Federal Court Finds Freezing of Charity's Assets Unconstitutional

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May 11, 2010, 03:54 ET

Ruling Means Congress Must Fix Law That Allows Treasury To Shut Down Organizations Without Judicial Warrant

TOLEDO, Ohio, May 11 /PRNewswire-USNewswire/ -- A federal court ruled late Monday that the U.S. Treasury Department's freezing of a charity's assets was unconstitutional and that in order to comply with the Constitution, Congress must fix the law to require a warrant be obtained based upon probable cause before taking such action. The court also found that the Treasury Department's failure to give the charity notice of the basis for freezing its assets violated the Constitution by preventing the charity from being able to meaningfully respond to the freeze.

Monday's ruling came in a lawsuit filed in November 2008 by the American Civil Liberties Union, the ACLU of Ohio and several civil rights attorneys on behalf of KindHearts for Charitable Humanitarian Development, Inc., an Ohio-based charity. The U.S. Treasury Department's Office of Foreign Assets Control (OFAC) froze KindHearts' assets four years ago without a warrant, notice or a hearing, based simply on the assertion that OFAC was investigating whether the charity should be designated as a "specially designated global terrorist" (SDGT).

"This landmark decision reaffirms the basic principle that the government may not simply ignore the Constitution's warrant and probable cause requirements in the name of national security," said Alexander Abdo, an attorney with the ACLU National Security Project. "By requiring Congress to step in and fix the government's unconstitutional terrorist-designation scheme, the ruling restores a critical check on executive power. No longer will the government have the authority to shut down a domestic organization's operations and to criminalize all transactions with the organization based merely on the say-so of the executive."

KindHearts has never been found to have engaged in any wrongdoing and has never been designated an SDGT, yet it has been effectively shut down since OFAC first froze its assets on February 19, 2006. As a result of the freeze pending investigation, it is a crime for anyone to do any business with KindHearts and the charity has no access to its own property.

"For years, the government has insulated its terrorist-designation decisions from any meaningful review by denying the frozen charities even the most basic constitutional requirements of due process," said Georgetown Law Professor David Cole, co-counsel for KindHearts. "Yesterday's decision confirms that such freezes are unconstitutional by requiring the government to provide KindHearts what it has been denied all along – a fair chance to clear its name."

In Monday's ruling, U.S. District Judge James G. Carr of the Northern District of Ohio, Western Division, held that going forward the administration must obtain a warrant based on probable cause before seizing an organization's assets. In KindHearts' case, the court held that the government must remedy its failure to get a warrant in this case by demonstrating that it had probable cause at the time it froze KindHearts' assets.

Judge Carr also ruled that OFAC violated the Fifth Amendment's guarantee of due process by failing to provide KindHearts notice of the charges against it or a meaningful opportunity to respond. He held that OFAC must remedy these failures by declassifying or adequately summarizing the classified evidence against KindHearts or by allowing KindHearts' counsel to view the classified evidence pursuant to security clearances and a protective order.

KindHearts' founders established the charity in 2002 – after the government shut down a number of other charities – with the express purpose of providing humanitarian aid both abroad and in the United States in full compliance with the law. Despite the efforts KindHearts took to implement OFAC policies and even seek its guidance, OFAC froze KindHearts' assets in February 2006.

In addition to Abdo and Cole, attorneys on the case, KindHearts v. Geithner, are Ben Wizner of the ACLU, Fritz Byers of Toledo, Ohio, Lynne Bernabei and Alan Kabat of Bernabei & Wachtel, PLLC in Washington and Carrie Davis of the ACLU of Ohio.

The ruling is available online at: www.aclu.org/national-security/kindhearts-charitable-humanitarian-development-inc-v-geithner-et-al-order

More information about the case is at: www.aclu.org/national-security/kindhearts-charitable-humanitarian-development-inc-v-geithner-et-al

SOURCE American Civil Liberties Union