A federal lawsuit alleging alleging bank "derisking" of charity accounts based on Arab ethnicity was unsuccessful, as the jury found in favor of the bank. Life for Relief and Development v. Bank of America, NA, was tried in August 2016 in federal district court in Detroit.
The civil rights case was based on the claim that Bank of America (BOA) closed LIFE’s accounts because of the Arab-American ethnicity of its leadership and staff and its humanitarian and development work in Muslim majority countries.The trial court denied a BOA motion to dismiss, finding that LIFE “presented sufficient evidence to create a genuine issue of fact as to whether the reasons BANA [Bank of America] provided for closing Life’s account were mere pretext.”
Background on Life for Relief and Development
Founded in 1992, Life for Relief and Development’s (LIFE) mission is to alleviate human suffering around the world, regardless of race, color, religion or cultural background. Its Third Amended Complaint notes that “Life has provided over One Hundred Million ($100,000,000.00) Dollars in humanitarian assistance to more than 13 Million Beneficiaries across more than 20 countries worldwide.” Its leadership, staff and donors are primarily Arab Americans. The complaint also notes that Life has Consultative Status with the Economic and Social Council of the United Nations, is registered with the United States Agency for International Development (USAID) and certified by the Combined Federal Campaign (CFC).
Bank of America closes accounts, no reasons given
In 2010, LIFE opened two checking and two credit card accounts with Bank of America (BOA), one for miscellaneous overhead expenses and one to serve as a back-up account. On May 21, 2012 BOA sent LIFE notice that its accounts would be closed in 30 days and that no transactions would be allowed after 21 days. BOA did not give a reason for its decision. LIFE sought assistance from the Arab American Anti-Discrimination Committee (ADC) to learn the reasons for the account closure. ADC sent a letter to BOA President Keith Cockrel in June 2012 requesting a meeting and noting that such closures are an ongoing problem, “to the detriment of Arab Americans…” After BOA did not agree to meet, LIFE contacted its Congressional representative, Rep. Hansen Clarke, who also inquired about BOA’s reasons for closing accounts. BOA responded with a letter to LIFE stating that it has the right to close accounts. LIFE then proceeded to file this lawsuit.
LIFE files a civil rights suit against Bank of America
LIFE sued BOA UNDER civil rights protections in 42 U.S.C § 1981 on Aug. 10, 2012 in the U.S. District Court for the Eastern District of Michigan (Case No. 12–CV–13550), claiming that the bank violated its right to make and enforce contracts through discrimination based on Arab ethnicity, as defined by federal law. An amended complaint filed on March 13, 2013 added a claim of illegal “financial redlining,” based on LIFE’s work in predominately Arab countries. The court granted a BOA motion to dismiss on July 23, 2013, without prejudice, because LIFE had not yet shown “that it was treated differently than similarly situated organizations or subjected to hostile treatment that could be deemed objectively discriminatory.” Life then filed a Third Amended Complaint on Nov. 21, 2013, invoking both 42 U.S.C § 1981 (equal rights and the right to make and enforce contracts) and §1982 (interference with property rights).
To show that it has been treated differently than similarly situated charities, LIFE identified the Zakat Foundation, a U.S. charity that operates programs similar to LIFE’s but is led by Turkish Americans and retains a BOA account. LIFE also argued that the inconsistent reasons BOA gave for closing LIFE’s account are a pretext to cover its discriminatory practice.
Evidence in pre-trial proceedings: Does BOA think Arab ethnicity = high risk?
The first reason BOA gave for closing the account was in its response to Rep. Clarke’s letter. BOA said it acted “[i]n accordance with the terms of the . . . Deposit Agreement and Disclosures publication[,]… either the bank or the customer [could] close” the account.”
However, in a pre-trial deposition Christa Marshall, a Senior Anti-Money Laundering Compliance Specialist at BOA, gave a different reason, referring to “the appearance of structuring cash deposits.” She gave yet another reason in a BOA AML Account Closure Form, saying “transactions are not consistent with expected activity.”
The deposition testimony of BOA expert witness Dennis Lorman, a former FBI agent and counterterrorism official at the Treasury Dept., suggests another reason. He stated as follows at p. 114:
Q. Do you have an opinion why a segment of the population -- of the American population, persons of Arab ethnicity, seem to be experiencing these type of bank closures in comparison lo other segments of the population that are not of Arab ethnicity?
MR. RODES: Objection to the extent that it hasn't been established that these closures are for any sort of -- one reason or another.
THE WITNESS: I would attribute it to risk.
Q. (By Mr. Akeel): Can you please explain to me, why is there -- when you say risk, what do you mean?
A. Where the entities have identified them, fairly or unfairly, as high-risk.
Q. Do you think persons' names contribute to that perception of possible risk if your name is Ahmed or Mohammed or Samir or things like that?
A. It shouldn't.
Q. Do you believe that that can contribute?
A. I don't think I can answer that, honestly. I really haven't seen it on an individual basis. I've seen it on a company basis. I've seen, for instance -- was it Dara Salam in Arlington, Virginia, they had their bank account closed.
Q. As you sit here today, based on the records that you've looked at, have you been able to discover any evidence of any illegal act at all committed by Life?
The trial court’s ruling on BOA’s motion to dismiss (summary judgment)
BOA filed a motion for summary judgement, which the trial court denied in part and granted in part. The key issue was whether LIFE has provided sufficient evidence to state a prima facie claim of discrimination. The court described the legal standard as follows:
“To establish a prima facie cause under 42 U.S.C. § 1981, Plaintiff [LIFE] must allege facts showing by a preponderance of evidence that:
(1) plaintiff is a member of a protected class;
(2) plaintiff sought to make or enforce a contract for services ordinarily provided by the defendant; and
(3) plaintiff was denied the right to enter into or enjoy the benefits or privileges of the contractual relationship in that (a) plaintiff was deprived of services while similarly situated persons outside the protected class were not and/or (b) plaintiff received services in a markedly hostile manner and in a manner which a reasonable person would find objectively discriminatory,”
The court denied BOA’s motion regarding the discrimination and equal protection claim, because LIFE identified the Zakat Foundation as a non-Arab charity doing similar work that BOA treated more favorably. The court also found that LIFE “presented sufficient evidence to create a genuine issue of fact as to whether the reasons BANA [Bank of America] provided for closing Life’s account were mere pretext.”
However, the court ruled in favor of BOA by dismissing the claim under 1982, saying, “LIFE has not alleged that BANA prevented it from using the funds in the account. The use of a bank account is governed by a contractual relationship, but does not constitute a property interest in and of itself.”
After a settlement conference held in May 2016 failed to produce an agreement, District Court Judge Denise Page Hood set the date for a jury trial to begin on Aug. 1. At the outset of the trial, BOA unsuccessfully sought to have its expert witness Dennis Lorman excluded. The bank asserted that they did not discriminate based on ethnicity but rather than the account closures grew out of an investigation of another charity with which Life was in communication. This assertion raises questions regarding whether Life's accounts were closed due to any alleged wrongdoing of its own. Officials with Life said their accounts should not be closed simply because they were in touch with other organizations. The charity added that BOA's allegations of deposits from unknown sources and "structuring," or making smaller deposits to avoid reporting requirements, are baseless.