In order to decide the present action, the Court would need to determine, for example, the novel question of whether the non-monetary support described in the Complaint, which Relator alleges was provided to Hamas by Oxfam through an intermediary, see Compl. ¶¶ 14-15, constitutes “material support” of terrorism. The Court would also need to decide whether the Palestinian Authority, the self-government body of the Gaza Strip, should be considered a “terrorist” entity, as alleged by Relator. Id. ¶¶ 17-19. Lastly, the Court would need to determine whether Oxfam’s representations to USAID were in fact material to USAID’s decision to award funds to the defendant. The adjudication of these issues would necessarily interfere with the Government’s own foreign policies, as well as its administration of USAID grant funds. The Government accordingly has a valid interest in precluding Relator from litigating these issues on behalf of the Government in the context of a declined qui tam action.
The standard for dismissal in False Claims Act cases is unclear. The DC Court of Appeals has held that the government has absolute discretion to dismiss, while the Courts of Appeals in the 9th and 10th Circuits have held the government must show dismissal would serve a valid government purpose. The Southern District of New York is in the 2nd Circuit, which has not taken a position on this issue. The government’s memorandum argued that it meets both standards.
On Dec. 28, 2019, TZAC filed a notice of voluntary dismissal, ending the case.
Oxfam was represented by J. Emmett Murphy and Jeffrey S. Bucholtz of the law firm King & Spalding LLP, who successfully defended The Carter Center in a False Claims Act suit filed by TZAC.