Selective Enforcement: Charities Targeted for Harsher Sanctions

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Date: 
June 29, 2009

The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) has designated nine U.S. charities as supporters of terrorism, seizing all property, blocking all funds and effectively closing all programs. In contrast, the for-profit corporations Halliburton and Chiquita Brands International have only had to pay fines for very similar alleged violations, and their operations have not been interrupted or shut down. There has been no explanation from OFAC.

 
A July 19, 2005 article in HalliburtonWatch.org notes that the company was under investigation by OFAC in 2001 for doing business with Iran, which is listed as a sponsor of terrorism. Rather than seize and freeze assets "pending an investigation," OFAC and the Department of Justice merely sent an inquiry to Halliburton requesting "information with regard to compliance." Halliburton's written response claimed they were in compliance with the law because its dealings with Iran are done through a Cayman Islands subsidiary, not its U.S. based entity.
 
Over two years later, in January 2004, OFAC sent a follow up letter requesting additional information. Halliburton responded in March 2004. In July 2004 the U.S. Attorney for the Southern District of Texas sent a grand jury subpoena requesting documents and the case was referred to the Justice Department. On Sept. 22, 2005 the Progressive Caucus in the House of Representatives wrote then President Bush asking that Halliburton be suspended from hurricane relief contracts for a host of reasons, including "dealing with nations that sponsor terrorism." 
 
 
The experience of Chiquita Brands International provides a clear example of the drastically different treatment of for-profit corporations for activities that clearly violate counterterrorism law. Between 1997 and 2004, Chiquita Brands International paid approximately $1.7 million to two U.S.-designated terrorist organizations, the United Self-Defense Forces of Colombia (AUC) and the leftist Revolutionary Armed Forces of Colombia (FARC), for protection in a dangerous region of Colombia. In 2003, outside attorneys for Chiquita notified the company that the payments violated U.S. anti-terrorism laws and should not continue. However, payments to the groups continued until Chiquita sold its subsidiary, Banadex, in June 2004.
 
On April 24, 2003, a board member of Chiquita disclosed to Michael Chertoff, then assistant Attorney General, Chiquita’s clear violation of anti-terrorism laws. Allegedly, Chertoff told the Chiquita representatives that the activity was illegal, but they should wait for more feedback. Three of Chiquita's officers were then placed under investigation by the Justice Department for authorizing and approving the payments, but in September 2007, the investigation ended without any criminal charges.
 
On March 14, 2007, Chiquita Brands International agreed to pay a $25 million fine. With annual revenues of approximately $4.5 billion, Chiquita's operations are unlikely to be affected. Had a charity engaged in this type of activity, it likely would have been shut down, its assets frozen indefinitely; Chiquita continues to operate, and none of its assets have been frozen by Treasury or any other agency.
 
Sources: 
3. "Ex-Chiquita Execs Won't Face Bribe Charges," Washington Post (Aug. 12, 2007).
4. "Chiquita fined for Colombia Payments," Los Angeles Times (Sept. 18, 2007).
 
At forum at Pace Law School in December 2004, Chip Poncy, Senior Advisor to the Assistant Secretary for Terrorist Financing and Financial Crime at the Treasury Department, described instances where Treasury has worked with Saudi charities to help them restructure in order to avoid designation and freezing of assets. He did not offer any explanation for why U.S.-based charities that have been designated did not receive similar treatment.