Intimidation Campaign Using False Claims Act and IRS to Push Problematic Enforcement Policy on NGOs

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Date: 
September 27, 2018
Author: 
Kay Guinane

This spring our monitoring picked up a surprising story. Norwegian People’s Aid (NPA) had agreed to pay over $2 million to the U.S. government for allegedly providing material support to listed terrorist groups, in violation of the anti-terrorism certification in its USAID grant agreement.  NPA had been sued under the False Claims Act (FCA), a whistleblower law, by the Zionist Advocacy Center (TZAC) and said it settled the case in order to avoid the expense of a trial.  As we reviewed the documents in the case we saw defenses that could have been raised if there had been a trial. We also learned that TZAC also sued the American University in Beirut, which also settled, and the Carter Center, whose case was dismissed in June . In an interview with IRIN News, TZAC attorney David Abrams said two additional cases are pending under seal and he is preparing two more. TZAC also unsuccessfully sought to have Doctors Without Borders tax-exempt status revoked by the IRS because it was working with health authorities in Gaza to provide medical assistance there.

Our review of these cases indicates that TZAC is engaged in an intimidation campaign against non-governmental organizations (NGOs) working in conflict zones, equating traditional assistance programs to support for terrorism.  The charitable sector and its donors must challenge this theory of the law and assert vigorous defense in future FCA and IRS cases.  The Charity & Security Network is committed to supporting that effort. We published an issue brief summarizing the FCA and the three known cases as a first step to providing NGOs with the information and resources needed to defend themselves adequately against overly broad claims of providing material support and inappropriate use of the FCA to change U.S. enforcement policy.  A webinar on the False Claims Act on October 9 will present detailed information on the FCA and what defenses can be asserted.

The problem with these cases is not that TZAC is raising issues of what constitutes material support or questioning where the U.S. should draw the line between legitimate engagement or incidental transactions that facilitate aid to civilian populations. The problem is that the FCA and IRS complaints are a disproportionate way to address that issue. If TZAC believes NGOs have made mistakes there are remedies short of imposing crippling fines or revoking tax-exempt status that could address them. If the goal is to argue for a stricter interpretation of the material support prohibition there more direct, proportionate ways to go about it. But if the goal is to shut down aid in conflict zones, these tactics make sense. That fact that TZAC has chosen the approach it has indicates that its true agenda is much broader than seeking compliance or policy change.

The definition of prohibited material support is not as clear cut and simple as TZAC’s legal filings and public statements imply. The definition in 18 USC 2339 A and B is both broad and vague, with potential for zero-tolerance enforcement that is at odds with on-the-ground realities in conflict zones, U.S. foreign policy objectives, international humanitarian law and simple common sense. Over the past ten years or more U.S. enforcement authorities have sought to balance the positive effects of humanitarian aid and peacebuilding programs in conflict areas with the need to prevent diversion of resources to terrorist groups in several ways. For example, guidance documents from the Departments of Treasury and Justice  have noted they have not prosecuted legitimate efforts to provide aid or reduce violence. But enforcement authorities have been clear that they want to reserve the current broad powers to use in cases of egregious violations. While the nonprofit sector had advocated for a clearer definition of material support that excludes peacebuilding communications and incidental transactions that facilitate aid to civilians, NGOs have learned to live with what is essentially a “Don’t Ask Don’t Tell” enforcement policy because of government’s assurances.

TZAC, on the other hand, appears to want a zero-tolerance approach to enforcement that is at odds with a practical and proportionate approach. If carried to its logical conclusion, TZAC’s approach would make it impossible for NGOs with USAID funds to work in conflict zones, wherever they are located. Civilians in need of life-saving aid are the ones who will suffer if this becomes U.S. policy.

The nonprofit sector must meet the threat created by TZAC’s use of FCA and IRS complaints with firm insistence on enforcement policies that respect principles of humanity, independence and neutrality. One place to start is to learn more about the legal defenses that can be raised in FCA cases and providing support to groups targeted by TZAC. It is time to challenge TZAC’s theory that aid to civilians in areas controlled by terrorist groups equals support for terrorism.

Nonprofits can start by reviewing our Issue Brief and registering for the October 9 webinar on the False Claims Act here.