On Nov. 7, 2012, a federal appeals court heard arguments about the distribution of charitable assets seized by the government from the Holy Land Foundation for Relief and Development’s (HLF) to pay victims of terrorism.  In 2011, a district judge ruled that all HLF’s property, including millions of dollars in charitable funds and other assets seized by the government, could be used to satisfy, in part, a $214.5 million judgment against Hamas by victims of a 1997 suicide bombing in Israel.  The three-judge panel from the U.S. Court of Appeals for the Fifth Circuit did not say when it would make its decision about the seized assets.  Just days before, the Supreme Court denied the charity officials’ petition for appeal. Click here for background and summary of the HLF case.

David Strachman, an attorney for the bombing victims, argued during the hearing that the Terrorism Risk Insurance Act of 2002 (TRIA) gives his clients priority over the government’s claim under criminal forfeiture statutes.  “After living through this ordeal and years of litigation, they are caught in the web of exactly what Congress intended to remedy by enacting TRIA,” Strachman said.

Also speaking at the hearing, an attorney for the Justice Department said the charitable assets seized by the government were earmarked for paying American victims of Hamas attacks, and that Strachman gave “no reason for this court to deem that disingenuous.”

In the case of assets of a charity like HLF there are additional legal requirements that have not been included in the court proceedings, as HLF was effectively dissolved by being put on the terrorist list.  Internal Revenue Service regulations require that the assets of a charitable group must be distributed solely for charitable or public purposes upon dissolution.  (See 26 CFR 1.501(c)(3)-1(b)(4)) A state charity regulator, such as the Attorney General, could intervene to protect charitable assets, but that has not happened in this case.”  See Review of Legislative History Shows Treasury’s Position on Frozen Charitable Funds Without Basis

By taking the position that the assets should be distributed to victims of terrorism, the government has identified a public purpose.  However, it should also “consider the interests of well-intentioned donors who collectively donated tens of millions of dollars to help needy beneficiaries, as well as the people in need of humanitarian aid that these donors intended to assist.”  All are, in their way, victims of terrorism.